MBE Contracts and Sales Flashcards
3 Basic Contract Questions
- Has a contract been formed
- Has the contract been performed?
- What are the remedies for breach?
What is a contract? (basic)
legally enforceable agreement
Elements of a formed contract
mutual assent (offer and acceptance) PLUS consideration (MINUS defenses)
What types of contracts does common law govern?
services and real estate
What types of contracts does the UCC govern?
Goods
What happens in a MIXED contract?
- All or nothing rule - ONE universe must apply (unless divisible)
- Predominant purpose rule (ex: commissioning Andy Warhol to paint a portrait versus commissioning your roommate)
4 elements when asking whether an enforceable contract has been formed
ALL CONTRACTS DONT STINK Agreement - offer and acceptance Consideration Defenses Statute of Frauds
An agreement is comprised of….
offer and acceptance
Offer
manifestation of a willingness to enter into an agreement that creates a POWER OF ACCEPTANCE
Caterpillar!
What is the test for intent of an offer?
Does the offeror display an objectively serious intent to be bound
(humor and anger are NOT objectively serious intents)
Does an expression of opinion count as an offer?
no
Must an offer be directed at you for you to accept?
Yes, EXCEPT
- contest/reward offer (reward for missing pet)
What must an offer include at COMMON LAW (services and real estate)?
All essential elements must be included
- parties
- subject
- price
- quantity
What must an offer include at UCC (goods)?
ONLY essential term is quantity - will plug the gap for the rest
OK so UCC only requires quantity. What about requirements/output contracts?? Are they kosher?
They are specific enough - they provide a formula for calculation.
“I don’t know how many I need over the next 10 years, but I promise to buy all of them from you.”
“I don’t know how many I will make over the next 10 years, but I promise to sell all of them to you.”
4 requirements for an offer
- Objectively serious intent
- Offer is directed to the right person
- Offer is specific enough (diff for UCC and CL)
- Must give power of acceptance to the other side
2 common things that DONT give the power of acceptance to the other person (and therefore aren’t an offer)
- Invitations to deal - reserve final round of approval with the speaker
- Advertisements - seen as invitations to deal (unless they leave nothing open to negotiation - first come, first served usually so only 1 person can accept)
6 ways to terminate an offer (squashing the caterpillar)
- Offeror REVOKES by express communication
- Constructive revocation (offeror takes an action absolutely INCONSISTENT with continuing ability to contract and offeree knows about it)
- Offeree REJECTS the offer
- Offeree makes a COUNTEROFFER
- Offeror DIES (only for an offer - not a K!)
- Offer expires after a reasonable period of time
Note 4 kinds of irrevocable offers
Time frame for revoking an offer
Usually free to revoke at any time prior to acceptance…unless its an irrevocable offer
4 kinds of irrevocable offers
- When an option is purchased/separately considered
- Merchant’s Firm Offer (UCC)
- Unilateral contracts where performance has started
- Detrimental reliance
Merchant’s Firm Offer
- Must be in writing
- must contain an explicit promise to not revoke
- must be signed by the merchant
- Can last as long as stated, or a reasonable time, not to exceed 90 days
MFO must then be explicitly revoked by the merchant, unless a reasonable amount of time has passed
Unilateral Contract
Promise that requests acceptance by an ACTION (instead of a return promise) “I promise to pay you $100 if you paint my house”
- offeree has the right to finish if they begin since they can only accept by performance
Can the offeror of a unilateral contract sue the offeree for breach if they don’t complete the action?
NO! no agreement until performance is completed!
Contractor/subcontractor fact pattern is typical of…
detrimental reliance on a offer –> irrevocable
Intent of acceptance is governed by which test?
objective
Who is the master of the offer?
the OFFEROR - they get to set the terms for acceptance - offeree must accept according to those rules
Who decides whether a K is unilateral or bilateral?
the OFFEROR - there’s no K if the offeree tries to accept a unilateral K with a promise
What if a seller tries to accept a unilateral offer by shipping the wrong goods?
UCC says this is ACCEPTANCE + BREACH
Can you accept a reward/open-to-all offer if you don’t know about it?
NO - must know!
Mailbox rule
ACCEPTANCE sent by mail is valid when the letter is SENT
- doesn’t matter if the letter is lost/never received
Exceptions to the mailbox rule
- Offeree sends something else first (like a rejection or a counteroffer) - they’ve lost the protection of the mailbox rule
- Does not apply to other communications (revocations and rejections - those are valid when received)
- Option contracts - governed by the period of the option
If you mail an acceptance, then call with a rejection…
There is still a K (acceptance controls)
UNLESS seller detrimentally relied on rejection (sold to someone else)
If you mail a rejection, then mail an acceptance and they are received at the same time…
Depends on which one is opened first!
- Rejection takes effect when read
- No MBR for acceptances that follow a rejection or counteroffer
Does an acceptance need to be communicated to the offeror?
YES, unless:
- Unilateral reward offer
- Past history of silence serving as acceptance (such that offeree should reasonably notify the offerror if they don’t accept)
- Offeror says acceptance must come via silence and offerree intends to accept via silence
Common law uses WHAT rule for counteroffers?
Mirror Image - terms of acceptance must match terms of the offer EXACTLY
How does common law view conditional acceptances? (“I accept, if you do xyz”)
Another kind of counteroffer - not an acceptance
How does the UCC view acceptances that don’t exactly match the terms of the offer?
more forgiving - can count as an acceptance if it’s
- within a reasonable time
- not super different
- not conditioned on acceptance of the new term
When does the different term control?
ALL must be met: (very difficult)
- BOTH parties are merchants
- New term doesn’t MATERIALLY alter the deal
- Initial offer did not EXPRESSLY limit acceptance to its terms
- Offeror does not object to the new term within a reasonable amount of time
If there is not a real contract (based on these different terms) but the parties still act as if there is an agreement…
only terms both writings agree to are part of the K, while UCC supplies the rest via default rules
Definition of Consideration
a deal in which the parties exchange promises involving a legal detriment or benefit
Steps to sniffing out consideration
- Who is making the promise?
- Is there a benefit to the promisor or a detriment to the promisee? ONLY NEED ONE!
- Was this bargained for - did the parties think they were making a deal when they exchanged promises?
Definition of detriment
Some kind of negative OR not doing something you are legally entitled to do
Do conditional promises have consideration? (I’ll give you my Jeep if you come to my house to pick it up)
NO - I don’t care if you show up or not, nothing you can sue to enforce.
4 things to watch out for with consideration
- Consideration must be ADEQUATE (not nominal, so low its a sham)
- Consideration must be a CLEAR COMMITMENT (not an illusory promise - “I’ll sell it to you if I feel like it.”)
- Past consideration is not consideration (can’t bargain for something that already happened)
- Promising not to sue CAN serve as consideration if good faith belief the claim is valid (settlements)
