Midterm Review

Question 1

What is a contract?

Answer 1

A promise or a set of promises for the breach of which the law gives a remedie, or the performance of which the law in some way recognizes as a duty

Question 2

What are the two major remedies?

Answer 2

Specific performance & Monetary Remedies

Question 3

How do you test the intent to enter a contract?

Answer 3

Apply an objective test

• How would a reasonable person understand the statement
• Exception is if the other party is made aware that it is a “joke” and not a serious offer

Question 4

Is mental assent of the parties needed to form a contract?

Answer 4

No, if the words or other acts of one of the parties have but one reasonable meaning, his undisclosed intention is immaterial

Question 5

What is an offer?

Answer 5

The manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it

Question 6

Section 17 (Offer)

Answer 6

The formation of a contract requires a bargain in which there is manifestation of mutual assent to the exchange and consideration

Question 7

Section 22 (Offer)

Answer 7

• A contract requires a manifestation of mutual assent
• An agreement requires an offer followed by an acceptance

Question 8

Section 24 (Offer)

Answer 8

A reasonable person in the position of the offeree would have understood that the offeror wanted to enter a bargain, and that there was nothing else to be discussed

Question 9

Section 33 (Offer)

Answer 9

An offer must be complete, certain, and definite

Question 10

What is the process of contract formation?

Answer 10

• Offeror makes an offer
• Offer gives the offeree the power to accept
• Once the offer is made there are several options
  - Explicitly accept
  - Explicitly deny
  - Do nothing
  - Make a counteroffer
• If the offeree does anything but accept, the initial offer is gone

Question 11

Are advertisements often considered offers?

Answer 11

NO

Question 12

What can make an advertisement an offer?

Answer 12

• If it is clear, definite, explicit, and leaves nothing open for negotiation
• If it would lead a reasonable person to understand that an offer was intended
• If it invites a performance of a specific act without further communication and leaves nothing for negotiation

Question 13

Section 30 (Acceptance)

Answer 13

• Acceptance must be knowing, voluntary, and a deliberate act (evaluated from an objective perspective)
• Acceptance can be by words or actions
• Acceptance must be made in a manner prescribed in the offer and on the terms prescribed in the offer
• If the offer is silent on the manner and type of acceptance, the offeree enjoys some flexibility in terms of how to accept and what they need to do to accept

Question 14

Section 50 (Acceptance)

Answer 14

(1) Acceptance of an offer is a manifestation of assent to the terms thereof made by the offeree in a manner invited or required by offer
(2) Acceptance by performance requires that at least part of what the offer requests be performed or tendered and included acceptance by a performance which operates as a return promise
(3) Acceptance by a promise requires that the offeree complete every act essential to the making of the promise

Question 15

Section 64 (Acceptance)

Answer 15

Acceptance given by the telephone or other medium of substantially instantaneous two-way communication is governed by the principles applicable to acceptances where the parties are in the presence of each other

Question 16

What is the Two-Prong Test for Section 64?

Answer 16

(1) The communication must be “substantially instantaneous”; and
- The transmission must occur within a
few seconds, or, at most, a minute or
two
(2) The communication must be two-way
- One party must be able to determine
whether the other party is away of the
first party’s communications, through
immediate verbal response, or when
the communication is face-to-face,
through non-verbal cues

Question 17

Section 36 (Acceptance)

Answer 17

(1) An offeree’s power of acceptance may be terminated by:
(a) rejection or counteroffer by the offeree;
or
(b) lapse of time; or
(c) revocation by the offeror; or
(d) death or incapacity of the offeror or
offeree
(2) An offeree’s power of acceptance is terminated by the non-occurrence of any condition of acceptance under the terms of the offer

Question 18

Section 43 (Acceptance)

Answer 18

An offeree’s power of acceptance is terminated when the offeror takes definite action inconsistent with an intention to enter into the proposed contract and the offeree acquires reliable information to that effect

Question 19

Section 69 (Acceptance)

Answer 19

(1) Where an offeree fails to reply to an offer, his silence and inaction operate as an acceptance in the following cases only:

    (a) Where an offeree takes the benefit of 
          offered services with reasonable 
          opportunity to reject them and reason 
          to know that they were offered with the 
          expectation of compensation
    (b) Where the offeror has stated or given 
          the offeree reason to understand that 
          assent may be manifested by silence or 
           inaction, and the offeree in remaining 
           silent and inactive intends to accept 
           the offer
    (c) Where because of previous dealings or 
         otherwise, it is reasonable that the 
         offeree should notify the offeror if he 
         does not intend to accept

Question 20

Section 54 (1) (Acceptance)

Answer 20

• The offeror as the master of the offer can explicitly require or dispense of notification
• If the offer requires performance as the manner of acceptance and the offer is silent as to the notification, notification is not necessary

Question 21

Section 54 (2) (Acceptance)

Answer 21

• If the offeree knows or has reason to know that the offeror has no adequate means of learning of the performance within a reasonable time, the contractual duty is discharged unless the offeree takes action to notify the offeror, the offeror finds out about that performance anyway, or the offeror indicates that not notification is required

Question 22

Section 32 (Acceptance)

Answer 22

• In case of doubt, and offer is interpreted as inviting the offeree to accept either by promising to perform what the offer requests or by rendering the performance, as the offeree chooses

Question 23

Section 45 (Acceptance)

Answer 23

• Where the offer invites acceptance by performance, once the offeree tenders or begins the invited performance, the offeror loses the ability to revoke

Question 24

Section 62 (Acceptance)

Answer 24

(1) Where an offer invites an offeree to choose between acceptance by promise and acceptance by performance, the tender or beginning of the invited performance or a tender of a beginning of it is an acceptance by performance

(2) Such an acceptance operates as a promise to render complete performance

Question 25

Section 63 (Acceptance)

Answer 25

Unless the offer provides otherwise:

(a) an acceptance made in a manner and by a medium invited by an offer is operative and completes the manifestation of mutual assent as soon as out of the offeree’s possession, without regard to whether it ever reaches the offeror; but

(b) an acceptance under an option contract is not operative until received by the offeror

Question 26

What is the Mailbox Rule?

Answer 26

Once an offeree has dispatched his acceptance via the mail, it is too late for the offeror to revoke the offer
(The offeree cannot back out either)

Question 27

Implications of the Mailbox Rule?

Answer 27

• Acceptance might occur before the offeror knows
• Attempt by the offeror or offeree to revoke an offer after the mailing of the acceptance is ineffective

Question 28

What is the Mirror Image Rule?

Answer 28

For an acceptance to be effective, the offeree must accept the exact terms of the offer

Question 29

What are procedural terms?

Answer 29

• A deadline
• A specific manner of delivery
• Other acts that must take place
• Offer can also specify whether acceptance requires performing the requested act or just promising to perform the requested act

Question 30

What is a bilateral contract?

Answer 30

• Offeror might ask the offeree to promise to do something (the performance of the subject matter will come later)
• The promise is enough to be acceptance

Question 31

What is a unilateral contract?

Answer 31

• The parties are exchanging a promise and performance
• Both must be done for the contract to be accepted
• Performance HAS to be completed before there is acceptance