Offer, Acceptance, Consideration Flashcards
1
Q
What governs a contract for goods?
A
UCC
2
Q
What governs a contract for services or real property?
A
Common law
3
Q
What is a hybrid contract?
A
A contract that involves goods and non-goods.
4
Q
Before the 2022 amendments,
How were hybrid contracts handled?
A
The predominant purpose test was applied to determine if the contract was primarily for goods or services. If the predominant purpose was for goods, UCC governed the whole contract. If the predominant purpose was for services or real property, common law governed the whole contract.
5
Q
How are hybrid contracts handled after the 2022 amendments?
A
The predominant purpose test is applied. If the contract is predominantly for goods, UCC applies to the whole contract. If the contract is predominantly for services or real property, the UCC is only applied to the disputes over goods, and the rest of the contract is governed by common law.
6
Q
What is the predominant purpose test?
A
A test offcially adopted by Code which looks to four factors to determine what the predominant purpose of the contract is:
1. The language of the contract;
2. The nature of the business of the seller;
3. The reason the contract is needed or entered into; and
4. The cost of both services and goods, respectively.
7
Q
What is mutual assent and how is it expressed?
A
Mutual assent is a “meeting of the minds” of both parties and is most commonly expressed through an offer and acceptance, whether through written or spoken word or by conduct.
8
Q
What standard are determinations of mutual assent based on?
A
The objective theory of what a reasonable person would believe based on the outward expressions, words and conduct, of the other party. Unexpressed intentions are irrelevant.
9
Q
Is an offeree bound to inconspicuous contractual provisions?
A
No, regardless of apparent manifestation of assent, the offeree is not bound by inconspicuous contractual provisions of which he is unaware, contained in a document whose contractual nature is not obvious.
10
Q
When would an offeree be bound, even if there is no evidence of actual notice of terms?
A
If a reasonably prudent user would have been on inquiry notices of the terms.
11
Q
Must the manifestation of assent be unambiguous? When would this issue arise?
A
Yes, manifestation of assent must be unambiguous. This issue arises out of agreeing to terms and conditions such as registering for an account online or purchasing something only. Was the consumer required to click, “I accept,” or was there a general notice at the bottom of the page which required no action?
12
Q
What 5 factors must be considered when determining whether a unilateral contract exists?
A
- The language of the statement;
- The circumstances;
- The conduct of both parties;
- Whether the terms are sufficiently definite;
- The length of time between the alleged offer and alleged acceptance
13
Q
What is a unilateral contract?
A
An offer to which only the offeror is bound and the offeree may choose whether or not to perform
14
Q
What is a bilateral contract?
A
When both parties are bound and acceptance may be a promise or performance
15
Q
What are the 3 categories of contracts?
A
- Express (offer and acceptance)
- Implied in fact (inferred by circumstances/unilateral)
- Implied in law (EMS requires payment)
16
Q
Must parties intend to be legally bound to an agreement?
A
Yes. This intent or lack of intent can be express (written or spoken) or inferred by circumstances of the contract (is it written? any reason to think they wouldn’t be?) or presumed such as in commercial contracts.
17
Q
What is an offer?
A
An offer is a written, spoken, or implied by conduct manifestation of willingness to enter into a bargain which empowers the offeree to conclude the bargain by acceptance.
18
Q
When is an offer invalid? (8)
A
- If the offeree knew it was intended to be a joke
- Preliminary negotiations
- Price quotations
- Advertisements
- Solicitations for bids
- Seller’s response to inquiry
- Expressions of opinion
- Indefinite offers
19
Q
What is a preliminary negotiation?
A
When the offeree knows or has reason to know that the offeror does not intend to conclude a bargain until he has made a further manifestation of assent.
20
Q
When are advertisements or solicitations for bids valid offers?
A
When their terms are clear, definite, and explicity and leave nothing open for negotiation
21
Q
What is the idea of written contract to follow?
A
That even though writing is not required under the law for the particular type of agreement at issue, the parties did not intend to be bound until a writing was executed. If either party carries such intention, no amount of negotiation or oral agreement will result in a binding contract.
22
Q
What 7 factors does a court examine to determine whether a party or parties intended not ti be bound without a formal writing?
A
- Whether all terms have been agreed upon;
- Whether the contract type typically involves writing;
- Whether the contract needs a formal writing for its full expression;
- Whether the contract has few or many details;
- Whether it is a common or unusual contract;
- Whether a standard form of contract is widely used in similar transactions; and
- Whether either party takes any action in preparation for performance during the negotiation
23
Q
What is acceptance?
A
A manifestation of assent to the terms set forth in the offer which binds the parties to the terms of the offer.
24
Q
What are the 3 requirements for acceptance by promise?
A
- Must be an expressoin of commitment
- Must not be conditional on any further act by either party
- At common law, must not vary at all from the offer’s terms
25
How may an offer be accepted?
However the offer identifies or invites as acceptable, either expressly determining or by other mode that is reasonable under the circumstances (e.g. mailed offer = ok to mail acceptance; is there a time limit for acceptance?)
26
What if the offeror does not define an appropriate mode of acceptance?
The law requires only a clear and unmistakable expression of the offeree's intention to accept.
27
Generally, does silence constitute acceptance?
No, and an offeror cannot impose upon the offeree a duty to respond.
28
When are the exceptions to the rule that silence does not mean acceptance? (4)
1. When the offeree benefits from services, has time to object, and has reason to believe that the offeror expects payment;
2. When the offeror states or gives reason to belief that silence will constitute acceptance;
3. When based on prior dealings it would follow that the offeree should notify the offeror of intent to not accept; and
4. When the offeree acts inconsistently with the offeror's ownership of an item
## Footnote
Silence as acceptance usually creates an implied in fact contract.
29
How is the mailing of unordered merchandise treated?
It may be treated as a gift and may be retained, used, or discarded.
30
What is a negative option plan?
When a consimer gets regular shipments at a set mail rate until they cancel the agreement
31
Can a party avoid the terms of a contract by claiming they did not read them?
No. However, courts must determine whether the outward manifestations of consent would lead a reasonable person to believe the offeree has assented to the agreement.
32
Can an offeree accept an offer they did not know about?
No, an offeree must know of an offer prior to acceptance. This also includes silence as acceptance.
33
When is the power of acceptance terminated? (5)
1. Revocation by offeror
2. Counteroffer by offeree
3. Rejection by offeree
4. Death or incapacitation
5. Lapse of time
34
When and how may an offeror revoke his offer?
Any time prior to acceptance (except option contracts and unilateral w/ part performance). Revocation may be an explicit manifestation of a party's intent not to enter into a contract or indirect by the offeree learning of the contrary intentions from another reliable party. If an offer is published in a particular manner, it should be revoked in the same manner.
35
What is a nudum pactum?
An agreement that is unenforceable because it lacks consideration. A naked promise.
36
What is the general rule in cases where it is unclear whether acceptance is invited by performance or promise?
That the offeree can accept by either promise to perform or performance.
37
If acceptance by performance is required by the offeror or chosen by the offeree, what must happen?
By begining performance (partial performance) the offer becomes an option contract and the offeree is required to complete the performance
38
When does lapse of time terminate the power of acceptance?
Either by the time specified in the offer or, if unspecified, by a time which is reasonable depending on the circumstances existing when the offer and attempted acceptance were made
39
When do offers made face to face or by phone call usually expire?
Unless otherwise agreed upon by the parties, an offer made face to face or by phone call ends as soon as the conversation is over and the power of acceptance is terminated.
40
When does death or incapacity terminate the power of acceptance?
When an offer was made but not yet accepted. If accepted prior to either, a contract exists. If accepted by offeree without knowledge of either, and it is reasonable, the contract is binding. Another exception is an option contract. Continuing offers terminate upon death, even without notice to offeree.
41
When does an offeree's rejection not terminate the power of acceptance? (2)
1. When the offeror has manifested the intent to keep the offer open despite the rejection or
2. When the offeree manifests the intention to take the offer under further advisement
42
What is the general mailbox rule?
That as long as mail is an acceptable means of acceptance, a contract is binding upon the proper postage of the mail.
43
When is a mailed revocation in effect?
When it received
44
If the acceptance is mailed correctly but never arrives to the offeror, is it valid?
Yes, a binding contract is still formed.
45
When mailed, when are a counteroffer, rejection, or option contract effective?
Upon receipt
46
Can parties contract out of the mailbox rule?
Yes, by including in the terms of the offer that acceptance must be recieved by a certain date or that acceptance is only effective upon receipt.
47
What if the offeree first mails the acceptance and then the rejection/counteroffer?
A binding contract is formed regardless of which letter arrives first. Unless the rejection arrives first and the offeror relies upon it.
48
What if the offeree first mails the rejection and then the acceptance?
The acceptance is only effective if it is received before the rejection.
49
What if a mailed acceptance letter has one digit wrong in the zip code?
It is still effective because the postal regulations do not require a zip code for a single piece of first-class mail.
50
What is a counteroffer and how does it operate?
A counteroffer is an offeree's response to an offer which changes any of the terms of the offer. It acts as a rejection. If the original offeror proceeds under the counteroffer's terms, the parties are bound by those terms.
51
What is the common law mirror image rule?
That an acceptance to an offer must be to all terms of the offer and may not vary even slightly
52
When is a contract **not** void for indefiniteness?
When the material terms are reasonably certain as to provide a basis for determining the existence of a breach and giving a remedy.
53
What if a contract is missing one or more material terms?
It may indicate to the court that the parties did not have intent to contract
54
What material term is absolutely required by the UCC?
Quantity. The UCC provides gapfillers for almost all other terms, except for quantity.
55
How should courts deal with indefinite terms which do not void the contract?
Courts should fill in gaps to ensure fairness where the reasonable expectations of the parties are fairly clear. However, courts should not impose on a party any performance to which he did not and probably would not have agreed.
56
When should specific performance be denied in contracts with indefiniteness?
Where a gap in an agreement manifests a failure to agree or where gaps cannot be filled with confidence that the reasonable expectations of the parties are being fulfilled
57
What may a court do if specific performance is sought for an agreement which a consideration has been unperformed?
It may secure the performance through a surety bond or requiring a party to make a payment.
58
What are the two requirements of consideration?
A bargained for exchange and each party receives a benefit and sustains a detriment
59
What is bargained for exchange?
A performance or return promise is bargained for if it sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise
60
What may constitute performance for consideration?
1. An act other than a promise
2. A forbearance
3. The creation, modification, or destruction of a legal relation
61
Who can complete the performance or return promise required by consideration?
The performance or return promise may be given to the promisor or to some other person. It may be given by the promisee or some other person.
62
Is "I promise to give you $500" consideration?
No, this is a gift promise. A gift promise is not consideration.
63
Is it consideration if a 21 year old promises not to smoke cigarettes for a year?
Yes. Forbearing a legal right is consideration because the promisee is giving up that which he has a legal right to do.
64
Is it consideration to offer to buy a homeless man a jacket if he walks across the street to a store?
No. This is just a condition to a gift promise.
65
What is sufficiency in terms of consideration?
Sufficiency refers to whether the consideration has any value at all in the eyes of the law
66
What is adequacy in terms of consideration? Is it important?
Adequacy refers to the quantities of the consideration exchanged between parties. Courts will not often inquire into adequacy so long as sufficiency is establish. Mere adequacy will not void a contract for lack of consideration.
67
Are love and affection or other altruistic motives (like being a good samaritan) sufficient consideration?
No
68
Are things like novel/new ideas and skills of teaching sufficient consideration?
Yes
69
How do courts feel about sham or nominal consideration?
They are insufficient. (e.g. trading $50 for $100 - this is essentially a gift promise)
70
What is an option contract?
An option contract is an irrevocable offer which hold the offer for a predetermined period of time.
71
What are the majority and minority rules regarding consideration and option contracts?
The majority holds that consideration msut be tendered for an option contract to be valid. The minority holds that a mere recitation in writing which is signed is sufficient consideration for an option contract. Both jurisdiction allow nominal consideration for option contracts.
72
When is forbearance to assert a **valid** claim consideration?
Always
73
When is forbearance to assert an **invalid** claim consideration?
ONLY IF the surrendering party has a good faith belief that the claim is valid or an instrument surrendering the claim is bargained for
74
Is forbearance from not terminating an employee consideration?
It may be in a situation such as the employer forbears terminating the employee (at will employment) in exchange for the employee signing a noncompete agreement
75
What if an offer specifies a promise to forbear a claim as consideration?
If an offer specifies a return promise to forbear as the requested consideration, then forbearance without promise is not consideration
76
What is an illusory promise? Is it consideration?
It is a promise where the promising party reserves the right to change his or her mind. This is not consideration.
77
What is an output contract?
When a buyer promises to buy all of which a seller can produce, as long as it is within reason. Not illusory.
78
What is a requirement contract?
When a buyer promises to buy all of a specific item that it will need, so long as each party acts reasonably. This is not illusory.
79
What is a reasonable efforts obligation? Is it consideration?
A reasonable efforts obligation is an implied promise by a party to make reasonable efforts to obtain the results set out in the terms of the offer
80
What is the basic test for an illusory promise under common law?
Does the promise put a limitation upon the promiser's future liberty of action? If yes, not illusory.
81
What is a satisfaction clause?
A clause added to a contract which gives one or both parties the opportunity to terminate an agreement if a party is dissatisfied with the other party's work.
82
What are the two standards employed regarding satisfaction clauses? Describe them. When does the court employ each?
1. The reasonable person standard is an objective standard that applies to matters dealing with commercial quality, physical fitness, or utility.
2. The good faith standard is a subjective standard that applies to matters dealing with aesthetic or taste.
The court employs either standard based on the inferred intent of the parties.
83
Is past consideration sufficient? Why or why not?
No. Valid consideraton must be bargained for. It must induce a return act or promise. Consideration cannot have been delivered prior to a promise.
84
What is the majority rule regarding moral obligation as consideration?
The majority rule is that moral obligations are not sufficient consideration.
85
What are the 3 narrow exceptions to the majority rule regarding moral obligation as consideration?
1. A promise to pay a debt barred by an SOL
2. Promise to pay a debt discharged by bankruptcy
3. Promise to pay a voidable debt (one that could be voided on the grounds of fraud, mistake, duress, or infancy)
86
What is the minority rule regarding moral obligation as consideration?
Moral obligation is sufficient consideration where the promisor has received a material benefit although there was no original duty or liability resting on the promisor.
87
What is the basic concept of the pre-existing duty rule? What is its purpose?
A promise to pay a man for that which he is already under contract to do is without consideration. The rule's purpose is to prevent a "hold up" game where one party needs the work finished so it feels compelled to agree to pay more with no additional consideration.
88
When is a promise modifying a duty under an executory contract binding?
1. if the modification is fair and equitable in view of circumstances not anticipated by the parties when the contract was made; or
2. to the extent provided by statute; or
3. to the extent justice requires enforcement in view of material change of position in reliance on the promise
89
How does the UCC feel about contract modifications?
They require no consideration to be binding as long as they are made in good faith
90
May an office collect a reward for that which they were already under a pre-existing duty to do?
No
91
Can a person use the same performance as consideration for multiple contracts?
The majority rule is that there is no difficulty with using the same performance as consideration for two different contracts with two different people.
92
What are the rules governing paying past due monetary debts and consideration?
When a creditor agrees to accept less money than that which is due, there is no consideration. However, there is consideration where the creditor accepts less in conjunction with a new term such as paying the debt sooner or attaching a non-fungible item. If there is a good faith dispute, accepting less is consideration.
93
What is an executory accord?
It is a type of bilateral contract in the form of an agreement for the future discharge of an existing claim by substituted performance. The original cause of action is suspended until completion of the settlement agreement.
94
What is a substitute contract?
The promise of future performance, not the actual performance itself, which discharges the existing claim
95
Are executory accords binding? What are the remedies for beach?
Yes, until the owing party gives a reasonable basis for belief that they will not perform. The other party can either proceed with the original claim or sue for breach of the settlement agreement.
96
UCC 3-311 governs accord and satisfaction by use of instruments. What is the common law take on this issue of "paid in full" checks where the amount tendered does not satisfy the amount owed?
The majority common law rule is that cashing a check, even by mistake, works as an accord and satisfaction. No accord and satisfaction occurs absent a good faith dispute. The check should be returned immediately. Silence is acceptance where there is a duty to speak as is here.
97
What is promissory estoppel? When does it apply?
The doctrine of promissory estoppel applies when the promisee has reasonably and foreseeably relied on the promise and sustained a detriment from the reliance which would cause injustice absent enforcement.
98
What are the 4 elements of promissory estoppel?
1. a promise,
2. a foreseeable reliance
3. detrimental reliance
4. injustice absent enforcement
99
What are two exceptions to promissory estoppel where the court will usually not enforce the promise?
charitable subscriptions and marriage settlements
100
What type of authority is necessary to make a promise or enter contract?
Someone must have either actual or apparent authority to make a promise or enter a contract.
101
What is apparent authority?
Apparent authority is the power to bind a principal in the absence of actual authorization from the principal, but under circumstances in which the principal leads a person with whom his agent deals with to believe that the agent has authority.
102
What must courts consider in relation to the promisee's relaince on the promise?
Whether it was reasonable
103
What is the reliance interest in promissory estoppel?
The reliance is the plaintiff's interest in being reimbursed for loss caused by reliance on the contract, the out-of-pocket loss.
104
What does the court generally focus on in awarding damages for promissory estoppel?
out-of-pocket expenses
105
Should you pursue a breach of contract claim or promissory estoppel claim? Why?
If both options are available, it is usually better to pursue a breach claim. The goal with promissory estoppel is to prevent injustice. The damages are limited.
106
Is promissory estoppel a cause of action or substitute for a contract element?
Promissory estoppel is recognized as a free standing cause of action, not a substitute for consideration in a breach of contract action.
107
When is promissory estoppel not available?
When an enforceable contract exists.
108
Can promissory estoppel help with problems with consideration or indefinite contracts?
Yes. If there is a problem with consideration or the contract is too indefinite to enforce, promissory estoppel may provide a remedy. An agreement to negotiate or a promise to further negotiate is too indefinite, too undefined in scope, to be enforceable.
