Offer, Acceptance, Consideration

Question 1

What governs a contract for goods?

Answer 1

UCC

Question 2

What governs a contract for services or real property?

Answer 2

Common law

Question 3

What is a hybrid contract?

Answer 3

A contract that involves goods and non-goods.

Question 4

Before the 2022 amendments,

How were hybrid contracts handled?

Answer 4

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.

Question 5

How are hybrid contracts handled after the 2022 amendments?

Answer 5

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.

Question 6

What is the predominant purpose test?

Answer 6

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.

Question 7

What is mutual assent and how is it expressed?

Answer 7

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.

Question 8

What standard are determinations of mutual assent based on?

Answer 8

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.

Question 9

Is an offeree bound to inconspicuous contractual provisions?

Answer 9

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.

Question 10

When would an offeree be bound, even if there is no evidence of actual notice of terms?

Answer 10

If a reasonably prudent user would have been on inquiry notices of the terms.

Question 11

Must the manifestation of assent be unambiguous? When would this issue arise?

Answer 11

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?

Question 12

What 5 factors must be considered when determining whether a unilateral contract exists?

Answer 12

1. The language of the statement;
2. The circumstances;
3. The conduct of both parties;
4. Whether the terms are sufficiently definite;
5. The length of time between the alleged offer and alleged acceptance

Question 13

What is a unilateral contract?

Answer 13

An offer to which only the offeror is bound and the offeree may choose whether or not to perform

Question 14

What is a bilateral contract?

Answer 14

When both parties are bound and acceptance may be a promise or performance

Question 15

What are the 3 categories of contracts?

Answer 15

1. Express (offer and acceptance)
2. Implied in fact (inferred by circumstances/unilateral)
3. Implied in law (EMS requires payment)

Question 16

Must parties intend to be legally bound to an agreement?

Answer 16

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.

Question 17

What is an offer?

Answer 17

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.

Question 18

When is an offer invalid? (8)

Answer 18

• 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

Question 19

What is a preliminary negotiation?

Answer 19

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.

Question 20

When are advertisements or solicitations for bids valid offers?

Answer 20

When their terms are clear, definite, and explicity and leave nothing open for negotiation

Question 21

What is the idea of written contract to follow?

Answer 21

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.

Question 22

What 7 factors does a court examine to determine whether a party or parties intended not ti be bound without a formal writing?

Answer 22

1. Whether all terms have been agreed upon;
2. Whether the contract type typically involves writing;
3. Whether the contract needs a formal writing for its full expression;
4. Whether the contract has few or many details;
5. Whether it is a common or unusual contract;
6. Whether a standard form of contract is widely used in similar transactions; and
7. Whether either party takes any action in preparation for performance during the negotiation

Question 23

What is acceptance?

Answer 23

A manifestation of assent to the terms set forth in the offer which binds the parties to the terms of the offer.

Question 24

What are the 3 requirements for acceptance by promise?

Answer 24

1. Must be an expressoin of commitment
2. Must not be conditional on any further act by either party
3. At common law, must not vary at all from the offer’s terms

Question 25

How may an offer be accepted?

Answer 25

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?)

Question 26

What if the offeror does not define an appropriate mode of acceptance?

Answer 26

The law requires only a clear and unmistakable expression of the offeree’s intention to accept.

Question 27

Generally, does silence constitute acceptance?

Answer 27

No, and an offeror cannot impose upon the offeree a duty to respond.

Question 28

When are the exceptions to the rule that silence does not mean acceptance? (4)

Answer 28

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

Silence as acceptance usually creates an implied in fact contract.

Question 29

How is the mailing of unordered merchandise treated?

Answer 29

It may be treated as a gift and may be retained, used, or discarded.

Question 30

What is a negative option plan?

Answer 30

When a consimer gets regular shipments at a set mail rate until they cancel the agreement

Question 31

Can a party avoid the terms of a contract by claiming they did not read them?

Answer 31

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.

Question 32

Can an offeree accept an offer they did not know about?

Answer 32

No, an offeree must know of an offer prior to acceptance. This also includes silence as acceptance.

Question 33

When is the power of acceptance terminated? (5)

Answer 33

1. Revocation by offeror
2. Counteroffer by offeree
3. Rejection by offeree
4. Death or incapacitation
5. Lapse of time

Question 34

When and how may an offeror revoke his offer?

Answer 34

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.

Question 35

What is a nudum pactum?

Answer 35

An agreement that is unenforceable because it lacks consideration. A naked promise.

Question 36

What is the general rule in cases where it is unclear whether acceptance is invited by performance or promise?

Answer 36

That the offeree can accept by either promise to perform or performance.

Question 37

If acceptance by performance is required by the offeror or chosen by the offeree, what must happen?

Answer 37

By begining performance (partial performance) the offer becomes an option contract and the offeree is required to complete the performance

Question 38

When does lapse of time terminate the power of acceptance?

Answer 38

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

Question 39

When do offers made face to face or by phone call usually expire?

Answer 39

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.

Question 40

When does death or incapacity terminate the power of acceptance?

Answer 40

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.

Question 41

When does an offeree’s rejection not terminate the power of acceptance? (2)

Answer 41

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

Question 42

What is the general mailbox rule?

Answer 42

That as long as mail is an acceptable means of acceptance, a contract is binding upon the proper postage of the mail.

Question 43

When is a mailed revocation in effect?

Answer 43

When it received

Question 44

If the acceptance is mailed correctly but never arrives to the offeror, is it valid?

Answer 44

Yes, a binding contract is still formed.

Question 45

When mailed, when are a counteroffer, rejection, or option contract effective?

Answer 45

Upon receipt

Question 46

Can parties contract out of the mailbox rule?

Answer 46

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.

Question 47

What if the offeree first mails the acceptance and then the rejection/counteroffer?

Answer 47

A binding contract is formed regardless of which letter arrives first. Unless the rejection arrives first and the offeror relies upon it.

Question 48

What if the offeree first mails the rejection and then the acceptance?

Answer 48

The acceptance is only effective if it is received before the rejection.

Question 49

What if a mailed acceptance letter has one digit wrong in the zip code?

Answer 49

It is still effective because the postal regulations do not require a zip code for a single piece of first-class mail.

Question 50

What is a counteroffer and how does it operate?

Answer 50

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.

Question 51

What is the common law mirror image rule?

Answer 51

That an acceptance to an offer must be to all terms of the offer and may not vary even slightly

Question 52

When is a contract not void for indefiniteness?

Answer 52

When the material terms are reasonably certain as to provide a basis for determining the existence of a breach and giving a remedy.

Question 53

What if a contract is missing one or more material terms?

Answer 53

It may indicate to the court that the parties did not have intent to contract

Question 54

What material term is absolutely required by the UCC?

Answer 54

Quantity. The UCC provides gapfillers for almost all other terms, except for quantity.

Question 55

How should courts deal with indefinite terms which do not void the contract?

Answer 55

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.

Question 56

When should specific performance be denied in contracts with indefiniteness?

Answer 56

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

Question 57

What may a court do if specific performance is sought for an agreement which a consideration has been unperformed?

Answer 57

It may secure the performance through a surety bond or requiring a party to make a payment.

Question 58

What are the two requirements of consideration?

Answer 58

A bargained for exchange and each party receives a benefit and sustains a detriment

Question 59

What is bargained for exchange?

Answer 59

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

Question 60

What may constitute performance for consideration?

Answer 60

1. An act other than a promise
2. A forbearance
3. The creation, modification, or destruction of a legal relation

Question 61

Who can complete the performance or return promise required by consideration?

Answer 61

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.

Question 62

Is “I promise to give you $500” consideration?

Answer 62

No, this is a gift promise. A gift promise is not consideration.

Question 63

Is it consideration if a 21 year old promises not to smoke cigarettes for a year?

Answer 63

Yes. Forbearing a legal right is consideration because the promisee is giving up that which he has a legal right to do.

Question 64

Is it consideration to offer to buy a homeless man a jacket if he walks across the street to a store?

Answer 64

No. This is just a condition to a gift promise.

Question 65

What is sufficiency in terms of consideration?

Answer 65

Sufficiency refers to whether the consideration has any value at all in the eyes of the law

Question 66

What is adequacy in terms of consideration? Is it important?

Answer 66

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.

Question 67

Are love and affection or other altruistic motives (like being a good samaritan) sufficient consideration?

Answer 67

No

Question 68

Are things like novel/new ideas and skills of teaching sufficient consideration?

Answer 68

Yes

Question 69

How do courts feel about sham or nominal consideration?

Answer 69

They are insufficient. (e.g. trading $50 for $100 - this is essentially a gift promise)

Question 70

What is an option contract?

Answer 70

An option contract is an irrevocable offer which hold the offer for a predetermined period of time.

Question 71

What are the majority and minority rules regarding consideration and option contracts?

Answer 71

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.

Question 72

When is forbearance to assert a valid claim consideration?

Answer 72

Always

Question 73

When is forbearance to assert an invalid claim consideration?

Answer 73

ONLY IF the surrendering party has a good faith belief that the claim is valid or an instrument surrendering the claim is bargained for

Question 74

Is forbearance from not terminating an employee consideration?

Answer 74

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

Question 75

What if an offer specifies a promise to forbear a claim as consideration?

Answer 75

If an offer specifies a return promise to forbear as the requested consideration, then forbearance without promise is not consideration

Question 76

What is an illusory promise? Is it consideration?

Answer 76

It is a promise where the promising party reserves the right to change his or her mind. This is not consideration.

Question 77

What is an output contract?

Answer 77

When a buyer promises to buy all of which a seller can produce, as long as it is within reason. Not illusory.

Question 78

What is a requirement contract?

Answer 78

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.

Question 79

What is a reasonable efforts obligation? Is it consideration?

Answer 79

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

Question 80

What is the basic test for an illusory promise under common law?

Answer 80

Does the promise put a limitation upon the promiser’s future liberty of action? If yes, not illusory.

Question 81

What is a satisfaction clause?

Answer 81

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.

Question 82

What are the two standards employed regarding satisfaction clauses? Describe them. When does the court employ each?

Answer 82

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.

Question 83

Is past consideration sufficient? Why or why not?

Answer 83

No. Valid consideraton must be bargained for. It must induce a return act or promise. Consideration cannot have been delivered prior to a promise.

Question 84

What is the majority rule regarding moral obligation as consideration?

Answer 84

The majority rule is that moral obligations are not sufficient consideration.

Question 85

What are the 3 narrow exceptions to the majority rule regarding moral obligation as consideration?

Answer 85

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)

Question 86

What is the minority rule regarding moral obligation as consideration?

Answer 86

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.

Question 87

What is the basic concept of the pre-existing duty rule? What is its purpose?

Answer 87

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.

Question 88

When is a promise modifying a duty under an executory contract binding?

Answer 88

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

Question 89

How does the UCC feel about contract modifications?

Answer 89

They require no consideration to be binding as long as they are made in good faith

Question 90

May an office collect a reward for that which they were already under a pre-existing duty to do?

Answer 90

No

Question 91

Can a person use the same performance as consideration for multiple contracts?

Answer 91

The majority rule is that there is no difficulty with using the same performance as consideration for two different contracts with two different people.

Question 92

What are the rules governing paying past due monetary debts and consideration?

Answer 92

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.

Question 93

What is an executory accord?

Answer 93

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.

Question 94

What is a substitute contract?

Answer 94

The promise of future performance, not the actual performance itself, which discharges the existing claim

Question 95

Are executory accords binding? What are the remedies for beach?

Answer 95

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.

Question 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?

Answer 96

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.

Question 97

What is promissory estoppel? When does it apply?

Answer 97

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.

Question 98

What are the 4 elements of promissory estoppel?

Answer 98

1. a promise,
2. a foreseeable reliance
3. detrimental reliance
4. injustice absent enforcement

Question 99

What are two exceptions to promissory estoppel where the court will usually not enforce the promise?

Answer 99

charitable subscriptions and marriage settlements

Question 100

What type of authority is necessary to make a promise or enter contract?

Answer 100

Someone must have either actual or apparent authority to make a promise or enter a contract.

Question 101

What is apparent authority?

Answer 101

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.

Question 102

What must courts consider in relation to the promisee’s relaince on the promise?

Answer 102

Whether it was reasonable

Question 103

What is the reliance interest in promissory estoppel?

Answer 103

The reliance is the plaintiff’s interest in being reimbursed for loss caused by reliance on the contract, the out-of-pocket loss.

Question 104

What does the court generally focus on in awarding damages for promissory estoppel?

Answer 104

out-of-pocket expenses

Question 105

Should you pursue a breach of contract claim or promissory estoppel claim? Why?

Answer 105

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.

Question 106

Is promissory estoppel a cause of action or substitute for a contract element?

Answer 106

Promissory estoppel is recognized as a free standing cause of action, not a substitute for consideration in a breach of contract action.

Question 107

When is promissory estoppel not available?

Answer 107

When an enforceable contract exists.

Question 108

Can promissory estoppel help with problems with consideration or indefinite contracts?

Answer 108

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.