R5 M1 - Contracts: Part I (Notes) Flashcards
What are the three ways an offer can be terminated
- Revocation of offeror
-Even if the offeror is open for 30 days the offer can be revoked at any time before acceptance by the offeree. (This can be done directly or indirectly –> selling to somebody else without telling the person.)
-However, if the offeree gives you money to keep the offer open (option contract) then it is irrevocable option, until the offeree decides to exercise it or not.
- Rejection of the offeree.
- Once the offeree rejects the offer and request for a different price this is considered a counteroffer. Even if you rejected and later accepted, this would be considered a counteroffer. - Operation of law: –> (court says you can’t do that, death of a party)
If your acceptance is received before your rejection of an offer than the rejection is not valid.
Susan offered to sell Blackacre to Beth. Susan agreed to keep the offer open for one week and Beth paid Susan $10,000 to keep her offer open. Two days later, Susan revoked her offer and immediately returned the $10,000 to Beth. Assuming all the elements of a valid offer have been satisfied, is the offer still open?
A. No, an offer must be accepted immediately to be effective. B. Yes, an offeror must keep the offer open for the stated period of time if the offeree provided consideration. C. Yes, an offeror must keep the offer open for the stated period of time. D. No, an offeror can revoke an offer any time before acceptance.
Choice “B” is correct. Although the general rule is that all offers can be revoked prior to acceptance, there are three exceptions: (1) where consideration is paid to keep the offer open (called an option contract); (2) a substantial start on a unilateral contract; and (3) a merchant’s firm offer under the UCC.
Here, the offeree provided consideration ($10,000) to keep the offer open for the stated period of time, creating an option contract. The offeror, therefore, would have to keep the offer open for the time period stated.
Choice “A” is incorrect. As a general rule, to be effective, an offer must be accepted within a reasonable time after the offer is communicated.
Choice “C” is incorrect. Even where the offeror agrees to keep an offer open, the offer can be revoked any time prior to acceptance, unless one of the three exceptions above is present.
Choice “D” is incorrect. An offer can be revoked any time before acceptance unless one of the three exceptions listed above has been satisfied.
Terri sends a note to Jim offering to sell Jim her car. However, Terri conditions the sale on Jim accepting the offer by July 11. Terri may revoke the offer:
A. Before the note accepting the offer by Jim is actually received by Terri. B. Because it is mailed under the mailbox rule. C. Before Jim mails a note of acceptance. D. None of the above.
Choice “C” is correct. An offeror can revoke an offer any time up until the offeree accepts the offer. Under the mailbox rule, an offer is deemed accepted at the moment an acceptance is mailed. An offeror may opt out of the mailbox rule by providing that an acceptance must be received to be effective. Here, Terri merely provided that acceptance had to be made by July 11 and did not provide that it was effective only upon receipt.
Choice “A” is incorrect. Under the mailbox rule, an offer is deemed accepted at the moment the acceptance is mailed.
Choice “B” is incorrect. As a general rule, offers are revocable any time before acceptance, and this is true whether the offer was mailed or delivered personally.
Choice “D” is incorrect, based on the explanations above.
Method of Contract Formation:
Unilateral Contract
- There is one promise, which is given in exchange for performance
Example: I lost my dog, please find him for $1,000
Bilateral Contract
- There are two promises: A promise is exchange for a promise.
Example: I promise to pay $100 if you cut my hair.
There are two source of contract law:
- Common law (law that was made from prior decision. Derived from the courts)
Common law rules apply to RISE:
- Real Estate
- Insurance
- Service (Wash Car/ Doctor appointments)
- Employment
- Uniform Commerical Code (UCC) Sale Article -> anything you can move. It can be furniture, clothing etc. They can’t be real estate or service.
What are three elements that makes an agreement enforceable?
- Offer is made and accepted.
- An exchange of consideration (something of legal value)
- No defense (ex: forced to do the contract through fraud, duress, undue influence.
If all these three requirements are met the contract is enforceable, if not it’s not.
What is Quasi Contract
Quasi contract is contract for unjust enrichment.
I put down $10,000 for a house and he refuses to sell. I can go to court and ask for my money back since I can’t get the house.
Under the UCC to have a valid offer you need to have the quantity of the sale of goods.
Under the common law to have a valid offer we need to have:
- Identify the offeree and the material sold
- Price to be paid
- Time of performance
- Quantity involved
- Type of work to perform
What are three ways an offer can be Terminated?
Side note: Would you take $500.00 is not a counteroffer, it is an inquiry.
- Revocation of offeror (offeror can change his mind at any time before acceptance.)
- Rejection of the offeree (once rejected and accepted it has now become a counteroffer.
- By operation law (Death of either party, incompetence, Destroyed and illegal)
Exception: An option contract does not apply to operation of law
A rejection is valid when it is received. An acceptance is valid when it is sent.
If nothing is specified, the mailbox rule is applied if not the offeror can specify when he should receive the offer and that applies
Opal offered, in writing, to sell Larkin a parcel of land for $300,000. If Opal dies, the offer will:
A. Automatically terminate despite Larkin's prior acceptance. B. Terminate prior to Larkin's acceptance only if Larkin received notice of Opal's death. C. Remain open for a reasonable period of time after Opal's death. D. Automatically terminate prior to Larkin's acceptance.
Choice “D” is correct. The death of an offeror prior to acceptance terminates the offer by operation of law without notice to the offeree.
Choice “A” is incorrect, because if the offeree accepts prior to the offeror’s death, the offer cannot be revoked because a contract was formed.
Choice “B” is incorrect, because notice is not necessary for an offer to terminate by operation of law.
Choice “C” is incorrect, because the offer terminated by operation of law upon Opal’s death.
What is consideration?
A promise to do something you are not obligated to do.
- Promise to refrain or to perform acts
- Promise to pay money &
- Promise to give land, goods, stocks
For example - I promise to pay you $500 if you stop smoking
The only requirement for a consideration is that it has to be legally sufficient.
Consideration is something of legal value must be given by each party and there must be a bargain exchange.
The element of legal value comes into play when it is to the detriment of the Promisee or the benefit of the promisor.
For example, I promise to pay Bill $600 if you clean my Car. If the person performs something of legal value in his line of duty that does not count. For example, I will pay an attorney $500.00 to start suing process. This would not be consideration.
