Tests

Question 1

Test for Offer

Answer 1

The basic test is whether a reasonable person n the position of the offeree would believe that his or her assent creates a contract. This is objective.

Common law sale of real estate requires a price and description otherwise it’s not an offer.

UCC sale of goods does not require a price if the parties intend.

Vague or ambiguous material terms (i.e. fair, reasonable, or appropriate) are not an offer. However, output terms (i.e. all, solely, only, and requirements) are okay.

Question 2

Advertisements as Offers

Answer 2

Generally, an advertisement is not an offer, it’s merely an invitation to deal. However, advertisements that contain rewards (Carbolic Smoke Ball Co.) or that are specific as to quantity and who can accept (Mink Coat Case) will be considered offers.

Question 3

Methods of Terminating Offers

Answer 3

Lapse of Time: If the time stated in the offer has passed or if a reasonable amount of time has passed. 30 days is a good benchmark for a reasonable amount of time.

Revocation: Unambiguous statement by the offeror to the offeree of unwillingness or inability to contract OR unambiguous conduct by offeror which indicates the same and that the offeree is aware of.

Death or incapacity of either party after the offer but before acceptance terminates the offer, even if the other side doesn’t know. Unless its an option contract or partial performance has begun on a unilateral contract.

No mailbox rule for revocations, the offers is valid until actual notice of the revocation is received.

Question 4

Offers that Cannot be Revoked

Answer 4

Option Contracts: An offer cannot be revoked if the offeror has promised to keep the offer open and the promise is supported by consideration.

Merchant Firm Offer Rule: An offer cannot be revoked for UP TO 3 months if the party is a merchant who promises in a signed writing to keep the offer open and the offer is related to the buying or selling of goods.

Reliance: An offer cannot be revoked if there has been detrimental reliance by the offeree that is reasonably foreseeable.

Unilateral Contract Start of Performance: Start of performance (not mere preparation) of a unilateral contract makes that offer irrevocable for a reasonable amount of time to complete performance.

Question 5

Methods of Rejection

Answer 5

Counteroffer (not bargaining)
Conditional Acceptance
Additional Terms (common law only)

Question 6

Additional Terms Under UCC

Answer 6

A fact pattern in which there is an offer to buy or sell GOODS and a response with additional terms raises two questions:

Is there a contract? Under the UCC a response that adds new terms but does not make those new terms a condition of acceptance, is generally treated as a “seasonable expression of acceptance”

Are the new terms part of the contract? If both parties are merchants, the general rule is that the additional term is part of the contract. The exception is when the term materially changes the offer OR if deal is between merchants and the offeror objects to the change.

If one of the parties is not a merchant, the additional term is merely a proposal to be separately accepted or rejected.

Death or incapacity of either party after the offer but before acceptance terminates the offer, even if the other side doesn’t know. Unless its an option contract or partial performance has begun on a unilateral contract.

Question 7

Who can accept an offer?

Answer 7

Generally, the offer can only be accepted by someone who knows about the offer and to whom the offer was made. Offers cannot be assigned. Options can be assigned unless the option contract provides otherwise.

Question 8

Methods of Accepting an Offer

Answer 8

If the offeree fully performs. The only issue is whether notice of performance is required. The answer to that question turns on what the offer says and whether the offeree has reason to believe the offeror will learn of the acceptance.

If the offeree starts to perform it is usually acceptance of an offer to enter into a bilateral contract but not acceptance of an offer to enter into a unilateral contract (those require full performance).

The offeree promises to perform. This works so long as the offer does not state otherwise.

Mailbox Rule

Question 9

What happens if the seller performs but it isn’t perfect?

Answer 9

In UCC, demand perfect performance. So an imperfect tender is simultaneous acceptance and breach.

The exception to this is if the seller offers an accommodation and notifies the buyer. This is treated as a counteroffer, no breach.

Question 10

Silence and Acceptance

Answer 10

Generally, silence is not acceptance. The only exception is if custom indicates that acceptance is reasonable, or if the offeree by words or conducts agrees that silence is acceptance.

Question 11

Forms of Consideration

Answer 11

Performance: doing something you’re not legally obligated to do.

Forbearance: Refraining from doing something you’re legally entitled to do.

Promise to Perform or Forbear

Question 12

What does it mean to be “bargained-for”?

Answer 12

It’s part of an exchange, one party doesn’t just do it.

Lopsided bargains are okay if they are serious and bargained for. Joke consideration is something that was merely a gift and was not actually bargained for.

Past consideration is not consideration (i.e. can’t promise to pay someone for something they already did).

Pre-existing duty is not consideration for a promise to pay (under COMMON LAW) unless the person promising to pay is third party to whom the duty is not owed. Under UCC the pre-ecisting legal duty rule does not apply and the test is whether any changes to the existing duty are made in good faith.

Payment of debt that is due and undisputed cannot be consideration, but payment of not yet due debts, expired debts, or disputed debts can be consideration.

Promisory Estoppel (detrimental reliance) is the most important consideration SUBSTITUTE. It requires a promise, reliance that is reasonable, foreseeable, and detrient, and enforcement is necessary to prevent injustice.

Question 13

UCC: Delivery Obligations When Not Specified in Contract

Answer 13

If its a UCC contract and no place of delivery has been agreed upon, the place of delivery is the seller place of business unless both parties know the goods are located elsewhere, then that is the place of delivery.

Question 14

Who bears the risk of loss?

Answer 14

Agreement allocates risk

The breaching party is liable for any uninsured loss even though breach is unrelated to problem.

If delivery by common carrier, the risk of loss shifts from buyer to seller at time that the seller completes its delivery obligations.

If the seller is a merchant and the above fail, the risk of loss shifts when they buyer receives the goods. For a non-merchant seller, the risk shifts when he or she tenders the goods.

Question 15

Purposes for Parol Evidence

Answer 15

Changing the Written Deal: regardless of whether there is complete or partial integration, the parol evidence rule prevents parties from using earlier agreements as a source of terms that are inconsistent with the terms in the contract. However, the court may consider it for the following:

Mistake in Integration: Clerical error

Establishing a Defense: Courts may consider parol evidence for the purpose of determining whether there is a defense such as fraud, misrepresentation, or duress.

Explaining ambiguous terms in the deal when there was only partial integration.

Question 16

Sale of Goods Performance Concepts

Answer 16

Perfect Tender Rule

Rejection of Goods; Buyer can reject less than perfect goods prior to acceptance so long as there is not a cure or installment sale contract.

Cure: In some instances, a seller who fails to make perfect tender will be given a second chance. Buyers cannot compel cure.

Installment Sales Contracts: A buyer has a right to reject an installment only where there is substantial impairment that cannot be cured.

Acceptance of Goods: A buyer who accepts the goods cannot later reject them. Acceptance does not take place until buyer has had a reasonable chance to inspect the goods.

Revocation of Acceptance of Goods: A buyer who has accepted the goods can effect a cancelation of the contract by revoking acceptance if: there is a nonconformity that substantially impairs value, there is excusable ignorance of grounds for revocation or a reasonable reliance on sellers assurance of satisfaction, the renovation is within a reasonable time of the discovery of nonconformity.

Question 17

Payment Concepts

Answer 17

Unless otherwise agreed, cash is always okay, buyer can pay by check but seller does not have to accept, however, seller must then give buyer reasonable time to get cash.

Question 18

Defenses

Answer 18

Promisor's lack of capacity
Illegality
Misrepresentation (no fraud requirement)
Duress
Unconscionability at time of Formation
Ambiguity in Words of Agreement
Mistake of Fact At Time of Contract

Question 19

Liability for Defenses

Answer 19

A person who does not have capacity is still legally obligated to pay for things that are necessary such as food, clothing, medical care, or shelter, but that liability is based on quasi-contract law, not contract law.

Question 20

Result of Ambiguity in Words of Agreement

Answer 20

There will be no contract if the parties use a material term that is open to at least two reasonable interpretations, and that each party attaches a different meaning to, and neither party knows or has reason to know the term is open to at least two reasonable interpretations, and that neither party knows or has reason to know its open to multiple interpretations.

Question 21

Test for Unconscionability

Answer 21

Empowers the court to refuse to enforce all or part of an agreement. The two basic tests are unfair surprise and oppressive as tested at the time the agreement was made.

Question 22

Effect of a Mutual Mistake of Material Fact

Answer 22

There will be no contract if both parties were mistaken about a basic assumption fo fact, and that fact material affects the agreed upon exchange.

If the mistake is over whether something exists or not or its state, it will void the contract.

If the mistake is merely as to worth or value, it will not void the contract.

Question 23

Statute of Frauds (What to ask yourself)

Answer 23

Is the contract within the statute of frauds?
If so, is the statute satisfied?
Is there a statute of frauds defense?

Question 24

Contracts that Fall Under the Statute of Frauds

Answer 24

Promises in Consideration of Marriage
Promise by an Executor/Administrator to Personally Pay for Estate Obligations
Promises to Guarantee the Debts of Another
Service Contract Not Capable of Being Performed w/in a Year
Transfers in Interest in Real Estate
Sale of Goods for $500+

Question 25

How is the statute of frauds satisfied?

Answer 25

Full performance if a service contract
Partial performance on goods contracts
Specially Manufactured Goods
Partial Performance of Real Estate (2/3 payment, possession, or improvements)
Writing (all material terms)
Merchant Confirmatory Memorandum Rule
Judicial Admission of Sale of Goods Requirements

Question 26

Merchant Confirmatory Memorandum Rule

Answer 26

Aka “answer the damned writing rule”

Both parties must be merchants and the person who receives a signed writing with a quantity term that claims there is a contract fails to respond within 10 days of receipt.

Question 27

Judicial Admission of Sale of Goods Agreement

Answer 27

Admission=Statement by D acknowledging agreement

Judicial= Appeared in pleadings, discovery, or in court.

Question 28

When is there a LEGAL requirement of written evidence of a contract modification?

Answer 28

Resolve this issue by looking at the deal with the alleged change and determining whether the alleged change would force the contract into the statute of frauds. If so, then as a matter of law, the alleged modification must be in writing.

Question 29

Effect of Provisions Requiring Modifications to be Made in Writing

Answer 29

Under common law, contract provisions requiring all modifications to be in writing are ignored.

Under UCC, contract provisions requiring written modifications are effective unless waived.

Question 30

Recognizing and Identifying Express Conditions

Answer 30

Watch for words such as 
if
provided that
so long as
subject to
in the event that
unless
when
until
on the condition that

Question 31

What is the standard for satisfying an express condition?

Answer 31

The general rule is that the court will require strict compliance with express conditions. However, there is a reasonable person exception. A condition will be treated as satisfied if a reasonable person would approve, unless the subject is art or other inherently discretionary matters.

Question 32

How can an express condition be excused?

Answer 32

Estoppel

Waiver

Question 33

Excuse by Reason of a Later Contract

Answer 33

Rescission
Accord and Satisfaction
Modification
Novation

Question 34

Modification vs. Accord

Answer 34

Modification=Parties trust each other enough to dismiss the old obligation in lieu of the new one.

Accord= Parties don’t trust each other and want to keep the old obligations in place while still providing alternative satisfaction methods.

If you have an if…then… statement, its likely an accord.

Question 35

Who is liable after novation?

Answer 35

Novation excuses the contracted for performance of the party who is substituted for or replaced.

Question 36

How is delegation different than novation?

Answer 36

Novation requires the agreement of both parties to the original contract and excuses the person being replaced from any liability for nonperformance.

Delegation does not require the agreement of both parties and does not excuse.