6.1 FORMATION Flashcards
WHY SHOULD ONE ASK, “IS THE CONTRACT GOVERNED BY UCC OR COMMON LAW?
COMMON LAW IS DERIVED FROM COURT RULINGS AND APPLIES TO CONTRACTS WITH THE FOLLOWING SUBJECT MATTERS: 1) REAL ESTATE 2) SERVICES
UCC ARTICLE 2 APPLIES TO THE SALE OF GOODS, FURTHERMORE ARTICLE 2 DEFINES GOODS AS TANGIBLE PERSONAL PROPERTY.
ONE SHOULD ALWAYS ASK IS THE CONTRACT GOVERENED BY UCC OR COMMON LAW?
WHAT IS THE DIFFERENCE BETWEEN A VOIDABLE AND A VOID CONTRACT?
A CONTRACT IS VOIDABLE WHEN THERE IS A DEFECT IN ITS FORMATION OR TERMS, THE PARTY SEEKING TO AVOID THE CONTRACT MIGHT NOT HAVE ENTERED IT HAD THE DEFECT NOT BEEN PRESENT. (E.G., DURESS (THREAT) UNDUE INFLUENCE (POSITION OF TRUST), MISREPRESENTATION OF MATERIAL FACTS, FRAUD IN THE INDUCEMENT, MISTAKE, LACK OF CAPACITY E.G., MINOR
A CONTRACT IS VOID IF IT IS INVALID AND UNENFORCEABLE FROM THE ONSET. E.G., EXTREME DURESS, FRAUD IN THE EXECUTION, ILLEGAL SUBJECT MATTER, INCOMPETENT PARTY, UNCONSCIONABILITY. “EXTREMELY UNJUST”
INDUCEMENT: THE TERM OF THE CONTRACT ARE MATERIALLY MISREPRESENTED.
EXECUTION: BLIND PERSON SIGNS A MORTGAGE DOCUMENT, BUT THEY ARE TOLD ITS JUST A LETTER.
WHAT ARE THE ELEMENTS OF A CONTRACT?
TRUNK
SEE SCREENSHOT
WHAT ARE THE COMPONENTS OF AN OFFER FOR A CONTRACT?
PRESENT INTENT TO CONTRACT, DEFINITE AND CERTAIN TERMS, AND COMMUNICATION OF OFFER
FYI - UNDER COMMON LAW THE OFFER MUST BE EXACT FOR ALL NECCESSARY TERMS AND UNDER UCC THE OFFER CAN BE VAGUE “MORE FLEXIBILITY”
WHAT IS AN IRREVOCABLE OFFER EXAMPLE UNDER COMMON LAW AND UNDER UCC?
UNDER COMMON LAW WE HAVE OPTIONS - A TYPE OF CONTRACT THAT PROTECTS THE OFFEREE FROM AN OFFEROR’S ABILITY TO REVOKE THEIR OFFER TO ENGAGE IN A CONTRACT. (CONSIDERATION NEEDED)
UNDER UCC A FIRM OFFER IS AN OFFER BY A MERCHANT TO BUY OR SELL GOODS THAT IS IRREVOCABLE (NO CONSIDERATION NEEDED)
A FIRM OFFER UNDER UCC IS CREATED WHEN THE SUM CONDITIONS ARE MET.
A) SIGNED: THE OFFEROR MUST SPECIFICALLY SIGN A WRITTEN OFFER ON THE PAGE CONTAINING THE OFFER.
B) UP TO THREE MONTHS - THE OFFER IS ENFORCEABLE FOR THE TIME SPECIFIED IN THE WRITING. IF NO TIME IS SPECIFIED, IT IS OPEN FOR A REASONABLE TIME NO LONGER THAN 3 MONTHS
C) THE OFFEROR MUST BE A MERCHANT
HOW ARE OFFERS TERMINATED?
TERMINATION PRIOR TO ACCEPTANCE
WHAT ARE THE 3 COMMON FORMS OF ACCEPTANCE?
1) ACCEPTANCE OF A UNILATERAL CONTRACT - HAPPENS WHEN THE OFFEREE PERFORMS THEIR PART OF THE CONTRACT, ACCEPTANCE TAKES PLACE UPON COMPLETION OF THE ACT REQUIRED BY THE OFFER (E.G., ILL GIVE YOU 500 FOR CLIMBING ALL THE STEPS OF THE EMPIRE STATE BUILDING)
2) ACCEPTANCE BY SHIPPMENT OF GOODS
3) ACCEPTANCE OF A BILATERAL CONTRACT - THE EXCHANGE OF A PROMISE FOR A PROMISE
WHAT IS THE DIFFERENCE OF ACCEPTANCE UNDER COMMON LAW AND UCC?
SEE SCREENSHOT - (MIRROR IMAGE RULE FOR COMMON LAW)
FYI - THEIR ARE UCC RULES ON WHAT CONSTITUTES ACCEPTANCE THAT ARE DIFFERENT WHEN MERCHANTS AND NONMERCHANTS ARE INVOLVED.
IF THEIRS ACCEPTANCE FOLLWED BY ADDITIONAL TERMS “MERCHANT AND NON-MERCHANT” - “CONTRACT IS FORMED WITHOUT ADDITIONAL TERMS
IF THEIRS ACCEPTANCE FOLLWED BY ADDITIONAL TERMS “MERCHANT AND MERCHANT” “CONTRACT IS FORMED WITH ADDITIONAL TERMS, UNLESS THE ADDITIONAL TERMS ARE MATERIAL.
WHAT IS THE MAILBOX RULE?
THE MAILBOX RULE IS THE TIMING RULE FOR DETERMINING WHEN AN ACCEPTANCE TAKES EFFECT AND A CONTRACT IS FORMED.
THE MAILBOX RULE PROVIDES THAT WHEN THERE IS A PROPER METHOD OF ACCEPTANCE USED, THE ACCEPTANCE IS EFFECTIVE WHEN IT IS SENT,
AN AUTHORIZED MEAN IS THE SAME OR A FASTER METHOD OF COMMUNICATION.
SEE TIMING RULES FOR ACCEPTANCE.
WHAT IS CONSIDERATION?
CONSIDERATION IS SOMETHING OF VALUE GIVEN BY ONE PARTY TO THE CONTRACT TO THE OTHER PARTY.
A) DETRIMENT AND BENEFIT “EXCHANGE OF THE DETRIMENT AND BENEFIT IS CALLED A BARGAINED-FOR EXCHANGE.”
EACH PARTY TO A CONTACT MUST GIVE UP SOMETHING OF VALUE FOR CONSIDERATION TO BE PRESENT. A PROMISE TO MAKE A GIFT IS NOT AN ENFORCEABLE BY LAW
WHAT IS NOT CONSIDERATION?
A) PROMISES TO PAY ADDITIONAL CONSIDERATION FOR AN EXISTING CONTRACTUAL OBLIGATION (ALREADY OBLIGATED TO PERFORM)
B) EXISTING DUTIES WITH THIRD PARTY (POLICE OFFICER)
HOW DOES COMMON LAW DIFFER FROM UCC WITH MODIFICATION OF CONTRACTS AND CONSIDERATION?
COMMON LAW (AS LONG AS THIER IS CONSIDERATION BY BOTH PARTIES, MODIFICATIONS ARE ALLOWED)
UCC (ADDITIONAL CONSIDERATION NOT REQUIRED FOR CONTRACT MODIFICATIONS)
WHAT ARE THE EXCEPTIONS TO THE CONSIDERATION REQUIREMENT?
1) UCC MERCHANTS FIRM OFFER - NO CONSIDERATION REQUIRED
2) PROMISSORY ESTOPPEL: A PARTY THAT MADE A PROMISE IS ESTOPPED FROM REFUSING TO HONOR THE PROMISE BASED ON A CLAIM OF NO CONSIDERATIONS (PLEDGE TO A CHURCH)
WHAT IS THE STATUTE OF FRAUDS WITH REGARDS TO A CONTRACT? GROSSE
G - SALE OF GOODS > 500
R - REAL ESTATE SALES
O - OVER ONE YEAR REQUIRED TO PERFORM CONTRACT
S - SURETYSHIP (GUARANTEE DEBTS OF OTHER)
S - STATEMENTS IN CONSIDERATION OF MARRIAGE
E - EXECUTOR (RESPONSIBLE FOR EXECUTING)
WHAT ARE THE EXCEPTIONS TO THE UCC STATUTE OF FRAUDS?
SEE SCREENSHOT
- (M) IF TWO MERCHANTS HAVE AN ORAL AGREEMENT THAT MUST BE IN WRITING UNDER THE UCC STATUTE OF FRAUDS, THAT WRITING REQUIREMENT IS MET THROGUH A PROCESS REFERRED TO AS A MERCHANTS CONFIRMATION MEMORANDUM.
- MERCHANTS CONFIRMATION MEMORANDUM BETWEEN MERCHANTS ONLY - THAT IS NOT OBJECTED TO, BECOMES AN ENFORCEABLE CONTRACT DESPITE A LACK OF A WRITTEN SIGNATURE BY ONE PARTY
WHAT IS THE PAROL EVIDENCE RULE?
SEE SCREENSHOT
