Contract Formation

Question 1

What are the elements required for contract formation?

Answer 1

• offer
• acceptance
• consideration

Question 2

How is intent determined in contract law?

Answer 2

Objective theory of contacts. Whether a party intends to enter into a contract is judged by outward objective facts, as interpreted by a reasonable person.

Question 3

Rule Statement: “a contract may be formed…

Answer 3

“in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract.”

Question 4

Elements of an offer

Answer 4

1. Intent
   - Reasonably interpret, express present intent to be bound
2. Knowledge by the offeree
3. Terms
   - certain and definite
4. Language
   - words of promise, undertaking, or commitment, distinct from intent to sell or interest in buying
5. Invitation to deal
   - distinguish from invitations to deal

Question 5

Required terms under common law

Answer 5

All essential terms
- parties
- subject matter
-price
-quantity

Question 6

Required terms under UCC

Answer 6

Quantity (this is met with output contracts)

Question 7

Duration Terms

Answer 7

In most contracts, if a duration term is not specified in the agreement, courts will imply that the contract will last for a reasonable period

Question 8

Employment Contracts - Duration Terms

Answer 8

If an employment contract does not state duration, there is a rebuttable presumption that the employment is at will (either party can terminate at any time without being breach unless against public policy)

If provided for permanent employment, most courts hold this to be at will employment, as that term is too vague

*many employment agreements overcome the default rule of at will employment by express terms of the contract, rules published by the employer, or implication (usage or conduct)

Question 9

Missing Terms

Answer 9

As long as the parties’ intent to form a contract is apparent, the court may supply a missing term on the presumption that the parties intended to include a reasonable term.

Question 10

Unilateral v Bilateral Contracts

Answer 10

Bilateral - when a return promise is requested

Unilateral - When an act is requested

Question 11

Lapse of Time in Offer

Answer 11

If the offer specifies a termination date, then that date typically controls. If a number of days is stated, that typically starts to run when the offer is received

If no set time limit offered, the offer terminates at the end of a reasonable period.

Question 12

Reasonable period re offers

Answer 12

Question of fact, depends on
- nature of contract
- purpose and course of dealing between parties,
- trade usage

*unless otherwise agreed. if the parties bargain in person or via telephone, the time for acceptance does not ordinarily extend beyond the end of the conversation

Question 13

Offer Revocation

Answer 13

Offer is revoked when the offeror manifests an intent not to enter into the proposed contract.

May be made in any reasonable manner and by any reasonable means, and is not effective until communicated. By mail a revocation is not effective until received.

Question 14

Option Contract

Answer 14

Offeree must generally give separate consideration for offer to remain open, unless the option is within an existing contract

Question 15

UCC Firm Offer Rule

Answer 15

An offer to buy or sell goods is irrevocable if:
- The offer is a merchant
- There is an assurance that the offer is to remain open,
- The assurance is contained in a signed writing from the offeror

Offeree does not need to provide consideration

A firm offer in a form prepared by the offeree must be separately signed by the offeror to protect against inadvertent signing

Question 16

Option Contract Time Period

Answer 16

If no time stated, then held open for a reasonable time. Irrevocability cannot exceed three months, regardless of whether a time period is stated or implied, unless the offeree gives consideration to validate it beyond the three month period

Question 17

Promissory Estoppel re: whether an offer is revocable

Answer 17

When the offeree reasonably, foreseeably, and detrimentally relies on the offeror’s promise before acceptance, PE may make the offer irrevocable. Offeror liable to extent necessary to avoid injustice, which may result in holding the offeror to the offer, reimbursement of the costs incurred by the offeree, or restitution of the benefits conferred

Question 18

Partial Performance

Answer 18

Unilateral Contract
offeror cannot revoke the offer once offeree has begun performance, unless the offeror has reserved the right to revoke. Once begun, offeree will have a reasonable time to complete performance but cannot be required to complete the performance. Unilateral contract is not formed until performance is complete

Bilateral Contract
Commencement of performance operates as a promise to render complete performance and constitutes an acceptance

Regardless of type, offeree must have had knowledge of the offer when performance begun

Question 19

Predominant Purpose Test

Answer 19

Does the good or the service play a bigger role in making the contract

Ex. Hot water heater and installation, Hot water heater was the main purpose of the contract, UCC

Ex. Hire Warhol to paint a picture for 1 million. Service of Warhol using his skills to paint the picture, Common law applies

Question 20

When offer expiration due to time should be considered

Answer 20

Termination date specified
- stated date controls

Not specified
- End of reasonable period

Question 21

Death of offeror

Answer 21

If the offeror dies or becomes mentally incapacitated before the offer is accepted, then the offer is terminated

But an offer that is an option does not terminate

Question 22

What is the effect of additional terms under the common law

Answer 22

Mirror image rule (no different or additional terms)

Question 23

What is the effect of additional terms under the UCC

Answer 23

Additional terms do not automatically constitute a rejection

Question 24

What is the effect of a conditional acceptance?

Answer 24

Terminates the offer and acts as a new offer from the offeree

Question 25

Confirmation as acceptance under the UCC

Answer 25

a confirmation that contains additional or different terms is treated as an acceptance unless the acceptance is expressly conditioned on assent to the additional or different terms,, in which case the confirmation is a counteroffer *Merchant status for either party does not matter here, this is only about acceptance, not the new terms*

Question 26

Under the UCC, when are additional terms treated as part of the contract

Answer 26

One or both parties not merchants - additional or different terms are treated as a proposal for addition to the contract that must be separately accepted by the offeror to become part of the contract Both parties are merchants - battle of the forms

Question 27

When does merchant status matter and not matter under the UCC

Answer 27

Merchant status matters when you are trying to determine if new terms become part of the contract. UCC 2-207(2) Merchant status does not matter for acceptance alone UCC 2-207(1)