Contract Formation Flashcards
K Definition
(1) agreement, that is
(2) legally enforceable
K requirements
(1) mutual assent
(2) consideration or some substitute, and (3) no defenses
Offer
A person’s manifestation of willingness to contract.
Test: whether a reasonable person in the position of the offeree would believe that his or her asset creates a contract.
Requires a (1) promise, undertaking, or commitment, (2) CERTAINTY and DEFINITENESS in the essential terms (“apprpriate, reasonable, fair” not enough), and a (3) COMMUNICATION of the above to the offeree
Advertisements
usually construed as mere invitations for offers
Exceptions: (1) can be a unilateral offer if it is in the nature of the award (e.g. $100 reward to anyone who catches teh flu after using its smoke ball); (2) offer if it SPECIFIES quantity and expressly indicates WHO can accept (fur coat $10, first come first served); (3) price quotations can be an offer if sent in RESPONSE to an inquiry
Offer of land
Must identify the LAND and the PRICE terms. No deed required however. Courts will NOT supply a missing price term
Sale of Goods offer
QUANTITY must be stated. But NO requirement for price.
UCC “Gap Filler” will fill the rest. Reasonableness.
Requirement Contracts
Buyer promises to buy from seller all of the goods buyer requires, and seller agrees to sell that amount to buyer
Good faith assumed. Buyer can increase requirements so long as the increase is not UNREASONABLY DISPROPORTIONATE
NOT voided for vagueness or ambiguity if it says “all,” “only,” “exclusively,” or “solely”
Termination by Time
lapse of time stated in the K or a reasonable time passed will terminate an offer
Death of offeror
Death of offeror after an offer, but BEFORE acceptance, terminates offer
Exception: irrevocable offers
Revocation
UNAMBIGUOUS words or conduct by the offeror that terminate an offer that offeree is AWARE of
Option Contract
When offeree gives consideration for a promise by the offeror not to revoke for a certain amount of time.
Offer + 2: (1) offer, (2) promise to keep offer open (not revoke), and (3) promise is supported by consideration
May only be revocable if offeror detrimentally relies on an unequivocal rejection
Firm Offer Rule
UCC specific
Offer CANNOT be revoked for up to THREE MONTHS if (1) MERCHANT; (2) offers to buy or sell GOODS; (3) in a SIGNED WRITING; that (4) PROMISES to keep the offer open
If offer is promised to be open for a period longer than three-months, merchant will be bound to be irrevocable only for three months in court.
NOTE: no consideration necessary. If there is consideration, it becomes an option contract that can be held open for as long as the parties specify!!
Reliance irrevocability
offer CANNOT be revoked if offeror could reasonably foresee that offeree would rely on the offer to her detriment, and the offeree does so rely
Four types of Irrevocable offers
Option K, Firm Offer Rule, Reliance, Unilateral K
Unilateral K and revocability
Start of performance pursuant to a unilateral contract offer makes that offer IRREVOCABLE for a reasonable time to complete performance
NOTE: mere preparation is NOT enough to make an offer irrevocable, however. But can trigger detrimental reliance.
Counteroffer
Generally terminates offer and creates a new offer.
BUT does NOT kill an option K while option is still open, unless offeror detrimentally relied on rejection.
NOTE: mere inquiry is not a counteroffer and thus does NOT terminate the offer (would you accept $X?) – Reasonable person test
Conditional Acceptance
Look for: if, only if, provided, so long as, but, or on condition that (accept, but only if….)
Common law: reject and counteroffer that CAN be accepted
UCC: straight up rejects. Not counteroffer so can’t be accepted.
Mirror Image Rule
Common law
response to an offer that adds any new term is a COUNTEROFFER and NOT acceptance
Seasonable Expression of Acceptance
UCC mirror image equivalent (different from conditional b/c it is essentially a
response to offer that adds additional terms, but does not make those terms a condition, is generally treated as ACCEPTANCE (a seasonable expression of acceptance)
BUT, additional term is NOT part of the K unless: (1) both parties are merchants; and (2) the additional term is immaterial
UCC? –> Additional term? –> merchants –> immaterial?
Material: generally remedies, price, quantity, liability
Nonmaterial: shipping date, color of items
Acceptance
Manifestation of asset to the terms of an offer. Generally only person to whom an offer is addressed can accept (or a member of a class that has power to accept). Must also know of offer in order to accept.
power to accept CANNOT be assigned, unless if it is an option contract
Acceptance of unilateral contract
Offer provides it may be accepted only by performance. Performance must be completed to accept offer.
Beginning of performance creates option K and makes offer irrevocable, but offeree is not bound to complete performance, as only full performance is acceptance
Acceptance of bilateral contract
If not specifically state accepted only through performance, it is a bilateral contract.
Accepted by a promise to perform or by BEGINNING of performance
silence as acceptance
generally must be communicated. But silence may be acceptance if, because of PRIOR DEALINGS or TRADE PRACTICES, it is commercially reasonable for offeror to consider silence as acceptance
Effectiveness of Acceptance (Mailbox rule)
acceptance creates a K at the MOMENT OF DISPATCH, provided that the mail is properly addressed and stamped, UNLESS
(1) offer states that acceptance is not effective until received; or (2) an option contract is involved (effective only upon receipt)
All other communications are effective only when RECEIVED
If rejection is mailed BEFORE an acceptance is mailed, the neither is effective until RECEIVED
