Contract Formation: Agreement

Question 1

The four main topics covered for K formation?

Answer 1

1. Agreement
2. consideration
3. Defenses
4. SoF

All Contracts Don’t Stink

Question 2

Offer and acceptance are governed by the objective test, which means?

Answer 2

the outward appearance of words and actions are what matter, not secret intentions

Question 3

What is an offer?

Answer 3

a manifestation of a willingness to enter into an agreement that creates a power of acceptance in the offeree

Question 4

Key Q for an offer?

Answer 4

Does it display and objectively serious intent to be bound?

differentiate from an invitation to deal. Advertisements that are very specific and leave nothing open to negotiation, including how acceptance can occur can be an offer. Ultimately, a valid offer msut conveyr the power of accptance; they can simply say “i accept” and the deal is consummated.

Question 5

Offer

How specific must the offer be under common law versus UCC?

Answer 5

Common law: All essential terms must be covered by the agreement. Typically the parties, subject, price, and quantity

UCC: All you need it to identify the **subject, the parties, and the quantity. ** The law is more willing to fill the gaps with reasonable terms and find a K.

Question 6

Is this a valid offer: Sue offers to sell Bob “all wiper blades that I make this week.”

Answer 6

Yes, it’s an output contract

Output—seller promises to sell 100% to a specific buyer
Requirements—buyer promises to purchase 100% from a specific seller

Question 7

How can an offer be terminated or revoked?

Answer 7

1. By express communication to the offeree
2. By taking an action that is absolutely inconsistent with a contuning ability to contract and the offeree learns of this action
3. the offeree rejcts the offer
4. the offeree makes a counter offer
5. The offeror dies (does not terminate a K usually)
6. A reasonable amount of time passes

Can be revoked at any time before acceptance

Question 8

Irrevocable Offers and the Merchant’s Firm Offer

A ________ in the UCC universe can make a __________ ______________ to buy or sell goods (i.e., a binding, free option)

Answer 8

1. Merchant
2. firm offer

Question 9

Requirements for a firm offer? (3)

Answer 9

1. Must be written
2. Must contain an explicit promise not to revoke the offer; and
3. Must be signed by the offeror

Question 10

How long does a firm offer last?

Answer 10

Either for as long as stated in the offer or for a resaonable time period not to exceed 90 days

Question 11

Cars.com offers to sell you a car for $5,000, and it promises via a
signed writing not to revoke this offer for a week. Ten days later, you write back to accept the offer. Can you still accept?

Answer 11

Yes as long as the offer is not revoked and a reasonable time period has not expired

Question 12

Other irrevocable offers?

Answer 12

1. Option K (consideration to keep offer open)
2. firm offer
3. Offeree starts performing on unilateral K (requests acceptance by performance)
4. Detrimental reliance: arises when an offeree reasonably and detrimentally relies on the offer in some forseeable manner (look for contracter/subcontractor scenario)

How does the unilateral K one work in the UCC universe?

Question 13

Acceptance

Who is the master of the offer?

Answer 13

The offeror. The offeree must accept the offer according to the rules of the offeror

Question 14

If nothing in the offers specifies the method of acceptance, the UCC permits acceptance by …

Answer 14

return promise or by performance (typically shipping the goods)

Question 15

What happens when a seller tries to accept an offer by sending the wrong goods?

Answer 15

UCC generally treats this as acceptance w/ a breach.

Exception: If the seller seasonably notifies the buyer that the wrong goods are being shipped as an accommodation then no acceptance occurs, and you have a counteroffer.

Question 16

Acceptance

The offer must be ____________ to the person trying to accept it

Answer 16

specifically directed

Question 17

Acceptance

Even with an open-to-all offer, you must ________________ about that offer to accept it

Answer 17

Know

Question 18

Acceptance

How do you accept?

Answer 18

communicate acceptance to the offeror

Question 19

Acceptance

What is the Mailbox Rule? What does it not apply to?

Answer 19

an acceptance sent by mail is effective when the mail is sent.

It does not apply to the following:
1. if the offeree sends something first (e.g., rejection, counteroffer)
2. other types of communications (rejection, counter, revocations)
3. option contracts; or
4. it is unclear whether it applies to other media

Depends on receipt; what is opened first

Question 20

Acceptance

What is the limit on the mailbox rule?

Answer 20

I send acceptance in mail. I change mind and call to reject. There is a K unless the offeror detrimentally relies on the rejection.

Question 21

Acceptance

What are the ways in which an offer can be accepted without communication?

Answer 21

1. Unilateral reward offers or contests (find dog)
2. Unilateral offer in which the parties are geographically close (such that the offeror will see performance)
3. A past history of silence serving as acceptance (such that the offeree should reasonably notify the offeror if she does not accept)
4. the offer says that acceptance must come by silence, and the offeree intends to accept the offer by silence

Question 22

Acceptance

what is an implied-in-fact contract?

Answer 22

Acceptance by gestures or action. E.g., go get a haircut

Question 23

What is the common law rule for acceptance?

Answer 23

The mirror image rule. The terms of acceptance must amtach the terms of the offer exactly or it is not acceptance but a counteroffer.

Question 24

What UCC section replaces the common law mirror image rule?

Answer 24

UCC 2-207

Question 25

What soe UCC Section 2-207(1) say?

Answer 25

A definite and seasonable (timely) expression of acceptance [or a written confirmation] which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional upon assent to the addition or different terms.”

It does not matter whether the parties are merchants for this section

Assume inconsistent terms are knocked out

Question 26

Under 2-207 (2), when will the new terms in the acceptance control?

Answer 26

1. Both parties are merchants
2. the new terms does not materially alter the deal
3. The initial offer did not expressly limit acceptance to its terms; and
4. The offeror does not object within a reasonable time to the new term

“materially alter” = Terms materially alter the agreement if there is hardship through significant shifting of the burden or surprise.

Applies to additional terms. Assume inconsistent terms are knocked out

Question 27

Under 2-207(1), what happens when there is an oral agreements and then a confirming memo with additional terms?

Answer 27

It can operate as acceptance–“a written confirmation which is sent within a reasonable time operates as an acceptance even though it state terms addition l to or different from”–but the new terms will only come in if 2-207(2) is satisfied.

Question 28

Under 2-207(3), what happens when there is no contract but still act as though there is an agreement (issue with 2-207(1)) (e.g., exhange goods for money)?

Answer 28

Only the terms that both writings agree upon become part of the K, all other terms supplied by the UCC default rules.

E.g., materially inconsistent terms

Question 29

Auction contracts

How should each individual bid be understood?

Answer 29

as an offer

Question 30

Auction contracts

When does acceptance occur?

Answer 30

when the hammer falls

Question 31

Auction contracts

what happens if somone bids exactly when the hammer falls?

Answer 31

Under the UCC, an auctioneer has discretion to either:
* Re-open the bidding; or
* declare the auction final

Question 32

Auction contracts

What is a “no-reserve auction?”

Answer 32

the seller cannot withdraw an item after a bid has been received

Question 33

Auction contracts

Can bidders retract offers in a no reserve auction?

Answer 33

Yes, as long as the auction is not finished. This DOES NOT revive the prior bid.