contract formation and statute of frauds Flashcards
T or F • Even if UCC, common law still applies unless UCC contradicts it
True
What is an express contract
Explain an implied in fact contract? Give an example
What is an implied in law contract? Give some examples
o Express = oral and written expressions of the agreement
o Implied-in-fact = formed by conduct rather than words; consensual agreements that fail to express the agreement of the parties in its entirety.
EXAMPLE: Homeowner hires a plumber to fix a leak, but because of the urgency of the service, the parties do not discuss the price of the work performed. Upon completion of the work, Homeowner has an implied-in-fact obligation to pay the plumber the reasonable value of the services rendered.
o Implied-in-law(aka quasi contract obligation) = arises where one party bestows benefit on another and it would be unjust not to pay the reasonable value of the benefit
EXAMPLE: A surgeon who performs emergency surgery on an unconscious patient creates an implied-in-law obligation to the patient.
EXAMPLE: A merchant who mistakenly delivers goods to the wrong party may create an implied-in-law obligation on the wrong party.
what is the American rule regarding commercial advertisements?
what is the exception to the American rule?
o American Rule: Ads, catalogs, price lists are invitations for offers, since responses may exceed available supply of goods or services
Exception: Language that identifies who gets limited supply of goods even if there is an excess demand (i.e. first come, first served, or first 10 customers)
What is required to effectively revoke an offer?
distinguish between direct and indirect revocation
Must be revoked before acceptance + revocation must be communicated to the offeree.
• Direct revocation – offeror directly communicates to offeree an intent to withdraw the offer
• Indirect revocation – 2 requirements:
o Offeror takes action that is inconsistent with the intent to go through with the offer and
o Offeree learns of such action from reliable source
EXAMPLE: While deciding whether to accept an offer to sell you a car, you learn from a friend that the car was sold to someone else.
HYPOTHETICAL: A offers to sell real property to B. While B is considering the offer, A sells the property to C. Oblivious to the third-party sale, B sees A on the street and yells, “I accept your offer!” Is A now contractually bound to sell the property to B?
yes because A never found out about the offer
T or F under the American rule an offeror cannot revoke an offer if he gave a specific time to the offeree to accept.
False, American Rule: the offeror can revoke even if he gave a specific time to accept
Without additional consideration normally required in an option contact, Reliance/Construction: Courts will hold offers open when the offeree has?
detrimentally relied on them, such as when general contractors rely on subcontractor’s bids in forming their own bids on a project.
Do option contracts prevent revocation of an offer?
yes
Firm Offer under UCC – Irrevocable offer by merchant to buy or sell goods without consideration (3 requirements):
• Offer made by a merchant (in the business of buying or selling goods) +
• In a writing signed by the merchant +
• Expressly stating it will be held open
o Irrevocable for time stated or reasonable time, BUT no longer than 3 months even if stated otherwise
What are three methods of termination by offeree’s rejection?
o Outright rejection
o Rejection via counteroffer: counteroffer = rejection + new offer (e.g., I am not willing to pay $10K for the car, but I would happily buy your car for $9K.)
o Rejection via non-conforming acceptance
Mirror image rule (common law): Acceptance must mirror the terms, and any variation is counteroffer (and rejection of initial offer)
EXAMPLE: X offers to buy goods from Y, Y says OK, and says he expects payment in 30 days. This will be a violation of the mirror image rule, and thus a counteroffer.
T or F, an offeree can test the waters by making a mere inquiry. A mere inquiry does not terminate original offer.
give an example
True
e.g., $10k isn’t out of the question but it’s a little high given the age, would you consider a lower offer?).
HYPOTHETICAL: Professor A makes the following offer to her students: “For anyone who completes this series of exercises by Friday, I’ll provide you with a free beverage from Starbucks.” Student B completes the exercises by Friday but does not notify the Professor until Monday. Does B’s completion of the exercises by Friday constitute acceptance of A’s offer?
What change in the facts would make the offer acceptance not proper?
yes no notification asked for so completion of the exercises was proper acceptance of A’s offer.
If the professor asked for notification from the student that they completed the exercise by Friday
• Common law Mailbox Rule: acceptance by mail is effective upon dispatch if properly posted.
o Applies only to?
o Applies only to acceptances and not to any other communication (i.e., not to revocations or rejections)
What is the mailbox default rule? give an example
– it applies unless the offer provides otherwise
A’s offer to B stipulates that A “must hear from B by the close of business Thursday” in order for B’s acceptance to be effective. B dispatches acceptance of the offer on Wednesday, but it doesn’t reach A until Friday. Is B’s acceptance effective? NO because the offer provided otherwise
What happens when an offeree dispatches two responses to an offer, the first purporting to reject the offer and the second purporting to accept it?
o Mailbox rule does not govern if rejection is mailed before acceptance, and whichever arrives first will be effective.
T or F o An offeree’s nonconforming acceptance or confirmation (with additional terms) will operate as an effective acceptance of the offer, thus forming a contract (not a counteroffer).
True
o Between merchants, the “additional” terms in offeree’s acceptance or confirmation become part of the K EXCEPT in three circumstances:
- The offer expressly limits acceptance to its own terms
EXAMPLE: “This order expressly limits acceptance to the terms stated herein.”
2.If offeror objects to the additional terms within a reasonable time
EXAMPLE: This could be accomplished through language “We do not accept the binding arbitration provision set forth in your Acknowledgment of Order.”
- If the additional terms would materially alter the K.
• “Material alteration” = terms that would result in “surprise or hardship if incorporated w/o the express awareness of the other party”.
EXAMPLE: Buyer sends Seller a purchase order for 1,000 widgets at the advertised price of $10 each. Seller sends Buyer an Acknowledgment of Order that promises delivery of the widgets at the stated price and includes boilerplate language that negates all warranties and requires payment for the order to be complete within 30 days of delivery, which is standard in the widget trade.
What are some examples that would materially alter a contract under the UCC
• Examples of clauses that would materially alter the contract include:
o warranty disclaimers
o clauses that materially shorten the deadline for raising complaints
o clauses that change usages of trade or past courses of dealing
o arbitration clauses
EXAMPLE: Buyer sends Seller a purchase order for 1,000 widgets at the advertised price of $10 each. Seller sends Buyer an Acknowledgment of Order that promises delivery of the widgets at the stated price and includes boilerplate language that negates all warranties and requires payment for the order to be complete within 30 days of delivery, which is standard in the widget trade.
o If the offeree’s “acceptance” is specifically conditioned on offeror first agreeing to the additional terms in the acceptance before offeree will proceed, this nonconforming, conditional acceptance Will/ Wont be effective to form a K
Wont be effective its a counteroffer
No K is formed by the writings until the offeror expressly assents to the additional terms.
T or F o The UCC provides that the parties’ conduct in recognizing the existence of a contract is sufficient to establish a contract even though their writings do not otherwise establish a contract.
Example of K formation by conduct under the UCC.
but what terms will be enforceable?
True
EXAMPLE: Buyer sends order to Seller, Seller responds with a conditional acceptance containing a negation of warranties, and the parties have no further communications. Seller nevertheless ships the ordered goods, and Buyer accepts and pays for them. Although the parties’ writings do not form a contract—because Seller sent a conditional acceptance—a binding contract is formed by their conduct.
o The terms of the contract will be:
Terms on which the writings of the parties agree; and
Default terms provided by the UCC
Note: express terms in the parties’ communications which do not match or agree are omitted.
T or F, the courts police the equivalence or fairness of the exchange between the parties and may determine that consideration is inadequate.
False, they do NOT police the equivalence or fairness of the exchange between the parties in determining whether consideration is adequate.
5) Gratuitous Promises: Promise to make a gift, generally unenforceable due to insufficient consideration. What is the exception? examples
• Exception: Gratuitous transfers are legally binding
EXAMPLE: If I promise you a new car for your birthday, that would constitute a gratuitous promise and would be unenforceable if I decline to follow through. However, if I give you a new car for your birthday, then the transfer is legally binding, and I cannot later change my mind and take back the car.
What is the definition and example of an illusory promise?
4) Illusory Promises: Promise of performance that leaves performance to the unlimited discretion of the promising party does NOT constitute consideration
EXAMPLE: You agree to paint my portrait, and I agree to pay you $1,000 if I decide I want it.
Past or Moral Consideration
• Majority General Rule: A promise in exchange for something already given or performed is NOT supported by consideration.
EXAMPLE: In Mills v. Wyman [20 Mass (3 Pick.) 207 (1825)], the court refused to enforce the father’s after-the-fact promise to compensate a Good Samaritan for nursing his dying son, and the case would likely come out the same way today.
- What are the exceptions that are enforceable?
- What is the minority rule or material benefit test? example
- Exceptions (these are enforceable):
o A written promise to pay a debt barred by limitations;
o A written promise to pay a debt discharged by bankruptcy; - • Material Benefit Test (minority rule): promise made in recognition of a past benefit conferred is enforceable if:
o Promisee conferred the benefit on the promisor (not a third party); and
o The benefit is material
EXAMPLE: A sees that B is in grave danger and heroically intervenes to save the latter, injuring himself in the process. B gratefully promises to compensate A for his efforts. These are the facts of Webb v. McGowin [27 Ala. App. 82 (1935)], where the court enforced the promise because A’s efforts bestowed a material benefit (the saving of a life) on B.
EXAMPLE: Because the Good Samaritan in Mills v. Wyman bestowed the benefit of nursing services on the promisor’s son rather than on the promisor, the promise would not be enforceable.
