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Flashcards in Contract Fundamentals Deck (51):

What does the UCC govern?

The sale of goods


More Info: The UCC


What are examples of types of goods the UCC covers the sale/exchange of?

Any movable item, including:

1) Growing crops, both while the crops are growing & after harvest

2) Uncut timber

3)Unborn animals

4) Computer software and other electronic information


In hybrid cases, which involve both a sale of goods and a services contract, what law applies to the transaction?

The applicable law is determined by the predominate purpose of the transaction. Ask if the transaction is more about the goods sold or more about the services provided.


What factors are weighed in determining the predominant purpose of a contract?

1) The language of the contract

2) The nature of the supplier's business

3) The relative values of goods versus of services


In the sale of goods, the common law will apply unless?

The UCC provides contrary provisions


How are implied-in-fact contractual obligations formed?

Conduct rather than words


When does an implied-in-law contractual obligation arise?

One party bestows a benefit on another and it is unjust to retain the benefits without paying (e.g. emergency services).


More Info: Implied-In-Law Contract


What is Quantum Meruit?

The cause of action to recover the reasonable value of the services provided in an implied-in-fact contract.


More Info: Quantum Meruit


In order to constitute an offer, a party's communication must meet what two requirements?

1) An outward manifestation (oral, written, or conduct)

2) A signal that acceptance will conclude the deal (nothing left to do but say "yes" to conclude the deal)


What is the American advertising offer rule?

What is the exception?

Ads, catalogues, and price lists are not offers, rather they are all invitations for offers.


When language exists that identifies who gets a limited supply of goods in an excess of demand situation (i.e. first come, first serve")


What are two types of reward offers?

1) Self-limiting rewards

2) Open-field rewards


Define self-limiting rewards.

Rewards that indicate the task to be rewarded can be performed only once.


Are offers for rewards acctually offers?

Generally, reward offers are treated as offers because they offer money in exchange for the performance of a specified task.


Who is the offeror in an auction?

The auctioneer is inviting offers, and the responsive bidders are the offerors.


What is the legal effect of an offer?

An offer creates the power of acceptance in the offeree.


List the four ways to terminate power of acceptance.

1) Lapse
2) Death or incapacity
3) Revocation by offeror
4) Rejection by offeree


When is the power of acceptance terminated due to lapse?

1) After the time stated in the offer

2) After a reasonable time


3) The Face-to-Face Conversation Rule applies.


What is the Face-to-Face Conversation Rule?

An offer made in a face-to-face conversation generally lapses at the end of the conversation unless the offer states otherwise.


When is the power of acceptance terminated due to death or incapacity?

The death of either party terminates the power of acceptance.

If either party becomes mentally incompetent or otherwise incapacitated, the power of acceptance is terminated.


When is a power of acceptance terminated due to offeror's revocation?

The offer is revoked before the offer is accepted, and the revocation is communicated to the offeree.


When does direct revocation occur?

When the offeror directly communicates to the offeree an intent to withdraw the offer


When does indirect revocation occur?

1) Offeror takes an action that is inconsistent with the intention to go through with the offer


2) The offeree learns about such action from a reliable source


What is the Functional Equivalents Rule?

The offeror revokes by communicating the revocation in a functionally equivalent manner to how the offer was made. The communication terminates the power of acceptance even if the offeree is unaware of the revocation.


What are the ways to prevent offeror revocation?

1. Option contracts


2. Firm offers under the UCC


List the elements of a common law option contract.

1) An offer

2) A second promise to keep the offer open for a set time period

3) Consideration for the second promise


More Into: Options contract


The majority rule is where a general contractor uses a particular subcontractor's bid to formulate his own, what type of contract has been formed?

Promissory estoppel applies in these situations to protect the general contractor from revocations by the subcontractors.


What are the elements for a firm offer?

1) The offer is made by a merchant

2) The offer is made in a signed writing by the merchant

3) The offer expressly states by its terms that it will be held open

A firm offer that meets all of these requirements becomes irrevocable for the period of time stated or, if not stated, for a reasonable time.


More Info: Firm Offer


How long can a "firm offer" remain open?

3 months

If greater than 3 months, there must be consideration.


How can an offeree reject an offer?

1) Outright rejection

2) Counteroffer

3) Non-conforming acceptance


What is the Mirror Image Rule, and when does it apply?

In common law contracts, acceptance must mirror the offer, and any variation results in a counteroffer.


What are bilateral contracts and who is bound by them?

They are contracts that exchange promises. Once promises are exchanged, both parties are bound.


What are unilateral contracts and who is bound by them?

They are formed when a promise is made for performance in a contractual exchange. The offeror is bound only when the offeree's performance is completed, and the offeree is never bound.


When can an offeror revoke a unilateral contract?

Once the offeree begins performance, an option contract is created and the offeror may not revoke.

Acceptance of the offer is still effective only upon the completion of performance.


When does acceptance under the common law occur?

1) The acceptance mirrors the terms of the offer


2) The acceptance is communicated to the offeror


If the offer stipulates a particular means of communicating acceptance, then what is required to accept the offer?

The means stipulated in the offer must be followed


If the offer is silent as to the means of communication for acceptance, the offeree can accept by what means?

1) Means used by the offeror to communicate the offer

2) Means customarily used in similar transactions


3) Means of communication that are equivalent in speed and reliability to the means used by the offeror


When does acceptance by silence occur in common law contracts?

1) When the offeree takes the benefit of the offeror's services with both reasonable opportunity to reject them and reason to know that compensation was expected

2) When the offeror gives the offeree reason to understand that acceptance may be communicated by silence the offeree's silence will be effective if the offeree intends to accept

3) When, because of previous dealings, it is reasonable that the offeree should notify the offeror when he does not intend to accept


More Info: Acceptance by Silence


In a unilateral contract, how is acceptance effectuated?

Only by completing performance


What does the Mailbox Rule not apply to?

1) Offers

2) Rejections

3) Revocations

4) Option contracts


What does the Mailbox Rule apply to?

Acceptance by mail is effective upon dispatch so long as it is properly posted.

It does not matter if the acceptance is lost in the mail.


When a rejection, offer, or revocation is put in the mail, when is it communicated?

Upon receipt, not upon being read


What carrier services does the Mailbox Rule apply to?

The Mailbox Rule applies to any means of transmission that involves a foreseeable delay between dispatch and receipt.


In a situation where parties simultaneously dispatch identical offers, what is the effect?

Offers are only effective upon receipt. Therefore, dispatch of simultaneous offers is not legally relevant.


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?

1) If the acceptance reaches the offeror first, the there is a contract by virtue of the communicated acceptance.

2) If the rejection reaches the offeror first, then there is no contract.


How can seller accept a buyer's offer under the UCC?

1) A promise to ship goods in conformance with the offer

2) Prompt or current shipment of the goods in conformance with the offer

3) Shipping non-conforming goods, unless sent as an accommodation


What is the effect of a UCC seller's shipment of nonconforming goods?

1) Accepts the offer forming a binding contract


2) Puts the seller in breach of the contract.


The UCC will allow for a binding contract to be formed with a non-mirror acceptance when what occurs?

1) Both parties are merchants

2)New terms address a new topic not addressed by the offer and not expressly limited to nor objected to, and the new terms do not materially alter the contract or change an existing term in the offer.


More Info: UCC - Non-mirroring Contracts


Under the UCC, what is a term that materially alters a contract?

Terms that would result in surprise or hardship if incorporated without the express consent of the other party, such as:

1) Warranty disclaimers

2) Clauses that materially shorten the deadline for raising complaints

3) Clauses that change industry standard or past courses of dealing


Under the UCC, what must the parties be for non-mirror acceptance to be binding?

Both parties must be merchants. If one is a consumer, then the acceptance is merely a proposal.


What are the terms of a UCC contract formed by conduct?

1) Terms upon which the writings of the parties agree


2) The default terms provided by the UCC


What is the legal effect of the agreements that consumers find once they open the boxes or packaging containing their goods?

In consumer transactions, they are mere proposals that the consumer can accept or reject.