Contracts Flashcards
(7 cards)
I. The elements of a contract are met in the oral agreement for 100 shopping carts.
The first issue is whether the oral exchange between the grocer and the supplier contained the elements of a valid contract.
Contracts for the sale of goods are governed by Section 2 of the Uniform Commercial Code (UCC), with goods defined as “things moveable” at the time of contracting. A valid contract contains four elements: offer, acceptance, intent, and consideration. An offer is a party’s manifestation of intent to enter into a bargained-for exchange, and acceptance is a party’s manifestation of intent to accept the offer on the offeror’s terms. Consideration is a legal
detriment or bargained-for-exchange.
Application
Here, the supplier’s action of placing shopping carts on the floor with a price tag of $125 likely constituted an offer by a commercial vender. Moreover, after the grocer inquired about whether the supplier could supply 100 shopping carts, the supplier indicated that he could do so in 30 days, clarifying that the offer of a shopping cart for $125 was good up to that amount. The grocer accepted this offer by telling the supplier to “Please ship me 100 of these shopping carts by March 31” in exchange for a $12,500 payment on arrival. The $12,500 payment was sufficient consideration for the contract, and the supplier’s statement, “You’ve got a deal,” manifested clear intent to enter into the contract.
In conclusion, all four elements of a contract are met, and the parties entered into a valid, oral contract for 100 shopping carts for $125.
II. The Statue of Frauds will prevent enforcement of the oral agreement for 100 shopping carts but will allow enforcement of the agreement up to 60 shopping carts.
The next issue is whether the oral agreement between the grocer and supplier, even though valid as a contract, is enforceable under the UCC Statute of Frauds.
Under the UCC Statute of Frauds, contracts for sale of goods over $500 must be in writing. The writing must be sufficient to show the existence of a contract between the parties, must describe the material terms of the contract, including the quantity of goods, and must be signed against the party against whom enforcement is sought. A writing is enforceable only up until the quantity of goods named therein. The definition of “signed” under the UCC is broad and includes any mark sufficient to show the party’s intent to adopt the writing as their own. Letterhead may be sufficient to act as a signature.
Under the “merchant confirmatory memo” exception to the UCC Statute of Frauds, an oral contract for sale of goods may be enforceable if one merchant sends to another a written memo detailing the material terms of the oral agreement, of which the receiving merchant has reason to know, and the receiving merchant either acknowledges the agreement or does not respond within 30 days. However, a merchant confirmatory memo – like any other
writing sufficient to satisfy the Statute of Frauds – must be signed.
Application
This contract was for a sale of 100 shopping carts at a total price of $12,500, which means that it is subject to the UCC Statute of Frauds. Unless the grocer can produce a writing sufficient to satisfy the statute of frauds, the contract will be unenforceable.
A. The grocer’s March 2 note to the supplier is not sufficient to enforce a contract for 100 shopping carts at $125.
Just a few days after the parties entered into an oral agreement for sale of 100 shopping carts at $125, the grocer sent the supplier a note stating the essential terms of quantity and price. The supplier received the note, read it, and did not respond. However, the problem is that the grocer’s note was handwritten and unsigned, on blank paper. There was no indication – such as a logo, or letterhead, or even the grocer’s name – that the grocer was authorizing the document. An unsigned document will not qualify for the “merchant
confirmatory memo” exception, and therefore, the grocer’s March 2 note will not result in an enforceable contract for 100 shopping carts.
B. The Supplier’s March 31 document will allow enforcement of the contract for 60 shopping carts, but not for 100.
Although the March 2 note is not sufficient to satisfy the statute of frauds, the supplier’s March 31 note is sufficient. The note contained the essential terms of price and quantity, and most importantly, was printed on the supplier’s letterhead. This letterhead acts as a signature and renders the contract between the supplier and the grocer enforceable. However, the supplier’s note stated that the grocer ordered “60 shopping carts,” not 100. Even though this
is a misstatement of the oral agreement between the parties, the contract is only enforceable as to the quantity of goods named in the writing: here, 60 shopping carts.
III. Conclusion
In conclusion, there is not an enforceable contract requiring the supplier to sell 100 shopping carts to the grocer for $125 each. Instead, there was an enforceable contract for 60 shopping carts, which the grocer was free to reject as non-conforming with the original agreement.
