Flashcards in Contracts Deck (178)
What is a unilateral contract?
One promise and a performance
This results from an offer that expressly requires performance as the only possible method of acceptance
Ex. "offer" + "only by"
Once performance begins under a unilateral contract, the offeror cannot cancel the offer. However, mere preparation is not enough for the unilateral K to become irrevocable - performance must have begun.
Doesn't terminate when offeror dies; as long as you continue performing, you recover.
What is a bilateral contract?
This results from all offers that aren't unilateral
There will be a bilateral contract unless:
(2) Offer expressly requires performance for acceptance (unilateral)
What is quasi contract?
An equitable remedy not governed by contract law. Any time the application of contract rules produces an unfair result, consider quasi contract.
Also known as implied-in-law contract. When there is no contractual relationship between the parties, an implied-in-law contract action will prevent unjust enrichment of one party to the detriment of another.
What is the UCC Art. 1
Under Article 1, common law contract applies to sale of goods "unless displaced by particular provisions" of Art. 2
What is the UCC Art. 2 and what does it apply to?
Art. 2 applies to contracts that are primarily for sales of goods. Factors in determining applicability:
(1) type of transaction (sale?) and
(2) subject matter of transaction (goods - tangible/personal property)?
Does NOT apply to: real estate transactions, services contracts, employment contracts, agreements to provide specific services.
How do you determine whether a mixed deal (with services, sale of goods) applies the UCC?
General rule: all or nothing test, based on what the most important part of the deal is.
Exception: if the contract expressly divides payment, then apply UCC to sale of goods and common law to the rest (ex. $10 for yo yo, $39,990 for lessons)
What is the basic definition of a contract?
A contract is an agreement that is legally enforceable. Thus, an agreement must be ENFORCEABLE (valid offer, termination of offer? acceptance)
What is the general test for determining whether an initial communication constitutes an offer?
General test: manifestation of commitment. Would a reasonable person in the position of offeree believe that his or her assent creates a K.
Note: a bid can be an offer.
What if the price term is missing in an offer to sell?
If common law: price and land description required to constitute an offer to sell.
If UCC: can exclude price in offer, so long as it meets test ("intent of parties")
What if there are vague or ambiguous terms in an offer?
Under UCC/common law alike, vague or ambiguous MATERIAL terms are not an offer (test: appropriate, fair, reasonable)
Ex. sale of car for "fair price" is not an offer under either CL or UCC
What is a requirements or output contract?
When buyer agrees to buy all its things from the seller, OR the seller agrees to sell its whole production to the buyer.
- Can't be vague/ambiguous
- Can state quantity of goods in terms of either requirement or output (ex. all, only, exclusively, solely)
- Under UCC, price/time need not be spelled out - terms supplied by "reasonableness" standard if otherwise consistent with parties' intent (but that won't change the express terms of the K)
Under the UCC, a good faith term is implied (such actual requirements as may occur in good faith)
In a valid requirements contract, both parties' promises create binding obligations - the promisor binds itself to buy from the supplier all that it requires, and the supplier binds itself to sell to the promisor that same amount. Consideration exists because the promisor is suffering a legal detriment; it has parted with the legal right to buy the goods it may need from another source.
Ex. "as many peaches as it chooses" does not sufficiently bind because it is illusory; "as many peaches as it requires" does. An agreement to bind only what is desired is not consideration.
Can a buyer increase the requirements in a requirements contract?
Yes, so long as the increase is in line with prior demands, and no unreasonably disproportionate increase is allowed.
Test: compare proportionally with the prior demand
Can an advertisement or price quote be an offer?
Generally, ads and price quotes aren't offers.
- Reward is unilateral offer
- Ads can be offer if it specifies quantity and explicitly dictates terms of acceptance (fur coat, first come first serve, $10)
What is offer termination?
Removes the power of acceptance from the offeree; the offer itself no longer exists
What are the four main ways in which someone can terminate an offer?
1. Lapse of time
2. Death of a party prior to acceptance
3. Words or conduct of offeror (offer revocation)
4. Words or conduct of offeree
What is required for an offer to be considered terminated due to lapse of time?
Either time stated, or reasonable time elapses.
What is required for an offer to be considered terminated due to death of a party?
General rule: death or incapacity of either party after offer, but before acceptance, terminates.
Exception: irrevocable offer.
What is required for an offer to be considered terminated due to words or conduct of offeror (i.e. revocation)?
An offer can be revoked through either:
1. Later unambiguous statement by offeror to offeree of unwillingness or inability to contract, OR
2. Later unambiguous conduct by offeror indicating an unwillingness or inability to contract that the offeree is aware of.
- Multiple offer does not constitute a revocation, b/c not unambiguous
Exception: four irrevocable contracts
What are the four irrevocable contracts?
1. Option (offer + paid promise)
2. UCC Firm Offer Rule (offer + written promise + merchant)
3. Reliance (offer + reasonably foreseeable and detrimental reliance)
4. Unilateral contract (unilateral K offer + start of performance)
What is an option contract (irrevocable contract, which cannot be terminated by offeror after offer)?
(2) offeror promised not to revoke (or promised to kep offer open) and
(3) promise supported by payment or other consideration ("option") (common law)
Options are irrevocable both in UCC and common law.
Options may be kept open for however long parties contract to.
Note: mailbox rule does not apply to the exercise of options. Acceptance of an option is effective only when received.
What is the UCC's "firm offer rule" (irrevocable contract, which cannot be terminated by offeror after offer)?
Offer cannot be revoked for up to three months if:
(1) offer to buy/sell goods
(2) signed, written promise to keep offer open (by its own terms)
(3) offeror is a merchant.
Irrevocable during the time stated. Period of irrevocability may not exceed 90 days (if litigated).
Note: if you see an orally agreed-to option contract from a merchant, firm offer rule will NOT apply and it will not be irrevocable.
A merchant is someone in business
If the promise says that the offer won't be revoked for longer than three months, the courts don't punish that overreach they just cap it at 3 months.
What is the irrevocable offer through reliance?
Offer cannot be revoked if there has been reasonably foreseeable and detrimental reliance.
When is an offer in a unilateral contract irrevocable?
Start of performance pursuant to an offer to enter into unilateral contract
Mere preparation will be insufficient (if painting - preparation is everything up to putting the paint on the wall)
When will the words/conduct of offeree create an indirect rejection?
Indirect rejection through
(2) Conditional acceptance
(3) Additional terms aka Mirror Image Rule [common law only]
What is a counteroffer?
Generally TERMINATES the offer and creates a new offer.
- If there is an option (offer + promise + consideration), counteroffer will not kill offer.
Distinguish from bargaining, which doesn't terminate offer (question mark)
What is a conditional acceptance, and when will it constitute an indirect rejection?
A conditional acceptance always terminates the offer. At CL, it becomes a counteroffer that can be accepted through conduct. In UCC, it's just a rejection!
Look for response to an offer with the words "accept" followed by "if"/"only if"/"provided"/"so long as"/"but"/"on condition that.
The difference between CL and UCC means that there will be a difference as to which terms are accepted (UCC - conduct will be based solely on conduct, new provision doesn't enter)
What is the Mirror Image Rule?
UCC expressly rejects, only under common law.
A response to an offer that adds new terms is treated like a counteroffer rather than an acceptance. That means that there is no enforceable contract between the parties, because the additional term constitutes a rejection of the offer and counteroffer.
What happens if there are additional or different terms added to an offer (under UCC Art. 2-207)?
Battle of the forms.
1. Is there a contract?
- If you add new terms but don't make them a condition of acceptance, generally treated as "seasonable expression of acceptance"
2. Is the additional term a part of the K?
- If both parties aren't merchants, not a part.
- If both parties are merchants, will not be a part if the additional term
(a) is material
(b) the offer expressly limits acceptance to its terms, OR
(c) offeror has already rejected the terms or rejects the terms in reasonable time period
1. If the offeree (seller, usually) accepts the offer and at the same time makes a material alteration or adds an additional term to the offer, we have a contract and the terms of the offer control.
2. If there is an acceptance with a non-material change, then the change is incorporated into the contract, UNLESS the offeror objects to those changes within a reasonable period of time. If the offeror objects, the changes are out.
3. What is a material alteration? A change that substantially affects the economic risks/benefits, or changes the usual remedy for breach of K (liability, $, damages) i.e. arbitration clause.
Who can control the method of acceptance of an offer?
Offeror can control the method. However, usually on bar exam questions the K will be silent as to these details and we will have some complication.