Contracts & Sales Flashcards
(24 cards)
Steps to address a Contracts/ Sales Q
AFTER Method
Applicable Law (UCC/CL)
Formation–was a k formed (offer, mutual assent, terms, defenses)
Third Party Issues - Is there a 3rd party to the K (e.g., Assignment/Delegation)
Excused Performance - Was the K performed or was performance excused? Conditions/Breach
Remedies - If there was a breach, what remedies are available
Contract Definition
K is a legally enforceable agreement. An enforceable contract requires mutual assent and consideration. Mutual assent means a valid offer and acceptance. Consideration means a benefit bargained for and received by the promisor from a promise.
Applicable Law
Common Law - Real Estate, Services, etc.
UCC Art. 2 - Goods
Mixed Ks–
All or Nothing Rule
No mixed Ks, we’ll put you into a good or service K
Exception: Divisible K – K is divided into 2 mini Ks (e.g., purchase of a hot water heater w/ a separate additional fee for installation)
Predominant Purpose Rule
Does the Good or Service play a bigger role
(reason for entering K often)
Gravaman Test: Where is the issue arising out of?
Formation Issues to Address
All Contracts Don’t Stink
Agreement (Offer & Acceptance)
Consideration
Defenses to Formation
Statute of Frauds (enforceability)
Formation - Agreement
Agreement requires mutual assent which requires offer and acceptance
Formation - Agreement - Offer
An offer is the manifestation of a willingness to enter into agreement by the offeror that creates a power of acceptance in the offeree. It is governed by an objective test as to whether the offeror displayed the objective serious intent to be bound, such that a statement is an offer only if the person to whom it is communicated could reasonably interpret it as such. An offer must typically be communicated to a specific offeree. Under the CL, all essential terms must be contained within it, though under the UCC only quantity must be specified.
Formation - Agreement - Offer - Offer Specificity
At Common Law the offer must cover all essential terms (parties, subject, price, quantity
UCC - typically just need quantity and UCC will gap fill.
Formation - Agreement - Offer - Terminating the Offer
Offeror normally free to revoke at any time prior to acceptance.
Can revoke by express communication to offeree
Offer revoked when the OFeree leans the offeror has taken action that is absolutely inconsistent w/ a continuing ability to contract
Offer revoked when offeree rejects offer
Offer revoked when offeree makes a counter offer (though beware counter-inquiry)
Offer revoked upon offeror’s death
Offer revoked after the passage of a reasonable amount of time
Formation- Agreement - Offer - Irrevocable Offers
O FUD
Option K–Offeree buys an option, where the option is paid for with separate consideration to keep the offer open, even if that separate consideration goes to final price
Merchant’s firm offer under the UCC - Firm offer must be 1) made by a merchant, 2) in writing, 3) signed by the offeror, and 4) contain an explicit promise not to revoke. Firm offers last as long as stated or not longer than 90 days
Unilateral K where the offeree has started performance
Detrimental Reliance - Offeree reasonably and detrimentally relies on the offer in some foreseeable manner.
Formation - Agreement - Acceptance
Acceptance is the objective manifestation by the offeree to be bound by the terms of the offer. The offeror is the master of the offer and may decide how, within reason, acceptance is to occur. The offeree must communicate acceptance to the offeror for it to be effective. At common law the acceptance must mirror the offer exactly, while under the UCC additional or different terms included in an acceptance do not constitute a rejection, unless acceptance was made expressly conditional on assent to the additional or different terms.
Mailbox Rule
Acceptance sent by mail is effective when the letter is sent.
The mailbox rule is not applicable if 1) the offeree sends a non-acceptance first and then acceptance (thus effective upon reciept), 2) non-acceptances, 3) option ks.
Acceptance by Silence
Typically not allowed, though there are exceptions for
1) unilateral reward offer or contest
2) Unilateral k in which the parties are geographically close so that the offeror will see that performance has occurred
3) past history of dealing where silence served as acceptance, such that the offeree should reasonably notify the offeror if they do not accept
4) offer says acceptance must come by silence and the offeree intends to a ccept the offer by silence.
Implied in Fact Ks
An implied in fact contract may be found where the offeree does not write or speak their acceptance, but their assent is inferred from their conduct and the offeree has reason to know that conduct may be construed as assent.
Counteroffers under the Common Law
The common law uses the mirror image rule, where the terms in acceptance need to match the offer exactly, otherwise the response is a counteroffer. A counteroffer is a statement from the offeree to the offeror that alters one or more terms of the original offer. It operates both as a rejection of that offer and as a new offer.
Counteroffers must be distinguished from inquiries, where the offeree does not manifest an intent to create a counteroffer but rather is merely inquiring about the offeror’s proposed terms
UCC Counteroffers (2-207)
A definite and seasonable 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 on assent to the additional or different terms.
Additional Terms under 2-207
Additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless:
* (a) the offer expressly limits acceptance to the terms of the offer;
* (b) they materially alter it; or
* (c) notification of objection to them has already been given or is given within a reasonable time after notice of them is received.
Different Terms under 2-207
The knock-out rule manages different terms under the UCC such that when an acceptance has a different term from the initial offer–under the majority rule both terms are knocked out and the UCC gap fills and under the minority rule the initial offer controls the terms.
Consideration
Consideration means a benefit or detriment bargained for and received by the promisor from a promise. It is a necessary aspect of an enforceable contract.
Gift Promises and Conditional Gifts do not count
Ask
* Who is making the promise that needs to be
supported by the law (promisor)
* Is there a benefit to the promisor OR a
detriment to the promisee)
* Was this bargained for? (do parties think they
are making a deal when promising)
Consideration - Promising not to Sue
Settling legal claim can be sufficient consideration, only if:
1) Plaintiff has a good faith belief in the validity of the claim, or
2) There is reason to doubt validity of claim due to uncertain law.
K Modification & Consideration
Modifying an existing contract may require new consideration to be valid.
Under the common law, follow the pre-existing duty rule
Under the UCC, ask whether the modification is being made in good faith.
Pre-Existing Duty Rule
Modification of a contract under common law follows the pre-existing duty rule. The pre-existing duty rule states that a promise to do something that you are already legally obligated to do is not consideration.
There are exceptions to the Pre-Existing Duty Rule for changes in performance, instances where a 3rd party promises to pay, and where unforeseen difficulties would excuse performance.
Under the Pre-Existing Duty Rule, promising partial payment for release from a debt obligation is not a valid exception if the debt is currently due and undisputed.
Modification under the UCC
Modifying a UCC contract without new consideration is binding if the modification is made in good faith.
Good faith means honesty in fact and fair dealing.
Consideration Substitutes - Promissory Estoppel
Promissory Estoppel may substitute for consideration in order to make a promise enforceable. A promise is binding if
1) the promisor makes a promise that would be reasonably expected to induce reliance,
2) the promisee does take detrimental action in reliance on the promise, and
3) injustice can only be avoided by enforcement of the promise.
Consideration Substitutes - Quasi K (K Implied in Law)
A quasi-contract may be found if
1) the plaintiff conferred a measurable benefit on the defendant,
2) the plaintiff reasonably expected to be paid, and
3)it would be unfair to let the defendant retain the benefit because either the defendant had an opportunity to decline the benefit but knowingly accepted it, or the plaintiff had a reasonable excuse for not giving the defendant such opportunity, as in an emergency.
Damages often limited to the fair value of the benefit conferred.
