Formation

Question 1

Who are the parties to a contract?

Answer 1

The offeror (makes the offer) and the offeree (has the right to accept)

Question 2

What are the requirements for the formation of a contract?

Answer 2

1. Offer
2. Acceptance
3. Consideration
4. No Defense (No Mistake, Fraud, Duress, Undue Influence, or Illegality)

Question 3

What are the requirements of a valid offer?

Answer 3

1. Present Intent (Objective Intent) - Offer must be made with serious intent
2. Definite Terms - Terms of the offer must be definite enough to cover the legal minimum of formation
3. Communication of Offer - must be communicated by the offeror and received by the offeree

Question 4

What definite terms are required under Common Law?

Answer 4

Identification of the parties, the subject matter, the price stated, and the time for performance.

Question 5

What definite terms are required by UCC Article 2?

Answer 5

Subject matter (item and number of items)

Question 6

Revocation

Answer 6

An offer can be revoked at any time prior to acceptance. They must be communicated and received prior to acceptance by the offeree.

Question 7

Options

Answer 7

A separate contract for time. Offeree gives consideration in exchange for the offeror’s promise to keep the offer open for a specified period. Rejection during the period does not end the option. The offeree still has the right to accept during that time period. 3 months is the maximum time limit without consideration.

Question 8

Rejection

Answer 8

An offer is terminated at any time prior to acceptance by the offeree saying or writing anything that would be considered a rejection

Question 9

Mirror Image Rule

Answer 9

Acceptance must be absolute, unequivocal, and unqualified. Any variation in the terms results in a counteroffer and rejection.

Question 10

Counteroffer

Answer 10

A counteroffer is not only a rejection of the original offer by the offeree, but also a new offer that makes the original offeree an offeror.
Conditional acceptance is also considered a counteroffer.

Question 11

Termination of Offers

Answer 11

• End of a stated period.
• Death or insanity of one of the parties
• Object of the offer is destroyed prior to acceptance
• Subject matter of the contract becomes illegal to sell

Question 12

Acceptance of a Unilateral Offer

Answer 12

Acceptance takes place upon completion of the act required by the offer.

Question 13

Acceptance of a Bilateral Offer under Common Law/Mirror Image Rule

Answer 13

Acceptance must be absolute, unequivocal, and unconditional, or it is treated as a counteroffer and not acceptance

Question 14

Acceptance of Bilateral Offer under UCC Article 2

Answer 14

Both Merchants and Nonmerchants: A definite expression of acceptance that doesn’t change any terms.
Nonmerchants: A definite statement of acceptance followed by some additional terms forms a contract but without the additional terms.
Merchants: A definite statement of acceptance followed by additional terms results in a contract with the additional terms unless they are material, the original offer states “this offer is limited to these terms.” or the offeror objects within a reasonable time after receiving the acceptance to the additional terms

Question 15

Timing of Acceptance

Answer 15

• If an acceptance is sent by an authorized medium (mail), the contract is formed when the offeree delivers the acceptance to the authorized medium even if it is never received by the offeror due to unforeseen circumstances.
• If there is a specified means of acceptance and the offeree uses a different means, it is considered a counteroffer and rejection because offeree has violated the terms of the offer and mirror image rule

Question 16

Legal Detriment

Answer 16

Doing what you are free not to do and not doing what your are free to do (There is no contract unless there is detriment on both sides, otherwise it is considered a gift)

Question 17

Preexisting Duty and Consideration

Answer 17

You cannot obtain more detriment from the other party in order to perform what you are already legally obligated to do

Question 18

UCC Requirements Contract

Answer 18

A contract where a person agrees to purchase all that they need for their home or business from a seller. Quantity is left open, but it is enforceable under the UCC

Question 19

UCC Output Contract

Answer 19

A seller agrees to sell all that it produces to a particular buyer

Question 20

Accord

Answer 20

An agreement to waive legal rights and release another party from legal obligations

Question 21

Satisfaction

Answer 21

Actual payment of the amounts agreed to in the accord

Question 22

Liquidated Debts

Answer 22

Debts in which the amount due and owing is clear to both parties

Question 23

Unliquidated Debts

Answer 23

Debts in which the parties acknowledge that money is due and owed, but they disagree on the amount

Question 24

Past Consideration

Answer 24

A promise to pay for an act already completed is without (not bargained-for) consideration

Question 25

Promissory Estoppel

Answer 25

A doctrine that a party may recover on the basis of a promise made when the party's reliance on that promise was reasonable, and the party attempting to recover detrimentally relied on the promise.

Question 26

Types of contracts that must be in writing under the Statute of Frauds

Answer 26

-Guaranty of debt contracts -Contracts involving an interest in real property -Contracts impossible to perform within one year of formation -Contracts for the sale of goods priced at $500 or more -Promises of executors for personal liability for debts of the estate

Question 27

Requirements for a valid writing/record of a contract

Answer 27

-Signature -Exception (if both are merchants, only one party needs to sign to bind the parties) -A writing/record which need not be in one document or formal.

Question 28

Interpreting the terms in a contract

Answer 28

Terms are assumed to have their ordinary meaning. If technical. their technical meaning. Any ambiguity will be construed against the party who drafted the contract.

Question 29

Parole Evidence Rule

Answer 29

If what you wanted is not in the contract but promised as an aside in negotiations, or as you were signing the contract, you can't bring it up later and expect to get it.

Question 30

Defenses to formulation of a contract

Answer 30

- Mistake - Fraud or Misrepresentation - Duress - Undue Influence - Illegality

Question 31

Unilateral Mistakes

Answer 31

If only one of the parties makes a mistake, the mistake is binding on the mistaken party unless the other party knows or should know of the mistake, or the mistake is material and obvious.

Question 32

Bilateral Mistakes

Answer 32

If both parties are mistaken and the mistake is one that involves the identity, existence, or quantity of the subject matter, the contract cannot be enforced by either party