Formation

Question 1

Offer - Definition

Answer 1

An objective manifestation of a present intent to K

Demonstrated by a promise, undertaking, or commitment; definite and certain terms; and communication to offeree

Question 2

Offer - Objective Manifestation of Intent

Answer 2

Offer must give offeree a reasonable expectation that offeror is willing to enter into a K

Would a reasonable person believe the communication is an offer inviting acceptance?

Question 3

Offer - Definite and Certain Terms

Answer 3

Terms included must be sufficient to allow a court to enforce the K (e.g. quantity, time for performance, price, etc.)

Vague terms or terms of negotiation are insufficient

Question 4

Offer - Communication to an Identified Offeree

Answer 4

Offeree must know of the offer and have the power to accept it

Question 5

Offer - Communication to an Identified Offeree (Advertisements)

Answer 5

Generally not offers, unless highly specific as to quantity and clearly indicate who may accept

Question 6

Offer - UCC Offers

Answer 6

Quantity must be certain or capable of being made certain

Missing terms OK, particularly price, if parties clearly intended to make a K and there is a reasonably certain basis for giving a remedy

Question 7

Termination of Offer - Definition

Answer 7

An offer may be terminated by an act of a party or by operation of law

Question 8

Termination of Offer - Acts of Parties (3)

Answer 8

1) Revocation by Offeror

2) Rejection by Offeree

3) Lapse of Time
- Offeror can set a time limit for acceptance, at the end of which offeree’s power of acceptance automatically terminates

Question 9

Termination of Offer - Operation by Law (3)

Answer 9

1) Death or insanity of either party

2) Destruction of proposed K’s subject matter

3) Supervening Illegality

Question 10

Revoking Offers & Irrevocable Offers - Definition

Answer 10

An offeror may revoke her offer, which effectively terminates the offer and the offeree’s power of acceptance

Question 11

Revoking Offers & Irrevocable Offers - Methods of Revocation (2)

Answer 11

1) Unambiguous statement by the offeror to the offeree

2) Oferee becomes aware of offeror’s unambiguous conduct or statement indicating an unwillingness or inability to contract

Question 12

Revoking Offers & Irrevocable Offers - Limitations on Revocation

Answer 12

Revocation is only effective upon receipt by offeree

Offer cannot be revoked once it has been accepted

Question 13

Revoking Offers & Irrevocable Offers - Limitations of Revocation (Unilateral Ks)

Answer 13

Start of performance makes the offer irrevocable for a reasonable time to complete performance

Start of performance must go beyond mere preparation

Question 14

Revoking Offers & Irrevocable Offers - Irrevocable Offers (Option K)

Answer 14

Promise to keep an offer open

Common Law: Consideration required in exchange for option

UCC: No consideration required

Question 15

Revoking Offers & Irrevocable Offers - Irrevocable Offers (UCC Firm Offers)

Answer 15

A merchant’s offer made in a signed writing that assures the offer will be held open is irrevocable for the time stated: no consideration is required

If no time stated, irrevocable for up to three months

Question 16

Revoking Offers & Irrevocable Offers - Irrevocable Offers (Detrimental Reliance by Offeree)

Answer 16

Reliance must be reasonable

Question 17

Rejection of Offer - Definition

Answer 17

Revocation by offeree terminated the offer and the offeree’s power of acceptance

Question 18

Rejection of Offer - Methods (4)

Answer 18

1) Express Rejection

2) Counteroffer

3) Conditional Acceptance

4) Acceptance with Additional Terms

Question 19

Rejection of Offer - Express Rejection

Answer 19

Effective when Received

Question 20

Rejection of Offer - Counteroffer

Answer 20

Terminates original offer and becomes a new offer

• Bargaining or requests for information are not counteroffers

Question 21

Rejection of Offer - Conditional Acceptance

Answer 21

Terminates original offer and becomes a new offer (look for terms such as “if,” “provided,” “so long as,” etc.)

• E.g. offer to mow lawn; offeree says “I accept if you also trim the hedges”, this is a new offer; offeree is now offeror

Question 22

Rejection of Offer - Conditional Acceptance (Exception)

Answer 22

A condition that would be included anyway (e.g. implied warranty) does not terminate original offer

Question 23

Rejection of Offer - Acceptance with Additional Terms (Common Law)

Answer 23

Acceptance must MIRROR the offer; acceptance with additional terms creates a rejection and counteroffer

Question 24

Rejection of Offer - Acceptance with Additional Terms (UCC - K Involving Non-Merchant)

Answer 24

Terms of offer govern, K is formed, but additional terms are excluded and considered mere proposals to modify the K

Question 25

Rejection of Offer - Acceptance with Additional Terms (UCC - Both Parties are Merchants)

Answer 25

Additional terms become part of the K unless certain exceptions apply

Question 26

Acceptance - Definition

Answer 26

Acceptance arises upon offeree's clear expression of assent to the terms of the offer - Offeror Controls Method: Offeror is the master of the offer and can dictate the manner by which an offer is accepted

Question 27

Acceptance - Mirror Image Rule (Common Law)

Answer 27

Acceptance must mirror the offer's terms; it cannot add, omit, or change terms of the offer

Question 28

Acceptance - UCC Acceptance (2 Issues)

Answer 28

1) Acceptance with Additional Terms 2) Acceptance by Shipment

Question 29

Acceptance - UCC Acceptance (Acceptance with Additional Terms - Are both parties merchants? Yes!)

Answer 29

K is formed with additional terms unless either: a) Additional terms MATERIAL change the offer, b) Offer expressly limits acceptance to the offer's terms, or c) Offeror objects within a reasonable time

Question 30

Acceptance - UCC Acceptance (Acceptance with Additional Terms - Are both parties merchants? No!)

Answer 30

K is formed, but without additional terms

Question 31

Acceptance - UCC Acceptance (Acceptance by Shipment)

Answer 31

A merchant may accept an offer to buy goods either: a) providing a promise to ship goods (usually written confirmation), or b) Promptly shipping conforming goods - Shipment of Nonconforming goods: acts as an acceptance, but may give rise to breach

Question 32

Mailbox Rules - Definition

Answer 32

Offers and acceptance transmitted via mail (however, the mailbox rule does not apply to email) become effective upon either dispatch or receipt

Question 33

Mailbox Rules - Offers

Answer 33

Effective upon receipt - Rejections and counteroffers are also effective upon receipt

Question 34

Mailbox Rules - Acceptance

Answer 34

Effective upon dispatch

Question 35

Mailbox Rules - Method of Communication

Answer 35

Unless otherwise provided, offers invite acceptance in any reasonable manner under the circumstances - E.g. A sends offer to B via e-mail and B accepts via text message; valid K had been formed - If acceptance is via instantaneous two-way communication (e.g. phone), it is treated as if the parties are in each other's presence

Question 36

Mailbox Rules - Limitations

Answer 36

If the offer stipulates acceptance is not effective until received, the offer controls (i.e. offeror can opt out of mailbox rules) If offeree send both a rejection and acceptance, first to arrive controls

Question 37

Mailbox Rules - Limitations (Option Ks)

Answer 37

Acceptance is effective upon receipt

Question 38

Mailbox Rules - Revocation

Answer 38

Revocation is effective only upon receipt (i.e. mailbox rules do not apply)

Question 39

Acceptance by Performance - Definition

Answer 39

Unless acceptance is limited by terms of the offer, offeree may accept by partial performance (for bilateral Ks) or complete performance (for unilateral Ks)

Question 40

Acceptance by Performance - Unilateral Ks

Answer 40

Complete performance required - Offeree is not obligated to start or complete performance - Failure to perform does not give rise to breach b/c no K is formed absent complete performance

Question 41

Acceptance by Performance - Unilateral Ks (Revocability)

Answer 41

Offer may become irrevocable upon the start of performance until completion

Question 42

Acceptance by Performance - Unilateral Ks (Notice only required upon Completion)

Answer 42

Offeree is not required to give notice upon start of performance, but must notify offeror within a reasonable time upon completion

Question 43

Acceptance by Performance - Bilateral Ks

Answer 43

Partial performance gives rise to acceptance - Offeree must make offeror aware of acceptance

Question 44

Acceptance by Performance - Offers Requiring Acceptance by Promise (2)

Answer 44

An offer requiring acceptance by promise may still be accepted by performance if: 1) Offeree begins to perform; and 2) Offeror knows offeree has begun performance and acquiesces Note: An offer may always limit methods of acceptance

Question 45

Consideration & Substitutes for Consideration - Definition

Answer 45

Consideration is bargained-for exchange of legal value between parties; there must be a benefit to promisor or detriment to promise - Required element of every K

Question 46

Consideration & Substitutes for Consideration - "Bargained-for Exchange"

Answer 46

The promise must induce the detriment and the detriment must induce the promise Detriment = an obligation to do or refrain from doing something one would otherwise not be obligated to do or refrain from doing

Question 47

Consideration & Substitutes for Consideration - Bargained-for Exchange (Pre-existing Duty)

Answer 47

A promise to perform a pre-existing duty or obligation generally does not constitute consideration

Question 48

Consideration & Substitutes for Consideration - Bargained-for Exchange (Pre-Existing Duty - Exception)

Answer 48

Promise to pay a debt after the SOL has run is binding

Question 49

Consideration & Substitutes for Consideration - Invalid Consideration

Answer 49

The following do not constitute consideration: 1) Promises of gifts or conditional gifts 2) Illusory Promises: A promise where there is no obligation to perform (e.g. A promises to do B's chores if he has time)