Formation Flashcards
(20 cards)
Sale of goods: contract can be made
In any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of a contract
2-204: Formation in General (3)
- Contract does not have to be in writing or follow strict rules, conduct can be enough to show agreement
- Doesn’t’ have to be formed at a precise moment
- Contract does not just because some terms (price/delivery date) are missing
Merchants Firm Offer UCC 2-205
Special rule in the sale of goods, allowing merchant to make irrevocable offers without consideration for a limited period of time
What are the Elements of the Merchants Firm Offer Rule: 2-205 (3)
- Offer must be made by a Merchant
- Offer must be in a Signed Writing (verbal promises not enough to make offer irrevocable)
- The Offer must give assurance that it will be held open and will remain open for a specific or reasonable time (if not time stated, NEVER more than 3 months, unless there is separate consideration like a paid option contract)
Acceptance: 2-206
Offers to make sales contracts may be accepted in ANY MANNER and by any MEDIUM REASONABLE under the circumstances
Acceptance: 2-206: What are the ways acceptance by Shipment of Goods
Order for goods can be accepted by either
1. A promise to ship OR
2. Actually shipping the goods
Acceptance: 2-206: What is acceptance by shipment of Non-Conforming Goods? Exception?
If the Seller ships non-conforming goods, this generally acts as acceptance of the contract from the Buyer but breach of contract
Exception: If non-conforming goods are shipped instead BUT Seller notifies Buyer that goods are an “accommodation”, shipment serves as counteroffer, not acceptance. Buyer may reject or accept
Acceptance: 2-206: Performance As Acceptance (2)
- If Seller begins performance as acceptance, the Seller MUST notify the Buyer within a reasonable time
- If the Buyer doesn’t receive notice within a reasonable time, the offer may lapse and be considered rejected
Battle of the Forms: 2-207 (Additional Terms in Acceptance or Confirmation)
When parties exchange standard forms (like purchase orders and acknowledgments) with conflicting terms
Battle of the Forms: 2-207(1) Acceptance Despite Differing Terms (3)
Acceptance By Offeree
- If Offeree responds in a way that clearly indicates acceptance of the offer or written confirmation
- Even if acceptance includes terms that were not in the original offer or change terms in the offer, it is still treated as acceptance
- UNLESS, the Offeree states that their acceptance is conditional on the Offeror agreeing to the new or different terms, it is NOT acceptance, INSTEAD it is a counteroffer because it introduces a condition to the agreement
Battle of the forms: 2-207(2) Treatment of Additional Terms (4)
When Both Parties are Merchants, terms become part of the contract UNLESS one of the following exceptions apply:
- The offer expressly limits acceptance to its terms:
- The additional terms materially alter the contract:
- Objection to the additional terms within a reasonable time:
- Non-Merchants: additional terms are treated as proposals that require explicit agreement to become part of the contract
Battle of the Forms: 2-207(3): Conduct Creates a Contract. What is the knockout rule?
If the parties’ conduct shows a contract exists (e.g., shipping and accepting goods), a contract is formed even if their forms don’t agree
Situations where parties behave as though the contract exists even though their written documents (not contracts) do not perfectly align. Conflicting forms the parties exchanged before or during performance
The Knockout Rule: When the parties’ forms contain conflicting terms, both terms are knocked out (i.e., removed from the contract), and UCC gap-fillers are used to supply the missing terms.
What is the Statute of Frauds?: 2-201
The requirement that contracts for the sale of goods for the price of $500 or more must be in writing
Statute of Frauds: 2-201: The required writing need contain what? (3)
- A sufficient indication that the contract for sale has been made
- The signature of the party who is trying to avoid the contract
- A quantity term: writing can be incomplete or have error EXCEPT quantity must be written
Statute of Frauds: 2-201: What are the Exceptions to the SOF (4)
- Merchants Exception
- Special Manufacture Exception
- Judicial Admission Exception
- Part Performance Exception
- Promissory Estoppel (non-statutory exception)
SOF Exception: Merchant Exception: 2-201(2): (4)
- Between Merchants
- A writing in confirmation is sent
- The other merchant has reason to know of its contents
- Failure to object within 10 days makes it enforceable.
SOF Exception: Specifically Manufactured Goods: 2-201(3)(a): (3)
Contract is enforced on reliance theory if:
- Goods are specifically manufactured AND
- Goods are not suitable for sale to others in ordinary course of business AND
- Seller has already begun production or made significant commitments to procure materials before the Buyer backs out
SOF Exception: Judicial Admission: 2-201(3)(b)
Where the party which whom enforcement is sought (party seeking to avoid the contract) “admits in his pleading, testimony or otherwise in court that a contract for sale was made.”
SOF Exception Part Performance: 2-201(3)(c)
to the extent that either the seller receives and accepts payment for the goods, or the buyer receives and accepts the goods, neither party can deny the existence of an oral contract.
- Comment 2 to §2-201 puts it as, “receipt and acceptance either of goods or of the price constitutes an unambiguous overt admission by both sides that a K actually exists.”
SOF Exception (Non-Statutory): Promissory Estoppel (1-103)
Can sometimes override SOF, allows a court to enforce a promise even if it wasn’t technically a binding contract
Requirements:
1. Promise (without writing)
2. Promisor should reasonably expect to induce action or forbearance
3. Promise does induce such action or forbearance
4. Injustice can be avoided only by enforcement.
