Formation Flashcards
(125 cards)
1
Q
What is an offer?
A
An offer is a communication that gives the recipient the power to conclude a contract by acceptance without further action by the other party.
This definition highlights the unilateral nature of offers where acceptance finalizes the agreement.
2
Q
What is a bilateral offer?
A
A bilateral offer requires a return promise to accept.
Bilateral offers involve mutual promises between parties, distinguishing them from unilateral offers.
3
Q
How can a bilateral offer be accepted?
A
A bilateral offer can be accepted either with a return promise or by starting performance, which operates as an implied promise to render complete performance.
This means that taking action can signify acceptance of the offer without a formal promise.
4
Q
What does starting performance imply in a bilateral offer?
A
It operates as an implied promise to render complete performance.
5
Q
What is the essential element in the formation of a contract?
A
A bargained-for exchange of promises or performance.
6
Q
What must each party do to meet the legal detriment requirement in a contract?
A
Relinquish a legal right by either:
* Performing an act not legally required
* Refraining from performing a legally permissible act.
7
Q
What does the requirement of a bargained-for exchange ensure?
A
Each party’s willingness to enter into the contract must be induced by the other party’s act or promise.
8
Q
True or False: A promise to make a gift involves a bargained-for exchange.
A
False.
9
Q
Fill in the blank: The legal detriment requirement can be satisfied by performing an act that is _______.
A
not legally required.
10
Q
According to the text, can parties challenge a contract based on inadequate consideration?
A
No, parties generally cannot challenge on that ground.
11
Q
What is the main rule regarding promises to perform preexisting duties?
A
Promise to perform (or performance of) preexisting duty is not consideration.
12
Q
What constitutes new or altered consideration?
A
New duty added or preexisting duty altered (e.g., acceleration of due date).
13
Q
What is ratification of a voidable duty?
A
New promise to perform voidable duty (e.g., upon reaching age of majority).
14
Q
What is an exception to the common-law rule regarding honest disputes?
A
Scope of duty honestly disputed.
15
Q
What is the definition of an unexpected event in the context of contract modification?
A
Fair & equitable modification in view of unanticipated circumstances.
16
Q
What is a renewed promise in relation to preexisting debt?
A
Renewed promise to pay preexisting debt despite technical defense (e.g., statute of limitations, bankruptcy) if written or partially performed.
17
Q
What role does a third party play in the exceptions to the preexisting-duty rule?
A
Third party offers additional promise that is contingent on performance of preexisting duty.
18
Q
What is the UCC exception regarding modification?
A
Modification sought in good faith - honesty and observance of reasonable commercial standards of fair dealing.
19
Q
What must a settlement agreement be supported by?
A
Consideration.
20
Q
Is there consideration if one party merely promises to perform a preexisting duty?
A
No, there is no consideration.
21
Q
In what situation is there consideration despite a preexisting duty?
A
If the scope of that duty is disputed in good faith.
22
Q
What can a creditor do regarding an honestly disputed debt?
A
Promise to settle for a lesser amount than billed.
23
Q
What is the distinction between novation and accord and satisfaction?
A
Novation substitutes a new party, while accord and satisfaction involves alternate performance that discharges a contractual obligation.
24
Q
Are oral settlement agreements generally enforceable?
A
Yes, if their terms are sufficiently precise.
25
When does an oral settlement become enforceable even when a writing is required?
When one party performs (e.g., by making the settlement payment).
26
What is a gift in the context of contract formation?
A gift is not a bargained for exchange
## Footnote
A gift does not involve consideration and thus cannot form a binding contract.
27
Define token consideration.
Token consideration is insufficient if it does not induce a bargain
## Footnote
Token consideration lacks real value and does not create a valid contract.
28
What is sham consideration?
Sham consideration occurs when recited performance is not intended to be completed
## Footnote
It does not create legal detriment or induce a bargain.
29
What is the implication of preexisting duty on legal detriment?
There is no legal detriment if performance is already owed or completed
## Footnote
Preexisting duties cannot serve as consideration for a new contract.
30
What is an illusory promise?
An illusory promise imposes no obligation and thus has no legal detriment
## Footnote
Such promises do not constitute valid consideration.
31
What is required for contract modifications to be valid?
Contract modifications must generally be supported by new consideration
## Footnote
Each party must alter its duties unless the modification is fair and equitable.
32
What is the significance of a preexisting duty in contract modifications?
A promise to perform a preexisting duty is insufficient for new consideration
## Footnote
It does not discharge the parties' duties under the original contract.
33
Is a writing required to modify a contract?
A writing is not required unless the statute of frauds applies
## Footnote
This is not typically seen in standard contract modifications.
34
Can a party delegate its duty of performance to a third party?
Yes, either party can delegate its duty of performance to a third party
## Footnote
However, this does not extinguish the original party's liability for breach.
35
What is a novation?
A novation substitutes a new party, discharges the original party's obligations, and requires agreement by all parties
## Footnote
It must involve consent from the original creditor to the new arrangement.
36
True or False: A promise to perform a preexisting duty constitutes new consideration.
False
## Footnote
Such a promise does not create a new obligation or consideration.
37
What is the irrevocability period for a firm offer under the UCC?
The irrevocability period is for the time stated in the offer or, if no time is stated, for a reasonable time not to exceed three months.
38
What happens to a firm offer after three months if it is not expressly revoked?
The firm offer becomes revocable.
39
Under what conditions can a merchant's firm offer remain open?
It may contain assurances that it will remain open.
40
True or False: A firm offer can be revoked after three months without any express revocation.
True
41
Fill in the blank: A full handwritten signature is not always required if the merchant _______.
handwrites on his/her letterhead to confirm that a firm offer was already made.
42
What is required for option contracts for the sale of goods under common law?
They must be supported by consideration.
43
What is the UCC?
Uniform Commercial Code
44
What happens to a revocable offer if it is not accepted within a reasonable time?
It may lapse.
45
What is the educational objective regarding a merchant's firm offer?
A merchant's firm offer is irrevocable for the time stated or for a reasonable time not to exceed three months.
46
What must be present for a firm offer to be irrevocable?
It must be a signed, written offer by a merchant.
47
True or False: The UCC allows for the creation of option contracts for the sale of goods without consideration.
False
48
What is the doctrine of promissory estoppel?
It is a legal principle where an offer is treated as an option contract and is irrevocable for a reasonable period of time if certain conditions are met.
49
What conditions must be met for an offer to be irrevocable under promissory estoppel?
1. The offeror reasonably expected to induce reliance on the offer before acceptance. 2. The offeree reasonably relied on the offer. 3. That reliance caused the offeree to suffer substantial detriment.
50
Can an offer be irrevocable without consideration?
Yes, an offer can be irrevocable even if no consideration (e.g., money) was given to support its irrevocability.
51
Can a general contractor recover if they relied on a sub-bid before acceptance?
Yes, the general contractor could still recover if she reasonably relied on that bid before acceptance, regardless of the sub-bid's request for acceptance after awarding the main contract.
52
What is the educational objective regarding offers as it relates to option Contracts?
An offer is binding as an option contract and irrevocable if the offeror expected to induce reliance, the offeree relied on the offer, and that reliance caused substantial detriment.
53
What is a promise to pay debt barred by?
Technical defense
## Footnote
Examples include statute of limitations and bankruptcy.
54
What is required for a promise to perform a voidable duty to be enforceable?
New promise is not also voidable
## Footnote
For instance, a minor reaffirming a promise after reaching the age of majority.
55
What is promissory estoppel?
A doctrine where a promisor should reasonably expect promisee to rely on promise
## Footnote
It applies when the promisee relies on the promise to their detriment.
56
What must a contract be supported by to be enforceable?
Consideration
## Footnote
This refers to a bargained-for exchange of promises or performance.
57
Why is a promise to make a gift generally unenforceable?
It does not involve a bargained-for exchange
## Footnote
Example: uncle's promise to give $5,000 without asking for anything in return.
58
Under what conditions can a gift promise become enforceable?
Promissory estoppel conditions
## Footnote
1. Promisor expects reliance 2. Promisee relies to detriment 3. Injustice avoided only by enforcement.
59
Does promissory estoppel require proof of economic benefit to the promisor?
No
## Footnote
Promissory estoppel does not require proof of economic benefit.
60
What is the limitation of the promisee's remedy under promissory estoppel?
Actual loss suffered in reliance on the promise
## Footnote
It is not necessarily the full value of the promise.
61
What is an option in contract law?
A contract where the offeree gives consideration in exchange for the offeror's promise to keep an offer open for a specified period of time.
## Footnote
Consideration can be money or another form of value.
62
When is an offer to form an option revocable?
Prior to acceptance of the option.
## Footnote
Revocation can occur through direct communication or reliable information received by the offeree.
63
How does an offeror revoke an option?
By directly communicating the revocation to the offeree or if the offeree learns from a reliable source that the offer was revoked.
## Footnote
Example: If the house was sold to another buyer.
64
Under the Mailbox Rule, when is acceptance of an offer generally effective?
Upon dispatch.
## Footnote
This rule applies generally, with some exceptions.
65
What is the doctrine of promissory estoppel?
An offer may become irrevocable if the offeree reasonably and detrimentally relied on that offer.
## Footnote
This is also known as detrimental reliance.
66
What does Article 2 of the Uniform Commercial Code state about firm offers?
A firm offer from a merchant is binding, but only for contracts for the sale of goods, not real property.
## Footnote
This means real estate transactions are not covered under this provision.
67
What is required for a binding option in contract law?
Actual consideration, not sham consideration.
## Footnote
Sham consideration refers to a nominal amount that is not intended to be paid.
68
What does Article 2 of the UCC govern?
Contracts for the sale of goods.
69
What happens to an offer once it is accepted under the UCC?
It becomes irrevocable.
70
What must a contract contain according to the UCC?
Definite terms that reasonably identify the goods to be sold and specify a quantity of goods that is certain or can be made certain.
71
What is required for the quantity term in a contract?
It must be certain or capable of being made certain by reference to objective facts.
72
What is a requirements contract?
A contract for the sale of as many goods as the buyer needs during a specified period.
73
Can a contract without a certain quantity be enforceable?
Yes, if the terms are sufficiently definite and the actual requirements can be determined objectively.
74
What happens if a supplier refuses to give a promised discount?
It may constitute a breach of contract.
75
What makes a promise illusory?
If the promisor has discretion whether to perform at all.
76
Does the absence of a minimum quantity term render a promise illusory in a requirements contract?
No, because the buyer is still required to buy all products it actually needs.
77
What can make a vague contract enforceable?
Part performance by the parties that supplies needed clarification of the terms.
78
What can modify an existing contract under the UCC?
Agreement (i.e., offer and acceptance) of the parties
79
Is an offer to modify a contract generally revocable before acceptance?
Yes
80
What makes an offer to modify a contract irrevocable?
A firm offer—i.e., a merchant's written and signed assurance that the offer will be kept open for a period of time
81
In the given scenario, why was the accountant's offer revocable?
The accountant is not a merchant with respect to bookshelves
82
What action did the accountant take to revoke the offer?
Informed the lawyer on November 12 that he decided not to part with the shelves
83
Under the doctrine of promissory estoppel, what two conditions make an otherwise revocable offer irrevocable?
1. Offeror could reasonably foresee reliance 2. Offeree reasonably and detrimentally relied on the offer
84
Did the lawyer suffer any detriment from the accountant's offer?
No, he incurred no expenses to prepare for the shelves' delivery
85
Is consideration required to modify a sale-of-goods contract under the UCC?
No
86
Fill in the blank: Under the UCC, an offer to modify a contract is generally _______ unless it is a firm offer.
revocable
87
What is the general rule regarding the duration of an offer?
An offer generally remains open for the time stated in the offer or, if no time is stated, for a reasonable time.
88
What causes an offer to terminate prematurely?
An offer will terminate prematurely if the offeror dies or becomes permanently mentally incapacitated before the offer is accepted.
89
What is the exception to the termination of an offer due to the offeror's incapacitation?
An offer will not terminate if consideration was paid to keep the offer open for a specified period of time.
90
Why was the investor's offer not considered an option?
The owner had not paid any consideration to keep the offer open.
91
What event caused the investor's offer to terminate?
The investor suffered a stroke that caused severe brain damage and permanent mental disability.
92
What is the implication of permanent mental incapacity on contract validity?
Permanent mental incapacity is presumed if there has been a formal adjudication that a party lacks the capacity to enter into a contract.
93
When is an acceptance considered effective when mailed?
An acceptance that is mailed within the allotted response time is effective when sent.
94
What would have happened if the investor's offer had still been open when the owner mailed the acceptance?
The acceptance would have been effective.
95
What is an accord in contractual obligations?
An accord is a new contract created when the parties to a contract agree to give and accept something different in satisfaction of their existing contractual obligations.
96
What is required for an accord to be valid?
An accord must be supported by consideration.
97
When can new consideration be worth less than the original contract?
New consideration can be worth less if there is a good-faith dispute as to the amount owed or if the new consideration is of a different type than what was owed under the original contract.
98
What does the doctrine of promissory estoppel enable?
It enables a party who reasonably and detrimentally relied on a promise to enforce that promise even though no valid contract was formed.
99
What is required for an agreement to be enforceable?
Consideration, i.e., a bargained-for exchange of promises or performance.
100
What does the preexisting duty rule state?
A promise to perform or the performance of a preexisting duty does not qualify as consideration.
101
What is an example of a situation where there is no consideration?
When a debtor promises to pay a liquidated debt that is already owed.
102
True or False: A debtor's promise to pay part of a liquidated debt qualifies as consideration.
False.
103
What happens if a creditor promises not to sue based on a debtor's promise to pay a preexisting debt?
There is no consideration to support the creditor's promise.
104
Fill in the blank: A _______ consideration refers to something that does not induce a bargain.
sham
105
What is the implication of an illusory promise?
No legal detriment if the promise imposes no obligation.
106
What is meant by 'forbearance' in the context of consideration?
The creditor's promise not to sue.
107
What is the legal status of an agreement where a debtor delays payment on an undisputed debt?
Not enforceable without consideration.
108
What does it mean for a promise to be 'void for lack of consideration'?
The agreement is invalid because there was no bargained-for exchange.
109
What is the consequence of a debtor performing only what they are already obligated to do?
No additional consideration exists.
110
What is the result if a creditor's promise not to sue lacks a bargained-for exchange?
The promise is not enforceable.
111
True or False: A promise to delay payment on a disputed debt is enforceable.
False.
112
What constitutes a legal detriment?
An obligation that imposes a burden or duty.
113
Is notice required to accept an offer by starting performance?
Notice is not required unless the offer requires it.
## Footnote
This indicates that performance can serve as acceptance without prior notice in most cases.
114
What must the Offeree do if the offeror cannot learn that performance has begun?
The Offeree must notify the offeror.
## Footnote
This ensures that the offeror is aware of the acceptance through performance.
115
What happens if the Offeree does not notify the offeror?
The offeror's contractual duty will be discharged.
## Footnote
This means that the offeror is no longer obligated to fulfill the contract.
116
True or False: An offeror is always aware when the performance has begun.
False.
## Footnote
The offeror may not have a convenient way to learn that performance has started.
117
What is a general offer?
An advertisement that specifies the subject matter, quantity, and price, and places a reasonable limit on who may accept the offer.
## Footnote
General offers are legally binding if they meet specific criteria.
118
What are the two conditions that make an advertisement a general offer?
1. Specifies the subject matter, quantity, and price
2. Places a reasonable limit on who may accept the offer
## Footnote
These conditions are essential for the advertisement to be considered a legally binding offer.
119
True or False: A revocation of a general offer is effective if it is publicized less than the offer.
False
## Footnote
A revocation must be publicized at least as heavily as the original offer to be effective.
120
Fill in the blank: A revocation of a general offer is only effective if it is _______.
[publicized at least as heavily as the offer].
## Footnote
This ensures that all potential offerees are aware of the revocation.
121
What governs contracts for the sale of goods?
Article 2 of the Uniform Commercial Code (UCC)
## Footnote
The UCC provides a framework for commercial transactions, including the sale of goods.
122
What does the UCC do when certain terms are missing from a contract?
The UCC 'fills the gap'
## Footnote
This means it provides default rules or provisions to cover missing terms.
123
What is the gap filler for a missing place of delivery?
The seller's place of business if the seller has one
## Footnote
This is the default location where goods are expected to be delivered.
124
When is payment due unless specified otherwise in the contract?
At the time and place the buyer is to receive each shipment of goods
## Footnote
This provision ensures clarity regarding when payment must be made.
125
What must the seller do in relation to payment tendered by the buyer?
The seller is only required to deliver the goods if the buyer tenders the payment
## Footnote
This establishes a condition for the seller's obligation to deliver.
