Formation Issues Flashcards
(33 cards)
Manifestation of Commitment
Offer=manifestation of intention to K—words/conduct showing commitment. Basic test is whether a reasonable person in position of offeree would believe his assent creates K [Objective]
When can advertisement be an offer?
Ad can be offer if: (1) nature = reward (must be aware of reward); (2) Ad specifies quantity and expressly indicates who can accept. (“1 fur coat $10—first come/served); (3) sent in response to request
Ways to terminate an offer?
- Lapse of time
- Death (or incapacity) of either party prior to acceptance= termination.
- Revocation: Conduct of Offeror** (2 ways to revoke) [irrevocable, revocable, revoked]
- Rejection: Conduct of Offeree
Revocation: Conduct of Offeror
- Unambiguous statements by offeror to offeree of unwillingness or inability to K, or
- Unambiguous conduct by offeror indicating an unwillingness or inability to K that offeree is aware of.
a. Note: “Mere fact of a multiple offers is not an indication of unwillingness to sell.”
Irrevocable Offers
a. Option K
b. UCC Firm Offer Rule
c. Reliance
d. Performance for Unilateral
Option K
(paid for promise not to revoke): Offer cannot be revoked if offeror has not (1) promised to not revoke (“open”) AND (2) promise is supported by payment or consideration (“option”).
UCC Firm Offer Rule
(signed, written promise for sale of goods by merchant to keep open): An offer cannot be revoked for stated time if (1) offer to buy or sell goods, (2) signed, written promise to keep the offer open, and (3) party is a merchant.
i. If no time limit, it becomes irrevocable for reasonable time, for up to 3 months
ii. If no express offer to keep open, it is NOT a firm offer
Reliance
Irrevocable if: (1) reliance that is (2) reasonably foreseeable and (3) detrimental.
Performance for Unilateral
Start of performance pursuant to an offer to enter into a unilateral K makes that offer irrevocable for a reasonable time to complete performance.
i. Unilateral/performance: O offers P $1K to paint house. Offer states acceptance “only by” performance. P starts painting. Offer becomes irrevocable.
ii. Unilateral/mere preparation: Same as above, but P only buys the paint (moves paint to job/opens it, etc). This is only preparation and offer can still be revoke (tested most frequently). But, look to see if it has become detrimental reliance (special paint that cant be returned?)
Rejection: Conduct of Offeree
- Counteroffer (kills all offers and becomes new offer; not express K til counteroffer accepted).
a. Distinguish from “bargaining”, which does not terminate offer. Also, does NOT apply to Option K - Conditional Acceptance: (kills all offers) Look for responses to an offer with the word “accept” followed by [if, only if, provided, so long as, but, on condition that].
a. New “offer/term” can be accepted through words or conduct and be legally enforceable. - Additional Terms: (only kills CL, not UCC) Under CL, a response to an offer that adds new terms is treated like a counteroffer rather than acceptance. Mirror Image Rule.
UCC Art. 2 2-207
(i) offer for goods, and (ii) response w/ additional terms raises 2 separate issues:
i. Is there a K? Yes. Under UCC, a response to offer that adds new terms (but does not make them conditional of acceptance) is generally treated as acceptance (merchant is irrelevant here).
ii. Additional Term Part of K? Maybe. Only if (i) both parties are merchants, AND (ii) additional term is not material {fact question} AND (iii) additional term is not objected to by offeror. Otherwise, K stays and term falls away (limit on liability is material)
Promissory Estoppel (Elements)
a. Promise;
b. Reliance that is reasonable, detrimental and foreseeable; and
c. Enforcement is necessary to avoid injustice.
When does a defendant lack capacity?
Under 18; Mentally Incompetent (no ability to understand K); Intoxicated person (if other party has reason to know).
Consequences of Incapacity
a. Right to disaffirm by person w/o capacity (can’t be revoked by person who does have capacity)
b. Implied affirmation by retaining benefits after gaining capacity (ratification)
c. Quasi-K liability for necessaries (a person w/o capacity is legally obligated to pay for things that are necessary (food, clothing, medical care, or shelter). Liability based on quasi-K law, not K law.
Statute of Frauds Defense
SOF is a statute designed to prevent fraudulent claims of existence of K (makes it harder by requiring the claimant have proof that K exists before getting day in court.) Proof required to satisfy SOF is (1) performance, or (2) writing signed by the person who is asserting no K. If you are w/in SOF, you must satisfy “special burden” above in order to bring a claim.
When does SOF defense apply?
a. Marriage
b. Year* (Service K not “capable” of being performed w/in a year from time of K). SOF does not apply to “rest of P’s life.”
c. Land (Transfers of interest in real estate w/ exception for leases or one year or less)
i. Applies to selling a house, but not building one (no transfer of interest).
d. Executor
e. Goods (sale of goods for $500 or more)
f. Surety (promise to answer for debts of another). Look for guarantee to pay if someone else doesn’t.
i. Main Purpose Exception: If “main purpose of the obligation already guaranteed was to benefit guarantor, then not even the guarantee is w/win the SOF.” (not considered a surety)
How is SOF Satisfied?
- Performance
- Writing
- Judicial Admission
How is SOF satisfied by performance?
i. Real Estate: part performance satisfies SOF if any 2 of the following (1) improvements to land, (2) payment, or (3) possession.
ii. Service K (year):* full performance by either party satisfies SOF (part perf not sufficient)
iii. Sale of Goods: Seller’s part performance (part delivery of ordinary goods) satisfies SOF, but only to extent of part performance. Does not apply to undelivered goods.
• Specially mfg goods: SOF is satisfied as soon as S makes a “substantial beginning”.
How is SOF satisfied by Writing?
(remember, not every writing satisfied, and SOF can also be satisfied by performance)
i. CL: look at contents of writing OR WRITINGS—“all material terms test” (who/what); Also, look at who signed (must be signed by person who is asserting SOF defense and saying no K).
ii. Art 2 UCC:** Again look at contents and who signed. Writing must indicate a K for sale of goods, and contain quantity (does not have to include price).
• Generally, must be signed by person asserting SOF defense (∆), but UCC 2-201 provides an exception based on that person’s failure to respond to a signed writing. Both parties must be merchants and person who receives a signed writing w/ a quantity term that claims there is a K fails to respond w/in 10 days.
How is SOF satisfied by Judicial Admission?
SOF is satisfied if ∆ admits a K in a judicial proceeding.
“Equal dignity rule”
law requires a written authorization to execute K for someone else only if the K to be signed is w/in SOF
Modification of K and SOF
Where there is an alleged K modification you should: 1) look at deal w/ alleged change, and 2) determine whether deal w/ alleged change would be w/in SOF. (Reducing lease from 3 years to 1 years is not subject to SOF).* [If still subject to SOF, modification must be written]
i. If agreement requires that all modification be in writing?
• CL: not effective, ignore that language.
• UCC: provisions requiring written modification are effective unless waived. Even if SOF would not otherwise apply (raising car price from $300 to $400).
Defense of Illegality
If subject matter is illegal, the agreement is not enforceable (pay someone to hurt another). If the subject matter is legal but the purpose is illegal, the agreement is only enforceable by the person who did not know of the illegal purpose (P buys ticket from D, who plans to fly and hurt someone. P doesn’t know).
Public Policy Defense
Ie: “exculpatory agreements” (exempts intentional/reckless conduct from liability, or covenant not to compete w/o reasonable need or limit on time or place.) Not enforceable!
