II. Formation Flashcards
What are the four elements of a valid contract?
A valid contract requires (1) mutual assert, via an offer and acceptance, (2) consideration and (3) no defenses to formation.
What is an offer?
An offer is the (1) manifestation of a present intent to contract that is (2) in definite and certain terms and (3) communicated to the offeree.
Objective standard - reasonable person in shoes of offeree.
Advertisements are merely an invitation to deal (no manifestation of intent to contract), unless (1) in nature of reward and (2) specific as to quantity and who can accept.
Definite and certain terms?
Necessary terms (parties, subject matter, time for performance and price) that are not vague and ambiguous.
Note: If duration is not specified in employment contract it is terminable at will.
What are the ways an offer may be terminated?
(1) Lapse - TIME STATED or REASONABLE
(2) Death/incapacity of either party PRIOR TO ACCEPTANCE (unless irrevocable)
(3) Revocation
(4) Rejection
(5) Supervening illegality - offer legal when made, becomes illegal, power of acceptance terminated
What is required for a revocation?
UNAMBIGUOUS WORDS or CONDUCT of UNWILLINGESS/INABILITY to contract. Effective upon receipt of notice by offeree.
Note: Multiple offers - must be removed by notice (subsequent offers irrelevant)
Note: UCC “firm offer” rule (separate flash card)
What is a rejection and what is a counter-offer?
(1) A rejection is a DECLARATIVE statement that offeree DOES NOT INTEND to accept.
Does not include mere BARGAINING or INTERROGATIVE statements - mere inquiry / request for information.
(2) A counter offer terminates the original offer and becomes a new offer. CONDITIONAL ACCEPTANCE acts as a counter offer (e.g., “I accept if… provided that… on the condition…”) (common law “mirror image” rule)
What are the key irrevocable offers?
(1) Option contract (promises not to revoke) for payment consideration
(2) For reasonable time if detrimental reliance was reasonably forseeable (promissory estoppel)
(3) Starting performance of unilateral contract (not mere prep)
What is valid acceptance?
For a valid contract, an OFFEREE with KNOWLEDGE of the offer must OBJECTIVELY MANIFEST ASSENT to the offer by communicating UNEQUIVOCAL acceptance to the offeror, before an offer is terminated. It must be a “MIRROR IMAGE” (without deviation).
If offer requires acceptance BY MAKING RETURN PROMISE, statement of intent is insufficient.
Only the offeree may accept, unless it is an ASSIGNABLE OPTION CONTRACT supported by consideration.
What should the mode of acceptance be? What are the four methods of acceptance?
Unless some EXPLICITLY FORM is REQUIRED in the offer, it must be REASONABLE. However, silence generally is not sufficient (not an OBJECTIVE MANIFESTATION OF ASSENT). NOTE: Consider unilateral contract?
Methods include: (1) promise to perform, (2) partial performance, (3) completed performance and (4) UCC - shipment of goods.
What are the exceptions, when acceptance by silence may suffice?
(1) Prior history of dealing
(2) Intent to contract exists
(3) Benefits taken with reasonable opportunity to reject
What is the “mailbox rule”?
Communications are effective upon receipt (e.g., revocation) EXCEPT acceptance, which is effective upon DISPATCH.
If an offeree first rejected by mail, then subsequently accepted, neither is effective until receipt. Rejection also effective if “learned” earlier.
Exceptions: Offer didn’t permit, option contracts.
What are the rules for acceptance by promising to perform, starting to perform or completing performance?
UNILATERAL: Only completed performance constitutes acceptance. STARTING performance will prevent revocation for reasonable period.
BILATERAL:
Promise - YES
Starting - YES, will be implied
Completing - YES, only if reasonably prompt notice to offeror
What is the general rule regarding consideration?
Consideration is the bargained for exchange. It’s present whenever PROMISES WITH VALUE or PERFORMANCE are exchanged. Any DETRIMENT or FORBEARANCE can also constitute consideration.
Bonus: The promise must induce the detriment and the detriment induce the promise.
Must consideration be adequate? Discuss past consideration as well.
That won’t be at issue unless it’s (1) token consideration/entirely devoid of value, (2) an ILLUSORY promise or (3) PAST CONSIDERATION.
A subsequent promise to pay consideration for a past performance (at their request or under and emergency) will be enforceable.
Is there consideration if a statute of limitations has passed?
Yes, if there is a written promise, even if no longer obligated = consideration substitute.
