Negotiation, Contract, and Sales Flashcards
Elements of Promissory Estoppel
Hint 6
This relates to Blackmon v. Iverson case:
• Clear and definite promise- Yes
* Promisor should have expected that promisee would rely on it: Yes, marketing material, moved to Philly * Promisee did, in fact, rely: Yes, used his own money to directly develop "The Answer" * Promisee’s reliance was reasonable: Yes, typically expenses- did not purchase a lambo * Promisee’s reliance resulted in substantial detriment: Yes, person put their own money down * Enforcement of promise is necessary to avoid injustice: Yes, Blackmon was cut out
contract of adhesion
you either sign or you cannot participate
What is a Contract?
A legally enforceable promise.
- Performance is recognized as a duty
- Breach entitles non-breaching party to remedies
Types of Contracts
Most contracts are enforceable, regardless of whether they are written, oral or based on conduct.
• Bilateral: promise for a promise ○ Ex: “I promise to sell you my bike for $500. You promise to buy my bike for $500” ○ K is formed upon exchange of promises. • Unilateral: promise for an act ○ Ex: “If you wash my dog, then I’ll pay you $50.” ○ K is formed upon performance (e.g., act of dog washing). ****Merely preparing for performance generally does not count as acceptance of a unilateral contract.***
Elements of a Contract
Hint: 4
○ For an enforceable contract, there must be:
• Offer & Acceptance
○ A.k.a. “Mutual Assent” to same terms
○ A.k.a. “meeting of the minds”
• Consideration
• Capacity
• Legality
Offer + Acceptance Generally
Q1) Meeting of the minds = ?
Q2) Courts look at ??
In order for an agreement to be made, the parties must mutually assent to the same terms.
• Courts will look at:
• What the parties said when entering into the K.
• How the party acted or appeared.
Circumstances surrounding the transaction.
Requirements of an Offer
(under common law of contracts)
Hint: 3 General Aspects
• (1) Offeror’s serious intent to be bound
○ Ask what a reasonable person in offeree’s position would conclude as to the meaning of offeror’s words and acts.
○ Can’t be an obvious joke.
• (2) Reasonably definite terms
○ Identity of the Parties
○ Identity of the subject matter
○ Duration of K
○ Consideration to be paid (aka Price)
○ Time of payment, delivery or performance
○ Note: Under the Uniform Commercial Code (governing sales of goods), an offer for the sale of goods may be found even though it contains only party names, subject matter and quantity.
(3) Offer must be communicated to offeree.
When are Offers Effective?
- Offers only valid once communicated and “received” by offeree or her agent.
- Duration of Offers:
- If there’s a stated time within which acceptance must be made, an attempted acceptance after that time constitutes a counter-offer (e.g., “you must accept by January 30 at 5pm”).
- If there’s no stated time, offers are presumed to be open for a “reasonable” period of time.
- In telephone or face-to-face dealings, offers are presumed to lapse once the conversation ends, unless otherwise specified.
An offer can be revoked any time before it’s accepted
You take an action inconsistent of what was previously agreed upon- like purchasing equipment prior to doing the action
Revoking Offers: How To’s
• Usually, offer may be revoked by offeror any time prior to acceptance.
• Except: signed “firm offers” by “Merchants” (person who regularly deals in goods involved in K) (see UCC)
• Except: if “option contract” to keep offer open for a certain period of time is made by paying additional consideration
• Generally, revocation is effective upon actual receipt by offeree or agent
• How to Revoke:
• Words that communicate to offeree that offeror doesn’t intend to be bound:
○ “I hereby revoke my previous offer dated July 12…”
• Action by offeror inconsistent with intent to be bound once offeree learns it.
○ But, in case of a unilateral K, revocation must occur prior to the start of performance.
• Offers to the general public (e.g., a reward for information or return) can usually be revoked in the same way they were offered (newspaper, TV)
Be careful when rejecting offers- You can reject offers by making a counteroffer
You can make inquiries about an offer but that does not mean you have rejected an offer.
Rejecting Offers
(under common law of contracts)
Offer is generally terminated when???
- Offer is generally terminated when:
- The offeree rejects the offer by words or conduct, and the original offeror receives the rejection.
- The offeree proposes new/different terms.○ This last situation is considered a rejection of the original offer and a counteroffer, which the original offeror can accept or reject.○ It exemplifies the common law “mirror image rule” in which an acceptance must exactly mirror the terms of the offer.
Note: the mirror image rule has been modified in respect of contracts for the sale of goods, as the UCC usually allows acceptance, if otherwise definite and timely, even though terms of acceptance modify/add to the original terms.
Precontractual Liability for Failure to Negotiate in Good Faith
Usually, offers can be revoked and deals cancelled anytime prior to acceptance.
However, obligation to “negotiate in good faith” may be imposed if executed LOI/TS includes it.
Courts look at intent of parties & definiteness of terms
Breach of obligation to negotiate in good faith can result in payment of others’ reliance damages, and sometimes even lost profits!
If you intend a LOI/TS to be truly non-binding, don’t agree to “negotiate in good faith,” and expressly disclaim any obligation to proceed on commercial terms in LOI/TS.
Consideration = ?
Think about the Lucht Concrete v. Horner Case
To be adequate, consideration must consist of a legal detriment that consists of what???
“Consideration” is the value given in return for a promise.
Also, Consideration must consist of legally sufficient value
• To be adequate, consideration must consist of a legal detriment: ○ Promise to do something you were not otherwise required to do. ○ Performance of an action you were not otherwise required to do. ○ Refraining from doing something you were legally allowed to do.
Courts will usually not second-guess the adequacy of consideration.
Also think about it like this…….
• “Bargained for exchange”
* “If you do this, I’ll do that.” * Bargained-for exchange does not require actual negotiation. * Simply means it can’t be a gift (i.e., something for nothing)
**If you are obligated to do a certain thing, you are clear and doe
s not count towards consideration
Agreements that Lack Consideration
- Pre-existing duty cases
- There’s no consideration if you’re already required to do a particular thing.
- If you’re already obligated to do work in exchange for payment, you generally cannot enforce another agreement to do the same thing for more money.○ Exception: If there are unforeseen circumstances in construction that neither party anticipated, courts will sometimes enforce a landowner’s promise to pay more money, even though it’s the same work as was originally contracted.
- Past Consideration cases
- Promises made in return for actions or events that have already occurred are unenforceable; they’re gifts!
- Illusory Promises
- Agreement to buy as many widgets as I want is invalid○ But, K to buy as many as I need (requirements K) is valid.○ And, K to buy as many as you produce (output K) is valid.
Promissory Estoppel = ? = aka= ?
Used when?
Promissory estoppel – a legal doctrine providing that a person who has reasonably and substantially relied on a promise of another to his detriment may be able to obtain recovery. aka “detrimental reliance.”
Used when there is no contract, usually due to lack of consideration.
Contractual Capacity are considered what?
Capacity is an element of a valid contract, and the lack of capacity is also a defense to enforcement:
Minors –
Age of majority for purposes of contracts in most states is 18.
Minors can enter into most contracts before that age, but they are voidable at the option of the minor
Intoxication –
Contracts entered into while voluntarily intoxicated are voidable by the intoxicated party upon sobriety, if the person lacked mental capacity to appreciate the legal consequences of entering into the contract.
Mental Incompetence-
If a court has found a person incompetent and appointed a guardian for them, the K with the incompetent person is usually void (no legal effect) because only the guardian can enter into contracts on their behalf.
If a court has not yet declared a person incompetent, the K may be voidable, if the person did not know she was entering into the K or did not appreciate the consequences. But, if she was competent at the time of formation, it’s valid.
