TD3 Flashcards
(204 cards)
1
Q
What are the main ways an offer can be terminated?
A
- Expiration date or after a reasonable time
- Revocation (direct or indirect)
- Rejection
- Lapse of time
- Death or insanity of the offeror
2
Q
How does an expiration date affect an offer?
A
If an offer includes an expiration date, it automatically terminates after that date.
3
Q
What is revocation of an offer?
A
A retraction of an offer by the offeror before acceptance.
3
Q
What happens if no expiration date is stated?
A
The offer terminates after a reasonable amount of time based on the nature of the offer.
4
Q
When can the offeror revoke the offer?
A
At any time before acceptance unless there’s an option contract or partial performance in a unilateral contract.
5
Q
What are the two types of revocation?
A
- Direct
- Indirect
5
Q
How must revocation be communicated if the offer was made through a publication?
A
The revocation must be made through comparable means (e.g., same type of publication).
6
Q
What is direct revocation?
A
When the offeror directly communicates to the offeree that the offer is revoked.
6
Q
What happens after direct revocation?
A
The offer is no longer open to the offeree.
7
Q
What are the elements of an indirect revocation?
A
- Correct information
- From a reliable source
- Involves acts of the offeror that would lead a reasonable person to believe the offer is revoked
7
Q
What’s an example of an indirect revocation?
A
If the offeree sees someone else performing the service that was the subject of the offer.
8
Q
Shylock offers Portia $1000 to paint his house on Wednesday. On Friday, Portia sees Antonio painting the house. What type of revocation is this?
A
Indirect – Shylock’s act of hiring Antonio signals that the offer to Portia is no longer valid.
9
Q
Shylock texts Portia, “Nevermind, I found someone who will do it for $850.” What type of revocation is this?
A
Direct – Shylock is explicitly communicating that the offer is revoked.
10
Q
What happens if the offeree rejects the offer?
A
The offer is terminated, and the offeree cannot later accept it.
10
Q
What must the offeree do if they want to accept after rejecting the offer?
A
They must make a new offer.
11
Q
What is an example of rejection?
A
Portia tells Shylock, “No, I don’t want to paint your house.”
12
Q
When does an offer lapse?
A
After the stated time or a reasonable period if no time is specified.
13
Q
What determines a reasonable period of time for an offer to remain open?
A
The nature of the contract and industry standards.
13
Q
What happens to an offer if the offeror dies before acceptance?
A
The offer is automatically terminated unless it’s part of an option contract.
14
Q
What if the offeror becomes insane before acceptance?
A
The offer is terminated if the insanity prevents the offeror from having legal capacity.
14
Q
What is an option contract?
A
A separate contract where the offeree gives consideration to keep the offer open for a specific period.
15
Q
What’s an example of an option contract?
A
Portia pays Shylock $10 to keep the offer open for one week.
16
Q
Why does an option contract prevent revocation?
A
The offeror is bound to keep the offer open for the agreed period because the offeree gave consideration.
17
Q
What is a unilateral contract?
A
A contract where the offeror invites acceptance by performance rather than a promise.
17
What happens if the offeror revokes an offer subject to an option contract?
The revocation is invalid because the offeror has a contractual obligation to keep the offer open.
18
What’s an example of a unilateral contract?
Shylock offers Portia $1000 to paint his house; once Portia starts painting, Shylock cannot revoke the offer.
18
Can the offeror revoke a unilateral contract after performance has begun?
No, once the offeree starts performing, the offeror cannot revoke the offer.
18
What are the four essential elements of contract formation?
- Offer ✅
- Acceptance ✅
- Consideration ✅
- Lack of defenses ✅
19
What is consideration?
Something of value exchanged between the parties (e.g., money, service).
19
When can an offeror terminate an offer?
At any time before acceptance unless:
- There’s an option contract
- Performance has begun in a unilateral contract
20
Can an offeror revoke if they promised not to revoke for a specific time?
Yes, unless there’s an option contract – moral obligation only.
21
On Friday, Shylock hires Antonio to paint the house. What’s the status of the offer to Portia?
Indirect revocation – A reasonable person would understand the offer is no longer open.
21
On Wednesday, Shylock offers Portia $1000 to paint his house. Portia says she’ll think about it. What’s the status of the offer?
Suspended – The offer remains open until revoked, rejected, or a reasonable time passes.
22
If Shylock promises Portia he won’t revoke the offer for one week, can he still revoke it?
Yes, unless there’s an option contract supported by consideration.
23
What defenses could prevent contract formation?
- Fraud
- Duress
- Mistake
- Incapacity
- Illegality
24
What if the offeree starts performance but doesn’t complete it?
The offeror is not obligated to fulfill the contract unless full performance occurs.
24
Can an offeror terminate a unilateral contract once performance has started?
No – the offeror must allow the offeree to complete performance.
25
What’s the key difference between direct and indirect revocation?
- Direct – Offeror explicitly withdraws the offer
- Indirect – Offeror’s actions, communicated through a reliable source, signal withdrawal
26
What’s the general rule about terminating offers?
Offers can be terminated before acceptance unless there’s:
- An option contract
- Partial performance in a unilateral contract
27
What is needed to make a contract?
Almost total liberty—if both parties gave their consent to enter into a contract. Can be formed through words or actions (offer + acceptance).
28
What are the two elements of a promise?
1. Promisor (person who makes the promise)
2. Promisee (person to whom the promise is made)
29
What are the two components of a promise?
1. Commitment
2. Future performance
29
What is the objective theory of contract formation?
The best way to determine a promise is through observable factors like words and conduct rather than subjective intent.
30
What issues does the subjective theory of contract formation present?
- Difficult to prove actual state of mind
- Many contracts are implied, not precise or clear
30
How does the court judge promise formation under the objective theory?
The court looks at objective, observable factors such as words and conduct.
30
How is contract law similar to tort law?
Both look at actions rather than intent to protect reasonable expectations of the other party.
31
How is contract law different from tort law?
- Contract law requires mutual assent and consent to obligations
- Tort law imposes duty without consent
32
What is the burden of persuasion and production in a contract lawsuit?
- Burden of persuasion = convince the court
- Burden of production = produce the evidence
32
What is the purpose of a lawsuit in contract law?
To seek a remedy for a breach of contract.
32
Why is definiteness important in contract formation?
1. Evidence of consent
2. Gives the court a better basis for dealing with a breach
33
What are the four criteria of contract formation?
1. Offer
2. Acceptance
3. Consideration
4. Lack of defense as to formation
33
What must be proven in a contract lawsuit?
1. Existence of a valid contract
2. Breach of contract
33
Who has the burden of proof in a contract lawsuit?
The plaintiff.
33
What is consideration in a contract?
Something of value exchanged between the parties.
34
What is the standard of proof in contract law?
Preponderance of the evidence (more likely than not).
35
What happens if a contract lacks consideration?
It is usually unenforceable unless there is a substitute (e.g., promissory estoppel).
36
What is promissory estoppel?
A promise is enforceable even without consideration if:
- Promisee relied on the promise
- Promisor reasonably expected reliance
- Injustice can be avoided only by enforcement
37
What questions must be asked to determine contract formation?
1. Was there mutual assent (offer + acceptance)?
2. Was there consideration or a substitute for consideration?
3. Are there any defenses to contract creation?
37
Can a contract be formed even if some terms are missing?
Yes, if essential terms are sufficiently definite and the court can fill in the gaps.
37
What happens if there’s no price stated in a contract?
The court may supply a "reasonable price" based on reasonable expectations.
38
What factors may indicate a contract even without a stated price?
- Course of dealing
- Trade usage
- Market value
38
What happens if an offer lacks certainty?
No contract is formed unless the terms are reasonably definite.
39
Can an offer be revoked?
Yes, unless:
- It’s under an option contract
- Offeree has already begun performance
39
What happens if parties agree to agree later?
No contract unless the agreement to agree is sufficiently definite.
39
What happens if an agreement is vague?
If the court cannot give it a clear meaning, it will not be enforced.
39
What is an implied-in-fact contract?
A contract formed by the parties' conduct rather than explicit words.
40
What is an implied-in-law contract (quasi-contract)?
- No actual contract exists
- Imposed to prevent unjust enrichment
40
What is an offer?
A clear, definite, and communicated proposal to enter into a contract.
41
What is acceptance?
An unqualified agreement to the terms of an offer.
41
Can silence be considered acceptance?
No, unless:
- Parties have a prior course of dealing
- Offeree accepts benefits knowing they are not free
42
What is an option contract?
A separate contract where the offeror is paid to keep the offer open.
42
What is a counteroffer?
A response that changes the terms of the offer, which acts as a rejection of the original offer.
42
What is a bilateral contract?
A contract where both parties exchange promises.
42
What is the mailbox rule?
Acceptance is effective when sent, not when received (unless otherwise specified).
43
What is the mirror image rule?
Acceptance must match the terms of the offer exactly.
43
What is an invitation to treat?
An invitation to negotiate, not an offer (e.g., advertisement).
44
What is the difference between a void and voidable contract?
- Void = no legal effect from the beginning
- Voidable = valid until one party exercises the right to void
45
What is a unilateral contract?
A contract where the offeror promises to pay only if the offeree performs.
45
What are defenses to contract formation?
- Lack of capacity
- Duress
- Misrepresentation
- Mistake
- Illegality
45
What happens if a contract is illegal?
It is void and unenforceable.
46
What is mutual mistake?
Both parties are mistaken about a material fact → voidable.
46
What is unilateral mistake?
One party is mistaken about a material fact → contract stands unless the other party knew or should have known of the mistake.
47
What is misrepresentation?
False statement of material fact that induces another to enter into a contract → voidable.
47
What is duress?
Improper threat that leaves no reasonable alternative → voidable.
47
What is undue influence?
Taking advantage of a position of power to unfairly persuade → voidable.
48
What is the parol evidence rule?
When a contract is written, prior or contemporaneous oral terms cannot contradict the written contract.
48
What is the statute of frauds?
Certain contracts must be in writing to be enforceable (e.g., sale of land).
49
What is specific performance?
A remedy where the court orders the breaching party to perform the contract.
49
What is expectation damages?
Puts the injured party in the position they would have been in if the contract had been performed.
49
What are reliance damages?
Compensates for costs incurred in reliance on the contract.
50
What would a reasonable person understand from Karen’s text accepting Jon’s offer?
A reasonable person would assume she accepted the offer based on the objective theory of contract formation.
50
What are restitution damages?
Restores any benefit the breaching party received from the injured party.
50
What is the objective test in contract law?
A contract is based on the objective meaning of the parties' words and conduct, not their internal or subjective intent.
51
What is the key idea behind the objective theory of contracts?
"A contract has nothing to do with the personal intent of the parties but with the words and acts that represent a known intent."
51
Why doesn’t subjective intent matter in contract formation?
Because the law is based on the reasonable interpretation of outward expressions, not hidden intentions.
51
What happens if one party privately meant something different than what they said?
The contract stands based on the reasonable interpretation of their words and conduct.
52
What is mutual assent in contract law?
A meeting of the minds based on objective manifestation of intent through offer and acceptance.
52
What are the three criteria for a valid offer?
1. Expression of a promise, undertaking, or commitment
2. Certainty and definiteness in essential terms
3. Communication to the offeree
52
Can negligent promising affect contract formation?
Yes, if one party acts negligently in making or accepting an offer, they may still be bound.
53
What are common issues in defining an offer?
- How an offer can be made
- How definite the offer needs to be
- How modern advertising and exchanges complicate contract law
54
What legal effect does an offer have?
- Creates a power of acceptance in the offeree
- Imposes a corresponding liability on the offeror
54
What are the three types of contracts based on form?
1. Express contracts – formed by written or oral language
2. Implied contracts – formed by conduct rather than language
3. Quasi contracts – not actual contracts but imposed to prevent unjust enrichment
55
Why are hard cases said to make bad law in contract law?
Because unusual or extreme cases may lead to unpredictable or inconsistent legal outcomes.
56
What is an express contract?
A contract formed through spoken or written words.
57
What is an implied contract?
A contract formed by the parties’ conduct rather than explicit language.
58
What is a quasi-contract (implied-in-law contract)?
A legal obligation imposed to prevent unjust enrichment, not based on actual agreement.
59
Jon sits in a barber’s chair and the barber shaves his beard. What type of contract is this?
Implied contract – formed by conduct.
60
Portia sells Antonio her car. What type of contract is this?
Express contract – formed by spoken or written agreement.
61
What are the two types of contracts based on parties?
1. Bilateral contracts – mutual exchange of promises
2. Unilateral contracts – acceptance by performance
62
What is a bilateral contract?
A contract where both parties exchange promises to perform.
63
Hypothetical: Susan promises to pay Charles $5 if he delivers a textbook to Rick. What type of contract is this?
Unilateral contract – acceptance requires performance.
63
Which type of contract is more common—bilateral or unilateral?
Bilateral contracts are more common.
63
What is a unilateral contract?
A contract where one party makes a promise that can only be accepted by performance.
64
Hypothetical: Rick promises to pay Susan $30 for a textbook, and Susan promises to deliver it to Rick. What type of contract is this?
Bilateral contract – mutual exchange of promises
65
What is consideration in contract law?
Something of value exchanged between the parties.
65
What are the four criteria for contract formation?
1. Offer
2. Acceptance
3. Consideration
4. Lack of defense as to formation
66
What happens if a contract lacks consideration?
It is usually unenforceable unless there is a substitute (e.g., promissory estoppel).
67
What is acceptance in contract law?
An unqualified agreement to the terms of an offer.
68
Can silence be considered acceptance?
No, unless:
- Course of dealing establishes silence as acceptance
- Offeree accepts benefits knowing they are not free
69
When is acceptance effective under the mailbox rule?
When it is sent, not when received.
69
What is a counteroffer?
A response that changes the terms of the offer, which acts as a rejection.
69
What is an option contract?
A contract where the offeror is paid to keep the offer open.
70
What happens if a contract lacks price or quantity terms?
A court may imply reasonable terms based on industry standards or past dealings.
70
What is the mirror image rule?
Acceptance must exactly match the terms of the offer.
70
When can an offer be revoked?
Anytime before acceptance, unless:
- Option contract exists
- Offeree has begun performance
70
Why is definiteness important in contract formation?
1. Shows evidence of consent
2. Gives the court a basis for dealing with a breach
70
What happens if the offeree rejects an offer?
The offer is terminated and cannot be revived.
71
What is mutual mistake in contract law?
Both parties are mistaken about a material fact → voidable.
71
What is unilateral mistake?
One party is mistaken about a material fact → contract stands unless the other party knew or should have known of the mistake.
71
What is duress?
Improper threat that leaves no reasonable alternative → voidable.
72
What is misrepresentation?
False statement of material fact that induces another to enter into a contract → voidable.
73
What is undue influence?
Taking advantage of a position of power to unfairly persuade → voidable.
74
What are expectation damages?
Damages that put the injured party in the position they would have been in if the contract was performed.
74
What happens if a contract is illegal?
It is void and unenforceable.
74
What is specific performance?
A remedy where the court orders the breaching party to perform the contract.
74
What are reliance damages?
Compensation for costs incurred in reliance on the contract.
75
What substance did the Carbolic Smoke Ball contain?
Carbolic acid (phenol).
75
What are restitution damages?
Restores the benefit conferred on the breaching party.
75
What product was at the center of the Carlill v. Carbolic Smoke Ball Co. case?
The Carbolic Smoke Ball, a supposed miracle cure for influenza and colds.
75
How was the Carbolic Smoke Ball supposed to work?
By compressing the ball, carbolic acid powder would be released in small particles resembling smoke, supposedly preventing diseases.
76
What harmful property does carbolic acid have?
It is toxic and can cause harm to human health.
76
How did the company show its sincerity about the reward?
By depositing £1000 with the Alliance Bank.
76
How much was the Carbolic Smoke Ball sold for?
10 shillings (refill cost: 5 shillings).
76
What was the intended effect of stating that £1000 had been deposited?
To demonstrate that the offer was genuine and not mere puffery.
76
What reward did the Carbolic Smoke Ball Co. offer?
£100 to anyone who contracted influenza after using the Smoke Ball according to the instructions.
76
What key phrase in the advertisement indicated a serious promise?
The statement that £1000 had been deposited in the bank to show sincerity.
77
Why did the court reject the argument that the ad was directed at the public at large?
An offer can be made to the world at large, and acceptance is through performance.
77
What were the key arguments made by the defendant in Carlill v. Carbolic Smoke Ball Co. case but were rejected?
- The ad was a joke
- The ad was to the public at large → no contract
- The essential terms were too uncertain
- The ad was mere puffery
- The ad was a proclamation, not a promise
- The offeree might have misused the product
77
Why did the court reject the argument that the ad was a joke?
The deposit demonstrated a serious intention to contract.
77
How did the court respond to the argument that the ad was mere puffery?
The deposit of £1000 showed the company intended to be bound by the offer.
78
What legal principle did the court establish regarding unilateral contracts?
A unilateral offer can be accepted by full performance without notifying the offeror in advance.
78
Why did the court reject the argument that the terms were uncertain?
The use of the Smoke Ball according to the instructions provided clear terms.
79
How did Mrs. Carlill accept the offer?
By using the Smoke Ball according to the instructions and still contracting influenza
79
What type of contract was the offer in Carlill v. Carbolic Smoke Ball Co.?
A unilateral contract – acceptance by full performance.
79
Why was this considered a valid offer despite being made to the public at large?
Because it specified the conditions for acceptance (using the product as instructed).
80
Why did the court find that a valid contract existed?
The offer was clear, the terms were definite, and acceptance occurred through performance.
80
What was the court’s ruling in Carlill v. Carbolic Smoke Ball Co.?
The court ruled in favor of Mrs. Carlill – the company was bound by its offer.
81
Why did the court reject the argument that misuse could prevent liability?
If the product was used according to the instructions, the company was bound by the offer.
82
How did the company respond after losing the case?
They adjusted the ad to state that only three people had claimed the reward, reinforcing the product’s effectiveness.
83
What did the case establish about advertisements as offers?
An ad can be treated as an offer if it shows an intention to be legally bound.
84
What key legal principles were established in Carlill v. Carbolic Smoke Ball Co.?
1. Advertisements can be offers if they show intent to be bound.
2. A unilateral offer can be accepted through performance.
3. Objective theory applies – intent is judged by how a reasonable person would interpret the ad.
4. An offer to the public at large can be valid.
5. Performance according to terms equals acceptance.
84
How does Carlill v. Carbolic Smoke Ball Co. relate to the objective theory of contracts?
The court focused on the outward expression of intent, not the company’s internal intention.
85
How would modern contract law likely view the Carbolic Smoke Ball Co.’s ad?
It would still likely be treated as an offer because of the clear terms and stated intent to be bound.
85
Why is Carlill v. Carbolic Smoke Ball Co. still important today?
It remains a leading case on advertisements as offers and the formation of unilateral contracts.
86
What distinguishes puffery from a valid offer?
Puffery is exaggerated or vague, while an offer includes specific terms and a clear intent to contract.
87
Why was the Carbolic Smoke Ball ad not considered mere puffery?
The deposit of £1000 and the detailed conditions of use showed a serious intent to contract.
87
What is the significance of the court’s ruling for consumer protection?
It protects consumers from deceptive advertising and holds companies accountable for their promises.
88
What effect did the ruling have on advertising practices?
It established that companies must honor clear promises made in advertisements.
89
Did the Carbolic Smoke Ball Co. ultimately benefit despite losing the case?
Yes – the case gave the product free publicity, and the company used the outcome to market the product’s effectiveness.
89
What was the legal issue in Leonard v. Pepsico?
Whether the Pepsi points commercial constituted a legitimate offer for a Harrier jet.
89
What was Pepsi’s promotional campaign at the center of the case?
The Pepsi Points campaign allowed customers to collect points from Pepsi products and redeem them for merchandise.
89
What did the Pepsi commercial feature as a possible reward?
A Harrier jet for 7 million Pepsi Points.
89
How did the plaintiff, John Leonard, attempt to claim the Harrier jet?
He obtained the necessary Pepsi Points through a combination of purchases and a check for $700,008.50.
90
How much did Leonard offer to pay for the remaining points needed to reach 7 million?
10 cents per point, as allowed by the promotion’s official terms.
90
What was Leonard’s main argument?
The commercial constituted a serious offer that could be accepted by collecting the required Pepsi Points.
91
What did Pepsi argue about the commercial's context?
The exaggerated nature of the commercial made it clear to a reasonable person that it was not a genuine offer.
91
How did the portrayal of the youth in the commercial affect the court’s reasoning?
The youth was depicted as a callow and unlikely pilot, suggesting the commercial was not serious.
91
What was Pepsi’s main defense?
The commercial was a joke and mere puffery, not a serious offer.
91
Why did Leonard believe the offer was legitimate?
The commercial provided specific terms (7 million points) and showed the Harrier jet in a way that implied it could be claimed as a reward.
92
What was the court’s third reason related to the Harrier jet itself?
The notion of using a military attack jet as a mode of school transportation was an exaggerated fantasy.
92
What was the court’s first reason for rejecting Leonard’s claim?
Commercials are often exaggerated and use humor to promote products, which a reasonable person would not interpret as a literal offer.
92
What was the court’s fourth reason based on the function of a Harrier jet?
A Harrier jet’s military purpose (air and surface attacks) made it unreasonable to expect it to be offered as a promotional reward.
93
How did the court assess the overall tone of the commercial?
The commercial’s use of “zany humor” indicated that it was not intended to be taken seriously.
94
What did the court say about humor in the commercial?
Humor and exaggeration in advertising are not treated as genuine offers under contract law.
94
What was the court’s ruling in Leonard v. Pepsico?
The court ruled in favor of Pepsi, stating that the commercial was not a serious offer.
95
What did the court say about the absurdity of the offer?
The offer was clearly in jest and not one that a reasonable person would take seriously.
96
What contract law principle did the court apply regarding the offer?
Objective theory – A reasonable person would not interpret the ad as a serious offer.
96
How does this case relate to puffery?
Puffery and exaggerated humor in advertising are not treated as enforceable offers.
97
How does this case differ from Carlill v. Carbolic Smoke Ball Co.?
In Carlill, the ad showed serious intent (deposit of £1000), whereas Pepsi’s ad was exaggerated and humorous.
98
What key factor determines whether an advertisement is a valid offer?
Whether a reasonable person would interpret it as a serious promise to contract.
99
How did the objective theory of contracts apply in this case?
A reasonable person would not believe that Pepsi intended to give away a military jet for Pepsi Points.
99
What does this case illustrate about unilateral contracts?
A unilateral contract requires a serious and clear offer – exaggerated humor does not meet this threshold.
100
Why was the objective test important in rejecting Leonard’s claim?
The court determined that no reasonable person would interpret the ad as a serious offer for a Harrier jet.
100
What factors made the commercial puffery rather than an offer?
- The humor and exaggeration
- The implausibility of using a Harrier jet for school transport
- The lack of formal contract terms
100
Why did Carlill v. Carbolic Smoke Ball Co. result in a different outcome?
The deposit of £1000 in Carlill showed an intent to be bound, whereas Pepsi’s ad was a joke.
100
When can an advertisement be considered a valid offer?
When it includes definite terms and shows clear intent to contract.
100
Why was the Pepsi ad considered mere puffery and not an offer?
The exaggerated nature and humorous tone of the commercial made it clear that the ad was not serious.
101
How did Leonard v. Pepsico impact contract law?
It reinforced the distinction between puffery and genuine contractual offers in advertising.
101
What happened to Leonard’s attempt to collect the jet after the case?
The court rejected Leonard’s claim, and he did not receive the jet.
101
How does the case affect advertising practices today?
Companies are protected from absurd claims based on humorous or exaggerated ads.
101
What lesson does Leonard v. Pepsico teach about advertising?
Advertisements that are clearly exaggerated and humorous are not treated as serious offers.
101
How did Pepsi respond to the case afterward?
Pepsi increased the point total for the Harrier jet in future ads to a humorously impossible number.
102
How does this case reflect the balance between humor and legal liability in advertising?
Humor and puffery are protected unless a reasonable person would interpret the ad as a serious offer.
103
What’s the key takeaway from Leonard v. Pepsico?
Just because an ad mentions a reward doesn’t mean it’s a binding contract – context and reasonableness matter.
