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62 Cards in this Set
- Front
- Back
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Contract
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• A promise or set of promises, for breach of which the law provides a remedy, or the performance of which the law in some way recognizes as a duty
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Quasi-Contract
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Equitable Remedy, rules of K law don’t apply as this is NOT a contract
- Anytime the straight application of common law contract application renders an inequitable result you will right a paragraph re: quasi-contracts Elements - P has conferred a benefit on D - P reasonably expected to be paid - D realized unjust enrichment if P is not compensated |
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Unilateral
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An offer that expressly requires performance as the ONLY method of acceptance
• On the bar this appears in only two situations |
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Bilateral
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Anything that is not a unilateral contract
• Key is that we are in a bilateral contract world - If in doubt assume it is bilateral |
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NBC offers A $25k to sing “X” on SNL. A agrees to sing – Is there a K?
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• YES – Bilateral K as it CAN be accepted in a manner other than by performance
- If she doesn’t sing it then she is liable for a breach of contract |
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i Void
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– Has no legal effect from the get go – e.g. agreement to commit a crime
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ii Voidable
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– Party may elect to avoid or ratify – e.g. a contract by a minor
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iii Uneforceable
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– Otherwise valid but for defiense exists extraneous to formation – e.g. SOF
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Article 2 of the UCC
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Regulates contracts pertaining to the Sale of Goods
- Two factors in determining whether Article 2 of UCC applies (1) Type of transaction – Must be a sale (2) Subject matter of transaction – Must be dealing with goods o Tangible, personal property Note: Real estate is common law – Not a “good” Example: C contracts to buy a house – Article 2? - NO – Service contracts are dealt with via common law Example: C contracts to have his car washed – Article 2? - NO – This is not a sale of goods Example: C contracts to buy a 1973 Cadillac for $400 – Article 2? - YES – ANY sale of goods is Art. 2 – No $500 minimum as you may have heard/learned in law-school. |
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Mixed Deals
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All or nothing/More important part
- Generally, a contract is governed – all or nothing – by either common law or UCC - Whatever is the “most important part” of the contract prevails - All or nothing/More important part Example: C buys E’s car in return for E providing C with 2 parallel parking lessons – Article 2? YES – The sale of goods is the primary part so the whole agreement is subject to Article 2 Example: C contracts to buy a Yo-Yo and receive 10 lessons from Yo-Yo Ma for $40k – Article 2? NO – The quality time is the key to the agreement common law governs services! |
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Mixed Deals Exception
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If K divides payment, apply UCC to SOG and common to the remainder
Example: C will pay $10 for Yo-Yo and $39,990 for lessons – Article 2? - Article 2 for the Yo-Yo - Common Law for the remainder/lessons |
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FORMATION OF A CONTRACT
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A K is an agreement/promise that is legally enforceable. Most Ks on the bar are based on an agreement. So, 1st look for agreement, then, 2nd determine whether agreement is legally enforceable.
Level One – The initial communication (“offer”); & Level Two – What happens after initial communication (“termination of offer); & Level Three – Who responds and how she responds (“acceptance”). |
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Offer
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Is (i) an expression of a promise, undertaking or commitment to enter into a contract which (ii) has definite and certain terms and (iii) is communicated to an offeree.
- An offer is a manifestation of an intention to contract – words or conduct showing commitment BY ONE PERSON! Basic test is whether a reasonable person in the position of the offeree would believe that his or her assent creates/constitutes a contract. NOTE: "meant" or "intended" NOT manifestation!!!! |
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Mixed Deals Exception
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If K divides payment, apply UCC to SOG and common to the remainder
Example: C will pay $10 for Yo-Yo and $39,990 for lessons – Article 2? - Article 2 for the Yo-Yo - Common Law for the remainder/lessons |
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Offer Problems to Look Out For
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(1) Missing price terms in sales contracts
(2) Vague or Ambiguous material terms are not offers under either common law or UCC – Key Words include appropriate, fair, reasonable usually are NO offer. (3) Requirement/Output Contracts |
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FORMATION OF A CONTRACT
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A K is an agreement/promise that is legally enforceable. Most Ks on the bar are based on an agreement. So, 1st look for agreement, then, 2nd determine whether agreement is legally enforceable.
Level One – The initial communication (“offer”); & Level Two – What happens after initial communication (“termination of offer); & Level Three – Who responds and how she responds (“acceptance”). |
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Offer
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Is (i) an expression of a promise, undertaking or commitment to enter into a contract which (ii) has definite and certain terms and (iii) is communicated to an offeree.
- An offer is a manifestation of an intention to contract – words or conduct showing commitment BY ONE PERSON! Basic test is whether a reasonable person in the position of the offeree would believe that his or her assent creates/constitutes a contract. NOTE: "meant" or "intended" NOT manifestation!!!! |
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(1) Missing price terms in sales contracts
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- Sale of RE (Common Law):Price and description REQUIRED for offer to occur/exist
-Example: S “offers” to sell BA to B without anything about price – Is this a valid offer? NO - Sale of goods (Article 2): No price requirement for offer to occur/exist – If parties intend an offer it is an offer – Quantity is required though! Example: S “offers” to sell car to B w/o saying anything about price – Is this a valid offer POSSIBLY – Depends on parties intent |
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(2) Vague or Ambiguous material terms are not offers under either common law or UCC – Key Words include appropriate, fair, reasonable usually are NO offer.
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Example: S “offers” to sell car to B for fair price – A valid offer? NO – Vague and ambiguous material terms.
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Offer Problems to Look Out For
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(1) Missing price terms in sales contracts
(2) Vague or Ambiguous material terms are not offers under either common law or UCC – Key Words include appropriate, fair, reasonable usually are NO offer. (3) Requirement/Output Contracts |
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(1) Missing price terms in sales contracts
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- Sale of RE (Common Law):Price and description REQUIRED for offer to occur/exist
-Example: S “offers” to sell BA to B without anything about price – Is this a valid offer? NO - Sale of goods (Article 2): No price requirement for offer to occur/exist – If parties intend an offer it is an offer – Quantity is required though! Example: S “offers” to sell car to B w/o saying anything about price – Is this a valid offer POSSIBLY – Depends on parties intent |
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Requirement/Output Contracts
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Requirement/Output Contracts are generally sufficient as a good faith intention is usually read into the contract – Quantity req. less strict
(1) K for SOG can state quantity of goods to be delivered under the K in terms of the buyer’s requirements or seller’s output or in terms of exclusivity – Key Words include all, only, exclusively, solely - Italicized terms triggers a requirements/output contract which are considered VALID [satisfy SOG quantity requirement as they can be determined objectively] - Example: B “offers” to buy grits from S for 5 years. There is no specific quantity term in the “offer”; instead it provides B shall purchase all of its grits from S – Is this a valid offer?YES – Requirements/Output contract (2) No unreasonably disproportionate increases in amount due under a requirement/output contract are allowed – A buyer can increase requirements so long as the increase is in line with prior demands - Example: B buys 1,000 lbs. of grits in each of the first 3 years of agreement. B then orders 1,020 lbs. the 4th year – What result? is this OK? YES – in looking at the prior demands we can see an increase of 20 pounds is in line with the prior demands |
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(2) Vague or Ambiguous material terms are not offers under either common law or UCC – Key Words include appropriate, fair, reasonable usually are NO offer.
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Example: S “offers” to sell car to B for fair price – A valid offer? NO – Vague and ambiguous material terms.
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Context to look out for -- Advertisements
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Generally, an advertisement is NOT an offer
- Exception: Advertisement can be an offer if it is in the nature of a reward. E.g. Carbolic Smoke Ball Co. promises 100 pound reward to anyone who catches the flu after using its smoke ball as directed (Carbolic Smoke Ball Case) - Exception: An advertisement can be an offer if it is specific as to quantity and expressly indicates who can accept. E.g. Dept. Store advertises “1 fur coat $10 – 1st come, 1st served.” (Lefkowitz Department Store) |
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Level Two: Terminating an Offer Prior to Acceptance
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- An offer cannot be accepted if it has been terminated nor terminated after accepted
- An offer that has been terminated is officially “dead” There are 4 methods of terminating an offer (1) Lapse of Time (2) Death of a Party (3) Revocation (4) Rejection |
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Requirement/Output Contracts
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Requirement/Output Contracts are generally sufficient as a good faith intention is usually read into the contract – Quantity req. less strict
(1) K for SOG can state quantity of goods to be delivered under the K in terms of the buyer’s requirements or seller’s output or in terms of exclusivity – Key Words include all, only, exclusively, solely - Italicized terms triggers a requirements/output contract which are considered VALID [satisfy SOG quantity requirement as they can be determined objectively] - Example: B “offers” to buy grits from S for 5 years. There is no specific quantity term in the “offer”; instead it provides B shall purchase all of its grits from S – Is this a valid offer?YES – Requirements/Output contract (2) No unreasonably disproportionate increases in amount due under a requirement/output contract are allowed – A buyer can increase requirements so long as the increase is in line with prior demands - Example: B buys 1,000 lbs. of grits in each of the first 3 years of agreement. B then orders 1,020 lbs. the 4th year – What result? is this OK? YES – in looking at the prior demands we can see an increase of 20 pounds is in line with the prior demands |
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Lapse of Time
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An offer is terminated (dead/gone) if a stated or otherwise reasonable time has lapsed
- Watch for a fact patter that gives you information about the date an offer is received and the date it is responded to – Bar doesn’t use “red herrings” - Rule of thumb is that anything over a month lapse deserves to be discussed on the essay portion of the exam Example: During break, I write in your notes I will sell you my car for $400. Writing fails to indicate how long the offer will be kept open – Can you accept in 5 years? • NO – This is not a reasonable time obviously |
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Context to look out for -- Advertisements
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Generally, an advertisement is NOT an offer
- Exception: Advertisement can be an offer if it is in the nature of a reward. E.g. Carbolic Smoke Ball Co. promises 100 pound reward to anyone who catches the flu after using its smoke ball as directed (Carbolic Smoke Ball Case) - Exception: An advertisement can be an offer if it is specific as to quantity and expressly indicates who can accept. E.g. Dept. Store advertises “1 fur coat $10 – 1st come, 1st served.” (Lefkowitz Department Store) |
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Level Two: Terminating an Offer Prior to Acceptance
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- An offer cannot be accepted if it has been terminated nor terminated after accepted
- An offer that has been terminated is officially “dead” There are 4 methods of terminating an offer (1) Lapse of Time (2) Death of a Party (3) Revocation (4) Rejection |
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Lapse of Time
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An offer is terminated (dead/gone) if a stated or otherwise reasonable time has lapsed
- Watch for a fact patter that gives you information about the date an offer is received and the date it is responded to – Bar doesn’t use “red herrings” - Rule of thumb is that anything over a month lapse deserves to be discussed on the essay portion of the exam Example: During break, I write in your notes I will sell you my car for $400. Writing fails to indicate how long the offer will be kept open – Can you accept in 5 years? • NO – This is not a reasonable time obviously |
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Death of a Party Prior to Acceptance
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• Generally, death or incapacity of either party after offer but before acceptance leads to a termination of an offer – Notice of death/incapacity to offeree NOT pre-requisite
- Exception: Options Where party pays to keep offer open for a specified period of time o More on this below - Exception: Part Performance of Offer to Enter a Unilateral Contract Death does not terminate partial performance on a unilateral K o Must remain “open” for a reasonable time to complete |
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Revocation by Offeror
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How can an offer be revoked?
- Unambiguous statement by offeror to offeree of unwillingness or inability to contract; OR - Unambiguous conduct by offeror indicating an unwillingness or inability to contract that the offeree is made aware of in a reliable fashion, NEED OFFEREE AWARENESS! |
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Jan. 15th, I offer to sell car to S for $400. Next day, while in the shower, I exclaim “I have changed my mind. I do not want to sell my car to S.” – Can S still accept the offer?
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o YES – Unless in the shower also. Otherwise the statement is not being made TO the offeree
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Jan. 15th I offer to sell car to S for $400. Next day I sell to C – Can S still accept the Jan 15th offer?
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o YES – No S awareness of the revocation
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Jan. 15th I offer to sell car to S for $400. Next day I sell to C. S sees C driving car on Jan 16th and learns from him that he has bought it – Can S still accept?
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o NO – S is aware of the “revocation” so offer is dead
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Jan. 15th I offer to sell car to S for $400. Next day I make same offer to C (both S and C are considering it). S learns I made offer to C. Same facts as previous example except S simply learns that I offered car to C – Can she still accept my offer?
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YES – There is no revocation yet
- Multiple Offers NOT REVOCATION! |
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Irrevocable
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NO Possibility of Revoking
- FOUR situations (1) Option (2) Firm Offer (3) Detrimental Reliance (4) Commencement of Performance on a Unilateral Contract (OFDC) |
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Revocable
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There is the POSSIBILITY of revoking but it hasn't happened yet.
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Revoked
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ACTUALLY happened.
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(1) Option
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An offer cannot be revoked if the offeror has (i) promised to not revoke (or promised to keep offer “open”) AND (ii) this promise is supported by payment or other consideration (“option”)
- Example: S offers to sell B her car for $400. B pays S $10 for S’s promise “to keep the offer open for a week.” – Can S still revoke? NO – This is an option - Example: S offers to sell B her car for $400. S promises to keep “the offer open for a week.” – Can S still revoke? YES – This is NOT an option as there was no promise which was supported by payment or other consideration |
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(2) UCC “Firm Offer Rule”
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An offer cannot be revoked for up to (at most) three months if there is (i) an offer to buy or sell goods, (ii) a signed, written promise to keep the offer open, and (iii) offeror is a merchant (a merchant is simply a business person for purposes of the bar)
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Example: S, a used car dealer, offers to sell B a car for $400. Offer is in writing, signed by S, and expressly promises it will be kept open for a week – Can S revoke?
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o NO – Not for a week.
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Example: S, a used car dealer, offers to sell B a car for $400. The offer is oral and includes a promise that it will be kept open for a week – Can S revoke?
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o YES – Not a written promise. Oral promises are no good
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Example: S, a used car dealer, offers to sell B a car for $400. Written offer is signed by S and promises it will not be revoked for 6 months – Can S revoke?
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o YES/NO – For 3 months its irrevocable but no more
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Example: S, a used car dealer, offers to sell B a car for $400. The written offer is signed by S and promises it will not be revoked but does not state a time period – Can S revoke?
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o NO – While it doesn’t state period the court will pick a reasonable one (time period) not exceeding 3 months
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Example: S, a used car dealer, makes an offer by signed writing to B to sell a car for $400 – Can S revoke?
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o YES – There is no writing promising to keep the offer “open” to the offeree/B as is required
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*****Example: S offers to sell B her house for $100k, and written offer promises it can’t be revoked for the next 4 months – Can S revoke? ****
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o YES – RE is not governed by the UCC (CL applies) and the “Firm Offer Rule” only applies to SOG’s offers
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(3) Detrimental Reliance
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An offer cannot be revoked if there has been (1) reliance that is (2) reasonably foreseeable and (3) detrimental
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Example: G, general contract bidding on a contract to build a new hotel, uses various subcontractors. S, a subcontractor, submits a bid to G to do paint work for $100k. G uses S’s bid in making its bid and is awarded the contract – Can S still revoke its bid?
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Bid usually = offer!!
o NO – Detrimental reliance prevents revocation |
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(4) Commencement of Performance on a Unilateral Contract:
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The start of performance pursuant to an offer to enter into a unilateral contract makes that offer irrevocable for a reasonable time to complete performance
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Unilateral Performance: o Example: O offers P $1k to paint O’s house. O’s offer states that it can be accepted ONLY by performance (unilateral). P starts painting – Can O still revoke?
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• NO – Unilateral performance
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Unilateral Preparation
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Example: O offers P $1k to paint O’s house. O’s offer states it can ONLY be accepted by performance (unilateral). P buys paint – Does this trigger this exception to the general rule of revocability? NO – Offeror can revoke if offeree only/merely preparing to perform and here he is only buying the paint – default on the side of preparation.
Example Continued: Does this situation trigger the detrimental reliance exception to the general rule of revocability of an offer by the offeror? YES – So watch out for detrimental reliance (is it normal colored paint that can be returned?) |
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Rejection
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1. Counteroffer
2. Conditional Acceptance 3. Additional Terms to Common Law Contract – Mirror Image Rule 3b. Additional Terms to a UCC Article 2 Contract – UCC §2-207 |
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Counteroffers:
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Counteroffers kill previous offer and takes their place
Thus, where a counteroffer has been made there is no express contract UNLESS that counteroffer has itself been accepted. o HOWEVER, counteroffers must be distinguished from bargaining which does NOT terminate an offer |
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• Example: S offers BA to B for $10k. B responds “I will only pay $9k – Can B later accept S’s offer to sell for $10k?
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NO – This is a counteroffer
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• Example: S offers BA to B for $10k. B’s response is “Will you take $9k?” S refuses to sell for $9k – Can B later accept S’s offer
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YES – This is merely a question which (on the bar) is only bargaining and thus is NOT considered a counteroffer.
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(2) Conditional Acceptance
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Conditional acceptance operates just as a counteroffer does – Kills the offer and takes its place as a “new” offer which now must be accepted for a valid contract to exist
Look for “accept” followed by one of the following words or phrases – if, only if, provided, so long as, but, on condition that |
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Example: L offers to lease a building to T by sending T a signed lease that is silent about arbitration of disputes. T adds a paragraph that states that T “accepts provided that all disputes shall be resolved by arbitration of disputes and signs – Has T accepted L’s offer creating express K?
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• NO – Conditional acceptance amounts to a rejection of the offer and takes the place as a “new” offer that must be accepted
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Example: B sends S a purchase order for polyester pant suits. The purchase order makes no mention of arbitration of disputes. S sends an acknowledgment form that provides for arbitration of disputes and states “accept only if this arbitration term as a part of contract:” No further communications or actions – Is there an express K?
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• NO – Same answer as above
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(3a) Additional Terms to Common Law Contract – Mirror Image Rule: Under the common law, an “acceptance” which adds new terms is treated like a counteroffer rather than an acceptance
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o Example: L offers to lease a building to T by sending T a signed lease that is silent about arbitration of disputes. T adds a paragraph that states that all disputes shall be resolved by arbitration of disputes and signs – Has T accepted L’s offer creating an express contract?
• NO – Additional terms to a common law K |
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(3b) Additional Terms to a UCC Article 2 Contract – UCC §2-207:
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Under the UCC Article 2 an “acceptance” which adds new terms is STILL treated as an acceptance. We look for a fact pattern in which there is (i) an offer to buy or sell goods and (ii) a response with additional terms. This raises two questions and concerns
(i) Is there a contract? Under UCC, a response to an offer that adds new terms (but does not make new terms an express condition of acceptance), is generally treated as acceptance – a “seasonable expression of acceptance.” (ii) Is the additional term a part of the contract? All depends on the # of parties involved who are merchants. • 0-1 Merchant(s) – Additional term is a proposal that is to be separately accepted or rejected and the contract includes only the terms of the offer • Both Merchants – Additional term is generally a part of the contract subject to 2 EXCEPTIONS (1) If the additional term(s) materially changes offer [Material alteration]; OR (2) If the offeror objects to the change within a reasonable time frame |
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• Example: B sends a signed purchase order for grits that is silent about arbitration of disputes. S responds by sending back signed acknowledgment form that states that all disputes shall be resolved by arbitration – Is there a K?
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YES – here the arbitration clause is not insisted upon in order for the contract to be accepted (hence the difference from question listed 2 above) so it’s treated as acceptance of offer under the UCC
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