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67 Cards in this Set

  • Front
  • Back
Intent to Contract
(Objective Theory)
K law follows objective theory of k's.

Manifestation of Intent:
A party's intent is deemed to be what a REASONABLE PERSON in the position of the other party would think the 1st party's objective manifestation of intent meant.

Communicated:
There must be real communication so the offeree knows of the offer (reasonable person)
Intent to Contract
(Legal Enforceability)
The parties' intention regarding the legal enforceability will normally be effective. Thus, if both parties intend the agreement to be legally enforceable, it will be even if they mistakenly believe it is not.
Intent to Contract
(Ambiguous Intent)
Where the evidence is ambiguous, courts will follow these rules:
1) in a "business" context, court presumes parties intended to be enforceable
2) in a "social or domestic" situtation, presumption will be that legal relations were NOT intended
Intent to Contract
(Intent to Write Down Later)
If two parties agree (orally or in brief writing) on all points, but decide to formally write document later, preliminary agreement may or may not be binding. The parties INTENTION controls.
Intent to Contract
(Intent to Write Down Later)
(No Manifested Intent)
Where intent is ambiguous, court will treat a k as existing when the mutual assent is reached, even if no formal document is ever drawn up.

However, for very large deals, the court will find no intent to be bound until the formal document is prepared and signed.
Offer
(Definition)
An offer is "the manifestation of willingness to enter into a bargain," which justifies another person in understanding that his assent can conclude the bargain.

An offer is something that creates in another the power of acceptance.
Acceptance
(Definition)
An acceptance of an offer is "a manifestation of assent to the terms thereof made by the offeree in a manner invited or required by the offer."
Unilateral v. Bilateral Contracts
(Bilateral)
A bilateral k occurs where BOTH sides make PROMISES.

This is an exchange of promises.
Unilateral v. Bilateral Contracts
A unilateral k occurs where there is an exchange of the OFFEROR's PROMISE for the OFFEREE's ACT.

Here the offeree does not make a promise, but acts instead.
Validity of Offers
(Offer made in Jest)
An offer which the offeree knows or should know is made IN JEST is not a valid offer.

Even if there is acceptance, no contract is created.
Validity of Offers
(Preliminary Negotiations)
If a party SOLICITS BIDS, the solicitation is not an offer and cannot be accepted. Instead it merely serves as a basis for preliminary negotiations.

Example: A says, "I would like to sell my house for at least $100,000." This is almost certainly a solicitation of bids, rather than an offer, so B cannot "accept" by saying, "Here's my check for $100,000."
Validity of Offers
(Advertisements)
Most ADVERTISEMENTS appearing in newspapers, store windows, etc., are NOT offers to sell.
Validity of Offers
(Advertisements w/ Specific Terms)
If the advertisement contains specific words of commitment, especially a promise to sell a PARTICULAR NUMBER of units, then it may be an offer.

Example: "100 men's jackets $26 apiece, first come first served starting Saturday," is so specific that it is probably an offer.
Validity of Offers
(Words of Commitment)
Words of commitment suggest an offer.

Example: "Send three box tops plus $1.95 for your free cotton T-shirt," is an offer even though it is also an advertisement, because the advertiser is committing himself to take action in response to the consumer's action.
Validity of Offers
(Auction)
Similar to advertisements. This is usually not an offer, but a solicitation of offers (bids). Unless the sale is expressly said to be "without reserve," the auctioneer may withdraw the goods from the sale even after the start of bidding.

UCC 2-328 (3)
Acceptance
(Who may accept?)
An offer may be accepted only by a person in whom the offeror intended to create a power of acceptance.
Acceptance
(Must offeree know)
Acceptance is valid only if the offeree knows of the offer at the time of his alleged acceptance.
Acceptance
(Rewards)
If a reward is offered for a particular act, a person who does the act without knowing about the reward cannot claim it.
Method of Acceptance
The offeror is the master of his offer. The offeror may prescribe the method by which the offer may be accepted.
Method of Acceptance
(Method Not Specified)
If the offer does not specify the mode of acceptance, the acceptance may be given in ANY REASONABLE method.
Method of Acceptance
(Acceptance of Unilateral K)
An offer for a unilateral k is accepted by FULL PERFORMANCE of the act.

Note: The offer is temporarily irrevocable once the offeree begins performance.
Method of Acceptance
(Offer invites promise OR performance)
If offer does not specify how to be accepted, the offeree may accept by EITHER a promise or a performance.
Method of Acceptance
(Shipment of Goods)
If a buyer of goods places a "purchase order" that does not state how acceptance is to occur, the seller may accept by either promising to ship the goods, or by in fact shipping the goods.
UCC 2-206 (1)(b)
Method of Acceptance
(Non-conforming Goods)
If the seller is shipping non-conforming goods, this does not act as acceptance. In this "accomodation shipment" situation, the seller is making a counter-offer, which the buyer can either accept or reject. If the buyer accepts, there is a k for the quantity and type of goods actually sent, not those originally ordered. If the buyer rejects, he can send back the goods. In any event, seller will not be found to be in breach.
UCC 2-206 (1)(b)
Method of Acceptance
(Notice of Acceptance - Unilateral K)
Most courts hold the offeree must give notice of his acceptance within a reasonable time, after he has done the requested act. If he does not, the K was formed by the act is discharged.
Method of Acceptance
(Silence)
Generally, an offer cannot be accepted by silence, but there are a few exceptions:
Method of Acceptance
(Silence - Reason to Understand)
Silence can be acceptance if the offeror has given the offeree REASON TO UNDERSTAND that silence will constitute acceptance, and the offeree subjectively intends to be bound.
Method of Acceptance
(Silence - Benefit of Services)
An offeree who silently receives the benefit of SERVICES (but not goods) will be held to have accepted a k for them if he: (1) had a reasonable opportunity to reject them; and (2) knew or should have known the provider of the services expected to be compensated.
Method of Acceptance
(Silence - Prior Conduct)
Prior course of dealing may make it reasonable for the offeree's silence to be construed as consent.
Method of Acceptance
(Silence - Acceptance by Dominion)
Where the offeree receives GOODS, and KEEPS THEM, this exercise of "dominion" is likely to be held to be an acceptance.
Acceptance Varying from Offer
(Mirror Image Rule)
Under the common law, the offeree's response operates as an accepance only if it is the PRECISE mirror image of the offer. If the response conflicts at all with the terms of the offer, or adds new terms, the purported acceptance is in fact a rejection and counter offer, not an acceptance.
Acceptance Varying from Offer
(Battle of Forms UCC View)
UCC rejects the mirror image rule, and will often lead to contract formation even though acceptance differs from the offer.

Wherever possible, the UCC tries to find a k, to keep the parties from weaseling out (as they often do when the market changes). This "battle of the forms" is dealt with in UCC 2-207.
Acceptance Varying from Offer
UCC 2-207
2-207(1), at a very general level, provides that any "expression of acceptance" or "written confirmation" will ACT AS AN ACCEPTANCE even though it states terms that are "additional to or diffierent from" those contained int he offer.
Acceptance Varying from Offer
(Conditional Acceptance on Changed Terms)
An expression of acceptance does not form a k if it is "expressly made conditional on assent to...additional or different terms." 2-207(1)

Note: courts are reluctant to apply this section. Only if the second party's form makes it clear that the party is unwilling to proceed with the transaction unless the first party agrees to the second party's changes.
Acceptance Varying from Offer
(Additional Term in Acceptance)
Where offeree's response contains an additional term, the consequences depend on whether both parties are merchants.
Battle of the Forms
(Additional Term in Acceptance)
(At least one party not Merchant)
In this case, the additional term does not prevent the offeree's response from giving rise to a k, but the additional term becomes part of the k only if the other explicitly assents to it.
Battle of the Forms
(Additional Term in Acceptance)
(Both Parties Merchants)
If both parties are merchants the additional term automatically becomes part of the k, as a general rule.

However there are 2 exceptions:
1) Materiality - the addition will not become part of the k if the term materially alters it.
2) Objection - if the offeror objects to having the additional term become part of the k, it will not so become.
Battle of the Forms
(Acceptance Silent)
If an issue is handled in the 1st document (offer) but not in the 2nd (acceptance), the acceptance will be treated as covering ALL terms of the offer, not just those on which the writings agree.
Battle of the Forms
(Conflicting Terms)
If an issue is covered one way in the offering and another, conflicting, in the acceptance, most courts apply the "knock out" rule. That is, the conflicting clauses "knock each other out" of the k, so neither enters the k and a UCC "gap-filler" provision is used if one is relevant; otherwise common law controls.

Example - see p.51
Battle of the Forms
(Response Diverges Greatly from Offer)
If an acceptance diverges greatly from the terms of the offer, it will not serve as an acceptance at all, so no K.
Battle of the Forms
(K by parties' conduct)
If the divergence occurs (so the exchange of offer and acceptance does not create a k), the parties' CONDUCT later on can still cause a k to occur.

2-207(3) - conduct by both parties which recognizes the existence of a k is sufficient to establish a k for sale although the writings of the parties do not otherwise establish a K.
Battle of the Forms
(K by parties' conduct)
(Buyer's Failure to Return Goods)
(Sealed warranty)
Still may be a contract without offer and acceptance when one purchases retail goods whose warranty terms are inside of a sealed box and unknown to the buyer until after the purchase. If the seller gives the buyer the right to cancel the transaction by returning the goods if the buyer is unhappy when opening the box, and the buyer retains the goods, the court will likely decide the buyer's retention constitutes agreement to the seller's proposed terms.

Shrink-wrapped software
Battle of the Forms
(K by parties' Conduct)
(Terms)
Where a k by conduct is formed, the terms "consist of those terms in which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of this act"

For example, the price may be imposed by 2-305's price "gap filler"
Battle of the Forms
(Confirmation of Oral Contract)
If the parties initially reach an oral agreement, a document later sent memorializing the agreement is called a "confirmation"

a) Additional Terms in confirmation: if confirmation contains additional terms, that term becomes part of the K unless either: 1) additional term materially alters the oral agreement or 2) party receiving the confirmation objects to the additional terms.

b) Different term in confirmation: If a clause in the confirmation is different from a term on the same issue reached in the oral agreement, the new clause probably does not become part of the agreement.
Duration of the Power of Acceptance
(General)
For a valid acceptance, it must become effective while the power of acceptance is still in effect, so when there is doubt about whether acceptance is timely:
1) pinpoint the moment at which the "acceptance" became effective, and 2) ask whether the power of acceptance was still in effect at that moment.

If answer to 2 is yes, then acceptance was timely.
Duration of the Power of Acceptance
(Ways to terminate Power)
Offeree's power of acceptance may be terminated in 5 ways:
1) Rejection by offeree;
2) Counter-offer by offeree;
3) Lapse of time;
4) Revocation by offeror;
5) Death or incapacity of one party
Ways of Terminating Power of Accept
(Rejection by Offeree)
Normally, rejection by offeree will terminate power of acceptance.

Exceptions:
1) the offeror indicates that the offer still stands despite the rejections
2) the offeree states that although she is not now accepting, she wishes to consider the offer further later.
Ways of Terminating Power of Accept
(Counter-Offer)
If there is a counter-offer, the power to accept the original offer is terminated.

However, this does not always reject indefinitely as mentioned in rejection by offeree.
Ways of Terminating Power of Accept
(Lapse of Time)
The offeror, as "master of his offer" can set a time limit for acceptance at the end, the power of acceptance terminates.

End of Reasonable Time:
If offeror doesn't set a time limit for acceptance, power of acceptance terminates at the end of a reasonable time period.

Face-to-face conversation: if bargaining face-to-face or over the phone, the power of acceptance expires at the end of the conversation unless there is evidence of other intent.
Ways of Terminating Power of Accept
(Revocation)
Offeror is free to revoke offer at any time before it is accepted (except in option contracts)

However, revocation is not effective until it reaches the offeree.

Lost revocation: if is lost through misdelivery, the revocation never becomes effective.
Ways of Terminating Power of Accept
(Death or Incapacity to One Party)
If either party dies or loses legal capacity to contract, power to accept is terminated
Duration of the Power of Acceptance
(Irrevocable Offers)
Ordinary offer is revocable at will of offeror, however there are some exceptions:
1) Option Contracts
2) "Firm Offers" under UCC
3) Part performance or reliance
Standard Option Contract
Offeror may grant an "option" to enter into the contract. The offer itself is then referred to as an "option contract"

Common law requires consideration:
traditional vies is that an option contract can be formed only if the offeree gives the offeror consideration for the offer.

Modern (Restatement) approach:
a signed option contract that recites the payment of consideration will be irrevocable, even if the consideration was never paid.
"Firm Offers" under the UCC:
UCC allows formation of an irrevocable offer even if no recital of the payment of consideration is made.

2-205, offer to buy or sell goods is irrevocable if it:
1) is by a merchant;
2) is in a signed writing;
3) gives assurance offer will be held open

Such an offer is irrevocable even though it is without consideration or even a recital of consideration.

Ex p. 54

However:
a) no offer can be made irrevocable for any longer than 3 months, unless consideration is given
b) if the firm offer is on a form drafted by the oferee, it is irrevocable only if the "firm offer" clause is separately signed by the offeror.
Part Performance/Detrimental Reliance
Offeree's part performance or detrimental reliance (preparations to perform) may transform an otherwise revocable offer into a temporarily irrevocable one.

a) Offer for unilateral contract: where offer is for a unilateral k, the beginning of performance by offeree makes offer temporarily irrevocable.

Preparations - applies only to the beginning of actual performance, not the making of preparations to perform.

b) Preparations by offeree: if offer is for a bilateral k, offeree's making of preparations will cause offer to be temporarily irrevocable if justice requires.

Offers by sub-contractors: an offer by a sub to a general contractor will often become temporarily irrevocable under this rule.
When Acceptance Becomes Effective
(Mailbox Rule)
acceptance is effective upon proper dispatch.

Mailbox doesn't apply if the offer provides otherwise

If the acceptance is lost in transmission, or delayed, the applicability of mailbox rule depends on whether communication properly addressed.

Properly addressed: it is effective at time of dispatch even if never received.
Improperly addressed: (or sent by slow means, or improperly dispatched) it will be effective upon dispatch only if it is received within the time in which a properly dispatched acceptance would normally have arrived. If it comes later than this "normal" time, it will not be effective until receipt.
Mailbox Rule
(Accept and Reject sent)
Rejection Sent First: acceptance will be effective if and only if offer receives it before he receives rejection.

Acceptance Sent First: acceptance is effective upon dispatch, and later dispatched rejection does not undo the acceptance, no matter what order the offeror receives them.
Mailbox Rule
(Option Contracts)
Acceptance of an option contract is effective upon receipt by the offeror, not the dispatch
Mailbox Rule
(Mistake in Transmission)
Risk of mistake in transmission of terms of the offer is upon the offeror. A contract is formed on the terms of the offer as received by the offeree.

1) However, if the offeree knows or should reasonably have known that the offer has undergone a mistake in transmission she cannot snap up the offer
Indefiniteness
(Generally)
No contract will be found if the terms are unduly indefinite.
Indefiniteness
(Court supplies missing term)
If court believes parties intended to contract, and it believes it can supply a "reasonable" value for the missing term, it will generally do so.

a) UCC: expressly allows court to fill in terms for price, place for delivery, time for shipment, time for payment, etc., as long as parties intended to contract.
2-204(3)

b) Non-UCC: most modern courts follow this gap filler approach as long as parties have shown an intent to contract

c) Too indefinite: there are times where parties intended to contract, but the terms are so shitty a court cannot supply all missing terms. (RARE)
Indefiniteness
(Obligation of Good Faith)
an important type of term the court will supply is an obligation of good faith and fair dealing. 1-304, "every k or duty within this act imposes an obligation of good faith in its performance or enforcement"

a) Consistency with other party's expectations: an important aspect of good faith is that a party is required to behave consistent with other party's reasonable expectations about how the contract will work.
Indefiniteness
(Agreement to agree)
court will supply missing term if parties intentionally leave that term to be agreed upon later, and then don't agree. 2-305(1)(b)
Indefiniteness
(Part Performance)
Even if an agreement is too indefinite for enforcement at time it is made, subsequent performance may cure indefiniteness.
Misunderstanding
(General)
If parties have misunderstanding about what they are agreeing to, this may prevent from "meeting of the minds," and prevent a k from existing. No K if
1) Parties have different subjective belief about contract term;
2) That term is a material one; and
3) neither party has reason to know of the misunderstanding
Misunderstanding
(Fault)
If one party knows or should know he has a different understanding as to the meaning of an ambiguous term than the other, a K will be formed on the term as understood by the other (innocent) party
Misunderstanding
(Offeree doesn't understand)
where offeree fails to understand or read, similar "fault" applies:

1) Offeree is negligent: if offeree's failure to read or understand the offer is due to his own negligence, he is bound by terms of contract
2) Misrepresentation: if offeree's misunderstanding is due to offeror's misrepresentation of therms, and offeror knows this, there is a K on terms as understood by offeree.