Contracts I - Midterm Review

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Mutual Assent

Back 1

Offer & Acceptance
The same bargain at the same time
"A meeting of the minds"

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Is a subjective meeting of the minds necessary?

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NO.
Courts use OBJECTIVE MEASURE

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Parties are bound to the ______ intention that he manifests to the other(s).

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Apparent

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Elements to a contract

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Mutual Assent
Consideration
Any defenses to creation of the K?

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Manifesting Assent Mnemonic

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OPP:
Acceptance by OFFER: manifestation of assent to terms thereof made by the offeree in a manner invited or required by the offer
Acceptance by PERFORMANCE: requires at least part of what the offer requests to be performed or tendered AND includes acceptance by a performance which operates as a return promise
Acceptance by PROMISE: requires that the offeree complete every act essential to the making of the promise

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Types of contracts Mnemonic

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EII:
Express
Implied-in-Fact
Implied-in-Law

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Express Contract

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An agreement manifested by words - oral or written

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Implied-in-fact

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An agreement manifested by conduct - other than written or oral language

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Implied-in-law

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"quasi-contract": not a contract at all but an obligation imposed by a court despite the absence of a promise in order to avoid an injustice;
Constructed by courts to avoid unjust enrihment - permit the PL to bring action in restitution to recover the amount of the benefit conferred by the D

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Common Law Contract Law

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In most jurisdictions, contract law is not codified, and thus the primary source of general contract law is caselaw

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UCC

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Uniform Commercial Code:
has been adopted by every state except Louisiana.

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Application of UCC

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covers all transactions for the SALE OF GOODS other than securities and leases.
It applies to any party;
It's not limited to merchants altho individual provisions may be

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Goods

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any tangible thing that his moveable:
ex: growing crops or timber, unborn young of animals and other identified things attached to land, regardless of who severs them from the land provided that they can be removed w/o causing material harm to the land; currency exchanged as a commodity; minerals or the like or a structure or its materials to be removed from realty that are to be SEVERED BY THE SELLER

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Goods does NOT encompass

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- intangible rights such as intellectual property
- investment securities
- money which si the medium of payment for goods
- minerals or the like or a structure or its materials to be removed from realty that are to be severed by the buyer

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Sale

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transfer of title for a price.
If the primary function of the contract is to provide a service, the UCC doesn't apply, even if an incidental sale of goods occurs

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Merchant

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one who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill particular to the practices or goods involved in the transaction OR who employs an agent or broker in such occupation.

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Good Faith

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Every contract for the sale of goods imposes an obligation of good faith dealing on all parties in its performance and enforcement;
- "Honesty in fact in the conduct or transaction concerned."
Merchants are subject to an additional good faith standard which requires "honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade."

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Offer is accepted in 1 or 3 ways:

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- Promise
- Performance
- Either Promise or Performance (ee has the choice b/t) **MOST COMMON

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Offer accepted by PROMISE

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ee accepting must promise to make a binding K b/c acceptance must match up with offer

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Offer accepted by PERFORMANCE

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has to be performance not promise for ee to accept

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Legal enforceability of K

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if both parties intend and desire that their "agreement" not be legally enforceable it will not be

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Intent to Contract

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Party's intent is deemed to be what a reasonable person int he position of the other party would think

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Intent to put into writing later

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If parties agree on all points but decide tehy will put their entire agreement into a formal written document, the preliminary agreement may or may not be binding. The parties' intention controls

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Does outward expression supercede inward intent?

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Yes ; ex: Lucy v. Zehmer - Zehmer shoed by words and actions he intended to contract, although inwardly he was joking

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Elements of OFFER

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CCC:
Commitment
Communicate
Certainty

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Commitment element of OFFER

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Commitment: (promise or undertaking) rather than a mere invitation to negotiate; must be INTENT to enter into a K; intent found in language, surrounding circumstances, prior practice and relationship of the parties

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Communication element of OFFER

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- to have the power to accept, the offeree must have knowledge of the offer
- proposal must be communicated to him/her

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What communications DO NOT constitute an offer?

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- opinions about future results, including professional opinions
- statements of intention
- invitations to submit a bid
- price estimates
- ads, catalogs, and mass mailings
- auctions with reserve

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When is the offer effective?

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An offer is not valid until RECEIVED by the offeree or his agent

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Duration of offer

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If the offer has a stated time within which the acceptance m ust be made, any attempted acceptance after the expiration of that time will fail and will merely constitute a counter-offer by the offeree.
- If no specific time is stated within which the offeree must accept, it's assumed that the offeror intended to keep the offer open for a reasonable period of time
- generally, the time for accepting an offer begins to run from the time it is received by the offeree. If there's a delay in delivery of the offer of which the offeree is aware, th eusual inference is that the time runs from the date on which the offeree would have received the offer under ordinary circumstances

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Revocation of offer

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With limited exceptions, an offer is generally revocable at any time prior to acceptance

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Communication of Revocation

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An offer may be revoked by any words that communicate to the offeree that the offeror no longer intends to be bound. An offer is also revoked by action that is inconsistent with the intent to be bound once the offeree learns of such inconsistent action

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Offers that MAY NOT be revoked where...

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1. there is an option contract in which the offeree gave consideration for an irrevocable offer for some period of time
2. the offeree relied on his detriment upon an implied or express promise by the offeror not to revoke if such detrimental reliance was foreseeable by the offeror
3. offeree relied on his detriment upon the offer itself if the such detrimental reliance was reasonably foreseeable by the offeror.
4. in case of a unilateral contract, the offeree began performance of the promised act to any extent
5. in goods contracts, a merchant indicates in signed writing that an offer to buy or sell goods will be held open for a stated time or a reasonable time if no time is specified, not to exceed three months, if no consideration if given

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Effective time of Revocation

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A revocation is effective upon recept by the offeree.

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Termination of the Offer

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An offeree's power to accept an offer is terminated by:
- death or insanity of the offeror or offeree
- death or destruction of a person or thing essential to performance
- the offeree's rejection of the offer, which can't be reinstated by the offeree's subsequent attempted acceptance
- the offeree's counter-offer, which impliedly manifests a rejection of the offer
- revocation of the offer
- experiation of the offer

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Unilateral

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Promise for an act
- offeror-promisor would promise to pay upon COMPLETION of the requested act by the promisee - once act is complete, then contract is formed

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Bilateral

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Promise for a Promise
- each party is BOTH a promisor and promise
EX: A promises to sell B for X-amount and B promises to purchase item at the X-amount
(Most Ks are Bilateral- each party has a right and a duty)

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Preliminary negotiations

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if a party desire to contract to solicit bids, it's not an offer but merely a basis for preliminary negotiations

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Advertisements

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not generally offers to sell, offers to begin negotiations UNLESS:
- specific terms: if it contains a particular number then it probably is specific enough to be an offer
- words of commitment: these suggest an offer

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Auctions

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not usually an offer but rather a solicitation of offers.
Unless sale is said to be w/o reserve the auctioneer may withdraw the goods from the sale even after the bidding has started

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Types of Acceptance

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Bilateral: exchange of mutual promises; a promise for a promise
Unilateral: acceptance by performance; a promise for an act

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Silence as Acceptance?

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Silence is NOT acceptance unless:
- offeree uses services having opportunity to reject and knowing that compensation was required
- where offeror has made it clear that silence is acceptance
- b/c of previous dealings, offeree should notify

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Knowledge of Offer

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- must be mutual assent
- must have knkowledge of the reward/offer in order to be possible to have made an acceptance
- if starts without knowledge however LEARNS BEFORE FINISHING act and then completes the act, K is formed
- exceptions - gov't agencies might still owe reward

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Motive

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must have present intent - look at surrounding circumstances - motive for responding doesn't count
- motive irrelavant as long as it's done voluntarily

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Modes of Acceptance

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- true contract ALWAYS has a promise
- at least one promise (unilateral vs. bilateral contracts)
- where offeror invites acceptance by choice of offeree, then the beginning of the performance acts as a promise to complete the performance

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Elements / Ways to terminate power of acceptance

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- by counteroffer or offeree rejection
- lapse of time
- revocation by offeror
- death/incapacity

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Revocation by Offeror

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- can revoke any time before acceptance
- offer revoked before money tendered
- if offeree acquires reliable info that offeror has taken action to revoke offer, then offer revoked

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Indirect Revoke of Offer

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an offeree's power of acceptance is terminated when the offeror takes definite action inconsistent with an intention to enter into the proposed contract and the offeree acquires reliable information to that affect

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Tender

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if offeree begins the performance, that constitutes acceptance

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When does an acceptance become effective?

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1. The offeror may specify when the acceptance will be effective
2. Absent such specification, an acceptance is effective when sent, if sent by reasonable means
3. If an acceptance is sent by inappropriate or unreasonable means, the acceptance will be effective upon receipt
4. With option contracts, an acceptance isn't operative until received by the offeror

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Lapse of Time

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Power of acceptance is terminated at time specific in offer, or by a reasonable time. If not stated, acceptance valid if mailed before midnight on day when offer received.
- when conversations end, offer ends, unless otherwise stated

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Option Contract

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where offer invites offeree to accept by performance, and not promise, the beginning of performance creates option contract

if offer only asks for performance and ee starts performing, by starting to perform that creates an Option Contract (offeror can't revoke during time ee is completing his performance

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Do proposals and inquiries reject offer?

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No.

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Mailbox Rule

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time of acceptance by offeree is when put in the mail box; once in mail, offer deemed accepted; acceptance effective upon dispatch; rejection upon receipt; purpose is to protect offeree
- Doesn't apply to option contracts, firm offers, revocations, offers
- only applies when mode of acceptance is NOT stated
- if offeror wants to revoke and already in the mail by offeree, then can not (b/c already accepted) if revoke before offeree puts int he mail, then can (b/c revoke before accepted)

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Counting days for Mailbox Rule

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count from day after receipt and right up to midnight on due date

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Mirror-Image Rule

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Counteroffer rule:
acceptance must look exactly like offer, otherwise seen as counteroffer

UCC rejects this rule

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Know that according to UCC, once you have K and one party tries to alter the deal/change terms

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Know that if Option K, OR cannot revoke, EE can reject and then change his mind later

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Rejection must be...

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- received by the offeror
- if by mail - what amounts to a receipt (by mail) - person
- if accepting, when EE puts in mail

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Under UCC § 2-207

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Contracts for the sale of goods:
- it gives effect to a definite and seasonable expression of acceptance even though it contains additional or different terms from those offered, unless the offeree expressly makes the acceptance conditional on the offeror's assent to the different or additional terms

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More under UCC § 2-207

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At common law, the mirror image rule requires an acceptance to be exactly like the offer. The rule is reversed under the Uniform Commercial Code, however. Under UCC § 2-207, an acceptance is still an acceptance even though it states different or additional terms from the offer.

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More under UCC § 2-207

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The battle of the forms and its legal treatment is attributed to two factors. The first factor is the failure of the participants to read thoroughly the terms of the other party's form. The second factor is attributed to section 2-207 of the Uniform Commercial Code (UCC). Perhaps more criticism has been leveled against section 2-207 than any other provision of UCC. The section addresses contract scenarios in which commercial parties have failed to bargain effectively.
Section 2-207 attempts to answer three questions.
a) Does the exchange of the conflicting forms constitute a binding contract?

b) If a binding contract exists, what are the enforceable terms?

c) If the exchange of forms does not establish a contract, but the parties nonetheless perform, what are the terms of the contract established by conduct.

Unfortunately, judicial interpretation of section 2-207 varies widely, making the answers to these questions far from clear. Litigation of the battle of the forms derived from this section has produced hundreds of court decisions. A variety of alternatives and revisions have been proposed and debated and yet a definite resolution seems to be unreachable.

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Do different terms invalidate a contract?

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No. 2-207(1) states: a form sent within a reasonable time "operates as an acceptance" even tho it states different or additional terms.

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Part one of UCC § 2-207

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Ex: B sent order form to S. S sends back its "different" form confirming a sale. Is there a contract despite different terms?
YES.

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Part two of UCC § 2-207

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Whose terms control?
The additional terms are to be construed as proposals for ADDITION to the contract.
But if it's between MERCHANTS,
it automatically becomes part of the contract unless B has indicted an objection (The additional terms become part of the contract unless the merchant (B) objects) OR the additional terms "materially alter" the contract

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Part three of UCC § 2-207

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Provides that the K may be put into effect by conduct by both parties which recognizes the existence of a K even though the forms differ.

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General overview of § 2-207

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A contract is formed even when seller and buyer use different terms, and the seller's different terms become part of the contract unless these terms materially alter the contract or the buyer timely objects to these terms.