Lecture 7 - Contracts Part 1

Front 1

Except for contracts involving the sale of goods, which are governed by a 4 year s|l, all other contract claims are governed by a 6 year s|l.\Can the parties shorten the s|l in the contract?

Back 1

Yes, to a “reasonable time” and NY Appellate courts have held that shortening it to 6 months or 9 months in a construction contract is reasonable. However, in a sale of goods contract, the s|l can’t be shortened to less than 1 year.

Front 2

Can the parties lengthen the s|l?

Back 2

Yes, but it cannot be done in the parties’ original contract, which is against public policy. After the claim arises, the parties are free to extend the s|l, but it cannot be extended longer for the period of time governing that claim.

Front 3

A breach of contract complaint must sufficiently do what?

Back 3

Establish the existence of a contract, its breach and privity of contract between the plaintiff and the defendant.

Front 4

What is “Privity”?

Back 4

"Privity" is simply a contractual relationship between 2 parties.

Front 5

Define a valid contract.

Back 5

A valid contract is a voluntary agreement (no duress or undue influence) by competent parties (not infants or mental incompetents) containing definite terms supported by valid consideration and not induced by any misrepresentations in which the contracting parties agree to do or not to do a specific thing. It is a promise or set of promises for which law or equity will provide a remedy if the contract is breached.

Front 6

The basics of a contract are TACO. What does TACO stand for?

Back 6

T - definite terms expressed or implied
A - acceptance of those terms
C - consideration supporting the promise
O - offer that invites an acceptance

Front 7

Example: In a signed writing, O promised N, his 16-year-old nephew that O would pay N "a handsome reward" on N's 21st birthday if N did not smoke until age 21. N was induced by O's promise and did not smoke before his 21st birthday even though his contract was contained in a signed writing and it was supported by valid consideration, O's promise is not enforceable as a contract because the term, "handsome reward" is too indefinite. This is an example of what?

Back 7

If a contract is not reasonably certain as to its material terms, then it is not enforceable.

Front 8

Example: A separation agreement between souses stated that if W “cohabited” with another person, that H could case paying maintenance payments. The term “cohabit” was found too ambiguous and unenforceable. This is an example of what?

Back 8

If a contract is not reasonably certain as to its material terms, then it is not enforceable.

Front 9

Problem: A signed a contract to purchase Blackacre "at fair market value". This term is sufficiently precise if market value can be objectively determined. However, a contract to purchase "at fair market value" to be determined by a procedure to be later agreed upon by the parties is not enforceable. What do you think the court concluded?

Back 9

The court concluded it was simply an agreement to agree.

Front 10

What is an executory contract?

Back 10

It is a contract awaiting performance.

Front 11

Problem: In June, T executed a will leaving Blackacre to S, his son. In July, T executed a written contract to sell Blackacre to B, buyer. In August, T died. What happens to Blackacre?

Back 11

Since the contract was still executory (the deed had not passed to B), then S's right to Blackacre under the will is not lost under the doctrine of ademption of the specific bequest. Upon T's death, S will take legal title under the will subject to B's equitable title, and B's right to specifically enforce that contract under the doctrine of equitable conversion (see lecture 14). If the deed had passed to the B before T's death, then the specific bequest to S of the property would adeem under the doctrine of ademption and S would take nothing under the will because at the time of T's death, T had neither legal nor equitable title in Blackacre. Essay 5, Feb. 2008. NYEB pg. 564. Essay 2, Feb. 2010 NYEB pg. 682.

Front 12

Contracts are divided into 2 general categories. What are these 2 general categories?

Back 12

1. Express contracts, which are stated in definite written or oral words and
2. Implied contracts, which are divided into contracts of either implied in fact or implied in law

Front 13

What does implied in fact mean?

Back 13

Contracts implied in fact are contracts that arise from one party's conduct evidencing the she has impliedly entered into a contract (usually to pay money).

Front 14

Problem: To make extra money, T, a teenager mowed N's lawn while N was on vacation. When N returned, N refused to pay T. Can T sue N for quantum meruit ("for as much as he deserves") to recover the fair market value of T's performance? (the price usually and customarily paid for such services). (implied in fact)

Back 14

No, because it is not "unjust" for N to refuse to pay T because N did not request T's services and N was unaware that the services were being performed. However, an implied in fact contract entitling T to quantum meruit recovery would arise if N was at home and watched T cut the grass.
Assume T left a $100 invoice for N to pay. When N arrived home, N wrote T a note thanking T for cutting the grass and promising to pay T's $100 invoice. N's promise to pay is not a TACO contract because N's promise was supported only by past consideration. The consideration exchanged for N's promise preceded his promise. Likewise, the estoppel doctrine could not be invoked by T since T's conduct was not induced by N's promise. Thus T did not detrimentally rely on N's promise.

Front 15

Problem: To make extra money, T, a teenager mowed N's lawn while N was on vacation. When N returned, N refused to pay T.In NY, N's written promise setting forth T's past consideration would be an enforceable promise. POP. Assume that N was at home and that T, as a neighborly gesture decided to cut the old man's grass and watch T labor for 3 hours, and then came out and criticized T's job. Could T then sue N for quantum meruit? (implied in fact)

Back 15

No, because T's intent from the start is gratuitous, and the law will not imply an enforceable contract from activities that were undertaken and intended as a gift.

Front 16

What does implied in law mean?

Back 16

aka quasi contracts, which are a fiction imposed by law to 1. prevent one party's unjust enrichment or 2. to compensate a party who has detrimentally relied on an express or unenforceable contract (reliance damages).
A quasi contract (implied in law) is not a contract at all, but rather is an obligation imposed by law to do justice even where it is clear that no enforceable promise exists. Quasi contracts can arise 1. from one party's detrimental reliance by expending time, money, or labor in performing an unenforceable contract or 2. to prevent the other party's unjust enrichment resulting from a party's performance of an unenforceable contract.

Front 17

Example: P contracted to paint O's house. Halfway through the paint job, a tornado, a flood, or a non-negligent fire demolished O's house. Under the doctrine of impossibility of performance, P and O are excused from further performance under the contract, but P can sue in quasi contract on the now unenforceable contract to the extent his services enhance the value of O's house at the time it was destroyed. When a contract is excused for impossibility, the performing party's recoverable damages are limited only to the amount that the services increase the value of O's realty. (implied in law)

Back 17

Problem: The law implies a quasi contract for contribution whenever a joint tortfeasor because of joint and several liability pays 100% of the plaintiff's money judgment even though she was found only partially at fault.

Front 18

Quasi contracts arise in only 2 situations. What are these 2 situations?

Back 18

1. Even though there was never any express agreement between the parties, and there was no implied conduct by one party to pay, but in order to do justice, and to compensate a performing party, the law imposes a contract. This arises in only 2 situations
(a) A doctor who stops and renders aid to an unconscious victim may sue in quasi contract for the value of her services (even though the victim dies). This quantum meruit recovery is based on the reasonable value of the medical services rendered and is not based on the value of the benefit conferred or
(b) P found X's damaged boat washed up on shore. P put the boat in storage and repaired it and when X learned where it was, X demanded its return. Here, P has a claim in quasi contract to recover his expenses in repairing and storing X's property.
2. There was an express contract between the parties, but that contract is unenforceable due to a contractual defense such as illegality, impossibility, statute of frauds, unconscionability, or mistake, but only after 1 party (the plaintiff) has partially performed the contract or has detrimentally relied on that now unenforceable promise. Here, courts usually award only reliance and restitution damages, but they do not award expectation damages to the plaintiff.

Front 19

The law imposes a quasi contract under #2 situation for what?

Back 19

Either to compensate the performing party for the reliance damages incurred in performing the unenforceable contract or it will award restitution damages to avoid unjustly enriching the other party at the expense of the partially performing party.

Front 20

Problem: T was mowing his own lawn and over the roar of the machine, he hollered to his neighbor, N, "I'll cut your grass for $25." N hollered back, "No way!", but T thought that N said, "OK!" and T cut N's grass. At the end of T's job, N noticed that T was cutting N's grass and asked T what he was doing?

Back 20

T's best theory to recover notwithstanding the parties' mutual mistake and not withstanding their failure to have a meeting of the minds on their contract would be a claim for quasi contract to prevent N's unjust enrichment.

Front 21

Problem: P agreed to dye and color 5,000 of D's cloth napkins at P's plant. Upon completion of the dying process, P was to return the goods to D's warehouse. When P was halfway through D's load, a non-negligent fire destroyed everything. Is P liable for the loss of D's goods?

Back 21

No, this was a bailment contract and a bailee (P) has no duty to ensure bailed goods. This contract was a bailment for the mutual benefit of both parties since they both expected to benefit or to profit from the contract. Thus, P owed a duty of ordinary care since the fire was not caused by the negligence of P. P is not liable for D's loss.

Front 22

Problem: P agreed to dye and color 5,000 of D's cloth napkins at P's plant. Upon completion of the dying process, P was to return the goods to D's warehouse. Is D liable to P?

Back 22

Yes, a quasi contract arises when an express contract is partially performed and then is excused by a contractual defense (impossibility of performance). When bailed goods perish through no fault of the bailee, the bailee is entitled to compensation to the extent its services enhance the value of the bailed property when the goods were destroyed.

Front 23

Problem: For 15 years, P worked part time for D under an express (TACO) oral promise that D would repay P for his efforts by leaving P Blackacre in his will. However, when D died, he left everything to his sister. The statute of frauds prohibits the enforcement of an express oral contract to transfer an interest in real property, but here, the law will imply a quasi contract to avoid D's unjust enrichment and\or to compensate P for P's detrimental reliance on the unenforceable real property contract. P can recover the reasonable value of P's services, but not Blackacre because the statute of frauds prohibits enforcement of an express oral contract conveying an interest in real property. Will the court compensate P for all 15 years?

Back 23

No, the NY s|l for quasi contract is the 6 year period prior to commencement of P's action. MLO pg. k5.

Front 24

Even though a lawyer and client have entered an express written retainer agreement setting forth the legal fee for the lawyer to receive (1dash3 contingent on a successful judgment in a tort claim), a client is always free to discharge the lawyer and cancel that contract. If this occurs, and the lawyer is discharged WITHOUT CAUSE, then what is the lawyer entitled to?

Back 24

then the lawyer is entitled to a quasi contract claim to seek a quantum meruit recovery regardless of whether that amount may be more or less than the amount provided in the retainer agreement. NYEB essay 4, Feb. 2009 pg. 644, 2nd paragraph.

Front 25

Is a quasi contract claim available where a party has performed under an enforceable contract where its existence and validity are not disputed ?

Back 25

No, a quasi contract is not available where a party has performed under an enforceable contract where its existence and validity are not disputed. Otherwise, a contracting party who has made a bad bargain could seek to ignore it and instead seek to recover in quantum meruit. NYAA pg. 279.

Front 26

Does a quasi contract claim arise between an unmarried couple living together?

Back 26

A quasi contract claim does not arise between an unmarried couple living together to impliedly share all assets acquired while living together. 112 Appellate Division 3rd 204, 2nd Dept. 2013.
NY will enforce an oral express contract between such a couple who agreed that the net profits from the relationship were to be used for their equal benefit. Likewise, when one party expressly agreed to give up her job and raise their out of wedlock child, in return the other party would support, maintain and financially take care of the other.

Front 27

When a NY law firm hires an attorney, there is an implied in law contract that both will honor the rules of professional responsibility. What does this mean?

Back 27

Thus, even though the hired attorney is an employee at will (see lecture 10), the law impliedly limits the law firm's right to fire the employee for reporting unethical conduct of an attorney in that firm. NYAA pg. 270.

Front 28

What is a cause of action for unjust enrichment?

Back 28

A cause of action for unjust enrichment is a quasi contract implied in law claim that arises in the absence of a valid and enforceable contract. The unjust enrichment claim asked the court whether it would be unjust and inequitable for the defendant to retain the benefits of the unenforceable contract. For example, where the buyer of real property sues the seller to recover the 10% deposit paid on the oral unenforceable contract.

Front 29

What is the non-breaching contract allowed to retaion?

Back 29

Under Restatement of Contracts and in a majority of states (NY), the non-breaching party of a contract is allowed to retain the benefits of a partially performed contract where there was no SUBSTANTIAL PERFORMANCE (see lecture 10).

Front 30

What is the distinction between a unilateral and bilateral contract?

Back 30

In a UK (not commonly used in business), the offeror seeks a completed performance and not a return promise to perform by the other contracting party. It is a promise to pay or enact, but only if the act is completed. For example, offers of rewards, real estate broker contracts, or attorney contingent fee arrangements.
"Walk across the Brooklyn Bridge and I will pay you $100." Here, the promisor of the UK undertakes to pay only for the completed performance. The walker has promised nothing.
At the inception of a common law unilateral contract, there is no binding obligation on either party. It is merely a promise to pay in the future provided the other contracting party fully performs the contract terms.
In a UK, the promise to pay is the TACO offer and the fully performed act is the TACO acceptance. At no time in a UK, has the performing party contractually bound herself to do anything. At common law, even if she starts to perform, she has no contractual duty to finish performance.

Front 31

What occurs under a common law contract?

Back 31

Under common law contract, the unilateral contract offer (to pay) could be revoked at any time before performance was fully completed because the performing party was not contractually bound to complete performance. Neither preparing to begin nor beginning to perform protected the performing party from the offeror's power to revoke the offer. The performing party had only a claim for restitution or reliance damages to prevent an unjust enrichment, but she did not have a claim for breach of contract. NY continues to follow this common law rule. MLO K pg. 11-12. For protection, a NY contracting party should insist on a bilateral contract.

Front 32

Under the modern Restatement of Contracts approach adopted by many states and MBE, part performance in response to a UK offer renders the offer irrevocable. Thus, whenever the performing party does either what 2 things?

Back 32

1. "tenders" performance ("I'm here and ready to begin."), but the other party refuses to cooperate and prevents performance, then the performing party's tender makes the UK offer binding and irrevocable. or
2. the performing party begins performance.

Front 33

If the offeror revokes the offer following "tender" of performance or beginning of performance, then what?

Back 33

Then a claim for breach of contract arises and not just a claim for restitution.

Front 34

Distinguish what?

Back 34

(a) beginning performance and (b) mere preparation to begin.

Front 35

Does mere preparation affect the offeror’s right to revoke the UK offer?

Back 35

No, mere preparation does not affect the offeror's right to revoke the UK offer.

Front 36

In UCC sale of goods contracts, and under Restatement of Contracts, once performance begins, or there is a tender of performance, then the unilateral contract offer is treated as a bilateral contract, requiring the performing party to complete a conforming performance. Otherwise, what?

Back 36

Otherwise, the offeree is in breach. Thus, where the offeree begins performance, becomes the equivalent of the promise to perform.

Front 37

Is a notice of performance required in a UK?

Back 37

In a UK, no notice of performance is required unless the circumstances indicate that the offeror would not know performance has begun in which notice is required to protect the offeror from entering a second enforceable contract for the same performance.

Front 38

How have UCC and Restatement of Contracts substantially altered the common law rules for UK and bilateral contracts ?

Back 38

UCC and Restatement of Contracts have substantially altered the common law rules for UK and bilateral contracts by stating "unless otherwise unambiguously insisting on a specific form of a TACO acceptance" (look at the language in the offer), a UK offer invites an acceptance either by a promise or a performance. Thus, if a buyer's offer requests delivery of goods, that UK offer can be accepted by a seller's promise to deliver or by a delivery itself. Likewise, a buyer's offer requesting a seller's promise to sell may be accepted by a delivery or by the seller's promise.

Front 39

What happens if an offer unambiguously insists on a particular method of acceptance?

Back 39

If an offer unambiguously insists on a particular method of acceptance, then only that method can form a contract. For example, "If you agree to the terms of this offer, sign the letter and return it to my office." Here, only a written signed acceptance can form a contract. NYAA pg. 275. (really look at this one!)

Front 40

What are bilateral contacts?

Back 40

A UK has only one promise whereas a bilateral has 2 promises. Both parties must make binding promises to perform and 1 promise is the bargained for consideration of the other promise.
To constitute a binding bilateral contract, there must be an express or implied offer coupled with an express or an implied acceptance of that offer. That is, there must be a mutual assent to the agreement in which both parties become contractually bound to perform under the contract terms.

Front 41

Why are written or oral offers and acceptance statements not hearsay?

Back 41

Because they are not offered into evidence to prove the truth of their contents, but are offered simply to show the words were spoken. The words themselves have independent legal significance because the out of court words establish a cause of action or a defense and thus are not offered into court for their truth, but are offered simply to prove the statement was made. The same rule applies to defamatory statements, offers for a bribe, or threats.

Front 42

What happens since contract law construes the words used in the original offer?

Back 42

Contract law construes the words used in the offer by their ordinary meaning and under the circumstances the offer was made. Thus, it is not what the offeror subjectively believed or intended, but rather, it is how a reasonable person would have construed those words under similar circumstances.

Front 43

T OR F: Contract law does not permit a breach of contract claim on the offer and acceptance of a social engagement.

Back 43

True.

Front 44

A bilateral contract offer is a party's manifestation of what?

Back 44

An IMMEDIATE WILLINGNESS to enter into a contract that leads the other contracting party to believe that her acceptance is invited and that it will conclude in a binding contract. To be valid, the offer must be sufficiently definite. That is, it must contain the essential material terms in unambiguous language. For example, price, parties, description or in a sale of goods contract, quantity.

Front 45

Problem: X dictated an offer to sell, but told his secretary, S, not to send the offer out until X double checked the prices. S mistakenly mailed out the offer and it was accepted. Is there a binding contract?

Back 45

Yes because a reasonable person who received the offer under these circumstances would have believed it was a valid offer inviting an acceptance. X's subjective intent would not be considered by the court and the risk falls on the offeror. X should consider the remedy of equity of rescission (COPS) (see the defense of mistake lecture 10). Whenever an offer contains a substantial mistake that a reasonable person would immediately recognize as wrong (i.e. an error in the quoted price or other factors), then even though the offer is accepted, the contract is voidable by the mistaken party. This usually involves an offer that is too good to be true. For example, X faxed an offer to sell 20 oz. of gold at $130\oz. instead of the current market price of $1300\oz., the offeree cannot snap up this offer knowing a mistake was made. (In class question 4, do at home.)

Front 46

Problem: O said to B, "I'm going to sell my car for $300." B immediately replied, "I will buy it. Here is the $300." Is there a binding contract?

Back 46

No, statements of intent are not offers. Preliminary contract negotiations or requests for price quotations are not true offers and thus do not create in the other party, the power to bind. X wrote to Y, "Will you sell me Blackacre for $100,000?"

Front 47

Problem: O said to B, "I'm going to sell my car for $300." B immediately replied, "I will buy it. Here is the $300." Is there a binding contract? No, statements of intent are not offers. Preliminary contract negotiations or requests for price quotations are not true offers and thus do not create in the other party, the power to bind. X wrote to Y, "Will you sell me Blackacre for $100,000?" Can Y immediately accept?

Back 47

No, this is an inquiry and not an offer. A question cannot be an offer or a counteroffer because it seeks information and it does not amount to a commitment to be bound to a contract

Front 48

What is an invitation to negotiate?

Back 48

If a written offer indicates it is being offered to several people simultaneously, then it is not an offer, but is an invitation to negotiate. Form letters, advertisements in newspapers or catalogs, are deemed expressions of an intent to sell and are not considered offers.

Front 49

What is deemed a binding offer?

Back 49

If an ad makes a limited offer (iPads for $20 to the first 100 customers "first come first served"), then it is deemed a binding offer that can be accepted by the first 100 by including the QUANTITY in the advertisement then the offer sufficiently conveys to the buyer the power to accept the limited offer (by the first 100 customers).

Front 50

Problem: X published an offer, "I will pay $100 for the return of my gold ring." Without knowing of X's reward offer. Without knowing of X's reward, Y found it and returned it to X. Is Y legally entitled to the reward?

Back 50

No because the offer was never communicated to Y. Thus, Y did not know of X's promise to pay the reward when Y performed.
An exception to this rule is a continuing year round standing offer of a reward for a specific type of crime, which can be accepted without knowledge of that offer. For example, a $5000 reward to anyone giving information leading to the conviction of anyone who killed a police officer.

Front 51

How do you have a valid contract?

Back 51

In order to have a valid contract, the TACO offer must induce the performance. That is, both parties must agree to enter into a legal relationship. Example, identical offers (to buy and to sell) that cross in the mail do not create a contract because neither offer has been accepted with knowledge of the offer's existence.

Front 52

What needs to be done to revoke an offer?

Back 52

To revoke an offer, the revocation must be communicated to the offeree prior to acceptance of the offer. An exception arises for a reward type offer in which revocation of the offer is effective if it is communicated in a manner EQUAL TO OR GREATER THAN the publicity given to the offer even though the offeree has no actual knowledge of the reward's revocation.

Front 53

What happens at an auction?

Back 53

At an auction, an auctioneer invites bids. It is the buyer's bid that is the TACO offer, which the auctioneer would then have to accept.

Front 54

What can the bidder withdraw the offer at the auction?

Back 54

The bidder may withdraw the offer prior to the auctioneer's acceptance by the hammer falling and the auctioneer announcing, "Sold!" If a high bid is timely withdrawn, it does not revive the prior bid, and the bidding must commence all over again.

Front 55

What does “with reserve” and “without reserve” mean in an auction?

Back 55

An auctioneer's invitation for bids is impliedly made "with reserve", allowing the auctioneer to remove the item if a sufficient price is not bid. If the auction is expressly made "without reserve", then the auctioneer cannot withdraw the item unless it receives no bids.

Front 56

What happens under NY’s GOL?

Back 56

Under NY’s GOL, if the auction house enters into its sales booke, the names of the buyer and seller, the price bid, and a description of the item, this satisfies S\F. NYAA Jan. 2014, pg. 5.

Front 57

What happens if an offeror arbitrarily fixes the lifetime of the offer?

Back 57

An offeror may arbitrarily fix the lifetime of the offer and courts will not alter the time period even if it is unreasonable.

Front 58

If the offer does not state a time for acceptance, then what?

Back 58

Then a "reasonable time" will be inferred under the circumstances.

Front 59

Problem: A stockbroker, R, faxed E "offer to sell 200 shares of Exxon Mobil at $100\share". 5 days later E faxed back an acceptance. Is there a binding contract?

Back 59

No, because under the circumstances (stocks daily fluctuate in price), E's acceptance was not within a reasonable time. Thus, the passage of time terminated R's offer.

Front 60

Problem: X telephoned Y and made an offer. Y did not immediately accept, but called back the next day to accept. Is there a binding contract?

Back 60

No, because generally absent contrary language, when parties deal face-to-face or on the telephone, the offer must be accepted immediately, and it will not survive the conversation.

Front 61

When does an offer expire? When it is TIRED. What does TIRED stand for?

Back 61

T - a reasonable time after the offer is made or after the time period expressly set forth in the offer expires.
I - mental incapacity or death of either party
R - revocation of the offer communicated to the offeree before the offer is accepted
E - express or implied rejection of the offer communicated to the offeror
There are 2 ways to reject an offer.
D - destruction of the subject matter of the offer or an intervening illegality terminates the offer by operation of law.

Front 62

1. What are the 2 ways to reject an offer? (think E in TIRED).

Back 62

An express rejection
2. A rejection implied in fact (a counteroffer), which is an offeree's acceptance that adds additional or different terms not contained in the offer. If an acceptance is even slightly at variance with the terms of the offer, then the response operates as a rejection and terminates the offer. NYAA pg. 275!. An exception is when an acceptance adds a term that is implied by law, such an acceptance does not attempt to add a new term since the law implies that the contract already contains it. For example, a buyer accepting a merchant's offer to sell goods, but the acceptance insists that the seller warrant the goods to be of merchantable quality. Likewise, when a buyer accepts an offer to sell Blackacre where the acceptance adds a new term that the seller's deed at closing contain "marketable title".

Front 63

Problem: On June 1, R mailed to E an offer, "I will sell you Blackacre for $100,000. This offer is good for 8 days." (This is not an option because there is nothing in R's language that limits R's right to revoke the offer before 8 days. This language simply sets an expiration date when the offer expires.) E received it on June 3. When is the 8 days measured from?

Back 63

8 days from when it was received (June 3) because E's power to accept the offer did not exist until the offer was received. However, if it was unreasonably delayed and E was aware of the delay (floods, tornados, snow storm, or postal strike), then it is 8 days from when it should have arrived. Assume that 5 days after the offer was received, E learned that R had just sold Blackacre to X for $130,000. This communicated fact is an implied revocation of R's offer even though R did not expressly notify E, E had knowledge of R's intent to revoke the offer by R's sale of the property to X. A revocation by implication must be communicated to the offeree. Assume E timely mailed an acceptance not knowing of the sale to X. Here, a valid acceptance occurred, but E's remedy is limited to money damages for E's lost profit ($30,000) since E could not seek specific performance of that contract if X, the buyer was a BFP. See lecture 15. Assume R did not sell to X, but unknown to R or E, Blackacre burned down hours before E faxed an acceptance to R. Here, the destruction of the subject matter of the contract terminated R's offer by operation of law. Knowledge or notice to the offeree is not required because the contract would be rescinded based on the parties' mutual mistake.
If E mailed an acceptance before the fire, then there would be a binding contract at the moment E dropped the acceptance into the mailbox (the mailbox rule). Once a contract exists (the offer had been accepted), then look to the rules for risk of loss to determine who will suffer the loss. Unless E's jurisdiction recognizes the Uniform Vendor Vendee Risk Act (only 13 states including NY), then E would suffer risk of the fire loss under the doctrine of equitable conversion (NJ, CT, or MA). Essay 1, July 2011 pg. 771 NYEB. See lecture 15.

Front 64

What is an option?

Back 64

An option is an offer that provides that the offeree with express assurance that the offer will not be revoked by the offeror for a period of time. "This offer is firm and will not be withdrawn prior to June 1."
An offer merely stating the date on which the offer will terminate is not an option since it does not give assurances that it will not be revoked earlier.
Using the word "option" or in a UCC sale of goods contract, the term, "firm offer", indicates the existence of an irrevocable option.
An option is assignable by the offeree whereas an offer is not assignable. An option is accepted only when it is received by the offeror rather than when it is earlier mailed.

Front 65

An option is not terminated by TIRED, but an option can DIE and an option terminates by DIE. Define DIE.

Back 65

D - destruction of the subject matter
I - an intervening illegality
E - expiration of the stated option time

Front 66

How is an option not terminated?

Back 66

An option is not terminated by an express or an implied rejection (a counteroffer) or by the death or incapacity of either party.

Front 67

When does a written or oral option become enforceable?

Back 67

A written or oral option is enforceable provided it is supported by consideration.

Front 68

What can R do in common law and in MBE?

Back 68

At common law and in MBE, R may revoke the offer at any time even though it stated it would remain open and not be revoked because R's option was a gift because it was not supported by consideration flowing from the offeree.

Front 69

What is covered under UCC Article 2?

Back 69

Under UCC Article 2, a merchant's signed written option "giving assurances that it will be held open" (a firm offer) is not revocable by a merchant for lack of consideration. Under UCC 2-205 merchants may make gifts of written options. If the merchant's firm offer does not state how long it will be held open, then it is irrevocable for a reasonable time. If the time is stated, then absent consideration, it's irrevocability cannot exceed 3 months even though the merchant stated it would be held open longer. After 3 months, the option automatically converts into an ordinary revocable offer.
A's promise. Thus, there is n