Contracts Terms Part 1

Uniform Commercial Code

governs contracts for the sale of goods

Goods

are tangible chattels which are moveable and identifiable to the contract at the time of formation

Contract for Both Goods and Services

the court will apply the "predominant factor test" to see if the contract's primary purpose is sale of goods or provision of services and then apply the appropriate law

Merchant

one who deals regularly in the kind of goods involved in the contract, or one who holds himself out as having special knowledge or skill about the practices or goods involved in the contract

Contract

an agreement between two or more parties which the law will enforce

Elements of a Contract

are offer, acceptance, and consideration

Mutual Assent

the requirement that the parties agree to enter into a contractual relationship, including terms and conditions

Meeting of the minds

the parties subjectively intended to enter into a legally binding contract and agreed to the terms and conditions of the contract

Objective Theory of Contracts

mutual assent exists if a reasonable person would objectively have understood the outward actions and statements of the other party to indicate an intent to enter into a legally binding contract and agreement to terms and conditions of the contract

UCC Formation

a contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such contract

Offer

a manifestation of present contractual intent which includes certain and definite terms; is communicated to the offeree; proposes a bargain in which the offeror's act, forbearance to act, or promise is exchanged for the offeree's act, forbearance to act, or return promise; and creates a power of acceptance in the offeree

Advertisements

is not an offer but is merely an invitation for offers. Under the minority rule, if an it includes definite and certain terms, it may be an offer

Revocation

he canceling, annulling, or otherwise voiding of an offer. An offer may freely be revoked by the offeror unless 1) the offer was for a unilateral contract and the offeree has already begun performance, 2) the offer was a firm offer, in which case it terminates at the end of the time stated without the need for further action by any party, or 3) the offeree detrimentally relied on the offer

Revocation Effective upon

effective upon receipt by the offeree. A minority view holds that the revocation becomes effective when sent by the offeror

Counteroffer

an offer by the original offeree regarding the same transaction but containing terms that differ from those proposed in the original offer made by the offeror

Counteroffer as an Implied Rejection

an implied rejection of the original offer. It is, in effect, a new offer available for acceptance

Acceptance

an unequivocal assent to the terms of an offer

Mirror Image Rule

an acceptance must match the terms of the offer. If the acceptance contains additional or different terms, it is a counter offer rather than an acceptance. However, modernly the UCC modifies this rule to allow an acceptance to differ from the offer as to minor terms

UCC Acceptance

a definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms

Methods of Acceptance

The offeror is the master of his offer." If the offeror states a required mode of acceptance, the offeree must accept using that mode. If the offeror does not state a required mode of acceptance

Mailbox Rule

an acceptance of an offer for a bilateral contract, dispatched by an authorized mode of communication, is effective when mailed

UCC Methods of Acceptance

a promise to ship or prompt shipment. Even a shipment of non-conforming goods constitutes acceptance unless the seller notifies the buyer that the non-conforming goods are offered only as an accommodation to the buyer

UCC Acceptance by Conduct

conduct by both parties which demonstrates the existence of a contract is sufficient to establish a contract, even though the writings of the parties do not otherwise establish a contract

Rejection

a manifestation by the offeree that he or she does not intend to accept the offer nor to give it further consideration

Rejection Effective when Received

A rejection becomes effective upon receipt by the offeror

Consideration

that which is bargained for and given in exchange for a promise. It may be an act, a forbearance to act, or a return promise on the part of the promisee

Legal Detriment

a promise to do something that one is not legally obligated to do, or to refrain from doing something that one is legally privileged to do

Sufficiency of Consideration

courts do not require that the consideration benefit the promisee, nor that it be of any substantial value, as long as there is some legal detriment to the promisor so that the consideration serves as an inducement for the return promise of the promisee

Valuable Consideration

legally valid, confers a benefit to the promisor in exchange of his detriment

Illusory Promise

an expression , resembles promissory terms, but in actuality imposes no obligation upon the party making it so that the element of legal detriment is lacking

Promissory Estoppel

substitute for the element of consideration when there has been a foreseeable and detrimental reliance by the promisee upon the gratuitous promise made by the promisor

Moral Obligation Rule

consideration may be found if the promisor has received something of value from the promisee under such circumstances as to create a moral obligation for the promisor to pay for what he or she has received, and if the promisor has later promised to pay

Terms

contract must include the following terms: quantity, time for performance, identity of parties, price, and subject matter. Missing terms may result in a failure to contract for indefiniteness of terms

Terms under UCC

a contract must include the parties and the quantity, but "gap fillers" may be used to supply other missing terms if there is a reasonably certain basis for determining the missing term

UCC Absence of Specified Place for Delivery

1. if the contract does not state delivery terms:

a. delivery of goods at seller's business location or, if none, at seller's residence

b. exception: if both parties know goods are elsewhere at the time of contract, that location is the place of delivery

c. place of delivery for title documents is usual banking channels

UCC Time for Payment

1. if contract does not state time for payment:

a. payment is due upon receipt of goods or title

b. buyer may inspect goods prior to paying

Risk of Loss

during shipment is placed upon the party who was in the best position to have insured against risk of loss. If the seller is a merchant, then the seller bears the risk of loss until the buyer receives the goods; if the seller is not a merchant, then the buyer assumes the risk

FOB

"free on board," and means that the buyer pays shipping costs and once the seller puts the goods into the carrier's possession for shipping, the buyer bears the risk of loss

FOB destination

he seller pays the shipping costs to a specified destination and bears the risk of loss to such destination. Reasonable notice that the goods have arrived at the destination and are available for the buyer

F.A.S

"free alongside" and means the buyer pays shipping costs and assumes the risk of loss once the seller places goods alongside a vessel for shipping

CIF

"cost, insurance, freight," and means the seller pays the cost of delivering goods to the carrier for shipment, as well as insurance and freight costs to the destination, but the buyer bears the risk of loss during transit

No Arrival No Sale

seller has a duty to ship goods and bears the risk of loss during shipment. If the goods arrive damaged or late, through no fault of the seller's, then the buyer has the option either to void the contract or to accept the goods at a discount

Shipment under Reservation

the seller ships the goods, but consigns them to himself at the destination so that he retains control of the goods in transit and until the buyer pays for them

Exculpatory Clause

a provision in a contract that is intended to remove liability from one or more of the contracting parties that may result from certain acts or events

Privity of Contract

the relationship that exists between the parties to an agreement, allowing them to sue each other to enforce the agreement, but preventing a third party from doing so

Battle of the Forms

may occur when parties use standardized forms to make offers and acceptances. Such forms contain fixed contractual language (boilerplate) which often conflicts with the terms included in the other party's forms

UCC Additional or Different Terms in Acceptance or Confirmation by Non-merchants

if additional or different terms are included in an acceptance for a contract between non-merchants, these terms are merely a proposal unless acceptance is expressly conditional on assent to the additional or different terms

UCC Additional Terms in Acceptance or Confirmation by Merchants

1. contract between merchants

2. acceptance includes additional terms unless:

a. the offer expressly limits acceptance to the terms of the offer, or

b. additional terms constitute a material alteration, or

c. notification of objection is already made or made within a reasonable time

UCC Different Terms in Acceptance or Confirmation by Merchants

do not generally become part of the contract even if they do not constitute a material alteration

Knockout Rule

different terms in an offer and acceptance are "knocked out" of the contract, and the contract consists of those terms upon which the parties agree, with UCC gapfillers used to supply missing terms

First Shot Rule

terms in an acceptance which are different from those in an offer are out, meaning that the contract consists of the terms of the offer.

Last Shot Rule

different terms are treated the same as additional terms. That is, different terms are treated as a proposal (i.e., counteroffer) and are deemed accepted and therefore binding, if followed by performance

Best Shot Rule

would determine which party's forms include standard terms which are the most fair overall, and adopts those terms entirely