Contracts Formation Quimbee

Mailbox Rule (2nd Restatement 66-67)

a properly addressed acceptance becomes effective upon dispatch. an improperly addressed acceptance is effective upon dispatch only if it is received within the time that a properly addressed acceptance would have been received.

EXCEPTIONS TO MAILBOX RULE:

1. the offeror remains master of the offer and may specify a time other than dispatch when an acceptance becomes effective.

2. the mailbox rule does not apply to unilateral contracts, which are accepted by full performance.

3. the mailbox rule does not apply to option contracts, where acceptance is effective upon receipt.

UCC 2-207 (UCC Acceptance)

a definite and seasonable expression of acceptance operates as an acceptance, even though it includes terms additional to or different from those in the offer, unless acceptance is expressly conditioned upon the offeror’s assent to the additional or different terms.

When the offeror and offeree are merchants, then additional or different terms in an acceptance automatically become part of their contract, unless

(1) the offer expressly limited acceptance to the terms of the offer,

(2) the additional or different terms in the acceptance materially alter the contract, or

(3) the offeror objects to the additional or different terms within a reasonable time.

Acceptance (2nd Restatement 59)

Mirror Image Rule requires the acceptance to be a mirror image of the offer, or an unconditional assent to the exact same terms as the offer; any change to the terms of the offer is considered a counteroffer that rejects and terminates the original offer.

*Does not apply to the sale of goods under the UCC

Offers made in jest

cannot form a contract if the offeree knows or has reason to know that the offer is a joke.

Can there be tacit acceptance of an offer by performance?

Yes. acceptance via performance of the services, even if he didn’t say “I accept.”

Option Contract

a promise that meets the requirements for contract formation and limits the offeror’s power to revoke the offer. The offeree provides consideration in exchange for the offeror’s promise to keep an offer open for a specified time. CAN APPLY TO GOODS OR SERVICES. The seller also cannot sell the thing to anybody else during the specified time (exclusivity)** Professor says exclusivity not necessarily always

Firm Offer for the Sale of Goods (UCC)

enforceable without consideration, are made by MERCHANTS in A SIGNED WRITING that explicitly assures the offeree that an offer will be kept open. cannot be left open for longer than three months. After that the merchant may revoke the offer. Revocations [and acceptances] are effective UPON RECEIPT. Like options contracts, the seller cannot sell the thing to anybody else during the specified time (exclusivity)

Condition

a term specifying an uncertain event that must occur before one of the parties is required to perform.

Exception to Promissory Estoppel

the promisee’s reliance must be justified. For example, a promisee who relies upon a promise from a promisor with no money or ability to honor the promise, or who relies even after the promisor has made clear he will not honor the promise, does not rely justifiably. (ex: someone who you know is broke promises to buy you a car if you pass your road test)

Promissory Estoppel

(1) the promisor made a promise that the promisor should have reasonably expected would induce the promisee’s action or forbearance,

(2) the promisee actually and justifiably relied on the promise, and

(3) enforcement of the promise is necessary to avoid injustice (e.g., the promisee has suffered a substantial detriment due to relying on the promise).

In most states, the remedy provided under the doctrine of promissory estoppel is limited to what is required to prevent an injustice to the promisee, with the aim of enforcing the promise only to the extent necessary to make the promisee whole.

Illusory Promises

reserve to the promisor the choice to either perform or not perform, at the promisor’s sole discretion and with no apparent restrictions on the promisor’s discretion, so that the promisor is not bound to perform under the contract. Illusory promises do not constitute valid consideration.

Pre-Existing Duty Rule

an act or forbearance is not consideration if the party already has a legal obligation to perform the act or forbearance. DOES NOT APPLY TO GOODS/UCC.

Can parties under 18 years old enter into contracts?

if a party is under 18 years old, then the party lacks the capacity to form an enforceable contract. BUT THE MINOR HIMSELF IS THE ONLY PARTY WHO MAY ASSERT THIS DEFENSE.

A contract can be modified without additional consideration (the exception) if:

(1) it results from unforeseen circumstances that were not anticipated by the parties when the contract was formed; or (

2) the parties’ duties are altered sufficiently to constitute consideration

Modifications for Contracts for Sales of Goods

the UCC does not require new consideration to enforce modifications made to contracts for the sale of goods, so long as the modifications are made in good faith.

If an advertisement leaves room for negotiation (or best offer)

it is not a valid offer. Advertisements are generally not considered offers unless they contain a reasonably certain promise that leaves no room for negotiation.

4 Exceptions to Silence Not Being Acceptance of an Offer

(1) the offeree receives the benefit of the offered services, despite reasonable opportunity to reject those services, as well as reason to know that compensation is expected; (

2) the offeree exercises dominion over offered property by acting inconsistently with the offeror’s ownership of that property;

(3) there are prior dealings that make it reasonable for the offeror to expect to be notified of a rejection and, in the absence of a rejection, to conclude acceptance; and

(4) the offeror and offeree intend for the offeree’s silence or nonverbal conduct to constitute an acceptance.

2 Kinds of Offers that Cannot be Revoked by Offeror

1. options contracts (require consideration from offeree)

2. firm offers (but can be revoked after 3 months)

Lack of Capacity Due to Intoxication

Only applies if the other party knew that the person was drunk.

Preliminary Negotiation Examples (non-binding)

invitations to bid, price quotations, and proposals.

Promised or Provided Performance (Consideration) Examples

(1) an affirmative act;

(2) a forbearance to do something a party has a legal right to do; or

(3) the creation, modification, or termination of a legal relationship.