Contracts I

Flash Cards

Is there a K?

There are three bases for contractual obligation:

1. Traditional K

2. Reliance

3. Restitution

Is there a traditional K?

Formation of a traditional K requires MA + KSN.

Is there mutual assent?

Mutual assent typically takes the form of offer + acceptance.

Is there an offer?

• R24 - A communication is an offer if it invites assent and indicates assent will conclude the deal.

• Totality of the circumstances test: (1) completeness of terms; (2) does it say ‘offer'?'; (3) language of commitment; (4) would a reasonable person believe an offer was intended?

• R25 - Preliminary negotiations are not offers if the addressee knows or has reason to know the person making the communication needs to further assent.

• R36 - An offeree’s power of acceptance terminates by (1) rejection/counteroffer by offeree; (2) lapse of time; (3) revocation by offeror; or (4) death/incapacity of either party.

• Ads and form letters are not offers.

• Offerees must be identifiable.

• Exception - Offers by advertisement must include clear, definite, express, and unconditional language of commitment or invitation to take action without further communication or negotiation.

• Exception - Misleading ads may be treated as offers if the purported offeror is engaged in deceptive conduct.

Is there a revocation?

• General rule - offers are freely revocable at any time prior to acceptance.

• R42 - Direct revocation occurs when (1) the offeror lets the offeree know that the offer is revoked and (2) must be communicated to the offeree to be effective.

• R43 - Indirect revocation occurs when (1) the offeror takes definition action inconsistent with an intention to enter into the proposed K; and (2) the offeree acquires reliable information to that effect.

• Option Ks prevent revocation.

Is this a traditional option K?

An option K requires

• The offeror to hold the offer open for a specified or reasonable period of time, and

• KSN by offeree for holding the offer open

Is this a unilateral option K?

• R45 - An option K cannot be revoked once the offeree tenders or begins requested performance under a unilateral K, so long as the offeree timely completes performance per the offer.

• R45(1) - An option K is created when the offeree begins the invited performance or tenders the beginning of it and where the offer invites acceptance by performance and not a promise.

Is this an R87(2) option K?

R87(2) - An offer that results in

• (1) foreseeable reliance by the offeror;

• (2) substantial reliance by the offeree; and

• (3) avoids injustice

becomes a binding option K.

R87(2) Option K Analysis

1. Did the offeror know or should they have known that the offeree would rely on the offer?

2. Did the offeree incur substantial expense, undertake substantial commitments, or forego alternatives?

3. Did the offer induce the reliance by the offeree?

4. Was the reliance reasonable?

5. How clearly established are the terms?

Limitations of R87(2)

• Practical limitations make it rarely applicable outside of a construction bidding context.

• If the offeror makes a bona fide mistake known to the offeree, R87(2) may not apply.

• If the offer expressly states or clearly implies that it is revocable at any time prior to acceptance, R87(2) may not apply.

Is there acceptance?

• Mirror Image Rule - Acceptance must mirror the terms in the offer.

• Mailbox Rule - Acceptance is effective upon dispatch when: (1) the offer states mail is an acceptable form of acceptance; (2) mail is properly stamped & addressed; and (3) offer is not for an option K.

Is there a counteroffer?

• General rule - If the offeree changes the terms of the offer, a counteroffer is created which amounts to a rejection of the offer and terminates the offeree’s power of acceptance.

• R39 - A counteroffer is an offer may be an offeree to the offeror (1) relating to the same matter; and (2) proposing a substituted bargain that terminates the power of acceptance unless the offeror or counteroffer manifests a contrary intention.

• R59 - A counteroffer is not an acceptance and is a reply to an offer which purports to accept it but is conditional on the offeror’s assent to additional or different terms.

Is this acceptance relating to a unilateral K?

• Unilateral Ks require completed performance for acceptance.

• R32 - In such cases of ambiguity, the court should assume the offeror intended to allow the offeree to have the power to accept by making a return promise or rending the requested performance.

Is this acceptance for an option K?

• R63 - An acceptance under an option K is not operative until receive by the offeror.

• R45(2) - The offeror’s obligation under any option K is conditional on completion of the requested act per the offer terms.

Is there KSN?

KSN is something of value that motivates each party to enter into a K and may take the form of (1) a tangible item; (2) a service; (3) a promise to refrain from doing something.