2 - Valid Contract; Formation

Failure

Contract

A contract is an agreement between two or more parties which the law will enforce.

Elements of a Contract

The necessary elements of a contract are offer, acceptance, and consideration.

Mutual Assent

Mutual assent relates to the requirement that the parties agree to enter into a contractual relationship, including terms and conditions. It is usually proved by showing that one party made a valid offer and the other party made a valid acceptance.

Meeting of the Minds

The historic rule holds that mutual assent exists if there was a “meeting of the minds” between the parties, meaning that 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

The modern rule holds that 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.

U.C.C. Formation

Under the UCC, 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. Additionally, under the UCC, a contract for sale may be found even though the moment of its making is undetermined.

Offer (Offer)

An offer is 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.

Advertisement (Offer)

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

Definite Terms (Offer)

Termination (Offer)

Revocation (Offer)

Revocation results from the 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 Receipt by Offeree (Offer)

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

Counteroffer (Offer)

A counteroffer is 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 (Offer)

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

Rejection (Offer)