Contracts Exam II

Inquiry

A statement asking for clarification or exploring terms; it is generally not an offer, acceptance, or rejection. It leaves the original offer intact and does not terminate the power of acceptance.

Counteroffer

A firm conditional statement altering the essence of the offer (ie. price or quantity change). It’s rejection and permanently terminates the offeree’s power to accept the original offer.

When can an order to buy goods for current shipment be accepted?

A prompt to ship or the the prompt or current shipment of goods (non-conforming or conforming)

Under UCC § 2-206, shipping goods or accepting delivery without formal written acknowledgment forms a contract by _____.

conduct

When is a newspaper an advertisement?

An ad constitutes a binding unilateral offer if the facts show that the performance promised is clear, definite, explicit, and leaves nothing open for negotiation.

What are the rules against post-acceptance modifications?

once an offeree accepts a clear unilateral offer by performing the requested act, the offeror cannot modify the offer or impose new unstated “house rules.”

What does knowledge have to do with the power of acceptance?

Reward offers require communication to the offeree thus invoking the power of acceptance. If one lacks the knowledge of the offer, they lack the power of acceptance.

Acceptance

a manifestation of assent to the terms thereof made by the offeree in a manner invited or required by the offer

What does promissory estoppel require?

A clear promise, reasonably foreseeable reliance, injustice, and related proof.

What’s a mistake in contract?

an incorrect belief about a factual or legal reality (makes a contract voidable)

What’s a misunderstanding in contract?

it happens when parties give different, equally reasonable meanings to an ambiguous term in the contract (no mutual assent so no contract ever formed)

Offer

manifestation of willingness to enter into a bargain and recipient is of the reasonable belief that if they accept it then it creates a contract and they confer an immediate power of acceptance

Preliminary Negotiations

An invitation to offer; a manifestation of willingness to enter into a bargain is not an offer if the person to whom it’s addressed knows or has reason to know that the person making it does not intend to conclude a bargain until he has given a further manifestation of assent

When does a price quote constitute an objective offer?

if its language, definiteness of terms, specific addressee groups, and prior negotiations would cause a reasonable recipient to believe acceptance will conclude the transaction

Labeling a communication a "form letter" or warning of other prospective buyers keeps it a _____ _____.

preliminary negotiation

Is a notice soliciting bids an offer?

Invitation to offer

Is a submitted bid an offer?

The submitted bid is the actual offer, conferring power of acceptance upon the offeree

What happens if an offer explicitly conditions contract formation on a specific formality?

no other conduct or partial performance satisfies acceptance

Explain the rule for offeror’s as master of the offer.

The offeror prescribes the exclusive manner, medium, and time of acceptance.

Acceptance by return promise

It requires notice of acceptance be actually communicated to the offeror before revocation occurs. (bilateral contract)

Acceptance by conduct

It occurs when an offeree objectively manifests assent through actions rather than spoken or written words.

Is silence acceptance?

Usually no

When is silence acceptance?

(1) The offeree takes the benefit of offered services with a reasonable opportunity to reject them knowing compensation if expected; (2) Prior dealings make it reasonable to give notice only if not accepting; (3) The offeree acts with subjective intent to accept by remaining silent

What happens if a seller ships non-conforming goods?

It can count either as acceptance and breach of contract or a counteroffer

When does a seller shipping non-conforming goods count as acceptance and breach of contract?

If the seller ships the wrong items without explaining it’s a favor, the shipment is acceptance and a contract is immediately formed. The seller breached contract for shipping wrong goods.

When does a seller shipping non-conforming goods count as a counteroffer?

If the seller ships wrong items with a seasonable notice stating shipment is an accommodation, the shipment is a counteroffer. (No contract is formed unless the buyer explicitly agrees to accept the accommodation goods. The buyer is free to reject the accommodation shipment with no breach by the seller.)

What does the mailbox rule state?

Acceptance is effective upon dispatch and revocation/rejection is effective upon receipt

What’s the exception to the mailbox rule?

If an offer requires delivery by a specific date, the mailbox rule is inapplicable; actual receipt on or before the deadline is required.

Option contract

When the offeree pays to keep offer irrevocable until terms specified; limits the promisor’s power to revoke an offer

When is option contract created by past performance?

in a unilateral offer, it forms the moment the offeree begins performance

Can consideration be nominal in option contracts?

Yes

Reliance based option contract

Arises when an offer becomes irrevocable because the offeree reasonably and foreseeably relies on it (no consideration needed)

Firm Offer

An irrevocable offer to buy or sell goods made by a merchant in a signed writing giving assurance that it will be held open without consideration, for a period up to 3 months (must be made by a merchant/only in UCC)

List the elements of an offer.

Must contain language that is serious, certain, and no element of uncertainty; must be communicated to the offeree(s); must have intent to enter into a bargain; and a reasonable person would conclude they have the power of acceptance

What does the uniform electronics act state?

An agreement formed by the interaction of electronic agents from the contracting parties. It’s valid even if no human reviewed or was aware of of the automated actions or the resulting agreement.

What’s the applicable law under UETA?

The terms of any contract formed through an automated transaction are determined by the relevant, substantive law.

What are the five way an offer can be terminated?

1. Lapse of time

2. Death or incapacity of the offeror/offeree

3. Revocation by the offeror

4. Rejection or counteroffer by the offeree

5. Conditions of acceptance specified offer aren’t met

Rule for indirect revocation of an offer by the offeror

Acceptance terminated when the offeror takes definite action inconsistent with an intention to enter into the proposed contract and the offeree acquires reliable information of that inconsistent action from a third party

Proposing new terms or a counter does ___ terminate an option contract supported by consideration.

not

What is conditional response under common law?

A counteroffer/rejection that terminates the power of acceptance to the original offer

When is an email effective acceptance?

Acceptance sent via electronic media (like email) is ordinarily effective upon receipt