Contracts Module 1

Flashcards for Contracts Module 1 — Prof. Brain, Pepperdine Law, Fall 2026.

What does a court look for to determine whether the parties are in a legally enforceable contract?

The intent of the parties to be in an enforceable agreement with legal consequences.

If the parties do not discuss whether they intend to be in an enforceable agreement, what doctrine did the courts use to make a finding as to their intent to contract in Balfour and Wilhoite?

They used presumptions – in Balfour the presumption that husbands and wives typically intend to make only social promises or compacts with each other, not agreements that either of them expected a court to enforce. In Wilhoite, they were: (1) the presumption that promises made about rent between family members who live together as a family are not intended to be legally enforceable; (2) the presumption that closely-related parties generally do not intend for their promises to be legally enforceable; and (3) the presumption that in arm's length transactions, the recipient of services from another generally carries with it the intent that the provider of services will be paid for them

What explains the different results in Balfour and Wilhoite?

In Balfour, there was nothing to "rebut" the presumption that, as between husband and wife, most promises were not intended to have legal effects (or at least that's what the court based its decision on). In Wilhoite, there were facts which convinced the court that the presumption against legal consequences of promises made by family members living together was rebutted and that second cousins were not sufficiently "closely-related" for that presumption to apply.

Name at least four situations in which there is a presumption against parties intending court-enforced, legal consequences of their exchanged promises.

There are others, but the most common are: Husband-wife; Brother-sister; Parent-child; Probably other family situations, e.g., Uncle/niece or nephew; grandparents-grandchildren; Good friends making a social compact (e.g., give me a ride to the game and I'll buy you a beer); Those who live together as a family (Wilhoite).

Does each party have to intend his or her promise or action has legal consequences in order for there to be an enforceable agreement?

No. This is Lucy. Assume a negotiation between A and B. Under the objective theory of contracts, the intention of A is measured by how an objective person in the position of B would view A's intent to enter into an agreement with B, and not by what A may have subjectively intended. Of course if A admits he or she intended to enter into a contract, it is evidence the parties intended to do so.

How does the requirement of "mutual assent" (R § 17(1)) mesh with the objective theory of contract, as explained in Lucy?

The answer is in R § 19(2). Paraphrasing that section: 19(2) provides that a party's assent can be established: (1) if he or she "intends" to manifest an intent to enter into an agreement with legal consequences; or (2) if he or she "knows" that the other party will infer an intent to enter into an agreement with legal consequences; or (3) if he or she "has reason to know" that the other party will infer an intent to enter into an agreement with legal consequences. It is the third option above that is the basis for the objective theory of contract, and allows a party like Lucy to enforce a contract against Zehmer, even if Zehmer didn't intend to sell the land.

What is the difference in structure between a unilateral and a bilateral contract?

In a unilateral contract, the parties exchange a promise for an act (I promise to pay you $1,000 if you paint my fence next Wednesday); in a bilateral contract, the parties exchange a promise for a promise ("I promise to pay you $1,000 if you promise to paint my fence next Wednesday").

How are implied-in-law and implied-in-fact contracts different?

Implied-in-fact contracts are treated the same as express contracts, the difference being that no words are exchanged, only actions that have communicative value in context. Implied-in-law contracts are situations in which the legal system requires a benefitted party to pay for services rendered on his or her behalf, when he or she is unable to contract for them (e.g., paying the doctor to work on you when you are unconscious).

What contracts are governed by Article 2 of the UCC?

"…[t]ransactions in goods" 2-102

What "transactions" are Article 2 contracts?

"Transactions" are not defined in the Code, but all we will be interested in are sales transactions. Transactions NOT covered by Article 2 include: Real Estate Transactions; Intellectual Property Transactions; Services (although you should know the rules for sales/service hybrid transactions)

What are "goods" under Article 2?

"All things … movable at the time of identification to the contract." 2-105(1). That is, personal property which can be picked up and moved.

When is a good "identified" under Article 2?

When it is "shipped, marked, or otherwise designated by the seller as goods to which the contract refers." That is, when the seller indicates that this particular good (or goods) is what is the subject matter of the contract.

What is the test for determining whether a sales/service hybrid transaction will be governed by Article 2?

It used to be based on whether a court had adopted the "predominant purpose" test or the "gravamen" test (see BMC Industries). Today it is governed by 2-102: if the goods part of the contract predominates, the entire transaction is governed by the UCC; however, if the service part predominates, only those UCC provisions that affect the goods part are applicable to the goods, and the service part is determined by other law.

What is an "offer"?

A "manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it." R § 24.

What events will terminate an offeree's power of acceptance to a revocable offer?

Rejection by the offeree; Counter-offer by the offeree; Lapse of time; Revocation by the offeror; Death of the offeror; Incapacity of the offeror; Death of the offeree; Incapacity of the offeree; The non-occurrence of any condition of acceptance made in the offer, R §36 et seq.

What is the legal difference between a "revocable" and an "irrevocable" offer?

With a "revocable" offer, the offeree only receives a "power" to accept the offer; under an "irrevocable" offer, the offeree obtains a "right" to accept the offer.

Can any event terminate the right to accept an "irrevocable" offer?

Yes. Expiration of time (time specified, or a reasonable time if none — not to exceed 3 months for a merchant's firm offer under the UCC); Destruction or death of a thing necessary for performance; Supervening illegality of the subject matter; Non-occurrence of an express condition in the offer; (Majority rule): Rejection or counter-offer by the offeree followed by reasonable, foreseeable, and actual reliance by the offeror.

What are the four types of "irrevocable" offers?

(1) Offer to enter into a traditional option contract (R § 25); (2) Merchant's firm offer (2-205); (3) Option formed by beginning or tendering performance in response to a unilateral contract offer (R § 45); (4) Option contract formed when the offeror should reasonably expect to induce action or forbearance of a substantial character on the part of the offeree before acceptance (R § 87(2); Drennan)

What is a general offer and how can it be revoked?

A general offer is a unilateral offer made to the general public (like Carbolic Smoke Ball). Under the "equal publicity rule" a general offer can only be revoked when the revocation is publicized relatively equally as was the offer. Anyone who had begun performance or tendered the beginning of performance before the revocation is published has a reasonable time to accept, even after an otherwise effective revocation. (R § 45)

What is the name of the type of offer made which can reasonably be accepted by either an action or a promise on the part of the offeree?

An "indifferent" or "ambiguous" offer.

What is the "unilateral contract trick"?

When an offeree sends non-conforming goods in response to a unilateral offer. At common law, this was a counter-offer; under the UCC, it is a simultaneous acceptance and breach. [UCC 2-206(b)]

If a "battle of the forms" contract is established via an exchange of the forms, under what circumstances do the terms of the acceptance become part of the enforceable contract?

If a contract is formed by exchange of the writings under 2-207(1), then 2-207(2) governs. Under 2-207(2), the terms of the acceptance are only proposals if either party is a non-merchant. If both parties are merchants, the terms of the acceptance become part of the contract unless the offeror objected (in the offer or separately), or unless the terms "materially alter" the deal. [See Comments 4 and 5 to 2-207 for examples of materially altering terms]

When can silence or inaction on the part of the offeree be an effective acceptance?

(1) Where the offeree takes the benefit of offered services knowing the provider expects to be compensated, with a reasonable opportunity to reject them; (2) Where the offeror has given the offeree reason to understand that acceptance can be made by silence and the offeree intends to accept; (3) Where because of previous dealings, it is reasonable that the offeree notify the offeror that he or she does not intend to accept; (4) Where an offeree does an act inconsistent with the offeror's ownership of the offered property. [R § 69]

Under the mailbox rule, what communication is always effective upon dispatch in all jurisdictions?

Acceptances.

What is "indirect revocation"?

Where the offeree of a revocable offer hears from a reliable source that the offeror can no longer perform, usually because the offeror has sold the subject matter to another or because performance is otherwise impossible. [R § 43]

What is the function of "gap fillers" and how many are there in Article 2?

Gap fillers empower a court to "save" a contract from failing under the "indefiniteness" doctrine. Under the UCC they can supply: the price of the goods (2-305); the mode of delivery (2-307); the place of delivery (2-308); the time of delivery (2-309); the time and place for payment (2-310). Also know the broader Restatement provision empowering a court to interpret a contract with reasonable terms.

What is rule regarding the offeree's rights to accept when there has been a delayed transmission of the offer?

If the offeree knows or has reason to know of the delay in communication at the time he or she receives the offer, the delay does not extend the time the offeree may accept the offer. (R § 49)

What is a cross-offer and what is the effect of exchanging cross-offers?

A cross-offer is an offer sent by an offeree at or nearly at the same time as the offeror's offer, where both contain identical terms. In that case, both parties have made an offer, and neither party has accepted the other's offer even though the terms are the same. (R § 23, Cmt. d)

Why is the customer typically thought to be the offeror in a retail store?

This goes back to the "inventory" problem. If the store were the offeror and it was out of stock, a customer could order 3,000 of the goods and put the store in breach 3,000 times. Also, it is not clear when the offer could be accepted throughout the day. When the inventory and timing problems can be solved, like in Lefkowitz, then the store is considered the offeror and the customer the offeree.