Contract & Sales RULES

Common Law vs. UCC

• Common law applies to contracts for the sale of services/real estate.

• Article 2 of the UCC applies to contracts for the sale of goods.

• If transaction has both goods/services, then predominate purpose test asks if good or service played a larger role.

Contract Formation

• Contract is a legally enforceable agreement and requires offer, acceptance, and consideration.

• Under common law, essential terms are required (party, price, quantity, subject).

• Under UCC, contract is formed if parties intend to contract and there is reasonably certain basis for remedy. Only quantity is required and UCC “fills the gap” for missing terms.

  • Requirement/output contracts are specific enough and do not require quantity term.

Offer and Acceptance

• Offer is a manifestation of willingness to enter into agreement by offeror that creates a power of acceptance in offeree. Offer must be directed to specific offeree (exception is contest/reward offer).

  • Offer/acceptance is governed by objective test (offeror displays objectively serious intent to be bound).

  • Ads are not offers (invitation to deal), but can be offer if with specific terms

• Offeror is “master of the offer” and offeree must accept according to terms of offer.

  • Generally, acceptance must be communicated to other party.

  • Acceptance by silence is effective if unilateral reward/contest offers, past history of silence as acceptance, or offer explicitly allows it.

Mailbox Rule

• Under mailbox rule, acceptance is effective when mail is sent.

• Exceptions are irrevocable offers and if offeree sends rejection first. If offeree sends rejection first with subsequent acceptance, then first mail received by offeror is effective.