Contracts CHAPTERS 1,2

What are the four ways in which an offeree’s power of acceptance can be terminated?

Rejection, Revocation, Lapse of Time, and Death/Incapacity.

When is a contract indefinite?

When there’s an agreement to agree.

What is the only provision that cannot be gap filled by UCC?

Quantity

Sufficiency

the offered consideration must be something that has value in the eyes of the law.

Adequacy

refers to the quantity of the amounts exchanged.

When is Nominal Consideration OK?

Option contracts because consideration has different function.

Forbearance of an invalid consideration is not consideration UNLESS

[uncertainty as to the facts or law/fair belief of validity] 1. the claim or defense is in fact doubtful because of uncertainty as to the facts or the law, or 2. the forbearing party believes that the claim or defense may be fairly determined to be valid.

Illusory Promise Rule

RULE: If a promise is illusory, the promise should not be enforceable and the promise cannot be consideration for an enforceable contract.

Alternative Promises

If there’s framing of alternative promises, each promise MUST have consideration.

Reasonable Efforts Obligations

Provision to put in reasonable efforts in return of promise.

Output & Requirements

Contracts that specify quantity based on output or create a requirement for purchase source etc..

When are Output/Requirement contracts ILLUSORY (UCC?)

if output is zero or if production is zero, but UCC 2 306 allows zero production if the contract was made in good faith.

Satisfaction Clauses

Conditional promise on condition of satisfaction of product.

Commercial Utility Standard

requires objective standard to assess satisfaction. (eg. expert testmny.)

Aesthetic fancy Standard Requirements (When ILLUSORY?)

requires good faith, subjective standard to assess satisfaction. ILLUSORY if bad faith (eg. lying on reason of dissatisfaction)

Past Consideration

RULE: Past consideration is NOT sufficient consideration for a new promise.

Past Consideration Exception 1

If a new promise is made in recognition of preexisting legal obligation, past consideration is sufficient. (Moral obligations can reawaken legal obligations if you make a new promise based on that old obligation w/o new consideration.)

Past Consideration Exception 2

If a new promise is made in recognition of material benefit received to the promisor, past consideration is sufficient. Eg. McGowin’s life was saved.

The Preexisting Duty Rule

RULE: Promise to do what you are already obligated to do is NOT consideration.

The Preexisting Duty Rule Exception

Modifications made in light of unanticipated conditions are enforceable.

Preexisting Duty Rule UCC 2 209

An agreement modifying a contract needs no consideration. Still requires good faith.

When does an offer invite acceptance by either promise or performance?

When the offer is ambiguous

When does silence constitute acceptance?

[material benefit/opportunity to reject/expectation of compensation] When there’s a material benefit to the promisee with reasonable opportunity to reject and reason to know that they were offered the expectation of compensation.

Mailbox Rule

Offers are accepted when acceptance is put in the mail.

Under an offer that can be accepted by performance OR promise when is the offer accepted? Vs. under a unilateral K?

At the beginning of performance vs. complete performance. Option K is created at beginning of performance.

Does a rejection during the option period of a contract kill the offer?

No.Option K preserves power of acceptance. UNLESS offeror relies on rejection.