Contracts Quiz #5 (copy)

§ 2–207.Additional Terms in Acceptance or Confirmation.

(1)A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.

(2)The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless:

• (a)the offer expressly limits acceptance to the terms of the offer;

• (b)they materially alter it; or

• (c)notification of objection to them has already been given or is given within a reasonable time after notice of them is received.

(3)Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. In such case the terms of the particular contract consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of this Act.

§ 2–204.Formation in General.

(1)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 a contract.

(2)An agreement sufficient to constitute a contract for sale may be found even though the moment of its making is undetermined.

(3)Even though one or more terms are left open a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy.

Silence and Inactivity

According to UCC 2-207 and CISG 18(1), silence or failure to object does not constitute express assent.

(Klocek v. Gateway, Inc.)

When assent is largely passive, the user must have either:

Actual notice = you actually knew about the terms.

Inquiry notice = you were given enough information that a reasonable person would realize there were contractual terms they should investigate.

(Berkson v. Gogo LLC)

Types of electronic agreements and enforceability from best to worst:

Scrollwrap: users must scroll through terms before clicking “I agree.”

Clickwrap: users must click “I agree” or check a box; not forced to scroll.

Sign-in wrap: assent inferred from sign-up/use; enforceability depends on whether a reasonable user would be aware of terms.

Browsewrap: mere site use with a footer link; more likely enforced against sophisticated repeat users.

Restatement §20: Effect of Misunderstanding

NO K	K
Neither A nor B knows or has reason to know the meaning attached by the other R20(1)(a)	There is a K based on A's understanding if he does not know of B's understanding, and B knows of A's understanding R20(2)(a)
Both A and B know of the other's understanding, or both A and B have reason to know of the other's understanding R20(1)(b)	There is a K based on A's understanding if A has no reason to know of B's understanding, and B has reason to know of A's understanding R20(2)(b)

Traditional v. Modern Approach to determine if a K exists when an essential term is missing.

Modern Approach:

§ 33.Certainty.

(1)Even though a manifestation of intention is intended to be understood as an offer, it cannot be accepted so as to form a contract unless the terms of the contract are reasonably certain.

(2)The terms of a contract are reasonably certain if they provide a basis for determining the existence of a breach and for giving an appropriate remedy.

(3)The fact that one or more terms of a proposed bargain are left open or uncertain may show that a manifestation of intention is not intended to be understood as an offer or as an acceptance.

(Moolenar v. Co-Build)

Traditional Approach:

If an essential term is left for future agreement between the parties, there is no binding obligation until the parties actually reach that agreement.

(Walker v. Keith)

§ 204.Supplying an Omitted Essential Term.

When the parties to a bargain sufficiently defined to be a contract have not agreed with respect to a term which is essential to a determination of their rights and duties, a term which is reasonable in the circumstances is supplied by the court.

UCC § 2–305(1).Open Price Term.

(1)The parties if they so intend can conclude a contract for sale even though the price is not settled. In such a case the price is a reasonable price at the time for delivery if

• (a)nothing is said as to price; or 

• (b)the price is left to be agreed by the parties and they fail to agree; or

• (c)the price is to be fixed in terms of some agreed market or other standard as set or recorded by a third person or agency and it is not so set or recorded.

When is a contract sufficiently definite?

A contract is sufficiently definite if the performances to be rendered by each party are reasonably certain (Moolenaar v. Co-Build Companies)

Consideration Defined

§71(1)To constitute consideration, a performance or a return promise must be bargained for.

§ 71.Requirement of Exchange; Types of Exchange.

(1)To constitute consideration, a performance or a return promise must be bargained for.

(2)A performance or return promise is bargained for if it is sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise. 

(3)The performance may consist of

• (a)an act other than a promise, or

• (b)a forbearance, or

• (c)the creation, modification, or destruction of a legal relation.

(4)The performance or return promise may be given to the promisor or to some other person. It may be given by the promisee or by some other person.

What determines if a promise/performance is bargained for

1. Whether the promisor made the promise at least in part to induce the promisee's performance or return promise.

2. Whether the promisee gave that performance or return promise in exchange for the promisor's promise.

§ 72. Exchange of Promise for Performance.

Except as stated in §§ 73 and 74, any performance which is bargained for is consideration.

§ 74.Settlement of Claims.

(1)Forbearance to assert or the surrender of a claim or defense which proves to be invalid is not consideration unless

• (a)the claim or defense is in fact doubtful because of uncertainty as to the facts or the law, or

• (b)the forbearing or surrendering party believes that the claim or defense may be fairly determined to be valid.

(2)The execution of a written instrument surrendering a claim or defense by one who is under no duty to execute it is consideration if the execution of the written instrument is bargained for even though he is not asserting the claim or defense and believes that no valid claim or defense exists.

§ 75. Exchange of Promise for Promise.

Except as stated in §§ 76 and 77, a promise which is bargained for is consideration if, but only if, the promised performance would be consideration.

What is an Illusory Promise?

Bryan’s Defintion:
An illusory promise cannot constitute consideration. A promise is illusory when it does not actually bind the promisor because the promisor retains the unrestricted ability to avoid or discontinue performance. (e.g., at-will employment contracts)

Full Def in R2§ 77

§ 81.Consideration as Motive or Inducing Cause.

(1)The fact that what is bargained for does not of itself induce the making of a promise does not prevent it from being consideration for the promise.

(2)The fact that a promise does not of itself induce a performance or return promise does not prevent the performance or return promise from being consideration for the promise.

Consideration vs. Gratuitous promises

The key distinction is whether a promise is a bargained-for exchange (quid pro quo) or a gratuitous promise with a condition.

Traditional Approach:

The promisee must promise something that benefits the promisor.

Modern Approach:

Consideration may consist of a benefit to the promisor OR a detriment to the promisee. It does not matter whether the promisee's forbearance actually benefited the promisee or whether the promisor received any benefit.

Pre-Existing Duty Rule

Bryan’s Definition

Performance of, or a promise to perform, a legal duty that a party is already contractually/statutorily obligated to perform is not consideration for a new promise.

Full Def in R2§ 73

§ 79.Adequacy of Consideration; Mutuality of Obligation.

If the requirement of consideration is met, there is no additional requirement of

• (a)a gain, advantage, or benefit to the promisor or a loss, disadvantage, or detriment to the promisee; or

• (b)equivalence in the values exchanged; or

• (c)“mutuality of obligation.”