Contracts I

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  1. What is a contract?
    A contract is a promise or set of promises, the breach of which results in a remedy at law, and the performance of which the law recognizes as a duty. 

    Traditional contracts, express and implied require mutual assent and consideration
  2. What standard is applied to determine whether an agreement can be enforced as a contract?
    Whether or not there is a reasonable certain basis on which an appropriate remedy could be granted.
  3. Does Article 2 of the UCC specifically cover service contracts?
    No. The UCC deals with transactions in goods only. It does not cover services, real property, or intangibles (i.e. stocks).
  4. King Lear is a vain old man. In search of immortality, he commissions Billy Shakespeare, local playwright, to write a play about him. "Something light," says Lear. "Maybe a musical comedy." Shakespeare agrees. Will Article 2 of the UCC apply to the resulting agreement?
    No. UCC Article 2 applies only to transactions in goods, not services. However, a court could apply the UCC by analogy.
  5. What is an offer?
    A communication by the offeror; creating  reasonable expectation in the offeree; that offeror is willing to enter into a contract; on specified terms; such that the offeree need only accept in order to form a contract. 

    Offeror must manifest an intent to be presently bound. 

    Offer must have language of a promise, definiteness as to essential terms, and be communicated to offeree.
  6. Is the communication a promise?
    Consider language, circumstances, prior practices and relations of parties, method of communication, and industry custom. 

    • Typical Promise Language
    • "I offer" 
    • "for immediate acceptance"
    • "I promise"

    • Typical Negotiation Language (Not an offer)
    • "I quote"
    • "I'm asking"
    • "I want"
    • "I'd consider"
  7. What are the 4 essential terms of an offer, at common law?
    ToPPS (Time, Parties, Price, Subject)

    Quantity must be supplied in the offer. 

    The more terms left open, the less likely it is the parties intended to form a contract.
  8. Is a subjective standard used to determine whether an offer has been made?
    No. An objective standard is used. OTK. Objective Theory of Contracts. 

    Would a reasonable person believe that the power of acceptance had been created in him? Thus, an offer could exist whether or not the offeree intended that it exist.
  9. What is an option?
    An option is an offer made irrevocable by consideration - i.e. offeree pays offeror to keep the offer open for some period of time. 

    UCC View: 2-205: An offer can be irrevocable in the absence of consideration (firm offer) as long as the offeror is a merchant, the transaction concerns the sale of goods, and the assurance not to revoke is embodied in a signed writing. Maximum length is 3 months. If parties state a longer period, its only valid to 3 months. 

    When the option expires, the offer isn't automatically revoked. The right to revoke returns to the offeror.
  10. Does the UCC make offers binding without consideration?
    No. Except under certain conditions. 

    UCC 2-205: An offer can be irrevocable in the absence of consideration (firm offer) as long as the offeror is a merchant, the transaction concerns the sale of goods, and the assurance not to revoke was embodied in a signed writing. 

    3 months length even if parties state a longer period. 

    After expiration, right to revoke returns to the offeror. 

    Merchant = one experienced in dealing with the type of goods involved in the transaction
  11. Under the UCC, can a non-merchant make an offer irrevocable in the absence of consideration?
    No. The UCC, 2-205, allows irrevocable offers without consideration, or "firm offers," only where the offeror is a merchant and the offer of irrevocability is made in a signed writing. 

    Also, the time period of the firm offer is limited to three months. Therefore, under the UCC a non-merchant cannot make an irrevocable offer. 

    Common Law Rule: Consideration is required to create an option, which is the common law equivalent of an irrevocable offer.
  12. Can offers made in jest ever be the basis of a contract?
    Yes, as long as a reasonable person would understand the offer to create a power of acceptance in him. If this objective standard is not met, the joking offer is not valid. 

    • Lucy v. Zehmer
    • OTK
  13. Does an offer continue until it is expressly revoked?
    No. Although the offeror can set any time limit he likes, in the absence thereof, the offer expires at the end of a reasonable time. 

    Reasonable time varies according to circumstances, including trade customs, nature and subject matter of the contract. 

    Means of communication is also relevant: An oral offer made face to face normally lapses when the meeting ends; a phone offer lapses when the conversation ends. 

    An offer can terminate through death or insanity of eithe rparty, intervening illegality, rejection, or counter-offer, and destruction of the subject matter. 

    If an offer gives an offeree a set time in which to accept an offer, the time period begins when the oferee receives the offer, unless the offeror specifically provides otherwise, or the offeree should know the offer had been unusually delayed.
  14. Must the offeror expressly revoke his offer to offeree in order for the revocation to be valid?
    No. Any act which is inconsistent with the offer is sufficient to revoke, as long and as soon as the offeree knows about it.
  15. May an offeror revoke his offer under a unilateral contract once offeree has begun to perform, under the modern view?
    No. Under the modern view, an offer to into a unilateral contract becomes irrevocable once offeree beings to perform.  R2d § 45

    Traditional View: The offeror could revoke until performance was completed. Older courts based this on the fact that offeree could revoke anytime, even after he began to perform so in the name of mutuality, the offeror could revoke anytime also.
  16. Traditionally, does an offer for a bilateral contract request performance in return rather than another promise?
    No. A traditional bilateral contract consists of exchanging mutual promises; the situation given involves a unilateral contract - a promise requesting performance, not a return promise.

    Almost all contracts - barring offers of rewards or offers in which the offeror expressly demands only performance in return - can be construed as bilateral contracts.

    *R2d doesn't recognize unilateral/bilateral distinction, but categorizes offers which request a promissory acceptance (bilateral) and those that don't (unilateral).
  17. Must a statement sufficiently identify the offeree to constitute an offer?
    Yes, b/c it must create in offeree an immediate power of acceptance. Although the offeree is normally one person, it can be a class of persons and even the general public, as long as the terms are sufficiently definite and the offeree clearly identified. 

    *The broader the "class" of ostensible offerees, the more likely a court is to find that an offer is actually an invitation for offers (i.e. advertisement)
  18. In determining whether an offer to enter into a contract has been bade, is the context of the communication relevant?
    Yes. Where the language itself is not definite, the relationship between the parties, prior practices, method of communication, and the like can frequently determine whether an offer has been made.
  19. Does a missing quantity term invalidate a contract?
    Yes, because without a quantity term there is no reasonably certain basis on which to give an appropriate remedy. This is true at common law and under the UCC. 

    A quantity term need not be an express quantity in the contract itself, as long as it can be definitely ascertained. Thus, requirements contracts: "We will buy all the widgets we need next year from you." or output contracts: "We will buy all the widget oil you produce next year" are valid.
  20. Dorothy, owner of the Wizard of Odd Sizes Shoe Store, and the Wicked Witch are chatting. Dorothy comments, "I'm planning on selling my ruby slippers for $50." Wicked Witch says, "here's my check. I accept." could a contract result.
    No, because Dorothy's statement was not an offer, but merely a statement of intent. An offer requires the present intention to enter into a contract; here, Dorothy did not intend to create in Wicked Witch the immediate power of acceptance. As such, no contract results.
  21. Hans Trojan, Commander of the Trojan Army, sends the following wire to the Practical Jokes R Us Company: "I need a price on 4,000 cubic feet of fake horse manure. Please give me a quote on same." Is this an offer?
    No. An immediate power of acceptance must be created in the offeree in order for an offer to exist. Here, the wire is a request for a price, not an offer.
  22. Maltida Kisch has a veritable wonderland of lawn ornaments in her front yard. Sandy Mentell, passing by one day, asks Matilda, "Would you consider selling the jockey holding the lantern for $150?" Matilda replies, "I accept." Could there be a contract?
    No. Sandy's question is an invitation for negotiation or an offer, but it is not an offer in and of itself, since an offer requires the language of a promise, definiteness of essential terms, and communication to the offeree. An immediate power of acceptance must be created in the offeree in order for an offer to be valid; the offer must be unambiguous and unequivocal; the putative "offer" here is not. "Would you consider" indicates an interest in negotiating; language like "I offer" or "I promise" typically indicates an offer.
  23. Einstein, as a joke, tells Oppenheimer, "I'll sell you my chemistry set for $5." Oppenheimer, who has no idea the plutonium alone is worth many times $5, says, "I accept." Could there be a valid contract?
    Yes. Oppenheimer could reasonably have assumed that Einstein's statement created an immediate power of acceptance in him. The fact that Einstein was joking is irrelevant; it's the appearance of valid offer that counts.
  24. Astor owns Mary's An-Teek Shop. In her inventory, she has an unusual statuette of a black bird - the Maltese Falcon. A customer, Bogart, wants to buy it. Astor says, "Well, business is slow. It breaks my heart to do it, but I'll let you have the Maltese Falcon for $150." Is this an offer?
    Yes. Bogart could reasonably assume that Astor has created the immediate power of acceptance in him with her statement. The fact that she did so reluctantly does not change this because Bogart's perception of an "offer" was not affected.
  25. Lincoln tells Johnson that he intends to offer Davis his season ticket to Ford's Theater for $200. Davis overhears Lincoln's comment, walks up, and says, I accept." Contract?
    No. The offer must be communicated in the manner the offeror intended in order to create a power of acceptance in the offeree.
  26. Socrates offers to sell his collection of Great Philosophers bubble gum cards to Plato for $20. Plato offers $15 for them. At common law, is Socrates' offer still valid?
    No. According to R2d § 38, a counter-offer terminates the original offer. This is known as the mirror image rule

    UCC View: UCC 2-207 - between merchants only the addition of terms or alteration of others does not, in some cases, terminate the offer.
  27. In its advertising circular, the O.K. Mart advertises wash and wear interview suits for $15.99. Is this an offer?
    No. Such ads are generally construed as invitations for offers, disseminating prices at which the seller will receive offers. They are not offers because the quantity term is missing, and thus there is no clear offeree and as such, no power of acceptance in a reader of the ad.
  28. The Camelot Army/Navy Store puts the following ad in a local newspaper: "Sale - Saturday only - singing sword, Excalibur. Was $500, now only $24. First come, first sered. Will open at 10a.m." Arthur King sees the ad, camps out in front of Camelot Friday night, and is the first one there on Saturday morning. He says, "I accept your offer for Excalibur. here's my $24." Is there a binding agreement?
    Yes. Camelot's offer was specific as to quantity, price, stated to whom the offer was made (first come), and was, in general, worded as a promise. As such, it created an immediate power of acceptance in Arthur King, and when he accepted, a contract was formed.
  29. Caesar offers Antony $500 to slip an asp into Cleopatra's bedroom, so that the snake will bite and kill Cleopatra as she sleeps. If Antony accepts, is there an enforceable contract?
    No. An offer to undertake an illegal agreement, as here, cannot result in an enforceable contract.
  30. Washington tells Gainsborough, "I will give you $500 if you paint my portrait." When the portrait is half finished, Washington revokes the offer. According to modern courts, is Washington's revocation valid?
    No. According to the modern rule, an offer to enter into a unilateral contract is irrevocable once the offeree begins performance. Thus, if Gainsborough finishes the portrait, he can compel Washington to pay him the $500; or he can stop and sue for damages. 

    Traditional View: Washington's revocation would be valid, since older courts viewed offers to enter into unilateral contracts as being revocable anytime until offeree completed performance.
  31. The White Star Line, owner of the Titanic, take out an ad in Treasure Hunt Magazine, in which it offers $5,000 to anyone who raises the wreck of the Titanic from the bottom of the sea. What's the most obvious way for White Star to revoke its offer?
    To take out another ad in Treasure Hunt revoking it. The revocation of a "general offer" must be accomplished by equivalent notice to the original offerees (thus an ad in another magazine or via another medium would not suffice). If that medium isn't available, any other media likely to reach approximately the same audience would suffice.
  32. Christopher Columbus offers to sell his powerboat, the Santa maria, to Leif Eriksson. He turns around and sells it to Isabella instead. If Leif overhears of the sale from two strangers at the local tavern, Newe Worlde, is the offer revoked?
    Yes. An offer may be terminated if the offeree knows of an act by offeror which is inconsistent with the offer. Selling the subject of the offer to someone else would certainly qualify as a revocation, once Leif knows about it.
  33. King George III validly offers to sell Canada to James Monroe. Before Monroe accepts, George calls him and says, "I revoke my offer." Can Monroe still accept the offer?
    No. Monroe did not have an option, so George could revoke at will. Once he did so, Monroe no longer had the power to accept, since there could be no mutual assent if he did. 

    *Common Law controls b/c the transaction concerns land not goods.
  34. Mistress Miller offers her first born child to Rumpelstiltskin, in return for a pile of gold. Miller says, "I promise you faithfully that I will leave the offer open for one week." Three days later, before Rumpelstiltskin has made up his mind, Miller sells ehr baby to Cinderella, who is unable to bear children of her own. Assuming it is legal to sell children, was Miller entitled to revoke her offer to Rumpelstiltskin?
    Yes. A non-merchant cannot make an offer irrevocable in the absence of consideration, and as such the revocation is valid. 

    *Note that exceptions to this rule, making offers irrevocable, include option contracts, and offeree's detrimental reliance on the promise to keep the offer open.
  35. Hatfield offers to buy "some of McCoy's moonshine equipment for $100." could a contract result?
    No. Hatfield's offer is too vague. "Some of" does not create an offer sufficiently certain to be enforceable; a court could not supply the missing terms to fulfill the intent of the parties. As such, there could be no contract.
  36. Marie Antoinette offers to buy "all the jewelry I want next year" from the Gill Otine Jewelers, and Gill Otine accepts. Could there be a contract?
    No. A valid contract requires a quantity term. Here, the quantity is neither stated, nor is it capable of verification by extrinsic facts (as in the case of "requirements" and "output" contracts). There is no restriction on Antoinette's freedom of action whatsoever, making her promise illusory. Antoinette's purchases from Gill Otine are based on whim alone, and so the contract fails.
  37. The Magic Supply House offers to buy "all the rabbits Old MacDonald's Farm produces next year," and Old MacDonald accepts. Is the "quantity" term satisfied?
    Yes, this is an "output" contract, and the quantity term is satisfied because it can be proven by referring to objective, extrinsic facts - Old MacDonald's production next year. 

    *However, the "requirements" must remain within the reasonable anticipation of the parties in order to be enforceable UCC § 2-306.

    *Either business can terminate operations, by retiring or selling the business, as long as it is done in good faith, at both common law and under the UCC. 

    *Consideration in "requirements" and "output" contracts is supplied by giving up the right to buy from (or sell to) anyone else.
  38. The Marquis de Sade offers to buy "all the brass knuckles I will require next year" from the Caligula Supply Co., which accepts the offer. Is the "quantity" requirement satisfied?
    Yes, this is a "requirements" contract, and the quantity term is satisfied because it is capable of proof by reference to objective, extrinsic facts. 

    *However, the "requirements" must remain within the reasonable anticipation of the parties in order to be enforceable. UCC § 2-306. 

    *Either business can terminate operations, by retiring or selling the business, as long as it is done in good faith, at both common law and under the UCC. 

    *The consideration in "requirements" and "output" contracts is supplied by giving up the right to buy from (or sell to) anyone else.
  39. Tittle makes Flutie an offer. Flutie dies before he accepts. Does Flutie's passing terminate the offer?
    Yes. R2d § 48 provides that an offer is terminated by the death or insanity of either the offeror or the offeree. The other party need not be notified of the death or insanity. R2d § 45.
  40. At a lunch meeting on October 28, 1929, Speck Eulator offers to buy 10,000 shares of alchemy Welding Company stock for $200/share from Dee Fenestrated. On October 29, the stock market crashes, and Alchemy drops to 59, cents a share. On October 30, Dee calls Speck, and says, "I accept your offer." Could there be a contract?
    No. Speck's offer had lapsed due to business custom. The stock market changes so quickly that two days would be too long a time in which to decide (unless Speck specifically provided otherwise).

    *Note also that the offer was made orally and in a face-to face meeting. Normally, such an offer lapses when the meeting ends.
  41. The Weher Fucht Zeppelin Company offers to sell the Hindenberg, a zeppelin, to Cecil de Milo for $1,000. The next day, the Hidenberg hits a radio tower and is destroyed. Is the offer terminated?
    Yes. When anything (or anyone) essential to the performance of the contract is destroyed, the offer is terminated. R2d § 35.
  42. Loch Ness owns the Ness Cafe, a tavern. He offers to buy "All the alcohol I need next year" from the Boozitupp Liquor Wholesaler. Before Boozitup accepts, Prohibition is enacted and the sale of alcohol becomes illegal. Can Boozitupp still accept Ness' offer?
    No, due to intervening illegality, which terminates the offer. R2d § 35
  43. Cassanova offers to sell his collection of hotel towels to Don Juan for $300. Don Juan says: "I don't want them." Can Juan turn around and subsequently accept the offer?
    No. According to R2d § 36, express rejection terminates an offer. As such, offeree cannot thereafter accept it.

    *Cassanova could, of course, still recognize the acceptance, and be bound to a contract, but he doesn't have to accept.
  44. Langely offers by letter to sell his glider to Orville Wright for $1,000, if Wright accepts by July 4. On June 20th, Wright writes back, "How about $900?" Langely responds, "I'm not interested in those terms." Wright writes, on July 1, "I accept your offer." Contract?
    Yes. Although Wright's letter constituted a rejection and counter-offer, Langely's subsequent letter implicitly revived the original offer. As such, since Wright's acceptance met the July 4 deadline, a contract exists.
  45. May Petey Barnum revoke his offer to sell his solar powered nightlight to Gil Ibble for $100 if Ibble has given him $5 to keep the offer open for one month?
    No, because Ibble has an "option," that is, an irrevocable offer. Normally, an offer unsupported by consideration is revocable. However, once the offeree pays to keep the offer open, he has an option, which is a contract in and of itself, which creates an assignable property right in the offeree (unless the offeror specifically provides otherwise). The option specifies that the offer will be open for a set time, and even offeree's express rejection of the offer cannot shorten the option period. 

    UCC View: Under UCC § 2-205, an offer can be irrevocable in the absence of consideration - it's called "firm offer" - as long as the offeror is a merchant, the transaction concerns the sale of goods, and the assurance not to revoke is embodied in a "signed writing."
  46. George intends to offer Razor Palaver 500 cruise missiles at $10,000 each. George misaddresses the teleram containing the offer, and sends it to Ashauler Inseini instead. Can Ashauler accept the offer, thus creating the contract?
    Only if a reasonable person in Inseini's shoes could assume that he was the intended offeree; if he knew or had reason to know the offer was intended for someone else, the acceptance could not be valid.
  47. Dee Fecht visits the Mendel Greenhouse. She is looking over the pea plants, and George Mendel, the owner, tells her, "I have pea plants with red flowers and some with white flowers. I'll sell you any one of them for $5." Is the offer invalid because the subject matter is not identified specifically enough?
    No, the offer is valid. Giving the offeree a reasonable range of choices does not destroy the offer. As soon as Dee chooses a plant, the contract is formed. Here, an ambiguity in the offer is cured by the acceptance.
  48. On December 26, in the Year O, Snowy Paperweights, Inc. comes out with a commemorative paperweight depicting the manger where Jesus was born. Fred's Gifts orders 2,000 of the paperweights. Neither party mentions a price. Under the UCC, can the price be inferred, or will the contract fail.
    The price can be inferred under UCC § 2-305(1)(c), by determining a "reasonable" price at the time of delivery."
Card Set:
Contracts I
2013-12-13 19:49:20
Offer - Rules and Hypos
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