Contracts Outline Maracantel Fall 2010
I. Contract Formation
A. Offer & Acceptance
A. Formation of a contract requires a manifestation of mutual assent along with consideration
a) Offer: the 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.
(1) An offer closes at either a stated time or, if no time is stated, a reasonable time
(2) Broad Communications (e.g., advertisements) are invitations for offers and not offers in themselves
(3) Generally, an offer can be revoked at any time before acceptance
(a) A revocation is effective when received
(b) A “separate” option contract, supported by consideration, will force the offeror to hold the offer open for the length of the option
(c) A “firm offer” by a merchant for goods in a signed writing is irrevocable either for the term stated or a reasonable time § 2-205
(i) Requirements:
(a) offer
(b) Made by a merchant
(c) Through a signed writing (has to be signed)
(d) With explicit assurance it will remain open
(i) if no indication of how long the offer is to remain open, then it is for a reasonable time;
(ii) in any case, it cannot be made irrevocable for longer than three months (note consideration can make it irrevocable for a longer time)
(d) A party who relies on the promise may be able to recover under promissory estoppel,
(e) Death of offeror revokes all offers
b) Acceptance: a manifestation of assent by the offeree in the manner suggested by the offeror
(1) Has the offeree manifested assent to the offer
(2) Mailbox Rules
(a) Generally, an acceptance is valid when it is sent. (all others valid when received)
(3) Manner of Acceptance (§ 30)
(a) Any manner of acceptance is valid, unless
(b) the offer (by language or circumstances) specifies otherwise
(4) Silence never equals acceptance unless (§ 69):
(a) The offeree takes the benefit of the services offered with a reasonable opportunity to reject them (e.g., he acts like he is accepting)
(b) The parties have agreed to such beforehand
(5) How precise must an acceptance be?
(a) Classic doctrine: An offer must be accepted according to its precise terms – any differing terms creates a rejection and counteroffer (Mirror Image Rule)
(b) U.C.C. § 2-207
(i) Merchant is defined as someone engaged in any type business
(ii) One of the parties is NOT a merchant
(a) Doesn’t have to meet the mirror image rule
(b) If it smells like acceptance it will not fail
(i) UNLESS the acceptance specifically states that it is conditional upon acceptance of the additional or different terms.
(c) Additional terms to the contract will become proposals
(i) Require assent prior to incorporation into the contract
(d) Different terms will be knocked out of existence and not be part of the contract
(iii) Both parties are merchants
(a) Additional terms WILL become part of the contract, UNLESS
(i) The offer expressly limits acceptance to the terms of the offer
(ii) The additional terms materially alter the agreement
(iii) There is notification of rejection
(b) Different Terms will be knocked out.
(iv) 2-207(battle of the forms) is Only intended to operate when the writings don’t establish a contract, in such a case the conduct of the parties is looked at. This is used when 2-207(1) fails, i.e. the form cannot be taken as an acceptance yet the parties act as if a contract had been entered into. The contract forms by conduct
(v) Essential Terms Are
(a) The subject of the contract
(b) Price
(c) Parties
(d) Time for Performance
(vi) Rules for Essential Terms
(a) If parties say nothing about an essential term the court will fill in using reasonableness
B. The U.C.C. largely replaces these requirements (and the requirement of consideration) with a general requirement of proof that the parties intended to make a contract
a) The workings of 2-305 (open price term)
(1) Subpart (1): deals with determining price when parties intended to have contract but did not provide the price term.
(2) Subpart (2): deals with determining price when one party is left to make the decision. Duty of Good Faith
(3) with situation where price term is to be fixed by something other than agreement, and one party causes the fixing to fail. Bad Faith
(4) Subpart (4): deal
uy can be made unilateral (by shipping) or bilateral (by promising to ship) by the offeree
D. Modification of Contracts
A. Common Law Rule – Contract modifications must be supported by consideration
B. § 2-209 – Mutually-agreed on modification needs no consideration to be enforceable
E. Key Differences between the U.C.C. and the Common Law for Formation
A. Holding Offers Open
a) Common Law requires independent consideration to create an option contract, which holds the offer open
b) The U.C.C. permits a merchant’s firm offer to remain open without the support of consideration
B. Acceptances with Additional Terms
a) Common Law requires an acceptances to adhere to every term of the offer, or no contract is formed (but rather a rejection and counteroffer) Mirror Image
b) The U.C.C. permits an acceptance with additional terms to form a valid contract; the details are worked out later, as per the Battle of the Forms Rule
C. Contract Modification
a) Common Law requires consideration to modify contracts
b) The U.C.C. permits good-faith modifications agreed on by both parties to be binding without consideration (§ 2-209)
D. UCC Rules
a) 105- goods are anything that is moveable at the time of identification to the contract for sale
b) 204(2)- a caontract for sale can exist, even if the court is unable to determine the moment the contract pops into existence
c) 204(3)-failure to provide ALL of the terms in the contract is not fatal to the contract, so long as the parties demonstrated mutual assent and there is a reasonably certain basis for providing a remedy. Court will write in the terms
(1) 305-Price Term
(2) 309-time of delivery
(3) 308-place for delivery
(4) CANNOT write in quantity, if quantity is completely open contract formation will fail.
