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University of California, Davis School of Law
Horton, David Owen

Contracts David Horton 2015 fall

UCC or CL?

UCC applies to the sale of goods (UCC 2-201).

Goods are tangible and moveable.

Everything else is covered by the CL.

Manifestation of Mutual Assent:

K requires through act or conduct, shown you agree.

Exceptions: (1) An obj. person would think that parties did agree

(2) Agree by accident

Bilateral Ks: Both parties promise to do something in the future.

Offer: (Rest. 24):

An offer must: (a) Arm the other party (offeree) with the “power of acceptance,”

(b) spell out the key terms in sufficient detail, and

(c) indicate that the offeror is actually willing to be bound by those terms

Ads as Offers:

Ads are not offers;

Exceptions: (a) the ad contains language that is so specific and definite that it “invites action without further communication.”

(b) “Bait and switch” situations (offer is misleading)

Acceptance: (Rest. 50)

Acceptance of the offer is a manifestation of assent to the terms thereof made by the offeree in a manner invited or required by the offeror.

The offeror is “master of the offer” and can: (1) Revoke at any time before acceptance, and

(2) Specify exactly how acceptance must take place.

Terminating Power of Acceptance: (Rest. 36)

(a) Rejection or counteroffer by the offeree, or

(b) lapse of time, or

(c) revocation of the offer, or

(d) death or incapacity of the offeree or offeror

When Acceptance Takes Effect: (Rest. 63) An offer or revocation is effective when its received

“Mailbox rule”—unless the offeror states otherwise, an acceptance is (legally) effective the instant it is deposited in the mail or otherwise leaves the offeree’s possession. (Rule does not apply to acceptance of the underlying offer in an option K, but does apply to offers that were options and then became offers).


(1) Each party must incur or promise to incur a detriment, and

(2) the detriments must be the price of each other (can’t be gifts w/ conditions or sham consideration).

There is no detriment where:

(A) the promisee need not do anything (the “keep on keepin’ on”), or

(B) where the promise has already done something (past consideration), or

(C) lack of a right to give up: either (1) a promise to refrain from some illegal conduct, (2) a promise to do something that someone is already legally obligated to do.

Exceptions to Past Consideration:

Moral Obligation Exception:

ONLY applies to promises to (1) pay a debt that is barred by the state of limitation,

(2) pay a debt that is incurred by an infant, or

(3) promise by bankrupt person to pay a debt after she’s gone through bankruptcy and is free and clear of debts.

Material Benefits Exception:

If you confer a material benefit to a party (must be promisor) and they promise to do something in the future, there is consideration.

Unilateral Ks: (Rest. § 32)

In case of doubt, an offer is interpreted as inviting the offeree to accept either by promising to perform what the offer requests or be rending the performance, as the offeree chooses.

Rest. § 45:

The offer by its terms can only be accepted by performance (and not a return promise), or it is not clear offeree can perform (bonuses and awards).

Offeror loses right to revoke as soon as offeree starts to perform.

Offeree can either: (1) finish performance and complete the unilateral K, or

(2) abandon performance before completion (results in no K).

Rest. § 62:

If offeror allows offeree to make up his/her own mind whether to accept by promise or performance,

The offeree accepts the offer by beginning to perform.

If begin to perform, there is a K, and the offeree must complete performance.


Different Terms: modify the offeror’s version of some right, duty, or issue that DOES appear in the offer.

Three Approaches: (1) follow offer’s original terms on the particular issue,

(2) subject “different” terms to the same analysis of “additional” terms;

(3) Knock Out rule: Terms knock each other out (neither is in the K).

Subsection (3): Counteroffer Land

[Not Mentioned in Statute: Offeror can EXPRESSLY AGREE to the offeree’s add. or diff. terms. If so, the offeree’s add. or diff. terms become part of the K.] If offeror does nothing/walks away, there is no K (conduct).

· The terms of the counteroffer do NOT control if the offeror accepts a counteroffer by performing.

· Instead, K consists of: (a) terms on which the parties agree (any term on which the offer

and the reply to the offer DON’T agree falls out of the K), and

(b) implied terms under the UCC (neutral terms from other parts of the UCC).

Electronic and Layered Ks:

(1) Shrinkwrap/rolling/layered: keep = agree; return = reject

(2) clickwrap: “I agree” box

(3) browsewrap: visit = I agree; as long as the term is obvious (constructive and actual obvious)

Arbitration Clauses in these Ks: Split in Authority:

(1) don’t apply UCC 2-207—seller is offeror,

(2) apply UCC 2-207—customer is offeror.

With These Ks, Customers MUST know: (1) There are terms/what the terms are, and

(2) that the customer has the power to reject the terms by sending back the product.