Elements of a Contract
WAS THERE AN OFFER?
Offer – Convey the power of acceptance to the offeree
was there a commitment – intention by the offeror to make an offer (objective – “reasonable person” would believe intent to enter into contract)
was there communication – the offeree must have actual knowledge of the offer in order to accept it
was it in definite terms – certainty to the subject matter of the contract
TEST: intention of the parties
No offer: Preliminary negotiations §26, advertisements (unless very specific), invitation to negotiate, statement of intent, request for price. Ambiguity is construed in favor of offeror
Offer can be revoked at any time prior to acceptance except where reliance – can be express or by an action by offeree that can be interpreted as a rejection
WAS THERE ACCEPTANCE?
Acceptance – Manifestation of assent to the terms thereof made by the offeree in a manner invited or required by the offer.
Time when acceptance takes place: §63 (a) If the offeree complies with the manner and medium that the offer requires, acceptance takes place regardless whether it ever reaches the offerer, BUT (2) an acceptance of an option K is only oper ative when received by the offeror
Where the sale of goods are concerned, an offer – usually a purchase order –can be accepted by reasonable means, including commencement of performance §2-206
Acceptance by silence: §69 Where an offeree fails to reply to an offer, the silence will operate as an acceptance only when:
a. where an offeree takes the benefit of offered services with reasonable opportunity to reject them and has reason to know that they were offered with expectations of compensation.
b. where the offeror has stated or given the offeree reason to know that silence will operate as an acceptance
c. because of previous dealings, it is reasonable that the offeree will notify offeror if he does not intend to accept.
Was the power of acceptance terminated?
An offeree’s power of acceptance may be terminated by: §36
a. rejection or counter-offer by offeree §39
b. lapse of time §40
c. revocation by offeror §42
d. death or incapacity of either offeror or offeree
e. non-occurrence of any condition of acceptance under terms of the offer
f. the offeror’s actions are inconsistent with the intention to enter into a K and the offeree acquires reliable information to that effect.
WAS THERE CONSIDERATION?
Consideration – § 71 – obligate self to do something not legally obligated to do
(1) a performance or return promise must be bargained for
a. it is bargained for if it is sought by promisor in exchange for his promise and is given by the promisee in exchange for that promise.
Performance may consist of:
a. an act other than a promise, or
b. a forbearance, or
c. creation, modification, or destruction of a legal relationship
What is not considered consideration:
performance of a legal obligation (preexisting duty) §73
Illusory promises §77
for a gift (tramp hypo)
Promissory Estoppel – Takes place of consideration – makes gratuitous promises enforceable
TYPES OF CONTRACTS:
Unilateral – Promise for an act or forbearance to act
his needs from the promisee, there is no enforceable agreement; did not bind self to anything. (“may load”) The promisor is not obligated to accept any services from the promisee and may terminate the relationship at any time without liability other than to pay for the services accepted. In the absence of a spe cification of quantity, no obligation to use any and its decision to cease using these services after a certain point is not actionable. Mutuality of obligation §79
Hierarchy in the way someone acts to determine meaning:
1. express terms of contract: given greater weight than general language
2. course of performance: how deal with others in previous contract §2-208
3. course of dealing: between parties to the contract only §1-205
4. trade usage: customs within industry §1-205
Sylvan Crest Sand & Gravel Co. v. United States (trap rock for airport)
H: In agreements which seem to reserve the right to cancel at any time, it is reasonable through interpretation to take the position that notice of cancellation is required, and, even though notice may be given at any time, it constitutes a det riment, hence, valid consideration. The US obligation to give delivery instructions or notice of cancellation within a reasonable time constituted consideration for Sylvan’s promise to deliver in accordance with instructions and made the K valid.