Contracts Outline
Villanova University
Spring 2011
Professor Dellapenna
I. Applying UCC: Article 2 applies to the sales of TANGIBLE & MOVEABLE goods. If there is a mixed deal (goods and services), then determine which part of the contract is more important and then apply an “all or nothing test” to the entire contract.
II. The Agreement: Must be viewed objectively, not subjective. Contract agreements are based on the standard of a REASONABLE LISTENER, NOT what the parties INTENDED.
A. 3 stages: Offer – Possible Revocation – Acceptance/Rejection
1. The Offer: Determining if the initial communication indicates that one party has offered to make a commitment.
a. Content of the offer must be complete and not missing any details such as the parties, the commitment, price, place of delivery, etc. If any ambiguity then the offer is not valid.
b. Output/Requirement Contracts – When a party offers to buy/sell exclusively with the other party and all terms except the amount are specified. The offer is the commitment to the exclusive right to buy/sell and must do so in good faith. (Trigger words are SOLELY/ALL)
c. Context of offer important to determine commitment. (Professional convo v. Bar-talk).
d. Advertisements are generally not offers but merely invitations to make offers, unless there is specific language that is clear and leaves nothing left to negotiation.
2. Revocation of the Offer
a. Offers are automatically revoked upon death.
b. Offers are revoked if they are not responded to within a reasonable time frame
c. Unambiguous Revocation: When the OFFEROR CHANGES HIS MIND. Allowed if acceptance has not yet been made and the revocation is unambiguously communicated to the offeree.
i. Certain offers CANNOT be revoked!
Ø Options – an offer PLUS a paid-for-promise NOT to revoke.
Ø Merchants Firm Offer Rule – Merchants who make offers CANNOT revoke for a reasonable period.
Ø Reasonable Reliance on a Promise (Inducement)
Ø Unilateral Contracts – once performance has begun, the offeror CANNOT revoke. Acceptance is only upon completion of performance.
3. Acceptance/Rejection of the Offer
a. Method: Offeror can control the method of acceptance!
b. If no preferred method of acceptance is made then you can respond the same way the offer was made, or whatever is reasonable to reach the person.
c. Mailbox Rule: Used when preferred method is mail, or no preferred method is stated and mail is reasonable.
i. Mailbox Rule: Acceptances effective when Mailed
ii. Mailbox Rule: Rejections effective when Received
d. If preferred method is NOT mail, then acceptances/rejections are effective when RECIEVED
e. Acceptance
i. Unilateral Contracts: Where performance is the method of acceptance, notice of acceptance is generally required but not mandatory. Performance depends on what the offer says is acceptable.
ii. Silence may constitute acceptance in appropriate cases when circumstances show that an effective rejection is unnecessary. Silence operates as acceptance if the offerree takes the benefit of the offered services with reasonable opportunity to reject them, or where previous dealings show that it is reasonable that the offeree should notify the offeror if he does not intend to accept.
f. Indirect Rejection:
i. Counteroffer – making a counteroffer to an offer rejects the first offer and terminates offer! Inquiries are not rejections but keeps offer open to negotiate.
ii. Conditional Acceptance – placing a condition on an offer while accepting will be considered a rejection if it goes against the terms of the original offer.
iii. Common Law MIRROR IMAGE RULE: For a contract to exist, the response cannot add or change anything in the original offer. If it does then the offer is not binding.
iv. UCC FIRST SHOT RULE: In a SALE OF GOODS, where there has been multiple communications about the terms of the offers, the UCC 2-207 regards the first communication as the offer and the response as acceptance. If the response is coupled with additional terms, only the agreed upon terms in first communication will be binding and we must determine whether the new terms are also binding.
B. Validation Devices: (Consideration): A device created to distinguish between agreements that merit enforcement. Consideration is defined as a BARGAINED FOR EXCHANGE. The exchange can be an affirmative act, another promise, or forbearance and will be valid unless the consideration is nominal. Love and affection is not sufficient consideration. Gifts are not enforceable b/c they are gratuitous. However charitable donations do NOT need consideration to be enforceable.
1. Bargained for Exchange: A promise has been made by one of the parties causing the other to act, forbear from action,
2. Disclaimer Clause: Attempts to rule out misrepresentations outside of the written contract. NO RELIANCE ON REPRESENTATIONS OTHER THAN WHAT IS IN THE CONTRACT. Sometimes courts say the disclaimer is part of the fraud.
F. Unconscionable Agreements: When the terms of the contract are so disproportionate that it shocks the conscious due to a gross inequality of unequal bargaining power. Unconscionable contracts often arise when the accepting party is not given the ability to make a reasonable choice and must accept the offerors terms. A court may excuse performance of a contract, or a particular contract term, if it determines that such terms are unduly oppressive to one party.
1. Procedural Unconscionability – Arises when there are problems with the agreement process that form an UNFAIR SURPRISE to one party.
2. Substantive Unconscionability – Arises when the agreement includes OPPRESIVE TERMS.
G. Adhesion Contracts: Refers to agreements that contain standardized/boilerplate terms. Boilerplate terms are generally found in agreements that are mass produced. Adhesive contracts are used to identify all the possible and remote conditions in the contract but are not usually enforced because the agreeing party has to either “take-it or leave it”
H. Unequal Bargaining Power: Arises if the offeree in the agreement lacks the ability to negotiate with the offerror. When the offeree’s only choice is to sign the contract (medical treatment agreements) and there is a dispute, then any shockingly unconscionable terms will be knocked out.
I. Compulsory Contracts – If you pay your bills then the company must contract with you unless they have a lawful excuse.
J. Unclean Hands: Equitable doctrine that denies relief to a party who seeks a remedy in relation to an action in which he did not act fairly. A person who has acted wrongly, either morally or legally, will not be helped by a court when complaining about the actions of someone else.
