Common Law Valid K
Which of the following examples likely constitutes a valid offer and acceptance between Harvey and Mike?
A. Harvey is at the bar with his buddies drinking and discussing Elon Musk. Harvey laughs and says to the group "I'd like to meet that guy! If any one of you can find me his address, I'll give you $10 million!" Everyone laughs, because they know Harvey doesn't like Elon. Mike goes home, finds the address, and gives it to Harvey.
B. Harvey is speaking to Louis and says "I need someone to wash my car on Saturday. Will you do it? I'll give you $50." Mike is walking by and overhears. He leans over and says "I'll do it! See you Saturday!"
C. Mike wants to buy Harvey's house. They meet to discuss the terms of the sale. They spend 8 hours nailing down the terms, including price, time of sale, and things Harvey will fix before Mike buys the house. At the end of the 8 hours Harvey says "this is great man! I'll get a formal contract drawn up and sent to you by the end of the week." Then they toast with some fancy champagne in celebration.
D. Harvey says to Mike "I'm selling my place and I know you love it, are you interested? We can discuss price later, I just wanna know if I should hold off on putting it on the market." Mike says "heck yeah man, I'll take it!"
C is correct! The conduct here looks like preliminary negotiations... but just because the parties contemplate a formal written contract after negotiations does not mean that the negotiations themselves were not binding if the parties, through their words or conduct, demonstrated intent to be bound! Here, the fact that the parties hammered out all the material terms and then celebrated suggests that they intended to be bound to the terms agreed on (like the Darius v. Boards practice problem... but with more evidence of ITBB.)
A is wrong because there is likely no intent to be bound. Under the objective standard, a reasonable person would probably have thought that Harvey was joking based on the laughing and the crazy amount. The fact that they were drinking would also be a point in favor of no intent to be bound.
B is wrong because Mike is not the offeree! Only Louis, the person the offer was made to, had the power to accept the offer.
D is wrong because the common law requires that all material terms are clear and definite in order for there to be a valid offer. Here, price is not included in the offer, and price is a material term.
Best Buy just created a new TV model that far surpasses all others (it's fair market value is like $10,000!) Jimmy wants one desperately so he submits a purchase order to BestBuy for a TV, it states "one Best Buy Model X TV, delivery on Thursday by seller. Buyer would additionally like to purchase seller's standard installation services." Best Buy sends him a acknowledgment, which confirms his purchase for one Model X TV, delivered on Thursday and their standard installation services. Best Buy delivers the TV as requested, but when it arrives they refuse to install it. If Jimmy sues for breach of contract, is the court likely to find that a valid contract existed between Jimmy and Best Buy?
The court will find that a valid contract existed between Jimmy and Best Buy.
When there is a hybrid contract that includes a mixture of goods and services, the predominant thrust test, which considers the ultimate purpose of the contract, is applied to determine whether the UCC or the Common Law will govern. Under the predominant thrust test, we consider three factors: (1) the language of the contract, (2) the nature of the business of the supplier, and (3) the intrinsic worth of the materials.
Here, the factors weigh in favor of UCC application. Under the first factor, the language of the contract includes terms like "buyer" and "seller" which are traditionally associated with the UCC. Additionally, the forms are referred to as purchase order and acknowledgment, which are commonly seen in contracts for the sale of goods. Finally, the language of the offer seems to contemplate the installation services as being ancillary to the purchase of the TV. Under the second factor, the nature of Best Buy's business is to provide electronics such as TV's phones, and computers (goods). While they may also offer installation services, their business is primary one that sells goods. Under the third factor, while we do not know the contract price and how it breaks down, the fair market value of this TV model is roughly $10,000. If Best Buy is selling the TV for anywhere near the fair market value, we can infer that the installation services will be a very small portion of the contract price. Therefore, the UCC governs.
Valid contract formation requires an offer, acceptance, and consideration. An offer is the manifestation of intent to enter into a bargain so made as to justify a reasonable offeree in concluding that acceptance is invited and will conclude the bargain. Under UCC 2-204, a contract can be made in any reasonable manner. Additionally, under 2-204 a contract will not fail for indefiniteness where it is missing material terms as long as it is clear that there is intent to be bound and a reasonable basis for remedy.
Here, Jimmy made an offer when he submitted a purchase order asking to purchase one Best Buy TV and installation services. While the purchase order did not include a price, it objectively indicated intent to be bound to an agreement with Best Buy for the purchase of the TV, and there is a reasonable basis for remedy because the court can apply the fair market value of one Model X TV.
An acceptance is a manifestation of intent to be bound to the terms of the offer. Under UCC 2-206, unless otherwise indicated, an acceptance can be made in any reasonable manner, including a promise to ship or actual shipment.
Here, Best Buy accepted Jimmy's offer via their acknowledgement, which was essentially a promise to ship the Model X TV. Additionally, while acceptance under the UCC can include additional or different terms, here Best Buy's acceptance matched the terms of Jimmy's offer, further demonstrating intent to be bound to its terms.
Therefore, the court is likely to find that a valid contract existed between the parties.
Dracula owns a historic castle that he is considering selling. On October 1st, he sends a signed letter to Frankenstein stating: "I offer to sell you my castle for $500,000. In exchange for your payment of $5,000, I promise to hold this offer open until October 31st at midnight. You may accept at any time before then."
Frankenstein immediately pays Dracula $5,000, and Dracula accepts the payment. On October 15th, Dracula receives an offer from the Mummy for $600,000 and sends Frankenstein an email stating: "I hereby revoke my offer to you. The castle is no longer available."
On October 25th, Frankenstein sends Dracula a signed letter stating: "I accept your offer to purchase the castle for $500,000."
Is there a valid contract for the sale of the castle between Dracula and Frankenstein?
A. No, because Dracula effectively revoked his offer on October 15th before Frankenstein accepted.
B. No, because $5,000 is inadequate consideration for an option to purchase a $500,000 property.
C. Yes, because Dracula's promise to keep the offer open was supported by consideration, making it an irrevocable option contract that Frankenstein validly exercised on October 25th.
D. Yes, but only if Frankenstein can prove he relied on Dracula's offer to his detriment.
C. Yes, because Dracula's promise to keep the offer open was supported by consideration, making it an irrevocable option contract that Frankenstein validly exercised on October 25th.
The Headless Horseman, a merchant who operates a pumpkin distribution business, sends a purchase order to the Wicked Witch of the West, a merchant who grows and sells organic pumpkins. The Horseman orders 1,000 pumpkins at $5 each for his Halloween festival. The purchase order includes standard commercial terms but does not specify any time limit for complaints about defective goods.
The Witch responds with an acknowledgment form accepting the order. However, the Witch's acknowledgment includes an additional clause stating: "Buyer must notify Seller of any defects or non-conformities within 48 hours of delivery, or all claims are waived." In the pumpkin industry, the customary time period for inspecting pumpkins and reporting defects is 10-14 days, as pumpkins may have internal rot or defects not immediately visible upon delivery.
Both parties are merchants. The Horseman receives the acknowledgment but does not respond to it. The Witch delivers the pumpkins, and the Horseman accepts delivery.
A. Yes, because both parties are merchants and the acknowledgment created a contract.
B. Yes, because the Headless Horseman's silence constituted acceptance of the additional term.
C. No, because requiring complaints within 48 hours materially alters the contract when the industry custom is 10-14 days, and the Headless Horseman did not expressly agree to it.
D. No, because the Wicked Witch's acknowledgment was a counteroffer that the Headless Horseman never accepted.
C. No, because requiring complaints within 48 hours materially alters the contract when the industry custom is 10-14 days, and the Headless Horseman did not expressly agree to it.
UCC Comment 4 2-207 : 4. Examples of typical clauses which would normally "materially alter" the contract and so result in surprise or hardship if incorporated without express awareness by the other party are: a clause negating such standard warranties as that of merchantability or fitness for a particular purpose in circumstances in which either warranty normally attaches; a clause requiring a guaranty of 90% or 100% deliveries in a case such as a contract by cannery, where the usage of the trade allows greater quantity leeways; a clause reserving to the seller the power to cancel upon the buyer's failure to meet any invoice when due; a clause requiring that complaints be made in a time materially shorter than customary or reasonable.
On Jan 1, Professor Whitley sends a letter to Professor Janssen saying that she is looking for someone to paint her house next Sunday. She says in the letter that if he agrees to do so she will pay him $500 for painting her house. On Jan 2, Professor Janssen receives her letter and writes back saying that he is busy next Sunday so he won't be able to do it. The next day (Jan 3), his Sunday plans are cancelled and he writes another letter to Professor Whitley saying that he will gladly paint her house for $500 on Sunday. Professor Whitley receives his first letter on Jan 3, and his second letter on Jan 4.
Which of the following is correct?
A. The offer was valid on Jan 1, and the acceptance was valid on Jan 3.
B. The offer was valid on Jan 2, and the acceptance was valid on Jan 3.
C. The offer was valid on Jan 1, and the acceptance was valid on Jan 4.
D. The offer was valid on Jan 2, but there was no valid acceptance.
D is correct.
Offers are valid on receipt. Professor Janssen received the offer on Jan 2.
Typically, acceptances are valid on dispatch (Mailbox rule), so the acceptance would normally have been valid on Jan 3. However, where a counter offer/rejection is a sent first, followed by an attempted acceptance, the mailbox rule is rendered ineffective and whichever arrives first is considered valid. Because Professor Whitley got Professor Janssen's rejection first, there was no valid acceptance.
Sam owns a potato store. Frodo is a potato farmer who often sells potatoes to Sam for Sam to sell in his store. Sam knows that Frodo has a big harvest coming up, so he send him a purchase order for 10,000 grade-A potatoes, delivery next Friday. Frodo sends back an acceptance on his standard form that agrees to Sam's terms. In addition, Frodo's standard boilerplate language (which has been in all his prior agreements with Sam) says "any disputes will be resolved via arbitration in Shire county," the county in which both Sam and Frodo live. Sam receives the acceptance and moves on with his day. The following Friday, Frodo delivers the potatoes and Sam pays him. Which of the following is most correct regarding the agreement between the parties?
A. There is no contract between the parties.
B. There is a contract between based on the writings the parties and it includes the arbitration provision
C. There is a contract between the parties based on the writings, but the arbitration provision will be kicked out under 2-207(2).
D. There is a contract between the parties based on the writings, but the arbitration provision will be knocked out under 2-207(3).
B is correct!
A valid contract requires offer, acceptance, and consideration.
An offer is the manifestation of intent to enter into a bargain so made as to justify a reasonable offeree in concluding that acceptance is invited and will conclude the bargain. Under UCC 2-204, a contract can be made in any reasonable manner and will not fair for indefiniteness where it is missing material terms as long as it is clear that there is intent to be bound and a reasonable basis for remedy.
Here, Sam makes an offer to Frodo when he submits his purchase for the 10,000 potatoes. While the purchase order did not include a price, it objectively indicated intent to be bound to an agreement with Frodo for the purchase of the 10,000 potatoes, and there is a reasonable basis for remedy because the court can apply the fair market value of that quantity of potatoes.
An acceptance is a manifestation of intent to be bound to the terms of the offer. Under UCC 2-206, unless otherwise indicated, an acceptance can be made in any reasonable manner, including a promise to ship or actual shipment. Under 2-207(1) an acceptance that is otherwise definite and seasonable is still a valid acceptance even though it includes additional/different terms unless the acceptance includes a MAMO clause (in which case it essentially becomes a counter offer.)
When there is no MAMO in the acceptance, the next question is whether the terms are different or additional. When the terms are additional, we then have to ask whether the contract is between merchants. In a contract between merchants, any additional terms will enter the agreement under 2-207(2) unless (a) the offer includes a MAMO, (b) the term materially alters the contract or (c) the offeror objects to the additional term within a reasonable time. A term materially alters the contract when it causes surprise leading to hardship under the surprise and hardship test.
Here, there is no MAMO in the acceptance, and it is otherwise definite (no different dickered terms) and seasonable (sent within a reasonable time) so the parties have achieved contract formation based on the writings. The arbitration term in the acceptance is an additional term and the contract is between merchants, so the term will be a part of the agreement unless 2-207(a)(b) or (c) applies. There is no MAMO in the offer and there was no objection by Sam, so (a) and (c) do not apply. Additionally, the arbitration provision is not a material alteration under 2-207(b). First, courts generally do not regard arbitration provisions to be material alterations. Secondly, even if courts did regard these to be material alterations, this arbitration provision had been a part of several previous agreements between the parties, so it is unlikely to be a surprise causing hardship under the surprise and hardship test.
Therefore, there is a contract between the parties based on the writings and the arbitration term will be part of this agreement.
The Invisible Man, a merchant who sells scientific equipment, sends a signed written offer to Dr. Jekyll on September 1st: "I offer to sell you one Model X-500 Laboratory Centrifuge for $10,000. This offer will remain open until September 30th." The letter contains no mention of consideration, and Dr. Jekyll does not pay anything for the offer to remain open.
On September 15th, the Invisible Man receives a much better offer from Mr. Hyde and sends Dr. Jekyll an email: "I need to revoke my previous offer. The centrifuge is no longer available to you."
On September 20th, Dr. Jekyll replies: "I accept your offer to purchase the centrifuge for $10,000."
Is there a valid contract for the sale of the centrifuge between the Invisible Man and Dr. Jekyll?
A. No, because the Invisible Man's revocation on September 15th was effective since Dr. Jekyll provided no consideration for the promise to keep the offer open.
B. No, because offers are always freely revocable until accepted, regardless of any promise to hold them open.
C. Yes, because under UCC § 2-205, a merchant's signed written promise to hold an offer open is irrevocable even without consideration, making this a valid firm offer.
D. Yes, because the Invisible Man's promise to keep the offer open until September 30th created an option contract that does not require consideration.
C. Yes, because under UCC § 2-205, a merchant's signed written promise to hold an offer open is irrevocable even without consideration, making this a valid firm offer.
B- There was a valid contract between the parties and the delivery term is part of the agreement.
Which of the following examples is/are valid contracts supported by adequate consideration?
A. Prof. Whitley calls Delaney and says that if Delaney will build her a pool on Sunday, then she will pay her $10,000. Delaney says "hmm sounds interesting” and hangs up the phone. On Sunday, Delaney shows up to Prof. Whitley's house with her equipment and starts digging a hole for the pool. 3 hours in, Prof. Whitley runs out and tells Delaney to stop because she hired another company, and that Delaney never promised to build her the pool anyway so she won't be paying her.
B. John agrees to fix George's broken shower for $500. John fixes the shower, but George does not pay him.
C. John wants to buy George's house. They meet to discuss the terms of the sale. They spend 8 hours nailing down the terms, including price, time of sale, and things George will fix before John buys the house. At the end of the 8 hours George says "this is great man! I'll get a formal contract drawn up and sent to you by the end of the week." Then they toast with some fancy champagne in celebration.
D. Neville asks Hermione if she will tutor him in exchange for his rare Albus Dumbledore trading card. Hermione says "no I don't want that.. but I'll do it if you help me practice my valedictorian speech... I'm super nervous and I need a practice audience." Neville thinks this sounds super boring (and knows it will take FOREVER), but agrees because he really wants the tutoring.
All of the above!!! In each of these we have a bargained for exchange.
A. is a valid unilateral K supported by consideration. In a unilateral contract, beginning performance constitutes both acceptance and consideration (assuming you then finish)! Prof. Whitley gives $10,000 and Delaney gives her performance of building the pool.
B. is a valid bilateral K supported by consideration. John in fixing the shower in exchange for the money and George is providing the money in exchange for getting his shower fixed. The fact that George does not pay does not mean there is no consideration.. it just means that George breached the K!
C. Yes! Assuming this is a valid offer and acceptance and not preliminary negotiations, the offer and acceptance are supported by consideration! John is promising money in exchange for George promising to provide a house.
D. Yes! Consideration does not have to be money, each side just has to be induced to enter the bargain by the benefit the other side is providing them. Here Hermione is only tutoring Neville because he agreed to help her practice, and Neville only agreed to help her practice because he wanted the tutoring services
Luke needs a shipment of new lightsabers for his jedi students. He places an order with Empire Lightsabers for "100 green lightsabers for $50,000, delivery next Friday. All standard warranties apply. Acceptance is expressly limited to the terms of the terms of this offer." Empire Lightsabers receives his order and sends back an acknowledgment stating "100 green lightsabers for $50,000, delivery next Friday. Empire disclaims all standard warranties. This acceptance is expressly made conditional on assent to any additional or different terms." Luke receives the acceptance and throws it away.
If there is no further contact or conduct between the parties, which of the following is correct:
A. There is no contract between the parties
B. There is a contract between the parties based on the writings on Luke's terms
C. There is a contract between the parties based on the writings on Empires terms
D. There is a contract between the parties based on the writing, but neither warranty term is part of the contract.
E. There is no contract between the parties based on the writings, but there is a contract by conduct between the parties and the terms will be determined by applying the knockout rule in 2-207(3) and gapfilling.
A is correct!
Here we have a situation where there is a MAMO in the offer AND in the acceptance, and the acceptance includes a different term.
2-207(1) tells us that an acceptance that is definite and seasonable will not fail because it includes additional or different terms UNLESS the acceptance includes a MAMO.
This acceptance is definite (no different dickered terms) and seasonable (sent within a reasonable time) but it includes a MAMO, so instead of acting like an acceptance, it essentially acts like a counteroffer.
When there is a MAMO in the acceptance, 3 things can happen: (1) the original offeror says/does nothing, in which case there is no contract, (2) the original offeror agrees to the additional or different term(s), in which case there is a K based on the writings on the original offeree's terms, or (3) the original offeror says nothing but the parties perform, in which case there is no K based on the writings, but there is a contract by conduct and the terms will be determined by applying the knockout rule in 2-207(3).
Here, the first thing (original offeror says/does nothing) happens! So there is no contract between the parties.
NOTE: When we have a MAMO in the acceptance, we do not even have to apply 2-207(2) or worry about whether the terms are different or additional!! This is our whole analysis!
Michael owns a paper and office supply store that is going out of business. He calls up his friend Dwight, the CEO of Staples, and offers to sell him his inventory for $500K. Dwight says that he has to think about it (and check their current stock) and asks if Michael would be willing to hold the offer open. Michael tells Dwight that he will hold the offer open for 30 days if Dwight pays him $50. Dwight agrees, hangs up the phone, and wires Michael the payment. The next day, Michael calls Dwight back and says "hey man, sorry but Office Depot agreed to buy my inventory for $600K, so I'm selling it to them. Did Michael have the right to revoke his offer?
A. Yes, because an offeror always has the unencumbered right to revoke an offer prior to acceptance, and Dwight had not yet accepted the offer.
B. No, because there was a firm offer under 2-205, which prevents Michael from revoking the offer for the agreed period.
C. No, because there was a valid option contract which prevents Michael from revoking the offer for the agreed period
D. Yes, because there was no valid firm offer.
C is correct!
An offeror can lose his right to revoke an offer in two ways: 1) an valid option contract is formed or 2) a valid firm offer is made under 2-205 (in the UCC)
For a valid firm offer under 2-205, there must be an offer made by a merchant in a signed writing that assures the offer will remain open for a stated period (or, if no period stated, a reasonable time not to exceed 3 months).
For a valid option contract, there must be an agreement to hold the offer open for the stated period that is supported by consideration.
Here, we are in the UCC, so we should first look at whether there is a firm offer. There is NOT a firm offer, because Michael's statement that he would hold the offer open was made orally over the phone. So we do not meet the requirements of 2-205.
However... in the absence of a firm offer under 2-205, we can look to the common law!! Even though we are in the UCC, a common law option contract remains a valid way to make an offer irrevocable.
Here, we have a valid option contract! Michael agrees to hold the offer open for 30 days in exchange for $50 (consideration) and Dwight accepts and pays him. Therefore, Michael's offer was irrevocable for 30 days and he was not permitted to revoke the following day.
Correct Answer - A - There was no contract between the parties.
The Headless Horseman, a merchant who operates a pumpkin distribution business, sends a purchase order to the Wicked Witch of the West, a merchant who grows and sells organic pumpkins. The Horseman orders 1,000 pumpkins at $5 each for his Halloween festival. The purchase order includes standard commercial terms but does not mention any interest charges or payment terms beyond "net payment."
The Witch responds with an acknowledgment form accepting the order. However, the Witch's acknowledgment includes an additional clause stating: "Interest at the rate of 1.5% per month shall be charged on any invoices not paid within 30 days of delivery." In the pumpkin industry, 1.5% monthly interest (18% annually) on overdue invoices is standard practice and falls within the customary range of trade practice.
Both parties are merchants. The Horseman receives the acknowledgment but does not respond to it. The Witch delivers the pumpkins, and the Horseman accepts delivery.
Under UCC § 2-207, does the interest clause become part of the contract between the Headless Horseman and the Wicked Witch?
A. No, because the Headless Horseman's original purchase order did not include an interest provision, so adding one materially alters the contract.
B. No, because any additional financial obligation materially alters a contract and requires express agreement.
C. Yes, because the interest rate is within the customary range of trade practice and does not involve unreasonable surprise, so it becomes part of the contract under § 2-207(2).
D. Yes, but only if the Headless Horseman expressly agrees to the term in writing.
C. Yes, because the interest rate is within the customary range of trade practice and does not involve unreasonable surprise, so it becomes part of the contract under § 2-207(2).
UCC Comment 5 2-207 - "Examples of clauses which involve no element of unreasonable surprise and which therefore are to be incorporated in the contract unless notice of objection is seasonably given are: a clause setting forth and perhaps enlarging slightly upon the seller's exemption due to supervening causes beyond his control, similar to those covered by the provision of this Article on merchant's excuse by failure of presupposed conditions or a clause fixing in advance any reasonable formula of proration under such circumstances; a clause fixing a reasonable time for complaints within customary limits, or in the case of a purchase for sub-sale, providing for inspection by the sub-purchaser; a clause providing for interest on overdue invoices or fixing the seller's standard credit terms where they are within the range of trade practice and do not limit any credit bargained for; a clause limiting the right of rejection for defects which fall within the customary trade tolerances for acceptance "with adjustment" or otherwise limiting remedy in a reasonable manner (see Sections 2-718 and 2-719)."