THE "BASICS"
Rule for Offer
An offer is (1) a communication showing the Offeror's willingness to enter a contract, that (2) justifies the Offeree in understanding their (Offeree's) assent will immediately create the contract
What are Pre-Existing Legal Duties
In forming a new agreement, it is potentially problematic if a Party is ONLY promising something that the Party already has a legal duty to do
A pre-existing legal duty issue is most likely to arise in a contract to modify a prior contract
HOWEVER - Pre-existing legal duty is NOT limited to contract modifications, as long as the prior contract is between the same Parties
Bargained-For Legal Detriment
Legal Detriment: Acquiring a duty to do something one is NOT legally obligated to do, or to refrain from doing something one has a legal right to do
To be a legal detriment, one must a legal right to do that activity - you cannot promise to not rob a bank, as you cannot legally do so
A legal detriment represents a change in the Party's legal position, NOT necessarily a loss, harm, or disadvantage in the common sense of the words. A legal detriment is a way to describe changes to a Party's situation
What does the UCC apply to?
The sale of goods
Bilateral Contracts
Acceptance via exchanging promises -> consideration = this promise for that promise
EX: This scarf in exchange for that jacket
Rule for Acceptance
Mirror Image Rule: Assent to the exact terms of the offer
Common Law Pre-Existing Legal Duty Rule
NOTE: This rule is most concisely used in a mix-and-match way
In the Common Law, a contract to modify a prior contract is enforceable only when each Party undertakes a legal detriment and requires in exchange what it seeks from the other Party
Forbearance on Suing Rule
Even if the claim later proves doubtful or invalid, forbearance on suing is valid consideration so long as (1) the claimant believes, in good faith, that the claim has merit, AND (2) the claimant has a non-frivolous basis in fact or law for asserting the legal claim
UCC Firm Offer Rule
Merchant Firm Offer Rule is an Offer:
1. By a merchant;
2. To buy or sell goods;
3. In a signed writing;
4. Which gives assurances that the offer will be held open
NOTE: Offer is not revocable during the time stated, or, if no time is stated, for a reasonable time. However, the period of irrevocability cannot exceed 3 months.
NOTE 2: This rule is in addition to, not replacing, the other offer rules
Unlilateral Contracts
Acceptance by performance -> consideration = this promise for that act
EX: Your dog is missing, and I bring you your dog in exchange for money (not in a ransom...)
Duty to Read Rule
A party has a duty to read AND understand ALL contract terms. A party is bound to a term, unless that term exceeds reasonable expectations. The contract is still enforceable if this rule is satisfied
Unanticipated Circumstances Rule
(1) While both Parties are still mid-performance, any contract modification (2) due to unanticipated circumstance is enforceable IF it is (3) mutually assented to by all Parties, (4) procedurally equitable, (5) and substantively equitable
Past Consideration Exeception Rule
Generally, past consideration does not count as consideration when forming a contract, HOWEVER: R2K § 86 - a promise made in recognition of a benefit previously received by the Promisor from the Promisee is binding to the extent necessary to prevent injustice
Case example: Mills v. Wyman - Father made a promise to the innkeeper, this was not enforceable as moral consideration/past consideration do not qualify as consideration for the current act // services were performed before the promise was made - can't exchange a promise for a past act
Contract Modificaiton
Under the UCC, an agreement modifying a contract for the sale of goods is binding without new consideration, IF formed in good faith due to legitimate commercial reasons
Option Contracts
Rules:
1. An option contract, as a fully formed contract, restricts the Offeror's power to revoke another offer
2. Without an option contract, Offeror can revoke an offer prior to acceptance, UNLESS the Offeree has started performance, or detrimentally relied on the offer
Offeror can still revoke even if they promised to keep the offer open (Naked Promise Rule)
Rule for setting the Manner and Medium for Acceptance
Unless the offer requires otherwise, the offer invites acceptance in any manner and by any medium that is reasonable in the circumstances
*See Restatement (Second) Contract §30(2)
Reasonably Certain Terms Rule
An Offer's terms must be reasonable certain Rule: A purported offer is NOT a valid offer unless the terms are reasonably certain- specific enough to determine what constitutes a breach and a remedy thereto
For an agreement to be enforceable, both parties must receive bargained-for consideration. "Bargained-for" means that each party must seek something from the other party in exchange for something that the other party is seeking
*NOTE: This rule does not tell us the scope of that "something", that's where the peppercorn theory of consideration comes in!
Knock Out Rule
Differing terms cancel each other out, and any resulting gaps are filled UCC gap-fillers
Revocation Rule (Direct + Indirect)
Direct: an offer is directly revoked when the Offeror unequivocally communicates that the Offeror will not form the proposed contract. A revoked offer terminates the Offeree's power to accept
Indirect: An offer is indirectly revoked when (1) the Offeree acquires reliable information that, (2) the Offeror did an act that is inconsistent with the offer's terms. A revokes offer terminates the Offeree's power to accept
NOTE: If only one is relevant, you don't need both rules in your rule statement (EX: only Direct Revocation is present, you wouldn't need to include the Indirect Revocation rule)
Mailbox Rule
Unless the offer requires something different, an acceptance (so long as the acceptance was made in a method permitted by the offer) forms a contract as soon as the acceptance is put out of the offeree's possession, even if the communication of the acceptance never reaches the offeror
IOW: Acceptance is in effect upon dispatch, unless the terms of the offer state otherwise
Material Breach depends on the following factors:
1. How deficient was the breaching Party's performance? The greater the deficienty = more likely a material breach;
2. How much the breaching Party would lose if the contract were cancelled? Greater loss to the breaching party = less likely to be a material breach;
3. How much the breaching Party was willing AND able to fix the breach after the fact? More willingness and ability to fix = less likely to be a material breach;
4. The extent in which the breaching Party acted in good faith? More good faith = less likely to be a material breach
"Naked Promise" Rule
A "Naked Promise" is only enforceable if the promise expressly revives a prior promise that had legal consideration
Sufficient Writing Rule
To satisfy the Statute of Frauds under the U.C.C., a writing must:
1. Show that a contract has been made
2. Be signed by the party to be charged (IOW: Party disputing the enforceability of the contract)
3. AND describe the quantity of the goods sold
What events terminate the Offeree's power to accept?
Terminating Offers - Rule: Offer termination rule identifies events that terminate the Offeree's power of acceptance; when termination of an offer occurs, the first step is to determine if a valid termination event occurred.
Events that terminate the Offeree's power to accept:
1. Offeree made a counteroffer;
2. The Offeror directly or indirectly revoked the offer;
3. The period of time in which the offer could be accepted has lapsed or ended;
4. Offeree rejected the offer;
5. OR, Offeror's or Offeree's subsequent death or legal incapacity
- This doesn't terminate the contract, it terminates the OFFER