Contracts!

Types of Offers

100

Fill in the blank! 

_________ is a promise by offeror in exchange for promise by offeree. 

_________ is a promise by offeror in exchange for performance by offeree. 

Bonus Points: How do you accept these promises?

Bilateral; Unilateral 

Bilateral: Accept by making a return promise

Unilateral: Accept by completing requested performance 

200

Sarah tells Leo: "I will buy your used laptop next Monday for $500."

Leo responds: "Deal. I promise to sell it to you for that price next Monday."

What kind of offer? 

Bonus Points: Explain your reasoning!

Bilateral! 

Both parties have committed to a future action. Sarah promised her money, and Leo promised his laptop.

300

When does an offer end? 

1.When specified by the offer;

2.Reasonable time (if not specified time);

3. Immediately (if instant communication → face-to-face, phone call, etc)

400

Monday: Homeowner Harriet leaves the exact same voicemail for Painter Pete: "If you paint my entire house by Friday at 5:00 PM, I will pay you $4,000. I don’t want a phone call or a promise; I only care if the job gets done."

Tuesday (10:00 AM): Pete drives to a local hardware store. He spends $500 of his own money on 20 gallons of custom-mixed paint that matches Harriet’s house. He loads the paint and his ladders into his work truck.

Tuesday (1:00 PM): Before Pete can drive over to Harriet's house to start working, Harriet calls him: "Change of plans. My brother is going to do it for free. I revoke my offer."

The Aftermath: Pete is furious. He drives over to Harriet's house anyway on Wednesday, sets up his ladders, and spends the next two days painting the entire house. Harriet refuses to pay him. Pete sues for the $4,000 contract price, or alternatively, the $500 he spent on paint.

• The Rule: Buying supplies, gathering tools, or driving to the job site are legally categorized as preparation to perform, not the beginning of performance. Performance on a painting contract only begins when the brush or scraper physically touches the house.
• The Impact: Because Pete was still in his truck and hadn't touched Harriet's property yet, the Restatement § 45 option contract was never triggered. Harriet retained her full right to revoke.
• The Outcome: Harriet's 1:00 PM phone call successfully killed the offer. When Pete showed up on Wednesday to paint anyway, he was doing so without an open offer. No contract was ever formed, and Pete cannot collect the $4,000.

2. The Alternative Remedy: Promissory Estoppel

Since Pete loses his contract claim, his attorney will plead an alternative cause of action under Promissory Estoppel (Restatement § 90) to recover his out-of-pocket losses.

• The Rule: An offeror can be held liable for an offeree's costs if they made a clear promise, reasonably expected the offeree to rely on it, and the offeree suffered a financial detriment.
• The Application: Harriet knew Pete was a professional painter. She should have reasonably foreseen that he would go buy paint to fulfill her request. Pete reasonably relied on her word and spent $500 on custom paint he cannot return.

Final Conclusion:

Pete does not get the $4,000 contract price because Harriet revoked before he began actual performance. However, Pete wins $500 in reliance damages under Promissory Estoppel to compensate him for the wasted paint.

500

What kind of offer is this? 

Anna writes a letter to Bob: "I need someone to paint my vintage barn. If you get it painted by Friday, I will pay you $1,500." 

Bonus Points: Explain the reasoning behind the answer! 

Doubtful offer!

Why?

A doubtful offer in contract law refers to an ambiguous offer where it is unclear whether the offeror wants the offeree to accept by promising (bilateral contract) or by rendering the requested act (unilateral contract). 

In this case, it is unclear whether Anna wants Bob to send a return promise first ("Yes, Anna, I promise to paint it by Friday") to lock in a bilateral contract, or if Anna doesn't want any talk and only cares if Bob actually shows up and paints the barn by Friday (a unilateral contract).

UCC or Common Law?

100

What does UCC govern? What does Common Law govern? 

The UCC governs the sale of movable goods

-Good: moveable at the time of identification to the K

COMMON LAW RULE: Everything not governed by the UCC is governed under the common law, such as services. 

200

What is the Last Shot Doctrine? 

Is this a rule under UCC or Common Law?

The last shot doctrine is a traditional common law rule used to determine the final terms of a contract when parties exchange conflicting forms (often called the "Battle of the Forms").

Under the common law, if a buyer and seller exchange purchase orders and confirmation forms with different terms, the last form sent before performance begins dictates the rules of the entire contract.

The last shot doctrine is a direct consequence of two other strict common law rules:

1. The Mirror Image Rule: An acceptance must exactly match the offer. If the response changes or adds any term, it is not an acceptance; it is a counteroffer that completely kills the original offer.
2. Acceptance by Performance: If a party performs their side of the deal (like shipping goods or paying for them) after receiving a counteroffer, their performance counts as an implied acceptance of that counteroffer.

Therefore, whichever party fires the "last shot" (sends the final piece of paperwork before the work actually starts) wins the battle. Their terms become the contract.

300

MegaCorp hires PaintPro to paint their corporate office for $10,000. Halfway through the job, PaintPro says, "The walls are rougher than we thought. We need an extra $2,000 to finish, or we walk." MegaCorp agrees in writing. After the job is done, MegaCorp only pays $10,000.

Under Common Law, what would the outcome be? Why?

MegaCorp wins and does not owe the $2,000. Under Common Law, a modification requires new consideration. Because PaintPro already had a "pre-existing duty" to paint the office, their promise to finish the job is not new consideration.

400

MegaCorp contracts to buy 500 custom office chairs from ChairCo for $10,000. Halfway through production, ChairCo states that plastic costs have spiked, and they need an extra $2,000 to finish the order. MegaCorp agrees in writing. Upon delivery, MegaCorp pays only $10,000.

Under UCC, what is the outcome? Why?

The Outcome: ChairCo wins and MegaCorp owes the $2,000. Under UCC § 2-209, a contract modification does not need new consideration to be binding. It only requires good faith commercial reasons.

500

What are the UCC Gap Fillers? 

DELIVERY: if not stated, SINGLE DELIVERY

PLACE OF DELIVERY if not stated, SELLER’S PLACE OF BUSINESS

TIME FOR SHIPMENT: if not stated, REASONABLE TIME

PAYMENT: if not stated, amount is a REASONABLE PRICE at the TIME OF DELIVERY

Payment due at the time and place of delivery

Consideration!

100

Define "Illusory Promise"

An illusory promise is a statement that sounds like a commitment, but places no actual obligation on the person making it. Because the speaker retains complete choice over whether to perform, they have promised absolutely nothing.

Example: Alpha Corp signs an agreement with Beta Supply: "Alpha will buy 1,000 widgets from Beta next month at $10 per widget, unless Alpha's CEO changes his mind and decides not to." 

The Promisor can back out, making this an illusory promise. 

200

What is the Rule for Promisory Estoppel?

1. A promise;

2.Promisors should reasonably expect promisee’s reliance;

3.Promise does induce reasonable reliance from promisee;

4. Damages limited to the extent necessary to avoid injustice

300

If a party is already legally or contractually required to do the act, performing it is not a legal detriment and cannot serve as new consideration. 

What is this called? And is it governed by UCC or Common Law? 

The pre-existing duty rule belongs strictly under Common Law.

Under Common Law (which governs services and real estate), a contract modification is void unless it is supported by new consideration. If a party promises to do something they are already legally obligated to do, that does not count as new consideration.

Conversely, the UCC (Uniform Commercial Code) has completely abolished the pre-existing duty rule. Under UCC § 2-209(1), an agreement modifying a contract for the sale of goods needs no consideration to be binding, provided the modification is made in good faith.

400

The Offer: Subcontractor Sam (an electrical subcontractor) submits a bid to General Contractor Genny: "I will do all the electrical wiring on the new city library project for $50,000."

 Genny is preparing her master bid to win the city contract. She relies directly on Sam’s low $50,000 figure to calculate her final numbers. Genny submits her total bid to the city.

 The next day, the city announces that Genny won the project. Before Genny can call Sam to officially accept his offer, Sam calls her: "Hey, I miscalculated my wire costs. I am revoking my bid; I won't do it for a penny under $70,000."

 Genny is legally locked into her contract with the city based on the lower numbers. She has to hire a different electrician for $70,000 instead and sues Sam for the $20,000 difference.

What is the outcome? 

1. Reasonable Expectation: Sam knew Genny was a general contractor using his figures to bid on a major project. He should reasonably expect her to rely on his offer.
2. Substantial Reliance: Genny did rely on it by binding herself to the city using his $50,000 price point.
3. Injustice: Allowing Sam to walk away leaves Genny holding a $20,000 penalty through no fault of her own.

The Outcome: The court rules that Sam's offer was an equitable option contract that could not be revoked. Sam is liable to Genny for the $20,000 in reliance damages. 

Rule: If offeree reasonably relies on offer before acceptance is possible, an equitable option K is created. 

500

Uncle Arthur is a wealthy real estate investor. His nephew, Ben, is a 21-year-old college student who has struggled with his grades. At a family dinner, Arthur tells Ben:

"Ben, I am so incredibly proud that you finally passed your chemistry class last semester. Because you worked so hard, and because I want to make sure you can focus on your upcoming finals next month without stressing about money, I promise to pay you $10,000 next Monday. Just make sure you drive over to my mansion on Sunday evening to pick up the check."

Ben is thrilled. He immediately goes online and books a non-refundable $2,000 spring break trip to Europe, relying on the expected cash. On Saturday, Ben calls his uncle to confirm the time. Arthur tells him, "I talked to your mother and found out you got a C- in that chemistry class. I changed my mind. The deal is off."

Ben drives to his uncle's mansion on Sunday anyway, but Arthur refuses to see him. Ben sues Arthur for breach of contract to collect the $10,000.

What is the outcome?

1. The "Past Consideration" Trap

Arthur explicitly stated he was making the promise because Ben "finally passed your chemistry class last semester."

• The Law: Past consideration is no consideration. Because Ben had already completed and passed the class before Arthur made the promise, that performance cannot be "bargained for" in exchange for the $10,000. 
• For consideration to exist, there must be a "bargained-for exchange." This means your promise must cause the other person's action, and their action must cause your promise. They must happen because of each other.

  Arthur did not bargain for Ben to pass chemistry. Arthur cannot say, "I will give you $10,000 next Monday in exchange for you passing that class last semester." Why? Because the passing has already happened. It is entirely in the past. Ben cannot change the past, and Ben cannot offer "passing the class" as a new bargaining chip because he has already done it. Therefore, Arthur's promise is legally viewed as a reward or a gift for a past good deed, not a commercial bargain.

2. The "Condition on a Gift" Trap

Arthur told Ben, "Just make sure you drive over to my mansion on Sunday evening to pick up the check." 

• The Law: This is a conditional gift, not a bargained-for exchange. Arthur did not promise the $10,000 because he deeply desired the benefit of seeing Ben's car in his driveway. The drive was simply the necessary mechanism for Ben to receive the gift. Therefore, the walk or drive does not count as legal consideration.

3. The "Motive vs. Consideration" Trap

Arthur stated his motive was "to make sure you can focus on your upcoming finals next month without stressing about money."

• The Law: A benevolent desire to help someone or an altruistic motive does not substitute for consideration. Arthur is not bargaining for Ben to study; he is explaining why he wants to give him a gift.

4. The Promissory Estoppel Safety Net

Because the contract fails entirely for lack of consideration, Ben’s only hope is Promissory Estoppel (Restatement § 90).

• The Application: Arthur made a clear promise, and Ben foreseeably and reasonably relied on it by spending $2,000 on a non-refundable trip.
• The Outcome: The court will reject Ben's contract claim due to zero consideration, but will award him $2,000 in reliance damages under promissory estoppel to prevent injustice. Ben does not get the full $10,000.

Enforceable or not? Voidable or not?

100

We know contracts made between a minor & adult are voidable by the minor. However, what is the moment of ratification by a minor that makes the contract enforceable?

If a party who has a defense (such as minority capacity) accepts the benefits from K or is silent for a considerable length of time after the opportunity to annul the K, ratification occurs. 

K is no longer voidable at this time.

200

Landlord Larry writes a letter to Ted: "I offer to sell you the Oak Street Lot for $100,000. I promise to keep this offer open for 30 days." Two weeks later, before Ted responds, Larry calls Ted and says, "I change my mind, the offer is revoked." Ted tries to accept anyway. 

Is this enforceable?

The Outcome: Larry successfully revoked. Under Common Law, a promise to keep an offer open is not binding unless the offeree pays for it (creating an option contract). Because Ted gave no money (consideration) to keep the offer open, Larry could revoke it at any time.

300

Developer Dave contracts with Builder Bob to construct a house. The written contract states: "Bob will build a two-story residential home on Dave's lot at 123 Main Street. The house must be built using first-class, highly aesthetic materials and feature a modern, pleasing design. Dave will pay Bob $400,000 upon completion." 

Bob builds the house, but Dave refuses to pay, claiming the design isn't "modern" or "pleasing" enough to his taste. Bob sues.

What is the outcome?

The contract fails for indefiniteness. Terms like "first-class," "highly aesthetic," and "pleasing design" are purely subjective and vague. A court has no objective standard to measure whether Bob fulfilled his promise or breached it. The contract is void.

400

Seller agrees to sell a cow named "Rose 2d" to Buyer for $80. Both parties firmly believe that Rose is barren (cannot have calves). Because they think she cannot reproduce, she is only worth her weight in beef ($80). Before delivery, the Seller discovers Rose is actually pregnant. A pregnant breeding cow is worth $1,000. Seller refuses to hand her over.

What is the outcome? 

A contract is voidable by the victim party if:

1.A mistake of fact is made at the time of the K;

2.That has a material effect on the value of performance;

3.The harmed party did not bear the risk of mistake

a.Contract allocates risk of error to both parties; or

b.Party is aware that at time of K, they had limited knowledge as to a material fact and proceeded anyway; or

c.One party could have reasonably discovered the truth

The Legal Outcome: Seller wins and can void the contract. This is a valid mutual mistake. Both parties were mistaken about the nature and character of the item being sold (a barren cow vs. a breeding cow). It wasn't just a bad guess about market prices; the entire identity of the commercial good was different than what they agreed upon.

500

Chef Pierre owns a high-end restaurant. He contracts with KitchenTech, a commercial outfitters company, to upgrade his kitchen. The written agreement states:

"KitchenTech will supply and install a custom-engineered walk-in flash-freezer for a flat fee of $60,000. KitchenTech will also provide 6 months of weekly mechanical maintenance services post-installation, valued at $5,000, included in the flat fee. Total contract price: $65,000. Any modifications to this agreement must be in writing and signed by both parties."

Two weeks into the project, a global steel shortage doubles KitchenTech’s manufacturing costs for the freezer's insulated panels. KitchenTech’s manager calls Chef Pierre and says, "Our costs skyrocketed. We cannot deliver the freezer unless you agree to pay an extra $8,000."

Chef Pierre is desperate to open his restaurant on time. He tells the manager over the phone, "Fine, I'll pay you the extra $8,000 if you finish on time."

KitchenTech finishes the installation perfectly and on schedule. Chef Pierre pays KitchenTech the original $65,000 but refuses to pay the additional $8,000. KitchenTech sues for the $8,000.

Is Chef Pierre legally obligated to pay the extra $8,000?

The Application: The total contract is $65,000. The flash-freezer (a tangible, moveable good) is worth $60,000, while the maintenance (a service) is only worth $5,000.

The Conclusion: The primary thrust of the contract is the sale of a high-tech good. The maintenance service is merely incidental. Therefore, the UCC governs the entire contract.

Because the UCC applies, you must look at UCC § 2-209

Step A: Under UCC § 2-209(1), a modification needs no consideration to be binding, provided it is made in good faith. A global steel shortage is a legitimate, unforeseen commercial reason. If this were a pure UCC analysis with no other clauses, the modification would be valid despite the lack of new consideration (unlike Common Law, which would fail under the Pre-existing Duty Rule).

Types of Agreements

100

What Type of agreement is this? 

Parties leave open an important term and specifically say “to be agreed upon”. 

Bonus Points: Is this type of agreement enforceable?

Agreement to agree!

Agreements to agree are NOT enforceable! 

An agreement to agree occurs when the parties leave a material term (like price, delivery date, or scope of work) open, explicitly stating they will figure it out later. Because a vital piece of the contract is missing, the contract is fatally vague.

200

What is an agreement to negotiate? 

An agreement to negotiate does not guarantee a final contract will be signed. Instead, it binds the parties to a process. They promise that they will bargain honestly, transparently, and in good faith to try to close the deal. These are enforceable! 

300

What are the types of Revocations? Explain in detail for each type. 

Direct Revocation

A direct revocation occurs when the offeror explicitly and unambiguously communicates directly to the offeree that the offer is no longer open.

• How it works: The communication can be made orally, in writing, via text, or email. It is only effective upon receipt by the offeree (the Mailbox Rule does not apply to revocations).
• Example: Alpha offers to sell his car to Beta. The next morning, before Beta accepts, Alpha calls Beta and says, "I have changed my mind; the car is no longer for sale." The offer is directly revoked.

2. Indirect Revocation

An indirect revocation occurs when the offeror does not tell the offeree directly, but the offeree learns through a reliable source that the offer is no longer available [Restatement (Second) of Contracts § 43].

• The Two-Part Test: For an indirect revocation to be legally effective, you must prove:
  1. The offeror took definite action inconsistent with an intent to enter into the proposed contract (e.g., selling the item to someone else).
  2. The offeree acquired reliable information about that action.
• Example: Based on the famous case Dickinson v. Dodds. Larry offers to sell his house to Ted, giving Ted until Friday to decide. On Wednesday, Ted's real estate agent tells him, "Hey, just so you know, Larry just signed a contract to sell that exact house to Uncle Arthur." Ted immediately rushes to Larry with an acceptance form.
• The Legal Outcome: Ted's acceptance fails. The offer was already indirectly revoked the moment Ted received reliable information that the house was sold to Arthur.

400

• Monday, October 5: Owner mails a letter to Buyer stating: "I am looking to sell my vintage record player. I am offering it to you for $500. Let me know your answer by Friday."
• Tuesday, October 6: Buyer receives the letter at 10:00 AM, opens it, and reads it.
• Wednesday, October 7 (9:00 AM): Owner changes his mind. He writes a revocation letter, prints it out, and drops it in the mail.
• Wednesday, October 7 (2:00 PM): Buyer decides he wants the record player. He writes an acceptance letter and drops it in the mailbox at the post office.
• Thursday, October 8 (11:00 AM): The mail carrier delivers Owner's revocation letter to Buyer's house. Buyer reads it.
• Friday, October 9 (10:00 AM): The mail carrier delivers Buyer's acceptance letter to Owner's house. Owner reads it and refuses to sell, claiming he revoked the deal first.

Classify each step as either offer, acceptance, nothing, or revocation. Then say the final outcome!

1. The Offer

• The Date: Tuesday, October 6 at 10:00 AM
• The Reason: An offer is not legally effective when it is written or when it is floating in the mail. It is only legally effective when it is received and read by the offeree, giving them the power of acceptance.

2. The Acceptance

• The Date: Wednesday, October 7 at 2:00 PM
• The Reason: This triggers the Mailbox Rule. The moment Buyer drops his acceptance letter into the post office mailbox, a binding bilateral contract is created. It does not matter that Owner hasn't read it yet; the legal "handshake" occurred at 2:00 PM on Wednesday.

3. The Revocation (The Failed Attempt)

• The Date: Thursday, October 8 at 11:00 AM
• The Reason: Owner dropped his revocation in the mail on Wednesday morning, but the law states that revocations are completely ineffective until they physically land in the offeree's hands. Because the revocation didn't arrive until Thursday, it was a day too late.

Final Conclusion:

A valid contract exists. Because the Acceptance (Wednesday at 2:00 PM) occurred before the Revocation became effective (Thursday at 11:00 AM), Owner is legally bound to sell the record player for $500. His attempt to revoke after the acceptance was already dispatched is legally void.

500

• Monday, Oct 5: Seller mails a physical letter to Buyer: "I offer to sell you my commercial espresso machine for $3,000. Let me know your answer by Friday."
• Tuesday, Oct 6 (10:00 AM): Buyer receives the letter and reads it.
• Wednesday, Oct 7 (9:00 AM): Buyer decides $3,000 is too high. He writes a counteroffer letter: "I want it, but I will only pay $2,500." He drops it in a mailbox at the post office.
• Wednesday, Oct 7 (1:00 PM): Buyer panics, realizing $3,000 is actually a bargain. He immediately writes an acceptance letter: "Forget my earlier letter. I accept your original offer of $3,000!" He drops it in the exact same post office mailbox.
• Thursday, Oct 8 (11:00 AM): The post office delivers the acceptance letter to Seller's house first. Seller opens it, reads it, and says, "Great! We have a deal."
• Friday, Oct 9 (10:00 AM): The post office delivers the counteroffer letter to Seller's house. Seller reads it, gets confused, and calls Buyer saying, "Hey, I see you sent a counteroffer. The deal is off."

1.  The Offer

• The Date: Tuesday, October 6 at 10:00 AM
• The Reason: Legally effective when received and read by the Buyer, opening the power of acceptance.

2. The Counteroffer (Wednesday, 9:00 AM)

• The Impact: Usually, a rejection or counteroffer is only effective upon receipt. However, because it was sent first, it strips the Buyer of the benefit of the Mailbox Rule for any subsequent letters. The contract status hangs in limbo until something arrives.

3. The Acceptance (Wednesday, 1:00 PM)

• The Impact: Because the counteroffer was already in the mail, this acceptance does not form a contract upon dispatch. The Mailbox Rule is dead here. This acceptance letter is only effective if it physically beats the counteroffer to the Seller's house.

4. The Race Outcome (Thursday, 11:00 AM)

• The Event: The acceptance letter arrives first.
• The Reason: Because the acceptance physically landed in the Seller's hands before the counteroffer did, a binding bilateral contract was formed at 11:00 AM on Thursday.

Final Conclusion:

A valid contract exists for $3,000. The counteroffer that arrived on Friday has no legal effect because the contract was already cemented the day before. Seller cannot back out; he must hand over the espresso machine for $3,000.