Contracts 1

Question 1

What is the most accurate statement of law?

A. The common law covers the sale of goods

B. The UCC covers the sale of movable goods

C. The UCC covers the sale of movable things

D. The UCC covers the sale of goods

Answer 1

D. The UCC covers the sale of goods

The UCC covers the sale of goods. Choice (B) represents a very common mistake. The term “movable goods” is redundant since “goods” are defined (in broad terms) as “movable things.” Saying “movable goods” is the same as saying “movable movable things.” Lawyers need to cite the law precisely. Answer (C) combines two rules together. The problem with this is that while “goods” (broadly defined) are movable things; there are many additional rules found in the definitions for goods. The best answer here is (D).

Chapter 2

Question 2

The predominant purpose test relates to?

A. (A) contracts for the sale of land

B. contracts for the sale of goods.

C. contracts for the sale of services

D. mixed goods and services contracts.

Answer 2

The correct answer is (D). To determine if the UCC Article 2 applies to a mixed services and sale of goods contract, courts should determine whether the predominant purpose of the transaction is, reasonably stated, either the rendition of service, with goods incidentally involved, or a sale of goods, with labor incidentally involved.

Chapter 2

Question 3

Which factor(s) do courts focus on in determining the predominant purpose of the contract?

A. The language of the contract

B. The nature of the business of the supplier of goods and services

C. The intrinsic value of the goods vs. the cost of the service

D. All of the above.

Answer 3

The correct answer is (D). All of the above. In the predominant purpose test, a court weighs relevant factors to determine the nature of the contract. Some important factors that courts have considered include all three listed factors. Normally, in a factor-based test, no one factor is dispositive, and every factor does not have to weigh in one direction. Instead, courts consider all facts and circumstances to reach a conclusion. For example, the nature of the business could predominantly be the sale of goods. However, if all the other factors suggest the sale of services, then the common law will probably apply.

Chapter 2

Question 4

In this course, we will only apply the common law when discussing…

A. contracts for the sale of goods

B. service contracts, construction contracts, employment contracts, land sale contracts, and anything else that is not the sale of goods.

C. contracts for the international sale of goods.

D. contracts for the sale of timber to be cut

Answer 4

The correct answer is (B) service contracts, construction contracts, employment contracts, land sale contracts, and anything else that is not the sale of goods. Thus, it is fair to say that the common law applies to any transaction that falls outside the coverage of the UCC. Often people summarize the coverage of the common law as applying to contracts for the services and real estate.

Chap 2

Question 5

True or false. Under the gravamen test, the court does not attempt to classify the contract as a whole, but rather it applies the UCC if the controversy in question relates to the sale of goods component, and applies the common law if the issue arises out of the services component.

Answer 5

True

The correct answer is (A) True. The gravamen test focuses on the nature of the complaint rather the character of the transaction. The test asks, “Did the essence of the complaint arise from the performance of services or the from the goods sold?” If the lawsuit is brought because the good had a product defect, then the UCC likely applies. If the lawsuit is brought because of negligence in the provision of installation services, like the delivering and setting up a refrigerator, then the common law likely applies.

Chapter 2

Question 6

Kent, a wealthy lawyer, contracts with Jacob & Youngs Mobile Homes, Inc. to have two mobile homes built. One is to be airlifted to a remote area of the Adirondack Mountains, where Kent plans to use it as a hunting and fishing retreat. The other is to be transported to remote island in the Caribbean, where Kent plans to use it as a winter hideaway. The contract provides that all pipe used in the mobile homes “must be well galvanized, lap welded pipe of the grade known as ‘standard pipe’ of Reading Manufacturer.”

When the mobile homes are completed, Kent goes to the factory to inspect them prior to having them transported to their sites by another contractor under a separate contract. Kent discovers that Jacob & Youngs used the wrong pipe from one of the homes. If Kent bring suit, which body of law would the court apply?

A. UCC
B. Common Law

Answer 6

A. UCC

The correct answer is (A) UCC. Under § 2-105(1), goods are “all things (including specially manufactured goods) which are moveable at the time of identification to the contract for sale other than money in which the price is to be paid, investment securities (Article 8) and things in action.” Uninstalled mobile homes, such as the ones at issue here, fit this definition pretty clearly.

Question 7

True or false. The UCC only applies to contracts for the sale of goods where one or both of the parties is an experienced, professional buyer or seller.

Answer 7

False

The correct answer is (B) False. The simple answer is that if a contract is for the sale of goods, the UCC applies, irrespective if who the parties to the contract may be. It does not matter whether the parties are professional and experienced or casual noobs.

Question 8

A homeowner buys carpet from a carpet retailer for $1,000. As part of the deal, the retailer agrees to deliver and install the carpet in the homeowner’s living room for free on August 30. The contract between the homeowner and the retailer is titled, “Agreement for Purchase and Sale of Carpet.” It identifies the brand, style, and color of carpet picked out by homeowner and specifies the quantity and price. It makes no mention of delivery and installation. The retailer delivers and installs the carpet three days late—on September 2 rather than August 30. The homeowner sues the retailer for damages.

Question: Assuming the court uses the predominant purpose test, which body of law would the court apply?

A. UCC

B. Common Law

Answer 8

A. UCC

The correct answer is (A) UCC. The language of the contract, the nature of the retailer’s business, and the large cost difference between the goods, $1,000 for the carpet, and the services, $0 for delivery and installation, all point to the sale of goods predominating. Indeed, the delivery and installation seem at best incidental.

Chapter 2

Question 9

A homeowner buys carpet from a carpet retailer for $1,000. As part of the deal, the retailer agrees to deliver and install the carpet in the homeowner’s living room for free on August 30. The contract between the homeowner and the retailer is titled, “Agreement for Purchase and Sale of Carpet.” It identifies the brand, style, and color of carpet picked out by homeowner and specifies the quantity and price. It makes no mention of delivery and installation. The retailer delivers and installs the carpet three days late—on September 2 rather than August 30. The homeowner sues the retailer for damages.

Question: Assuming the court uses the gravamen test, which body of law would the court apply?

A. UCC

B. Common Law

Answer 9

B. Common Law

The correct answer is (B) Common law. The essence of the homeowner’s complaint has to do with the retailer’s delivery and installation of the carpet. These are services. As such, the court would apply the common law.

Question 10

The Restatement (Second) of Contract is

(A) binding on courts.

(B) primary authority

(C) secondary authority

(D) an attempt to harmonize the different laws covering sales in each state.

Answer 10

The correct answer is (C) secondary authority. The Restatement (Second) of Contracts is secondary authority, albeit an important and persuasive one. It is an attempt to distill the common law from individual cases into a set of generalized rule. We will refer to the Restatement often.

Chap 2

Question 11

True of false. When trying to determine a party’s intent, a court will start by considering the ordinary meaning of the words.

Answer 11

True

True. Determining a party’s intent is a key concept used throughout our study of contracts. One of the principal ways that courts ascertain the parties’ intent is by considering the ordinary meaning of the language used.

Chap 3

Question 12

Choose the best answer. The meaning of a party’s manifestation of assent is judged …

(A) by the objective reasonable interpretation of his outward expression of consent and not by his subjective intent.

(B) by the party’s subjective meaning regardless of his outward expression of consent.

Answer 12

A. Is correct

As the text notes, language can be ambiguous and interpreted in different ways. Additionally, a party might state clearly that they want to enter into a contract but inwardly have some doubt about the terms. Consequently, a party’s subjective intent might not match what they said outwardly. In order to resolve this problem of claiming a subjective intent, courts adopted the objective theory of mutual assent to interpret a party’s intent.

Chap 3

Question 13

Choose the best answer. Shirley and Leon are contemplating entering into a contract. Shirley knows that Leon has a certain interpretation of a provision of that contract. Shirley has a different interpretation, and Leon is unaware of Shirley’s interpretation. Both interpretations are reasonable. Shirley and Leon enter the contract, but there is a dispute later over the interpretation of the provision mentioned above. If a court is applying Restatement (Second) of Contracts §201, whose interpretation will the court most likely follow?

A. Shirley’s

B. Leon’s

Answer 13

The correct answer is (B).

Restatement (Second) of Contracts §201(2)(a) provides as follows: “Where the parties have attached different meanings to a promise or agreement or a term thereof, it is interpreted in accordance with the meaning attached by one of them if at the time the agreement was made (a) that party did not know of any different meaning attached by the other, and the other knew the meaning attached by the first party.”

Shirley knew that Leon had a different interpretation, and Leon was unaware of Shirley’s interpretation. Therefore, the Restatement favors the innocent party—Leon—thereby creating an incentive for the party with superior knowledge—in this case, Shirley—to clear up the mistake.

Chap 3

Question 14

Choose the best answer. Charlie wants to play a prank on his friend Jeremy. He knows that Jeremy wanted to purchase Charlie’s vintage 1963 Ford Thunderbird; however, Charlie refused to sell it. Additionally, Charlie was sure that Jeremy did not have the money to purchase the car. One night while drinking, Charlie taunts Jeremy and says that he is willing to sell Jeremy the car for $30,000 — a price that is 25% above the fair market value. Jeremy agrees, and Charlie puts their agreement in writing. After sobering up the next day, Charlie was surprised to find Jeremy on his doorstep with a certified check for $30,000 demanding possession of the car. Charlie refuses, and Jeremy sues for breach of contract. Which of the following best states the legal relationship?

(A) There is no contract since Charlie was honestly playing a prank on his friend, and Charlie never intended to enter the agreement.

(B) A contract exists and Charlie is liable for breach.

Answer 14

The correct answer is (B).

This hypothetical replicates the issue in Lucy v. Zehmer but with different facts. A party’s language is judged by the objective meaning and not by their inward subjective intent.

Chap 3

Question 15

Choose the best answer. Two parties enter a contract but they have different interpretations of an important term of the contract. Both interpretations are reasonable. Neither party knows of the other party’s interpretation. If the parties end up in litigation over the contract and a court applies Restatement (Second) of Contracts § 201, which of the following statements best reflects a likely outcome?

(A) The court would decide which interpretation would be most objectively reasonable without regard to the intent of the parties.

(B) The court may conclude that a contract never formed since there was no “meeting of the minds.”

Answer 15

Answer (B) is the better answer.

Restatement (Second) of Contracts § 201(3) states as follows: “Except as stated in this Section, neither party is bound by the meaning attached by the other, even though the result may be a failure of mutual assent.” If the parties disagree on how to interpret a particular term and each interpretation is equally reasonable, then the objective standard does not apply. In such circumstances, the court may conclude that a contract never formed since there was no “meeting of the minds.” If there was never an agreement on a term and there is a material effect on the performance of one party, then the court will not enforce the agreement.

This principle is illustrated by the case Raffles v. Wichelhaus, also known as the Peerless ship case.

Chap 3

Question 16

Choose the best answer. Andy Toney, a third-year student at Delaware Law School, was the captain of the law school rugby club. One evening, Toney and a few of his rugby teammates were drinking beer at Pete’s Pub, a favorite Delaware Law School hangout. They were worried that the rugby club would be forced to disband because the law school had withdrawn its sponsorship. While Toney was discussing the problem with his teammates, Pete, the owner of the pub, approached the players. Pete indicated that he was interested in sponsoring the rugby club because he felt it would help business at the pub. During the ensuing discussion, Pete said that he would sponsor the rugby club by paying for rugby shirts and supplying the keg of beer following each home game the club played. Toney agreed to Pete’s sponsorship. “Sounds good,” said Toney.

Toney and Pete intended to reduce their agreement to writing but never did so. They both said, “Forget about the writing.”

Though Pete never said it, Toney assumed that Pete’s sponsorship would cover (1) the shirts, (2) the keg of beer (following home games), (3) transportation expenses for away games, and (4) equipment expenses.

Which of the following is the most accurate statement regarding the legal relationship between the parties?

(A) A contract exists under which Pete will pay only for rugby shirts and beer kegs.

(B) A contract exists under which Pete will pay for rugby shirts, beer kegs, transportation expenses, and equipment expenses.

(C) No contract exists, because Pete and Toney were thinking two different things.

(D) No contract exists, because Pete and Toney never reduced their agreement to writing as they had planned.

Answer 16

The correct answer is (A).

A contract is based on the mutual assent of the parties to the essential terms of the agreement. It is measured not by the hidden, subjective intent of the parties but rather by looking objectively at the parties’ manifestations—their words and conduct—to see if they amount to assent to the agreement. Pete said that he would sponsor the rugby club by paying for rugby shirts and supplying the keg of beer following each home game the club played. Toney, at least outwardly, manifested agreement to this. He specifically said, “Sounds good.” The fact that Toney was subjectively thinking about something different is irrelevant. He manifested agreement to Pete’s offer to pay for shirts and beer kegs. Moreover, the fact that Toney and Pete intended to reduce their agreement to writing does not change the analysis. Both Toney and Pete manifested an intent to be bound despite the lack of a writing. They said, “Forget about the writing.”

Chap 3

Question 17

Choose the best answer. Valentina owns and lives in a handsome Victorian house that has been in her family for over 100 years. Every time her friend Booker has visited her, Booker has said, ‘‘Valentina, I love your house. Please sell it to me right now.’’ Valentina has consistently answered, ‘‘Never!’’ After this had been going on for many years, Valentina became irritated with it. As far as she knew, Booker had no money and had never been serious in his request to buy the house. It was simply mindless prattle.

Valentina decided to put an end to the annoying routine by shaming Booker into silence. She prepared a deed of sale that she placed in a drawer. The deed was on a real legal form that she had purchased from a stationer. She fully filled out all the blanks, included a price somewhat exceeding the market value of the house, and signed it. The next time Booker was at the house and urged Valentina to sell it to him, she whipped the deed out of the drawer and exclaimed, ‘‘Okay, Booker. Put up or shut up! Sign this and the house is yours.’’

Instead of reacting with embarrassment and confusion, as Valentina expected, Booker coolly read the deed, expressed satisfaction, and signed it. At first, Valentina thought that Booker was simply playing along with her, but it is now clear that he did not see the bluff, took the offer seriously, and does have the financial means of buying the house. Booker insists that the transfer proceed. Valentina is sick with grief at the prospect of parting with her beloved family homestead.

Is Valentina bound to a contract?

(A) No, because a reasonable person would have known that Valentina was joking.

(B) No, because Valentina intended only to make a bluff.

(C) Yes, because Valentina outwardly manifested to Booker a serious intent to enter into an agreement to sell her home to Booker.

(D) Yes, because Valentina knew that Booker had been serious for some time about buying her home.

Answer 17

The correct answer is (C).

Valentina is likely bound to sell her house to Booker. Whether Valentina and Booker have a contract is determined by ascertaining whether there was a manifestation of mutual assent. Mutual assent means the parties have both agreed to the essential terms of a proposed agreement. Mutual assent is measured not by the hidden, subjective intent of the parties but rather by looking objectively at the parties’ manifestations—their words and conduct—to see if they amount to assent to the agreement. This examination is referred to as the objective theory of contracts. It has two parts: (1) The actual mental assent of the parties is not required if their words and actions shows assent; and (2) If it is shown that the party seeking to enforce the transaction did not know, or should not have known, that the other party harbored an unexpressed objection to the deal.

Here, Valentina outwardly manifested her assent to a contract to sell her house to Booker. She and Booker are friends. She prepared a deed of sale on a real legal form that she purchased from a stationer. She fully filled out all the blanks on the form, including a price somewhat exceeding the market value of the house, and signed it. She presented the deed of sale to Booker and told him, “Sign this and the house is yours.’’ Everything Valentina did outwardly manifested assent to selling the house. Booker also manifested—through his words and conduct—agreement to the contract for the house. He read over the deed, expressed his satisfaction with its terms, and signed.

That Valentina subjectively was bluffing and intending to shame Booker into silence is irrelevant. It is Valentina’s objective manifestations of assent to the agreement to sell the house that control. Nothing Valentina did indicated to Booker that she was bluffing or otherwise not serious. Moreover, no facts suggest that Booker knew or should have known that Valentina was anything but serious. Ultimately, Valentina is stuck with a contract to sell her house to Booker.

Chap 3

Question 18

Sam offers to sell his car to Bob for $20,000 but Sam actually misspoke. Sam meant to say $22,000 as the price for the car. Thus, Sam had the subjective intent in his head to set the price term at $22,000, but outwardly said $20,000 to Bob. Before Sam could correct his error, Bob accepted Sam’s offer to sell the car for $20,000.

Choose the best answer. Assume for purposes of this question only that Bob had no reason to know that Sam had misspoken and that $20,000 is a reasonable price for Sam’s car. Do Sam and Bob have a contract for the purchase and sale of Sam’s car, and, if so, for what amount of money?

(A) No, because Bob could not have reasonably thought that Sam intended to sell his car for $20,000 when he in fact intended to sell it for $22,000.

(B) No, because Sam said one thing but subjectively intended another. The contract simply falls apart.

(C) Yes, for $22,000, because, at the time they entered into their contract, Sam subjectively intended to sell his car for $22,000.

(D) Yes, for $20,000, because Sam objectively manifested his assent to sell the car to Bob for $20,000.

Answer 18

The correct answer is (D).

Sam and Bob likely have a contract for the sale of the car for $20,000. Whether Sam and Bob have a contract is determined by ascertaining whether there was a manifestation of mutual assent. Mutual assent means the parties have both agreed to the essential terms of a proposed agreement. Mutual assent is measured not by the hidden, subjective intent of the parties but rather by looking objectively at the parties’ manifestations—their words and conduct—to see if they amount to assent to the agreement. Objectively, Sam manifested his assent to sell the car to Bob for $20,000. That he actually intended to sell the car for $22,000 is irrelevant since he left that intent unexpressed and unknown to Bob.

Chap 3

Question 19

Sam offers to sell his car to Bob for $20,000 but Sam actually misspoke. Sam meant to say $22,000 as the price for the car. Thus, Sam had the subjective intent in his head to set the price term at $22,000, but outwardly said $20,000 to Bob. Before Sam could correct his error, Bob accepted Sam’s offer to sell the car for $20,000.

Choose the best answer. Assume for this question only that Bob went into negotiations with Sam intending to buy Sam’s car for no more than $20,000, the most he believed the car was worth. Further assume that Bob was fully aware that Sam only wanted to part with his car for $22,000, and importantly, knew that Sam had misspoken when he offered the car for $20,000.

Bob claims that he and Sam formed a contract for the purchase and sale of Sam’s car for $20,000. Is Bob likely to prevail with this argument?

(A) No, because Bob is clearly just trying to take advantage of Sam’s mistake.

(B) Yes, because regardless of what the parties were thinking, Sam manifested an intent to sell his car for $20,000.

(C) No, because Bob’s knowledge that Sam intended to sell his car $22,000 but misspoke means that he could not have reasonably believed that Sam intended to sell his car for $20,000.

(D) Yes, because Sam had no knowledge of Bob’s intentions.

Answer 19

The correct answer is (C).

Whether parties have made a contract is determined by ascertaining whether there was a manifestation of mutual assent. Mutual assent means the parties have both agreed to the essential terms of a proposed agreement. It is measured not by the hidden, subjective intent of the parties but rather by looking objectively at the parties’ manifestations—their words
and conduct—to see if they amount to assent to the agreement.

This examination is referred to as the objective theory of contracts. It has two parts:

The actual mental assent of the parties is not required if their words and actions shows assent; and
If it is shown that the party seeking to enforce the transaction did not know, or should not have known, that the other party harbored an unexpressed objection to the deal.
Here, the outward words and actions of Sam and Bob show mutual assent to a contract for the purchase and sale of Sam’s car for $20,000. However, Bob knew that Sam only intended to sell his car for a price of at least $22,000, and specifically knew that Sam had misspoken when he gave a price of $20,000. Therefore, under the objective theory of contract, Bob could not have reasonably believed that Sam intended to sell his car for $20,000. Thus, there could not have been any mutual assent.

Answer (D) is incorrect because this is not a situation that falls under Restatement (Second) of Contracts § 201(2)(a). The alleged contract between Sam and Bob does not contain an ambiguous term and each of them is assigning a different meaning to that term and both meanings are equally reasonable.

Rather, Sam clearly expressed the price term as $20,000, and Bob knew for certain that this price was not the one Sam intended. Thus, Bob cannot reasonably claim that he and Sam formed a contract with Sam to purchase his car for $20,000.

Chap 3

Question 20

Sam offers to sell his car to Bob for $20,000 but Sam actually misspoke. Sam meant to say $22,000 as the price for the car. Thus, Sam had the subjective intent in his head to set the price term at $22,000, but outwardly said $20,000 to Bob. Before Sam could correct his error, Bob accepted Sam’s offer to sell the car for $20,000.

Choose the best answer. Assume for this question only that Sam offered to sell his car for $2 instead of the $22,000 price he actually intended. Further assume that $22,000 is the normal price of the car, and that, to even a mildly observant person, the car was obviously worth substantially more than $2. Do Sam and Bob have a contract, and, if so, for what amount of money?

(A) No. The $2 price quoted by Sam is so low compared to the normal $22,000 price of the car that Bob could not have reasonably believed that Sam intended to sell for such a low price.

(B) No, because $2 is not sufficient consideration to support a promise from Sam to sell Bob his car.

(C) Yes, for $2, because Sam outwardly manifested an intent to sell his car for $2, and his subjective intent is irrelevant.

(D) Yes, for $2, because a buyer, like Bob, has no obligation to inform a seller of a stupid mistake.

Answer 20

The correct answer is (A).

Sam and Bob would likely not have a contract because any belief that Bob had that Sam was assenting to sell the car for $2 was unreasonable. If the normal price of the car is around $22,000, then $2 is so ridiculously low that Bob could not have reasonably believed that Sam intended to sell for such a low price.

Chap 3

Question 21

Choose the best answer. Juan sent a signed email message to Mary stating, “I offer you a one-year contract to work as an architect in my architecture firm starting August 1 for a salary of $105,000 a year.” Mary is

(A) the offeror.

(B) the offeree.

Answer 21

The correct answer is (B).

This question tests your understanding of the definition of the legal term “offeree.” Juan has made an offer to Mary; therefore, Mary is the offeree.

Chap 4

Question 22

Choose the best answer. Ariana is a DJ who mixes music at popular clubs worldwide. Jadyn is a promoter/agent who books gigs for DJs. Jadyn proposes that Ariana perform at a series of events at specific clubs on specific dates during the summer but that Ariana’s fee will be discussed later. Which of the following best describes Jadyn’s proposal?

(A) an offer, because the UCC will imply a reasonable price if one is missing

(B) an agreement to negotiate in good faith toward a definitive contract

(C) an attempted offer that fails for lack of certainty

(D) an attempted offer that fails for lack of an identified offeree

Answer 22

The correct answer is (C).

The parties agreed on many of the essential terms but failed to agree on the price. To form a contract, the terms must be reasonably certain. Restatement (Second) of Contracts § 33(2) provides “The terms of a contract are reasonably certain if they provide a basis for determining the existence of a breach and for giving an appropriate remedy.” Here, Ariana’s fee is left undefined.

Answer (A) is wrong since the UCC does not apply, as this transaction is not for the sale of goods.

Answer (B) is not the best answer since nothing in the facts suggests that the two agreed to negotiate in good faith to a definitive agreement.

Answer (D) is wrong because there is an identified offeree, Ariana.

Chap 4

Question 23

Choose the best answer. Why do most advertisements fail to be offers?

(A) They lack certain and definite terms.

(B) They lack intent to enter a bargain.

(C) There is no identifiable offeree.

(D) It is not reasonable for an offeree to conclude that an offer has been made.

Answer 23

The correct answer is (C).

Often, advertisements satisfy the first two elements of an offer (manifesting intent to enter a bargain and certain and definite terms). However, most advertisements are not directed to an identified person or persons because they are directed to the public at large.

Chap 4

Question 24

Choose the best answer. To be an offer there

(A) must be only one identified offeree.

(B) may be an identified offeree or offerees.

Answer 24

The correct answer is (B).

The requirement of a communication to an identified person or persons is derived from Restatement (Second) of Contracts §§ 24 and 29. Courts do not require that an individual be named; rather, the offer need only specify a method for identifying a person or group of people. See Chapter 4, Section B.3. - Communicated to an Identified Person or Persons.

Chap 4

Question 25

Choose the best answer. A price quote is normally construed as (A) an offer. (B) an invitation to deal. (C) preliminary negotiations. (D) a prospective acceptance conditioned on the buyer making an offer.

Answer 25

The correct answer is (B). The rule from Chapter 4, Section D.1.a - Special Issues in Offer.Advertisements and Price Quotes. Overview, provides that advertisements, catalogs, flyers, and price quotations are typically not offers but merely invitations to bargain. Answer choice (B) states this rule. Chap 4

Question 26

Choose the best answer. One standard that courts consider in deciding whether an offer has been made is “whether the court can determine what a breach of contract is and what would be the appropriate remedy.” Which element of the offer rule does this standard relate to? (A) present intent to enter a bargain. (B) certain and definite terms. (C) identifiable offeree or offerees. (D) reasonable understanding by offeree that an acceptance forms a contract.

Answer 26

The correct answer is (B). This question tests your knowledge and understanding of the elements. Here, you are matching the sub-rule defining certainty and definiteness to the appropriate element of the main rule — that of certain and definite terms. Being able to work backwards like this demonstrates that you know how all of the pieces of a complex rule fit together. Chap 4

Question 27

Choose the best answer. Parties are in preliminary negotiations if (A) both the offeror and the offeree have manifested the intent to enter a contract. (B) the purported offeree knows that the purported offeror is not willing to enter into a bargain.

Answer 27

The correct answer is (B). Restatement (Second) of Contracts § 26 provides that if a potential offeree “knows or has reason to know that the other party making a statement does not intend to conclude a bargain until he has made a further manifestation of assent” then no offer was made and the parties are in preliminary negotiations. Given that definition, Answer (B) is the best answer since it specifically says that at least one of the parties has not yet manifested intent to enter a contract. Chap 4

Question 28

Choose the best answer. The power of acceptance is (A) an element of an offer. (B) the right of the offeror to manifest intent to form the bargain. (C) the right of the offeree to form the contract. (D) a bargained for exchange right as consideration for the offer.

Answer 28

The correct answer is (C). Although the offeror proposes the terms, the offeree has the power of acceptance – i.e., the right to form the contract merely by agreeing to every term of the proposed offer. Recall that the offeror's offer creates the power of acceptance in the offeree upon notice of the offer to her. Chap 4

Question 29

Choose the best answer. Claire asks her friend Brandon to go to a Los Angeles Angels baseball game during game 1 of the playoffs. She knows Brandon is a fan of the Angels, and she could benefit from his companionship. Claire has (A) made an offer since there are certain and definite terms. (B) made an offer since there is an identified offeree, Brandon. (C) not made an offer because of the presumption that social engagements are not intended to be bargains. (D) not made an offer because the price of the ticket was not stated.

Answer 29

The correct answer is (C). This problem illustrates the special issue discussed in Chapter 4, Section D.2. Family Contracts and Social Engagements. Claire has not made an offer because of the presumption that social engagements are not intended to be bargains. Traditionally, social engagements as well as agreements among family members were not intended to be legally binding. A rebuttable presumption exists that family members do not intend to hold each other legally accountable for promises unless there is clear and convincing evidence that they intended to do so. Social engagements use the same rebuttable presumption. However, an exception exists. If the guest invited to a social engagement was to receive compensation to attend the function and provide a service (such as entertainment), then a contract exits. Claire is speaking with her friend, Brandon, and has offered him a ticket to the playoff game if he will accompany her. Although Claire benefits from Brandon’s companionship, these facts do not indicate that Brandon is being paid compensation for being a companion. Therefore, Claire has not made an offer for a bargain; rather, she has made a gratuitous promise. Chap 4

Question 30

Choose the best answer. For sixteen years, Jeanna has visited Mel's diner for breakfast about four times weekly between 6:00 am and 11:00 am, each time ordering two eggs over easy, sourdough toast, a side of bacon, and a regular coffee and each time paying the menu price for those items. Also, over these sixteen years, Jeanna has come to Mel's diner about three times weekly for lunch between 1:00 pm and 4:00 pm each time ordering a bowl of chili and paying the menu price. Today is Thursday. Jeanna steps into Mel's diner at noon sharp and sits at a table. Which of the following additional facts would best justify the legal conclusion that on this day, Jeanna has made an offer to Mel in which she proposes to buy two eggs over easy, sourdough toast, a side of bacon, and a regular coffee for the menu price? (A) Unbeknownst to Mel, Jeanna had breakfast today at 7:30 am in another diner, which she also has frequented regularly for sixteen years. (B) Unbeknownst to Jeanna or Mel, Jeanna's wristwatch is running one hour slow, and Jeanna believes the time to be 11:00 am. (C) Mel stops serving breakfast at 11:00 am. (D) A moment after taking her seat, Jeanna says, "I'll take the usual." (E) Jeanna says to Mel, "Ugh. Running behind today. Still haven't had breakfast. I'll take what I normally get. Can you bring out the coffee right away? Thanks."

Answer 30

The correct answer is (E). A sixteen-year history gives Mel every reason to know that Jeanna has two eggs over easy, sourdough toast, a side of bacon, and a regular coffee for breakfast and a bowl of chili for lunch. He should know, too, that when Jeanna wants breakfast she normally arrives before 11:00 am; for lunch she comes no sooner than 1:00 pm. Today, Jeanna arrives precisely at 12:00 pm and takes a seat. By doing so she communicates something. But, because it’s exactly noon, Mel can’t justifiably determine whether she wants her usual breakfast or her usual lunch. Absent additional circumstances, Jeanna has not made an offer. Neither answer choice (A) nor answer choice (B) relates to the substance of Jeanna's communication or any circumstance of which Mel should know. If Jeanna had breakfast earlier in the day or if her watch is fast, Mel has no reason to know anything about it. Neither fact can affect his reasonable understanding of what Jeanna intends to order. Thus, answer choices (A) and (B) are wrong. According to answer choice (D), Jeanna asks for "the usual." At noon sharp, Mel has no way to reasonably conclude that she wants her "usual" breakfast or her "usual" lunch. Her statement sheds no light on what she means. Thus, answer choice (D) is wrong. According to answer choice (C), Mel does not serve breakfast after 11:00 am. If Mel has reason to think that Jeanna knows that policy, he might be justified in believing that Jeanna wants her usual lunch. On the one hand, we’re not told that Jeanna knows the policy or that Mel has any reason to think she does. Nonetheless, you might assume that Mel has told Jeanna of his policy and that he should conclude that she wants a bowl of chili. Answer choice (C) is thus not a completely wrong answer, but answer choice (E) is better. In answer choice (E), Jeanna says, "Ugh. Running behind today. Still haven't had breakfast. I'll take what I normally get. Can you bring out the coffee right away? Thanks." These words tell Mel that (1) Jeanna is late for breakfast, (2) she hasn't had breakfast yet, and (3) she wants coffee which is part of her usual breakfast order. All of these things tells Mel that Jeanna proposes to buy two eggs over easy, sourdough toast, a side of bacon, and a regular coffee for breakfast for the menu price. Therefore, answer choice (E) is the best choice. Chap 4

Question 31

Choose the best answer. What standard does a court use to determine whether a party has manifested assent to the terms of an offer? (A) by performance in a bilateral contract and a promise in a unilateral contract. (B) by written evidence submitted to show the truth of the matter asserted. (C) by the objective standard. (D) by the subjective standard.

Answer 31

The correct answer is (C) As we learned in Chapter 3, one of the themes in mutual assent—and all of contracts—is that we judge intent by the objective standard, not the subjective standard. Answer (A) is not the best answer because it is not a “standard” but different methods that can be used to accept. Answer (B) is phrase from the law of evidence and pertains to procedural rules in court rather than the substantive law of contracts. Chap 5

Question 32

Choose the best answer. Does a contract form if the offeree does not subjectively intend to accept an offer but by his words and actions objectively assents to all of the proposed terms? (A) No. A fundamental principle of contracts is that a party must intend both by an outward manifestation and subjectively to enter into a contract. (B) Yes. Assent is determined by the objective meaning of a party’s outward manifestation and not by subjective means.

Answer 32

The correct answer is (B). The fundamental principle of contracts that we studied in Chapter 3 is that the outward manifestation of intent matters. As we saw in Chapter 3, a party could have a different subjective intent but we judge their communication by the outward manifestation of their words and actions. Chap 5

Question 33

Choose the best answer. Painter offers to paint Owner’s house by November 1 for $5,000. Owner makes a counteroffer to pay $4,000 for the painting of both Owner’s house and barn by November 1. Painter rejects Owner’s counteroffer. Owner then says that he accepts Painter’s offer to paint his house by November 1 for $5,000. Which of the following best describes the legal relationship between the parties? (A) There is no offer present. The parties are in preliminary negotiations. (B) A contract has formed for the painting of Owner’s house by November 1 for $5,000. (C) Painter has the power of acceptance as to Owner’s counteroffer to pay $4,000 for the painting of both the house and barn by November 1. (D) Painter has the power of acceptance as to Owner’s offer to pay $5,000 for the painting of Owner’s house by November 1.

Answer 33

The correct answer is (D). Painter made an offer, but Owner made a counteroffer thereby terminating the offer. Painter rejects Owner counteroffer thereby terminating that proposal. Although Owner now attempts to accept the original offer from Painter, he cannot since the power of acceptance has been terminated. However, Owner’s communication shows that he has manifested intent to enter a bargain on certain and definite terms. Even though Owner uses the word “accept,” it is clear that Owner wants to enter into the contract. Therefore, Painter has the power of acceptance making Answer (D) the best answer. Chap 5

Question 34

Choose the best answer. Which of the following statements is correct? (A) Either the offeror or offeree may reject an offer. (B) An offeree may revoke an offer so long as it is done before acceptance. (C) An offeror loses the power of acceptance after the offer has been rejected. (D) It is the offeree who might reject the offer and the offeror who might revoke.

Answer 34

The correct answer is (D). It is easy to mix up which party can revoke an offer and which party might reject an offer. This question tests whether you understand the actions that the offeror and offeree may take. Here, the only correct statement is that the offeree is the one who might reject the offer and the offeror is the one who revokes. Answer (A) is incorrect, because only the offeree rejects an offer. Answer (B) is incorrect, because it is the offeror—not the offeree—who revokes an offer. Answer (C) is incorrect, because the offeree—not the offeror—has the power of acceptance. Chap 5

Question 35

Choose the best answer. Buyer sent Seller an email offering to purchase Seller’s yacht for $1 million. Seller immediately accepts the offer by replying to the email. Seller is extremely excited because the yacht is actually worth only $500,000. Excited, Seller jumps up from his desk. He slips, hits his head on the floor, and dies instantly. Buyer later learns the true value of the yacht and attempts to revoke his offer given the death of the offeree. Which of the following is a correct statement? (A) Buyer's power of acceptance was terminated by Seller's death. (B) The parties have entered into an enforceable contract.

Answer 35

The correct answer is (B). This questions tests how death terminates the power of acceptance. Death or incapacity only terminates an offer before acceptance. Since Seller accepted Buyer’s offer before Seller died, Seller’s estate may enforce the contract against Buyer. There is an exception to this general rule if the contract formed was for “personal services.” However, this contract is for the sale of a good, i.e., the yacht. Consequently, the exception does not apply. Chap 5

Question 36

Choose the best answer. Assume that an offer has been made and neither party has communicated since the offer was made. How long does the offeree have before their power of acceptance terminates? (A) Only for a reasonable time as judged by the facts and circumstances. (B) For the time stated and, if no time is stated, then for a maximum of 48 hours. (C) The offer remains open until the offeror expressly revokes the offer or the offeree accepts, rejects, or counteroffers. (D) For the time stated or a reasonable time.

Answer 36

The correct answer is (D). This questions tests how lapse of time terminates the power of acceptance. Restatement (Second) of Contracts § 42(1) states, “An offeree’s power of acceptance is terminated at the time specified in the offer, or, if no time is specified, at the end of a reasonable time.” Chap 5

Question 37

Choose the best answer. When does the contract form in a unilateral contract? (A) Upon the exchange of promises. (B) When offeree begins performance, those actions are construed as a promise made through conduct that creates the contract. (C) Upon the completion of the offeror’s performance. (D) Upon the completion of the offeree’s performance.

Answer 37

The correct answer is (D). In a unilateral contract, the contract only forms after one party performs under the terms of the contract. In a unilateral contract, one party makes an offer, and the only way to accept the offer is to fully perform the duties under the contract. Answer (A) is incorrect since it describes a bilateral contact where the contract forms upon the exchange of promises. Answer (B) is incorrect since it describes how performance in a bilateral contract can be construed as a return promise through conduct. Answer (C) is incorrect since the offeror would not perform until the contract is formed, and the contract is not formed until the offeree completes performance. Chap 5

Question 38

Choose the best answer. A website developer offered to pay an artist $250 to use one of his illustrations on her website. The artist replied, "Let me think about it." Assuming that the artist would ultimately accept the offer, the developer went ahead and posted the illustration on her website. Many weeks later, the artist informed the website developer that he did not wish to accept her offer. Which of the following statements is most accurate? (A) No contract existed between the website developer and the artist because the developer never actually tendered the $250 to the artist. (B) No contract existed between the website developer and the artist because the artist never accepted the offer. (C) A contract existed between the website developer and the artist because the artist's failure to reject the offer in a timely manner constituted an implied acceptance of the offer. (D) A contract existed between the website developer and the artist because the artist's failure to object in a timely manner to the developer's use of his illustration constituted an implied acceptance of the offer.

Answer 38

The correct answer is (B). Every contract requires an offer followed by an acceptance. Here, the developer's statement to the artist that she would pay him $250 for the use of his illustration constitutes an offer. However, the artist never accepted that offer. The artist's statement that he would "think about it" had no real legal effect except perhaps to signal that he wasn't immediately rejecting the developer's offer. Chap 5

Question 39

Choose the best answer. A graphic artist offered his services to a website designer for $50 per hour. The website designer replied, "I'll get back to you tomorrow." The next day, just as she was about to accept the graphic artist's offer to work for her, the website designer received an email from him that said, "Leaving for China. I'll call when I get back." In need of immediate services, the website designer was forced to hire someone else for $100 per hour. She then filed an action for breach of contract against the graphic artist seeking to recover the extra expenses she incurred. Who should prevail in the breach of contract action? (A) The graphic artist, because the website designer did not have a valid contract. (B) The graphic artist, because the website designer's hesitation to accept acted as a counteroffer, which effectively revoked the graphic artist's offer. (C) The website designer, because she was counting on being able to hire the graphic artist for $50 per hour. (D) The website designer, because the graphic artist's trip to China deprived her of the benefit of the bargain.

Answer 39

The correct answer is (A). In general, an offeror can revoke an offer at any time prior to acceptance. Once the offer terminates, the offeree has no power to accept the offer. Here, in stating, "I'll get back to you," the website designer did not accept or reject the graphic artist's offer. The graphic artist's subsequent email operated as a revocation of his offer. Given the lack of acceptance by the website designer and the graphic artist's subsequent revocation of his offer, no contract existed between the parties. Thus, the graphic artist would prevail in an action against him for breach of contract. Chap 5

Question 40

Choose the best answer. On May 15, a florist sent a letter for one of his customers, offering to pay him $2,000 for his truck, with delivery of the truck to be made to the flower shop before 1:00 p.m. on May 20. Acceptance to be made by return letter. On May 16, the customer sent a letter to the florist indicating his acceptance of the florist's offer. However, the letter was delayed by a mixup at the local post office and did not reach the flower shop until May 19. By then, not having not heard back from his customer, the florist had purchased another used truck for $1,800. On May 20, the customer drove his truck to the florist, arriving at about 12:55 p.m. At that time, the florist rejected the customer's truck, stating that he was no longer in need of a delivery truck. The customer filed suit against the florist for breach of contract. What was the legal effect of the customer's letter of May 16? (A) Upon the florist's receipt of the customer's letter, a binding unilateral contract formed between the florist and the customer for the purchase and sale of the customer's truck. (B) Upon the mailing of the customer's letter, a binding unilateral contract formed between the florist and the customer for the purchase and sale of the customer's truck. (C) The customer's letter acted as a proper acceptance of the florist's offer, effective upon the customer's mailing of the letter. (D) The customer's letter was not a proper acceptance of the florist's offer, because the letter requested acceptance by delivery of the truck to the flower shop by May 20.

Answer 40

The correct answer is (C). The mailbox rule holds that acceptance of an offer for a bilateral contract by mail is effective upon dispatch, so long as the acceptance is properly posted, with the correct address and postage amount. The mailbox rule applies only to acceptances and not to any other communications between contracting parties. Once the offeree dispatches acceptance, she thereby creates a binding contract. In this case, the florist's letter to the customer constituted an offer for a bilateral contract for the purchase and sale of the customer's truck. The customer properly accepted the offer by mailing his letter of acceptance to the florist, and this acceptance was effective as of the mailing date, May 16, thereby creating a binding bilateral contract between the florist and the customer. Chap 5

Question 41

Contract Formation

Answer 41

The formation of a contract requires a bargain in which there is a manifestation of mutual assent to the exchange (which can be broken down into the two separate elements of offer and acceptance) and consideration. Chap 3

Question 42

Contract Formation Fill in blanks The formation of a contract requires __________________________________________________________________(which can be broken down into _________________________________________________) and __________________.

Answer 42

The formation of a contract requires a bargain in which there is a manifestation of mutual assent to the exchange (which can be broken down into the two separate elements of offer and acceptance) and consideration.

Question 43

Objective Theory

Answer 43

A party’s manifestation of assent to a bargain is judged by the objective reasonable interpretation of her outward expression of consent and not by her subjective intent. Words and conduct will normally be given the same meaning that would be given by a reasonable person in the same circumstances.

Question 44

Objective Theory Fill in the blanks A party’s ____________________________________________________________ is judged by ___________________ of consent and _____________________________. Words and conduct will normally be given __________________ in _______________________.

Answer 44

A party’s manifestation of assent to a bargain is judged by the objective reasonable interpretation of her outward expression of consent and not by her subjective intent. Words and conduct will normally be given the same meaning that would be given by a reasonable person in the same circumstances.

Question 45

Failure to Read

Answer 45

Under the objective theory of contracts, when a party signs a contract (or clicks “Agree” or “Accept”), she is manifesting her agreement to the terms of a contract even if she never reads the terms. Her subjective intent or state of mind about what she is or is not agreeing to does not control. However, defenses, such as unconscionability, which will be covered in the future, sometimes limit the terms that can be imposed on a party even in situations where the party has not read the contract.

Question 46

Failure to Read Fill in the blanks Under ____________________________, when a party signs a contract (or clicks “Agree” or “Accept”), __________________________________ even if ________________________. Her _________________________ about what she is or is not agreeing to___________________________. However, ______________________________________________, which will be covered in the future, sometimes __________________________________ even in situations where ______________________________.

Answer 46

Under the objective theory of contracts, when a party signs a contract (or clicks “Agree” or “Accept”), she is manifesting her agreement to the terms of a contract even if she never reads the terms. Her subjective intent or state of mind about what she is or is not agreeing to does not control. However, defenses, such as unconscionability, which will be covered in the future, sometimes limit the terms that can be imposed on a party even in situations where the party has not read the contract.

Question 47

Exceptions to Objective Standard

Answer 47

Three-step analysis for when subjective meaning controls. Does the alleged contract contain a latent ambiguity, i.e., a term that becomes ambiguous when facts external to the contract are considered? If no, then there is mutual assent and we stick with objective meaning. If yes, then objective meaning cannot be used, proceed to step 2. Have the parties attached the same meaning to the ambiguous term? If no, then proceed to step 3. If yes, then there is mutual assent and we interpret the ambiguous term according to the agreed upon meaning. Does either party know or have reason to know the meaning the other party attached to the ambiguous term? If no, then there is no mutual assent and alleged contract falls apart. If yes, then there is mutual assent and we interpret the ambiguous according the meaning of the innocent party, i.e., the party without knowledge of the other’s meaning.

Question 48

Exceptions to Objective Standard Fill in the blank

Answer 48

Three-step analysis for when subjective meaning controls. 1. Does the alleged contract contain________________________________? If no, then ______________ If yes, then ___________________________, proceed to step 2. 2. Have the parties _______________? If no, then proceed to step 3. If yes, then ___________________________. 3. Does either party _____________________? If no, then _________________________. If yes, then _____________________ and ________________________.

Question 49

Offeror

Answer 49

The party making the offer is called the offeror.

Question 50

Offeree

Answer 50

The party to whom the offer is made is called the offeree.

Question 51

Power of Acceptance

Answer 51

An offeror’s offer creates in the offeree the power of acceptance — i.e., the right to form a contract merely by agreeing to every term of the proposed offer.

Question 52

Preliminary Negotiations

Answer 52

Until one of the parties to a discussion manifests a present intent to enter into a bargain, the parties are merely engaged in preliminary negotiations and no offer has been made.

Question 53

Elements of an Offer

Answer 53

An offer requires: 1. a manifestation of a present intent to enter a bargain; 2. that it be stated in certain and definite terms; 3. that it be communicated to an identified person or persons; 4. that an offeree be able to reasonably understand that a contract would result if accepted.

Question 54

Manifest Present Intent to Enter a Bargain

Answer 54

We break this element down as follows: Manifestation- the offeror’s outward expression to another party rather than a secret, unexpressed intent. Present Intent- whether the offeror’s purpose — as determined by an objective interpretation of her words and actions — is to make a deal with another party. Bargain- an exchange of consideration.

Question 55

Certain and Definite Terms Generally

Answer 55

All the essential terms of an offer must be reasonably certain, meaning they must be specific and definite enough to provide a court a basis for determining the existence of a breach and for fashioning an appropriate remedy. Caveats: Uncertainty as to incidental or collateral matters is not generally fatal, assuming the parties otherwise show an intent to enter into a contract. Even if the parties to a contract have not agreed on every single term, a contract may still form.

Question 56

Certain and Definite as to Essential Terms

Answer 56

It is the essential terms of an offer that must be certain and definite. The essential terms generally include: the parties, the subject matter, the price, the payment terms, and the timing. The key to determining whether a term is in fact essential is whether or not a court needs the term to determine breach and/or to fashion the appropriate remedy.

Question 57

Common Law Implied Terms

Answer 57

Under the common law, a court may imply a reasonable term if one of the essential terms is missing. Consider the following common law examples: Time performance- when the parties do not include a time for the completion of performance, a court will likely imply a reasonable time based on all the facts and circumstances, including the nature of the contract. Price to be paid- the parties need not agree to an actual dollar figure so long as there is some objective way to determine the price, such as looking at a rental market to determine the fair rental value of an apartment. Scope of work or property transferred- if the parties do not identify what services are to be rendered or the piece of property to be bought or sold, it is unlikely the court can or will imply a term.

Question 58

UCC Gap Fillers

Answer 58

The UCC has specific provisions, called gap fillers, to fill in missing or indefinite terms in contracts for the sale of goods. They are as follows: 1. Missing time provisions- a reasonable time; 2. Open price term- a reasonable price; 3. Place for delivery- the seller’s place of business or wherever the goods are located, if they are store at a third location, such as a warehouse.

Question 59

Agreement to Agree

Answer 59

An agreement by the parties to agree to an essential term in the future — such as the rental rate for the renewal of a lease for a second term — is generally not enforceable. Our standard for certain and definite terms still applies. There must be enough certainty for a court to determine a breach and/or to fashion an appropriate remedy. If this standard is not met, the agreement to agree will fail as with any other contract.

Question 60

Identified Person or Persons

Answer 60

An offeror must communicate her offer to an identified person or persons, since it is only the identified person or persons who have the power of acceptance. The offeror need not identify a person by name. Rather, she need only specify a method for identifying the person or persons, such as “all persons entering the class of first-year law students in the Fall 2022 semester” are eligible to purchase a law school t-shirt at a 40% discount.

Question 61

Advertisements General Rule

Answer 61

Advertisements, catalogs, flyers, price quotations and the like are usually not offers but are merely invitations to deal. The reason being that such communications are generally too uncertain, do not manifest a present intent to enter a bargain, and suffer from a problem of over acceptance.

Question 62

Advertisements Exceptions

Answer 62

A court may treat an ad as an offer in the following circumstances: 1. Misleading ads- a court will treat an ad as an offer when a business makes a misleading ad to trick customers into a store only to be told the item is unavailable at the advertised price. 2. By statute- many states have passed consumer protection laws recognizing the ads of certain businesses, such as car dealerships, as offers in order to encourage these businesses to advertise truthfully. 3. Rewards- an ad for a reward or prize is usually construed as an offer for a unilateral contract. 4. Lefkowitz-type ad- when an ad is clear, definite, and explicit, and leaves nothing open to negotiation, it will be treated as an offer. In Lefkowitz, the ad was for “first person in line on Saturday at 9 AM gets fur coat for $1.”

Question 63

Reasonable Understanding of Offeree

Answer 63

Finally, recall that we adhere to the objective theory of contracts. So we must ask would a reasonable person in the place of the offeree view the offeror’s manifestations and conclude that all she must do is assent and she would have a contract with the offeror. Only if the answer is yes, do we ultimately conclude that the offeror has in fact made an offer that creates in the offeror the power of acceptance.

Question 64

Acceptance

Answer 64

Acceptance of an offer is a manifestation of assent to the terms of thereof made by the offeree in the manner invited or required by the offer.

Question 65

Manifestation of Assent

Answer 65

To accept, an offeree must outwardly express her agreement to the bargain proposed by the offeror. We judge whether the offeree’s outward expressions (aka manifestations) are in fact agreement to the offeror’s proposed bargain by the objective theory of contracts. We ask would a reasonable person view the offeree’s outward expressions as communicating such agreement.

Question 66

To the Terms of the Offer (acceptance under common law)(mirror image rule)(conditional acceptance)

Answer 66

Mirror image rule- under the common law, the offeree’s acceptance must be a mirror image of the terms of the offer. It must match every essential term of the offer. The offeree’s inclusion of additional or different terms in her purported acceptance causes it to be a counteroffer. Conditional acceptance- under the common law, a conditional acceptance does not exist. An offeree’s attempt to condition her acceptance on the offeror’s agreement to additional or different terms causes the offeree’s purported acceptance to turn into a counteroffer. Note: UCC rules operate differently than the common law. We have NOT yet covered these rules. We will do so in a future lesson.

Question 67

Manner invited or required (offeree... offeror...)

Answer 67

The offeree must accept in the manner invited or required in the offer. The offeror is the master of her offer. She may specify both (1) the method of communication the offeree must use — such as email, phone, text message, US mail, fax, face-to-face, etc. — and (2) whether the offeree must accept by return promise or return performance.

Question 68

Method of communication (specified...unspecified....)

Answer 68

Specified- If the offeror specifies that only a particular method of communication may be used to accept the offer — such as email, US mail, text message, or by a particular form — then the offeree must use that method. The offeree’s failure to use the specified method means the purported acceptance is ineffective. Unspecified- If the offeror does not specify a particular method of communicating acceptance, then the offeree may use any method reasonable in the circumstances. Generally, this means using the same method of communication used by the offeror to communicate the offer or a different method that is equally as fast or faster.

Question 69

Return promise or performance (bilateral, unilateral, unspecified)(How accepted? Timing of formation? Executory duties?)

Answer 69

Bilateral Contracts - How accepted? Return promise. Timing of formation? All exchange of promises. Executory duties? On both sides. Unilateral Contracts - How accepted? Return promise. Timing of formation? Offeree’s completed performance. Executory duties? Only on Offeror’s side. Unspecified - How accepted? Choose promise or performance. Timing of formation? If performance, then contract forms when performance starts.

Question 70

Termination of Power of Acceptance (how can the offeree terminate their power of acceptance?)

Answer 70

An offeree’s power of acceptance may be terminated the following ways: 1. rejection; or 2. revocation; or 3. counteroffer; or 4. lapse; or 5. death.

Question 71

Rejection

Answer 71

An offeree rejects an offer when she communicates to the offeror that she does not intend to accept the offer. A rejection is effective upon notice to the offeror.

Question 72

Revocation

Answer 72

The offeror may revoke her offer any time before the offeree accepts the offer. A revocation is effective upon notice to the offeree. It may be communicated directly or indirectly by words or actions.

Question 73

Counteroffer

Answer 73

An offeree makes a counteroffer when she rejects the original offer and replaces it with a new offer. It is effective upon notice to the offeror. Note that the offeror could specify that the offer will remain open even though a counteroffer has been made.

Question 74

Mere Inquiry

Answer 74

A mere inquiry must be distinguished from a counteroffer. An offeree makes a mere inquiry, rather than a counteroffer, when: 1. The offeree asks the offeror to consider additional or different terms from those proposed in the original offer but reserves the power to accept the original offer with its terms. For instance, she might say, “While I mull over what you’ve proposed, what do you think of this alternative?”; or 2. The offeree explores with the offeror the possibility of additional or different terms from those proposed in the original offer, but she does not provide specific, concrete alternatives. For instance, she might say, “Would you consider going any lower on the price?”, but not suggest a specific, lower price possibility.

Question 75

Lapse

Answer 75

An offeree’s power of acceptance is terminated at the time specified in the offer, or, if no time is specified, at the end of a reasonable time. A reasonable time depends on all the facts and circumstances.

Question 76

Death

Answer 76

An offeree’s power of acceptance terminates upon the death of either party. However, an already agreed upon contract survives death.

Question 77

Silence as Acceptance

Answer 77

Silence is normally not acceptance unless: 1. offeree agrees that it is, 2. past business dealings establish that it is, or 3. offeree exerted control over the consideration that was offered.

Question 78

Mailbox Rule Generally

Answer 78

The mailbox rule is an exception to the general rule that an offeree’s acceptance is effective upon notice to the offeror. The rule provides that when an offeree sends an acceptance through the mail, it is effective upon dispatch. Note that everything else – i.e., offer, rejective, counteroffer, revocation, etc. – is effective upon receipt.

Question 79

Mailbox Rule Exceptions

Answer 79

The mailbox rule does not apply in the following situations: Parties agree that acceptance is not effective until received by the offeror. The parties have an option contract. In which case, the offeree’s acceptance must be received by the offeror during the option period. The federal government is a party to the business dealings. The federal government is not bound by the mailbox rule. The offeree mails a rejection and then an acceptance. Mailbox rule does not apply. Whichever communication the offeror receives first is effective. The offeree mails an acceptance and then a rejection. By some fluke the offeror receives the rejection first and then offeror relies on the rejection by, for instance, selling house to someone else. The mailbox rule does not apply and the rejection is given legal effect instead.

Question 80

Auctions

Answer 80

In a traditional auction, the bidder is the offeror, and the auctioneer is the offeree. Contract formation generally occurs as follows: When the auctioneer calls out a starting price, this is an invitation to deal or a solicitation for offers. When a bidder makes a bid (e.g., by raising her hand, etc.), this is an offer to purchase the item up for auction at that price. The auctioneer accepts a bidder’s offer when the hammer falls and the auction concludes.

Question 81

What is the core difference between a contractual promise and a non-contractual promise?

Answer 81

A contractual promise is legally enforceable, creating a duty for one party and a right for the other.

Question 82

The objective theory of mutual assent judges a party's intent based on their _____ manifestations, not their _____ intent.

Answer 82

Outward; subjective

Question 83

Under the 'duty to read' doctrine, what is the consequence of a party signing a contract without reading it?

Answer 83

Their act of signing objectively manifests assent to the terms, regardless of whether they read them.

Question 84

What are the four essential elements of a legally valid offer?

Answer 84

1) Manifestation of present intent to bargain, 2) certain and definite terms, 3) communicated to an identified person(s), and 4) creates a reasonable understanding that acceptance will form a contract.

Question 85

According to the Restatement, what must the terms of a contract provide to be considered ‘reasonably certain’?

Answer 85

They must provide a basis for determining the existence of a breach and for giving an appropriate remedy.

Question 86

If a contract for performance does not specify a time, what term will a court typically imply?

Answer 86

A court will imply a reasonable time for performance.

Question 87

Generally, are advertisements, catalogs, and price quotations considered offers or invitations to bargain?

Answer 87

They are generally considered invitations to bargain, not offers.

Question 88

What is the 'Lefkowitz' exception regarding advertisements as offers?

Answer 88

An advertisement can be an offer if it contains words of limitation, such as being clear, definite, explicit, and leaving nothing open for negotiation (e.g., 'first come, first served’).

Question 89

Who is considered the 'master of the offer' and what power does this grant them?

Answer 89

The offeror is the master of the offer and has complete control over its proposed terms, including the manner of acceptance.

Question 90

What test do courts use to determine whether UCC Article 2 or the common law governs a hybrid transaction involving both goods and services?

Answer 90

The predominant purpose test

Question 91

Under the Predominant Purpose Test, what are the three factors used to analyze a hybrid contract?

Answer 91

1) The language of the contract, 2) the nature of the supplier's business, and 3) the intrinsic value of the goods versus the cost of the service.

Question 92

According to UCC Article 2, what are 'goods'?

Answer 92

All things that are movable at the time of identification to the contract for sale.

Question 93

What is the common law 'mirror image rule' for acceptance?

Answer 93

The acceptance must assent to every term of the offer exactly; any variation constitutes a counteroffer.

Question 94

If an offeree's response to an offer contains additional or different terms, what is it considered under the common law?

Answer 94

It is considered a counteroffer, which acts as a rejection of the original offer and creates a new offer.

Question 95

What are the five primary ways an offeree's power of acceptance can be terminated?

Answer 95

1) Rejection, 2) Counteroffer, 3) Revocation by the offeror, 4) Lapse of time, or 5) Death or incapacity of either party.

Question 96

When is an offeror's revocation of an offer effective?

Answer 96

A revocation is effective when the offeree receives notice of it, either directly or indirectly.

Question 97

What is an indirect revocation of an offer?

Answer 97

It occurs when the offeree receives reliable information from a third party that the offeror has taken action inconsistent with an intent to enter the proposed contract.

Question 98

What happens to an offer if no time for acceptance is specified?

Answer 98

The offer terminates at the end of a reasonable time.

Question 99

During a face-to-face conversation, when does an offer typically terminate if no duration is specified?

Answer 99

The offer is generally considered to terminate at the end of the conversation.

Question 100

How does a 'mere inquiry' differ from a counteroffer?

Answer 100

A mere inquiry explores the possibility of different terms (e.g., 'Would you consider a lower price?') without rejecting the original offer, while a counteroffer proposes a new bargain and terminates the original offer.

Question 101

What is the default ‘’mailbox rule’ for acceptance?

Answer 101

An acceptance sent through the mail is effective upon dispatch (when it is mailed).

Question 102

Under the mailbox rule, when are offers, rejections, counteroffers, and revocations effective?

Answer 102

They are all effective upon receipt by the other party.

Question 103

What is the outcome of an offeree mails a rejection and then mails an acceptance?

Answer 103

The mailbox rule does not apply; whichever communication is received by the offeror first is effective.

Question 104

What is the outcome if an offeree mails an acceptance and then sends a rejection that arrives first?

Answer 104

A contract was formed upon dispatch of the acceptance, but the offeror may be able to use detrimental reliance as a defense if they acted on the rejection.

Question 105

What type of contract is formed by an exchange of promises before any performance has occurred?

Answer 105

A bilateral contact

Question 106

In what type of contract is acceptance accomplished only by full performance of the requested act?

Answer 106

A unilateral contract

Question 107

What is an option contract?

Answer 107

A contract, supported by consideration, that limits an offeror’s ability to revoke an offer for a specified period of time.

Question 108

Does the mailbox rule apply to acceptances under an option contract?

Answer 108

No, an acceptance under an option contract is effective only upon receipt by the offeror.

Question 109

In a unilateral contract, when does an option contract become created under the Restatement (Second of Contracts $45?

Answer 109

An option contract is created when the offeree begins the invited performance, making the offer irrevocable for a reasonable time to allow for completion.

Question 110

The UCC's 'Firm Offer' rule (§2-205) makes an offer irrevocable without consideration if it is made by a _____, is in a signed ______, and gives assurance it will be held open.

Answer 110

Merchant; writing

Question 111

Under UCC §2-205, what is the maximum period of irrevocability for a firm offer if no time is stated?

Answer 111

The period cannot exceed three months.

Question 112

What legal doctrine can make a promise binding to prevent injustice if the promisor should reasonably expect it to induce action and it does induce such action?

Answer 112

Promissory estoppel (or detrimental reliance).

Question 113

In general contractor-subcontractor bidding cases like Drennan v. Star Paving, what principle is often used to make a subcontractor’s bid irrevocable after the general contractor has relied on it?

Answer 113

Promissory estoppel

Question 114

Generally, is an offeree’s silence considered acceptance of an offer?

Answer 114

No, silence does not normally operate as an acceptance.

Question 115

Name one of the 3 exceptions where silence can constitute acceptance.

Answer 115

1) the parties’ words or conduct indicate silence is acceptance; 2) prior dealings establish a pattern of acceptance by silence; or 3) the offeree exercises dominion over the offered consideration

Question 116

In a standard auction, who is the offeror and what action constitutes acceptance?

Answer 116

The bidder is the offeror, and the fall of the auctioneer’s hammer constitutes acceptance.

Question 117

Under the UCC, an offer to buy goods for prompt shipment can be accepted either by a promise to ship or by the _________ itself.

Answer 117

Prompt shipment of goods

Question 118

If there is a mutual misunderstanding where each party attaches a different, reasonable meaning to a material term, and neither party knows of the other’s meaning, what is the result?

Answer 118

No contract is formed because there was no ‘meeting of the minds’.

Question 119

If one party knows the different meaning the other party attaches to a term, whose meaning will the court enforce?

Answer 119

The court will enforce the meaning of the innocent party (the one whose interpretation was not known by the other).

Question 120

An offeree phones an offeror and asks, ‘Is $350,000 your final price?’ for a house. How is this communication best characterized?

Answer 120

As a mere inquiry, not a counteroffer, because it does not propose a new bargain.

Question 121

Buyer mails an order for ‘10,000 boxes of nails at your current price.’ Seller mails an acceptance. Before Buyer receives the acceptance, Buyer calls to revoke. Is there a contract?

Answer 121

Yes, a contract was formed when the Seller dispatched the acceptance letter, before the buyer’s attempted revocation.

Question 122

An offer to sell goods is open until Nov. 20 and states acceptance must be ‘received on or before that date.’ An acceptance is mailed Nov. 16 but arrives Nov. 21. Is the acceptance effective?

Answer 122

No, because the offeror, as master of the offer, stipulated that acceptance was effective only upon receipt by a specific date.

Question 123

A faculty offers $2,500 to any student who writes and publishes a specified article. How is this offer best classified?

Answer 123

As an offer for a unilateral contract, to be accepted by the performance of writing and publishing the article.

Question 124

An offeror promises to hold an offer open until March 14 but receives no consideration for this promise. On March 12, the offeror revokes. Is the revocation effective?

Answer 124

Yes, because a promise to keep an offer open (a gratuitous option) is not binding w/o consideration

Question 125

Lando says, “I’m thinking of selling the Falcon for $500,000.’ Has Lando made a legal offer?

Answer 125

No, this statement indicates future intent or preliminary negotiations, not a present intent to be bound.

Question 126

UCC §2-204 states that a contract for the sale of goods does not fail for indefiniteness if the parties intended to make a contract and there is a reasonably certain basis for a(n) _________.

Answer 126

Appropriate remedy

Question 127

A letter of intent for the sale of a business outlines price, assets, and financing but states a 'more formal document will be drafted. If it contains all essential terms, is it likely a binding contract?

Answer 127

Yes, if a writing contains all essential terms required for a contract, it can be enforced even if a more formal document was contemplated

Question 128

What is the legal status of a social engagement, such as an invitation to a date?

Answer 128

It is not a legally binding contract; there is a presumption that parties to social engagements do not intend legal consequences.

Question 129

What are the two primary bodies of law that govern contracts?

Answer 129

The Uniform Commercial Code (UCC) and the common law

Question 130

Under the UCC, what constitutes a 'sale'?

Answer 130

A 'sale consists in the passing of title from the seller to the buyer for a price.

Question 131

How does the UCC define 'goods'?

Answer 131

'Goods' are all things which are movable at the time of identification to the contract for sale.

Question 132

What types of transactions are governed by the common law of contracts?

Answer 132

Common law governs contracts for services and real estate.

Question 133

What is the 'predominant purpose test' used for?

Answer 133

It is used to determine whether the UCC or common law applies to a hybrid transaction involving both goods and services.

Question 134

What three factors do courts consider in the predominant purpose test?

Answer 134

1. The language of the contract 2. The nature of the supplier's business, and 3. The relative value of the goods versus the service

Question 135

What question does the 'gravamen test' ask to determine which body of law applies to a hybrid transaction?

Answer 135

It asks, 'Did the essence of the complaint arise from the performance of the services or from the goods sold?'

Question 136

The UCC covers the sale of movable things, which are defined as 'good', making the term 'movable goods' legally __________.

Answer 136

redundant

Question 137

What is the 'objective theory of contracts'?

Answer 137

A party's intent to contract is judged by the objective reasonable interpretation of their outward expression of consent, not by their subjective intent.

Question 138

What is the legal presumption regarding a party who signs a contract without reading it?

Answer 138

There is a rebuttable presumption that the party has read, understood, and intends to be bound by the terms.

Question 139

What happens if the parties attach different meanings to a term, and one party knows of the other's interpretation while the other is unaware?

Answer 139

The interpretation of the unaware party prevails, binding the party who knew of the misunderstanding.

Question 140

If two parties have different but equally reasonable interpretations of a material term and neither is aware of the other's meaning, what might a court conclude?

Answer 140

A court may conclude that no contract was ever formed due to a lack of 'meeting of the minds'.

Question 141

What are the four essential elements of a valid offer?

Answer 141

1. Manifestation of present intent to enter a bargain, 2. States in certain and definite terms, 3. Communicated to an identified person or persons, 4. An offeree can reasonably understand a contract would result if accepted.

Question 142

Under Restatement (second) of Contracts, when are the terms of a contract considered 'reasonably certain'?

Answer 142

The are reasonably certain if they provide a basis for determining the existence of a breach and giving an appropriate remedy.

Question 143

What is the general legal status of advertisements, catalogs, and price quotations?

Answer 143

They are usually considered invitations to bargain, not offers.

Question 144

Under UCC$2-204, a contract for the sale of goods does not fail for indefiniteness if the parties intended to make a contract and there is a basis for a remedy, but what terms is essential?

Answer 144

The quantity of the goods must be specified.

Question 145

What is the 'mirror image rule' under common law?

Answer 145

The acceptance must assent to every term of the offer exactly; any change constitutes a counteroffer.

Question 146

What are the five ways an offeree's power of acceptance can be terminated?

Answer 146

1. Rejection 2.Counteroffer 3. Revocation by the offeror 4. Lapse of time 5. Death or incapacity of either party.

Question 147

When is a revocation of an offer effective?

Answer 147

A revocation is effective when the offeree receives notice of it.

Question 148

If an offer does not specify a time for acceptance, when does the power of acceptance terminate?

Answer 148

It terminates at the end of a reasonable time, which depends on the circumstances.

Question 149

How is a unilateral contract formed?

Answer 149

A unilateral contract is formed upon the offeree's full performance of the requested act.

Question 150

What is the 'mailbox rule' for acceptances?

Answer 150

An acceptance sent through the mail is effective upon dispatch, not upon receipt.

Question 151

Under the mailbox rule, when are offers, rejections, counteroffers, and revocations effective?

Answer 151

They are all effective upon receipt by the other party.

Question 152

If an offeree sends a rejection and then an acceptance, which communication is effective?

Answer 152

The mailbox rule does not apply; whichever communication is received by the offeror first is effective.

Question 153

What is an option contract?

Answer 153

An option contract is a promise to keep an offer open for a specified period, which must be supported by its own consideration to be enforceable.

Question 154

According to Restatement, when does an offer for a unilateral contract become irrevocable?

Answer 154

An option contract is created and the offer becomes irrevocable once the offeree begins the invited performance.

Question 155

Under UCC $2-205, what is a 'merchant's firm offer'?

Answer 155

It is an offer by a merchant to buy or sell goods in a signed writing which by its terms gives assurance that it will be held open.

Question 156

What is the maximum period of irrevocability for a merchant's firm offer under UCC $2-205 if not time is stated?

Answer 156

The period of irrevocability cannot exceed three months.

Question 157

Does a merchant's firm offer under the UCC require consideration to be irrevocable?

Answer 157

No, a merchant's firm offer is not revocable for lack of consideration during the time stated (up to 3 months).

Question 158

What is the common law 'last shot rule' in a 'battle of the forms' scenario?

Answer 158

The party who sends the last form before performance begins wins, and their terms control the contract.

Question 159

Under UCC $2-207(1), can a definite and seasonable expression of acceptance form a contract even if it states additional or different terms?

Answer 159

Yes, unless the acceptance is expressly made conditional on assent to the new terms.

Question 160

In a contract between merchants under UCC $2-207(2), when do additional terms automatically become part of the contract?

Answer 160

They become part of the contract unless the offer expressly limits acceptance to its terms, they materially alter it, or notification of objection is given.

Question 161

Under UCC $2-207(3), if writings do not establish a contract but the parties' conduct shows one exists, what terms comprise the contract?

Answer 161

The contract consists of the terms on which the writings of the parties agree, supplemented by any UCC gap-fillers.

Question 162

Many jurisdictions apply the _____ rule to handle 'different' (conflicting) terms in a battle of forms under the UCC.

Answer 162

knockout

Question 163

What are the two essential elements of consideration?

Answer 163

Consideration requires a bargained-for-exchange and legal value

Question 164

The legal value element of consideration requires either a benefit to the promisor or a ________ to the promisee.

Answer 164

detriment

Question 165

What is the 'adequacy of consideration' rule?

Answer 165

Courts will not inquire into the adequacy of consideration; an imbalance in value will not void a contract, unless it is nominal or a pretense of a bargain.

Question 166

What is an illusory promise?

Answer 166

An illusory promise is one where a party appears to commit but has reserved the right not to perform, making it unenforceable for lack of consideration.

Question 167

Why is a promise based on 'past consideration' generally unenforceable?

Answer 167

It is unenforceable because the promise was not bargained for; the detriment occurred in the past and did not induce the promise.

Question 168

A promise based on a ____ obligation is generally not considered legally enforceable consideration.

Answer 168

moral

Question 169

What is the 'preexisting legal duty' rule?

Answer 169

A promise to do something that a party is already legally obligated to do cannot serve as consideration for a new promise.

Question 170

Under common law, what is required for a contract modification to be enforceable?

Answer 170

A contract modification requires new or additional consideration.

Question 171

Under the UCC, what is required for a modification of a contract for the sale of goods to be binding?

Answer 171

The modification does not require new consideration, but it must be made in good faith.

Question 172

What is the difference between a conditional gift and an enforceable promise?

Answer 172

In a conditional gift the condition is merely an even that must occur to receive the gift, whereas in a contract the condition is a detriment bargained for by the promisor.

Question 173

A contract is a promise or set of promises for which the law gives a ______, or the performance of which the law recognizes as a duty.

Answer 173

remedy

Question 174

What is the primary policy behind the adequacy of consideration doctrine?

Answer 174

Freedom of contract, which stands for the principle that parties, not courts, should determine the value of their exchange.

Question 175

What is a 'novation'?

Answer 175

A novation is an agreement that replaces a party to a contract with a new party, relieving the original party of liability.

Question 176

What is an 'accord' in contract law?

Answer 176

An accord is an agreement to accept a different performance in satisfaction of an existing contractual duty.

Question 177

What is a 'satisfaction' in the context of an accord?

Answer 177

Satisfaction is the actual performance of the accord agreement, which discharges both the accord and the original duty.

Question 178

What happens to the original contractual duty when an accord is made but before satisfaction occurs?

Answer 178

The original duty is suspended pending performance of the accord.

Question 179

Under UCC $2-207(2), if at least one party to a contract is no a merchant, additional terms in the acceptance are treated as ______.

Answer 179

proposals for addition to the contract

Question 180

The Restatement (Second) of Contracts is considered what type of legal authority?

Answer 180

It is considered secondary authority, meaning it is persuasive but not binding on courts.

Question 181

The party who makes an offer and is considered the 'master of the offer' is known as the ____.

Answer 181

offeror

Question 182

The party to whom an offer is made and who has the power of acceptance is the _____.

Answer 182

offeree

Question 183

What is the legal effect of a counteroffer?

Answer 183

A counteroffer terminates the original offer and creates a new offer from the original offeree to the original offeror.

Question 184

How does death or legal incapacity affect an offeree's power of acceptance?

Answer 184

It terminates the offeree's power of acceptance, meaning an offer cannot be accepted after the death of either party.

Question 185

Why are requirement contracts not considered illusory under the UCC?

Answer 185

They are not illusory because the buyer is obligated to purchase all of its good faith requirements from that particular seller.

Question 186

What are 'gap fillers' under the UCC?

Answer 186

They are standard terms the UCC provides to fill in missing terms in a contract, such as a reasonable price or time for delivery.

Question 187

Does the UCC apply to contracts for the sale of goods regardless of whether the parties are merchants?

Answer 187

Yes, the UCC applies to all sales of goods, though some rules apply specifically to merchants.

Question 188

What kind of duty arises for a public official, like a police officer who has a duty to protect the public?

Answer 188

This is a pre-existing public duty, which cannot serve as consideration for a private promise of reward.

Question 189

Refraining from using an illegal drug, which one is already legally obligated not to do, cannot be consideration because it violates the ____ rule.

Answer 189

pre-existing legal duty rule

Question 190

Under what doctrine might a general contractor be able to enforce a subcontractor's bid even before it has been formally accepted?

Answer 190

Promissory estoppel, based on the general contractor's detrimental reliance on the subcontractor's bid.

Question 191

If acceptance under an option contract is mailed when is it effective?

Answer 191

It is effective upon receipt, which is an exception to the general mailbox rule.

Question 192

A contract where the parties exchange promises for future performance is known as a _______ contract.

Answer 192

bilateral

Question 193

An 'executory promise' is a promise that has _______.

Answer 193

not yet been performed

Question 194

To determine a party's intent, a court first considers the _____ meaning of the words used.

Answer 194

ordinary

Question 195

Between family members, a promise to render services is presumptively considered a ________ promise.

Answer 195

gratuitous