Essay Structure
(Surely, All Contracts Don’t Stink)
1) Source of Law that applies (Common Law / UCC Article 2)
2) Agreement = Offer + Acceptance (Mutual Agreement)
3) Consideration
4) Defenses
5) Statute of Frauds
Source of Law
Common Law - Governs service agreements and the sale of an interest in land
UCC Article 2 - Governs sale of movable goods
Contract Formation
For an enforceable contract to be formed there must be a valid offer, acceptance, and bargained-for consideration.
There must be no defenses to the formation of the contract, and the SoF must not bar the enforcement of the agreement
Offer - Definition
Necessary Terms
An offer is an OBJECTIVE manifestation of a WILLINGNESS to enter into an agreement that gives someone else the POWER TO ACCEPT
Must be directed to a specific offeree (except for contest offers or reward)
Terms: CL (all required terms - parties, subject, price, and quantity); UCC (no price needed - UCC will fill the gap)
Termination of Offer
(1) Revocation (Direct Communication)
(2) Constructive Revocation
(3) Rejection
(4) Counter-Offer (mere inquiry is not a counter-offer)
R2d - Mirror Image Rule
UCC - Battle of the Forms
(5) Death
(6) Lapse Time (Reasonable amount of time)
Irrevocable Offers
Option Contracts;
Firm Offers;
Unilateral Contracts (in a contest / reward if a party starts performance, the offer cannot be revoked);
Detrimental Reliance (general contractors/subcontractor context)
Firm offers under the UCC
Firm offers under the UCC: An offer to buy or sell goods is irrevocable if it
1) is by a merchant;
2) is in a signed writing; and
3) gives explicit assurance that the offer will be held open
Time Period:
1) As stated in the offer; or
2) reasonable time period not to exceed 90 days.
No offer can be made irrevocable for any longer than 3 months, unless consideration is given. If the offer lists a period longer than 3 months, the offer becomes revocable after 3 months
Acceptance
Acceptance is an OBJECTIVE manifestation of a WILLINGNESS to enter into an agreement by the offeree
Offeror is Master of the offer - Offeree must accept it according to its terms
In Unilateral Contracts - one must know about the offer to accept it
Mailbox Rule
Acceptance sent by mail is EFFECTIVE when SENT
Does not Apply if offeree sends rejection/counteroffer first - Which ever the offeror RECEIVES first
Acceptance without communication
- Unilateral reward offers or contests
- Past history of silence serving as acceptance
- The offer says that acceptance must come by silence + offeree intends to accept
Counteroffer
Common Law - Mirror Image
The terms in the acceptance must match the terms of the offer exactly
Counteroffer
UCC Battle of the Forms (2-207)
2-207(1) - Acceptance?
Acceptance, unless acceptance is expressly made conditional on assent to the additional or different terms
2-207(2) - What Terms Control?
ADDITIONAL TERMS
If not Merchants: Contract is formed and additional terms must be regarded as proposal
If Merchant: Additional terms become part of the contract, unless
(i) the offer expressly limits acceptance to the terms of the offer;
(ii) they materially alter it; or
(iii) notification of objection is given within a reasonable time
DIFFERENT TERMS
Knock-out rule, Use gap fillers
Consideration
Consideration is a BARGAINED-FOR exchange of a benefit or legal detriment
(Not doing something that you are legally entitled to do is a legal detriment)
Nominal Consideration - NO CONSIDERATION
Illusory Promise - NO CONSIDERATION (must be a way for the promisor to breach - “if I feel like it”) - Satisfaction; output and requirements contracts are ok
PAST CONSIDERATION IS NOT CONSIDERATION
Contract Modification
Pre-Existing Duty Rule
Might require new consideration to be valid
CL - Follows the PEDR
Exceptions: Change in performance; a third party promising to pay; unforeseen difficulties
Partial Payment/Release - IF currently due, modification is not binding
UCC - Does not follow PEDR
Good faith? Them, binding w/o new consideration
Statute of Frauds
Unenforceable Ks unless in writing:
MY LEGS
- Marriage
- One Year - A contract that by its terms CANNOT be performed within one year from its making (MORE THAN 1y)
- Real Property - only transferring an interest in the property (LAND)
- Executor (executor agreement of an estate)
- Suretyship (GUARANTEE)
- SALE OF GOODS - $500 or more
- Part performance
- LAND
- Pay some money; and
- Possesion of the land OR make improvements to the land
- Sale of Goods
- Give some money, ship some goods back
- Guarantor
Main purpose exception - If the main purpose in agreeing to pay a 3rd party debt is for surety’s own economic advantage, then no SoF
SoF - Satisfaction
Performance - If full performance, the other party cannot assert SoF defense
Writing - (i) Signed by the party against whom enforcement is sought; (ii) Essential Terms (parties, subject, quantity – and price (if CL))
Real Estate - Part performance can satisfy if (2 of the following):
- Possession,
- Payment
- Improvements to the land
Part Performance (only for the quantity delivered and accepted)
Custom-made (exempt from SoF)
SoF - Must the modification satisfy the SoF?
Ask whether the deal, with the modification, would be in the SoF
If so, SoF requirements must be met
3rd PARTY BENEFICIARY
Two people make a contract and someone else benefits.
- 3 PARTIES HYPO!
- Intended – Guy who the original parties intended to benefit
o Parties express the intention!!
- Parties can change their minds, if rights are not vested!!
- Can only enforce the right, if the right is vested:
- One of the original parties inform the beneficiary
- 3rd party learn about it and begins to rely on this
- Incidental – 3rd parties claiming something but the original parties do no intended to benefit him
- Never has rights!! EVEN IF HE RELIES
ASSIGNMENT v. DELEGATION
ASSIGNMENT – One party ASSIGNS away their rights in the contract
VS.
DELEGATION – One party DELEGATES their duty under the contract
Rule = You may freely assign (rights) or delegate (duties) to whomever whenever you want
- The other party needs to allow the performance
- If the party breaches, the non-breaching party may sue BOTH
- If the parties execute a NOVATION, Then, can only sue the assignee
Never assume novation!! - The new party cannot unilatery change the terms of the original contract – after assignment, he assumes the original terms
Exceptions:
- If service is unique –> Cannot delegate (IN ANY CASE)!
- If the parties agree that neither party may ASSIGN the rights – but assignment anyway – the assignment is valid and effective! But owe damages for breaching the promise!
- BUT IF ATTACHED TO THE WORD VOID (“any assignment will be void”) –> NOT VALID
- BUT, If the parties agree that neither party may DELEGATE the duties – but delegate anyway – NOT VALID!
PAROL EVIDENCE
PAROL EVIDENCE – After a contract is formed, one party tries to admit Oral evidence in the contract
- Is the K integrated? Final vs. Partial Integration
- Final/Compete Integration –> Parties want the contract to be the final understanding (4 corners) – Merger Clause
o Parol Evidence is not admissible!
o UNLESS, to clear up an ambiguous term
o DEFAULT RULE –> Everything is partial unless the question tells otherwise - Partial Integration –> Admissible
o Except – Contradict a material term! - Always admissible:
o to prevent fraud or duress!
o To show that was a condition precedent
o In a sale of goods contract, to show course of dealing, trade or custom
- If Partial, consistent additional terms admitted, but not material alteration, or CONTRADICTS MATERIAL TERMS
- If FINAL, nothing admitted, except to clear up ambiguity
MODIFICATION
MODIFICATION –
- Same rules as Counteroffer (but CO is before the agreement)
- Modification does not have to be in writing!!!
COMMON LAW - Additional consideration needed
- Services
- Land
UCC – No Consideration needed, only GOOD FAITH
- Sale of goods
