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When is a contract unilateral?
A contract is bilateral unless:
  1. it is for a reward, prize, or contest; OR
  2. offer expressly requires performance for acceptance
When does the UCC apply?
Primarily, the sale of goods

UCC does not apply to the sale of real estate or services.
When does the UCC apply in a mixed contract for goods and services or real estate?
If the contract divides payment, UCC applies to goods portion only.

If the contract does not divide payment, then UCC applies to the entire part if the goods were the more important part of the K.
Is an offer with a missing price term acceptable?
In the sale of real estate, no.

In the sale of goods, under UCC, it is ok if the parties so intend.
What words in an offer create vagueness or ambiguity problems?
If these words are in a material term of an offer, it is probably too vague:
  • Fair
  • Appropriate
  • Reasonable
Is an advertisement an offer?
Generally no, but there are two exceptions:
  • reward (carbolic smokeball - reward to those who got sick after using product)
  • specifies quantity and who can accept (e.g. 10 widgets, first come, first served)
How can an offer be terminated?
  1. Lapse of time (reasonable unless stated)
  2. Death of a party (except for irrevocable offers)
  3. Words or conduct of offeror
  4. Words or conduct of offeree
When is an offer irrevocable?
  1. option purchased with consideration
  2. firm offer rule
  3. reasonably foreseeable detrimental reliance
  4. beginning of performance on unilateral K (provided completed in a reasonable time)
What are the differences between CL and UCC?
  1. UCC allows offers without prices as long as parties intended it.
  2. UCC allows irrevocable options without consideration under the Firm Offer Rule.
  3. UCC allows formation if acceptance adds additional terms [even if parties are not merchants, but additional terms will not be part of K unless both parties are merchants]
  4. UCC does not treat a conditional acceptance as a counteroffer, so conduct indicating existence of a K following a conditional acceptance will determine whether the terms of conditional acceptance are part of K.
  5. UCC does not require additional consideration to modify a K as long as there is good faith. CL generally requires new consideration unless there are differences in their promise (manner, circumstances, or to whom).
  6. UCC allows partial performance to satisfy SoF, whereas service K's require full performance and real estate contracts require 2 of 3: payment, improvements, possession.
  7. UCC does not require all material terms in a writing to satisfy SoF, it only requires quantity.
  8. UCC allows unsigned writings to defeat a SoF defense against a (1) merchant who receives (2) a signed writing with a quantity term from another merchant and (3) does not respond within 10 days.
  9. UCC allows contracts to require that all modifications be in writing.
  10. UCC does not require material breach to excuse performance. Instead, it has the perfect tender rule.
  11. UCC allows insecurity to excuse performance.
What is the Firm Offer Rule?
An offer for cannot be revoked for up to 3 months if:
  1. offer to buy or sell goods
  2. written promise to keep offer open
  3. party is a merchant
What are the three methods of indirect rejection?
  1. counteroffer
  2. conditional acceptance
  3. mirror image response plus terms
What is the difference between a counteroffer and mere bargaining?
Bargaining comes in the form of interrogatories.
What words indicate conditional acceptance?
  • if, only if
  • provided
  • so long as
  • but
  • on condition that
When do additional terms in an acceptance become part of the contract?
Not in non-goods contracts.

Not in contracts involving non-merchants

But otherwise, as long as the offer was to buy or sell goods between two merchants unless:
  1. it materially changes the offer
  2. if the offeror objects to the change
What happens if a conditional acceptance is followed by conduct indicating there is a K?
  • CL: conditional acceptance is treated as a counter-offer and later conduct is treated as acceptance, so K includes terms of conditional acceptance.
  • UCC: K is based solely on conduct, so terms of conditional acceptance may or may not be part of K depending on conduct.
What happens if a verbal offer is followed by full performance but no acceptance?
Full performance is acceptance unless notice was required by offer or offeree had reason to believe that offeror will not learn of acceptance.
What happens if a verbal offer is followed by beginning performance but no acceptance?
If bilateral, there is a K and offeree has an implied promise to finish performance.

If unilateral, there is no K and offeree has no implied promise to finish performance. But offeror will be held to have given offeree an option K to finish performance, so his offer is not revocable.
What are the mailbox rules?
  1. All cmmcns other than ACCEPTANCE are effective on receipt.
  2. ACCEPTANCE is effective on dispatch (unless rejection mailed first).
  3. If rejection is mailed before acceptance, first to be received is effective.
  4. Cannot use mail box rule to accept an option K.
Is there a K if seller sends the wrong goods?
Without more, yes there is a K and breach.

But if seller offers these goods as replacement, it is just a counteroffer and there is no K.
Who has the power of acceptance?
  1. Someone who was made the offer (unless it is an option K, which is assignable unless terms forbid assignment); AND
  2. is aware of the offer.
Non-option offers are not assignable.
Definition of consideration
bargained-for legal detriment
Does past consideration count?
Only if it the act was expressly requested by promisor and there is an expectation of payment by the promisee.
When does a pre-existing legal duty count as consideration?
At CL, only in CUT:
  • Change in required performance
  • Unforeseen difficulty severe enough to excuse performance
  • Third-party (consideration to another party)
At UCC, provided there is good faith, modifications can be made to a K without new consideration:
When can repayment of an owed debt count as consideration?
It is not consideration if the debt is due and undisputed.
What are the substitutes for consideration?
  1. a written promise to satisfy a questionable obligation is enforceable without consideration
  2. Promissory Estoppel
What are the elements of Promissory Estoppel?
  1. Promise
  2. Reliance that is reasonable, detrimental, and foreseeable.
  3. Enforcement necessary to avoid injustice.
Who lacks capacity to contract?
  1. Youth under 18.
  2. Mental incompetents that lack the ability to understand
  3. intoxicated persons if the other party should know
Exceptions to Guarantee basis for Statute of Frauds
  • Can't just be a promise to pay, must be a promise to pay if someone else doesn't
  • main purpose exception - not within SoF if the main purpose of the contract is to benefit guarantor.
What are the consequences of incapacity?
  1. Right to disaffirm (but also option to enforce K)
  2. K if retain benefits after gaining capacity
  3. Quasi-K for necessities (judged by market prices)
What are the bases for SoF?
  1. Transfers of Interest in real estate (except leases not longer than 1 year)
  2. Sale of goods for $500 or more
  3. Surety: Promises to "answer for" (guarantee) the debts of another.
  4. Executor promises to "answer for personally"
  5. Promise in consideration of marriage
  6. Service K not capable of being fully performed within 1 year from date of K
  • capable = includes Ks that take longer as long as they are capable of being performed within one year, such as life Ks because someone could die within 1 year.
    How is the SoF satisfied?
    1. Performance
    2. Writing
    3. Judicial Admission
    When does performance satisfy the SoF?
    1. Services: Full performance by either party required.
    2. Goods: part performance satisfies SoF for part performance only, except for specially manufactured goods which satisfy SoF when seller has made a "substantial beginning"
    3. Real Estate: Performance counts if buyer has done any two of the following three: (a) payment; (b) improvements; (c) possession
    When do writings satisfy SoF?
    1. Non-UCC: must contain all material terms and only defeat SoF defenses raised by parties who signed the writing.
    2. UCC: must contain only the quantity term and must either (1) be signed or (2) be a merchant's failure to respond to a signed writing containing quantity from another merchant within 10 days.
    What are the uses for SoF other than defeating formation?
    1. Authorizing someone to contract on your behalf must be in writing if the contract they entered was within SoF.
    2. Modifications to a K must be in writing if the modified agreement is within SoF.
    When can K's require that all modifications be in writing?
    1. At CL, this is not enforceable.
    2. At UCC, this is enforcable if in writing.
    What are deficiencies that prevent formation despite an agreement?
    1. Lack of consideration
    2. Lack of Capacity
    3. Violates SoF
    4. Illegal subject matter (not illegal purpose)
    5. Public Policy - prevent overbroad non-compete clauses and excusing intentional or reckless conduct
    6. Misrepresentation - a false assertion of fact that induces the K. No wrongdoing is required.
    7. Wrongful nondisclosure
    8. Duress: Physical or Economic - an improper threat against one who has no alternative
    9. Unconscionability
    10. Ambiguity in words of agreement
    11. Mistake of Fact
    If at time of King, the K was procedurally or substantively unconscionable, a court can modify or nullify K.

    Examples of Procedural unconscionability:
    • Inconspicuous risk shifting
    • K of adhesion
    • Exculpatory clauses
    If (1) a material term has multiple reasonable interps and (2) each party attaches different meaning to term and (3) neither party knows or should know that there are multiple reasonable interps, then the K is unenforcable. If some party knows or should know of ambiguity, enforce K under terms understood by the other party.
    Mistake of Fact
    a disfavored defense to formation

    Only applies if there is a mistaken belief, not a mistaken judgment or mere uncertainty.

    Courts are more willing to grant relief if mutual mistake than in cases of unilateral mistake.
    What is a merger clause? What is its effect?
    A merger clause states that "this is the complete and final agreement." It is persuasive, but not conclusive.
    When is parol evidence allowed?
    • Allowed to help interpret terms or to establish a defense to formation (e.g., misrepresentation).
    • It is not allowed to contradict a term, unless it is pointing out a typo.
    • It is allowed to add additional terms to a contract if the court finds (i) the agreement is only a partial integration or (ii) the additional terms would ordinarily be in a separate agreement.
    When does the parol evidence come into play?
    • the court finds a final written agreement; AND
    • there is prior oral or written statements or contemporaneous oral statements
    Define custom, course of performance, and course of dealing

    What is the order of importance?
    course of performance - same parties, same contract

    course of dealing, same parties, different but similar K

    custom - different but similar parties, different but similar contracts
    What is a shipment K? A destination K?
    Under shipment K, seller is done as soon as he (i) gets goods to common carrier, (ii) makes reasonable arrangements for delivery, and (iii) notifies buyer.

    Under a destination K, seller does not complete performance until goods are delivered to buyer.

    FOB (city) will be a destination K unless the city is the seller's city.
    What are the risk of loss rules?
    Applied in order of priority:
    1. Agreement
    2. Breach - breaching party is liable for any uninsured loss even if it is unrelated to breach.
    3. Delivery by common carrier - shifts after delivery obligation is fulfilled.
    4. Last - if seller is merchant, risk shifts on buyer's receipt. If seller is not a merchant, risk shifts after goods are tendered (telling buyer where goods are and how to get them).
    What are the types of warranties?
    1. Express warranty - only for factual guarantees, not opinion - includes showing a sample.
    2. Implied warranty of merchantability
    3. Implied warranty of fitness for a particular purpose
    When is there an implied warranty of merchantability? What is its effect?
    Applies when seller is a merchant who deals in goods of the kind sold.

    It warrants that the goods sold are fit for ordinary purposes.
    When is there an implied warranty of fitness for a particular purpose? What is its effect?
    Three elements:
    1. Buyer has a particular purpose
    2. Buyer relies on seller to select suitable goods.
    3. seller has reason to know of purpose and reliance
    It warrants that goods are fit for a particular purpose.
    What warranties can be disclaimed? How?

    What warranties can be limited? How?
    • Can't disclaim express warranties.
    • Can disclaim implied warranties with (1) conspicuous language or (2) "as is" or "with all faults" (which don't have to be conspicuous).
    • All warranties can be limited, subject to unconscionability.
    • It's prima facie unconscionable if warranty breach on consumer goods causes personal injury.
    Perfect Tender
    1. Applies to sale of goods only.
    2. means perfect goods, perfect delivery.
    3. Imperfect tender generally gives buyer option to reject goods.
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