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APPLICABLE LAW

-- INTRO TO CONTRACTS --

CONTRACT DEFINITION
A contract is a bargained for exchange, the breach of which the law will provide a remedy.
APPLICABLE LAW

-- INTRO TO CONTRACTS --

OBJECTIVE THEORY
The objective theory of contracts provides that a party's conduct is judged by how a reasonable person  would interpret the conduct of that party.
APPLICABLE LAW

-- INTRO --

APLLICABLE LAW
The applicable law governing a contract depends upon the subject matter of the K.

a. UCC: The UCC governs Ks for the sale of goods.

b. Common Law: The commone law governs all other Ks except those for the sale of goods.
UCC
Article 2 of the UCC governs Ks for the sales of goods. Special UCC provisions apply when one or more parties are merchants.  As a general principle, the UCC interprets more liverrally than common law and endeavors to find a K exists where possible.
UCC

-- GOODS--

DEFINED
Goods are defined as movable, tangible property.
UCC

-- MERCHANTS --

DEFINED
A merchant is one who deals in goods of the kind, or one holding onself out as having special knowledge or skills regarding the practices or goods involved in K.  Merchant is construed broadly.
COMMON LAW

-- DEFINED --
CL applies to all Ks that do not involve the sale of goods. Typically this involves Ks for the provision of services, or relating to real property.
PREDOMINANCE TEST
Where a K includes both goods and the provision for services, the predominance test determines if UCC or common law governs the K.  Determine the predominant purpose for the K as a whole and the law governing that area provides the applicable law for the entire K.
APPLICABLE LAW

EXAM TIP
The application of the predominance test will likely hae lots of factual analysis and a two-sided argument without a clear answer. If so, throughout your analysis of the rest of the issues, be sure to analyze the facts using both the UCC and the common law where the two rules differ.
FORMATION

DEFINED
A valid K requires mutual assent, which consists of an offer and acceptance and consideration. Once the offer is accepted, the parties have a contract.
FORMATION

-- OFFER --

DEFINED
An offer is a manifestation of willingness to enter into a bargain. An offer requires a demonstration of intent to enter into a K, definite and certain terms, and communication to the offeree.
FORMATION

-- OFFER --

INTENT
The words or conduct of the offeror (the person making the offer) must demonstrate a present intent to enter into a K. An objective reasonable person standard is used to analyze.
FORMATION

-- OFFER --

INTENT

LANGUAGE
The language used by the offeror can help establish the offeror's intent. While precise language, such as "I offer", clearly establishes an offer, it is not required. The objective standard of how a reasonable person would nterpret the language is used to determine intent.
FORMATION

-- OFFER --

INTENT

CONTEXT
The context in which an offer is made can help establish intent.

1. Offers in jest: An offer made in jest is not a valid offer.
2. Preliminary negotiations: A party's language may invite preliminary negotiations but lack present willingness to K. (e.g., "I'm thinking of selling my car" or "I'd consider taking $5,000 for my car.")
  a. Solicitation of bids is likely preliminary negotiations.
  b. Advertisements are typically invitations to deal and not offers to sell.
     i. Exception: Ads containing words of commitment and where the offeree can be identified with specificity can be sufficiently definite to be an offer.
  c. Catalogs with specified goods and prices are typically an invitation to deal, not an offer.
FORMATION

-- OFFER --

DEFINITE & CERTAIN TERMS
The offer must contain definite and certain terms such that the content of the bargain can be determined and enforced. (The parties can communicate back and forth, which as a whole provides the essential terms, and the court may supply some missing terms.)
FORMATION

-- OFFER --

DEFINITE & CERTAIN TERMS

QTIPS
Quantity: The quantity term must be stated or acertainable.
Time of perfomrance can be a missing term supplied by the court as a "reasonable" time.
Identity of the parties: The parties must be identified.
Price: must be stated for real estate K. However, the UCC provides "reasonable price at the time of delivery" if missing.
Subject matter must be identified clearly.
FORMATION

-- OFFER --

COMMUNICATED TO THE OFFEREE
An offer must be communicated tot eh offeree, such that the offeree has knowledge of the offer.
FORMATION

-- ACCEPTANCE --

DEFINED
An acceptance is the manifestation of assent to the terms of the offer. This can be by words (oral or written) creating an express K, or by conduct, created a K implied-in-fact.
FORMATION

-- ACCEPTANCE --

METHODS

GENERAL
the offeror is the master of the offer and thus proscribes the method by which his offer can be accepted.
FORMATION

--ACCEPTANCE --

METHODS

BILATERAL
A bilateral K is where both parties make promises to perform.
FORMATION

-- ACCEPTANCE --

METHODS

UNILATERAL
A unilateral K exxchanges the offeror's promise for the offeree's actual performance of the requested act.
FORMATION

-- ACCEPTANCE --

POWER

TIMING
Acceptance must be within a "reasonable time."
FORMATION

-- ACCEPTANCE --

POWER

ONLY BY OFFEREE
Only by a person at whom the offer is directed may accept.
FORMATION

-- ACCEPTANCE --

POWER

ONLY IN RESPONSE TO AN OFFER
The offeree must know of the offer before accepting. (e.g., Where a reward has been offered, a person performing the requested act without knowing about the reward cannot "accept" by his performance.)
FORMATION

-- ACCEPTANCE --

POWER

MANNER OF ACCEPTANCE
An offer must be accepted in the manner required by the offer. But, if no method is specified, acceptance can be by any "reasonable" means.
FORMATION

-- ACCEPTANCE --

POWER

OBJECTIVE STANDARD
Acceptance by performance is judged by an objective standard.
FORMATION

-- ACCEPTANCE --

TERMINATION OF THE POWER TO ACCEPT (5 WAYS)

REJECTION
An outright rejection of the offer by the offeree.
FORMATION

-- ACCEPTANCE --

TERMINATION OF THE POWER TO ACCEPT (5 WAYS)

COUNTEROFFER
A counteroffer is an offer made by the offeree to the offeror regarding the dame subject matter as the original offer but contains different terms.  It is a rejection and a new offer.
  1. Distinguish counteroffer from inquiry: Inquiring about the possibility of another deal will not serve as a counteroffer and rejection. Analyze the language used (e.g., "Would you take less..?" is an inquiry, not a counteroffer).
FORMATION

-- ACCEPTANCE --

TERMINATION OF THE POWER TO ACCEPT (5 WAYS)

REVOCATION

Generally
An offeror can revoke an ordinary offer at any time before acceptance, which serves to terminate the power of acceptance. A revocation can be direct or indirect unambiguous words or conduct of which the offeree is aware.
FORMATION

-- ACCEPTANCE --

TERMINATION OF THE POWER TO ACCEPT (5 WAYS)

REVOCATION

Direct or Indirect
A revocation can be direct or indirect.
FORMATION

-- ACCEPTANCE --

TERMINATION OF THE POWER TO ACCEPT (5 WAYS)

REVOCATION

Unambiguous words or conduct
Unambiguous words or conduct that is inconsistent with the intention to K (e.d., selling the good that is the subject of the K to another party).
FORMATION

-- ACCEPTANCE --

TERMINATION OF THE POWER TO ACCEPT (5 WAYS)

REVOCATION

Of which the offeree is aware
The offeree need only be made aware of words or conduct of the offeror that indicates the offer was revoked.
FORMATION

-- ACCEPTANCE --

TERMINATION OF THE POWER TO ACCEPT (5 WAYS)

REVOCATION

Exception: irrevocable offers under the UCC firm offers
Some offers are irrevocable:
a. UCC "firm offers" are irrevocable even without consideration. "Firm offers" require the following:
  i. Made by a merchant (one dealing in goods of the kind).
  ii. Digned writing: In writing and signed.
  iii. Gives assurance it will be held open for a specified time, during which irrevocable.
  iv. Three-month limit on irrevocability: no offer can be irrevocable for longer than three months without consideration.  Even if a "firm offer" states it will remain open for longer than three months, it will only be irrevocable for three months. BUT, the offer is not automatically revoked after three months. So, for the first three months the offeror cannot revoke the offer, but after three months the offeror can revoke his offer. If he does not revoke his offer, it will remain open and can still be accepted.
FORMATION

-- ACCEPTANCE --

TERMINATION OF THE POWER TO ACCEPT (5 WAYS)

REVOCATION

Exception: Option Contracts
An option K is one where the offeror grants the offeree an "option" to enter into a K for a specified period of time and promises the offer will be held open during that time. Consideration is required for an option K. The offer will be irrevocable for the stated option period.
FORMATION

-- ACCEPTANCE --

TERMINATION OF THE POWER TO ACCEPT (5 WAYS)

REVOCABLE

Exceptions: Detrimental reliance & partial performance
An offer will be temporarily irrevoable if the offeree has made preparations to perform in reasonable detrimental reliance on the offer, or has performed in part.

  a. Unilateral K: Once performance has begun the offer is temporarily irrevocable.
  b. Bilateral K: Making preparations to perform may make the offer irrevocable if justice requires (e.g., subcontractor bids).
FORMATION

-- ACCEPTANCE --

TERMINATION OF THE POWER TO ACCEPT (5 WAYS)

LAPSE OF TIME
The offeror can set a time limit for acceptance, OR if none is stated it remains open only for a "reasonable" time. Once the time has passed, the offer lapses and may not be accepted. An oral offer typically lapses at the end of the conversation.
FORMATION

-- ACCEPTANCE --

TERMINATION OF THE POWER TO ACCEPT (5 WAYS)

DEATH OR INCAPACITY OF EITHER PARTY
If either the offeror or offeree dies or loses the legal capacity to enter into a K, the power to accept an outstanding offer is terminated automatically.
FORMATION

-- ACCEPTANCE --

EFFECTIVENESS

MAIL BOX RULE
The mailbox rule provides an acceptance is effective upon proper dispatch.

1. Proper dispatch requires that the offeree no longer has control or possession of the acceptance, such as with a properly mailed letter.
FORMATION

-- ACCEPTANCE --

EFFECTIVENES

MAIL BOX RULE

Exceptions
1. Where the offer itself provides otherwise, the terms of the offer control.
2. Option contract is effective upon RECEIPT!
3. If both an acceptance and a rejection sent, the rule depends on which was dispatched first.
  a. Rejection dispatched first, the acceptance will only become effective IF it is received first.
  b. Acceptance dispatched first is  effective on dispatch in accordance with the normal rule.
FORMATION

-- ACCEPTANCE --

VARYING FROM OFFER
When the acceptance varies from the offer, the rule will depend upon if CL or UCC applies.
FORMATION

-- ACCEPTANCE --

VARYING FROM OFFER

CL MIRROR IMAGE RULE
An acceptance must be a precise mirror image of the offer. If the response conflicts at all with the terms of the offer, or adds new terms, the purported acceptance is a rejection and counteroffer.
FORMATION

-- ACCEPTANCE --

VARYING FROM OFFER

UCC - general
Any "expression of acceptance" or "written confirmation" will act as an acceptance even if terms are "additional to or different from" those contained in the offer. The outcome here depends on if the terms are additional or conflicting to those in the offer.
FORMATION

-- ACCEPTANCE --

VARYING FROM OFFER

UCC

Additional Terms in Acceptance
If there are additional terms in the acceptance: the "battle of the forms" rule determines the outcome & depends on if one or both parties are merchants.

a. If one party or more is not a merchant, any additional term is a proposal and will not become a part of the contract unless the other party assent.

b. If BOTH parties are merchants, the additional term automatically becomes a part of the K subject to a few exceptions: (the term won't be added if):
  i. Offer expressly limits acceptance to its terms.
  ii. Material alteration with added terms (e.g., warranty disclaimer).
  iii. Objection: If the offeror objects to the additional term within a reasonable time.
FORMATION

-- ACCEPTANCE --

VARYING FROM OFFER

UCC

Conflicting Terms
Conflicting Terms will cancel each other out.
  a. Knock-out rule: Conflicting terms cancel each other out and neither enters the K. The K then consists of the agreed-to terms, and the court will supply missing terms if needed.
  b. UCC: The K then consists of the agreed-to terms and UCC gap fillers will supply the missing terms as follows:
  i. Price "reasonable price at the time of the delivery."
  ii. Place of delivery: buyer must pick up the goods from the seller.
  iii. Time for shipment is a "reasonable time."
  iv. Time for payment: Payment is due upon receipt of goods. Thus, no credit is extended.
c. Common law: The K then consisists of the agreed-to terms and the court may supply the missing terms on a resonable basis if necessary.
FORMATION

-- ACCEPTANCE --

ACCEPTANCE BY SHIPPING GOODS

GENERAL
Unless the offer specifies otherwise, an offer to buy goods may be accepted by shipping the goods (e.g., a "purchase order" sent to the seller and the seller fills the order). The offer is accepted by promptly shipping conforming or nonconforming goods.

a. Shipping conforming goods is an acceptance.
b. Shipping nonconforming goods: The effect of shipping nonconforming goods depends upon whether the seller acknowledges the nonconformity of the shipment.
  1. Shipment without acknowledging nonconformity: The offer has been accepted and breached simultaneously.
  2. Shipment with acknowledging nonconformity: This is an "accomodation" to the buyer and will not serve as an acceptance. Rather the seller is making a counteroffer that the buyer is then free to accept or reject.
FORMATION

-- ACCEPTANCE --

EXAM TIP
Mutual assent is frequently tested on the bar exam. Some questions will state the parties have a valid K so mutual assent is not at issue.  If so, do not waste time establishing the K, just identify the parties and terms of the K and move on to the issues raised in the question. Where mutual assent is an issue requiring depth of analysis, there will typically be a series of communications (oral or written) between the parties. It is helpful to sketch out a brief timeline in chronological order, noting the dates of each communication and what transpired on each date.  Analyse each communication in order to determine if a K has formed.  First, look for an offer. Determine if the first communication is an offer. If it's not, consider if the next communication is an offer (because it can't be an acceptance). If the first communication is an offer, look to the next communication to determine if it's an acceptance or a rejection and counteroffer. Countinue looking at each communication until you find an offer and acceptance. Any communication that occurs after the valid acceptance must pertain either to a new K, a potential modification of the K at hand, or an issue related to breach.
FORMATION

-- CONSIDERATION --

DEFINED
Consideration is a bargained for exchange of legal detriment and can be a promise to do an act, OR forbearance from doing an act one is otherwise entitled to do.
FORMATION

-- CONSIDERATION --

ILLUSORY PROMISE
An illusory promise is one not supported by consideration and is thus not enforceable. The promisor appears to promise something, but in fact does not commit to do anything at all. (e.g., A's promise to buy as many widgets as he wants is illusory because A can say he doesn't want any widgets and thus wouldn't have to perform.)
FORMATION

-- CONSIDERATION --

REQUIREMENTS AND OUTPUTS CONTRACTS

GENERALLY
Requirements and output Ks can appear illusory but are not because the implied obligation of good faith requires both parties to use their best efforts to supply the goods and promote their sale.
FORMATION

-- CONSIDERATION --

REQUIREMENTS & OUTPUTS KS

REQUIREMENT Ks
In requirement Ks the parties agree the seller will be the exclusive source of all of the buyer's requirements for a particular item for a specified period of time.
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