MBE Contract Law - Formation

Legally enforceable agreement that contains the rights and responsibilities of the contracting parties.

Common Law: employment contracts, personal service contracts

UCC Article II: anything moveable; tangible personal property

Mixed: When the contract deals with both services and good, predominant purpose of the contract reigns

Mutual assent (offer + acceptance);

Consideration (bargained for legal detriment); and

No defenses to formation

Contract created by mutual promise of performance. The most common type of contract.

Ex. You agree to pay a certain amount of money in exchange for title of a home.

Requires full performance as method of acceptance; the offeror is bound once the performing party begins performance

An outward, objective manifestation of willingness to enter into a bargain;

That creates the power of acceptance in the offeree (i.e. nothing left to do except say “yes”)

Parties

Subject matter

Price

Quantity

Description of the land and price terms

Quantity

⭐️ As long as parties intended to make K, UCC will supply gap fillers for missing terms

Quantity expressed in terms such as “all” or “only” or “solely”

No, unless they contain specific and detailed information as to the price, quantity, and who can accept

(Ex. “50 blazers for sale for $50 for law students who passed the bar)

Yes, because they generally offer money in exchange for performance of a specified task

Counter-offer;

Death;

Incapacity

Lapse;

Rejection; or

Revocation

Any time before acceptance

Option contracts;

Firm offers;

When there is detrimental reliance;

When offeree has started performance on a unilateral contract

Make an offer irrevocable if:

Offeror promised to keep offer open for a specific period of time; and

Promise was supported by consideration

Offer that is irrevocable (for a maximum of 3 months) under the UCC as long as:

Offeror is a merchant;

Offer is signed, in writing; and

Expressly provides that the offer will be held open

Yes, otherwise no power of acceptance was created

Offeror.

If no method specified, can be accepted by any reasonable method.

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Full performance; and

Notice to offeror that you accepted within a reasonable time frame after performance starts

⚠️ Note: partial performance does not constitute acceptance (but you may still be able to argue detrimental reliance or quasi-contract)

rejection + new offer

Acceptance must be a mirror image of every single term of the offer.

If any part of the terms are different, it will function as a counter-offer and rejection.

The terms will automatically become part of the contract, unless:

the terms materially change the contract;

the offeror has already objected to the additional terms, or objects within a reasonable time frame; or

the offer was explicitly limited to the original terms

Additional terms are not incorporated, but the acceptance is still valid

Promise to ship the goods; or

Shipping the goods within a reasonable time period

Yes, but also constitutes breach

If one term conflicts with another in the contract, they will "knock" each other out and a UCC gap filler will used instead.

Acceptance is effective upon DISPATCH

No, the offer controls

Rejection is sent first: Acceptance will be effective if received BEFORE the rejection

Acceptance is sent first: Acceptance effective upon dispatch (regardless of whether rejection is received before)

Upon receipt by offeror.

No.

(Ex. If Max knew that he was supposed to get an offer for 500 toys at $5 a piece, but instead receives an offer for 500 at $0.05 a piece, he cannot grab the offer).

Detriment to promisee (promisee forgoes something of value); or

Bargained-for exchange (must not be nominal)

Doing something you are not legally obligated to do; or

Refraining from doing something you are legally entitled to do

Generally no, unless:

Giver knows gift will induce substantial reliance; and

Failure to uphold promise will cause injustice

Promise that doesn't obligate the promisee to anything, and therefore doesn't qualify for consideration

Promises to satisfy a pre-existing duty (e.g. pay a past debt or perform a prior duty) does not constitute consideration

Mutual modification (ex. promise to pay more $$ for different performance)

Unforeseen circumstances that render performance substantially more burdensome than was reasonably anticipated;

Valid defense to K formation (voidable obligation);

Third party offers a promise contingent upon performance of a contractual obligation by a party;

Honest dispute as to duty;

Modification of K for the sale of goods

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No, modifications do not require new consideration as long as they were made in good faith UCC § 2-209(1)

Payment of past debts;

Firm offers

Note: Option contracts are sometimes enforceable without consideration. In addition, individuals may be able to recover under the doctrine of promissory estoppel, though there is no "agreement" governing the transaction.

Yes, unless:

New obligations on both sides; or

Existence of circumstances unforeseen by either party

True

No, as long as both parties are acting in good faith

One that attempts to extort another party

No

In an auction with reserve, the auctioneer may withdraw the goods at any time until he announces completion of the sale.

In an auction without reserve, after the auctioneer calls for bids on an article or lot, that article or lot can be withdrawn only if no bid is made within a reasonable time. UCC § 2-328(3)