QUICK COURSE OUTLINE CONTRACTS '0 FORMATION OFFER TERMINATION 2. Bilateral (see Mailbox Rule Chart below): 1. An offeree's power of acceptance may be a. Requires an exchange of promises. terminated by: b. A valid acceptance (for a bilateral IN GENERAL a. Rejection or counter-offer by the offeree. contract) requires that there be an offeree The parties must form an agreement by b. Lapse of time. with the power to accept, unequivocal consenting to the same terms at the same time. c. Revocation by the offeror. terms of acceptance, and communication They accomplish this by the process of offer d. Death or incapacity of the offeror or offeree. of acceptance. and acceptance. Lonergan v. Sea/nick, 129 Cal. e. Non-occurrence of any condition of ••• App. 2d 179, 276 P.2d 8 (1954). acceptance under the terms of the offer. 2. Detrimental reliance makes an offer irrevo- POWER TO ACCEPT Once there is an offer and an acceptance, the cable for a reasonable time (modern view). parties have arrived at mutual assent. Generally, the entity to whom the offer has been a. Common Law: No such thing (must go to addressed has the power of acceptance . ••• the UCC-merchant firm offer). 3. Termination by operation of law: OFFER a. Incapacitation of the offeror. UNEQUIVOCAL TERMS OF b. Destruction of the subject matter prior to ACCEPTANCE An offer is the manifestation of willingness to an effective acceptance. enter into a bargain, so made as to justify a Acceptance must mirror the offeror's terms reasonable person in the position of the offeree ••• exactly. Otherwise, the "new" offer with addi- in understanding that her assent to that bargain CONSIDERATION tional or modified terms becomes a new offer. is invited and will conclude it. A contract is enforceable only if it is supported (Under the UCC, the rule is different. An ••• by consideration. Kirksey v. Kirksey, 8 Ala. 131 acceptance need not be an exact mirror of the (1845). Consideration must be a bargained-for original offer.) INTENT exchange and of legal value. Intent must be manifested through such words 1. Bargained-for exchange: COMMUNICATION OF ACCEPTANCE or acts that a reasonable person would believe a. Parties must exchange something, even if / 1. Mailbox Rule: A contract is formed upon the an offer is being made. Lucy v.Zehmer, 196 Va. it is a peppercorn. 493, 84 S.E.2d 516 (1954). b. Gifts are not "bargained for" and thus moment of dispatch of the acceptance. This do not qualify as consideration (see assumes that it is properly sent (i.e., properly promissory estoppel). addressed, stamped, and deposited in a ESSENTIAL TERMS OF AN OFFER c. Forbearance will be sufficient if it benefits mailbox). If the acceptance has not been \.J (COMMON LAW) the promisor. properly sent, then acceptance is effective upon receipt. 1. Identification of the parties. d. Past or moral consideration is not valid. 2. Legal value. Note: The Mailbox Rule only applies to 2. Description of the subject matter. a. A party must bear a detriment. acceptances. Other acts (e.g., rejection) are 3. Time for performance. b. A pre-existing legal duty is not consideration. only effective upon receipt. 4. Price. 3. Substitutes for consideration. 2. Exceptions to the Mailbox Rule: a. Promissory estoppel. Note: Silence on some of the terms above a. If the offer stipulates that the acceptance b. Detrimental reliance. may be interpreted to mean that reasonable is not effective until received. (The parties c. Modification under the UCC. terms may be determined at a later date. may contract out of the Mailbox Rule.) ••• (Article 2 of the UCC, which governs the sale b. Option contracts are immune to the Rule. of goods, only requires that quantity be an ACCEPTANCE c. If the offeree sends a rejection and then essential term of the contract-all other terms 1. Unilateral: sends an acceptance, whichever arrives will be filled in appropriately.) a. Acceptance can be done only through first is effective. performance. Ragosta v. Wilder, 156 Vt. d. If the offeree sends an acceptance and 390,592 A.2d 367 (1991). then a rejection, the Mailbox Rule would DURATION OF THE OFFER b. Once performance has started, offeror normally apply. If the rejection arrived first 1. Merchant's Firm Offer (UCC § 2-205): Usually may not revoke the offer. and the offeror detrimentally relies on it, irrevocable. c. Offeree must be aware that the offer exists. the Rule would be inapplicable. I 2. Option Contract: •• a. Money is paid to keep the offer open for THE MAILBOX RULE ./ a certain period of time . b. Counteroffer does not terminate the power to accept, unless the buyer Timeline . I detrimentally relies on it. Contract is formed unless offeror detrimentally relies on rejection before acceptance arrives. "INVITATION TO DEAL" Do not confuse an offer with an "invitation to VARIATIONS OF THE MAILBOX RULE deal:' The latter is more of the type that would Scenario 1. Rejection arrives first = rejection controls and no contract is formed. be found in catalogs. Note: Crossing offers in the mail that are \.J Timeline . I identical are void and do NOT form a contract. •• Scenario 2. Acceptance arrives first = acceptance controls and contract is formed . Timeline . I 1 ELEMENTS OF CONTRACTS INCAPACITY, MINORITY UNCONSCIONABILITY 1. Incapacity: Insane persons lack the capacity If a contract is deemed "unconscionable," a ELEMENTS OF A CONTRACT to enter into a valid contract. Intoxicated court will attempt to strike the offending people as well. contract, to be properly formed, needs an clause(s) from the contract and enforce the 2. Minority (underthe age of 18): -"'ef and an acceptance with consideration. rest of the contract. a. A contract made during one's legal minority may be disaffirmed at any time lYPES OF CONTRACTS before or after the attainment of a legal ILLEGALITY majority. Unless and until the contract is 1. Express contracts are formed when the If the subject matter of the bargain is illegal, disaffirmed, it remains binding. offer and acceptance are manifested by oral the contract is void. R.R. II. M.H. & Another, b. Other considerations for minority: or written words. 426 Mass. 501, 689 N.E.2d 790 (1998). However, i. If the contract invOLves necessities 2. Implied contracts are formed if the mutual a few things should be considered: assent of the parties is manifested by (food, clothes, or medical attention), the minor is still liable for the reason- 1. If the subject matter or participation of parties conduct Wood II. Lucy, Lady Duff-Gordon, is declared illegal when the offer is made, the 222 NY 88, 118 N.E. 214 (1917). able market value of the items. offer is revoked as a matter of law. 3. Quasi-contracts ("implied-at-Iaw") are not ii. Once the minor reaches the age of 2. If the subject matter or participation of the technically contracts, but devices created to legal majority, the contract may be parties is declared illegal AFTER formation, avoid unjust enrichment. ratified, and thus be made binding. BUT BEFORE performance, then the duties of both parties are discharged under the DUTY TO MITIGATE doctrine of impossibility. In most cases, the suing party has a duty to miti- gate damages. If the duty has been breached, it merely serves to reduce (does not bar) recovery. FRAUD STATUTE OF FRAUDS T Misrepresentation of a fact or promise of future De following types of contracts require the performance at the time the contract was made contract to be in writing in order to be valid: DURESS which induces party to enter into the contract. • Marriage. 1. Physical Duress: Coercive acts (can be to 2. Contract cannot be performed within a year. others beside the victim, i.e., family members) 3. Executor/administrator. may be a valid personal defense to avoid Surety. the obligations of a contract or the forced 5. Interest in land. rescission of a contract PERFORMANCE Contract for the sale of goods at a price of 2. Economic Duress: No defense when one of S500 or more. the parties is in dire need of the subject matter CONDITIONS and the other takes advantaqe of the circum- stances to drive an overly harsh bargain. 1. Promise v. Condition: A promise is a - PART PERFORMANCE FOR A LAND commitment to do or not to do an act that CONTRACT is at the heart of the contract. A condition performance on a land sale contract will MISTAKE is an event which will modify the underlying - e the Statue of Frauds and allow a land 1. Unilateral Mistake: A unilateral mistake of a promise (such as when and if the promise sale to be performed without fulfilling the material fact will not be a defense to contract must be performed). lfitten requirements of the Statute of Frauds. formation. The contract will be enforceable 2. Effects of Condition v. Promise: • Part performance will be satisfied for a despite the mistake of one of the parties. Failure of a promise = Breach. land sale contract if buyer does TWO of the ExceptiOn: The non-mistaken party had Failure of a condition = Relief from the 'ng three: reason to know of the mistake by the other obligation to perform. 1. Part payment. party. Only then, does a unilateral mistake 2. Possession. become a defense to contract formation. 3. Improvements on the land. Market St. Associates II. Frey, 941 F.2d 588 TYPES OF CONDITIONS • emitz II. Summit Hills Joint VeNture, 312 (7th Cir.1991). 127,538 A.2d 778 (1988). 2. Mutual Mistake: If there is a mutual mistake 1. Categorized by timing: condition precedent, of a material fact concerning the bargain, the conditions concurrent, condition subsequent.