Master Contracts Outline

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Contracts II. Contract FormationA. Basic elements of contract formation 1. Offer2. Acceptance3. ConsiderationB. Applicable Rules1. General contract lawa. Uniform Commercial Code (UCC)i. Applies to the sales of goodsii. Goods are movable at the time of contract formationb. Common law (Classical )i. Applies to everything but goodsii. K2dsecondary source but very influentialc. Which rules apply?i. What is the greater portion of the contract ($)ii. 50/50 could be either so must argue both2. Statute of fraudsa. Certain contracts must be in writingi. Sale of goods >$5001) Also personal property >$5,0002) E.g. intellectual propertyii. Sale of real propertyiii. Contract that cannot be completed within 1 year1) Literally cannot under any circumstances2) If at all possible then SOF does not applyb. If SOF applies then see SOF section

II. Elements of a Contract (See Ray v. William G. Eurice & Bros., Inc.)A. Offer (See Lonergan v. Scolnick and Normile v. Miller)1. Expression of intent to enter into a bargaina. Something for something (consideration)b. Intent to be bound by the offers terms without any further assent from offeror2. Creates a power of acceptance in offeree3. ORP STANDARDif the offeree accepts, will a contract be formed? 4. Classical v. Modern (See Walker v. Keith and Quake v. AA)a. Classical jurisdictioni. Offer must expressly state all material terms; orii. A non-debatable formula to determine termsiii. Cannot agree to agree lateriv. Formalize later? Only if certain termsb. Modern jurisdictioni. Do the parties intend to be bound?ii. Is there enough information to determine what constitutes breach and fashion a remedy?iii. ORP STANDARDargue both ways (reasonable minds could differ)iv. Formalize later? If the terms can be reasonably figured out5. Advertisementsa. Generally NOT considered offersi. Cannot create a power of acceptance in an unreasonably large number of peopleii. ORP STANDARDdid they intend to with everyone who received the ad?b. Exceptions:i. Specified number of people1) First come, first served2) First ten people to arriveii. An expressed limited supply and expressed number of people who can accept

iii. When it is clear the seller has enough supply to feasibly with everyone who views the ad1) Flyers directed to certain people2) Posters in the mall6. Form lettersa. Generally NOT offersame reason as advertisementsb. Consider them an invitation to make an offerc. ORP STANDARDi. Did the sender intend to be bound?ii. Are the terms listed enough to form a ?7. Estimates, quotes, and bidsa. Estimates are not offersi. Terms usually not definite enough1) Is the estimate meant to be binding?2) ORP STANDARDwould an ORP expect the offeror to be bound to the estimate?ii. Invitation to make an offer WITH solid termsb. Quotes generally are not offersi. Terms may or may not be enough to be an offerii. ORP STANDARDcould be enough for an offerargue both sidesc. Bidsi. Usually offersii. Follows an invitation to bid (make offers) that expresses requirements of an offeriii. Usually very specific terms8. Terminating the power of acceptancea. Rejection by offereei. I do NOT acceptii. Counteroffer1) Terminates offer by rejection2) Creates power of acceptance in original offeror under different terms

b. Lapse of timei. Reasonable amount of timeii. ORP STANDARDargue both sidesc. Revocationi. Offeror has power to revoke any time before offeree acceptsii. Revocation is effective upon receipt by the offereeiii. Can be a term of the offere.g. must accept before 12/25/20141) Term like this is NOT a promise to keep open (Option )2) States time of automatic revocationiv. Offeree must get reliable notification1) Not necessary a direct expression of revocation2) Somehow must get notification (See Normile v. Miller)d. Death or incapacitation of either party9. Option (Firm offer) (See Wood v. Lady Duff Gordon, Berryman v. Kmoch, and Walser v. Toyota)a. Promise to keep offer open for a specific amount of timeb. Only valid under certain conditionsi. Supported by its own consideration1) Basically a mini- inside an underlying a) Ill sell you my car for $1000b) ...and keep the offer open for 1 week if you give me $102) Little or seeming sham consideration is sufficient to validateii. Option promise under K2d 90(1) (overt promise)1) I promise to keep offer open for 1 week2) Rules for promissory estoppel (PE) applya) Only as far as the promise to hold the offer openb) To the extent necessary to prevent injusticeiii. Reliance under K2d 87(2) (implicit promise under the circumstances)1) Substantial, reasonable, foreseeable reliance on an offer is binding to the extent necessary to prevent injustice2) Generally only applies in GCSubcontractor context (See Drennan v. Star Paving) Baird

iv. Signed writing under K2d 87(1)(a)1) A signed writing stating offer will remain open is binding if:a) It recites any consideration (regardless of whether consideration is actually paid);b) The underlying contract is fair; andc) The option is for a reasonable amount of time2) Some courts follow; most do notv. Merchant signed offer to buy or sell goods under UCC 2-2051) If a merchant signs an offer that states a period of irrevocability, it is valid without consideration, statement of consideration, or reliance2) Can be no longer than 3 months (under UCC only)3) PE under 87(1), 90(1), or option w/ consideration may still apply past the 3 month limitvi. Beginning performance on unilateral contract under K2d 451) A contract that can only be accepted by performance becomes irrevocable when performance begins (explained fully under acceptance section)2) Preparing to perform does not constitute beginning performance but 87(2) may apply to reliance costsB. Acceptance1. Manifestation of intent to be bound by the terms of an offer in the manner prescribed by the offeror2. Common Law (applies to non-goods AND in absence of UCC definition)a. Mirror image rulei. Acceptance must be to the exact material terms of the offer1) Material terms are those that offer is dependent upon2) Simple requests with a purported acceptance may still be acceptance and not counteroffer3) ORP STANDARDa) I accept but please have the car washed Acceptanceb) I accept only if you wash the car first Counterofferii. Any additional/different terms constitute a rejection and counteroffer which must be accepted by original offeror before formationb. Last shot rulei. If there are no overtly agreed upon terms but actions imply a contract then last shot rule appliesii. The terms of the last offer are the terms of the c. Manner of acceptancei. Bilateral 1) Acceptance by promise or performancea) Promise for promiseIll pay you $10,000 for your car Promise to pay $10k Promise to deliver car formed when agreement made (mutual assent) regardless if car is ever delivered (if not then breached)b) Promise for performanceIll pay $500 if you paint my house Promise to pay $500 formed even if painter says nothing but starts painting the housec) Offeror can specify how to accept, and if so only formed when the specific action happened (promise or performance)2) Acceptance by part performancea) K2d 62(1) If offer gives choice of promise or performance then tender or beginning of performance is acceptanceb) K2d 62(2) Acceptance by performance in this manner constitutes promise to complete performance (in contrast to unilateral ) Once performance is begun, the contract is formed and both parties are bound to the contract Beginning of performance operates as a promiseii. Unilateral (See Petterson v. Pattberg and Cook v. Coldwell Banker)1) Acceptance only by performance2) Ill pay you $100 if you run around the blocka) Acceptance occurs when performance completeb) When performance begins, offer becomes irrevocable (K2d 45) but formed at completion Must be tender or beginning of performance NOT preparation to begin performance3) E.g.bonus payments, reward offers, rebates, etc.d. Mailbox rulei. An offer is effective when RECEIVED by offereeii. Acceptance is effective when SENT by offeree1) Exceptions:a) Offer can state acceptance only valid when receivedb) Option acceptance is only when receivediii. If offer is revoked but offeree already mailed acceptance then is formed3. Acceptance with the sale of goods (UCC 2-207Battle of the Forms) (See Princess v. GE and Brown v. Hercules)a. 2-207(1)A definite and seasonable timely expression of acceptance will form unless:i. Acceptance is expressly conditional on additional or different terms1) An overt statement that the new term(s) must be agreed upon before becomes binding2) Requires further assent from original offerorii. Could be informal agreementnot necessarily in writingb. 2-207(2)If is formed under 2-207(1) then the following applies to additional or different terms:i. Both merchants (anyone who is regularly in business and is making the deal in question for their business and not as a consumer)1) Additional terms become part of the contact unless the offer expressly rejected additional terms2) The additional terms would materially alter the (comment 4)a) Surpriseb) Hardship3) The offeror expressly objects to the additional terms4) Different terms have three approaches (if present, argue all three)a) Approach 1apply 2-207(2)b) Approach 2different terms NEVER come inc) Approach 3Apply the Knock-Out Ruledifferent terms knock each other out and are replaced with reasonable terms and background provisions of the UCCii. Only 1 or neither is merchant1) Additional and different terms must be agreed upon2) Terms of the offer standc. 2-207(3)i. Supplants common law last-shot ruleii. Applies when no is formed but parties act as is formed1) Knock-Out Rule applies2) All different terms out3) UCC warranties and background provisions apply4) Terms like limitations on liability are out4. Boxed termsorder something and terms arrive in the box with the product (See Hines v. Overstock and DeFonted v. Dell)a. Appro