Professional Documents
Culture Documents
I. Contract Formation
A. Basic elements of contract formation
1. Offer
2. Acceptance
3. Consideration
B. Applicable Rules
1. General contract law
a. Uniform Commercial Code (UCC)
i. Applies to the sales of goods
ii. Goods are movable at the time of contract formation
b. Common law (Classical )
i. Applies to everything but goods
ii. K2dsecondary source but very influential
c. Which rules apply?
i. What is the greater portion of the contract ($)
ii. 50/50 could be either so must argue both
2. Statute of frauds
a. Certain contracts must be in writing
i. Sale of goods >$500
1) Also personal property >$5,000
2) E.g. intellectual property
ii. Sale of real property
iii. Contract that cannot be completed within 1 year
1) Literally cannot under any circumstances
2) If at all possible then SOF does not apply
b. 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 bargain
a. Something for something (consideration)
b. Intent to be bound by the offers terms without any further assent from offeror
2. Creates a power of acceptance in offeree
3. ORP STANDARDif the offeree accepts, will a contract be formed?
4. Classical v. Modern (See Walker v. Keith and Quake v. AA)
a. Classical jurisdiction
i. Offer must expressly state all material terms; or
ii. A non-debatable formula to determine terms
iii. Cannot agree to agree later
iv. Formalize later? Only if certain terms
b. Modern jurisdiction
i. Do the parties intend to be bound?
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b. Lapse of time
i. Reasonable amount of time
ii. ORP STANDARDargue both sides
c. Revocation
i. Offeror has power to revoke any time before offeree accepts
ii. Revocation is effective upon receipt by the offeree
iii. Can be a term of the offere.g. must accept before 12/25/2014
1) Term like this is NOT a promise to keep open (Option )
2) States time of automatic revocation
iv. Offeree must get reliable notification
1) Not necessary a direct expression of revocation
2) Somehow must get notification (See Normile v. Miller)
d. Death or incapacitation of either party
9. 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 time
b. Only valid under certain conditions
i. Supported by its own consideration
1) Basically a mini- inside an underlying
a) Ill sell you my car for $1000
b) ...and keep the offer open for 1 week if you give me $10
2) Little or seeming sham consideration is sufficient to validate
ii. Option promise under K2d 90(1) (overt promise)
1) I promise to keep offer open for 1 week
2) Rules for promissory estoppel (PE) apply
a) Only as far as the promise to hold the offer open
b) To the extent necessary to prevent injustice
iii. 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 injustice
2) Generally only applies in GCSubcontractor context (See Drennan v.
Star Paving) Baird
i. Consideration
ii. The owner lets you use his car and in return he gets a full tank of gas
4. Consideration does not have to be fair (See Batsakis v. Demotsis)
a. formation is not dependant on a fair bargain, just a bargain
b. law is meant to be binding when parties want to bound, not to make an unfair
deal more equitable
5. Sham consideration
a. Something that would normally be consideration cannot be given just to avoid
the consideration requirement if it is not really part of a bargain
b. E.g.$1 for a Yacht SHAM CONSIDERATION
c. ORP STANDARDwould someone believe a yacht would cost $1?
IV. Statute of Frauds (See Crabtree v. Elizabeth Arden, Beaver v. Brumlow, Alaska Dem.
v. Rice, Buffaloe v. Hart)
A. Certain contracts must be in writing
1. Sale of goods >$500
a. Also personal property >$5,000
b. E.g. intellectual property
2. Sale of real property
3. Contract that cannot be completed within 1 year from formation
a. Literally cannot under any circumstances
b. If at all possible then SOF does not apply
B. Common Law (K2d 139)
1. A signed writing by the party to be charged that reasonably identifies the subject
matter of the contract,
a. definition of signature 134Any symbol made or adopted, with the intent,
actual or apparent, to authenticate the writing as that of the signer
b. Literally only applies to SOF, but arguably could be applied to other writings in
the Restatement--87(1)signed option offer
2. It sufficiently indicates that a contract has been made between the parties or has
been offered by the party to be charged, and
a. States with reasonable certainty the essential terms of the unperformed
promises in the contract
b. the writing can be made at any time
c. does not need to be a memorialization of a contract (can be a diary entry)
3. if essential terms are missing, other evidence can be supplied to indicate that term,
but generally the writing is inadequate if it omits an essential term (compare to
UCC)
4. The signed writing must identify the contract in questionEx. a lease contract with
an optional renewal provision signed by both parties probably does not adequately
show the existence of the renewal contract, but will show the existence of an offer
by the party to be charged
b. K2d 130 allows for performance that cant be completed within 1 year for party
that fully completes performance within 1 year:
c. Majority SOF doesnt prevent enforcing other parties promises under K
d. Minority SOF doesnt prevent enforcing other parties promises under K, BUT
only if the full performance occurred within 1 year of making of K. Otherwise,
recovery is limited to restitution.
2. Promissory Estoppel (K2d 139, 90) but first restitution under 139
D. UCC 2-201
1. 2-201(1) requires a writing sufficient to indicate a contract for sale has been made
between the parties
a. less demanding than K2dneed not state all essential terms of the contract
even quantity but performance will be limited to the quantity indicated on the
memorandum (thus the writing must at least indicate some quantity to be
enforceable at all)
b. Signed by party against whom enforcement is sought
c. Definition of signedany symbol executed or adopted by a party with present
intention to authenticate a writingmore restrictive than the restatements
definition
d. Standard is whether there the writing affords a basis to believe that oral
evidence rests on a real transaction
2. 2-201(2) is an additional way a writing can satisfy the SOFBetween merchants if
one party sends a written confirmation that would otherwise satisfy 2-201(1)
against the sender (there is a reasonably sufficient basis to indicate that a contract
has been entered into), then that confirmation is valid (as to the SOF) against the
recipient if the recipient has reason to know of its contents, and does not object to
the existence of the contract within 10 days (even though the recipient didnt sign it)
a. a signed objection may be a valid writing under 2-201(1) if it does not reject the
existence of a contract
b. Ex. Merchant to a contract sends another merchant a confirmation for 1000
widgets of $5000, and the recipient responds, No, the contract was for
$7000.not a valid objection under 2-201(2) and the SOF will be satisfied
c. Objection must object to the actual existence of the contract
3. (See Crabtree v. Elizabeth Arden)there may be several writings that combine to
form a memorandum that satisfies the SOFthey must clearly relate to the same
transaction, but as long as some of the writings state with reasonable certainty the
essential terms of the contract, and another writing contains a signature, then the
writing is valid as to the SOF
E. Exceptions under UCC 2-201
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1. Part performance
a. Under UCC, part performance can only validate K for the goods which have
been accepted or paid for and accepted
b. Admission by other party of the existence of K
2. Once admitted, party making admission cannot use SOF as a defense
3. Goods are specially manufactured
4. Vendor accepts or holds payment
3. Except as stated in this Section, neither party is bound by the meaning attached by
the other, even though the result may be a failure of mutual assent.
a. i.e. no contract if the parties both reasonably did not know nor reasonably
should have known of the others interpretation
D. Other considerations
1. Generally, a contract should be construed against the drafter of the contract,
because he has the knowledge, skill, and power to draft terms favorable to him.
a. But, when both parties are sophisticated, as in Joyner v. Adams, both parties
have the power and knowledge both to negotiate and to understand terms
commonly used, so less emphasis is placed on who actually drafted the
contract
b. Terms are also interpreted with the overreaching purpose of the contract
(fairness argumentwhat was the contract actually for?)
c. Plain language, course of dealing, and usage of trade are all factors that go into
who knows or reasonably should know what the other party means
VI. Warranties Under the UCC (See Caceci v. DiCanio and Bayliner v. Crow)
A. 2-313 Express Warranty overt statement, implied warranty - ORP would believe that
this is what youre going to get; does not include puffery or opinions.
B. 2-314: Implied warranty of merchantability only applies to merchants who regularly sell
good of the kind in question. Fit for its ordinary use. Good has to be Ok/pass in the
trade. (cannot be materially problematic)
C. 2-315 Implied warranty for fitness for a particular purpose seller has skill or
judgment and knows or has reason to know that the buy is relying on the sellers
expertise to select or endorse the good for a particular use.
D. 2-316 some warranties can be disclaimed
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