Formation General 2-204 ( Any Manner Sufficient )

A)Contract?

Definition (17),

Mutual assent (22),

Formation general 2-204 (“Any manner sufficient”)

B)Mixed Goods?

C)Offer?

Valid Offer?

-Offer defined (24),

-Form of acceptance invited (30)

-Firm Offer 2-205 (no consideration),

-Offer/Acceptance 2-206 (“acceptance in any manner/medium reasonable under the circumstances)

-Output Dealing (Indiana-America) 2-306 – Consideration section

Offer Certain?

-Certainty (33), Certainty2-204(3) (does not fail for indefiniteness),

-No Price 2-305,

-No delivery 2-308,

-No delivery/shipment date 2-309

Not a Valid Offer?

-Preliminary Negotiations (26),

-Jest or Misunderstanding (18, 20),

-Agreement to Negotiate

D)Option contract?R2d 87

E)Acceptance? Or Confirmation

Is there a Valid Acceptance?(50)

-Additional Terms in Acceptance or Confirmation 2-207

-Acceptance of Goods 2-606

-Written Memorial (27),

- Further Advisement (38) – Rejection,

Was the Offeree's power to accept terminated? Rejection, Time Lapse, Revocation (§42)?

-Methods of termination of Acceptance:

Rejection/Counter-offer (38/39),
Lapse of Time (41),
Revocation (42-47),
Death (48)

F)Counter-offer? (39)

G)Timing of Acceptance & Rejections - Mailbox Rule (40)

H)Consideration

When Is There Consideration? (71)

-Output, Requirement, Exclusive Dealing 2-306

When Is There Not Consideration?

-Performance of legal duty (73),

-Illusory Promise (77),

-Conditional Promise (76)

I)Contract Without Consideration? Consideration Substitutes

Material Benefit (Past consideration) (86),

Estoppel (90)

J)Contract altered through rescission, modification, waiver or settling claims?

Pre-existing Duty (73),

Modification (89),

-Modification/Rescission/Waiver 2-209

Settlement (74),

-Substitution/Accord (279,281),

-Accord and Satisfaction 3-311

K)Statute of Frauds Apply?

Capacity to Contract,

Statute of Frauds 2-201

L)Mistake, misrepresentation, duress or undue influence?

Mistake (151),

Misrepresentation (159),

Duress (174)

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Definitions:

Restatment: / UCC
§ 1 CONTRACT DEFINED
A contract is a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty. (R2d Contracts §1) / "Goods" means all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale § 2–105. Definitions: "Goods"
(1) A promise is a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made. Also need certainty
(R2d Contracts §1, 33)
Promise=Assure=Guarantee=Will / "Agreement", as distinguished from "contract", means the bargain of the parties in fact, as found in their language or inferred from other circumstances, including course of performance, course of dealing 2–106
DEFINITION OF "reason to know"
Only to deduce awareness based on information a party already has; a person maintains no duty to inquire; party has no obligation to inquire as to what the buyer/seller means (R.2d § 19; Comment b) / "Contract" means the total legal obligation that results from the parties' agreement as determined by the UCC as supplemented by any other applicable laws. 2–106
"Good faith" means honesty in fact and the observance of reasonable commercial standards of fair dealing. § 1–201
"Signed" includes any symbol executed or adopted with present intention to adopt or accept a writing. § 1–201
Theory of Restitution: One is unjustly enriched and can be sued in cross complaint. / "Writing" includes printing, typewriting, or any other intentional reduction to tangible form. "Written" has a corresponding meaning. § 1–201
Avoiding injustice for promissory estoppel:
1) The reliance on the promise must be reasonable (Ricketts v. Scothorn)
2) The reliance must be definite and substantial in relation to the remedy sought
3) The formality with which the promise is made is important (was the promise made in writing? – promissory note) / "Contract for sale" includes both a present sale of goods and a contract to sell goods at a future time unless context otherwise requires § 2–106. (1)
A "Sale" consists in the passing of title from the seller to the buyer for a price § 2–106. (1)
"Seasonably" when it is taken at or within the time agreed or if no time is agreed at or within a reasonable time. From § 1-205
"Material" - see UCC 2-207 and R.2d §162 When Misrepresentation is Material (Section 14 below)
"Term" means a portion of an agreement that relates to a particular matter. § 1–201
“Reasonable Time”: Reasonable depends on the nature, purpose, and circumstances of the action From § 1-205

UCC?

We will analyze issue through application of Article 2 of the UCC because question involved a good (a thing moveable at the time of identification to the contract § 2–105). Common law of the relevant jurisdiction (R2d Contracts in this exam) will govern the extent where Article 2 does not furnish a rule of law applicable to the transaction.

What is the Governing Law for Mixed Goods?

Not good: Construction contract, service contract, real estate/property contract

“Gravaman of the action” test: Under this test, the court seeks to find the source of the complaint. If the complaint is with goods, court applies Article Two. If the complaint is with services, the court will not apply Article Two Used by "some" jurisdictions. / In jx that apply the Predominant purpose test:
UCC Article 2 can be applied where the predominant purpose of the transaction involved the furnishing of goods

Purpose of the agreement is or is not predominantly goods
XXX would be incidental to the YYY because without YYY, XXX would be useless. Value of YYY > value of XXX.
Which costs more

Merchants?

- A person who deals in goods of the kind or

- Otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction or

- To whom such knowledge or skill may be attributed by his employment of an agent or broker or other intermediary who by his occupation holds himself out as having such knowledge or skill. § 2–104.

Comment 2:Only applies to a merchant in his mercantile capacity; a lawyer or bank president buying fishing tackle for his own use is not a merchant

Note: "merchant" for warranty of merchantability must "deal in goods"

Is there a contract?

RESTATEMENT / UCC
Contract requires manifestation of mutual assent and consideration(R2d Contracts §17(1)).
Contract may still be formed without consideration under certain rules §§ 82-94 (R2d Contracts §17(2)).
§ 18 MANIFESTATION OF MUTUAL ASSENT
Manifestation of mutual assent to an exchange requires that each party either make a promiseor begin or render a performance. (R2d Contracts §18).
§ 22 MODE OF ASSENT: OFFER AND ACCEPTANCE
(1) Manifestation of mutual assent to an exchange ordinarily takes the form of an offer by one party followed by an acceptance by the other party. (R2d Contracts §22).
(2) A manifestation of mutual assent may be made even though neither offer nor acceptance can be identified and even though the moment of formation cannot be determined
§ 4 HOW A PROMISE MAY BE MADE = § 2–204(1)
* in words either oral or written, or
* may be inferred wholly or partly from conduct.
Implied-in-Fact Contract = Marvin v. Marvin
Other conduct, sometimes including silence, so intention to make a promise may be manifested in language or by implication from other circumstances §4, comment a / § 2–204. Formation in General.
(1) A contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract.
(2) An agreement sufficient to constitute a contract for sale may be found even though the moment of its making is undetermined.
(3) Even though one or more terms are left open a contract for sale does not fail for indefiniteness if the parties have intended(= reasonable person)to make a contract and there is a reasonably certain basis for giving an appropriate remedy
Court must find a) basis for concluding parties engaged in process of offer and acceptance, and b) court must find it has sufficient info about the incomplete transaction to apply UCC provisions which fill in the gaps (i.e., to apply UCC 2-207)

Offer
Is there a valid Offer?

§ 24 OFFER DEFINED
An offer is the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it. (R2d Contracts §24).
“Manifestation of willingness”:
A promisor manifests an intention if he believes or has reason to believe that the promisee will infer that intention from his words or conduct (R2d Contracts 2, comment b)
- Conditions: A promise conditioned upon satisfaction isn’t illusory because it would require person act in good faith to… Conditional promise therefore good consideration for other party’s promise to… (Mattei v. Hopper) Could he avoid the deal at his whim?
- Supported by fact that seller did accept the offer.
- Missing or Ambiguous terms may not preclude a contract formation 2-204(3) / § 2–205. Firm Offers.
An offer by a merchant to buy or sell goods in a signed writing which by its terms gives assurance that it will be held open is not revocable, for lack of consideration, during the time stated or if no time is stated for a reasonable time, but in no event may such period of irrevocability exceed three months; but any such term of assurance on a form supplied by the offereemust be separately signedby the offeror.
§ 29 TO WHOM AN OFFER IS ADDRESSED
(1) The manifested intention of the offeror determines the person or persons in whom is created a power of acceptance.
(2) An offer may create a power of acceptance in a specified person or in one or more of a specified group or class of persons, acting separately or together, or in anyone or everyone who makes a specified promise or renders a specified performance. (R2d Contracts §29).
§ 30 FORM OF ACCEPTANCE INVITED
(1) An offer may invite or require acceptance to be made by an affirmative answer in words, or by performing or refraining from performinga specified act, or may empower the offeree to make a selection of terms in his acceptance.
(2) Unless otherwise indicated by the language or the circumstances, an offer invites acceptance in any manner and by any medium reasonable in the circumstances. (R2d Contracts §30).
§ 35 THE OFFEREE'S POWER OF ACCEPTANCE
(1) An offer gives to the offeree a continuing power to complete the manifestation of mutual assent by acceptance of the offer. / § 2–206. Offer and Acceptance in Formation of Contract.
(1) Unless otherwise unambiguously indicated by the language or circumstances
(a) an offer to make a contract shall be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances; (the offeror is the master of his offer)
(b) an order or other offer to buy goods for prompt or current shipment shall be construed as inviting acceptance either by a prompt promise to ship or by the prompt or current shipment of conforming or non-conforming goods, but such a shipment of non-conforming goods does not constitute an acceptance if the seller seasonably notifies the buyer that the shipment is offered only as an accommodation to the buyer.
(2) Where the beginning of a requested performance is a reasonable mode of acceptance an offeror who is not notified of acceptance within a reasonable time may treat the offer as having lapsed before acceptance.

Is the Offer Certain?

§ 33 CERTAINTY
(1) Even though a manifestation of intention is intended to be understood as an offer, it cannot be accepted so as to form a contract unless the terms of the contract are reasonably certain.
(2) The terms of a contract arereasonably certain if they provide a basis for determining the existence of a breach and for giving an appropriate remedy.
(3) The fact that one or more terms of a proposed bargain are left open or uncertain may show that a manifestation of intention is not intended to be understood as an offer or as an acceptance.
Specific price, specific item, specific person, time of selling / § 2–305. Open Price Term.
(1) The parties if they so intend can conclude a contract for sale even though the price is not settled. In such a case the price is a reasonable price at the time for delivery if
(a) nothing is said as to price; or
(b) the price is left to be agreed by the parties and they fail to agree; or
(c) the price is to be fixed in terms of some agreed market or other standard as set or recorded by a third person or agency and it is not so set or recorded.
§ 32 INVITATION OF PROMISE OR PERFORMANCE
In case of doubt an offer is interpreted as inviting the offeree to accept either by promising to perform what the offer requests or by rendering the performance, as the offeree chooses. / § 2–204. Formation in General.
(3) Even though one or more terms are left open a contract for sale does not fail for indefiniteness if the parties have intended(= reasonable person)to make a contract and there is a reasonably certain basis for giving an appropriate remedy
§ 2–308. Absence of Specified Place for Delivery.
Unless otherwise agreed
(a) the place for delivery of goods is the seller's place of business or if he has none his residence; but
(b) in a contract for sale of identified goods which to the knowledge of the parties at the time of contracting are in some other place, that place is the place for their delivery; and
(c) documents of title may be delivered through customary banking channels
Condition to offer:
Like a condition of satisfaction, this is a condition to performance of a promise (the promise to buy the horses) that does not make the promise illusory because performance is subject to the determination of an outside expert and is definite / § 2–309. Absence of Specific Time Provisions; Notice of Termination.
(1) The time for shipment or delivery or any other action under a contract if not provided in this Article or agreed upon shall be a reasonable time

When Is It Not a Valid Offer? Preliminary Negotiations, Jest or Misunderstanding

§ 26 PRELIMINARY NEGOTIATIONS
A manifestation of willingness to enter into a bargain is not an offer if the person to whom it is addressed knows or has reason to know that the person making it does not intend to conclude a bargain until he has made a further manifestation of assent.
Is the offer an advertisement?Donovan v. RRL Corp - Usually an ad is just an invitation to negotiate unless: Offer is in definite terms, circ. Indicate intention, a specific action is invited w/o further communication and over acceptance is unlikely? § 26 § 27
Is the offer a price quote? Probably valid.
Was The Offer in Jest? Leonard v. Pepsico, Inc. –
§ 18 MANIFESTATION OF MUTUAL ASSENT
Comment C: Sham or jest. Where all the parties to what would otherwise be a bargain manifest an intention that the transaction is not to be taken seriously, there is no such manifestation of assent to the exchange as is required by this Section.
Setting (dramatic performance) can make it clear that there is no contract, as where a business transaction is simulated on a stage during a dramatic performance.
When there’s doubt: If one party is deceived and has no reason to know of the joke the law takes the joker at his word. Even if the deceived party had reason to know of the joke, there may be a claim for fraud ... / Agreement to Negotiate – Imposes a duty to negotiate in Good Faith going forward - Copeland v. Baskins Robbins.
Breached its duty to negotiate in good faith, Victoria’s recovery of damages for breach would be limited to her expenses in reliance on the promise to negotiate
Was there a misunderstanding?
§ 20 EFFECT OF MISUNDERSTANDING
(1) There is no manifestation of mutual assent to an exchange if the parties attach materially different ((=significant, of importance) meanings to their manifestations and
(a) neither party knows or has reason to know the meaning attached by the other; or
(b) each party knows or each party has reason to know the meaning attached by the other.
(2) The manifestations of the parties are operative in accordance with the meaning attached to them by one of the parties if
(a) that party does not know of any different meaning attached by the other, and the other knows the meaning attached by the first party; or
(b) that party has no reason to know of any different meaning attached by the other, and the other has reason to know the meaning attached by the first party.
[Subsection (2) deals with cases where both parties are not equally at fault]
Only if one party knows and the other doesn’t is there a contract. Meaning of the party that doesn’t know is used. (§ 20(2)) / When the Offer and Acceptance do not equal each other based upon UCC 2207 the Unless Clause must be clearly stated:
UCC 2-207 (1) - The "Unless Clause"
...unless acceptance is expressly made conditional on assent to the additional or different terms.
Contract must state: "This statement is expressly made conditional on assent to the terms enclosed."
Additional Terms in acceptance
§ 2–207.

Does the offer form the basis of an option contract?

§ 25 OPTION CONTRACTS
An option contract is a promise which meets the requirements for the formation of a contract andlimits the promisor's power to revoke an offer.
-Offeree must give consideration for the offer to be valid(Bancshares)
- Comment c: A single consideration may support BOTH a present contract and a future option
§ 87 OPTION CONTRACT Based on: 1) Consideration 2) Statute 3) Reliance alternative
(1) An offer is binding as an option contract if it
(a) is in writing and signed by the offeror, recites a purported considerationfor the making of the offer, and proposes an exchange on fair terms within a reasonable time; or
- Underlying deal must be fair (eg: reasonable wage for a job)
- Reasonable time if exchange proposed doesn’t involve anything with volatile price.
- Options absent consideration are generally NOT enforceable (James Baird Co.)
(b) is made irrevocable by statute.
(2) An offer which the offeror should 1) reasonably expect to induce (reliance)action or forbearanceof a substantial characteron the part of the offeree before acceptance and which does induce such action or forbearanceis binding as an option contract to the extent necessary toavoid injustice.
- Promissory estoppels(Drennan)
Note: Such action/forbearance must be reasonably foreseeable given nature of offer
- Material Benefit Rule(R.2d § 86) (First National Bancshares)
Pecuniary benefit already received affords consideration for a subsequent promise to pay for the benefit / Option without consideration: Firm Offer
§2-205
(Under “Timing of Acceptance & Rejections”)
§ 37 TERMINATION OF POWER OF ACCEPTANCE UNDER OPTION CONTRACT
Notwithstanding §§ 38-49 [DURATION OF THE OFFEREE'S POWER OF ACCEPTANCE], the power of acceptance under an option contractis not terminated by rejection or counter-offer, by revocation, or by death or incapacity of the offeror, unless the requirements are met for the discharge of a contractual duty.
§ 45 OPTION CONTRACT CREATED BY PART PERFORMANCE OR TENDER
(1) Where an offer invites an offeree to accept by rendering a performance and does not invite a promissory acceptance, an option contract is createdwhen the offeree tenders or begins the invited performance or tenders a beginning of it.
(2) The offeror's duty of performance under any option contract so created is conditional on completion or tender of the invited performance in accordance with the terms of the offer.
- Offeror can’t revoke once offeree begins performance. Offeree not obliged to complete. Completion must be within a reasonable time.
§ 87, Comment b -CONSIDERATION PROVIDED IS A “NOMINAL AMOUNT” (i.e. one dollar);
The courts do not ordinarily inquire into the adequacy of the consideration bargained for. (§ 79)
-Small payment for consideration is ok.