REVIEW SESSION -CONTRATCS-

REVIEW SESSION -CONTRATCS-

Disclaimer: You are all probably smarter than We are. - These slides were not originally created by usOur TA for contracts (Mr. Lance White) created this and we thought it was really good. However, we have made some slight changes to reflect what in our opinion are the essentials that you need not just to pass but to distinct yourself in Prof. Meggetts contract class and in the BAR exams. (Call this the Q-source).

1BIG PICTUREApplicable Law? Always common law. (lucky you) (2) What is a Contract? (3) VALID Contract? Offer Acceptance Consideration No Valid Defense thus making it enforceable What is a contract?A contract is a promise or set of promises that the law will enforce; It is an exchange relationship created by an agreement between two or more parties containing at least one promise and recognized as enforceable in law.Valid Enforceable Contract? In order to have a valid contract, there must be an: (1) Offer(2) Acceptance (3) Consideration(4) No Valid Defenses

4Is there an Offer?An offer is an objective manifestation of present intent to enter into a contract.Demonstrated by : Promise, undertaking or commitment;Clear and Definite Terms;Communicated to the Offeree; and Gives the Offeree the power to accept; Ex. I will sell you my car if youll pay me $2,000 cash. This is an offer because it expresses a willingness to conclude the deal if the other party pays the required $2,000. Ex. Yes , Id be willing to sell your car, but what are you willing to pay for it? IS THIS AN OFFER? Why? Why not?

Objective Theory of an Offer (1) Objective reasonable personAsk yourself, would a reasonable objective third party believe the person making the offer actually intended to make a contract. IF the answer is yes, then (2) Subjective Whether the person receiving the offer actually believed that there was a valid offer as well. IF the answer is yes, then We have a valid offer that is ripe for Acceptance EXAMPLE: A seemingly serious offer to sell real property made in secret jest is nonetheless an offer. Price Quotes Is it an Offer? General Rule: Price quotes are not considered offers. Exception: If the price quote appears to have sufficient information, is clear and definitive, and seems to have the other objective manifestations of intent to be bound, it could be deemed an offer. Would a reasonable objective person believe it to be an offer? Advertisements Is it an Offer? General Rule:Advertisements are not offers.Exception: Advertisements may be deemed an offer if it is sufficiently clear, definite and leaves nothing open for negotiation. Would a reasonable objective person think the advertisement is an offer?

Rewards Is it an Offer? General Rule: Reward offers are treated as offers because they are considered communications that promise a bounty in exchange for the performance of a specified task. Exception (limitation of acceptance): Those who have a pre-existing duty cannot accept the offer.

Auctions an Offer? General Rule: The general rule is that the auctioneer is inviting offers, and the responsive bids are the offers. Exception: Where the auction is without reserve, then the auctioneer is making an offer to sell to the highest bidder TERMINATION OF AN OFFER(1) Lapse of TimeAn offerees power of acceptance terminates at the time stated in the offer. If the offer does not specify the time of termination, then the power of acceptance will terminate after a reasonable time. The reasonable time determination is based on the following factors: Subject matter and market conditions; and The degree of urgency communicated by the means of transmission. Face to Face ConversationsAn offer made by one to another in a face to face conversation is ordinarily deemed to continue only to the close of the conversation. TERMINATION OF AN OFFER(2) Death or incapacity of either partyThe supervening death of either the offeror or offeree will terminate the power of acceptance with respect to the offer. The supervening incapacity of either the offeror or the offeree, as evidenced by adjudication or the appointment of a guardian, will terminate the power of acceptance. Incapacity has to go to the ability to understand the nature and consequences of the transaction. TERMINATION OF AN OFFER(3) Revocation The offeror is free to revoke an outstanding offer, terminating the offerees power of acceptance, at any time and for any reason, so long as the revocation: Occurs prior to acceptance; and Is effectively communicatedDirect Revocation: Revocation occurs and terminates the offerees power of acceptance when the offeror communicates directly with the offeree and advises the latter that the offer has been revoked. Indirect Revocation: In some cases, the offeree will learn of the offerors intentions to abandon the deal from a third party source, and this will also terminate the offerees power of acceptance where two conditions are met: The offeror has taken definite action inconsistent with the intention to enter the proposed contract (such as selling the offered real estate to a third party); and The Offeree acquires reliable information of the offerors inconsistent action (such as learning of the sale from a real estate broker)

TERMINATION OF AN OFFERRevocation of the offer in a Unilateral ContractAn Offeror may not revoke his offer once the offeree begins performance. An Offeror may revoke his offer where the offeree has engaged in mere preparation. TERMINATION OF AN OFFEROption Contract Irrevocable Offer Enforceable options contract when: (1) An Offer(2) A subsidiary promise to keep the offer open; and (3) Consideration for time.MUST BE EXCHANGED/Not a simple recitation of the consideration (minority). Termination of Options Contract(1) Option period lapse(2) Acceptance********Rejection, revocation, death or capacity will not terminate the offer during the option period. TERMINATION OF AN OFFER(4)Rejection by Offeree Power of acceptance can also be terminate if the offeree refuses to accept the offer. (1) Outright RejectionThe offeree has the power to accept the offer, but the offeree cannot change his mind and try to accept the offer once he has rejected it. (2) Rejection via Counteroffer in this situation the parties switch roles. Offeror becomes offeree and vice versa. A counteroffer made on the same subject matter operates to simultaneously reject the initial offer. Revival of OfferThe maker is the master of the offer. An offeror has the power to revive an offer that the offeree has rejected, and with it the offerees power of acceptance, and he can likewise revive an offer that has lapsed; all he must do is communicate the revival to the offeree. This can be accomplished by restating the offer or giving the offeree more time to make a decsion.

AcceptanceAcceptance of an offer is the objective manifestation of assent to the terms thereof made by the offeree in a manner invited or required by the offer. Manner of AcceptanceOfferor is king of the deal, therefore the offer determines how acceptance must be made. An Offer can require acceptance by either a promise (Bilateral Contract) or a performance (Unilateral Contract). If it is unclear which mode (promise or performance) is needed to accept = Offeree may accept by promise or performance. If the offer does not provide for a specific manner or medium in which it must be accepted, then the offer may occur in any manner and medium which is reasonable.

Manner of Acceptance (1) Bilateral Contract - Promise (2) Unilateral Contract Performance (3) Silence (1) Promissory Acceptance PROMISE FOR PROMISE to do something in the future. Requires the offerees promissory acceptance be communicated to the offeror or an authorized representative of the offeror to be effective.

Mailbox RuleMailbox rule? The Mailbox rule applies to acceptances sent by any means of transmission that involves a foreseeable delay between the time of dispatch by the offeree and the time of receipt by the offeror. The parties are bound, even if the acceptance is lost in transmission and the offeror has no knowledge of that acceptance. The Offeror may not revoke an offer once acceptance has been dispatched. EX. While B was considering As Offer, A had a change of heart and sent a revocation, but B dispatched his acceptance before receiving As revocation. The parties have a contract because As revocation was not effective until receipt by B, and Bs acceptance was effective upon dispatch and thus prior to receipt of the would-be-revocation.

Mailbox RuleWhen does it not apply? The Mailbox rule is only a default rule, meaning that it only applies if the offeror is silent on the question of when acceptance will be effective. As always, the maker is the master of the offer, and thus the offeror is free to establish his own rules for effective acceptance. Telephone, Instant messaging, texting and other means of communications that are instantaneous. Acceptance of Options ContractsRevocation affective upon receipt. A letter that is misaddressed or fails to include proper postage. H/w if it is misaddressed/the offeree uses the wrong method/the Offeree doesnt use proper postage/or the offeree just botches it but it nevertheless reaches the offeror in a seasonable time then such acceptances is deemed accepted upon dispatch.

22(2) Acceptance by PerformanceA unilateral contract calls for performance by the offeree. Acceptance by performance requires that at least part of what the offeror request be performed or tendered.Performance acts as an options contract. Offeror must keep the offer open long enough for the offeree to perform. Mere preparation is not enoughThe offeree is not required to notify the offeror of their performance (acceptance) UNLESS the offeree has reason to know the offeror wont find out about that performance.

(3) Acceptance by SilenceGeneral Rule: An offerees silence in response to an offer cannot constitute acceptance. Exception: (1) Where the offeree takes the benefit of the offerors services with a reasonable opportunity to reject them and with reason to know the offerors intention; (2) Where the offeror has given the offeree reason to understand that acceptance may be communicated by silence, the offerees silence will operate as acceptance if he intends as such; and (3) Where, because of previous dealings or other circumstances, it is reasonable that the offeree should notify the offeror if he does not intend to accept, his silence will operate as acceptance. Mirror Image RuleMirror Image acceptance must mirror the terms of the offer. General Rule: Acceptance that do not mirror the offer is an implied rejection/counter offer. Modification exception in some jurisdictionsAcceptance can contain deviations so long as the deviations do not materially alter the offer, and is not conditional.

25