Final

Consumer sends a purchase order to Seller, which does not mention how disputes are to be resolved. Seller sends an acknowledgement form back to Consumer, which correctly recites the basic terms of the deal (price, quantity, etc.), and then says, "All disputes are to be arbitrated." What result under the Uniform Commercial Code?

A contract was formed but the arbitration clause is not part of the contract. Even though the acknowledgement (the "acceptance") differed from the purchase order by introducing the arbitration term, the acknowledgement formed a contract. However, since at least one party (Consumer) was not a merchant, this additional term will only become part of the contract if Consumer explicitly assents to that term (e.g., by initialing the arbitration clause on the acknowledgment form).

Buyer's purchase order states that disputes will be litigated in New York state court. Seller's acknowledgement form states that disputes will be arbitrated. What result under the Uniform Commercial Code?

A contract was formed by the exchange of documents but different terms are "knocked out." You should apply the "knock out" rule, whereby neither the "New York court" nor "arbitration" clauses would take effect. Instead, the common law - allowing an ordinary civil suit to be brought in any state that has jurisdiction - would apply.

Assume that Tom died instead on November 6. What result?

A contract was formed on November 5 when Shelly mailed her acceptance, which event occurred before Tom died. The offer therefore had not lapsed.

Owner negotiates over a period of time with Contractor to have Contractor re-pave Owner's driveway. At one point, Contractor sends a proposal to Owner listing a proposed price of $5,000. Owner sends a response, "$5,000 won't work, but how about $4,000?" Contractor doesn't make a verbal response, but shows up and paves the driveway. What result under the common law?

A court is likely to conclude that Contractor's work of paving the driveway constituted his acceptance by conduct of Owner's offer of $4,000.

Dad, an 80-year-old living alone, breaks a hip in a fall. He says to his grown son Sam, "For the next month, please come over once a week to mow the lawn and rake the leaves." Sam does so, and each time Dad looks on, says "Thanks," and says nothing further. If Sam sues Dad for the reasonable value of these yard services on an implied-in-fact contract theory, what result?

A court will almost certainly conclude that no such contract came into existence, because the intra-familial context should have led one in Dad's position to believe that Sam was rendering these services for free rather than in expectation of payment. This is a gratuitous transaction.

For consideration, Owner grants Buyer an option to acquire Blackacre for $100,000, the option to be valid "for 30 days." The document says that the option shall be exercised by "Buyer's payment of a non-refundable $2,000 deposit." The document does not say whether exercise will be deemed to have occurred when Buyer sends the $2,000 deposit or only when Owner receives it. On the 30th day, Buyer sends a letter with the check, but Owner doesn't receive it until the 34th day. Analyze.

A court would likely hold that the option was not timely exercised, because an acceptance of an option (i.e., exercise) is effective only upon receipt, not dispatch.

A says to B, "If you walk across the Brooklyn Bridge, I promise to pay you $1,000 as soon as you finish." Analyze.

A has proposed to exchange his promise for B's act of walking across the bridge. Therefore, A has proposed a unilateral contract - B will accept by walking, not by promising to walk. This is an offer for a unilateral contract.

A says to B, "I'll sell you my house for $100,000, if you give me a check right now for $10,000 and promise to pay the rest within 30 days." B says, "Here is my $10,000 check, and I'll have the balance to you next week." Analyze.

A's statement to B is an offer. B's reply to A is an acceptance. After the acceptance occurs, the parties have an enforceable contract (assuming that there is no requirement of a writing, as there probably would be in this situation since it involves the sale of real estate)

O says to A, "I offer to sell you my house for $100,000." B overhears, and says, "I accept." Is a contract formed?

Acceptance - who may accept. Assuming that O's offer was reasonably viewed as being limited to A, B cannot accept even though the consideration he is willing to give is what O said he wanted.

Albert Hayes wrote a letter to Paul Harris that stated, "I want you to come to work for my company at $160,000 per year. I don't want to hear anything from you other than your acceptance. No matter what you say, you have until the end of this month (the 30th), to say yes. I will simply ignore any other response." On the 20th, Harris replied, "You're suggested salary is an insult. Forget it." On the 29th, Harris wrote and mailed a letter which stated, "O. K., we have a deal at $160,000." Hayes replied by mail, "After receiving your letter of the 20th, I hired somebody else." Analyze

Albert Hayes' offer is not an option contract because it is not supported by consideration. Harris' response on the 20th constitutes a rejection of Hayes' offer. Thus, Harris no longer had the power of acceptance and his letter of the 29th is a new offer, which Hayes did not accept (an in fact rejected).

Francis wanted to own a pizza parlor. Francis engaged in extensive negotiations with Firenze Pie to obtain a franchise. Firenze assured Francis that Francis had been approved for a franchise, but told Francis that before they could enter into a formal contract Francis had to demonstrate that Francis was ready and able to operate one. The franchisor encouraged Francis to quit their job, sell their house, move to a different city, purchase a building on a corner lot, and to purchase expensive restaurant equipment including a stove, tables and chairs. However, in the end Francis and Firenze were unable to agree upon how much Francis would have to pay for the franchise, and the negotiations ended without an agreement. What damages, if any, is Francis entitled to recover from Firenze?

Although in the usual case a party is not liable to another under the law of contract until a contract is formed, in this case the promises made by the franchisor were specific enough to reasonably induce reliance, and the elements of promissory estoppel are satisfied. However, Francis is only entitled to recover the value of the expenses that were incurred as a result of reliance on the company's "suggestions." Francis is not entitled to the profits that Francis expected to earn if Francis had been awarded a franchise. The remedy granted for breach may be limited as justice requires. Section 90(1) of the Restatement (Second) of Contracts.

Alex writes to Bart, "I'll sell you my house for $100,000, closing to take place April 1." Bart writes back, "That's fine; let's close April 2, however." Under the common law, has a contract been formed?

At common law, Bart's response is not an acceptance because it diverges slightly from the offer, so there is no contract. This the "mirror image" rule.

Seller sends an offer to Buyer. This offer says that payment is to be C.O.D. Buyer sends back a "purchase order" form that says, "Terms: 30 days net." What result under the Uniform Commercial Code?

Buyer's form constitutes an acceptance under §2-207(1), even though the 30-day-net (i.e., 30 days' credit) term is a "different" term from one in the offer. That is so because Buyer's form indicates an intent to enter into the proposed transaction, and does not make the deal expressly conditional on Seller's agreement to replace the C.O.D. term with the 30-days-credit term. So regardless of which (if either) term becomes part of the contract (we discuss this below), the important thing is that the fact that the two forms did not agree did not prevent a contract from coming into existence.

On Feb. 1, Seller writes to Buyer, "I'll sell you 2,000 widgets @ $20; you must take all or none." On Feb. 5, Buyer faxes Seller, "Would you consider letting me buy 1800 at the $20 price?" Seller makes no response. On Feb. 9, Buyer faxes an order for all 2,000 at $20. Was a contract formed?

Buyer's order for all 2,000 is a valid acceptance. That's because Buyer's Feb. 5 fax, although it explored an alternative arrangement, was not so definitive that it should be considered a counteroffer (which would have had the effect of terminating Seller's offer). Instead, the Feb. 5 fax had no effect on the validity of the Feb. 1 offer, so that offer remained in place to be accepted by Buyer on Feb. 9

Retailer, an office supply store, orders 1,000 dozen "No. 2 pencils" from Manufacturer, for immediate shipment. Due to an error in the shipping department, Manufacturer ships 1,000 dozen "No. 3 pencils." What are the rights of the parties?

By making the shipment, Manufacturer has accepted the order. Furthermore, since Manufacturer has shipped non-conforming goods (without qualifying for the "accommodation shipment" scenario), Manufacturer has breached the agreement. Therefore, Retailer will be entitled to reject the non-conforming shipment, and if any cure period expires without a cure, Retailer will be entitled to sue for breach.

Same facts except that Sims never received Ames' September 15 letter. Analyze.

Different result. A contract was formed by the exchange of letters. A revocation may be made in any reasonable manner and by any reasonable means, and it is not effective until communicated. A revocation sent by mail is not effective until received.

Big Box Appliances places an advertisement in the local newspaper, "Black Friday Sale on all 65" 4K Samsung Televisions, first come, first served - $499. One Day Only!" Eddie shows up at Big Box at the crack of dawn and is the first person in line on Black Friday and is told, "sorry, but we have no more of those in stock." Analyze.

Eddie is in luck. An advertisement that is sufficiently specific and limiting as to who may accept may qualify as an offer (e.g., "Used car for sale for $5,000. First come, first served.").

Big Box Appliances places an advertisement in the local newspaper, "Black Friday Sale on all 65" 4K Samsung Televisions, while supplies last - $499. One Day Only!" Eddie shows up at Big Box at Noon on Black Friday and is told, "sorry, but we have no more of those in stock at that price." Analyze.

Eddie is out of luck. Advertisements generally are considered invitations to receive offers from the public, unless associated with a stated reward.

Big Box Appliances places an advertisement in the local newspaper, "Black Friday Sale on all 65" 4K Samsung Television - $499 - no limit on purchases! One Day Only!" Eddie shows up at Big Box at the crack of dawn on the day after Black Friday and is told, "sorry, but we have no more of those available at that price." Analyze.

Eddie is out of luck. An offer can be accepted only when it is still outstanding (i.e., before the offer is terminated). If the offer specifies a date on which the offer terminates, then the time fixed by the offer controls. If the offer states that it will terminate after a specified number of days, the time generally starts to run from the time the offer is received, not sent, unless the offer indicates otherwise

Buyer's purchase order is for 100 widgets at $5 each. Seller's acknowledgement form is for 200 widgets at $7 each. Buyer does not say anything in response to the acknowledgement form. Seller ships the 200 widgets, and Buyer keeps them. What result under the Uniform Commercial Code?

Even though the exchange of documents did not create a contract, the parties' conduct gave rise to a contract by performance, for 200 widgets (at a price to be supplied by the UCC's "gap filler" provision, in this case, a "reasonable price"). UCC §2-207. This is the scenario where the parties exchange documents (say a purchase order and an acknowledgement), and the two documents diverge so much that the second one does not constitute an acceptance, but the seller ships goods that the buyer keeps.

Buyer sends a purchase order for 100 widgets at $5 each. Seller does not send any acknowledgment or other writing, but ships the 100 widgets and Buyer keeps them. What result under the UCC?

Even though there was no exchange of documents, the parties conduct gave rise to a contract by performance, for 100 widgets at $5 each. UCC §2-207(3). This is the scenario where there are no writings, or just one writing (e.g., a purchase order), but the seller ships goods that the buyer keeps the goods.

True or False. In a claim based on promissory estoppel, all of the relevant authorities state that the promisee must prove that the action or forbearance that was induced by the promise was "definite and substantial."

False, the relevant authorities do not agree on this point of law. The First Restatement of the Law of contracts states that the promisee's action or forbearance that is induced by the promise must be definite and substantial, but the Second Restatement omits this requirement.

Mandy had worked at Dynamo Plastics for 35 years and was considering retirement. Dynamo did not have a pension plan for employees, but Gerry, the President of Dynamo, assured Mandy that the company would "do the right thing" and would "take care of" Mandy if Mandy would retire. In truth, Gerry wanted to replace Mandy with a younger employee who would work harder and earn less. It would have been difficult to fire Mandy because the company had a longstanding policy of only firing employees for cause, and Mandy had not engaged in any dereliction of duty or misconduct. Mandy retired. The company paid Mandy $2,000 per month for two years, and then discontinued the pension. Mandy has tried to find other employment but has been unsuccessful. Is the company liable to continue paying Mandy a pension?

Gerry's promise may have been vague, but it was intended to induce Mandy to retire, and Mandy in fact retired in reliance on that promise. Any vagueness in the promise was cured by the fact that the company paid Mandy $2,000 a month for two years. The company is obligated to continue paying Mandy that amount. If Gerry had promised Mandy a pension after Mandy had given the company notice of intent to retire, then a court would probably rule that Gerry's promise was not enforceable, because Gerry's promise did not induce Mandy to retire.

A sub-contractor, offers to supply steel to General Steel on a job where General Steel is bidding to become the general contractor. General Steel calculates its bid in reliance on the figure quoted by the sub-contractor. General Steel gets the job. Before General Steel can accept, the sub-contractor tries to revoke its offer. What are the rights of the parties?

If General Steel can show that he bid a lower price because of sub-contractor's sub-bid, the court will probably hold sub-contractor to the contract, or at least award General Steel damages equal to the difference between sub-contractor's bid and the next-lowest available bid. But observe that General Steel, the offeree, is not bound, so General Steel could accept somebody else's sub-bid (recall "bid shopping").

Pat was a first-year high school teacher at a public school in Scranton, Pennsylvania, earning $40,000 annually. Pat could have qualified for tenure after three years. Pat's good friend Jamie was a successful real estate developer in Jupiter, Florida. Jamie promised Pat a job that would pay Pat $100,000 a year. In reliance on this promise Pat gave the school district notice at the end of the school year, moved to Florida, and began working for Jamie. After three months, however, Jamie sold the business, and the new owner fired Pat. Florida is an "employment-at-will" state, meaning that employees can be terminated without cause - for any reason or for no reason. Pat is now working in Florida as a drug counselor for $18 an hour ($36,000 per year) with no benefits and no job security. Is Jamie liable to Pat under the doctrine of promissory estoppel?

Jamie is not liable to Pat for anything. Jamie in fact performed their promise to Pat. This is a risk that is taken by any person who changes jobs. Pat's reliance is not likely reasonable and justice would not require a remedy.

On June 15, A mails an offer to B. On July 1, A mails a revocation to B. On July 3, B has a letter of acceptance hand-delivered to A. On July 5, A's revocation is received by B.

Mailbox Rule. Revocation effective upon receipt. Acceptance effective upon dispatch. B's acceptance is valid, because A's revocation did not take effect until its receipt by B, which was later than the July 3 date on which B's acceptance took effect.

On July 1, Ames offers to sell Barnes 100 widgets at $5 each, the offer to be left open indefinitely. On July 2, Barnes responds, "I'll buy 50 at $4." Ames declines. On July 3, the market price of widgets skyrockets. On July 4, Barnes tells Ames, "I'll accept your July 1 offer." Was a contract formed?

No contract is formed, because Barnes's power of acceptance was terminated as soon as Barnes made her counteroffer on July 2

On December 1, Gretsch writes to Edge by email, "Per your inquiry, we have a one-of-a-kind GS61361 Bono FalconTM Hollow Body guitar signed by all member of the band U2 for sale to you at $50,000. Your immediate response is requested. Payment by cashier's check only." Edge receives Gretsch's letter on December 2 and immediately writes back, "I accept your offer and enclose a cashier's check in that amount made out to you." Gretsch receives Edge's letter on December 5 but unfortunately, the guitar had been destroyed in a fire on December 4. Analyze.

No contract is formed. An offer can be accepted only when it is still outstanding (i.e., before the offer is terminated). An offer involving subject matter that is destroyed is terminated.

On November 1, Tom writes to Shelly, "I will sell you my entire collection of vintage vinyl 33-RPM records, valued at more than $20,000, for just $15,000. Your immediate response is requested. Payment by cashier's check only." Shelly receives Tom's letter on November 5 and she immediately writes back to him, "I accept your offer to sell your entire collection of vintage vinyl 33-RPM records for $15,000. A cashier's check in that amount made out to you is enclosed." Tom's personal representative received Shelly's letter on November 7, but unfortunately and unbeknown to Shelly, Tom had died on November 4. Analyze.

No contract is formed. An offer can be accepted only when it is still outstanding (i.e., before the offer is terminated). An offer terminates upon the death or mental incapacity of the offeror, even if the offeree does not learn of the offeror's death or mental incapacity until after the offeree has dispatched what he believes is an acceptance.

An uncle mails a letter to his adult nephew that states: "I am thinking of selling my pickup truck, which you have seen and ridden in. I would consider taking $7,000 for it." The nephew writes back, "I will buy the truck for $7,000 cash." Analyze.

No contract is formed. Uncle's letter is a solicitation of an offer, not an offer. It is just a preliminary negotiation. Therefore, when the nephew writes back, "I will buy the truck for $7,000 cash," this is an offer, not an acceptance, and no contract has yet been formed.

On September 9, Ames, a collector of antique automobiles, sent a letter to Harry Sims, another collector, offering to sell a 1938 Dusenberg antique automobile for $200,000. The letter closed with, "The offer ends in 10 days." Sims received the letter on September 11. On September 16, Sims sent an e-mail to Ames stating, "We have a deal for the 1938 Dusenberg at $200,000." On September 18, Ames wrote back to Sims, "Sorry, but I sold the Dusenberg to Barnes on September 15th." What are the rights of the parties under the common law?

No contract was formed. An option is an independent promise to keep an offer open for a specified period of time. Such a promise limits the offeror's power to revoke the offer until after the period has expired, while also preserving the offeree's power to accept. If the option is a promise not to revoke an offer to enter a new contract, the offeree must generally give separate consideration for the option to be enforceable

On September 9, Ames, a collector of antique automobiles, sent a letter to Harry Sims, another collector, offering to sell a 1938 Dusenberg antique automobile for $200,000. The letter closed with, "The offer ends in 10 days." Sims received the letter on September 11. On September 15, Ames sent a letter to Sims stating, "Forget the Dusenberg deal. I have never sold one of my antiques. I just can't part with it." On September 16, Sims sent an e-mail to Ames stating, "We have a deal for the 1938 Dusenberg at $200,000." Was a contract formed?

No contract was formed. In general, an offer can be revoked by the offeror at any time prior to acceptance. An offer is revoked when the offeror makes a manifestation of an intention not to enter into the proposed contract. Restatement (Second) of Contracts § 42. A revocation may be made in any reasonable manner and by any reasonable means, and it is not effective until communicated. A revocation sent by mail is not effective until received.

Bonnie and Clyde agree to rob the Bank the next day. Is a contract formed?

No. A contract is a legally enforceable agreement. A legally enforceable contract is created through the process of mutual assent (i.e., offer and acceptance) and consideration, provided no valid defense to contract exists. Mutual assent occurs upon acceptance of a valid offer to contract.

AbCo and BenCo agree that BenCo will buy widgets from AbCo from time to time. The parties do not decide anything about quantity, price, delivery, etc. Has a contract been formed?

No. A court would probably find that even though AbCo and BenCo may have meant to conclude a binding agreement, the absence of terms makes their agreement void for indefiniteness.

Freddie says to Buddy, "Buddy, you're a boy, make a big noise, playing in the street, 'gonna be a big man someday, and when that day comes, I'll sell you my vintage 1936 Gibson J-35 acoustic guitar worth $5,000 for just $500, pennies on the dollar!" Is this an offer?

No. A statement is an offer only if the person to whom it is communicated could reasonably interpret it as an offer. It must express the present intent of a person to be legally bound to a contract. The primary test of whether a communication is an offer is based on the objective theory of contracts; i.e., whether an individual receiving the communication would believe that he could enter into an enforceable deal by satisfying the condition.

Ames says to Barnes, "I'm thinking of selling my 1965 Ford Mustang for $10,000." Barnes replies, "I'll take it!" Is a contract formed?

No. An offer must contain words of promise, undertaking, or commitment (as distinguished from words that merely indicate intention to sell or interest in buying). The offer must also be targeted to a number of people who could actually accept.

Ames writes to Barnes, "I will sell you my vintage 1965 Ford Mustang for $15,000." Barnes writes in response, "We have a deal, so long as that comes with a set of winter tires." Under the common law, has a contract been formed?

No. Barnes' reply violates the mirror image rule. It is considered to be a rejection and a counter offer. Ames now has the power of acceptance under Barnes' new terms (the tires).

A offers to ship goods to B on the steamer "Peerless." B accepts. Unknown to both, there are in fact two steamships by this name. A intends to use the later one; B subjectively intends to get shipment on the earlier one. Is there an enforceable contract?

No. Because both are in subjective disagreement about the meaning of the material term, and neither has reason to know of the disagreement, there is no contract. [Raffles v. Wichelhaus]. This is a mutual mistake of fact.

Julia inherited an old violin from her late uncle Ralph and sells it to Natalie for $100 cash. Neither Natalie nor Julia realized at the time of the sale that the violin is actually a Holstein Workshop Stradivarius Violin (No. 180) worth $2,400. Can Julia avoid the contract and get the violin back?

No. Even though there was a mutual mistake of fact, Julia bore the risk. The adversely affected party must not assume the risk of the mistake to avoid a contract. A party may bear the risk of a mistake when she is aware at the time of the contract that she has only limited knowledge of the facts to which the mistake relates, and she accepts her limited knowledge as sufficient. Note that the risk created by conscious ignorance rests on the party being aware of her limited knowledge. Restatement (Second) of Contracts § 154. Note also: When the mistake is attributable to a party's failure to know or discover facts before entering into the contract, the party may nonetheless assert the defense of mistake, unless the party failed to act in good faith and in accordance with the reasonable standards of fair dealing. The mistaken party's negligence with regard to the mistake is not sufficient to prevent the mistaken party from avoiding the contract. Restatement (Second) of Contracts § 157

Ames says to Barnes, "I am going to sell my Ford Mustang." Barnes replies, "I'll take it!" Is a contract formed under the common law?

No. For a contract to exist, the terms of the contract must be certain and definite, or the contract fails for indefiniteness. Under common law, all essential terms (i.e., the parties, subject matter, price, and quantity) must be covered in the agreement. The UCC allows for a more liberal contract formation. Under the UCC, a contract is formed if both parties intend to contract and there is a reasonably certain basis for giving a remedy. The only essential term is quantity, and as long as the parties intend to create a contract, the UCC "fills the gap" if other terms are missing, such as the time or place for delivery, or even the price for the goods.

On May 1, Painter writes to Owner, "I'll paint the exterior of your house for $10,000. This offer will remain open until May 30." On May 10, Painter emails Owner, "Sorry - I'm too busy. Offer is withdrawn." On May 20, Owner purports to accept the offer. Is Owner's acceptance effective?

No. The acceptance won't be effective - even though the offer said it was irrevocable until May 30, it wasn't, and Painter's May 10 email successfully revoked it. At common law, there was no consideration for the option contract.

A borrower knows that he owes a lender $1,000 today. The borrower promises to repay the loan if the lender promises to lend the borrower an additional $100. The lender agrees. Is the lender's promise enforceable?

No. The borrower had not provided consideration for the promise. At common law, a promise to perform a preexisting legal duty does not qualify as consideration because the promisor is already bound to perform (i.e., there is no legal detriment).

On Monday, a contractor completes construction of a garage for a homeowner. Under the terms of the contract, the homeowner owes the contractor $40,000 in cash. The homeowner offers to deliver a sports car worth $35,000 to the contractor on Friday in satisfaction of his contractual obligation. The contactor agrees. The homeowner delivers the sports car on Friday. On Saturday, the contractor demands as additional $5,000. Is contractor entitled to the additional $5,000.

No. The contractors' acceptance of the homeowner's offer creates an accord, and homeowner's delivery of the car constitutes satisfaction of the accord, which discharges the homeowner's obligations in full. When a party agrees to accept a lesser amount in full satisfaction of its monetary claim, there must be consideration or a consideration substitute for the party's promise to accept the lesser amount. For example, consideration can exist if the other party honestly disputes the claim or agrees to forego an asserted defense (e.g., Settlement of a legal claim), or if the payment is of a different type than called for under the original contract. Restatement (Second) of Contracts § 281, cmt. d. A "satisfaction" is the performance of the accord agreement; it will discharge both the original contract and the accord contract. However, there is no satisfaction until performance, and the original contract is not discharged until satisfaction is complete. Therefore, if an accord is breached by the party who has promised a different performance, the other party can sue either on the original contract or under the accord agreement.

WKRP runs a radio contest that it will award $20,000 to the first person who catches the trout tagged "Big Red," which the radio station has stocked in North Park Lake. Jim-Bob was fishing in North Park Lake yesterday and caught Big Red, but he was unaware of the radio contest, since he never listened to WKRP. When he rowed back to shore, his friend, Myron told him about the contest. Can Jim-Bob collect the $20,000 prize?

No. The offeree must have knowledge of the offer in order to have the power to accept the offer.

Ames offers to sell Blackacre to Barnes at a stated price, and gives Barnes a week in which to respond. Within the week, Ames contracts to sell the land to Cal, and Barnes learns of this through a tenant of Blackacre. Barnes nonetheless sends a formal acceptance, which is received by Ames within the week. Has a contract been formed between Ames and Barnes?

No. There is no contract between Ames and Barnes, because Ames's offer to Barnes was revoked at the time that Barnes learned that Ames had made the contract with Cal. See Rest. 2d, §42, Illustr. 1. Indirect communication of revocation.

On July 1, Amy sends an offer. On July 2, Amy dies. On July 3, Betty telegraphs her "acceptance." On July 4, Betty learns of Amy's death. Has a contract been formed?

No. There is no contract. Death or incapacity of offeror or offeree revokes the offer.

Amy says to Bill, I'll pay you $1,000 if you cross the Brooklyn Bridge." Bill says, "I happily accept!" Is a contract formed?

No. This can only be accepted by Bill's act of completely crossing the bridge.

Ames writes to Barnes, "I will sell you my vintage 1965 Ford Mustang. What's the best price you will pay?" Is this an offer? Analyze.

No. This is a mere invitation to deal. Offers must be distinguished from invitations to deal.

Employer tells Employee, "stick with me through the busy season and I promise you there will be a big bonus paid if I feel like it." Employee stays employed through the busy season but Employer refused to pay any bonus. Is Employer's promise legally binding?

No. This is an illusory promise, which is one that essentially pledges nothing because it is vague or because the promisor can choose whether to honor it. Such a promise is not legally binding. A promise that is based on the occurrence of a condition within the control of the promisor may be illusory, but courts often find that the promisor has also promised to use her best efforts to bring about the condition. Restatement (Second) of Contracts § 76 cmt. d.

A retail store's circular states, "Men's jackets, $26 each." Is this an offer?

No. This is not an offer to sell jackets at that price, because it is too vague regarding quantity, duration, etc.

Don is drowning and Mike dives in and saves Don's life. Grateful at having been saved, Don promises to give Mike $5,000. Later, Don reneges on his promises and refuses to pay Mike. Can Mike enforce Don's promise?

No. Under the common law, something given in the past is typically not adequate consideration because it could not have been bargained for, nor could it have been done in reliance upon a promise. Here, there is no consideration and the promises is therefore unenforceable. Don's promise is based on a moral obligation arising out of past conduct.

Anna says to Bob, I'll pay you $1,000 if you cross the Brooklyn Bridge." Bob immediately begins to walk across the Brooklyn Bridge, but Anna yells "Just kidding. I revoke my offer!" Is a contract formed?

Not yet. Bob can only accept by completing performance, but Anna's offer will be rendered temporarily irrevocable once Bob starts to perform.

Yoko says to Bono, "For $2.1 Million, I'll sell you my late husband's Epiphone Casino guitar, which he played throughout his Beatles career." Bono says, "I'd be proud (in the name of love) to own that one. Let me think on it." Six months later, Bono calls Yoko and says, "I'll take it!" Is a contract formed?

Probably not. In most contracts, if a duration term is not specified in the agreement, courts will imply that the contract will last for a reasonable period of time. Six months is probably too long a time to "think on it." If the offer does not set a time limit for acceptance, the power of acceptance terminates at the end of a reasonable period of time.

On Feb. 1, Seller, a merchant, writes, "I'll sell you as many widgets as you want, up to 1,000; this offer will remain open until May 1. My standard pricing applies." On Feb. 15, Buyer orders 400 widgets, which Seller ships. On April 10, Seller writes, saying "Our supplies have tightened, and all customers are on allocation, so I can't ship you any more widgets for 3 months." On April 15, Buyer orders another 600. Seller refuses to ship. What are the rights of the parties?

Seller has breached as to the 600 - on April 15, Seller was still an offeror of 600 more units under the outstanding firm offer. In other words, Seller's initial offer would be interpreted as a firm offer for a series of acceptances up to the 1,000 total, not just as a firm offer that would vanish when a single order for less than 1,000 was placed against it.

Buyer and Seller are both merchants. Buyer telephones seller and says, "Send me 100 blue widgets, your Model 101, at $3, delivery to occur in 30 days." Seller says, "OK." Seller then faxes a confirmation, with a cover sheet that says, "Please sign and return this confirmation." Buyer doesn't sign the confirmation, but instead puts it in the file. The price of widgets rises, and Seller sends a notice (before 30 days have passed) saying "Because you didn't sign or return the confirmation, we have no deal and will not deliver." What are the rights of the parties?

Seller has breached. The parties' deal was completed no later than the moment when Seller sent the confirmation (and probably was complete even earlier, at the moment of the oral agreement). Therefore, Buyer's failure to sign and return the confirmation had no effect, and Seller was obligated to fulfill the contract

Buyer to Seller: "Do you have 100 widgets for immediate shipment?" Seller to Buyer: "Yes, at a price of $2.37 per widget." Analyze.

Seller's response is an offer, because it implies that Seller is willing to let the Buyer immediately conclude a contract for the items.

Buyer sends Seller an order for "100 red gizmos, at $5.75 each, for immediate shipment." Seller sends 100 blue gizmos, with a note reading "I'm all out of red gizmos. I've taken the liberty of shipping you 100 blue ones instead, at the same price, hoping that they'll do for you." What are the rights of the parties?

Seller's shipment of the blue gizmos is an accommodation shipment under §2-206 (1)(b). Therefore, Seller's shipment does not constitute an acceptance. Instead, it is a counteroffer of blue gizmos. Buyer can accept the counteroffer (by keeping them, in which case he owes the $5.75 for each with no discount for the non-conformity) or reject the counteroffer (by sending them back). If Buyer rejects the counteroffer by sending the blue gizmos back, Seller has not breached (because there was never any accepted order), so Seller does not owe Buyer any compensation.

The Bretons owned an old house in need of repair and were $20,000 behind in payments to the bank on their mortgage loan. The bank promised not to foreclose on the house so long as the Bretons made their regular monthly payments and did not fall any further behind on the indebtedness. In reliance on the bank's promise the Bretons worked diligently on the house themselves: painting, plastering, and repairing plumbing and electrical problems. After the repairs have been made may the bank change its mind and foreclose on the house? If so, is the bank liable to the Bretons for the work that they performed?

The bank may foreclose on the Breton's residence, but it must pay them for the value of the work that they performed on the house in reliance on the bank's promise. A promise which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. Section 90 of the Restatement (First) of Contracts. b. There is a modern trend, adopted by the Second Restatement, toward enforcing such promises when necessary to prevent injustice, unless the promisee intended his act to be a gift, or otherwise did not expect compensation. A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires. Section 90(1) of the Restatement (Second) of Contracts. Furthermore, courts will enforce a promise only to the extent that the value of the promise is proportional to the previous benefit conferred by the promisee. See, e.g., First National Bankshares of Beloit, Inc. v. Geisel, 853 F.Supp. 1344 (D.Kan. 1994), Restatement (Second) of Contracts § 86.

Ben offers to purchase Jerry's Ice Cream Stand for $100,000. Jerry tells Ben, "You don't have that kind of money, fool! But just to humor you, here!" Jerry writes on the back of a sales receipt, "Jerry's Ice Cream Stand is hereby sold to Ben for $100,000. /s/ Jerry," and hands it to Ben. When the next day, Ben brings a check for $100,000 made out to Jerry, and Jerry refuses to sign over title to Ben, saying he was just joking. What result?

The contract is binding. Lucy v. Zehmer. In contract law, intent is determined by the "objective theory" of contracts and not by the subjective intent or belief of a party. The objective theory is key to determining whether an offer or acceptance is valid. Whether a party intends to enter into a contract is judged by outward objective facts, as interpreted by a reasonable person. The intent of a party is what a reasonable person in the position of the other party would believe as a result of that party's objective manifestation of intent.

Albert Starr wanted to buy a painting owned by Paul Vincent called "Blue" panted by the recently deceased artist, Jackson Spence. Starr assumed that Vincent had paid $1 million for "Blue" and, with Spence's death, that price could soar. Starr sent a letter to Vince stating, "I will purchase "Blue" for $1.5 million." Vincent had actually paid only $500,000 for "Blue" and immediately replied that he would sell "Blue" to Starr for $1.5 million. Neither Starr nor Vincent were aware that another authentic Spence painting, also called "Blue," was owned by a third party which Starr assumed was the "Blue" owned by Vincent, while Vincent assumed the only "Blue" was the one he owned. What are the rights of the parties?

The contract is void. Because both are in subjective disagreement about the meaning of the material term, and neither has reason to know of the disagreement, there is no contract. [Raffles v. Wichelhaus]. This is a mutual mistake of fact.

Farmer Jones sold a cow to Farmer Zeke for $500, both of them thinking (incorrectly) that the cow was barren. In fact, the cow was pregnant, making her much more valuable. Analyze.

The contract is voidable by the adversely affected party. See, e.g., Sherwood v. Walker. Mutual mistake occurs when both parties are mistaken as to an essential element of the contract. In such a situation, the contract may be voidable by the adversely affected party upon proof of the following: i) Mistake of fact existing at the time the contract was formed; ii) The mistake relates to a basic assumption of the contract; iii) The mistake has a material impact on the transaction; and iv) The adversely affected party did not assume the risk of the mistake.

Buyer sends Seller an order form. Seller sends an "acknowledgement" form, containing the same terms, but adding a clause providing that Seller's maximum liability for breach shall be $1,000. Both Seller and Buyer are merchants. What result under the Uniform Commercial Code?

The parties have a contract, but Seller's limitation-of-liability clause does not become part of the contract. That's because the clause is an "additional" clause - one that adds to rather than contradicting the Buyer's form - and this additional clause materially alters the contract (since a limitation-of-liability clause will always be deemed to be a material alteration).

Buyer sends a "purchase order" containing a warranty. Seller responds with an "acknowledgement," containing a disclaimer of warranty. Under the Uniform Commercial Code, has a contract been formed?

There will be a contract under the UCC, even though there would not have been one at common law. UCC §2-207(1).

Assume there was only one "Blue" painted by Spence and that Starr and Vincent agreed on the purchase and sale of the one and only "Blue" at $1.5 million. They jointly hired Lawrence Gibbons, Esq. to draft their contract. Gibbons drafted the contract which stated that the parties had agreed upon the sale of Spence's painting called "Gray" which Vincent also owned. Starr would be pleased to own "Gray," but Vincent does not want to part with "Gray."

This is a clerical error. Vincent is not obligated to deliver "Gray."

An online retailer advertises, "Send three box tops plus $1.95 for your free cotton T-shirt; supplies limited." Analyze.

This is an offer even though it is also an advertisement; this is because the advertiser is committing himself to take certain action in response to the consumer's action, up to the advertiser's present supply.

A says to B, 'I promise to pay you $1,000 on April 15 if you promise now that you will walk across the Brooklyn Bridge on April 1." Analyze.

This is an offer for a bilateral contract, since A is proposing to exchange his promise for B's promise.

Barnes write back to Ames, "I'll give you $7,500 for your vintage 1965 Ford Mustang." Analyze.

This is an offer. Barnes has created in Ames the power of acceptance.

On Feb. 1 Tycoon sends Artist, a painter, a color photo of himself, and says in the accompanying letter, "I'm interested in having you paint my portrait in oils, on a canvas of at least 24 X 36. Do not proceed unless you're willing to do the work for $10,000." Artist receives the letter on Feb. 3 and immediately starts work. On Feb. 4, Tycoon dispatches a letter saying "I have changed my mind - cancel the portrait." On Feb. 5, without having received Tycoon's letter, Artist sends a fax to Tycoon saying "have begun work, will charge you the agreed-upon $10,000." On Feb. 7, Tycoon faxes back, "In case you didn't get my letter, portrait request is withdrawn." As of the moment Artist receives this fax, is there a contract for the portrait?

Yes, Artist's commencement of work constituted an acceptance of the offer, since the offer was reasonably interpreted to call for either acceptance by promise to paint or acceptance by the beginning of actual painting. If Artist had not given notice of acceptance reasonably promptly after starting work, the contract would have been "discharged." But Artist's giving of notice two days after starting work met the requirement of reasonably prompt notification, so the contract stayed in place, and could not be invalidated by either the delivery of Tycoon's purported revocation letter or Tycoon's later fax. (Indeed, once Artist started work, even receipt of a cancellation before Artist was able to give the prompt notice would not have ended the contract.)

Same facts as above example. This time, A knows or should know that there are two ships nemned Peerless, and knows or should know that B means the earlier one. B doesn't and shouldn't know that there are two. Is there an enforceable contract?

Yes. A contract is formed for shipment on the earlier (the one understood by B, the "innocent" party).

Insurer writes a homeowner's policy on Owner's home. The policy says that in the event Owner suffers a loss, Owner must report the loss "in detail" and in writing to Insurer within 30 days. Twenty-eight days after Owner's home is burglarized, he submits a one-sentence description of the loss to Insurer. Insurer writes to Owner merely, "Your description is not specific enough," but refuses to tell Owner what type of detail must be added. (Assume that Insurer's evasiveness is an intentional attempt to prevent Owner from submitting a claim meeting the requirements of the policy.) The deadline passes without Owner's rewriting the description, and Insurer refuses to pay the claim. Is Insurer obligated to pay the claim?

Yes. A court would probably find the Insurer's intentionally evasive behavior violated its implied duty of good faith, because the behavior was an attempt to deprive Owner of his reasonable expectation that his loss would be covered by the policy

Buyer orders Goods from Seller, telling Seller, "I'll keep and pay for the Goods if I am satisfied as to their quality." Seller ships objectively satisfactory Goods, but Buyer rejects the Goods and refuses to pay Seller, because Buyer found similar goods at a lower price from a different seller. Is Buyer legally obligated to Seller?

Yes. Buyer's promise is not illusory. Restatement (Second) of Contracts § 76 cmt. d. A promise to purchase goods upon the promisor's satisfaction with the goods is not illusory because the promisor is required to act in good faith. UCC § 1-304

Tom promises in writing to donate $10,000 this year to the Church on the Bluff. The Church is delighted and relies on Tom's promise to purchase a new HVAC system. The stock market has had a rough year, and Tom has lost a fortune. Tom reneges on his promise and donates nothing. Can the Church on the Bluff enforce Tom's promise?

Yes. Courts often apply the doctrine of promissory estoppel to enforce promises to charitable institutions. In some cases, they presume that the charity detrimentally relied on the promised contribution. A charitable subscription (i.e., a written promise) is enforceable under the doctrine of promissory estoppel even without proof that the charity relied on the promise. Restatement (Second) of Contracts § 90(2).

A borrower knows that he owes a lender $1,000 tomorrow. The borrower promises to pay the lender $900 today if the lender agrees to forego the additional $100. The lender accepts the offer. Is the promise enforceable?

Yes. The borrower has provided consideration for the promise. Note that if the promisor gives something in addition to what is already owed (however small) or varies the preexisting duty in some way (however slight), most courts find that consideration exists. Restatement (Second) of Contracts § 73.

Without paying, Moocher joins a tour group walking downtown learning about landmark buildings. Can the tour guide charge Moocher the fee for the tour?

Yes. When words express the intent of the parties, the contract is an express contract. When conduct indicates assent or agreement, the agreement is considered implied in fact.

On September 9, Ames, a collector of antique automobiles, sent a letter to Harry Sims, another collector, offering to sell a 1938 Dusenberg antique automobile for $200,000. The letter closed with, "The offer ends in 10 days." Sims received the letter on September 11. On September 16, Sims sent an e-mail to Ames stating, "We have a deal for the 1938 Dusenberg at $200,000." On September 18, Ames wrote back to Sims, "Sorry, but I sold the Dusenberg to Barnes on September 15th." NOW assume that Ames is a merchant who deals in goods of the kind (antique automobiles). What are the rights of the parties under the Uniform Commercial Code?

a. A contract was formed when Simms sent his acceptance by email on September 16 and Ames breached when he sold the Dusenberg to Barnes on September 15th. Under UCC §2-205, an offer to buy or sell goods is irrevocable if (i) The offeror is a merchant, (ii) There is an assurance that the offer is to remain open; and (iii) The assurance is contained in a signed writing from the offeror. Under these conditions, no consideration is needed to keep the option open. b. For purposes of this rule, a merchant includes not only a person who regularly deals in the type of goods involved in the transaction or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction, but also any businessperson when the transaction is of a commercial nature. c. If the time period during which the option is to be held open is not stated, a reasonable term is implied. However, irrevocability cannot exceed 90 days, regardless of whether a time period is stated or implied, unless the offeree gives consideration to validate it beyond the 90-day period. d. The primary purpose of the signed writing requirement is to ensure that the merchant deliberately makes a current firm offer binding.