Contracts Midterm Review - From Quizzes

Assuming the facts as stated in Question 5, suppose the Order Acknowledgement e-form had stated, under the title, "this acknowledgement is subject to the buyer's assent to the additional or different terms contained herein." North breaches, South sues, North cites to the clause limiting its liability. What result? A. South may prevail, since the term in dispute is subject to a 2-207(2) analysis. B. South may prevail, since the term in dispute is subject to a 2-207(3) analysis. C. North will prevail, since the term in dispute would be included under a contract formed by the exchange of performances (i.e., under 2-204), and South agreed to the term when it paid for the goods upon receipt. D. North will prevail, since the term in dispute was agreed to by South under a contract formed by the exchange of documents (i.e., under 2-207(1)), and the term would survive "between merchants" under 2-207(2).

A. South may prevail, since the term in dispute is subject to a 2-207(2) analysis. This time, the correct answer is A. The language, "may prevail," is more accurate than in C and D, "will prevail," since the term is "additional or different" and subject to 2-207(2). Since 2-207(2)(a) is not applicable here, and the facts don't indicate any objection by South after the fact, the clause would be knocked out only if a court determined that its inclusion in the contract would cause a "material alteration" of the agreement between North and South. The result of its application of the "surprise or hardship" test would depend on the industry context and the jurisdiction.

Alice lives on her own in Chicago and works as an attorney specializing in wills and trusts for a large law firm. Her widowed father, Michael, lives on a farmstead in Idaho. Michael is diagnosed with prostate cancer in an advanced stage. He calls his daughter on the phone and assures her that if she would come to work for him on the farmstead, he would bequeath to her the land, worth $1 million. Alice moves to the farm and works for her father for several years. During that time, she had ample opportunity to ask her father to reduce his "promises" to writing but did not do so. When Michael dies, it was found that he had disinherited his daughter. She sues the estate, arguing that Michael "induced" her to come work on the farm. What is the most likely result? A. Alice will prevail, on a theory of contract. B. Alice will prevail, on a theory of promissory estoppel. C. The estate will prevail, since Alice's reliance was unreasonable, given her education. D. The estate will prevail, since there was no promise made to Alice.

B. Alice will prevail, on a theory of promissory estoppel. The issue here is whether or not an "inducement" can be characterized as a promise, the predicate for a finding of contract or, alternatively, enforcement under a theory of promissory estoppel. The facts are based on the Bouton v. Byers case on p.221, the issue being the "reasonableness" of the reliance. Recall that for a court to enforce a promise, it must find either an express or implied promise. Alice alleges she was "induced" to move from her home to her father's farm; in similar cases (e.g., Greiner v. Greiner; Kirksey v. Kirksey), the conduct of the promisor "implied" a promise where no express promise was made. Same goes for the Harvey case. In addition, the reliance here seems substantial. The only question, raised by the trial court in the Bouton case, was whether the daughter's reliance was reasonable, given that her training should have required her to insist upon a written document to protect her interests. The appeals court in that case noted, however, that to so rule would be to say, as a matter of law, that familial promises would not be enforced unless they resembled "a joint venture for business advantage." The best choice is B. Choice A is a close second. Here, it would seem that unlike the other familial donative promises, the promisor receives a benefit, by way of the work the daughter provides on the ranch. What is implied (and should have been included in the facts) is that there is a contract for services ratified between father and daughter (she's not working for free). There is no agreement as to the conveyance, however, or compensation for the loss of income in giving up a lucrative career as a lawyer/professor. It's this loss, the reliance interest, that she seeks to recover. Later, we'll learn that for the conveyance there has to be more than "inducement," but also a writing that "satisfies" the statute of frauds.

Anouk submitted a notice in the online village blog (rather like craigslist) that read, in relevant part, "Authorized to sell five relatively new iPhone X models at $50 each! Cash only, first buyer first served!" Anouk provided his home address. Aimée saw the ad moments after it was posted and quickly wrote an email to Anouk that read, "I accept your offer! I will buy all 5 models at stated price! I'm coming over!" Meanwhile, Anouk's neighbor Amita, who was standing next to Anouk as the latter received the response from Aimée on his cellphone, took out her purse and tendered $250 cash in exchange for the models, which Anouk accepted. Anouk writes back: "Sorry, I just sold them." Aimée sues. Under the classical rules of offer and acceptance, A. Anouk's email giving notice of revocation terminates Aimée's power of acceptance. B. Anouk's acceptance of the cash from Amita is an attempted revocation, but Aimée will prevail under the mailbox rule. C. Aimée's acceptance was timely, and it would be unfair if Amita prevailed since she had the advantage of being in the house with Anouk at the time. D. Aimée's email was an offer, which was not accepted by Anouk.

B. Anouk's acceptance of the cash from Amita is an attempted revocation, but Aimée will prevail under the mailbox rule. The issue is whether the advertisement could be considered an offer, or merely an invitation. If an invitation, then choice D would be correct. However, the language tracks the Lefkowitz case ("first come, first served") highlighted in the casebook notes, and establishes the proviso that "[T]o make an offer by an advertisement...there must ordinarily be some language of commitment or some invitation to take action without further communication." Since Anouk made an offer, he created a power of acceptance for Aimée. The offer has conditions, though: cash only, and "first come" suggests unilateral contract (performance demanded) rather than return promise. The next issue whether or not the offer was timely accepted by Aimée. The mailbox rule would help were this an offer to create a bilateral agreement, which it is not. Choice A is therefore the best response.

Amita, Bertram and Clyde are having a coffee at a stall in Boston Common. Bertram says, "If either one of you can promise me that you can walk from here to Fenway Park in less than thirty minutes, you've got yourself $100, which I promise to pay." Amita says, "Thirty minutes is cutting it fine. Come on, let's make it two hours, eh?" Clyde says "I can do it. I promise to make it in less than thirty minutes, no sweat." Bertram raises his hand to give Clyde a high-five. Amita quickly interposes, raises her hand and shouts, "Okay! Okay! Thirty minutes! You're on!" It is her hand that slaps Bertram's. A. Contract between A and B. B. Contract between B and C. C. Contract between A and C. D. No contract.

B. Contract between B and C. Choice B. There is a promise inducing a promissory acceptance that involves a future act, i.e. this resembles a promise for performance but is in form at least an offer from Bertram to create a bilateral agreement. Amita makes a counteroffer when she attempts to change the terms, so as to her, in classical contract terms, the offer from Bertram would seem to have been rejected. Alternatively, she is still in negotiations with Bertram and has not yet rejected his offer ("Come on...). In any event, Clyde accepts Bertram's offer. Since the terms of the offer were for only one party to accept, this extinguishes the power of acceptance as to the other party (Amita). As such, her acceptance is moot.

On March 1, Olivia contacts Bob and expresses interest in having him install a swimming pool in her backyard. On March 3, Bob responds with a signed written offer to build the pool. In the offer, Bob specifies price, timetable, and all other relevant details. As for scheduling, the offer provides that Bob will begin work on April 1 and complete it by April 15. He writes, "I have only those 15 days in which to install your pool, and I can only install one pool at a time. I am filled up with commitments before and after that period. You have one week in which to respond." On March 4, Olivia learns from her neighbor, Nancy, that Nancy and Bob have formed a contract for the installation of a swimming pool on Nancy's property, with Bob to begin on April 1 and finish by April 15. Immediately on that same day, March 4, Olivia sends a signed email to Bob, stating, "I accept your March 3 offer." In response, Bob advises Olivia that his offer is no longer open - that he has committed April1 - April 15 to building another party's swimming pool. Olivia maintains that Bob is in breach of contract: that he made her an offer on March 3, gave her one week in which to accept, and that within one week she

B. No, because Olivia lost her power to accept Bob's offer on March 4 when Olivia's neighbor spoke with Olivia. Issue in this mutual assent case is whether or when an offer can be revoked. The rule provides that in general an offeror may revoke her offer at any time before the offeree accepts it. See R2 43, which provides, "An offeree's power of acceptance is terminated when the offeror takes definite action inconsistent with an intention to enter into the proposed contract and the offeree acquires reliable information to that effect." Thus, the best answer is B. Choice C misstates the law. Choice D describes a common law rule that does not apply to the facts (since the offer was in writing, and not pursuant to a conversation). Also, no "option contract" was formed without some sort of consideration provided in order to keep the offer open (for a week). And Choice A draws the wrong conclusion.

South searched online for a wholesale producer of specialty fabrics and found something interesting within the local market: a company called North Specialty Fabrics Inc. On September 5, 2022, South downloaded its own boilerplate "purchase order" form, filled out the blank spaces to request the following from North: 3,000 reams of high-count cotton fabric for delivery to its clothing factory no later than September 25, for a total price of $10,000. South then signed and scanned the form to North via email, with a note in the message box: "Please see attached order for your product. Please sign and return promptly if interested in accepting our offer." On September 6, North mailed to South its acceptance. "We're delighted to serve you," said the message box, signed by one Lisa Danvers, Sales Representative. Below her name and "e-signature," within the body of the email, was the title, "Order Acknowledgement." Below the title were the words, "This acknowledgement is expressly conditional on the buyer's assent to the additional or different terms contained herein." The email then listed the terms to match the purchase order. Below these common terms, the email/acknowledgement form listed f

B. South, since the term in dispute is subject to the 2-207(3) analysis and would be excluded. The correct answer is B. South's acceptance was indeed a counteroffer - note the language of express conditionality that tracks the UCC 2-207(1) for acceptances. As such, a contract was formed not under 2-207(1) by the exchange of documents but by their exchange of performances. To determine the terms in the agreement, the "agreed terms" (or alternatively, the knock-out rule) approach under 2-207(3) governs. Since the term in dispute is not present in both documents (it is not in the PO) but only in the OAF, it is not an "agreed term." There is no UCC gap-filler that would "fill in" a limited liability clause, and so this provision would fall out. South is therefore correct.

Seller owns two bicycles: one old bicycle worth about $75 (Old Bike) and a new bicycle worth $200 (New Bike). Seller wants to sell the Old Bike and keep the New Bike. On a public street, Seller is seated on the New Bike, to which he has attached a sign, "My bicycle for sale, $75." Walking on the street, Buyer approaches Seller. Seller says, "As the sign gives notice, my bicycle is for sale; $75 takes it." Buyer believes that Seller is offering for sale the very bicycle on which Seller sits. Buyer takes $75 from his pocket and says, "I'll take it." Buyer hands Seller the $75 and says, "So, would you give it over to me please? I'll ride it away now." Seller responds, "Oh, no. I was referring not to this bicycle but to an older bicycle I have sitting in my garage." A. The Old Bike sitting in Seller's garage. B. The New Bike on which Seller is seated. C. No bicycle, because there was no meeting of the minds between the two parties. D. No bicycle, because $75 would be considered too little money for a bicycle worth $200.

B. The New Bike on which Seller is seated. As this is a mutual assent case, the correct answer is B, under the objective approach to contract formation. (See R2 50(1) pursuant to an invitation to complete the bargain either by promise or by performance. More on "unilateral" contracts next day). Under a "subjective" or "meeting of the minds" approach, the seller's "actual" intention would obviate contract formation (see Ray case, lower court decision). But under the objective "manifestation of assent" approach the seller's actual or mistaken belief does not signify as against the seller's "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." R2 24. A reasonable buyer would understand the advert, attached as it is to the bike in place, to refer to that bike, rather than another one in a remote location.

An employer sends a computer programmer an email stating, "I am making you a job offer to hire you for a one-year contract at a salary of $100,000 a year." The email provided all of the relevant employment terms, including the details of the programmer's duties, job title, benefits etc. The email ended by stating, "This offer will remain open for 60 days. Write or call me to accept." The programmer replied by email, stating, "That is a very interesting offer. Let me consider it over the next couple of months. Would you consider hiring me for two years at a salary of $90,000 a year?" The employer did not reply to the programmer's email. Within the 60-day period, the programmer called and told the employer that he accepted the employer's original offer. Which of the following is the most accurate characterization of the parties' communications? A. The programmer's email is a counteroffer. B. The programmer formed a contract with the employer when he called the employer within the 60-day period. C. Since the programmer only accepted orally, the programmer could argue he hadn't accepted in the proper form (in writing) if he later changed his mind and wanted out of the agreement. D. The

B. The programmer formed a contract with the employer when he called the employer within the 60-day period. This is a mutual assent problem, the main legal issue being whether the programmer's email was a counteroffer that destroyed the power of acceptance. To solve the problem, identify the legal effect of each communication. The employer's email is obviously an offer since the employer manifests intent to enter into a bargain. The essential terms are certain and definite because the salary, term, relevant duties and other employment terms are specified. Therefore, the programmer has the power of acceptance. Was the programmer's response a counteroffer that destroyed his power of acceptance as to the employer's offer? R2 39(2) provides that, "An offeree's power of acceptance is terminated by his making of a counteroffer, unless the offeror has manifested a contrary intention or unless the counteroffer manifests a contrary intention of the offeree." Here, the programmer has made what might be deemed a "mere inquiry" as to whether the employer would accept different terms: a slightly lower salary but for a longer term. Because the programmer specifically asks to think the offer over before asking about these other terms, the programmer has sought to reserve his power of acceptance as to the employer's offer. Here, it is clear that the programmer does not intend to reject the original offer through a counteroffer. Since the employer specified that the offer was open for 60 days, the lapse of time has not destroyed the programmer's power of acceptance. Since the employer specified that the programmer could accept by phone or email, the programmer's phone call serves as acceptance of the offer since he agrees unequivocally to every term of the original offer. Consequently, Choice B is correct. Choice D misapplies the "silence as acceptance" rules. Silence is not normally acceptance (see p.45), but R2 69 provides some exceptions. However, nothing in these facts suggests that the parties had previously agreed that silence is acceptance. None of the other exceptions apply.

On January 1, Accountant sent a letter to each of her clients offering to prepare their tax returns by April 15, the tax deadline. The letter stated the services that she was offering, the rates she charged, and a list of documents that she would need from the client to prepare the tax return. The letter stated, "If you want to hire me to do your taxes by April 15, then you must let me know and send me all of your tax documents by February 15." Laura is one of Accountant's clients and received Accountant's letter. On March 1, Laura called Accountant asking her to prepare her tax returns. Accountant replied, "I am not sure that I can do that. I needed your documents earlier, and I have many commitments between now and April 15." Laura sent Accountant by overnight mail copies of her tax documents and a signed letter that stated, "I accept your offer of January 1. Enclosed are copies of my tax documents. I look forward to having my taxes prepared by April 15." Accountant did not respond to Laura's letter and did not prepare Laura's taxes by April 15. Laura brings a breach of contract claim against Accountant. Which of the following is the most accurate statement about the outcome of Laura's

C. Accountant will win, because Laura did not have the power of acceptance when she mailed her acceptance and tax documents. Issue: this problem tests the common law rules of mutual assent, specifically the power of acceptance (see Lonergan and cases following). In a mutual assent problem, examine each communication/event chronologically and then evaluate the legal effect, if any, of the communication. Dispositive here is the February 16 deadline specified as a term of the offer from Accountant. Since Laura missed this deadline, her power of acceptance was terminated, and no contract was formed despite her subsequent efforts. If, then, one can characterize Laura's March 1 phone call as an offer to Accountant, nothing in her response suggests a manifestation of assent or acceptance. She is also, however, not outright rejecting the offer. So the subsequent communications should be examined to see whether any contract formed. Accountant's nonresponse to Laura's overnight mailing meant that she did not accept Laura's offer, and no contract was formed. Therefore, C is the best answer.

Anita places an advert in the local papers: "I offer my farm Blackacre for sale to the highest cash bidder and undertake to make conveyance to the person submitting the highest bid received at the address below within the next thirty days." Five days after this ad is placed, Candace submits a bid for $40,000. Two days later, Bertram submits a bid for $50,000. Bertram triumphantly insists that he has a contract with Anita. A. Bertram is correct, since his bid is higher than Candace's bid. B. Bertram is correct, since Anita's advert is not an invitation but an incontrovertible offer. C. Bertram is not correct, since Anita's advert is not an invitation but actually a real offer with a condition attached. D. Bertram is not correct, since Anita's advert is an invitation merely, and not an offer.

C. Bertram is not correct, since Anita's advert is not an invitation but actually a real offer with a condition attached. Anita's advert is an offer but it is conditional; that is, each bid operates as an acceptance creating rights and duties conditional on no higher bid being received within thirty days. Bertram's acceptance is still within the first week. Thus, even though this advertisement would be seen as an offer - see R2 26 (and R2 29), Comment b - because there is "language of commitment or some invitation to take action without further communication," this does not mean that the offer was accepted without the condition's being satisfied.

Allen Inc. makes and sells high quality widgets (Type X), and Beta Corp. has been purchasing these widgets from Allen Inc. for two years. Commercial standards of the business determine their course of dealing: price, quantity and delivery terms were routinely specified in the Purchase Order Form from the buyer (Beta), and the Order Acknowledgement Form from the seller (Allen). Beta enters into discussions with Carrot Company to purchase a test sample of Carrot's Type Z prototype. Upon learning of this, Allen offers to sell Beta its own version of the Type Z prototype but requires Beta to agree to purchase a minimum of 30,000 units. Beta says it can only afford 10,000 units, and the negotiations stall. The two parties continue to purchase and sell the Type X product. The following week, Beta purchases 500 units of Type Z prototype from Carrot. Allen quickly sends a price index with discounted prices for its Type Z product, but once again stipulates that an agreement is contingent upon Beta purchasing a minimum of 30,000 units. As a further inducement to agree to purchase the product, Allen ships 250 units to Beta and Beta accepts, with payment at the discounted price. When Beta refuses to

C. Beta is right. The parties were negotiating, and there was no agreement as to an essential term. The issue is contract formation under the UCC Article 2. The question is loosely styled on the facts in the Styberg case. Allen seems to have at least a colorable claim that the parties intended to form an agreement, but there is even less evidence on these facts than in the Styberg case. The parties are negotiating for the purchase of Type Z product from Allen, but they break off negotiations before any agreement is reached: even under the liberal rules of 2-204, such that "even though one or more terms are left open a contract for sale does not fail for indefiniteness," a contract is formed only "if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy." Thus, two things fail the test in this case: first, there is no evidence that the parties intend to enter a contract for the sale of the Type Z units. Beta does not submit, as is its usual practice, a purchase order for 30,000 or even 10,000. Second, an essential term is missing, one that would enable the court to "give an appropriate remedy.". What then becomes of the subsequent sale and purchase of 250 units? Seller argues this constitutes an "acceptance" of its offer via part performance. But its offer has already been rejected, so this doesn't work. Could it be "part performance" of the buyer's offer of purchase, with shipment constituting seller's acceptance? Nothing in the facts suggests that the shipment and acceptance are contingent on an agreement to purchase more than the shipment itself; the course of dealing between the parties seems to be on a basis of specifying each term within the exchange of documents, and here they only reflect the actual consignment. (Alternatively, in the language of Styberg, "Eaton's two requests for 240 I-brakes, one of which was cancelled, did not come close to the repeated, ongoing dealing that proved a contract [for the sale of the new product]." Finally, Beta's conduct with Carrot was inconsistent with an implication of intent to form a contract with Allen. Beta did not, in the language of Article 2-204, act as if it "recognized the existence of a contr

On June 12, Ramone signed an agreement with Horst Construction Co. to tear up Ramone's front lawn and pave it over. The contract specified, at Ramone's direction, that Horst was to use a rare and expensive Italianate cobblestone. The specification clause read, inter alia, "subject to availability." A month later, after the lawn had been torn up, Horst showed Ramone samples of a stone similar to the one Ramone desired but, rather than imported from Italy, it had been quarried in Babcock, Illinois. Ramone remonstrated, then looked out of his window at the ravaged lawn. He relented. When the job was completed, Ramone sued for breach of contract and specific performance. A. Ramone will prevail because although he relented, he really didn't want the stone from Babcock. B. Ramone will prevail under a theory of actual, objective intent (he really wanted, and signed up for, Italianate cobblestone). C. Horst will prevail under a theory of objective consent, because of the "subject to availability" clause. D. Horst will prevail under a theory of subjective intent.

C. Horst will prevail under a theory of objective consent, because of the "subject to availability" clause. Choice C. A is incorrect because Ramone assented to the "subject to availability" clause. Even though he "actually" wanted Italianate, he bore the risk that he might not get it.

Amanda had been thinking about giving up bartending and attending law school. She finally decided to do it and made the necessary applications and preparations. When her aunt, herself a lawyer, heard about the decision, she was delighted, and promised Amanda that she'd contribute $10,000 toward her education. Assume Amanda goes to law school and graduates. She writes to Aunt to remind her of her promise. Aunt replies that she's awfully glad Amanda has done well, but she's afraid she's fallen on hard times ("My clients have fled!") and can no longer pay as promised. Desperately in need of money pursuant to setting up a new law practice and relying on the aunt's promise to undertake start-up costs, Amanda sues for the money. If litigated, what result? A. Judgment for Amanda under the benefit/detriment test. B. Judgment for Amanda under the bargained-for exchange test. C. Judgment for Aunt under a donative promises test. D. Judgment for Aunt under a "condition versus consideration" test.

C. Judgment for Aunt under a donative promises test. Choice C. Amanda may have suffered a "detriment in fact," in that she spent money in reliance on the promise of payment from her Aunt. However, there was no bargain: Amanda's decision to attend law school preceded the Aunt's promise. As such, it might constitute "past consideration" for the promise. Under a benefit/detriment test, the same result: although there is benefit on one side (to Amanda), there was no induced benefit or detriment on the other. The promise was for her education, not her practice. In the result, the promise was gratuitous and nonreciprocal.

Trucker visits Mechanic's facility and tells her his truck engine needs an overhaul. Mechanic says that the service charge alone for an overhaul is $15,000. Trucker agrees to pay that amount. Mechanic then presents Trucker with a pre-printed form entitled, "Contract for Engine Overhaul." In a blank space that appears after the words, "charge for service will be $___," Mechanic inserts, "$15,000." The pre-printed portion of the writing includes this text: "Customer will pay for all parts used in connection with the work to be done." The form contains space for listing the cost of parts and a total price, which are both left blank. Mechanic signs the writing and gives the form to Trucker. Mechanic says, "Please read and sign this." Mechanic turns away to help another customer. Trucker signs the form without reading it. Mechanic completes the overhaul. She presents Trucker with a bill, showing a charge of $15,000 for labor, and $3,000 for parts. Trucker refuses to pay the $3,000 for parts. Can Trucker avoid paying the $3,000 for parts? A. Yes, because the law imposes a duty on reasonable businesspeople to orally explain any written agreement. B. Yes, because a party cannot be held to a co

C. No, because a party can be held to a contract without knowing its terms, and Trucker did not prove any deception by Mechanic. Issue: can a party be held to a contract's terms if he signs a writing without reading it? Rule: under the manifest assent theory of contract formation, one who signs a contractual writing is bound by its terms whether she has read them or not. There are exceptions to the rule, such as when a party signs a contract under circumstances that would lead to a defense of fraud, duress, unconscionability, or mistake. The "duty to read" actually represents a more fundamental rule: that contracting parties are bound by the intentions each party reasonably attributes to the other. It thus expresses the "objective theory" of contract formation. Thus, under the rule, Trucker is bound by the terms of the writing that he signed even though he did not read the writing. Nothing in the facts shows that Mechanic intentionally deceived Trucker. The pay-for-parts provision was disclosed on the form and Mechanic asked Trucker to read it. Choice C is correct.

Matthew purchased an antique 1956 sports car and was restoring it himself. It needed a great deal of mechanical work. Matthew's friend, Nadia, came by one day whilst Matthew was working on the car. Matthew was trying to loosen a bolt on the engine when something broke. Matthew looked at the car in dismay and said to Nadia, "I paid $10,000 for this car, but I don't think I will ever be able to get it to run properly." Then he laughed and said, "I am so thirsty, I would trade this car to you for the can of soda you are drinking." Nadia laughed too and said, "It's a deal." Nadia handed Matthew the can of soda, and Matthew took a drink from the soda. Matthew then said, "I was joking, of course." Nadia insists that the parties have a contract for the purchase and sale of the sports car in return for the can of soda. Is Nadia correct? A. Yes, because Nadia formed a unilateral contract when she gave Matthew the soda. B. Yes, because Nadia formed a bilateral contract when she said, "It's a deal. C. No, because a reasonable person would understand that Matthew was joking. D. No, because the subjective intent of the offeror controls whether an offer has been made.

C. No, because a reasonable person would understand that Matthew was joking. Correct answer is C. Issue is whether Matthew made an offer that Nadia accepted. Rule: R2 24 defines an offer as, "the manifestation of a 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." Use the "objective theory of contract" to determine whether in the circumstances Matthew intended to make an offer, per the reasonable person test.

Arlene posts this advertisement on a website that provides news and information to citizens of a certain city: "Leather handbag lost on downtown city bus; $100 reward for its return [address, telephone number, email address]." Jack lives in the city but has not seen Arlene's posting. Riding the downtown city bus, he finds the handbag. In it, he discovers a writing that shows Arlene's home address, to which he then travels. Finding no one at the home, he leaves the handbag in Arlene's mailbox. Is Jack entitled to the $100 reward? A. Yes, because the advertisement was an offer for a unilateral contract. B. Yes, because he lived in the city that the website targets. C. No, because he acted without knowledge of the advertisement. D. No, because he failed to deliver the handbag personally to Arlene.

C. No, because he acted without knowledge of the advertisement. Answer C is correct. The issue is mutual assent: whether a party must have knowledge of the offer to accept it. R2 50(1) states: "Acceptance of an offer is a manifestation of assent to the terms thereof made by the offeree in a manner invited or required by the offer." A person cannot manifest the intent necessary to accept an offer if he or she does not know that the offer exists. Also, the mere fact that this advertisement would be seen as an offer does not mean that the offer was accepted.

Amita promises Ben, a workmate, that if Ben would pick up Amita's weekly paychecks, along with his own, from Payroll (upstairs) every Friday, Amita will pay Ben a .5% commission on her salary at the end of each month. Ben says, "Why would you want to pay me to pick up your check? This sounds like a joke." Amita says, "No, I'm serious. But I don't want you to promise you'll do it. Just do it and I'll pay the commission." Ben says, "Sure, okay, I'll do it." At this point, do Amita and Ben have a contract? A. No, since Amita has not made an offer under a theory of "further manifestation of assent" upon her part, should Ben perform. B. No, since Ben has not accepted Amita's offer. C. Yes, since Ben is persuaded, that Amita is serious, and the parties have effectuated a "meeting of the minds." D. Yes, since Ben is persuaded, that Amita is serious, and the parties have manifested an intent to be bound.

C. Yes, since Ben is persuaded that Amita is serious, and the parties have effectuated a "meeting of the minds." The issue here is whether the elements of contract formation were all satisfied, including whether the agreement between Amita and Ben is supported by consideration. The offer from Amita clearly indicates that she seeks a return performance rather than a return promise. As such, until Ben performs, they do not have a contract under a theory of unilateral contract formation, and Choice B is correct. Ben's performance will supply the necessary consideration to support the formation of a contract.

Mr and Mrs Spain worked for Matt Door, a rancher. When the Spains decided to raise livestock of their own, Door agreed to furnish grass for their animals. The Spains borrowed $9,000 from the Moorcroft Bank to finance the operation and executed a note and livestock mortgage in favor of the bank in that amount. They were awarded the loan. Door was not involved in any of these loan negotiations. Eight days later, however, the bank's president invited Door to his home, where he presented Door with a proposed personal guaranty of the loan to the Spains. Loan guarantees typically precede a bank's approval of a loan and function as part of the consideration for a debtor's promise of payment. Door refused to sign, explaining that he had only agreed to provide grass for the livestock, not to guarantee a loan. "Besides, my signature would be after the fact, a worthless promise really." "I know," said the bank manager, "and of course it will never come to that. I'm sure the Spains are good for the money. Have another glass of wine." After a time, Door left the house, and vaguely remembers signing something at the behest of the bank manager. Several months go by, and the Spains default on the loan.

D. Judgment for Door, if he can prove to the court that his promise to the bank lacked consideration. Choice D. Choice A might have been possible as an ex post promise of payment should the Spains default, but the word "only" is a giveaway, given that the fact that there may have been a defect in contract formation which we'll discuss further when we get to defenses/excuses. Choice C essentially says the same thing as choice A, and choice B is wrong because there is no reliance on the signature from Door for the promise of a loan from the bank to the Spains. If Door can prove that the promise to the bank lacked consideration, given that it was not "induced" by the exchange of promises between the bank and Spain and thus, at best, would function as a gift from Door to the bank (there's nothing in it for Door, after all), then he should prevail.

Assuming the facts as stated in Question 1 (supra), but suppose instead that before the purchase of the first shipment of 250 units from Allen, Beta's floor manager (at its operating plant) called her counterpart at Allen and relayed the following message: that she believed her company, Beta, was "playing hardball" and might really be interested in purchasing Allen's prototype rather than Carrot's; that Beta would eventually agree to purchase the full 30,000 required by Allen because its product was "superior" to the Type Z produced by Carrot; and therefore, that Allen would be wise to produce sufficient quantities to fulfil an anticipated order of 30,000 from Beta. The following week, as noted in Question 1, Allen ships the consignment of 250 units. This consignment accepted and paid for, but the subsequent shipment of 250 units is rejected by Beta. Allen sues. In court testimony, Beta says that the floor manager at Beta had absolutely no authority to "bind" Beta in any negotiations with Allen to purchase Type Z product; that she was only expressing her opinion. What result? A. Contract. Even if the floor manager had not actual authority, she had apparent authority to bind the parties

D. No contract, since Beta's actions were governed by the offer of 250 and not by the offer of 30,000 units. Here, the issue is whether the representations of the floor manager indicated that the parties (secretly, notwithstanding their conduct as manifestations of assent or the lack thereof) intended to enter an agreement for Beta to purchase 30,000 units from Allen. Does Beta's purchase order "ratify" the floor manager's representations to a similarly placed officer at Allen? The representations themselves were rather vague, such that ratification would seem to rest on a slim reed. It should be noted that 2-204 presumes a search for intent on an "interchange [of] correspondence" and not on mere speculation, particularly in a context (sale of goods) where contracts may be formed in any manner and at any time, so long as intent is shown. As such, the dispositive issue remains whether or not, on these facts, the parties have an agreement for the sale and purchase of the Type Z prototype. Choice D is the best response.

Anita writes to Bertram, "I am eager to sell my house. I would consider $20,000 for it." Bertram promptly answers, "I will buy your house for $20,000 cash." Do Anita and Bertram have a contract? A. Yes, Anita and Bertram have a contract, since Bertram accepted Anita's offer. B. Yes, Anita and Bertram have a contract, since Bertram is willing to pay cash. C. No, Anita and Bertram do not have a contract, since Bertram's reply to Anita is a counteroffer. D. No, Anita and Bertram do not have a contract, since Bertram's reply to Anita is an offer.

D. No, Anita and Bertram do not have a contract, since Bertram's reply to Anita is an offer. Anita's statement is an invitation to Bertram to make her an offer; she "would consider" this price, but she might consider an alternative price also. Anita has yet to make a further manifestation of assent to Bertram's response, whereupon a contract would then be formed.

Seller builds and sells high-end custom computers. Buyer, who earns her living as a teacher, sent Seller a signed email with an offer that Seller build a computer for her. The offer contained (1) specifications for the custom computer, (2) a delivery date of July 15, and (3) a proposed price of $10,000 to be paid upon delivery. Seller sent a signed email stating, "I accept your offer to build a custom computer with these specifications delivered by July 15 in return for a payment of $10,000, payment to be made upon delivery. All computers are sold 'as is' without any warranty - express or implied." Buyer did not reply to Seller's email. Seller builds the custom computer according to the specifications and delivered it to Buyer by July 15. Buyer paid the $10,000 upon delivery. Buyer used the computer for one week; however, the computer, through no fault of Buyer, stopped working after one week. Buyer tried to return the computer or have Seller fix it, but Seller refused. Under UCC Article 2-314, all sales of goods by a merchant include an "implied warranty of merchantability," which under these facts means that the goods must be fit for their ordinary purpose. However, the implied warran

D. The clause was not included, because the "as is" clause would be construed as a proposal for addition to the contract and Buyer did not expressly agree to the proposal. This is another battle of the forms problem. UCC 2-207 applies since the transaction involves the sale of goods. The problem includes some background information on warranties under the UCC that we have not studied yet; this helps to explain the different outcomes. Under 2-207, best to take a two-step approach (see Answer to Question 1, supra). The two steps are: (1) Has a contract formed despite additional or different terms in the acceptance? (2) Are the additional or different terms incorporated into the contract? Step 1: Formation. Here, Seller's acceptance agreed to all of the proposed terms in Buyer's offer; however, it also contained an additional term: an "as is" clause that disclaims any warranty on the computer. This term was not in Buyer's offer. Under the common law, Seller's purported acceptance would be treated as a counteroffer. However, under 2-207(1) a contract is formed despite the additional term. Step 2: Contract Terms. Under these facts, 2-207(2) controls. This provision breaks into two parts. The first sentence applies to situations where at least one party is not a merchant. The second sentence applies to situations where both parties are merchants. Therefore, it is crucial to determine whether both parties are merchants. Here, the contract is between a merchant (Seller) and a nonmerchant (Buyer). Seller is classified as a merchant under 2-104. However, Buyer works as a teacher. Nothing in the facts suggests that she is a dealer in computers or has any particular expertise in custom computers or holds herself out in that way. As such, Buyer is not a merchant. Since one party is not a merchant, the second sentence in 2-207(2) does not apply. That means that any additional terms in Seller's acceptance are construed as proposals for addition to the contract which require affirmative acceptance by the Buyer and are not passively adopted under the second sentence (applicable between merchants). Since Buyer never agreed to the "as is" clause, it is not included in the contract terms. Choice D is correct.

Seller manufactures and sells hydraulic jacks. Buyer is a construction company that regularly purchases hydraulic jacks, which it uses to install elevators. On August 1, by signed writing, Buyer contacts Seller: "Pursuant to earlier discussions with you, we have studied your Hydraulic Jack Set Model U-t. We wish to purchase ten units of this particular model for $500,000 with delivery on September 1. We will pay within 30 days after you deliver." On August 2, Seller responds with a signed "Acceptance of offer, and Sales Confirmation" form. Seller's form included all of the terms in Buyer's writing. Seller's form also contained the following clause: "Late Charge: If by 90 days after Seller makes delivery, there remains unpaid any portion of the purchase price, Buyer agrees to pay, as a late charge, Interest on the unpaid balance for each month during which it remains unpaid." On another part of the form, "Interest" is defined to be the prevailing market rate, and a method is determined to calculate the amount. In this industry, interest as a late charge is a standard practice; however, Buyer's writing did not include this clause. Seller sends the form to Buyer, and Buyer quickly receives

D. The term is included, because the Late Charge provision does not materially alter the terms. This is a battle of the forms problem under UCC Article 2-207. The battle illustrates a difference between the UCC Article 2 and the common law. Under the common law mirror image rule, a purported acceptance with an additional term is treated as a counteroffer. However, under 2-207(1), "a definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon." Since this transaction involves the sale of goods (hydraulic jacks), it is covered by UCC Article 2. Buyer made an offer and Seller manifested an intention to agree to all of the terms of Buyer's offer. Under 2-207(1), a contract is considered to have formed even though Seller's form contained a different term. Does this term become part of the contract? See the first sentence of 2-207(2): if at least one of the parties is not a merchant then the "additional terms are to be construed as proposals for addition to the contract." However, if both parties are merchants, then the additional terms are included unless one of the three exceptions applies. Are both parties merchants? UCC 2-104 provides that a merchant "means 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." The definition is broad enough to encompass both buyers and sellers. Here, Seller is clearly a merchant since the manufacturer deals in the goods. Although Buyer is not a reseller, as a construction company it regularly purchases hydraulics and therefore holds itself out as having knowledge or skill necessary to be classified as a merchant. Since both parties are merchants, the second part of 2-207(2) applies. The facts don't state that the offer "expressly limits acceptance to the terms of the offer" under sub-(a), nor that the offeror objected to the additional terms in a reasonable time, per sub-(c). That leaves the issue of whether the terms materially alter the offer under sub-(b). An additional clause m