Business Law CH 9,10,11

X, a manufacturer of pencils, offers to sell Y 1,000,000 pencils for $1 million. The offer, which is signed by X's President, says that it will remain open for six months. The offer does not request that Y pay any consideration for the promise to keep the offer open, and Y does not pay X any consideration. When can X revoke the offer? At any time, because there is no consideration for X's option promise. After three months. After six months. After a reasonable time.

After three months.

If posted properly, by acceptable means, when is an acceptance effective?

An acceptance is effective upon dispatch, assuming it is posted properly, by acceptable means. The contract is formed whether or not the acceptance is received by the offeror.

What is the difference between an executed and executory contract?

An executed contract (has been completed) is when all parties to the agreement have fully performed their promise. An executory contract (still in process) is when performance by one or all the parties to the contract are still in the process of being completed. Once all the parties to the agreement have fully performed, the contract becomes executed.

Does Article 2 of the UCC cover service contracts?

Article 2 of the UCC does not cover service contracts, only contracts for the sale of goods (tangible, moveable objects). Service contracts are governed by common law.

Which of the following is necessary for the existence of an offer? A writing. A conscious intent to contract on the offeror's part. Facts and circumstances that reasonably indicate the offeror's intent to contract. Reliance by the offeree on the offeror's promise.

Facts and circumstances that reasonably indicate the offeror's intent to contract.

On May 1,. A makes a written offer to B for the sale of A's car. On May 2, A mails B a letter revoking the offer, On May 3, A telephones B to tell him that he is revoking the offer. On May 4, B learns that A has sold the car to C. On May 5, A's letter finally gets to B. A's offer terminated on: May 2. May 3. May 4. May 5.

May 3.

Is a revocation effective when dispatched, under the "mailbox" rule?

No, revocation is only effective upon receipt by the offeree; that is what is under the "mailbox rule."

Lincoln tells Johnson that he intends to offer Davis his season ticket to Ford's Theater for $200. Davis walks by, overhears Lincoln's comment to Johnson and says, "I accept". Is there a contract?

No, there is no contract. Lincoln did not directly communicate his offer to the intended offeree, so there was no legally binding offer to accept.

The Ginsu Warp Record Club sends Melanie Foofus a mailer which reads, in part: "A stupendous offer! First time ever! Every record ever recorded. You receive 10,000 records a week. We bill you in convenient monthly payments of $1,299.00. If we do not hear from you before next Wednesday telling us you reject this incredible offer, we'll assume you want the records and we'll start sending them immediately." Melanie does not respond. Is there a contract?

No, there is no contract. Silence does not mean acceptance, unless some prior agreement between both parties existed that stated silence would mean acceptance.

Does an offer continue until it is expressly revoked?

No. If no time limit is set by the offeror, an offer expires after a "reasonable time," according to circumstances and trade customs, etc.

Sorcerer offers to sell Apprentice his magic wand for $20 and stipulates acceptance by telegram. Apprentice mails his acceptance instead. Under the UCC, is the acceptance valid?

No. Under the UCC (and even common law), when the offeror specifically states (stipulates) the exact means that must be used for acceptance, no other means constitutes a valid acceptance.

Under traditional common law, in accepting an offer, may an offeree request additional terms?

No. Under traditional common law the "Mirror Image" Rule states that the acceptance must mirror the offer in order for it to be considered a valid acceptance, otherwise, it was considered a rejection and counter-offer.

In general, when are offerees bound by "fine-print" terms stated in offers? Focus only on the rules regarding offers and do not consider unconscionability. Always. Only when they actually read the term. Only when they had actual or reasonable notice of the term. Never .

Only when they had actual or reasonable notice of the term.

Advertisements for bids usually are treated as invitations to make an offer.

TRUE

An advertisement offering a reward for the return of lost property usually is treated as an offer for a unilateral contract.

TRUE

Communication to the offeree is one of the requirements for a valid offer.

TRUE

Strictly speaking, a contract has nothing to do with the personal intent of the parties.

TRUE -to test the intent of the offeror, the objective test is used (the reasonable man standards)

Article 2 of the UCC has a number of rules that, in effect, tell the court what term to include in an offer that lacks a key term.

TRUE Gap-fillers.

Dr. Bob offers to sell his bike to Sue for $100, and promises to keep his offer open for five days. Sue thanks him and leaves. At this point, Dr. Bob still has the power to revoke his offer.

TRUE Sale of goods = UCC Dr.Bob not a merchant, so no firm offer. Not an option because no consideration was paid.

Under Article 2 of the UCC, some promises for options accompanying offers will be enforced despite the absence of consideration.

TRUE UCC Firm offers do not require consideration.

Generally speaking, the UCC's rules for the definiteness of an offer make it easier to form a contract than the traditional common law rules.

TRUE UCC allows gap fillers for contracts in regards to things the offeror may have forgotten.

What differences does the UCC make to the common law "mirror image" rule?

The UCC treats additional or different terms in the acceptance differently depending on their materiality. Where both parties are merchants, and the offeror has not limited the offer to its terms, any non-material changes may still constitute a valid acceptance unless the offeror notifies the offeree within a reasonable time that he objects the change.

On May 1, X writes Y a letter offering to pay Y $1000 if Y will promise to paint X's house. The offer says nothing about stipulated or authorized means of acceptance. On May 2, Y sends X a letter rejecting X's offer. On May 3, Y changes his mind and (saying nothing about his May 2 letter) telephones X to accept the offer. On May 4, X goes completely insane. On May 5, X receives Y's rejection letter. Which of the following is true? There is no contract because Y's written rejection was effective upon dispatch. There is no contract because X's insanity terminated the offer on May 4. There is no contract because Y's telephoned May 3 acceptance was inadequate. There is a contract here.

There is a contract here.

A orally offers to sell B 100 premium-grade fountain pens but neglects to state the price. B orally accepts. Immediately thereafter, A tries to back out of the deal. At this point in time, which of the following is most likely to be true? There is no offer and no contract because the offer is indefinite. There is no offer and no contract because the offer must be in writing. There is a contract, if the parties intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy. There is a contract, because the offer contained all material terms.

There is a contract, if the parties intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy.

What's the difference between contracts that are void, voidable, and unenforceable?

Void contracts are agreements that create no legal obligations and for which no remedy will be given (completely dead). Voidable contracts are valid agreements but one of the parties is a member of a protected class (harmed parties) and thus given the option of remaining in the agreement or backing out of the agreement (and not be in breach) thereby making the contract unenforceable. An unenforceable contract is a bilateral contract that meets the basic legal requirements for a contract but may not be enforced because prior to performance some other legal rule was passed or some act of nature occurs. Not all of an unenforceable contract is necessarily unenforceable, some of it can be kept.

What are the rules where offeree both accepts and rejects an offer. In other words, how will a court decide whether a contract has been formed?

When both a rejection and an acceptance are sent, the Mailbox rule dictates that since acceptance is valid upon dispatch and rejection is valid upon receipt, a contract is formed at dispatch. This is assuming that the rejection was not received prior to the date of dispatch.

Freud offers to sell his psychotherapy practice to Jung for $10,000. "I guess I'll go along with that;" responds Jung. "But I wish you could lower it to $9,000,. that way I could buy a new couch." Is there a contract?

Yes, It appears that when Jung said "I guess I'll go along with that," he was saying he accepts. He was not happy with the terms but he did accept them. Under modern common law a grumbling acceptance is still an acceptance. Had Jung said "I'll buy if you lower the price to $9,000" then this would have been a counter-offer. Whether "I guess I'll go along with that" is really an acceptance may come down to the test of a would a reasonable person assume that this was a "yes I accept."

Larson Lexus, a new car dealer, runs the following newspaper ad during the Fall of 1994. "Three '94 Lexus LS-400s must go! $45,500 each! The first three customers who arrive at our dealership on Saturday, October 8 with this ad can buy one of these cars for $45,500!" Knowing that $45,500 is a very good price for an LS-400, Mike is the first customer to appear at the Larson lot on Saturday, October 8. He hands the ad to the Larson salesman and says that he'd like to buy one of the LS-400s for $45,500. Is the dealership contractually bound to sell Mike the car at that price? No, because advertisements are not offers but rather are invitations to negotiate. No, because a written offer must be accepted in writing. No, because under the UCC rule, ads of this kind are not offers. Yes, because this ad is an offer and Mike accepted it.

Yes, because this ad is an offer and Mike accepted it.

Peewee runs Peewee's Novel-tee Shop. He gets regular shipments from the Whoopie Cushions R Us. Wholesaler. Peter, who owns Whoopie Cushions R Us, and Peewee have a system, whereby Peewee stands on the steps of the town hall on the third of each month, and performs the soliloquy from Hamlet, if he wants to return that month's shipment. Could this unorthodox arrangement constitute a valid offer and acceptance?

Yes. Prior relationships, past dealings, and industry customs are all relevant in determining whether there has been a valid offer and acceptance.

Sellers at auctions make an offer that the highest bidder accepts.

FALSE Request for bids is an invitation to make an offer.

A revocation normally is effective at the time it is dispatched by the offeror.

FALSE Revocation is effective upon receipt by the offeree.

What is a contract?

A contract is a legally enforceable promise or set of promises, the breach of which results in a remedy at law. "Legally enforceable" means the courts will back it. Contracts can be oral or written.

What are hybrid contracts and does the UCC cover them?

A hybrid contract is one of which calls for both the sale of goods and service. The UCC will cover a hybrid contract if the main purpose in entering the contract was for the sale of goods.

What's the difference between unilateral and bilateral contracts?

A unilateral contract is a promise for an act and the contract is formed when the act requested is performed. A bilateral contract is a promise in exchange for another promise and the contract is formed as soon as the promises are exchanged. The performance can occur at a later date.

The State of Indiana agrees with the Ace Construction Company that Ace will do some repair work on a bridge. The: agreement, however, does not specify the exact work to be done, the quality standards Ace must meet, and the time the job must be completed. Also, the agreement states an ambiguous formula for determining Ace's compensation. Later, before either it or the state has done anything, Ace backs out of the job. Then it is sued by the state. Ace defends by arguing that the contract fails because it (or the offer) is indefinite. Which of the following is true? Ace's argument is correct and the state cannot recover. Ace's argument is no good because here the parties obviously intended to make a contract. Ace's argument is no good because here the court has a reasonably certain basis for giving an appropriate remedy. Ace's argument is no good because here the parties obviously intended to make a contract, and the court has a reasonably certain basis for giving an appropriate remedy.

Ace's argument is correct and the state cannot recover.

Austen Construction, a general contractor, advertised for bids from subcontractors on the electrical work for the renovation of one of State University's parking structures.The advertisement announced that the contract will be awarded to the lowest bidder. Bronte, an electrical subcontractor, submitted the lowest bid to Austen for the electrical portion of the work. Austen informed Bronte that she should begin Work immediately. Bronte then stated that she is "withdrawing" her bid from Austen. Which of the following statements is most accurate? Austen should not rely on Bronte's offer to do the electrical work. Austen has accepted Bronte's offer prior to Bronte's attempt to revoke. Austen is not bound by Bronte's bid until he informs her of his intent to accept. Bronte has accepted Austen's offer by submitting the lowest bid.

Bronte has accepted Austen's offer by submitting the lowest bid.

Socrates offers to sell his collection of Great Philosophers bubble gum cards to Plato for $20. Plato offers $15 tor them. At common law, is Socrates' offer still valid?

No. Under common law this is a counter-offer and as such terminates the original offer. This is known as the Mirror Image rule.

Chica, a women's fashion retailer, sends catalogs to its customers, who can then order from the catalog via phone or online. Donna decides to order a black dress priced at $99.00. Donna calls to place her order. The sales representative who answers the phone tells Donna that the black dress is no longer in stock. Under these facts: Chica is not liable for breach of contract. Chica is liable for breach of contract. Chica is liable for "bait and switch." Chica is liable under a quasi-contract theory.

Chica is not liable for breach of contract.

Generally speaking, advertisements are not offers.

TRUE Unless the ads are highly specific, they are just invitations to make an offer.

The offeror's death automatically terminates an offer, but the offeree's death does not.

FALSE Doesn't even make sense.

Offers that fail to provide a specific time for acceptance are invalid because they are deemed to be indefinite.

FALSE If no specific time for acceptance is stated by the offeror, courts will decide a reasonable time.

All terms of contracts, even "fine-print" terms of standard form contracts, are part of the parties' deal and binding on them, because parties have an obligation to read their contracts and are assumed to have done so.

FALSE Modern law: reasonable man standard of notice OR actual notice. -When doing problems like this, always use modern common law over traditional, unless told otherwise.

A rejection normally is effective at the time it is dispatched by the offeree.

FALSE Rejection is effective upon receipt by the offeror.