L201 Oct. 26 Reading (Contracts Exam)

Pride v. Lewis: Was there a valid contract in this case? Why or why not?

No, the Prides should have secured Lewis's acceptance to the counteroffer before advancing the transaction... Lewis could have been clearer with respect to the fact that he was rejecting the counteroffer, but he had no legal duty to act or explicitly reject the counteroffer

Cabot Oil case: What were the six factors that the court considered in determining whether parties intend to have a final written agreement before there can be a binding contract?

(1) "whether the contract is of that class... usually found to be in writing"; (2) "whether it is of such nature as to need a formal writing for its full expression"; (3) "whether it has few or many details"; (4) "whether the amount involved is large or small"; (5) "whether it is a common or unusual contract"; and (6) "whether the negotiations themselves indicate that a written draft is contemplated as a final conclusion of negotiations"

In determining if an offeree accepted an offer and created a contract, a court will look for evidence of three factors:

(1) the offeree intended to enter the contract, (2) the offeree accepted on the terms proposed by the offeror, and (3) the offeree communicated his acceptance to the offeror

What is the "Last Shot Rule"?

(for contracts governed by the common law, the last shot rule would apply) In other words, the last shot rule provides that the last document sent before performance is the governing document

What is the "Knock Out Rule"?

(for contracts under the UCC) The Code provides that the terms of a contract created by such performance are those on which the parties' writings agree, supplemented by appropriate gap-filling provisions from the Code -That is, the contract will consist of those terms on which the parties' writings agree plus any appropriate gap-filling presumptions of the Code

Acceptance of Ambiguous Offers

Although offerors have the power to specify the manner in which their offers can be accepted, often an offer is unclear about which form of acceptance is necessary to create a contract - In such a case, the offer may be accepted in any manner that is reasonable in light of the circumstances surrounding the offer

Under "Battle of the Forms," when would acceptance not be valid?

An attempted acceptance that was expressly conditioned on the offeror's agreement to the offeree's terms would not be a valid acceptance

Is an acceptance judged by an objective or subjective standard?

And, as is true of intent to make an offer, intent to accept is judged by an objective standard... the difference is that the offeree must objectively indicate a present intent to contract on the terms of the offer for a contract to result

Pride v. Lewis: What did the court say about whether silence or inaction can constitute acceptance of an offer?

As a general rule, silence or inaction cannot constitute acceptance of an offer

Pride v. Lewis: In this case, the plaintiffs acknowledged that by sending the purchase agreement back with a closed changing date, they had sent a counteroffer - why?

Because the question is, was the counteroffer accepted? Lewis argues that he never accepted this counteroffer, and, thus, there was no contract. The Prides argue that Lewis accepted their counteroffer through his conduct and failure to act

Bauer v. Qwest Communications: Why was silence considered sufficient acceptance in this case?

Given the parties' lengthy relationship and course of dealings, the district court reasonably construed Susman's silence as an assent to be bound

Recent "Mirror Image" Rule Tendency

Recent years have witnessed a judicial tendency to apply the mirror image rule in a more liberal fashion by holding that only material (important) variances between an offer and a purported acceptance result in an implied rejection of the offer

Is silence usually an acceptance of an offer? Why/why not?

Since contract law generally requires some objective indication that an offeree intends to contract, the general rule is that an offeree's silence, without more, is NOT an acceptance

Trademark Properties v. A&E Television Networks: What standard does the court use in this case to determine whether there has been a valid acceptance to an offer?

So long as the offeror's interpretation of the offeree's equivocal acceptance is plausible or reasonable, New York courts will find a contract has been formed

Acceptance by Shipment

The Code states that an order requesting prompt or current shipment of goods may be accepted either by a prompt promise to ship or by a prompt or current shipment of the goods -The Code additionally provides that prompt shipment of either conforming goods (what the order asked for) or nonconforming goods (something else) operates as an acceptance of the order -Also no contract is created if the seller notifies the buyer within a reasonable time that the shipment of nonconforming goods is intended as an accommodation (an attempt to help the buyer)

Pride v. Lewis: What was the main legal issue in this case?

The Prides sued Lewis for breach of contract, seeking the damages for the difference between the $55,000 contract price with Lewis and the $40,000 for which the house actually sold, for the lost rent the year they were unable to find another tenant, and for attorney's fees, as provided in the contract

What are the terms of a contract created by the exchange of standardized forms?

The additional terms contained in the offeree's form are treated as "proposals for addition to the contract." If the parties are both merchants, the additional terms become part of the contract unless: (1) the offer expressly limited acceptance to its own terms; (2) the new terms would materially alter the offer; or (3) the offeror gives notice of objection to the new terms within a reasonable time after receiving the acceptance

When can silence be deemed an acceptance of an offer?

The circumstances of a case sometimes impose a duty on the offeree to reject the offer affirmatively or be bound by its terms... these are cases in which the offeree's silence objectively indicated an intent to accept -Customary trade practice or prior dealings between parties may indicate that silence signals acceptance -An offeree's silence can also operate as an acceptance if the offeree has indicated that it will -It is generally held that offerees who accept an offeror's performance knowing what the offeror expects in return for his performance have impliedly accepted the offeror's terms

Duro Textiles, LLC v. Sunbelt Corp.: What was the main legal issue in this case?

The main legal issue was whether a forum selection clause included in a merchant offeree's response is part of the contract

Stipulation

The offeror, as the master of the offer, has the power to specify the precise time, place, and manner in which acceptance must be communicated

Duro Textiles, LLC v. Sunbelt Corp.: What did the court decide and why?

The provision is not part of the contract between the parties because the forum selection clause is a material alteration to the contract within the meaning of 2-207

Common Law: Traditional "Mirror Image" Rule

The traditional contract law rule is that an acceptance must be the mirror image of the offer - Attempts by offerees to change the terms of the offer or to add new terms to it are treated as counteroffers because they impliedly indicate an intent by the offeree to reject the offer instead of being bound by its terms

Either a promise to perform or performance, if reasonable,

creates a contract

The Code in "Battle of the Forms" section

has changed the mirror image rule for contracts involving the sale of goods

Acceptance

is "a manifestation of assent to the terms [of the offer] made by the offeree in the manner invited or required by the offer"

The acceptance is vitally important because

it is with the acceptance that the contract is formed

When the offeree has made his acceptance expressly conditional on the offeror's agreement to the new terms or when the offeree's response to the offer is clearly not "an expression of acceptance" (e.g. an express rejection),

no contract is created under section 2-207 - A contract will only result in such cases if the parties engage in conduct that "recognizes the existence of a contract," such as an exchange of performance

Even under the mirror image rule,

no rejection is implied if an offeree merely asks about the terms of the offer without indicating its rejection (an injury regarding terms), or accepts the offer's terms while complaining about them (a grumbling acceptance)

The only person with the legal power to accept an offer and create a contract is the

original offeree (because as the masters of their offers, offerors have the right to determine who can bind them to contract)

The Code provides

that a definite and timely expression of acceptance creates a contract, even if it includes terms that are different from those stated in the offer or even if it states additional terms that the offer did not address

UCC Section 2-207 allows

the formation of a contract even when there is some variance between the terms of the offer and the terms of the acceptance - it also makes it possible, under some circumstances, for a term contained in the acceptance form to become part of the contract

To accept an offer for a bilateral contract,

the offeree must make the promise requested by the offer

To accept an offer for a unilateral contract,

the offeree must perform the requested act

If the offeror stipulates a particular manner of acceptance,

the offeree must respond in this way to form a valid acceptance - If the offer merely suggests a method or place of communication or is silent on such matters, the offeree may accept within a reasonable time by any reasonable means of communication

Intent to accept is objectively demonstrated by

words or conduct or a combination of the two

Pride v. Lewis: What are the exceptions to the general rule about silence or inaction?

Acceptance of an offer or counteroffer does not always have to be made through explicit spoken or written words, an offer may be accepted by conduct or failure to act

Intent to Accept

In determining whether an offeree accepted an offer, the court is looking for the same present intent to contract on the part of the offeree that it found on the part of the offeror

Trademark Properties v. A&E Television Networks: Was there a valid acceptance in this case? Why or why not?

Yes, because there is sufficient evidence from which a reasonable jury could conclude that Davis objectively treated Norlander's statement as an acceptance of his offer to make a television series and split the revenues

An attempt to accept by anyone other than the offeree is treated as

an offer (because the party attempting to accept is indicating a present intent to contract on the original offer's terms)