REVIEW SESSION

-CONTRATCSDisclaimer: You are all probably smarter than We are.

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

BIG PICTURE
(1) Applicable Law?
(1) Always common law. (lucky you)

(2) What is a Contract?

(3) VALID Contract?
(2) Offer
(3) Acceptance
(4) Consideration
(5) No Valid Defense thus making it enforceable

What is a contract?
A contract is a promise or set of promises that the
law will enforce; It is an exchange relationship
created by an agreement between two or more
parties containing at least one promise and
recognized as enforceable in law.

Valid Enforceable Contract?

In order to have a valid contract, there must be an:
(1)
(2)
(3)
(4)

Offer
Acceptance
Consideration
No Valid Defenses

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

Objective Theory of an Offer

(1) Objective reasonable person
Ask yourself, would a reasonable objective third party believe
the person making the offer actually intended to make a
contract.

IF the answer is yes, then

(2) Subjective
Whether the person receiving the offer actually believed that
there was a valid offer as well.

IF the answer is yes, then

We have a valid offer that is ripe for Acceptance

EXAMPLE:
A seemingly serious offer to sell real property made in secret
jest is nonetheless an offer.

Price Quotes Is it an Offer?

General Rule:
Price quotes are not considered offers.

Exception:
If the price quote appears to have sufficient information, is
clear and definitive, and seems to have the other objective
manifestations of intent to be bound, it could be deemed an
offer.
Would a reasonable objective person believe it to be an
offer?

Advertisements Is it an Offer?
General Rule:
Advertisements are not offers.

Exception:
Advertisements may be deemed an offer if it is sufficiently
clear, definite and leaves nothing open for negotiation.
Would a reasonable objective person think the advertisement
is an offer?

Rewards Is it an Offer?
General Rule:
Reward offers are treated as offers because they are
considered communications that promise a bounty in
exchange for the performance of a specified task.

Exception (limitation of acceptance):

Those who have a pre-existing duty cannot accept the offer.

Auctions an Offer?
General Rule:
The general rule is that the auctioneer is inviting
offers, and the responsive bids are the offers.

Exception:
Where the auction is without reserve, then the
auctioneer is making an offer to sell to the highest
bidder

TERMINATION OF AN OFFER
(1) Lapse of Time
An offerees power of acceptance terminates at the time stated in
the offer. If the offer does not specify the time of termination, then
the power of acceptance will terminate after a reasonable
time. The reasonable time determination is based on the
following factors:
Subject matter and market conditions; and
The degree of urgency communicated by the means of transmission.

Face to Face Conversations

An offer made by one to another in a face to face conversation is
ordinarily deemed to continue only to the close of the conversation.

TERMINATION OF AN OFFER
(2) Death or incapacity of either party
The supervening death of either the offeror or offeree will
terminate the power of acceptance with respect to the offer.
The supervening incapacity of either the offeror or the
offeree, as evidenced by adjudication or the appointment of
a guardian, will terminate the power of acceptance.
Incapacity has to go to the ability to understand the nature and
consequences of the transaction.

TERMINATION OF AN OFFER
(3) Revocation
The offeror is free to revoke an outstanding offer, terminating the
offerees power of acceptance, at any time and for any reason, so long
as the revocation:
Occurs prior to acceptance; and
Is effectively communicated
Direct Revocation:
Revocation occurs and terminates the offerees power of acceptance when
the offeror communicates directly with the offeree and advises the latter
that the offer has been revoked.
Indirect Revocation:
In some cases, the offeree will learn of the offerors intentions to abandon
the deal from a third party source, and this will also terminate the offerees
power of acceptance where two conditions are met:
The offeror has taken definite action inconsistent with the intention to
enter the proposed contract (such as selling the offered real estate to a
third party); and
The Offeree acquires reliable information of the offerors inconsistent
action (such as learning of the sale from a real estate broker)

TERMINATION OF AN OFFER
Revocation of the offer in a Unilateral Contract
An Offeror may not revoke his offer once the offeree begins
performance.
An Offeror may revoke his offer where the offeree has
engaged in mere preparation.

TERMINATION OF AN OFFER
Option Contract Irrevocable Offer
Enforceable options contract when:
(1) An Offer
(2) A subsidiary promise to keep the offer open; and
(3) Consideration for time.
MUST BE EXCHANGED/Not a simple recitation of the
consideration (minority).

Termination of Options Contract

(1) Option period lapse
(2) Acceptance
********Rejection, revocation, death or capacity will not
terminate the offer during the option period.

TERMINATION OF AN OFFER
(4)Rejection by Offeree
Power of acceptance can also be terminate if the offeree refuses to accept
the offer.
(1) Outright Rejection
The offeree has the power to accept the offer, but the offeree cannot change
his mind and try to accept the offer once he has rejected it.

(2) Rejection via Counteroffer in this situation the parties switch

roles. Offeror becomes offeree and vice versa.
A counteroffer made on the same subject matter operates to simultaneously
reject the initial offer.

Revival of Offer
The maker is the master of the offer. An offeror has the power to
revive an offer that the offeree has rejected, and with it the offerees
power of acceptance, and he can likewise revive an offer that has lapsed;
all he must do is communicate the revival to the offeree. This can be
accomplished by restating the offer or giving the offeree more time to
make a decsion.

Acceptance
Acceptance of an offer is the objective manifestation of
assent to the terms thereof made by the offeree in a
manner invited or required by the offer.

Manner of Acceptance
Offeror is king of the deal, therefore the offer
determines how acceptance must be made.
An Offer can require acceptance by either a
promise (Bilateral Contract) or a performance
(Unilateral Contract).
If it is unclear which mode (promise or
performance) is needed to accept = Offeree
may accept by promise or performance.

If the offer does not provide for a specific

manner or medium in which it must be
accepted, then the offer may occur in any
manner and medium which is reasonable.

Manner of Acceptance
(1) Bilateral Contract - Promise
(2) Unilateral Contract Performance
(3) Silence

(1) Promissory Acceptance

PROMISE FOR PROMISE to do something in the future.
Requires the offerees promissory acceptance be
communicated to the offeror or an authorized representative
of the offeror to be effective.

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

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

(2) Acceptance by Performance

A unilateral contract calls for performance by the
offeree.
Acceptance by performance requires that at least part
of what the offeror request be performed or tendered.
Performance acts as an options contract. Offeror must
keep the offer open long enough for the offeree to
perform.

Mere preparation is not enough

The offeree is not required to notify the offeror of their
performance (acceptance) UNLESS the offeree has
reason to know the offeror wont find out about that
performance.

(3) Acceptance by Silence

General Rule:
An offerees silence in response to an offer cannot
constitute acceptance.

Exception:
(1) Where the offeree takes the benefit of the offerors
services with a reasonable opportunity to reject them
and with reason to know the offerors intention;
(2) Where the offeror has given the offeree reason to
understand that acceptance may be communicated by
silence, the offerees silence will operate as acceptance
if he intends as such; and
(3) Where, because of previous dealings or other
circumstances, it is reasonable that the offeree should
notify the offeror if he does not intend to accept, his
silence will operate as acceptance.

Mirror Image Rule

Mirror Image acceptance must mirror the terms of the offer.

General Rule:
Acceptance that do not mirror the offer is an implied
rejection/counter offer.

Modification exception in some jurisdictions

Acceptance can contain deviations so long as the deviations
do not materially alter the offer, and is not conditional.