Professor Marotta-Wurgler

Contracts, Fall 2011

Elements of a Contract

1. Mutual Assent a. Objectiveb. Serious (Lucy v. Zehmer, Leonard v. Pepsico)

2. Offera. Expiry with the passage of timeb. Termination of the offer before its expiry (R36)

i. Rejectionii. Counteroffer

iii. Offeror’s death or mental disabilityiv. Revocation (unless an option)

Only effective when it is communicated to the offeree bya. Offeree received notice of revocation, orb. Offeree has learned from other reliable sources (Dickenson v.

Dodds)3. Acceptance

a. Offeror has the power to prescribe the form & method, offeree manifests assentb. “Mirror image” rule (material changes to the offer is not OK)

i. Exception: Standard form (UCC 2-207)c. Did the offeror specify a form of acceptance is mandatory and exclusive?

i. Yes: offeree must comply exactlyii. Specify but not exclusive: reasonable method that is consistent with the prescribed

mode and provides offeror the same level of protectioniii. No: any manner reasonable under the circumstances

Mailbox rule: acceptance takes effect as soon as it is put out of the offeree’s possession (if the form is valid)

a. Offeror bears the risk of uncertaintyb. BUT: if acceptance follows a counteroffer or rejection, it is effective

on receiptd. Acceptance by promise for future actionBILATERAL CONTRACT

i. Both parties have outstanding promises to be performed in the futuree. Acceptance by complete act of performance UNILATERAL CONTRACT

i. Offeror has outstanding promisef. Acceptance by future action OR performanceBilateral OR unilateral

i. Ex: seller offers land if you come in with $ on Friday, you give written acceptance on Monday

ii. Ex: seller offers $ if someone will accept job to cut trees, you cut tree (limit: time-barred, can’t perform way later)

g. Acceptance by performance that cannot be accomplished instantlyi. R2 62 (when offer does not mandate acceptance by performance): commencement

of performance constitutes an implied promise to complete the performancebilateral contract was formed upon commencement

ii. R 2 45: (when offer calls for performance as the exclusive mode): commencement of performance creates an option, offer becomes irrevocable. If offeree fails to complete performance before the option lapses, no paymentunilateral contract

h. Notice when offer is accepted by performancei. If performance is rendered directly to or in the presence of the offerorordinarily

the offeree has no duty to notifyii. If nom and the offeror has no reasonably prompt and reliable of learning itduty

i. Acceptance of unknown terms (Terms are available after acceptance)i. Terms are no included as part of the contract b/c offeror cannot unilaterally impose

terms on the offeree after the contract was formed ii. Terms are standard and are applicable if reasonably expected

iii. Delivery of the terms is the offer and buyer accepts if he does not reject within a reasonable time

ProCD: buyer accepted by using the software, terms expressly allowd the buyer to return for refund

iv. Looks at the term to see if offeree had a reasonable opportunity to become aware of it, and if the term is fair and within reasonable expectation

Carnival Cruise: as a matter of policy, forum selection clause reduces cost to travellers and limits liability to cruise line

4. Counteroffera. R2 39: offer by the offeree to the offeror, relating to the same matter as the original offer

and propsing a different substitute bargain i. Both a rejection and a new offer