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Contracts, Offer: an objective manifestation of the offers willingness to…

- - - - bilateral contract is one in which a promise by one party is exchanged for a promise by the other
        
        The exchange of promises is enough to render both promises enforceable. An offer requiring a promise to accept can be accepted either with a return promise or by starting performance. Commencement of performance of a bilateral contract operates as a promise to render complete performance
      - Unilateral contract: one in whc=ich one party promises to do something in return for an act of the other party (e.g., a monetary reward for finding a lost dog)
    - - means of acceptance is reasonable if: it has been used by the offeror; it is used customarily in the industry; it has been used in prior transactions b/w parties
      - silence as a means of acceptance:
        
        Generally, silence does not operate as an acceptance of an offer, even if the offer states that silence qualifies as acceptance (or, more likely, implied acceptance), unless:
        
        i) The offeree has reason to believe that the offer could be accepted by silence and the offeree was silent with the intent to accept the offer by silence; or
        
        ii) It is reasonable to believe that the offeree must notify the offeror of his intent not to accept because of previous dealings or patterns of behavior.
      - shipment of goods as a means of acceptance:
        
        If the buyer requests that the goods be shipped, then the buyer’s request will be construed as inviting the seller’s acceptance either by a promise to ship or by prompt shipment of conforming or nonconforming goods.
        
        If the seller ships nonconforming goods, then the shipment is both an acceptance of the offer and a breach of the contract. The seller is then liable for any damage to the buyer due to the breach.
        
        If, however, the seller seasonably notifies the buyer that the nonconforming goods are tendered as an accommodation, then no acceptance has occurred, and no contract is formed. The accommodation is deemed a counteroffer, and the buyer may either accept (thereby forming a contract) or reject (no contract formed).
    - - rejection follioing acceptance
        
        If the offeree sends an acceptance and later sends a communication rejecting the offer, then the acceptance will generally control, even if the offeror receives the rejection first. If, however, the offeror receives the rejection first and detrimentally relies on the rejection, then the offeree will be estopped from enforcing the contract.
      - acceptance following rejection
        
        If a communication is sent rejecting the offer and a later communication is sent accepting the contract, then the mailbox rule will not apply, and the first one the offeror receives will prevail. An acceptance or rejection is received when the writing comes into the possession of the offeror or the offeror’s agent or when it is deposited in the offeror’s mailbox. The offeror need not actually read the communication that is received first for it to prevail
      - revocations effective upon receipt
        
        offers revoked by the offeror are effective upon receiept
      - options and other irrevocable offers
        
        The mailbox rule does not apply to an option contract, which requires that the offeror receive the acceptance before the offer expires. The rule also does not apply to offers that specify that acceptance must be received by a certain date.
      - medium
        
        If the acceptance is via an instantaneous two-way communication, such as telephone or traceable fax, it is treated as if the parties were in each other’s presence
    - - Bilateral contract
        
        An offeree of a bilateral contract must give notice of acceptance. Under the mailbox rule, because acceptance becomes valid when sent, a properly addressed letter sent by the offeree operates as an acceptance when mailed, even though the offeror has not yet received the notice. Under the UCC, an offeree must give notice within a reasonable time if he accepts by beginning performance. Failure to do so will result in a lapse of the offer
      - Unilateral contract
        
        No notification is required for an effective acceptance when the offer invites the offeree to accept by rendering performance, unless the offer requests such notification
        
        ii) The offer requires notice.
        
        i) The offeree has reason to know that the offeror would not learn of performance within a reasonable time; or
        
        In a unilateral contract, an offeree is not required to give notice after performance is complete, unless:
  - - - Mutual mistake
        
        Mutual mistake occurs when both parties are mistaken as to an essential element of the contract. In this situation, the contract may be voidable by the adversely affected party upon proof of the following:
        
        i) A mistake of fact existed when the contract was formed;
        
        ii) The mistake relates to a basic assumption of the contract;
        
        iii) The mistake has a material impact on the transaction; and
        
        iv) The adversely affected party did not assume the risk of the mistake.
      - Unilateral mistake
        
        When only one of the parties was mistaken as to an essential element of the contract when the contract was formed, either party can generally enforce the contract on its terms. However, the mistaken party can void the contract if the elements for a mutual mistake exist and either:
        
        i) The mistake would make enforcement of the contract unconscionable; or
        
        ii) The nonmistaken party caused the mistake, had a duty to disclose or failed to disclose the mistake, or knew or should have known that the other party was mistaken.
      - Reformation for mistake
        
        When a writing fails to express the agreement because of a mistake of both parties, the court may, at a party’s request, reform the writing to express the agreement, except to the extent that rights of third parties who have relied on the document, such as good-faith purchasers for value, will be unfairly affected.[v]
        
        Reformation of a writing for mistake is available if:
        
        i) There was a prior agreement (either oral or written) between the parties;
        
        ii) The parties agreed to put that prior agreement into writing; and
        
        iii) As a result of a mistake, the prior agreement and the writing differ.
        
        A party’s negligence in failing to read the writing does not preclude reformation if the writing does not correctly express the prior agreement and the party acted in good faith and in accordance with reasonable standards of fair dealing.
    - - a. Neither party knows or should know of the misunderstanding
      - If the misunderstanding involves a material term and neither party knows or has reason to know of the misunderstanding, then there is no contract.
      - b. One party knows or should know of the misunderstanding
      - If a material term in the offer and acceptance is ambiguous and only one party knows or has reason to know that the other party has a different understanding of the meaning of the ambiguous term, then there will be a contract formed based on the meaning of the term as understood by the unknowing party.
      - c. Both parties know of the misunderstanding
      - There is no contract if both parties at the time of contracting knew or had reason to know that a material term was ambiguous, unless both parties intended the same meaning.
      - d. Waiver of the misunderstanding
      - Even if there is a misunderstanding, one party may waive the misunderstanding and enforce the contract according to the other party’s understanding.
      - e. Subjective determination of misunderstanding
      - In determining the existence of a misunderstanding, it is each party’s knowledge or reason to know of the misunderstanding that governs, not what a reasonable person would know. In this regard, the objective theory of contracts does not apply. In addition, in determining what a party knows or has reason to know, the principles regarding conscious ignorance and negligence apply.
    - - Fraudulent misrepresentation requires:
        
        i) The misrepresentation is fraudulent;
        
        a) A false assertion of fact made knowingly or recklessly without knowledge of its truth; and
        
        b) With intent to mislead the other party;
        
        ii) The misrepresentation induced assent to the contract; and
        
        iii) The adversely affected party justifiably relied on the misrepresentation.
      - Nondisclosure: Affirmative conduct to conceal a fact is equivalent to an assertion that the fact does not exist. In addition, mere nondisclosure of a known fact is tantamount to an assertion that the fact does not exist, if the party not disclosing the fact knows that:
        
        i) Disclosure is necessary to prevent a previous assertion from being a misrepresentation, fraudulent, or material;
        
        ii) Disclosure would correct a mistake of the other party as to a basic assumption and the failure to disclose would constitute lack of good faith and fair dealing;
        
        iii) Disclosure would correct a mistake of the other party as to the contents or effect of a writing evidencing their agreement; or
        
        iv) The other party is entitled to know the fact because of a confidential or fiduciary relationship.
      - Effect of fraudulent misrepresentation
        
        Fraud in the factum: (or fraud in the execution) occurs when the fraudulent misrepresentation prevents a party from knowing the character or essential terms of the transaction. In such a case, no contract is formed, and the apparent contract is void (i.e., not enforceable against either party) unless reasonable diligence would have revealed the true terms of the contract.
        
        Fraud in the inducement: occurs when a fraudulent misrepresentation is used to induce another to enter into a contract. Such a contract is voidable by the adversely affected party if she justifiably relied on the misrepresentation in entering into the agreement.
      - nonfraudlent misrepresentation: Even if nonfraudulent, a misrepresentation (innocent or negligent) can still render a contract voidable by the adversely affected party if:
        
        i) The misrepresentation is material (i.e., information that would cause a reasonable person to agree or that the person making the misrepresentation knows would cause the adversely affected party to agree);
        
        ii) The misrepresentation induced assent to the contract; and
        
        iii) The adversely affected party justifiably relied on the misrepresentation.
      - Effect of party's fault in not knowing or discovering facts: A party’s fault in not knowing or discovering facts before entering into the contract does not prevent the party’s reliance on the misrepresentation from being justified unless it constitutes a failure to act in good faith and in accordance with the reasonable standards of fair dealing. The party’s negligence regarding learning about the falsity of the misrepresentation is not sufficient to prevent the party from avoiding the contract
      - Cure of misrepresentation: f, following a misrepresentation but before the deceived party avoids the contract, the facts are cured so as to accord with the previously misrepresented facts, then the contract will no longer be voidable by the deceived party.
    - - Unfair persuasion: unfair persuasion of a party to assent to a contract.
        
        Undue influence can occur in a relationship between a dominant party and a dependent party because the dependent party lacks expertise or experience or has diminished mental capacity. Such relationships include trustee-beneficiary, lawyer-client, doctor-patient, financial adviser–client, and, in some cases, parent-child.
      - Confidential relationship—fairness and disclosure
        When a confidential relationship between contracting parties is established, the burden of proving that the contract is fair may be placed on the dominant party. The dominant party to the contract may also be held to a higher standard of disclosure than she would in a contract between arms-length parties
      - third-party undue influence
        When a person who is not a party to the contract causes the undue influence, the victim may void the contract unless the nonvictim party to the contract gave value or materially relied on the contract while acting in good faith and without reason to know of the undue influence
      - Damages: restitution damages may be available to the party induced to enter into a contract because of undue influence.
    - - Improper threat: Examples of improper threats include threats of a crime, a tort, or criminal prosecution or the threat of pursuing a civil action (when made in bad faith). In addition, threatening to breach a contract is improper if doing so would violate the duty of good faith and fair dealing
        
        1) Threat of criminal prosecution
        
        The threat of criminal prosecution is an improper means of inducing a person to enter into a contract. It does not matter whether the person making the threat honestly believes that the person who would be subject to criminal prosecution is guilty. Nor does it matter whether the person threatened with prosecution is in fact guilty of the crime.
        
        2) Threat of civil action
        
        Unlike the threat of criminal prosecution, the threat of a civil action is generally not improper. The lack of success in pursuing a civil action does not make the threat improper unless the civil action is pursued in bad faith
      - Deprivation of meaningful choice
        A person is deprived of meaningful choice only when the person does not have a reasonable alternative to succumbing to the threat. Thus, regarding the threat of a civil action, a person generally has the reasonable alternative of defending against the action. However, if the threat also involves the seizure of property in conjunction with the civil action or if it prevents the person from fulfilling other contractual obligations, then the person may be deprived of a meaningful choice
      - Effect on the contract
        
        When a party’s agreement to enter into a contract is physically compelled by duress, such as the threat to inflict physical harm, the contract is void. In other instances when a party is induced to enter into a contract by duress, such as when the threat is a breach of the duty of good faith and fair dealing, the contract is voidable.
        
        When a person who is not a party to the contract causes the duress, the victim may void the contract unless the nonvictim party to the contract gave value or materially relied on the contract while acting in good faith and without reason to know of the undue influence
    - - infancy: Infants (in most states, individuals under the age of 18) do not have the capacity to contract. A contract between an infant and a competent party is voidable by the infant but not by the competent party. This means that the infant may either disaffirm (void) the contract and avoid any liability under it or hold the other party to the contract. If the infant disaffirms, it must be done either before the individual reaches the age of majority or within a reasonable time thereafter, or else the contract is deemed ratified. If the contract is disaffirmed, the individual must restore any benefits received under the contract, if possible
        
        1) Liability for necessities
        
        An exception to the infancy rule exists when the contract is based on necessities. When necessities are furnished to the infant, the infant must pay for them, but the recovery by the person furnishing the necessities is limited to the reasonable value of the services or goods (not the agreed-upon price). Recovery is under a theory of quasi?contract.
        
        2) Statutory exceptions
        
        By statute, an education loan made to a minor student may not be voidable by the student but instead may be fully enforceable by the lender. Similar treatment may also be accorded an insurance contract entered into by a minor.
      - Mental illness: If an individual is adjudicated mentally incompetent, a purported contract made by the individual is void. However, if there has been no adjudication, a contract is voidable and may be disaffirmed if the individual is unable to:
        
        ) Understand the nature and consequences of the transaction; or
        
        ii) Act in a reasonable manner regarding the transaction and the other party has reason to know of this fact.
        
        If a contract is made during a lucid period, the contract is fully enforceable unless the person has been adjudicated incompetent. A mentally incompetent person may be liable for the reasonable value of necessities furnished by another party
      - Guardianship
        If an individual’s property is under guardianship because of an adjudication (such as for mental illness or defect, habitual intoxication, narcotics addiction), that individual has no capacity to contract, and a purported contract made by the individual is void. A person under guardianship may be liable for the reasonable value of necessities furnished by another party
      - Intoxication
        A contract entered into during alcohol or drug intoxication is voidable by the intoxicated party if he was unable to understand the nature and consequences of the transaction and the other party had reason to know of the intoxication. The intoxicated party must act promptly to disaffirm the contract and is required to return any value received, if possible. Generally, the intoxicated party may be liable in quasi-contract for the fair value of the goods or services furnished
- - - - ignorance of illegality
      - lack of illegal purpose
      - divisible contracts
      - licensing violation
      - availability of restitution
- - - - written revocation, rejection, or acceptance is received when it comes into the person addressed or his authorized agent ; offeror can generally revoke an offer at any time before acceptance; offer is revoked when offeror manifests intent not to enter into proposed contract ; communicating revocation can be done in any reasonable manner, but it is not effective until it is communicated
    - - Merchant: person dealing regularly with the goods in the transaction, person by his occupation holds himself out as having knowledge or skill in peculiar to the practices or good involved in the transaction, and any business person when the transaction is commercial in nature
      - time period: if not stated, a reasonable term is implied that does not exceed three months (regardless of if the specified time is beyond three months), unless consideration is given to extend beyond 3 months
      - signed writing is required to make a firm offer binding ; provisions of ucc requiring a signed writing may be satisfied by e-record or e-signature
    - - unilateral contract
      - bilateral contract
      - unilateral or bilateral contract