CONTRACTS OUTLINE – LINZER FALL 2008
a. What is a Contract?
i. A contract is formed in any transaction in which one or both parties make a legally enforceable promise. A promise
is a commitment or undertaking that a given event will or will not occur in the future and may be express or implied
from conduct or language and conduct. A promise is legally enforceable where it:
1. was made as part of a bargain for valid consideration;
2. reasonably induced the promisee to rely on the promise to his detriment; or
3. is deemed enforceable by a statute despite the lack of consideration.
b. Types of Contracts
i. Contract may be of the following types:
1. Express – an agreement manifested by words
2. Bilateral – both sides make promises (exchange of promises)
3. Unilateral – one which involves an exchange of the offeror’s promise for the offeree’s act. That is, in a
unilateral contract the offeree does not make a promise, but instead simply acts.
a. Implied-in-fact – an agreement manifested by conduct
b. Implied-in-law ("quasi-contract") – not a true contract but an obligation imposed by a court despite
the absence of a promise in order to avoid an injustice
c. Sources of Contract Law
i. Common Law – in most jurisdictions, contract law is not codified, and thus the primary source of general contract
law is caselaw.
ii. Restatement – written by the American Law Institute to provide guidance to the bench and bar, the Restatement of
Contracts (currently in the second edition) has no legal force but nevertheless provides highly persuasive authority. iii. Uniform Commercial Code (UCC) – created under the auspices of the American Law Institute and the National
Conference of Commissioners on Uniform State Laws, has been adopted by every state except Louisiana. Proposed
revisions to Article 2, governing contracts for the sale of goods, have been finalized and presented to the states for
iv. United Nations Convention on Contracts for the International Sale of Goods (CISG) – ratified by many of the
leading trading nations including the United States and China (but not the United Kingdom and Japan), it governs
many transactions for the sale of goods between parties with places of business in different nations. v. UNIDROIT Principles of International Commercial Contracts – non-binding authoritative text similar to the
vi. Uniform Computer Transactions Act (UCITA) – addresses issues arising out of computer licensing but has only
been enacted in Virginia and Maryland.
vii. Uniform Electronic Transactions Act (UETA) – adopted by most states, this act does not affect basic contract
doctrine but governs the use of electronic communications. It applies to "transactions," defined as "the conduct of
business, commercial or governmental affairs." Thus, it does not govern contracts such as those between family
members or with non-profit institutions.
viii. Electronic Signatures in Global and National Commerce Act (E-Sign) – this federal law allows states to preempt
it by enacting the UETA.
d. Contracts for the Sale of Goods
i.  Application of UCC
1. Article 2 of the Uniform Commercial Code covers all transactions for the sale of goods other than securities
(article 9) and leases (article 2A). It applies to any party; it is not limited to merchants although individual
provisions may be.
ii.  "Goods" Defined
1. Under the UCC, a "good" is any tangible thing that is moveable. [UCC ? 2-105(1)] In addition to
manufactured products, "goods" include:
a. growing crops or timber, unborn young of animals and other identified things attached to land (other
than minerals or the like or structures), regardless of who severs them from the land provided that
they can be removed without causing material harm to the land
b. currency exchanged as a commodity (as opposed to the medium of payment for a good)
c. minerals or the like or a structure or its materials to be removed from realty that are to be severed by
i. The term "goods" does not encompass:
ii. intangible rights such as intellectual property
iii. investment securities
iv. money which is the medium of payment for goods
v. minerals or the like or a structure or its materials to be removed from realty that are to be
severed by the buyer
iii.  "Sale" Defined
1. UCC ? 2-106(1) defines "sale" as the transfer of title for a price. Contracts that involve both goods and
services must be evaluated to see which constitutes the primary purpose of the contract, with the secondary
purpose being treated as incidental. If the primary function of the contract is to provide a service, the UCC
does not apply, even if an incidental sale of goods occurs.
iv.  "Merchant" Defined
1. A "merchant" is one "who deals in goods of the kind or otherwise by his occupation holds himself out as
having knowledge or skill particular to the practices or goods involved in the transaction" or who employs an
agent or broker in such occupation. [UCC ? 2-104(1)]
v.  "Good Faith" Defined
1. Every contract for the sale of goods imposes an obligation of good faith dealing on all parties in its
performance and enforcement. [UCC ? 1-203] All parties, including non-merchants, are subject to UCC ? 1-
201(19) which defines "good faith" as "honesty in fact in the conduct or transaction concerned." Merchants
are subject to an additional good faith standard, set forth in UCC ? 2-103(1)(b), which requires "honesty in
fact and the observance of reasonable commercial standards of fair dealing in the trade." vi.  "Record" Defined
1. The proposed revision of Article 2 reflects the contemporary use of electronic communications by substituting
all prior references to "writing" with "record," defined in proposed UCC ? 1-201(33a) as "either a writing or
a retrievable information in a computer's memory, a computer disk, or the like."
e. Types of Law
i. Classical Contract Law (Legal Formalism): Samuel Williston (Arthur Corbin held different views)
1. Preference for clear rules over general standards
2. Expressed an indifference to issues of morality and social policy. nd3. Williston was in charge of the R(1)K, with Corbin as his 2 in command.
4. So the R(1)K is almost schizophrenic in nature, b/c Corbin and Williston had differing ideas. ii. Modern Contract Law (Legal Realists): Arthur Corbin and Karl Llewellyn (wrote the UCC)
1. Legal Realist: Believes that the law is not ―out there‖, but that the judge makes the law.
2. Corbin wrote the R2K.
3. Rules are always working…never Permanent!
4. Conceptual; considers real life issues.
5. Llewellyn: ―Covert tools are always bad tools!!‖ b/c the next lawyer will use them differently.
f. R(2)K: A contract is a legally enforceable ―promise or…set of promises.‖
i. Lon Fuller‘s 3 Substantive Bases of Contractual Liability:
1. Private Autonomy – people willingly contract to do something, the court should honor this b/c it has
something to do with the autonomy of people. (ex. Gift (Gratuitous) Promises are Not Contracts – autonomy
should be protected b/c they didn‘t really intend or mean to promise it.)
2. Reliance – People make plans in preparation of a contract; therefore, you should not be able to get out of
contracts b/c someone else has relied upon you.
3. Unjust Enrichment – One side gets away w/ something by breaching a contract and the other side was not
enriched, or even suffered a detriment. This is not fair. (If I give a watch to a jewelry shop to fix it and they
haven‘t returned it or fixed it, they have been unjustly enriched)
ii. Enforcement of a Promise Requires:
1. Consideration – something given in exchange for the promise
2. Promissory Estoppel – reliance on the promise
3. Restitution – unjust enrichment.
2. MUTUAL ASSENT - For a contract to be formed, the parties must reach ―mutual assent.‖ That is they must both intent to contract,
and they must agree on at least the main terms of the deal.
a. INTENTION TO BE BOUND/Intent to Contract (OBJ. THEORY)
i. Objective theory – in determining whether the parties have reached mutual assent, what matters is not what each
party subjectively intended. Instead, a party‘s intentions are measured by what a reasonable person in the position of
the other party would have thought the first party intended, based on the first party‘s actions and statements.
ii. Question 1: Is there Contract Formation Here?
iii. Ray v. William G. Eurice & Bros., Inc. – (I didn‘t read it…but, I signed it)
1. (Revised plans were attached to a contract which was read and signed by Eurice. Eurice also signed each
spec individually at the bank. Subsequently, Eurice refused to perform, and Ray sued for breach. D
contended he never saw the specifications referred to by the contract and believed the contract referred to his
own specifications. Refuse to honor ―promise‖.)
a. ―Duty to Read‖ ththb. ―Meeting of the Minds‖ – was the law in the 18 Century, but in the 19 century it‘s not about the
2. TOOL: Mutual Manifestation of Assent
3. R2K ?21: A party does not have to intend for a promise to be binding for it to be enforceable.
4. R2K ?19(3): The conduct of the party may manifest his assent, even though he does not assent. In these
cases, the contract may be voidable b/c of fraud, duress, mistake, or other invalidating cause.
5. The signed piece of paper is ―objective manifestation of assent‖ according the court.
6. Rule: If a party signs a K that a reasonable person would‘ve understood to mean one thing and the party did
not intend to agree to that thing, the contract is still enforceable. If there is a ―mutual manifestation of assent‖,
unless both of the parties enter into the contract by mistake, fraud, or duress, the contract is valid and both
parties are bound. The intent of the parties to be bound is irrelevant.
iv. Park 100 Investors, Inc. v. Kartes – (Signing in Hurry – Fraud)
1. (The Kartes (D) negotiated with Park 100 (P) to lease space for their business. A lease agreement was
signed which did not include any provisions for a personal guaranty of the lease and a personal guaranty
was never mentioned. A representative of Park 100 caught the Kartes as they were late to their daughter’s
wedding and fraudulently obtained their signatures on a personal guaranty.)
v. Two types of Fraud:
1. Fraud in the Execution (Fraud in the Factor): Have a blind man sign a blank check.
2. Fraud in the Inducement: By Park 100‘s silence, they let the Kartes‘ believe that it was the original lease
agreement agreed upon.
3. Fraud is an exception to the basic ―Duty to Read‖ and ―Manifestation of Assent‖ rules.
vi. In order to use Fraud as an escape:
1. The charged party must have known of the fraud (he was silent for a reason)
2. The fraud must have been relied upon by the complaining party (they signed)
3. The fraud must have cause injury ($)
vii. Rule: A contract entered into by fraudulent means is not valid.
viii. Linzer: These two cases are CONSISTENT! They follow the same rule, but the Park 100 case is an exception to
the rule b/c fraud was involved.
b. OFFER & ACCEPTANCE
i. Offer - An offer is a manifestation of an intent to be contractually bound upon acceptance by another party. An
offer creates in the offeree the power to form a contract by an appropriate acceptance. [Restatement ? 24]
ii. Acceptance – an acceptance of an offer is a manifestation of assent to the terms thereof made by the offeree in a
manner invited or required by the offer
iii. Hohfeldian Analysis:
1. Right: Something the govt. will enforce.
2. Duty: The ―correlative‖ of Right. (If I have a right against you, you have a duty to me. You have a duty not
to violate my right.)
3. No-Right: Opposite of Right
4. Privilege: Absence of Duty
5. Right ；--------？ Duty
6. Power: The Ability to change legal relations with another person. (―power of attorney‖)
7. Liability: The person is subject to the one with the power (―My power is your liability‖)
8. Disability: Opposite of Power
9. Immunity: If they can‘t change legal relations then you are immune.
10. Power ；--------？ Liability
11. If I say: ―I‘ll give you $100, if you walk the bridge‖
a. You are giving me the ―Power‖ to ACCEPT.
iv. BILATERAL – both sides make promises
1. Lonergan v. Scolnick – (The ―Snail Mail is Too Slow‖ Case)
i. (After Lonergan (P) had made several inquiries concerning some advertised land;
Lonergan sent a letter stating he wanted the property, but it had been sold to another
several days before. He alleged a valid contract had been formed while Scolnick said they
had merely negotiated in the letters sent back and forth.)
b. An Ad is usually an ―invitation for an offer‖
c. This case shows us what an offer IS NOT!
d. Their minds didn‘t meet.
e. Mailbox Rule: You put it in the mailbox, the deal is done. i.e the offer/acceptance is binding on you.
i. This applies to email.
f. Rule: If from a promise, the person to whom the promise or manifestation is addressed knows or has
reason to know that the person making the offer (offeror) does not intend it as an expression of his
fixed purpose until he has given further expression of assent, he has not made an offer.
2. Izadi v. Machado (Gus) Ford – (The exception to the ―AD is not an offer‖ Rule)
i. (Izadi (P), attempted to purchase a 1988 Ford Ranger Pick-Up by giving the dealership
$3,595 in cash, and a trade-in. The dealership refused to recognize Izadi’s interpretation
of their ad, which specified in small print that the minimum $3,000 trade in value (no
matter how much the trade-in was actually worth) only applied to the purchase of ―any
New ’88 Eddie Bauer Aerostar or Turbo T-Bird in stock‖, and that the other trade-ins
mentioned in the ad would have to be worth $3,000.)
b. Machado intentionally intended for the customer to be fooled.
c. The more specific you are, the more likely it will be considered an offer.
i. Williston: The test of true interpretation…is what a reasonable person in the potion of the
parties though it to mean.‖\
ii. Corbin: Ad is an invitation to make offers (R2K ?26)
d. Rule: A deliberately misleading advertisement that intentionally leads the reader to the conclusion
that a binding offer exists can be considered an ―offer‖.
i. If an ad contains specific words of commitment, especially a promise to sell a particular
number of units, then it may be an offer.
e. Generally ads are not offers to sell.
v. UNILATERAL – one side promises while the other acts (on the promise)
1. Definition: Offeror offers to give offeree something if the offeree performs – the ball is in the offeree‘s court,
the offeror is not bound unless the offeree performs.
2. Brooklyn Bridge Hypothetical:
a. Mutuality of Obligation: ―Offeror was not bound, until the offeree completed the act.‖
b. Wormser says since the promisee is not bound to complete, then ―both must be bound or neither
should be bound‖.
c. Unilateral K is formed WHEN he walks across the bridge, so anytime before that offeror can revoke. d. There can be Consideration without Mutuality and without Obligation, therefore not a valid contract. e. UNILATERAL: ―I‘ll pay you $100 if you find my dog‖
f. BILATERAL: ―I‘ll pay you $100 if you promise to find my dog‖
i. Now if he promises and doesn‘t find your dog, then he has breached the contract.
g. Wormser also says the burden should be on the offeror, not the offeree.
3. Requirements Contract: If you give me a good price, I‘ll buy all I need from you.
a. Buyer may stop using the product, therefore no longer needing it and not being obligated to buy any
4. Option Contract: I will buy everything you can make.
a. No ―mutuality of obligation‖ – Seller did not have an obligation as long as they didn‘t sell to anyone
else, they could close the factory.
5. Patterson v. Pattberg – (Dang it, I should‘ve slid the money under the door!)
i. (Pattberg (D) offered to discount the mortgage on Petterson’s estate on the condition that it
be paid on a certain date. Petterson had showed up at Pattberg’s door, announcing he was
going to pay him, only to be told the mortgage had already been sold to another. Petterson
sues for breach of contract.)
b. Classical Court: There was no ―tender‖ (handing over of the money) before the offer was revoked.
c. Williston: The offeror may see the approach of the offeree as contemplated…
d. Hard (harsh) cases can‘t make bad cases.
e. Rule: If the defendant withdraws his offer before the act of the promisee was completed (which
would‘ve made the promise binding), no contract was ever mad and revocation is allowed.
f. *****ON a test argue the classical Patterson view (you can revoke at any time before he
tenders money) and modern R2K ?45 part Performance View …if oferree starts performance,
the oferror can’t revoke the offer, but his duty to pay does is contingent on him actually
6. Cook v. Coldwell Banker – (I think you owe me a bonus!)
i. (P, Cook, said she had accepted Coldwell’s, D, offer of a bonus by substantial performance.
The bonuses were to be paid at the end of the year, but Coldwell changed the conditions a
few months later and moved the pay time to March of the following year. Cook stayed with
Coldwell until the end of the year in reliance of the original offer, but she was not paid.) b. Courts are now using unilateral contract analysis to enforce liability, rather than to avoid liability.
c. R2K ?45 – Option Contract: ―If you start walking, I promise not to withdraw the offer.‖
i. Where an offer invites an offeree to accept by rendering a performance and does not invite
a promissory acceptance, an option contract is created when the offeree tenders or begins
the invited performance or tenders the beginning of it.
ii. The offeror‘s duty of performance under any option contract so created is conditional on
completion or tender of the invited performance in accordance with the terms of the offer.
(This rule protects the offeree in justifiable reliance on the offeror‘s promise.)
iii. Cook had created an underlying option contract under 45. She should get her whole
promise, even if she does not stay until March. You cannot change or modify a contract in
this way. Coldwell cannot change the terms as she ―was walking across the Brooklyn
d. Rule: In the context of an offer for a unilateral contract, the offer may not be revoked when the
offeree has accepted the offer by substantial performance.
e. Llewelyn: The only true unilateral K is one in which the oferror would not want a return promise –
real estate brokers, offer of rewards, b/c there is not 100% assurance that they will make good on
vi. When is the Offer Effective?
1. Receipt of offer - An offer is not valid until received by the offeree or his agent. [Restatement ? 68]
2. Duration of offer
a. If the offer has a stated time within which the acceptance must be made, any attempted acceptance
after the expiration of that time will fail and will merely constitute a counter-offer by the offeree. If
no specific time is stated within which the offeree must accept, it is assumed that the offeror
intended to keep the offer open for a reasonable period of time, to be determined based on the nature
of the proposed contract, trade usage, prior dealings and other circumstances of which the offeree
knows or should know.
b. Generally, the time for accepting an offer begins to run from the time it is received by the offeree. If
there was a delay in delivery of the offer of which the offeree is aware, the usual inference is that the
time runs from the date on which the offeree would have received the offer under ordinary
c. Generally, courts hold that in telephonic or face-to-face communications in which an offer is made,
the offer lapses when the conversation terminates in the absence of a clear indication that the offer
remains open beyond the conversation.
vii. VALIDITY OF PARTICULAR KINDS OF OFFERS
1. Offer made in jest – an offer which the offeree knows or should know is made in jest is not a valid offer. Thus
even if accepted, no contract is created.
2. Preliminary negotiations – if a patry wishes to solicit bids, this is an invitation to Make offers. 3. Advertisements –see Izadi
4. Auctions – an item that is put up for auction usually not an offer but a solicitation of offers from the audience.
So unless the sale is expressly said to be /out reserve, the auctioneer may w/draw the goods form the sale
even after the start of bidding UCC 2-328(3)
viii. Types of Contracts as to Validity
1. Void contract
a. One that is totally w/out any legal effect from the beginning (ex. Agreement to commit a crime) 2. Voidable contract
a. One that one or both parties may elect to avoid or to ratify (ex. Contracts w/ infants or mentally ill
3. Unenforceable contract
a. An agreement that is otherwise valid, but that may not be enforceable due to various defenses
extraneous to contract formation such as the statute of limitations or statute of frauds.
i. Who may accept: an offer may be accepted only by a person in whom the offeror intended to create a power of acceptance.
ii. Offeree must know of offer:
1. An acceptance is usually valid only if the offeree knows of the offer at the time of his alleged acceptance
a. Rewards – if a reward is offered for a particular act, a person who does the act w/out knowning
about the reward cannot claim it.
iii. Manner of Acceptance:
1. Traditional Approach
a. Traditionally, the nature of the contract dictated whether the offer could be accepted by a return
promise or by actual performance of the promised act.
b. [a] Acceptance by Performance; Unilateral Contracts
i. In a unilateral contract, the offer empowers the offeree to only accept by complete
performance of the promise. The offeree's failure to perform does not constitute a breach
since no contract is formed until the offeree renders full performance.
c. [b] Acceptance by Return Promise; Bilateral Contracts
i. In a bilateral contract, the offers empower the offeree to only accept by return promise.
Bilateral contracts are formed upon the giving of the promise to perform an obligation in
the future, and failure to fulfill such promise results in breach.
2. Modern Approach
a. Under the modern approach, an offer invites acceptance by any means reasonable under the
circumstances, unless otherwise indicated by language or circumstances. [UCC ? 2-206;
Restatement ? 30(2)] This approach reflects the fact that many offers do not specify whether
acceptance is to be by full performance or promise. A contract may be formed even if an offer
clearly indicates that acceptance is to be by promise if:
i. the offeree begins to perform, in lieu of making the required promise; and
ii. the offeror learns of the commencement of performance and acquiesces to such manner of
iv. Method of Acceptance
1. The offeror is the ―master of his offer.‖ That is, the offeror may prescribe the method by which the offer may
be accepted (ex. Telegram, letter, by mailing a check, etc)
a. Where method not specified: if the offer does not specify the mode of acceptance, the acceptance
may be given in any reasonable method.
b. Acceptance of unilareral contract: an offer for a unilateral contract is accepted by full performance
of the requested act
c. Offer invites either promise or performance – if the offer does not make clear whether acceptance
is to occur through a promise or performance, the offeree may accept by either a promise or
i. Shipment of goods – if buyer of goods places purchase order that doesn‘t specify method
of acceptance, seller may accept by promising to ship, or just by shipping the goods.
d. Notice of acceptance of unilateral contract – where an offer looks to a unilateral contract, most
courts now hold that the offeree must give notice of his acceptance after he has done the requested
e. Acceptance by silence – generally an offer cannot be accepted by silence, unless:
i. Reason to understand – silence can constitute acceptance if the offeror has given the
offeree reason to understand that silence will constitute acceptance and the offeree
subjectively intends to be bound
ii. Benefit of service – an offeree who silently receives the benefit of services (but not goods)
will be held to have accepted a contract for them if he: 1. Had a reasonable opp. To rejet
them; and 2. Know or should have known that the provider of the services expected to be
f. Acceptance by dominion – where the offeree receives goods, and keeps them, this exercise of
dominon is likely to be held to be acceptance.
v. Acceptance Varying from Offer
1. Common law ―mirror image rule‖ – under common law, the offeree‘s response operates as an acceptance only if it is the precise mirror image of the offer. If the response conflicts at all w/ the terms of the offer, or
adds new terms, the purorted acceptance is in fact a rejection and counter offer, not acceptance.
2. UCC view – UCC rejects ―mirror image rule‖, and will often lead to a contract being formed even though the acceptance diverges form the offer.
3. Battle of the forms
a. General – UCC 2-207(1) provides that any expression of acceptance or written confirmation will
act as an acceptance even though it states terms that are additional to or different from those
contained in the offer
b. Acceptance expressly conditional on assent to changes – an expression of acceptance does not for
a contract if it is expressly made conditional on assent to additional or different terms. So if the
purported acceptance contains additional/different terms form the offer, and also states something
like, ―this acceptance of you offer is effective only if you agree to all of the terms listed on the
reverse side of this form,‖ there is no contract formed by the exchange of documents.
i. Limited – crts reluctant to use this. Only if form makes clear that party is unwilling to
proceed w/ the transaction unless the other party agrees to this party‘s changes.
c. Additional term in acceptance – where the offeree‘s resonse contains an additional term, the
consequences depend on whether both parties are merchants.
i. At least one party not merchant – if one party is not a merchant, the additional term does
not prevent the offeree‘s response from giving rise to a contract, but the additional term
becomes part of the contract only if the offeror explicitly assents to it.
ii. Both merchants – if both parties are merchants, then the additional term automatically
becomes part of the contract, as a general rule. However,
1. Materiality – the addition will not becomes part of the contract if it is one which
materially alters the contract. Ex. Disclaimer of warranty
2. Objection – If the offeror objects to having the additional term become part of the
contract it wont.
iii. Brown Machine v. Hercules Inc. (I EXPRESSLY said No more terms…but then we
ACTED like we had a K!)
1. (Brown is suing Hercules for indemnification. Brown submitted proposal,
Hercules sent purchase order (offer) that said ―expressly limits acceptance to the
terms stated herein…any additional or different terms proposed by the seller are
rejected unless expressly agreed to in writing‖ and ―sellers actions shall
constitute an acceptance of the above terms‖. Brown sent back an order
acknowledgement with an additional term – an indemnity provision. Brown wins
at trial court level.)
iv. Browns order acknowledgement acted as an ―Acceptance‖ with additional or different
terms from the offer.
v. Rule: UCC ?2-207 (2). Even if Brown had applied their ―express limitation of acceptance
on new offers‖, ?2-207(3) says if they act like they had a contract, then they had a contract,
w/o the indemnification clause. (?)
vi. Revised ?2-207 threw everything out. What you agreed on was your contract, if you didn‘t
agree it was filled in by one of the UCC‘s default rules.‘
d. Acceptance silent – if an issue is handled in the first doc. (offer) but not in the sec doc (acceptance),
the acceptance will be treated as covering all the terms of the offer, not just those which the writings
e. Conflicting terms in documents – if an issue is covered one way in the fofering doc and another
conflicting way in the acceptance, most courts apply the knock out rule. That is, the conflicting
clauses ―knock each other out‖ of the contract, so that neither enters the contract. Instead, a UCC
gap-filler provision is used if one is relevant, otherwise, common law.
f. Response diverges too much to be acceptance – if a purported acceptance diverges greatly from
the terms of the offer, it will not serve as an acceptance at all, so no contract formed.
g. Contract by parties’ conduct – if divergence occues, the parties‘ conduct later on can still cause a
contract to occur. UCC 2-207(3) provides that conduct by both parties which recognizes the
existence of a contract is sufficient to establish a contract for sale although the writings of the parties
do not otherwise establish contract.
i. Buyer’s failure to return goods – ex: shrink wrap (see below)
h. Confirmation of oral contract – if parties initially reach an oral agreement, a doc later sent by one
of the memorialize the agreement is called a confirmations
i. Additional terms in confirmation – if the confirmation contains additional terms, they
become apart of the contract unless either 1. The additional term materially alters the oral
agreement or 2. The party receiving the confirmation objects to the additional terms
ii. Different term in confirmation – if a clause contained in the confirmation is different
from a term on the same issue reached in oral agreement, the new clause probably does not
become apart of the contract
i. Last shot rule - Buyer sends out P.O. with terms A + X, sellers send back acknowledgement saying
A+Y, this acts as a counter-offer. A party impliedly assents to and thereby accepts a counter-offer by
conduct indicating lack of objection to it. Tended to favor Sellers over Buyers b/c Sellers normally
―fire the last shot‖ (send the last form).
4. Ask yourself 3 Questions:
a. What was offered?
b. What was accepted?
c. What is the contract?
5. Knock-out Rule: Conflicting terms cancel each other out UCC 2-207.
6. Mirror-Image Rule: Gives a ―varying‖ acceptance the effect only of a counter-offer, preventing the contract
from being made on the terms of the original offer. Both sides have to have the completely same terms. Poel
7. Last-Shot Rule: Buyer sends out P.O. with terms A + X, sellers send back acknowledgement saying A+Y, this acts as a counter-offer. A party impliedly assents to and thereby accepts a counter-offer by conduct indicating lack of objection to it. Tended to favor Sellers over Buyers b/c Sellers normally ―fire the last shot‖ (send the last form).
8. UCC ?2-207: Worst written statute ever, b/c its based on the notion that you actually read boilerplates but nobody does.
a. (1) If an acceptance is made that contains additional or different terms, then the those terms are
treated as proposals for additional terms, and the acceptance is still good, UNLESS acceptance is
expressly made conditional on assent to the additional or different terms. (Negates Mirror-Image
i. All sellers put this in their acknowledgments
b. (2) Additional terms are to be treated as proposals for addition to the contract. B/w merchants such
terms become part of the contract unless:
i. (a) the offer expressly limits accepts to terms of offer (every decent lawyer will put this into
a buyer‘s form)
ii. (b) the terms materially alter the contract
1. Comment 4 – examples of what material alters a K.
2. Linzer says Arbitration is material, although some cases say it is not
iii. (c) notification of objection of additional terms has already been given (a) or is given within
reasonable time after notice is received (but didn‘t we say no one reads these form
1. Linzer says this isn‘t likely b/c Llewelyn says no one read this stuff so they are not
aware of the additional terms.
c. (3) Conduct by both parties recognizing the existence of a contract is sufficient to establish a
contract; but the contract consists of those terms on which the writings of the parties agree.
i. Contradictory terms are knocked out b/c they are basically objections to each other, so they
will be replaced with gap fillers.
9. Sidd’s take on Definite Expression of Acceptance ?2-207
a. IF Offer = A + Not X and Acceptance = A+X; then the K= A+Not X
b. If there was express conditionality in the offer, you can only accept A (express terms in offer)
c. If there was no express conditionality and
i. If you are not a merchant ？ Specific Acceptance of Terms (Klocek v. Gateway)
ii. If you are a merchant ？ Other terms are integrated, UNLESS the new terms are material
alterations. (non-material altercation are ok and will not get knocked out)
10. Revised UCC ?2-207:
a. Revised 2-207: Terms of Contract; Effect of Confirmation
i. If (i) conduct by both parties recognizes the existence of a contract although their records
do not otherwise establish a contract, (ii) a contract is formed by an offer and acceptance, or
(iii) a contract formed in any manner is confirmed by a record which contains terms
additional to or different from those in the contract being confirmed, the terms of the
contract, subject to Section 2-202, are:
a. terms that appear in the records of both parties,
b. terms, whether in a record or not, to which both parties agree, and
c. terms supplied or incorporated under any provision of this [Act].
ii. This is a double knock-out rule. Different terms are acceptable if in the written form
records of both parties. This is not so under existing 2-207. Material differences would
have to be expressly made.
; Who made the offer?
; Was there an acceptance or counter-offer?
o If acceptance – what terms got in?
; Last-shot rule.
; Mirror-image rule (classical)
; Brown Rule – UCC 2-207.
o If counteroffer –
; Did other party accept either through either express or implied-in-fact consent,
in that case what terms got in?
vi. DURATION OF THE POWER OF ACCEPTANCE
1. For an acceptance to be valid, it must become effective while the power of acceptance is still in effect. So where there is doubt about whether the acceptance is timely: 1. Poinpoint the moment at which the acceptance became effective; and 2. Ask whether the power of acceptance was still in effect at that moment.
2. Ways of terminating power of acceptance
a. Rejection by the offeree
i. Exceptions – 1. the offeror indicates that the offer still stands despotie the rejections; or 2.
The offeree states that although she is not now accepting, she wishes to consider the offer
b. Counter-offer by offeree
c. Lapse of time
i. Acceptance terminates at the end of a reaosnbale time period
ii. Face-to-face convos – acceptance terminates at the end of convo usually
d. Revocation by the offeror
i. Effective upon receipt i.e. received by offeree
e. Death or incapacity of offeror or offeree
3. Irrevocable Offers – usually an offer is revocable at the will of the offeror. However, there are some
a. Standard option contract - first, the offeror may grant the offeree an ―option‖ to enter into the
contract. The offer itself is then referred to as an option contract
i. Common law requires consideration – the traditional common law view is that an option
contract can be formed only if the offeree gives the offeror consideration for the offer (i.e.
ill pay you $5 and you hold the offer open for 3 days)
ii. Modern (Restatement) approach – modern approach, is that a signed option contract that
recites the payment of consideration will be irrevocable, even if the consideration was
b. ―Firm Offers‖ under the UCC – UCC is even more liberal in some cases: it allows formation of an
irrevocable offer even if no recital of payment of consideration is made. 2-205, an offer to buy or sell
goods is irrevocable if it 1. Is by a merchant; 2. Is in a signed writing; and 3. Gives explicit
assurance that the offer will be held open. Even w/out consideration or recital.
i. Three month limit – no offer can be made irrevocable for any longer than three months
unless consideration is given
ii. Forms supplied by offeree – if the firm offer is on a form drafted by the offeree, it is
irrevocable only if the particular firm offer clause is separately signed by offeror. c. Part performance or detrimental reliance – the offeree‘s part performance or detrimental reliance
may transform an otherwise revocable offer into a temporarily irrevocable one
i. Offer for unilateral contract – for a unilateral contract, the beginning of performance by
the offeree makes the offer temporarily irrevocable. As long as the offeree continues
diligently to perform, the offer remains irrevocable until he has finished.
ii. Preparations by offeree – if the offer is for a bilateral contract, the offeree‘s making of
preparations will cause the offer to be temporarily irrevocable if justice requires. ―An offer
which the offeror should reasonably expect to induce action or forbearance of substantial
character on the part of the offeree before acceptance and which does induce such action or
forbearance is binding as an option contract to the extent necessary to avoid injustice.
1. Offers by sub-contractors to general contractor will often become temporarily
irrevocable under this rule
d. An acceptance of an offer is a manifestation of assent to the terms thereof made by the offeree in a
manner invited or required by the offer
vii. Limiting the Offeror’s Power to Revoke
1. James Baird Co. v. Gimbel Bros., Inc. – (The Sub-Contactor Bid Error – No Reliance)
a. (Gimbel (D) submitted an offer to Baird, but there was a mistake as to the actual amount of linoleum
needed, causing Gimbel’s prices to be about half the actual cost. Gimbel telegraphed all
contractors of the error, but the communication was received by Baird just after Baird submitted its
lump sum bid relying on Gimbel’s erroneous prices. Gimbel refused to recognize a contract.)
b. No Promissory Estoppel/ No Reliance
c. No Bilateral Agreement
d. A contractor does not ―accept‖ the sub-contractors when he uses it b/c the sub-contractor couldn‘t
sue for BoK if he chose someone else.
e. Hand saying ?90 shouldn‘t apply to commercial transactions since businesses should be able to take
care of themselves.
f. Hand opinion was the most widely used until the 60s (DRENNAN case)
g. Rule: If the sub-contractor did not say they meant for the contractors to rely on his quotes when
making their bids, then their bids are not considered offers for acceptance.
2. Drennan v. Star Paving Co. – (The Sub-Contractor Bid Error – Reliance)
a. (Drennan (P) was preparing a bid on a public school construction project. On the day the bid was
to be submitted, Star (D) phoned in its bid of $7,131.60 for paving. Star’s bid for paving was low
and used by Drennan and the contract was awarded to Drennan the same evening. The next day,
Star refused to do the paving for less than $15,000.) thb. Most Important Contract Case of the 20 Century!
c. Just like Cardozo changed the law in Allegany College, Traynor changed the Law in Drennan.
d. Traynor uses ?45 as an anology - ?90 (bilateral) & ?45 (unilateral) are two sides of the same coin!
e. ?45 comment – implied promise in every offer that if part performance is made, the offer can‘t be
revoked if injustice…
f. Sub-contractor is bound to keep their contract and allow the general contractor the chance to accept.
g. This case made ?90 applicable to not only donative promises.
h. Rule: Promissory Estoppel now applies to commercial transactions, and unless the sub-contractor
specifically says he does not want general contractor to rely and he can revoke, he is bound. 3. Pop’s Cones Inc. v. Resorts International Hotel, Inc. – (TCBY franchisee got screwed by Big Hotel)
a. (Pop’s (P), a vendor of TCBY, negotiated with Resorts (D) to lease a location in its resort hotel.
Relying on Resorts’ advice and assurances that an agreement had been reached, Pop’s ended its
lease at its other location, placed its equipment in temporary storage, and retained an attorney to
finalize the terms of the lease. Resorts later withdrew its offer)
i. Only asked for ―Reliance Damages‖, which will make her whole.Great Lawyering here.
ii. Reliance appears to look like a Tort and it is taking over the Code!
iii. Classical Contract would say that Resorts could revoke, b/c no K, no bargain, no offer, but
there is an argument that ?90 applies.
b. Hoffman v. Red Owl Stores Inc. (Illustration 10 in ?90):
i. Objective Test: ―reasonably should‘ve expected‖ is different than ―expected‖
c. Malaker - ―seemed to have heightened the amount of proof required to establish a ‗clear and definite
promise‘ by searching for ‗an express promise of a clear and definite nature.‘‖
d. Mere expressions of intention, coupled with a prediction are not sufficient assurances.
e. Rule: Promissory Estoppel (?90) is not only triggered by an explicit promise, but by assurances and
representations made that induce someone to rely to his detriment producing injustice if not
enforced. A promise is a clear and definite promise if a reasonable person would expect someone to
rely on their assurances and representations.
viii. When an Acceptance Becomes Effective
1. Mailbox Rule – acceptance is effective upon proper dispatch
a. Offer provides otherwise – mailbox rule doesn‘t apply if offer provides otherwise
b. Lost in transmission – if acceptance is lost or delayed, it depends on whether the communication was
properly addressed (if it was, then acceptance is effective at dispatch, if it wasn‘t then only effective
if it is received w/in a normal amount of time had it been properly dispatched.) 2. Both acceptance and rejection send by offeree – if the offoree sends both an acceptance and rejection,
depends on which one is sent first
a. If rejection is sent first but acceptance is received first, then acceptance will be affective
b. If acceptance is sent first it is accepted at dispatch and doesn‘t matter if rejection is received first
3. Option contracts
a. Acceptance of an option contract is effective upon receipt by the offeror, not upon dispatch!
b. Risk of mistake in transmission
i. A contract is formed on the terms of the offer as received by the offeree.
ii. If the offeree knows or has reason to know that the terms of offer are a mistake, the offeree
cannot ―snatch up‖ the offer
4. In transactions governed by the CISG, the acceptance becomes effective when it reaches the offeror.
ix. Late Acceptance
1. A number of approaches are applied to communications that are intended as an acceptance but sent after the
a. the communication may qualify as a counter-offer;
b. the offeror may waive the lateness and honor the acceptance;
c. if the acceptance is nevertheless sent within a reasonable time, albeit after the offer's stated
expiration, the acceptance is valid and results in the formation of a contract if the offeror does not
reject it within a reasonable time
x. Electronic Contracting
1. Contracts of Adhesion: A form contract that consumers can‘t do anything to change. We can‘t get rid of them
b/c it‘s a practical matter, we want them for mass transactions. If you don‘t like the terms of one
company…go to another company.
2. R2K ?211(3) – Reasonable Expectation