Contracts & Sales Law – Comprehensive Exam Study
Guide | UCC Article 2, Offer & Acceptance, Remedies,
Case Law, & Real-World Scenarios
What three elements does contract formation require?
Offer, acceptance, and adequate consideration
What is an offer?
An objective manifestation of the offeror's willingness to enter into a contract that creates a
power of acceptance in the offeree
To be an offer a statement must be...
reasonably interpretable as a offer and express a present intent to be bound
Offer requirements
1) intent to contract—words of promise, undertaking, or commitment
2) knowledge of the offer by the offeree(s)
3) essential terms that are certain and definite
4) targeted to a number of people who could actually accept
Essential offer terms
Common law:
1. parties
2. subject matter
3. price
UCC: quantity
5 ways to terminate an offer
(1) death/mental incapacity
(2) destruction or illegality
(3) lapse of time
(4) rejection
,(5) revocation (express or implied)
Death/mental incapacity
Terminates an offer prior to acceptance even if the offeree sends an acceptance before learning of
the offeror's condition
Destruction or illegality
of the subject matter of an offer terminates the offer and prevents it from being accepted.
Lapse of time
Terminates an offer when the offer says it does or after a reasonable amount of time has passed
Rejection
An offer is terminated when the offeree clearly conveys an intent not to accept it or takes action
absolutely inconsistent with a continuing ability to contract.
It is usually effective when it is received.
A counteroffer acts as one and creates a new offer.
Revocation
Terminates an offer if expressed or implied prior to acceptance, even if the offeror promised to
keep it open for a specified time.
It is effective when communicated, and, if mailed, when received.
Types of irrevocable offers
UCC: (1) firm offer
Common law: (1) option contract; (2) partial performance; (3) promissory estoppel
Firm offer
Merchant gives written and signed assurance that offer will remain open for a reasonable period
not to exceed 3 months (consideration not required)
Option contract
Offeror promises to keep offer open in exchange for consideration
partial performance
for unilateral contracts, if an offeror invites acceptance by performance and the offeree begins to
perform, the offer is irrevocable until the offeree has had a reasonable time to complete
performance
, Promissory estoppel
Offeror could reasonably foresee reliance on offer, and offeree reasonably and detrimentally
relies on it (consideration not required)
acceptance
• an objective manifestation by the offeree to be bound by the terms of the offer
• an offeree must know about the offer to have the power to accept it
What is the general rule for mailed acceptance within allotted response time?
effective when sent, not upon receipt, unless the offer provides otherwise (the mailbox rule)
acceptance by silence or actions/gestures alone
(1) Silence is not acceptance unless the offeree has reason to believe that it should be
or previous dealings make it reasonable to believe that the offeree must give notice of an intent
not to accept
(2) Actions and gestures alone can be an acceptance (e.g., sitting in the barber chair) and
create an implied-in-fact contract
-move these to another card!-
(3) Asking a seller to ship goods invites acceptance by either promise to ship or by prompt
shipment of the goods
(4) Shipping nonconforming goods is both an acceptance and a breach unless the seller
"seasonably" notifies the buyer that the goods are an accommodation (which operates as a
counteroffer). The buyer must then accept or reject the goods
When does the mailbox rule apply?
If an acceptance is sent before a rejection. The acceptance will control (it doesn't matter if
rejection was received first) unless the offeror receives the rejection first and detrimentally relies
on it
When does the mailbox rule not apply?
If a rejection is sent before an acceptance, the mailbox rule does NOT apply and whatever is
received first is effective
The mailbox rule also does not apply with respect to offers and revocations. Offers and
revocations are effective upon receipt. An acceptance sent before a revocation is received
controls.
Bilateral contract
Guide | UCC Article 2, Offer & Acceptance, Remedies,
Case Law, & Real-World Scenarios
What three elements does contract formation require?
Offer, acceptance, and adequate consideration
What is an offer?
An objective manifestation of the offeror's willingness to enter into a contract that creates a
power of acceptance in the offeree
To be an offer a statement must be...
reasonably interpretable as a offer and express a present intent to be bound
Offer requirements
1) intent to contract—words of promise, undertaking, or commitment
2) knowledge of the offer by the offeree(s)
3) essential terms that are certain and definite
4) targeted to a number of people who could actually accept
Essential offer terms
Common law:
1. parties
2. subject matter
3. price
UCC: quantity
5 ways to terminate an offer
(1) death/mental incapacity
(2) destruction or illegality
(3) lapse of time
(4) rejection
,(5) revocation (express or implied)
Death/mental incapacity
Terminates an offer prior to acceptance even if the offeree sends an acceptance before learning of
the offeror's condition
Destruction or illegality
of the subject matter of an offer terminates the offer and prevents it from being accepted.
Lapse of time
Terminates an offer when the offer says it does or after a reasonable amount of time has passed
Rejection
An offer is terminated when the offeree clearly conveys an intent not to accept it or takes action
absolutely inconsistent with a continuing ability to contract.
It is usually effective when it is received.
A counteroffer acts as one and creates a new offer.
Revocation
Terminates an offer if expressed or implied prior to acceptance, even if the offeror promised to
keep it open for a specified time.
It is effective when communicated, and, if mailed, when received.
Types of irrevocable offers
UCC: (1) firm offer
Common law: (1) option contract; (2) partial performance; (3) promissory estoppel
Firm offer
Merchant gives written and signed assurance that offer will remain open for a reasonable period
not to exceed 3 months (consideration not required)
Option contract
Offeror promises to keep offer open in exchange for consideration
partial performance
for unilateral contracts, if an offeror invites acceptance by performance and the offeree begins to
perform, the offer is irrevocable until the offeree has had a reasonable time to complete
performance
, Promissory estoppel
Offeror could reasonably foresee reliance on offer, and offeree reasonably and detrimentally
relies on it (consideration not required)
acceptance
• an objective manifestation by the offeree to be bound by the terms of the offer
• an offeree must know about the offer to have the power to accept it
What is the general rule for mailed acceptance within allotted response time?
effective when sent, not upon receipt, unless the offer provides otherwise (the mailbox rule)
acceptance by silence or actions/gestures alone
(1) Silence is not acceptance unless the offeree has reason to believe that it should be
or previous dealings make it reasonable to believe that the offeree must give notice of an intent
not to accept
(2) Actions and gestures alone can be an acceptance (e.g., sitting in the barber chair) and
create an implied-in-fact contract
-move these to another card!-
(3) Asking a seller to ship goods invites acceptance by either promise to ship or by prompt
shipment of the goods
(4) Shipping nonconforming goods is both an acceptance and a breach unless the seller
"seasonably" notifies the buyer that the goods are an accommodation (which operates as a
counteroffer). The buyer must then accept or reject the goods
When does the mailbox rule apply?
If an acceptance is sent before a rejection. The acceptance will control (it doesn't matter if
rejection was received first) unless the offeror receives the rejection first and detrimentally relies
on it
When does the mailbox rule not apply?
If a rejection is sent before an acceptance, the mailbox rule does NOT apply and whatever is
received first is effective
The mailbox rule also does not apply with respect to offers and revocations. Offers and
revocations are effective upon receipt. An acceptance sent before a revocation is received
controls.
Bilateral contract
