Contracts – Issue Spotting Quick Hits

1. Was there an agreement?

a. Apply objective theory in analysis!
i. Offer: unilateral or bilateral?
1. Advertisement as offer
ii. Promise? (illusory, conditional, alternative, gratuitous)
iii. Written Contract?
b. Identify: goods or services?
c. Was the offer terminated in some way?
i. Can terminate by:
1. Rejection
2. Revocation
3. Counter-Offer
4. Time Lapse
5. Death/Incapacity
ii. Additional or different terms?
iii. Option contract/firm offer (prevent time lapse)?
iv. Did performance begin, preventing revocation?
v. Was revocation communicated, but indirectly? (R2d 43)
d. Was offer Accepted?
i. Can accept by silence, return promise, or performance
1. Mailbox rule
a. Different for option contract
2. If accepting by performance, was notification required? (R2d54)
e. Was there consideration?
i. Return promise/performance/forbearance, BARAGINED FOR
1. Substitutes: Promissory Estoppel, Promise Made in Recognition of
a Benefit Already Received
ii. Was consideration required?
1. Quasi Contracts
2. Any other reasons contract shouldn’t be enforced?
a. Incapacity
b. Dealings of parties:
i. Mistake
ii. Misunderstanding
iii. Duress
iv. Unconscionability
v. Misrepresentation
vi. Statute of Frauds

DETAILED
 1. Was there an agreement?
a. Apply objective theory in analysis!
- An agreement between parties is legally binding if, in the opinion of a reasonable person
who is not a party to the contract, an offer has been made and accepted.
i. Offer: unilateral or bilateral?
Three Types of Offers
1) Offers that can only be accepted by performance, forming a unilateral contract.
2) Offers that can be accepted only by a promise, forming a bilateral contract.
3) Offers that can be accepted by EITHER a promise OR performance, forming a unilateral
or bilateral contract, depending on the method of acceptance.
1. Advertisement as offer
Advertisement Rule
- The facts must show that some performance was promised in return for something the
advertisement requested.
- When the offer is clear, definite, and explicit, and leaves nothing open for
interpretation, it is an offer.
ii. Promise? (illusory, conditional, alternative, gratuitous)
Illusory Promises:
- A promise that doesn’t bind the party to any course of action; places no limits on the
persons’ freedom (promise is meaningless). They do not constitute consideration – a
promise made in return for an illusory promise is not binding.
Conditional Promises – Where the condition is outside of the promising parties’ control:
- Valid consideration for promise received in return if the condition is outside the control
of the promisor.
Alternative Promise (promisor chooses between multiple options):
- If each alternative in return promise constitute consideration standing alone,
consideration. If one of the two options under promise is illusory, promise doesn’t
constitute consideration. The alternatives must meaningfully limit freedom under each
option. When there are alternative promises within the control of the promisor, each
alternative must constitute consideration and not be an illusory promise.
Conditional Promise – Where the condition is within the promising parties’ control:
- Consider the context – each alternative must limit the parties freedom in some
meaningful way based on that party’s circumstances. Break down each alternative and
ask if they each constitute consideration.
iii. Written Contract?
- If agreement was oral, could be invalidated because of statute of frauds – requires some
contracts to be inwriting.
- If agreement was in writing, could have dispute over terms or could have been made
under ill dealings of parties.
b. Identify: goods or services?
- Goods: UCC
- Mixture of Goods/Services:
 o Majority Rule “predominant purpose test” - courts will look to predominant
purpose of contract to determine if UCC governed. IF predominant purpose is
goods, UCC governs. If it is services, UCC does not.
o Minority approach “Gravamen approach” - looks to portion of transaction in
contract on which complaint is based. Does the part of contract in dispute
involve goods or services? If goods, UCC governs. If services, it does not.
c. Was the offer terminated in some way?
i. Can terminate by:
1. Rejection/Counter-Offer
- Offeree may reject the offer or make a counter-offer, which operates as a rejection by
operation of the law.
o R2d 38: A manifestation of intention not to accept an offer is a rejection unless
the offeree manifests an intention to take it under further advisement.
o R2d 40: Rejection/Counter Offer is valid when received. If an offeree issues both
an acceptance and a rejection at different points in time, the communication
RECEIVED first is binding.
2. Revocation
- Offeror may revoke the offer.
R2d 42 – “Revocation by Communication from Offeror Received by Offeree”:
(Mailbox rule, revocation) An offeree’s power of acceptance is terminated when the offeree
receives from the offeror a manifestation or an intention not to enter into the proposed
contract.
3. Time Lapse
- Offer may expire by its own terms.
o UCC 2-206(2): Where the beginning of a requested performance is a reasonable
mode of acceptance, an offeror who is not notified of acceptance within a
reasonable time may treat the offer as having lapsed before acceptance.
4. Death/Incapacity
ii. Additional or different terms?
- Common Law Approach, operate as counter-offer.
o UCC 2-207
iii. Option contract/firm offer (prevent time lapse)?
Option Contract Definition
Offers under an Option Contract are irrevocable; the offeror can not revoke for a specified
period of time because their promise to keep the offer open for that period of time is
supported by consideration. It is a promise which meets the requirements for the formation of
a contract and limits the promisor’s power to revoke the offer. (R2d 25)
UCC 2-205 – “Firm Offers”:
ONLY APPLIES TO OFFERS MADE BY MERCHANTS
An offer by a merchant to buy or sell goods in a signed writing which by its terms give assurance
that it will be held open is not revocable for lack of consideration during the time stated, or if
no time is stated – for a reasonable time, but in NO event may such period of irrevocability
exceed three months; but any such term of assurance on a form supplied by the offeree must
be separately signed by the offeror.
 - Acceptance of an option contract is effective WHEN RECEIVED. (R2d 63)
iv. Did performance begin, preventing revocation?
v. Was revocation communicated, but indirectly? (R2d 43)
R2d 43 – “Indirect Communication of Revocation”:
An offeree’s power of acceptance is terminated when the offeror takes definite action
inconsistent with an intention to enter into the proposed contract and the offeree acquires
reliable information to that effect.
d. Was offer Accepted?
R2d 50(1) – “Acceptance of Offer Defined”:
- 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.
- 4 elements:
1) Manifestation of assent
2) Assent to terms of the offer
3) Made by offeree
4) In a manner invited or required by the offeror
i. Can accept by silence, return promise, or performance
R2d 69 – “Acceptance by Silence or Exercise of Dominion”
When an offeree fails to reply, silence and inaction operate as acceptance only if:
- An offeree takes the benefit of offered services with reasonable opportunity to reject
and reason to know the were offered with expectation of compensation
- The offeror has stated or given the offeree reason to understand that assent may be
manifested by silence or inaction, and the offeree in remaining silent intends to accept
the offer.
- Because of previous dealings, it is reasonable that the offeree should notify the
offeror if he does not intend to accept.
R2d 30 – “Form of Acceptance Invited”:
(1) an offer may invite or require acceptance to be made by an affirmative answer in words, or
by performing or refraining from performing specified act, or may empower the offeree to
make a selection of terms in his acceptance.
(2) Unless otherwise indicated by the language or the circumstances, an offer invites
acceptance in any manner and by any medium reasonable in the circumstances.
R2d 60 – “Acceptance of Offer Which States Place, Time or Manner of Acceptance”:
If an offer prescribes the place, time or manner of acceptance, its terms in this respect must be
complied with in order to create a contract. If an offer merely suggests a permitted place, time
or manner of acceptance, another method of acceptance is not precluded.
1. Mailbox rule
When mail is a permissible mode of acceptance, acceptance occurs at the moment the letter
leaves the possession of offeree and enters into the possession of post office. The offferor
carries risk under this rule. This rule is only default when offeror does not specify when
acceptance is operative.
a. Different for option contract
 R2d 37 – “Termination of Power of Acceptance Under Option Contract”:
Notwithstanding §§ 38-49, the power of acceptance under an option contract is not terminated
by rejection or counter-offer, by revocation, or by death or incapacity of the offeror, unless the
requirements are met for the discharge of a contractual duty.
Acceptance of an option contract is effective WHEN RECEIVED. (R2d 63)
2. If accepting by performance, was notification required? (R2d54)
R2d 54 – “Acceptance by Performance; Manifestation of Intention Not to Accept”:
- Where an offer invites an offeree to accept by rendering a performance, no notification
is necessary to make such an acceptance effective unless the offer requests such a
notification.
- If an offeree who accepts by rendering a performance has reason to know that the
offeror has no adequate means of learning of the performance with reasonable
promptness and certainty, the contractual duty of the offeror is discharged unless
o (a) The offeree exercises reasonable diligence to notify the offeror of
acceptance, or
o (b) The offeror learns of the performance within a reasonable time, or
o (c) The offer indicates that notification of acceptance is not required
e. Was there consideration?
Consideration, which is almost always required for the existence of a legally enforceable
contract, exists when values are exchanged in a bargain. Promises, acts, and forbearance have
value and may constitute consideration. The person who makes the promise at issue can be the
offeror or offeree, but is referred to as the ‘promisor’. The ‘promisee’ is the person to whom the
promise at issue was made.
i. Return promise/performance/forbearance, BARAGINED FOR
1. Substitutes: Promissory Estoppel, Promise Made in Recognition of
a Benefit Already Received
Promissory Estoppel Analysis
1) Need a promise.
2) The promise in question needs to be one where the promisor should have reasonably
expected to induce the action or forbearance on the part of the promisee or a third
party (OBJECTIVE THEORY OF CONTRACTS - REASONABLE PERSON).
3) The action or forbearance is actually induced by the promise.
4) Injustice be avoided only by enforcing this promise.

PROMISE MADE IN RECOGNITION OF A BENEFIT ALREADY RECEIVED

A party is benefited, and after being benefited, they promise something in recognition of the
benefit they received. Even though there is no consideration in these scenarios, the court
enforces the promise because some substitute standard has been met. There are 3 approaches
to determine if the promise is binding:
1) Common Law Approach - no consideration, not binding, UNLESS pre-existing obligation
rendered inoperative under positive law and person re-obligates themselves.
2) Webb Approach - In order for a promise made in recognition of a benefit already
received to be legally binding, promisor needs to have received some sort of material
benefit as a result of the promisee's past acts.
 3) Restatement Approach (R2d 86) - (1) A promise made in recognition of a benefit
previously received by the promisor from the promisee is binding to the extent
necessary to prevent injustice. (2) A promise is not binding under Subsection (1) (a) if
the promisee conferred the benefit as a gift or for other reasons the promisor has not
been unjustly enriched; or (b) to the extent that its value is disproportionate to the
benefit.
ii. Was consideration required?
1. Quasi Contracts
Situations where offer acceptance and consideration are missing, but court permits contract-
like remedy, which means DEF is liable for contract-like recovery.
Two Most Common Claims:
1) Claim where one party has furnished necessities to another party while the other party
lacked capacity.
2) Claim where one party has been unjustly enriched by conduct of other party
Restitution Measurements:
1) Measured through market value of thing provided to the PLA (necessities situation)
2) Measured through value of benefit the DEF received (unjust enrichment situation)
2. Any other reasons contract shouldn’t be enforced?
a. Incapacity
b. Dealings of parties:
i. Mistake
Mistake, Enforcement Defense: Two types, Mutual, or Unilateral.
- Mutual Mistake: when both parties make the same mistake and are mistaken about the
SAME THING.
ANALYSIS - Where a..
1) Mistake of both parties
2) At the time a contract was made (mistake must be at time contract was
made)
3) As to a basic assumption on which the contract was made (mistake has to go
to a BASIC assumption on which the contract was made)
4) Has a material affect on the agreed exchange of performances (mistake has
significant effect on agreed exchange of performances)
IF YOU HAVE ALL OF THIS, the contract is voidable by the adversely affected party,
UNLESS…
• That party bears the risk of the mistake under 154
- Unilateral Mistake: when one party makes the mistake at issue.
ANALYSIS: Where a…
1) Mistake of ONE PARTY
2) At the time a contract was made (mistake must be at time contract was made)
3) As to a basic assumption on which the contract was made (mistake has to go to
BASIC assumption)
4) Has a material effect on the agreed exchange of performances that is averse to
him, (mistake has significant effect on agreed exchange of performances)
 • IF YOU HAVE ALL OF THIS, the contract is voidable by the adversely affected
party, UNLESS…
o That party bears the risk of the mistake under 154
• AND, prove EITHER A or b
o Effect of mistake is such that enforcement of the contract would be
unconscionable (extreme form of unfairness. Very high burden to
meet)
o The other party had reason to know of the mistake, or, his fault
caused the mistake
ii. Misunderstanding
Misunderstanding, Formation Defense:
R2d 20 – “Effect of Misunderstanding”: (1) There is no manifestation of mutual assent to an
exchange if the parties attach materially different meanings to their manfestations and (a)
neither party knows or has reason to know the meaning attached by the other, or, (b) each
party knows or each party has reason to know the meaning attached by the other.
iii. Duress
Issues of duress will arise when the fact pattern indicates that the party had no alterative but to
accept the terms or face serious financial hardship.
- Austin Instrument Inc. v. Loral Corp: Requirements to establish Duress:
1) One party wrongfully threatens to withhold goods unless other party agrees to further
demand
2) Has to appear that threatened party couldn’t get goods from another source
3) Has to look like ordinary remedy for breach of contract is insufficient
o The key is: was it reasonable for party to feel like they had no other option
other than to assent?
o The key is: need WRONGFUL threat, and circumstances need to show that there
were no reasonable alternatives.
iv. Unconscionability
Unconscionability is a defense to the enforcement of a contract.
- Unconscionable: extreme form of unfairness; so unfair that the court won’t enforce an
unconscionable contract even if it meets all other requirements of contract law.
- 2 Categories of Unconscionability: (need some of both categories to succeed, but, if one
category is heavily present, the court may require less of the other) Procedural,
Substantive
 Procedural Substantive
Procedure by which that contract was entered Actual terms of the contracts are so unfair that it
into: shocks your conscience (the way the contract
- entered into in such an unfair way the works in substance, not the way the contract
court wont enforce it. Was the procedure was entered into; WILLIAMS v. WALKER-
of entering into the contract THOMAS)
unconscionable?
Important terms are hidden, party was presented
with contract drafted by other party and on a take
it or leave it bases (contract of adhesion - either
adhere to terms or we have no contract; WEAVER)
Unequal distribution of bargaining power/extreme
difference in sophistication of parties
(Party making the claim had no meaningful choice
- thing bargaining for is a necessity and dealing
with the other party is the only way they can get
that thing or if all other parties they could have
dealt with have similar terms in their contracts)
v. Misrepresentation
Misrepresentation Analysis:
1. Has there been a misrepresentation? ASK:
• Was there any assertion not in accord with the facts?
• [R2d 159 – misrepresentation definition]
2. Was the misrepresentation fraudulent or material? (misrepresentation made by the
party other than the one seeking rescission of the contract, or by the other party's agent)
• Material: if it would be likely to induce a reasonable person to manifest his assent, or, if
the maker knows that it would be likely to induce the recipient to do so. [R2d 162(2)]
• Fraudulent: if the maker intends his assertion to induce a party to manifest assent, AND
the maker… (only need one to be met for misrepresentation to be fraudulent) [R2d
162(1)]
• Knows of believes that the assertion is not in accord with the facts, or,
• Does not have the confidence that he states or implies in the truth of the
assertion, or
• Knows that he does not have the basis that he states or implies for the assertion
3. Was the party's assent induced by the misrepresentation?
4. Was the receiver justified in relying on the misrepresentation?
vi. Statute of Frauds
- If both parties have fully performed already, Statute of Frauds doesn't apply.
- If neither party is trying to get out of contract over the Statute of Frauds, (if defense is
not raised) then the fact that the contract is oral isn't going to stop the court from
enforcement. This needs to be raised by one party as a defense!
- Statute of Frauds does not apply in quasi-contract claims.
- If you get past the Statute of Frauds, it ONLY means your claim is not barred from
moving forward – it doesn't mean that you've won the claim. You’ll still need to prove
contract, terms of contract, and whether or not it was breached.
- R2d 110, UCC 2-201