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Formation Outline

Law Outlines > Contracts Outlines

This is an extract of our Formation document, which we sell as part of our Contracts Outlines collection written by the top tier of University Of Michigan Law School students.

The following is a more accessble plain text extract of the PDF sample above, taken from our Contracts Outlines. Due to the challenges of extracting text from PDFs, it will have odd formatting:

I.

FORMATION? (Or: Do we have a Contract?) a. Offer and Acceptance i. The Mailbox Rule

In the era when contracts were executed in the mail, the following standards were developed to control offer and acceptance:????

An offer is effective upon receipt of the document in the mail, and revocable until delivery. Acceptance of an offer is effective upon dispatch. Once it's in the mailbox, it operates as acceptance, even if it never arrives. Revocation following dispatch is ineffective. Rejection is effective upon receipt (i.e., if rejection is in the mail and you accept verbally before it arrives, the acceptance is valid). If rejection and acceptance are both sent, the first one to arrive controls. Acceptance under an option contract isn't effective until receipt. Notices are effective only upon receipt. Exchange by electronic transmission is treated the same as when the parties are in one another's presence. ii. An offer is...??

Objectively reasonable. It must sound serious to the court. Objectively valid. The offeror's intention not to bind himself is immaterial if his offer looks like an offer to the offeree. (Cobaugh v. Klick-Lewis) More than a mere invitation to deal; a definite expression of a party's intent to be bound. (Moulton v. Kershaw: advertisement to sell salt no an offer). Revocable until the offeree accepts it (generally). (Petterson v. Pattberg: offer to reduce mortgage principal was revocable until offeree tendered performance). iii. How an Offer Becomes an Option

An option is an offer that is irrevocable for a period of time. Options are made in five ways:??Put and Call: A pays B money to hold an offer open. Rest. SS 87(1): A and B make an agreement to hold B's offer open in exchange for nominal or fictional consideration. (Thomason v. Bescher) Rest. SS 87(2): B makes A an offer which reasonably induces some detrimental reliance by A. (See: PROMISSORY ESTOPPEL). (Drennan v. Star Paving) Rest. SS 45: B makes an offer to form a unilateral contract with A, and A begins the requested performance. UCC SS 2-205: Merchant's Firm Offer Rule. Where a merchant makes an offer to buy or sell goods in a signed writing, it is not revocable for the time stated, or if no time is stated, for a reasonable time not exceeding three months. iv. Unilateral and Bilateral Contracts?

Unilateral contract: A promises to pay B $100 if he will cross Brooklyn Bridge. There is no return promise from B. A may revoke his offer until B tenders performance. Performance does double duty as both acceptance and consideration. Bilateral contract: A promises to pay B $100 if B will promise to give A his lawnmower. A may revoke his promise until B accepts. v. What is Acceptance?

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The offeree must know about the offer in order to accept it. In a bilateral contract, the offeree accepts by making a return promise. In a unilateral contract, tendering performance may operate as acceptance. Rest. SS 32: Where a contract is ambiguous as to the means of acceptance, either tendering performance or making the requested promise is sufficient. (Allied Steel v. Ford Motor Co.) Rest. SS 62: But tendering performance then binds the offeree to the promise. Notification of acceptance is necessary in bilateral contracts, but not unilateral contracts. (Carlill v. Carbolic Smoke Ball). Rest. SS 69: Silence operates as acceptance when: o The offeree takes the benefit of the thing offered with reasonable opportunity to refuse it and reason to know the offeror expects compensation in return. o The offeror has given offeree reason to know that assent may be manifested by silence or inaction, and the offeree intends to accept by silence or inaction. o Due to previous dealings between the parties, it is reasonable to expect the offeree to notify the offeror if he intends not to accept. Rest. SS 36: The power to accept is terminated by: o Rejection or counteroffer by the offeree; o Lapse of time; o Revocation by the offeror; or o Death or incapacity of the offeror or offeree. UCC SS 2-206: o (1) Unless otherwise unambiguously indicated by the language or circumstances:
? (a) An offer to make a contract shall be construed as inviting acceptance in any manner and any medium reasonable in the circumstances.
? (b) An order to buy goods for prompt or current shipment shall be construed as inviting acceptance either by a prompt promise to ship or by the prompt shipment of conforming goods. o (2) If 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. vi. Acceptance by Silence

In certain circumstances, it is sufficient for a party to express acceptance by silence, rather than by making a return promise, beginning performance, or otherwise acknowledging acceptance.Rest. SS 69: Silence as Acceptance o (1) Where an offeree fails to reply to an offer, his silence is acceptance ONLY when:
? (a) The offeree takes the benefit of the thing offered wit reasonable opportunity to refuse it and reason to know the offeror expects compensation in return.
? (b) The offeror has given the offeree reason to know that assent may be manifested by silence or inaction, and the offeree intends to accept by silence or inaction.
? (c) Due to previous dealings between the parties, it is reasonable to expect the offeree to notify the offeror if he intends not to accept.
??????With Past Conduct: Past conduct between the parties which suggests silence is a legitimate form of acceptance makes it so, provided the party can return the goods if he desires. (Hobbs v. Massassoit Whip Co.)
??????Without Past Conduct: A party may not volunteer to confer benefit on another and then presume that his silent acceptance means he agrees to pay; the accepting party must have reason to believe the vendor expects payment. (Martin v. Little, Brown & Co.: free proofreading)
??????Contract Implied in Fact: Where there is no express consent between the parties, yet their conduct suggests they intend there to be an exchange. Example: a doctor performs an operation on a conscious patient. There is no exchange of words, but the patient's failure to refuse treatment suggests an intent to pay for the procedure. (Collins v. Lewis: Deputy took the cow, and owner knew about it; by doing nothing he implicitly assumed a duty to pay Deputy)
? Contract Implied in Law: Where the law creates the legal fiction of a contract in order to award a remedy. Example: a doctor performs an operation upon an unconscious patient. Though there is no

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