Contract Law: Objective Theory and Letters of Intent
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Questions and Answers

What is the primary focus of the UCC?

  • General contract principles for all types of contracts
  • Persuasive authority on contract law
  • Guidance for the sale of goods (correct)
  • Guidelines for agreements unrelated to goods

    • What do the provisions of the Restatement aim to generalize?

  • Procedures for resolving contract disputes
  • The enforcement of legal contracts
  • Specific cases related to commercial transactions
  • Common law principles derived from case law (correct)

    • Which of the following elements is NOT necessary for a valid and binding contract?

  • Consideration
  • Offer
  • Acceptance
  • Negotiation (correct)

    • What does the term 'mutual assent' refer to in contract formation?

    <p>The agreement of both parties to the contract terms (B)</p> Signup and view all the answers

    Which section of the UCC includes provisions for acceptance?

    <p>§2-206 (B)</p> Signup and view all the answers

    Under the Restatement, which of the following is required for mutual assent?

    <p>At least one promise or act of performance (A)</p> Signup and view all the answers

    Which of the following best describes the nature of the UCC?

    <p>It is a state statute that specifically governs sales of goods (B)</p> Signup and view all the answers

    In the context of contracts, promissory estoppel is significant because it relates to which aspect?

    <p>Enforcement of promises that may not meet all contract requirements (A)</p> Signup and view all the answers

    What is essential for the formation of a contract according to the Objective Theory of Contract?

    <p>Both sides must either make a promise or start performing what they agreed to. (D)</p> Signup and view all the answers

    How does the concept of 'mutual assent' manifest according to the content provided?

    <p>By outward conduct demonstrating intent. (D)</p> Signup and view all the answers

    Which statement best describes the role of intention in contract formation?

    <p>Only the words spoken or actions taken matter, not the underlying intent. (A)</p> Signup and view all the answers

    What does a Letter of Intent typically signify regarding a contract?

    <p>It can be binding in limited terms but usually not for the entire deal. (A)</p> Signup and view all the answers

    What could prevent the formation of a contract despite a promise being made?

    <p>Evidence showing no intent for legal obligations. (D)</p> Signup and view all the answers

    What is suggested about written documents in terms of contract negotiations?

    <p>They can show preliminary negotiations and not be binding. (A)</p> Signup and view all the answers

    Which of the following statements regarding contract formation is accurate?

    <p>Intent can be implied through actions, not merely stated verbally. (B)</p> Signup and view all the answers

    What is implied by R2K 21 regarding the intention of parties in a contract?

    <p>The actual intention behind a promise does not affect its legality. (B)</p> Signup and view all the answers

    What happens if a price is left for future agreement and is not set due to the fault of one party?

    <p>The other party has the option to treat the contract as cancelled or fix a reasonable price. (C)</p> Signup and view all the answers

    In an online contract, what factor indicates that a user is bound by the standard contract terms?

    <p>A reasonable person would understand that the user has assented. (B)</p> Signup and view all the answers

    Which clause describes a situation where nothing was said about price in a contract?

    <p>The price fails to be agreed or fixed by an external entity. (A)</p> Signup and view all the answers

    When may a price be fixed by the seller or buyer?

    <p>The price is meant to be set in good faith by either party. (D)</p> Signup and view all the answers

    What is the underlying principle if the parties do not act in good faith regarding price fixing?

    <p>The party at fault may face cancellation of the contract. (A)</p> Signup and view all the answers

    What is necessary for a user to show unambiguous assent in an online contract?

    <p>There must be a clear manifestation of assent that a reasonable person would interpret as consent. (A)</p> Signup and view all the answers

    Which of the following statements is true regarding a price set by an external objective standard?

    <p>The parties must ensure that the external standard is recorded and agreed upon. (A)</p> Signup and view all the answers

    If a party is not at fault in failing to fix a price, what is their recourse?

    <p>They can cancel the contract or choose a reasonable price. (C)</p> Signup and view all the answers

    What constitutes an offer according to R2K § 24?

    <p>A manifestation of willingness to enter into a bargain (B)</p> Signup and view all the answers

    Which of the following statements is true regarding advertisements?

    <p>Advertisements are invitations to receive an offer. (A)</p> Signup and view all the answers

    Under what condition is a late acceptance treated according to R2K § 70?

    <p>It can be effective as an offer. (B)</p> Signup and view all the answers

    What is the effect of silence in relation to an offer according to R2K § 36?

    <p>Silence operates as an acceptance. (A)</p> Signup and view all the answers

    What occurs under R2K § 41 when an offer specifies a duration?

    <p>The offer terminates at the specified time. (A)</p> Signup and view all the answers

    Which case exemplifies that an advertisement listing goods at a certain price is not an offer?

    <p>Patkis-Pico v.Cutter (C)</p> Signup and view all the answers

    In a unilateral contract, what type of acceptance is required?

    <p>An act performed in accordance with the promise (B)</p> Signup and view all the answers

    What is the outcome if an offer is rejected according to R2K § 38?

    <p>No acceptance can occur unless a new offer is made. (D)</p> Signup and view all the answers

    What is required for consideration to be valid in a contract?

    <p>A benefit to the promisor or detriment to the promisee is necessary. (C)</p> Signup and view all the answers

    Under what condition can a pre-existing duty be considered valid consideration?

    <p>If the performance differs from the original duty significantly. (D)</p> Signup and view all the answers

    In the context of illusory promises, when is a promise considered not to be valid consideration?

    <p>When it involves multiple alternative performances with no clear choice. (C)</p> Signup and view all the answers

    Which situation would allow modification of a contract without needing new consideration under UCC?

    <p>Unforeseen circumstances arise that affect the original contract terms. (B)</p> Signup and view all the answers

    When can past consideration be enforceable according to the Material Benefit Rule?

    <p>If it leads to an unjust situation when not enforced. (B)</p> Signup and view all the answers

    What must be true for a promise to be enforceable under promissory estoppel?

    <p>The promise must reasonably induce action or forbearance by the promisee. (B)</p> Signup and view all the answers

    Which of the following describes 'nominal consideration'?

    <p>A consideration that is not sufficient unless part of an option contract. (C)</p> Signup and view all the answers

    How does the common law view modification of contracts in comparison to the UCC?

    <p>Common law allows modifications without consideration only under specific conditions. (B)</p> Signup and view all the answers

    Study Notes

    Intent

    • Courts use the Objective Theory of Contract, meaning they focus on how a reasonable person would interpret the parties' outward conduct, not their subjective intent.
    • Manifestation of mutual assent requires each party to make a promise or begin performance.
    • A party's true intention, even if different from their outward conduct, doesn't matter unless they clearly show they don't want the promise to have legal effect.

    Letters of Intent

    • Letters of Intent can sometimes be legally binding on limited terms but usually not for the entire deal.
    • Courts will consider if the parties intended to be bound, looking for factors like:
      • Whether price was discussed
      • If price was left for future agreement and parties couldn't agree
      • If price was to be set by an external standard and it didn't happen
      • If parties acted in good faith

    Online Contracts

    • Users are bound by standard contract terms if they:
      • Had a reasonable opportunity to review the terms, and
      • Unambiguously manifested assent to the transaction.

    Offer & Acceptance

    • Preliminary Negotiations: The offeror must manifest an intention to be bound. Otherwise, it's just negotiation.
    • Offer: A manifestation of willingness to enter into a bargain that justifies another person in understanding their assent is invited and will conclude the contract.
    • Ads: Typically considered invitations to receive offers, not offers themselves.
    • Offeree: Has the power to accept the offer.
    • Unilateral Contract: Promise for an act (e.g., a reward for finding a lost dog).
    • Bilateral Contract: Promise for a promise (e.g., a promise to sell a car for a promise to pay).

    Duration of Offers

    • Termination: Offers are terminated at the specified time, or after a reasonable time.
    • Late or Defective Acceptance: Can operate as a counteroffer.
    • Silence as Acceptance: Typically not acceptance, unless prior dealings or trade custom create that expectation.

    Methods of Termination of Acceptance

    • Rejection: Must be clear and unambiguous; boilerplate language subject to further agreement may not be enough.
    • Counteroffer: Operates as a rejection and creates a new offer. Materially altering terms can lead to surprise or hardship.
    • Lapse of Time: Offer lapses after a reasonable time.
    • Revocation: Offeror can revoke an offer before accepted.
    • Death or Incapacity: Of the offeror or offeree, terminates an offer.

    Consideration

    • A bargained-for exchange of legal value that is sought by the promisor and given by the promisee.
    • Legal Value: Doesn't need to be market value, but there must be something of value that justifies the promise.
    • Nominal Consideration: Not enough unless part of an option contract.
    • Benefit-Detriment Test: Benefit to the promisor or detriment to the promisee.
    • Illusory Promises: When the promisor reserves a choice of performances, without each alternative being valuable on its own or a substantial possibility of meaningful choices remaining.

    Pre-Existing Duty Rule

    • Performing a pre-existing duty is not consideration, unless it differs substantially from the original duty.
    • Rule is being questioned in some jurisdictions.

    Consideration for Modification

    • Common Law: Requires new consideration or exceptions (statute, promissory estoppel, mutual agreement).
    • UCC: No new consideration needed, but modifications must be made in good faith.

    Past Consideration

    • Majority Rule: A promise to pay for a benefit received in the past is unenforceable (moral obligation is not enough).
    • Material Benefit Rule (Minority): A promise to pay for a past benefit is binding to prevent injustice, especially where the promisor received a material benefit.

    Promissory Estoppel

    • A promise that induces action or forbearance by the promisee is binding if injustice can be avoided only by enforcement.
    • Promisor must reasonably expect the promise to induce action or forbearance.

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    Description

    Explore the principles of contract law including the Objective Theory of Contract, mutual assent, and the implications of Letters of Intent. This quiz will assess your understanding of how courts interpret outward conduct and the binding nature of online contracts.

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