MANGMT 3540 1st Edition Lecture 10 Outline of Last Lecture I Mutual Manifestation of Assent II Offer Defined and Four Non Offers III IV V Three Requirements for Valid Offer When does offer terminate Requirements for Valid Acceptance Outline of Current Lecture I Acceptance and Unilateral Contracts II Introduction to Uniform Commercial Code III Variations under the UCC IV Firm Offer V U C C Acceptance Sale of Goods VI Introduction to Consideration VII Pre existing duty rule VIII Exceptions to consideration rule IX Consideration under the U C C Current Lecture I Acceptance and Unilateral Contracts A Acceptance is not i Verbal B Acceptance is by i Performance These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute 1 What if partial performance Execution of a part of a contract 2 Partial performance typically makes the offer irrevocable for a reasonable time to complete performance C Awareness communication of offer i Offeree must know of offer before acceptance by performance offer must have been received by the offeree ii Example award for turning in criminal but most know of offer before turning in person II Introduction to Uniform Commercial Code UCC Article 2 of the UCC governs contracts involving sale of goods A Sale i Passage of title from Seller to Buyer for a price consideration ii Not a lease no passage of title iii Not a gift no price B Definition of Goods i Things tangible and movable ii Tangible has physical existence desk vs promissory note patent iii Moveable can be carried from place to place not attached to real estate iv Goods vs Services look at the primary purpose of the contract 1 Example mid life crisis C Merchant 3 categories i A dealer in goods of the type contracted for ii A person who holds himself out as having special knowledge as to goods of the type contracted for iii A person who employs a merchant as an agent III Variations under the UCC Article 2 of the UCC alters contracts and duties of parties for sales of good For the purpose of this class if there is no stated alteration assume the common law applies A Standards of Dealing i Good faith is implied in every contract ii Higher standards for merchants must meet industry standards for fair dealing in trade B Offer i Offer may have open terms including price UCC fills in the blanks ii Price reasonable at time of delivery iii Payment terms on delivery iv Delivery sellers place of business v Shipment time reasonable vi The courts will enforce the contract and fill in the missing terms if 1 The parties and goods are identifiable 2 The quantity is specified and 3 The court determines the parties intended to make a contract IV Firm Offer A If a merchant in a signed writing promises an offer will be kept open the merchant is bound to hold the offer open for stated time or reasonable time not greater than 3 months Missouri Rule UCC 90 days V U C C Acceptance Sale of Goods A Qualifies the Mirror Image Rule i An acceptance is valid despite new terms ii Additional terms are considered proposals for new additions to the contract iii Exception An acceptance made conditional on new terms is a rejection and counteroffer B Between Merchants i New terms in an acceptance sometimes become part of contract if 1 The change is not material important 2 No objection to the change is made by the offeror within 10 days VI Introduction to Consideration 2nd requirement for a valid contract A Definition i Value given or detriment suffered B Quid Pro Quo i This for that A bargained for exchange C Four Types of Sufficient Consideration i An act ii Giving up the exercise of a legal right iii A change in legal status iv A promise to do any of the first three D Sufficiency vs Adequacy i Sufficiency required enough to make the promise enforceable ii Adequacy or fairness is not required E Five Types of Insufficient Consideration i Illusory Promise 1 Promise with no substance subject to the whim of the promisor exceptions a Requirement contracts are valid promises to buy all goods you need for a certain period of time b Output contracts are valid promises to sell all the goods you can produce for a certain period of time ii iii iv v c E g I promise to sell you my car unless I change my mind OR I promise to work for you for 1 year unless I need to quit d A good faith duty to have requirements or continue producing is implied under the UCC A gratuitous promise is insufficient consideration 1 Defined A promise to make a gift or moral obligation 2 Example you are in an accident doctor comes I promise to pay bill but don t doctor can t sue Past consideration is insufficient consideration 1 The promised consideration has already been performed prior to the promise to do it Nominal Consideration 1 Consideration in name only typically only recited in a written agreement but not paid 2 The amount is very small in light of the entire contract A promise to Perform a pre existing duty is insufficient consideration 1 E g I won t kill you if you pay me 10 000 VII Pre existing Duty Rule A Definition i If a duty existed prior to the promises to do it then the promise to fulfill that duty is not valid consideration ii Contract Modifications New promises on both sides often needed B Two exceptions to pre existing duty rule i Recession voluntary and new contract out with the old in with the new gets around modification problem ii Promise to pay an unliquidated debt VIII Exceptions to Consideration Rule A Four exceptions to the consideration rule i Promises to pay debts barred by statute of limitations ii Reaffirmation agreements in bankruptcy iii Charitable subscriptions pledges made to a charity are often enforceable iv Promissory Estoppel 1 A promise is made by the defendant 2 Plaintiff suffers detriment by reasonable reliance on the promise and 3 Enforcement of the promise is necessary to avoid injustice IX Consideration under the U C C A Two changes of the Common Law as to Consideration i Contract modifications modifications need no new consideration to be binding ii Firm offers are binding although they are not option contracts