MANGMT 3540 1st Edition Lecture 10 Outline of Last Lecture I. Mutual Manifestation of AssentII. Offer Defined and Four Non-OffersIII. Three Requirements for Valid OfferIV. When does offer terminate?V. Requirements for Valid AcceptanceOutline of Current Lecture I. Acceptance and Unilateral ContractsII. Introduction to Uniform Commercial CodeIII. Variations under the UCCIV. Firm OfferV. U.C.C. Acceptance – Sale of GoodsVI. Introduction to ConsiderationVII. Pre-existing duty ruleVIII. Exceptions to consideration ruleIX. Consideration under the U.C.C.Current LectureI. Acceptance and Unilateral ContractsA. Acceptance is not:i. VerbalB. Acceptance is by:i. PerformanceThese 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 performanceC. Awareness (communication of offer): i. Offeree must know of offer before acceptance by performance – offer must have been “received” by the offereeii. Example: award for turning in criminal, but most know of offer before turning in personII. Introduction to Uniform Commercial Code (UCC: Article 2 of the UCC governs contracts involving sale of goods.)A. Salei. 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 Goodsi. Things tangible and movableii. 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 contract1. Example: mid-life crisisC. Merchant- 3 categories i. A dealer in goods of the type contracted forii. A person who holds himself out as having special knowledge as to goods of the type contracted foriii. A person who employs a merchant as an agentIII. Variations under the UCCArticle 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 Dealingi. Good faith is implied in every contractii. Higher standards for merchants: must meet industry standards for fair dealing in tradeB. Offer i. Offer may have open terms including price; UCC fills in the blanksii. Price: reasonable at time of deliveryiii. Payment terms: on deliveryiv. Delivery: sellers place of businessv. Shipment time: reasonable vi. The courts will enforce the contract and fill in the missing terms if:1. The parties and goods are identifiable2. The quantity is specified, and3. The court determines the parties intended to make a contractIV. Firm OfferA. 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 GoodsA. Qualifies the Mirror Image Rulei. An acceptance is valid despite new termsii. Additional terms are considered proposals for new additions to the contractiii. Exception: An acceptance made conditional on new terms is a rejection and counterofferB. Between Merchantsi. 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 daysVI. Introduction to Consideration (2nd requirement for a valid contract)A. Definitioni. Value given or detriment sufferedB. Quid Pro Quoi. This for that. A bargained for exchangeC. Four Types of Sufficient Consideration i. An actii. Giving up the exercise of a legal rightiii. A change in legal statusiv. A promise to do any of the first threeD. Sufficiency vs. Adequacyi. Sufficiency required – enough to make the promise enforceableii. Adequacy or fairness is not requiredE. Five Types of Insufficient Considerationi. Illusory Promise1. 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 timec. 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 UCCii. A gratuitous promise is insufficient consideration1. Defined: A promise to make a gift or moral obligation2. Example: you are in an accident, doctor comes, I promise to pay bill but don’t, doctor can’t sueiii. Past consideration is insufficient consideration1. The promised consideration has already been performed prior to the promise to do itiv. Nominal Consideration1. Consideration in name only – typically only recited in a written agreement but not paid2. The amount is very small in light of the entire contractv. A promise to Perform a pre-existing duty is insufficient consideration1. E.g. I won’t kill you if you pay me $10,000VII. Pre-existing Duty RuleA. Definitioni. If a duty existed prior to the promises to do it, then the promise to fulfill that duty is not valid considerationii. Contract Modifications: New promises on both sides often neededB. Two exceptions to pre-existing duty rule:i. Recession (voluntary) and new contract – out with the old; in with the new – gets around modification problemii. Promise to pay an unliquidated debt VIII. Exceptions to Consideration RuleA. Four exceptions to the consideration rulei. Promises to pay debts barred by statute of limitationsii. Reaffirmation agreements in bankruptcy iii. Charitable subscriptions: pledges made to a charity are often enforceableiv. Promissory Estoppel:1. A promise is made by the defendant2. Plaintiff suffers detriment by reasonable reliance on the promise; and3. Enforcement of the promise is necessary to avoid injusticeIX. Consideration under the U.C.C.A. Two changes of the Common Law as to Considerationi. Contract modifications – modifications need no new consideration to be bindingii. Firm offers are binding although they are not option