Contract Formation...

Contract Formation General Approach:

A contract is a promise or a set of promises that the law will afford a remedy if breached. Contracts are classified by how they are formed and how they may be accepted. The law governing a contract is generally common law, but for goods, UCC Article 2 will apply.

A contract requires 1) Mutual Assent, 2) Consideration, and 3) No Defenses:

1. Mutual Assent:
a. Offer: An offer creates the power of acceptance in the offeree. The elements of an effective offer are:
i. Expression of present intent to be bound
ii. Definite and certain terms
iii. Communicated to the offeree

An offer can be terminated by: 1) the act of either party (revocation, rejection, lapse) or 2) operation of law: (death or insanity, destruction of subject matter, supervening illegality).

b. Acceptance: Acceptance requires the following:
i. Power of acceptance
ii. Communicated to offeree
iii. Not assignable
iv. Must be unequivocal (Mirror Image Rule) and
v. Is effective upon dispatch (Mailbox Rule)

2. Consideration:
a. Bargained-for Exchange:
i. Bargain
ii. Legal Value
b. Substitution for Consideration:
i. Promissory Estoppel/Detrimental Reliance: (requires)
1. Promisor reasonably expect to induce act or forebearance
2. Act or forebearance actually occurs
3. Act or forebearance is of a definite and substantial character
4. Recovery is limited as justice requires
ii. Good faith modification under the UCC

3. No Defenses: Possible defenses to contract formation include:
a. Mutual mistake:
i. Both parties mistaken
ii. Material adverse effect on the contract
b. No consideration
c. Illegality
d. Incapacity:
i. Infancy
ii. Insanity
iii. Intoxication
iv. Duress/coercion