Contracts: Formation & Offer/Acceptance

What are the essential elements required to form a valid contract?

The essential elements of a valid contract are offer, acceptance, consideration, mutual assent (intent to be bound), and no valid defenses (such as lack of capacity or illegality).

What is the primary difference between a bilateral contract and a unilateral contract?

A bilateral contract is formed by an exchange of mutual promises, whereas a unilateral contract is formed only by the offeree's complete performance of an act.

What three elements are required for a communication to constitute a valid legal offer?

A valid offer requires (1) an objective manifestation of present intent to contract, (2) definite and certain terms, and (3) communication to an identified offeree.

Under common law, are advertisements generally considered valid offers?

No, advertisements are generally considered invitations to deal or make an offer, unless they contain highly specific terms, promise something in exchange for clear action, and leave nothing open for negotiation (e.g., the Lefkowitz case).

What are the five primary ways an offer can be terminated before acceptance?

An offer can be terminated by revocation by the offeror, rejection or counteroffer by the offeree, lapse of time, death or mental incapacity of either party, or destruction of the subject matter or intervening illegality.

What is an option contract and how does it affect the offeror's power to revoke?

An option contract is a distinct contract in which the offeree gives consideration (e.g., money) to keep an offer open for a specified time, which legally restricts the offeror from revoking the offer during that period.

Under UCC Article 2-205, what are the requirements for a firm offer that cannot be revoked even without consideration?

A UCC firm offer requires that the offeror be a merchant, the offer be in a signed writing, and it explicitly gives assurances that it will be held open. It is irrevocable for the stated time or a reasonable time, not to exceed three months.

How does a counteroffer differ from a mere inquiry regarding an offer?

A counteroffer acts as a rejection of the original offer and creates a new offer, terminating the offeree's power of acceptance. A mere inquiry requests information or explores terms without rejecting the original offer.

What is the common law Mirror Image Rule regarding acceptance?

The Mirror Image Rule requires that the offeree's acceptance must exactly match the terms of the offer; any variation or addition of terms constitutes a rejection and a counteroffer.

How does UCC Article 2-207 (Battle of the Forms) alter the common law Mirror Image Rule for the sale of goods?

Under UCC 2-207, an acceptance with additional or different terms is still a valid acceptance unless expressly made conditional on assent to the new terms. Between merchants, additional terms automatically become part of the contract unless they materially alter it, the offer limits acceptance to its terms, or the offeror objects.