CONDITIONS TO USE

THE MATERIAL SET FORTH BELOW (THE “OUTLINE”) IS BEING PROVIDED FOR USE BY THE STUDENT SOLELY TO PARTIALLY ASSIST THE STUDENT IN PREPARING FOR THE CLASS LECTURES OF MICHAEL J. LOMBARDO (THE “INSTRUCTOR”) CONCERNING THE COURSE MATERIAL FOR ACCT 311 TO BE PRESENTED IN CLASS BY THE INSTRUCTOR. REVIEW OF THE MATERIAL INCLUDED IN THE OUTLINE IS NOT A SUBSTITUTE FOR CLASS ATTENDANCE OR FOR TAKING NOTES DURING THE CLASS LECTURES. THE INSTRUCTOR RESERVES THE RIGHT TO EXPAND, SUPPLEMENT, ADD TO, OMIT FROM, CORRECT, UPDATE, OR OTHERWISE MODIFY THE MATERIAL INCLUDED IN THE OUTLINE, AT ANY TIME AND FROM TIME TO TIME, IN ANY CLASS, WITHOUT POSTING ANY CHANGES TO THE OUTLINE. IN ADDITION TO THE MATERIAL INCLUDED IN THE OUTLINE, EACH STUDENT IS RESPONSIBLE FOR ALL OF THE MATERIAL INCLUDED IN THE CHAPTERS REQUIRED TO BE READ AS SET FORTH IN THE COURSE OUTLINE PREPARED BY THE INSTRUCTOR, AND FOR ALL MATERIAL PRESENTED DURING THE CLASS LECTURES. RELIANCE SOLELY ON THE MATERIAL INCLUDED IN THE OUTLINE IN PREPARING FOR ANY TEST TO BE GIVEN BY THE INSTRUCTOR IS PROHIBITED. THE INSTRUCTOR RESERVES THE RIGHT TO DISCONTINUE POSTING ANY MATERIAL ON THE WEB AT ANY TIME

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2. Specific Requirements.

a. Creation (Agreement). (Chapter 11)

i. Generally.

Mutual assent - offer and acceptance of the same deal

Must have an offer and an acceptance

ii. Offer.

A. Required Elements

(1) Commitment

(2) Communication of commitment to and identifiable offeree

(3) Definite terms

_________________________________(1) Commitment

aa. Test - objective - will a reasonable person, considering all of the circumstances, believe that a commitment was made.

bb. Jest or Anger - when a commitment is understood as such, offer is unenforceable.

cc. Advertisements or Catalogs are not offers, but merely invitations to deal.

Exception - Where the terms are certain, definite and where the intention is clear (usually where there is a “one-of-a-kind” item)

(2) Communication to an identifiable Offeree.

aa. Knowledge - one cannot accept an offer until one has knowledge of its existence

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(3) Definite Terms.

aa. Quantity - must be specifically stated.

bb. Exceptions.

1. UCC - certain terms can be implied if the offer is silent (e.g. time of delivery, method of payment and sometimes even price)

2. Requirements and Outputs Contracts.

a. Requirements - agree to purchase all that is needed.

b. Outputs - agree to sell all that can be produced.

3. Cost Plus Contracts.

4. Services as needed.

5. Current Market Price.

B. Termination of Offers-List.

(1) Revocation by offeror

(2) Rejection by offeree

(3) Operation of Law

_____________________________(1) Revocation.

aa. Rule - most offers may be terminated prior to acceptance.

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bb. Exceptions

1. UCC. Merchant’s Firm Offer

a. Person in business

b. Written, signed offer

c. Offer provides it will be held open

Rule - The offer will, by law, remain open (i.e. it cannot be revoked) for a reasonable period of time not to exceed 3 months, even if it states it will be held open beyond 3 months unless there is consideration given to keep the offer open.

2. New York - GOL §5-1109 - If offeror makes a written offer which states it is irrevocable, it is irrevocable even if there is no consideration given.

3. Detrimental Reliance.

Rule - Offer is enforceable if the offeree foreseeably relies on it (change or establish a position).

New York Limitation - Rule applies only to charitable gifts.

4. Offer for which Consideration is given.

Rule - If consideration is given to keep an offer open, it cannot be revoked before the stated time.

cc. Offer to make a Unilateral Contract

Rule - Same as general rule (offer can be revoked at any time prior to acceptance)

Acceptance - When performance is fully complete

dd. Methods of Revocation.

1. Communication to Offeree.

Communication must be sent to, and actually received by, the offeree.

Communication is considered received when it arrives at a place within the scope of the offeree’s control.

2. Public Offers. Can be revoked by the same or similar means as used when the offer was made.

3. Indirect Communication. Offer is revoked when the offeree learns from a reliable source that the offeror cannot perform.

(2) Rejection by Offeree.

aa. Methods.

1. Expressed Rejection - words of rejection.

2. Counteroffer - any modification of the original offer, no matter how slight

bb. Effect - Once rejected, the original offer may not be reinstated.

(3) Operation of Law.

aa. Complete Destruction of Subject Matter

bb. Supervening illegality (after offer is made, a law is enacted prohibiting its enforcement)

cc. Death or incapacity of offeror

dd. Lapse of time stated in offer (reasonable time if no time is stated)

iii. Acceptance.

A. Issue -Acceptance or counteroffer

B. Counteroffer.

(1) UCC.

aa. Applies to sales of all personal property

bb. 2 ways to have a counteroffer:

1. Submit non-conforming goods as an accommodation.

Example - “A” orders widgets, and “B” ships darts “as an accommodation”. If “A” can use the darts, “A” keeps them and there is a contract for darts (price is implied). If “A” cannot use them and returns them, it is only a counteroffer. If “B” ships darts but does not state “as an accommodation”, it is an acceptance of “A”s offer and a breach.

2. Expressly conditioned acceptance.

cc. Acceptance with Proposed Additional Terms

1. Contract with a consumer. There is a contract and the new proposed term can be accepted or rejected by the offeror without affecting the contract.

2. Contract Between Merchants. There is a contract and the new proposed term

automatically becomes a part of the contract unless:

a. Offer specifically states offeror will accept no other terms (e.g. “No Changes”)

b. Offeror rejects the

new terms.

c. New term materially alters the contract.

(2) Other Contracts.

Expressly conditioned acceptance

C. Methods of Acceptance.

(1) New York Rule - Acceptance can occur only by using the same means used to communicate the offer.

Offer by mail - Acceptance must be by mail.

New York’s rule is a rule followed by a minority of states.

aa. When Acceptance Occurs.

1. Mail Box Rule - (mail & telegrams) - Acceptance is effective when mailed (deposited or dispatched)

2. Exceptions

a. Option Contract. Acceptance occurs only when it is actually received.

b. As specified in Offer Where offer states that acceptance is

effective only upon receipt.

c. Reliance (vacillating offeree) - Situation where offeree sends a rejection (effective upon receipt) and then sends an acceptance (effective when mailed

Rule: If offeror receives the

rejection before receiving the acceptance, and acts upon it, the acceptance is unenforceable. If the rejection was not acted upon, acceptance is enforceable.

(2) Acceptance By Conduct.

Offeror can require that a particular conduct occur to establish acceptance and if so, that is the only means of acceptance.

(3) Unsolicited Merchandise. (GBL §396(2))

NOT A FORM OF ACCEPTANCE.

The law provides that the recipient of unsolicited goods can keep the goods and need not return or pay for them.

(4) Silence.

aa. Implied in Fact. If services are rendered and offeree (recipient) knew or had reason to know there was an expectation of compensation, and he had an opportunity to reject

the services but did not, it constitutes an acceptance.

bb. As a proposed term.

If proposed by Offeror - not an acceptance (don’t force people to act affirmatively to reject an offer)

If proposed by Offeree - will be an acceptance.

(5) Unilateral Contracts.

Acceptance will occur only upon full performance.

(6) Auctions. (UCC §2-328)

aa. Types

1. With reserve

2. Without reserve

bb. Similarities.

Each bid is an offer

Acceptance is fall of hammer

cc. Differences.

With reserve - the goods may be withdrawn at any time before the fall of the hammer

Without reserve - the goods may not be withdrawn after the bidding has started

b. Consideration.

i. Definition. That which is bargained for and given in exchange for a promise.

ii. Elements

A. Induce performance.

B. Detriment to promisee

C. Binding obligation on both sides

__________________________________

A. Induce performance.

(1) Past consideration - insufficient

(2) Gifts - unenforceable

(3) Moral Consideration - valid in 2 cases:

aa. Promise to pay a debt even if statute of limitations has expired if promise or acknowledgment of debt is in writing.

S.L. - 6 years

Partial payment - same effect (reinstates balance of debt)

bb. Promise to pay a debt discharged in bankruptcy

Must have a reaffirmation, before discharge, and a court hearing

(4) Sham Consideration - If the consideration cited is proven to be false, and no other consideration exists, the agreement fails.

Adequacy - court will not question it

(5) Pre-existing Duty - insufficient.

B. Detriment to Promisee.

(1) What is it? Promisee must promise to do something or refrain from doing something he has no legal obligation to do.

(2) Statutory Exceptions

aa. Modification of contract for sale of goods - need not be in writing unless the statute of frauds or the contract requires) [UCC §2-209(1)]

bb. Written modification of any contract if it is signed by the person against whom enforcement is sought [GOL §5-1103]

cc. Release of another from a claim [UCC §1-107, GOL §5-303]

dd. Rewards - finder of lost or mislaid property may collect a reward if the reward offer is in writing or was published [GOL §5-1113]

If one has a pre-existing duty-can’t accept reward

C. Binding Obligation on Both Sides

(1) Illusory Promises - No obligation on part of promissor - unenforceable

(2) Conditional Promises - enforceable

iii. Consideration Substitutes.

A. Seal - no longer a substitute in New York

B. Promissory Estoppel - detrimental reliance

C. Merchants firm offer (UCC) - can be open for a maximum of 3 months without consideration