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

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

(3)

B.

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.

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.

bb.

Exceptions
1.

UCC. Merchants 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
offerees control.

(2)

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.

Rejection by Offeree.
aa.

Methods.
1.

Expressed Rejection - words

of rejection.

2.

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

bb.
(3)

Effect - Once rejected, the original

offer may not be reinstated.

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 As offer
and a breach.
2.

cc.

Expressly conditioned
acceptance.

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:

(2)

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.

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 Yorks 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 (dont 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)
B.

Pre-existing Duty - insufficient.

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-cant
accept reward

C.

iii.

Binding Obligation on Both Sides

(1)

Illusory Promises - No obligation on part of

promissor - unenforceable

(2)

Conditional Promises enforceable

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