Contracts §2-207 Hypothetical

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AVBucks4239
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Contracts §2-207 Hypothetical

Postby AVBucks4239 » Wed Dec 07, 2011 10:49 am

Just did a practice exam without a model answer. I know this runs against most advice, but my professor recommended to look at this other professor's exams. So, the hypo is in the quote below, and my summary answer follows. Please let me know if I'm way off base here.

Assume both parties are merchants and all letters are signed by the sender.

Letter One: P sends to D a promise to buy 35 carloads of widgets. She wants a discount from the usual price of $2.00/widget to $1.50/widget. She also wants to know if she can have 10 extra carloads if she needs it. Assume the letter also clearly manifests intent to enter into a bargain.

Letter Two: D replies to P. He says "we cannot cut our price that much." He offers 35 carloads of widgets at $1.80/widget. Also states that he cannot send more than 35 carloads.

Letter Three: P relies to D. She says, "If $1.80 is the best you can do, we are inclined to take it." Also accepts the fact that she will not be able to get the 10 extra carloads. She does, however, request that all the widgets be blue.

Letter Four: D replies to P. Says blue widgets are more expensive to make and that price would be $1.85/widget.

Letter Five: P replies to D. Says she can't afford $1.85/widget, so send any colors. Also states, "Enclosed is my check for $5,000 as a down payment in token of my good faith." Facts do not state whether D signed or deposited check.

Later, P telephoned D to request her first shipment. D tells her to "go to hell" and does not send any widgets.

What are the rights and duties of each parties?


My analysis:

1) This is a transaction in goods, UCC applies.
2) P's first letter is the offer.
3) D's reply is a counter-offer. It is not simply "different or additional terms" prescribed by §2-207(1). The changes are material.
4) P's reply to D's counter-offer qualifies as an acceptance. She assented to price and quantity. The request for blue widgets only is allowed under §2-207(1).
5) D objected to P's request, so it does not enter contract pursuant to §2-207(2)(c).
6) P's reply is merely a confirmation of the shipment not being blue all widgets. The $5,000 payment potentially raises a part performance issue under §2-201(c). Facts are unclear, however, whether D accepted payment.
7) Conclusion: contract was entered into when P accepted D's counter-offer. Mutual assent and consideration were present, thus a contract is enforceable. Other letters were simply further negotiations between the merchants that §2-207 is designed to deal with.

NonTradHealthLaw
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Re: Contracts §2-207 Hypothetical

Postby NonTradHealthLaw » Wed Dec 07, 2011 11:02 am

Your analysis looks solid to me, though because the blue were more expensive to make, D may claim P's request for all blue widgets constituted another counteroffer because it represented a material alteration. After that, P's request for $5,000 worth of widgets becomes the new offer, because the counteroffer rejected the $1.80/widget offer. D, frustrated with the whole process of negotiation, chooses to reject that offer.

I'd be hesitant to only argue your first conclusion - at least based on my professor's preferences - though I think that's a much stronger argument.

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Re: Contracts §2-207 Hypothetical

Postby AVBucks4239 » Wed Dec 07, 2011 11:06 am

NonTradHealthLaw wrote:Your analysis looks solid to me, though because the blue were more expensive to make, D may claim P's request for all blue widgets constituted another counteroffer because it represented a material alteration. After that, P's request for $5,000 worth of widgets becomes the new offer, because the counteroffer rejected the $1.80/widget offer. D, frustrated with the whole process of negotiation, chooses to reject that offer.

I'd be hesitant to only argue your first conclusion - at least based on my professor's preferences - though I think that's a much stronger argument.

I thought about that, but how can you argue that's a counteroffer after the fact you've established that P's reply was an acceptance? Are you saying D's argument is that P's letter is not an acceptance, the request for blue is material, and thus this is another counteroffer, and so on?

I should also note that my professor has a 1,050 page word limit. So any argument I think is that weak, I'm not bringing up. The balance of arguing both sides while still analyzing the situation thoroughly is much more difficult than I thought with a word limit.

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Mce252
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Re: Contracts §2-207 Hypothetical

Postby Mce252 » Wed Dec 07, 2011 11:10 am

The request for blue widgets isn't a counteroffer. That's why 2-207 exits - to avoid to mirror image rule and treat the terms as proposals for additions.

D's original reply isn't a counteroffer because of the material terms - it's a counteroffer becuase its not a seasonable and definite expression of acceptance. An acceptance - even with materially different terms - is still acceptance, unless they demand assent to the terms.

The only real big 2-207 component to the problem is the whole blue thing. Since the seller rejects the proposal within a reasonable time, it doesn't enter the contract. And it's also likely a material addition.

This problem doesn't go into any conlicting/different terms which requires you to analyze knockout rule versus offeror's terms so make sure you find a couple problems with a little more depth.

NonTradHealthLaw
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Re: Contracts §2-207 Hypothetical

Postby NonTradHealthLaw » Wed Dec 07, 2011 11:11 am

My point is that P's reply was not an acceptance because he added conditions that materially altered D's counteroffer - namely, requesting all blue widgets. Is it material....hardly; however this is a thin fact pattern which you'd want to mine for every nugget of possibility, if it's your only essay.

Could probably state it pretty briefly:

If P's response requesting all blue widgets materially alters the conditions, then D's invitation to "go to hell" is a rejection and D may move on with impunity. More likely, however, <your conclusion> "contract was entered into when P accepted D's counter-offer. Mutual assent and consideration were present, thus a contract is enforceable. Other letters were simply further negotiations between the merchants that §2-207 is designed to deal with."

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Re: Contracts §2-207 Hypothetical

Postby AVBucks4239 » Wed Dec 07, 2011 11:15 am

Mce252 wrote:The request for blue widgets isn't a counteroffer. That's why 2-207 exits - to avoid to mirror image rule and treat the terms as proposals for additions.

D's original reply isn't a counteroffer because of the material terms - it's a counteroffer becuase its not a seasonable and definite expression of acceptance. An acceptance - even with materially different terms - is still acceptance, unless they demand assent to the terms.

The only real big 2-207 component to the problem is the whole blue thing. Since the seller rejects the proposal within a reasonable time, it doesn't enter the contract. And it's also likely a material addition.

This problem doesn't go into any conlicting/different terms which requires you to analyze knockout rule versus offeror's terms so make sure you find a couple problems with a little more depth.

Part in bold is something I didn't even think of. So obvious that I missed it. Good argument to strengthen what I had.

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Mce252
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Re: Contracts §2-207 Hypothetical

Postby Mce252 » Wed Dec 07, 2011 11:17 am

Assume both parties are merchants and all letters are signed by the sender.

Letter One: P sends to D a promise to buy 35 carloads of widgets. She wants a discount from the usual price of $2.00/widget to $1.50/widget. She also wants to know if she can have 10 extra carloads if she needs it. Assume the letter also clearly manifests intent to enter into a bargain.

This is original offer with essential terms.

Letter Two: D replies to P. He says "we cannot cut our price that much." He offers 35 carloads of widgets at $1.80/widget. Also states that he cannot send more than 35 carloads.


Counter offer - is not a definite and seaasonable expression of acceptance.

Letter Three: P relies to D. She says, "If $1.80 is the best you can do, we are inclined to take it." Also accepts the fact that she will not be able to get the 10 extra carloads. She does, however, request that all the widgets be blue.

Acceptance. Additional term: blue widgets could be argued both ways for materiality but the seller rejects proposal within a reasonable time below.
Letter Four: D replies to P. Says blue widgets are more expensive to make and that price would be $1.85/widget.

Letter Five: P replies to D. Says she can't afford $1.85/widget, so send any colors. Also states, "Enclosed is my check for $5,000 as a down payment in token of my good faith." Facts do not state whether D signed or deposited check.

I think you argue the statute of frauds here, like OP mentioned. If the check was accepted, statute of frauds met. If not, there is a need for signed writing for goods over $500.

Later, P telephoned D to request her first shipment. D tells her to "go to hell" and does not send any widgets.

Breach

What are the rights and duties of each parties?

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Re: Contracts §2-207 Hypothetical

Postby BeaverHunter » Wed Dec 07, 2011 11:20 am

This is more of a formation problem than 2-207. There is no definite expression of acceptance and no conduct by both parties recognizing a K. I'd say no K is formed here.

If you said "we are inclined to take it" qualifies as a definite expression of acceptance, then all blue would be an additional term knocked out because the seller objected.
Last edited by BeaverHunter on Wed Dec 07, 2011 11:24 am, edited 1 time in total.

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Re: Contracts §2-207 Hypothetical

Postby Mce252 » Wed Dec 07, 2011 11:22 am

BeaverHunter wrote:This is more of a formation problem than 2-207. There is no definite expression of acceptance and no conduct by both parties recognizing a K. I'd say no K is formed here.



I agree. It's not a good 2-207 question. However, I think that the possible acceptance ("If $1.80 is the best you can do, we are inclined to take it.") could be argued either way. Being inclinded isn't exactly a definite acceptance, but could be.

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Re: Contracts §2-207 Hypothetical

Postby AVBucks4239 » Wed Dec 07, 2011 11:24 am

BeaverHunter wrote:This is more of a formation problem than 2-207. There is no definite expression of acceptance and no conduct by both parties recognizing a K. I'd say no K is formed here.

I guess this is where the real issue lies. D would argue no definite and seasonable expression of acceptance, thus no K. P would argue that "I am inclined to accept your price of $1.80" is definite and seasonable, thus a K was entered into.

Insert 200 watt light bulb going off in my head.

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Re: Contracts §2-207 Hypothetical

Postby DocHawkeye » Wed Dec 07, 2011 11:28 am

Mce252 wrote:

I think you argue the statute of frauds here, like OP mentioned. If the check was accepted, statute of frauds met. If not, there is a need for signed writing for goods over $500.



Doesn't the exchange of singed letters meet the requirement of a writing under the Statute of Frauds? The writings need not be all the same document if the various documemts all clearly relate to the same transaction.

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Mce252
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Re: Contracts §2-207 Hypothetical

Postby Mce252 » Wed Dec 07, 2011 11:34 am

DocHawkeye wrote:
Mce252 wrote:

I think you argue the statute of frauds here, like OP mentioned. If the check was accepted, statute of frauds met. If not, there is a need for signed writing for goods over $500.



Doesn't the exchange of singed letters meet the requirement of a writing under the Statute of Frauds? The writings need not be all the same document if the various documemts all clearly relate to the same transaction.



You're right. I overlooked the blurb at the top that said all of them were signed. I'm not sure exactly what issue the mailed check is drawing out.

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Re: Contracts §2-207 Hypothetical

Postby DocHawkeye » Wed Dec 07, 2011 11:48 am

Mce252 wrote:
DocHawkeye wrote:
Mce252 wrote:

I think you argue the statute of frauds here, like OP mentioned. If the check was accepted, statute of frauds met. If not, there is a need for signed writing for goods over $500.



Doesn't the exchange of singed letters meet the requirement of a writing under the Statute of Frauds? The writings need not be all the same document if the various documemts all clearly relate to the same transaction.



You're right. I overlooked the blurb at the top that said all of them were signed. I'm not sure exactly what issue the mailed check is drawing out.


UCC 2-201(3)? A contact that deson't meet the SoF definition in 2-201(1) is still enforceble if payment is made (and accepted)?
Last edited by DocHawkeye on Wed Dec 07, 2011 11:59 am, edited 1 time in total.

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Re: Contracts §2-207 Hypothetical

Postby AVBucks4239 » Wed Dec 07, 2011 11:53 am

DocHawkeye wrote:
Mce252 wrote:
DocHawkeye wrote:
Mce252 wrote:

I think you argue the statute of frauds here, like OP mentioned. If the check was accepted, statute of frauds met. If not, there is a need for signed writing for goods over $500.



Doesn't the exchange of singed letters meet the requirement of a writing under the Statute of Frauds? The writings need not be all the same document if the various documemts all clearly relate to the same transaction.



You're right. I overlooked the blurb at the top that said all of them were signed. I'm not sure exactly what issue the mailed check is drawing out.


UCC 2-210(3)? A contact that deson't meet the SoF definition in 2-201(1) is still enforceble if payment is made (and accepted)?

If I had to guess, the $5,000 is there to get a student in some long winded discussion about an option contract, despite it clearly not being present. I had a one sentence blurb about "This is clearly not an option for lack of x, y, etc." I tried to use it for SoF, but like you guys have said, it seems to be met.

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Re: Contracts §2-207 Hypothetical

Postby Mce252 » Wed Dec 07, 2011 12:05 pm

DocHawkeye wrote:
Mce252 wrote:
DocHawkeye wrote:
Mce252 wrote:

I think you argue the statute of frauds here, like OP mentioned. If the check was accepted, statute of frauds met. If not, there is a need for signed writing for goods over $500.



Doesn't the exchange of singed letters meet the requirement of a writing under the Statute of Frauds? The writings need not be all the same document if the various documemts all clearly relate to the same transaction.



You're right. I overlooked the blurb at the top that said all of them were signed. I'm not sure exactly what issue the mailed check is drawing out.


UCC 2-201(3)? A contact that deson't meet the SoF definition in 2-201(1) is still enforceble if payment is made (and accepted)?



Right, that's what I thought the first time around, but that provision is uncessary if the writing requirement is fulfilled. That only applies if the writing is not established.

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Mce252
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Re: Contracts §2-207 Hypothetical

Postby Mce252 » Wed Dec 07, 2011 12:07 pm

If I had to guess, the $5,000 is there to get a student in some long winded discussion about an option contract, despite it clearly not being present. I had a one sentence blurb about "This is clearly not an option for lack of x, y, etc." I tried to use it for SoF, but like you guys have said, it seems to be met.


Consideration isn't necessary for an option contract by a merchant so I don't see the relevance.




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