Contracts – “Short Essay” Question and Answer “Rights of John & Pete”

1. John decides to sell his truck to Pete for $1,000. Pete agrees to buy it at that price and to pay John the money “when he is able.” Discuss. (SEE SAMPLE ANSWER, infra.)

WRITING STYLE EXAMPLE

 
RIGHTS OF JOHN & PETE

FORMATION OF CONTRACT

In order to prove a valid contract, John and Pete must establish the following elements: First, to determine the applicable law and then whether there is an (1) offer, (2) acceptance, (3) consideration, and (4) the absence of any defenses.

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Applicable Law

The UCC governs all contracts based on the sale of goods.

Given the fact John’s truck is a good, the applicable law governing the transaction between John and Pete is the UCC.

There are no facts qualifying either John or Pete as a merchant routinely engaged in the commercial purchase and sale of goods so that the UCC rules applicable to merchants will not apply.

Offer

In order to establish a valid offer there must be the manifestation of present contractual intent, definite and certain terms, and communication of the offer to the offeree.

To prove the requisite intent, the following factors may be considered: Whether there are facts of preliminary negotiation or invitation to contract – or whether there are facts demonstrating a precatory expression and showing a desire, request or wish to make an offer.

When John “decided to sell his truck” to Pete, it is unlikely the requisite intent was established because this only established the desire to do so as a precatory expression. Further, John’s decision could be construed as a preliminary invitation or negotiating tactic – assuming it was communicated to Pete.

Although at CL, time for performance and price were necessary terms, the UCC only requires “quantity” – which is implicit in John’s potential offer given the fact only “John’s truck” is contemplated. Further, it can be assumed John’s “offer” was communicated in view of Pete’s agreement to buy it for the $1,000 price.

Overall, John’s potential offer is suspect given the difficulty of satisfying the necessary intent element as discussed, above.
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Acceptance

The unequivocal assent to the terms of a valid offer constitutes acceptance. Although at CL the addition of any term by the offeree caused a counteroffer and rejection of the offer, UCC 2-207 establishes the additional term must materially alter the offeror’s terms.

When Pete as the offeree agreed to buy John’s truck for the price of $1,000 but added the term to “pay John when he is able,” an argument may be made that this materially altered John’s potential offer because it created a condition for Pete to perform that may objectively be incapable to determine.

Consideration

Assuming a valid offer and acceptance, at issue is whether John and Pete each incurred sufficient benefit and detriment regarding, respectively, the truck and $1,000 in order to constitute valuable bargained-for consideration.

Again, given Pete’s agreement to “pay when able,” an argument may be made that his potential acceptance is at best illusory – unless the “when able” term is objectively capable of being determined to be definite and certain so that Pete’s performance will be assured by a specific date.

Defenses

Statute of Frauds

All contracts for the sale of goods for more than $500 must be in writing.

Presuming an otherwise valid contract based on a valid offer, acceptance, and consideration – and regardless of the issues discussed above – at issue is whether the Statute of Frauds would apply given the fact there is no evidence of a writing between John and Pete and in view of the fact the cost of the truck exceeds the $500 requirement. This would constitute a valid defense to the formation of the John/Pete contract in the event the writing element necessary to satisfy the statute of frauds cannot be satisfied.
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Q: What “organizational” format was used in this answer – “formal” or “informal”?
A: “Formal”
Why?: Because the “elements” (i.e., “issues”) for “Formation” were headnoted. The “informal” organizational approach would have “compressed” discussion of the elements into a series of paragraphs – mostly using the “minor” paragraphing/analysis technique.

 

 

 
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