Contract Formation
Offer, acceptance, consideration—then the defenses. The battleground is always which rulebook applies and whether the offer was still alive when it was accepted.
First: which law?
Is the deal for goods—movable, tangible things?
UCC Article 2. Merchants get special rules (firm offers, 2-207, warranties).
A mix of goods and services?
Predominant purpose controls the whole contract—count the dollars and the point of the deal.
Common law
Mirror image, pre-existing duty, and friends.
Offer
An offer is a manifestation of present willingness to be bound on definite terms, communicated so the offeree reasonably believes their assent seals the deal. Ads are usually invitations—unless specific and promissory (“first come, first served, one fur coat, $1”).
“I'll sell you my bike for $100,” Liv tells Lana—offer. “I'm thinking of selling my bike” is musing; Lana's “I accept!” creates nothing.
When the offer can't be revoked
| Device | Requirements | How long |
|---|---|---|
| Option contract | Promise to keep open + consideration paid | The stated period—counteroffers don't kill it |
| Firm offer (UCC 2-205) | Merchant, signed writing, assurance it'll stay open—no consideration needed | Stated time, max 3 months |
| Unilateral start | Offeree begins performance of a unilateral offer | Reasonable time to finish |
| Foreseeable reliance | Offeror should expect reliance before acceptance (the sub-bid cases) | As justice requires |
Rosa (a dealer) signs, “this espresso machine is yours at $2,000, offer open 30 days”—firm offer, irrevocable, no payment needed. Liv, not a merchant, must be paid for her promise to hold the bike.
Acceptance—and the mailbox rule
Acceptance is a manifestation of assent in the manner invited. Common law demands a mirror image—any change is a counteroffer. Mailbox rule: acceptance is effective on dispatch; everything else (revocation, rejection, counteroffer) on receipt. Rejection-then-acceptance: whichever arrives first. Options: acceptance effective on receipt.
Liv mails a revocation Monday; Lana mails her acceptance Tuesday, before the revocation arrives Wednesday. Contract—Lana's acceptance beat the revocation because dispatch wins.
Battle of the forms (UCC 2-207)
- A definite acceptance with added terms still forms the contract
- The added terms come IN unless they materially alter, the offer limited acceptance to its terms, or the offeror objects
- Different (conflicting) terms: majority knocks both out and fills with UCC gap-fillers
- Contract still forms on the offer's terms
- The new terms are mere proposals—in only if expressly accepted
- No writing at all but both perform? Contract = the terms on which the writings agree + gap-fillers
Rosa orders 40 chairs; Noodle Corp.'s confirmation adds “disputes go to arbitration.” Both merchants: the term joins the deal unless it materially alters (courts split on arbitration—flag it). If Rosa were a consumer, it's just a proposal she never accepted.
Consideration
A bargained-for exchange—each side's promise or performance induces the other's. Gift promises fail. Pre-existing duty (common law): doing what you already owe isn't consideration—modifications need something new. UCC contrast: good-faith modifications need no consideration (2-209). Substitutes: promissory estoppel (foreseeable, reasonable, detrimental reliance).
Mid-renovation, Liv demands $5,000 extra to finish the same job—Rosa's promise to pay is unenforceable at common law (pre-existing duty). If instead Rosa's chair supplier raises the price in good faith after a lumber shortage, the UCC modification sticks with no new consideration.
Defenses to formation
| Defense | The core rule |
|---|---|
| Statute of Frauds | Signed writing needed for: Marriage, deals not performable within a Year, Land, Executor's promises, Goods $500+, Suretyship. Outs: part performance (land), specially manufactured goods, merchant confirmations unobjected to in 10 days, judicial admissions |
| Capacity | Minors may disaffirm (but pay for necessaries); mental incapacity; intoxication if the other side knew |
| Misrepresentation / fraud | False assertion of fact, material or fraudulent, justifiably relied on—voidable |
| Duress / undue influence | Improper threat (economic duress = wrongful threat + no reasonable alternative) |
| Mistake | Mutual mistake on a basic assumption → voidable by the adversely affected party; unilateral mistake only if the other side knew or should have |
| Unconscionability | Procedural + substantive unfairness, judged at formation—the court's scalpel |
MBE rhythm: which law → live offer → valid acceptance → consideration → defense. Most wrong answers break exactly one link—usually a dead offer (revocation, lapse, counteroffer) that someone tries to accept.
Where the points are
The traps examiners actually set.
- Most tested
- Firm offer vs. option (merchant? consideration? 3-month cap); the mailbox rule with a racing revocation; 2-207 added vs. different terms; pre-existing duty vs. UCC good-faith modification.
- Classic traps
- Accepting a revoked or lapsed offer; a counteroffer killing an ordinary offer but not an option; firm offers from non-merchants; “$500+ goods” contracts enforced without a writing; treating ads as offers.
Keep going: UCC Article 2 quick chat Parol Evidence quick chat Contract Formation flowchart Contracts Attack Sequences UCC Formation MEE guide