CONTRACT I AND II
CRYSTAL
2011
I. PROMISE
An undertaking, however expressed, either that something shall happen, or that something shall not happen, in the future.
Express: formed by language, oral or written. OR
Implied: formed by manifestations of assent other than oral or written language, i.e., by conduct.
If induced by a return promise = CONSIDERATION. (then each promise is consideration for the other)
If it also has value (but CT won’t ask!) = CONSIDERATION
o If no value = NO CONSIDERATION
o If grossly excessive value…
§ May be gift
§ Maybe no meeting of the minds
§ May be unconscionable
o If pre-existing (have to do it anyway) legal duty = NO CONSIDERATION, but may be modified
o If illusory = NO CONSIDERATION
o If pre-existing moral duty = NO CONSIDERATION, but new promise makes it so
o If conditional = CONSIDERATION (normally)
o If speculative or uncertain = CONSIDERATION (Good Faith)
· If all else fails, look for Reliance on Promise, to Promisee’s Detriment
o If reliance is reasonable = PROMISSORY ESTOPPEL
II. MUTUAL ASSENT – OFFER AND ACCEPTANCE
A. Common Law, Restatement, & the UCC: Law Governing Contracts
· Common Law – Generally common law (judge-made) governs contracts…for contracts involving services or the sale of real property
· Rest. 2d. of Contracts – Services
· UCC Article 2 – for the sale of goods
B. CONTRACT TYPES
· Contract – A promise or set of promises for the breach of which, the law gives a remedy, or the performance of which the law in some way recognizes a duty.
§ In order for a valid contract to exist, there must be a mutual agreement – offer & acceptance – and consideration (or some substitute for consideration).
1. Types of Contracts as to Formation
· Express – Are formed by language, oral or written
· Implied in Fact – Are formed by the conduct of the parties, if such conduct demonstrates an intent to contract
· Quasi Contract – “Implied in Law” – Not a true contract; they are construed by the court to avoid unjust enrichment.
§ Quasi Contract if…
· (1) ∏ confers benefit on ∆
· (2) ∆ knows of and retains benefit
· (3) Under circumstances such that it would be inequitable for ∆ not to pay.
§ NOT for volunteers: who appear to be giving a gift
§ NOT for officious intermeddlers: who intentionally come between you and the market. EXAMPLE: Guy knows your house needs to be painted so paints it without you asking him to.”
· Fine-Tuning Rule: A promise may be excused without a contract being breached.
§ This involves one party’s performance being excused by circumstance.
§ The other party is then excused due to failure of performance by the excused party. NO breach.
§ This is not for a post-execution [of the contract] change in advantage
§ UCC § 2-615 Delay in delivery or non-delivery in whole or in part by a seller is NOT a breach of his duty under a contract for sale IF
· performance as agreed has been made impracticable by the occurrence of a contingency the non-occurrence of which was a basic assumption on which the contract was made
2. Types of Contracts as to Acceptance
§ Traditional Bilateral/Unilateral Contracts
· Unilateral Contract – Acceptance by Performance.
o Involves the exchange of the Offeror’s Promise for the Offeree’s Act. That is, in a unilateral contract, the Offeree does not make a promise, but instead simply acts
o EXAMPLE: A promises to pay B $4 if he will deliver a book to C. B is not obligated to deliver the book, but if he does in fact deliver it, A is obligated to pay $4.
· Bilateral Contract – Exchange of Mutual Promises. Both sides make promises.
o EXAMPLE: A promises to sell car to B for $4,000, and B promises to purchase car for that price.
§ Modern View – Most Contracts are Bilateral
· Acceptance by Promise or Start of Performance
o Under the UCC and Restatement 2d of Contracts, it is possible to form a bilateral contract by starting performance. All offers are “doubtful” or “indifferent” offers which may be accepted by promising or by performing, unless clearly indicated otherwise by the language or circumstances.
· Unilateral Contracts Limited to 2 Circumstances
o (1) Where offer clearly indicates that completion of performance is the only manner of acceptance
o (2) Where there is an offer to the public, i.e. Reward
· Test for Determining Bilateral vs. Unilateral Contracts
o Bilateral = Each party has a right and a duty
o Unilateral = One party only has a right and the other party only has a duty
C. MUTUAL ASSENT
§ Objective Measure – Courts use an objective measure, by which each party is bound to the apparent intention that he manifested to the others. Must have mutual assent – “meeting of the minds.”
o Words or conduct are judged by what a reasonable person would believe such words and actions meant.
o What parties subjectively intended is irrelevant.
§ Embry – ∏’s contract expires and he goes during busy period to ask ∆ if his contract is renewed. ∆ Responds, “Go ahead, you’re all right; get your men out and don’t let that worry you.” Π took that to be a verbal agreement to renew his contract for another year. 3 months later, ∆ fired him. Π sued for breach of contract and won.
o Intending Legal Consequence – Parties needn’t intend legal consequences to be legally bound, but IF the objective evidence makes it clear that they do not intend to be bound, there is NO K.
o Intent to Formalize Agreement – If parties reach agreement on a transaction but agree that they will not be bound unless and until they sign a formal agreement, they will not be bound until that time. If they intend the future writing to be merely a convenient memorial of their
es to accept, but land already sold. Π sues; Δ wins since letters showed no offer; he was simply trying to see if ∏ was interested in making an offer; ∏ was not given a right to act within a certain time.
§ Advertisements
o General Rule – Advertisement does NOT constitute an offer. Rather, it is a mere request to examine and negotiate. [EXAMPLE: “Men’s Coats, $40 each.” Not an offer because t is too vague regarding quantity, duration, etc.]
§ Pepsico – ∆ advertised merchandise consumer could get for sending in order form & Pepsi points. Commercial showed jet for 7M points. ∏ sent in order form and 7M points. Ad was not an offer – OBJECTIVE, reasonable person would not have considered it an offer AND the Order Form and points were actually the offer!
o Exception to the General Rule – For advertisement to constitute an offer it must be clear, definite, explicit, and leave nothing open for negotiation.
§ Leftkowitz – Store advertised fur coat for $1 to first-comer on Saturday. Π shows up to buy, but is denied b/c of house rule of selling to women only. Π wins because ads addressed are considered binding if the facts show that some performance is definitely promised for something requested. Here, the ad offered specific merchandise at a stated price to the first person. There was no room for negotiation as the offer was clear, explicit and definite.
o Rewards as Offers – Advertisements offering rewards are offers to anybody [don’t have to ID the addressee! ]Who performs the conditions named in the advertisement – as long as they KNEW of the reward. Ads offering rewards seek to induce performance, unlike an invitation to negotiate, which seeks a reciprocal promise.
§ Price quotation with facts and circumstances considered may constitute an offer, even though the word “offer” is not included. However, price quote alone is not an offer.
o Southworth – ∆ discussed selling land and grazing permits to ∏. ∆ sent information letter with price, acreage, location, terms of the sale. ∏ sent ∆ an acceptance. ∆ said it was starting point for negotiation. Court used following guide to interpretation & said it was an offer:
§ What a reasonable person in the position of the offeree would be led to believe
§ The language used, especially words of promise, undertaking, or commitment;
§ The specificity of the persons to whom the writing is addressed; and
§ The definiteness of the proposal.
