Jones Contract I Fall 2011
CONTRACTS
I. What is a contract?
A. §1 Contract Defined
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 as a duty
B. Promise + Enforcement = Contract
C. Offer + Acceptance + Consideration = Contract
II. What is a breach of contract?
A. Must prove three elements:
1. Existence of a contract
2. Breach of the contract
3. Damages, which are a result of the breach
III. What is a promise?
A. A promise is a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made.
B. Contract formation by promisee’s interpretation
C. Not all promises are contracts
IV. Has your client made a deal
A. DETERMINING MUTUAL ASSENT
1. Question to ask: Whether there is a manifestation of mutual assent (agreement)?
2. Subjective v. Objective Test
a. Courts employ objective theory in deciding whether parties assented to be bound-binding agreement if reasonable person would judge (outward/objective acts) that an offer has been made and accepted.
3. Objective Theory-What a reasonable person would have believed; what offeree actually believed
4. Court must look to the outward expression of a person as manifesting his intention rather than to his secret and unexpressed intention; If the words or other acts of one of the parties have but one reasonable meaning, his undisclosed intention is immaterial EXCEPT when an unreasonable meaning which he attaches to his manifestations is known to the other party; A person cannot set up that he was merely jesting when his conduct and words would warrant a reasonable person in believing that he intended a real agreement; If offeree knows that offeror made a mistake or did not intend to sell→ no offer)
B. OFFER
1. Definition of offer (R2K § 24)
a. An offer is the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it.
2. Preliminary Negotiations (R2K §26)
a. A manifestation of willingness to enter into a bargain is not an offer if the person to whom it is addressed knows or has reason to know that the person making it does not intend to conclude a bargain until he has made a further manifestation of assent.
b. Lonergan v. Scolnick-No contract entered into between parties-no definite offer as letters were exchanged and seller indicated that he would sell to first buyer
3. An offer musts contain:
a. Price
b. Substance
c. Parties
d. Time
4. A valid offer consists of:
a. Intent
b. Content (essential terms)
c. Communication
5. An offer must be definite and certain, to be a contract of sale by acceptance, it must be made under circumstances evidencing an express or implied intention that its acceptance shall constitute a binding contract. If price quotation, it is not an offer as it is not sufficient or definite.
6. UCC § 2-204: A contract for sale of goods may be made in any matter sufficient to show agreement, including offer and acceptance, conduct by both parties which recognizes the existence of a contract.
7. The general rule is that advertisements are not offers. However: If the offer is clear, definite, and explicit and leaves nothing open for negotiation, it constitutes an offer, acceptance of which will complete the contract.
8. To Whom An Offer Is Addressed (R2K §29)
a. The manifested intention of the offeror determines the person or persons in whom is created a power of acceptance.
b. An offer may create a power of acceptance in a specified
D. PRESERVING THE OFFER
1. Option Contracts (R2K § 25)
An option contract is a promise which meets the requirements for the formation of a contract and limits the promisor's power to revoke an offer.
2. A promise which constitutes an option contract may be contained in the offer itself, or it may be made separately in a collateral offer to keep the main offer open.
3. Option Contract (Irrevocable Offer) (R2K § 87)
(1) An offer is binding as an option contract if it:
(a) is in writing and signed by the offeror, recites a purported consideration for the making of the offer, and proposes an exchange on fair terms within a reasonable time; or
(b) is made irrevocable by statute.
(2) An offer which the offeror should reasonably expect to induce action or forbearance of a substantial character on the part of the offeree before acceptance and which does induce such action or forbearance is binding as an option contract to the extent necessary to avoid injustice.
4. Termination of Power of Acceptance under Option Contract (R2K § 37)
The power of acceptance under an option contract is not terminated by rejection or counter-offer, by revocation, or by death or incapacity of the offeror, unless the requirements are met for the discharge of a contractual duty.
5. Possible options
a. Pay the offeror to keep the offer on the table
b. Provide some other consideration
c. Reliance that invites performance
