Contracts Hefferan Spring 2014
Class 1
Contract- A promise or a set of promises that the law will enforce
Freedom of Contract v. Statute/Party Autonomy v. Legislation
I. 2 key elements
A. A promise or promises
1. A commitment as to the happening or non-happening of some future event
B. Enforcement
1. Legal enforcement- an award of damages or some other order by a court of law (all agreements aren’t enforceable under the law)
II. Contracts have limitations based on statutes(i.e.. minimum wage/ 3 day cooling off period)
A. Default provisions kick in when the agreement does not specify
B. Certain provisions can not be contracted around
Course overview
I. Eight Questions
A. Is there a deal?
B. Was there the necessary consideration or consideration substitute
1. Consideration- Something bargained for and received by a promisor from a promisee; that which motivates a person to do something(terms)
C. Is there some reason based on the agreement process or the terms of the agreement not to enforce the agreement?
D. What are the terms of the deal?
E. When is someone who made an enforceable deal excused from doing what she agreed to do because of some post-agreement occurrence or non-occurrence?
F. How does the law enforce a deal?
G. What are the alternatives to contracts and contract law?
H. When can someone assert legal rights because of a deal made by others?
R.R. v. M.H.
1. Has there been a meeting of the minds or an outward manifestation of mutual assent?
2. The mental assent of the parties is not requisite for the formation of a contract. If the words or others acts of one of the parties have but one reasonable meaning, his undisclosed intention in immaterial except when an unreasonable meaning which he attaches to his manifestations is known to the other party. (Restatement 1st of Contracts § 71)
a. Would a reasonable person in the position of the offeree understand from the offeror’s words and conduct an intent to be bound?
b. Did the offeree actually so believe?
3. In ascertaining the existence of a binding contract, the courts examine and give legal effect to the outward manifestation of the parties, regardless of what wither party may have privately or secretly intended. The question then is not what the offeror may have actually meant by what she said, but what the reasonable impression created in the mind of the offeree by the words used and the conduct engaged in by the offeror.
Offer
I. Revoking or Terminating the offer
A. Rejection- Power of the offeree to terminate the offer
B. Revocation- Power of the offeror to change or terminate the offer before acceptance. An offeror can give up this power if proper consideration is given.
1. Direct- express statement
2. Indirect- Information from a third party, that is a reliable source, implies that the offer has been terminate
Dickenson v. Dodds
Defendant makes off to sell land with an option to keep it open until the 12th at 9 o’clock. Plaintiff decides to accept offer on the 11th but doesn’t tell Dodds until he hears from Berry that Dodds has been negotiating with Alan. The vice chancellor ruled in favor of Dickenson and Dodds appeals. The chancellor on appeal held that the promise to keep the offer open was not enforceable and Dodds was free to do what he wanted with a property until an acceptance was received because there was not consideration given.
C. Lapse
1. An offer lapses after the period stated in the offer, or, if no duration is stated, after a reasonable time.
Minnesota Linseed Oil Co. v. Collier White Lead Co.
Minnesota Linseed Oil Co. made an offer to sell linseed oil at 58 cents to Collier. Collier takes a day upon receipt to accept the offer and the court held that because of the fluctuation in the price of oil the 24 hour delay wasn’t reasonable and the offer had lapsed.
D. Death or Incompetence of the offeror- An offeree’s power of acceptance terminates when the offeree or offeror dies or is deprived of legal capacity to enter into the proposed contract.
Beall v. Beall
Carlton buys Pearl’s land with an option to buy Calvin’s land within 3 years. He gave $100 consideration for the option. Option was extended for another 5 years and he gave another $100 consideration for that option. Option was extended another 3 years and no consideration was given for that option. Calvin dies and his wife Cecilia doesn’t want to sell the land. Court holds that there was no consideration for the second offer for extension so specific performance for sale of the land would not be warranted. Plaintiff appealed, issue on appeal is whether or not she revoked the offer before the plaintiff accepted. Appellate court remands to trial court.
Board of Control of Eastern Michigan University v. Burgess
Argument over whether or not contracted consideration was actually given. A lack of consideration does not terminate the initial offer. The lack of consideration just gives the offeror the right to revoke the initial offer at any time before acceptance. Restatement s
. The court held that there wasn’t a binding contract because The Smith’s did not notify Behee of the acceptance. An uncommunicated intention to accept an offer is not an acceptance. When an offer calls for a promise as distinguished from an act, on the part of the offeree, notice of acceptance is always essential. A mere private act of the offeree does not constitute an acceptance.
Adams v. Lindsell
Lindsell was selling wool to Adams via mail but they sold the wool before they received the acceptance. Trial court held that there was no binding contract but they issue a show cause order. Court ultimately held that there was a binding contract because the acceptance was effective upon putting it in the mail and not upon receipt. The mailbox theory requires that the offer be by mail and then acceptance by mail is appropriate. An equal medium must be used to accept the offer as what was used to send the offer.
Where an offer invites an offeree to accept by rendering a performance, no notification is necessary to make such an acceptance effective unless the offer requests such a notification. If an offeree who accepts by rendering a performance has reason to know that the offeror has no adequate means of learning of the performance with reasonable promptness and certainty, the contractual duty of the offeror is discharged unless: (1)the offeree exercises reasonable diligence to notify the offeror of acceptance;(2) the offeror learns of the performance within a reasonable time or; (3) the offer indicates that notification of acceptance is not required. A reasonable person in the position of the offeree would think based on the terms that no notice was required.
Objective Theory of Contracts
Lucy v. Zehmer
While drinking with a friend Lucy agrees to buy Zehmer’s farm for $50,000. He writes an agreement on the back of a restaurant receipt. Zehmer and his wife sign the receipt. The next day Zehmer says he was just joking and Lucy sues for specific performance. Zehmer says there was no agreement. The trial court held that there was no agreement. On appeal the issues are capacity, manifested intent(was he joking?) and the court held that he was competent and he wasn’t joking so the contract was enforceable. In contract law the courts should look to the outward expression and not the parties’ secret thoughts. Even if a party says they’re joking 5 minutes after the contract is formed the contract is still enforceable. Regardless is a reasonable person in the position If Lucy had known that Zehmer was joking the contract would not be enforceable.
