Professor Boss
Contracts Outline
Fall 2017
Introduction
R2K § 17: the formation of a K requires a bargain in which there is a manifestation of mutual assent to the exchange AND consideration
Allen v. Bissinger & Co. (official report)
D did not intend to be bound by requesting the information P who offered an “official report”; P argues parties were not talking about same thing and refuses to pay.
Takeaway:
Intention or feelings in the mind of the parties does not matter if the outward actions/words MANIFEST an intend to be bound
Feldman v. Google (Pay per click ads)
Feldman purchased ads from google pay per click, and hit “I agree” button but claimed he did not intend to be bound by the terms of the agreement
Clicking “I agree” manifested his intent to be bound to Googles terms
Takeaway:
Party is not excused from a K for failure to read the terms set forth if there was an objective manifestation of assent i.e. click agree button
Contract Formation
Mutual Assent
R2K § 22: The manifestation of mutual assent to an exchange ordinarily takes the form of an offer or proposal by one party followed by an acceptance by the other party
Intention to be bound: the objective theory of contacts
Ray v. William G. Eurice & Bros., (home renovations)
Parties negotiate specs for renovations of P’s home, both parties sign an agreement to the specs, later D claims they did not agree to specs; specs were corrected several times
Takeaway:
Manifestation of assent to the terms makes a binding K
K is still enforceable even though one of the parties made a unilateral mistake in interpreting the agreement
R2K § 20:
Offer and Acceptance in Bilateral K
R2K § 24: 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.
R2K § 50:
Acceptance of an offer is a manifestation of assent to the terms thereof made by the offeree in a manner invited or required by the offer
Acceptance by performance requires that at least part of what the offer requests be performed or tendered and includes acceptance by performance which operates as a return promise
Summary:
Manifestation of willingness to enter into a bargain
Invites acceptance
The acceptance (if made) will end in the formation of a K
How would a reasonable person judge the manifestation (objective theory)
Lonergan v. Scolnick
D puts land for sale; expresses this sale through an invitation for offers on the land in the newspaper; P inquiries about the land through a letter; D sends specific info (address, ect.) to P; P visits property; D sells to third party
Holding: No K had been formed
Takeaway:
If the promisee knows or has reason to know that the promisor does not intend it as an expression of his fixed purpose until he has given further expression of assent, the promisor has not made an offer
R2K § 36:
An offeree’s power of acceptance may be terminated by
Rejection or counter-offer by the offeree
Revocation of the offer (before it is accepted)
Lapse of time
Death of incapacitation of the offeror or the offeree
R2K § 41: an offeree’s power of acceptance is terminated at the time specified in the offer, or, if no time is specified, at the end of a reasonable time
R2K § 43: An offeree’s power of acceptance is terminated when the offeror takes definite action inconsistent with an intention to enter into the proposed K and the offeree acquire reliable information to that effect
*** The revocation of the offer is effectively communicated
R2K § 63: the mailbox rule
Unless the offer prescribes to the contrary, an acceptance sent by a reasonable means (mail) is effective on dispatch (not when its received)
Izadi v. Machado (Gus Ford) Inc. ***exception to the general rule
Bait and switch ad put in newspaper by car dealership (D), P goes to D expecting to accept the purposely misleading offer
Takeaway:
Ads are not generally considered offers
Found an offer here for morality reasons – D purposeful misled buyers
Normile v. Miller (you snooze you lose)
P puts an offer in on D’s house stating “this offer must be accepted on or before Aug. 5 at 5pm; D responds immediately but with several changes—NO INTENT TO BE BOUND—because of new terms
Making an effective rejection and counter offer
D sells house to 3rd party (Aug5. Aprox. 12.30pm)
P is informed of Ds action by real estate agent Aug 5 at 2pm
P tries to respond to D’s counter offer before 5 pm
Takeaway:
Revocation can be through actions, not only words
Revocation may be communicated Directly or indirectly
Option/irrevocable/firm offer must be communicated through explicit language
Option Contract: an agreement between buying and selling that gives the purchaser the option or right to buy or sell a particular asset at a later date at an agreed upon price
R2K § 25: an option K is a promise which meets the requirements for the formation of a K and limits the promisor’s power to revoke offer
Offer and Acceptance in Unilateral K
Minority of K’s
The offeror is not bargaining for a promise…bargaining for performance
No K formed until the other party performs or
R2K § 45:
when the offeree tenders or begins the invited performance, or tenders a beginning of it
offeror is only bound once performance is completed
Only the offeror is bound
Ex. $500 to anyone who finds my armadillo, only get $ if you bring armadillo back (perform)
There is no way every single person in t
that D never intended to be bound was premature
On remand, the trier of fact must hear evidence and decide whether D ever intended to be bound
Concurrence:
Provided a middle ground of the binding/non-binding arguments
Bargaining in good faith
Rule of Law:
A letter of intent to enter into a contract may be enforced if the K will substantially be based on the same terms of the LOI (if letter specifically did not state that the parties did not intend to be bound)
Consideration
***Needed to form a K pursuant to R2K§17 – requirement of a bargain
***Bargain for Exchange
Defining Consideration
R2K § 71: Requirement of Exchange; Type of Exchange
To constitute consideration, a performance of a return promise must be bargained for
A performance or return promise is bargained for if it is sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise
The performance may consists of:
An act other than a promise, or
A forbearance, or
The creation, modification, or destruction of a legal relation
Hamer v. Sidway **older test
Nephew refrains from smoking, drinking and gambling until 21 and uncle with give him $5000; nephew fulfills and asks for money; uncle says later because he wants to put in trust; uncle dies; nephew wants $; executor does not want to pay up
Executor argues there was no consideration because nephew was did not have “detriment”
Does matter b/c uncle DID benefit AND nephew gave up a legal right (aka detriment)
Takeaway:
Do not need both; a benefit or a detriment to have consideration
Benefit/Detriment is older test (not used anymore)
Better way: uncles promise induced the nephews actions
Pennsy Supply, Inc. v. American Ash **Newer Test
P uses D’s Agrite for paving at zero cost; paving stuff is defective and P has to remove it at their own expense and re-pave; Was there a bargain for exchange thus enforceable contract
D wanted P to use Aggrite so D didn’t have to dispose of it themselves
Court held Am Ash promise to supply Aggrite free of charge induced Pennsy to assume detriment of collecting and taking title to the material; which induced AM. Ash to make promise to provide free Aggrite
