Contracts Outline
I) Types of offers
A) What is a K and how is it made
1) K for sale of Services- Restatement
© Restatement §2: a promise is a manif. of intent to act, refrain from acting, or otherwise justify an promissee’s understanding that an agreement is made
(a) Manifestation of intention is external expression of intention, as distinguished from undisclosed intention
(i) Gives rise to obj theory of K
© Restatement §3: bargain is an agreement to exchange promises, a promise for performance, or exchange performances;
(a) includes agreements that are not Ks and transaction that would otherwise be Ks, but are invalidated by legality
© Restatement §4: a promise can be stated orally, written or may be inferred wholly or in part by conduct; if the parties enter an agreements with the intent that it later be put in writing, but their conduct shows an intention to be immediately bound, and the add’l form is seen to be a mere formality, their intention is the standard to be bound to
(i) Where evidence of intent is ambiguous, the ct will generally treat a K as existing as soon as the mutual assent is reached, even if no formal K is ever drawn up
2) K for the sale of Goods- UCC
© UCC § 2-204(1): K formation
(a) A K for the sale of gods may be made in a manner to show that both parties recognize it
(b) An agreement sufficient to be a K for sale can be found w/o knowing exact time of formation
(c) A K for the sale of goods doesn’t fail for indefiniteness if both parties intend to make a K and there is reasonably certain basis for giving an appropriate remedy
(i) Refers primarily to situation where interchanged correspondence doesn’t disclose exact point when the deal was closed but both parties understand it exists
(ii) Binding agreements are recognized as law, despite missing terms if there is reasonable certain basis for granting a remedy
© Revised § 2-204 states that a contract may be made in any manner sufficient to show agreement, including… interaction of electronic agents [Note 3.1, pg 132]
B) Types of offer and Intent to be Bound
1) A contract is consensual; both parties must agree to be bound, which is measured by offer and acceptance, and w/o both parts a contract is not formed
2) The parties’ intention regarding whether a K is to be legally enforceable is usually effective. If both parties intend and desire that their “agreement” not be legally binding, it will not be. But, if both desire that it be legally binding, it will be even if parties mistakenly believe it’s not
© Where the evidence is ambiguous about the parties’ intent to be bound, cts assume that businesses want to K with each other, but that domestic or social parties do not[2-206]
3) Bilateral
© An exchange of promises; contract formation @ moment of promises
(a) Executory- some time in the future (i.e. licensing K)
(i) Hill v. Gateway, Brower v. Gatewaywere examples of executory contracts
4) Unilateral
© A unilateral K is one that involves an exchange of the offeror’s promise for the offeree’s act. The offeree doesn’t make a promise, he performs.
5) Ambiguous
© When offeror doesn’t specify which method of acceptance is needed, offeree has the power to decide how to accept
6) The offeree must accept in the manner that the offeror specifies
© Offeror can decide the manner of acceptance
(a) Hill v. Gateway where Gateway decided that they would include the terms in the box, and deduced the terms for acceptance
C) Validity of Types of Offers
1) Restatement § 24 Offer Defined
© An offer is the manifestation of willingness to bargain, which justifies another in understanding that his assent is invited and will conclude it
(a) An offer is an act on the part of one person giving another person the legal power of creating the obligation of a contract; if the offer is not intended to give offeree power to make a contract there is no offer
2) Offers made as jokes or in jest are not enforceable, even after acceptance
© However, if one party does not know or have reason to know of the joke, it is enforceable if a reasonable person would also conclude that a K was formed
© Lucy v. Zehmer
(a) Restatement § 18: Manifestation of mutual assent to an exchange requires that each party either make a promise or begin or render a performance.
(i) Comment c: If one party is deceived and has no reason to know of the joke the law takes the joker at his word
3) Preliminary Negotiations give ppl freedom from K and freedom to K
© Parties who solicit bids are free from K as the solicitation is not an offer and cannot be accepted. It merely serves as a basis for preliminary negotiations
4) Advertisements are usually NOT offers
© They usually don’t include sufficient words of commitment to sell. But, if the ad contains specific words of commitment, esp. a promise to sell a specific # of units, then it may be an offer (Lefkowitz v. Great Minneapolis- case with fur coats)
© Advertisements that contain words of commitment suggest an offer b/c the advertiser is committing herself to specific actions in response to customer actions
(a) Carlill v. Carbolic Smoke Ball
5) Auctions are not offers
© Auctions are held like solicitation
e before the written contract
7) Leonard v. Pepsi Co.- an advertisement cannot be seriously construed as an offer
© No offer has been made if it is clear that offer is not serious; offers are serious when the offeree can seriously conclude that a contract is conferred, not when presented with an obvious joke or otherwise invalid offer
© Also, where an offer req add’l measures before completion (i.e. order forms and catalog) it cannot be construed as an actual offer
II) Terminate an Offer
A) Revocation/ Rejection before Acceptance
1) Rejection- the offeree rejects the offer, “killing” the offer and removing power of acceptance.
© However, the offer may not die if the offeror indicates the offer is still standing, or the offeree indicates that she accepts now, but reserves the right to consider the offer further later
2) Direct Revocation- explicit removal of an offer before it can be accepted (can be a product of a counter-offer being made)
© Fairmount Glass Works v Crunden-Martin Woodenware Co.
(a) P attempted to revoke the offer after D had accepted it
(b) P claimed that the letter w/specifics (after telegram) from D included a clause not listed in the initial offer, so it should not be bound to the acceptance they refused b4 getting the letter
(i) This idea relies on mirror rule, where acceptance must reflect the offer
(c) In this case, the offerer submitted a reasonable offer which included specifics about the deal and the offeree expected that a deal had been made, which constituted a contract
3) Indirect Revocation
© Per Dickinson, revocation needs to be explicitly communicated before it’s effective
(a) If a revocation is lost thru mail or telegram, it never becomes effective
© Dickinson v. Dodds- learning of revocation thru a third party= indirect revocation and no power of acceptance
(a) Law states that an offeror who specifies a time frame isn’t obligated to give that time
Furthermore, if the offeree knows that the offeror has changed his mind and sold the property to someone else, he cannot then accept the given offer to result in a
