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Contracts
Elon University School of Law
Levine, David S.

Contracts I – David Levine – Fall 2010
 
 
Bilateral – at the time of acceptance, a contract is formed under which both parties make promises to be
performed at a future date.
–          Promise for a promise
 
Unilateral – performance of one party under the contract is fully completed, act of acceptance is the act
of performance . Offeree’s performance is complete at the point of contract formation and the offeror’s performance remains outstanding when the contract is created.
–         Promise for performance
 
Giggle Test
If you can make the argument aloud, without laughing, then you have a reasonable argument
 
Broad theories
We have jurisprudential theories which permeate the law Including:
·         “the law should reflect the way things are”
 
·         Critical legal Theory
·         Theory that the structure and logic of the law grows out of power relationships
·         The law promotes those who are in power to keep them in power and the law reflects certain prejudices.  
 
Restatement 2d
 
 – A promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes an a duty.”
 
Cohen v Cowels Media Co
Without requisite intent, there is no contract.
 
 
Policy
Why do we legally enforce contracts in the first place?
 
–          Social welfare; Private ordering. The general state of society increases as individuals state their preferences through contracts and private arrangements. Contracts between governments can be a private ordering.   The predictive quality to enforcing contracts
–          Free Market issue, personal autonomy. You are free to order your life in the way you choose, but according to applicable and guiding laws and rules; Ah, Freedom. There would be little need for contracts in a communist society because there is no private property. In a communist society, there’s no private property to reallocate. 
 
–          Allocation of resources is paramount in Contract Law (the “effective breach” mentioned)
 
–          We look for ways to enforce promises. The enforcement of contracts is favored. Encourage entrance into contracts.
 
Contractual Assent & Objective Test
 
Intent
 Contracts are about personal autonomy. Both parties must choose to enter the contract.
 
Modern View –
A contract can form even if both parties do not agree. Does not always have to be a “meeting of the minds”
 
Objective Manifestation of Assent
A party “assents” to a contract when he/she objectively manifests an intent to be bound through overt acts/words
·         The party’s subjective intent is not relevant
·         “Objective” evaluated from perspective of “reasonable observer”
In determining manifestation of assent, every fact matters.
 
–          Subjective Intent can be admitted if probative
Objective Advantages –
·         Easier to accurately assess objective statements rather than beliefs
·         It avoids self interested, untruthful testimony. 
·         It protects parties’ interests for “efficient societal transactions”
·         It’s easier to figure out, (easier to judge and observe)
 
Objective Disadvantages –
·         Possibility of being held to a contract that wasn’t intended, by one or both of the parties.
·         Fails to take into account the intentions of the promisee
 
Kabil Development Corp V. Mignot (Inland)
Oregon Supreme Court (1977)
 
–          Kabil believed there was a contract, and Inland did not perform. Mignot was upset because the court was allowed to hear Kabil’s President’s subjective testimony.
 
Rules: The actions of the parties is the most important determination in whether there was a contract,
but if the subjective understanding is probative it can be included.
 
“The Reasonable Observer”
·         One who must observe the behavior of the parties. Must take into account the backgrounds of the parties. Course of dealing may be relevant. What is the usually or generally used definition of the phrase in the trade.
 
Lucy v. Zehmer
Deciding Court: Supreme Court of Appeals of Virginia
 
Issue: Can contractual assent made in jest be legally binding?
 
Yes, The court found that the Zehmer’s intentio

ue language may have been construed as an offer. The plaintiff’s would have benefited from this. The Plain language theory actually benefits the defendant in this instance.
–          Illegal transactions cannot be enforced in court.
 
 
Advertising as Offers
·         General rule: ads are “invitations” to make an offer, not offers
·         Exception: When the ad is “clear, definite and explicit, and leaves nothing open for negotiation”
·         In addition to contract, consumer protection laws apply to advertising.
 
 
Lefkowitz v. Great Minneapolis Surplus Store
–          Leftowitz saw an ad in a paper. The ad stated “Sat 9 am sharp. 3 Brand New fur coats worth to $100. First Come First Served $1 Each.
 
–          Leftowitz was denied the coat because eth house rule is you had to be female. A second ad went out, this time he sued for both. The court found that this was an offer because eof the specific language it provided, and left nothing open to negotiation.
 
Harris v. Time
 
–          3 year old received mailing. Window in envelope showed that the recipient would get a watch, just for opening the envelope. When you opened it, you would see that you had to subscribe to the magazine, the window conveniently hid the last line of the offer.
 
–          3 year olds parents sued and started a class action for the watch, then for damages for not receiving the watch. The court ruled that it was an offer which was enforceable, but it was a trivial matter, so it was dismissed on those grounds, even though Time was riled to have made an offer.
 
–          From a consumer protection standpoint, there is an interest in protecting us from being preyed upon.