Contracts I Outline
Tuesday, August 19, 2008
1. Contractual Assent and the Objective Test
a. The Objective Standard for Determining Assent
· Manifestations of assent are interpreted from the standpoint of a reasonable person in the position of the party to whom the manifestation was made.
· Ask how the words and actions of the party should have been understood.
b. Lack of Serious Intent
· Lucy v. Zehmer:
§ Zehmer, the owner of property, alleged that his offer to sell it to Lucy was a bluff.
§ The court found that Lucy was in earnest and under the objective test, had no reason to believe Zehmer was not.
· Leonard v. PepsiCo:
§ The court found that an alleged offer really should have been reasonably understood as a joke.
§ No reasonable person could have understood the commercial to be a serious offer of a jet, but would have realized that the use of the jet was just to add an absurd comic touch and to exaggerate the excitement of the drink.
· Expectation Damages
· Reliance Damages
· Specific Performance
· Enforcement of an Award of Damages
2. Offer and Acceptance
a. Offer: 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.
§ Manifestation: understanding there is an offer through the actions of the offeror
§ Communication to the offeree (Objective Test)
§ Commitment (Intent): indicate a desire to enter into a contract
§ Specify the performances to be exchanged
§ Terms that will govern (i.e. manner and time)
c. Direction: must be directed at some person or group
d. Invitation: must invite acceptance
§ May or may not indicate how and by what time the acceptance is to be communicated
e. Understanding (Objective): a contract will arise without any further approval being required by the offeror
· Advertisements as Offers
· Generally, ads are not offers, unless there is a clear, definite, and explicit offer that leaves no room for interpretation.
· Explicit Definition: The more clear, concise, and specific the offer, the more likely there is an offer; AND/OR
· Words of limitation: The more limited the offer, the more clear there is most likely an offer. (First come first serve).
· A reasonable person, showing a price and a quantity, could believe there is an offer.
· Revocation of an Offer
a. Must be revoked before an acceptance is communicated
b. Termination of Power of Acceptance
§ Expiry of the Offer By Time
· Direct Revocation:
§ Offeree must receive notice of revocation before acceptance.
§ Generally, the revocation should be in the same form as given for the offer or requested for the acceptance.
· Indirect Revocation:
§ Offeree reasonably believed the offer had been revoked (Offeror takes action clearly inconsistent with the continued intent to enter a contract.)
§ Information from a reliable third party.
§ Death or mental disability of the offeror
· If the offeror dies before the offer is accepted, the offer lapses automatically (even if the offeree was unaware of the death).
· Once a contract has been formed, the death does not terminate the contract, unless otherwise expressed or implied in the contract.
· Developed mental disabilities are treated the same as deaths.
b. Acceptance: must be knowing, voluntary, and a deliberate act.
· Intent to enter a contract on the terms of the offer assessed objectively.
· Substantive Nature: the proposal for the contract itself in the offer
§ Mirror Image Rule: Response must accept the exact (substantive terms) offer
· “Yes” NOT “Yes, But”
· Procedural Nature: the procedure to be followed to accept the offer
§ Time and Manner from the offer, if the terms are addressed
· “Shall” is a requirement
· “May” is permissive
§ Default Rules: Reasonable time, reasonable manner
· Method that the offeror used is presumed to be a reasonable method of acceptance.
3. Communication through conduct or words
§ Exception: if the contract explicitly says the acceptance does not need to be communicated
§ Mailbox Rule: where the mail is an expressly or impliedly authorized medium of acceptance, a properly addressed acceptance takes effect when deposited in the mail.
a. When there is a time delay
b. When there is a loss of control (retrieving the mail before it reaches the offeror)
· Applies only to Acceptance, not revocation or rejection
· Protects the offeree who believes the offer is still open
§ Applies to payments put in the mailbox before the deadline
· Offeror has control to opt out of the Mailbox Rule in
pts orders for computers by telephone, facsimile transmission, and email. Consumer pays for the equipment, and the seller sends the equipment with the written agreement contained in the packaging with the item shipped.
b. Former UCC 2-207
1. Given the industry practice and contract doctrine regarding offer and acceptance, when did a contract exist based upon the paperwork that the parties exchanged?
2. If a contract existed based upon an offer and acceptance in the paperwork or a confirmation of a prior agreement, what were the terms of that contract?
3. If a contract did not exist based upon an offer and acceptance in the paperwork but the parties acted as if there was a contract so that a contract was found by conduct under former 2-204, what were the terms of that contract?
4. Incomplete and Indefinite Agreements
a. The Statute of Frauds
§ Writing or Record
· By burdened party
· To evidence the contract
· Identifies subject matter
· Sufficient terms
2. Application Flow Chart:
§ Is the contract subject to the statute of frauds?
· If the answer is no, the contract need not be in writing to be enforceable, and the analysis need proceed no further.
· If the answer is yes, the next question must be asked.
§ Is there a signed writing in a form sufficient to satisfy the statute?
· If the answer is yes, the contract is enforceable.
· If no, the contract is not enforceable unless the third question can be answered affirmatively.
§ Is there a recognized exception to the statute of frauds that will allow enforcement of this contract even though it is subject to the statute and there is no writing sufficient to comply with it?
· 2-201(3). A contract that does not have a writing but which is valid in other respects is enforceable:
If the goods are to be specially manufactured for the buyer and are not suitable for sale to others in the ordinary course of the seller’s business and the seller, before notice of repudiation is received and under