Contracts 1 Outline
Chapter 1
A. Introduction
Definition of a contract: “a contract is a promise or set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty.” (Restatement (Second) of Contracts (1981).)
Derived from two different general sources: Common law and Statutory law.
It is often said that contracts are the product of a consensual relationship between the parties to the agreement, that is, the parties themselves enter into a bargain setting the terms of their obligations to one another. For a contract to exist, there must be a “meeting of the minds.” The parties rather than the courts or legislature are the source of the duties governing the relationship. When disputes arise over whether there is a contract or over a contract’s terms, the parties may call upon the courts to resolve their differences.
“Judge-made Law”: Cases that are similar should be decided equally.
Stare-Decis: Law that binds judges from prior judicial decisions.
“Trial-and-Error” process: Seeking principles that work, and discarding those that don’t.
The Restatement (Second) of Contracts (1981): Authoritative exposition of contracts; Refines the older restatements analysis and incorporates new developments, such as the Uniform Commercial Code (U.C.C.).
U.C.C.: Contains Statutory provisions which govern several commercial subjects, including the sale of goods (facilitates transactions). The purpose of this is to create uniformity among the states.
Statutory Law: Derived from legislation opposed to judicial decisions.
Statute of Frauds: At common law, oral agreements are enforceable. Informs what must be in writing to form a contract.
Gifts v. Contract: For a gift, the giver expects nothing in return. There is no promise. The giving of gifts is “donative intent.” This differs from the serious “contractual intent.” A promise to give a gift is not enforceable (Pappes v. Bebber; (Iowa).)
Barter v. Contracts: A Barter is the present exchange of items, one for another, with no promises. Barter can also be a sale.
Traditional Contract- Duties defined by private parties.
Promissory Estoppel- One reasonably relies to one’s detriment on the promise of another.
Unjust Enrichment- An equitable doctrine employed in the absence of consent, bridging contracts and torts. There no contract, but one party received something and was benefited from it, so society deems that the beneficial party should compensate the other for services or whatever was received.
Purposes and Theories of Contract Law:
Freedom of Contract Focus
(1) Consent Theory: By manifesting their intention to be legally bound, promisors and promisees have consented to a legally enforceable agreement, and contract law should impose individual responsibility on those who made it.
(2) Will Theory: Contract law should be designed to foster individual liberty, private autonomy, and freedom of transaction in the private sector, subject to minimum controls in the name of collective or public interest. Courts should vindicate the intentions of those who exercise this “freedom of contract.”
(3) Promise Theory: Contract law is necessary to uphold moral values, by recognizing the sanctity of promise. Promisors should be held to their commitment.
(4) Reliance Theory: When promisees act in reliance upon others’ promises, courts should protect them from injury due to broken promises to avoid injustices.
Law and Economics Movement
(5) Utilitarian Economic Theory: The principles of contract law should be designed to maximize the potential gains from transactions by facilitating the process of voluntary trade. Should be utilitarian and based on free market principles.
Postmodernism; Philosophy and Literary Criticism
(6) Critical Legal Studies Theory: Contract law should be deconstructed and then reconstructed to serve altruistic, societal interest in the pursuit of social justice rather than the venal interest of individuals. Shouldn’t be the haves versus the have-nots.
Interpersonal Relationships
(7) Relational Theory: Contract law should be about the social and interpersonal relationships between the parties to the contract. Focuses on social practices, normative behavior, long-term relationships and how these factors operate together to influence transactions.
B. Public Policy and Enforcing Promises
Cohen v. Cowles Media Co.; 457 N.W.2d 199 (Minn. 1990)
– Ethical and Moral obligations are not legal obligations. There is no contractual intent.
– If a contract is against public policy, then it will not be enforced.
– Contract: (1) Contractual Intent; (2) Offer; (3) Acceptance; (4) Consideration; (5) Certain Terms.
– Oral agreements are enforceable, unless it is in such a nature that is in the Statute of Frauds.
– Free market system: Willing buyers and sellers make their own contracts, agree upon their own exchanges, and fix their own values.
C. Consensual Transactions and The Market
Stutz v. Stutz; (Tenn. App. 2005)
– If contracts are against public policy, they are not enforceable, even if there is contractual intent by both parties.
– Unequal bargaining power of the parties are measured.
– Exploitation: “For an offer to be exploitative, it must serve to create or take advantage of some recognized psychological vulnerability which, in turn, disturbs the offeree’s ability to reason effectively.”
Chapter 2- Offers of Contractual Terms
A. Contractual Intent, Assent and the Objective Theory of Contracts
Before courts will enforce agreements or provide remedies for the breach of agreements, they must be satisfied that the parties intended to be bound by the agreements’ terms. “Meeting of the Minds,” is characterized by the offer, followed by an acceptance. Whether an offer has been made is significant prerequisite for the formation of an express contract.
The offeror is the “Master of the Offer.” That is the offeror has the power to set forth the substantive terms of the bargain as well as the procedural terms by which the offeree may accept the offer.
Unilateral Contract: Formed when an offeror makes a promise which the offeree accepts by actual performance of the act required under the terms of the offer. Only one of the parties has made a promise.
Bilateral Contract: Formed when the offeror offers a promise in exchange for the offeree’s return promise instead of
cognizable offer, but until one party expresses an intention to be bound, such preliminaries are not offers and do not justify the other party’s belief that he or she may strike a bargain by accepting.
Advertisements, price list mailings and circulars, catalogues and other comparable publications are generally not considered to be offers but are invitations to the public to inspect, negotiate or consider purchasing the subject goods, services, etc. The reader or the circular makes the initial offer when placing an order with the advertiser. This may be overcome though, by an expressed intention to extend an offer.
Theirs a presumptions governing advertisements, price-lists, circulars, catalogues, estimates, and most price quotes. Ordinarily, they are not offers but invitations to inspect the goods and make an offer.
Owen v. Tunison; 158 A. 926 (1932)
– An advertisers response to a potential buyers question is not a contract where the response may have been written with the intent to open negotiations that might lead to a sale, but not an offer.
Harvey v. Facey; 1893 A.C. 552 (Privy Council 1893)
– An agreement to sell cannot be implied by the mere statement of the lowest price.
Volker Court, LLC v. Santa Fe Apartments, LLC; 130 S.W.3d 607 (Mo. App. 2004)
– A preliminary offer may not constitute an actual offer, but merely an invitation to negotiate further concerning the proposed sale.
– Offeror is the master of the offer and states the terms. Offeree retains the power of acceptance and rejection.
Fairmount Glass Works v. Grunden-Martin Woodenware Co., 51 S.W. 196 (1899)
– When a price quote is for “immediate acceptance,” and states specific terms, including the understood quantity, then it is an offer.
Zanakis-Pico v. Cutter Dodge, Inc.; 47 P.3d 1222 (HI. 2002)
– In order for there to be an offer, there must ordinarily be some language of commitment or some invitation to take action without further communication.
– Advertisements are generally not binding contractual offers, unless they invite acceptance without further negotiations in clear, definite, express, and unconditional language.
– “Based on approved credit”; a term that is a condition of sale and therefore cannot constitute an offer that an offeree is free unilaterally to accept. This is a financing terms, and is not an offer, because not everyone will qualify under the terms. Advertisements with this language simply invite the public to come in and attempt to qualify for financing, not to accept financing without any further manifestation of assent.
