Contracts Outline

Contracts I Outline
Jones Fall 2012
MEANING OF TERMS
            Restatement § 9 Parties Required
– There must be at least two parties to a contract, a promisor and a promisee, but there may be any greater number.
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Chapter 2: The Basis of Contractual Obligation: Mutual Assent and Consideration
 
Classical/Traditional Theory
Classical contract law showed a preference for clear rules (sometimes referred to as “legal formalism”) over general standards (such as “reasonableness”)
 
Traditional contract law was relatively indifferent to issues of morality or social policy presented by contract cases (other than the policy that contracts should be kept pacta sunt servanda)
 
 Pacta sunt servanda: Doctrines such as “good faith” and “unconscionability exemplify this modern approach.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
A. MUTUAL ASSENT
The Restatement (Second) in §17 states that formation of contract requires “a bargain in which there is a manifestation of mutual assent to the exchange and a consideration.”
 
First, the restatement refers to the concept of a bargain, in which the parties manifest mutual assent. Under the traditional model of contract formation, applicable to many commercial transactions, parties engage in the give-and-take of bargaining through a process of offer and acceptance, ultimately either reaching a deal (a “manifestation of mutual assent”) or breaking negotiations.
 
***It is important to recognize, however, that a contract can be formed even when the parties do not engage in bargaining.
 
Second, when parties are in bargaining relationship, it is also possible that one party can incur legal obligations to another person even though they have not entered into a contract.
 
Third, even if a contract has been formed, that is far from the end of the analysis. As we will see in subsequent chapters, a party who has entered into a contract may be relieved of that obligation if the other party has engaged in some form of bargaining misconduct, such as fraud, duress, or undue influence (to name just three), or if circumstances that existed at the time of the contract have changed sufficiently to justify nonperformance.
 
Contracts can be formed even when two parties do not engage in bargaining
Liabilities can be formed even though no contract has been formed
Bargaining misconduct: Fraud, distress, or undue influence
 
A meeting of objective minds (reasonable minds) NOT subjective.
You are bound by the signature- even if you are illiterate
 
 
 
 
 
 
 
 
 
 
 
I. Intention to be Bound: The Objective Theory of Contract
 
In applying the concept of mutual assent, some courts state that the formation of a contract requires a “meeting of the minds” between the parties.
 
“mutual assent”:
EX: Suppose S and B sign a written document in which B agrees to buy a condominium in a new development. B later claims that he did not understand that he was signing a contract and that he did not intend to buy the condo. B might claim that he thought that the document he signed simply “reserved” the condo for him but did not obligate him to buy the property. The case goes to a trial before a jury. Suppose the jury believes that B is telling the truth and that he honestly did not understand that he was obligated to buy the property.
 
If contract law requires a “meeting of the minds” for contract formation, then the jury should find for B.
 
This view of contract formation has been described as “subjective” in that the actual intention of a party, rather than that party’s conduct, determines the party’s legal obligations.
 
On the other hand – if contract law requires a manifestation of mutual assent, then (absent some fraud or other misconduct by S) the jury should find for S because both S and B manifested their assent by signing the document of sale.
 
This approach has been described as “objective,” in that it looks at the conduct of the parties from the perspective of a reasonable person rather than their actual, subjective intentions.
 
Ray v. William G. Eurice & Bros., Inc
Ray v. William G. Eurice Bros., Inc. – Ray and wife are the owners of a lot and the plaintiffs, Eurice Bros. are the construction company they were working with. They had several meetings concerning the plans and blueprints to build on lot. These plans went back and forth and eventually signed by all. D held final meeting claiming they would not build because they had never seen the contract and plans.
Issue: How does the parties’ intent determine the contract?
Holding: Judgment reversed, and P was awarded damages.
Reasoning: Builders had the capacity to understand and fully read the contract. There was no fraud of duress found by owners of lot. Builders signed contract and they are held accountable. Ignorance or Negligence is no excuse.
 
The Court concluded that the Eurice and Bros to have time to read and understand this contract because this was their profession. Thus, the company has previously worked with contracts before.
The Court concluded a contract is not established by intent, rather the signature that presumes one has read and understood its literature
 
What a reasonable person would interpret the contract’s literature
 
Rule: Duty to Read: Unless there was fraud, duress, or mutual mistake or that one having the capacity to understand a written document who reads and signs it or without having it read to him signs it is bound by his signature in law at least.
 
R 18: Manifestation of Mutual Assent:
Manifestation of mutual assent to an exchange requires that each party either make a promise or begin or render a performance.
 
R 19: Conduct as Manifestation of Assent:
(1) The manifestation of assent may be made wholly or partly by written or spoken words by other acts or failure to act.
(2) The conduct of a party is not effective as a manifestation of his assent unless he intends to engage in the conduct and knows or has reason to know that the other party may infer from his conduct that he assents.
(3) The conduct of a party may manifest assent even though he does not in fact assent. In such cases a resulting contract may be voidable because of fraud, duress, mistake or other invalidating cause.
 
R 21: Intention to be Legally Bound:
Neither real nor apparent intention that a promise be legally binding is essential to the information of a contract, but a manifestation of intention that a promise shall not affect legal relations may prevent the formation of a contract.
Duty to Read Rule: a party is bound to a signed document, which he has read with the capacity to understand it, absent fraud, duress and mutual mistake
 
Duress: unlawful threats or other coercive behavior by one person that causes another to commit acts that he would otherwise do.
 
 
 
 
THE DUTY TO READ RULE (objective sta