Contracts-Ford
Spring 2010
OUTLINE
§1 Contract= promise or set of promises, for breach of which the law gives a remedy, or the performance of which the law in some way recognizes a duty
LAWS GOVERNING CONTRACTS
a. Common Law- generally governs contracts
i. Common Law Restatements
b. Statutory Law
i. UCC §2-201 – contracts for the sale of goods
1. 810 ILCS 5/2-102
2. Cal U. Com. Code §2102 (2009)
ii. Where the rules in the UCC are silent, fill the gap with common law
CHOICE OF LAW §187/8
a. Diversity of Citizenshipà Federal Jurisdiction applied when:
a. Parties from two different states file suit
b. Dispute is over $5MM
c. Filed w/in 30 days
b. Lex Loci = last contact, place where contract was formed/signed
c. Most Interest: participation, place of employment, residence,
iii. Ex: Palmer v. Beverly Enterprise: plaintiff sued for breach of employment contract when he got fired. He signed contract in IL and moved to work in CA.
1. Case heard in Fed court because parties involved in various states
iv. Ex: Nortek v. Molnar: Fired employee sues for severance recovery.
1. Case heard in Fed court- how did it get there: Diversity of citizenship applies: plaintiff sued for breach of employment contract where he lived and worked in NY, office HQ in DE, Signed in OH, traveled in PA and RI
a. Applied NY laws because NY had most interest and contract was signed there
OBJECTIVE/SUBJECTIVE APPROACH §17
a. Manifestation of Mutual Assent/Meeting of the Minds §17(c)
b. Objective Theory- Hotchkiss
i. Doesn’t matter what was meant, rather what was said (20 Bishops would agree) we don’t know your secret meaning, so we have to go off what you said or what would be understood by the reasonable observer
c. Subjective: Theory of Legal Interpretation – Holmes
ii. What of you both have a different meaning of what was said
2. Ex: Raffles v. Wichelhaus: Peerless
iii. What was meant, or understood by reasonable person
3. Ex: Rickets v. PA Railroad: man injured on the job on railroad cart signed release waiver to recover loss wages, but not his injury claims (which could have been much greater) there are exceptions to the rule when we don’t know what was thought, rather what was agreed to
TYPES OF CONTRACTS §4
1. Bilateral- exchange of mutual promises OR performance
a. Part performance constitutes bilateral contract
b. Test: Each party has a duty and a right
2. Unilateral- acceptance by performance
a. Requires completion of performance in order for promisor to uphold promise/manifest acceptance
b. Offer to public is also a unilateral contract,
i. i.e. reward offer
c. Test: One party has only a right and the other party has only a duty
3. Express
a. By language, oral or written §4(a)
i. Ex: Man calls his grocer and asks him to send 10 lbs of flour. If grocer sends man 10lbs, Man has promised to pay the grocer its current price
4. Implied in Fact
a. Formed by manifestations of assent other than written or oral, i.e. by conduct
5. Quasi Contracts (implied by law) §4(b)
a. Not actually contracts, rather constructed by courts as equitable devise to avoid unjust enrichment
6. Void Contract
a. Totally without any legal effect from the start
i. i.e. agreement to commit a crime
7. Voidable Contract §7
a. Both parties may elect to avoid or ratify
i. i.e. contracts with minor, or mentally ill parties, created from duress, or by fraud
ii. voidable in that the contract wont be enforced against the harmed party, but its still a legal contract
8. Unenforceable Contract §8
a. Agreement that is otherwise valid, but that may not be enforceable due to various extraneous contract formations like statute of frauds, or limitations
i. Voidable contract is one type of unenforceable contract
9. Option Contract
a. Keeps contract open while party “thinks about it” before committing, but limits promissor’s power to revoke
FORMATION OF CONTRACTS
I) MANIFESTATION of MUTUAL ASSENT/MEETING of the MINDS
A. Formation of a contract requires a bargain in which there is manifestation of mutual assent to exchange a consideration §17
1. Meeting of the Minds §17(c)
B. Manifestation of Mutual Assent §18
1. Assent by Promise or Performance §18(b)
2. Offers in jest/sham are not intended to be taken seriously, thus not mutual assent §18(c)
C. Conduct of Assent: Oral, Written of by Conduct §19
1. Ex: Morales v. Sun Construction-
a. Whether signing contact w/o understanding all terms binds the signor to all its terms
b. Employment contract translated in Spanish and translator left out information about arbitration clause. Plaintiff tries to sue for breach of contract, while defendant motions to stay proceedings and arbitrate.
c. Even though plaintiff didn’t speak English, mutual assent was met b/c plaintiff signed contract, including arbitration clause, and didn’t question it for the year he was employed
2. Ex: Schillachi v. Flying Dutchmen:
a. Whether ATV Race course is liable for injuries occurred on track when driver assented to terms
b. ATV racer signs liability waver releasing liability from track for any injuries sustained. Man is severely injured at race and sues by fails because he expressed his assent b
endant wrote up a preliminary letter of intent, which was detailed and stated an out clause. Plaintiff relied on Defendants letter of intent and started to work, but wasn’t hired- they sue.
iii. Terms in letter are ambiguous but allude that it was binding
2. Retail- when is the offer made/contract formed?
a. Ex: Lasky v Grocery Store
i. Bottle explodes when plaintiff took it off shelf- had not yet committed to buying it (self service store- pre UCC days) no transfer of title until you pay
ii. Grocer not liable. Plaintiff failed to prove that she accepted offer
b. Ex: Sanchez-Lopez v. Fedco
i. Bottle explodes at register
ii. Bilateral contract formed when plaintiff came to check out counter- implied contract of sale
iii. Grocer liable for damages
c. Ex: Barker v. Allied SuperMarket
i. Bottle explodes while placing it in cart
ii. Under UCC- intention to pay by possession. Enter into contract when you pick up item at store, but voidable until you pay
iii. Grocer liable for damages
D. Advertisements as preliminary Negotiations §26
1. Advertisement is an invitation to enter into negotiation (not a firm offer) Unless:
a. For an ad to be an offer, must be clear, definite, explicit and leave nothing open for negotiation
2. Ex: Lefkowitz v Great Minneapolis Surplus
a. Whether first come first served ad in newspaper was accepted when plaintiff showing up first in line (when ad was very explicit and left nothing open for negotiation)
b. Defendant placed explicit ad in newspaper which plaintiff responds to, and is turned down b/c it was allegedly only offered to women (that was not in the ad)
c. Court rules in favor of plaintiff- ad was explicit enough to nit leave anything up for question
E. Form of Acceptance Invited §30
1. Explicitly saying I accept, by conduct, by staying silent
2. Anything that is reasonable under the circumstances and invited by the offeror
F. Certainty of Terms §33
1. Even though a manifestation of intent is intended to be understood as a offer, it cannot be accepted as to form a contract unless the terms of the contract are relatively certain
