Contracts Outline

Avoidance of Contract: misunderstanding, mutual mistake
· Sources of K Law
o Elements:
§ Offer – promise to do something under certain conditions
§ Acceptance – accept on terms of offer (assent)
§ Consideration (only recognized in CL)– expectancy interest enforced when party who receives promise gives something in return
· “Nudem pactum” – naked promise; not usually enforceable
· Intent to K
· Mutual Assent
o Lucy v. Zehmer (1)-napkin contract- A person’s outward expression of an intent to be bound to a K will be conclusive evidence of that intent rather than any secret or any unexpressed intent
§ Courts consider objective evidence, not the party’s subjective intent to determine the validity of the K
· Prevents someone from asserting he accepted offer that he didn’t really mean to accept
o Stepp v. Freeman (10)-lotto ticket:Relational K – K established among a group of people which binds them according to the practices of the group and creates certain obligations and entitlements according to that promise
§ 3 types of enforceable Ks:
· Express K
· Implied K: K implied in fact – all parties perform as if there were an express K in effect
o Parties’ meeting of the minds is shown by the surrounding circumstances, including conduct and declarations of the parties that make it inferable that the K exists as a matter of tacit understanding
§ Reasonable 3rd party viewing all the circumstances of the parties’ behavior would conclude that there was a tacit understanding between them
· Quasi-K: Neither type of K actually exists, but it would be inequitable not to enforce a party’s expectations
o Promisee relies to his detriment on promisor’s promise (promisee changes his course of conduct in a costly way)
o Promisor estopped from denial of promise, and promise is enforced (usually through damages)
o Contracting within the family (9-10)
§ A husband and wife are not precluded from enforcing commercial contracts, but contracts regulating matter essential to the marital relationship are view with great suspicion
· A spouse can bring an action to recover on a loan made to the other spouse for an independent business enterprise
o Rest. 2d, §21: Where the transaction is one which would normally be considered a “business” transaction, it will be presumed that the parties intended that the agreement be legally enforceable
· Offer
o Rest. 2d, §24: the 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 [the bargain].
o An offer must contain a promise or commitment, rather than merely an opinion
o Essential terms of an agreement:
§ Parties
§ Subject matter
§ Time for performance
§ price
o Preliminary Negotiations
o PFT Roberson v Volvo Trucks .(17) – truck fleet- Court uses the objective test to determine if implied K exists (from Stepp): would a reasonable person have concluded through the surrounding circumstances that a party meant to be bound by the agreement [No, document was not seen as K; document was short – usually they are long] o Also PE and Merger
§ Objective test considerations: Course and substance of negotiations; prior dealings/course of dealing; customary practice and trade/business; entirety and completeness of documents to conclude negotiations
· UCC §1-205 (882)
· Course of dealing: sequence of previous conduct between parties to a particular transaction which is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct.
o Usage of Trade: any practice or method of dealing having such regularity of observance in a place, vocation, or trade as to justify an expectation that it will be observed with respect to the transaction in question.
o Solicitations
o Lefkowitz v. Greater Minneapolis Surplus Store, Inc. (22)-coats – Rule for offer: where the offer is clear, definite, and explicit, and leaves nothing open for negotiation, it constitutes an offer, acceptance of which will complete the K [Williston] o UCC Section 2-205. Firm offer (56): Offer that the offeror cannot withdraw until the expiration of a period of which the offeror has set or until a condition set in the offer occurs
§ Must be in writing: an oral communication will not do
§ Def Cross references: goods, merchant, signed, and writing
o Common law: offer can be revoked at any time until someone accepts it according to its own terms
§ Can make a firm offer if that offer is supported by consideration
§ No consideration = offer remains revocable
· Only a merchant can make a firm offer without consideration
§ Bait and switch advertising(25): FTC can prevent under 15 U.S.C. §45(a)(1)
§ Offer v Invitation to Deal (most stores)
o Written Contract to Follow
o Continental Laboratories v. Scott Paper Co. (27) – 7 factors courts should consider to determine parties’ intentions in entering a contract and being bound before a written document is produced: from Restatement §27(31)
§ Whether K is usually written
§ Whether K requires formal writing for full expression
§ Whether it has few or many details
§ Whether the amount is large or small (from case)
§ Whether k is common or unusual
§ Whether all details have been agreed upon or some remain unresolved (from case)
§ Whether the negotiations show a writing was discussed or contemplated
§ Whether a standard form of contract is widely used in similar contracts
§ Whether either party takes an action in preparation for performance during negotiation
· Acceptance
o Effect of Acceptance
o Fixes the term of the K; establishes the K i