Contracts Korobkin Spring 2016
Promissory Liability – liability for making promises
3 Reasons Why You Would Have Legal Liability for Breaking a Promise
1) Contract Proper – B/C there is an agreement (there is mutual assent, agreement)
3 Elements Needed to Create a Contract:
i. Mutual assent (offer and acceptance)
ii. Consideration
iii. No defenses to formation
a. Mutual Assent (offer which creates a power of acceptance; requires Offer and Power of Acceptance)
– Mutual Assent is determined by the objective theory
– We don’t demand that both parties have the same intention, what is important is that they display manifestation of contracting behavior.
– Ray v. Eurice Bros. – Even if you didn’t understand what you are signing if a reasonable person would believe that you knew what you were signing, you are bound. The test for assent is objective and not subjective. Intent is determined from what a reasonable person in the position of the parties would have thought it meant
– Assuming there is a contract that can be defeated on affirmative defense of unilateral mistake. This is a breach of contract and expectation damages will apply which is in money damages, cost to complete the house.
– Must be an offer which creates a power of acceptance
– A promise is a manifestation of intent. The mere expression of present intention, as oppose to manifestation of actual intention, predictions, or opinions do not constitute promises.
– For mutual assent to exist there must be an:
Offer§24 p. 153
An offer is 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 it.
– It is right before both parties are bound.
– An offer signals what has to occur before mutual assent and communicates vital information to the offeree
1) Not open to just anyone – specific
2) Indicate essential terms – Informs parties what they will be bound to
3) Reasonable person could understand it was an offer (that it would not surprise that you are now bound)
– Not merely an invitation to negotiate, it is a manifestation of a willingness to enter into a bargain (offeror), so made as to justify someone in believing that their assent is invited and will conclude the bargain (oferree).
Offer v. Invitation to Deal
1.words that suggest negotiations
a.are you interested, would you give, I would consider…
2.words that suggest offer
a. I will sell, I will buy, I offer, I bid
3. Things to look at: language, prior relationship surrounding circumstances, method of communication (broader is less likely an offer), custom in industry and degree of definiteness of terms
Scolnick Case – A communication should be interpreted as a reasonable person would interpret it, regardless of the secret intention of the person making it. Advertisements are generally not offers unless they invite acceptance without further negotiations in clear, definite, express, and unconditional language.
Buyer and seller of land with back and forth of communication.Was there an offer? I have land but you must confirm quickly.Court says there was not offer.
An offer creates power of acceptance
What is an offer?
intended to allow the offeree to accept either by making a return promise or by rendering the performance requested by the offeror.
§32 does not apply when it was clear that the offeror sought an act and only an act in exchange for the promise of performance.
Also would not apply if the offeree simply began performance without making a return promise
§45 Second Restatement
When an offeree tenders or begins the requested performance under a unilateral contract, the offeror becomes bound and cannot revoke his offer so long as the offeree completes performance in accordance with the terms of the offer.
Case: Cook v. Coldwell Banker/Frank Laiben Realty (Substantial Performance)
Synopsis of Rule of Law. An offer to enter into a unilateral contract may not be revoked once the offeree has made substantial performance.
Ways in which you can have termination of power of acceptance before it is exercised.
Revocation
Direct – notification that they intend not to go forward
Indirect – offeror takes an action in contrast with the offer and the offeree learns of it from a reliable source
i.e in Plattsberg by communicating that the mortgage had been sold Peter was indirectly communicatingrevocation
Rejection – Oferee communicates that he won’t accept
Counter Offer
Lapses
