Contracts Outline
Dadush, Fall 2016
Summary of Topic 1: What Promises Are Enforceable?
Mutual assent: To establish whether enforceable promises have been made, courts look to see whether there was mutual assent to being bound.
R2-18 Pg. 151: Manifestation of Mutual Assent: Requires that each party either make a promise or begin or render a performance
R2-19 Pg. 152: Conduct as Manifestation of Assent: May be made by written or spoken words, or by other acts or failure to act. Not effective unless party 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
Objective theory of contract
is an interpretation tool whereby assent is established (or not) by considering the objective manifestations of intent, above, and sometimes to the total exclusion of any subjective intent. (e.g. Lucy v. Zehmer) Must look to what a “reasonable person would do,” and how person acts on outside not inside. Forces people to be clear w/ intent.
Enforceable K:
1. Has to be exchange of goods or a good
2. Has to be intent to be bound
Lucy v. Zehmer Pg. 1:
Zehmer “jokingly” signs over farm for 50K, Lucy believes it to be real.Court ruled that Zehmer had both capacity & manifestation, thus intended to enter into a serious biz transaction and be bound. Only outside manifestations matter.
R2 (16)
Intoxicated Persons rule pg. 148 (unable to act in a reasonable matter, or understand nature and consequences)
R2-17 Pg. 151: Requirement of a Bargain:
Must be mutual assent
Specific Performance:
Sale of Farm for 50k.
Expectation Damages:
Put party back in same position as they would have been if contract not breached. Spec. Perf. In this case b/c land is not easily replaceable with $.
Problem 1-1 Pepsi Pg. 14: Ad is not an offer, merely invitation to bargain. Reasonable person would not expect to get Jet for Pepsi points.
Contract Defined
A contract is a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes duty
R2-2(1): Promiseee
A promise is a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promise in understanding that a commitment has been made
UCC 1-103 (b): Course of Dealing:
Sequence of conduct concerning previous transactions between the parties to a particular transaction that is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct
Must be within reasonable time of acceptance (30 days)
is primary route for making a promise enforceable and finding mutual assent – i.e. a promise is enforceable if it is supported by consideration. Can include either a benefit or detriment to the promisor.
R2(71) Requirement of Exchange Pg. 167.
A performance (which can be an act or a forbearance) or return promise that is bargained for.
“Bargained for”: sought by the promisor in exchange for his promise and given by the promisee in exchange for the promise.
R2-74 Pg. 169: Settlement of Claims:
Forbearance to assert or the surrender of a claim or defense which proves to be
invalid is not consideration
Unless the claim or defense is doubtful b/c of uncertainty as to facts of law, or belief the the claim or defense may be fairly determined to be valid
R2-79 Pg. 170: Adequacy of Consideration; Mutuality of Obligation:
If the requirement of consideration is met, there is no additional requirement of a gain, advantage, or benefit to the promisor or a loss, disadvantage, or detriment to the promise; or equivalence in the values exchanged; or mutuality of
e is in the eye of the beholder. But if values exchanged are seriously out of balance, could be evidence of something else, e.g. some other problem that makes the promise not enforceable like fraud or abuse of bargaining power.
Illusory promise:
where one party has unlimited discretion to perform / exit the deal (e.g. maybe I’ll buy your book and maybe I won’t) is not consideration, but courts will sometimes imply terms that “rescue” a promise from being illusory. When courts rescue a promise this way, they rescue the contract. The UCC provides such terms in the context of the sale of goods arrangements contained in output and requirement contracts, which have no specified quantity.
Frozen Treats Ice Cream Company and Tip-Top Sundae Shop enter into a contract in which Tip-Top will buy all the ice cream it needs from Frozen Treats, and Frozen Treats will sell as much ice cream as it wants to Tip-Top. This contract is illusory because Tip-Top is bound to buy all of their ice cream from Frozen Treats, while Frozen Treats is bound to nothing at all. In fact, if it so chooses, Frozen Treats does not have to sell any ice cream to Tip-Top, and can choose to sell instead to another vendor that offers more money. This contract is not enforceable.
Past consideration is not consideration
unless it counts as moral consideration; that is, unless the promise made following the past un-bargained for act is supported by a sufficiently strong moral obligation to carry out the promise, the promise will not be enforced. Courts are not consistent in deploying moral obligation doctrine.
