CONTRACTS: Professor KETTLE
1.) Contract- legally enforceable agreements
2.) Quasi-contract- equitable remedy (not governed by formal K law, it is governed by equity)
3.) Unilateral K- a contract that results from an offer that requires performance to accept.
a. Two hypotheticals frequently used.
i. Contest hypo. You can only receive the reward if you perform. You can only perform if you know about the offer.
ii. Reward hypo.
b. An option contract is formed when you begin performance such that you cannot revoke the offer while performance is being rendered.
4.) Bilateral K- a contract that results from an offer that is open as to how it can to be accepted.
I What is the Applicable Law:
a) Common law (reflected in the restatement second of contracts).
b) UCC Article 2
i) It is common law unless it is a sale of goods, then it is the UCC Article 2.
II Formation of Contracts:
Do you have an agreement? What do you need?
a) Offer- a manifestation of commitment
i) Manifestation (Need a Meeting of the minds. MOM)
a) You look at words
b) You look at actions
– DON’T LOOK AT WHAT WAS IN THE HEAD OR THE HEART!!!! An oral K is as good as the paper it is written on
iii) Objective theory
(1) An objective person would see that it was an offer
iv) Pitfalls…stuff that professors love to test on
(1) Advertisements are not offers. When you give your money to a store clerk in a store you then have an offer, not when you see a price in the paper.
(2) Missing price term- can you be legally obligated without knowing how much you need to pay? No. YOU MUST INCLUDE ALL MATERIAL TERMS TO CONSTITUTE AN OFFER UNDER THE COMMON LAW. PRICE IS A MATERIAL ITEM. Under the UCC Article 2 this is okay. You can have a missing price and it can be an offer.
(3) Vague or ambiguous material term- under the common law and the UCC, you cannot have a vague or ambiguous material term and have it be considered an offer.
(4) A Requiremance K- measures the quantity of goods to be purchased by how much the buyer needs (UCC 2-306).
(a) It is okay to express quantity in terms of buyer’s requiremance. THIS IS NOT CONSIDDERED A VAGUE OR AMBIGUOUS MATERIAL TERM WHICH NEGATES AN OFFER.
(b) Unreasonably disproportionate test- if a buyer under a requiremance K wants to increase the stuff he buys, he cannot increase it unless it is reasonable.
(5) Output K- you agree to sell all that you produce (like the breadcrumbs case)
(6) Gifts: not contracts, can also get you out of a contract
v) Termination of offers
(1) Termination of an offer means that the offer is gone and it cannot come back. IT IS DEAD FOREVER.
(2) How it happens. . .
(a) Lapse of time- if there is a time stated and the time lapses the offer is dead. If no statement than it is open only for a reasonable time.
(b) Death of either party before acceptance.
(c) Revocation of the offer-
(i) How does it happen?
1. A later statement that the offeror changed their mind.
a. This statement can come from a third party if that party is reliable.
2. The offeror exhibits inconsistent behavior later (like selling the object to anther that you were supposed to buy).
a. THE OFFEREE MUST BE AWARE OF THE ABOVE TWO THINGS FOR THE OFFER TO BE REVOKED.
(ii) When does revocation of an offer become effective?
1. You have to complete your revocation before acceptance has occurred.
2. If a revocation of a offer is sent through the mail it is not effective until it is received (THE MAILBOX RULE)
(iii) When not? What offers cannot be revoked?
1. Option- a seller gives you an option to do something for a time period and the buyer gives consideration for that promise.
2. Where the offer is foreseeably and reasonably relied upon. PROMISSORY ESTOPPEL (RESTATEMENT 90) can be claimed here.
3. Where there had been PART PERFORMANCE IN AN OFFER TO ENTER INTO A UNILATERAL CONTRACT. (You cannot be stopped walking across the GWB if someone tells you that they will pay you $500 if you walk across it and you begin performance. If, however, you agree to paint someone’s house for $500 and you buy all the supplies, the K can be revoked b/c you have not begun performance).
4. Article Two of the UCC’s FIRM OFFER RULE- If a merchant in a signed writing promises to keep her offer open, then she cannot revoke. This only applies to a sale of goods.
(d) Rejection by the offeree kills the offer.
(e) INDIRECT REJECTION
(i) Counter offer- if you make a counter offer you reject the first offer (Restatement section 40).
1. Bargaining is different that counter offer. You ask a question, not make a counter offer.
a. Example- “I’m still thinking but if you lower the price I can give you an answer now.”
(ii) Conditional acceptance- “I accept if…” means that I reject.
(iii) Adding additional terms means that you reject the offer.
(iv) HOWEVER- A grumbling acceptance is considered acceptance.
1. The Common Law rule- Mirror Image Rule- acceptance needs to look like the offer. If your acceptance contains any other additional
PTANCE OF UNILATERAL CONTRACTS
(a) The offeree must act with knowledge of the offer and be motivated by it.
(b) NO DUTY TO GIVE NOTICE OF PERFORMANCE
(i) Usually just performance of a unilateral K is acceptance. In some situations there are EXCEPTIONS.
1. OFFEROR REQUESTS NOTICE
2. ACT WOULD NOT NORMALLY COME TO THE OFFEROR’S ATTENTION.
(4) ACCEPTANCE OF BILATERAL CONTRACTS
(a) Subjective intent is irrelevant
(b) Steps that a reasonable person would consider acceptance count.
(c) Performance as acceptance
(i) You can accept by performance so long as it happens within a reasonable time and the offeror knows about it (through notice or otherwise).
(d) Knowledge of Contractual terms
(i) Knowledge is Judged by an objective standard
(ii) If the offeree objectively manifests her assent, she is bound by all contract terms that a reasonable person would have noted and understood.
(iii) OPPRESSIVE TERMS
1. If there are oppressive terms, the K may be VOIDABLE.
2. The court may use their “BLUE PENCIL” to fix the offending language.
(iv) PROVISIONS CONTRARY TO PUBLIC POLICY
(i) offers vs. preliminary negotiations vs. invitations (grants power of Acceptance)
(f) quotations- not contracts, invite to offer
a) Consideration- a bargained for legal detriment. Consideration removes the hazards of mistaken or perjured testimony that would attend the enforcement of promises for which nothing is given in exchange.
i) ELEMENTS OF CONSIDERATION
(1) A bargained for exchange
(2) It must constitute a benefit for the promisor or a detriment to the promisee.
(a) A forbearance of rights.
(b) A promising to do something.
(c) Promising to forbear on something.
ii) ADEQUACY OF CONSIDERATION
(1) “Nominal Consideration”
(a) a nominal sum given as consideration in a promise for something of greater value is unenforceable. This reflects a rigorous adherence to the bargain concept. DO NOT USE $1 consideration.
iii) Special Situations