CONTRACTS
MACINTOSH
FALL 2012
· Hawkins v. McGee
o Hairy hand case. Dr. talks kid into doing a skin graft on his hand. Hand gets hairy and doesn’t work anymore. Kid sues and recovers. (reliance?)
· Remedies
o Expectation: X expects to receive a certain benefit from Y. This is expectation interest. If Y breaks his promise, X will seek a remedy that will make X as well of as if Y had performed under that contract.
o Restitution: X performs the contract and a benefit is conferred on Y. Y, in turn, does not perform her half of the contract. X needs to get his benefit back. Y needs to disgorge the benefit they received. If Y does not have the exact thing they need to give back to X, the value of that thing will be paid to X. Want to make sure Y is not unjustly enriched.
o Reliance: X enters into a contract with Y. Y makes a promise and X relies on it. (Ex: Y offers X a job so X quits his old job. X has changed his position). Want to put X back into as good a position as he would have been if Y had fulfilled her promise. May not be able to give X his job back, but can give him some money
o Expectation is post-contractual and reliance is pre-contractual.
· Sullivan v. O’Connor
o Performer gets botched nose job from Dr. Sues and recovers reliance and restitution (the difference between her old nose and this damaged nose, hospital fees, pain & suffering in third operation but not first two) but not expectation (difference between her damaged nose and the promised nose).
IS THERE A CONTRACT?
Objective theory of assent
· Lucy v. Zehmer
o Zehmer contracts to sell ranch to Lucy for 50k while at a bar – calling Lucy’s bluff. When realizes Lucy is serious tells him he was just kidding. Lucy takes contract, sues for specific performance, and wins. Assuming Zehmer wrote this contract as a joke, it would be binding anyway if Lucy had reason to believe it was genuine (court found he did).
o Specific performance: an order from the court ordering the contract breacher to do exactly what he had promised to do.
· Courts very reluctant to say that social promises are contractually enforceable.
What is an offer?
· Did the person, whether communicating orally or in writing, intend to make an offer which can be accepted to create a binding agreement?
o Intent is determined by an objective standard.
· Owen v. Tunison
o Owen wrote a letter asking Tunison if he would sell him property for $6000. Tunison wrote back stating he could not possibly sell it unless he “was to receive $16000.00 cash.” (alleged offer) Owen wrote back saying he accepted his offer and requesting that he send the deed. Tunison wrote back that he did not wish to sell the property.
o Court held that there was no offer and thus no contract.
· Harvey v. Facey
o Facey was going to sell his store to Kingston when Harvey telegraphed him a message stating “Will you sell us Bumper Hall Pen? Telegraph lowest cash price—answer paid.” (1) Facey answered by telegram, “Lowest price for Bumper Hall Pen £900.” (2) Harvey answered by telegram, “We agree to buy bumper Hall Pen for the sum of nine hundred pounds asked by you.” (3) Harvey sued for specific performance and to keep Kingston from receiving the property. Court found that telegram 2 was not an offer and so there was no contract.
o Court said mere statement of the lowest price at which the vendor would sell contains no implied contract to sell at that price to the persons making the inquiry.
· Fairmount Glass Works v. Cruden-Martin Woodenware Co
o Crunden-Martin Woodenware wrote Fairmount Glass Works asking them the lowest price for a large order of mason jars. Fairmount wrote back quoting them a price and conditions (offer). Cruden-Martin wrote back submitting an order (acceptance), and Fairmount wrote back telling them that they could not book the order because the output was all sold. Cruden-Martin Woodenware Company sued Fairmount Glass Works for breach of contract. Judgment for Cruden-Martin, holding that the telegram Cruden-Martin sent submitting an order closed the contract.
o Typically a price quote is not an offer, just information.
o Court said 2nd telegram was an offer b/c Crunden clearly made with the intent to buy. A reasonable person would have understood Crunden was also asking, will you sell me this much merchandise?
o #1 is a solicitation of an offer. #2 is the actual offer. #3 is acceptance.
· Lefkowitz v. Great Minneapolis Surplus Store
o Lefkowitz saw an ad advertising a black lapin stole for $1 for the first person who came to buy it. Lefkowitz was the first one to be there but they wouldn’t sell it to him because he wasn’t a woman. Lefkowitz sued the store and won expectation – the value of the stole minus $1. Court said the ad was an offer because it was clear, definite, explicit, and left nothing open for negotiation. Lefkowitz accepted the offer by showing up first.
o Typically an ad is not an offer but just providing information. Just an offer for others to make offers.
· Hypo: The Problem of the Neighborly Buy-Out p. 128
o Oliver sent letter to four neighbors, including one he had discussed selling his ranch to in the past (Southworth), a letter containing the details of what he is looking for in a sale. Actual case is Southworth v. Oliver (Or. 1978)
· Court holds that the letter is an offer so Southworth can accept.
· About what a reasonable person would believe – in Southworth’s position, reasonable person would believe that the letter is an offer because had talked about it before and don’t know that the letter is going to other people.
· Oliver basically made an offer to four people at once: can only give performance to one and the other three would have an opportunity to sue him.
· Core of an offer is intent: Is there intent to make an offer/enter into a binding contract?
· Overarching message: surrounding circumstances, esp. prior communications, can affect what is a reasonable belief.
What is an acceptance?
· § 30 RS (2d): Form of Acceptance Invited
(1) An offer may invite or require acceptance to be made by an affirmative answer in words, or by performing or refraining from performing or refraining from performing a specified act, or may empower the offeree to make a selection of terms in his acceptance.
(2) Unless otherwise indicated by language or the circumstances, an offer invites acceptance in any manner and by any medium reasonable in the circumstances.
· § 65 RS (2d): Reasonableness of the Medium of Acceptance
o Unless circumstances known to the offeree indicate otherwise, a medium of acceptance is reasonable if it is the one used by the offeror or one customary in similar transactions at the time and place the offer is received.
· Unilateral contract: unilateral because only one promise. Offeror promises to pay $10 for the offeree to mow the lawn. Offeree mows the lawn (without making a return promise). Performance is acceptance.
· Bilateral contract: Bilateral because there are two promises. Offeror promises to pay $10. Offeree promises to mow the lawn. Offeree’s promise is acceptance.
· § 32 RS (2d):
o In case of doubt an offer is interpreted as inviting the offeree to accept either by promising to perform what the offer requests or by rendering the performance, as the offeree chooses.
· Sometimes can’t accept by promise. A: “I will give $500 to whoever finds my missing cat.” Just goofy for B to go to A and say, “I promise to find your missing cat.” In this case, acceptance must be by performance.
· White v. Corlies & Tift
o White, a builder, was contacted by Corlies & Tift who asked him to quote how much it would be for him to fit up a suite of offices of theirs. He gave them an estimate, they changed their specifications and he gave them a new estimate, and finally the sent him a note saying that “upon agreement” (promise, not performance) that he could finish the job in two weeks he could start immediately. He immediately went out and bought supplies to begin the job (preparation for performance). The next day they sent him another note revoking the first note. White sued for breach of contract and lost.
o Court found there was nothing in White’s thought or in his acts that indicated or set in motion an indication to the defendants of his acceptance of their offer. Since there was no way for the defendants to know by his actions that he had accepted their offer, it is not a binding acceptance and there was no contract.
o No reliance because lumbar could be used for any job. If had done work v. specific to job, would have likely won.
o Revocation: taking an offer back.
· § 62 RS (2d): Effect of Performance by Offeree Where Offer Invites Either Performance or Promise
(1) Where an offer invites an offeree to choose between acceptance by promise and acceptance by performance, the tender or beginning of the invited performance or a tender of a beginning of it is an acceptance by performance.
(2) Such an acceptance operates as a promise to render complete performance.
o In general, if acceptance is by performance only, notice that performance has begun is required.
· Ever-Tite Roofing Corp. v. Green
o The Greens wanted Ever-Tite Roofing re-roof their house, and signed a document that stipulated that “This agreement shall become binding only upon written acceptance hereof, by the principle or authorized officer of the Contractor, or upon commencing performance of the work.” (either performance or promise) They singed this form because the Greens’ credit needed to be checked before beginning the job. After the transaction approved (approx. 9 days later), Ever-Tite loaded two trucks and sent them with workmen to the Greens’ house. Another company was already working on the house and they were not permitted to work. Sued for breach of contract and won. Court found that loading up the trucks was the beginning of performance (acceptance).
· Allied Steel and Conveyors, Inc v. Ford Motor Co
o Ford bought some machinery from Allied in 1955 to be installed by Ford’s employees. Then Ford offered to buy more machinery in 1956 to be installed by Allied’s employees. Along with the offer was an indemnification form that said Allied must take responsibility for negligence committed by Ford’s workers as well as its own. Allied started installing the machinery before they sent back the acceptance of the offer. One of Allied’s employees was injured as a result of the negligence of one of Ford’s employees. Then Allied sent back their written acceptance of the offer. That employee sued Ford, and Ford brought in Allied as a third-party defendant. At trial, the employee prevailed against Ford, but Ford prevailed against Allied in the same amount. Allied appealed.
o The court finds that Allied accepted the contract in full by performing it. It doesn’t matter that they didn’t use the method of accepting the contract that was included in the contract, because the court interprets it to be just a suggested method of acceptance. It would have been different if the contract had stipulated that a written response was the only acceptable way of accepting the offer.
o § 62 applies here because the offer is ambiguous regarding how to accept.
· § 56 RS (2d): Acceptance of Promise; Necessity of Notification to Offeror
o Except as stated in §69 or where the offer manifests a contrary intention, it is essential to an acceptance by promise either that the offeree exercise reasonable diligence to notify the offeror of acceptance or that the offeror receive the acceptance seasonably.
· International Filter Co v. Conroe Gin, Ice & Light Co.
o International Filter Co. (P) offered to provide a water softener and filter to Conroe Gin, Ice, & Light (D). The offer called for prompt acceptance and would become a binding contract upon acceptance by Conroe Gin and subsequent approval by an executive of International Filter. D accepted the offer and Engle, P’s president, approved and signed the proposal. P then acknowledged the order but did not
ion to support the contract.
· § 79 RS (2d): the law does not ask if the consideration was adequate.
· § 71 RS (2d): Both people must be looking to get something out of the bargain. If what A is really doing is giving a gift there is no consideration.
· Fiege v. Boehm (1956)
o Bargain: Fiege agreed to pay Boehm’s medical expenses, lost wages, and child support, on the condition that she did not conduct bastardly proceedings against him. Forbearance – she will refrain from her legal right to start a paternity suit.
o Issue: she has a legally invalid claim. Child wasn’t his, so a paternity suit wouldn’t be successful anyway.
o Court finds for Boehm because she believed her suit was valid and performed her end of the contract.
· § 74 RS (2d): Settlement of Claims
o (1) Forbearance to assert or the surrender of a claim or defense which prove to be invalid is not consideration unless (a) the claim or defense is in fact doubtful because of uncertainty as to the facts or the law, or (b) the forbearing or surrendering party believes that the claim or defense may be fairly determined to be valid.
o (2) The execution of a written instrument surrendering a claim or defense by one who is under no duty to execute it is consideration if the execution of the written instrument is bargained for even though he is not asserting the claim or defense and believes that no valid claim or defense exists.
· How to find bargained-for exchange
1. Identify the promise that someone is trying to enforce.
2. Identify the potential consideration (could be performance or return promise).
3. Establish the bargained-for exchange.
· If there is anything that looks like a settlement in good faith, judges are going to latch onto it.
· Feinberg v. Pfieffer Co.
o Lawsuit for breach of contract – Feinberg was given a pension by her company, and they paid it for awhile. Lawyer for Pfieffer told owner that they did not need to pay the pension because there was no consideration.
o Past services are not a valid consideration. Her years of service before pension was decided on are not consideration because she was not working in expectation of a pension.
o There is reliance here – retired before she would have because of pension – but no consideration.
· Kirksey v. Kirksey
o Brother invited his widowed sister-in-law to live on his property, then moved her to less and less comfortable accommodations before evicting her entirely. Sister-in-law abandoned the property she had been living on before in reliance on brother-in-law and has nowhere to go. Sued for breach of contract
o Court holds that brother’s promise was gratuitous and that there was no consideration. There was clearly reliance – but this got you nothing in contract law in 1845.
· Broadnax v. Ledbetter
o Broadnax captures a prisoner and brings him back to prison – there was a reward out for prisoner’s return but Broadnax did not know about it and failed to claim it. Then sues for it when hears about it.
o Looking for consideration – Broadnax was not induced to performance by the promise of the reward. However, would have gotten the reward if he’d known about it – just because there are multiple motivations to accept an offer doesn’t mean any of the invalidate the others.
o In order to accept an offer you have to know there is an offer. Otherwise you are not accepting.
· Employment contracts
o Employee policy handbooks function as an offer to modify the terms of the contract. The consideration is the employee continuing to work after seeing the handbook. This is consideration because an at-will employee could quit at any time.
o Law disfavors non-competition agreements because they restrict trade. However, will enforce them if they are “reasonable.”
· Lake Land Employment Group of Akron, LLC v. Columber
o Columber was given and signed a non-competition agreement a few years into his employment. He then continued to work for the company for another ten years. Columber later breached the non-competition agreement and Lake Land sued.
o Issue: whether subsequent employment after non-competition agreement was signed is adequate consideration.
o Holding: Subsequent employment is alone sufficient consideration to support a covenant-not-to-compete agreement with an at-will employee entered into after employment had already begun.
o Dissent: Columber gained nothing by signing the agreement, so no consideration. The majority opinion would allow an employer to exact an agreement and then fire employee the next day.
· § 51 RS (2d): Effect of Past Performance Without Knowledge of Offer
o Unless the offeror manifests a contrary intention, an offeree who learns of an offer after he has rendered part of the performance requested by the offer may accept by completing the requested performance.
