Macintosh_Contract_Spring_2013
I. I. IS THERE A CONTRACT?
A. Objective theory of assent
1. Objective test to evaluate if parties assented to K
a. Actions & words are evaluate, not unexpressed intentions & meanings
b. Reasonable person believe the contract was assented to [Lucy v. Zehmer– agreement to sell Zehmer’s farm, although seemingly a joke, was a binding contract]
c. Generally evaluate:
(1) the words used, surrounding circumstances, to whom the offer was made (public v. one person), definiteness & certainty of terms, written contract contemplated
B. B. What is an offer?
2. An act whereby one person confers upon another the power to create contractual relations b/w them – creates a power of acceptance in the offeree to create the K
a. Did the person intend to create such an agreement
(1) Measure this intent objectively (reasonable person standard)
b. What are generally not offers:
(1) Advertisements, mere quotes (seen as an invitation to offeree to make an offer) , negotiations, solicitations, jokes, doctors opinions
3. Present willingness to enter into a bargain, made in such a way that a reasonable person would believe that she could conclude the bargain merely by giving her assent (i.e. by accepting the offer)
4. Owen v. Tunison.
a. Δ’s letter was not an offer to sell land to π b/c it was written with the intent to open negotiations that might lead to a sale
5. Harvey v. Facey
a. No contract formed between parties’ telegrams b/c there was lack of definiteness that needed to be resolved in negotiations. Statement of lowest price vendor will sell contains no implied contract to sell at that price to the persons making the inquiry – everything else is left open. The prospective buyer’s last telegram is not an acceptance, it is only an offer to purchase that must be accepted by seller.
6. Fairmount Glass Works v. Crunden-Martin Woodenware Co.
a. Contract was formed: Prospective buyer’s letter was an inquiry for price and terms that appellant would sell the goods. Seller’s answer was not merely a quotation of prices, but a definite offer to sell on the terms indicated, and could not be withdrawn after the terms had been accepted.
7. Lefkowitz v. Great Minneapolis Surplus Store
a. Δ’s advertisement of selling stole for $1.00 was an offer and thus π’s seeking to purchase it was an acceptance of the offer. Store cannot impose new or arbitrary restrictions not contained in the published offer after offer was already accepted.
b. This case is an exception to the rule; generally ads are not offers to sell, only an invitation by seller to buyer to make an offer to purchase
C. C. What is an acceptance?
1. Offeror has the power of the offer
a. Can specify a method of acceptance- is binding
(1) Can decide if acceptance will be done through promise of performance
b. Once offeree accepts, the offeror cannot withdraw or change its mind w/o liability
c. Measure it objectively
2. Bilateral v. Unilateral Contract
a. Bilateral- 2 promises made
(1) Offer that calls for acceptance by a promise – exchange promise for promise
(2) Offeror obtains a commitment to perform in future
(3) Requires mutuality of obligation–both parties must be bound or neither is bound
b. Unilateral- 1 promise, 1 performance
(1) Parties exchange a promise for an act
(2) Acceptance by performance, not promise
(3) Performance is the acceptance- commencement of activity is the acceptance
3. Communication of Acceptance
a. Acceptance by performance (unilateral)
(1) No notice required – unless requested by offeror [RS §54]
(a) If the offeror is unlikely to be alerted of the acceptance by performance, & offeree does not alert, then offeror’s contractual duties can be voided if:
i) The offeree does not try to notify offeror
ii) The offeror does not find out on their own
iii) The offer states the notification is not accepted
b. Acceptance by Promise (bilateral)
(1) Notice is required [RS §56]
(a) Must be reasonably diligent in notifying the offeror of acceptance or offeror must receive the acceptance seasonably
i) Not required when jx does not follow RS [Int’l Filter Co v. Conroe Gin]
c. If case of doubt of how to accept, an offeree can accept either by promising to perform or by actual performance itself – the offeree may choose [§32]
(1) When the offer allows the offeree to choose the manner of performance, the tender or beginning of the invited performance, or at least the beginning of the performance = acceptance by performance
(a) [Begin performance = acceptance (when unclear how to accept)]
(b) Such an acceptance by performance = a promise to render complete performance [§ 62]
(2) When the offeror requests a promise, a return promise/performance must be given to offeror
(a) [White v. Corlies & Tift]
(3) Offeror must allow reasonable time for offeree to accept via performance
(a) [Ever-Tite Roofing Co. v. Green]
(4) If the offeree fails to comply with suggested method of acceptance, but does perform?
(a) K is formed [Allied Steel v. Ford]
D. D. Terminating the power of acceptance
1. Lapse of an Offer or expiration
a. If offeror gives no ending date, the offer expires after a reasonable time
(1) face to face or by phone
(a) time for acceptance typically does not extend beyond the conversation unless otherwise indicated
(2) acceptance of offer by mail
(a) is timely if mailed within a reasonable time depending on circumstances
b. If offeror gives an ending date, offeree’s power of acceptance lapses at end of the period
(1) Usually, period runs from time offer was recieved
2. Death of Offeror
a. Death or loss of mental capacity of offeror or offeree terminates the contract
(1) does not matter whether or not offeree knows about the death or incapacit
invited by the offer.” Thus it would not ordinarily apply to acceptance by mail of an offer made by telegram, and such an acceptance would be effective only on receipt.
c. Revocation & Rejection
(1) is effective only upon receipt (when it is received)
d. No clear rule for electronic mail- some use mailbox rule
(1) UCITA uses – Receipt is effective even if no one knows its there
(2) Rejection and revocations are only acceptable on receipt
E. E. Consideration
1. 1. Bargained-for exchange
c. Questions:
(1) Is promisor seeking a return promise in exchange for his promise?
(2) Is promisee providing the return promise or performance?
d. Generally, a promise is not enforceable unless it is supported by consideration
e. Elements of Consideration:
(1) Return promise
(a) an action or forbearance
i) benefit to promisor or detriment to promisee [Hamer v. Sidway]
(2) Performance
(a) must be bargained-for-exchange
(3) RS § 71
(a) Bargained for performance (in exchange for promise) can be: an act, forbearance, creation/modification/destruction of a legal relation
(4) RS § 79
(a) if consideration is met, no additional requirement of benefit/detriment to promise or promisor
f. What is sufficient consideration/ bargained for exchange?
(1) Forbearance not to sue based on an invalid claim is sufficient
(a) [Fiege v. Boehm]
(2) Past action/performance is not consideration
(a) Not bargained for [Feinberg v. Pfeiffer Co.]
(3) ‘Peppercorn’ considerations are not considerations
(a) [RS §71]
i) Subpart (1). To constitute consideration, a performance or a return promise must be bargained for.
ii) Subpart (2). Is bargained for if it is sought by promisor in exchange for his promise and is given by promisee in exchange for that promise
iii) Subpart (3). Performance can be act other than a promise; or forbearance; or creation, modification or destruction of a legal relation
iv) Subpart (4). Performance or return promise may be given to promisor or someone else. May be given by promisee or someone else.
(4) Gratuitous promises are not binding due to no consideration
(a) Must be a gift or bargain in exchange [Kirksey v. Kirksey]
(5) can’t collect on a reward you were unaware of b/c not induced by promise = can’t accept an offer you are unaware of = no bargained for exchange
