CONTRACTS OUTLINE (Caraballo; Fall 2013; Knapp)
EXAM
1. Which law applies? UCC/Common Law
2. Is there a contract?
3. Throughout your answer show how different laws/schools of thought would lead to different results.
4. Preponderance of the Evidence Standard.
I. What is a Contract?
1. Mutual Assent (Bargain: O&A)+ Consideration (Promised Exchange).
2. Sources of Contract Law
a. Common Law: (Rulings/Restatement).
b. UCC:
3. When & How to apply Common Law or UCC? (Important for Exam)
a. UCC § 1-103: UCC may be supplemented by common law principles.
i. UCC Values: Simplicity, Clarity, Modernization of Comm Trans in goods.
ii. Policy: UCC must be liberally construed to promote these values.
b. UCC: Transactions in goods.
i. Goods: Movable items. Non-Fixtures. Services do not apply.
1. Fixture: anything attached to real property.
ii. Transaction: (Consumer-Consumer), (Merchant-Consumer), (M-M).
iii. Merchant: UCC definition.
1. A person who deals in goods (of the kind in question) or
2. by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction or
3. to whom such knowledge or skill may be attributed by his employment of an agent or broker or other intermediary who by his occupation holds himself out as having such knowledge.
c. UCC Does NOT define OFFER or CONSIDERATION (look to Common Law).
d. Predominate Factors Test: If K is a hybrid one (uses both goods and services), then whichever factor is dominant will control whether the UCC or the Common Law is used to judge the case.
4. Types of Contracts:
a. Bilateral: 2 promises exchanged.
b. Unilateral: One promise exchanged for an act. (If you do x, I will give you y)
i. a Uni K an offeror may not revoke an offer where the offeree has made substantial performance.
c. Option K: Offeree given the option to accept for a given period time, during which offer cannot be revoked.
II. Mutual Assent:
-UCC has lower standards for K formation & the existence of a K.
· Common Law/Mutual Assent: manifestation of MA (definite agreement).
· UCC/MA: a contract can be formed in any manner sufficient to show agreement. As long as there it is shown that parties intended to be bound.
o (Less definiteness required in order to promote Values/Policies: liberalize)
COMMON LAW: Definite Agreement
1) Was there mutual assent?
a. Objective standard: Manifestation of mutual assent.
i. Reasonable person would expect to be bound à contract enforceable.
1. Objective manifestations: context, actions, etc.
ii. Meeting of the Minds:
1. Now objective standard:
a. Unilateral mistakes, unlike bi-lateral mistakes do not prevent meeting of the minds. Ray v. Eurice Bros
b. Promise:
i. Contains language of commitment.
1. Different from statement of intention.
2. Different from expectancy of continued course of conduct.
ii. Statement of promise does not have to be serious.
1. Only matters that a reasonable person would regard it as a serious. Lucy v. Zemmer.
UCC: Mere Intent to be Bound (Evidence of,)
1. UCC § 2-204: K for sale of goods may be made:
a. in any manner sufficient to show agreement, including conduct by both parties which recognizes existence of a K
i. Even if…
1. Moment of its making is undetermined.
2. One or more terms are left open
b. K 4 sale does not fail for indefiniteness if
i. Parties have intended to make a K, and
ii. There is a reasonably certain basis for giving a remedy.
2. However, even under UCC, K must be definite agreement as to essential terms (identity of parties, subject matter, quantity consideration, price- can be left for future determination).
III. Offer & Acceptance (Think of in terms of MA)
1.OFFER:
COMMON LAW: (No UCC definition)
OFFER:
1. §24 2nd R: Offer is…
a. Manifestation of willingness to enter into a bargain
b. That justifies another persons’ understanding that his assent to that bargain is (i) Invited, and (ii) Will conclude it.
2. Takes effect when received.
3. Must be
a. Definite for there to be a K Lonergan v. Scolnick.
i. Requires “fixed purpose”/No further assent needed.
b. Using the word “offer” may not constitute an offer in a legal sense.
c. Offer & revocation must be communicated.
4. Offer made in Jest: Considered an actual offer if a reasonable person would believe his assent is invited & would seal the deal.
5. Non-Offers
a. Advertisements: Generally not Considered Offers. (Invitation to make offer)
i. Unless Specific Terms: ad invites acceptance w/o further negotiations
1. i.e. Buy 10 leather jackets, $100, 1st come first serve.
ii. unless bait & switch used, Izazdi v. Machado
b. Preliminary Negotiations: (Not definite enough for acceptance to merit K).
i. Invitation for an offer does not operate as an offer to create an enforceable contract. Lonergan v. Scolnck- ad 4 land sale, correspondence, prelim offer made
ii. If a RP believes that seller can still sell to another buyer, then no def offer.
c. Bids: Not offers. (See sec on Promissory Estoppel).
6. Counter-Offer: Rejection of the original offer. (Original offeree becomes new offeror).
a. UCC: can have acceptance with additional/different terms
2. Acceptance:
A. Acceptance/Manifesting Assent
1. Common Law: governed by R §50: Acceptance is a manifestation of assent to the terms made by the offeree in a manner invited/required by the offer.
a. Offeror: Master of the Offer: can dictate time/manner of acceptance.
b. Power of Acceptance (who may accept?)
i. Offer may be accepted only by a person in whom the offeror manifestly intended to grant a power
on
§ Consideration can be nominal or merely recited (if in a signed writing).
o §45 Restatement: In uni contract, option contract created when offeree tenders or begins the invited performance.
o Acceptance: mail box rule does not apply. Acceptance must be received for there to be a binding K in an option K.
o If “Acceptance” is given after the option has expired, the “acceptanc” becomes an offer.
UCC “Firm Offers”
· §2-205: Offer Irrevocable if it is…
o by a Merchant, in a signed writing, and gives explicit assurance that it will be held open.
o Such an offer is irrevocable even if it is w/o consideration or recital of consideration.
· Only need 2-205 when there is no consideration, if there is consideration then option can be kept open forever, under common law. 1-103 allows common law to take over.
VI: Agreement to Agree: “Postponed Bargaining”
Contract to make a contract:
– Step 1: Agree to make a contract and express all (essential) terms to be discussed.
– Step 2: Make the actual contract.
o If anything in (2) is different than (1), then (1) is not binding.
o Walker v. Keith: Need agrmt on all mtrl terms 4 k 2b enforceable. (lease agreement w/option 2 renew). Quake v. Amer Air- letter of intent w/stated terms 4 construction job, makes the agreement stronger than prelim neg.
VII. Additional/Different Terms (Review cases to get a good idea).
– Big issue (exam/generally): huge difference in how CL/UCC approach this problem, make sure you properly apply Predominate Factors Test, because difference is substantial.
– Cases: Princes Cruises- GE sent back counter offer that took away K protections by PC. Which terms stick depends on predominate factors test (counter offer vs. acceptance w-dif terms). MIR+LSR. Brown Machine- adding indemnification clause=material alteration, also invalid b/c offer was limited to stated terms. Gottlieb merchant shouldn’t be surprised by added limitation of damages provision.
Common Law
– Under CL additional/different terms are considered counter-offers (reject original offer)… the following rules take effect.
Mirror Image Rule: Requires that the offer and acceptance match. Counter-offer controlling.
Last Shot Rule: Implicit acceptance of a counter-offer by conduct indicating a lack of objection to it. (fire the last shot).
– Problem: slipping a term into K during “battle of the forms”
