Contracts Outline
Fall 2015 Semester with Professor Boon
Sources of Contract Law:
Definition of Contract- “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 as a duty.”
The Uniform Commercial Code (UCC)
Applies to the sale of goods only
Important definitions under the UCC
2-104 “Merchant” a person who deals with goods by his occupation and holds himself out as having knowledge or skill peculiar to the practices or goods involved
§ 2-105 “Goods” = any moveable & tangible object, includes crops & animals
Common Law
Applies to k for anything besides goods
Princess v. GE
Established the predominant purpose test à is it mostly about goods or services/anything else?
Services in this case, so it’s under common law not UCC
Convention on the International Sale of Goods (CISG)
Applies when its:
international contracts;
of the sale of goods; and
between merchants
becomes effective upon communication
Does not require consideration
Art 16 Addresses firm k and reliance
(1) Until a contract is concluded an offer may be revoked if the revocation reaches the offeree before he has dispatched an acceptance
(2) However, an offer cannot be revoked:
(a) if it indicates, whether by stating a fixed time for acceptance or otherwise, that it is irrevocable; or
(b) if it was reasonable for the offeree to rely on the offer as being irrevocable and the offeree has acted in reliance on the offer.
Types of Contracts
– Two parties agree to exchange promises
– Exchange of offeror’s promise for the offeree’s performance
-Contract/Restitution – Not really a k, but courts make like one to avoid unjust enrichment
– Offeror holds the offer open for a period of time
– Formed by language, either written or oral
– Formed by conduct
1. Essential Elements for the Formation of Contracts
Common Law – Mutual Assent “meeting of the minds”
Parties must both intent to contract and must agree on at least the main terms of deal
Requirement of a bargain
The formation of a contract requires a bargain in which there is a manifestation of mutual assent to the exchange and a consideration
Intent to be bound: Objective theory
To determine mutual assent we use the reasonable person standard: Whether or not a reasonable person would believe parties intended to enter into a contract
Ray v. Eurice Bros (house building case)
A reasonable person would have presumed that Eurice agreed to the specs when he signed the contract regardless of what Eurice subjectively thought he was agreeing to
Formation of a contract under
(1) A contract for sale of goods may be made in any manner sufficient to show agreement, including offer and acceptance, conduct by both parties which recognizes the existence of a contract
(2) An agreement sufficient to constitute a contract for sale may be found even if the moment of its making is undetermined
(3) Even if one or more terms are left open, a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy
Jannusch v. Nafziger (food truck)
Sale of goods = UCC
Open/missing terms here, but doesn’t matter under UCC
Essential terms were still there = price and equipment
Parties acted as if there was a valid contract
Was not an agreement to agree so it’s a valid contract
2. Is there a valid contract? (offer, acceptance, consideration)
OFFER §24
§24 – An offer is the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it
TEST – Is it an offer or are the parties still in preliminary negotiations? Was it terminated or a counteroffer made?
REQUIREMENTS OF AN OFFER:
(a) Promise given (expressed or implied)
(b) Definite and clear terms (identify offeree, subject matter, time, and price)
(c) Communicated to the offeree
Ads are not an offer – just an invitation EXCEPT when it’s a reward offer (unilateral k)
Longergan v. Scolnick
Ad in paper for land à Not a valid offer, it’s an invitation
Must have a specific audience
It would create too many powers of acceptance if it was one
Izadi v.
wise you have a counteroffer
– What constitutes an acceptance
(1) Acceptance of an offer: manifestation of assent to the terms made by the offeror
(2) Acceptance by performance requires that at least part of what the offer requests be performed or tendered and includes acceptance by a performance which operates as a return promise
(3) Acceptance by a promise requires that the offeree complete every act essential to the making of the promise
Mailbox Rule
Generally acceptance is effective when sent
Option Ks: Effective when received
AGREEMENT TO AGREE / POST-PONED BARGAINING
Terms of the contract need to be reasonably certain and no essential terms missing from the contract that are to be determined later
Walker v. Keith (lease with option to renew later)
This term is not part of the contract because:
There was no rent number (essential term)
Simply an agreement to agree without any type of reasonable calculation at how it will be determined later
i.e. 1 cent per gallon for gas price
Quake Construction v. American Airlines (cancellation clause)
They showed intent to be bound by the letter to work together on the construction project (b/c of the cancellation clause, if it was not an intent to be bound – wouldn’t need that to be in the letter)
Letter was valid because it included all essential terms
ACCEPTANCE BY SILENCE
Generally, if an offeree is silent this will NOT be considered acceptance
(a) If offeree has reason to know silence will constitute acceptance
(b) When offeree receives benefits of services and knows that they were offered with the expectation of compensation
(c) Because of previous dealings, it is reasonable to know that he must notify offeror of non-acceptance
