Contracts Outline – Prof. Powers Fall 2004
1) Introduction
a) Contract
i) Objective Theory – what a reasonable person would understand from what is manifested by parties
ii) Promises Law won’t enforce
(1) Gift – with no C
(2) Illegal – K for a murder
(3) Illusory – future not bound by statement à promise to sell car tomorrow if I still want to
(a) If limitation placed on it, it’s ok – just b/c one party has greater control over it, doesn’t mean unenforceableà promise to lease you car I buy next month if I decide to buy it
(b) Just b/c there are alternatives, it’s ok as long as there are limitations à If I decide to buy car, I will lease to you or your cousin
iii) Promise for a promise – bilateral K; Promise for an act or forbearance – unilateral K
b) UCC
i) Article 2 governs sales/transactions in goods (sales – title passes from buyer to seller)
(1) UCC defines goods as objects which are movable at the time of their identification to the K
(2) Excludes transactions in real property, sale of intangible rights (insurance, promissory notes, stocks, bonds, checks) and sale of services
ii) Courts look to combinations of goods/services to see which predominates
iii) NOT limited to merchants, though there are some rules that only apply to merchants
c) Common Law – Governs anything not for the sale of goods
d) Software – Huge fight over whether goods or intangibles
2) Offer
a) Offer – intentional statement by an offeror that creates in mind of offeree a reasonable expectation that the offeror intended to enter into a K; usually viewed from point of view of a reasonable person and ask whether he would understand that the offeror had contractual intent
i) Opinions – don’t usually create K à doc thinks arm will heal in a month – therapeutic value
(1) Some exceptions – Hawkins v. McGee à hand grafted – doc promised 100% new hand b/c went beyond therapeutic value and doc used it to get him to agree to operation
b) An offer lasts until:
i) Offeror revokes before acc
ii) Offeror dies or loses capacity (if there’s already a K, that will not be affected)
iii) Lapse (time stated or a reasonable time)
iv) Offeree rejects
v) Offeree counteroffers
c) Offer must be definite enough to allow us to figure out what the K would be
i) UCC 2-part Test in §2-204
(1) Did parties intend to have K?
(2) Can court fashion a remedy?
ii) UCC has gap-filling provisions
(1) Price – reasonable price
(2) Risk of Loss
(3) Obligations
(4) Remedies
(5) Warranties
(6) Place of Delivery – seller’s place of delivery
(7) Time of Performance – reasonable time
iii) UCC §1-303 – “Construction Terms”
(1) Usage of trade – custom of industry; binds all, sometimes even consumers
(2) Course of dealing – parties’ past history w/each other
(3) Course of performance – what parties do in performing this K; useful in installment Ks
iv) Preliminary Negotiations
(1) Tend not to force parties into K until it’s clear they intended a K
(2) Major test – did parties intend??? – courts are slow to force into K when it’s unclear they intended K, but also slow to let parties out once they’ve established K
v) Advertisements
(1) Usually presumed to be mere solicitations for offers b/c leave too much to be negotiated like quantity, price, and form & time of payment
(a) Exception – Lefkowitz v. Greater Minneapolis Surplus Store à “one black lapin stole for $1” & “1st come 1st served”; court allowed b/c advertisement was specific/definite enough – specif
nder K law and are enforceable
(2) Courts usually construe fairly & not in accordance with their literal language
(a) “reward for arrest & conviction of the man who murdered my brother” – courts will usually say that b/c most people can’t arrest others, info leading to arrest is sufficient
(3) Revocation – Requires same or similar publicity/channels of communication to revoke
vii) Death/Incompetency – CL usually says offer terminates and power to acc is destroyed
viii) Rejection – Slightest rejection kills offer – “Will you buy my tie for $10? No…wait, yes!” à no good
ix) Counteroffer
(1) Impliedly a rejection; destroys power of acc, UNLESS
(a) Option K
(b) “Mere Inquiry Rule” à“Will you buy my tie for $10? I wonder if you’d consider $5”
3) Acceptance
a) General
i) Announced intention of the offeree to accept the offer
(1) By conduct/performance – unless offeror has expressly required a written acc
(2) By verbal communication
(3) By writing
ii) Replies are construed as what a reasonable person in the offeree’s shoes would understand to mean “reply” – i.e. “reply by return mail” – could mean only by return U.S. mail or could mean by e-mail, telegram, phone call, etc.
“Mirror Image Rule” and “Battle of the Forms”– CL rule says acc has to look exactly like offer; if acc tries to add new terms, it is a counteroffer; it destroys the offer, and unless acc by the offeror, no K
