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South Texas College of Law Houston
Carlson, Richard R.

CONTRACT – a contract is a promise or set of promises, for breach of which the law gives a remedy, or performance of which the law in some way recognizes as a duty.

Ø Law Governing Contracts:
· Common Law – services
· UCC – Article 2 – Sale of Goods

· Expectation Interests – (largest) – put in position had the contract been performed; benefit of the bargain; includes profit
· Reliance Interests – put in position had the contract not been made; get back what was lost (expenses); does not include profit; go for reliance if $ would have been lost or you don’t know what the outcome would be.
· Restitution – (small) – to prevent unjust enrichment; injured party interest restored if benefit was conferred on breaching party.

· Express Contracts – terms are explicitly set out in oral or written words of agreement
· Implied In-fact Contracts – parties presumably intended contract based on their conduct; mutual assent is inferred
· Implied In-law Contracts – not a true contract because assent is missing; obligation imposed by law; avoid unjust enrichment

MUTUAL ASSENT – intent to contract; a mutual manifestation of assent to the same terms
· Offer + Acceptance
· An agreement on “the same bargain at the same time” – “a meeting of the minds”
· Objective theory – the mental intentions of the parties is irrelevant
· A party’s intention will be held to be what a reasonable person in the position of the other party would conclude the manifestation to be
· An expression is not interpreted according to what the person making the expression subjectively meant it the expression to convey; or what the person to whom the expression is addressed subjectively understood the expression to mean
· This protects the parties’ reasonable expectations in relying on a promise, and the need for security and certainty in business transaction – they must be able to rely on the other party’s manifested intentions, without regard to her thoughts or mental reservations
o Lucy v Zehmer – Question of contractual intent. Zehmer was joking about the sale of his land, but Lucy perceived him to be serious. Holding: Look to the outward expression of a person as manifesting his intention rather than to his secret and unexpressed intention. Judged by what the reasonable person would believe the other party was intending. If you are joking about an offer or acceptance, the other party has to know that you are joking
· There is sufficient manifestation whenever the party uses an expression that he knows or has reason to know, the other party would reasonably interpret as an offer or acceptance, and the other party does so interpret
o Stepp v. Freeman – The lottery pool case. Mutual assent from an implied


A communication by the offeror;
creating a reasonable expectation in the offeree;
that offeror is willing to enter into a contract;
on specified terms;
such that the offeree need only accept in order to form a contract

The offeror must manifest an intent to be presently bound. It is important to distinguish an offer from a negotiation or an offer to negotiate. The offer must have:

the language of a promise,
a definiteness as to the essential terms and
be communicated to the offeree.

Promise, Undertaking, or Commitment – there must be intent to enter into a contract. There must be a promise, undertaking or commitment to enter into the contract. To determine whether a communication is an offer these criteria are used:

Language – ambiguity is construed in favor of the offeree
Surrounding Circumstances – interpreted objectively
Prior Practice and Relationship of the Parties
Method of Communication
Industry Custom

Certainty and Definiteness of Terms