Contracts I Outline
I. Questions to Ask in Every Dispute in Contracts:
A. Was there an offer
B. Was there acceptance
D. Statute of Frauds
II. Derived from State Law – 2 approaches
1. Pre-1945 rationale
2. People should look out for themselves – literal interpretation of contracts
1. Post – 1945 Rationale
2. UCC – sale of goods
III. Contracts controlled by:
C. Common Law – usually most applicable
D. CISG – International Contracts
E. UNIDROIT – non-sale of goods cases – no test on this.
F. Federal law is supreme over state law
IV. What is a Promise
1. Manifestation of willingness to enter into a bargain, so that a reasonable person believes that his assent can conclude the bargain.
2. Objective Reasonable Person test
a) What is said and done in the context of the contract.
b) Does not matter what the subjective intent is
(1) Fly on the wall test – what would a fly on the wall think transpired.
(2) Words alone are good as long as a reasonable person would interpret similarly.
(3) Must intend to contract, not just keep a promise.
(a) In the case of confidentiality of news reporter and source, must have intended to create a binding contract, not just make a promise not to reveal source.
(4) If you tell employee to go ahead and keep working when employee comes wanting to renew contract then likely going to be considered a contract because employee left believing that he had a contract and could not know that employer subjectively never intended to renew contract.
(5) If you put an agreement to sell your land in writing on a napkin which contains price and timeframe and is signed by all parties and was rewritten to include both husband of wife who owned property, then likely to be considered a contract.
(a) Possible defense is that if you were seriously drunk at the time of the contract then can possibly be availed, but would have to demonstrate severe drunk.
(6) Cannot say you are joking after the appearance of a contract has been made. Would have to state that you were joking before contract or reasonable person would have to infer that you were joking.
3. Implied in fact contract
a) Looks at acts and conduct of parties to determine if elements of an express contract exist even though no express agreement to contract.
b) Where one accepts a benefit from another where compensation is customary.
(1) When working with another party to help create your marketing campaign and tell them you intend to create a contract but then another department of yours develops own marketing campaign the strongly resembles the one you were working on, can sue for breach of contract because the evidence demonstrates that the parties intended to contract.
4. If you agree to sell cotton at a certain price and upon harvest market price goes up, still must perform under original contract.
5. Firm Offers
a) UCC 2-205 – offers by a merchant to buy or sell goods in a signed writing which by its terms gives assurance that it will be held open is not revocable, for lack of consideration, during the time stated or if not time is stated for a reasonable time, but in no event may such period of irrevocability exceed three months; but any such term of assurance on a form supplied by the offeree must be separately signed by the offeror.
6. Determining when it is an offer:
a) Preliminary negotiations are not offers
(a) §26 – Advertisements are not offers unless a commitment or invitation to take action. Clear definite, etc.
(2) Reasonable person test
(a) If company says if you collect 7,000,000 points from their products or buy enough points will sell Harrier Jet in a commercial, but commercial states specific method
a) Can revoke any time before acceptance if there was no consideration to keep the offer open.
b) Once aware of revocation or implication of revocation, then offer no longer open. Even if not directly notified but hear from reliable source.
c) Revoking reward offer:
(1) Must publish with as much publicity as the original offer was published
(1) §48 – if party dies, offer is revoked then, not when other party hears he died
(1) Offeree’s power of acceptance terminated by:
(a) Rejection or counter-offer
(b) Lapse of time
(d) Death or incapacity
(2) Non-occurrence of any condition of acceptance under terms of offer.
f) Option contacts
(1) If you accept within timeframe given, cannot then backout still before the timeframe.
(2) Consideration can be nominal to make a valid option contract
(3) Can be in writing and recite a purported consideration and propose a fair deal and be signed.
(a) §87 – modern jurisdictions only
(4) UCC 2-205 – firm offers must remain open for timeframe.
(5) Counter-offers are not treated as rejections of original offer.
(6) §63 – Mailbox rule does not apply. Notification must be by that time, not putting in the mail by that time.
1. Manifestation of assent to the terms of the offer in a manner that was invited or required by the offer or reasonably forseeable manner.
2. Implied or Express
3. Said or done
4. What constitutes valid performance