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Contracts II
South Texas College of Law Houston
Carlson, Richard R.

·         Legally enforceable
o       Contract
§         Promise exchanged for promise – bilateral contract
§         Promise exchanged for act or forbearance – unilateral contract
·         Legally un-enforceable
o       Gift promise (until delivery)
o       Illegal promise (ex. Promise to do crime)
o       Illusory promise (no limit on promissor’s future)
§         Limit of promissor’s future needed
§         Can’t “promise X if I want to…”
Contract Law
·         Common Law
·         Statutory
o       UCC
§         Article 2 – Sale of Goods (transactions in goods)
ú         Goods = Chattels (movable)
ú         Does not include:
·         Real property
·         Negotiable instruments
·         Insurance
·         Services
ú         Mixed transactions
·         Predominates – If TXN is more goods?
ú         Merchant = one who regularly deals in the types of goods in txn. Held to higher standard.
·         Ex. Saw mill sold saw to another sawmill. Court held that mill is merchant of wood not saws.
·         Farmers historically not considered merchant, but recently consider farmer’s sophistication
ú         Requires “Good faith” – subjectively honest
·         Merchants must also show reasonable commercial practices
ú         Controlling factors on contract
·         Express terms
·         Course of performance = “practical construction” is what the parties are doing for current contract and is best indicator of what the parties “meant”
o       § 2-208 – Course of performance may indicate parties desire to deviate from express terms
·         Course of Dealing = history between the parties – gives indication of what parties usually do
·         Usage of trade = custom within the industry – part of the deal and binds anyone who should know of it.
§         Article 2A – Lease of Goods
§         UN Treaty – International Sale of Goods
Offer & Acceptance
·         Definite and clear offer
o       Would a reasonable person in the position of the offeree believe that the offeror intended to make an offer (objective test)
§         When doubt, courts reluctant to impose K
§         Intent – perceived intention to be legally bound
ú         Social promises – “pick you up at 8” no intention to be legally bound
ú         Marital promises – “I’ll take out trash” not enforceable… but married couples can set up business and pre-nuptial agreements
ú         Parties stipulate that promise not legally enforceable –
ú         Opinions – professional opinions are not contracts. “My opinion is that with abx, infx will clear” vs “I promise that if you I do surg, you will recover”
o       Definite = a reasonable person would understand that saying “I accept” creates the K
§         UCC fills gaps (missing terms) with “reasonable” terms.
§         § 2-204 Indefinite K
ú         Did parties intend contract?
ú         Can court fashion a remedy?
§         Preliminary negotiations – No intent to form contract
§         Advertisement – Solicitations for offers
ú         Too indefinite – No unlimited quantity
ú         Lefkowitz v. Great Minneapolis Surplus Store: Ad for 1 black lapin stole. 1st come 1st served. Store refused to honor because L not a woman. Store argued ad was not an offer. L argued ad was definite enough to be an offer.
§         “Formal contract to follow” – when is binding, now or after written?
ú         Depends on intent of parties
·         Unspecified case: Parties each signed their own copy of K with same terms; just prior to exchange of K for other signature, there was a disagreement. Court held that since each party kept the K that they themselves signed, parties intent was that K did not begin until exchange of the papers.
ú         Opportunity to back ou

uty to speak
§         Previous course of dealing
§         Silence plus conduct = acceptance. Especially with unilateral contact.
ú         Bilateral contract – start of performance is implied promise to complete
§         1970 postal reorganization act – unsolicited merchandise via mail
ú         Option to return or keep.
§         Phillips v. Moore: After negotiations, acceptance sent in, but arguably too late. Court held, where there is an acceptance arguably too late, acts as counter offer, and based on previous course of dealing, silence is acceptance. Duty to speak created before reliance interest.
·         Battle of forms
o       Mirror image rule – In common law – to be an acceptance, had to be mirror image of offer, or else considered a counter offer.
§         Last Shot: last form has terms of contract
o       § 2-207 (1) Acceptance is acceptance even with new or different terms. UNLESS acceptance is made CONDITIONAL to new or different terms. (Called “proviso”)
o       § 2-207 (2) New terms are proposals and need to agreed to become terms of the contract. HOWEVER, where both parties are MERCHANTS, the terms do become part of the contract, UNLESS:
§         Initial offer objected to any such change, or
§         Offeror immediately objects, or
§         Terms materially alter offer (does act as acceptance, but term stricken)
ú         Disclaimer of warranties
ú         Arbitration clause (unless common in trade)
§ 2-207 (3) if conduct recognizes existence of contract