Select Page

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

I) Philosophical Underpinnings of Contract Law
§Natural tension b/w K law as private law vision (facilitative and deferential to the private ordering of business affairs e.g. enforcing liquidated damages) and law as reflection of public values, where rulings based on social norms of the day.

Langdell has a decidedly classical impression of K law. He stands for the formal proposition that K law is timeless, neutral, and detached, administered by impartial judges. He says:
1. Don’t get distracted by what going on in society at large
2. Law is axiomatic w/ a deductive power. It is a science, and if we teach it and implement it as such, the results will be certain.

Holmes in “Path of Law” proposes two interpretations:
1. Law is not about morality (attack on formalism); and
2. History of law is one of practical choices and the impact such choices have on society.
So judges make tremendous decisions about how society should be organized, prompted by the current context (emanating from society).

Gilmore and his confederates recognize that the seeds of destruction of classical contracts were planted long ago. The Lochner-era and its subsequent demise illustrates that the classical vision has been in decline. Gilmore is recording the shift from formalism to realism in K law. While Horwitz and Gilmore coming from different perspectives (Horwitz writes more about K law reflecting current social values) they are probably in the same camp. Macaulay in “Use and Non-Use of Contracts” would also be in this camp, holding that the role the black-letter requirements of plays in daily transaction is relatively minor; K law as we study it all a vestige of bygone era.

II) Where Courts Find Contracts
Implied in-law K – sometimes called quasi-contracts. Not really contracts in the conventional sense, because there’s no need for offer and acceptance. Here courts hold that the benefited party must compensate the other, notwithstanding any absence of an agreement to pay for such services. Rather it is implied that the benefited party agreed to pay for the services. Court saying “we don’t care what you said or what you did, you’re going to pay!”

Implied in-law K – something reasonably implies by the parties conduct. The legal effect of an implied in-law K is exactly the same as an express K. Court is saying “we don’t care what you said (or didn’t say), only about what you did.”

Express K – enforcement based upon what was said or written.

Formality requirement – Court is saying “put what you mean in writing or else we aren’t going to enforce the K.”

III) Foundations of a Contractual Relationship
a) Meeting of the Minds / Offer & Acceptance
§consensus ad idem: meeting of the minds

§ 2-204: Formation in General
§focus on existence of agreement between parties, whether shown by words or conduct, and steering away from technicalities, should uphold K.

§ 2-206: Offer and Acceptance in Formation of Contract
(1) Unless stated unambiguously otherwise,
(a) an offer to make a K can be made in any manner reasonable in the circumstances
(b) offer to buy goods for shipment can be seen as inviting acceptance either by promise to ship or by shipment.
(2) the offeree must notify the offeror of beginning performance “within a reasonable time”

Determining Meeting of the minds
§standard answer: interested in what reasonably appeared to be the case.
§objective approach: what a reasonable person would think
§subjective approach: “inside the head” approach (evidentiary problems)

§manifestation of commitment – look at the content of communication. What was said? Written?
§ Was there an expression of a promise, undertaking, or commitment to enter a K?
§ Were there certainty and definiteness in the essential terms?
§ Was there communication of the above to the offeree?
§“essential” elements include:
úidentity of the offeree and the subject matter;
úthe price to be paid;
úthe time of payment, delivery, or performance;
úthe quantity involved; and (only essential term under UCC)
úthe nature of the work to be performed.
úHOWEVER, if the parties fail to explicity state one or more of these essential elements, the Ct. may in certain circumstances attempt to supply the missing term, as long as it contains some objective standard to supply the missing terms.

§expression of agreement to an offer made by another party. Would a reasonable person have understood this to be an acceptance? (use objective approach)

Embry v. Hargadine, McKittrick Dry Goods Co.; (Ct of Appeals of Missouri, 1907); CB 5

made to D. P says there is no options K. Why?
1. option offer never intended to be binding
2. no K for lack of specificity
3. D said it would never order another ship from P after late delivery of first one
4. option unsupported by consideration revocable (and P told D it was closing its shipyeard)
5. P never breached any agreement
§D fails to meet burden that parties ever contractually bound. Court determines there are too many gaps to fill, and there was never any intent to have a binding K. Also relevant is fact that D knew there were gaps in the K suggesting D expected more negotiation before an enforceable K was arrived at. Court very reluctant here to rely upon UCC §1-103 “good faith.”

c) Misunderstanding and Mistake
§A misunderstanding exists when:
(1) the parties’ K is ambiguous, meaning that it is reasonably susceptible to more than one meaning;
(2) the parties actually had in mind different interpretations of the language, and
(3) the misunderstanding is material (or important)
§when all of these elements are satisfied, the K is unforceable.

Raffles v. Wichelhaus; (Ct of Exchequer, 1864); CB 582; Notes 33
No K if parties have different subjective expectations
§Facts: Peerless ships case. Two ships named Peerless, K didn’t specify which. P thought he was buying cotton off Peerless that sailed in Oct., D thought he was selling from Peerless that sailed in Dec. D refused to accept cotton when it came on the Dec. ship.
§Issue: is there a binding K?
§Holding: did not agree to same terms, so no K. No meeting of the minds.
§Rule: where mutual mistake over term that goes to the heart of the agreement (i.e. material difference), K is void per se.
§Commentary: Restatement sections not too far from this opinion. Consult Rstmt § 20 (effect of misunderstanding) and § 201 (whose meaning prevails)