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Contracts
St. Johns University School of Law
Borgen, Christopher J.

K1 Outline Fall 2011 Christopher Borgen
September-26-11
7:57 AM

I.            Contracts generally
·         What is a contract?
·         A promise or set of promises for the breach of which the law gives a remedy, or the performance of which the law recognizes as a duty
·         Remedies for breaching contract enforced in civil court (civil court = getting damages)
·         Compensatory not punitive
·         Promise
·         Manifestation of intention to act or refrain from acting in a specified way

·         Purpose of contract law
·         Make sure the sides get what they want
·         A way of ordering private affairs (obligations, what happens if things go wrong)
·         Sets out the order of when things need to be done
·         They are a way of sharing risk.

·         O (offer) + A (acceptance) + C (consideration)= K (contract)

·         How a promise is made?
·         Oral
·         Written
·         Inferred

·         Uniform commercial code (UCC)-
·          enforces sale of goods
·         Article 2=sale of goods
o    There is an old article 2 and new article 2 or UCC, for this class we will focus on “old” article 2

·         Types of contracts
o    Bilateral contract – both parties promise performance, promise for a promise (each has right & duty)
o    Unilateral contract– act sought for promise given, only one party makes a promise
o    Implied
o    Requirement-
o    Output-


BARGAINING PROCESS

·            ASSENT
·         Have the parties agreed to this? Have they actually made a bargain?
·         Have to figure this out to find out whether there was a bargain
·         Objective theory of contracts to find this out- what is important are outward facts. What is important is the outward expression of what the parties have done (facts that are provable not specifically what was happening in somebodies mind)
·         Reasonable man standard- if a reasonable man would take the agreement to be a real agreement it is enforceable (Lucy v.  Zehmer- drunks in a bar, make agreement to sell farm- A contract is enforceable despite one party's subjective belief that the  parties are joking (if Lucy knew Zehmer was joking, he couldn't enforce the contract)
·         Reasonableness may change with the times (ex. Industry standards)
·         Dominant theory in US law
·         Exam- might give us a set of facts where I need to make an argument to whether or not there was assent using the objective  theory
·         Subjective theory- look at the intention of the parties (what was happening in the parties minds)
§  This is disfavored in American courts as it would bring too much uncertainty
·         Some importance is given to subjective intent

·  Read section on gentleman's agreements, note 2 pg 121

·            OFFER(§24)
·         An offer is the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it
·         Borgen's definition- An act whereby one person confers upon another the power to create contractual relations between them
§  Ask this question when looking at fact patterns: Is it clear whether party A was giving party B the power to say “I accept” and make a contract?
·         Another way to define this:
§  Offer[A manifests assent to B to enter into a contract] if acceptance[B manifests assent in return (this is bargained for exchange) by  some action]
·            Qualities of offer
·         Communicated to offeree
·         Intent to be bound
·         Definite


·            Whoever is accepting is accepting the offer as is. The offeror is bound to whatever it is that they offered.

·            Offeror dictates the way the offer should be accepted. If not expressely stated, offer invites acceptance in any manner reasonable. (International filter)

·            Determining what an offer is. Look to see whether these 7 essential terms of an offer at common law are in the fact pattern (Mnemonic- Ducks Say Quack Quack When People Pass)
Subject matter
Price
3.       Payment terms
4.       Quantity (must be supplied)
5.       Quality
6.       Duration
7.       Work to be done

·            If a term is missing it can reasonably be implied by the court
·            UCC only requires that the parties manifest their intent to be bound and that there is a reasonable basis on which to apply a remedy

·            A contract is enforceable despite one party's subjective belief that the parties are joking (Lucy v Zehmer- drunk at a bar, agrees to sell farm)
·         Objective theory of K- looking at what a reasonable person would have taken the actions to mean. In this case, everything Zehmer did indicted to Lucy that he was serious in his offer. If Lucy knew or suspected Zehmer was joking then the K would not be enforceable.

·            2 freedoms in contract law
·         Freedom for individuals to make contracts with each other
·         Freedom from contract- a court is not going to “make” a contract between 2 parties if it is not clear that they assented to the contract

·            Difference between offer and solicitation
·         Solicitation usually opening communication. Communication to negotiate
·         BLL: An invitation to negotiate is not binding as an offer to contract, neither is stating a possible sale price
§  The general rule is that a communication is an offer if the person receiving the communication would be justified in thinking that he or she had the power to bind the other party to a legally enforceable agreement
·         Look at communications  to see whether they fill in enough holes to constitute an offer (in Fairmount, the first communications was a solicitation which was specific

to accept or not the terms that had been prepared


·         ACCEPTANCE(§50)

·            What is acceptance?
·         Acceptance of an offer is a manifestation of assent to the terms thereof made by the offeree in a manner invited or required by the offer
·            Who may accept: An offer may be accepted only by a person in whom the offeror intended to create the power of acceptance
·            Offeror must know of offer: An acceptance is usually valid only if the offeree knows of the offer at the time of his alleged acceptance
·         Rewards: If a reward is offered for a particular act, a person who does the act without knowing about the reward cannot claim it
·            Method of acceptance: Offeror controls the method and means of acceptance by the language of the offer
·         If method is not specific: acceptance may be given in any reasonable method
·         Ex. White v. Corlies- Builder accepts a construction contract by beginning to purchase lumber for job. Wasn't clear whether offer was accepted because buyer did not know whether lumber was purchased for his job or for another job
·         Offer invites either promise or performance: If the offer does not make clear whether acceptance is to occur through a promise or performance the offeree may accept by either a promise or acceptance
·         Shipment of goods: Ex. If buyer of goods places a purchase order that does not state how acceptance is to occur, the seller may accept by either promising to ship the goods or by in fact shipping the goods (2-206 (1)(b)
·         Accommodation shipment (2-206): if a seller ships non-conforming goods and notifies the buyer that the shipment is an accommodation then the seller has not accepted the buyers offer (this is a counter offer by the seller) (Ex. Corinthian Pharmaceutical- vaccination vials, some were sent at previous price)
·         Accepting bilateral contracts: Acceptance by promise
§  The acceptance must be manifested by some appropriate act (Usually by words). Can also be by action if  these fairly indicate to the offeror that the offeree intends to enter into the contract. He is not bound if that manifestation is not put in a proper way to be in the usual course of events in some reasonable time communicated to him
§  Must complete every act essential to making of the promise
·         §56 Acceptance by promise