Must ask and answer these seven questions when writing an answer regarding contracts:
1. Was there an agreement?
a. Offer and Acceptance
2. Is there any reason that agreement should not be enforced?
3. Once we have an enforceable agreement, must ask: Does the Statute of Frauds require a writing?
4. What are the terms of the agreement? – Exactly what it is that the parties agreed to do?
5. Have the parties performed according to the terms of the agreement? – Did the parties do what they promised to do?
6. Does the party that failed to perform have an excuse for non-performance?
7. What remedies are available when someone makes an agreement and then doesn’t do what they promised to do?
Ø Before you start answering any question first look at – what law applies to this situation?
o Article II of the UCC – it’s a statute, it’s the law that governs certain kinds of transactions
§ Applies when the subject matter of the contract involves A SALE OF GOODS (need sale, and goods)
· Sale = transfer of title for a price, not a lease or gift
· Goods = movable, personal property, not real estate or services
· Merchant: everyone in the business world
o Common Law
o If you have any other kind of contract then UCC does not apply and you use common law of contracts
o Common Law: cases that were covered in class
Ø What if there is sale of goods AND services?
o How do you know whether to apply UCC or not?
§ Ask: are the goods more important than the services or are the services more important than the goods?
§ If you find goods are more important (predominate) – apply UCC
· Ex: buying carpet (goods) with installation (service):
o Here, goods are more important: apply UCC
§ If the services predominate the goods – apply common law of contracts
· Ex: hire a painter to paint my house and buy paint with it
o Here, the service of painting the house predominates, so look to the common law of K’s, not UCC
Ø Restatement 2nd of Contracts: cite as persuasive authority, but not the law
o Issue is never controlled by the Restatements (the law is either the UCC or Common Law)
Ø Vocabulary – know difference between:
o Contract & Agreement (not synonymous)
§ Contract = legally enforceable agreement
o Bilateral & Unilateral
§ Distinction relates to how an offer can be accepted
§ Unilateral contract = involves an offer that requires performance as the only means of acceptance (rare in the real world) promise in exchange for performance
· Way to identify — you can accept this offer “ONLY BY ___ING”
§ Bilateral contract = the offer can be accepted by any reasonable means- a promise for a promise
o Duty & Condition
§ Duty = obligation to perform
§ Condition = limit a party’s duties under a contract
o Expectation & Reliance
§ Measure of Damages
o Impossibility & Frustration of Purpose
§ Excuses for non-performance
o Statute of Frauds & Parole Evidence Rule
§ Both have to do with preventing fraud
§ Parole Evidence Rule = has to involve a writing; regulates what kind of evidence can get in
§ Statute of Frauds = virtually always involves an oral agreement; determines if you need a writing
Essential Elements of a Contract (K)
· An oral or written agreement between two or more persons
· An exchange relationship
· At least one promise
Types of Contracts: Unilateral and Bilateral
1. Unilateral Contract – a K in which the promise is given in exchange for an act
· A promise is exchanged for performance
· E.g., “I promise to give you my book if you give me $50 – I’m not interested in promises; no deal until you give me the cash.”
· K exists when you give me the cash, not before
o Until you give me the cash, I have no obligation to give you the book
o My failure to give you the book is not a breach
2. Bilateral Contract – a K in which the promise is given in exchange for a promise
· Exchange of a promise for a promise
· E.g., “I promise to give you my book tomorrow if you promise to give me $50 the following day” (and you promise)
· K exists the moment we exchange promises – today
o If I fail to give you my book tomorrow, that’s a breach!
Promise – some commitment for the future, some liability lasting beyond the instant agreement
– “a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made”
o Restatement (2d) of Ks § 2(1)
A. Express Promise (express K – one manifested by words)
1. Intention manifested by words (verbally)
2. Need not be written
3. E.g. “I promise to pay you $5,000 if you take care of my horse”
B. Implied-in-Fact Promise (implied K)
1. Intention (party’s agreement) is manifested by conduct, not by words
a) Objective Intent –What would a reasonable person understand the promisor to intend?
2. What meaning does the party’s conduct imply in the circumstances?
a) “Does a party’s conduct, under circumstances, manifest an agreement”
b) E.g. Auction:
· In itself, raising one’s hand is ambiguous – doesn’t manifest any intention clearly
· In context of an auction, raising one’s hand manifests an intention to bid on the item
C. Implied-in-Law Promise or Contract – (Quasi-K, Constructive K, Restitution)
1. No manifestation of intent, either express or implied-in-fact
· Has nothing to do with the intent of the parties
· Assuming the parties didn’t intend to agree
2. Law imposes a promise (K) on a party in the interest of justice
· Party didn’t intend to make a promise, but he should have
· Court will infer a promise in order to promote a fair result for the purpose of bringing about justice and equity
3. Elements of Implied-in-Law K – all elements must be met for there to be a contract (exceptions to element (b) below)
a) P Confers a benefit on D
b) Appreciation by D
· D knew about the benefit and did not decline it
· The unconscious D
o If you had been conscious you would have wanted benefit (E.g.: person on side of road unconscious and volunteer helps them)
c)Circumstances are such that it would be unjust (or unreasonable) for D to retain the benefit without reimbursing the P
· If I confer a benefit on you, with reasonable expectation that you will pay, then the law says that you should reimburse me
D.Changed Circumstances (Bolin Farms v. American Cotton)
tood as an offer, it cannot be accepted so as to form a K unless the terms of the K are reasonably certain
· “Terms of the K are reasonably certain if they provide a basis for determining the existence of a breach and for giving an appropriate remedy”
· Fact that one or more terms of a proposed bargain are left open or uncertain may show that a manifestation of intention is not intended to be understood as an offer or an acceptance
o **Courts have been moving from a more classic, traditional, formalist view of “need complete agreement on all material terms” to a more flexible, romantic view; more a change in attitude than verbal locution
· No K if any essential term is indefinite
· Material terms must be sufficiently definite
§ Terms may not be indefinite if there is an external criteria that gives meaning to the term (industry standard, etc.)
o When a material term is indefinite, the entire K is unenforceable and void
§ Therefore, can not recover any term, definite or not, if an indefinite term exists
· Possibility of recovery in quantum meruit – (restitution – employee will get compensated for any work that he has done that he has not already been compensated for)
Varney v. Ditmars – (Employee fired, worked for D. P sued for “fair share” of profits and lost wages as he was promised in exchange for his services)
– There is NO K because the terms were so indefinite on the material terms of the K à court can’t give damages because they don’t know what the damages are; no way to determine what is the “fair share”
– If there was an objective indication of what the fair share of profits were then the K could be enforceable
– TRADITIONAL RULE = if indefinite material term, whole K is unenforceable
1. Reasoning = courts don’t want to fill in their own value; don’t know what the parties wanted; K law is about enforcing law parties made for themselves; trying to create incentives for future parties; judicial economy
Ø Incomplete and Deferred Agreement
MGM Inc v. Scheider – (Parties in oral K. Start date for TV series is missing; was there a complete K?)
– Rule – Negotiations of essential elements of performance begun on good faith understanding that agreement on unsettled matters will follow
o It will enforce K even if elements are left open if objective method of determination is available
o Use custom and usage to fill in gaps.
o *If reasonably certain basis for finding breach and giving remedy, courts more willing to save parties from themselves.
(Not enforceable unless material terms are reasonably certain