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Contracts
St. Louis University School of Law
Bodie, Matthew T.

CONTRACTS

BODIE

FALL 2011

If goods are involved, then the UCC is involved. If good not involved, then UCC isn’t.

exam question – if goods involved in scenario, then talk about UCC

Goods – all things movable at the time of the contract

Is ___ a thing or things movable at the time of contract?

If so, ____ is a good/goods

If not, ____ is not a good/goods

Land is not a good

What if you have a mixture of goods and services? (wedding reception)

Test is called the dominant factor test

Are goods primary object with services as secondary, or other way around?

If goods are primary, then it is a good

UCC holds that contracts are an exchange of agreements, whereas Restatement says it is a promise or set of promises.

Section I: Contract Formation

18: Manifestation of Mutual Assent

requires that each party either make a promise or begin or render a performance

if one party jokes and the other does not recognize the joke, the law is one the side of the latter party

21: Intention to be Legally Bound

Neither real nor apparent intention that a promise be legally binding is essential to the formation of a contract, but a manifestation of intention that a promise shall not affect legal relations may prevent the formation of a contract

22: Mode of Assent: Offer and Acceptance

(1) The manifestation of mutual assent to an exchange ordinarily takes the form of an offer or proposal by one party followed by an acceptance by the other party or parties.

(2) A manifestation of mutual assent may be made even though neither offer nor acceptance can be identified and even though the moment of formation cannot be determined.

Determining Mutual Assent

Lucy v. Zehmer

Facts: D agreed to sell farm to P while the two parties were at a restaurant; D wrote a contract on a restaurant order ticket and he and his wife signed it; P attempted to execute the agreement; D refused to follow through with the promise; P sued; D claimed the agreement was a joke.

Rule: The words and acts of the parties should be used to determine their intentions. If the words or others acts of one of the parties have but one reasonable meaning, his undisclosed intention is immaterial except when an unreasonable meaning which he attaches to his manifestations is known to the other party. Mental assent of the parties is not requisite for the formation of the contract. If his words and acts, judged by a reasonable standard, manifest an intention to agree, it is immaterial what may be the real but unexpressed state of his mind.

Conclusion: A K is enforceable if one of the parties mentally agreed to it only in jest b/c it was reasonable for P to think D intended a real agreement. P is entitled to specific performance of the K.

2. The Pepsi Ad: Pepsi ad showed that you could get a jet for earning so many Pepsi points. Leonard sent away for the jet and sued when they sent the check back. Pepsi won b/c of the obvious absurdity of the commercial and no objective person could reasonably have believed they would get a jet.

a. Intent to be bound: (Freedom to Contract and Freedom from Contract pg 122.

A promisor may not be bound if the promise, whether from its content or the circumstances of its making is insufficiently serious to indicate the promisor’s intent to be bound

Cannot look at subjective views of plaintiff or defendant, but rather a reasonable person. The objective theory of contract clearly shows that a reasonable person would view the offer of a jet as an obvious joke.

Critical that the advertisement is the offer, not the catalog

if harrier jet was in catalog, it would have seemed much more likely that they were offering the jet

Subjective intent of plaintiff would be that commercial is real and there is an actual offer

Objective, reasonable person would clearly see that commercial was a joke

law can see humor

Tying Lucy and PepsiCo together

– in Lucy, a reasonable person would have taken agreement as serious, not a jest. In PepsiCo, a reasonable person would have seen that the commercial was clearly a joke.

Gleason v. Freeman

1.Text v. 2.Context – do you look solely at the words of the contract or at the big picture of what happened between the parties

Rule: When the words used create a doubt as to the parties’ intention to be bound, the Court looks to “1. the situation, 2. acts, and 3. the conduct of the parties, and 4. the attendant circumstances.”

Application: Ebay repeatedly states that bids or real estate are non-binding. Defendants additional terms were used to scare off fraudulent bidders, not create binding contract. Plaintiffs also demonstrated contract was non-binding by continuing to negotiate the terms beyond the auction.

Holding: Looks at both text and context, but ultimately determines no mutual assent.

Smith v. Boyd

Facts: D was selling home, and P made an offer on it. However, D took a different offer, but P thought they had a binding oral contract.

Issue: Did the discussions of the Boyd’s and Smith’s progress beyond negotiations to form a contract?

Rule: If a party signifies to the other that they wish a contract to be binding before a written contract is drafted, then it is the objective intent that it is binding.

Application: Policy is that businesses should not fear that mere discussions will lead to binding contracts. Court will consider 1. practice of the trade, 2. written contract to be drawn up by someone other than the parties and 3. statements made during discussion.

1.widespread real estate practice that an offer to purchase realty is made in writing

2. written “purchase-and-sale

terms of the contract are reasonably certain.

2. The terms of a contract are reasonably certain if they provide a basis for determining the existence of a breach and for giving an appropriate remedy.

3. The 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 as an acceptance.

Lonergan v. Scolnick (finality)

– Finality problem and RS 26

– correspondence indicates that it was the intention of the D that negotiations were preliminary. Intention was to find out interest, not enter into a deal. Advertisement was just a request for an offer, and the statement of expecting to have a buyer soon indicated that he was entitled to sell to the first-comer.

U.C.C. 2-204: Formation in General

1. A contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract.

2. An agreement sufficient to constitute a contract for sale may be found even though the moment of its making is undetermined.

3. Even though one or more terms are left open a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy.

Maryland Supreme (context)

An offer must be definite and certain, and dependent on the intentions of the parties. The parties must intend that the offer given, if accepted, constitutes a binding contract. Mere expressions of an intention to do an act, such as a price quote, does not constitute an offer, but is rather trying to induce an offer. Therefore, the facts and circumstances of the acts of the parties indicates intention. The letter sent from P clearly indicates that if accepted, then a contract is formed. The normal method of operation of the construction industry and prior course of dealings between P and D indicate a contract.

Contract between general and subcontractor was verbal, not written, because that is how construction industry does it

Reasons why this is more than a price quote

Says that it is guaranteed throughout the entire job

In construction industry, the general contractor does not write back to subcontractor

– only verbal