CONTRACTS I FALL 2010 OUTLINE
I. Contract Defined
a. Restatement 2nd
i. A contract is a promise or set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty.
1. Meeting of the mind
2. Manifestation of intention to be bound
3. Bargained-for exchange
a. Something sought by the promisor
b. Given by the promise
c. No legal duty
i. Each contract has an implied covenant of good faith and fair dealing, where each party agrees not to injure the rights of the other party under that agreement.
a. The person manifesting the intention is the promisor.
b. The person to whom the manifestation is the promisee.
c. Where the performance will benefit a person other than the promisee, that person is a beneficiary.
d. A promise is a manifestation of intention to act or refrain from acting in a specified way, so
made as to justify the promisee a commitment has been made.
III. Expressed and Implied Contracts
a. EXPRESSED – formed by language, oral, or written
b. IMPLIED – formed by manifestation of intention other than language, i. e. actions
· Instead of promising to run a marathon, start running it
c. QUASI CONTRACT – not really contracts. Construed by courts to avoid unjust enrichment by permitting P to bring an action in restitution to recover the amount of the benefit conferred on D
· 3 elements:
o P must show benefit was conferred on D by P
o Appreciation or knowledge by D of benefit
o Acceptance or retention of the benefit by D under circumstances making it inequitable for D to retain the benefit.
FINDING AN ENFORCEABLE CONTRACT
I. Was there a promise?
a. A promise is a manifestation of intentionto act or refrain from acting in a specified way, so made as to justify a promisee in understanding a commitment has been made.
i. Advertisements can show promise
EX) Laux v. Bekins- (extensive) advertising for fireproof storage which the company did itself manifested an intention that they intended to store goods in said storage. Promise was made.
EXCEPTION: Must decide reasonableness of advertisement: reputable or joking as seen by a reasonable person. Words + conduct.
EX: No flies in beer ad a bar à could show manifestation of intent to act as advertised.
ii. Reputation in the industry can show promise
EX) Silverman v. Imperial London Hotels- Baths had a reputation for being clean and the court found that they should be fit for the PURPOSE/PROCEDURE/REPUTATION INTENDED without bugs. No words necessary. There was a promise for baths to give services they were known for when they accepted the money for such services.
a. Objective manifestation of intention
b. Justifiedin believing a commitment has been made
c. Intent to be bound
· Must have intent to enter into contract àMeeting of the minds (what did the parties intend?)
· Expressed intentions: words (oral or written)
o Secret intentions don’t count if a reasonable person understands under circumstances a promise has been made.
· Was a person justified in believing a promise was made?
o Reasonable person std in similar circumstances
· EX) Embry v. McKittrick – Secret intentions were not taken into account so Embry was justified in thinking there was a contract since McKittrick only communicated his intent to enter into a contract. McKittrick conducted himself in a way that a reasonable person would’ve believed he was assenting to terms proposed and entered into K.
d. Types of Promises
a. Gift promises – I’ll give you a $1000 on your birthday
b. Illusory promises – nothing is actually being promised
· No commitment: “I’ll paint your house if I feel like it.”
· Was there an intention to be bound?
o Good fait
e wasn’t serious. i.e. Showing disparity in price.
iv. If both parties joke, no meeting of minds, no contract.
EX) Keller v. Holderman – Buyer (meant to put disclaimer on check put forgot) paid for the watch with a check and then kept the watch until trial to show he believed offer to be real. Seller (took check – do disclaimer on check, gave up watch, believed commitment to buy watch was made) said disparity in price was too high for any reasonable person to believe in the offer as real. Ct found both parties were joking so no contract existed.
EX) Brown v. Finney – Buyer of coal believed in offer b/c seller was a certified coal miner and they spoke of specifics (amount, quantity, details of conditions) in delivering coal. Seller said he shouldn’t have been taken seriously since he refused to accept payment and discussion took place at a bar, not a place of business. Ct found that
III. Interpretation of vague and indefinite promises
a. Sometimes there is a difficulty in finding the intentions of the parties even in WRITTEN CONTRACTS!!!!
b. Plain meaning rule:
· Extrinsic evidence used only when language of contract is very ambiguous.
· Intent determined from four corners of the contract.
c. EXCEPTION: Context rule: (Restatement 2nd)
· Courts look at extrinsic evidence even though the language may not be ambiguous. Used when the J/jury can’t determine fairly the meaning of the contract, outside context helps to give a better understanding of the intent of parties/terms.
· Extrinsic evidence (evidence of parties’ intent as shown by the contract as a whole, its subject matter and objective, prior dealings of parties, circumstances of its making, subsequent conduct of the parties, and reasonableness of their interpretations.
· Berg v. Hudesman – Ct ruled need to look at extrinsic evidence to determine intent of parties