Professor Grinvald Contract Law Fall 2010 Saint Louis University School of Law
Mutual Assent
· Mutual assentà (classical) parties engage in the give-and-take of bargaining through a process of offer and acceptance, concluding in the deal
· Meeting of the mindsà (modern) π can claim they did not understand the contract
· Bargainà an exchange, give and take, the deal, the subject matter of the contract, there is no need for a negotiation.
Restatement § 17 Elements of a Contract à(1)…[T]he formation of a contract requires a bargain in which there is a manifestation of mutual assent to the exchange of a consideration.
Restatement § 24 Offer à 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.
No mutual assent
èRay v. William G. Eurice & Bros, Inc., 1952The Rays contracted with the Eurices to construct their house and the Eurices backed out of the deal. Example of the objective approach to contracts and mutual assent – writing as it appears, not what the parties thought they were agreeing to.
Offer and Acceptance
· Once the offer is out there, you cannot take it back.
· At this point, the other party only needs to accept it.
Restatement § 26 Preliminary negotiationsà A manifestation of willingness to enter into a bargain is not an offer if the person to whom it is addressed knows or has reason to know that the person making it (the offer/bargain) does not intend to conclude a bargain until he has made a further manifestation of assent.
Restatement § 24 Offersà An offers 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.
Restatement § 35 Power of Acceptance à
Restatement § 50 Acceptance à(1) 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 offeror. (2) Acceptance by performance requires that at least part of what the offer requests be performed or tendered and includes acceptance by a performance which operates as a return promise. (3) Acceptance by a promise requires that the offeree complete every act essential to making of the promise.
Restatement § 59 CounterofferàA reply to an offer which purports to accept it but is conditional on the offeror’s assent to terms additional to or different from those offered is not an acceptance but is a counter-offer.
Restatement § 69 Acceptance by Silence à(1) Where an offeree fails to reply to an offer, his silence and inaction operate as an acceptance in the following cases only: (a) Where an offeree takes a benefit of offered services with reasonable opportunity to reject them and reason to know that they were offered with expectation of compensation.
UCC § 2-204 – Formation in Generalà (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.
UCC §2-205 Firm Offersà An offer by a merchant to buy or sell goods in a signed writing which by its terms gives assurances that it will be held open is not revocable, for lack of consideration during the time period stated or if no time is stated for a reasonable time, but in no event may such period of irrevocability exceed three months; but any such term of assurance on a form supplied by the offeree must be separately signed by the offeror.
Offer present
èIzadi v. Machado (Gus) Ford, Inc., 1988Misleading advertisement for “any” trade for $3,000. Court held that Δ’s ad was binding offer to π. Binding offer can be surmised from a deliberately misleading ad. Ad = offer, would a reasonable person believe it was an offer?
Offer not present
èLonergan v. Scolnick, 1954The Δ placed an ad for land for sale and the π inquired to purchase the land, but Δ had sold the land to 3rd party. The court held there was no offer from the Δ due to lapse of time from section 36 of the restatement.
Methods of termination
· Real estate transaction where CO doesn’t have the same expiration as the original offer.
· Revocation is only effective upon communication (bilateral)
· Offer can be revoked at any time prior to completion (unilateral)
o Now protected under Restatement § 45
Restatement § 25 Option Contract àAn option contract is a promise which meets the requirements for the formation of a contract and limits the promisor’s power to revoke an offer.
Restatement § 36 Methods of Termination of the Power of Acceptance à (1) An offeree’s power of acceptance may be terminated by (a) rejection or counter-offer by the offeree, or (b) lapse of time, or (c) revocation by the offeror, or (d) death or incapacity of the offeror or offeree (2) In addition, an offeree’s power of acceptance is terminated by the non-occurrence of any condition of acceptance under the terms of the offer.
Restatement § 45 Option contract created by part performance or tender à(1) Where an offer invites an offeree to accept by rendering a performance and does not invite a promissory acceptance, an option contract is created when the offeree tenders or begins the invited performance or tenders a begging of it. (2) The offeror’s duty of performance under any option contract so created is conditional on completion or tender of the invited performance in accordance with the terms of the offer.
Termination – effective revocation and counteroffer
èNormile v. Miller, 1985π offers to purchase a house from the Δ, Δ rejects with CO, the house is sold to a third party. Effective revocation communicated to the πs and option on original offer doesn’t apply to CO.
No termination
èPetterson v. Pattberg, 1928Δ promises π that he’ll take $ off mortgage if he shows up w/ $, informs him the offer is revoked when π appears. Classical approach to unilateral – offer is revoked at anytime.
èCook v. Coldwell Banker/Frank Laiben Realty Co., 1998π had substantial performance on an offer from Δ when offer was revoked months later. Substantial performance induced from a promise makes promise enforceable. § 45.
Consideration
· Consideration is something of value
· Something given in exchange for a promise or in reliance upon the promise.
· Two tests – benefit/detriment and bargained for exchange.
· Used by the courts to distinguish a mere gratuitous promise from one that’s legally enforceable
Restatement § 71 Requirements of exchange; types of exchange à (1) to constitute consideration, a performance must be bargain for. (2) A performance is bargained for if it is sought by the promisor in exchange for his promise and is given by the promise in exchange for that promise. (3) The performance may consist of (a) an act other than a promise, or (b) a forbearance, or (c) the creation, modification, or destruction of a legal relation. (4) The performance or return promise may be given to the promisor or to some other person. It may be given by the promise or by some other person.
Consideration when
èHamer v. Sidway, 1891benefit/detriment test – The nephew gave up legal right to drink/gamble on the strength of his uncle’s
ourt held there was sufficient evidence to show Δ intended π to rely on their promise.
Charitable donations
èKing v. Trustees of Boston University., 1995π promises to entrust his papers to Δ university upon his death. Court holds Δ’s actions of preserving documents and having staff demonstrate considerable reliance. No contract but there was a promise/reliance on that promise. (Subsection 2 of § 90).
Battle of the forms
· Occurs when companies exchange forms with “boilerplate” elements (stock paragraphs).
· Each company wants their form to govern the transaction.
· The “last shot” rule where the last form governs transaction.
· The “mirror image” idea where elements must be similar in order to be incorporated.
· Classical understanding of contract law à two assumptions on classical contract law
o (1) Traditionally, when parties entered into a contract they were in an equal bargaining position
o (2) There was likely some type of bargaining going on. Modern contract law does not necessarily need a bargain.
Uniform Commercial Code (UCC) § 2-207
§ 2-207 (1) àA definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon. Unless acceptance is expressly made conditional on assent to the additional or different terms.
§ 2-207 (2) àThe additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless: (a) the offer expressly limits acceptance to the terms of the offer; (2) they materially alter it; or (3) notification of objection to them has already been given or is given within a reasonable time after notice of them is received.
§ 2-207 (3) àConduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. In such case, the terms of the particular contract consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of this Act.
Restatement § 59 àA reply to an offer which purports to accept it but is conditional on the offeror’s assent to terms additional to or different from those offered is not an acceptance but is a counter-offer.
Restatement § 19 à (1) The manifestation of assent may be made wholly or partly by written or spoken words or by other acts or by failure to act.
The “last shot” rule and the common law…
èPrincess Cruises, Inc. v. General Electric Company, 1998π sues for breach of contract for defective work by Δ. UCC does not apply since the majority of the work is for services, and Δ’s form governs.
o “Predominate purpose test”
§ Look at the language of the contract.
§ The nature of the business of the supplier
§ The intrinsic worth of the materials, what are the goods that are being bought and sold here?
