Contracts – Prof. Cherry – Fall 2015
Overview:
A contract is: “ a promise or set of promises, which is part of a voluntary exchange, for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty.” R2K § 1.
Type of Exchange between Two Parties:
Theory is that exchange will make both sides better off, it may not be equal for both sides but both parties are still better off.
Essential Premise: exchange was voluntary for each side
ASSENT: Restatement (Second) § 17: Requirement of a Bargain
(1) “…the formation of a contract requires a bargain in which there is a manifestation of mutual assent to the exchange…”
Mutual Assent: Each party to a contract manifests its assent to the contract by making a promise or by beginning or tendering performance, and each party’s promise or performance must relate to the other party’s. R2 §§ 18 & 23.
(How would a disinterested observer “fly on the wall” interpret what he saw happen between the parties)
Subjective Assent (What was a party actually thinking when he appeared to agree)
As a general rule, we judge contract formation (as well as contract terms) by the objective manifestations of the parties’ intent – what they said and what they did – not by their hidden, subjective intent.
Lucy v. Zehmer – D drew up a K on receipt to sell Ferguson farm. D claimed he “made it in jest”. A party may be considered to have entered into a K even if the assent to the K was entered in jest, if that party fails to disclose their lack of serious intent.
However, if objective assent is shown, but neither party had subjective intent, there is no contract.Likewise, if one party knew of the other’s subjective intent not to form a contract, then no contract is formed.(The parties’ assent will be judged based on the subjective intent of the first party, because it was known to both parties at the time the alleged contract was formed.See R2 § 20(2)).
“Bilateral” vs. “Unilateral” Contracts
Bilateral Contract: each party makes a promise in exchange for the other party’s promise.
Unilateral Contract: one party makes a promise in exchange for the other party’s specified performance.
Sources of Contract Law:
UCC 2-105 (1): Goods
Definition of a good: Goods means “all things (including specially manufactured goods), which are movable at the time of identification to the contract for sale other than the money in which the price is to be paid, investment securities and things in action. Goods also includes the unborn young of animals and growing crops and other identified things attached to realty as described in the section on goods to be severed from realty.”
If you don’t have a good, you are looking at common law
Hybrid Transaction: Part “goods”; Part something else (non-goods).
Two tests:
Predominant Purpose Test – What is the major part of what is sold? Look at transaction as a whole and determine what is the major purpose
Example: Vet comes to house and does a major examine and you also buy pills. This would be a hybrid transaction but would go with service since exam was more $$ and more purpose.
If it is a good, go with the UCC
If not, follow the hierarchy
Gravamen of the Complaint Test – Which part of the transaction gave rise to the problem?
if it’s dealing mostly with goods, go with UCC
Look at what causes the problem and then that is what will dictate the law.
In Vet example, if having a problem with the pills sold then you would go with the UCC.
UCC 2-104: Merchant:
Definition of a merchant: “Person who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction or to whom such knowledge or skill may be attributed by his employment of an agent or broker or other intermediary who by his occupation holds himself out as having such knowledge or skill.”
Historical Background of K Law:
Farnsworth:
By the 15th and 16th centuries the legal system struggled to enforce promises within the framework of the forms of action.
This was first done by developing exceptions and then by fashioning those exceptions into a general basis for enforcing promises.
Determined that quid pro quo (or something for something) would be a general basis for enforcing promises
It became clear that for there to be a quid pro quo, the benefit must have been actually conferred – a mere promise to confer it would not suffice.
So how was the common law to break out of this mold?
The answer to the question was found on the variety of the common law action of “trespass on the case” that came to be known as assumpsit
So the ri
supported by consideration or reliance. Held for estate and said congregation had no right to enforce this gift
King v. Boston University
King Promised BU all of written letters.After death, widow claimed no consideration. Consideration was the care and curating of the papers by BU
More of a bargain in this case than in Congregation case.
Morality in Consideration:
Hamer v. Sidway:
Uncle offers nephew $5,000 if he would refrain from drinking, smoking, and gambling. Court found that there was consideration since he gave up activities even if it was for his benefit
Rule: A waiver of a legal right at the request of another party may serve as sufficient consideration for a promise
Family Promises: Reasons for Caution
Alternative purpose: (1) Gift;(2) Satisfaction of parental or
other family duties; (3) Personal statement of intent.
Relatives might still intend a binding, bargained for exchange
Mills v. Wyman:
P sued to recover compensation for board, nursing, and care given to D’s ill adult son before his death.
Rule: If there was nothing paid or promised in return for a promise, the law “leaves the execution of it to the conscience of him who makes it. […] It is only when the party making the promise gains something, or he to whom it is made loses something, that the law gives the promise validity.” This promise was made without consideration because Mills had already performed before father offered to pay and action in the past cant serve as consideration.
No consideration in this case because past consideration and no bargain plus services already rendered. The Samaritan giving gift to son since the promise was not bargained for by the father, may have a moral obligation to reimburse but not legal one. If would have gone the other way, then would have created bad law, uprooting an entire rule because feel bad for a good Samaritan
