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Contracts
St. Louis University School of Law
Cherry, Miriam A.

Contract Outline – Professor Cherry
Fall 2015
 
Background, Objective Theory of Assent, Sources of Contract Law
 
Historical Background of Contract Law
Agreement – manifestation of mutual assent on the part of two or more persons
Bargain – agreement to exchange promises or to exchange a promise for a performance or to exchange performances R2 § 3
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.
Objective Assent: How would a disinterested observer interpret what he or she saw happen between the parties?
Subjective Assent: What was the party actually thinking when he or she actually agree?
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; Leonard v. Pepsico)
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).
Promise – may be stated in words either oral or written, or may be inferred wholly or partly from conduct
Contract: “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.” R2 § 1
 
Sir Henry Maine
The movement of “progressive societies” has been uniform in one respect: the gradual dissolution of family dependency and the growth of individual obligation in its place
 
Moving from “status” relationships towards a phase of social order in which all these relations arise from the free agreement of individuals
 
Promises were seen as enforceable and a breach was a sin under Cannon Law
 
The 15th and 16th centuries started developing a legal system that began created exceptions and then fashioning those exceptions into general basics for enforcing promises:
 
Quid pro quo (something for something
Loan (Which gave rise to the common law action of debt)
 
Assumpsit – oblige could sue on the variety of the common law action of “trespass on the case”
Where the action of debt was available, the action of assumpsit was not
General basis for enforcing promises, including purely executory exchanges in promises
This was an effort to create a basis on which exchange of a promise for a promise would become enforceable (now known as, CONTRACT)
* Common law courts chose to accept the assumption that a mere promise does    
not give rise to an action
 
Revolutionary or reactionary?
Novel idea – not based upon status or hierarchy like it used to be
Between a wide array of people – no rule prohibiting certain class
Increasingly revolutionary as new technology emerges
– critique of contract law
If we just enforce them as they’re written, wouldn’t one party get a better deal?
Parties make on their own and don’t think in depth on what they have decided
There maybe concern that this reinforces power balances the exists in society
 
Sources of Contract Law:
The Restatement (Second) of Contracts
Product of the American Law Institute (ALI)
Persuasive power
Uniform Commercial Code (UCC) NOTE: only applies to contracts of goods
Joint product of the ALI and the National Conference of Commissioners
Statute adopted by 49 states (all except Louisiana)
Binding in courts
Supersedes any common law rules that are inconsistent with provisions
Common Law
Common law of each state regulates:
A lease of goods
A sale of land
An employment services contract
 
*To determine the type of law that you use to enforce a contract, you must determine what the exchange is dealing with
UCC 2-105(1): Goods
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.”
 
UCC 2-104: Merchant
“Person

itting each party to rely on the other’s manifested intentions. 
 
*Under certain conditions subjective intent is also relevant.
 
Subjective v. Objective Assent
                Subjective: What was a part actually thinking when s/he appeared to agree?
                Objective: How would a disinterested observer (a “fly on the wall”) interpret what s/he
                saw happen between the parties?
                                *This is what the court looks at to find if acceptance occurred.
 
Lucy v. Zehmer –
Facts: Contract written on napkin after a few drinks.
Set precedent that contract can’t be backed out of as a “joke.”
Reasonability of case based on outside “reasonable” observer.
Rule: The mental assent of the parties [to a contract] is not requisite for the formation of a contract. If the words or other 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.
 
 
 
Getting In: Contract Formation
 
(Was there an offer?)
 
Consideration or the Bargain Element: An inducement to contract
An offer:  is an expression of present willingness to enter into a bargain, made in such a way that a reasonable person in the shoes of the person to whom the expression is addressed would believe that she could conclude a bargain merely by giving assent in the manner required by the expression (Rest. 2D §24)
 
Consideration:
The inducement to the contract; the cause, motive, price or impelling interest which leads one to enter a contract; anything of value; the existence of which shows that an exchange has taken place and it is not a “mere” gratuitous promise.
*Consideration leads one to enter into a contract; your intent to give