WHAT IS A CONTRACT
1) GENERAL DEFINITION- Promise or set of promises, for breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty.
2) LAW GOVERNING K- generally, common law. For the sale of goods, UCC trumps the common law.
a. The Law recognizes 4 types of enforceable promises or contracts, each involves a transaction where something is added to the promise so as to make it legally binding. They are…
i. Promise plus consideration (Bargain Contract)
ii. Promise plus antecedent benefit (Moral Obligation)
iii. Promise plus unbargained-for reliance (Promissory Estoppel)
iv. Promise plus form (U.C.C.)
3) TYPES OF CONTRACTS
a. Types of Contracts as to Formation
i. Express Contract- formed by language, oral or written.
ii. Implied Contract- For by manifestations of assent, by conduct
iii. Quasi Contract- Not Contracts. Constructed by courts to avoid unjust enrichment
b. Types of Contracts as to Acceptance
i. Exchange of Mutual Promises Restatement §18
ii. Acceptance by Performance- offer requests performance rather than a promise. K is formed upon completion of the requested act.
iii. Acceptance by Start of Performance- More modern theory.
iv. Unilateral Contracts- limited to 2 circumstances, completion of performance (only manner of acceptance), and offer to the public (such as a reward).
v. Unilateral or Bilateral- each party has a right and a duty (bilateral), one party has a right and the other party only has a duty (unilateral)
4) CREATION OF A CONTRACT
a. Was there mutual assent? §18
b. Was there consideration?
c. Are there any defenses to creation of the contract?
d. Statute of Frauds- says that certain types of contracts have to be written or signed
MUTUAL ASSENT- OFFER AND ACCEPTANCE
1) THE OFFER- gives the offeree the power of acceptance. Must create a reasonable expectation in the offeree that the offeror is willing to enter into a K on the basis of the offered terms and be legally bound §21.
a. Promise, Undertaking, or Commitment- For communication to be an offer, it must contain a promise, undertaking, or commitment to enter into a K, rather than a mere invitation to start preliminary negotiations. The following are criteria to determine whether a communication is an offer…
i. Language- does the language used by the offeror reasonably convey the intent to form a K
ii. Surrounding Circumstances- is the statement made seriously or as a joke or out of anger?
iii. Prior Practice and Relationship of Parties
iv. Method of Communication
1. Use of Broad Communications in Media- viewed as solicitations of an offer
2. Advertisements- invitations for offers, unless the language can be construed as a promise were the terms are certain and definite and the offeree is identified.
v. Industry Custom
vi. Certainty and Definiteness of Terms- the more definite the terms are, the more it amounts to a K
b. Terms Must be Definite and Certain- is the K capable of being enforced? (i) the identity of the offeree and the subject matter (ii) the price (iii) the time of payment, delivery, or performance (iv) the quantity involved and (v) the nature of the work. If these terms are clear we have a K.
c. Manifestation of Assent- Both parties must manifest assent §22
d. Auctions §28- Auctioneers invite offers from bidders which he may accept or reject. Bidders can withdraw bids before the auction closes, but that does not revive any previous bids. These are the rules unless special circumstances are made known.
2) TERMINATION OF THE OFFER- power of acceptance ends when offer is terminated §36
a. Revocation of Offer- must be communicated before they accept!
b. Death/Insanity/Destruction of Subject Matter/Illegality- can all kill the offer
i. Indirect Communication- if offeree receives info from a reliable source that would indicate to a reasonable person that the offeror has revoked the offer, no K if it happens before acceptance.
ii. Limitations on Power to Revoke- offers not supported by consideration or reliance can be revoked by the offeror, even if he has promised not to. Exceptions…
1. Options- when offeree gives consideration to the offeror not to revoke K
2. Detrimental Reliance- if the offeror reasonably contemplates offeree’s reliance
3. Partial Performance- if offeree starts performance offeror cannot revoke offer unless she takes forever to complete the task.
c. Rejection of the Offer by Offeree §38
i. COUNTER OFFER- serves as a new offer
1. Inquiries are not counter offers and can sometimes serve as acceptance
ii. Reasonable time- must accept offer within a specified or reasonable amount of time. §41
3) THE ACCEPTANCE- manifestation of assent to the terms of the offer, forms a K
a. Must Accept ALL the Terms
i. Statements that make implicit terms explicit constitute acceptance
ii. Grumbling Acceptance is acceptance as long as it stops short of actual dissent
iii. Request for Clarification is not necessarily a rejection or counteroffer.
b. Mirror Image Rule (Common Law) different terms in the acceptance make the response a counter offer
c. Generally, Acceptance Must be Communicated
i. Common Law Rule- acceptance becomes effective upon dispatch if offeree used the same mode of communication offeror did. Acceptance is effective upon receipt if a different mode is used.
ii. UCC 2-206- offer may be accepted by any medium reasonable in the circumstances unless the offeror specifically limits the acceptance to certain means.
d. Mailbox Rule §63-69- creates a K at the moment of dispatch unless the offer stipulates that acceptance is not effective until it’s received. Does not apply outside of ACTUAL POSTAL MAIL or to option contracts
i. If offeree sends rejection notice, then acceptance–MB Rule does not apply, which ever was received first stands. If opposite, MB rule applies unless offeror changed his position in reliance on it.
ii. If offeree sends acceptance before he receives a revocation sent by the offeror, K maybe formed.
iii. For sale of Goods see UCC 2-206
e. Acceptance by Conduct- acting in a way which would reasonably convey acceptance.
i. §50 Accept by Performance- If you accept by starting performance you must finish it to accept the K
ii. §60 Promise to Perform- Can accept by promising to perform, but if you start you have to finish.
iii. Shipment of Non-Conforming Goods- (UCC 2-206) the shipment of nonconforming goods is an acceptance and breach of the contract unless the shipper tells the buyer that they are only an accommodation. The buyer isn’t required to accept the goods but if rejects them there is no breach and no contract and the shipper can get the goods back.
f. Silence as Acceptance §69- if offeree takes offered benefits without communicating acceptance, he accepted the K. Also, if there are prior dealings between parties or trade practices that would lead the offeror to reasonably conclude acceptance by the offeree. (Ammons)
i. Also, an offer can state that the offer can be accepted through silence, but silence is only acceptance if the offeree intends to accept.
ii. The victim of tortious activity can turn that activity into acceptance of a contract, but it can’t be unreasonable. (Russell)
g. Unilateral Contract Formation-
i. To accept a unilateral K, the offeree must act with knowledge of the offer and be motivated by it.
4) UCC §2-207- applies for sale of goods only.
a. Proposal of additional or different terms by offeree in a definite and timely acceptance or confirmation does not constitut
Also, they may substitute arbitration for judicial process.
f. Victorious party may recover interest on $ withheld and, possibly costs associated with the litigation.
4) Foreseeability- you are only entitled to damages if your losses are reasonably foreseeable to the other party.
a. Loss may be foreseeable as a probable result of a breach because it follows from the breach.
i. in the ordinary course of events, or as a result of special circumstances, beyond the ordinary course of events, that the party in breach had reason to know. Hadley v. Baxendale
b. §351 Unforseeablity and Related Limitations on Damages
i. Damages are not recoverable for loss that the party in breach did not have reason to foresee as a probable result of the breach when the contract was made.
Bailey v. West
· There is a horse and no one claims it, left at Bailey’s farm and he sues for cost of upkeep
Bolin Farms v. American Cotton Shippers
· Refuse to sell cotton at price set in Contract. Basic case that says you must follow contract because it is the law
REMEDIES FOR A BREACH
Sullivan v. O’Connor
· P sues for bad nose operation. The surgery was to get better jobs, could not prove this would help for the damages.
· He promised better nose than she got
· Received: Pain and suffering, Value of old nose, and cost of all 3 surgeries
Curtis Brothers v. Catts
· Tomato Caning company sues for tomatoes
· Specific performance, rare and only in situations were there is no easy substitute
· Here time table or quality was a reason for specific performance
Hadley v. Baxendale
· P’s broken crank caused their mill to stop so they sent the crank to D for repairs. D told P if the crank were sent by noon, it would be delivered the next day. P hired carriers so it will arrive before 12 but didn’t mention the urgency.
· Delivery of the shaft was delayed for several days by some neglect by D.
· Court said that to determine the damages, they’d need to know what both parties knew about the consequences of the breach of at the time the contract was made. Defaulting party is only liable for foreseeable losses.
· If special circumstances were not communicated, the D is not liable for the loss of profit.
PROMISE PLUS CONSIDERATION
Kirksey v. Kirksey
· D told P to leave her land and live with him. D gave P a place to stay for 2 yrs then kicked her out.
· Court found for D saying his action was a ‘gratuity.’ No Consideration
Hamer v. Sidway
· Gave up right to legally drink and stuff. Each side gets a benefit. Giving up a Legal right is consideration
RESTITUTION AND QUASI CONTRACT
Bailey v. West
· There was a benefit conferred, Appreciation (something of value),
· There was then acceptance and retention of benefit, and it was Inequitable to retain w/o payment
Petrie v. LeVan
P a house and it was damaged after view, but before the sale of house. First owner, D, kept insurance money
Court ruled for P, this was a quasi-contract because it was unjust