CONTRACTS FINAL OUTLINE FALL 2010
Chapter 1: The Agreement Process
§1: Intent to Contract
1. Lucy v. Zehmer: Lucy claimed that his offer to sell his farm to Zehmer was made as a joke.
a. First thing with a contract is to look at the intent. To do this you must use look at the objective outward behavior in a way a reasonable person would interpret it to be.
b. RULE: If a person’s words and acts, judged by a reasonable standard, manifest a certain intent, it is immaterial what may be the real but unexpressed state of that persons mind.
2. Balfour v. Balfour: Husband agreed to pay wife a specified monthly sum while she lived elsewhere due to sickness.
a. Donative Intent: this is something meant as a gift and is effective upon delivery (it cannot be taken back after that). One cannot be made to give a gift they promised to give but ended up not giving.
b. Executive: money already given
c. Executory: money to be given in the future
d. With DI, you have no intent for it to be legally binding or with legal consequences.
3. Sanchez v. Life Care Centers of America, Inc.: Employee is suing Company for breach of contract in firing her without going through protocols set forth within the Handbook.
a. To form a contract you must have a commitment. “At-Will” employement means that there is no contractual obligation. Ex.) If you do not go into work one day, they cannot sue you for that.
b. Issue: Disclaimer after section in Handbook that set out a certain process they would do before terminating an employee. This disclaimer said they did NOT have to do those steps they said they would do before firing someone, if they didn’t want to. So it went from At-Will: no promise, to Handbook: promise, to Disclaimer: no promise.
c. When it sets forth certain steps they would do before firing someone in the Handbook, that is promising something, effectively making it no longer at-will.
d. Disclaimer must be CLEAR and CONSPICUOUS to be valid.
4. K.D. v. Educational Testing Service: Student is suing for a declaratory judgment and an injunction restraining the defendant from cancelling his April LSAT score.
a. Adhesion Contract: where one side had no power to bargain.
b. AC is a binding contract b/c one can have contractual intent.
c. RULE: An AC, which is one entered into between parties with unequal bargaining power, is not automatically void. But the Court will usually utilize a variety of pretexts to disregard any part that it finds unfair or unreasonable.
5. MCC v. Ceramica Nuova: MCC sought not to be bound to the terms written on the reverse side of a contract, which he signed, b/c it was in a different language.
a. These are binding because you can still manifest contractual intent even if you do not understand the contract.
b. If you do not understand the contract you have the responsibility to say so or learn what it is they are wanting in the contract.
§2: The Offer
1. Collins v. Reynard: Client suing lawyer for malpractice.
a. Lawyers can make offers/guarantees because they know they can do certain things and if they promise that they can and will do it, one can sue if they break the promise.
b. Offers: makes clear the subject matter of the proposed bargain, the quantity and the price. They must be definite.
c. Offers can be revoked any time before acceptance unless otherwise stated.
2. Hawkins v. McGee: Patient is suing Doctor for damages because of breach of contract and malpractice.
a. Medical Opinion is not a commitment. Ex.) You’ll be fine. You’ll be out in no time.
b. If a Doctor convinces a patient of a committed result and guarantees with specifics the outcome, then that is when his words become a promise.
c. The behavior of inducing and persuading, along with being very specific makes a medical opinion a promise.
3. Leonard v. Pepsico: Plaintiff is suing Defendant for specific performance of an alleged offer of a Harrier Jet.
a. Advertisements are not offers because they:
i. lack a quantity term (fatally indefinite)
ii. have no set limitations (such as first to redeem offer will get item)
iii. usually are sent to many people
iv. lack commitment language
v. often not reasonable
b. Ads are invites for someone to make an offer.
c. Some ads that are specific enough can be considered offers.
4. Hoffman v. Horton: Plaintiff is suing Defendant for damages due to a reopened bid.
a. Bidding at Auction: where a bid is missed or made simultaneous with the falling of the hammer, he may, at his discretion, reopen the bidding.
b. Firm Offer: can only be done by merchants
c. UCC 2.205: Firm Offers
i. An offer by a merchant to buy or sell goods in a signed writing which by its terms gives assurance that will be held open is not revocable, for lack of consideration, during the time 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 offerree must be separately signed by the offeror.
5. US v. Briggs: Plaintiff is suing Defendant for damages to recover for freight charges.
a. A quote of prices can be deemed as an enforceable offer if it is definite.
b. An estimate of prices is only an “idea” or “approximation”, however if it gets too specific then it becomes an offer. Also, if the offeror is an expert and the other party is relying on the estimate then it could become an offer.
c. If, when offering a quote, one says “This is NOT an offer”, then regardless of how definite it is, it cannot be construed as an offer.
d. Sub-bid: an irrevocable offer (even if it was just quoted). But the General’s using of the bid is not an acceptance.
e. Expressed Reservation: doesn’t matter what happens until we get A, B and C.
f. Definite Test: (Judge does this)
i. Parties have done enough for the court to know what they’ve agreed to
ii. Parties have done enough to see a breach and find a remedy.
g. Void à Contract never existed
h. Voidableà Someone with the disability can avoid it or ratify it and keep it.
i. Unenforceableà Contract exists but the law prevents you to perform.
6. Lonergan v. Scolnick: Defendant sold his property before Plaintiff had a chance to respond to a letter asking for an immediate decision on the property.
a. Form Letter: same letter goes out to many. These are invitation for offers.
b. No contract is form if the party knows or has reason to know that the other party does not intend to enter into a binding agreement without some further assurance.
7. Fairmount Glass v. Crunden-Martin: Plaintiff is suing Defendant for breach of contract based on not going through with an offer of shipping goods.
a. If a party puts a label on their statement (this is a quote, estimate, proposal etc…), it doesn’t matter. Must see if what they labeled their statement to be falls under an offer.
b. Where prices are requested on an order and the vendor quotes those prices to the vendee, the vendor has offered to fill the order and is obligated to fill the order upon receipt within a reasonable time of vend
e. Indefinite means there is a promise but just don’t know certain things.
f. Illusory means there is no promise at all.
6. Walker v. Keith: Walker rented property from Keith for ten years with an additional ten year option, rent to be fixed mutually by the parties, said rental values to reflect the comparative business conditions between the periods.
a. RULE: No contract exists where essential terms such as price are not contained in an option contract and no standards are included whereby it may be judicially determined to exist.
b. If a contract is indefinite is it VOID.
c. An agreement to agree is VOID.
d. The question to ask is whether a reasonable Judge know what the price formula or representation means and how to come up with a monetary amount to fill into the contract.
e. Ex.) Comparative business conditions: not specific enough for a judge to figure out how to come up with a monetary number.
f. Terms do not matter as long as the contractual intent is there.
g. Categories for Void/Voidable/Unenforceable:
i. Void: illusory, indefinite, or mutuality of obligation
ii. Voidable: fraud, distress, duress, undo influence
iii. Unenforceable: statute of frauds (must be written for certain types of deals), statute of limitation (time)
7. Copeland v. Baskin Robbins: Buyer is suing seller for breach of contract by not following through with negotiations agreed upon in the initial contract.
a. Parties CAN make an agreement to negotiated but they must do so in good faith.
b. If they do not negotiate in good faith then it could be a breach of contract.
c. This is not an agreement to agree.
8. Oglebay Norton v. Amco Inc.: When Oglebay and Amco could not agree on a shipping rate under their long term contract, Oglebay sought a declaratory judgment form the court that the contract rate was the correct rate, or alternatively that the court would set a reasonable rate.
a. If first price term fails, see if there is an alternative.
b. Must ask: Can a Judge know around what the price term would reasonably be intended to be if the negotiations went ok.
c. Doctrine of Litigation: migitate your loses by still making some money!
d. If the parties intend to conclude a contract for the sale of goods, where the price is not settled, the price is then a reasonable price at the time of delivery if the price is to be fixed in terms of an agreed standard set by a third person or agency and is not so set.
9. Eckles v. Sharman: Plaintiff is suing Defendant for breach of a basketball contract.
a. Concluding a contract with some terms unsettled is ok if there is still intent.
b. If the said “essential terms” are missing but the parties acted as if they both were still in a contract then those terms are irrelevant and there was still a contract based on the intent and outward behavior of the parties.