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Contracts
St. Thomas University, Florida School of Law
Plass, Stephen A.

 
Plass-Contracts-Fall-2013
 
AGREEMENT PROCESS
Mutual Assent = An Agreement
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                                                   Agreement = “A mutual manifestation of assent to the same terms”
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                                                                      Arrival Process- “Offer” & “Acceptance” = Agreement
Offer = Intent, Content, & Communication
OFFER + ACCEPTANCE + CONSIDERATION = K
 
Objective Theory is used to determine whether mutual assent/agreement has been achieved.
Statute of Frauds requires certain types of K’s to be in writing.
VALIDITY
Voidà NO legal obligation/ NO legal effect like it never happened. Ex. – Exchange of promises without consideration (No K was ever created)
 
Voidableà One party has the power of avoiding; it’s valid but avoidable. Ex. – Minors, mental illness, entered into because of a mistake/duress, or fraudulent K’s.
 
Unenforceableà K is valid/exits & has legal consequences BUT you can’t enforce it. Ex. – Statue of Frauds & Limitation or Ambiguous Terms.
–         Expressed Reservation Clause – parties reserved the right to be bound ONLY when written agreement is signed.
·         If there is no “Express Reservation Clause? Court looks at factors for ‘Intent to be bound’:
ü  Complexity/Magnitude—Whether the deal is such that a formal & executed writing would normally be expected.
ü  Essential Terms—Whether they have been agreed upon.
ü  Partial Performance—If there is partial performance [accepted], one can believe there is intent to formalize.
 
 
Intent to Contractà measured by the words & actions of the parties’ [Outward Expressions]  
Promise = manifestation of intent to act or refrain from acting in a specified way.
 
 
Lucy v. Zehmer [Drunk K] Offer Made in JestàObjective Theory
RULE à Outward manifestation of the parties must be consistent with the meaning of the act of a person’s objective intentions NOT subjective intentions.
 
Balfour v. Balfour [Kobe B.] Intent for Legal Consequences to follow Agreement
RULE à An agreement is not a valid K unless the parties INTEND to be legally bound. A gift promise is enforceable BUT only after the gift has been delivered.
 
 
Texaco, Inc. v. Pennzoil [Gordon Gecko Case] Intention For Agreement—Memorialized
RULE à The terms of a K must be ascertainable [clear] to a reasonable degree of certainty in order for a K to be enforceable
 
 
–NOT OFFERS–
·         Opinions/ Predictions = in absence express promise, NO promise can be implied. (Doctors)
·         Estimates = an intention is different from making a promise.
·         Invitation for Offer = is a question/invitation to make an offer NOT considered to be the offer.
·         Ads = these are invitations/proposals for offers NOT offers.
o   If they include “Promissory Words”à price, quantity, & “first come first served” then it can constitute as an offer.
·         Auctions = NOT offers b/c auctioneer is only inviting others to make offers.
·         Quote = NOT offers b/c they are statements of intention to sell at a given unit price unless there is QUANTITY
·         Preliminary Negotiations = NOT offers b/c they include communications prior to acceptance or offer. There must be language of commitment/definiteness. Parties need to be clear that until there is no further assent, there is no offer.
 
 
Offers Distinguished From Expressions of Opinion, Advertisements
 
Hawkins v. McGee [Hairy Hand] Distinguishing an Offer v. Opinion
RULE à Medical opinions are not legally binding; an offer/promise is. (Ex. Doctor guarantees a specific result or entices the patient to undergo a procedure.)
 
 
Sullivan v. O’Connor [Bad Nose Job] Opinion Going Too Far
RULE à Agreements between a doctor & a patient that calls for a specified result (ex. compared to an image on a computer) can be enforced.
 
 
Leonard v. Pepsico, Inc. [Harrier Jet Commercial] Ads as an Invitation to Deal
RULE à A commercial is not an offer, but a solicitation for an offerà creates no power of acceptance.
·         “Quantity/amount” will make a representation fatally indefinite b/c of commitment & definiteness issue.
 
 
Offers—Preliminary Negotiations & Price Quotations
 
Lonergan v. Scolnick [Home Sale Ad] Preliminary Negotiations – Solicitation of An Offer ≠ An Offer
RULE à Form letter is not necessarily an offer b/c it’s sent to more than 1 person & is indefinite.
·         D reserves the right for a 1st come 1st serve basis; so 1st person that gets there destroys everyone else’s power of acceptance.
 
 
 
Fairmount Glass Works v. Crunden-Martin Woodenware Co. [Car Load] “Quotation” As An Offer
RULE à To determine whether a communication constitutes an offer, the court reads the K as a whole to conclude the contractual intent & parties true meaning. A quote is NOT an offer b/c it lacks commitment; it’s like an estimate.
·         The KEY is whether the terms, especially the quantity terms, are sufficiently definite à D responded to an inquiry about a specific quantity & they gave a specific price so they were committed & definite.
·         §2-305—Open Price Term à If parties settle a K for sale w/out “price” term, or if they fail to agree on the price, price is a reasonable price at the time of delivery.  
 
Indefinitenessà If parties have gone through offer & acceptance so that ther

he price à if UCC sees that the parties don’t intend to be bound, they will not gap fill.
·         The Doctrine of Specific Performance requires the terms of the K to be DEFINITE & SPECIFIC for remedy.
·         An Agreement to Agree on a material term in the future can’t be enforced (UNENFORCEABLE- Ambiguous Terms)
·         Agreement to Negotiate  on a material term in the future is binding (Negotiate in GOOD-FAITH)
 
BMC Industries v. Barth Industries  [Optical Case] Predominant Factor & The UCC
RULEàIf it’s a hybrid K & the predominant nature is for the furnishing of a product rather than services, then it must be ruled in favor of goods.
Ø  The UCC applies to goods transactions only. If it contains both goods AND services it is a Hybrid Contract
 
§  Use the Predominant Factor Test to determine if you use UCC or Common Law
·         Contractual language—what is the agreement called; how do parties refer to themselves, etc.
·         Circumstances surrounding the K—how is payment & billing structured, price allocation, ect.
·         What is being sold?
 
 
§ 2-206. Offer and Acceptance in Formation of Contract.
(1) Unless otherwise unambiguously indicated by the language or circumstances
•     (a) an offer to make a contract shall be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances;
•     (b) an order or other offer to buy goods for prompt or current shipment shall be construed as inviting acceptance either by a prompt promise to ship or by the prompt or current shipment of conforming or non-conforming goods, but such a shipment of non-conforming goods does not constitute an acceptance if the seller seasonably notifies the buyer that the shipment is offered only as an accommodation to the buyer.
(2) Where the beginning of a requested performance is a reasonable mode of acceptance an offeror who is not notified of acceptance within a reasonable time may treat the offer as having lapsed before acceptance.
 
 
·         §2-105—Definitionsà Goods = all movable things (including manufactured goods) at the time of identification; includes the unborn young of animals & growing crops & other identified things attached to realty.