A Contracts Outline:
Chapter 1. The Agreement Process
Intent to Contract
Restatement § 17 Requirement of a Bargain (1) Except as stated in Subsection (2), the formation of a contract requires a bargain in which there is a manifestation of mutual assent to the exchange and a consideration.
(2) Whether or not there is a bargain a contract may be formed under special rules applicable to formal contracts or under the rules stated in §§ 82-94.
Restatement § 21 Intention to Be Legally Bound Neither real nor apparent intention that a promise be legally binding is essential to the formation of a contract, but a manifestation of intention that a promise shall not affect legal relations may prevent the formation of a contract.
– For a contract to be formed, there must be mutual assent.
– Mutual Assent is arrived at by the process of “offer” and “acceptance”
– To determine whether mutual assent has been achieved, look at the objective theory of contracts, not subjective
Objective Theory of Contracts:
– Assent is determined by looking at what a reasonable person in the position of one of the parties would be lead to believe by the words and actions of the other party
– The existence of a contract is to be determined by the manifestations made by the parties, rather than the subjective intention
– If the words or acts of one party have only one reasonable meaning, that party’s undisclosed intention is immaterial except when the party attaches an unreasonable meaning to his manifestations that is known to the other party
Ø Lucy v. Zehmer: (Offer made in jest)
Zehmer sold farm to Lucy, but claimed it was only a joke and he was drunk
Rule:
· Outward manifestations of the parties must be consistent with the meaning of the act.
· Measure intent by outward manifestation not by inward thoughts or ideas.
· If you engage in conduct which you should reasonably have known would convey intent to offer then that is assent
Ø Balfour v. Balfour: (Intending Legal Consequences)
Wife sued husband for money that he promised her while he was over seas
Rule:
· An agreement is not a valid contract unless the parties intend that it can be sued upon
· The promise made between married couples are not intended by either party to have legal consequences
Ø Sanchez v. Life Care Centers of America, Inc: (Implied Promise by Employer)
At-will employee got fired, sued for wrongful termination. Co. handbook listed disciplinary guidelines, and disclaimer reserving right to cancel employment at any time without notice.
Rule:
· When an employee handbook disclaimer is unclear as to the modification of an employment relationship, the court must weigh evidence to interpret the contract
Ø K.D. v. Educational Testing Services: (Intention compared to Bargaining Power / Contract of Adhesion)
K.D. took LSAT twice, accepted conditions that ETS could cancel scores, they believed he cheated, score was canceled
Contract of Adhesion: When bargaining powers are uneven
Rule:
· An adhesion contract is enforceable if it is reasonable or provides a valuable public service
Ø MCC-Marble Ceramic Center v. Ceramica Nuova: (Duty to Read, Protection from Fraud)
MCC signed contract in Italian despite not knowing the language
Rule:
If you sign a contract you are bound regardless if you have read them or understood them
The Offer- An offer is a promise to do or refrain from something in the future, conditioned on the other parties acceptance.
– Manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it.
Restatement § 24 Offer Defined An offer is the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it.
Elements of an Offer:
Manifestation of Intent to Contract
Definite and certain expression of essential terms (identity of offeree, price, time of payment, delivery, nature of the work to be performed), and
Communication to the offeree
Offers Distinguished from Expression of Opinion, Advertisments, Etc.
Ø Hawkins v. McGee: (Harry Hand Case)
Rule: Damages are intended to compensate for breach in the terms of the contract. The measure of recovery is based on what the def should have given the plt not what the plt has given the def
Ø Leonard v. Pepsico, Inc.:(Advertisements are not an Offer)
Consumer thought Pepsi commercial was an offer for a Harrier Jet
Rule:
· In order for advertisements to be an offer there must be some language of commitment
· A request to consider, examine and or negotiate, by a reasonable standard, can not be a contract unless the words are plain and clear
· Advertisements are mere notices and solicitations for offers which create no power of acceptance
Offers Distinguished From Preliminary Negotiations and Price Quotations
Restatement § 26 Preliminary Negotiations A manifestation of willingness to enter into a bargain is not an offer if the person to whom it is addressed knows or has reason to know that the person making it does not intend to conclude a bargain until he has made a further manifestation of assent.
· Preliminary negotiations do not constitute a contract; b/c it does not contain definite terms
o A manifestation of willingness to enter into a bargain is not an offer if the person to whom it is addressed knows or has a reason to know that the person making it does not intend to conclude a bargain until he has made a further manifestation of assent
· Language used can sometimes raise a “quotation” from an invitation to negotiate to the level of “offer”
· A statement of intention to sell or a preliminary proposal inviting offer:
o Is usually indefinite as to quantity
o Lan
ion often in a handbook
Implied-In Law: Court impose on the employer a promise of good faith and fair dealing.
UCC § 2-204. Formation in General.(1) A contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract.
(2) An agreement sufficient to constitute a contract for sale may be found even though the moment of its making is undetermined.
(3) Even though one or more terms are left open a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy.
UCC § 2-310. Open Time for Payment or Running of Credit; Authority to Ship Under Reservation.Unless otherwise agreed
(a) payment is due at the time and place at which the buyer is to receive the goods even though the place of shipment is the place of delivery; and
(b) if the seller is authorized to send the goods he may ship them under reservation, and may tender the documents of title, but the buyer may inspect the goods after their arrival before payment is due unless such inspection is inconsistent with the terms of the contract (Section 2-513); and
(c) if delivery is authorized and made by way of documents of title otherwise than by subsection (b) then payment is due at the time and place at which the buyer is to receive the documents regardless of where the goods are to be received; and
(d) where the seller is required or authorized to ship the goods on credit the credit period runs from the time of shipment but post-dating the invoice or delaying its dispatch will correspondingly delay the starting of the credit period.
Ø Southwest Engineering v. Martin Tractor:(Application of U.C.C. / Lacking of Material Terms)
Martin refused to fill Southwest’s order alleging that the mode of payment had not been decided; therefore no contract existed.
Rule:
· Even if one or more terms are left open, a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonable certain basis for giving an appropriate remedy (U.C.C. § 2-204 (3))
· U.C.C. provides that payment is due at time and place at which buyer is to receive goods, they supply missing terms
Joseph Martin v. Schumache: (Application to Lease
