Contract I
Fall 2014
Sullivan
CH 1. The Autonomy Principle & Security Principle
I. Promises
R. §§1-3
Restatement §1. Contract Defined
A contract is a promise or a 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.
Restatement § 2. Promise
(1) a promise is a manifestation of intention to act or refrain from acting in a specified way, to justify a promisee in understanding that a commitment has been made. Determined by words/actions – it’s a factual determination.
Comments
b. Manifestation of Intention
The phrase “manifestation of intention” adopts an external or objective standard for interpreting conduct; it means the external expression of intention as distinguished from undisclosed intention. A promisor manifests an intention if he believes or has reason to believe that the promisee will infer that intention from his words or conduct.
e. Illusory promises
They are mere statements of intention. Words of promise which by their terms make performance entirely optional with the “promisor” whatever may happen, or whatever course of conduct in other respects he may pursue, do not constitute a promise….On the other hand, a promise may be made even though no duty of performance can arise unless some event occurs
Restatement § 3. Agreement Defined; Bargain Defined
An agreement is a manifestation of mutual assent on the part of two or more persons. A bargain is an agreement to exchange promises or to exchange a promise for a performance or to exchange performances.
A. Hawkins v. McGee – Hairy hand case/dr solicits patient promises him a new hand. Normally medical guarantee NOT an promise. But when it was paired with solicitation, it was a promise. BLL: The correct measure of damages for a failure to perform a contract as promised is the difference between the result that was promised and what was actually provided – expectation damages.
a. Intro into contract law and abt the importance of promises – the rule…also intro into remedies. Expectation basis of damages. In order to have a contract you have to have a promise
Restatement §344. Purposes of Remedies
Judicial remedies under the rules states in this R. serve to protect one or more of the following interests of a promise:
(a) his “expectation interest,” which is his interest in having the benefit of his bargain by being put in as good a position as he would have been in has the Contract been performed.
(b) his “reliance interest,” which is his interest in being reimbursed for loss caused by reliance on the Contract by being put in as good a position as he would have been in has the Contract not been made, or
(c) his “restitution interest,” which is his interest in having restored to him any benefit that he has conferred on the other party.
Comment
b. Expectation Interest. In principle, at least, a party's expectation interest represents the actual worth of the contract to him rather than to some reasonable third person. Damages based on the expectation interest therefore take account of any special circumstances that are peculiar to the situation of the injured party, including his personal values and even his idiosyncrasies, as well as his own needs and opportunities. In practice, however, the injured party is often held to a more objective valuation of his expectation interest because he may be barred from recovering for loss resulting from such special circumstances on the ground that it was not foreseeable or cannot be shown with sufficient certainty.
2. PROMISSORY AGREEMENTS
The Intention of the Parties
Restatement. § 201. Whose meaning Prevails
(1) Where the parties have attached the same meaning to a promise or agreement or a term thereof, it is interpreted in accordance with that meaning.
(2) Where the parties have attached different meanings to a promise or agreement or a term thereof, it is interpreted in accordance with the meaning attached by one of them if at the time the agreement was made:
(a) that party did not known of any different meaning attached by the other, and the other knew the meaning attached by the first party; or
(b) that party had no reason to know of any different meaning attached by the other, and the other had reason to know the meaning attached by the first party.
(3) Except for these exceptions, neither party is bound by the meaning attached by the other, even though the result may be a failure of a mutual assent.
A. Lucy v. Zehmer – Drunk dudes making a farm sale. Intent is looked at from an objective standard and not subjective, from a reasonable person’s viewpoint. It is the outward manifestation that counts. BLL: Where a party’s actions and statements could reasonably be seen as manifesting an intent to enter into a contract, the party will be bound to the contract, even if the party had no subjective intent to enter into the agreement.
**Undisclosed intentions are immaterial.**
Objective – legal concept that a binding agreement exists between two (or more) parties if a reasonable person would judge (from the outward and objective acts of the parties and the associated circumstances) that an offer has been made and accepted.
Subjective – legal concept that the existence of a binding agreement between two (or more) parties is determined by the existence of concurrence of intention ('meeting of minds') between the consenting parties. Modern (late 19th century) practice favors objective theory of contract that relies on external acts of the parties
Restatement § 18. Manifestation of Mutual Assent
Manifestation of Mutual Assent or an exchange requires that each party either make a promise or begin or render a performance.
Comment:
a. If both parties know that there was a joke in making the bargain then no contract exists. If only one person knows that the bargain was a joke then the contract will be enforceable.
Restatement § 19. Conduct as Manifestation of Assent
(1) The manifestation of assent may be made wholly or partly by written or spoken words or by failure to act.
(2) The conduct of a party is not effective as a manifestation of his assent unless he intends to engage in the conduct and knows or has reason to know that the other party may infer from his conduct that he assents.
(3) The conduct of a party may manifest assent even though he does not in fact assent. In such cases a resulting contract may be voidable because of fraud, duress, mistake, or other invalidating cause.
Restatment § 20. Effect of Misunderstanding
(1) There is no manifestation of mutual assent to an exchange if the parties attach materially different meanings to their manifestations and
(a) neither party knows or has reason to know the meaning attached by the other; or
(b) each party knows or each party has reason to know the meaning attached by the other.
(2) The manifestations of the parties are operative in accordance with the meaning attached to them by one of the parties if
(a) that party does not know of any different meaning attached by the other, and the other knows the meaning attached by the first party; or
(b) that party has no reason to know of any different meaning attached by the other, and the other has reason to know the meaning attached by the first party.
B. Embry v. Hargadine – no renewal signed, but continued to work. “Go get your men out.
on who gets there, gets the merchandise – anyone else after is out of luck. When they put that specific advertising in the paper, it constituted an offer! **When an offer is clear, definite, and explicit, and leaves nothing open for negotiation, it CONSTITUTES an OFFER, acceptance of which completes the contract. **
C. Leonard v. Pepsico: Pepsi ran an advertisement showing some of the prizes that could be gained through compilation of Pepsi points. Very dramatized commercial ended with a teenager landing a Harrier Jet at school. Leonard acquired the necessary 15 actual points and then sent a check for 700g dollars to Pepsi. He lost because:
a. The alleged offer was not an offer at all. An advertisement of a good is a request to field offers from interested parties, not an offer open to anyone to accept.
i. An order form is merely seen as an offer made and then the company that put the form out for the public is in the capacity of the acceptor.
ii. The exception to this is when an advertisement is very specific, clear, definite, and leaves nothing open for negotiation.
b. An objective, reasonable person would not see the commercial as an offer. The reasonable person would see the commercial as a joke. Unlike Lucy, court ruled “joke” was obvious.
D. Fairmont Glass Works v. Cruden-Martin (chirlstein pg. 34) Buyer wrote to seller asking for the lowest price they could give for a specific ten car order of Mason green jars. Seller returned an estimate, along with the requested terms of cash discount and said the estimate was “for immediate acceptance” and that there was available “60 days acceptance.” Buyer then sent a telegram asking seller to enter the ten car order. Buyer responded that the inventory was already sold. Buyer sued on the premise that an offer had been made and won.
a. The seller gave specific numbers for both price and quantity and then left the transaction up to the buyer, saying that the estimate was for immediate acceptance, and that the estimate was open to acceptance for 60 days.
b. The offer was left open and only needed an acceptance to be a valid contract.
c. UCC gap fillers could take care of the reasonable terms that are not discussed by the parties:
i. UCC § 2-310
d. Restatement 2d of Contracts §26: 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 out does not intend to conclude a bargain until he has made further manifestation of intent.
i. *Knowledge that there is no intent overrides the manifestation of intent to a third party.*
