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Contracts
St. Thomas University, Florida School of Law
Sullivan, Todd P.

 
CONTRACTS 1 OUTLINE – PROFESSOR SULLIVAN FALL 2014
The Agreement Process: FORMATION OF A CONTRACT.
 
 
3 elements of offer:
1.)    Intent:Objective manifestation of intent to form a present K right here and right now. The offeree, as a reasonable person, must believe that there is an outward manifestation of intent to enter into a K. In mutual assent not looking to subjective thought but the objective standard of a reasonable person.
2.)    Content: Essential terms of the offer so that the offeree knows what he/she is accepting.
3.)    Communication: of that intention and those terms to an individual who is intended by the offeror as the offeree. “meeting of the minds”
 
Statute of frauds- there are certain contracts that must be in writing to be enforceable.
i.                    Article 2: “Uniform Commercial Code”: the goal is for all the states to have all the same laws. Article 2 is NOT governing law but every state adopts it as a statute. Why have the same laws? To encourage people to have interstate transaction
ii.                  Parole evidence allows extrinsic evidence- prior oral agreements
iii.                Requires mutual assent: for a contract to be valid, both parties must manifest a mutual assent to be bound.
 
Intent to Contract
I.                    Requires Mutual Assent: for a contract to be valid both parties must manifest a mutual assent to be bound.
·         It is judged by the Objective Theory of Contracts that is whether a reasonable person would conclude that a contract had been formed.
 
A.     Example: Lucy v. Zehmer: Wherein D and his wife contracted to sell P an acre of farm for $50,000. D wrote an agreement in which they signed. D fails to go through with the sale stating they were only joking and claim they told P. The court held that D had made a valid offer because a reasonable person would conclude based on his conduct and words that it was not a jest but a real agreement.  
B.     Rule: If a party to the contract has a reasonable belief that the other party has the requisiste intent to enter into the agreement when he does not, the contract is still enforceable.
C.     Policy: In this case, a reasonable person in the position of the offeree based on outward conduct that there was no joke here and should be held responsible for the promise. While in Balfour there is a presumption against contractual intent in social situations or with family members as its casual agreements made every day.
 
 
 
D.     Example:  Balfour v. Balfour: Wife sues husband for breach of K for not giving her $30.00 per month as promised. The court held per the reasonable person standard, the contract is not enforceable because they was no intent to contract as family members both parties contract all the time.
E.      Rule: agreements between husband and wife do not constitute under the law as a contract. A promise between them is not an enforceable contract.
F.      However, husband and wife may enter into a legal contract if they work together. Hypo: Wife tells husband she will pay him this much to be her secretary.
 
Example: Texaco, Inc. v. Pennzoil: P and Getty oil negotiated a purchase of Getty; the terms were agreed to subject to the board of directors. Press released by both parties of their agreement. Before the board met a memorandum of agreement was signed which was subject to the board approval. D made a counter offer to Getty’s board which then repudiated the Memo of Agreement and agreed to sell D. P sues content D interfered with their contract while D asserts no binding contract as no inference could be drawn. HELD: based on words on the press release indicating terms, statements in the transaction drafts as such the record indicate the parties have reached agreement on all essential terms therefore intended to be bound.
 
Explanation: The court reviewed the following factors:
G.     Whether a party expressly reserves the right to be bound only when a written agreement is signed
H.     Whether there was any partial performance by one party that the party disclaiming the contract accepted
I.        Whether all essential terms of the alleged contract has been agreed upon
J.       Whether the complexicity or magnitude of the transaction was such that a formal, executed writing would normally expected
 
 
·         Explanation: The intent of the court is not to read minds but to look at the outward manifestation that is words and actions and protect people based on a their reasonable expectation. In Mutual assent not looking to subjective thought but the objective standard of a reasonable person.
·         Exception: The exception to the objective theory is if the person has specific knowledge.
POLICY: In Zehmer, a reasonable person can in the position of the offeree based on outward conduct that there was no joke here and should therefore be held responsible for the promise. While in Balfour there is a presumption against contractual intent in social situations or with family members as its casual agreements made every day.
II.                OFFERS:
Def. an offer is a manifestation of intent to be contractually bound upon acceptance by another party; it creates in the offeree the power of acceptance to form a contract by an appropriate acceptance.
 
Hawkins v. McGee
i.                    D [surgeon] told P’s parent who was to have hand surgery that he would “guarantee” to make the hand 100% perfect, if the parents agreed to contract for his services.
ii.                  The court held that the question of whether Dr. entered into a contract is to be determined by the jury per the objective theory of contract, thus, a reasonable person in the position of P would believe doctor made an offer to be legally bound to produce 100% perfection as he promised to cure hand.
iii.                When specific language is used in conjuction with a promise, such as “I guarantee” it implies an offer.
iv.                Rule: The measure of damages in a breach of contract case is the difference between the plaintiffs actual position and the position he would have been in had the contract not been breached.
v.                  Policy: evaluating the words used that could quantify as a promise that is reviewing the offeror’s statement or language to determine if a reasonable person in the shoes of the offeree would have believed that an offer has been extended.
Sullivan v. O’Connor
i.                    plaintiffs are entitled to recover expenses for worsening of condition, pain and suffering and mental distress. The courts take into consideration the public policy by not wanting to encourage defensive medicine. If actions for breach of promise can be readinly maintained, doctors will be frightened into practicing defensive medicine. On the other hand, if these actions were outlawed, leaving only for possibility to sue for malpractice, there is fear that the public might be exposed to enticemetns of charlatans, and confidence in the profession might be shaken.
ii.                  Patients often mistake opinions for promises due to their state of mind; cant hold doctors accountable because they must give some assurance to keep patients faith up in their ability. But, cannot “guarantee” because in the line of medical profession things are not 100% certain due to the nature of their fields.
 
Differences between Hawkins & Sullivan
Hawkins
Sullivan
·         “Guaranteed” 100% hand
·         pain and suffering is not a remedy under contract law
·         doctor pursued patient
·         yes, breach of warranty because it is part of the offer
·         patient pursued Doctor
·         no breach of warranty
Doctor’s side:
Patient’s side:
Policy argument: surgeons would be apprehensible if every word they said would be warranty
Policy argument: protect people from hacks/charlatans
 
 
An offer contains the following factors [Elements]:
 
1.      Promissory Language: Intent (objective manifestation to enter into a contract right her

s or Invitations to make offers:
Explanation: A statement that solicits the other party to make an offer is not an offer itself but rather an invitation or inquiry to make an offer. There are not offers.
Example of Inquiry: Will you sell me your car for $50,000.00? [This not an offer because it seeks information that does not amount to a commitment] Example of Invitations: “Are you interested in selling your car?” or “Would you give…..”
POLICY: There in no commitment to be bound in the transaction expressed by these kinds of statement and they are just soliciting information.
C.     Opinions
Explanation: Opinions are not offers unless have specific language to that effect [SEE ABOVE PROMISSORY LANGUAGE] Example: Doctors typically give opinions due to their line of work. Not encouraged to use specific language but typically have to provide some means of hope for down spirited patients. Sullivan Case [Nose gone wrong]: Patients often mistake opinions for promises due to their state of mind; can’t hold doctors accountable because they must give some assurance to keep patients faith up in their ability. But cannot guarantee in the line of scientific or medical profession because things are not 100% certain due to the nature of the fields.
D.     Price Quotes: Question
Explanation: They are not offers for there is no manifestation of intention to be bound and such as statement does not create the power of acceptance
Exception: Fairmount Glass Works v. Gruden [Green Mason Jars] wherein P requested a quote for the mason jars and D responded with specificity and immediate acceptance. P accepts but told they are out. HELD: D communication came in response to an inquiry that sought and offer; the response was detailed as to the quantity as it did not merely state “per unit” but made reference to the unit that P requested and the mode of response was indicated by offeror for immediate acceptance.
D’s language: Replying to your favor in April 20, we quote you Mason fruit jars, complete, in one-dozen boxes, delivered in East St. Louis, Ill.: Pints $4.50, quarts $5.00, half gallons $6.50, per gross, for immediate acceptance, and shipment no later than May 15, 1895; sixty days’ acceptance, or 2 off, cash  in ten days.- Court looked at the totality of the circumstances 1. Inquiry  2. Price Quotation vs. Offer 3. Acceptance 4. Breach (no longer in stock; cannot delivery). (2): Offer
 
 
E.      Auctions and Bids
ASK: Where is the offer and acceptance; specifically what kind of auction is it?
iv.                In a bid, the offeror is the bidder and the auctioneer is the offeree.
v.                  The bidder makes the offer with reserve, unless expressly stated that it is without reserve.
vi.                An auction with reserve, the auctioneer is deemed merely to solicit offers from the bidders and it is the bidders who are the offerors. The auctioneer is offeree [meaning can set his own min. price] thus, he can reject the bids if they are below the minimum price.
vii.              The auctioneer makes an irrevocable offer to ell and cannot withdraw after the first bid is made. Each bid is conditioned on:
a.)    it is not withdrawn before the hammer falls
b.) no higher bid is made