Contracts Outline
Professor Smith – Fall 2016
(2) Sale of Goods [Uniform Commercial Code (UCC), Article 2 – 102]
Transaction in Goods
No matter who the parties might be (merchants or not)
Merchant: Person who deals in goods of the kind involved in transaction
Predominant Purpose Test: Looks at transaction as whole [Pass v. Shelby Aviation]
Gravamen Test: Looks at parts of transaction
Hypotheticals:
Applebee’s Restaurant
Ordering a steak, and it comes back bad
Is the steak (good) bad, or was it prepared bad (service)?
Pepboys
Servicing a car; it includes buying of parts
Is it a good or a service? Look at the whole picture (service).
(3) Contractual Assent and the Objective Test
Agreement [§ 3]
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 performance or to exchange performances.
Mutual Assent [§ 23]
It is essential to a bargain that each party manifest assent with reference to the manifestation of the other.
Objective Standard (Reasonable Person Construct)
A person is bound by their outward manifestation of intent (i.e., words and actions), as a reasonable person in the position of the other party would understand it.
Morales v. Sun Constructors (No hablo English)
It was Morales’ obligation to ensure he understood the Agreement before signing it. (Objective evidence)
The Duty to Read
James v. McDonald’s Corporation (Who wants to be a millionaire?)
Ms. James claimed that she never entered into an agreement to arbitrate her dispute. She claimed that she was not aware of the Official Rules. The court ruled that a participant must agree to the rules of the game before participating.
Terms
Boxtop Terms: Printed on box/package
Shrinkwrap Terms: Printed on insert in box/package
Clickwrap Terms: “Click” required
Browsewrap Terms: “Click” not required
Bad Jokes
Lucy v. Zehmer
Zehmer’s outward manifestation constituted an offer; Lucy reasonably interpreted it as such. Purchasers were entitled to specific performance.
(4) Offer [§ 24]
An offer is the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that their assent to that bargain is invited and will conclude it.
Offeror is the MASTER OF THE OFFER
Has the power to define the terms agreed upon
Outward manifestation: It creates a belief that saying “yes” constitutes a deal.
Communication
Invites acceptance into a contract
Intent to be bound
Specific terms
An offer is NOT VALID until received by the offeree
Offer vs. Solicitation [Lefkowitz v. Great Minneapolis Surplus Store (1957)]
Store posted an ad at large for a coat for $1 (including other terms)
Lefkowitz showed up to the store with $1 (meeting all terms)
Store refused to sell, stating a “house rule” it was meant for women, even though it was not explicitly stated on the ad
Is it an offer? Yes!
There’s nothing left to negotiate; it was very clear – Coat for $1
Lefkowits showing up at the store constituted acceptance
When offeree accepts offer, it becomes a legally binding K
(5) Acceptance [§ 50]
Acceptance of an offer is a manifestation of assent to terms by offeree, in a manner invited, or required by the offer. (Mirror Image Rule)
General Principles of Acceptance
An offer may invite or require acceptance to be made by an affirmative answer in words, or by performing or refraining from performing a specified act, or may empower the offeree to make a selection of terms in his acceptance. [§ 30]
Acceptance must be communicated to the offeror
Acceptance must be in compliance with terms of the offer
Acceptance must not vary the terms of the contract proposed in the offer
Mirror Image Rule
Acceptance must reflect the offer exactly.
If acceptance varies in terms, it turns into a counteroffer
Acceptance must occur while offer is still in effect
of an Offer
Offeror holds power to revoke offer before it is accepted
It can be communicated by a third party
Hendricks v. Behee & Smith (1990)
P is an escrowee. Issue between two D’s. Behee (buyers) sent offer to buy house to Smith’s (sellers) real estate agent. Smith accepted offer and gave to his agent. Behee called the agent and rescinded the offer before he knew it was accepted. No K until acceptance is communicated to the offeror.
Dickinson v. Dodds (1876)
D made an offer to P to sell him his house. The offer stated it was open for two days. P heard D offered his house to someone else so he left an acceptance at a house where D was staying. D did not get it. Before the offer’s date of expiration P told D he accepted. D said he already sold the house to someone else. The offer was an informal agreement that’s not binding. D was free to sell to anyone before he received a complete acceptance. P knew D had changed his mind.
Unilateral Contracts – Acceptance by Performance § 54
A contract that exists when there is a promise in exchange for a performance.
If it’s not specified, it is implied; no need to notify the offeror
If offeror has no means of knowing about the performance, his/her contractual duty is discharged, unless:
Offeree exercised reasonable diligence to notify offeror of acceptance
Offeror learns of performance within reasonable time
Offeror indicates notification is not required
The offeree does not become bound when starting to perform the act requested, but the offeror is bound by an option K.
An offer for a unilateral contract can be withdrawn at any time prior to the offeree’s performance or commencement of performance.
