Select Page

Contracts
St. Thomas University, Florida School of Law
Smith, Kenya

Class 1: 8/14

Smith Contracts Outline Fall 2017

Promissory Liability

Restatements are a reflection of common law
Common law means judge made law
Legislature makes law
Code is called statutes
UCC like restatements are not law

UCC applicable in goods
Use a restatement like law
Restatements are like common law placed by judges

UCC becomes law when legislature of state adopts it
Contract:

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.
Gratuitous promises: a gift is not a contract

Analysis = connecting facts to rule
Contract Elements (definition reduced)

Offer
+ Acceptance

= Mutual Assent
+ Consideration

= Enforceable Contract

UCC Art. 1-102 Scope

Unless the context otherwise requires, this Article applies to transactions in goods; it does not apply to any transaction which although in the form of an unconditional contract to sell or present sale is intended to operate only as a security transaction, nor does this Article impair or repeal any statute regulating sales to consumers, farmers or other specified classes of buyers

UCC Art. 1-103 (b) Applicability of Supplemental Principles of Law

Unless displayed by the particular provisions of this title, the principles of law and equity, including the law merchant and the law relative to capacity to contract, principal and agent, estoppel, fraud, misrepresentation, duress, coercion, mistake, bankruptcy, or other validating or invalidating cause shall supplement its provisions.

Manifestation of Mutual Assent

The objective standard: The reasonable person construct

Restatement, 2nd 3 Agreement Defined; Bargain Defined

Agreement

A manifestation of mutual assent on the part of two or more persons

Bargain

An agreement to exchange promises or to exchange a promise for performance or to exchange performances

Restatement 2nd 23 Inadvertent Manifestation of Assent

“It is essential to a bargain that each party manifest assent with reference to the manifestation of the other”
Measure deal by objectivity

Equity

Class 2: 8/16

Mutual Assent: Offer

Primary authority is binding – it is the law
Secondary authority is persuasive

Misunderstanding

Restatement 2nd, 20. Effect of misunderstanding

There is no manifestation of mutual assent to an exchange if the parties attach materially different meanings to their manifestations and

neither party knows or has reason to know the meaning attached by the other; or
each party knows or each party has reason to know the meaning attached by the other.

The manifestations of the parties are operative in accordance with the meaning attached to them by one of the parties if

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
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.

Material means importance
Parties attach different meanings to the same words

Both are reasonable under the circumstances

Raffles v. Wichelhaus p. 246

2 HURL. 906, 159 ENG. REP. 375 (1864) – (Two Ships Peerless)
Different understanding of assent

Preliminary, Incomplete and Indefinite Agreements

Type 1 Agreement: Agreement in Principal

Whether there is an expressed reservation of the right not to be bound in the absence of a writing;
Whether there has been partial performance of the contract;
Whether all of the terms of the alleged contract have been agreed upon;
Whether the agreement at issue is the type of contract that is usually committed to writing.

Type 2 Agreement: Agreement to Good Faith Negotiations

Whether intent to be bound is revealed by language of the agreement;
The context of negotiations;
Existence of open terms;
Whether there has been partial performance of the contract;
Necessity of putting the agreement in final form

Offer

Restatement 24 (p. 285)
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

Preliminary negotiation

Restatement 26 (p. 285)

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

Certainty

Restatement 33 (p. 285-286)

Even though a manifestation of intention is intended to be understood as an offer, it cannot be accepted so as to form a contract unless the terms of the contract are reasonably certain
The terms of a contract are reasonably certain if they provide a basis for determining the existence of a breach and for giving an appropriate remedy.
The fact that one or more terms of a proposed bargain are left open or uncertain may show that a manifestation of intention is not intended to be understood as an offer or as an acceptance.

Lefkowitz v. Great Minneapolis Surplus Store

Offer or Solicitation?

The offer was written
There is a price to this bargain
Whoever is reading can understand the deal

It is a jus

fication is reasonably available. (missing quantity usually so not offer)

Offer to general public
Public post of canceling offer
Equal to offer post

Acceptance

Acceptance by Performance: Unilateral Contracts

Distinction between unilateral and bilateral contracts

Bilateral contract

Mutual exchange of promises

Unilateral contract

One party makes a promise other performs (performance = acceptance)

Restatement 32 Invitation of promise or performance (p. 329)

In case of doubt an offer is interpreted as inviting the offeree to accept either by promising to perform what the offer requests or by rendering the performance, as the offeree chooses

Restatement 62 Effect of Performance by Offeree where offer Invites either Performance or Promise (p. 329)

Where an offer invites an offeree to choose between acceptance by promise and acceptance by performance, the tender or beginning of the invited performance or a tender of a beginning of it is an acceptance by performance.
Such an acceptance operates as a promise to render complete performance.

Restatement 45 Option contract created by part performance or tender (p. 330)

Where an offer invites an offeree to accept by rendering a performance and does not invite a promissory acceptance, an option contract is created when the offeree tenders or begins the invited performance or tenders a beginning of it.
The offeror’s duty of performance under any option contract so created is conditional on completion or tender of the invited performance in accordance with the terms of the offer.

Option Contracts

Restatement 87 Option Contract (p. 332)

An offer is binding as an option contract if it

Is a writing and signed by the offeror, recites a purported consideration for the making of the offer, and proposes an exchange on fair terms within a reasonable time; or
Is made irrevocable by statute

An offer which the offeror should reasonably expect to induce action or forbearance of a substantial character on the part of the offeree before acceptance and which does induce such action or forbearance is binding as an option contract to the extent necessary to avoid injustice.