Zierdt Contracts Fall 2011
I. TRADITIONAL CONTRACT THEORY
A promise, + a promise, an action, and forbearance.
A. Promise:
Two basic/important terms:
o (1) Promisor- person who broke the promise.
o (2) Promisee- person trying to enforce the promise.
The enforceability of a promise; consider whether:
o (1) The promise is made in writing and signed.
o (2) Assent- intent to contract, both parties were in agreement.
o (3) Policing- the contract was legal; person had the capacity to understand.
o (4) Consideration- something of legal value (but not necessarily economic value) must be given by each party in exchange for what was promised or given by the other.
o (5) Exchange- is there an exchange, an agreement to exchange something, or is it a gratuitous promise?
o (6) Reliance- is the other party relying on the promise?
B. Traditional Contract Theory:
The kinds of promises that will go into the “bubble,” thus being legally enforceable.
We MUST have:
o (1) ASSENT
§ Offer
§ Acceptance
§ Notification
o (2) CONSIDERATION
ASSENT
o Mutual assent is necessary in every single contract.
o Subjective theory of assent is known as the “meeting of the minds;” BUT, courts don’t really follow the subjective theory anymore.
Ø Both parties must be thinking in their minds (at the time of the contract) that there is an intent to contract.
o Objective theory of assent- whether or not the reasonable person looking at the parties would think that they intended to contract.
o Basic test for assent
v Whether or not the reasonable person would think that there was a present intent to contract.
Lucy v. Zehmer (1954)
Bilateral promise: Zehmers promised to sell; Lucy promised to pay $50,000.
Problem: because this is a bilateral promise, as soon as Lucy promised to pay, the Zehmers couldn’t get out of the deal. (the moment the return promise was made, the contract was bound).
If this were a unilateral promise, the Zehmers could have backed out.
Court is not dealing with whether there is an offer or an acceptance; they are dealing with the more abstract theory of assent.
Did one of the parties not assent to the promise?
Zehmer’s arguments:
1. That he was too drunk
2. That he was making the promise as a joke
a. But, Lucy did not know this was a joke. Therefore, we still have a valid contract between Zehmer and Lucy because there was a present intent to contract.
Test for assent:
1. Could a reasonable person believe that the Zehmer’s had an intent to contract?
a. Reasonable person standard.
i. They talked about the contract for 40 minutes
ii. Re-drafted the contract
iii. Both Zehmer and his wife signed the contract.
iv. Lucy requested that the wife sign.
v. Added the provision to the satisfaction of Zehmer (not illusory b/c the promise was made in good faith).
vi. Decided a price.
b. Lucy would think that Zehmer had a present intent to contract.
2. Was there any reason to know that Lucy thought Zehmer was joking/ did not have a present intent to contract?
a. No, he thought they actually intended to contract.
i. Next day he took out provisions to secure the land.
1. Borrowed money.
2. Hired a lawyer.
3. Makes sure title is satisfactory.
4. After Zehmer’s say they were joking, Lucy said they weren’t and that they had already sold the farm.
How can you have mutual assent to the sale of the farm (contract) when one of the parties says they were only joking?
Because the joke was unknown to Lucy; it seemed to him that there was present intent to contract.
Zehmer’s arguments against him giving assent:
1. Setting- contract was made in the bar; a social setting.
2. He stated right after he signed that he didn’t really want to sell the farm.
*If price changed from $50,000 to $5000, things would change b/c a reasonable person would not think there was a present intent to contract, sell they farm that cheap.
OFFER
o All offers will be promises, but not all promises will be offers.
o *What do you look for to determine whether something is considered an offer? Intent, content (essential terms of proposal), communication (b/w both parties)
§ Whether or not a reasonable person would think there was an intent to contract
§ Negotiations
. It changes outcome.
· If you put the first fact back. But if you counteroffer and offer only 8 instead, you counteroffer and then if could be acceptance or non.
§ Price quotes are not an offer, they’re more like an ad.
o Lefkowitz v. Great Minneapolis Surplus Store:
o An advertisement is not an offer (as a general rule)
§ Why? B/c advertisements are aimed at more than one person; the reasonable person would not think that every single person who read the ad could come in and buy the product. The number of offerees is too huge.
o Facts:
§ The date is Sat. at 9 a.m.
§ 1 Black Lapin Stole (worth $139.50, selling for $1.00)
§ First come, first served
§ Lefkowitz came in the week before, but was told that the offer was for women only.
§ The next Saturday, they again stated the “house rule” that only women could buy the stoles.
o Rule:
§ Advertisements = offers to negotiate (not offers); negotiations aren’t sufficient to be offers.
o Exception to the Rule:
§ Sometimes advertisements can be offers, if there is nothing left to negotiate.
o This exception occurs when:
1. There is a specific quantity
2. There is a specific price
3. There is a specific time
4. There is a limit to the # of offerees (first come, first served)
5. Description makes item specifically identifiable (black lapin stole)
o *What is the problem with this being a contract? (a valid argument against the court’s decision)
Ø Lefkowitz knew that the store meant this offer for women only; he knew that the offeree’s intent to contract was with a woman.
Ø A reasonable person would not think that the store intended to contract with him, when he was told the week before that the offer was for women only.
o The court in this case was concerned with the store using a “bait and switch” tactic.
