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Contracts
SUNY Buffalo Law School
Wooten, James A.

Wooten, Contracts, Spring 2013
 
 
 
Objective Theory of Contracts
 
R2d 1 – contract defined
Promise or set of promises which the law gives a remedy
 
R2d 2 – promise
(1) a manifestation of the intention to act so made as to justify a promise in understanding that a commitment has been mane
 
R2d 3 – agreement defined, bargain defined
                – an agreement is a manifestation of mutual assent on part of parties
– a bargain is an agreement to exchange promises, exchange a promise for performance, or exchange performances
 
R2d 17 – requirements of a bargain
Requires manifestation of mutual assent to the exchange of consideration
 
R2d 22 – mode of assent: offer and acceptance
(1) manifestation of mutual assent usually is in the form of offer and acceptance
(2) manifestation of mutual assent can be found even though neither offer or acceptance can be identified and the moment of formation cannot be identified
 
R2d 24 – offer defined
The manifestation of willingness to enter into a bargain made to justify another in understanding that his assent to that bargain is invited and will conclude it
 
R2d 50 – acceptance of offer; performance or promise
(1) acceptance is a manifestation of assent to the terms of the K in a manner invited or required by the offer
(2) acceptance by performance requires at least partial performance
(3) acceptance by promise requires that offeree complete every act essential to making the promise
 
Lucy v Zehmer
Holding – there was a contract
Facts – contract was accepted (there was a signature), objectively Lucy was reasonable in believing there was an offer (discussion between the two parties, signed, multiple drafts)
 
Embry v Hargadine McKittrick Dry Goods
Rule – doesn’t matter what the subjective intent of parties was, what matters is what Embry could have believed and what Embry actually did believe
Facts – Embry said he was leaving if he didn’t get contract, D told him to get back to work
Holding – words by D were unambiguous in forming a contract
 
Offer
 
R2d 26 – preliminary negotiations
Willingness to enter into a bargain is not an offer if the person addressed knows or has reason to know that the addressor does not intend to conclude the bargain until he has made a further manifestation of assent
 
R2d 27 – existence of a contract where written memorial is contemplated
Manifestations that are sufficient to show that there is a K are fine to prove a K existed even if there was also intent to put the K in writing. However, the circumstances may show that the agreements were merely preliminary negotiations
 
R2d 29 – To whom and offer is addressed
(1) the manifested intention of the offeror determined who can accept
                – can be an individual, a group, or anyone who makes a specific promise or renders performance
 
Lonergan v Scolnick
Facts – D responded to inquiry about a piece of property for sale that P would have to act fact, D sold piece 4 days later before P had received the correspondence
Holding – For D, the letter above was not an offer, language made it clear that negotiations were preliminary, answered some questions and said P would have to act fast
 
Lefkowitz v Great Minneapolis Surplus Store
Facts – D put add in newspaper to sell one stole worth $140 for $1 “first come first serve”, P was denied even though he was first person
Holding – for P
Rule – usually advertisements are merely preliminary negotiations but here the offer was clear, definite, and explicit and therefore left nothing open for consideration, thus it was an offer
 
Courteen Seed Co. V Abraham
Facts – P inquired about ordering seed for which they had received sample by asking for a firm offer because the price of 24 cents was too expensive, D responded “I am asking 23 cents per pound” “have an offer of 22 ¾ cents per pound”
Holding – for D
Rule – information such as advertisements and trade letters usually don’t constitute an offer where language is general
 
Continental Labs v Scott Paper
Facts – Cont believed there was an oral agreement, Scott indicated that they had no intention of entering into an agreement until they signed it, Scott then backed out
Holding – for Scott, evidence shows that they had no intent to be bound by the oral agreement
Rule – Oral manifestations that are sufficient to show that there is a K are fine to prove a K existed even if there was also intent to put the K in writing. However, the circumstances may show that the agreements were merely preliminary negotiations
                – here the court looked at:
                1. whether this type of K usually in writing
                2. if agreement needs formal writing for its full expression
                3. # of details
                4. large or small agreement
                5. common or unusual agreement for the parties
                6. any unresolved details
                7. negotiations show written contract was contemplated
Note: what really matters is the objective theory of contracts, not this list
 
Metro-Goldwyn-Mayer v Scheider
Facts – parties entered into agreement where D would shoot pilot and if it was picked up MGM

has stated that silence by offeree will act as acceptance and the silence of the offeree is intended to accept the offer
(c) where because of pervious dealings, it is reasonable that offeree should notify offeror if he doesn’t intend to accept
 
Ever-Tite Roofing v Green
Facts – contract said it would become binding with written acceptance or start of performance, D never notified that he didn’t want service, P showed up to work and D told them he didn’t want their services
Holding – for P
Rule – work commenced when P loaded trucks in preparation to work at D house
 
Beard Implement v Krusa
Facts – farmer went to negotiate to buy a combine, filled out a purchase agreement and farmer signed but a representative for the company didn’t sign
Rule – if the purchase agreement was unambiguous in requiring a signature by both parties, then both parties must sign if for ct to uphold the K
Holding – for farmer
 
Davis v Jacoby
Facts – man sent P letter saying that if they came to take care him and his sick wife they would inherit everything, P accepted by airmail, man who made offer then committed suicide before P got there so P had not yet begun performance, will was never changed so everything in it went to a deranged nephew
Issue – whether the K was unilateral (could only be accepted by performance)  or bilateral (could be accepted by promise to perform)
Rule – ct looks to restatement and rule that, when in doubt, contracts will be presumed to be bilateral
Holding – for P, he should inherit everything not the deranged nephew
 
Termination of Offer
 
R2d 25 – option contracts cannot be revoked
 
R2d 36 – methods of termination of the power of acceptance
                (a) rejection or counter-offer
                (b) lapse of time
                (c) revocation by offeror
                (d) death of either party
(2) also can terminate upon condition of the offer
 
R2d 41 – lapse of time
(1) an offeree’s power of acceptance is terminated at the specified time, or if there is no specified time then after a reasonable amount of time