Brown Contracts Fall 2015
Contracts are promises the law will enforce*
Mutual Consent/Intent to Contract
1. Mutual Consent
a. Should be step 1 in all contract decisions: “Have the parties objectively manifested an intent to incur legal consequences if they do not fulfill their obligations under the agreement?
b. Agreement can be verbal, written, or by action.
c. Must be something that the law can enforce
i. In legal terms
ii. By people with capacity (not a minor or insane, etc.)
iii. Not under duress
iv. Not fraudulent
v. Not as a result of a severe misunderstanding
2. Intent to Contract
a. Must have mutual assent
b. Clear terms
c. Objective manifestation of intent (cannot be subjective)
d. Reasonable expectation of reliability/performance
e. Winston Factors –
i. whether a party expressly reserved the right to be bound only when a written agreement is signed
ii. Was there any partial performance that was accepted by the other party
iii. Had all essential terms been agreed upon
iv. Whether the complexity/magnitude of the transaction was such that a formal writing would normally be expected.
f. Parties without real intent to be bound are not bound by contract.
Lucy v. Zehmer
Contract was not valid – if the other party has no reason to believe that your offer is not genuine, or that you don’t intend to perform, than there is still a contract.
Texaco v. Pennzoil
Might have been a “memorandum of misunderstanding, but probably not a contract. Written agreements did not include all essential terms, and was not as detailed/long as one would expect for a company merger, although the court found that even though this was the case there was still intent. (Winston Factors included here on page 10). This case settled.
a. Unilateral Offer – must perform all conditions, only offeror can breach
i. Ex: dog lost – reward. Must find dog to claim; you can’t claim for promise of dog; or promise to look for dog. One can’t claim if you didn’t know about the reward.
ii. Once performance has started (start painting fence) offeror can’t revoke.
b. Bilateral Offer – “promise for a promise”
i. Both parties can breach
Hawkins v. McGee – The Hairy Hand Case
Any guarantees made must be clear, and not predictions. Because Dr. hounded the boy’s family to let him do surgery, guaranteeing to fix hand (guaranteeing the outcome, not just giving and opinion) he was liable. Guarantees must be clear.
Leonard v. PepsiCo
Ads are not offers unless clear and doesn’t leave anything to negotiate (terms are clear, and what constitutes acceptance is clear). In this case the ad was not the “offer”, sending in the order form was the offer and PepsiCo could accept for decline. By sending back the check they declined the offer.
Hoffman v. Horton – the auction case (what happened when the hammer falls at moment of another offer)
Forest – “Have the parties objectively manifested an intent to incur consequences if they do not fulfill their obligations under the agreement?”
a. “estimates,” ASAP, money, time (common examples)
b. Examples: 1. “won’t take less than X” 2. “if U ever sell X, I’ll give you Y” – “I’ll let you know” 3. “we should talk about X for Y” “Yes, let’s talk.”
i. “wont take less than X for Y – No offer
d. Prelim Promise/understanding
i. “If U ever sell X, I’ll give you Y” I’ll let you know” No Acceptance
e. Agreement to Agree (not binding)
i. “we should talk about X for Y” “yeah let’s talk” Not Binding
f. Agreement to negotiate in good faith
i. 1. Propose X for Y 2. Ok sounds good 3. Ok, but wont go forward without MOU 4. Sign MOU. Binding
g. “X for Y” Agreement
i. 1. Promises X for Y 2. I accept Binding
1. Shows mutual promise, offer, acceptance.
a. that cannot be fully performed within 1 year of making of contract.
b. That fact must be known to both parties.
c. Clock starts at formation
i. Ex: employ for five years – SoF
ii. Employ for rest of life – not SoF
3. Transfers of Land
a. Leases and mortgages
b. Usually not for leases of 1 year or less.
i. Ex: sell land for payment – SoF
ii. Ex: sell land for payment, then buyer makes improvements. If no writing, this is still enforceable through SoF w/out writing.
4. Executor-Administrator – Not Tested
a. Executor promises deseased persons debts to be paid – SoF and must be in writing.
5. Goods over $500
i. Specialty manufactured goods (not sellable to anyone else but this buer and with substantial beginning of production).
ii. Bob-injured party admits in court of agreement
iii. UCC A2 2-201 – if over $500 need a contract
iv. Payment has been made and accepted, or delivery is made and accepted.
6. Suretyship.- Not Tested
a. A “promisor” promises to pay a 3rd party debt
i. Unless: MAIN PURPOSE RULE: if it is mainly to benefit promisor, not 3rd party. This is enforceable without a writing.
Interpreting Writings in SOF:
a. Can be multiple documents, must be written in some form.
Ex: promise to sell land in 2 years.
a. A contract only needs to fall into one category to be in SoF even if it is exempt in one of the other categories.