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Contracts
Temple University School of Law
Smyth, Sophie E.

Contract Law
Smyth – Temple University – Fall 2009

INTRODUCTION TO CONTRACT LAW
1)    What is a Contract?
a)    Agreement between 2 people that is:
i)     Enforceable and lawful
2)    Sources of K law
a)    Case Law – common law
b)    Restatement of Contracts – not mandatory but very persuasive
c)    Uniform Commercial Code (UCC) – Statute
3)    Nature of A K
a)    Shaheen v. Knight – vasectomy but still had kid
i)     was a K; not contrary to public policy
ii)    lost because there were no damages
RST §1, 2, 3 & 4 pg 14-15 – Contract; Promise & Agreement Defined, How a promise may be made.

THE LIMITS OF CONTRACT:
1)    Public Policy
a)    K’s maybe invalidated if they are against public policy; freedom of K not absolute
i)     Baby “M” – surrogate mother signed K to sever rights to child
(1) Cannot give money for adoption of child, against PP
RST §178 – When term is unenforceable due to PP: pg 60
i)     If legislation makes it unenforceable
ii)    If interest in its enforcement is clearly outweighed by public interest
RST § 179 – Bases of PP: pg 60
i)     Derived from legislation; need to protect the public welfare
Casebook: pp. 22-45

FORMATION

The Objective Theory of Assent
1)    Mutual Assent – need MA to have a K
a)    Offer – must have offer before accpetance
b)    Acceptance 
c)    objective criteria, what would a reasonable person deduce from your actions
d)    NOT subjective, your thought and intentions do not matter
2)    Subjective intent does not matter, offer and acceptance is through objective manifestations only
a)    Embry v. Hargadine, McKittrick Dry Goods Co. – employee asks for new K of employment, told “its okay, go back and do your job”, took this as new K and acted accordingly
i)     Rule: objective intentions rule, he did not mean to hire but he did
ii)    Reasonable man would think he was hired
b)    Texaco v. Pennzoil – affirms jury instruction that upholds Embry
i)     The conduct of a party is not effective as a manifestation of his assent unless he intends to engage in the conduct and knows or has reason to know that the other party may infer from his conduct that he assents. Pg 296
3)    Objective outward expression matters, above your intent
a)    Lucy v. Zehmer – K drawn up on bar napkin for sale of land
i)     Went through motions of K, not drunk enough to claim incapacity it is a K
ii)    Ct cant look to inner secret expressions to determine intent
(1) Signed K
(2) Added wife
(3) Negotiated terms
(4) Reasonable price
RST § 17 – Requirement of a Bargain pg 304
i)     Requires manifestation of mutual assent, not meeting of the minds since that implies “thoughts” count
§ 18 – Manifestation of Mutual Assent
i)     Requires each party to either make a promise or begin to render a performance
§ 19 – Conduct as Manifestation of Assent
i)     Manifestation may be made by written or spoken words or by other acts or failures to act
ii)    Conduct is not manifestation unless he intends to engage in conduct and knows that the other party may infer assent from that conduct
iii)   Conduct may assent even if party does not assent. K may be voidable in this case for fraud, duress, mistake.
Casebook: pp. 289-304

What is an “Offer”?
1)    Offer Defined
a)    RST § 24 – offer is manifestation of willingness to enter a bargain pg 316
2)    When is preliminary negation an offer?
a)    Nebraska Seed Co. v. Harsh – seed sample sent with letter about goods, “accepted” “offer” and demanded delivery at that price
i)     Ct rules no offer: therefore no acceptance possible (Nebraska response probably an offer)
(1) Letter language was general
(a) Amount not defined
(b) Did not fix delivery
(2) Not intended as anything but a request for bids
(a) Advertisement
(b) Letter went to multiple companies
b)    Texaco v. Pennzoil – Parties trying to determine if letter of agreement betwn Getty and Pennzoil
i)     4 part test (none determinative) for whether parties intended to be bound by negotiations
(1) Did party expressly reserve right to be bound only when written agreement is signed?
(2) Was there any partial performance by one party that the other accepted?
(3) Have all essential terms been agreed on?
(4) Was the agreement so large or complex that only a written K would be expected?
c)    Empro Manufacturing Co. v. Ball-co Manufacturin

tance
i)     Offer gives power to complete MA by acceptance
ii)    K cannot be created by acceptance after power of acceptance has been terminated
§ 36 – Methods of Termination of the Power of Acceptance
i)     Offeree’s power of acceptance may be terminated by:
(1) Rejection or counter offer
(2) Lapse of time
(3) Revocation by offeror
(4) Death of either
ii)    Offer terminated by non-occurrence of any condition of acceptance
§ 37 – Termination of Power of Acceptance under option Contract
§ 42 – Revocation by communication from Offeror Received by Offeree
i)     Offeree’s power of acceptance terminated when receives from offeror a manifestation of intent not to enter proposed K
§ 43 – Indirect Communication of Revocation

UCC § 2-205 – Firm Offers
i)     Offer in writing to buy or sell that says it will be held open is not revocable, for lack of consideration for time stated or reasonable time (not to exceed 3 months)
Casebook pp. 305-335

What is an “Acceptance”?
1)    Acceptance with Varying Terms
a)    Acceptance is only made if terms are exact; cannot add additional terms to offer
i)     Ardente v. Horan – sent K for land, returned signed but asked for confirmation that furniture was included
(1) Acceptance must be “definite and unequivocal”, acceptance must be independent of conditions
RST § 61 – Acceptance which requests change of terms pg 338
i)     Acceptance changing terms is not invalidated unless acceptance is made to depend on assent being made to the changed terms

Mailbox Rule
1)    Mailbox Rule – Black letter Law, only applies to mail or mail equivalent
a)    Acceptance is effective upon deposit, when it is dropped in the mail it is effective
i)     Maybe overruled explicitly in the K