Introduction: – RST 1
What is a K?
· A promise or promises which the law will enforce or give a remedy
· Ks are typically exchange transactions in which two or more parties bargain for a deal
Restatements are a compilation of the common law – not a statute so not enforceable
· A good study aid, outline, and simplification of the law
UCC (Uniform Commercial Code) – Article 2
· involves Ks for the sale of goods (clothes, pens, shirts, material items, etc)
Has Your Client Made a Deal?
Hill v Gateway 2000, Inc. (1997)
· K in box – bound by arbitration clause even though they want to bring class action
· The judge states that they are not going to pick pieces out of the K which are binding. It is an adhesion K – take it or leave it. Not reading a K doesn’t make it invalid
· The judge will not pick pieces from the K because Ks need to be efficient and predictable deals.
Lucy v Zehmer (1954) decided by the Sup Ct of VA
· While drinking, Zehmer (seller) wrote on the back of a bar receipt that sold his farm to Lucy (buyer)
· In order for something to be a K, the party must have an objective opinion that the deal is reasonable AND he must believe subjectively that the other party is being serious.
· We always look at the case in the perspective of the person who is trying to enforce the K
Leonard v Pepsico, Inc
· During a Pepsi Stuff promotion, marketing team included a harrier jet as a ‘prize’ in the commercial,
· Ads are not offers. The language in the ad is merely an invitation to come into the store.
· There are some cases when an ad is an offer, ie “first come, first serve” – see Lefowitz case
The Offer – RST 24, 26
Lonergan v Scolnick Court of Appeal of CA 1954
· Scolnick (S) placed ad to sell property (40 acres), and Lonergan (L) responded with an inquiry. S sent a form letter to L stating that he would sell the property for $2500. L wrote back suggesting an escrow bank, to which S responded that that bank was fine “should L decide to purchase,” but he would sell within the week
· There was never a K because S never made an offer to sell, he merely gave an invitation and information
· There was never an offer from S because S had not settled on L as a buyer, so L had no reason to believe that the offer was in place; the only offer came from L when he deposited money into the escrow, and S had already sold the land
Fairmount Glass Works (seller) v. Grunden-Martin Woodenware (buyer)
· GMW inquires about the lowest price that FGW can give them on mason jars; FGW answers with the lowest price, contingent on immediate acceptance. GMW immediately replies via telegram. FGW responds that they are sold out and cannot fill the order for that price.
· Breach of K because this was not a quote and GMW immediately responded, binding the K.
Destruction of the Offer: RST 43
Rejection (no); Death; Lapse (reasonable time allowed); Revocation (takes back before acceptance)
Minnesota Linseed Oil Co (Seller) v Collier White Lead Co (Buyer) -LAPSE
· Seller made an offer. Buyer knew that the telegram had been sent on Saturday with the note “for immediate acceptance” and still waited another day to accept
· Court sides with Seller, stating that the lapse was unreasonable due to the sudden and great fluctuations in the oil market
· The reasonable nature of the lapse (time allowed) depends on the nature of the industry
· Mailbox rule – when acceptance by mail is put physically in the mail, that is when the acceptance is good
Dickinson (buyer) v Dodds (seller) (1876) Court of Appeal UK
· Dodds signed and delivered a memo which stated that he agreed to sell Dickinson his property for 800£, and that the deal would be open until Friday. On Thursday, Dickinson was informed that Dodds had agreed to sell the property to another (Allen). That night, Dickinson dropped off a formal acceptance to Dodds’ mother in law and again to Dodds on Friday morning.
· Dickinson lost the case because
o (1) he heard from another that Dodds had agreed to sell to another person, which is an indirect revocation and
o (2) while they had an agreement, it was not legally enforceable because there was no consideration An option agreement needs a separate consideration. A consideration takes away the option to revoke.
Making Offers Irrevocable RST 87; UCC 2-205 (very important statute)
(Carlton) Beall v (Cecelia) Beall (1980) Court of Special Appeals of Maryland
· Carlton bought farm from Pearl Beall in 1968. Cecelia and husband owned and lived on a parcel of land which was bordered by the farm on 3 sides. A 3 year option to purchase this land; $100 consideration. In 1971, 5 year option, $100 consideration. In 1975, a new option was made to extend until 1979 (no consideration was put down). In 1978, Carlton attempted to exercise his option and Cecelia refused.
· In an option K, K is only irrevocable if there is consideration, BUT an offer is good until some action is taken by the offerror or there is acceptance
· An offer with a fixed date is only irrevocable if consideration has been made (doesn’t have to be $)
· Firm offer – a merchant makes an offer – in writing, signed, which assurance it will be held open for specified or reasonable time, reasonable not to exceed 3 months; effective option K
Fulfilling the Requirements for Acceptance – RST 50, 32
Ever-Tite Roofing Corp v. Green (1955) Ct of Appeal of LA
· Ever signed document stating that the agreement to roof Green’s home would become binding only upon written acceptance, or upon commencement of work. Ever’s workers arrived a couple days later (a reasonable time) and found other workers at Green’s house doing the job.
· Work commenced when the workers began loading their trucks that morning and the delay taken from writing the document to beginning work was a reasonable and expected time.
· The offerror is KING and whatever terms they set for acceptance must be obliged to
· Credit check not performance? Because it could have led to rejection…it was prior to acceptance!
· Ks accepted by performance are much less certain than those accepted by notice.
· Damages issue: in K law, all you’re entitled to is what will make you “whole;” had roofing company performed the job, all they would have gotten were the profits of the job, $226.
Promissory Acceptance – RST 56, 63
(Caro and Frank) Davis v Jacoby (1934) Sup Ct of CA
· Davis was extremely close to (and niece of) Blanch and Rupert Whitehead and they considered Caro their daughter. After Caro moved out when she married Frank, the couples continued to be very close. In 1930, Blanche became very ill, and in 1931, Rupert began writing to Frank and Caro about their moving to CA from Canada in order to help care for them and manage their business. Sent note, “if you come, Caro will inherit everything.” Davis responded with their acceptance of the move and said they would be there after tying up their own business and life in Canada. Rupert responded that he had received their acceptance and was happy. Before they arrived, Rupert killed himself, and a month later, Blanche followed. For that month Caro took great care of Blanche. They then found out that the wills did not give them everything and instead left everything to Rupert’s nephews.
· Trial court said that while there was an offer, it wass accepted by a promise to perform, not an actual performance, as was necessary, and the offer was revoked with the death of Rupert.
· Appellate court stated that the offer was to enter into a bilateral K and was duly accepted by Davis 2 days later. Judgment reversed.
· MATT’S NOTES – Davis v Jacoby
o Unilateral K vs. bilateral Ks (outmoded terms; another example of the excessive formalism that once characterized the common law)
o Was this an offer to accept by promise or performance? You must be bargaining for one or the other, a promise or a performance.
o If for performance, then unilateral – promise only goes one way.
o If for promise, then bilateral – promises go both ways.
o Davis = putative beneficiaries; Jacoby = Whitehead’s executor
o Issue at hand: breach of promise to make a will
o Did the offer stipulate acceptance by performance (unilateral) or notification (bilateral)?
§ “if Frank could c
lause?
§ Did the addition of arbitration materially alter the K?
§ Was acceptance expressly made conditional on assent?
· Taking delivery is NOT expressed acceptance
· If C&A had refused to go forward without a signed form including arbitration, then there would be acceptance of that term
· Klocek v Gateway, Inc. (2000) US District Ct of Kansas
o Court overrules Gateway’s motion to dismiss
o Klocek brings suit against Gateway for making false promises, breach of K and breach of warranty
o Gateway asserts that Klocek must arbitrate based on the Standard Terms which were in the box which stated that terms were accepted 5 days after delivery
o ISSUE – Does the K of sales include the Standard Terms as part of the agreement?
o Court looks at the jurisdictional opinion of Kansas (where computer was bought) and Missouri (where Klocek lives), and while they haven’t dealt with this directly, other rulings imply that they would have upheld 2-207
o Court identifies Klocek as offerror and Gateway as offeree, so Standard Terms are a counter-offer made out of acceptance, but Gateway never explicitly stated the conditional terms to Klocek, so therefore they aren’t valid. There is no evidence that Klocek agreed to the terms (keeping computer 5 days is insufficient), so they never agreed to the arbitration clause
o K was formed at payment of computer
o 2 forms doesn’t necessarily need to be present under 2-207 to apply because it can be an oral negotiation/agreement followed by one side writing down the terms
· 2-207(2) – additional terms are to be proposals for addition to the K (this applies to non merchants)
· Between merchants, such terms would become part of the K UNLESS
o The offer expressly limits acceptance to the terms
o They materially alter it
o Notification of objection to them has already been given and is given within a reasonable time after notice is received
o (merchant – someone who deals regularly with the buying and selling of goods)
· Under common law, conditional acceptance = counter offer
o A conditional acceptance is a counter offer, but if the acceptance does not depend on the term, it is still an acceptance
· Seller: I’ll sell you my car for $3000
· Buyer: I accept. Will you take a check?
o His acceptance is a proposal, not a counteroffer
· Buyer: I accept only if you agree to take a check
o His acceptance is a counteroffer
· Buyer: I accept, but you fix the breaks?
o Counteroffer
· If there is an offer that is silent on a specific term, then a reasonable term is the standard (see Carbolic)
· In order to determine what’s in a K, we look at the offer and acceptance and see what is there
· Because of counteroffers, the buyer is often the offerror
Consideration As An Element of Contractual Obligation
Notes on Consideration
· In the old days, promises had to be made under seal to indicate they were serious promises with consequences – the cautionary and evidentiary function of consideration
· Although we must know about consideration, in modern times in commercial transactions, consideration is just not an issue
· Assumpsit – for the collection of debt
· Element of benefit and detriment when referring to consideration
· Think of consideration as a bargained for exchange
