Woodward Contracts Fall 2010
1) Offer and Acceptance
a) Offer – an offer is a communication that objectively manifests its maker’s willingness to enter a bargain and is made in a way that justifies another person believing that his or her assent to the bargain is invited and will conclude it
i) Offeror master of the offer – the offeror has almost complete control over the offer, and can revoke it etc.
ii) Unequivocal language – if it does not express willingness to be bound, it is not an offer
iii) Reasonable understanding – the offer is to be interpreted based on the context
iv) Definite terms – all essential terms of the deal must be present; this does not mean that they need to be specified eg for a sale of goods, the price could be set at market
v) Advertisements are not offers unless they specifically make an offer, ie “first five people to the store are guaranteed to be able to buy this item at this price”
vi) Jokes are not offers unless the accepter reasonably believed that it was not a joke
b) Acceptance – results in a contract; power of acceptance is created by the offer
i) A counteroffer is not an acceptance
ii) A grumbling acceptance is an acceptance
iii) A conditional acceptance is not an acceptance; it is the same as a counteroffer
iv) Time for acceptance – power of acceptance only exists while the offer is open;
v) Who can accept – only the person to whom the offer is directed can accept
(1) Offers to multiple persons/rewards – matter of interpretation; usually the offer is made to multiple people but can only be accepted by one person
(2) Crossed offers – a person can only accept an offer that he is subjectively aware of
(3) Intent to accept – a person must have the intent to accept the offer; in the case of a reward, he must know about the offer of a reward to receive it unless it is a government reward
vi) Manner of acceptance
(1) Limited by terms of the offer – the offeror can control how the offer can be accepted
(2) Reasonable manner of acceptance – if the offeror does not limit the offeree’s manner of acceptance, any reasonable manner is acceptable
(3) Acceptance through silence/not returning the item – in some instances, paying for something and not returning it or using it can function as acceptance; used in instances of tickets, software licenses, and additional terms included with phone order items
(a) ProCD Inc. v. Zeidenberg – Guy bought a database of consumer information and planned on using it for commercial purposes (posting it online and collecting ad revenues). The cd that he bought contained a pop-up license that restricted it to non-commercial uses, but the license was presented to him after he purchased the cd. Held: The license is treated as an ordinary contract. Notice on theoutside, terms on the inside, and a right to return if the license is unacceptable is beneficial to buyers and sellers alike. UCC does not require that the contract can only be formed by paying for goods at the store. The price of the software would have been much higher if the license had not been restricted.
(b) Hill v. Gateway – Consumer ordered a computer over the phone. After more than 30 days, he complained about the components and performance. There was a contract inside the box which required arbitration of all disputes and which allowed the consumer the reject the computer by returning it within 30 days. Held: The contract is enforceable. The consumer knew that there would be important terms such as warranty shipped with the computer, even though he did not specifically know them, and he had a right to reject the contract/revoke acceptance. FAA preempts any specific challenge to the arbitration clause.
(4) Bilateral – acceptance by return promise
(5) Unilateral – acceptance by full performance only, “I will pay you $100 if you cross the Brooklyn Bridge”; common problem in hypos is that the offer can be revoked partway through performance
(a) Davis v. Jacoby – Old couple told young couple that they would give them money if they came and helped them. The young couple agreed. The old man who made the offer killed himself before the young couple arrived, so it was essential to determine whether the contract was bilateral or unilateral. Held: The offer was for a bilateral contract. The Restatement favors the formation of bilateral contracts except where it is clear that the contract should be unilateral. Also, the old man wanted the young couple to continue performing after his death, so the contract should be interpreted as bilateral.
(6) Acceptance by beginning performance –
(a) Brackenbury v. Hodkin – Mother told daughter and son-in-law in writing that if they cared for her they would inherit her house. The children moved there and kind of helped her, but they all began fighting within a few weeks. The mother conveyed the house to another son. Held: The contract was a unilateral contract and was accepted by the children beginning performance. The children had an equitable interest in the land since the mother created a trust in her letter. The children began performing their duty even though it may not have been acceptable to the mother. Even though there may have been adequate relief at law, since this was a case involving a trust the equity court has jurisdiction.
a) Definition – some right, interest, profit, or benefit accruing to one party to a contract, or some forbearance, detriment, loss or responsibility given, suffered, or undertaken by the other
b) Does not need to be an actual detriment to the promising party, but a legal detriment; see Hamer v. Sidway (promise to not smoke may not have been to his health, but he was giving up his legal right to smoke)
c) Consideration is necessary from both parties for the formation of a contract
i) Exceptions to consideration
(1) Promissory estoppel – see later section
(2) Options contract – only a recitation of consideration is generally necessary even though technically consideration must be given
(3) Subcontractors – subcontractors are bound to their bids that are relied upon by a general contractor; the general contractor is not bound to the subcontractor’s bid though, so it functions like an option with no consideration
(4) Charitable donations – pledges to give a charitable donation are sometimes considered to be valid in the absence of consideration
(5) Firm offer – UCC allows merchants to make “firm offers”; these are irrevocable up to a certain point, and must be made in
(1) Kirksey – Wife’s husband dies. She lives on public land and was comfortably settled. Her brother in law invited her and her children to move near him and he would support her. She moved there, but within two years he forced her to leave. Held: The wife’s reliance on the brother-in-law’s promise was not sufficient consideration, so a contract was never formed. The brother-in-law’s offer was made gratuitously.
(2) Ricketts v. Scothorn – Grandfather told his granddaughter that he would pay her an allowance so that she would not have to work. She quit her job in reliance on the grandfather’s promise. Held: Since the grandfather’s promise induced the granddaughter to quit her work, his promise should be enforced even though there was no consideration. Note: Reasoning based on analogy to equitable estoppel.
ii) Conveyance of land – improvements to the land based on a promise to convey; this avoids unjust enrichment
iii) Charitable donations – discussed above as exception to consideration doctrine
iv) Commercial settings – similar to the usage in Hoffman
v) Statute of frauds – extremely controversial, but promissory estoppel has sometimes been used to circumvent the statute of frauds in cases of detrimental reliance. See statute of frauds for more info.
b) Use as an independent cause of action
i) Restatement 1st Contracts § 90 “A promise which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise.”
ii) Restatement 2d § 90 – eliminates the definite and substantial language, but this is often still often read into it; also adds that the remedy for promissory estoppel may be limited as justice requires
iii) Hoffman v. Red Owl Stores – Regional manager promised a man that he would get him a franchise. The man relied on the manager’s promise by selling his bakery, grocery store, buying land, and renting a house near the proposed franchise. The manager asked for more capital multiple times. The man’s application for a franchise was eventually rejected after following the manager’s advice. Held: Promissory estoppel should be applied since injustice can only be avoided by enforcing the manager’s promise. Damages are reliance damages; lost profit is not a recoverable damage. Reliance damages affirmed. Note: The plaintiff had little power to demand a written contract since the defendant could have just moved on to the next potential employee and tried to do the same thing.