Contracts I
Fall 2011
Prof. KJ Greene
TYPES OF CONTRACTS
I. Contract
a. Bilateral Contract – promise in exchange for a promise – when an offeror seeks a promise to do or refrain from doing some act by the offeree in exchange for a return promise by the offeror.
i. If unsure about what type of contract, assume its bilateral
ii. Revoking an Offer: An offer can be withdrawn at any time prior to acceptance
b. Unilateral contract = a promise in exchange for a performance – exists when an offeror seeks a performance by offeree in exchange for a promise by offeror. The offeror does not seek a return promise and offeree can just sit there and do/say nothing.
1. Ex: if you find my car, I’ll pay you $100
2. Ex: Prize contests: promoter is bound to perform if he make a reward/prize and the other person acts on it and is aware of the reward.
ii. Acceptance of a Unilateral Contract: By performance NOT return promise
iii. Revoking an offer:
1. Under classic common law – an offer can be revoked at any time before acceptance and full performance.
2. Restatement 45 – an offer cannot be revoked if the person starts performance (deemed as consideration) and you must allow the party sufficient time to complete.
a. Ex: I will pay you $100 if you cross the bridge; you cant revoke the offer once the person starts performing
b. Case: Cook v. Coldwell Page 58 – plaintiff was real estate agent and boss offered bonus then revoked offer; he was unable to revoke bc she has started performing and he had to hold the offer until it was complete
c. Option Contract (a type of unilateral contract) – an agreement to hold an offer open for a specific period of time with consideration; it is a contract when the other party accepts it; you cannot revoke an offer if there is consideration and if you do it is a breach (Restatement 25);
i. Consideration in this case can be nominal consideration (i.e. small payment). If no payment, no consideration, so no contract.
ii. Revoke of an Offer:
1. If there was no consideration (money paid) it is now a continuing offer where the offer can be revoked at any time OR once time lapses.
2. Once a party tenders or starts performance, there is an option contract, wherein an offer cannot be revoked prior to acceptance, or to performance starts and the party has to be given opportunity to complete.
3. Under classic common law – an offer can be revoked (if no consideration) at any time before acceptance and full performance.
4. Restatement 45 – an offer cannot be revoked if the person starts performance or made a nominal payment (consideration) and you must allow the party sufficient time to complete (wait until time lapses).
d. Under the UCC – sales of goods (means all things which are moveable UCC §2-105)
i. Contract Formation UCC §2-204: a contract can be formed in any manner sufficient to show agreement, where both parties recognize the existence of a contract (no magic moment)
ii. Firm Offer = Option Contract Under UCC §2-205 (if it is a transaction involving the sale of goods and there is no consideration– a firm offer is an options contract where there does not necessarily have to be consideration for it to be enforceable.
1. An Offer (Restatement 24)
2. By a Merchant
3. To buy/sell Goods (all moveable things)
4. In a signed writing which give assurance that it will be held open is not revocable (for lack of consideration)
5. It must remain open for no more than 3 months.
MUTUAL ASSENT
(Can be demonstrated through Offer & Acceptance)
I. Mutual assent: is an intent to be bound (Restatement §21) and sufficient definiteness of agreement of terms (Restatement 33);
a. How is definiteness of agreement of terms determined:
1. Objective Standard: by evaluating the external factors (indicia) such as words/communications, execution of documents, relationship of parties, custom in the industry, relationship of parties.
a. Ex: Steel ship
2. Subjective Test – What one party thinks is a contract – idiosyncratic, internal preferences or experiences.
a. Duty to read – party must read terms
3. Damages – the amount of money party would have received had the contract been done – expectation damages.
i. Case: Ray v. Eurice – building of home
II. Offer: a manifestation of the willingness to enter into a bargain, so made as to jus
acceptance (Restatement 24)
III. Acceptance – a manifestation of assent to the terms made by the offeree in a manner invited or required by the offeror. After the acceptance occurs the parties have an enforceable contact. LOOK AT RESTATEMENT 50
i. Manner of acceptance:
1. Terms specified by the offeror
2. Acceptance is effective when it is communicated not received.
a. Mailbox rule: acceptance is effective once it leave the hands of offeree – as in a public mailbox. Note: it applies to an acceptance but not when the party makes a counteroffer.
b. Restatement 63 – in an options contract, an offer is accepted when received
3. Under UCC §2-204 under a contract for the sale of goods a contract is made/accepted in any manner
a. Case: Harlow v. Advance – accepted to buy steel over the phone as is custom
ii. Mirror Image Rule: party’s acceptance must conform the offer; If it is a non-conforming acceptance, it is actually a counteroffer which is a new offer and a rejection of the original offer.
iii. Telephone Rule: if offer is not accepted before the end of the conversation, the offer expires.
iv. The Last Shop Rule – the last terms/condition of the last offer/counteroffer accepted rules the contract.
IV. Counteroffer – a nonconforming acceptance to the terms of the offer which is a rejection of the first offer and is a new offer; there is no intent to be bound bc they want different terms
i. Original offer is dead when a counteroffer is made
ii. Mirror Image Rule: party has not accepted the offer if it does not conform or mirror the terms of the original offer (common law test)
iii. Case – Normille v. Miller – buyer offered to buy house; seller made changes to her offer (counteroffer), buyer didn’t say no but didn’t say yes (no intent); seller sold house to someone else;
