Professor Golden
Contracts I
Fall 2010
CONTRACTS
I. FORMATION: The bargaining Process
Contract is a promise or set of promises for the law will enforce. Or promise or set of promise for breach of which the law gives a remedy
Contract requires 2 parts:
§ 1) Mutual Assent: the parties expressed manifestation of intent to the set of terms
§ 2) Consideration
Mutual Assent: Offer and Acceptance
Objective standard: would a reasonable person in offeree shoes assume the power of acceptance was created for him-Doesn’t matter what party is thinking- is there a outward display of assent -Do they give the appearance of agreeing??
A. The Offer: One parties expression/manifestation of assent to enter a bargain so made as to justify another person in understanding that his or her assent is invited and will conclude it
i. Elements: A communication or expression that:
§ Identifies a bargain (a trade or exchange):
§ Expresses speakers assent to be bound to that bargain
§ Invite the assent of the addressee to that bargain so that the deal is closed
· REQUIRED: The speaker places the power to cause an contract to come into existence entirely into the hands of the addressee
· Certain Specific terms: who (the parties), what-subject matter, when it will take place, delivery of performance, quantity and price
ii. Examàmake sure to clarify that the speaker expresses his assent to be bound to THIS PRESENT bargain that is identified in the communication
iii. Communications that are NOT offers:
· Negotiations-statements of intent
· Invitations to submit a bid: The party inviting bids is the offeree, subs are offeror
· Advertisements: General rule that ads are not offer but invitation for the offer.
· Exceptions: First come first serve-limits who can accept the deal Must define: 1) who can accept the offer and 2) the quantity. EX: “First come first serve. Only 100”
· Price estimates: general estimates are not offers. Specific price quote is an offer
· Auctions with Reserve: With reserve: the auctioneer solicits offers in the form of bids. W/o reserve: the request for bids or his statement that an item will go to the highest bidder will be deemed an offer
B. THE ACCEPTANCE: Other parties manifestation of assent to the terms made by offeree in a manner invited or required by offeror
i. Expression/Manifestation by offeree:
§ Of assent to terms of “bargain” in offer
§ In a manner invited or required by the offeror
ACCEPTANCE ANALYSIS
Offeror is the master of the contract- has power to control what offeree must do in order to accept.
If manner of acceptance is expressed it is the ONLY way it can be made. If not expressly made can be interpreted to be required in one way
ii. Acceptance by Performance- Unilateral Contracts
§ An offer seeks acceptance in the form of the offeree complete performance
§ Notice of acceptance: no notice is required unless the offeror specifies so.
§ Moment of acceptance: offeree renders full performance; Offeree’s failure to perform does not constitute a breach since no contract
iii. Acceptance by Promise- Bilateral Contracts
§ An offer that seeks acceptance in the form of return promise from the offeree
§ Acceptance can also be when offeree takes some action which implies expression of assent to promise-à without expressly promising to do what is invited but begins performance of their side of the bargain (commencing the performance that is called for by the offer)
§ Notice of acceptance: Offeree MUST notify offeror of acceptance
§ Moment of acceptance: Offeree’s promise, now promises to be filled on both sides; failure to fulfill such promise results in breach
iv. Default Rule: when offeror does not express how acceptance is to be made and cant be resolved:
§ When in doubt treat the offer as a bilateral contract
§ Restatement: When in doubt let the offeree decide
v. Shipment of Goods as Acceptance:
UCC 2-206 (1)(b) Unless otherwise indicated
An offer (buyer) to buy goods for prompt or current shipment invites acceptance (seller) either by:
· Promise to ship
· Shipment of conforming goods
· Shipment of non-conforming goods (non-conforming goods are not acceptable if sent as an accommodation with seasonable notice)
vi. Common Law: Acceptance ONLY if mirror image of offer-If offeree attempts to accept in terms that vary in any way it is NOT acceptance- not additional rule-inherent in acceptance
C. Termination of the Power of Acceptance- acceptance must occur before power to accept has been terminated
§ Before the behavior that would have otherwise been an acceptance something happened that terminates the offerees power to accept
ii. Lapse of an Offer: Any offer unless accepted or otherwise terminated can lapse when it becomes stale. If no time specified by Offeror, it lapses after a reasonable time determined by circumstances:
§ Factors to looks at for reasonable time: subject matter, method offer is made
iii. Revocation- Acts or words of offeror that comes to attention of offeree to cause a reasonable person to believe that offeror NO longer assents to be bound to the offered transaction
§ Direct: Offeror expresses directly to offeree that he no longer has willingness to be bound EX: I revoke
§ Indirect: offeree acquires reliable information of action by offeror that is inconsistent with offeror continuing being assented to be bound. (i.e. sells to another buyer) AND 3rd party informs offeree (there MUST be some communication to the offeree otherwise not revocation and contract exists)
§ Limitations on Power to Revoke: (Promise NOT to revoke is not enough to make keep offer open) Offeror is precluded from revoking if that promise not to revoke is enforceable:
· Options Contracts: See below
· Firm Offers:
iv. Death/incapacation an Offeror- Power to accept offer terminates when the offeror dies
v. Rejection- Actions or words by offeree to cause a reasonable offeror to believe offeree intends not to accept.
§ Rejection by offeree terminates the power of acceptance, so that he can no longer accept after rejecting.
§ Either direct statement or Mirror Image Rule includes offeree making unqualified counteroffer
D. The Mailbox Rule: de
d as proposals to amend the contract with the additional terms
· Will only be here if found acceptance in sub 1
· NON-MERCHANTS: analysis done and additional terms are proposals to amend K and the terms of the contract are that in the offer
· Additional terms need assent from offerorà to become apart of K
· MERCHANTS: additional terms automatically become apart of K UNLESS:
§ The offeror expressly limits acceptance only to the terms of the offer;
§ The additional terms would materially alter the contract:
· Ex: material: terms that result in surprise or hardship if incorporated without express awareness by other party, more than trivial change
· Terms can be materially altered for parties other than merchants
§ Notification of objection to additional terms has already been given or is given within a reasonable time after notice of them is received
· If offeror rejects additional terms- then K based on terms of offer and
· Anyone of these 3 things will prevent terms for becoming part of K
· Different terms:if expression or acceptance contains different terms, not additional:
Knock out Rule: (Majority) the conflicting terms both are knocked out and UCC implies reasonably terms (gap fillers)
§ Subsection 3: if the writings exchanged do not create K, we can still find a contract based on the parties behavioràif so, the terms of the K are the terms on which there exchanged writings agree, plus any additional terms (gap fillers) supplied by UCC
§ Conduct by both parties that recognizes the existence of K is sufficient to establish K- even if writing does not
§ Need behavior by both parties- there needs to be at least one writing exchanged from each party. If only 1 writing and then performance=sub 3 doesn’t apply
§ ONLY get to sub 3 if don’t find assent in sub 1- status doesn’t matter here
