Contracts Outline

CONTRACTS
MEANING OF TERMS
 
Promise- “manifestation of intention to act or refraining from acting in a specified way, so made as to justify a promise in understanding that a commitment has been made
A promise may be stated in words either oral or written, and may be inferred wholly or partly from conduct
Promisor- person manifesting the intention
Promisee- the person to whom the manifestation is addressed
Beneficiary- Where performance will benefit a person other that the promisee
Agreement- a manifestation of mutual assent on the part of two or more persons
Bargain- an agreement to exchange promises/exchange promise for performance/exchange performance for performance
Voidable Contracts- where one or more parties have the power, by a manifestation of election to do so, to avoid the legal relations created by the contract, or by the ratification of the contract to extinguish the power of avoidance
Option Contract- is a promise which meets the requirements for the formation of a contract and limits the promisor’s power to revoke an offer
“Option”: A promise which constitutes an option contract may be contained in the offer itself, or it may be made separately in a collateral offer to keep the main offer openàthese type of promises are called “options”àalso often used for any continuing offer, even though revocable, and is referred to any power to make a choice
 
OFFER AND ACCEPTANCE
 
INTENT TO CONTRACT
 
Parties Required
There must be at least two parties to a contract, a promisor and a promisee, but there may be any greater number
Capacity to Contract
No one can be bound by contract who has not legal capacity to incur at least voidable contractual duties. Capacity to contract may be partial and its existence in respect of a particular transaction may depend upon the nature of the transaction or upon other circumstances
A natural person who manifests assent to a transaction has full legal capacity to incur contractual duties thereby unless he is;
a. under guardianship, or
b. an infant, or
c. mentally ill or defective, or
d. intoxicated
Intoxicated Persons
A person incurs only voidable contractual duties by entering into a transaction if the other party has reason to know that by reason of intoxication;
a.       he is unable to understand in a reasonable manner the nature and consequences of the transaction, or
b.      he is unable to act in a reasonable manner in relation to the transaction
 
1.      Objective Theory of Contacts: Reasonable person standard
2.      Subjective Intent: “True meeting of the minds” This involves the intentions of the two people of the contract (offeree and offeror)
 
Presumptions: Where the evidence is ambiguous about whether the parties intended to be bound, the court will follow these rules:
1.      businessà legally enforceable
2.      social or domesticàlegal relations were not intended
Intent to Put in Writing Later: Parties intention controls enforceability and when no intent is manifested, contract exists as soon as mutual assent is reached
 
Ÿ        The actual words used as interpreted by a reasonable man, rather than the subjective intent of the parties determined whether a contract has been formed
Ÿ        When a parties conduct and words would warrant a reasonable person in believing that he intended a real agreement, the party cannot avoid the contract by claiming he was acting only in jest.
***Outward expression of a person as manifesting his intention rather than his secret or unexpressed intention***
Ÿ        The promise of confidentiality given by a newspaper reporter to the source does not create an enforceable contract
 
MANIFESTATION OF MUTUAL ASSENT
 
Requirement of a Bargain
Except as stated in Subsection (2), the formation of a contract requires a bargain in which there is a manifestation of mutual assent to the exchange and consideration
Whether or not there is a bargain a contract may be formed under special rules applicable to formal contracts under the rules stated in § 82-94
 
Manifestation of Mutual Assent- requires that each party either make a promise or begin to render a performance
 
Conduct as Manifestation of Assent
The manifestation of assent may be made wholly or partly by written or spoken words or by other acts or by failure to act
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
The conduct of a party may manifest assent even though he does not in fact assent. In such cases a resulting contract may be voidable because of fraud, duress, mistake, or other invalidating cause
 
Effect of Misunderstanding
There is no manifestation of mutual assent to an exchange if the parties attach materially different meanings to their manifestations and
Neither party knows or has reason to know of the meaning attached by the other; or
Each party knows or each party has reason to know the meaning attached by the other
The manifestations of the parties are operative in accordance with the meaning attached to them by one of the parties if;
That party does not know of any different meaning attached by the other, and the other knows the meaning attached by the 1st party; or
That party has no reason to know of any different meaning attached by the other, and th