Contracts I Comprehensive Outline
II. Sources of Contract Law
Mutual Assent & Bargained for Exchange
Monge v. Beebe Rubber Co.
Howard v. Dorr Woolen Company
Monge
Cloutier v. The Great Atlantic & Pacific Tea Co.
Creates two-part test, drawing from Monge and Howard
P must show that D was motivated by bad faith, malice, or retaliation.
P must demonstrate that he was discharged because he performed an act that public policy would encourage or refused to do something which public policy would condemn.
Determined that the “balancing” test was best to be done by a jury.
construed very narrowly. Where there are other grounds to bring a claim, plaintiff must rely on those other grounds before turning to broad public-policy arguments.
At-will employment contract issue (note: would probably be handled by sexual harassment statutes if the claim were made today).
Were the foreman’s advances a “condition” of employment? Is there a causal relationship between her “being nice” and her getting better tasks and pay.
Realist Theory carries the day – “at-will” is limited by greater issues of public good. The rights of employers must be balanced against the infringement on workers’ rights – therefore, bad faith, malice, and retaliation are not undue burdens on the employer and serve to reasonably protect the employee.
D. Mutual Assent – Ray v. William G. Eurice & Bros., Inc.
How do we determine if there is mutual assent?
Classical Theory – “Meeting of the Minds”. A agreed to the same thing to which B agreed <Subjective Theory>.
Objective Theory – Is the agreement reasonable to the average 3rd Party? (Essentially a Tort theory).
Ray v. Eurice
Ray requests an estimate from Eurice
Eurice submits an estimate of $16,000
Ray has an architect draw up plans
Ray gives plans to Eurice
Eurice makes bid of 16,300 “according to specs”
Ray amends the bid with notes in green ink
Ray takes amended contract to his lawyer to draw up
Ray & Eurice signed the contract
Eurice helps Ray fill out FHA mortgage form
Eurice took copies of FHA application and specs
Eurice agrees to start building
Eurice runs into a problem at the site. He sees the specs, calls Ray and says he won’t work under those specs.
Was there and meeting of the minds?
Rules
absent fraud or duress, one who has the capacity to understand a written document who reads it and signs it, or without reading or having it read to him, signs it, is bound by his signature in law.
The only thing that matters is whether they manifested mutual assent by intending to do the act.
St. Landry Co. v. Avie
Restatement 2d § 19
Summary: Assent may be manifest in writing, in words, or by action or failure to act. Any combination that indicates intention to assent and allows the other party to reasonably infer assent is binding. Miscommunication may be voided because of fraud, duress, mistake, or other invalidating cause – but those are the exceptions!
Did the parties intend to engage in conduct that manifests assent?
Would a reasonable 3rd party viewing the transaction believe that the parties voluntarily manifested assent to the agreement?
Rule: Participating in the act of signing indicates that the signer knows and understands what’s being signed.
Did Landry have actual knowledge or have enough information to make the inference that Avie doesn’t understand the contract? Liability lies with the party that knows.
Offer & Acceptance
Offer Acceptance
Consideration sits outside the process of developing a contract. One can analyze consideration after all the other components are met. Then we can decide whether the contract made by the offer/negotiation/acceptance process is actually valid.
Lonergan v. Scolnick
Facts.
Issue.
Held.
D never made an offer
Neither the ad nor the letters by D contained a definite offer; they indicated that D would sell to the first buyer who made an offer meeting the stated price. (Check the nature of the communications between the parties. Which (if any) constitutes the offer? Would the party receiving it reasonably believe they could “close the deal” by accepting it? Circulars & advertisements are not offers. They are invitations to begin negotiations.
; he simply was trying to see if P was interested in making an offer. P was not given a right to act within a certain time.
Commentary.
A valid offer requires: (i) manifestations of present contractual intent; (ii) certainty and definiteness of terms; (iii) communication to the offeree.May a letter which refers to a potential sale to a third party be construed as a firm offer to the addressee? (Was there ever even an offer?)No. Judgment affirmed.
Restatement §§ 25, 26, 35, 38, 39, 57, 58, 59, 63
§25. Option Contract: An option contract is a promise which
meets the requirements of contract formation and limits the an offer.
promisor’s power to revoke
Lonergan (P) inquired about land which was advertised in a newspaper by Scolnick (D). D sent a form letter describing the property and stating the asking price. Then P wrote asking for a legal description and if a certain bank would be acceptable as an escrow agent. On April 8, D wrote that the bank was fine but that P would have to act fast since D would sell to the first buyer, and that he expected one to make a deal in the next week. P received this letter April 14. On April 12 D sold the property. Without this knowledge, on April 15 P sent a letter to D indicating that he would open escrow immediately. The trial court found there was no contract and P appeals.
Contract Formation
Consideration is the relationship between Offer and Acceptance
Mutual Assent is formed by
Negotiation
Offer (AKA first assent)
Acceptance
If the offeree doesn’t want to accept he can:
Counter-Offer
Allow the offer to Lapse
Reject the offer
Offeror can REVOKE.
Only Acceptance makes a contract
Definitions
Manifest Assent – Did you do something outwardly that signaled your assent?
First Assent – grants authority to the offeror to bind the offeree. The Offeror is the “Master of the Offer”
Offeree Options
Accept – legal relationship is changed
Counter-Offer – Sends it back to negotiation. If it is definite enough, the Counter-Offer becomes a new offer (with the power to bind the offeror).
Rejection – negotiations are over. More final than a counter-offer. Once offeree rejects, power to close the deal is ended.
Lapse – Wait too long to make a decision of acceptance.
Offeror can revoke before the offeree accepts. This is the equivalent of a lapse (it speeds the clock).
into a bargain is not an offer if the person receiving knows
or has reason to know that there was no intention to
conclude a bargain without further manifestation of assent.
§35. Offeree’s Power of Acceptance:
Offer gives offeree power to complete mutual assent by acceptance of the offer.
A contract can’t be created by acceptance after the power of acceptance has been terminated (by rejection, lapse, revocation, death or incapacity).
§38. Rejection: Offeree’s power of acceptance is terminated by
rejection of the offer. Manifestation of intent not to accept is
rejection.
§39. Counter-Offers:
Relates to the original offer, but differing from the original and substituting for it.
Offeree’s power of acceptance is terminated by the making of a counter-offer.
§57. Effect of Equivocal Acceptance: Does not bind offeror
unless off
neral rule (or, where the cases appeared to conflict, the better rule).
NONE OF THE ALI RESTATEMENTS HAVE THE FORCE OF LAW, AS DOES A STATUTE OR AN INDIVIDUAL COURT DECISION — they are secondary (though remarkably persuasive) authorities.
Legal Commentary
in these are also secondary sources of authority.
authors of these works have sought to clarify the law, to propose solutions for unresolved issues, and in some cases to argue strenuously and often effectively for legal change.
most weighty party to multivolume treatise is by professors Samuel Williston and Arthur Corbin.
Perspectives of Contract Theory
Formalist-contract law as a set of universal rules distilled from decided cases. Cases to be decided by the virtually mechanical application of rules to reach a doctrinally correct result. (Williston, Langdell, the original Restatement of Contracts).
Legal Realist-court decisions are the end result of a decision-making process in which both of the finding of facts and the application of rules are affected by the personalities, points of view, interests, and goals of the decision makers. All law making is in effect policymaking. Legal rules should be the result of conscious application of all relevant knowledge of human affairs, including the social sciences. (Llewellyn, Pound).
Economic Analysis-central issue is efficiency
empirical argument that legal rules tend in general to reach efficient outcomes
the normative claim that inefficient rules of law should be modified in the direction of greater efficiency
Positivist Claim – the common law rules are generally inefficient
The Chicago School — led by Oppenheimer has reached conclusions that are generally regarded as conservative. Courts should not be used to enforce agreements merely because they’re unfair or even unconscionable; enforcement should be withheld only when an agreement is the product of such defined bargaining misconduct as fraud or duress (noninterventionst)
Criticisms – Law is essentially conservative. It maintains the status quo
General
Terminology
Contract
Agreement-in-Fact: What the parties verbally agreed to do.
Agreement-as-Written: What the parties agreed to, as expressed by what made it onto paper.
The piece of paper on which terms are written
The legal effect of the agreement – if it’s binding, the parties have changed their legal relationship to one another.
A Contract allows a party to go to the state for a legal remedy.
Contract
Exchange
Immediate Exchange – Like at the grocery store. When you walk to the checkout line, you don’t own the ground beef. After you pay for it and take the ground beef, the exchange is complete.
Future Exchange – The Agreement is made today for performance to occur sometime in the future. Each side has an expectancy. They expect that the other side will fulfill their obligations. A contract protects expectancy via enforcement by the state.
is about exchange. Contracts allow property to be put to a more valuable use.
