Contracts II Outline

Contracts

IV. Avoidance of Contract

HAS AN ENFORCEABLE CONTRACT BEEN CREATED?

A. Insufficient Agreement
●Contract: 4 requirements: agreement, consideration, capacity, legality
●8 different situations where even though it looks like you have a contract, you don’t- problems preventing contracts from being formed. [defective formulation of agreement, indefinite or incomplete contract, incapacity, mistake, fraud, duress, unconscionability, illegality] –misunderstanding regarding what the parties are agreeing about

1. Detective Formulation of Agreement
– think you have a contract, but both talking about different things (misunderstanding)

►Raffles v. Wichelhaus-
*Ambiguous wording can render a contract unenforceable for vagueness
–P contracted to buy cotton from D, from what he thought was Peerless that came in Oct, but D though peerless in Dec.—no bad faith, just misunderstanding (& prices cotton fell)
–Ct. ruled no contract bc no meeting of the minds
–did not apply the usual objective standard of parties intent- probably bc name of ship was material term to case- only proxy they had to determine when cotton was coming…
–not mistake, just contract w/ ambiguous term

►Konic International Corporation v. Spokane Computer Services, Inc.
*Where parties both hold diff. understandings as to terms, no k- if reasonable
–Young bought surge protector from Konic- thought meant $56.20, but meant $5,620-context matters in this case- different if $56.20 for car- not reasonable
–lwr court ruled no contract bc Young didn’t have authority to buy item
–Peerless rule: Restatement (second) § 20: (1) There is no manifestation of mutual assent to an exchange if the parties attach materially different meanings to their manifestations and (a) neither knows are has reason to know the meaning attached by the other
– Doctrine applicable in 3 instances:
o Only when parties have different understandings of their agreement
o Does not apply when one party’s understanding, bc of that party’s fault, is less reasonable than the other party’s understanding
o Parol evidence is admissible to est. the facts necessary to apply rule
–“fifty six twenty” was material term to case, both party’s reasonable, so NO K.

2. Indefinite or Incomplete Agreements
– you spell out contract, but leave something fundamental out (agreement to agree)- not quite enough to know what contract is about
– How definite does it need to be?

Enforced————————————————————————————–à Not enforced
If you do a good job helping gray area: if you do a good job helping
Me build a home, then I’ll give if you do a good job me build a house, then I’ll
$10/hr plus 5% of sales price helping build house give you $10/hr plus
give $10/hr + fair share something
o