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Contracts II
University of Alabama School of Law
Lee, Grace

Lee
Contracts
Spring 2011
 
 
THE BARGAIN RELATIONSHIP
I.                  ASSENT
a.       Nature and Acceptance of Counteroffer—Mirror Image Rule v. UCC § 2-207
                                                               i.      Written Requirement—all require at a minimum that the agreement be in writing assented to by both parties (not necessarily signed) Ch. 1 of FAA § 2—A written provision in any…contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or controversy, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.
                                                              ii.      Hill v. Gateway:  (packing terms not in original offer—arbitration clause still effective)
1.       CONTROLLING LAW REGARDING ARBITRATION CLAUSES
2.       Π orders and ∆ sends computer, packaging terms included contract w/ language: accepted if not rejected w/in 30 days and an arbitration clause)
3.       issue: were terms in the packaging a valid contract b/w the parties formed after general “send me the product”
4.       Court: keeping it 30 days, Πs accepted offer, including the arbitration clause
a.       language clearly stated that using and not returning made the contract
b.       contract need not be read to be effective
                                                                                                                                       i.      in AL: if you signed it, you’re assumed to have read and understood it
5.       How to discover terms of agreement
a.       ask vendor to send a copy b/f deciding to buy a good
b.       consult public sources that may contain the info
c.        may inspect the documents after the product’s delivery (Hill’s method)
                                                            iii.      Kloeck v. Gateway
1.       Π orders and ∆ ships computer w/ Standard Terms incl. 5 day review-and-return period as condition of sale
2.       issue: whether the contract of sale includes Standard Terms as part of the agreement
3.       Ruling: Standard Terms not part of the agreement (∆s motion to dismiss overruled)
4.       Reasoning:
a.       customer is offeror and is t/f master of the offer—∆ accepts Πs offer to purchase
b.       standard terms not a counteroffer b/c ∆ did not expressly make its acceptance conditional on Πs assent to the additional terms
c.        Π is not a merchant—additional terms did not b/c part of the agreement b/c Π did not expressly agree to them
                                                                                                                                       i.      keeping computer is not express agreement to express terms
b.       Assent in Electronic Commerce
                                                               i.      Specht v. Netscape Communications Corporation (scroll down license terms—arbitration not binding)
1.       Π downloaded free software, license terms included arbitration clause—required Π to scroll down page to a screen located below the download button
2.       issue: Did Π assent to be bound by the license terms (including arbitration clause) by downloading the free software?
3.       Ruling: no acceptance of the license terms
4.       Reasoning:
a.       Πs mere act of downloading software did not unambiguously manifest assent to the arbitration provision contained in the license terms
b.       reasonably prudent user would not have known or learned of the existence before responding to ∆s invitation to download the free software
c.        reference to license terms is not sufficient to place consumers on inquiry or constructive notice of the terms
5.       Policy—courts don’t like arbitration being snuck in
6.       Fixable—reorder information, balancing test for companies (litigation risk worth profit made)
                                                              ii.      UCC § 2-205—firm offers in signed writing by merchant must remain open for time listed up to 3 mos. (don’t need consideration)
1.       if 2 potential buyers know that both have been offered, neither has power of acceptance so an acceptance letter is not valid (need some other sign of commitment of affirmation on part of offeror)
                                                            iii.      Rest. (2nd) § 36:  SEE CASE LIST
1.        offerees power of acceptance may be terminated by
a.       rejection or counter-offer by offeree
b.       lapse of time
c.        revocation by the offeror
d.       death or incapacity of the offeror or the offeree
2.       terminated by the non-occurrence of any condition of acceptance in the offer
                                                            iv.      Rest. (2nd) § 43: Where there has been an offer for the sale of land, and the offeror contracts to sell the land to another, and the offeree acquires reasonable information of that fact, before he has accepted, the offer is revoked
                                                             v.      Rest. (2nd) § 41: an offer lapses of its own terms after the expiration of the time stipulated; where there is no such stipulation, after a reasonable period of time
                                                            vi.      Rest. (2nd) § 42: offeree’s power of

3.       cites Raffles—no contract when each party:
a.       attaches a materially different meaning to the manifestation of mutual assent
b.       neither knows or has reason to know the meaning attached by the other
4.       see note 1 for more info
                                                             v.      Rest. (2nd) § 206: if interpretation is inconclusive, court may prefer the understanding which operates against the party who wrote the contract (LAST RESORT)
                                                            vi.      Rest. (2nd) § 20:  no manifestation of mutual assent to an exchange if the parties attach materially different meanings to their manifestations and (a) neither knows or has reason to know the meaning attached by the others…
1.       Comment C: even though the parties manifest mutual assent to the same words, may be no contract b/c of a material difference of understanding as to the terms of the exchange
                                                          vii.      where a phrase of contract is reasonably capable of different interpretations, there is no contract
c.        Indefinite Agreements
                                                               i.      Varney v. Ditmars (profit sharing denied—indefinite terms of agreement—Cardozo dissent)
1.       Π claims promise for share of profits at end of year = implied contract for employment through the end of year; ∆ argues—no meeting of the minds
2.       Court: no meeting of the minds
a.       agreement must be certain and explicit for contract to be valid
b.       full intention must be ascertained to a degree of certainty
c.        cannot have vagueness, indefiniteness, and uncertainty
3.       Cardozo’s DISSENTà eventually becomes law through UCC
a.       even if promise is vague and indefinite, if promise is made w/ contractual intent, it should be enforced
b.       such intent may be manifest through expressed words and reasonable implication
4.       No PE b/c he cannot show to what extend he was prejudiced.
5.       Rst. (2nd) § 32—terms of the offer must be sufficiently clear and complete so that the court can determine what the parties intended and can fix damages in cases of non-performance