CONTRACTS
HOLMES
SPRING 2013
I. OFFER AND ACCEPTANCE
When are you bound?
Rule: If a reasonable man would believe he was assenting (agreeing), he is bound even if he did not intent to be bound, undisclosed intentions of one party are immaterial
i. A person cannot say they were kidding or not serious when his conduct would warrant a reasonable person to believe that he intended a real agreement.
1. Restatement §20 (2)(a)- Intent-outward manifestations of intent bind, even when one party does not mean to contract. When one party knows that the other party does not know, then the parties are bound.
a. Lucy v. Zehmer- a contract is enforced if one party agrees but later claims he didn’t intend to agree. Guys at bar, Zehmer agrees to sell Lucy his farm and he signs in agreement, but later says it was a joke.
i. Being drunk is NOT a defense unless u are so drunk you don’t understand what u are doing and the other party knows it.
2. Restatement §201
a. If both parties attach the same meaning, it prevails
b. If both parties attach different meanings, the one who has no reason to know that the other does not agree is the one that prevails
i. Meeting of the minds is no longer necessary in Ks!
c. Embry v. Hargadine- Employee asked employer for another year’s contract to work and employer replied, “Go ahead, you’re all right, get your men out and don’t let that worry you,” constituted reasonable assent (agreement) regardless of his intentions.
Joke Contracts
i. If a contract was a joke and both parties knew it was, there is no contract, (Keller v. Holderman) §201(1)
Offer & Acceptance vs. Mutual Assent:
i. Example: If F says to B, why don’t u sell this pen to J and both say yes at the same time, it is mutual assent because the offer and acceptance happen at the same time. Parties manifest their mutual assent through offer and acceptance.
II. OFFER AND REVOCATION
1. What constitutes an offer?
a. RULES:
i. Contract is formed when a party accepts an offer.
ii. Was it an offer? Restatement §24:
1. Manifestation of a willingness to enter into a bargain
2. so made as to justify to another person that assent (agreement) is invited and will conclude it.
iii. Factors to consider by Farnsworth:
1. Language (will “I accept” seal the deal?)
2. Context (second to last statement)
3. Completeness (clear, definite, and explicit, detailed)
4. Number of persons to whom offer is made (to others also means no offer)
b. Examples: Yes an Offer
i. Clear, definite, and explicit, nothing left open for negotiation
1. Advertisement to sell coat for $1, first come, first serve (Lefkowitz v. Great Minneapolis Supply Store)
ii. Answer to a quote for mason jars exact amount & price specified.
iii. Hotel reservations; even when guest has not guaranteed reservations.
c. Examples: Not an offer/only invitations to deal (“preliminary negotiations” §26
i. No amount or quantity specified- less likely to be an offer. “I want $2.25 for this seed.”
ii. Form letters- are only invitation because sent to many people, further assent required. In response to an inquiry from an ad, the seller sent a letter describing the property and stating, “rock bottom price is $2500,” for an offer to sell a house. The letter identified itself as a “form letter.” (Lonergan v. Scolnick)
1. Form letter makes the response an offer and then the seller makes the acceptance.
iii. Sign for switchblade knife in window “offer for sale,” not an offer, only an invitation, so no prosecution for violation of a statute. (Fischer v. Bell)
iv. Advertisement letter “we are authorized to offer salt at 85 cents per barrel, we shall be pleased to receive your order;” Language is too general and offered to too many people.
v. Appointments for haircuts, car dealers, dinner reservations, etc..
2. Things that Terminate the Offerree’s Power of Acceptance:
a. Things which terminate an offerree’s power of acceptance §36
i. Rejection
ii. Counteroffer (Ardente- house furniture)
iii. Lapse of time (§41- Akers)
iv. Revocation by offeror
v. Death or incapacity of either party
b. Issues to see if acceptance was valid
i. Has the attempted acceptance been effective to close the deal?
ii. Was it made when the offeree still had the power of acceptance?
c. Lapse
i. §41- An offer must be accepted either:
1. In a fixed time if it is specified
2. Or in a “reasonable time.”
a. Possibly right away or at the lat
§87-2 is promissory estoppel in the options contract setting
ii. Works to bind offers and acceptances in contractor-subcontractor agreements. (Drennan v. Star Paving- paving bid for school, then Star Paving said the bid was too low) so long as they are not bid chiselers.
3. Cannot be terminated normally; Restatement §37
a. Power of acceptance is not terminated normally in options contracts by rejection, counteroffer, or death/incapacity.
b. The only thing that terminates is when both parties agree to terminate.
4. Mailbox Rule in Option contracts- acceptance not effective until receipt.
ii. Regular Revocation:
1. Revoke through Direct Communication §42 saying “I revoke.”
a. When a person receives it or someone designated to receive it, or if its deposited in a place to be specified it is considered received. §68
2. Revoke through Indirect Communication §43
a. If the offeror acts in a way that shows he is revoking and the offeree knows about it.
b. (Dickinson v. Dodds) Π knew the Δ had revoked his offer to sell property because he knew Δ had sold to another person.
i. This would be different if it were for the sale of goods instead of land.
III. TRANSACTING AT A DISTANCE
1. Mailbox Rule (applies for example where u send out an offer and something gets lost; what happens with the contract?)
a. Basics
i. Offer valid upon receipt
ii. Acceptance valid upon dispatch (ie- even before it is received).
b. §63, Acceptance effective on dispatch
i. Unless:
1. The parties specify otherwise (like performance as acceptance) §63
a. Ex- U can say acceptance is only good upon receipt, §60 –OR-
2. Option contractsà they are effective upon receipt by offeror, start counting the days from the receipt, §63(b)
3. PP Note: (Courts in other countries use the opposite of the mailbox rule so that acceptance is effective upon receipt.)
