Contracts II Outline

Irrevocable Offers – offers that cannot be revoked by the offeror and therefore terminated (3 ways)
–          1) Option Contract – a new contract to keep an existing offer open (3 ways)
o   a) Option Contract w/ Actual Consideration (majority) – create an option contract the same way you create a normal contract (offer + acceptance + consideration)
§ consideration must be a bargain for exchange separate from actual contract itself
§ can be oral
o   b) Option Contract w/o Actual Consideration (Restatement, Second § 87(1)) – to have an option contract you must have
§ i) a writing (cannot be oral)
§ ii) signature by the offeror
§ iii) purported consideration – alleged consideration (a statement is sufficient)
§ iv) a proposed exchange on fair terms within a reasonable time
o   c) State Statute – a statute may create an option contract which is irrevocable
–          2) Firm Offer (UCC 2-205)
o   a) must have a signed written offer
o   b) offeror must be a merchant (either kind is okay)
o   c) do not need new consideration
o   d) reasonable time
§ if no time is stated in the writing then cannot be longer than 3 months
§ if the writing says longer then 3 months then courts differ on whether it will be upheld
o   e) if the offeror of the firm offer is the buyer then the offeror of the original offer must acknowledge that offer is being kept open
–          3) Reliance (2 types)
o   a) Option Contract Created by Promissory Estoppel (Restatement, Second § 87(2)) – because of the substantial reliance there is an opportunity to accept an offer and create an enforceable contract (3 elements)
§ i) offeror must seek to induce substantial reliance by the offeree before acceptance,
§ ii) offeree substantially relies, and
§ iii) keeping the option contract open will avoid injustice
o   b) Option Contract Created by Part Performance (Restatement, Second § 45) – option contract created when the offeree begins the requested performance (offeror has lost power to revoke the offer)
 
Unjust Enrichment – if a benefit has been inferred on you, you should not just be able to walk away with the benefit without paying for it (equitable claim) Contract implied in law
–          2 elements
o   1) one party must have been enriched, and
o   2) it would be unjust for that party to keep the benefit without compensating the party giving the benefit
–          remedy = restitution (2 ways) 
o   1) return of benefit, or
o   2) money judgment (usually calculated on the fair market value)
§ quantum meruit – fair market value for services
§ quantum valebant – fair market value for goods
–          no unjust enrichment when
o   1)act gratuitously
§ volunteer – a person who confers a benefit gratuitously, doesn’t expect to get paid.
o   2) impossible return a benefit
§ officious intermeddler – person who fully intends to seek payment when she confers the benefit, without any reason that it is expected or wants to pay for it.
 
Material Benefit Doctrine (equitable claim)
–          Restatement, Second § 86(1) – there is a binding promise if made by the promisor after she has received a benefit from the promisee if it prevents injustice
o   (ex. there is a binding promise if after A gets his lawn mowed by B he tells B that he will give him $50)
o   exceptions (Restatement, Second § 86(2)) – the promise is not binding if
§ 1) the promisee made the benefit as a gift or the promisor has not been unjustly enriched, or
§ 2) its value is disproportionate to the benefit
 
Policing Doctrines – there is a contract but is unenforceable because of some defect in formation (no meeting of the minds)
–          ask yourself – even though there is a contract is there some problem with its formation which makes it not enforceable?
–          REMEDIES
o   1) rescind the contract
§ a) voidable – injured party gets to decide whether to rescind or ratify contract (some policing doctrines are voidable)
§ b) void – never was a legally binding contract (some policing doctrines are void)
o   2) damages
–          all policing doctrines
o   1) misrepresentation
o   2) duress
o   3) undue influence
o   4) unconscionability
o   5) illegality
o   6) public policy
o   7) incapacity
o   8) misunderstanding
o   9) mistake
o   10) statute of frauds (covered in 1st semester)
 
Misrepresentation – an assertion not in accord with the facts (what I said in the contract does not equal the facts) no UCC, common law applies. – make sure was not just an opinion.
–          Restatement, Second § 164 – a contract is voidable based on misrepresentation when
o   1) there is an assertion not in accord with the facts,
o   2) there is either a fraudulent or material misrepresentation, and
o   3) there is justified reliance by the injured party
–          what can give rise to misrepresentation
o   1) affirmative statement (fraud or material misrepresentation)
o   2) concealment
o   3) nondisclosure (silence)
–          METHODOLOGY – whatyou need to do in order to determine if there is a misrepresentation
o   1) identify the statement
o   2) determine whether the language does not equal reality (4 steps)
§ a) is the fact fraudulent based on actual misstatement, concealment, or non-disclosure?
·         yes – continue to reliance (skip material)
·         no – continue
§ b) is the fact material?
·         yes – continue to reliance
·         no – no misrepresentation
§ c) did the recipient rely?
·         yes – continue
·         no – no misrepr