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Contracts
University of California, Davis School of Law
Dodge, William S.

 
Contracts
Dodge
Fall 2015
 
Theoretical frameworks:
Objective theory of Contracts
Subjective intent—unless the party subjectively intent to the same things, there is no contract.
Objective intent– the party subjective intent doesn’t matter unless it is expressed. 
(Doesn’t matter what you are thinking, it only matters what you said.)
·         American rule is modified objective intent theory
But with 2 subjective exceptions: R2dSEC.20(2)a.  UCC SEC.201-2(a)(b)
—If one party actual knows the other party subjective intents, that subjective intent will control.
—Or the party’s subjective intents agreed, then their subjective intent controls.
Types of Contracts:
·         Unilateral    R2d. SEC.45
Definition: a unilateral contract involves one party making a promise in exchange for performance of an act by another party. In unilateral contract, the party making the promise is not to seeking a promise in return, but the performance of the requested action.
When the offeror is bound under unilateral contract:
1)where an offer invites an offeree to accept by rending a performance and doesn't invite a promissory acceptance, an option contract is created when : a) the offeree tenders or begins the invited performance or tenders a beginning of it; b) the offeree finished the invited performance
·         Bilateral
Source of law:
·         Second Restatement of contracts:
Secondary authority, persuasive, no force of law. 
Not Binding. But most courts follow the tradition of R2d
 
·         U.C.C. Art 2:
a State law, not Federal law. Do Not govern  real estate contracts or personal service contracts.
Apply to All Sales of Goods—including both parties are not merchants. (Goods—Movable)
Written under the background of Common law— when there is a Gap in UCC, the Common Law fill in the gap, if there is an individual law cover the gap, apply the Individual Law
 
·         CISG
A Treaty—a convention
Apply to All Sales of Goods—Do not apply to Consumer Transactions (UCC apply)
Has the Force of Law
CISG is binding when the parties of contract have business places in Different Countries, 
and both countries Agree and Join the CISG.
Cross nation convention—the treaty is Above the state law
Does not contain with the Validity of contract
Written under the background of domestic law—When there is a Gap, find domestic law like UCC or Restatement to fill the gap.
 
Contract formation:
Agreements to agree
Offer
·         Elements
An offer must be addressed to certain offeree
Contain reasonable certain terms
Manifest the willing to be bound
 
·         Lapse
Ad is not an offer—not addressed to certain offeree and it doesn’t contain certain terms, unless they addressed to certain like say first come first serve.
 
Counter offer R2d SEC.39
Counter offer is an offer made by offeree to offeror relating to the same matter as the original offer and proposing a substantial bargain different from what is proposed by the original offer.
And, offeree's power of acceptance is terminated by his making counter offer, unless the offeror has manifested a contrary intention or counter offer manifests a contrary intention of the offeree.
 
·         UCC offers
·         NYU: UCC uses two step test to determine whether there is an enforceable contract:  1.  have to find if parties intended a contract (look at what parties said and did, presumption is that parties do not intentionally make non-contracts, 2. find a reasonably certain basis for giving a remedy
 
·         R2d SEC.24  an offer is the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it.
–offer must be addressed to specific offeree contain reasonable certain terms, and manifest the willingness to be bound.
 
–how long offers stay open:
 1) offers are freely revocable by the offeror until they are accepted, even if the offeror promised to keep the offer open. There are exceptions, a few ways to create irrevocable offer, one is need get consideration and exchange for holding the offer open.
2) indirect way to revoke: taking an action inconsistent to hold the offer open will revoke the offer, but only if the offeree learns of that from a reliable source, the source doesn’t has to be offeror, but it has to be reliable. 3) if an offer doesn’t say the deadline, it remains open for a reasonable period of time.
 
Make an offer irrevocable(5 ways)
Generally, offers are freely revocable by the offeror anytime before the acceptance, even when the offeror promise to keep it open.
1) Exception of this general rule: an offer can become irrevocable if the offeror promise to hold the offer open and that promise is supported by consideration.
Traditional option contract: arises when offeror promises to keep the offer open and receive sth for exchange.—>promise to hold the offer open supported by consideration perform an option contract, contract that hold offer open for a reasonable period of time.
Official Comment: there are 2 separate contracts, one is the contract to hold the offer open, other is the main contract. Even the small amount of consideration may be given support to hold the offer open.
2)R2d S87(1), does not require actual consideration, just require a recital that there is an consideration, but it has certain formal requirements: the offer must be in writing and must be signed.
3)R2d S87(2), an offer become irrevocable if the offeree substantially reliance on the offer.
Most court don't follow 87(1) and limited 87(2)
4)UCC2-205 Firm offer rule: only apply to transfer of goods. Only to merchants. Required offer by a merchant in a signed writing, and it give an assurance that it will hold open. If it does, then it will be irrevocable for that period of whatever time that is stated, but it cant be longer than 3months.
( Merchants: people in business.)
( Signed writing:
Signed–see 1-207(37), includes using any symbol executed or adopted with present intention to adopt or accept a writing.
Writing–see 1-201(43) including printing, typewriting, any other intentional reduction to tangible form. )
5)CISG Art.16, an offer can not be revoked if it indicates, whether by stating a fixed time for acceptance or otherwise, that it is irrevocable. —> if an offer indicates that it’s not revocable, then it’s not revocable
 
Acceptance
·         Elements
In general, in contract law, everything is effective upon receipt, only acceptance is effective upon dispatch. 
Under the CISG by contracts, an acceptance is effective upon receipt, everything under CIS

can be contract existing. Not doing sth can be consideration, cuz it's forbearance.
 
·         Pre-existing  rule
If one does not have the right to do sth, the contract is about to remove that right, there is no contract cuz you are not possible to do that originally.
 
·         Past consideration is not consideration.
Past consideration can't be the bargain for exchange, it's impossible to bargain for sth that has already happened, can't decide if consideration was sufficient of excessive.
 
·         Moral consideration
court reject moral consideration, also reject the appreciation of pleasure be consideration
 
·         Open term contract
 
In common law, generally  doesn’t allow open price contracts because prices consistent material
In UCC SEC.2-205, leave the price term blank is allowed, court can fix a reasonable price for many goods, there is market price  it's easier to identify “reasonable” price can leave price term blank, but can't leave quantity term block.
UCC also combine: one of the party may be given the authority to set the price, in this case, that party must fix the price in good faith.
In CISG Art.14,55, allow open price term contract, if they left the price term unfix, the court will come up with a reasonable price like market price.
 
If the agreement is indefinite and ambiguous, it is unenforceable.
1)material terms:
Under both CISG & common law, quantity term is essential, if not, the agreement is not enforceable.
2)price terms:
Under common law, price term is a material term;
Under CISG, contract can be enforceable if the price term is blank. CISG Art.14(1)
But, Under CISG, there is one exception: CISG Art.55
 
Parties can be bound before they execute a final written agreement, under R2d & UCC, the question is whether the party is intent to be bound before they execute the final document, those depend on facts. E.g. some facts may be relevant to it, how many terms have parties agree to, the more agreement to terms, the more likely they are intended to be bound.
Different facts may lead to different situations about whether promise should be enforce.
 
·         Battle of the forms
 
In mix contract(both contain goods and services), have to see which fact dominate, the good or the service, to decide which law would apply.
 
Applying the common law mirror image rule to the battle of forms would result in “last shot rule”, favor seller in most cases.
 
UCC SEC.2-207
Under mirror image rule, an additional term add to the terms would create the counter offer, but UCC 2-207 is designed to change the mirror image rule.
[See print law rule page]