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Contracts
University of California, Davis School of Law
Horton, David Owen

CONTRACTS HORTON FALL 2016

I. CONTRACT FORMATION

A. MUTUAL ASSENT

i. Objective Theory of Contract

Manifestation of Mutual Assent

ALLEN V. BISSINGER

— P wants to recover money for sending D a report; D contests that what it asks for in its letter isn’t what P sent

Mutual agreement of two parties can be ascertained by outward expressions (ie words or actions)
If what’s offered is not what’s purported to be accepted then there’s no meeting of the minds

The way D refers to the report would have commercially understood to sufficiently describe what D gets (what was offered and what was accepted were close enough)

— contract was made and should be honored

FELDMAN v. GOOGLE INC

— P contests a clickwrap contract because of “click-fraud”

The agreement must be construed as if both parties wrote it
Price term is essential term of contract. If parties agreed upon a practical method of determining the price in the contract with reasonable certainty (ie. market standard) then the contract is enforceable

Proclamation of assent — acting in a way that somebody observing from outside would think that you agree (intention required)
If P cannot show proof of fraud, just bc P didn’t read the agreement doesn’t excuse P from noncompliance
By clicking “yes, I agree to the above terms and conditions,” P indicated agreement to the terms
Adwords Agreement describes with sufficient definiteness a price determining process

— Adwords Agreement and its terms were enforceable

LUCY v. ZEHMER

— P and D “negotiate” a simple contract to buy land at a bar and wrote it on a napkin
— If the words or other acts of one of the parties have a clear, reasonable meaning, his undisclosed intention is immaterial UNLESS such unreasonable meaning is known to the other party.

The fact that they took time to negotiate is inconsistent with the claim that it was a joke
And there were all other legal issues ironed out on the contract

— there was manifestation of mutual assent so contract is enforced

RAY v. WILLIAM G. EURICE

— P enter a contract with D to build a house. P wrote on contract, and both sign each page of the 5 page contract. Just before construction, D refused to build the house based on the specification and the price
— Unilateral mistake, unlike mutual mistake, does not prevent the meeting of the minds required for contract formation.

The Eurices signed the contract
Contract specifies that any deviation from the specification must be made with the Rays’ assent
It would make no sense to have the three page specifications as the contract because it’s only extension of the actual contract

— the D was able to read the contract and assented to it; if there was a mistake or a lack of mutual assent, it was because the D alone misunderstood the terms of the contract, therefore, contract is still enforceable

b. Unilateral vs. Bilateral Contracts

— Both parties are promising to do something in the future;

ie. Lucy: one party is promising to pay $50K and the other one is promising to give over a farm

— Only has a promise on one side; the only thing that the other party can do to accept is to render a performance

“True unilateral contract” — where common sense tells us that the only way to accept is to complete the performance; the offeror wouldn’t be happy with just a simple “I accept”

ii. Offer and Acceptance in Bilateral Contracts — Common Law

Restatement § 24. Definition of an OFFER — offer gives the offeree “power of acceptance” (ability to create a contract just by saying “yes”) and thus must:

spell out the key terms in sufficient detail
indicate that the offeror is willing to be bound by those terms

Restatement § 25 — if the offeree knows or should know that the offeror doesn’t intend to keep the promise until further assent, no contract has been made

LONERGAN v. SCOLNICK

— D posted ad to sell land, P replied, D told P to “act fast,” D then sold to third party before P replied, then P replied saying he wants to buy land
— Restatement §25
— April 8 letter says that D wants to sell in the next week, indicating first come first serve basis, so P should have known that he was not given special time. Furthermore, there was not enough details in the ad to suggest an offer
— There can be no contract unless there has been a meeting of the minds and the parties have mutually agreed upon some specific thing. This is usually evidenced by one party making an offer which is accepted by the other party. Here, there was an invitation for offers, not an offer.

Restatement § 36. Methods of Termination Offeree’s power of acceptance may be terminated by (** The offeror is the master of the offer)

Rejection or counteroffer by the offeree
Lapse of time
Revocation by the offeror
Death or incapacity of the offeror or offeree

Restatement § 50. Acceptance of Offer — Acceptance of an offer is a manifestation of assent to the terms thereof made by the offeree in a manner invited or required by the offer

*** The offeror is the “master of the offer” and can (1) revoke at any time before acceptance and (2) specify exactly how acceptance must take place.

Restatement § 63. Time when Acceptance takes Effect

An offer is effective when it’s received
A revocation is effective when it’s received
Unless the offeror states otherwise, an acceptance is effective the instant it’s deposited in the mail or otherwise leaves the offeree’s possession (MAILBOX RULE: acceptance has legal power as soon as it leaves the offeree’s possession; BUT if somehow your offer doesn’t get through to the mail because of your own fault, then you don’t have a K)
Offeror states the terms of acceptance;

ie. If the offeror says call me to accept, then the mailbox rule goes out the window

** Power to revoke must be exercised before acceptance

“Last Shot” Rule :a party implicitly assented to and thereby accepted a counter-offer by conduct indicating lack of objection to it. In addition to being based on a questionable notion of implied assent, the last shot rule tended in practice to favor sellers over buyers, because sellers

ods.
— Since it’s not a transaction of goods, common law applies. and GE’s Final Price Quote altered the terms of Princess’s offers. Princess accepted the counteroffer through actions: gave GE permission to proceed, not objecting to confirmation letter, and paying the amount set by GE and not the original amount.

v. Offer and Acceptance in Bilateral Contracts — UCC:

UCC §2-207: ** only applies to sale of goods (which are tangible and movable)

Subsection 1 — Determines whether the reply is an acceptance or a counteroffer. A reply that doesn’t match the offer completely CAN still be an acceptance

It is an acceptance if the reply is a “definite AND seasonable (timely) expression of acceptance”
THREE ways a reply can be a counteroffer

it doesn’t meet the deadline/ expiration date
it isn’t a “definite expression of acceptance” (new price or new quantity)
it states that the only way offeror accepts is if offeree accepts his terms

TWO acceptance situations that UCC governs:

When the writings exchanged are materially different
There is an oral contract but the forms exchanged don’t conform to the oral contract (ie. “unless acceptance is expressly made conditional on assent to the additional or different terms”)

Subsection 2 — Governs the additional terms that might come with the reply if the reply is an acceptance.

Either parties is not a merchant
(a) The original offer states that it does not accept additional term.
(b) Materialization occurs due to the term being surprising or if it imposes hardship on one of the parties. (This is usually thrown out the window if it’s traditional or expected of the industry)
(c) Either parties object to the term in a timely manner.

“Additional terms” vs. “Different terms”

Additional terms — Adds right, duty or issue that didn’t appear at all in the offer
Different — Modifies the offer’s version of right, duty or issue that did appear in the offer
Court’s treatment on omission of different terms from §2-207

Original term = the governing term
Different terms = additional terms
Take the two different terms and cross both out and then apply the gap filling

Subsection 3 — If the reply is found to be a counteroffer

Offeror can 1) expressly agree to the additional/different terms 2) not perform and not enter into a contract or 3) perform and thus the court will only apply the terms that the parties agreed on, and omits everything else.