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

Contracts Dodge Fall 2015

Contract Theories

Subjective vs Objective Theories

Subjective

Raffles v. Wichelhous

There must be a “meeting of the minds.” (intent of the parties must match)

Ship Peerless case. Court rules according to Subjective theory of contracts. In order for there to be a contract, the intent of the parties matters.

Objective

What a reasonable person would find

Ray vs Eurice Bros
Not what the a party thinks, or wanted it to mean, but what a reasonable person in the position of the other parties would think it means.

Contract to build a home. Ray changed the provisions of the contract the parties had discussed. D’s signed the contract, and later breeched, stating it was not their intent to enter into a contract with such strict provisions. The Def’s entered into a valid contract when they signed.

Modified Objective Standard

Objective with two exceptions
If both parties subjective intents agree, even if a reasonable person would find different
If one party knows the subjective intent of the other party, they are bound by the intent
*Objective standard protects the parties reasonable expectations of the contract

Contract formation

Requires “a bargain in which there is a manifestation of mutual assent to the exchange and consideration.”
UCC Contract formation

Offer can be made in any way that shows agreement, including conduct
A K can be formed even if the moment of formation is undeterminable
Can have open terms (including price) if the parties intended, and there is a way to determine a remedy

Sources of Contract Law

Common Law

Case law
Binding

UCC

Collection of Statutes
Adopted by 49 of 50 states
Deals with the sale of goods

Goods – movable objects

Restatements

Persuasive authority, not binding
For purposes of test, consider it the law

CISG

Treaty – (Federal Law, trumps UCC)
Applies to K’s between parties of different States
Applies to sale of goods
Only applies to member countries

When looking at the different sources, for a sale of goods K:

UCC is the top coat of paint, where there are gaps, use common law (base coat)

For international sale of goods Contract:

CISG is the base, where there are gaps, use domestic law

When it’s a mixed K for goods and services

Factors for determining whether the UCC or CL govern

Language of the K
Nature of the business of the supplier
Intrinsic worth of the materials

Types of Contracts

Look to the language of the K: If the offer is ambiguous, acceptance can be made by promise of performance

Bilateral

Promise for a promise

Unilateral Contracts

A promise for the actual rendering of performance

Classic example is Brooklyn Bridge example

No acceptance until performance is complete

Mostly found in two scenarios:

Reward situations (lost cat)
Bonus programs at work.

Good for offeree, not bound to finish (not sure if performance is possible ie bonus)

Rnd §32 Invitation for promise or performance

If the offer is ambiguous, acceptance can be made by promise of performance

Rnd §45 Option K created by part performance

Once performance has begun, irrevocable
Must complete the performance in order to accept

*Offeree is free not to finish, no acceptance, no K

COOK V COLDWELL BANKER

Offeror is bound to a unilateral contract once offeree has rendered substantial performance

Mortgage broker offer bonus program at work when reaching certain thresholds

Stayed with Coldwell for the entire year to receive the bonus

Coldwell tried to revoke original offer in Sept, after substantial performance

Mutual Assent

Offer

First question in K formation, is there an offer?

Look to the 3 elements.

Is the offer addressed to a specific person(s)?
Are the terms reasonably certain?
Was there an intent to be bound?

Under the UCC, offer can be made in any way that

Invites acceptance
Is reasonable under the circumstances
A purchase order is an offer which invites acceptance by shipping, or promising to ship the goods.
Terms can be left open, as long as the parties intended to make a K, and there is a reasonably certain way to remedy

Under the CISG (similar to the CL)

Addressed to one or more persons
Sufficiently definite
Indicate an intent to be bound
Must expressly or implicitly fix or make provisions to fix the price and quantity

Things to remember:

Offer is effective upon receipt
Offers are freely revocable, even if promised to stay open
If no time frame stated, offer stays open (expir

s (ads) unless the other party clearly indicates to the contrary

Acceptance

Was there acceptance? Or merely a counter offer?

Elements:

An expression of assent to the terms of the offer
Must be made in accordance to the terms of the offer (if offer says stand on your head in the corner, that’s what you have to do)
If no manner of acceptance specified, any reasonable manner will suffice.
An acceptance is only valid, however, if the offeree knows of the offer, the offeree manifests an intention to accept, and the acceptance is expressed as an unequivocal and unconditional agreement to the terms of the offer.

Rnd §50

Acceptance is manifestation of assent to the terms made in the offer, in accordance to the requirements of the offer.
Acceptance by performance requires at least part of what the offer requests be performed.
Acceptance by a promise requires that the offeree complete every act essential to making the promise

Acceptance by silence not valid in most cases

Exceptions:
Rnd §69

Offeree takes the benefit of the offer, and knows they were offered with expectation of compensation.
Offeror has stated that assent may be manifested by silence or inaction, and the offeree intends to accept by silence or inaction
Previous dealings show that silence is norm for acceptance, and should notify if rejecting.

Mirror Image Rule

Acceptance must mirror the terms of the offer. Cannot add or delete terms.
Rnd §59 Acceptance that is conditional on the offeror’s assent to terms additional or different from those offered is not acceptance but a counter offer.

Counter offer

Rnd §39
Proposal of a substitute bargain relating to the same matter of the original offer.
Offeree’s power of acceptance terminated by making a counter offer
Suggestions to a K do not necessarily make a counter offer