Select Page

Contracts
University of California, Davis School of Law
Bjorklund, Andrea K.

IS THERE A CONTRACT?
· ENFORCEABLE CONTRACT requires:
o 1) Mutual assent (offer and acceptance) – UCC uses gap fillers to fill in missing offer terms
o 2) Consideration [none required in UCC (i.e., exchange of money), but still mention] o 3) Definiteness of Terms – for breach purposes
A. MUTUAL ASSENT
I. Intent to Contract
· Did the parties objectively manifest contractual intention to enter into a contract?
· Subjective Test/Theory: “meeting of the minds”; what does offeree hear?
· Law does not require genuine subjective “meeting of the minds” – focus on apparent assent
II. Offer
· Offer: 1) where one person confers upon another the power to create a legally enforceable promise
· Require contractual intent + indicia of offers [split in two prongs] o Objective Test: Can a reasonable person in offeree’s position have understood offeror as manifesting contractual intent?
· CHECKLIST: Objective Test: Specific Indicia of Offer (all must be reasonable)
o 1) Parties; price; delivery date/time; subject matter of K; “on your acceptance” = O
§ If o’ee knows there are others, may not be justified in understanding words/conduct as offer
o 2) Specificity of language WRT intent (i.e., no equivocal language): “thinking” vs “doing”
o 3) Position of the statement in the sequence of correspondence; context (Harvey, Fairmont)
o 4) Circumstances surrounding transaction
· Duration of the Offer: limited time span held to last until after reasonable period of time if not specified
o “Reasonable” depends on circumstances
o Default Rule RSC 41: offer lapses upon end of face-to-face or phone convo – unless contrary agmt
§ NOT concrete – consider reasonable circumstances (i.e., i.e., face to face, but tix at home)
§ NOT OFFERS – NO CONTRACTUAL INTENT
o Jokes/Bluffs: acts evidently done in jest or w/o intention to create legal relations
§ EXCEPTION: Lucy v Zehmer: whatever Z’s actual intent, Lucy was earnest and objectively had no reason to believe that Z was not
o Property Sales and Price Quotes: preliminary negotiations; ITOs; standard practices
§ Other offerees; generic language
§ EXCEPTION: exclusive addressee/offer; specific language offering “for immediate acceptance”
o UCC 2-328 Competitive Bidding: This is ITO (bids).
§ Bid acts as acceptance without reserve price; WITH reserve price is merely offer and offeror free to decide whether to accept; may withdraw goods at any time.
o Ads: generally, invitation to make an offer (Lefkowitz v Great Mpls Surplus – 2 Lapin stoles for $1)
§ EXCEPTIONS: 1) clear, definite, explicit specific terms. 2) Must be “language of commitment” 3) Invitation to take action without further communication à REAL OFFER
· Unilateral Mistakes in Offers: Construction K (Karstorff) – JX SPLIT
o Offeror NOT bound If offeree is aware of mistake at time of acceptance
o RSC 153: FOUR ELEMENTS:
§ 1) Mistake of fact, not judgment [attempt to weed out bad judgment calls] § 2) Erroneous facts are basic assumption on which K is made (reason why D entered K?)
§ 3) Mistake has material effect on the agreed exchange that is adverse to the party making the mistake (did mistake create imbalance – desirable vs disadvantageous position)
§ 4) Party making mistake does not bear the risk of mistake [difficult b/c should give accurate figures; should know what pipes are req’d], THEN party can void the contract IF:
ú 1) Effect of the mistake is such that enforcement would be unconscionable, or
ú 2) Other party had reason to know of the mistake or his fault caused mistake
o Karstoff: Contractor made clerical mistake and rescinded offer from school (who had other options) before school relied, so unconscionable to enforce K à J/Contractor
o CA (apply 153): Donovan: enforcement of mistake would NOT be unconscionable. Protect buyers against purposefully misleading advertising, not honest mistakes or typos.
III. Termination of the Offer
· Lapse of Offer: Offer lasts until revoked and/or accepted
· Death of Offeror: Offer revoked even if offeree doesn’t know about death
o RSC 48: Death doesn’t affect power of acceptance under Option K
o Bilateral promise (performance) à offer revoked at death b/c outstanding obligation
o Unilateral (promise) à K is binding at acceptance and K survives death.
· Revocation: offeror free to revoke w/ notice at any time before accepted (UNLESS Option K)
o Revocation effective only upon receipt by offeree
o RSC 43: Notice – Power to accept is terminated if:
§ 1) OR takes definite action inconsistent with intention to enter into the proposed contract [direct revocation]; or
§ 2) OE acquires reliable information to that effect [indirect revocation].
§ Dickenson v Dodds – hides until offer expires even though no consideration.
§ Rece

5, but only need RELIANCE!
o Reliance on EXPLICIT PROMISE à recovery of reliance damages
· 6) Reliance/PE: Implied Promise [RSC 87.2]: create binding option K; can be used for subcontracting
o 1) Offer which offeror should 2) reasonably expect to induce action or forbearance before acceptance is 3) binding as an option K 4) to extent necessary to avoid injustice
§ Option K open for a reasonable amount of time if there’s 1) implied C, or 2) reliance
o Drennan: Star’s offer contained implied subsidiary “promise not to revoke.” Drennan relied on implied promise to bid on project. D reasonably relied à no reason to believe he couldn’t
§ Also implied consideration: Drennan uses bid in exchange for promise not to revoke
o General contractor not free to delay acceptance (bid shopping) after awarded general K à implies contractor’s lack of reliance on offer
o Also cannot reopen bargaining with Sub and still claim continuing right to accept original O
§ Inquiry to shave bid prior to acceptance à probably doesn’t affect irrevocability
§ Inquiry after acceptance of bids à probably affect irrevocability
· 7) Payment of Consideration
V. Acceptance
· Offeree’s manifestation of assent whereby he exercises power conferred upon him by the offer and creates K, in manner and w/in time specified.
o Acceptance must be volitional act, performed freely, deliberately, and with the intent to enter
· Rejection: If VERY clear rejection, offeree terminates offer
o EXCEPTIONS: 1) offeror indicates offer still stands despite rejections; and 2) offeree states that although not accepting, wishes to consider later.
· Objective Contractual Intentà Do conduct and words reasonably suggest acceptance?
· Method of Acceptance; Notice
o “Master of the Offer” can prescribe person and method of acceptance
§ If not specified: acceptance “in any matter and medium reasonable in the circumstances.”