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Contracts
University of California, Hastings School of Law
Lefstin, Jeffrey A.

Lefstin – Fall 2006
Contracts Review
I. Mutual Assent
 
Unless a question specifically states that the parties made a contract, the answer to the question should address whether a contract was formed.
Consider whether each communication was an invitation to bid, an offer, a revocation, an acceptance, an inquiry, a conditional acceptance, a counteroffer, or a rejection.
A response to an offer that is considered an acceptance must be examined to determine whether it is:
                  1) timely,
2) is in the proper form, and
                  3) deviates from the offer in any way.
The Objective Theory of Assent
Used to determine what a reasonable person to whom an expression has been addressed would understand the expression to mean. 
·         General rule: It is for the court to construe the effect of writings relied on to make a contract and also the effect of unambiguous oral words (or of words that a reasonable man would consider to indicate a contract)… However, if the words are in dispute, the question of whether they were used or not is for the jury. Embry v. Hargadine, McKittrick Dry Goods Co.
·         Look to the outward expression of a person as manifesting his intention rather than to his secret and unexpressed intention. Lucy v. Zehmer
o       The mental assent of the parties is not a requisite for the formation of a contract.
o       A person cannot set up that he was merely jesting when his conduct and words would warrant a reasonable person in believing that he intended a real agreement.
·         Restatement
§ 17 Requirement of a Bargain
(1)   except as stated in subsection 2, the formation of a contract requires a bargain in which there is a manifestation of mutual assent to the exchange and a consideration
(2)   whether or not there is a bargain a contract may be formed under special rules applicable to formal contracts under rules stated in §§ 82-94
§18 Manifestation of Mutual Assent
Manifestation of mutual assent to an exchange requires that each party either make a promise or begin or render a performance.
§ 19 Conduct as Manifestation of Assent
(1)   the manifestation of assent may be made wholly or partly by written or spoken words or by other acts or by failure to act. 
(2)   The conduct of a party is not effective as a manifestation of his assent unless he intends to engage in the conduct and knows or has reason to know that the other party may infer from his conduct that he assents.
(3)   The conduct of a party may manifest assent even though he does not in fact assent. In such cases a resulting contract may be voidable because of fraud, duress, mistake, or other invalidating cause.
                                                              i.      Protects the parties’ reasonable expectations by permitting each party to rely on the other’s manifested intentions
Express and Implied Contracts
Express – mutual assent is manifested in words of agreement, written or oral
Implied
                                                              i.      Implied in fact – when the promises of the parties are inferred from their acts or conduct, or from words that are not explicit words of agreement
                                                            ii.      Implied in law – where a court fictionally implied a promise to pay for benefits or services to avoid inequities or unjust treatment (a.k.a. quasi-contracts)
 
C. What is an Offer? 
An offer is a manifestation of present willingness to enter into a bargain, made in such a way that a reasonable person in the shoes of the person to whom it is addressed would believe that she could conclude the bargain merely by giving her assent.
·         The mere statement of the price at which property is held cannot be understood as an offer to sell. Nebraska Seed Co. v. Harsh
·         In determining the existence of an offer, the court must not consider the defendant’s subjective intent in making the commercial, or plaintiff’s subjective view or what the commercial offered, but what an objective reasonable person would have understood the commercial to convey. Leonard v. Pepsico
·         General Rule: An advertisement does not constitute an offer. Leonard v. Pepsico
§         Advertisements – generally construed as invitations to deal rather than offers unless there is a clear indication that there’s an intention to bargain, the ad is specifically addressed to someone, or over-acceptance is unlikely. 
o       Rewards are normally construed as offers
·         Restatement
§ 22 Mode of Assent: Offer and Acceptance
(1)   the manifestation of mutual assent to an exchange ordinarily takes the form of an offer or proposal by one party followed by an acceptance by the other party or parties
(2)   A manifestation of mutual assent may be made even though neither offer nor acceptance can be identified and even though the moment of formation cannot be determined.
§ 24 Offer Defined
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.
§26 Preliminary Negotiations
A manifestation of willingness to enter into a bargain is not an offer if the person to whom it is addressed knows or has reason to know that the person making it does not intend to conclude a bargain until he has made a further manifestation of assent.
§ 29 To Whom an Offer is Addressed
(1)   The manifested intention of the offeror determines the person or persons in whom is created a power of acceptance.
(2)   An offer may create a power of acceptance in a specified person or in one or more of a specified group or class of persons, acting separately or together, or in anyone or everyone who makes a specified promise or renders a specific performance.
§ 33 Certainty
(1)   Even though a manifestation of intention is intended to be understood as an offer, it cannot be accepted so as to form a contract unless the terms of the contract are reasonably certain
(2)   The terms of a contract are reasonably certain if they provide a basis for determining the existence of a breach and for giving an appropriate remedy
(3)   The fact that one or more terms of a proposed bargain are left open or uncertain may show that a manifestation of intention is not intended to be understood as an offer or as an acceptance.
·         The U.C.C.
§ 2-204 Formation in General
(1)   A contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract.
(2)   An agreement sufficient to constitute a contract fore sale may be found even though the moment of its making is undetermined
(3)   Even though one or more terms are left open a contract for

where the goods are to be received; and
(d)   where the seller is required or authorized to ship the goods on credit the credit period runs from the time of shipment but post-dating the invoice or delaying its dispatch will correspondingly delay the starting of the credit period.
·         Intent must be determined solely from the language used when no ambiguity in its terms exists. Empro Manufacturing Co v. Ball-Co Manufacturing Inc.
·         Restatement
§ 27 Existence of Contract Where Written Memorial is Contemplated
Manifestations of assent that are in themselves sufficient to conclude a contract will not be prevented from doing so operating by the fact that the parties also manifest an intention to prepare and adopt a written memorial thereof; but the circumstances may show that the agreements are preliminary negotiations.
Essential elements of an offer:
                                                              i.      Intent to enter into a bargain that is reflected by language and the surrounding circumstances of the statement
                                                            ii.      Definiteness of terms that must be clear about the bargain’s subject matter, price, and quantity involved
a.       Exception: statement can still be construed as an offer if there is obvious intent to conclude a bargain or if the court could fill in the gaps. 
Termination of the power of acceptance
1.      Contracts die because:
a.       Expiration or relapse
·         No acceptance within the time limit
·         No acceptance within a reasonable amount of time
b.      Rejection by the offeree
c.       Counteroffer
·         Does not include inquiries and requests
d.      Conditional or qualified acceptance
·         Terminates the offeree’s power of acceptance.
·         It is itself a counteroffer
e.       Termination by revocation
f.       Termination by operation of the law
·         Death or incapacity of the offeror
·         Changed circumstances terminates the offeree’s power of acceptance.
5. Revoking an offer:
·         It is not necessary for there to be an expressed withdrawal of an offer. An offer no longer stands if the accepting party knows that the offering party no longer wishes to do so. An offer can be revoked at any time before the other party says, “I accept” Dickinson v. Dodds
·         Restatement
§ 17 Requirement of a Bargain
(1) except as stated in subsection 2, the formation of a contract requires a bargain in which there is a manifestation of mutual assent to the exchange and a consideration
(2) whether or not there is a bargain a contract may be formed under special rules applicable to formal contracts under rules stated in §§ 82-94