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Contracts
University of California, Hastings School of Law
Martinez, Leo P.

CONTRACTS MARTINEZ FALL 2016

TERMS AND DEFINITIONS

Bilateral Contract- Each party makes a promise- the offeror’s promise is contained in the offer and the offeree makes a return promise in acceptance. “Bilateral” refers to the fact that both parties have made promises.

EXAMPLE: Jon offers to pay $1000 in return for Jessica’s promise to sell her car. As soon as Jessica accepts John’s offer, a bilateral contract is formed and both parties are bound.

Unilateral Contract- Only one party makes a promise- the offeror’s promise is in the offer and the offeree renders a performance as the acceptance.

EXAMPLE: Ben offers $1000 to anyone who finds and returns his laptop. If Emma finds the computer and returns it to him, she is entitled to the $1000. Ben is not seeking Emma’s return promise to find his computer, but the actual performance of returning it to him. If Emma finds his computer and returns it to him, then her acceptance is her act of performance.

Implied-in-Law Contract (Quasi-K): 1. D received a benefit; 2. Appreciation or knowledge by D of the benefit, and; 3. Circumstances make it unjust for the D to retain the benefit without paying for it. In sum, situation in which we impose an obligation despite the absence of any promise, offer, acceptance, consideration.

Quasi-K

Benefit incurred
Appreciation
Unjust

PRELIMINARY CONCEPTS

Rest 2d §§ 1- Contract Defined

A contract is a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty.

Rest 2d §§ 2- Promise; Promisor; Promisee; Beneficiary

A promise is a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promise in understanding that a commitment has been made.
The person manifesting the intention is the promisor.
The person to whom the manifestation is addressed is the promisee.
Where the performance will a benefit a person other than the promisee, that person is a beneficiary.

Rest 2d §§ 3- Agreement Defined; Bargain Defined

An agreement is a manifestation of mutual assent on the part of two or more persons. A bargain is an agreement to exchange promises or to exchange a promise for a performance or to exchange performances.

Rest 2d §§ 4- How a Promise May Be Made

A promise may be stated in words either oral or written, or may be inferred wholly or partly from conduct.

UCC §2-204. Formation in General

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.

Appropriate conduct by the parties may be sufficient to establish an agreement.

An agreement sufficient to constitute a contract for sale may be found even though the moment of its making is undetermined.

Directed primarily to the situation where the interchanged correspondence does not disclose the exact point at which the deal was closed, but the actions of the parties indicate that a binding obligation has been undertaken.

Even though one or more terms are left open, a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy.

Principle of “open terms”

If the parties intended to enter into a binding agreement, this subsection recognizes that agreement as valid in law, despite missing terms, if there is any reasonably certain basis for granting a remedy

CISG Art. 8

Statements made by and other conduct of a party are to be interpreted according to his intent where the other party knew or could not have been unaware what that intent was.

If last paragraph is not applicable, statements made by and other conduct of a party are to be interpreted according to the understanding that a reasonable person of the same kind as the other party would have had in the circumstances.

In determining the intent of a party or the understanding of a reasonable person, due consideration is to be given to all relevant circumstances.

CISG Art. 23

A contract is concluded at the moment when an acceptance of an offer becomes effective in accordance with the provisions of this convention.

CONTRACT FORMATION AND PROMISSORY LIABILITY

ASCERTAINING ASSENT

Mutual assent is one of two key elements of the contract formation process. When a court finds mutual assent, it means that the parties expressed their willingness to be bound to the same terms (meeting of the minds). When finding assent courts apply “objective test” which looks to the parties’ words and actions (outward manifestations).

Rest 2d. §§22- Mode of Assent: Offer and Acceptance

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.

The 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.

The Objective Test: Embry’s Reasonable Person Rule

If, whatever a man’s real intention may be, he so conducts himself that a reasonable man would believe that he was assenting to the terms proposed by t

Professor’s Definition of Offer

Manifest willingness to bargain.

Pretty much show the other party you want to enter into a bargain.

Invite assent
That assent will conclude a bargain.

Note: Offeree has power of acceptance. Can’t accept until offer has been made.

Restatement 2d § 26- Preliminary Negotiations

A manifestation of a 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 intent.

Lonergan Rule- A contract is formed when one party makes an offer and the other assents to the offer. There can be no contract unless the minds of the parties have met and mutually assented to the same thing.

Fact Summary- D placed an ad in a newspaper, trying to sell real property. P responded to the ad. D responded with directions to property and stated a price. P responded to that letter and mentioned “should I desire to purchase land” at the end. D said “decide quickly.” Once P accepted, D said “sorry already sold.” P sued, D said he didn’t make an offer, was just willing to enter into a bargain. Court ruled in favor of D, saying no contract was formed.

Dirty Rundown of Lonergan Rule

Willingness to enter into a bargain does not necessarily invite assent.
Trial court thought there was a K because they thought assent was invited, but they ruled in favor of D because they thought of offeree terminated his power of acceptance because lapse of time.
Appellate Court ruled in favor of D, but said there was no K because there was no assent.

Just responding to an inquiry does not necessarily constitute as assent

Fork- Offer vs. Preliminary Negotiations

Amy- “I will sell you my computer for $1000”

First case: This is bilateral K. Amy has made a plain promise/offer to sell the computer if offeree agrees to pay $1000.

Amy- “I am thinking of selling my computer but will not take less than $1000. Let me know if you are interested.”

Second case: Amy is expressing an invitation for someone to make an offer. Indicative of preliminary negotiations, not an offer.