H.G. Prince – Fall 2009 – UC Hastings
1L Contracts
Formation
mutual assent
we need to at some point say that the two parties exchanged something
objective theory: “meeting of the minds”
i. would a reasonable person looking from the side think this was a contract?
ii. We don’t want to make it too hard to enforce contracts (esp with poor/uneducated) because we WANT contracts to be formed, our society to function
iii. Good
1. Keeps people from lying about what they intended
2. Protects expectations – otherwise people would not be able to rely on contracts
iv. Bad
1. Benefits more sophisticated parties
2. Contracts in theory should enforce only consensual agreements
v. Case: Ray v. Eurice Brothers
Subjective theory: (less used now)
offer
i. “just say yes and we have a deal”
ii. Manifestation of willingness to enter into a bargain, to be bound, so made as to justify another person in understanding that her assent to the baragin is invited and will conclude the deal
1. R2d §24
2. Elements
3. Objective manifestation of intent
4. Definite terms
a. BUT §33 says reasonably certain terms, not absolutely definite
b. BUT really open terms may show that it’s not intended to be an offer or acceptance
5. Must be communicated to offeree
6. Must create immediate power of acceptance
7. Intent to negotiate or intent to make an offer in the future is not enough
iii. NOT an offer if
1. lack of definite terms – subject matter, time, quantity, parties, etc §33 – need reasonable certainty as to the terms
a. this can be argued either way of course
2. solicitation (newspaper ad, usually) – many recipients
3. mere intent to negotiate
a. willingness to enter into a bargain
b. §26
c. If person to whom its made knows or has reason to know that person making it does not intend to conclude a bargain, it’s not a bargain
d. If person reserves the right to speak again it is not an offer
4. Use of the word ‘offer’ is not determinative
5. Promise vs. prediction/aspiration
6. no immediate power of acceptance created
7. not communicated to offeree
8. jest – if reasonable person would think so
a. Case: Lucy v Zehmer
9. right to speak last
a. Case: Lonergan v. Scolnick
b. Case: Izadi v. Machado (Gus) Ford
iv. freely revocable
v. and rejectable – how to terminate power of acceptance
1. rejection
2. counteroffer – unless specified otherwise
a. by offeree to offeror
b. same subject matter
c. proposing a different substitute bargain
d. §59 – conditional acceptance is a counteroffer
3. lapse of reasonable time – varies by situation
4. death/incapacity
5. some condition of acceptance doesn’t happen
6. manifestation of intent not to accept – unless specified that this is only until further advisement
7. offeror takes definite action inconsistent with intent to enter into contract and offeree gets reliable info to that effect
vi. BUT
1. Option Contracts!!!
2. A promise to keep an offer open for some period of time that takes away the offeror’s normal power of revocation.
a. The only way to make a bilateral agreement irrevocable!
b. §87(1)
c. Elements: binding as an option if:
i. (In writing and signed by the offeror???); proposes exchange and reasonable time and consideration
ii. OR is made irrevocable by statute §87(1)b
iii. Or some other basis — reliance
d. offeror said to offeree, “I’ll give you $50 if you give me 120 days to put together a team” “OK”
e. IMPORTANT: courts will sometimes accept nominal consideration – but does need own consideration – because like a contract within a contract
f. Characteristics:
i. Needs own consideration!!!!!!!!!
ii. Mailbox rule does not apply – acceptance valid upon receipt
iii. Must be in writing
iv. Promissory estoppel is applied when there is an implied or express promise to keep the offer open!!!
v. §45 – part performance on a unilateral contract ALSO created an option K, remember
g. UCC 2-205, also
h. Cases:
i. Berryman v. Kmoch
ii. Hoffman v. Red Owl Stores
iii. James Baird Co. v. Gimbel Bros.
iv. Drennan v. Star Paving
v. Pop’s Cones v. Resorts International Hotel
3. Dr/pe/§90
vii.
Acceptance
i. R2d §50
ii. Manifestation of mutual assent to the terms made in a manner invited.
iii. Assent
1. offeror is the master of the offer!!!! Can specify any means of assent
a. performance, signing, etc
i. §60 – specified means of acceptance
ii. has to actually mandate it – if only suggests, then can be a diff way and still be OK
b. if not specified, any reasonable means are good
c. silence is NOT usually OK – but can be
2. silence not usually acceptance
a. exceptions:
b. if offeree takes the service or exercises dominion over property
c. if in the past silence has meant acceptance
d. if offeror has given offeree reasons to know silence is acceptance AND offerree intends to accept
iv. Mirror Image Rule
1. §58
2. anything but exact terms is a counterof
nce
3. creation/destruction/modification of a legal relation
v.
benefit/detriment
i. benefit to promisor or detriment to promisee
ii. R2d: §71: just because there is detriment in there somewhere, it is NOT consideration without mutual inducement!
iii. cases:
1. Hamer v. Sidway – b/d as relates to return consideration
a. uncle’s promise was at issue – what was the return consideration?
b. Court: can have either a benefit to uncle or detriment to nephew . . . don’t need both
c. R2d = more modern approach, but the courts have NOT gotten that memo
2. Pennsy Supply v. American Ash
iv. R2d §79: don’t need b/d if there is a bargained-for exchange
1. trying to steer courts away from looking for equivalence in exchange
a. ex: widow, bank, and piece of paper (certifying no debt) à under THIS, that would be fine, the courts should not get into weighing things they don’t understand
b. Case: Batsakis v. Demotsis
2. condition is not consideration
3. we go more with § 71
Mutual Inducement
i. Must be supported by each other
ii. The promisor is promising in order to induce conduct
iii. The promise must induce the detriment
1. Offerree must know of offer and intend to accept it
2. Must be induced to act because of the promise
iv. Partial inducement OK
1. §81
2. If consideration is good, it does not have to be the sole motivating factor.
v. Non-economic OK – doesn’t have to be $$
NOT consideration
i. Gratuitous
1. Case: Dougherty v. Salt
ii. Past consideration
1. Because no mutual inducement
2. Case: Plowman v. Indian Refining Co.
iii. Illusory promise
1. Appears to be promising something, but in fact is not committing the promisor to anything
2. §77
iv. Moral obligation
v. Conditional gifts
1. Telling tramp that if he walks to the store with you, you’ll buy him a coat
2. Case: Plowman v. Indian Refining Co.
3. Test:
Is the occurance of the condition beneficial to the promisor
