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Contracts
University of California, Hastings School of Law
Knapp, Charles Lincoln

CONTRACTS OUTLINE

**Precontractual
-duress
-fraud/misrepresentation/non-disclosure
-(mistake)
-unconscionability
-[Good Faith?]

**Contract
-Good Faith
-Contract Terms
-once terms have been reached, becomes the law of the K
-figure out what the parties have agreed to
-Interpretation
-contra proferendum (interpreting against the drafter)
-reasonable expectation
-penalty defaults

RESTATEMENT

§1: Contract Defined: a promise or 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.

Ray v William G Eurice & Bros (1952) p23
F: Ds claim didn’t know particular specs were included and isn’t possible to complete those specs at given estimate
R: Absent fraud, duress, or mutual mistake, having the capacity to understand a written document, you are bound by your signature.

§2: Promise; Promisor; Promisee; Beneficiary
*manifestation of intention to act or refrain from acting in specified way
*Where performance will benefit a person other than the promisee, that person is a beneficiary

§26: Preliminary Negotiations
*manifestation of intent is not an offer if person to whom it’s made knows or has reason to know that person making it does not intend to conclude a bargain until he has made a further manifestation of assent.

§27: Existence of a K Where Written Memorial is Contemplated
*Just because parties intend to prepare and adopt a written memorial does not mean that no K has been concluded. However, it may show that agreements are only preliminary negotiations.

OFFER

Offer vs Invitation for an Offer: §§24 & 26: Can the recipient reasonably understand speaker/writer was willing to be bound without the need for further expression of commitment on his/her party, merely an accepting response from the recipient?

offer v promise: before it’s binding, it’s a promise, and once it’s bound, it’s an offer once it’s accepted, essentially. If you want protection under the law, then accept the offer. (§45)

§24: Offer Defined
*willingness to enter into a bargain; his assent to that bargain is invited and will conclude it.

§21: Intention to be Legally Bound
*a manifestation of intention that a promise shall not affect legal relations may prevent the formation of a K

Quake Construction Inc v Amer Airlines (1990) p170
F: AA orally informed Quake it won bid, but wanted license numbers, and to obtain them, sent letter of intent. Also contained cancellation clause. AA terminated Quake’s involvement.
R: Although letters of intent may be enforceable, such letters are not necessarily enforceable unless the parties intend them to be contractually binding.

Lonergan v Scolnick (1954) p34
F: D sells property to third party before P accepts, but after P prepares to purchase.
R: If from a promise, the person to whom the promise is addressed knows or has reason to know that person making the promise doesn’t intend it as an expression of his fixed purpose until he has given a further expression of assent, he has not made an offer.

§33 Certainty
*An intention can not be accepted so as to form a K if the terms aren’t reasonably certain. The terms must provide a basis for determining the existence of a breach and for giving a proper remedy. Leaving one or more terms open may indicate intention is not intended to be understood as an offer or acceptance

Walker v Keith (1964) p168
F: Ten-year agreements leaves option for renewal. No rent amount set forth, nor formula to determine rent.
R: Where essential terms such as price are not contained in an option K, and no standards are included whereby such terms may be judicially determined, no K exists.

§32: Invitation of Promise or Performance
*In case of doubt, an offer is interpreted as inviting the offeree to accept either by promising to perform what the offer requests or by rendering the performance, as th

Rejection
*offeree’s power of acceptance terminated by his rejection of the offer unless offeror has manifested a contrary intention
*intention not to accept is a rejection unless offeree plants to take it under further consideration

§40: Time When Rejection or Counter-Offer Terminates the Power of Acceptance
*By mail or telegram, power of acceptance not terminated until received by offeror

§38 Rejection
*acceptance is terminated by rejection of offer, unless offeror has manifested contrary intention.
*Manifestation of intention not to accept an offer is a rejection unless intention to take it under further advisement.

REVOCATION

§43: Indirect Communication of Revocation
If offeror takes definite action inconsistent with an intention to enter into proposed K, the offeree’s power of acceptance is terminated

James Baird Co v Gimbel Bros Inc (1933) p109
F: D sent out a bid for a job, but same day that P accepted, D realized the mistaken estimate and telegraphed all Kers and revoked offers. However, P didn’t get revocation until after P submitted a bid using D’s figures. P sued for breach.
R: Where an offer is withdrawn before it is accepted, and the offer language does not indicate a contrary intention, a K is not formed.
R: The doctrine of promissory estoppel is not applicable where an offer is made for an exchanged act or promise and no consideration has been received by the offeror.
*No K existed here. Many cts have found mere use of a bid does not constitute an acceptance of that bid, forming a binding bilateral K (binding for both parties).