CONTRACTS, PRINCE, 2010
I. Intention to be bound: the objective theory of contract
a. Must consent to the SAME TERMS AT THE SAME TIME (accomplish this by the process of offer and acceptance)
b. Subjective theory à meeting of the minds (actual intent of the parties) IS NOT the law
c. Objective theory à mutual assent (offer and acceptance); look at the conduct of the parties from the perspective of a reasonable person, rather than their actual, subjective intentions (base their intent on this)
II. Four Part Formation of Contract Law
a. Formation à mutual assent (two parties agree to have an exchange; there has to be offer and acceptance; classic form of mutual assent is signing contract) and consideration (something being given on both sides; bargain for exchange à mutual inducement; there’s a promise and return consideration [could be a promise, performance, or object]; consideration can also be achieved through benefit to the promisor or detriment to the promisee)
b. Terms à express and implied; interpretation issues
c. Performance/non-performance à does the party do what it’s supposed to do? If breach, does it have an excuse? Consider public policy.
d. Remedy à money damages
III. Unilateral mistake
a. Still bound to performance of contract; if you signed it, you’re bound to it (EXCEPTIONS: contract under fraud, duress, or if there’s mutual mistake = contract not valid)
IV. Ambiguity surrounding contract
a. Apply the objective person standard. Don’t use meeting of the minds.
a. Restatement, Section 24 à Was there communication to manifest assent to conclude the bargain?….If yes, then there’s an offer [no bright line rule]; in other words, if assent is enough to conclude a bargain, then there was an offer
b. Section 26 à “I reserve the right to speak last”; offeror is the master of the offer; can condition it as he/she wants ; offer in general creates a power of acceptance on the part of the buyer
c. Solicitation for an offer
i. Not an actual offer
ii. One characteristic is “act fast…there’s another buyer in the picture…and I reserve the right to accept the first buyer that comes in.”
d. When does an ad amount to an offer?
i. No certain rule (consider number of recipients, specific language)
ii. Car ad where car VIN numbers are provided with a specific price, can be deemed as an offer (CA)
iii. Generally, ads solicit offers
iv. Use objective person standard; what would a RPP think?
a. Yes to an offer
b. Mailbox rule à (CL) acceptance once in the mail; upon dispatch (exception rule)
c. Generally speaking, acceptance is effective upon receipt
d. CISG says acceptance must reach the offeror in order to be valid
e. Mirror image rule àacceptance must be a literal mirror image of the terms of the offer (no changes to the offer)
f. Battle of the forms à acceptance doesn’t match up with offer; in order for acceptance to be honored, it must be a mirror image of the offer
g. UCC 2-207 (tries to get rid of the mirror image and last shot doctrine; applies to goods)
i. Last shot à whatever’s the last thing that’s on the table when the parties perform, the conduct that’s taken is a manifestation of those terms; this is a CL doctrine that applies to services sold
ii. For goods: the terms of an initial offer are still valid if the terms in a counter offer are not expressly obvious or conditional (even if different).
iii. Predominant thrust/nature test
1. If there’s a contract that’s both for a sale of goods and services, you need to determine what the main thrust of the contract is (mainly for sale, or mainly for good?)
2. Factors to consider: language of the contract, nature of the business of the supplier, the intrinsic worth of the materials (compare costs of goods to services)
a. Some terms are changed
b. Generally speaking, embodies a rejection of an offer
c. Original offeror now has the power of acceptance as counter offeree
a. Say no
b. Terminates the power of acceptance; can’t then turn around and accept the offer
c. Lapse – Section 36 (after a certain point, the offer expires)
IX. Revocation (Section 43)
a. If I make an offer, I can freely revoke it before you accept it
b. Revocation is only effective upon receipt; can be direct/indirect
i. Example of indirect revocation: real estate agent à “too bad, you snooze you lose”
c. Ways to limit revocation
i. Option contract à takes away the overwhelming power of the offeror to revoke the offer. For a time period, the property will be available at a certain price (two elements: promise to keep offer open and must be supported by some kind of consideration)
ii. Promissory estoppel/detrimental reliance
d. Death of the offeror à contracts survive death; offers don’t
X. Bases for Promissory Obligation
a. When is a promise enforceable?
i. When there’s consideration
1. Use four part framework here (formation, terms, performance, remedy)
ii. Promissory estoppel/detrimental reliance (Section 90)
1. Four elements:
b. Reasonable/foreseeable reliance
c. Actual/detrimental reliance
d. Injustice to promisee if promise isn’t enforced
2. Even w/ a gratuitous promise, if the promisee relies on it, it may make the promise enforceable, if reasonable
3. Enforces gifts/non-bargained promises
1. Three elements:
a. Benefits received
b. Enrichment of one party at the expense of another
c. Under a circumstance where it’s unfair to keep the benefit without paying
iv. Promissory Restitution (minority rule)
v. Seal/Formality (in England, put your seal on something; seal has lost most of its vitality today)
XI. Bilateral v. Unilateral contracts
a. Bilateral Contracts à parties exchange promises of performance in future
b. Unilateral Contracts à parties bargain not for an exchange of promises but for performance (performance needs to completed to have a contract); i.e. pay you to walk across the bridge
i. Section 45 à when an offeree tenders or begins the requested performance under a unilateral contract, the offeror becomes bound and cannot revoke his offer so long as the offeree completes performance in accordance w/ the terms of the offer
2-205 à A formality rule. In the world of sale of goods, you can have a binding promise to keep an offer even w/out consideration
ii. First, there has to be an offer. Second, offer must be made by a merchant. Third, has to be goods. Fourth, it has to be in signed writing. Fifth, if no time is stated, must be a reasonable time.
h. Charitable subscriptions
i. To enforce a charitable subscription or a charitable pledge, a party must establish that (1) there was a promise to give some property to a charitable institution and (2) that the promise was supported by consideration or reliance (may be liberal in finding either)
1. Consideration and reliance are not mutually exclusive
ii. Section 90(2) à a charitable subscription is binding even when there’s no consideration or reliance (only Iowa has adopted this)
i. Third party beneficiary/Third party reliance would have standing to sue
i. Section 71, subsection 4 à Sepuya-Deming promise each other to donate $ to Hastings
ii. Hastings can come after both for the money if it has some establish third party standing (even if they can’t show reliance); w/ the bargain of exchange between Sepuya and Deming, you don’t need any other consideration AND you don’t need reliance
j. Doctrine of promissory estoppel/detrimental reliance can be applied in commercial settings (i.e. pension payments)
k. CISG – promissory estoppel not recognized
a. Need to have clear, essential terms for the contract to be enforceable. Otherwise, no agreement. Can’t just have agreement to agree.
i. i.e. With rent, need to have a set price or come up with a formula to determine rent.
ii. Sometimes there are exceptions (i.e. a court feeling sympathetic to tenants because they’re not just paying for rent of land, but also for option contract ten years down the line)
iii. When there’s agreement to agree, courts generally don’t want to step in and determine the terms
b. Agreement in principle
i. When essential terms are agreed upon but a final written contract has not been entered into by either party
c. UCC 2305 is different.
i. If there’s intent to be bound and there’s no explicit price, you’ve agreed to a reasonable, fair market price.
d. Section 33 à even though you got manifestation of intent, understood to be an offer, it can’t be accepted unless the terms of the contract are reasonably certain (if they provide for the basis of breach)