Contracts Outline
General Things to Keep in Mind:
***Try to imagine what the parties intended when they entered into the contract***
***Look at rules from an ex ante perspective***
***You don’t want to be overcompensated because they’ll end up charging more for a service***
***Look at hypothetical bargain, what they would have wanted if they anticipated the event that led to the dispute***
I. Making of Agreements – exchange of promises; promising is about consenting; for liability to exist there must be mutual consent
A. Mutual Assent – mostly about the intention to be bound, generally interpreted objectively; K law is all about cooperation; more about problems of interpretation
— Did the parties really assent?
— Sometimes someone makes what sounds like an offer but is not really one, a reasonable person may interpret it as one, but the person may not have meant it
— is it how they meant to be bound or how other people would interpret your words?
— K isn’t really about mutual assent its about having to be careful when talking to people
— agreeing to agree problem: people enter into agreements in the sense that they expect they’re going to act in a certain way but they didn’t intend to create a legal obligation
— Even in business this is true, they have an agreement to go forward but they don’t want to provide a basis for a lawsuit; you have a letter of intent but its too early to commit
1. Subjective v Objective Standard
a. Subjective Standard – meeting of minds
b. Objective Standard – reasonable man
2. Objective Standard:
a. Reasonable Man Standard: Embry v Hargadine McKittrick Dry Gods Co. – Jury instruction that called for a subjective standard for assessing the intention of the parties is NOT valid – Manifestation of reasonable mutual consent is enough
i. Facts: Employee (Embry) had a written contract, which expired on a certain date, noted that if they wanted him for beyond that year they would have to give him notice, and says that the employer did orally agree to that, but then they terminated the employment later – Sues for breach of contract
ii. Issue over jury instructions: “if y
jury?
iii. Proper, because allowing it would not confuse the jury as to what constitutes creation of K
iv. Ct says even the “staunchest” objectivist would not let jury hold 2 parties to K when neither thought the other meant to assent
c. Effect of Fraud on the Objective Standard – New York Trust Co. v Island Oil & Transport Corp. (Outlier)
i. F: Transaction was a joke to deceive the authorities, new person inherits the contract and wants to enforce the sham contractàreasonable person would interpret the contract as a real contract, but the subjective intent of each person was not to intend to enter into a contract. Court does not enforce contract, how is this reconciled? Because of fraud, and in the context of the agreement, it was clearly a sham. Reasonable person knows all of this stuff.
Doesn’t want sham transaction to affect bankruptcy cases
