Introduction
I. Restatement vs UCC
A. The Restatement is a compilation of common law rules involving contract law. It doesn’t have the force of law, but courts frequently cite it. In some instances, the Restatement contains a rule that is in conflict with a rule adopted by a state.
B. The UCC is similar to the Restaetment, but it deals with sales contracts of goods by merchants.
1. Goods: Anything tangible and movable. Excludes land and services.
2. Merchants: Dealer of goods, expert in goods, or boss of expert
Mutual Assent
I. Objective Theory of Assent (Rest. 2d §19; Embry; Lucy)
A. Objective test with subjective twist:
** Would a reasonable person understand the communication to be an offer (or acceptance as the case may be) ?
** Did the person to whom the statement was made so understand?
B. Outward expressions matter from a reasonable person’s perspective, not subjective intentions.
C. The reasonable person standard is not well defined. It is most often interpreted as a contextual construction
II. The Offer
A. What is it?
1. An offer is the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it. (Rest. 2d §24)
2. An offer creates the power of acceptance on the part of the offeree (O’e) and a corresponding liability on the part of the offeror (O’r) (Rest. 2d §35)
3. For a communication to qualify as an offer, it must create a reasonable expectation in the O’e that the O’r is willing to enter into a contract on the basis of the offered terms.
B. How do we determine that such a reasonable expectation exists?
1. Apply the Objective Theory of Assent (Rest. 2d §19; Embry; Lucy)
a. Test
** Would a reasonable person understand the statement to be an offer?
[A1] ** Did the person to whom the statement was made so understand?
[A2]
b. Examples of applying the reasonable person test:
· In deciding whether in responding to the plaintiff’s inquiry about renewing his contract a supervisor’s answer amounted to an acceptance, the court inquired into: 1) whether a reasonable person would understand the supervisor’s statements as a manifestation of acceptance. 2) whether the plaintiff understood it as such (Embry)
· Similarly, when someone makes an offer as an intended joke, but the other party doesn’t understand it as such, the court inquires into: 1) whether a reasonable person would understand the communication to be an offer. 2) whether the plaintiff understood it as such (Lucy)
o Hypo: if Zehmer told Lucy before he signed the contract that it was a joke, there would not have been a valid contract. If Zehmer told Lucy that it was a joke after he signed the contract, it would still be considered a valid contract.
2. Applying the first prong: How do we know if a reasonable person would understand the statement to be an offer? Look at the following criteria:
a. What was said (or written)?
· What statement was used? “I offer” or “I promise” helpful, but not required
b. How certain/definite was the promise made? (Rest. 2d §33)
· The more certain/definite the promise, the more likely it is an offer
· In Nebraska Seed Co., a commercial transaction initiated by D telling how much seed was available at a certain price was not an offer because the language used was too general to constitute an offer
o Hypo: If D’s
A contract can be found before the final agreement is memorialized in writing, but there must be a manifestation of assent to that extent (Rest. 2d §27)
c. Objective reasonable person standard is applied to determine intent to contract now or after document finalized, evidenced by:
i. Language of documents that have been exchanged
ii. Behavior of parties (i.e. partial performance)
iii. Agreement on essential terms
iv. Complexity/content of transaction to determine expectation of formalism in transaction (more formal à less likely to be a contract earlier)
d. For example, in Empro, “a letter of intent” was held not to form a contractual relationship because it included language that indicated it was “subject to” a final agreement. In this case, the explicit language provided evidence of the intent of the “letter or intent.” Similarly, the court in Texaco applied the above factors in determining whether a memorandum of agreement was binding on two parties. They ruled that when evaluating all of the above factors, there was enough evidence to support the intention of the parties to be bound before execution of a final document. Only objective signs (words and actions) are considered when evaluating intent to be bound now or after final document executed.
[A1]Protects O’e
[A2]Protects O’r by preventing abuse of reasonable person standard
