I. CONTRACT FORMATION
There must be mutuality for an agreement to be enforceable
i. manifestation of assent
§17 requirement of a bargain “the formation of a contract requires a bargain in which there is a manifestation of mutual assent to the exchange and a consideration”.
what you must have for a contract:
1 – bargain
2 – manifestation of mutual assent
3 – exchange
4 – consideration
§18 manifestation of mutual assent “manifestation of mutual assent means that each party either makes a promise or renders a performance”
§19 Conduct as manifestation of assent
(1) manifestation of assent may be made wholly or partly by written or spoken words or by other acts or by failure to act.
(2) Conduct is not effective as manifestation unless he intends to engage in the conduct and knows or has reason to know that other party may infer assent from his conduct
(3) Conduct of party may manifest assent even though he does not in fact assent. In such cases a resulting contract may be voidable because of fraud, duress, mistake, or other invalidating cause.
§22 mode of assent: offer and acceptance
(1) manifestation of mutual assent is usually in form of offer/acceptance.
(2) but, there may be a manifestation of mutual assent even if neither offer nor acceptance can be identified and even if the moment of formations cannot be determined (eg., in complex negotiations).
Case 21: Dickinson v. Dodds, Options contract for sale of property sold to third party
I: Should SP be given to an options contract whereby the D gave P till 9am the following day to determine whether he wanted to purchase the property and then D sold property to third party within that time which P knew about before deciding to accept offer?
Lower Ct: According to §42, revocation by D must be conveyed to P explicitly
R1: no need for express or actual withdrawal from offer, can be inferred from D’s intent to sell to third party
R2: no meeting of the minds at time P chose to accept offer (D already intend to sell to another), therefore no contract
R3: Promise to hold till 9am is a promise without consideration, therefore it’s not binding
§42 revocation by communication from offeror received by offeree “an offeree’s power of acceptance is terminated when the offeree receives from the offeror a manifestation of an intention not to enter into the proposed contract”.
§43 indirect communication of revocation “power of acceptance is terminated when the offeror takes definitive action inconsistent with an intention to enter into the proposed contract and the offeree acquires reliable information to that effect”
§ 24 Offer defined “ 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.”
§ 25 Options contract – is promise which meets the requirements for the formation of a contract and limits the promisor’s power to revoke an offer. (e.g. A promises B under seal or in return for $100 paid or promised by B that A will sell B 100 shares of stock for $5000 at any time within 30 days that B selects. This is an option contract, B has an option).
requirements of an effective revocation:
1 – words or conduct must be clear
2 – must be communicated to offeree
3 – effective when received (minority rule is w
H: objective standard applied: what D’s intentions were totally irrelevant in deciding if a contract is formed à if what he says would have been taken by a reasonable person to be a contract as P so understood it, it constituted a valid contract.
Case 23: Texaco v. Pennzoil, Texaco attempts to interrupt business dealings of Pennzoil & Getty p. 341
F: Pennzoil wanted to do a deal with Getty Oil, and thought it had a deal done. Getty’s Board voted 15-1 for it, memorandum signed by almost all parties, binding letter signed by Chairman of Getty, press release announced tentative deal, etc. Then Texaco came in and stole the deal
I: should manifestations of intent be considered only between parties and not to third parties?
R1: objective manifestations of intent of parties and expressed by words and deeds that determine whether that parties have actually entered into a contract.
R2: conduct not effective as manifestation unless he knows other party may infer assent from conduct.
Case 24: Lucy v. Zehmer, drunken sale of land on back of restaurant check
F: P and D were old acquaintances and out drinking one night. P offered to buy D’s farm, D said P couldn’t raise the money for it, P said he could. D wrote out a contract for sale, signed it, and got his wife to sign it too. P offered an immediate down