Contracts
Kurlantzick
Fall 2012
Ch. 1 Is there an agreement?
I. OFFER – REVOCABLE UNTIL ACCEPTANCE – 3 Stages – A manifestation of commitment
A. Was the initial communication/call/email an offer? If not, why not and where was the offer? Evaluate:
1. Objective Standard – Would a reasonable person think that there was an agreement? (no meeting of minds)
a. Lucy v. Zimmer – Contract entered into in a bar, written. Zimmers said that it was a joke.
2. What was said:
a. Missing Terms: It is not necessary that all terms of the deal be spelled out. However,
b. Vague Terms: Watch for: FAIR, APPROPRIATE OR REASONABLE – tell prof that this sort of vague language creates problems and this communication may not be an offer.
c. Courts are moving towards accepting more indefiniteness – See Toys & Armco – Ch. 2
d. UCC §204.3: “Even though one or more terms are left open a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy.”
e. ***See What are the Terms – Ch. 2
f. Setting: lawyers office more likely than a bar to lead to a contract
g. Advertisements: Generally not offers.
3. Rest. § 33. Certainty: (1) Even if an offer is intended, it cannot be accepted so as to form a contract unless the terms of the contract are reasonably certain. (2) The terms of a contract are reasonably certain if they provide a basis for determining the existence of a breach and for giving an appropriate remedy. (3) The fact that one or more terms of a proposed bargain are left open or uncertain may show that a manifestation of intention is not intended to be understood as an offer or as an acceptance.
II. Termination of Offers and Holding Them Open
A. $ Death – SHOULD NOT KILL OFFER; Rest. Is wrong – seems to make more sense w/ ‘meeting of minds’ and is at odds w/ the objective standard – Some cases allow banks to pay checks from decedent
B. Offer lapses after a reasonable amount of time or when expressly dictated (Wheat:hours?/House:Month?)-Ever-Tite Roofing
C. Revocation: Offeror (him only) changes his mind: Even if he promised not to revoke (opposite of some civil law countries)
1. Offeror must UNAMBIGUOUSLY indicate that he changed his mind
2. It must be COMMUNICATED to the offeree by WORDS OR ACTION – seeing someone else driving the car is sufficient b/c it’s unambiguous & communicated (Rest. §43 = Indirect revocation by a behavior inconstant with the offer remaining open)
3. Offeree does NOT need to receive this communication
4. Dickenson v. Dodd: O can revoke the offer even if he has promised to keep it open. B/c there is no consideration to keep it open. – UCC changes this for merchants with written offers.
III. Irrevocable offers
A. Option Contract: Offer +Paid for promise not to revoke – Rest. § 87
B. Reliance on the offer that was reasonably foreseeable
1. GC/Sub bids: GC relies on Sub bid to make his bid – Sub can’t revoke after GC submits bid
2. Elsinore School Dist. Case – no reliance; Bidding contractor tried to revoke next day.
C. UCC: Firm offer rule: §2-205 Merchant makes offer in signed writing – Irrevocable in 3 months; or when stated
1. Firm offers must still be revoked – they do not automatically lapse
D. Unilateral Contracts – Offer that can only be accepted by performance/completion, no promise
1. At Start of Performance, an option contract is formed & offeror can’t revoke
2. Mere Preparation is not start of performance
a. Ragosta v. Wilder – Δ tells Π that he will sell him his shop if he shows up at the bank with the financing on a specific day. Δ tries to revokes while Π is gathering the financing. Mere Preparation.
E. Irrevocable by statute – Elsinore School Dist. Case
IV. Responses – look to the offer b/c offeror is master of his offer & controls means of acceptance; must be reasonable – can’t respond to a faxed price for wheat with a snail-mail letter
A. Acceptance:
1. International filter: – The Offeror is allowed to modify or dispense with the requirement for notice of acceptance.
a. Rule was that acceptance did not require notice, sent it anyway, didn’t matter if it was sufficient.
2. Automated response is not an acceptance – Corinthian v. Lederle Laboratories
3. Mailbox Rule: People at a distance, communication delays (not tech savvy), inconsistent communications
a. Acceptances: Effective when SENT; Everything else: upon receipt; letters cross in transit = acceptance wins
b. Option Contract Exception: Only affective upon RECEIPT
4. Once accepted, offer can’t be revoked – can’t squish a butterfly
5. Acceptance by performance OR giving notice: Acceptance must be communicated either by words or by conduct that unambiguously demonstrates acceptance: Not necessary that offeror actually receives acceptance.
a. Ever-Tite Roofing Corp. v. Green: Agreement to re-roof and pay on installments. Deal only binding upon written acceptance or commencement of work. Understood that Π needed to check Δ’s credit first. 8 days later, Π shows up and another contractor is doing the work. Offer lapses after a reasonable time, that was reasonable, never revoked. – Π gets $85.37 for loading the trucks and $226 in lost profits.
b. White v. Corlies & Tift – He began performance by buying wood, he didn’t do anything that would indicate acceptance to them. He buys wood for a lot of things – see Ever-Tite roofing, acceptance by showing up
B. Ignore the offer – Lapses after a reasonable time – Rest. §41
C. Rejection
1. Direct rejection – Hell no!
2. Counter offers – Indirect rejection, kills the offer
3. Conditional Acceptance – Indirect rejection, kills the offer. “On condition that” “If” “Only” “Provided” “So long as”
4. Mirror Image Rule – Common Law Only – different terms, add or change anything, no contract
a. Look for offer & purported acceptance that adds terms; restates the deal and adds delivery date or like
b. Rest. § 59. Purported Acceptance Which Adds Qualifications
i. A reply to an offer which purports to accept it but is conditional on the offeror’s assent to terms additional to or different from those offered is not an acceptance but is a counter-offer.
5. UCC 2-207 – UCC abolished Mirror image rule. You have a contract, new terms are generally not a part
i. If terms are not objected to and there is performance, usually good & Language of Condition: Makes the new communication counteroffer?
b. Don’t say: “this is a sale of goods, so 2-207 applies” It only applies with additional terms in acceptance
ation: Father can convey land to son for $1 – IS binding
2. Restatement 2: Peppercorn NOT Sufficient Consideration: Mere Pretense
3. Today: Form a trust.
J. Pre-existing Legal Duty Rule (Concerned w/ overreaching) – Rest.§73: MUST RUN THROUGH THE HISTORY
1. Common Law: You need new consideration to modify a common law contract
a. If a modification only benefits one side it is void for lack of consideration. Reasons: (Alaska Packers)
i. No commercial reason to seek modification.
ii. One party has the other over a barrel – hold up game
b. Alaska Packers: Crew demands more money after they left – playing the hold-up game
c. The slightest change in (or addition of) duties is enough to be consideration
i. Rest. §73 – “Performance of a legal duty owed to a promisor which is neither doubtful nor the subject of honest dispute is not consideration; but a similar performance is consideration if it differs from what was required by the duty in a way which reflects more than a pretense of bargain.”
2. Historical Change to CL- Watkins Case gave rise to Rest. §89
a. Watkins & Son v. Carrig: Contractor to build cellar, found bedrock that increased price 9X. Parties agreed to new price and owner refused to pay new amount based on preexisting legal duty rule. Court held that contract was rescinded and a new contract was made. This later gave way to the restatement §89. – Legit commercial reason + owner knew what he was getting into.
i. Oral agreement valid b/c rescinded old deal & entered a new deal simultaneously.
ii. **NOT TYPICAL WAY RESCISSION THOUGHT OF**
b. Rest. §89(a): Written so legal fiction of Recession & New Deal is not necessary & it’s more predictable
i. Exception for fair and equitable circumstances which were unforeseen by both parties at the time of contract (hitting bedrock – Watkins Case)
ii. § 89. Modification of Executory Contract
A promise modifying a duty under a contract not fully performed on either side is binding:
(a) if the modification is fair and equitable in view of circumstances not anticipated by the parties when the contract was made; or (b) to the extent provided by statute; or (c) to the extent that justice requires enforcement in view of material change of position in reliance on the promise
3. UCC 2-209 – basically abolishes for sale of goods – Agreements to modify must ONLY be in good faith
a. Modification of $500 of more must be in writing – Statute of Frauds (Reliance may overcome, but separate issue)
4. Rule is becoming disfavored, courts bend offer backwards to ameliorate the rule. Recession; even a tiny change; UCC abolished & only req. good faith.
