CONTRACTS Fall 2012
Sources of common law:
1. Primary source of law is judicial opinions of common law (cases that are presidents)
2. Source of common contract law with high degree of persuasion: Restatement 1st – general common law principles by ALI (American Law Institute) in 1932.
Restatement 2nd – 1980. We refer to the 2nd restatement usually.
3. Another important authority is particular Article 2 of the Uniform Commercial Code, UCC, governs all the cases involving the sale of goods.
Kind of contracts
UNILATERAL v BILATERAL.
Unilateral – Promise for performance (Hamer v Sidway – because only one person is obliged, if nephew will abstain, then uncle is obliged to pay, but the nephew is not obliged to abstain, he wont get the money if he will not obliges)
Bilateral – promise for promise agreement
Historically restatement does not use this concept, but the courts do.
Contract formation: an offer by one party and the acceptance by the other party.
Sometimes the response to an offer is a counteroffer. That the other party have to accept in a mirror manner. (If conditions of an offer are changed, not meeting the mirrow rule, it counts as a counteroffer each time) Contract will not be formed until the acceptance in a mirror way will follow the offer.
Nowadays the negotiations are more sophisticated and do not constitute strictly of offer and acceptance, it became a more blurry process.
LAW OF FORMATION OF COONTRACTS:
Historically about offer and acceptance require all major thins be set in agreement: quantity and price.
Yet with output and requirements contract there is no requirement of quantity, the buyer says he will buy all the producer makes
Second problem that requirements contracts raise – addressed in intern airline case – consideration – quantity is in the control of one of the party.
Hawking v. McGee (Hawkins (P) underwent surgery to repair scar tissue on his hand resulting from burns he sustained from contact with an electrical wire. Dr. McGee (D) gave Hawkins a 100% guarantee that he would be able to repair the scar tissue by grafting skin from his chest to his hand. The surgery was unsuccessful and Hawkins was left with a hairy hand. At trial, Hawkins sought damages for breach of contract due to McGee’s failure to perform including pain and suffering. The jury entered judgment for Hawkins but the judge ordered remittitur. Hawkins refused and brought this appeal.)
RULE: The purpose of damages for breach of contract is to put the person in as good position as he would be had the agreement been performed.
The plaintiff was entitled to expectancy damages plus incidental losses resulting from the breach. Expectancy damages are damages sufficient to put the plaintiff in the position he would have been if the contract had been performed.
In this case, Hawkins was not entitled to damages for pain and suffering because he would still have endured them had the procedure been successful. Hawkins was entitled to the difference between what he sought – a perfect hand, and what he received – a hairy hand. The plaintiff was also entitled to incidental losses resulting from the breach. At the and parties settled.
Creating contractual obligations.
ASEENT AND DEFINITENESS
Moral underpinning of contract law is CONSENT it is not surprised that parties should provide manifestation of mutuality and intention to be bound by the terms of the agreement by written document or by start of the performance or by the oral expression of the agreement.
Mechanical character we will be dealing with in this contract.
Person says that there was not manifestation of the agreement, so the law has to decide where there were in fact a deal or no.
1. To distinguish the culmination moment of the agreement distinguishing from the bargaining
2. Protect the agreement form staring the bargaining process again.
Two theories as to when contract is created exist:
1. OBJECTIVE or “meeting of the minds” (nothing to do with the intentions that the parties) by Judge Hand. Subjective or the “actual intent” or “meeting of the minds” by Judge Hand – contract has nothing to do with personal intent of the parties. A contract is an obligation attached by the mere force of law to certain acts of the parties, usually word. And if “20 bishops were to testify that the words meant something else than usually intended, the contract would be enforceable” unless there is some kind of a mutual mistake. This approach can impute intentions that the parties or one of them did not have. Objective approach treats all the varieties of the contracts in the same way, AND they exclude as legally irrelevant consideration of the actual original intention (in all contracts and all phases of the contracts)
2. SUBJECTIVE by Judge Frank – the intent of the person on the moment of making the contract matters. (intendment, meant, believed).
OBJECTIVE THEROY IS USED – reasonable person test – wherether the reasonable person would conclude that the party’s words and actions constitute an offer.
Lucy v. Zehmer (an old friend had a contract written on the restaurant receipt for buying a land from the owner of the restaurant who with his wife signed that paper.)
RULE: In determining whether a party has made a valid offer, the words and actions of the party are interpreted according to a reasonable person standard. If the words or other acts of one of the parties have but one reasonable meaning, his undisclosed intention is immaterial except when an unreasonable meaning which he attaches to his manifestations is known to the other party.
The court looks to th
more info. Note 3.
Competitive bidding – a bidder is the one who is making an offer.
§2-328 sales of good by auction (not land) – if the sale is “without reserve” the auctioneer is bound not to withdraw after a bit is made, but the bidder is not similarly bound.
Page 136, note 4.
WHEN THE OFFER LAPSES?
1. Generally the offer can be revoked by the offeror at any time BEFORE acceptance.
2. If the offeror does not revoke it, and does not have an indication that the offer is lapses, it will be counted as its lapses at REASONABLE TIME. Reasonable time depends on what kind of market you are in. (in civil law countries, they say that the offer is irrevocable for the reasonable time. Civil law approach is designed to provide the dtable bases of the decision for the offeree. US tries to respond to the same interest by 2 related rules –
– (1) – revocation MUST be communicated to terminate the power of the acceptance;
– (2) – mail box rule – acceptance is effective on dispatch (sending out) – effective when you mailed it! So offeror can not revoke it when the mail was sent with acceptance of his offer.)
Owen v. Tunison (Plaintiff sent a letter to Defendant asking to buy a certain property for $6000. Defendant wrote a reply that described that “it would not be possible to sell unless I was to receive $16,000 cash.” Plaintiff then sent a message that he accepted the offer to buy for $16,000.)
RULE: A statement of a minimum selling price is not an offer.
An offer is an act that must express the will or intention to allow an offeree to reasonably believe that the power to create a contract. It excludes situations that evidence intent to deal or open negotiations.
“I am willing to offer” is NOT an offer in this sense.
Reasoning: Courts look to similar language that had been determined to be intent to negotiate or bargain rather that intent to offer a contract for sale such as “would not consider less than” an amount or language that generally might be used in an advertisement. The Court found the language of the letter “not be possible to sell unless” did not manifest an intention to give Plaintiff the power to close a final deal with his acceptance.
Damages: if the contract was enforceable, the remedy would be specific performance because its land.