CONTRACTS JIMENEZ FALL 2016
applies
Theme of Contacts
Freedom TO contract
Freedom FROM contract
Sources of Law
Mutual Assent
Objective Theory: Would a reasonable person in the position of the offeree understand from the offeror’s words and conduct an intent to be bound? AND Did the offeree in fact believe so?
Subjective Theory: Was there mutual assent? Did both litigants mean to enter into a contract? Whether the litigant seeking to enforce the contract believed that the other part meant to enter into a contract
Ads
General Rule: an ad does not constitute an offer. It’s either a notice soliciting offers or just notice that goods will be offered
Exception: when the ad is clear, definite, explicit, and doesn’t allow negotiation
Restatement (Second) of Contracts:
Restatement § 21: Intention to Be Legally Bound
Neither real nor apparent intention that a promise be legally binding is essential to the formation of a contact, but manifestation of intention that a promise shall not affect legal relations may prevent the formation of a contract.
Restatement § 22: Mode of Assent (Offer and Acceptance)
The manifestation of mutual assent to an exchange ordinarily takes the form of an offer or proposal by one party followed by an acceptance by the other party or parties
A manifestation of mutual assent may be made even though neither offer nor acceptance can be identified and even though the moment of formation cannot be determined.
Restatement. § 24 –An offer is.. manifestation of a willingness to enter into a bargain is not an offer if the person to whom it is addressed knows or has reasons to know the person making it does not intend to make a bargain until he has made a further manifestation of assent.
Lucy v. Zehmer- CB 47
Facts: Parties were drinking at pub and Zehmer (landowner) formed written agreement with Lucy (buyer) to sell land. Zehmer says he was kidding, but this was not apparent to Lucy.
Holding: to decide whether parties intended to be bound (mutual assent), the trial court should consider: the practice of trade or profession, prior practice between parties, whether written contract was drawn up by persons other than the parties, and statements made during the negotiations.
A person cannot set up that he was merely jesting when his conduct and words would warrant a reasonable person in believing he intended a real agreement.
The mental assent of the parties is not requisite for the formation of a contract.
If the words or other acts of one of the parties have but one reasonable meaning, his undisclosed intention is immaterial except when the other party is aware of the unreasonable intentions of the other party.
Objective Theory Test
Reasoning:
The mental assent of the parties is not requisite for the formation of a contract.
If the words or other acts of one of the parties have but one reasonable meaning, his undisclosed intention is immaterial except when the other party is aware of the unreasonable intentions of the other party.
Longergan v. Scolnick – CB 70
Facts: Scolnick placed ad to sell farm in newspaper to sell farm. Longergan notified him of his interest in the farm. Scolnick told Longergan to decide fast because he expects another buyer soon. Longergan responded four days later and farm was already sold to someone else.
Holding: No contract, ad was request for offer. No actual offer or acceptance. Does not fall under exception because terms of promotion were not sufficiently plain and clear to overcome general presumption against finding a binding offer to sell in a general ad.
A contract is officially formed when one party makes an offer and the other party assents to the offer.
“If…the person to whom the promise is addressed knows or has reason to know that the person making it does not intend it as an expression of his fixed purpose until he has given a further expression of assent, he has not made an offer.”
An advertisement is a mere request for an offer.
Reasoning:
The can be no contract unless the minds of the parties have met and mutually agreed upon some specific thing.
The correspondence indicated an intention on the part of the D to find out whether the P was interested, not an intention to make a definite offer to the P.
The statement that D expected to have a buyer in the next week or so indicated that D intended to sell to the first-comer and was reserving the right to do so.
P should have known that he was not being given time to accept an offer, but that some further assent on the part of the D would be required.
Offers
General Rule Creating Offers: A statement will be considered an offer if a reasonable person would think that they can complete the deal by simply giving their assent. Offers can be explicit or, in certain situations, implicit. Whether a reasonable person would find an offer has been made will depend on a lot of circumstantial information
(Restatement §24)
Manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent is invited and will conclude the bargain
Restatement (Second) of Contracts § 17: Requirement of a Bargain
(1) Except as stated in Subsection (2), the formation of a contract requires a bargain in which there is a manifestation of mutual assent to the exchange and a consideration.
THREE PARTS: bargain, mutual assent, consideration
(2) Whether or not there is a bargain a contract may be formed under special rules applicable to formal contracts or under the rules stated in §§ 82-94.
UCC § 2-204: Formation in General – DEFINITION of OFFER
(1) A contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract
(2) An agreement sufficient to constitute a contract for sale may be found even though the moment of its making is undetermined.
(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
Maryland Supreme Corp. v. Blake Co. – CB 74
Facts: contractor (Blake) hires subcontractor (MSC) for concrete after receiving letter, guaranteeing price. MSC changes price of concrete states was merely a quote. Letter constituted the offer.
Holding/Rule: letter constituted a definite and certain offer for it gave assurance as perceived by a reasonable person as applied to the situation at the time the “offer” was made. Was definite and certain.
Destroying Offers
Rejection
Anything but a complete “Yes” is rejection
Express rejection – offeree expressly states that he does not accept the offer
Implied (Indirect) rejection – offeree rejects the offer without expressly stating so
EX: a counter-offer is an indirect rejection
Revocation
Offeror has opportunity to destroy offer
Direct Revocation – until acceptance, offeror has full control and mastery over her offer including the right to modify or terminate the offer
Indirect Revocation – isn’t expressly stated, but can be inferred by the actions taken by the offeror (Dickinson v. Dodds)
Dickinson v. Dodds – CB 98
Facts: seller of house told buyer that the offer would be valid until 6/12. Buyer decided to buy on 6/11, but didn’t tell seller. Seller sold to another person, buyer was told this by a 3rd party.
Holding: Seller’s actions of selling to another person is an indirect revocation of the offer to the original buyer.
Lapse
An offer lapses after the period stated in the offer or, if no duration is stated, after a reasonable time
Courts look at the circumstances surrounding the offer to determine what constitutes a reasonable time
Have to think about if it’s a price that changes drastically over a short period (i.e. gas), if so then very little time to respond (same day) before offer lapses
Minnesota Linseed Oil Co. v. Collier White Lead Co. – CB 103
Facts: telegrams back and forth between buyer/seller for oil, a product whose market price changes rapidly; buyer receives offer on Friday, but does not accept until following Tuesday
Holding: if a party does not accept the offer within a reasonable time (set by market condition, norms of the industry, previous dealings between parties, etc.), then it is said to terminate via lapse.
Death/Incapacity of offeror/offeree
An offeree’s power of acceptance terminates when the offeree or offeror dies or is deprived of legal capacity to enter into the proposed contract
Even if still-living party didn’t know of the offeror’s death
Preserving the Offer—Option Contracts
General Rule: all offers are revocable (even if they say it’s not revocable), unless supported by independent consideration or statute
An offer will only be considered to be irrevocable if it is accompanied by some sort of consideration given by the promisee.
Beall v. Beall – CB 110
Facts: contracts between parties to use land; Calvin chooses to exercise another f
t making a commission off of Smiths
Mailbox Rule – If I make an offer to you and you accept by mail, the acceptance is valid as soon as you mail it out. But only if it is reasonable for you to accept via mail. ONLY APPLIES TO ACCEPTANCES
EVERYTHING OTHER THAN ACCEPTANCE (REVOCATION OR REJECTION) IS ONLY EFFECTIVE UPON RECEIPT
Restatement § 40 – if a rejection is mailed first, but then an acceptance later, the rule is that the first to arrive governs.
Acceptance by performance—Unilateral Contract—Option contract once begin performance
Common Law: Required complete performance for acceptance (and allowed revocation any time before then);
Carlill v. Carbolic Smoke Ball Co. (England, 1893) – CB 149
Rule: a person who makes an offer can get notice of acceptance via performance. Does not necessarily have to have notice before completion of the act.
The ad was an offer.
The Consideration was seeking to induce consumers to purchase its product. Also, Ms. Carlill, by using the product, was motivated by the offer to do something she was not legally required to do.
Rule: If a party makes a unilateral offer (acceptance by performance only), then, unless they specify that they want notice, performance of the act alone is sufficient for acceptance. But you do have to notify them of your finished performance within a reasonable amount of time.
Modern Rule: Restatement § 45
(1) Where an offer invites an offeree to accept by rendering a performance and does not invite a promissory acceptance, an option contract is created when the offeree tenders or begins the invited performance or tenders a beginning of it.
(2) The offeror’s duty of performance under any option contract so created is conditional on completion or tender of the invited performance in accordance with the terms of the offer.
i.e. also requires complete performance for acceptance, but says that when an individual starts performing, they create an option contract that makes the offer irrevocable for a reasonable period of time—so you have time to finish performance and complete acceptance.
Important black letter rule: preparatory / prefatory (introductory, preface) activities don’t count as part performance for R2C 45 – only acts that actually constitute part of performance do!
Acceptance by Silence or Inaction
General Rule: silence or inaction alone are not sufficient to constitute an acceptance.
Laredo National Bank v. Gordon (5th Cir., 1932) – CB 161
Facts: Gordon worked for bank, contingency fee = 25%. They didn’t want him to work for them anymore. Gordon stipulated that his fee would be just a flat $12,500 instead of the 25%. Bank doesn’t answer for a long time; then says they won’t pay it.
Rule: Silence can be considered an acceptance of an offer if both parties continue to operate as if there was in fact an agreement. Plus they said he needed to tell them his fee right away and he did, they should have responded right away too.
Restatement § 69 Acceptancy by Silence or Exercise of Dominion
(1) Where an offeree fails to reply to an offer, his silence and inaction operate as an acceptance in the following cases only:
(a) Where an offeree takes the benefit of offered services with reasonable opportunity to reject them and reason to know that they were offered with the expectation of compensation.
(b) Where the offeror has stated or given the offeree reason to understand that assent may be manifested by silence or inaction, and the offeree in remaining silent and inactive intends to accept the offer.
(c) Where because of previous dealings or otherwise, it is reasonable that the offeree should notify the offeror if he does not intend to accept.
