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Contracts
University of Dayton School of Law
Morris, Jeffrey B.

Contracts
Outline

Approach to Exam Questions

1) Is there a Valid Offer?
a. Intent – objective manifestation of present intent to contract (Attn: State of mind & Prelim negotiations)
b. Content – essential terms of the agreement
i. Yes – Parties, Subject Matter, Time of Performance, Price
ii. No – Interpretation, Imply a Reasonable Term (Gap Fillers)
c. Communication – intent to communicate the offer to the offeree
2) At time of Acceptance, was the Offer still Outstanding?
a. Specific Termination – Expired on Specified Date or Event?
b. Other Termination
i. Reasonable Time Expiration?
ii. Illegality?
iii. Either party die/incapacitated?
c. Rejection or Counteroffer?
d. Revocation?
i. Exception – Option K?
1. consideration
2. reliance
3. firm offers (sale of goods, written offer, signed by offeror merchant)
3) Was there a Defective Acceptance?
a. Mailbox Rule
i. commercially reasonably manner (dispatch), not (receipt), option (receipt)
b. Rejection/Counteroffer
i. Common Law – Mirror Image
1. Additional/varying terms create counteroffer
2. Unless Exceptions
ii. Goods – UCC §2-207
1. Must have Intended to be a Non-Conditional Acceptance = valid K
2. Different Terms – 3 ways to handle (First-Shot, Additional Analysis, “Knockout” Rule)
3. Additional Terms
a. If non-merchant – terms are mere proposals & only accepted if explicitly agreed
b. If both merchants – No K if…
i. Language Expressly Limits
ii. Additional terms are Material (economic impact of profit/loss, risk allocation, impair some remedy)
iii. Objection in Reasonable Time
4. Conduct – if yes, K of agreed writings & UCC gap fillers for disagreement
5. Oral – different (not part of K; either offeror or UCC), additional (same analysis)
c. Unilateral K’s – Bias towards Bilateral K’s; Reliance in Partial Performance Issues

4) Consideration Issues
a. Was there…
i. 1) bargain-for-exchange, of…
ii. 2) legal detriment (i.e. “But for” this bargain not legally obligated to perform or forebear)
b. No Consideration b/c…
i. Illusory Promises (lack of mutuality)
1. Exceptions – full performance of K or implied term (best-efforts or exclusivity in requirements contracts)
ii. Pre-Existing Duty Rule
1. Exceptions (change in duty, unforeseen problems, dispute/settle, UCC modification)
iii. Condition of a Gift? – bare recital of consideration to make gratuitous promise binding (no benefit to promisor)
c. Failure of Consideration? – valid K but material breach b/c consideration failed
d. Inadequacy of Consideration? – valid K (unless fiduciary relationship)
5) Substitute for Consideration?
a. Reliance & Promissory Estoppel Claims
i. Requires: 1) promise 2) reasonable reliance 3) induces such reliance 4) injustice avoid by enforce
b. Restitution
i. Implied in Fact: no acceptance but understanding of intention for compensation
ii. Implied in Law :1) benefit conferred 2) knowledge/acceptance/emergency 3) inequitable
1. Exceptions: Officious, Gratuitous, Not-Measurable
iii. Promissory Restitution & Material Benefit Rule (Moral Obligation & Worries of Enforcement)

6) Statute of Frauds
i. K w/in SOF? – K for Land, K for Goods +$500, & K of +1yr
ii. Was there Memorandum? – 1) identification of subject matter, 2) indicates K btw parties, 3) specifying essential terms, 4) signed by party to-be-charged (voidable if not sufficient memorandum)
iii. Exception? – goods paid for/accepted, specialty goods, lack of mutuality, admission, equal-dignity, reliance
7) Interpretation of K Terms
a. Objective (text) v. Subjective Approach (“know or had reason to know” of diff. interpretation)
b. Course of Performance, Course of Dealing, & Trade Usage (order of importance)
c. Omitted Terms (UCC Gap Fillers to avoid nonexistence of K)
d. Implied Terms (Good Faith , Reasonable Notice of Termination)

8) Parol Evidence
a. Facts must be – 1) agreement 2) written expression 3) litigation re: term/understanding not in writing
b. Issues
i. Integrated Writing? (full or partial re: full expression)
ii. Parol Evidence? (must be prior to writing)
iii. Impact on Writing? (contradict/vary/add v. explanation/defining)
c. Classic (4 corners) v. Modern Approach (explain patent & latent ambiguity)
d. Exceptions

9) Status Defenses
a. Minority – voidable (exception re: necessaries; misrepresentation = restitution relief of mkt value)
b. Incapacity – voidable (exception re: necessaries; but knowledge of incapacity?)
10) Behavioral Defenses
a. Duress – 1) threat 2) inducing manifest of assent 3) no reasonable alternative; economic duress
b. Undue Influence – 1) undue susceptibility 2) excessive pressure
c. Misrepresentation – fraud of inducement (voidable); fraud in factum (void); nondisclosure
11) Substantive Defenses
a. Unconscionability – procedural (process) & substantive (content) unconscionability; possible remedies to avoid voiding K
b. Public Policy – deny enforcement to discourage behavior
12) Justifications of Nonperformance
a. Mutual Mistake – 1) of both parties 2) re: basic assumption w/ material effect 3) voidable unless party assumed risk
b. Unilateral Mistake – mutual mistake factors & either unconscionable/knowledge by other party
c. Impossibility – illegality, death/disability of promisor, & supervening destruction
d. Impracticality – 1) event makes perf. imprac. 2) after K re: basic assump 3) not caused by party 4) no assump of risk
e. Frustration of Purpose – substantial frustration & impracticality factors
f. Modification – pre-existing duty rule & exceptions; SOF issues; NOM clauses; NW clauses, settlement through modification (liquid v. non-liquid dmg’s)

13) Conditions
a. Express (explicit) v. Constructive (implied) v. Promissory (good faith effort) v. Satisfaction (obj v. sub.)
b. Exceptions to Enforcement – Forfeiture, Adverse Interp, Wavier, Estoppel
14) Breach
a. Material v. Not Material
i. Common Law – look at factors & exp conditions – if not substantial performance and cost-of-completion
ii. UCC & Goods – Perfect Performance
b. If Material – Partial or Total – can it be remedied w/in reasonable time for which compensation
c. Anticipatory Repudiation – definite statement of breach allows suit before time of performance; Retracted Exceptions
d. Demand for Adequate Assurance – in writing based on reasonable circumstances/doubts

15) Remedies
a. Expectation
i. Duty to Mitigate
ii. PE as substitute for consideration to create valid K
iii. Damages must pass Foreseeable (or notice given), Certainty (new bus rule), & Causation Test
b. Reliance
c. Restitution
d. Equitable Remedies
i. Substantial Performance
ii. Injunction

16) 3rd Party Beneficiaries
a. Status (intended v. incidental)
i. Is 3rd intended beneficiary (2 elements – direct undertaking by promisor to 3rd , intention of the promisee)
ii. If Yes, have his rights vested (assent, reliance, or litigation; prevents recession or modification)
iii. What Defenses may the promisor raise? Counterclaims to diminish recovery; Set-offs not allowed
iv. What rights, if any, accrue to the promisee? Specific performance, reliance dmg’s, or restitution dmg’s
b. Assignment & Delegation

Sample Intro’s to Sections

Contractual Bargained-For Exchange
D’s promise is enforceable as a bargained-for exchange only if supported by consideration, which would consist of some promise or performance sought by X in exchange for his promise and given by P in exchange for that promise. D’s offer recited as “consideration” for his promise…
Such “past consideration” cannot serve as consideration for a present promise, as D could not be making his promise in order to induce the provision of such services, and P could not have given those services in order to receive the benefits of a promise that had not yet been made.
Because D’s promise was conditioned on X…, that may well have been something that D sought in exchange for her promise and that could provide contr

offers a Harrier jet if someone sends in 7 million points.

C. Legal enforceability: The parties’ intention regarding whether a contract is to be legally enforceable will normally be effective. Thus if both parties intend and desire that their “agreement” not be legally enforceable, it will not be. Conversely, if both desire that it be legally enforceable, it will be even if the parties mistakenly believe that it is not.
1. Presumptions: Where the evidence is ambiguous about whether the parties intended to be bound, the court will follow these rules: (1) In a “business” context, the court will presume that the parties intended their agreement to be legally the enforceable; (2) but in a social or domestic situation, the presumption will be that offer legal relations were not intended.

Example: Husband promises to pay a monthly allowance to Wife, with whom he is living amicably. In the absence of evidence otherwise, this agreement will be presumed not to be intended as legally binding, since it arises in a domestic situation.

Example: A invites his friend B to dinner in his home, and B accepts. There is no K. If A promised B a fee for attending and entertaining guests, and B did so, there would be a K to pay a fee

(a) Duty to read: Generally, parties are obligated to know the terms of the agreement they are signing, and cannot avoid their obligations under the agreement due to a failure to read it. Park 100 (38)

(b) Ordinary care and diligence: While a person relying on another’s representations must use ordinary care and diligence to guard against fraud, the requirement of reasonable prudence in business transactions is not carried to the extent that the law will ignore an intentional fraud practiced on the unwary.

D. Intent to put in writing later: If two parties agree (either orally or in a brief writing) on all points, but decide that they will subsequently put their entire agreement into a more formal written document later, the preliminary agreement may or may not be binding. In general, the parties’ intention controls.

Example: If the parties intend to be bound right away based on their oral agreement, they will be bound even though they expressly provide for a later formal written document.)

1. Where no intent manifested: Where the evidence of intent is ambiguous, the court will generally treat a contract as existing as soon as the mutual assent is reached, even if no formal document is ever drawn up later. But for very large deals (e.g., billion dollar acquisitions), the court will probably find no intent to be bound until the formal document is signed.

E. Restatement sections: §21 (Intention to be Legally Bound)

II. CONSIDERATION – PRIMARY BASIS FOR ENFORCING THE CONTRACT
A. Definition of consideration: As a general rule, a contract will not be enforceable unless it is supported by “consideration.” A promise is supported by consideration if two elements are satisfied:
1. Sufficient underlying promise: The promisee gives up something of value, or circumscribes his liberty in some way (i.e., he suffers a “legal detriment”); and

Bargained-for-Exchange: The promise is given as part of a “bargain”; that is, the promisor makes his promise in exchange for the promisee’s giving of value or circumscription