IBH Contracts Outline
I. Contracts Generally and Objective Theory of Contracts
a. A contract is; “A promise, or set of promises that the law will enforce or at least recognize in some way” – Farnsworth
b. Confined to promises that the law will enforce- therefore primarily deals with exchanges as courts require some consideration
c. Promise aspect suggests that contracts deal with future behavior
i. Contracts differ from other areas of law-they are consensual and for the law must try to infer parties intentions at the time of the agreement
ii. Economic Analysis; Exchange is socially desirable to facilitate allocative efficiency, to that end contract law enforces voluntary exchange.
d. Objective tests for mutual assent
i. Courts gauge how a reasonable person would have interpreted the parties behaviors
ii. This is an issue of fact and has increasingly been left to juries
e. It is not required that parties actually intend to be legally bound (subjectively)
f. Modern View: parties’ intention for legal enforceability depends largely on context of the agreement
i. Problem1-1- break a date costing the other person money; Words that may otherwise give rise to a K do not b/c the situation and nature of the agreement are not something the law will enforce
g. Agreement only required as to major terms; as long as parties intended to from a K, courts will sometimes fill in some details
Lucy v. Zehmer [objective test for offer, did they objectively manifest intent?] – D signs a paper saying he will sell P his land for $50,000. D’s wife also signs the paper
– D had been drinking and claims he was only joking
– P believed they had negotiated a sale since the D did not manifestly show that here was not serious about the sale
– Held: P wins; court uses an objective perspective to ask if a person would have believed the D was serious in negotiating this deal
– Was the mere signing of the note enough assent?- Royce says some further gesture must be made- note must be delivered
h. R2d § 19; (1) The manifestation of assent may be made wholly or partly by written or spoken words or by other acts or by failure to act.
(2) The conduct of a party is not effective as a manifestation of his assent unless he intends to engage in the conduct and knows or has reason to know that the other party may infer from his conduct that he assents.
(3) The conduct of a 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.
i. Unless there is manifest intent NOT to be legally bound
Embry v. Hargadine adds a subjective test; “If what McKittrick said could have been taken by a reasonable man… and Embry so understood it”
a. R2d §24; “manifestation of willingness to enter into bargain, so made as to justify another person in understanding that his assent is invited and will conclude it.”
b. An offer creates power of acceptance–Offer test: An offer leads offeree to reasonably believe that either promise or performance will form a K –
There is only one, constant, unexcepted criterion that can be stated: the expression must be a promise. From this base, the following guide can be constructed: If a statement is sufficiently definite and there is a manifestation of commitment, a promise designed to induce action or for
Courteen Seed v. Abraham: Held that D’s telegraph was an invitation to negotiate further rather than an offer. Use of the word “asking” as opposed to “offer” is not controlling but may be persuasive
Southworth v. Oliver: rancher corresponding about sale of land, sending information to two different neighbors. Held: Letter was a valid offer b/c P could have reasonably understood it as such—no reason for P to suspect that D was sending ‘info’ to another also
Continental Labs v. Scott Paper: Oral agreement appeared to be reached about hotel supplies. Held: the agreements was not sufficiently definite, D showed a desire to not be bound w/out written signature
MGM v. Scheider: company and actor agreed to basic terms and a pilot episode was filmed.
Held: commencement of performance had begun- the essential elements were set with good-faith understanding even though finalized agreements weren’t signed. P. 57  court will enforce a K and use “some objective method” from elsewhere to fill in the gaps- i.e. “course of dealings”-past relationships and practices, industry protocol etc.
– R2d § 33 Certainty:
– 2) “The terms of a contract are reasonably certain if they provide a basis for determination of a breach and for giving an appropriate remedy”
– Remedy is obvious here- completion of acting duties in filming of show