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Contracts
University of Dayton School of Law
Dickinson, Kelvin

CONTRACTS OUTLINE
 
I. The Autonomy and Security Principles
 
INTRODUCTION
 
-Promise: a commitment or an undertaking that some event will or will not occur in the future; made by using express words or implied by conduct or some form of words and conduct R §§2,4
 
•Hawkins v. McGee: Purpose of awarding damages for breach of contract is to put the plaintiff in as good a position as he would have been in had the defendant kept his contract.
Restatements §§1-5
 
-Statements of Mutual Assent, see Restatements §17-20
            •Lucy v. Zehmer holds that if a person’s words and acts, judged by a reasonable standard, manifest a certain intent, it is immaterial what may be the real but unexpressed state of that person’s mind.
            -For more on
 
FORMATION – OR NOT – OF AN AGREEMENT
 
•Embry v. Hargadine, McKittrick Dry Goods Co. holds that the secret feelings, intentions, or beliefs of a party will not affect the formation of a contract if their words and acts indicate that they intend to enter into a binding agreement.
-if the other party reasonably relies on the promise, an undisclosed intention will not affect the formation of a binding contract. 
 
•Oswald v. Allen (“The Meeting of the Minds” case) holds that a contract does not exist when the terms used to express an agreement are ambivalent, the parties understand the terms in different ways, and neither party should have reasonably been aware of the other party’s understanding.
-subjective beliefs DO matter at least where the parties have different understandings of the basic material elements of the deal, in this case, what is being sold
 
OFFER & ACCEPTANCE
b. Offers
R §24: Offer Defined
•Mesaros v. US holds that where one party solicits and receives an order or other expression of agreement from another, clearly specifying that there is to be no contract until ratification or assent by some officer or representative of the solicitor, the solicitation itself is not an offer, it is a request for an offer
-most of the time, ads do not solicit an offer and sending in an order is not acceptance
*Exception to Mesaros:
•Lefkowitz v. Great Minneapolis Surplus Store holds that a newspaper ad (for the sale of an article) which is clear, definite and explicit, and leaves nothing to negotiation is an offer, acceptance of which will create a binding contract.
-a binding obligation may originate from an ad if the facts show that some performance was promised (in the ad) in positive terms in return for something requested
 
c. Powers of Acceptance
R §35: Offeree’s Power of Accceptance
R §36:  Methods of Termination of the Acceptance
R §41: Time Lapse for Acceptance
•Akers v. J.B. Sedberry, Inc. holds that an offer made by one to another in a face-to-face conversation is deemed to continue only to the close of the conversation and cannot be accepted thereafter.
-Plaintiffs offered resignation and Defendants said nothing at the time, but accepted it the next day; such offers must be accepted within the close of conversation or if no time is fixed, within a “reasonable amount of time”
 
Counter-Offers
R §38: Rejection
R §39: Counter-offers
R §59: Purported Acceptance that adds Qualifications
•Ardente v. Horan holds that an acceptance which is equivocal or upon condition or with a limitation is a counteroffer and requires acceptance by the original offeror before a contractual relationship can exist.
-Ps accepted sale of house then proposed that additional items remain on the property – forming a counteroffer that Ds rejected
-“Nevertheless, an acceptance may be valid despite conditional language if the acceptance is clearly independent of the condition” BUT that does not occur in this case
R §42-43: Revocation
•Petterson v. Pattberg rules that an offer into a unilateral contract may be withdrawn at any time prior to performance of the act requested to be done.
 
OPTION CONTRACTS
R §25: Option Contracts
R §37: Termination of Option Contracts
R §45: Option Contract Created by Part-Performance
•Marchiondo v. Scheck rules that where an offer invites an offeree to accept by rendering a performance, an option contract so created is conditional on the offeree’s completion of performance in accordance with the terms of the offer.
– in case of unilateral offer, the beginning of performance renders the offer irrevocable; if offerree finishes performance, then contract is bound, but if he doesn’t then contract was not accepted and there is no issue.
 
d. Acceptance
R §§50-69: Acceptances
•Davis v. Jacoby rules that in case of doubt, it is presumed that an offer invites the formation of a bilateral rather than a unilateral contract.
-Unilateral contract = no promisor receives a promise as consideration for his promise
-Bilateral contract = mutual promises between two parties to the contract; each party being both a promisor and a promise
-Restatements have jettisoned the terms bilateral and unilateral contracts because they find them confusing and misleading
 
R §19: Conduct as Manifestation of Assent
R §69: Acceptance by Silence or Exercise of Dominion
•Houston Dairy, Inc. v. John Hancock Mutual Life Insurance Co. rules that a purported “acceptance” by an offeree after the time for acceptance designated by the offeror has expired constitutes a counteroffer, which must be separately accepted in a communication by the original offeror to the original offeree.
-Silence = no way of knowing whether the offer had been accepted or rejected,
•Cole-McIntyre-Norfleet Co. v. Holloway rules that delay in notification amounts to acceptance of an offer when the subject goods of the contract will become unmarketable by delay.
 
•Seaview Ass’n of Fire Island v. Williams rules that where there is knowledge that a private community homeowners’association provides facilities and services for the benefit of the community residents, the purchase of property there may manifest acceptance of conditions of ownership, including payment for the facilities and services offered. 
-there was an implied contract between the Defendants and the Ps that includes paying a proportionate full cost of maintaining the facilities and services where acceptance of the implied contract is buying the property on the island
-this case highlights the idea of fair play as an alternative to consent in contract cases
 
e. Formation of a Contract Under the UCC
-UCC §2-204, 2-206 are key and cover sale of goods
-UCC §2-105: Definition of Goods
2-314
•ProCD, Inc. v. Zeidenberg rules that a buyer accepts goods when, after an opportunity to inspect, he fails to make an effective rejection.
-UCC does not countenance the sequence of money now, terms later
•Empire Machinery Co. v. Litton Business Telephone Systems rules that where a buyer-offeror makes an offer to purchase by means of a form supplied by the seller-offeree, the buyer-offeror has the power to waive any specified manner of acceptance in such a form, and thus the offer can be deemed accepted and ripened into a contract if the seller-offeree takes actions that are directed toward the contractual obligation.
-cites Comment 1 to UCC §2-206 that an acceptance of a contract could only be made in the manner and medium of the offer
 
– UCC § 2-207. Additional Terms in Acceptance or Confirmation
•Ionics, Inc. v. Elmwood Sensors, Inc. rules that where the terms in two forms are contradictory, each party is assumed to object to the other party’s conflicting clause.
-This is really a technical interpretation of the UCC
-UCC §2-207

devalued currency had some value, so the contract cannot be voided
• Newman & Snell’s State Bank v. Hunter: In order for a contract to be valid, valuable consideration must be exchanged between the two parties.
-When the P surrendered the something of no value to the D, it parted with nothing of value, and D received nothing of value, the P suffered no loss and the D received no benefit; the weight of authority is behind D, but it is clear that the transaction was without consideration
 
R § 74: Settlement of Claims 
•Dyer v. National By-Products, Inc.
Facts: Plaintiff claimed that he had a deal with Defendants that he would not sue for negligence if he had a job for life with the company
Issue: Does settlement of an unfounded claim asserted in good faith constitute valuable consideration for a settlement agreement?
Rule: Settlement of an unfounded claim asserted in good faith constitutes valuable consideration for settlement agreements.
-as a matter of policy, the law favors compromise and such policy would be defeated if a party could second-guess his settlement and litigate the validity of the compromise
-that the forbearing party assert the claim in good faith sufficiently protects the policy of law that favors settlement of controversies
 
UCC 2-306(1): Output, Requirements and Exclusive Dealings
•Wickham & Burton Coal Co. v. Farmers’ Lumber Co.
Facts: P and D entered into an oral agreement whereby P would supply all of D’s need for coal whenever he wanted coal, but there is no obligation on the part of the D to buy the coal and he was not constrained to solely buy from P
-Classic Example of an illusory promise: “I’ll buy as much of X as I want”
Rule:  a contract to sell personal property is void for want of mutuality if the quantity to be delivered is conditioned entirely on the will, wish or want of the buyer
­-when one party offers to sell as much as the other wishes, there is a contract after the other declares what quantity he will take
•Wood v. Lucy, Lady Duff-Gordon
Facts: D contracted P to have the exclusive right endorse and market designs by D, but D broke the contract by endorsing designs without P’s knowledge.
Issues: If a promise may be implied from the writing even though it is imperfectly expressed, is there a valid contract?
Rule: While an express promise may be lacking, the whole writing may be instinct with an obligation – an implied promise – imperfectly expressed so as to form a valid contract.
Rationale:  **In determining the intention of the parties, the promise had a value and the P has duties: to pay the D one-half of the profits and revenues resulting from the exclusive agency and to render accounts monthly was a promise to use reasonable efforts to bring profits and revenues into existence
-If UCC applied, Sec. 2-306: in any contract where there is a sale of goods, there is an implied promise on the other side to use best efforts to fulfill their end of the bargain
àbut this is not a sale of goods, so oh well, UCC DOES NOT apply