Contracts – Fall 2010
Moffat
Overview – Key Policy Concepts
o Considering competing policies – contracts should be:
§ Equitable – contract law should be fair
§ Equitable/fairness – every contract has the same policies. Contract should be enforceable because there are no other options.
§ Ex: Dell has a leg up because of their legal dept.
§ Not necessarily consistent – treat members of same group the same, but differs from group to group.
§ Consistent – contract law should apply even-handedly to all members of society
§ Treat ALL people alike, regardless of group. Related to fairness/equitable.
§ Predictable – contract law should be certain so that businesses and individuals can act accordingly
§ Freedom of contract – contract law should reflect our free market society.
§ Policy that parties are free to bargain about the terms of their deal, but once the deal is stuck there is not turning back.
§ Voluntary. You can choose whether you want to enter into the contract
Is There An Agreement?
Nature of Assent
Lucy v. Zehmer
§ Court will look to what a reasonable person would believe (objective approach), NOT what one person said at the time (subjective).
§ Objective approach: Ask what a reasonable person would think/understand.
§ Disclosure forcing mechanism: both parties should be able to rely on each other.
§ Subjective approach: supports freedom of contract because claims that you should mentally be entered into a contract
§ In this method, you have to “get inside the defendant’s head”
§ Subjective approach might lead to a predictability issue in cases.
§ Result would be different for Zehmer and court would find that the agreement isn’t binding.
Much easier to look at the objective approach. Court will apply the objective approach and look to outward manifestations of the parties.
When is there an offer?
Leonard v. Pepsico
§ Was there an offer?
§ Court holds that a commercial (advertisement) can’t be an offer
§ You cant’ say yes to an ad and have a contract
§ If there is no offer, there’s no contract (even if someone says they accept)
§ Freedom of Contract:
§ Offer defined: Restatement §24: An offer is the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it.
· Reasonable for another person to understand
Restatement §25: Option Contracts
· An option contract is a promise which meets the requirements for the formation of a contract and limits the promisor’s power to revoke an offer.
Fairmount Glass Works v. Grunden-Martin
Court ruled and affirmed that the April 23 letter closed the contract due to wording (specifity).
UCC §1-201(3):
· Defines the term agreement broadly to mean the parties bargain in fact, derived not only from what was spoken between them but also “from other circumstances, including course of dealing or usage of trade or course of performance.
· The test for an offer is whether it induces a reasonable belief in the recipient that his acceptance is all that is necessary to seal the deal.
· If a party to a commercial transactions does NOT want a particular prior course of dealing or trade usage to become part of a new contract she must affirmatively say so in the new agreement.
Leftkowitz v. Great Minneapolis Supply Store
Exception to the rule that advertisements do not create any power of acceptance in potential offeree’s is where the advertisement is “clear, definite, and explicit, and leaves nothing open for negotiation.”
No offer
Offer
Leonard – pepsi commercial not serious offer.
Fairmount – court decides is an offer b/c wording on april 23 letter. Ads/price quotes not an offer, but here the price quot
nt accepts.
o Offer is no longer valid since the lapse of time. An offer passes when a reasonable amount of time passes.
o When in doubt, reasonable person approach helps.
· Offer is made, and then Moffat revokes the offer. (Revocation by offeror)
· Moffat offers then she drops dead or is committed, then the offer is terminated (death or incapacity of the offeror or offeree).
UCC § 2-101: Definition of UCC: This should be used and cited as the UCC.
UCC 2-105: Definitions (Transferability, “Goods”; “Future” Goods; “Lot”, “Commercial Unit”
When is there acceptance
Restatement §30: Form of Acceptance Invited
Restatement §32: Invitation of Promise or Performance
Restatement §33: Certainty
Restatement §50: Acceptance of Offer Defined; Acceptance by Performance; Acceptance by Promise
Restatement §63: Time When Acceptance Takes Effect
UCC § 2-206: Offer and Acceptance in Formation of Contract
§ Does NOT apply to LaSalle and Ever-Tite.
Moffat says: Current rule about situations where there is doubt about how the offer is to be accepted:
· Bilateral contract – promise on both sides of the offer. A promise for a promise
· Unilateral contract – Only way an offer can be accepted is by performance of the contract or promise and full performance of the contract.
o i.e. can’t promise to find the dog…have to show up with the dog to collect on the reward.
· Restatements say you can accept via promise or performance, whichever is reasonable under the circumstances
