Contracts
Basics
1. What is a contract? A contract is a promise or set of promises that the law will enforce. A “paper” contract can be just the memorialization of the actual contract. Contracts can be written, oral, electronic, and implied.
a. What is a promise? A promise is a commitment as to the happening or non-happening of some future event.
b. What is meant by “enforce”? A legal enforcement in the form of an award of damages or some other type of order by the court.
2. Manifestation of assent
a. Subjective approach: based on what was in the person’s “heart of hearts” and his actual intent. The emphasis was on free will and individualism.
b. Objective approach: reasonable person interpretation of outward appearances. Helps reduce risk and enhance predictability.
c. Modern approach: mix of sub and obj approaches. Its purpose is to learn actual intent, figure out what to do when there is a disagreement of intent and to encourage commerce. Think: would a reasonable person believe an offer was made and did the acceptor so believe?
*** Subjective truth trumps objective manifestations if the acceptor knows it.
1. What is a contract?
a. Contract: a promise or a set of promises that the law will enforce; the beach of which the law will award damages, or the performance of which the law recognizes as a duty.
i. Changed circumstances are usually not a basis for avoiding a contract
ii. 2 Elements of a Contract:
1. A Promise or set of promises
a. Promise: an undertaking, however expressed, either that something shall happen or that something shall not happen in the future.
2. Enforcement of the promise
a. Enforcement: not all promises are legally enforceable.
i. To be a legally enforceable promise:
1. The promise must be bargained for (consideration must exist)
a. If there is no consideration, a statute must exist that makes the promise enforceable despite the lack of consideration.
2. The promisee must rely on the promise
3. A court must be able to award damages
iii. 2 types of contracts
1. Unilateral: a promise for an act
a. An offer which can only be accepted by performance
i. If the offeree does not perform, that doesn’t constitute a breach because no contract could be formed until the performance was fully rendered.
b. When a unilateral contract exists to pay someone for their services, that contract can be cancelled
and buyer did so believe, that an offer had been made.
2. Offer + Acceptance = Mutual Assent
ii. How Manifestation of Mutual Assent is Interpreted
1. Test of Mutual Assent: use the reasonable person standard.
a. If words and acts show an intention to agree to the terms, then the real but unexpressed state of his mind doesn’t matter.
i. Exception: if both parties know the contract is a joke.
b. The acts by which you show mutual assent must be done with intent to do them.
i. Use the Objective Standard to determine the parties’ intent
1. We must look to the outward expression (objective) of a person as manifesting his intention rather than to his secret and unexpressed intention (subjective).
2. Leonard v. Pepsico, Inc. (25) ad for harrier jet was not an offer that could be accepted.
iii. There has to be a meeting of the minds
When the party’s objective manifestations show that there was meeting of the minds, but there actually
