A Roadmap for Contract Law
Lucy v. Zehmer, 196 Va. 493 (1954)
Facts: Π allegedly enters a contract with Δ for the sale of land. Π says they were serious, but Δ says he was clearly only joking around. Π wants specific performance.
Issue: Was there a contract, and is it enforceable?
Held: The contract was in good faith and specific performance was awarded. The private intentions of Δ are irrelevant, only the manifested acts.
NIPSCO
Facts: (P) electric utility in Indiana and Carbon County Coal Company (D) signed a contract whereby Carbon County agrees to sell and NIPSCO agreed to buy the coal. The price went up and NIPSCO stopped accepting from Carbon County Coal when there was an agreement for NIPSCO to buy 1.5 tons of coal from Carbon County for 20 years. NIPSCO argued under the doctrines of frustration or impossibility they should be released from their contractual duties by reason of the economy purchase orders. Carbon County counterclaimed for breach of contract.
Issue: Whether NIPSCO’s obligation under the contract were excused or suspended by virtue of either the doctrines of frustration or impracticability.
Held: The Appeals Court turned down Carbon County’s appeals as well as NIPSCO’s.
Rule:
UCC §2-615 – Impracticability or Impossibility
Delay in delivery or non-delivery in whole or in part by a seller who complies with paragraphs (b) and (c) is not a breach of his duty under a contract for sale if performance as agreed has been made impracticable by the occurrence of a contingency the non-occurrence of which was a basic assumption on which the contract was made or by compliance in good faith with any applicable foreign or domestic governmental regulation or order whether or not it later proves to be invalid.
Where the causes mentioned in paragraph (a) affect only a part of the seller’s capacity to perform, he must allocate production and deliveries among his customers but may at his option include regular customers not then under contract as well as his own requirements for further manufacture. He may so allocate in any manner which is fair and reasonable.
The seller must notify the buyer seasonably that there will be delay or non-delivery and, when allocation is required under paragraph (b), of the estimated quota thus made available for the buyer.
Framework for analyzing a contract
STEP ONE: IS THERE A VALID OFFER?
There is an offer if:
1. Intent: desire to contract
a. Objective manifestation (subjective thoughts irrelevant)
b. Present (at the time the offer is made)
c. Clear (reasonable person standard)
2. Definiteness: offeror is “master of the offer”
a. Must contain specific terms of the exchange (such as subject matter, price, quantity)
b. Sufficiently clear as to manner of acceptance and reasonable understanding that acceptance of proposal will conclude the deal
3. Communication:
a. Directed to the offeree
b. Becomes effective when known/received
The offer is valid if it has not:
1. Been terminated by its own time limit
2. Lapsed
3. Been revoked
a. Offer may be revoked anytime before acceptance
b. Revocation must be clear and actually communicated (directly or indirectly)
c. 3 exceptions:
i. Option contract which grants an irrevocable offer in exchange for consideration;
ii. Detrimental reliance;
iii. Firm offer (signed agreement to keep offer open for a particular period of time)
4. Been rejected
a. Must be communicated
b. Once communicated, cannot retract
5. Been subject to a counteroffer
a.
might later desire to do or gives a free way out of his commitment. If so, the promise may be unenforceable for lack of mutuality.
c. Surrender or forbearance of legal right: enforceable only if claim was reasonable or held in good faith.
d. Nominal: bargain in form but not in substance. Promise unenforceable as donative promise.
i. EXCEPTION: something that is “valuable in its own right”
e. Insufficiency or Voidable promise: bargain made with a minor or a drunk person
f. Promissory estoppel: bargain in the form of reliance upon it.
g. Like-kind exception:exchange of 2 identical things of different quantities
i. We know they are like-kind when they are fungible goods (apples for apples) → indistinguishable goods
ii. Only worry about nominality if it is a nominal amount (CHECK FIRST)
1. 2 bushels for 800 bushel
3. If the promise was not given as part of a bargain, it is unenforceable, UNLESS there is:
a. Past or moral consideration: promise given in recognition of a material benefit previously received
b. Reliance: did the promisee rely on the promise to his detriment?
If any of these factors are present, the promise may be enforceable even though there was no bargain.
4. Exceptions –no consideration required to support promise
a. Detrimental reliance
b. Charitable subscriptions
c. Firm offer
d. Unforeseeable difficulties
e. Requirements & Output Contracts
