Taylor
Contracts
Fall 2010
I. Introduction to K – R. § 1
a. UCC – applies to sale of goods
b. CISG – applies to sale of goods
i. Force of law because it is a treaty
II. The Objective Theory of K
a. Mutual Assent § 17 –“ a bargain in which there is a manifestation of mutual assent to the exchange and a consideration”
i. Traditional and most important way in which a K can be formed, but it is not the only way
ii. Compare to meeting of the minds – B truly thought he was just reserving condo although S thought K was for sale of condo à jury rules in favor of B because there was no meeting of the minds (subjective)
iii. Mutual assent: B and S signed the K, so jury rules in favor of S (objective)
iv. Ray v. Eurice Brothers: A developer signed a K w/o reading it and later tried to get out of the special demands the property owner had made. Court held that the standard for evaluating a contract is objective. Absent fraud, duress or mutual mistake, signing is binding.
1. Duty to read
v. Lucy v. Zehmer: D offered to sell farm to P for $50,000. D claimed was drunk, kidding and P knew that. Court upheld offer as P reasonably believed D, the conditions were not unreasonable and P made serious effort in reliance on the offer. Fault on offeror.
1. Don’t joke around – you might be found in a K when you didn’t want to be
III. Offer and Acceptance in Bilateral K’s
a. Offer § 24– a clear and definite statement of intention to perform that is reasonable to believe assent would conclude the offer
b. Acceptance § 50-69
i. Lonergan: P responds to an ad in paper for land in Joshua Tree placed by D. D sent a form letter in response. P believed that there had been an offer and acceptance. Court holds that the form letter was merely an invitation to an offer. “you will have to decide fast as I expect to have a buyer in a week or so”
1. Specific performance: I want THAT land
2. Seller was smart to say this is a form letter and you will have to act fast – this was just preliminary negotiation, not a K
3. Ways for offer to come off the table § 36
a. Rejection or counteroffer by offeree
b. Lapse of time
c. Revocation by offeror
d. Death or incapacity of offeror or offeree
e. Offeree’s power of acceptance is terminated by the non-occurrence of any condition of acceptance under the terms of the offer
ii. Izadi: Machado put ad in paper advertising $3,000 of any Ford, and in small print underneath specifies which car. Izadi sues for breach of contract, misleading advertising, and fraud. Court holds that K arose from offer contained in an ad (as construed by the reasonable person in the same circumstances [Pepsico]) – Unusual holding (classical court would say duty to read). A binding offer may be implied from ads which deliberately mislead the reader to conclude that offer exists (bait and switch).
1. R. § 26 cmt b: ads are not usually offers . . . for it to be an offer there must be some language of commitment or some invitation to take action without further communication
2. R. § 26 – Preliminary Negotiations
iii. Lefkowitz: advertisement offering mink coat for $1 “first come first served.” D argued that this was an ad and thus could be withdrawn. Court held that it was a clear definite statement à P was first in line, found in favor of P.
iv. Normile: “you snooze you lose” D put house up for sale. P made offer, D made counter-offer asking for more $. While P was deciding, D told them offer was gone as she had sold to someone else. P claims there was a contract or at least a first option. Court held that D’s counter-offer was a rejection of P’s offer. The ‘new’ offer was rescinded prior to P accepting.
1. § 59 Mirror image rule – acceptance must be the mirror image of the offer to serve as acceptance; otherwise = counteroffer
a. Change signing from 2:30 to 2:35 à mirror image? Formalist vs. modernist (de minimus variation – RPS)
b. §39(2) – contrary intention “I accept your offer. I prefer XYZ, but if not, I will accept the original terms of the offer”
c. §43 – indirect communication of revocation
d. §63 Mailbox rule – Acceptance effective as soon as it is sent; any other commcn (rejection, revocation) not effective until it is received (§ 42)
i. if acceptance overtakes rejection in mail, it is a K (§ 40)
IV. Offer and Acceptance in Unilateral K’s – Law prefers bilateral Ks as opposed to unilateral Ks when possible – equality, both parties bound § 32
a. Petterson: (“I refuse to take the money you’re trying to hand me; therefore, I revoke the offer.”)
i. A unilateral contract may be withdrawn at any time before the act requested to be done is performed.
1. Foisting: putting the money into the offeror’s pocket and forcing him to accept, for example
2. R § 32 – Invitation of Promise or Performance – An offer is interpreted as inviting the offeree to accept either by promising to perform what the offer requests or by rendering the performance, as the offeree chooses.
b. Cook: Real Estate Company offers bonuses to their ag
ree provides form, look closely at form to ensure no foisting
– If form supplied by offeror, more lax
– 2-205 hinges on writing instrument, so if offer is sent June 1, received June 3 and says it will be held open for 20 days, expires June 23
– Termination of the firmness of the offer doesn’t terminate until seller revokes offer – if buyer accepts on June 25 seller is bound if he didn’t revoke already
– Offer expires according to R 36 – reasonable time lapse
iii. Comments:
1. Does not require consideration.
2. Must sign – initialing okay
3. Not to apply outside of 3 months. Can be renewed. If supported by consideration it may continue for as long as the parties specify.
4. When the form is created by offeree, the offeror must sign all parts, so that he can be bound – 2-302 unconscionability can apply if court finds parts to be unconscionable
iv. Problem 2-2
Qualified Acceptance: The Battle of the Forms
i. Princess Cruises: Court determined K was primarily for services, CL applies – Last Shot Rule (unduly favors seller who often has last word); If goods UCC applies – 2-207; To determine if the predominant purpose of the transaction is goods or services: 1) the language of the K; 2) the nature of the business of the supplier; 3) the intrinsic worth of the materials.
a. Brown Machine: Battle of the Forms – P sold a machine to D. Seller’s forms included indemnification, but buyer’s forms did not. Court held that buyer made the offer and seller’s response was an acceptance. The new terms, thus, were merely proposals that D never explicitly accepted. Since buyer didn’t expressly consent to indemnification, it’s not part of the contract (2-207).
UCC 2-207 Always run through the statute and cover each part. If there is a contract under (1) then it moves to (2). If there is no contract under (1) then it moves to (3). Further, only some part has to be in writing for it to apply. This sort of takes away the last shot rule because it wasn’t fair. The checklist
Section (1)
