K Outline
Take it to the LIMIT: How, Why, Define
I. Policy Considerations (include in all answers, in the analysis for each issue)
a. Freedom of contract (free market economy)
b. Consistency
c. Predictability
d. Efficiency
e. Equitability
f. Mutuality
II. ALWAYS ASK: U.C.C.(goods) OR Common Law?
a. UCC 2-102: UCC applies to sale of goods
i. Real estate & employment contracts are not goods!
ii. UCC 2-105: (definition of transferability) GOOD = anything (almost) thing that is movable at the time of K
1. Goods mean all things which are movable at the time of the identification of the K for sale other then the money in which the price is to be paid, invest securities, and things in action
a. unborn animals, growing crops
b. Must both be existing and identified
iii. UCC 2-101: short title
1. The legal consequences follow directly from the K and action taken under it w/o resorting to the idea of when property passed or was to pass as a determining factor
III. Introduction
a. Gateway Cases (arbitration clauses)
i. Hill: The terms of a K rise and fall together.
1. By keeping the computer for more than 30 days, Hills accepted Gateway’s offer, including the terms of the arbitration clause.
ii. Brower: b/c of excessive fees associated with arbitration, the K was unconscionable & the agreement should be modified.
iii. What constitutes a K?
1. Agreement = Offer + Acceptance and
2. Consideration
iv. Notes:
1. When the K forms is important because it shows when parties are bound…
2. A K does not have to be formal or in writing or typed or signed… can be oral
3. A K is a promise or a set of promises that the law will enforce.
IV. Is there an Agreement?
a. The Nature of Assent
i. Must be an outward manifestation of mutual assent (objective theory of K)
1. Mutual Assent is the idea that contracts are voluntary, opt-in agreements. (Freedom of Contract)
2. Test:
a. Would a rp in the position of the offeree understand for the offeror’s outward manifestations (words and actions) as an intent to be bound?
ii. Actual mental assent of the parties is not required if the words and acts, judged by a reasonable standard manifest the intent to agree
iii. Look at external manifestation, outward appearances
iv. Lucy v. Zehmer: K to buy farm, but Zehmer claims he was just joking.
1. The fact that L. didn’t hear the whisper is key – had Lucy overheard, a rp from Lucy’s perspective would know that Z. was joking
2. Result = There was a K. All the external evidence would leave a rp to believe that this was a real K. Doesn’t matter if he really was joking, because he appeared serious!
v. Rule: what would a reasonable person assume based on the outward manifestation of the others actions (intent)
1. What made it look like there was a K:
a. 40 min discussion of the K, the rewriting of the K, completeness of the instrument that was executed, Z. did not ask for the contract back, 50K good price
vi. Objective rule bad for: Fairness and Freedom of Contract, but Good for: consistency and predictability
1. Policy reasons: bad if people could get out of agreements by saying they were joking
2. Hard to prove subjective intent!
vii. The old test was more subjective, and there had to be a “meeting of the minds.”
1. Do we still care about the “meeting of the minds?”
a. We still care about what people intend, but will only look at certain (outward) things.
b. When is there an offer?
i. Definition of an offer:
1. RST 24: An offer is a 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
2. Would a rp believe that all they had to do was say yes to “make a deal”?
a. Creates the POWER OF ACCEPTANCE
3. It is the last step before acceptance
a. Offeree v. offeror can change in the course of the negotiations
ii. Is an Ad an offer?
1. Generally ads are not seen as offers, but merely as requests to enter into bargain
a. Would a RP think that the ad was an offer?
i. Leonard v. Pepsico, Inc.: Harrier Jet for 700,000 Pepsi points
1. Result: The ad was not an offer
a. Ad was still negotiation, the consumer makes an offer when sends in the forms and the Pepsi points
i. Acceptance is when Pepsi sends the item back.
2. NO RPP WOULD THINK THAT THIS AD WAS AN OFFER
ii. Generally, ads are preliminary negotiations.
1. Want companies to be able to control whether or not they enter into K
iii. Leonard v. Pepsico II
1. Ads are understood to be mere requests to consider and examine and negotiate; and no one can reasonably regard them as otherwise unless the circumstances are exceptional and the words used are very plain and clear.
2. Ad not transformed into an enforceable offer merely by a potential offeree’s expression of willingness to accept thru the completion of an order form.
iii. When can an ad be an offer?
1. When it is clear, definite explicit and leave nothing open to negotiation, so a RP would believe all they needed to do was “say yes” and the deal is done
a. Policy: don’t want people entering into K’s all the time w/o knowing it
2. Lefkowitz v. Great Minneapolis Supply Store: Fur coats: was very explicit, clear ($1, 1st come, assented when came)
a. The more specific (pointed) and narrow a negotiation/offer is, the more likely we are to say it is an offer.
iv. When can Preliminary Negotiations be an Offer?
1. Lonergan v. Scolnick: Inquires about land and the seller sends back information. Is that sending back of information sufficient for a K?
a. Result: No K : sending back info was merely a request for an offer (PRELIMINARY NEGOTIATION)
b. RPP would not assume it was an offer (due to act fast language in the ad) because there was more necessary than just saying yes to make a deal
c. If the person making it does not intend it as an expression of his fixed purpose until further expression of assent, not an offer.
d. There is no offer unless the only thing left to do is to “say yes”
i. Some further assent on the part of the ∆ was required.
v. Price-Quote Plus
1. Fairmont: telegram for mason jars
a. Result: Court looks at the specific language – “for immediate acceptance” – and determines that there is a K based on the terms & conditions. OFF
offer did not lapse b/c (1) there was no specified amount of time, and (2) it was not an unreasonable amount of time.
b. TEST: The power to create K thru acceptance of an offer terminates at the time specified in the offer, or, if not time is specified, at the end of a reasonable time.
i. Question specific to the facts…
v. Cases of DOUBT
1. In cases of doubt, the offeree can accept in any way reasonable under the circumstances.
2. RST 32: offer invites the offeree to accept either by promise to perform what the offer requests or by rendering the performance, as the offeree chooses
3. Acceptance by Promise
a. RST 50(3): Offeree must complete every act essential to the making of the promise
b. Notice Requirement: RST 54: offeree must provide notice to offeror of acceptance unless otherwise specified for acceptance to be effective
i. Noticemust be received by the offeror
ii. Hendricks v. Behee : ∆ revoked offer by telling ∏’s agent after K signed by ∏, who argues that by signing, a K formed
1. Result: “Acceptance is not effective until notice.” If ∏’s agent had told ∆ signed, would have been a K
iii. RP would not understand a deal has formed until he received notice.
c. Exception: Mailbox Rule
i. RST 63(a): Notice of acceptance is valid when it is put in the mailbox (dispatched), not when it is received!
1. If get it in the mail, can return it in the mail
ii. ONLY when it is reasonable to accept by mail
1. Clicking “send” on an email is the same as putting a letter in the mailbox.
iii. Only applies to ACCEPTANCE. Notice is required in all other circumstances – i.e. revoking acceptance.
iv. Applies even if acceptance is not received
v. Usually K around the Mailbox Rule
vi. Adams: ∏ received offer for wool in mail, signed acceptance, and sent acceptance back to ∆, but ∆ sold wool to another customer before he received acceptance.
1. Result: Mailbox rule = acceptance occurred when put in the mail
vii. TWIST to the Mailbox Rule: (very narrow exception to the Mailbox Rule exception.) RST 40: if rejected and then accepted, whatever you get notice of first is what counts.
4. Acceptance by Performance (pursuant to the offer made)
a. RST 50(2): only partial performance is necessary for acceptance
b. RST 54(1): Acceptance by performance does not require notice, the contract is effective when performance is commenced unless otherwise specified in the K
c. Carbolic Smoke Ball: Ad that offers to give 100 pounds to anyone who uses the carbolic ball but then later gets sick
