Is there a K?
If so, what are its terms?
Have the parties performed? We are really asking, do they have an excuse to get out of performing?
What remedy is available?
Introduction
What is a K? Defn: p. 1-12; 1101-03; 1107-12
Part I. The Process of Reaching Agreement
The Nature of Assent
Objective manifestation of intent
i. RST §1: promisor believes or has reason to believe that the promisee will infer an intention/commitment from his words or conduct to act or refrain from acting in a specific way
ii. A contract need not be read to be effective; people who accept w/o reading take the risk that the unread terms may prove unwelcome. (Hill v. Gateway)
iii. If a person’s words and actions have one reasonable meaning, his subjective intent/undisclosed intention is irrelevant unless the other party knows or has reason to know the unreasonable meaning. (Lucy v. Zehmer, Leonard v. Pepsico)
iv. Ads are generally not offers (reasonable person does not expect everything he sees to be an offer).
v. If writing is anticipated, probably not K. (Smith v. Boyd)
1. exception: when extensive preparation or performance has begun
2. when parties can prove an objective intent to be bound prior to execution of the written contract (oral contract)
vi. Prior practice between the parties
vii. Practice of the trade (Smith v. Boyd)
The Offer
Defn: offer is the manifestation of willingness/intent 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.
Preliminary negotiations (Lonergan v. Scolnick)
i. If the person to whom the promise is made/manifestation of willingness to enter into a bargain is addressed/circumstances existing knows or has reason to know that a further expression of intent is forthcoming, there is no offer. §26
ii. Policy: so that parties can negotiate w/o fear of being bound until obj. manifestation.
Ads – generally NOT offers §29
i. To be offers, language must be specific (identified offeree, quantity, price, quality, product, shipping, billing, language of commitment, presence of a statute); show to offeree that his assent is all that is required to close the deal/create a K; no further communication necessary.
ii. Ads that request the performance of a specific act without further negotiation and leave nothing for negotiation might be offers (Donovan v. RRL Corp.; rewards; hole-in-one; first-come, first-served).
Quotes generally not offers (reservation of the power of assent)
i. Fairmount= counterexample. Specificity of language taken to be offer. (see above)
ii. Each case turns largely on the language used.
Destruction of the offer
Events that can destroy an offer
i. Revocation (direct or indirect) by the offeror
1. Offeror can revoke any time prior to acceptance
2. Indirect revocation as effective as direct (Dickinson v. Dodds)
ii. Lapse (MN Linseed)
1. Offer lapses when a reasonable person would think it had lapsed. Evaluate:
a. Totality of the circumstances
b. Character of the subject matter of the K
iii. Rejection by the offeree
iv. Death of Offeror (offer and option die; contract does not)
v. Mailbox Rule – acceptance is effective upon deposit. (MN Linseed)
Making offers irrevocable
3 Ways:
i. Option K w/ deposit of consideration (Dickinson;
1. An option is not binding as a K where there is no consideration, unless it is accepted within the time limit and before the offer is withdrawn.
2. Option K v. promises to keep offers open (Dickinson v. Dodds – nudum pactum)
ii. Option K w/ recital of consideration (Burgess; Beall v. Beall)
1. Defn. option: an agreement to keep an offer open for a period of time
2. W/o valid consideration, an option K is merely a simple offer which can be revoked by the offeror anytime before acceptance
3. RST §87 (1)
a. Writing
b. Signature by offeror
c. Recital
d. Fair terms
4. RST §45 partial performance
ctual obligation (Kirksey; Hamer)
[Changing Your Mind About Agreeing to Give – Looking for Bargained for Benefit to Promisor or Detriment to Promisee]
Hamer:
– legal detriment different from actual detriment
– no inquiry into adequacy of amount of consideration
– promise as consideration
– bargained for requirement
– past consideration
Consideration: the quality of the agreement that makes it enforceable, that makes it something for which the court will provide a remedy in the case of non-performance. 2 pieces – sought by the promisor and given by the promisee (bargain and exchange). Promisor seeks the promise of performance and the promisee acts because of the promise.
i. Process: the exchange or bargain of consideration
ii. Substance: Is the consideration sufficient to satisfy the requirement? It must be bargained for, not just a nominal statement. Detriment to the promisee vs. valuation and exchange – consideration can be anything of indeterminate value.
iii. [If performance is requested, a promise does not bind the offeror.]
Usually easy to spot (ex. a business supplying a product and the other party supplying some form of return payment, which would serve as the consideration)
In family situation, the presence or absence of consideration is usually more difficult to determine. (Kirksey is different because Mr. Kirksey is not seeking her detriment; she acts on his promise, but because he didn’t seek it, it was not exchanged.
History of consideration = seal (England)
Fully executory K: one that has been formed but not performed (2 promises on the table). Courts wanted to see proof that promises had been exchanged, so they looked to the seal or consideration. Courts do not inquire into the adequacy of consideration.
RST § 71 (handout): Is there a bargain/exchange? Sufficiency?
Settlement agreements and releases (Schnell v. Nell; Dyer)
