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Contracts
University of Florida School of Law
Harrison, Jeffrey L.

 
 
CONTRACTS – HARRISON
FALL 2015
I.            DETERMINING MUTUAL ASSENT
A.         Objective Theory
i.            What would a reasonable person in the position of each party believe based on the other party’s words and conduct, regardless of what each party may have actually intended
ii.          Lucy v. Zehmer
a.          2 men having drinks, offered $50k for farm, wrote on napkin and signed
b.          Binding K – “fly on the wall” would have believed it was a K
 
B.          2 Prongs Must be Satisfied
i.            Reasonable person in position of promisee must believe the other party intended to be bound, and
ii.          Promisee must have actually believed so
 
II.          OFFER
A.         In General
i.            A promise by one party, made to another party, to do or not do something in the future, contingent upon the other party’s acceptance
ii.          An offer must (directly or indirectly):
a.          Be communicated
b.          Indicate a desire to enter into a K
c.          Be directed at some person(s)
d.          Invite acceptance
e.          Create a reasonable understanding that upon acceptance a K will arise
 
B.          Validity of Particular Kinds of Offers
i.            Offer Made in Jest
a.          If offeree knows, or should know, offer is made in jest – NOT a valid offer
b.          No K, even if accept
 
ii.          Preliminary Negotiations
a.          Only seeking to solicit bids, this solicitation is not an offer and CANNOT be accepted
b.          Example:
(i)         “I would like to sell my house for at least $100k” – solicitation, cannot be accepted
 
iii.         Advertisements
a.          General Rule: NOT AN OFFER
(i)         Specific Terms
(a)        If advertisement contains specific terms (# units) then it may be an offer
(ii)       Words of Commitment
(a)        Typically suggests an offer
(iii)      Leonard v. PepsiCo
(a)        Harrier jet for 7m Pepsi points – purchased points to get jet – Pepsi said no
(b)       Commercial was not an offer
(c)        Why: Reasonable person would not believe that it was an offer
(iv)      Lonergan v. Scolnick
(a)        ∆ put ad in newspaper saying wanted to sell property. π sent letter of inquiry. ∆ sent letter describing property and indicated lowest price. π sent letter asking legal description and suggested an escrow agent for purchase of land. ∆ wrote back saying he expected a buyer soon and then sold land to 3rd party. π brought action for specific performance.
(b)       No K – Ads are invitations to make offers – was just soliciting bids
 
iv.         Auctions
a.          Usually not an offer – just soliciting bids
b.          Unless expressly “w/o reserve”, auctioneer may withdraw goods even after bidding starts
 
C.          Termination of Offer
i.            Rejection
a.          Offeree declines offer (express rejection)
b.          One rejected, only offeror can revive offer
c.          Counteroffer = implied rejection
 
ii.          Revocation
a.          Offeror can modify, withdraw, or revoke offer at any time (Master of Offer)
b.          Direct Revocation – affirmative statement to offeree expressly withdrawing offer
(i)         Exceptions:
(a)        Detrimental reliance by offeree upon a promise not to revoke offer or reliance upon the offer itself
(b)       Unilateral K – once offeree begins performance, cannot revoke
(c)        UCC – firm offer rule
(d)       Promise not to revoke is supported by consideration
c.          Indirect Revocation – offeree learns of revocation from someone else
(i)         Example:
(a)        A offers to sell land to B at stated price and gives B a week to respond. During the week, A sells land to C and B learns of sale. B still sends acceptance w/in the week.
(b)       No K – A’s offer was revoked (indirectly) at time B learned of A’s sale to C
 
iii.         Lapse
a.          Offer lasts as long as offeror says it will (assuming not terminated by rejection/revocation)
b.          Offer remains open reasonable time if no specific time stated
(i)         Fluctuating prices = will lapse very quickly (acceptance should be close to immediate)
 
iv.         Death (Incapacity)
a.          Offeror dies = offer terminates automatically
 
D.         Preservation of the Offer (Option Contracts)
i.            Common Law Option
a.          Promise to hold offer open
b.          Not enforceable unless supported by consideration
(i)         NOTE: even if don’t actually receive $, but states in signed writing you did = consideration
 
ii.          UCC Option
a.          Firm Offer
(i)         By a merchant,
(ii)       In a signed writing, and
(iii)      Gives explicit assurance offer will be held open
b.          No consideration needed
c.          If no period stated, cannot exceed 3 months
(i)         Even if states period longer than 3 months, irrevocability only lasts 3 months
 
iii.         Reliance as a Basis to Create an Option
a.          Offer that foreseeably induces detrimental reliance may be enforced as a binding option K, to extent necessary to prevent injustice, despite promise of irrevocability and consideration
 
 
 
 
III.         ACCEPTANCE
A.         3 Rules of Acceptance
i.            The offeree must have knowledge of the offer (intent to accept)
ii.          Only the offeree can accept the offer
iii.         The acceptance must be in the form authorized by seller (common law)
a.          UCC – can accept in any reasonable manner
 
B.          Rewards
i.            Acceptance is only valid of offeree knows of the offer at time of alleged acceptance
ii.          Person who does act w/o knowing about reward cannot claim it
 
C.          Method of Acceptance
i.            Bilateral K (by promise)
a.          Acceptance must be communicated to offeror
b.          Notice to agent is notice to p

different terms fall out
 
(iv)      Step 4 – What if acceptance is actually a counteroffer, but parties act like there was a K?
(a)        Terms of K are terms on which parties agree plus any default provisions from UCC
 
E.          Mutual Misunderstanding of Contract Terms
i.            When parties agree to use same term, but each attaches a different meaning to that term
ii.          No K will be formed if:
a.          The parties each have a different subjective belief about a term of the K;
b.          The term is a material one; and
c.          Neither party knows or has reason to know of the misunderstanding
iii.         Raffles v. Wichelhaus
a.          A offers to ship goods to B on ship “Peerless.” B accepts. Unknown to both, there are 2 ships named Peerless. A intends to use latter ship, B intends to get shipment on earlier one.
b.          Both in subjective disagreement about meaning of material term; neither know = No K
iv.         Fault: If one party knows or should know that he has a different understanding as to meaning of an ambiguous term than the other, a K will be formed on the term as understood by innocent party
a.          Example:
(i)         Same facts as Raffles. This time A knows of the two ships and knows B means earlier one, but still sends on latter one. K is formed for shipment on earlier Peerless.
 
F.          Indefiniteness and Incomplete Terms
i.            No K if terms of “agreement” are indefinite
ii.          K is too indefinite to enforce if:
a.          Terms of K are so indefinite that it would be difficult or impossible for court to detect breach, or
b.          Even if the breach could be detected, but it is difficult or impossible for the court to fashion a remedy, then the K is “too indefinite” to enforce
iii.         Indefinite analysis occurs in two steps:
a.          Whether the parties intended to enter into a legally binding deal, and, if so
b.          Whether there is a reasonably certain basis for court to fashion an appropriate remedy
 
IV.        CONSIDERATION
A.         Introduction
i.            General Rule – K will not be enforceable unless it is supported by consideration
a.          A promise is supported by consideration if:
(i)         The promisee gives up something of value or suffers a legal detriment
(ii)       The promise is given as part of a bargain