Contracts Fenster Fall 2017
Mutual Assent
Present Commitment Requirement: Needs to be offer by one party and acceptance by the other. This “meeting of the minds” is mutual assent.
Certainty Of Terms
Common Law
Lucy v. Zehmer: Z makes offer to sell property to L in the form of writing offer on bar napkin and L accepts. Z claims offer was made in jest. L did not understand it to be made in jest.
RULE: Manifestation of intent is judged by what the parties OBJECTIVELY manifested given the context and circumstances of what a reasonable person would believe. Outward expression of a person as manifesting his intention rather than to his secret and unexpressed intention.
Harvey v. Facey: Telegram case. “Will you sell us BP? Telegraph lowest cash price-answer paid.” Response: “Lowest price is $900.”
RULE: This was a two-part question and only the second part was answered. Simply stating the lowest price is NOT an offer. No implied contract to sell at that price. Ambiguous and lacks certainty of terms. Precise question needs precise answer
UCC
In UCC, (Always looser to encourage commerce exchange)
Certainty of Terms is NOT a requirement. (Important but not an element)
Special Offer Rules
Restatement Sections:
§26: A manifestation of willingness to enter into a bargain is not an offer if the person to whom it is addressed knows or has reason to know that the person making it does not intend to conclude a bargain until he has made a further manifestation of assent. (An offer is not an offer if the offeree knows the offeror isn’t making an offer).
§27: Manifestations of assent that are in themselves sufficient to conclude a contract will not be prevented from so operating by the fact that the parties also manifest an intention to prepare and adopt a written memorial thereof; but the circumstances may show that the agreements are preliminary negotiations. (things than can show it IS a contract: length of talks, money commitment, language used)
I. Advertisements
General Rule: not offers; it is treated as a preliminary; UNLESS the language, in the context in which it is used, communicates a present commitment and not just a general offer to large group. SEE Restatement §26 (note b)
Leonard v. Pepsico: Harrier jet ad commercial
RULE: Ad’s are not intended to be offers unless there is commitment or the ad induces performance (Carbolic Smoke Ball case). Or if the ad is “clear, definite, and explicit, and leaves nothing open for negotiation” (Lefkowitz case). This case was neither it was simply an invitation to negotiate. It’s about what a reasonable objective person would have going through their head, not one person (Kay-R electric corp. case). If reasonable person didn’t see the jest of the ad, then could be contract. Clearly, that is not the situation in this case.
II. Price Quotes
General Rule: not offers; it is treated as a preliminary; UNLESS the language, in the context in which it is used, communicates a present commitment and not just a general offer to large group
Fairmount Glass Works v. Crunden-Marten Wooden Ware Co
The Court held that language used in telegram, “for immediate acceptance” sent in correspondence to lowest price inquiry of jars was more than just a price quote. This language used communicated present intent for proposition to sell. The quote was an offer.
Be careful with this case because Fenster thinks it is a much closer case
III. Request for Bids
General Rule: Courts generally hold that, when a general contractor seeks bids from subcontractors, the general contractor’s request for bids is an invitation for offers. The subcontractors’ bids are considered offers
IV. Letters of Intent
General Rule: not an offer but a document signed by both parties that purports to progression of a contract (partial completion), unless the language presents certainty and present commitment.
Sometimes parties cross the lines in seeking to bind other party and bind themselves in contract.
Store Properties v. Neal: Parties sign a letter of intent for 99-year lease for plot. Plaintiff claims it was a written contract. D says it’s not because it states “and a lease is prepared and mutually agreed upon) suggesting that this was just a preliminary agreement.
RULE: Where a contract appears to be a preliminary agreement embodying only the spirit of a contemplated supplementary contract, and it’s perfectly clear, that the minds of the parties never met upon the details, then it is not enforceable.
The court rules that unless there was meeting of the minds upon details it is not enforceable.
If parties contemplate a reduction to writing to be executed by the parties, and such writing is never signed, there is no contract until writing is signed.
Enough uncertain language in the letter indicated parties contemplated entering into more negotiations.
Manner of Acceptance
I. General manner of acceptance information
Offeror is considered to be the “master of the offer”. Therefore, an offeror may require that an offeree has to accept any specific way they want. If the offer does insist on a particular manner of acceptance, an offeree can only accept by complying with the insisted upon manner of acceptance. In contrast, if an offeror only suggests a preferred method of acceptance, acceptance by any reasonable means will suffice. (§60)
Kuzmeskus v. Pickup Motor Co.: providing transportation to schools, need to buy buses case
RULE: When manner of acceptance is specified, all elements of that manner of acceptance must be met in order for there to be a contract.
A promise made with an understood intention that it is not to be legally binding, but only expression of present intention, is not a contract. Presentation of forms to P was request for him to give order. In other words P was offeror (P used D’s terms of acceptance), and D didn’t complete acceptance b/c forms were never signed by officer of the company which was a stipulation of the terms of acceptance.
II. Bilateral and Unilateral Contracts
Bilateral: Promise for a promise, both sides are making a promise “you can only accept my offer by promising to buy the car”
Unilateral: Only offeror makes promise, offeree accepts by inducing performance. No cont
ideration=No contract
Forbearance (refraining from exercising a legal right) as Consideration
Hamer v. Sedway: Uncle offers Nephew $5,000 if he refrains from drinking and smoking
RULE: Forbearance from permissible legal conduct is sufficient consideration to make a promise on that forbearance a valid contract
The person making the promise doesn’t necessarily have to benefit from the consideration, it is enough that the other party is foregoing something
Adequacy/Sufficiency of Consideration
Lucht’s Concrete Pumping, Inc. v. Horner: Employer forbearing from terminating an employee in exchange for employee signing a non-compete is consideration because they are forbearing from using a legal right they have. Court’s only concern is if consideration exists; they are not worried about adequacy unless the consideration is unconscionable or absurd. Technically a contract but as a whole could be deemed unreasonable
Past and Moral Consideration
Mills v. Wyman: P took care of D’s sick son unbeknownst to D. After learning of P’s generosity after son died, D offered to pay P for P’s expenses he incurred while taking care of son. D breaks promise. Would’ve been morally good for father to pay.
RULE: A moral obligation or past consideration is NOT sufficient consideration to make a promise enforceable
Settlement of Invalid Claims
A runs red light and hits B. A agrees to settle with B by paying A $10,000 in exchange for B not suing. A later finds out that there is evidence to show that the light was green and if it went to court, A wouldn’t have been held liable. A might then sue to rescind the settlement contract or refuse to perform it.
A settlement of a claim which later turns out to be invalid is still enforced if:
(1) The settling P (B) had genuine belief in good faith that the claim was valid at the time of the settlement (not enforced if all is a lie), AND
(2) The claim was, at worst, doubtful (as opposed to obviously invalid) from the perspective of a reasonable person (even if claim is doubtful, it’s still enforced. However, if it’s obviously invalid, then not enforced).
Fiege v. Boehm: P was pregnant and believed D was father and D agreed to pay for expenses as long as P didn’t sue. D later finds out he is not father and stops paying
RULE: Since P genuinely in good faith believed that that claim was valid at the time and the claim wasn’t obviously invalid, the settlement claim is still enforced.
