Contracts Outline- Harrison
IMPORTANT SECTIONS TO KNOW FOR EXAM
Restatements of Contracts, 2d
§24 – Offer Defined
§32 – Invitation of Promise or Performance
§45 – Option Contract Created by Part Performance or Tender
§62 – Effect of Performance by Offeree Where Offer Invites Either Performance or Promise
§71 – Requirement of Exchange; Types of Exchange (Consideration)
§86 – Promise for Benefit Received
§87 – Option Contract
§90 – Promise Reasonably Inducing Action or Forbearance
Uniform Commercial Code (UCC)
§2-104 – Definition; “Merchant”; “Between Merchants”; “Financing Agency”
§2-105 – Definitions: Transferability; “Goods”; “Future Goods”; “Lot”’ “Commercial Unit”
§2-204 – Formation in General
§2-205 – Firm Offers
§2-206 – Offer and Acceptance in Formation of Contract (Deals with accommodations)
§2-207 – Additional Terms in Acceptance of Confirmation
§2-306 – Output, Requirements and Exclusive Dealings
§2-313 – Express Warranties by Affirmation, Promise, Description, Sample
§2-314 – Implied Warranty: Merchantability; Usage of Trade
GENERAL
A contract may be binding and enforceable, on both parties, whether it is written or oral.
There are two sources of contract law:
Common Law – which is used for contracts governing services, etc., and,
Note: The Restatements of Law are just restatements of common law.
Uniform Commercial Code (UCC) which governs the sale of goods. Goods are defined under §2-105 UCC. However, generally goods are anything movable. Real estate is not considered a good, thus governed by Common Law.
Note: Where the UCC is silent, Common Law is used.
When it is a deal involving services and goods, determine what the crux of the deal is, either the services or the goods, to determine whether to apply common law or the UCC. In determining which to apply remember that you apply either Common Law or UCC, not both.
Objective Theory of Contracts: The party’s intent is deemed to be what a reasonable person in the position of the other party would think that the first party’s objective manifestation of intent meant. Conduct is used to determine intent and not the internal intent of the parties. Ex. Lucy v. Zehmer
KEY PHRASES
“Manifestation of mutual assent…”- when discussing offer and acceptance.
“Seasonable expression of acceptance”- when discussing UCC and acceptance varying from offer.
“Disaffirm”-when discussing incapacity/infancy defense
Good Faith
a. Common law: Good faith and fair dealing implied in all Ks.
b. UCC: requires good faith in performance:
1. What is good faith?
i. Faithfulness to agreed upon purpose.
ii. Consistency with justified expectations.
CRITICAL ELEMENTS TO IDENTIFY
Who is making the offer? (Identifying the offer)
What is the wording? (Must be formal enough and reasonable)
How is the offeree to accept?
Notice. Unless the parties have expressly indicated the notice, if one party knows that the other is not likely to find out quickly- then they have to inform the other.
Type of Contracts:
Express: formed when the offer and acceptance are manifested by words (written or oral) only; can find the contract in the words of the parties
Implied: based in part on conduct; can’t find the K simply on the words of the parties.
i. -mutual assent: “meeting of the minds”- the agreement by both parties to the contract
1. determined by an objective standard
Quasi: (“Implied-at-Law”): not governed by contract law; it’s about doing what’s fair and right, it is an equitable remedy.
i. Bilateral: contract that results from an offer that is open as to how it can be accepted; results any time the offer doesn’t require a particular method of acceptance
ii. Unilateral: contract that results from an offer that requires performance for acceptance
Possible Stages of Contracts
Executory: has not yet been performed, it has not yet been done
Void: contract totally without any legal effect from the beginning
Ex. an agreement to commit a crime
Voidable: one or both parties may elect to avoid or ratify
Ex. Ks of infants or mentally ill parties
Unenforceable: agreement that is otherwise valid, but may not be enforceable due to a defense.
ELEMENTS OF A CONTRACT
a. OFFER + ACCEPTANCE W/ CONSIDERATION = CONTRACT (absent defenses)
b. A contract must have mutual assent and consideration (or a substitute).
OFFER
I. Definition: an offer is the manifestation of willingn
: “20 hamsters $15 each, first come first served starting Monday.”
-“words of commitment”: Ex: “Send 3 box tops plus $1.95 for your free t-shirt”- this is an offer even though it’s also an ad because the advertiser is committing themselves to take certain action in response to consumer’s action.
d. Auctions: usually not an offer, but a solicitation of offers from the audience; the auctioneer may withdraw the goods from the sale after the start of bidding if they wish, unless the sale is said to be “without reserve”; UCC §2-328(3)- the bidder is the offeror and not the auctioneer.
e. Opinions and Intentions: “Will you sell?” and “It would not be possible for me to sell unless…” and “I want…” are not offers. Stating a possible sale price is not a binding offer to sell for that price.
f. Crossing offers in the mail that are identical are void and do NOT form a K.
III. Irrevocable Offers: the ordinary offer is revocable at the will of the offeror, even if the offeror explicitly states “this offer will remain open for two weeks”- but there are some exceptions:
a. Merchant’s Firm Offer: UCC §2-205- irrevocable even though no consideration is given
(1) made by a merchant
(2) a signed writing
(3) gives explicit assurance that the offer will be held open
(4) three month ceiling: if no time provision given, 3 months is the most. If less than three months specified, that’s ok; if more than three months specified, three month rule will be enforced.
b. Option Contracts (R87): promise not to revoke for consideration given.
-money (or other consideration) is paid to keep the offer open for a certain period of time
-the offeror’s power to revoke is limited; the offer is not terminated by
counteroffer, rejection, or death (like a normal offer would be); counteroffer does not terminate the power to accept, unless the buyer detrimentally relies on it.
c. Part performance (R45) or detrimental reliance
