Contracts and Sales Barnett Fall 2016
Contracts in General
Contracts Defined – A contract is a promise or set of promises for the breach of which the law gives a remedy or the performance of which the law in some way recognizes as a duty.
Promise; Promisor; Promisee; Beneficiary
A promise is a manifestation of intention to act or refrain from acting in a specified way.
The person manifesting the intention is the promisor.
The person to whom the manifestation is addressed is the promisee.
Where the performance will benefit a person OTHER than the promisee, that person is a beneficiary.
Agreement Defined; Bargain Defined –
An agreement is a manifestation of mutual assent on the part of two or more persons.
A bargain is an agreement to exchange promises, performances, or promises for performances.
“meeting of the minds” – element of agreement is sometimes referred to as this – the parties to most Ks give actual as well as apparent assent, but it is clear that a mental reservation of a party to bargain does not impair the obligation he purports to undertake and is understood as manifestation of mutual assent.
How a Promise May Be Made – either oral or written, or may be inferred from conduct.
Restatement 25 – Option Contract An option contract is a promise which meets the requirements for the formation of a contract and limits the promisor’s power to revoke an offer.
Prima Facie Contract Action (attacking elements of the claim) –
mutual assent à I did not agree
consideration or other grounds for enforcement à was no bargain, seal, etc.
breach
damages (causation) à you weren’t damaged
affirmative defenses à statute of limitations is an affirmative defense – “yes I did it, but you can’t bring suit anyways”
Presumptions:
burden on P (establish prima facie case)
no enforceable agreement exists
people don’t breach Ks
breached Ks don’t lead to ascertainable damages
burden on D (prove your affirmative defense)
ELEMENTS FOR A BREACH OF CONTRACT CLAIM:
Offer
Acceptance
Mutual Assent
Enforceability
Breach of an Enforceable Promise
Defenses
Damages or other Remedy
Offer
Offer: §24: The essential elements of the offer are
Communication by offeror
The language of a promise/willingness to enter a bargain,
Definiteness as to essential terms, and
A substantially identified offeree.
Offer must create an immediate power of acceptance in the offeree.
OBJECTIVE STANDARD that a reasonable person would understand it to be an offer
WHAT IS AN OFFER
Offer à communicated willingness to bargain seeking another person’s assent
Need a manifested commitment which
justifies the offerees belief that his assent is invited and would be conclusive
terms of which are reasonably certain
Offer MUST Contain these Elements: (expressly or implicitly)
Offer must necessarily be communicated to the person whom it is addressed
Must indicate/specify performances to be exchanged or terms that govern the relationship
Must be directed at some people or group of people
Offer must invite acceptance (doesn’t necessarily have to say how and when)
Must illustrate reasonable understanding that acceptance creates the contract
TO DETERMINE AN OFFER:
# of communications
# of recipients
essential terms
ability to define remedy / breach
EX: Nebraska Seed Co., D sent out a letter offering seeds for a certain price, D responded saying that he wanted to purchase the seeds– D refused to deliver the seeds after due demand & tender.
Merely a proposal / invitation – not an offer that can be turned into an agreement by acceptance – D was just asking for offers, and although it could lead to a bargain a proposal for a bargain is not an actual bargain – the language was general and is not an offer which he may be.
The mere statement of the price at which property is held cannot be understood as an offer to sell – not all of the terms were discussed – here we did not have quantity, delivery time, or certainty
Restatement 26 – Preliminary Negotiations
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 doesn’t intend to conclude a bargain until he has made a further manifestation of his assent.
Difference between Offer (penultimate step of K formation) and Preliminary Negotiations:
Language – is there a quantity mentioned? Due date? What defines a breach? What makes a remedy?
Nature of Agreement – how many people are receiving it? Is it K or advertisement?
C/A TO # of ADRESSEES: Objective person could’ve believed they were the only recipient.
Conduct and Dealings between parties – what have their dealings looked like in the past?
Trade Usage: what’s customarily done in that industry
Timing of Communications – Good rule of thumb: if it’s the first communication then it is probably preliminary negotiations
If we have a preliminary negotiation, the offer cannot be accepted.
TERMS OF THE OFFER
Common Law Terms
Common law requires that to have an offer, price must be part of the terms – it’s essential (ambiguous or vague price terms will not work either!)
Restatement 24 – An offer is the manifestation (objective) 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 à first manifestation of a commitment to be bound, can be answered by a simple “yes”, and is usually the penultimate step to forming a contract.
Restatement 29 – To Whom an Offer is Addressed
The manifested intention of the offeror determines who has the power of acceptance.
An offer may create a power of acceptance in a specified person or class of persons, acting separately or together, or in anyone or everyone who makes a specified promise or renders a specified performance.
Restatement 33 – Certainty
Even though a manifestation of intention is intended to be understood as an offer, it cannot be accepted to form a K UNLESS the terms of the K are reasonably certain.
The terms of a K are reasonably certain if they provide a basis for determining the existence of a breach and for giving an appropriate remedy.
The fact that one or more terms of a proposed bargain are left open or uncertain may show that a manifestation of intention is not intended to be understood as an offer or an acceptance. [THIS PART IS USELESS]
UCC Terms
You still have an offer even if price is omitted.
Manner & Medium of Acceptance (2-206) – reasonable unless already indicated
Time Period for Offer – generally reasonable
Price (2-305) – reasonable price at the time of delivery if nothing is said as to price, the price is let to be agreed by the parties and they fail to agree, or the price is to be fixed in terms of some agreed standard and must be fixed in good faith.
Time for delivery (2-309) – reasonable
Place of delivery (2-308) – unless otherwise agreed the place for delivery of goods is the seller’s place of business or if he has none his residence
Time for payment (2-310) – unless otherwise agreed time and place of delivery
RULE: Mere statement of price at which goods/property is held cannot be understood as an offer to sell but if the quantity is specified, it can be seen as an offer.
RULE: Not an offer UNLESS it’s clear, definite, and explicit & leaves nothing open for negotiation
RULE: an advertisement does not constitute an offer but is an invitat
enter into the proposed K.
Actually receives: subjective – not “reasonably should receive”, etc.
However, objective standard is: would a reasonable person understand the language to be a revocation.
Subjective to receive. Objective to understand language of revocation
Restatement 43 – Indirect Communication of Revocation
An offeree’s power of acceptance is terminated when the offeror takes definite action inconsistent with an intention to enter into the proposed K and the offeree acquires reliable information to that effect.
UCC 2-205 Firm Offers– An offer by a merchant to buy / sell goods in a signed writing which by its terms gives assurance that it will be held open is not revocable, for lack of consideration (DO NOT NEED CONSIDERATION!!!), during the time stated or if no time is stated for a reasonable time, but in no event may such period of irrevocability exceeds three months; but any such term of assurance on a form supplied by the offeree must be separately signed by the offeror. (not including option Ks)
RULE: For K, an offer must be continuing up until the time of acceptance. Revocation can be inferred from D’s un/conscious conduct
RULE: Revocation is effective upon communications to Offeree through a reliable source
RULE: If Offeree adds additional terms to the offer the Offeror sent over then that K is void, unless Offeror accepts – to accept an offer while adding additional terms: “I accept your offer, and hope you would include XXX at market price”
RULE: If seller does not respond yes or no to new offer but they do something that manifests mutual assent, then the new contract is valid C/A: No notice or it was ambiguous notice
EX: Dickinson, Hearing news of the offeror entering into a K with someone else is enough.
To constitute a K, it must appear that the two minds were at one, at the same moment of time, that there was an offer continuing up to the time of acceptance – couldn’t have been meeting of the minds here because P knew D was trying to sell the property to someone else.
if we have an offer it can be accepted, but the offeree can also lose the offer à here we did not have an option contract and therefore it was just a naked promise.
Here we care about subjective knowledge – must actually receive notice (actual receipt)
If P didn’t know about the new buyer, he could’ve gotten specific performance
For a K (bargain) you need the agreement AND consideration – if we had both of these than P would’ve had until 9AM but all they had was an agreement, for consideration something has to be given.
HYPO à Buyer heard seller was making inquiries, so buyer runs to the seller’s house and says he accepts the offer. Seller would have to give the buyer the property because he was making inquiries, which are just back-up offers – Black Letter rule: inquiries not enough under RST
Must be a definite action under RST 43
RST doesn’t want parties not to look into back up plans
Acceptance
Acceptance requires the offeree’s manifestation of agreement in the manner invited and in the time required.
