Contracts Outline

Contracts Outline

Baradaran

Fall 2016

FUNCTION AND TYPES

Contract: a bargained-for agreement/valid agreement with consideration, the performance of which the law recognizes duties and obligations, and the breach of which the law provides remedies.

Defenses

No consideration
No duty/obligation in promise
Gift
Gratuitous promise
Violation of public policy
Violated statute of frauds
Mistake

Private Contract Law, Common Law, and UCC

UCC

Sale of things movable; not real estate, services, intangibles.
UCC 1-103

Must be construed liberally and applied to promote underlying purposes:

Simplify, clarify, and modernize the law governing commercial transactions
Permit continued expansion of commercial practices through custom, usage, and agreement to the parties
Make uniform the law among various jurisdictions

UCC 1-305(a)

Remedies provided by the UCC must be liberally administered to the end that the aggrieved party may be put in as good a position as if the other party had fully performed, but neither consequential or special damages nor penal damages may be had except as specifically provided in the UCC or by other rule of law.

Function

Building block of capitalism!

Allows for specialization: reliance on others so I can focus on one thing
If not enforced, people wouldn’t enter into them
People would enter into them intending to break them

Who enforces contracts if not the government? The people, through violence. Contracts build civilization!

Unilateral Contract

Accept by performing. Only one promise.
Part Performance

RST need 1. Part performance if you even begin
If revoked before you start, does not count as past performance even if you made preparations.

Bilateral Contract

Accept by promising. Two promises.
Assume bilateral unless otherwise indicated

FORMATION

Mutual Assent: Offer & Acceptance

Offer and acceptance model conceives of a process of bargaining between parties that leads to formation of a contract.

WHEN DISPUTED

When parties dispute whether communication resulted in the formation of a contract
When it is agreed there is a contract, but dispute arises over which communication constituted the offer and which was the acceptance

STEPS

Is there a valid offer?
Was it revoked?
Is there a valid acceptance?

Offer

The manifestation 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; indication that the offeror is willing to be bound upon acceptance without further negotiation.

MUST BE

Communicated to the person to whom it is addressed
Indicate a desire to enter into a contract

Specify the performances to be exchanged
Terms that will govern the relationship

Directed at some person or group of persons
Invite acceptance

May or may not indicate how and by what time acceptance is to be communicated

Create reasonable understanding that acceptance will create the contract

Distinguishes offer from negotiations
WAS THE ADDRESSEE JUSTIFIED IN UNDERSTANDING THE PROPONENT INTENDED TO BE BOUND ON ACCEPTANCE

INTERPRETATION

Objective, not what the offeror intended but what a reasonable person in the position of the offeree would believe was an offer. MANIFEST INTENT OF OFFERROR. Factors to consider:

#1 LANGUAGE in the communication is the primary indicator of intent. Words like “offer”, “quote”, “proposal”, and “accept” rather than “ask”, “consider”, “wish”, etc.

Since offer is intended to form a contract, communication that omits significant terms is less likely to be an offer

Previous dealings between them, or any prior communications, can cast light on how offeree would reasonably interpret
Trade usage

Embry v. Hargandine – employer telling employee to “get back to work and not to worry about new contract” during conversation about new employment contract constitutes valid offer, despite employer’s lack of intent to employ the employee.

JOKES/BLUFFS

still depends on manifest intent.

Lucy v. Zehmer – intoxicated bar patron’s offer to sell written on a napkin is upheld due to reasonable interpretation of intent to offer

ADVERTISEMENT

Directed at public – offer or solicitation?

Balance usual market expectation that few advertisements are intended to give members the power to bind advertisers by responding to the advertisement with
Language that reasonably indicates a willingness to give potential customers the last word on forming a contract, bound immediately upon the response

When a solicitation

Recipient makes offer by responding to the advertiser
Common practice leads reasonable person to understand that advertisement or other generally disseminated proposal is a solicitation

When an offer

Clear, complete definite, explicit, leaves nothing open for negotiation

When Outrageous

Pepsico box top case with the plane – unsuitability, high number needed, discrepancy between value of plane and cereal boxes….obvious hyperbole

TERMINATION

REVOCATION

Offeror has the power to revoke the offer at any time before its acceptance, whether or not the offer states that it will be held open for a stated amount of time
Revocation only effective when it is communicated to the offeree
OR if offeror takes action clearly inconsistent with the continued intend to enter a contract and offeree obtains reliable information of this action

Offeree can learn of revocation through offeror or another reliable source
Dickenson v. Dodds Dickenson hears from third party that Dodds was selling to another party. Dickenson communicated acceptance immediately after hearing this, but it was too late because Dodds had already sold the property.
Notice must clearly indicate on a reasonable interpretati