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Contract LLM
University of Illinois School of Law
Kar, Robin B.

 
Kar­­_Contracts_LLM_Fall_2014
 
Outline for Contracts
 
– Three beasts of contract law:
1.      Breach of Contract
2.      Promissory Estoppel
3.      Restitution
 
BREACH OF CONTRACT:
·         To claim for a breach of contract, a contract must have been formed.
·         This requires a bargain in which there is:
1.      Mutual assent
          +
2.      Consideration
 
 
Mutual Assent:
·         “Meeting of the minds between parties”- Essentially generates reciprocal promises
·         Objective test is what matters! —-What would a reasonable man think in this situation?
·         Can be established in different ways:
                                  i.            Through contemporaneously signed contract, OR
                                ii.            Conduct through performance that parties believed that there was mutual assent to bargain, OR
                              iii.            The complex process of offer and acceptance, which requires 3 steps:
1.      Check if there’s an offer[1], state the objective test
2.      Check if there’s an acceptance[2] 3.      Check to see if the offer was terminated prior to acceptance:
a.       Rejection:
                                                                                                                i.      Objective test-Reasonable person might read conduct in not signing from the start as rejection
                                                                                                              ii.      Qualified acceptance = rejection + counter offer
b.      Revocation:
                                                                                                                i.      Objective test
                                                                                                              ii.      There are 2 types of revocation:
1.      Direct revocation arises when the offeree receives from the offeror a manifestation of an intention not to enter into the proposed contract.
2.      Indirect revocation arises when: (1) action inconsistent with offer remaining open + (2) reliable information.
c.       Lapse of time
                                                                                                                i.      Under the mailbox rule, acceptance is effective upon dispatch
d.      Death of the offeror
 
The objective test:
Determines whether a person has “manifested assent” through a voluntary (intentional) action. Determines the content of the mutual assent.
 
Why the objective test; three rationales
1.      Empowerment rationale: Promise as a tool
* Promisor wants to be able to induce promisee to do something (by making a trustworthy promise). So promisor wants promise to rely on objective meanings.
2.      Reliance rationale: Don’t harm
* Promisee might rely to detriment on objective meaning. So should protect promisee.
3.      Evidentiary rationale: Best evidence of subjective intent
 
Consideration
·         Promises are enforceable in a US court of Lawà Promises supported by consideration.
·         The modern test – the bargain theory:
A promise is supported by consideration if:
1. There’s a return promise or performance,
2. That is “bargained for”
                        – Sought by promisor in exchange for original promise; and
                        – Given by promisee in exchange for original promise.
·         Past performance [past act] is no consideration.
·         Gift is not consideration.
 
Default remedy for breach of contract is: expectation damages
·         This is the fair market value at the time of breach of what the victim of the breach would have obtained if both parties fully performed. 
·         It empowers the promisor as it induces him/her to work or not and protects the promisee in case of default by the promisor.
 
 
Promise
1.     Manifestation of intention to act or refrain from acting in a specified way
2.     So made as to justify a promisee in understanding that a commitment has been made
PROMISSORY ESTOPPEL:
 
Compensation for reliance
 
Test
1.      Promise[3]   
2.      Induces action or forbearance
3.      Promisor should have reasonably expected these actions and  forbearances
a.       These actions and forbearances should be reasonable.
4.      Injustice can only be avoided through enforcement
a.       This typically means there was detrimental harm from the reasonable reliancxe.
 
Remedy may be limited as justice requires (in most cases jus

the offeror is unilaterally bound to his promise. Examples: Rewards, Bonuses.
·         You might make offers for unilateral contracts irrevocable:
o   An offer for unilateral contracts becomes irrevocable once an offeree begins performance in accordance with the terms of an offer.
 
Grounds for irrevocability:
 
–          The “true“ Option contract:
1.      Offer for any contract
2.      Subsidiary promise to keep offer open, which is also
3.      Supported by consideration
 
–          The rule for unilateral offers
1.      Offer for a unilateral contract; and
2.      Offeree begins performance
 
–          The UCC’s firm offer provision
1.      The UCC applies
2.      Offer made by merchant
3.      Terms give assurance it will be held open
4.      Up to three months or lesser
* Even without consideration
 
–          Restatements formality provision (87(1)(a))
An offer is binding as an option contract if it is:
1.      In writing and signed by offeror
2.      Purports consideration
3.      Fair exchange and reasonable time
 
–          Restatement 87(2) (Very rare)
1.      Offer induces action or forbearance by offeree of a substantial character
2.      Offeror should have reasonably expected
3.      Must be binding as an option contract to avoid justice
[1] An offer is a (1) manifestation of a willingness to enter into a bargain, (2) so made as to justify another person that their assent is invited and (3) will conclude it. Courts use an objective test (state it); and look at 5 factors (language, history, directedness, definitiveness and type of K)
[2] An acceptance is a (1) manifestation of assent to a bargain (2) on the terms and (3) in the manner invited by the offer. Objective test and same five factors
[3] [promise cannot be induce an action in the past]