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Contracts
University of Illinois School of Law
Kar, Robin B.

Contracts Outline
Kar
Fall 2012
 
Contract 1) an oral or written agreement that 2) involves some sort of exchange, 3) at least one promise and 4) can be enforced
·         Formation of a Contract- formation of a contract requires a bargain where there is manifestation of mutual assent and consideration (restatement 2nd 17)
·         Mutual Assent-parties engage in the give and take of bargaining, often resulting in the final assent of finalizing an agreement
o   Write down a contract, conduct to establish a contract, offer/acceptance
o   Objective test-mutual assent is determined using the reasonable person test. Would a reasonable person believe a contract has been formed? Law enforces the apparent, not the intent of the parties.
§  Absent fraud, duress, or mistake, a parties negligence does not void the contract
·         Ray v William, inc.-court ruled that even though one party was unaware of the changes to the contract, absent fraud, their own negligence would not void the contract
§  Fork: some jurisdictions allow for the parties intent to be factored in as long as there is clear evidence of that intent.
o   Offer and Acceptance-most common way to affirm mutual assent is through offer and acceptance
§  Offer –the manifestation of willingness to enter into a bargain that invites an acceptance and , if accepted, forms a contract
·         Objective test-courts look towards the reasonable person test to determine an offer
o   Izadi v Ford-Car Company refused interpretation of advertisement as an offer and rejected acceptance. Court ruled that if reasonable person could belief that to be an offer, it was an offer
§  Policy: protects customers from being baited and switched and merchants from over extending their liability
·         An offer must addressed, without doubt, to a another party and indicate desire to form contract
o   Lonergan v Scolnick-while in talks with each other, another offer was made an accepted. Court ruled that until firm offer, parties are only in negotiations
·         Expressions, opinions, invitations, inquiries, intentions, or hopes are not offers
·         Advertisements, unless being definite language is include, are not offers but solicitations to make an offer
·         An offer can be withdrawn at anytime prior to acceptance, unless time frame is supported by consideration
·         Examine the history between the parties
·         Price quotations aren’t an offer unless they are specific enough to be considered an offer
§  Acceptance-manifestation to enter into bargain with terms proposed by offer, in a manner required by the offerer.
·         Acceptance uses the objective test to determine an acceptance
·         UCC 2-206-An offer can be accepted by any reasonable medium, including commencement of performance when the offeror is indifferent as to the manner
·         You cannot accept an offer you are unaware of, you must know of it and have intent to accept it (collecting an award after doing it if you didn’t know about the award prior to performance)
·         Silence can never be taken as acceptance
o   Exception-when there is a duty to speak, silence can be consider acceptance
o   Exception- unless silence is agreed to mean assent
o   Exception-unless the offeror has given the offeree reason to believe that silence will act as acceptance.
·         Conditional acceptances, unless conditions are implied by standard practice of the industry/setting, are not acceptances but counter offers and terminate original offer. An acceptance must be a mirror image of the offer.
o   Make sure the person isn’t just inquiring about the possibilities and making an actual counter offer
o   Normile v Miller-a valid contract can only exist when parties assent to the same thing
·         Only the party the offer was made to can accept
·         Mailbox rule: an offer dispatched by reasonable means of communication will become effective as soon as dispatched properly and without error, even if offer has not received notice of acceptance, a binding contract has formed.
o   Exception-offer may negate rule if terms state acceptance only good upon arrival
·         If indifferent about manner of acceptance, it must be reasonable (objective test)
§  Termination of Offers-when an offer is terminated, it can no longer be accepted
·         Rejection-an offer is terminated if the offeree rejects the offer or proposes a counter offer
·         Revocation-an offer is revoked as soon as it is received, no sooner no later.
o   Notice of revocation does not need to be direct, as long as a reasonable person would be aware of revocation
o   An offer can be revoked before final date to accept
§  Exception-if range of dates was supported by consideration, an offer must remain open until that date
·         Lapse of Time-an offer is terminated if a reasonable amount of time has passed
o   Use the objective test and take into account the type of offer
·         Death of Offer-death or destruction of an essential component of the offer terminates the it

ccept the offer
·         Cook v Coldwell-P sued D after they refused to give her the bonus she earned since she left the company
§  Saying Accept does not constitute acceptance, one must begin performance in order to accept
§  Offeree cannot not be held for breach of contract if he begins performance but does not complete performance
·         Only one of the parties is bound to the contract
·         Promissory Estoppel- 1) A promise which 2) the promisor should have reasonably expected to induce action of forbearance and which does 3) produce action or forbearance and 4) injustice can only be avoided by court enforcement
1.      There must be a promise
a.       Objective test-would a reasonable person consider that to be a promise
b.      a statement of future intent does not count as a promise
c.       promises do not have to be verbal
                                                                          i.      Wright v Newman-court ruled that signing birth certificate indicated a promise to support child  
d.      Negotiations are not promises unless talks strongly encouraged one to incur costs
2.      Promisor must reasonably expect the promise to induce action/forbearance
a.       Intent of the promisor does not matter, use objective test
3.      The promise must induce action/forbearance
a.       Objective test-would a reasonable person have acted or refrained from acting?
4.      Enforcement is the only way to avoid injustice
a.       Must have suffered some sort of legal harm while expecting gains by relying on the promise
·         Charitable subscriptions are often enforced even without meeting the requirements due to the nature of the charity—charities rely on promises and gifts to operate and charities are good things so we want to enforce those promises
Unjust Enrichment
·         Restitution occurs when there was a 1) Conferral of a material benefit and 2) the circumstances make retention of benefit unjust with the remedy being fair market value or return of benefit