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Contracts
University of Illinois School of Law
Brubaker, Ralph

 
CONTRACTS
BRUBAKER FALL 2014
 
 
Types of K
Unilateral K [Carbolic Smokeball] – P’or gives a promise in exchange for performance by the p’ee
– Voidable at any time up until performance is completed
I.                    Promisor
a.       The party to a k who makes a conditional promise
                                                               i.      A promise which only becomes binding when a certain condition is met
b.      Only the Promisor is bound by the k
                                                               i.      May be sued for failure to perform if promisee has completed performance
II.                  Promisee
a.       Must complete a performance in order to receive the benefit of a conditional promise
                                                               i.      Only becomes binding upon completion
b.      Not bound by the k
                                                               i.      If fails to perform, promisor has no legal remedy
III.                Example
a.       Hamer v. Sidway
                                                               i.      Uncle promises nephew that he will pay him 5k if he refrains from vice until her reaches 21
1.       Promise
a.       5k in exchange for performance
2.       Promisor
a.       Uncle
b.      Bound to pay once performance is complete
3.       Promisee
a.       Nephew
b.      Under no obligation to complete
c.       May bind uncle to k by performance
Bilateral K
– Both parties exchange promises – Enforced in order to further economic efficiency through reliance
– Voidable at any time until one party’s performance is complete
I.                    Promisor
a.       Offers a conditional promise in return for a promise made by the promisee
b.      Will be bound to the k
II.                  Promisee
a.       Provides the promisor with a return promise instead of a performance
b.      Bound to the k
III.                Example
a.       A promises to pay a sum of money to B if B promises to construct a house for him
                                                               i.      B is bound to construct house
1.       A has remedy for failure
                                                             ii.      A is bound to pay
1.       B has remedy for failure
IV.                Performance
a.       UCC 2-206.2: Exclusive dealing K imposes obligation for seller to use best efforts to supply goods, and for buyer to use best efforts to promote the sale
V.                  Termination
a.       UCC  2-309.3: Reasonable advance notice of termination is required
Option K/Firm Offer
 
I.                    REST 87.1: Offer is binding option K if
a.       It’s in writing, signed by the o’or,
b.      Recites a purported consideration, and
                                                               i.      Nominal consideration allowed (Peppercorn)
1.       You voluntarily chose to enter “sham” bargain satisfying cautionary/evidentiary
2.       Small consideration is OK for option if K has fair terms
c.       Proposes an exchange on fair terms within a reasonable time
– Irrevocable for a set period of time
– Real consideration (Money) is more likely to be enforced as option K
– Mailbox rule does not apply to option Ks
II.                  UCC 2-205: Firm Offer
a.       Offer by “merchant” (Any business person)
b.      Signed by o’or
                                                               i.      Firm offer clause separately signed by o’or if form supplied by o’ee
c.       Irrevocable for stated/reasonable time
                                                               i.      Not to exceed 3 months
Parts of a K
All Ks have 3 parts: offer, acceptance, and consideration
Offer
The beginning of the bargain
I.                    Definition
a.       Always a promise
b.      REST 2.1: Promise = manifestation of intention to act in specified way, so made as to justify p’ee in understanding a commitment has been made (Reservation of discretion = illusory promise)
c.       REST 4: A promise may be stated, oral/written, or may be inferred wholly/partly from conduct
d.      REST 24: Offer = manifestation of willingness to enter into a bargain, so as to justify another person in understanding that his assent to that bargain is invited and will conclude it (Express or implied)
II.                  Parts
a.       REST 17.1: K requires manifestation of mutual assent and consideration
                                                               i.      REST 18: Manifestation of mutual assent requires that each party make a promise or begin/render a performance
b.      REST 26: Manifestation of willingness is not offer if person to whom it’s addressed knows (subjective) or has reason to know (objective) the person making it wants the last word
c.       UCC 2-204.3: Open terms in K do not cause K to fail if the parties intended to make a K
III.                Offer is binding if the o’ee reasonably believes that it’s serious
a.       Lucy v. Zehmer
                                                               i.      “Joking” sale held to be actual offer
IV.                Offer v. invitation to negotiate
a.       An invitation to negotiate is never an offer
b.      Offer must be unambiguous
                                                               i.      Any words of equivocation mean there is no offer
1.       E.g. “I wouldn’t be willing to sell for less than $16k” is an invitation to negotiate, not an offer to s

escribed, another method of acceptance is not precluded.
1.       REST 53.1: Offer can only be accepted by performance if offer invites it
2.       REST 58: O’ee must comply with term of offer in order to accept (Requires that you stand on head and sing? This is the only way to accept)
3.       REST 32: In cases of doubt, either performance or promise is suitable
4.       REST 30.2: Language/circumstances surrounding offer may indicate whether offer seeks performance or promise as acceptance
                                                             ii.      REST 51: Unless stated otherwise by O’or, O’ee may accept offer after having partially completed as long as they learn of the offer before completion
1.       Lost dog, find dog, try to find owner, find reward, return dog = accepted
                                                            iii.      REST 62.1: Beginning of performance is acceptance
1.       REST 62.2: Such performance is promise to render complete performance [Evertite Roofing loading truck] III.                Notice
a.       REST 56: Essential that acceptance by o’ee is given to o’or with reasonable diligence, unless offer indicates otherwise
                                                               i.      Acceptance/Notice both met by sufficient performance (Construction worker tearing down wall)
b.      Unilateral K
                                                               i.      REST 54.1: Acceptance by performance does not require notice, unless requested
                                                             ii.      REST 54.2: Notice required when the O’or is unlikely to discover the performance on his own, Unless:
1.       The o’ee exercises reasonable diligence to notify, OR
2.       The o’or learns of performance within a reasonable time, OR
3.       The offer indicates that notification is not required
c.       Bilateral K
                                                               i.      Acceptance by promise always requires notice
1.       Puts o’or on notice that he is bound
2.       Allows o’or to rely on promise
                                                             ii.      O’or may dispense of requirement for notification