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

Contracts

Professor Robin Kar

Fall 2015

Contract Defined – a promise or a 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 – a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made

Breach of Contract

Empowerment interests

Formation

· Mutual Assent

o Simultaneously signed K

o Offer/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.

§ Objective test – Would reasonable person construe as offer?

§ Did offer happen

· Definiteness

· Directedness

· Language

· History

· Type

§ Mailbox Rule – Acceptance effective upon dispatch, offer effective upon receipt.

§ Advertisements are not usually considered an offer (Solicitation of offer)

· Exception: Bait and switch advertising

§ How to kill an offer

· Rejection

· Time

· Revocation before acceptance

o Rule – Action inconsistent with intention to make K acts as revocation when communicated to offeree.

o Rule – Action inconsistent with keeping offer open can be revocation.

· Death of offeror

§ Acceptance – a manifestation of assent to the terms thereof made by the offeree in a manner invited or required by the offer.

§ Mirror image rule – Terms of acceptance much exactly match those of offer to be valid acceptance.

o Conduct

· Consideration

o Consideration – Promise is supported by consideration if there is return promise or performance that is bargained for, which means it is sought by promisor in exchange for the original promise or performance and given by the promise in exchange for that original promise

o Past/false/nominal/moral(gratuitous) consideration is not consideration

o Mere inadequacy of consideration will not void K

§ Return promise does not have to be equal value

o Condition on gift is not consideration

Promissory Estoppel

· Promissory Estoppel – Reliance interest

o Promissory Estoppel – A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires.

o Charitable Subscriptions – Require consideration or reliance (Courts very liberal with these requirements)

Restitution

· Restitution – Conferral of a material benefit, non-gratuitously, under circumstances in which retention is unjust.

o Rule: Where one renders services of value to another with his knowledge and consent, the presumption is that the one rendering the service expects to be compensated, and that the one receiving services intends to pay, so law implies promise to pay.

o Protection of another’s life or health: A person is entitled to restitution if he (1) “performs, supplies, or obtains professional services” that protect another’s life or health and (2) “the circumstances justify the decision to intervene without request”. Unjust enrichment is measured by a reasonable charge for the services.

o Pelo Factors – mental incapacity

§ Acted unofficiously and with intent to charge

§ Service was necessary to prevent the other from serious bodily harm

§ Had no reason to know other would not consent (if mentally competent)

§ It was impossible for other to give consent, or immaterial (infancy, mental impairment)

o Sub-K owner Rule – Sub-K must exhaust all remedies against the general contractor and still remain unpaid, and owner must not have given consideration to any person for the improvements furnished by the sub-K.

§ claim is by subcontractor against end client/owner for construction wo

carried out after death. Lack of consideration irrelevant in this case. (is ambulatory: can be revoked by later will.)

• gift in trust – establish a trust that beneficiary would eventually enjoy benefits of. Avoids statute of limitations and allows enforcement of obligation.

Unilateral Contracts

· Unilateral K – Only way to accept is through completer performance, may be revoked before acceptance.

· Rule – Once performance starts offer become irrevocable (rejection, lapse of time, death still apply)

· If offer is ambiguous as to unilateral or bilateral contract:

o as default court will assume you were making promise that could be accepted by promise or act. Courts lean toward making it a return promise so bilateral instead of unilateral

· Haha Rule

UCC

· UCC –Predominant purpose of sale must be of goods

o Coakley Factors

§ language of contract

§ nature of business

§ intrinsic worth of goods v. services

· Formation under UCC:

o Price quotation – Usually solicitation for an offer

o Purchase Order – Often considered offer

o A k for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract.

o An agreement sufficient to constitute a K for sale may be found even though the moment of its making is undetermined.

o A contract for a sale does not fail for indefiniteness, even though one or more terms are left open, so long as parties intended to make a contract and there is a reasonably certain basis for giving a remedy