Select Page

University of Illinois School of Law
Tabb, Charles J.

Contracts Outline
I. Introduction and Overview
Objective Theory of Contracts: Don’t care what parties actually intended. Reasonable person
            -Lucy v. Zehmer, Georgia Pine case, Leonard v. Pepsico, Harriet Jet
What is a contract?
§ 1: promise or a set of promises for the breach of which the law fives a remedy, or the performance of which the law in some way recognizes as a duty.
What is a promise?
§ 2(a): a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promise in understanding that a commitment has been made
Bilateral Contract: I promise to pay you $1,000 if you promise to walk across the bridge.
Unilateral Contract: I promise to pay you $1,000 if you walk across the bridge.
            -walker has no obligation to do it
            -payer can back out of this until it’s been substantially performed
Contracts need not be in writing, can be implied
Implied in Fact Contract:
            1. Mutual Agreement
                        -if you don’t board horses, you probably didn’t agree to. Bailey
            2. Intent to Promise
                        -can be expressed in actions or inactions—holding up an apple to a clerk
            -if you visit a doctor and receive treatment, we imply an agreement to pay reasonable fees
Implied in Law (quasi) contract:
            1. Benefit conferred upon defendant by plaintiff
            2. Appreciation by defendant of such benefit
            3. Acceptance and retention by defendant of such benefit under such circumstances that it would be inequitable to retain the benefit without payment of the value thereof.
            -implied by law where justice so requires
                        -a doctor treats a patient in an emergency room
                        -NOT just for any volunteer
***Efficiency vs. Fairness***
***Never forget the causation factor. Damages must be caused by a breach***
***Contract liability is strict, unlike torts***
II. Mutual Assent: Offers, Counter-Offers, and Acceptance
A. Was there an offer?
§ 24 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
            -An offer gives the offeree power of acceptance to make a contract happen with one act
            -Where one uses general language not specifically designed as an outright offer to sell, one is not making an offer, Owen, “it would not be possible to sell for less than…”
                        -“I want $2.25 for the seed” is not an offer, either
                                    -this is an invitation to make an offer
                        -really need something like “I offer to sell you”
            -not enforceable if the offer should be interpreted as being offered in jest. But it doesn’t matter if you just meant it in jest, but an objective person wouldn’t see it that way. Lucy v. Zehm
            *the offeror is the master of his offer*
                        -you get to set the terms
Field of Offerees: The people to whom the offer is made
            -if you forward an e-mail offer, it might not be valid to those who get it
Typically, ads are not offers and the advertiser maintains rights of rescinding
            -they are merely invitations to continue negotiations
-Was there clear, definite, and explicit language that left nothing open for negotiation?
-Lefkowitz, “first come first served”
-Did the advertiser benefit from the statements made? Carbolic Smoke Ball
-Did the advertisement’s promises relate solely to the issue at hand? Carbolic
            -Or were they promises about things in the future? Leonard v. PepsiCo
-Did the advertisement offer a reward for those who did what it said? Carbolic
            -this would be stronger consideration, maybe?
How can you respond to an offer?
1. Acceptance
2. Counter-Offer = Qualified Acceptance
3. Rejection
4. Idle Chit-chat / General Grumbling
How can you cancel an offer?
            1. Rejection by offeree
            2. Counter-Offer, unless otherwise indicated in the counter-offer
            3. Lapse of sufficient/reasonable time
            4. Revocation by Offeror at any time before acceptance
            5. Death or Incapacitation
B. Was there acceptance?
§ 50 Acceptance: the manifestation of assent to the terms thereof made by the offeree in a manner invited or required by the offer
-can be made in many ways. In some purchase orders, need not be made
***offeror is the master of his offer: can set it so acceptance can be made in odd ways***
-acceptance must be in the terms of the offer, else it’s a counter-offer
            Ruble: Want $8,000 or $2,500 + payments. Giving $1,500 is a counter-offer.
§ 59 Qualified Acceptance: A qualified or conditional acceptance proposes an exchange different from that proposed by the original offeror. This is a counter-offer and ordinarily terminates the power of acceptance in the original offeree.
-acceptance by silence can be valid if you start benefitting.
-piecemeal acceptance of some terms is a counter-offer, Dibley v. Pan-Am
            -BUT idle chit-chat does not constitute a qualification. Foster v. West Pub. Co.
                        -“This sucks, but I guess I have no choi

bearance (Hamer v. Sidway, giving up smoking)
                        c. the creation, modification, or destruction of a legal relation
                        d. a return promise, bargained for and given in exchange for the promise
2: Consideration may be given to the promisor or to some other person. It may be given by the promisee or by some other person
§ 71: What’s a bargained-for exchange?
1: To constitute consideration, a performance or a return promise must be bargained for.
2: A performance or return promise is bargained for if it is sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise.
3: The performance may consist of
                        a. an act other than a promise
                        b. a forbearance
                        c. the creation, modification, or destruction or a legal relation
4: The performance or return promise may be given to the promisor or to some other person. It may be given by the promisee or by some other person
-Is there consideration or is it just a condition of a gratuitous promise?
                        -Does the happening of the condition actually benefit the promisor?
                        -“if you go to that store, you can purchase a coat on my account.”
                                    -This is just a condition of a gratuitous promise, not consideration
                                    -going to the store is a detriment, but it’s not what was bargained for
                        -Look for a reciprocal, bargained-for exchange, which creates a deal.
-Consideration need not satisfy one’s chief motive for undertaking an action.
                        -a painter may collect $500 for a painting, even if what he really wants is fame
B. Employee Contracts and Arbitration Agreements
Basic format would need an offer, acceptance, and consideration.
Offer: The company putting forth the contract
Acceptance: Signature
Consideration: Giving up the right to arbitrate, but must get something back, too.
                                    -continued employment isn’t consideration Tenet Healthcare v. Cooper