Introduction to the U.S. Legal System – Contracts Outline – Professor Sara Benson (Fall 2011)
I – DEFINITION OF A CONTRACT
1. A contract is a legally enforceable agreement under which both parties are bound to perform
· Generally, commercial promises are covered by contract law and social promises are not (social/moral reasons v. economic reasons)
· Protects commercial expectations and helps with economic stability and development
· Elements of a Contract: Offer + Acceptance + Consideration
II – OFFER
1. Restatement 2d § 24: “An offer is 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.” à if you have to say more than yes, than it is probably not an offer!
2. Restatement Section 26: “A manifestation of willingness to enter into a bargain is not an offer if the person to whom it is addressed knows or has reason to know that the person making it does not intend to conclude a bargain until he has made a further manifestation of assent” à preliminary negotiations!
3. Lonergan v. Scolnick:
· “there can be no contract unless the minds of the parties have met and mutually agreed upon some specific thing”
· Preliminary negotiations à “the correspondence here indicates an intention on the part of the defendant to find out whether the plaintiff was interested, rather than an intention to make a definite offer to the plaintiff”
· “The advertisement in the paper was a mere request for an offer”
· “under the language used the plaintiff was not being given a right to act within a reasonable time after receiving the letter”
4. An offer must be:
· Specific as to its term
· Aimed at a specific party
· Timing (generally occur late in the negotiation process)
5. The offeror is master of the offer
6. Your “last shot” at accepting to form a contract
7. Offer must be communicated to be effective (mailbox rule inapplicable here)
8. Revocation must be communicated to the offeree prior to acceptance in order to be effective (see Normile v. Miller below)
· Revocation of an offer can be either direct or indirect. Indirect revocation occurs when offeree receives reliable (reasonable person would understand as valid) information indicating that the offer is no longer outstanding
III – ACCEPTANCE
1. Restatement 2d § 50(1): “Acceptance of an offer is a manifestation of assent to the terms thereof made by the offeree in a manner invited by the offer”.
2. Restatement Section 59: “A reply to an offer which purports to accept it but is conditional on the offeror´s assent to terms additional to or different from those offered is not an acceptance but is a counter-offer”
· Modification: modification of any essential terms = counteroffer and rejection of the offer
· Normile v. Miller:
o
fferee has a reasonable amount of time to accept an offer unless the offer specifies a specific amount of time or the offer is revoked
Mailbox rule (or “deposited acceptance”) applies à acceptance occurs when deposited in the mail
· Will not apply, however, if the offeror has stated (expressly or by implication) that he must receive the acceptance for it to be effective.
IV – OBJECTIVE THEORY OF CONTRACTS (MUTUAL ASSENT)
1. Mutual assent (objective) v. meeting of the minds (subjective)
2. Restatement Section 151: “A mistake is a belief that is not in accord with the facts”
· Restatement Section 152 (when mistake of both parties makes a contract voidable): (1) “where a mistake of both parties at the time a contract was made as to a basic assumption on which the contract was made and has a material effect on the agreed exchange of performances, the contract is voidable by the adversely affected party unless he bears the risk of the mistake under the rule stated in Section 154.
(2) “In determining whether the mistake has a material effect on the agreed exchange of performances, account is taken of any relief by way of reformation, restitution or otherwise”
