Contracts
Andersen
Fall 2014
Ø Promise: a commitment or an undertaking that some event will or will not occur in the future; made by using express words or implied by conduct or some form of words and conduct RST §§ 2,4
o Hawkins (Injured Patient) v. McGee (Surgeon): the purpose of awarding damages for breach of contract is to put the plaintiff in as good a position as he would have been in had the defendant kept his contract. RST §§ 1-5
o Three interests: Expectation, Reliance, Restitution
Expectation
Reliance
Restitution
Pain & Suffering
No
Yes
No
Doctor fee
No
Yes
Yes
Hospital fee
No
Yes
No
Worsening
Yes
Yes
No
Failure to improve
Yes
No
No
Ø Mutual Assent: a requirement of a valid contract that the parties possess a mutuality of assent as manifested by the terms of the agreement and not by a hidden intent. RST §§ 17-20
o Lucy (Purchaser of farm) v. Zehmer (Owners of farm): if a person’s words and acts, judged by a reasonable standard, manifest a certain intent, it is immaterial what may be the real but unexpressed state of that person’s mind
Ø Formation of Contract
o Embry (Employee) v. Hargadine, McKittrick Dry Goods Co. (Employer): the secret feelings, intentions, or beliefs of a party will not affect the formation of a contract if their words and acts indicate that they intend to enter into a binding agreement.
§ Reasonable person standard
o Oswald (Buyer of coins) v. Allen (Seller of coins): a contract does not exist when the terms used to express an agreement are ambivalent, the parties understand the terms in different ways, and neither party should have reasonably been aware of the other party’s understanding.
§ Meeting of the minds: a requirement of a valid contract that the parties possess a mutuality of assent as manifested by the terms of the agreement and not by a hidden intent; enforceability of the contract is limited to those terms to which the parties assented. RST §20
Ø Offer: a proposed promise to undertake performance of an action, or to refrain from acting, that is to become binding upon acceptance by the offeree. RST § 24
o Mesaros (Collector of coin) v. US (Seller): where one party solicits and receives an order or other expression of agreement from another, clearly specifying that there is to be no contract until ratification or assent by some representative of the solicitor, the solicitation itself is not an offer, it is a request for an offer.
§ Advertisements and Solicitation: they are regarded as “a mere invitation to enter into a bargain rather than an offer.” In determining whether an offer has been made, it must be objectively reasonable that the alleged offeree believe that the advertisement or solicitation was intended as an offer.
o Academy Chicago Publishers (Publisher) v.Cheever (Widow of author): in order for a valid contract to be formed, an offer must be so definite as to its material terms, or require such definite terms in the acceptance, that the promises and performances to be rendered by each party are reasonably certain. RST §33
Ø Power of Acceptance. RST §§ 35; 36; 41
o Akers (Employee) v. J.B. Sedberry, Inc. (Employer): ordinarily, an offer made by one to another in a fact-to-face conversation is deemed to continue only to the close of the conversation and cannot be accepted thereafter. An Offer is rejected when the offeror is justified in inferring from the words or conduct of the offeree that the offeree intends not to accept the offer or to take it under further advisement.
Ø Counteroffer: a statement by the offeree which has the legal effect of rejecting the offer and of proposing a new offer to the offeror. RST §§ 38; 39; 59 (mirror image rule)
o Ardente (Buyer of house) v. Horan (Seller of house): an acceptance which is equivocal or upon condition or with a limitation is a counteroffer and requires acceptance by the original offeror before a contractual relationship can exist.
Ø Revocation: the cancellation or withdrawal of some authority conferred or an instrument drafter, such as the withdrawal of a revocable contract offer prior to the offeree’s acceptance. RST §§ 42 (against mailbox rule); 43;
o Petterson (Mortgagee) v. Pattberg (Mortgagor): an offer to enter into a unilateral contract may be withdrawn at any time prior to performance of the act requested to be done.
Ø Option Contract: a contract pursuant to which a seller agrees that property will be available for the buyer to purchase at a specified price and within a certain time period. RST §§ 25; 37; 45 (option contract created by part performance)
o Marchiondo (Broker) v. Scheck (Seller of house): where an offer invites an offeree to accept by rendering a performance (unilateral contract), an option contract so created is conditional on the offeree’s completion of performance in accordance with the terms of the offer. (RST § 45: when the offeree tenders or begins the invited performance or tenders a beginning of it, an option contract is created.)
Ø Acceptance: assent to the specified terms of an offer, resulting in the formation of a binding agreement. RST §§ 50-69
o Davis (Offeree) v. Jacoby (Nephews): in case of doubt, it is presumed that an offer invites the formation of a bilateral rather a unilateral contract. RST § 32; UCC § 2-206(1)
§ Bilateral contract:
§ Unilateral contract: an agreement pursuant to which a party agrees to act, or to forbear from acting, in exchange for performance on the party of the other party
o How to accept an offer
Manner of Acceptance
Unilateral
Bilateral
Words
No
Yes
Performance
Yes
Yes, if the offeror invites it; if not, the offeror cannot accept it by performance
o Conduct as Manifestation of Assent. RST §§ 19; 69
§ Houston Dairy, Inc.(Borrower) v. John Hancock Mutual Life Insurance Co. (Lender): a purported acceptance by an offeree after the time for acceptance designated by the offeror has expired constitutes a counteroffer, which must be separately accepted in a communication by the original offeror to the original offeree.
§ Cole-McIntyre-Norfleet Co. (Buyer of meal) v. Holloway (Seller of meal): delay in notification amounts to acceptance of an offer when the subject goods of the contract will become unmarketable by delay.
§ Seaview Ass’n of Fire Island (Homeowners Ass.) v. Williams (Buyer): where there is knowledge that a private community homeowners’ association provides facilities and services for the benefit of the community residents, the purchase of property there may manifest acceptance of conditions of ownership, including payment for the facilities and services offered.
· Fair play as alternative to consent in contract cases: when parties voluntarily enjoy benefits from collective agreements, obligations will attach to the parties for the benefit of the community.
Ø Formation of a Contract Under the UCC. UCC §§ *2-204; *2-206; 2-207 (against mirror image rule & knock out rule); 2-105; 2-314
o Does Article 2 apply?
§ Yes: Agreement (Transactions in Goods: Movable) Mixed → Generally Article 2 applies if the sale of goods is the transaction’s primary purpose.
§ No: Common Law (Offer, Power of Acceptance, Acceptance…)
§ Formation under Article 2
2-204(1): Formation of Agreement
2-207: If the terms of an offer and purported acceptance differ…..
es from deliberately changing positions according to exigencies of the moment in order to protect the integrity of the judicial process.
§ Powell (property owner) v. City of Newton (trespasser): the doctrine of judicial estoppel renders enforceable a settlement agreement reached in open court and orally ratified by the parties before a judge, but never memorialized by a signed writing, that otherwise would be unenforceable as a violation of S/F.
Chapter 2. The Justification Principle
Ø The Bargained-for Exchange. RST §§ 17; 71-72; 75; 79
o Congregation Kadimah Toras-Moshe (promisee) v. Deleo (estate administrator): an oral promise to donate money is unenforceable.
o Schnell (testator’s husband) v. Nell (will beneficiary): a contract will be vitiated for lack of consideration where the consideration given by one party is only nominal and is intended to be so. The general proposition that inadequacy of consideration will not vitiate a contract does not apply where consideration offered by one party is plainly intended to be nominal.
§ Creating an exception to the general rule that a mere exchange of sums of money whose value is exactly fixed is not consideration at all.
§ No moral consideration
§ No past consideration
o Hamer (promisee) v. Sidway (executor of promisor): forbearance is valuable consideration.
o Batsakis (Creditor) v. Demotsis (Debtor): mere inadequacy of consideration ($25) in exchange for ($2000) will not void a contract. RST §79
o Newman & Snell’s State Bank (lender) v. Hunter (debtor): in order for a contract to be valid, valuable consideration must be exchanged between the parties.
§ Hunter provided the note to Newman in exchange for her insolvent, deceased husband’s note, which was a worthless piece of paper. Hunter received nothing of value for this exchange.
o Dyer (employee) v. National By-Products, Inc. (employer): settlement of an unfound claim asserted in good faith constitutes valuable consideration for settlement agreements. RST § 74
§ It is in the best interest of the legal system to encourage settlement and negotiation. Thus, circumstances may arise where forbearance of an invalid claim can constitute sufficient consideration. So long as the forbearing the pursuit has a good faith belief that he is forbearing pursuit of a legitimate claim, such forbearance will be valid consideration.
o Lake Land Employment Group of Akron (former employer) v. Columber (former employee): continued employment (forbearance from discharging) alone satisfies the contractual requirement of consideration in a covenant not to compete entered into by an at-will employee who is already employed by the employer.
o Wood (Marketer) v. Lucy, Lady Duff-Gordon (Designer) (Cardozo, J.): while an express promise may be lacking, the whole writing may be instinct with an obligation-an implied promise-imperfectly expressed so as to form a valid contract. UCC § 2-306(2)
§ The finding of an implied promise for the purpose of finding sufficient consideration to support an express promise is an important technique of the courts in order to uphold agreements which seem to be illusory and to avoid problems of mutuality of obligation.
§ Notice, if there is no sale of goods, UCC § 2-306(2) does not apply.
