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University of Iowa School of Law
Andersen, Eric G.

Contracts Eric Andersen Fall 2016 Outline

Textbook: Principles of Contract Law (American Casebook Series) 4th Edition

I. The Autonomy and Security Principles

ü Hawkins v. McGee (Patient and Doctor)

· Fact: A young boy went to a surgeon to repair his scarred hand, and came away with a hand that was even more damaged.

· Rule: The correct measure of damage for a failure to perform a contract as promised is the difference between the result that was promised and what was actually provided. This is termed expectation damage

· Analysis

– The pain was necessary incident. It was a legal detriment suffered by him which constituted a part of the consideration given by him for the contract.

– It was also erroneous and misleading to submit to the jury as a separate element of damage any change for the worse in the condition of P’s hand. Any such ill effect from the operation would be included under the true rule of damage.

· Comment: The usual rule of damages for breach of warranty in the sale of chattels is that the measure of damages is the difference between the value of the goods if they had corresponded with the warranty and their actual value, together with such incidental losses as the parties knew or should have known would probably result from the failure to comply with the contract.

R §20: Objective Approach

ü Lucy v. Zehmer(Buyer and Seller, Objective Approach)

· Fact: Asserting that he had entered into a valid contract to purchase a form, a buyer sued to enforce the alleged contract over the objections of the farm’s owner who claimed to have been joking when he signed the sales contract with the buyer.

· Rule: Where a party’s actions and statements could reasonably be seen as manifesting an intent to enter into a contract, the party will be bound to the contract even if the party had no subjective intent to enter into the agreement.

· Analysis

-We must look to the outward expression of a person as manifesting this intention rather than to his secret and unexpressed intention.

-The mental assent of both parties is not necessary for the formation of a contract.

-A person cannot avoid a contract merely by claiming to have been joking when his conduct and words would cause a reasonable person to believe he intended a real agreement.

-However, if the apparent offer is obviously a joke form the perspective of the party hearing it, the offer would not be valid and could not be validly accepted.

ü Embry v. Hargadine (Employee and Employer)

· Fact: The employee contract is already expired. “Go ahead, you are all right. Get your men out and do not let what that worry you.”

*Reasonable Person: Objective Perspective

· Issue: To make a contract, is it required both parties’ intentions?

· Rule: ①Though Mckittrick may not have intended to employ Embry by what transpired between them according to the latter’s testimony, yet if what Mckittrick said would have been taken by a reasonable man to be an employment, and Embry so understood it, it constitutes a valid contract →②Whether or not the language used.

*The general rule is that it is for the court to construe the effect of writings relied on to make a contract, and also the effect of unambiguous oral words. However, if the words are in dispute, the question of whether they were used or not is for the jury.

· Applying: The answer was no ambiguous. It constituted in law a valid contract of re-employment as he understood that he was employed, as a reasonable man.

· Conclusion: The court erred in making the formation of contract depend on a finding that both parties intended to make one. Reversed and Cause remanded.

· Comment: The existence and terms of a contract are determined from the words and act of the parties rather than by the parties’ subjective intent.

R §24: Effect of Misunderstanding

ü Oswald v. Allen (Coin Collector and Seller, The Meeting of the Minds)

· Fact: Oswald thought that he’s struck a bargain to buy all of Allen’s Swiss coins, while Allen understood that only the coins in what she calls her Swiss Coin Collection were being sold, not all of her Swiss coins.

· History: Trial(Trial Judge based his decision upon his evaluation of the witnesses, the records of the defendant, the values of coins involved, the circumstances and reasonable probability)→ Appeal(No Contract)

· Rule: 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.

*Subjective beliefs matter at least where the parties have different understandings of the basic material elements of the deal, in this case, what is being sold.

· Comment: Even though the mental assent of the parties is not requisite for the formation of contract, the facts found by the trial judge clearly place this case within the small group of exceptional cases in which there is “no sensible basis for choosing between conflicting understandings.”

* Restatement &20: Objective (Reasonable person) + Subjective Approach


R §24: Offer Defined

ü Mesaros v. US (Buyer and Seller, Advertisement)

· Fact: Mesaros ordered a number of commemorative Statue of Liberty Coins. Demand for the coins was so high that the order could not be filled. The materials included an order form in mail. Please accept my order” Request specific performance.

· History: District (Granted Motion for dismiss for Defendant) → Circuit (Affirmed)

· Rule: Generally, it is considered


· Holding: The Language used in plaintiff’s letter of Sep 8 is not consistent with an absolute acceptance accompanied by a request for a gratuitous benefit.

R §42-43: Revocation

ü Petterson v. Pattberg (Landowner and Mortgage Holder)

· Fact: Pattberg held a mortgage on Petterson’s land and offered to discount the total owed if Petterson paid it off early. When Petterson tried to comply, Pattberg had already sold the mortgage note to someone else.

· History: District (Granted Motion for dismiss for Defendant) → Circuit (Affirmed)

· Rule: It is elementary that any offer to enter into a unilateral contract may be withdrawn before the act requested to be done has been performed.

· Comment: An offer to sell property maybe withdrawn before acceptance without any formal notice to the person to whom the offer is made. It is sufficient if that person has actual knowledge that the person who made the offer has done some act inconsistent with the continuance of the offer, such as selling the property to a third person.

R §25: Option Contracts

R §37: Termination of Option Contracts

R §45: Option Contract Created by Part-Performance

ü Marchiondo v. Scheck (Sales Agent and Principal)

· Fact: Marchion-do was given six days to find a buyer for Scheck’s real estate. Just before Marchion-do closed the deal Scheck revoked the offer, causing Marchion-do to lose his promised commission.

· History: Trial (Dismissed) → Superior Court → Supreme (Reverse)

· Issue: Whether the offeror had a right to revoke his offer to enter a unilateral contract?

· Rule: Partial performance of a unilateral contract creates a conditional contract that may not be revoked by the offeror before the allotted time for complete performance has run, or a reasonable time if the offer is silent as to the time allowed for complete performance.

· Comment: Part performance by the offeree of an offer of a unilateral contract result in a contract with a condition. The condition is full performance by the offeree. Thereafter, upon performance being completed by plaintiff, upon defendants’ failure to recognize the contract, liability for breach of contract would arise.

*Preparation Performance v. Partial performance