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Contracts
University of Iowa School of Law
Burton, Steven J.

Long Law Outline
Tuesday, September 30, 2008
8:00 PM
 
The Autonomy and Security Principles
1.             Promises
2.             Promissory Agreements
a.                   The Intention of the Parties
·                             Subjective Theory of Promissory Agreement: Two parties “agree” when both intent to make an agreement, and the communicate their intentioned to do so. (Lucy v. Zehmer)
·                             Objective Theory of Promissory Agreement: Two parties “agree” when 1) the first party manifests an intention to enter an agreement, 2) a reasonable person would understand that manifestation as agreement; and 3) the second party intends to agree. (Embry v. McKittrick)
§                                   The first party need not intend to agree.
·                             Where there is no subjective or objective agreement, there is no agreement. (Oswald v. Allen)
b.                   The Offers
·                             Making a Bargain Contract
·                                   Was there a legal offer?
·                                   Was there a valid acceptance?
·                                   Was the agreement in writing and signed, if required?
·                                   Was there “consideration”?
·                                   Was there an absence of invalidating causes?
                    Elements of an Offer
·                 “Where the offer is clear, definite and explicit,, and leaves nothing open for negotiation, it constitutes an offer…” (Lefkowitz)
§                                   R2 § 24: Manifested Intention to be Bound
1.                                     Was there a manifestation of intention to enter into a bargain?
2.                                     Was it made so as to justify another person in understanding that his/her assent to that bargain is a) invited and b) will conclude the deal?
§                                   R2 § 33: Reasonable Certainty
1.                                     Are the contract terms reasonably certain?
·                                               Is there a basis in the agreement for determining a breach and fashioning a remedy?
·                             Power of Acceptance
·                                   Death of the Power of Acceptance – R2 § 36(1)
·                                         Powers of Acceptance terminate when there is a
·                                                rejection or counteroffer by the offeree; or
·                                                lapse of time; or
·                                                revocation by the offeror.
·                                                death or incapacity of the offeror or the offeree
·                                               Offeree can’t impose a different mode of acceptance on Offeror due to the autonomy principle.
·                                               A counteroffer terminates the power of acceptance because the Offer and Acceptance must establish both parties’ agreement to the same terms, in every respect. The Mirror Image Rule.
·                                                     Where a purported acceptance is conditional, it is a counteroffer and operates as such.
·                                               An offeree manifesting an intention to take it under further consideration is not a rejection
·                                                     So under Car Sale Hypo where B says “Thank you, I’d like to think about that” and A says nothing but hangs up, power of acceptance is still alive?
·                                   Option Contracts
·                                         Option Contracts limit an offeror’s power to revoke the offer.
·                                               R2 § 63(b): an acceptance under an option contract is not operative until
·                                         They can be created by:
·                                               R2 § 45(1): Option contract created upon part performance, or
·                                               An offer to keep the offer open in exchange for a promise to pay for it or a payment for it, as the offer requires; or
·                                               An offer that the offeree foreseeably and reasonably relies upon. R2 § 87(2); or
·                                               Formality.
·                                                     R2 § 87(1)
 An offer is binding as an option contract if it
         is in writing and signed by the offeror, recites a purported consideration for the making of the offer, and proposes an exchange on fair terms within a reasonable time; or
         is made irrevocable by statute.
                    UCC § 2-205: Firm Offers
An offer by a merchant to buy or sell goods in a signed writing which by its terms gives assurance that it will be held open is not revocable, for lack of consideration, during the time stated or if not time is stated for a reasonable time, but in no event may such a period of irrevocability exceed three months; but any such term of assurance on a form supplied by the offe

“Contract” — § 1.201(11) (matter or law)
·                       “Sale” — § 2-106(1) (passing of goods from seller to buyer)
·                       “Contract for sale” — § 2-106(1) (includes both a present sale and contract to sell at a future time)
·           Formation of Contracts Under UCC Article 2
·                 Was there an agreement?
·                       A bargain of the parties in fact as found by their language or by implication from other circumstances. § 2-204(1)
·                       If some terms were left open, did they provide a reasonably certain basis for giving a remedy and intend to make a contract? § 2-204(3)
·                       If the terms of an offer and purported acceptance differ, did the purported acceptance nonetheless operate as an acceptance? § 2-207; Ionics
·                             Abolishes the Mirror Image Rule
·                             Statutory purpose is implemented by holding that an agreement is formed by the conduct of the parties in sending and accepting delivery of the goods, not by the words in their forms. § 2-207(3)
·                                   “Knock-Out Rule:” Different terms cancel each other out/
·                                   Controlling conditions are those terms the parties agreed on, plus default terms under Article 2.
·                                         Buyer gets warrantees by operation of law, not by virtue of the agreement.
·                                         Article 2 as amended in 2004 (but not adopted) employs the knock-out rule.
                            viii.        Preliminary Agreement
·           What are preliminary agreements?
·                 Most letters of agreement
·                 Most letters of intent
·                 Parts of package deals
·           Generally, they are not valid agreements
·                 Some, however, are:
·                       E.g., express agreements for one party not to negotiate or conclude a deal with a third party for as long as negotiations proceed.
·           UCC § 2-305