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Contracts
University of Iowa School of Law
Carrasco, Enrique R.

What is a contract? 
            To create a contract, there must have been an offer and acceptance. There must have been mutual assent by the two parties. There must have been consideration for both parties.
I. Offer
F. Termination of the power of acceptance
II. Acceptance
III. Bases for Enforcing Contracts
                 A.      Bargain theory of consideration
                 B.      Reliance as a basis for enforcement
                 C.      Restitution as an alternative
IV. Policing the Bargain
V. Limits on the Bargain and its performance
VI. Remedies for breach
VII. Determining the Parties Obligations
VIII. Performance and Breach
IX. Mutual Mistake
The nature of Assent
Objective theory – what a reasonable person in the position of each party would be led to believe by the words or conduct of the other party. 
            Promotes certainty and stability. 
A.     Lucy v. Zehmer – One party jokingly enters into a contract to sell property for below market price as a joke. The other party did not take it as a joke and believed him to be serious. There was a contract here. 
a.       The mental assent of the parties is not needed. 
b.      If the words or actions judged by a reasonable standard manifest an intention to agree, it is immaterial what may be the real but unexpressed intention of his mind. 
I.            Offer
An offer is an act whereby one person confers upon another the power to create contractual relations between them. It must be an act that leads the offeree to reasonably believe that a power to create a contract is conferred on him.
Test – Would a reasonable person under the circumstances understand that he was being offered     the power to create a contract via acceptance? 
                 A.      Exclude invitations to deal or acts of preliminary negotiation and
1.      Owen v. Tunison
                 B.      Acts done in jest or without intent to create legal relations.
1.      Lucy v. Zehmer
                 C.      A simple price quotation is usually an invitation to the buyer to make an offer.
1.       Stating a minimum price for the sale of property is not an offer. 
a.       Owen v. Tunison – At most, it is an intent to open negotiations.
b.      Harvey v. Facey – a communication regarding only a price term is inadequate to constitute an offer. 
c.       There must be intent by the seller to sell to the buyer for it to be an offer. 
2.       Immediate acceptance language may make a price quote into an offer.
a.       Fairmount Glass Works v. Crunden-Martin Woodenware Co.
i.       P sent D asking for a price quote regarding exact numbers.
ii.     D replied with a price quote with exact quantity, price, and language “for immediate acceptance” which would result in shipment by a certain date. 
3.      This constituted an offer due to the language of the statement. 
a.       If D had sent the price quote first, it would not constitute an offer.
b.      Quantity is a crucial element in determining if the quote is an offer. 
i.       Salt-trade case where language stated “authorized to offer” yet was construed by court to not be an offer since there was no quantity listed.
4.      Could lead to a buyer “accepting” “ordering” more than the seller had.
                 D.      Advertisements are generally construed to be an invitation by the seller to the buyer to make an offer to purchase. 
1.      Advertisements are usually indefinite to quantity and other terms.
2.      Sellers should be able to choose who they deal with.
3.      If it was viewed as an offer, there might be over-acceptances. 
4.       Lefkowitz exception
a.       When the advertisement is clear, definite, and explicit, and leaves nothing open for negotiation, it can be an offer. 
b.      The offeror had no right to impose a house rule after the advertisement had been published since the offeror had the right to before acceptance to modify the offer.
                 E.      Construction Contracts – Mistaken Bids
1.      Elsinore Union Elementary School v. Kastorff
a.       D submitted a bid that contained a clerical error. P asked D to confirm the bid due to the low bid compared to others. D confirmed and was awarded the bid. D realized mistake the next day and called to have hid bid rescinded and P refused.
b.      Test – mistake must be
i.       Material, and not the result of neglect of a legal duty
ii.     Clerical, and not one of judgment.
iii.   If enforcement would be unconscionable if the other party can be placed in status quo
iv.   The amount of loss by party seeking relief must be significant
v.     The party seeking relief must give prompt notice of rescission and must restore of offer to restore the other party of everything of value which has been received under the contract.
2.      Restatement 153 – Where mistake of one party make a contract voidable.
a.       The effect of the mistake is such that enforcement of the contract would be unconscionable.
b.      Allowed when the other party had reason to know of the mistake or his fault caused the mistake
3.      If offeree knows at the time of mistake of the error in the bid, the offeror is not bound. 
a.       If bid falls within a reasonable differences in bids, then it could be reasoned that the party made it in good faith and be bound by it. 
                  F.      Terminating the Power of Acceptance
            After a party has made an offer, conferring on another the power of acceptance, that power can be terminated
1.       By lapse of the offer.
a.       If no period is specified in the offer, it lapses after a reasonable time.
b.      If period of time specified
i.       Offeror still has the power to revoke before acceptance
2.      By its revocation by the offeror
a.       B

revocation of an offer are effective on receipt by the other party.
                 A.      Battle of the Forms – The exchange of standardized forms.
Offeror sends purchase form. Offeree sends acknowledgment forms. 
1.      UCC tries to go away from common law rule and protect the offeror from surprises in offeree’s forms. 
2.      UCC 2-207 marks a shift away from the common law rule of mirror image. 
a.       207(2) contemplates that the terms of the contract may be determined at a different time than the time at which the contract is formed.
i.       A possibility exists that additional terms will become a part of the contract later when, after receiving notice of it, the offeror lets a reasonable time elapse without giving notification of objection to the additional term. 
b.      207(3) provides that even when the parties’ writings do not establish a contract under subsection 1, a contract may be found through conduct by both parties that recognizes the existence of a contract. 
3.      Notes p. 193
a.       Not all responses to an offer operate as acceptances. The expression must be definite, seasonable, and sent within a reasonable time, as well as being sufficiently responsive to the offer to indicate the intetn to enter a contract.
b.      The acceptance may by its own terms prevent its operation as an acceptance if it is expressly made conditional on assent to the additional or different terms in it.
i.       Ex – Offeree’s acceptance is conditional on the additional terms it included. 
4.      UCC 2-207- Additional terms in acceptance or confirmation
a.       Dorton v. Collins – if language states that acceptance is subject to all terms printed on the form satisfy the expressly made conditional requirement of 207(1)?
b.      Performance can create a contract under 207(3). Itoh v. Jordan.
c.       Different terms instead of additional ones. Northrop v. Litronic
 
II.                Acceptance
An acceptance is a voluntary act of the offeree whereby he exercises the power conferred upon him by the offer, and therby creates the set of legal relations called a contract. 
1.      Offeror can stipulate what manner of acceptance to create a contract. 
a.       Performance, Promise, or other means. 
Restatement 32 – If case of doubt an offer is interpreted as inviting