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Contracts
University of Kansas School of Law
Peck, John C.

 
Contracts Outline, Peck, Spring 2014
 
A.    General Notes
1.      Restatement 205: Duty to act in good faith in enforcement and performance (not at beginning) (UCC- 1-304 is the same)
2.      UCC Applicability
a)      Issue: Is UCC applicable?
b)      Law: 2-102, UCC deals in transactions in goods, 2-105 goods are things movable at time of identification to contract
c)      Application: Good X is movable, transactions are not defined, but generally we think of sales, not just removal. Therefore
d)     Conclusion: UCC is Applicable
3.      Getting from to Restatement
a)      UCC 1-103 applies general law if UCC sections inapplicable.
B.     A K is Offer + Consideration + Acceptance (Peck/Restatement 22)
C.     Offer
1.      Defining an offer generally (for offer problems, use 24/26/33)
a)      Restatement 24- defining Offer Generally
I         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.
i          Comment A: In the normal case of an offer of an exchange of promises or in the case of an offer of a promise for an act, the offer itself is a promise, revocable until accepted.
b)      Restatement 26- Preliminary Negotiations (Preliminary negotiations not an offer unless it made clear that the other party can accept)
I         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.
i          Comment A: This section deals rather with the case where the actor intents to make a bargain in the future, but only if he makes some further manifestation of assent.
ii        Comment B: ADVERTISING: Advertisements are not usually considered offers, usually an invitation to make an offer.
A.    Illustration 1: Advertising CAN be an offer, if it has explicit language, “first come first served” or “out they go Saturday” (Lefkowtiz Case, p. 148)
iii      Comment C: PRICE QUOTATION: Price quote is generally not an offer. The word “quote” usually means it is incomplete.
A.    If a “quote” is followed by “for immediate acceptance” the intent to make an offer would be unmistakable.
c)      Restatement 33
2.      Competitive Bidding
a)      Restatement 28- Auctions (apply this if auction of land/ construction contracts)
I         Unless contrary intention manifested:
i          Auctioneer invites offers from successive bidders, which he may accept or reject.
ii        Without reserve: can’t retract land, highest bid wins
iii      Can withdraw bid until close, does not revive previous bid
II      Bids at an auction embody terms made known by advertisements, publications, and announcement, of particular auction.
b)      UCC 2-328- Sale Of Auction (apply this if competitive building of movable good)
I         (2): Sale by auction is complete when the auctioneer announces by fall of hammer, or in other customary way. If bid is made while hammer is falling- the auctioneer as discretion on whether to open the bid or declare the goods sold.
II      (3) It is “with reserve” unless explicitly says without reserve. In an auction with reserve the auctioneer may withdraw the goods at any time until he announces completion of the sale. In an auction without reserve, after auctioneer calls for bid, it can no longer be removed unless it doesn’t receive any bids. In either case, a bidder may retract his bid until the auctioneer’s announcement of completion of the sale, but a bidder’s retraction does not revive any previous bid.
III   (4): About collusion between the auctioneer and the seller. Goes back to last good faith bid or buyer can avoid the sell.
3.      Mistake (Start with 151, go to either 152 or 153, then 154)
a)      Restatement 151- Mistake Defined (start with this one Mistake problem)
I         A mistake is a belief that is not in accord with the facts
b)      Restatement 152- Bilateral Mistake
I         Where mistake of both parties was made as to a basic assumption on which the contract was made 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 in 154.
II      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.
i          Illustration1: A contracts to sell B land for timber and both believe that there is timber. Timber was destroyed by fire. Contract is voidable by B. (the loser of the mistake can choose whether to void the contract for Bilateral mistake)
c)      Restatement 153- Unilateral Mistake (Elsinor Case, p. 14 in Supp)
I         Where a mistake of one party at the time a contract was made as to a basic assumption which he made the contract has a material effect on the agreed exchange of performances that is adverse to him, the contract is voidable if he does not bear the risk of the mistake under the rule in 154, and
i          The effect of mistake would make enforcement unconscionable, or
ii        The other party had reason to know of the mistake or his fault caused the mistake.
II      Peck Practice Exam: Only unilateral Mistake case was Elsinore, supp p. 14, where sub K got out for discovering mistake early and letting other side know promptly.
d)     Restatement 154- Bears Risk
I         Party bears risk of mistake when:
i          The risk is allocated to him by agreement of the parties, or
ii        He is aware, at the time the contract is made, that he has only limited knowledge with respect to the facts tow which the mistake relates but treats his limited knowledge as sufficient, or
iii      Risk is allocated to him by the court on the ground that it is reasonable in the circumstances to do so.
D.    Acceptance
1.      Acceptance- defined Generally
a)      Restatement 50- Acceptance of offer defined; acceptance by performance; acceptance by promise
I         (1)Acceptance of an offer is a manifestation of assent to the terms thereof made by the offered in a manner invited or required by th

n by offeror (42, 43, 44, 46, 47)
IV   Death or incapacity of the offeror or offeree (48)
V      If the one condition of the acceptance is not met.
2.      Lapse of Time
a)      Restatement 41
I         Offeree’s power of acceptance is terminated at the time specified in the offer or if not time is specified, at the end of a reasonable time, depending on the circumstances and subject to the rule stated in Restatement 49.
3.      Revocation of Offers
a)      Restatement 42- Direct Revocation
I         An offeree’s power of acceptance is terminated when the offeree receives from the offeror a manifestation fan intention not to enter into the proposed contract.
b)      Restatement 43- Indirect Revocation
I         An offeree’s power of acceptance is terminated when the offeror takes definite action inconsistent with an intention to enter into the proposed contract and the offeree acquires reliable information to that effect.
c)      Restatement 46- Revocation of General Offers (to the public or by advertisements)
I         Offeree’s power of acceptance is terminated when a notice of termination is given publicity by advertisement or other general notification equal to that given to the offer and no better means of notification is reasonably available.
4.      Death of Offeror
a)      Restatement 48
I         Offeree’s power of acceptance is terminated when the offeree or offeror dies or is deprived of legal capacity to enter into the proposed contract.
i          Unilateral: Offer Not Enforceable -if promise for performance
ii        Bilateral: Offer: Enforceable- if promise for promise
5.      Rejection- connect to mailbox problems
a)      Restatement 38- Rejection
I         (1)An offeree’s power of acceptance is terminated by his rejection of the offer, unless the offeror has manifested a contrary intention
II      (2)A manifestation of intention not to accept an offer is a rejection unless the offeree manifests an intention to take it under further advisement
6.      Counter Offer- connect to mailbox problems
a)      Restatement 39- Counter Offer
I         A counter offer is an offer made by an offeree to his offeror relating to the same matter as the original offer and proposing a substituted bargain differing from what proposed by the original offer
II      An offeree’s power of acceptance is terminated by  his making of a counter offer, unless the offeror has manifested a contrary intention or unless the counter offer manifests a contrary intention of an offeree.