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Contracts
University of Kansas School of Law
Ware, Stephen J.

Ware
Contracts
Spring 2011
 
 
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         Introduction
a.       UCC: general sections
                                                              i.      Scope
1.      UCC 2-102: UCC applies to transactions in goods (not just sale of goods).
a.       Extends to other business relationships
2.      UCC 2-106(1): “contract” and “agreement” are limited to those relating to the present or future sale of goods
                                                            ii.      Goods:
1.      UCC 2-105: “goods” mean all things which are moveable at the time of identification to the contract for sale
a.       Also includes the unborn young of animals and growing crops
                                                          iii.      UCC 1-103: if the UCC does not address a specific issue, principles of law and equity will supplements its provisions
                                                          iv.      Almost all states have adopted a UCC
                                                            v.      UCC 1-201(3): “Agreement” means the bargain of the parties in fact as found in their language or by implication from other circumstances including the course of dealing or usage of trade or course of performance
                                                          vi.      UCC 1-201(11): “Contract” means the total legal obligation which results from parties’ agreement as affected by this act and any other applicable rules of law. 
                                                        vii.      UCC 1-203: every contract or duty within this act imposes an obligation of good faith in its performance or enforcement
II.                Basis for enforcing Promises
a.       CONTRACTS:
                                                              i.      Definition:
1.      Re. 1: A K is a promise or set of promises for the breach of which the law gives a remedy, or the performance of which the law may in some way recognize as a duty.
2.      UCC 1-201(11): see above
3.      Element of the future is in inherent in a K.
                                                            ii.      General Terms
1.      Promise: Re. 2: manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promise in understanding a commitment has been made
2.      Agreement:
a.       Re. 3: manifestation of mutual assent on the part of two or more persons
b.      UCC 1-201(3): see above
c.       Agreements are not contracts—Example: I think it is going to rain today.”  “I agree.” This is an agreement and not a contract
3.      Bargain: Re. 3: Agreement to exchange promises or to exchange a promise for a performance or to exchange performances
4.      How a K is made: Re. 4: A promise may be stated in words either oral or written, or may be inferred wholly or partly from conduct.
5.      Beneficiary: performance benefits person other than promisee
6.      Guaranty: promise that 3rd person won’t/will perform something
7.      Illusory promises: promise that makes performance optional
8.      Opinions and predictions: opinions lack manifestation of intent, unless person was paid for opinion as an expert…then there may be a promise
                                                          iii.      Why enforce contracts?
1.      Creates confidence in business
2.      Reliance is big—these people are relying on conditions being enforced.  The promisee has a reliance interest if it has changed its position to its detriment in reliance on the promise.
3.      Expectation interest—puts person in position as if K was performed—all persons expect contract to come through.  The promisee’s injury consists of being worse off than if the promise had been performed.
4.      Restitution interest—the promisee has a restitution interest if it has not only relied on the promise but conferred a benefit on the promisor
5.      Relief to the aggrieved promisee should attempt to put the promisee in the position in which it would have been had the promise been performed.
                                                          iv.      3 questions to the creation of a contract
1.      Was there mutual assent?
2.      Was there consideration or some substitute therefore?
3.      Are there any defenses to creation of the contract?
III.             Creating contractual obligations
a.       The nature of assent
                                                              i.      General rule: objective assent over subjective assent
                                                            ii.      Re. 17 Requirement of a bargain: formation of a K requires a bargain in which there is manifestation of mutual assent to the exchange and consideration
                                                          iii.      Re. 18 Manifestation of mutual assent: manifestation of mutual assent to an exchange requires that each party either make a promise or begin or render a performance
                                                          iv.      Objective v. subjective assent
1.      Subjective: what your actual intent is
2.      Objective: does not matter what the intent is, it’s a matter of outward manifestations and is judged on the basis of what a reasonable person would believe
a.       Re. 19(3): the conduct of a party may manifest assent even though he does not in fact assent.  In such cases a resulting K may be voidable b/c of fraud, duress, mistake, or other invalidating cause.
                                                            v.      Hand and Frank—both said that a contract has nothing to do with the personal intent of the parties, but is created by the acts of the parties
                                                          vi.      Manifestation of intention: it means the external expression of intention as distinguished from undisclosed intention Re. 2 comment b
                                                        vii.      Jesting: Re. 18 comment c: where all parties to what would otherwise be a bargain manifest intention that transaction is not to be taken seriously, there is no such manifestation of assent to the exchange
1.      Lucy: “A person cannot set up that he was merely jesting when his conduct and words would warrant a reasonable person in believing he intended a real agreement.” (117)
                                                      viii.      Lucy v. Zehmer, 117: mental assent not required
1.      “the mental assent of the parties is not requisite for the formation of a K.  If the words or other acts of one of the parties have but one reasonable meaning, his undisclosed intention is immaterial except when an unreasonable meaning which he attaches to his manifestations is known to the other party
2.      A contract is determined on the basis of words and actions
                                                          ix.      Drunkenness: K is voidable if person is too

1.      “an act whereby one person confers upon another the power to create contractual relations b/w them…the act of the offeror operates to create in the offeree a power…; thereafter the voluntary act of the offeree alone will operate to create a new relation called a K—CORBIN
2.      3 questions to an offer
a.       Was there an expression of promise, undertaking, or commitment to enter into a K?
b.      Were there certainty and definiteness in the essential terms?
c.       Was there communication of the above to the offeree?
3.      Re. 24: Offer defined: 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.
                                                            ii.      Language:
1.      Degradation in order of probability that language would constitute an offer
a.       I offer—I will sell—I promise to sell—I would sell—I might sell
2.      The word “quote” is commonly understood as inviting an offer rather than as making one
a.       Ex. “I quote you…for immediate acceptance” will probably be construed as an offer.  By coupling words of invitation with words of offer, the offeror has at least created an ambiguity, which will be construed in the favor of the offeree.
3.      A question is never an offer
4.      No offers because of language:
a.       Owen v. Tunison, 127: P (buyer) writes: “will you sell me your store property for the sum of $6,000?  D wrote back: “it would not be possible for me to sell unless I were to receive $16,000
b.      Price quote
c.       Considered an invitation to negotiate
d.      Language was such that the offeree would know the offeror wanted further manifestation of assent
e.       not an offer because
                                                                                                                                      i.      he was responding to the question (no indication of intent)
                                                                                                                                    ii.      not strong enough language
f.       see Re. 26 Ill. 4
                                                          iii.      Preliminary Negotiations: Re. 26
1.      A 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
2.      General rule—price quotes aren’t offers, but quote can be used in an offer
                                                          iv.      Certainty: Re. 33
1.      To form a K, the terms must be reasonably certain i.e. provide basis for determining existence of breach and giving appropriate remedy
                                                            v.      Existence of K when written memorial is contemplated: Re. 27
1.      It’s possible to make a K which includes an obligation to execute a final writing which has certain set provisions/no others; but if parties regard it as incomplete, they’re preliminary negotiations and not K