Contracts Outline

Contracts Santarosa Winter 2012

K Formation, SoF, Consideration, Moral Obligation, PE, Illusory Promises

UCC 1-103 – Common Law applies where UCC is silent on an issue

Contract Formation

Bargain + Objective Manifestation of Mutual Assent? R2K 2c.b., 17, 18 Yes: Lucy v. Zehmer No: Bailey v. West

· If no, see Restitution and Quasi Contract: [1. benefit to ∆, 2. retention by ∆ of the benefit making it unjust for ∆ to retain benefit w/out payment 3. Π must not be acting as volunteer in conferring benefit – have reasonable expectation of getting paid; if performance rendered without request, unlikely ∆ under obligation to pay back] [Webb v. McGowin]

· Subjective Intent Irrelevant (Embry v. Hargadine)

· Joke Irrelevant if not Objective (Lucy v. Zehmer)

· Misunderstanding R2K 20 – No K/Mut.Asnt if both parties attach materially diff meanings to terms (Raffles)

· R2K 201: If one party knows/has reason to know of the other’s meaning, other’s meaning is used (Frigaliment)

UCC 2-204(1) K made “in any manner” suf. to show agreement, conduct, etc. 2-204(3) open terms don’t void K

Statute of Frauds

R2K 110 K’s requiring written memorandum: (1) K for sale of land (2) K that cannot be performed within 1 year UCC 2-201 (3) K’s involving the sale of goods worth $500

· SoF 1 Year Provision: R2K 130 – K must expressly state +1year, uncertain K’s excluded (Klewin v. Flagship)

· Writing Req: R2K 131 K must be in writing, signed by party against whom enforce sought, (a) reasonably identifies subject matter of K, (b) sufficiently indicates K has been made, (c) states with reasonable certainty essential terms, and in sale of goods, UCC 2-201 (d) must establish quantity sought or quantity is set at zero.

UCC 2-201(3) Exceptions: (1) specially mnfct goods, (2) adverse party admits K made, (3) payment accepted

Multiple Documents can Satisfy Writing Req: R2K 132 (Crabtree v. Elizabeth Arden)

SoF Prom.Estopp: R2K 139 Promise Reas.Fsbly Induces Reliance Enforceable Notwstnd SoF (McIntosh v. Murphy)

Consideration (bargained for exchange) R2K 71

Give up legal right (Hamer v. Sidway – Uncle No Smoke/Drink)

Agreement not to compete (Langer v. Superior Steel Corp)

Settlement of legal claim R2K § 74 (Fiege v. Boehm – Questionable Bastardy Suit)

Court doesn’t consider adequacy of consideration R2K 79 (Batsakis v. Demotsis – Imbalanced Loan)

Gratuitous promise is not consideration: (Kirksey v. Kirksey – Moving to Brother in Law)

Pretended Consideration not Sufficient R2K79 com. d. (In Re Greene) – Rejects Pcorn Principle

Moral Obligation: R2K 86 (Promise made in recognition of benefit previously received but not vol.)

· Mills v. Wymann (Sick Sailor Son) {Promise + Past Benefit = Enforceable K but if Mere Volunteer}

· Webb v. McGowin (falling log) – Moral Consideration Sufficient to Establish K – Minority Rule

· Harrington v. Taylor (crazy husband) – Moral Consideration not Sufficient – Π mere vol. – Maj Rule

Promissory Estoppel R2K 90 1) Promise 2) Forseeability of Reliance 3) Reliance 4) Injustice absent Enforce

· Equitable Estoppel: Actions cause change in position for the worse, equitably estop from asserting lack of consideration. Rickets v. Scothorn. Action versus Promise.

· Pre-Contractual Promissory Estoppel: Hoffman v. Red Owl Stores (fsee reliance from promise to offer)

· Promise for Charitable Gift – enforceable (Allegheny College), but need to show reliance (Congregation Kadimah Toras-Moshe)

· Promise must be enforced to prevent injustice (Cohen v. Cowles Media)

Illusory Promise:

R2K 77 com. a. Words of promise which by their terms make performance entirely optional with the ‘promisor’ do not constitute a promise.

· Satisfaction Clause not Illusory if [Subjective + Good Faith] or [Objective – RP/Industry Standard/etc], but not unfettered discretion. R2K 228 (Prefers RP Standard for Satisfactn) (Omni v. First Nat. Bank)

· Req Contract Void if party has unbridled discretion “wants to buy v. all it needs” (RehmZeiher v. Walker)

UCC 2-306(1) Output/Req Contracts are Enforceable due to Implied Term of Good Faith.

UCC 2-306(2) in exclusive dealing K implies term of best efforts to supply/sell (Wood v. LucyLady Duff)

Offer and Acceptance

Offer

Offer R2K 24 objectively reasonable manifestation of willingness to enter into a bargain. R2K 23 mnf. induce. e. other

Specify Means of Acceptance R2K § 30 (1) offer may specify acceptance by promise/performance (2) unless otherwise specified offeror invites acceptance by any reasonable medium.

Certainty R2K 33 offer terms must be reasonably certain: (a) provide means for determining breach and (b) for giving appropriate remedy – terms left open may indicate not an offer.

o Advertisements are usually requests for offers as not sufficiently/obj. definite (Lonergan v. Scolnick)

o Offer must objectively cause reasonable person to think it’s a man. of intent to bar. (Leonard v. Pepsico)

o R2K 29 offeror CAN create power of acceptance in anyone who makes specific promise/performance, i.e. first come first served, highest bidder, etc, if sufficiently definite (Lefkowitz v. Surplus Store)

UCC 2-204(1) K made “in any manner” suf. to show agreement – conduct, etc. 2-204(3) open terms not void K

Termination

Termination of Offer R2K 36 (1) (a) rejection or counter-offer by offeree, (b) lapse of time, (c) revocation by offeror, (d) death or incapacity of either party OR (2) by non-occurrence of condition of acceptance specific in offer.

Lapse of Time R2K 41 – At end of time specified or at end of reasonable time

Revocation R2K 42: p.of.a. terminated when offeree receives manifestation of intent not to contract and R2K 43 offer revoked when offeror takes action inconsistent with offer and offeree learns of it, even 3rd party (Dickenson v. Dodds).

Offer may be terminated any time prior to acceptance absent reliance or option for consideration (Petterson v. Pattberg)

Counter-offer R2K 39 counteroffer w/diff terms from original terminates pow.of.accept w/out con intent Mirror Im.

Acceptance

R2K 50 accept by promise or performance as specified in offer/must complete every act essential to making of promise

UCC 2-206: offeree can accept by any reasonable means – promise or ship – nonconforming goods amount to an offer

a. offeror who is not notified of acceptance w/in a reasonable time may treat the offer as having ended before acceptance

R2K 69 (1) accept by silence only if est. by course of dealing (Ammons v. Wilson – shipment of shortening)

R2K 69 (2) acceptance by exercise of dominion inconsistent w/ownership (Russell v. Texas Co –continued use of road)

R2K 54 acceptance by performance – notify only if offeror has no way to know – (Carlill v. Carbolic Smoke Ball – ad definite, called for accept by perf and didn’t specify notif., inconvenience=consideration). R2K46 – Rev Gen Offer news Ad.

R2K 56 accp by promise – reasonable effort notify offeror. R2K 62 – offer calls for either, begin perf. counts as acpt.

R2K 63 (a) acceptance takes effect when it is mailed (b) unless option K à acceptance on receipt. (Adams v. Lindsell)

Mailbox Rule Exception R2K 40: If rejection sent before acceptance, first one to arrive controls.

Irrevocable offers

Regardless of assurances, offer me be revoked any time prior to acceptance except:

Option K R2K 25 offer exchanged for consideration limiting offeror’s power to revoke for a stated time.

Option K R2K 45 When offeree begins performance on uni. K, irrevocable option K created on condition that offeree complete the performance – mere preparation does not count. (Ever-Tite Roofing v. Green – loading trucks was perf.)

Option K R2K 87 (1) offer binding if in writing/signed, consid., proposes fair exchange within reasonable time. Option

Option K R2K 87 (2) Offer which produces rsn.fsbl reliance is binding option K to extent nec. to prevent injustice. (Drennan v. Star Paving) – General May Rely on Sub’s Bid, (Gimbel v. Baird) – General May Not (Minority).

· Substantial Reliance must be shown and damages may be limited to restitution or reliance damages.

· R2K 153 – Unilateral Mistake Voidable – (a) general knew bid was error (b) bid unconscionable

· R2K 161 – Misrep. if General had known of mistake and not disclosed, and mistake went to a basic assump.

UCC 2-205 If merchant says in signed writing an offer will stay open, firm offer for time state/rnsble t. up to 3 months.

Preliminary Negotiations

R2K 26 – not an offer if offeree has R2K they are in