LK: Contracts – Soper
I. Contract Formation (Is there a contract?)
A. Nature of an Offer………………………………………………………………
B. Options and Firm Offers………………………………………………………..
C. Nature and Effect of Acceptance……………………………………………….
D. Consideration……………………………………………………………………
E. UCC and Formation in General…………………………………………………
F. What if NO contract……………………………………………………………..
II. Defenses to Formation/Time of Contract (Can it be enforced?)
A. General: Voidable v. Void……………………………………………………..
B. Statute of Frauds………………………………………………………………..
C. Defenses that Make Contracts Voidable………………………………………..
III. Post Formation Problems/Defenses (Can it be Enforced?)
A. Mistake: Mutual, Unilateral……………………………………………………
B. Reformation of Contract: Secretarial Mistake…………………………………
C. Impossibility……………………………………………………………………
D. Impracticability…………………………………………………………………
E. Frustration of Purpose………………………………………………………….
F. Condition (occurrence/failure) …………………………………………………
G. Promise/Condition & Avoiding Effect of Condition……………………………
IV. Duty to Perform: Substantive Content (If so, what are its terms?)
A. General Principles of Interpretation…………………………………………….
B. Gap Fillers………………………………………………………………………
C. Conflicting Terms of Writings: Common Law Rules………………………….
D. Offer and Acceptance: Battle of the Forms and the UCC……………………..
E. Extending §2-207 to One Form Transactions…………………………………..
F. Contracts of Adhesion…………………………………………………………..
G. Parol Evidence Rule…………………………………………………………….
V. Repudiation and Breach (Was contract broken?)
A. Performance…………………………………………………………………….
B. Anticipatory Repudiation……………………………………………………….
C. Breach……………………………………………………………………………
VI. Non-Contract Theories of Obligation (If no K, still relief?)
A. Promissory Estoppel……………………………………………………………
B. Unjust Enrichment – Quasi Contract……………………………………………
VII. Remedies (What relief?)
A. Damages: Kinds, Enforcement…………………………………………………
B. Expectancy Measure under Common Law……………………………………..
C. Expectancy under the UCC……………………………………………………..
D. Reliance Damages………………………………………………………………
E. Restitution………………………………………………………………………
F. Specific Performance……………………………………………………………
G. Liquidated Damages……………………………………………………………
I. Formation of the Contract
A. Nature of an Offer
1. Offer = “manifestation of willingness to enter into a bargain, so as to justify another person in understanding that his assent to that bargain is invited and will conclude it” [R.2d §24]
2. Elements of an Offer:
a) must be communicated (known to the offeree)
b) indicate desire/intent to enter contract
(1) specify the performances to be exchanged
(2) specify the terms that will govern the relationship
c) directed at someone
(1) if individual, offer is personalized to offeree
(2) if to group, must be some limit on acceptance; otherwise will only be an invitation to negotiate
d) invite acceptance
(1) if mode/time prescribed, then they must be followed
(2) can invite acceptance through either a promise (bilateral) or performance (unilateral)
e) creates reasonable understanding that contract will arise without any further approval…explicit language of offer
* Lonergan v. Scolnik: Was the add/form an offer? Details were left out, plus important to remember what type of seller, unique land so he may have interest in who buys. Understood it was first come first serve because told that it would go quickly.
* Lefkowitz v. Great Minneapolis: Offer was clear in terms and left nothing open for negotiation. It stated intent to make bargain, method of acceptance and limited the amount so over-acceptance wouldn’t be a problem.
* Nebraska Seed v. Harsh: Letter offered sale of seed. Gentlemen I have 1800 bu. Of seed to sell at $X. No completeness of terms, sent out to multiple addresses. No offer, rather invitation to deal.
* Moulton v. Kershaw: Authorized to offer 85 cents/barrel of salt. Dear sir, at your city…wording general of a form letter. Not limited to first come first serve, desire not to limit them… favored customers.
* Fairmount Glass Works v. Grunden: Letter included price of jars that was sent after a specific request of prices. They were given a specific reply in an offer and were afforded the power of acceptance.
3. The Objective Test: (what “reasonable person” would believe)
a) mutual assent not required
b) words used in the communication
(1) strong v. vague solicitation
(2) expressions of first come first serve (decide fast)
(3) reasonable inferences to be drawn from situation
c) omission of significant terms
d) specifically directed communication
e) relationship of the parties
f) common practices or trade usage
(1) implicit trade terms omitted
4. Expiry of Offer by Passage of Time:
a) R.2d §41:either specified in offer or within reasonable amount of time
(1) offer in persons presence: generally expires when they leave unless offer or surrounding circumstances indicate that the offer is intended to continue beyond the immediate conversation
(2) ambiguity in writing: within 5 days…of receipt or writing?
* Akers v. J.B. Sedberry: Employee offer to resign that the court deems to have expired at the close of their conversation. Soper thinks that she did respond in a reasonable time, give her a chance to talk to the manager and to respond to him.
b) late acceptance…3 possibilities
(1) no effect
(2) new offer
(3) failure to object may be acceptance (acquiesced in the delay)
5. Termination before its Expiry by Lapse of Time
a) rejection by offeree– cannot be recanted
b) counteroffer – treated as rejection
(1) same as conditioned or qualified acceptance
(2) [see Common Law and UCC battle of forms]
* Ardente v. Horan: Acceptance that was conditioned upon inclusion of other items in a sale is not an acceptance but a counteroffer.
* Price v. Oklahoma College: Adding words like ‘I don’t like your offer, but accept it anyway’ does not make an acceptance a counteroffer. It doesn’t change the original terms.
c) death or mental disability – terminates offer, voidable contract
d) revocation by offeror
(1) can revoke at any time unless
(a) option contract or firm offer [see section B]
(b) offer for unilateral contract and the performance has already begun
(2) manifestation must be communicated
(a) direct: offeree receives notice of revocation
(i) usually via means used to set out offer (if offer in newspaper, then can revoke via newspaper)
(b) indirect: revoked if the offeror takes action clearly inconsistent with the continued intent to enter a contract, and the offeree obtains reliable information of this action
* Dickinson v. Dodds: Offer to sell property. OE received notice of deal with other person through indirect means. He had a manifestation of revocation so his ability to accept the offer had expired.
B. Options and Firm Offers
1. Option = a promise to keep an offer open for a stated period of time
2. Common Law requires consideration
a) must be separate from consideration in offer
b) exception
(1) if option is part of existing contract, no need for separate consideration (e.g. option to renew under a lease)
3. R.2d §87: “Option Contract”
a) writing signed by the offeror
b) exchange on fair terms and within reasonable time
c) recites a purported consideration; even if sham, courts try to uphold (unless fraud involved); two ways to do so:
(1) Estoppel – preclude offeror from denying statement of consideration when offeree has justifiably relied
(2) Promise – treat recital as promise to provide consideration in the future
4. R.2d §87(2): Promissory Estoppel (as basis for option)
a) offeror made promise to keep open without separate consideration
b) offeree relies on promise and takes action to his detriment
c) offeree’s reliance justified and offeror estopped from claiming no consideration
(1) it is unreasonable to rely on an offer…not unreasonable to rely on a promise
5. UCC §2-205: Firm Offer
a) offer by merchant (one that deals in goods of that kind or otherwise has special skill or knowledge about such goods)
b) offer in writing
(1) if on form supplied by offeree, must be separately signed by offeror (can’t be bound by unread boilerplate)
c) offer gives assurance to be held open by its terms
(1) reasonable time if none stated, no more than 3 months
6. R.2d §45: Option Contract Created by Part Performance
a) Offer says only performance can be accepted
(1) Beginning or tender of performance creates option
(2) Offeree must have reasonable time to complete
(3) Offeree is free to quit
(a) offeree has no right to recover for performance in contract (may have unjust enrichment claim)
(4) Mere preparations don’t count as beginning or tender
(5) Offeree has duty of notification (beginning and completion)
(a) if performance isn’t rendered directly, and offeror is otherwise unlikely to find out about it, offeror can’t be bound unless notified of performance in reasonable time
7. Effect of an Option
a) offeree’s rejection is not final within the time allotted to the option
(1) can countermand the rejection by communicating acceptance before the end of the period
(a) acceptance must be communicated
C. Nature and Effect of Acceptance
1. Acceptance = offeree’s manifestation of assent to the offer
a) must be volitional, performed freely, deliberately and with intent
b) intent measured under “objective standard” (same as offer)
c) counteroffer rejects offer
2. Only an Offeree may accept offer
a) can’t be accepted by anyone who comes across it (personal to offeree)
3. Terms of Acceptance
a) “mirror image rule” of common law (acceptance on terms of offer)
(1) minor discrepancies: valid as long as no material change
(2) form contracts problem
(a) construed as counteroffer because of differing forms
b) materially different terms = counteroffer (rejection and new offer)
(1) rejection with explanation ≠ counteroffer
(2) suggestion or request for information ≠ counteroffer
(a) two above examples do not extinguish chance to accept
c) statement of implicit terms ≠ counteroffer
(1) recital of legal requirements with acceptance ≠ counteroffer
d) different between merchants
(1) UCC § 2-207 (battle of the forms)
4. Modes of Acceptance
a) What constitutes receipt of an acceptance?
(1) R.2d §68: deemed received when it comes into the possession of the person addressed, or some person authorized to receive it for them
(2) UCC §1-201: deemed accepted when brought to the attention of the organization, or should have received with due diligence
b) if particular mode set out in contract, the mode must be followed
c) if specified but not set out as exclusive, then any reasonably equivalent form of acceptance is allowed
(1) just consistent with prescribed mode and providing same protection to the offeror
d) not specified in contract
(1) same mode as used by the offeror
(1) “good faith” (UCC) or “best efforts” (R.2d) can be implied
(a) exclusive dealing codified [UCC §2-306(2)]
* Wood v. Lucy Lady Duff-Gordon: She gives Wood exclusive rights to sell her products and market her name. Lucy wants out because of illusory promise…she is claiming that it lacks elements of mutuality of a contract. She promised to give him exclusive rights to name and he promised nothing. Courts ruled that implied promise exists…instinct with an obligation. Promise to use reasonable efforts to sell the products.
(b) satisfaction clauses
* Mattei v. Hopper: Signed contract and gave $1000 to keep the option open to give the defendant a chance to see if he could get a satisfactorily amount of people to lease the property under him before he bought the land. Seller claims that they want out because the buyer was in no way bound to the contract, he could get out at any time if he wasn’t satisfied. Not so, he was required to put in a good faith reasonable judgment.
(2) in commercial context, implied terms are often reasonable
d) UCC §2-306(1) Requirements & Outputs Contracts
(1) Good faith = actual output or requirements
(a) good faith (honesty in fact) and, for merchants, “reasonable commercial standards of fair dealing in the trade” [UCC §2-103(1)(b)]
(2) Reasonableness: not disproportionate compared to estimate or to normal/comparable requirements
* LaClede v. Amoco Oil: Requirements Contract… It was impossible for LaClede to obtain another long term contract that would be comparable to the one with Amoco. Plus the physical difficulty of the situation added to the need for specific performance…they were the only pipes connected to so they would have an unreasonable burden placed on them to achieve through damages.
* Grouse v. Group Health Plans: Gives an at will employee the chance to at least show up and prove that he can do the job.
e) Donative/Gift Promises…promise to make a gift
(1) Generally not enforced
(a) promissee not hurt nor is the promisor enriched
(b) evidentiary proof, promisor may have acted rashly
(2) “Condition on a gift” = illusory consideration (walk across the street and I’ll give you $50)
(a) Up the ante test
(i) bargained for vs. foreseeable reliance
(b) Performance must be viewed as the price of the promise
* Doughtery v. Salt: Boy received note from aunt that said ‘value received’ promising $$$ payable at her death. Not enforceable because it was a voluntary promise of a future gift. No consideration.
(3) Charitable contributions: it depends
(a) may be supported by consideration (name on auditorium)
(b) may be enforceable under promissory estoppel
* Kirksey v. Kirksey: Brother in law of widow writes and says that if she comes down to him, she can live on his land. She does, and eventually he wants her off. Courts says reliance doesn’t matter, it was a donative promise that was revocable at any time. (apply up the ante test)
(c) must be consideration…not only cited and written, however, there must be consideration in actuality
(4) Exception when tendered, this is enforceable
f) Pre-existing duty rule
(1) Purpose: prevent coerced contract modification
(2) Rule: if already obligated or forbidden to do X, promise to do or not to do X is not consideration
(a) R.2d §73: Performance of a legal duty
(i) a bargain by a public official to obtain private advantage for performing her public duty is unenforceable & does not count for consideration
(b) R.2d §89: Modifications need consideration
* Gray v. Martino: P was a special police officer who contracted with the robbery victim to identify robbers for $500. Court found that because his official duty was to prevent crime he couldn’t collect.
(3) Problem: can hinder legitimate modifications
(4) Solutions: provide new consideration at time of modification; court may strain to find consideration
(5) Exceptions:
(a) UCC §2-209(1): modifications allowed without consideration; “good faith” presumed
(i) means used…threat to breach vs. questioning
(ii) response…duress vs. “good faith”
* Austin Instrument v. Loral Corp.: Proves that the circumstances surrounding the deal lead to the conclusion that in fact duress was present and that they did really have no choice, but to give in to Austin and accept the price increase. Had they gone elsewhere, they would have defaulted on the deal with the Navy, fearing this would impact their view by the Navy in other dealings.
* Lingenfelder v. Wainwright Brewery Co.: P hired to build and design refrigerator plant. When told that he wasn’t goin
