Brian Bix, Contracts, Fall 2011
– Always say if S of F applies and if UCC or common law applies to any exam question
– Think PER too
Chapter 1: An introduction for the Study of Contract Law
Contract can be:
1. Agreement in fact
2. Terms actually written
3. Contract is what you have chosen; as opposed to other forms of law that come upon you.
(set of rights and duties created by 1 and 2)
· Largely objective – you are held to particular follow through and you are held to what you have said.
Chapter 2: The Basis of Contractual Obligation
A. Mutual Assent:
1. Formation of a contract requires:
a. A bargain in which there is a manifestation of mutual assent (offer and acceptance) to the exchange and a consideration
2. Restatement’s Requirements for the formation of a contract:
a. Concept of a bargain, in which parties manifest mutual assent
i. This is done through a process of offer and acceptance (give and take bargaining)
1. Either reaching a deal (manifestation of mutual assent) or
2. Breaking off negotiations
ii. Contract can be formed w/o negotiations though
3. One party may incur legal obligations to another even if they have not entered into a contract by:
a. Restitution:
b. Promissory Estoppel:
An affirmative defense alleging good-faith reliance on a misleading promise and an injury or detrimental change in position resulting from that reliance.
c. Liability between parties even though no contract has been formed/contemplated
5. Relieved from fulfilling contract if the other party has engaged in some sort of bargaining misconduct
a. I.e. Fraud, duress, undue influence, etc.
1. Intention to be Bound: The Objective Theory of Contract
Meeting of the minds vs. Mutual Assent:
· Meeting of the minds is the subjective approach as it relies on the intention of the parties rather than their actual conduct.
· Mutual assent is objective as it looks at the actual conduct of the parties from the perspective of a reasonable individual as opposed to their intent.
– Offer and acceptance leads to bilateral contracts in which both parties have promised to do something in the future as part of the contract.
In General, ads are not offers..
· However, there are exceptions when there is misleading advertising or;
o the ad is stated such that it only encourages one offer/acceptance
· i.e. Highest bidder will get this product
– Ads are invitations for offers in general
· You can revoke an offer at any time prior to acceptance, even if you say it is open until 5:00 p.m., as long as you communicate your revocation, that is okay.
· However, if I pay you to keep an offer open, then it cannot be revoked, as we have entered a contract to keep the contract offer open (Options Contract)
· Often time there is no stated expiration date in an offer.
o In these cases, the offer does not remain open indefinitely, but only for a reasonable time
· Reasonable time varies
· Expiration dates can come sooner on offers in cases where:
o Revocation is communicated prior to the exp. Date
· Either directly (from offerer) or indirectly (from 3rd party)
o If a counteroffer occurs
Ray v. William G. Eurice & Bros., Inc., Maryland Ct of Appeals; 1952
Facts: Defendant William G. Eurice & Bros., Inc., entered into a contract to build a house for Plaintiff Ray. After signing the contract, the parties disagreed as to which specifications were to be used.
Issue: Is a party held to the terms in the written contract they signed or the terms they intended to be bound by?
Rule: One is ordinarily bound by the reasonable interpretation of his words or actions; not by his “secret intent” to that effect. (thus by signing the contract the Eurice Bros appear to have intended to be bound by those terms).
2. Offer and Acceptance in Bilateral Contracts
Bilateral contract: formed when the parties exchange promises of performance to take place in the future
· Each party is both a promisor and a promisee
· Communicated acceptance constitutes in effect their promise to perform
Process is as follows:
1. Preliminary negotiations – talk about who has to do what, and they both must agree to who is doing what.
2. The one party makes an offer (the offeror)
a. Offeree has the “power of acceptance”
If this party manifests their acceptance in a legally effective way, then at that moment a contract comes into being
3. Once the offeree accepts the offer, then a contract comes into existence
a. If this party dislikes the offer, a “counter-offer” may be proposed, (upon counter offer, a new offer is on the table and there is still no contract)
b. Or if they reject the offer, no contract is created.
c. Another counter offer has to be made, until an agreement is made, continually giving rise to new offers, only when the opposing parties terms are accepted is a contract formed.
Lonergan v. Scolnick; Cali Dist. Ct. of Appeals; 1954
Facts: Plaintiff Lonergan, responded to an ad placed by Defendant, Scolnick for land the Defendant was interested in selling. Plaintiff corresponded with Defendant through a series of letters. Defendant sold the land to a third party.
Issue: Is a contract formed if there is an invitation of offers through an ad and subsequent letters stemming from this that say the offeree must act fast if he wants the property?
Rule: If the person receiving a promise, knows that further assent is needed before an expression of fixed purpose is received, then there has been no offer made
– An invitation for offers does not operate as an offer to create an enforceable contract (as often happens with ads)
(i.e. If the offeror knows that further action is needed on the part of the offeree to accept, no contract has been made, “If you are interested act fast”, meaning the offeror needed to state clearly that he wanted to buy the propert
cept the offer, that the offeror no longer has power to revoke the offer
Cook v. Coldwell Banker; 1998
Fact: Plaintiff Cook was a real estate salesperson for Defendant Coldwell Banker at the time Defendant instituted a bonus program. After receiving the first part of her bonus, Plaintiff was informed that receiving the remaining portion of her bonus was contingent on continued employment. When Plaintiff left her job, Defendant refused to give her the remainder of her bonus.
Issue: Is a unilateral contract enforceable if the original offer was revoked and a new offer made, if the offeree has already done a large part of the action required to accept the offer?
Rule: An offer to enter into a unilateral contract may not be revoked once the offeree has made substantial performance. (i.e. here the offeree has almost met her quota to receive the bonus, so the offer cannot be revoked.)
4. Other Methods of Reaching Mutual Assent:
UCC Formation:
Article II of the UCC:
· Article 2 deals with the transactions in “goods”
o Goods: any tangible, moveable property, such as a car or a computer
· It applies to consumer and commercial sales of goods
o Including consumer to consumer purchases, consumer to merchant, and merchant to merchant.
***The UCC applies to all sales of goods regardless of who the parties are and what good they are buying. Period.****
· For a non-UCC case, there has to be Offer and Acceptance for the contract to be there.
§ 2-204. Formation in General.
(1) A contract for sale of goods may be made in any manner sufficient to show agreement,
(2) Including conduct by both parties which recognizes the existence of such a contract.
(3) even though the moment of its making is undetermined and
(4) one or more terms are left open
(5) a contract for sale does not fail for indefiniteness
(6) if the parties have intended to make a contract and
(7) there is a reasonably certain basis for giving an appropriate remedy.
Advance Steel; US District Ct.; 1976
Facts: Plaintiff and defendant orally set the terms of what their contract would consist of, over the phone. Then they each sent written forms with similar terms to each other w/o ever returning them or signing them. The def opted to reject the last shipment of steel claiming it was late, so the plaintiff brought this action to get payment for this last shipment as agreed per their oral agreement.
