CONTRACTS
OKEDIJI
FALL 2012
TWO BODIES OF LAW
1) Article 2 of UCC only if agreement for sale of goods
2) “Common law” of K for all agreements.
3) Predominant rule: Look at the subject matter of the contract. In mixed deals, look for the predominant purpose of K
PART I. WHETHER THERE IS AN k(3 elements)
A. OFFER(§24)
1) The basic test is whether a reasonable person in the position of the offeree would believe that his or her assent creates a contract.
2) Advertisements
a) Ads are not offers usually(ex:”OBO”).
b) BUT,An ad can be an offer if it is specific as to quantity and indicates who can accept.
3) Manifestation- Offer shall be manifest. (so if S offers to sell B a car at a “reasonable price.”, not an offer)
(a) TERMINATION OF OFFER
1) By lapse of time: K provision on time limitation or reasonable time(C.L.- 1 month; UCC§2-205 firm offer-3 months)
2) By OFFEROR’s revocation:
a) Revocation is effective when it isreceived or aware of by offeree.And before acceptance.
b) 4 situations under which an offerCANNOT be revoked:
i) Detrimental reliance(§ 87(2)): an offer cannot be revoked if there has been detrimental reliance by the offeree that isreasonable and foreseeable. all K apply.
ii) Unilateral contract/part performance rule(§ 45):
The beginning of performance pursuant to an offer to enter into a unilateral contract makes that offer irrevocable for a reasonable time to complete performance. Cf :in a bilateral contract where the start of performance is the acceptance so offeror cannot revoke.
iii) Option K(§ 87(1)): an offer cannot be revoked if the offeror has (i) promised to keep the offer open AND
(ii) the promise is supported by consideration
iv) Firm Offer Rule(UCC§2-205): An offer cannot be revoked for up to3 months if (i) K for sale of goods,
(ii)signed, written promise to keep the offer open, and (iii) Offeror is a merchant. (iv)No consideration is needed.
3) By OFFEREE’s response:
i) Counteroffer(R§ 39): Counteroffer terminates the offer- no longer can accept the original offer, and becomes a new offer. Counteroffers must be distinguished from bargaining. Bargaining does not terminate the offer.(query is not a counteroffer)
ii) Mirror Image Rule(Common Law ONLY): the acceptance must “mirror” the offer, any new terms is treated like a counteroffer.
iii) UCC and Additional Terms(UCC§2-207):gets rid of MIR,an acceptance or written confirmation with additional terms is generally treated as acceptance.
(1) If one or both parties are not merchants, the additional term is a proposal, not part of the deal.
(2) If both parties are merchants,
原則(UCC§2-207(2))：additional terms become part of the contract,
例外(UCC§2-207(2)(a)(b)(c))：unless (i) the offer expressly limited to its terms, (ii) the additional term materially alter the offer (iii) the offeror object within a reasonable time.
(3) If no K, BUT conduct by both parties that recognizes existence of K is sufficient to form a K. (UCC§2-207(3))
B. ACCEPTANCE
1) Bilateral K- a promise or start of performance.
Unilateral K- only the completion of performance.(also a consideration for unilateral K)
2) MAILBOX RULE: Conflicting communications and acceptance:
a) Acceptance is effective when sent (mailbox rule);
b) Exception: if rejection is sent before acceptance, both rejection and acceptance effective when received.
C. CONSIDERATION(§71– Bargain for exchange)
1) Consideration is bargained-for exchange. Person who made the promise must be bargaining for it; seeking something in return.
2) Benefit/detriment test(Classical):benefit to the promisor or detriment to the promisee; giving up a legal right is detriment (Hamer v. Sidway – Uncle promised $5000, kid gave up drink/etc.)
3) Inadequate consideration is still consideration. (Batsakis v. Demotsis- the loan in WWⅡ)
4) Past consideration are NOT consideration.(Plowman v. Indian Refining Co.) (*Mills v. Wyman- Past consideration and moral obligation alone are insufficient consideration.)
Exception: material benefit rule.(*Webb v. McGowin– the promisor has received a material benefit from the promise and avoid injustice.
5) if no consideration, it’s a gift –(Dougherty v. Salt – aunt v. nephew) – (if no consideration, check for Promissory Estoppel)
Ex:differences between conditions to a gift and consideration for a K (Williston Tramp example – walk to store is condition, move away from the store is consideration)
D. WHEN LACK OF CONSIDERATION
1) PROMISSORYESTOPPEL(§90)as considerationsubstitute.
-Eleme
zziv. Bloomfield)
2) Elements: (1)undue susceptibility to pressure; (2)excessive pressure applied by other party.
D. MISREPRESENTATION (§ 163; § 164)
1) Fraud is void–Elements :
(1) the D made one or more representations claimed by P,
(2) said statements, or one or more of them, were false,
(3) said false statements or representations were as to material matters with reference to the entering into K,
(4) theD knew the said representations, or one or more of them, were false,àmisrp. D does not know that were false.
(5) that said representations were made with intent to deceive and defraud the P,àmaterialmisrp. D does not intent.
(6) P believed and relied upon said false representations and would not have entered into the lesson contracts, except for believing and relying upon said misrepresentations, and
(7) the P was damaged through relying on said representations.
2) Misrp.Elements :(1)a fraudulent or material misrep.;(2) reeipient relys it; (3)K inducement by this misrep.
3) Non-disclosure make a misrep. (§ 161)If the fact (a)is ncecssary to prevent becoming mistrp; (b) would correct a mistake of a basic assumption of taking K and would fail to act in good faith and be a fair dealing ; (c) confidential relationship.
E. MISTAKE (§151)
1) Mutual mistake of material existing fact is a fatal flaw in the agreement process. (§152)
a) Effect: K is voidable, unless the adversely affected party bears the risk of mistake(§152+ §154)
b) Sherwood v. Walker (“Barren Cow Case”) – Both parties enter k to sell barren cow but is fertile in fact, seller can rescind K because it wasn’t what they contracted for.
c) *Lenawee County Board of Health v. Messerly-Whether rescission is the proper remedy to a mutual mistake should be determined on case-by-case.And K provided “as it” clause, the buyer bears the risk of the apartment)
