CONTRACTS ELIASON FALL 2015
Introduction to Contract Law
What is a contract?
An agreement with legal effect between two or more persons
Elements to a Contract
The agreement-in-fact between the parties
The set of rights and duties created by agreement-in-fact and agreement-as-written
The Basis of Contractual Obligation: Mutual Assent and Consideration
Intention to be Bound: The Objective Theory of Contract
Ray v. William G. Eurice & Bros., Inc.
RULE: Absent fraud, duress, or mutual mistake, if someone understands a written document and signs it, whether having read it or not, they are bound by their signature
The determination of whether there is mutual assent comes from the objective intent of the parties rather than their subjective intent.
Restatement §17 Requirement of a Bargain
Restatement §20 Effect of Misunderstanding
Restatement §21 Intention to be Legally Bound
Leonard v. Pepsico, Inc.
Could a reasonable person construe Pepsico as being serious in its offer of a Harrier jet?
Offer and Acceptance in Bilateral Contracts
Definition: Contract in which both parties exchange promises of performance to take place in the future. BOTH parties are obligated to act
Restatment §24 Offer Defined
Longeran v. Scolnick
RULE: An offer is made only if the communication expresses an intention to be bound without further assent on the part of the potential offeror.
Restatement §26 Preliminary Negotiations
Acceptance of an offer becomes effective and binds the offeror, once it has been properly mailed (even before the offeror has received it).
Normile v. Miller
RULE: A counteroffer constitutes a rejection of an offer and thus does not contain the terms of the initial offer that pertain to that initial offer.
A counteroffer cannot be accepted once notice of its revocation.
Offer and Acceptance in Unilateral Contracts:
Definition: Contract wherein only one party makes a promise of future performance in exchange for the other party’s actual rendering of performance, rather than a mere promise of future performance.
Petterson v. Pattberg
RULE: A unilateral contract can be revoked at any point before performance by the offeree is completed
NO LONGER THE RULE IN PRESENT-DAY
Restatement §45 Unilateral Contracts
Cook v. Coldwell Banker/Frank Laiben Realty Co.
RULE: An offeror may not revoke an offer where the offeree has accepted the offer by substantial performance.
Definition: the legal value in connection with a contract
Hamer v. Sidway
RULE: A waiver of any legal right at the request of another party is sufficient consideration for a promise.
Benefit-Detriment Theory Consideration
Consideration exists if there is a benefit to one party and a detriment to the other
No longer the predominant theory of consideration
Pennsy Supply, Inc. v. American Ash Recycling Corp. of Pennsylvania
RULE: If the promisor made the promise for the purpose of inducing the detriment, the detriment induced the promise.
If the occurrence of the condition would benefit the promisor, it is a fair inference that the occurrence was requested as consideration.
Bargain Theory mentioned
Reciprocal Conventional Inducement
Applying the Consideration Doctrine
Restatement §71 Consideration (Bargain Theory)
Restatement §79 Adequacy of Consideration; Mutuality of Obligation
Restatement §25 Option Contracts
Doughtery v. Salt
RULE: If the value for consideration has not actually been received, saying it has does not make the contract enforceable.
Batsakis v. Demotsis
RULE: There is no requirement of equivalence.
A contract will not be unenforceable simply because the consideration is inadequate.
It is not up to the court to inquire into the adequacy of consideration.
Plowman v. Indian Refining Co.
RULE: Past conduct or past consideration cannot serve as new consideration.
Morality of promise does not suffice as consideration.
An act which is a benefit to the promise and a detriment to the promisor cannot be a consideration.
Marshall Durbin Food Corp. v. Baker
RULE: If one party makes an illusory promise, such a promise can create a unilateral contract which can be accepted by the party who made the illusory promise by performance, leading to consideration.
Contract Formation Under Article 2 of the Uniform Commercial Code
Mutual Assent Under the Uniform Commercial Code
E.C. Styberg Engineering Co. v. Eaton Corp.
RULE: Price quotation is considered an invitation for an offer, rather than an offer to form a binding contract.
In the absence of agreement on essential terms, such as the identity
What were the terms of the contract?
Rule: If the communication expresses a willingness to be bound without further assent from the offeror, there is an offer.
Further Rules: UCC 2-207 §1 & §2
Electronic and “Layered” Contracting
Terms which can be read and accepted by the buyer only after the product is opened
Terms are agreed to by clicking I Agree or equivalent before completing transaction
Terms are posted, typically at bottom of webpage via a hyperlink that is required to be clicked
Hines v. Overstock.com, Inc.
RULE: In order for there to be a contract, there needs to be mutual assent and consideration.
A Party will not be bound by a license agreement when responding to an offer if they have no immediately visible notice of the license terms or do not have to give an unambiguous manifestation of assent to those terms.
DeFontes v. Dell, Inc.
RULE: Formation of a contract occurs when the consumer accepts the full terms after receiving a reasonable opportunity to refuse them.
Liability in the Absence of Bargained-for Exchange: Promissory Estoppel and Restitution
Protection of Promissory Reliance: The Doctrine of Promissory Estoppel
Allows recovery on a promise made without consideration (or mutual assent) when the reliance on the promise was reasonable, and the promise relied on the promise to his or her detriment
Promisor is barred (estopped) from claiming his or her promise did not constitute contract.
Restatement §90 Promissory Estoppel
Promises Within the Family
Kirskey v. Kirskey
RULE: Gratuitous promises do not have consideration
Harvey v. Dow
RULE: In determining whether there is a promise as required in Restatement §90, the conduct of the promisor may be used as evidence of the existence of a promise.
A promise may be implied as well as express.