Contracts – Fall 2017 – Davis
Sources of Contract Law:
1. Common law: USA, sales of goods and other things, merchants and non-merchants
2. Restatement: USA, sales of goods and other things, merchants and non-merchants
3. UCC Article 2: USA, sales of goods. (some rules apply to merchants only)
4. UNIDROIT: international, for non-goods and goods
5. CISG: international, for the sale of goods
UCC § 2-204. Formation in General
(1) A contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract.
(2) An agreement sufficient to constitute a contract for sale may be found even though the moment of its making is undetermined.
(3) Even though one or more terms are left open a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy.
Contract – a promise that the law will enforce. Contracts are about the spreading of risk. All contracts are essentially or need to prenuptial agreements in order to determine what happens when things go wrong.
Three elements for a valid contract:
Offer – a manifestation of willingness to enter into a bargain, so made as to justify another, in understanding that 1) his assent to bargain is invited and 2) will close the deal. (Restatement 24)
1. Manifestation- some act or statement that is going to convey meaning to another person (orally, written, or even a node).
2. Willingness to enter- they have to be willing to do this.
3. Bargain- one thing flowing from one side and one thing flowing to the other (consideration).
4. Justify another – lead another to realistically believe their assent is invited.
5. Assent is invited – asking them to say yes.
6. Will conclude the bargain- no more negotiations.
Acceptance – a manifestation of assent to the terms thereof in a manner invited or required by the offer.
Consideration – something in return for the promise
UCC 2-104 – Merchant
“Merchant” means a person who deals in goods of the kind or otherwise by occupation purports to have knowledge or skill peculiar to the practices or goods involved in the transaction or to whom such knowledge or skill may be attributed by employment of an agent or broker or other intermediary who by occupation purports to have such knowledge or skill.
A farmer may qualify as a merchant with regard to farming implements, not necessarily because he deals in goods of that kind with any frequency, but because, by his occupation, he holds himself out as a having knowledge or skill in relation to the goods or the transaction.
UCC 2-105 – Goods
“Goods” means all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale other than the money in which the price is to be paid, investment securities and things in action. “Goods” also includes the unborn young of animals and growing crops and other identified things attached to realty as described in ORS 72.1070 on goods to be severed from realty.
UCC 1-201 – Signed
“Signed” includes using any symbol executed or adopted with present intention to adopt or accept a writing.
UCC 1-201 – Writing
“Writing” includes printing, typewriting, or any other intentional reduction to tangible form. “Written” has a corresponding meaning.
Is there a contract?
How do you interpret that contract?
Is there a breach?
What are the damages and what is the available damages?
What if a contract is breached?
Termination, renegotiation, mediation/arbitration, litigation.
What if terms are left out of the contract?
The court will fill in those gaps.
Objective Theory of Contracts (Chapter 1)
Objective Theory of Contracts – A principle that the existence of a contract is determined by the legal significance of the external acts of a party to a purported agreement, rather than by the actual intent of the parties. your outward conduct, not your secret intent, shows whether or not your wanted to enter into a contract; if a reasonable person would believe it to be an offer then it is one.
Mutual Assent – In determining whether parties have reached mutual assent, parties are bound by the reasonable, objective interpretation of their words or actions, not their subjective thoughts or intentions.
Manifestation of intention – The phrase “manifestation of intention” adopts an external or objective standard for interpreting conduct; it means the external expression of intention as distinguished from undisclosed intention. A promisor manifests an intention if he believes or has reason to believe that the promisee will infer that intention from his words or conduct. The intent of a party to enter into a contract or not is determined by what an objective third person would determine their intent to be. I.e.- It could be reasonably seen that an acceptance letter mailed with a bomb would not be acceptance because the offeree could believe that blowing up the offeror would terminate the contract.
Reasonable person standard – Would a reasonable offeree find the communication/conduct to be an offer?
Advertisements, Websites, & Catalogs – unless the language or circumstances strongly indicate otherwise, the usual assumption is that proffering of goods on a website, catalog, or advertisement is not an offer, but a solicitation for offers from the public.
Lucy v. Zehmer (drunken joke offer)
If a reasonable person would think it’s an offer then it is one.
Embry v. Hargadine, McKittrick Dry Goods Co. (renewing expired employment contract)
If a reasonable person could infer from conduct that intent to enter into a binding contract exists, a binding contract exists. A meeting of the minds” is unnecessary if the outward, objective intent of the offeror shows they intend to be bound.
Leonard v. PepsiCo, Inc (Pepsi commercial with jet)
An advertisement does not constitute an offer unless terms are sufficiently clear and leave nothing open for negotiation. No objectively reasonable person could have seen the jet in the advertisement as an offer.
Has an Offer Been Made? (Chapter 2)
§ 24 Offer Defined
An offer is the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it.
1. Because an offer must be manifested, it must be communicated to the person to whom it is addressed.
2. Offer must indicate a desire (willingness) to enter into a contract
3. Bargain- one thing flowing from one side and one thing flowing to the other (consideration).
4. Another person – offer may be directed at a person of group of persons
5. Justify understanding that assent is invited – lead another to realistically believe their assent is invited. Offer must invite acceptance. It may or may not indicate how and what time acceptance is to be communicated. If specified, it must be followed. If the terms are not set, the court must decide whether the acceptance was reasonable and timely.
6. Will conclude the bargain- Offer must create the reasonable understanding that acceptance will
y intended to be bound by contract. In general, the more definite the proposal, the more reasonable it is to treat the proposal as involving a commitment.
Continental Laboratories v. Scott Paper Co. (negotiation broke down on hotel products)
An oral agreement does not form a binding contract if either of the parties intend to be bound by a formal written agreement. The court noted: “it would be strange for Scott to require written modifications without first contemplating a written contract.”
Metro-Goldwyn-Mayer v. Scheider (actor becomes A-list and wants to back out of a show)
When parties have negotiated the essential terms of a contract, and performance has begun on the good faith understanding that agreement on unsettled terms will follow, the contract is enforceable, provided some objective method of determining the missing terms is available. The contract may have lacked specificity, but Scheider already accepted the offer by acting in the pilot, so it was a contract.
Has the Offer Been Accepted? (Chapter 3)
R2 § 19. Conduct as Manifestation of Assent
(1) The manifestation of assent may be made wholly or partly by written or spoken words or by other acts or by failure to act.
(2) The conduct of a party is not effective as a manifestation of his assent unless he intends to engage in the conduct and knows or has reason to know that the other party may infer from his conduct that he assents.
(3) The conduct of a party may manifest assent even though he does not in fact assent. In such cases a resulting contract may be voidable because of fraud, duress, mistake, or other invalidating cause.
a. Conduct other than words. Words are not the only medium of expression. Conduct may often convey as clearly as words a promise or an assent to a proposed promise. Where no particular requirement of form is made by the law a condition of the validity or enforceability of a contract, there is no distinction in the effect of the promise whether it is expressed in writing, or orally, or in acts, or partly in one of these ways and partly in others. Even though the intentional conduct of a party creates an appearance of assent on his part, he is not responsible for that appearance unless he knows or has reason to know that his conduct may cause the other party to understand that he assents. In effect there must be either intentional or negligent creation of an appearance of assent.
R2 § 30. Form of Acceptance Invited.
(1) An offer may invite or require acceptance to be made by an affirmative answer in words, or by performing or refraining from performing a specified act, or may empower the offeree to make a selection of terms in his acceptance. (offeror can basically choose how offer is accepted)
(2) Unless otherwise indicated by the language or the circumstances, an offer invites acceptance in any manner and by any medium reasonable in the circumstances.