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University of Missouri School of Law
Lambert, Thomas A.

Fall 2009 Professor Thom Lambert
Casebook: Farnsworth 7th edition

Intro & Assent
I. Fundamentals of Contracts
a. Voluntary exchange creates wealth
i. Pareto efficient – someone better off, none worse off
ii. Kalder-Hicks efficient – total wealth enhanced, but someone worse off, potentially Pareto efficient if winner compensates loser
b. Necessary to force performance when facts chance
i. Between the promise and the actual performance
c. Ultimate goals- create wealth via Efficiency or ethical means
d. Enforce the parties expectations
e. RST 1 – contract is a promise for which the law provides a remedy
f. Economic Remedies
i. C/L must pay damages if breach
ii. Naval v. Charter -Efficient Breach Hypothesis – promisor will exercise option to breach and pay expectation damages instead of performing when in promisor’s best interest
iii. Pareto-improving- transaction that makes no one worse off while making someone better off
II. Assent – intent to do something and manifestation of intent w/ words or actions
a. Offer and acceptance, determined by an objective test
b. Must have control to have assent, must have capacity to contract (RST 14 &15)
c. If there are different meanings there is no mutual assent
d. Specific Performance – ruling requiring party to fulfill duties of contract
i. RULE: an agreement or mutual assent is essential to a valid contract (Lucy v. Zehmer)
ii. TEST: has the promisor done something to make promisee (or reasonable person) believe that the promisor intends to be bound

Pen ultimate step in contracting is the offer
I. What Constitutes an Offer
a. RST 24 – 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
i. Would a reasonable person in the position of the offeree feel they have the power to close the deal by saying yes?
II. Requirements for a Valid Offer
a. Manifestation of present contractual intent
b. Certainty and definiteness of terms
c. Communication to the offeree – must be communication to offeree, in no other way will it create power of acceptance – i.e. if A prepares an offer for B intending to mail it but never does no contract
d. TEST – Would a reasonable person in the position of the offeree feel that if he accepted the proposal a contract would be complete
III. Price Quotes and Advertisements
a. Price Quotation – a simple quotation of price usually construed merely as an invitation to the buyer to make an offer (Owen v. Tunnison)
b. “For Immediate Acceptance” – D’s quotation of prices for immediate acceptance is more than a quotation and constituted an offer (Fairmount Glass Works v. Crunden-Marten Woodenware Co.)
c. Advertisements – generally deemed invitations to deal b/c (1) are usually indefinite as to quantity and other terms (2) sellers ought to be able to choose with whom they deal and (3) gives the seller another say and protects them from oversubscription
i. Exception to Ad Rule – advertisements addressed to the public are considered binding if the facts show that some performance is definitely promised for something requested (Lefkowitz v. Great Minneapolis Surplus Store)
ii. Bait and Switch Ads – Uniform Deceptive Practice Act prevents these

I. Acceptance – a voluntary act of the offeree whereby he exercises the power of the offer
a. Default Rules
i. RST § 30 – acceptance can be by any means reasonable in the circumstances when they are unclear
ii. RST § 32 – acceptance either by promising to perform what the offer requests or by rendering the performance as the offeree chooses
iii. RST § 50 – manifestation of assent though the manner invited or required
b. Offer may only be accepted by the person to whom it is made
c. Acceptance must be unequivocal and unqualified
II. Requirements for valid Acceptance
a. Acceptance by Promise – Bilateral contracts – acceptance requires the offeree to give some type of return promise
i. All that is required is the counter promise based on reasonable person standard
ii. Acceptance by Promise – RST§ 56 – unless otherwise specified, the offeree must notify the offeror of his acceptance by promise seasonably and with reasonable diligence(Int. Nat’l Filter v Conroe)
iii. Can also be Acceptance by Performance RST § 62 – when offeree has to choose btwn acceptance by promise and acceptance by performance a beginning of performance is an acceptance – such an acceptance operates as a promise to complete performance
b. Acceptance by Performance Unilateral Contracts – offeree specifies contract occurs only on completion of performance
i. RST § 54 – when offer invites acceptance though performance, notice is not required unless specified, if offeror has not means of learning of the performance contractual duties are discharged unless
1. Offeree exercises reasonable diligence to notify
2. Offeror learns of the performance in a reasonable time
3. The offer indicated that notification was not required
ii. Notice is not required. Kx upon commence

ty does not terminate power of acceptance under option contract
iii. Death of a party after contract formation may affect obligations of the contract
c. Revocation by the Offeror (RST § 42) – an offer can be terminated any time before acceptance
i. General Rule – offer is freely revocable, power of acceptance is terminated when offeree receives from the offeror a manifestation of an intention not to enter into the contract
ii. Firm Offers – UCC 2-205 – a merchant’s signed promise to keep an offer open will be enforceable regardless of consideration – stays open for 3 months if:
1. Must agree on terms supplied by/on the form
2. Offeror must be a merchant
3. Offer must be signed
4. If form supplied by offeree, offeror must separately sign the form to keep it open
iii. Option Contract – promise made that effectively limits the offeror’s power to revoke. Usually option expressed directly or indirectly for a fixed period in which the offeree must “pick up” option
1. Must clothe the promise – offeree must give something in return for the promise (Dickenson v Dodds)
2. RST § 25 – The option – a promise which meets the requirements for the formation of a contract and limits the promisor’s power to revoke an offer
iv. Direct or indirect communication of revocation
1. RST § 43 – revocation indirectly – power of acceptance is terminated when the offeror takes an action inconsistent with intention to ender K and offeree receives reliable information to that effect – info must be from reliable source and true
2. General Offers – RST § 46 – notice of termination of offer must be given publicly in a manner equal to that given to the offer when no better means of notification available
a. Constructive notice – doesn’t matter if person who saw original offer saw the revocation (i.e. newspaper revocation)
b. Revocation must be on the same terms as the offer in the same medium to same audience
d. Offeree’s Rejection – power of acceptance terminates when you make initial rejection, later acceptance is considered a counter-offer