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Contracts
University of North Carolina School of Law
Broome, Lissa Lamkin

Broome, Fall 2012
 
Contracts Table of contents
 
Chapter 2: Is there an Offer/Acceptance (Has Your Client Made a Deal?)
1)     Determining Mutual Assent
2)     Offer
3)     Destroying the Offer
4)     Preserving the Offer
5)     Modes and Methods of Acceptance
6)     Deficient Agreements: Insufficient, Inadequate Postponed Terms
Chapter 3: Is there Consideration?
1)     Bargain and Consideration
2)     Promise to Pay for Something that Happened Before the Promise
3)     Reliance and concept of Promissory Estoppel
Chapter 4: Is the Agreement Enforceable?
1)     Statute of Frauds
2)     Fraudulent or material misrepresentation and nondisclosure
3)     Defendant’s Lack of Capacity
4)     Undue Influence and Duress
5)     Illegality and Public Policy
6)     Unconscionability
7)     Mistake
Chapter 5: What are the terms of the deal?
1)     Trade Usage (terms not words of parties)
2)     Parol Evidence Rule
3)     Parol and Extrinsic Evidence for true meaning
4)     Terms added by the courts
5)     Terms added by legislatures
6)     Warranties and the U.C.C
Chapter 6: When is someone who made an enforceable deal excused from K?
1)     Conditions
2)     Modifications, Waiver, or Estoppel as an escuse
3)     Impossibility, Impracticability
4)     Anticipatory Repudiation
5)     Material Breach
 
 
 
 
 
 
 
 
 
 
 
 
 
Chapter 2: Is there an Offer/Acceptance (Has Your Client Made a Deal?)
Sec 1. Determining Mutual Assent
If the words are in doubt, how can we determine assent?
 
A.      Subjective Theory – Was there a “Meeting of the Minds” – Bad test!  Never ask this.  We can’t know the true feelings/thoughts of parties.
 
B.      Objective Theory – Examine the conduct, acts, and words of both parties, and how a reasonable person would have perceived them.  We can look at outer expressions of assent:
Reasonable Person Test:
1)                 Lucy v. Zehmer: You can’t look inside Zehmer’s mind to see he is joking.  His outward manifestations of assent are clear to any reasonable third party, writing, signature, haggling over price.  Lucy relied on these manifestations despite drunkenness, past history, and intended joke.   Contract is enforceable
2)                 Leonard v. Pepsico:  Even though Leonard believed in the add was an offer, no reasonable person would believe the fighter jet was offered based on the ad (hyperbole of ad, difference between $700K in pepsi points, and $40million dollar plane, etc.).  Also, court can use reasonable person test for determination without taking it to a jury.  Summary Judgement: No Contract.
3)                 Gleason v. Freeman: The Ebay Elvis House.  The continued negotiations after the winning bid, manifests the buyer’s intent not to be held to any “binding” language added to the Ebay terms and agreements. Despite binding language ct held no Contract.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Sec 2. Offer
What does an offer look like?  Required components of an offer are:
a.       It requires nothing of offeree except acceptance, “Just say yes!”
b.      It has definite and certain terms (ex: price and quantity)
c.       A reasonable person would believe it is an offer (objective std)
d.      It has words of commitment (ex: offer, guarantee, agree, promise)
                                          2.      Additional Considerations: Number of potential acceptors (the fewer people that can accept it, the more likely that it is an offer)
                                          3.      R2K §24: 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)        Lonergan v. Scolnick: No words of commitment.  Form letter not an offer (many possible acceptors).  “Decide fast,” adds condition of prompt acceptance – lapsed. 
 
Output and Requirement contracts : Output K (all seller can produce) Requirement K (all that buyer requires).
 
Advertisements as offers: General rule: Ads are not offers, but should be viewed as a willingness to enter preliminary negotiations.  Same as Price Quotations.
R2K § 26: Preliminary Negotiations: A manifestation of willingness to enter into a bargain is not an offer if the person to whom it is addressed knows or has reason to know that the person making it does not intend to conclude a bargain until he has made a further manifestation of assent.
Also, R2K §29: Number of Offerees Offeror may create power of acceptance in a specified person, specified group, or class of persons, or anyone/everyone who makes a specified promise or renders specified performance.
Leonard v. Pepsi Co. : Not an offer but an invitation for offers from customers.  This gives no power of acceptance to recipient.  Directed at general public (many acceptors), no language of commitment, and reasonably obvious joke in presentation.
Exception: It is possible for an advertisement to be an offer but there must be “some language of commitment or some invitation to take action without further communication.”
Lefkowitz v. Great Minneapolis Surplus Store: Clear definitive terms “First come first served, $100 coat for only $1.”  Only three people could accept, and all they had to do was show up.  No restrictions in ad and no invitation for further negotiation.
 
 
 
 
 
 
 
 
 
 
Sec 3. Destroying the Offer: 4 ways: Rejection, Revocation, Lapse, Death/Incapacity
 
Rejection: (from offeree)
            Express rejection= “Hell no!” terminates offer
            Implied rejection= Counteroffer (terminates offer)
 
Revocation:
            Direct Revocation: (From Offeror) I could never sell, I revoke the offer.  R2K § 42 An offeree's power of acceptance is terminated when the offeree receives from the offeror a manifestation of an intention not to enter into the proposed contract.  Rationale: Offeror is master of the bargain and can control the offer, modify or terminate it until acceptance
            Indirect Revocation: (From Offeree) R2K §43 An offeree's power of acceptance is terminated when the offeror takes definite action inconsistent with an intention to enter into the proposed contract and the offeree acquires reliable information to that effect.  (Rumor not sufficient if Offeree doesn’t believe it).
            Dickinson v. Dodds: Buyer learns of Seller’s sale to another buyer, then accepts and demands land.  Learned from agent, reliable, and believed it.
 
When can you revoke an offer? – You can revoke an offer any time before and only before acceptance.
What is the result of an offer being properly revoked? -A

open, then it is regarded as irrevocable inspite of no consideration.
 
No Consideration, no option, but still offer: Beall v. Beall: no consideration, Ct. says “merely an offer.”  Remanded to see if revoked.
 
 
 
Sec. 5 Acceptance
Who controls the modes/method of acceptance? Offeror is the “Master of the Bargain” as acceptance is assent to the terms of the offer.
Modes of acceptance: Required v. Invited
General: You can accept an offer by the mode required or invited
R2K § 50:
 (1) Acceptance of an offer is a manifestation of assent to the terms thereof made by the offeree in a manner invited or required by the offer.
(2) Acceptance by performance requires that at least part of what the offer requests be performed or tendered and includes acceptance by a performance which operates as a return promise.
(3) Acceptance by a promise requires that the offeree complete every act essential to the making of the promise.
Required mode of acceptance
            When the K calls for the specific type of acceptance.
1).        La Salle Nat’l bank v. Vega – Offer required acceptance by execution (signing) of K.  Because OE never signed, the offer was not accepted and the K was not enforceable.
2).        Evertite Roofing v. Green – Offer required acceptance by performance or promise.  No time was indicated.  Roofers began to perform and no revocation.  So, K is binding.
Invited mode of acceptance
            No specific type of acceptance required, so what is “reasonable in the circumstance?”
            R2K §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.
(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.
R2K § 32 When in Doubt: Either Performance or Promissory are reasonable (here res 2d is more flexible than res 1st )
 
Effectiveness of Promissory Acceptance
            Must give notice of promise
1.                  Hendricks v. Behee – revoked offer before receiving notice.  Within his rights to revoke, so no K
2.                  Adams v. Lindsell – Established Mailbox rule in England. Seller misdirected offer and it arrived late, buyer’s acceptance by mail was dispatched soon after reading offer.  Seller didn’t receive response on day expected decided to sell to someone else assuming the offer refused.  Acceptance is binding once it leaves offeree’s control.  Seller bound by buyer’s acceptance upon dispatch.