Contracts: Coyle, Spring 2013
I. Introduction to Contracts
a. Is there a breach for the Sale of Goods?
i. YES: See Article 2 of the UCC
ii. NO: See common law
b. Meeting of the Minds NOT necessary – would a reasonable observer have thought the parties were in agreement?
c. Incomplete vs. Ambiguous
i. Incomplete Contracts (K is missing a vital term) – void, the contract does not exist
1. EX: Courts will not enforce a contract without a price term UNLESS the agreement describes a process by which the price can be determined (i.e., “dollars per click” or “the usual rate”)
ii. Ambiguous Contracts – the term exists, but it’s not clear what the parties thought it meant (Allen v. Bissinger)
d. Three paths from loss to remedy
i. (1) Formation of Contract – Breach, Prove that there was offer acceptance, consideration
ii. (2) Promissory Estoppel
iii. (3) Restitution
iv. You don't have to pick one of these theories, you can raise different claims in the alternative and see which one sticks with the court — maximizes your chance of recovering loss
II. The Basis of Contractual Obligation
a. Mutual Assent
i. Mutual Assent
1. Mutual mistake – both parties have a misapprehension about the good being transferred – no contract
2. Unilateral mistake — one party thinks they’re getting one thing and the other party thinks they’re getting another – contract (Ray v. William G. Eurice & Bros, Inc)
3. Jokes – would an objective person have thought the person was joking?
4. Children cannot legally enter into contracts
ii. Bilateral Contracts
1. To make a contract:
a. Invitation to make an offer
b. Offer – contains everything the offeree needs to know
c. Acceptance
i. Mailbox Rule: If you receive an offer which you wish to accept, your acceptance is binding on the offeror as soon as you out your acceptance in the mailbox (Coyle hates the mailbox rule)
2. If K contains two inconsistent, mutually exclusive clauses, the more obvious one wins (Izadi v. Machado Ford: P’s interpretation of K was based on large, bolded words, D’s interpretation was based on fine print; P wins) – look for an objectively reasonable interpretation
3. “Bait and Switch” – Business makes outlandish promise they have no intention of keeping to lure customers in and then take back the offer based on unreadable fine print – not allowed as a matter of public policy, so courts will enforce those promises
4. Normile v. Miller
a. Counteroffer: when an offer is made and it is accepted with changes/conditions/qualifications, then it becomes a counteroffer, which is actually a rejection plus a new offer (which is not binding until accepted by the other party)
b. Option contract: An offer in which the offeror promises to keep the offer open for a certain amount of time; Requires:
i. Language stating that it’s an option
ii. Consideration
iii. Unilateral Contracts – one party makes a promise, other party does an act (i.e., I’ll pay you a reward if you find my lost cat; I’ll give you $100 to climb that flagpole)
1. Classic Rule: If you get 9/10 of the way up the pole, the offeror can still revoke (Petterson v. Pattberg)
2. Modern Rule: Offeror cannot revoke if offeree has substantially performed – Doctrine of Part Performance (Cook v. Coldwell Banker)
iv. Agreements to Agree
1. Not binding unless the contract contains allowable method of calculation
a. Specific dollar amount or consideration
b. Formula (i.e., 6% plus inflation)
c. Arbitration
2. I.e., Walker v. Keith: Agreement to agree to determine future rent based on “comparative business conditions” – not clear so K is missing an essential term and is thus incomplete or indefinite – no K
a. UCC 2-305 for goods is basically diametrically opposed to this rule
3. Letter of intent – express intent to spell out and sign a contract at a later date; K to engage in good faith negotiations in the future
b. Consideration
i. Two Theories of Consideration
1. Classic Theory (Hamer v. Sidway – nephew’s voluntary restriction of his legal rights to smoke, drink, and swear consitute a “detriment”)
a. Benefit/Detriment Test: Consideration consists of either a benefit to the promisor or a detriment to the promisee
2. Bargain Theory (Pennsy Supply v. American Ash R
3. You have an acceptance with a proposal for a new term
4. Exception: Either party says “No K unless you accept the exact terms” – If neither party says “my way or the highway” then there IS a contract under the UCC
iii. If K is between two merchants, the additional terms (proposals) become part of K unless:
1. Someone says “my way or the highway” (as above)
2. The proposal materially alters the K
3. Party gets the new terms, hears about D, and says “absolutely not, we don’t accept” within a reasonable time
iv. If K is between two parties, at least one of whom is not a merchant, the new terms are treated as proposals and are not automatically put into K
d. Electronic and Layered Contracts
i. Is a electronic agreement enforceable? (Hines v. Overstock.com)
1. Did bound party have reasonable notice of agreement/the clause being sought to be enforced?
2. Did bound party manifest assent to the agreement/clause?
3. Absent a showing of fraud, failure to read the agreement is not an excuse
ii. Clickwrap Agreements – have to click an “I Agree” button – enforceable (Feldman v. Google)
III. Promissory Estoppel
a. Do not need to establish consideration on a theory of promissory estoppel; Just trying to prove that
i. D made a promise
ii. P relied on that promise to his detriment
iii. Injustice is promise is not enforced
b. Promises with the family (Harvey v. Dow – no oral or explicit promise, but actions by father show an implicit promise to give daughter land)
c. Charitable Subscriptions; §90(2) removes 2nd element and makes it super easy for charities to enforce promises of gifts – only Iowa has adopted this rule
