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Contracts
University of North Carolina School of Law
Feibelman, Adam

CONTRACT FORMATION
Two Step Procedure: R2d §17: For there to be a contract there must be (1) a manifestation of mutual assent (offer and acceptance) and (2) consideration.
Purpose of K Law:
To distinguish the moment of agreement from prior bargaining activity
To protect agreement from a return to the bargaining process
 
 
MUTUAL ASSENT
R2d §22: There must be mutual assent to the same bargain. This is demonstrated through offer and acceptance.
 
Determining Mutual Assent: Objective Standard: must prove that his actions/words would be interpreted by an objective, reasonable person as a manifestation of intent. not a question of intent but interpretation…….. [Embry, 325] Subjective Evidence of Intent is Permissible: permissible as evidence of how one “RP” interpreted the agreement. It is not, however, determinative…….[Kabil, 329] Requires a defined obligation: someone must consciously agreed to an obligation. consequently must know the scope and nature of their obligations. The scope and nature of the obligations must be able to be determined through an objective standard/methodology. Mere agreement to agree is unenforceable.
                                                              i.      Open Terms can be Possible
1.      Where the terms/price is subject to an objective methodology (ex: rent increase is tied to the National GDP, noted in Levin)
2.      Between merchants where you can show that the parties meant to leave the terms open (UCC §2-305)
a.       UCC 2-305: Parties can conclude K even if no price is stated. Price will be the reasonable market price at time of delivery if:
                                                                                                                                       i.      nothing is said to the price;
                                                                                                                                      ii.      price is left open to the parties and they fail to agree;
                                                                                                                                  iii.      set to some other fixed market standard.
3.      Options Available:
a.       Continue to negotiate (no K)
b.       Commit to negotiate (and establish conditions)
c.        Create a clear written agreement with open terms (have to be very clear – bound to performance and open to negotiations – AND must have objective standard.)
No Mutual Assent with Illusory Promises: Both parties must be bound or no one’s bound
                                                              i.      [Empro, 352] No mutual assent where there is mutual mistake resulting from a textual ambiguity (R2d 20)
                                                              i.       In order for assent to be mutual both parties have to agree to the same thing/terms. Therefore, when there is an ambiguity in the contract and both parties have materially different interpretations to its meaning, there is no contract as there is no mutual assent.
                                                            ii.      Application:
1.      Where neither party knows of the ambiguity/difference in interpretation (R2d 20(a)) – there is no K
a.       See Peerless case
2.      Where both party’s are aware of the ambiguity – there is only a K if they both attach the same interpretation (ie: no prob, bob)
3.      Where one party is aware of the ambiguity/difference in interpretation and knows (or has reason to know) of the other’s ignorance. à Interpreted in favor of the “innocent” party.
a.       Dickey v. Hurd….don’t lead someone on if you know something (manner of acceptance)
 
I.                   OFFER: 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. [R2d, §24]  
FRAMING AN OFFER: The offereror is the “Master of the Offer” as such he establishes the substantive terms of the bargain (price, quantity, etc) and the procedure of acceptance.
Required Procedure: OR can condition acceptance in any form (ex: “stand on head in rotunda at 4am to accept”), however he must be very clear that X is the only way to accept [Panhandle v. Smith]                                                               i.      A suggested means of acceptance does not preclude other means [Allied Steel].
1.      Performance of solicited act can function as acceptance (in absence of prior, formal acceptance) Frequently used in “routine and recurring events.”
2.      See: UCC 2-206: w/sale of goods can accept through any reasonable medium, including beginning performance. R2d. 32 and 62
                                                            ii.      Unilateral v. Bilateral K:
1.      Bilateral K: an exchange of binding promises
2.      Unilateral K: a promise in exchange for performance; the only way to accept under a unilateral K is through performance.
a.       ___: Unilateral K performing party not bound so can’t “breach” (no obligation to complete performance)
                                                                                                                                      i.      Option K created by parter performance/tender: Estopps OR from revoking – providing reasonable opportunity for OE to complete performance (to accept) (R2d 45)
1.      Otherwise – problem of unjust enrichment .[Patterson v. Pattberg; Brackenbury v. Hodgkin, 385] 3.      Ambiguity: when in doubt the OE gets to interpret ambiguity, implicit ct preference for bilateral Ks]… R2d §32….[Davis v. Jacoby, 372] a.       R2d 62: beginning performance constitutes acceptance (if you start performing – you have to finish performing)
                                                          iii.      Time Frame:
1.      Where there is n

be effective. R2d. §60
 
Acceptance Must Be Unqualified:
Counter-Offer Terminates Original Offer [Livingstone v. Evans]                                                               i.      Distinction between counter-offer and inquiry is dependant on context
Mirror Image Rule (old rule, R2d 59): didn’t mirror à terminated the original
                                                               i.      elements of an offer are interconnected – one is generally bargaining for more than the exchange (may influence exchange value)
2-207Allows acceptance when terms varies somewhat (distinction between additional terms and conflicting terms)
 
UCC 2-207:
(1)   A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.
(2)   The additional terms are to be construed as proposals for addition to the K. Between merchants such terms become part of the K unless:
a.       The offer expressly limits acceptance to the terms of the offer
b.       They materially alter it; or
c.        Notification of objection to them has already been given or is given within a reasonable time after notice of them is received.
(3)   Conduct by both parties which recognizes the existence of a K is sufficient to establish a K for sale although the writings of the parties do not otherwise establish a K. In such cases the terms of the particular K consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of this Act.
 
                                                              i.      Purpose: Important for the efficient and secure exchange of goods (capitalism)
U.C.C. 2-207: In the sale of goods insertion of additional terms does not necessarily constitute a rejection of an offer unless the OE expressly conditions acceptance on the additional terms. Where acceptance is not so conditioned it creates a binding K and the additional terms are treated as “proposals/suggestions” for inclusion. For K’s between merchants the new terms become a part of the K unless (1) offer limits acceptance to