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Contracts
University of Oklahoma College of Law
McCall, Brian

Contracts Outline
 
I)       Introduction
A)    Rules
1)      Contract (R 2nd § 1) – a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty. (“Contract” means an enforceable promise).
2)      Contract (UCC § 1-201[11]) – the total legal obligation which results from the parties’ agreement as affected by this act and any other applicable rules of law.
3)      Scope; Certain Security and Other Transactions Excluded from this article (UCC § 2-102) – Unless the context otherwise requires, this article applies to transactions in goods…….
4)      Goods (UCC § 2-105) – 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 the section of goods to be severed from realty. Can be future goods. Layman’s terms: Goods are tangible, movable property, such as a car or computer. UCC does not cover contracts for the sale of real estate, contract to provide services (paint house) or contracts to lease goods.
5)      ***Note: Students often make the mistake of stating that Art 2 does not apply unless the parties to the contract are not merchants.
B)     Sources of Contract Law
1)      Judicial Opinions
2)      Statutes (UCC)
3)      Restatements – don’t have the force of law, but are persuasive and have been followed in judicial opinions.
4)      Legal Commentary – secondary authority
C)    Law Governing Contracts
1)      The common law generally governs contracts. However, contracts for the sale of goods are governed by the UCC. The common law is still applied to contracts for the sale of goods, but any conflicting rules in the UCC replace the common law.
D)    Types of Contracts
1)      Express – are formed by lang, oral or written.
2)      Implied – are formed by manifestations of assent other than oral or written lang (by conduct).
E)     Note: Equity (as opposed to common law) is the check on the law. Court that could go beyond the rules for a just result.
 
II)     Objective Theory of Contracts: Mutual Assent
A)    Rules
1)      Formation in General (UCC § 2-204)
(a)   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.
(b)   An agreement sufficient to constitute a contract for sale may be found even though the moment of its making is undetermined.
(c)    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.
2)      Intention to be Legally Bound (R § 21) – Neither real nor apparent intention that a promise be legally binding is essential to the formation of a contract, but a manifestation of intention that a promise shall not affect legal relations may prevent the formation of a contract.
3)      Methods of Termination of the Power of Acceptance (R § 36)
(a)   Rejection of an offer can be made through:
(i)     Counteroffer – a change in terms communicated back to the offeror by the offeree terminates the original offer. (§59)
(ii)   Rejection – An offeree’s power of acceptance is terminated by his rejection of the offer unless the offeror has manifested a contrary intention. A manifestation of intention not to accept an offer is a rejection unless the offeree manifests an intention to take it under further advisement. (§38)
(iii)Lapse of time – at the time stated in the offer or, if not stated, after a reasonable period of time).
(iv)Death or incapacity
(v)   Actions that are contrary to the intention to be bound (ex. Sale of the item)
(vi)Revocation – a retraction of the offer by the offeror prior to valid acceptance. Revocations may be indirect – require acts that are inconsistent with the offer (reasonable person standard) and are communicated by a reliable source. Common law says that an offer is revocable unless and until it is accepted by the offeree, even if the offer itself expressly states that it cannot and will not be revoked.
(vii)           Conditional – acceptance that is conditional upon certain obligation, if the conditional criteria not met, contract is terminated.
(b)   In addition, an offeree’s power of acceptance is terminated by the non-occurrence of any condition of acceptance under the terms of the offer.
B)     General – Formation of a contract requires “a bargain in which there is a manifestation of mutual assent to the exchange and a consideration.”
1)      Mutual assent is a “meeting of the minds.” The process by which parties reach this is generally in some form of negotiation, during which at some point, one party makes an offer and the other agrees to it (acceptance). An actual subjective (actual intention of a party rather than the party’s conduct) meeting of the minds is not necessary. Crts use an objective measure (conduct of the parties from perspective of a reasonable person). It doesn’t matter what the actual intention was, it is the apparent intention that he/she manifested to others that matters.
(a)   Ray v. Eurice –
(i)     Facts: Property owner sues building contractor for breach of contract for not building his home for the price estimated (or the specific spec’s) agreed upon in a contract. Contract was signed by Eurice who later claimed he did not read the attachments referenced in the contract.
(ii)   Rule: Absent fraud, duress or mutual mistake, one having the capacity to understand a written document who reads and signs it, or has it read to him and signs it, is bound by his signature in law.
(iii)Note: It is not important to determine when the contract was signed, just that it was signed.
 
III) Offer and Acceptance Bilateral (2 parties) Contracts
A)    Rules
1)      Offer Defined (R § 24)
(a)   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.
2)      Formation in General (UCC § 2-204)
(a)   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.
(b)   An agreement sufficient to constitute a contract for sale may be found even though the moment of its making is undetermined.
(c)    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

fused to accept the offer.
(b)   Rule: When an ad uses bait-and-switch tactics (misleading), then the ad is held to be an offer. The test of interpreting an offer is not what the party thought it was but what a reasonable person would have thought. Normally an enforceable contract does not arise from an offer contained in an advertisement.
3)      Normile v. Miller
(a)   Facts: D had real estate for sale. P’s made an offer (on the condition it was accepted by 5pm Aug. 5th 1980); D made a counteroffer (rejected original offer). P’s considered the offer, but their agent thought they rejected it and found another buyer, Plaintiff Segal. P Segal made an offer that D accepted on the 5th. After this, at 2 pm, the agent told P’s “You snooze, you lose; the property has been sold.” Prior to 5 pm, N&K had signed and initialed the counteroffer and put down the deposit.
(b)   Rule/Holding: If a seller rejects a purchase offer by making a counteroffer and the counteroffer is not accepted before receiving notice of the counteroffer’s revocation, then the prospective purchaser does not have the power to accept the counteroffer after.
4)      Harlow & Jones, Inc. v. Advance Steel Co. (this case deals with sale of goods {UCC applies})
(a)   Facts: Harlow agreed to sell D 1000 tons steel for shipment Sept-Oct 1974 per phone conversations. P mailed sales form confirming and same day placed order with 3rd party company; D never signed or returned sales form, and later mailed purchase order to P (with some minor revisions on shipping dates). This form wasn’t signed or returned either. D rejected last shipment, alleging it didn’t come in on time.
(b)   Rule/Holding: The court finds that an oral contract for the purchase of steel was formed before either party began sending or receiving written contract forms (during the week of phone convo’s). An agreement sufficient to constitute a contract for sale may be found even though the moment of its making is undetermined.
 
IV) Offer and Acceptance Unilateral Contracts
A)    Rules
1)      Option Contract Created by Part Performance or Tender (R § 45)
(a)   Where an offer invites an offeree to accept by rendering a performance and does not invite a promissory acceptance, an option contract is created when the offeree tenders or begins the invited performance or tenders a beginning of it.
(b)   The offeror’s duty of performance under any option contract so created is conditional on completion or tender of the invited performance in accordance with the terms of the offer.
2)      Formation in General (UCC § 2-204)
(a)   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.