Contracts Outline

Contracts

Manesh

Fall 2011

I. INTRODUCTORY MATTERS

A. WHAT IS A CONTRACT?

1. “An exchange relationship created by agreement that includes at least one promise and is enforceable by law”

2. Elements

· (1) Exchange relationship

· (2) Created by agreement

· (3) There must be at least one promise

· (4) Enforceable by law

B. COMMON LAW AND STATUTORY LAW

1. Common Law: Contract is judge made law based in English Common Law (except LA)

· Applies to every kind of contract transaction where the UCC does not supersede it.

· Restatement is a secondary source of law not binding on any individual court; common law precedent binds courts.

ú Look at restatement when no precedent exists.

2. Statutory Law: Courts are bound by the Uniform Commercial Code (UCC)

ú UCC Article 2 applies to sale of goods

ú UCC Article 1 defines goods: “Any objects that are moveable”

ú Predominate Purpose Test: Whether a mixed contract (e.g. sale of service including a good) are governed by the UCC:

(a) Was the purpose to sell a good?

(i) Yes à UCC

(ii) No à Common Law

· The UCC is not comprehensive; when a particular issue involving the sale of goods is not discussed in the UCC, common law applies.

C. FUNDAMENTAL PRINCIPLES OF CONTRACTS

1. Empowers individuals to make their own law to govern their relationship

· Personal autonomy

2. Promotes economic efficiency

· Free market principles

D. LAW V. EQUITY

1. Problem with legal realism: One man’s equity is another’s injustice

2. Tension between law and equity: Equity tries to achieve justice in a specific case, but at times this can undermine the rule of law.

ú Kilarjian v. Vastola: Specific performance wasn’t allowed when it normally would be because of sympathetic diseased defendant.

II. FORMATION

Contract formation requires: Mutual Assent, which = Offer + Acceptance

A. MUTUAL ASSENT

1. Objective Standard

· Assent to a contract is determined not by trying to ascertain if the parties subjectively believed that they had an agreement but by having regard to their apparent intent as shown by their overt acts and words.

· Mutual assent can be through conduct; it does not require a “formal” offer and acceptance. (signature = gold standard for assent)

· Kabil Developments Corp. v. Mignot.: Helicopter service contract breached because site was unsafe. Subjective evidence was admitted as evidence to bear on behavior and perceptions of parties in negotiating.

2. The Reasonable Person

· The objective test is aimed at protecting the reasonable expectations of the particular party involved in the transaction.

· Thus, parties to the contracts are analyzed based on a reasonable person standard, where the reasonable person is defined in the entire context of the transaction.

ú Subjective elements are not entirely excluded, fact finder takes into account parties attributes when look at whether they acted reasonably. (e.g. experience, training, commercial sophistication, relationships between parties, background information, etc.)

· Lucy v. Zehmer: Sale of land on bar napkin. Reasonable P would have understood D’s conduct to mean assent. Written twice w/details added.

3. “Duty” to Read

· A party who had the opportunity to read a contract, but did not, is bound by the terms

· James v. McDonald’s Corporation: Woman didn’t read arbitration clause on her food or in line. It would be unreasonable to make cashiers recite terms before giving out fast food, etc.

4. Capacity to Contract: Restatement §12

· No capacity if under guardianship, an infant, mentally ill/defective, or intoxicated.

B. OFFER

1. Definitions

· “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.” – Restatement §24

· An objective manifestation of intent by the offeror to the offeree to be bound to the offeree without any further action on the part of the offeror. – Manesh

2. Role of Offeror

· The offeror is the master of his offer.

· Can prescribe the time and procedure sufficient for acceptance by the offeree.

· As long as his offer has not yet been accepted, he can revoke his offer by notifying the offeree.

3. Role of the Offeree

· Power to decide whether there will be a contract; if she accepts the offer, the contract comes into effect immediately

ú She must be able to understand this from the terms/manner of the offer and from the offeror’s objective manifestations.

· She must accept in the manner and time specified by offeror, if this is not given then a “reasonable” time and manner is used.

· Inaction/sile