Contracts Outline
Professor McWilliams
Fall 2011
Question for the Class: What qualities must a private undertaking have to be enforced by public institutions?
Exam Tips:
● Start each question with “this issue is covered by ____________(The Restatement/UCC)
● Define everything
● Word limit—be succinct
● Use IRAC model for exam questions (Issue, Rule, Application, Conclusion)
● (if there’s extra room, talk about policy)
Chapter 1: Introduction to Contract Law
1. Goals of the law:
a. order
b. perceived fairness
c. advancement of social goals
d. predictability (realization of reasonable expectations)
2. Contracts are “efficient” for both parties. They provide each party with something they value more highly.
3. First question to ask about a dispute: Is this governed by the UCC or the Restatement?
a. the UCC (Uniform Commercial Code) applies to the buying and selling of goods.
i. Goods – “all things which are movable at the time of identification to the contract…” (Restatement 2-105)
ii. Article 2 of the UCC is statutory law which every state has adopted, therefore it is binding authority (except in Louisiana).
iii. UCC is based on how people typically carry out contracts—much more flexible than common law.
b. The Restatement (Common Law) governs other contract disputes not covered in Article 2 of the UCC
i. real estate, services, etc.
ii. Provides definitions and fills in gaps in UCC
c. CISG (Convention on Contracts for the International Sale of Goods) governs international trade
i. International analogy to Article 2 of the UCC
4. Meanings of a Contract
a. “a promise or 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.” (Restatement §1)
b. “the total legal obligation which results from the parties’ agreement as affected by this Act and any other applicable rules of law.” (UCC § 1-201(11))
5. Remedies:
a. Specific performance—judge makes person do what they said (rarely enforced) (used a lot in real estate disputes).
b. Damages—Money substituting for performance (the benefit of the bargain)
i. Rule: Punitive damages not awarded in contract cases. With contracts you get expectation damages, which put the nonbreaching party in the position they would have been in if the contract had been performed.
6. Types of court jurisdiction:
a. personal
b. subject matter
7. Theories of contract law
a. Williston (“Classical,” “Objective”) – 1st restatement
i. prefers clear rules (legal formalism)
ii. indifferent to morality and social policy
iii. lesser influence of government control
iv. see Eurice Bros.
b. Corbin (“Modern,” “Subjective”) – 2nd Restatement
i. Attentive to needs of commercial marketplace
ii. characterized more by standards than rules
iii. Movement towards social justice
iv. Legal realism, legal activism
8. Notes:
a. Construction of meaning of a written document is a matter of law concerning judges, not juries.
b. Statute of Frauds: English Parliamentary enactment requires certain types of contracts to be evidenced by signed writing.
c. terms of enforceable contract are determined by parties, then treated as law.
Chapter 2A: Basis of Contractual Obligation: Mutual Assent and Consideration
*** What qualities must a private undertaking have in order to be enforced by public institutions?
1. Mutual Assent (and “meeting of the minds”)
a. Intention to Be Bound: The Objective Theory of Contract
i. Ray v. William G. Eurice & Bros., Inc. (Maryland Court of Appeals, 1952)
1. Calvin Ray (P) and Katherine Ray (P) had an unimproved lot on which they wanted to build a home on. They negotiated with Eurice & Bros., Inc. (D), and after a 9 page report, John Eurice agreed to write up a proposal (3 pages). After seeing the proposal, Ray had his lawyer write a counter-proposal [note: counterproposals reject, nullify, and substitutes it.] and it was signed by all parties involved (Henry Eurice, John Eurice, C. Ray, and K. Ray). The Messrs. Eurice refused to carry out the contract, stating that they believed that they were signing the 3 page proposal that had drafted.
2. Procedural History: The lower court ruled in favor of the Messrs. Eurice, stating that there was not a “meeting of minds,” and that this situation was an “honest mistake.” The plaintiffs appealed (? on what ground?)
3. Ruling and Judgment: The court reversed the lower court’s decision, concluding that the Defendants wrongfully breached the contract. They said the unilateral mistake is not an excuse for non-performance.
a. excuses for non performance include fraud, duress, and mutual mistake (see note bellow for Williston on mutual mistake)
b. “the law is clear, absent fraud, duress or mutual mistake, that one having the capacity to understand a written document who reads and signs it, or, without reading it or having to read to him, signs it, is bound by his signature in law, at least…”
4. Notes:
a. Judge L. Hand’s “twenty bishops” observation has become the classic statement of the objective theory of contracts (pp. 29-30)
b. Unilateral Contract
i. one party offers to exchange his promise of a future performance only in exchange for the offeree’s actual rendering of a performance.
ii. Traditional View- offeror can revoke anytime before the performance is completed.
iii. Modern View- (the exception to the general rule) §45 – In unilateral contract, an option contract is formed when offeree tenders of begins the performance.
b. Offer and Acceptance in Bilateral Contracts
i. Lonergan v. Scolnick (California District Court of Appeal, 1954)
1. ∆ placed an ad in the paper soliciting the sale of his land. π inquired into buying the land. The two had a 3-4 letter exchange during which, Defendant sold his property to another buyer.
2. Issue: Did the parties enter into a contract?
3. Procedural History: The lower court ruled in favor of the Defendant. The Defendant, in one of his letters, warned the Plaintiff that prompt action was necessary. The court ruled that prompt action was not taken by Plaintiff, and that, because so, he did not accept the offer.
4. Reasoning: the appellate court denies that any offer was made at all. The communication in this case demonstrated a solicitation of an offer to the Plaintiff, not an offer itself.
5. Ruling and Judgment: Since no contract was entered into, the court affirmed the decision of the lower court, but on different grounds. Because there was no legitimate offer, there was not contract, and therefore there is no breach of contract.
6. Notes:
a. court uses § 24 of the Rest. to define offer as “an expression of the offeror’s ‘fixed purpose,’ requiring no ‘further expression
was withdrawn before it became a binding promise, there is no contract for the ∆ to breach.
5. Reasoning: Williston on contracts: “if the offeror can say ‘I revoke’ before the offeree accepts…the offer is terminated.” In cases of an unilateral contract, the terms of the contract must be performed for the offeror to be bound to the contract.
6. Dissent: “It is a principle of fundamental justice that if a promisor is himself the cause of the failure of performance either of an obligation due to him or of a condition upon which his own liability depends, eh cannot take advantage of the failure.” (Williston on Contracts, sec 677.) If the offeror is the cause of failure to the performance, he should not be able to revoke.
7. Notes:
a. Part Performance Doctrine- Drafters of the Rest. (second) responded to this case by adding §45 – Offeror invokes a conditional contract when offeree renders (substantial/beginning of?) performance.
b. Another amelioration of the harsh results under classical analysis of contract law is § 32: in cases of doubt concerning whether the offeror intended to allow the offeree to accept by rendering an action or by future promise, the promisee can either make a return promise or render the performance requested by the offeror.
c. Rule: Ambiguous contractual language is usually enforced in the drafter’s disfavor.
ii. Cook v. Coldwell Banker/Frank Laiben Realty Co. (Missouri Court of Appeals, 1998)
1. Real estate agent (π) was told that if she earned a certain amount of money, she would get a bonus at the end of the year. Agent’s boss (∆) later changes the day the bonus would be paid to March. π leaves before March, and is not given the bonus.
2. Procedural History: π sues on breach of contract, court awards her damages. ∆ appeals on grounds that there was no submittable case, and that the court should have issued a directed verdict.
3. Issue- Can the ∆ revoke a unilateral contract after substantial work on the contract has been made?
4. Ruling- No, after substantial work is rendered on a unilateral contract by the offeree, the offeror cannot revoke. judgment is affirmed (π wins).
5. Reasoning:
a. Since ∆ appeals that there should have been a directed verdict, all of π evidence and testimony is granted as true.
b. General Rule: ∆ can revoke offer at any time before π accepts offer.
c. Exception: Offeror cannot revoke when the offeree has made substantial performance. (also, Corbin on Contracts) “Part performance or tender may thus furnish consideration for the subsidiary promises. Moreover, merely acting in justifiable reliance on an offer may in some cases serve as sufficient reason for making a promise binding.” (restatement [first] §45).
d. And so, since the offer was substantially performed by September, the offeror could not revoke.
