E. Nelson Contracts Fall 2013
Review Class 10/16/13
Read the exam looking for issues (active reading). During exam, be specific about each issue. Tie your issues to specific contract topics to help organize your thinking and your answer. Then attach Rule, Analysis, and Conclusion. Keep in mind to argue both sides. Write in paragraph format. NOT “I:xxxx, R:xxxx, A:xxxx, C:xxxx.” Only have to talk about the rules that are fairly raised just as you only deal with the issues fairly raised. In essence, you don’t have to discuss every exception or rule, just what applies. If it is clearly a sales of goods or sale of lands or services, you do not have to waste time saying this is a UCC contract or a Common Law contract. You only have to bring this up if it is clearly a hybrid contract, then you must determine which law applies and go forward.
Organization matters. Practice writing out at least one or two issues just to get used to it.
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I. Introduction to Contracts
A. Contract: 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
1. Two Parts of a Contract (RS 17)
a. Mutual Assent (see III)
b. Consideration
B. Promise: Promisor: Promisee: Beneficiary (RS 2):
1. Promise: Manifestation of intention to act or refrain from acting, so made as to justify a promissee in understanding that a commitment has been made. May be stated in words either oral or written, or inferred wholly or partly from conduct (RS 4).
2. Promisor: Person manifesting the intention
3. Promissee: Person to whom the manifestation is addressed
4. Beneficiary: Person who is not the promissee, but who performance will benefit
C. Agreement (RS 3): A manifestation of mutual assent on the part of two or more persons
D. Bargain (RS 3): Agreement to exchange promises or to exchange a promise for a performance or to exchange performances
E. Goods: Any tangible thing that is moveable [UCC 2-105(1)]
F. Types of Contracts
1. Bilateral – Exchange of promises
2. Unilateral – A performance
3. Option – A promise to keep the offer open for a specified period of time with no possibility of revocation until after time specified.
4. Hybrid Goods Contracts- i.e. a contract that includes both services and goods. It must be determined what the main purpose of the contract is and that determines if the Restatement versus the UCC governs.
a. Dominant purpose Test – Determine what main focus of the contract was at the time of formation; what the parties intent was at that time; goods versus services. Advantage of this test is it furthers the parties’ expectations.
b. Source of complaint Test– Determine what the parties intent is at time of breach; look for where the contract went wrong; goods v. service. (Not widely used because the policy is for parties to be bound to contracts that they manifested their intent to be bound to at the time of contract formation.)
Assumpsit: an express or implied promise to take responsibility or do something for another.
II. Public Policy
A. RS 178 and RS 179: Courts can object to contracts just because they believe they go against public policy (Shaheen v. Knight) (In Re Baby M)
B. Encourage commercial transactions – UCC
Policies of Contracts
1) Assent Policy: We do not want to impose a contract on a party that did not intend to be bound.
2) Expectancy Policy: When parties bind in a contract, certain expectations are created. We want to have rules and judgments that honor these expectations.
3) Freedom of Contract: Freedom to contract with one another as well as freedom to not contract with one another.
*If courts voided contracts, expectations would not be fulfilled and contracts would be discouraged. Our society wants law that encourages contracts and commercial transactions.
III. Mutual Assent
A. Objective Theory of Assent
1. Two Types of Assent
a. Objective: Outward manifestations
b. Subjective: Inside person’s mind (thoughts)
2. Requirement for “meeting of the minds”
a. Embry v. McKittrick Dry Goods
i. Embry believed contract extended, president did not – no meeting of the minds
ii. Objective controls over subjective
iii. Reasonable Person Test
b. Lucy v. Zehmer
i. Outward expressions are only thing that matters
ii. Zehmer’s outward manifestations made Lucy think there was a contract
3. Manifestation of Mutual Assent (RS 18): manifestation of mutual assent to an exchange requires that each party either make a promise or begin to render a performance
4. Conduct as Manifestation of Assent (RS 19):
a. May be made wholly or partly by written or spoken words or by other acts or by failure to act
b. Conduct of a party is not effective as a manifestation of his assent unless he intends to engage in the conduct and knows or has reason to know that the other party MAY INFER from his conduct that he assents
c. The conduct of a party may manifest assent even though he does not in fact assent
5. Mode of Assent—Offer and Acceptance (RS 22):
a. Manifestation of mutual assent is an offer + acceptance
b. Manifestation can be made even though neither offer nor acceptance can be identified or a moment of formation cannot be determined
B. Offers
1. Of
v. Ex. If the offeror was revoking via voicemail, the offerree would have to have actually received the voicemail for it to have been revoked. Dispatching a revocation does not create a revocation.
b. RS 66 Acceptance must be properly dispactched.
c. Under an option contract, acceptance is operative upon receipt by the offeror—opposite of the Mailbox Rule
3. Acceptance by Performance; Unilateral Contracts
a. RS 30 permits offerors to specify form of acceptance required
b. RS 32: if in doubt; can accept in any manner offeree chooses
c. Bilateral contracts result from acceptance by a promise; unilateral contracts result from acceptance by performance
d. Ex. Of Unilateral Contract: Lost dog, finding the dogs earns a reward.
e. Carill v Carbolic Smoke Ball: if advertisement makes a promise that is not “mere puff, ” then that promise is binding if someone performs the conditions .
i. Offeror gets notice of acceptance simultaneous with notice of the performance of the condition. No additional notification is needed.
ii. Extravagant promises are no reason not to be binding
f. RS 54
i. No notification is necessary to make acceptance effective.
ii. If offeree who accepts by performance has reason to know that the offeror has no adequate means of leaning of the performance, contractual duty is discharged unless offeree
1. attempts to notify offeror of acceptance or
2. offeror learns of the acceptance or
3. offer indicates notification of acceptance is not required
g. White v. Corlies & Tift: did not perform an act which indicated an acceptance of this job specifically, so not acceptance by performance.
h. Petterson v. Pattberg: If offeror can say “I revoke” before offeree completely finishing acting, no matter how brief the time, the offer is terminated (differs from RS 45). Old rule.
i. RS 45: Option contract created when offeree tenders or begins the invited performance or renders beginning of it. Offeror’s duty of performance is conditional on completion or tender of the invited performance. MODERN RULE changes old rule.
j. RS 62: Tender or beginning of invited performance is an acceptance by performance
