Contract Law McWilliams Fall 2016
III. Overview
Establishing an Enforceable Contract
Sources of Contract Law
Restatement (2d) of Contracts: Services; Real Estate
Uniform Commercial Code (UCC): Goods
“What qualities must a private undertaking have to merit enforcement by public institutions?”
Offer
Acceptance
Consideration
Equitable Remedies
Promissory Estoppel
Restitution
Promissory Restitution
Special Considerations
Statute of Frauds
Parol Evidence Rule
Implied Contractual Terms
Good Faith
Implied Warranties
Contract Unenforcement
Contract Avoidance
Minority/Infancy
Mental Incapacity
(Intoxication)
Duress
Undue Influence
Misrepresentation
Nondisclosure
Unconscionability
Public Policy
Excused Nonperformance
Mistake
Frustration & Impracticability
Impossibility
Modification
Conditions and Breach of Contract
Damages
What qualities must a private undertaking have to merit enforcement by public institutions?
Contract
Restatement §1à A contract is 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.
Casebook: planned interaction with enforceable expectations between parties that has negotiated allocations of risks and costs.
Promise
Restatement §2(1)à A promise is a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promise in understanding that a commitment has been made.
Sources of K Law
Common Lawà Services & Real Propertyà Restatement (Second)
Statuteà Goodsà UCC
Chapter 2: The Basis of Contractual Obligation: Mutual Assent and Consideration.
Theories of K Law
Classical- Willison- Restatement (First)
Objective- hard, fast rules, without regard to social justice. Look at 4 corners of K.
Modern- Corbin – Restatement (Second)
More subjective, considers needs of commercial market, responsive to social justice, includes fairness doctrines (equitable doctrines) & social norms.
Today, adhere to OBJECTIVE THEORY OF CONTRACTSà courts determine what a reasonable 3rd party would objectively think when no special meanings are attached, regardless of party’s personal subjective thoughts or intentions.
Mutual Assent/Intention to Be Bound
Requirement of a Bargain §17
Except as state in (2), the formation of a contract requires a bargain in which there is a manifestation of mutual assent to the exchange and a consideration.
Whether or not there is a bargain a contract may be formed under special rules applicable to formal contracts or under the rules stated §§82-94.
Mode of Assent: Offer & Acceptance §22
The manifestation of mutual assent to an exchange ordinarily takes the form of an offer or proposal by one party followed by an acceptance by the other party or parties.
A manifestation of mutual assent may be made even though neither offer nor acceptance can be identified and even though the moment of formation cannot be determined.
Ray v. Eurice Brothers
Facts: Eurice signed K that would build π house according to specifications. Claimed to be mistaken on specifications & refused to perform.
Issue: Objective v. Subjective. Does unilateral mistake make a bilateral K void?
Holding:
No, unilateral mistake doesn’t make unenforceable absent fraud, duress, or mutual mistake.
Applies Plain Meaning Ruleà Look at words of K objectively as a reasonable person would. There was an offer, a bargain, and a manifestation of assent (signed writing that shows intention and content). Look at intention to be bound to an objective reading of the K, not an intention to be bound to what one party believes is the agreement
Notes:
Counter-offerà declines original offer and serves as new offer. Original can no longer be accepted.
Mortgageà secured loan with collateral. Transferable document.
Unilateral mistake (clear K, but one party misunderstands) typically will not void. Mutual mistake (bargaining over something that doesn’t exist, more likely to make K unenforceable.
Official bid=offer; and estimate=request for an offer.
Offer & Acceptance in Bilateral K
Bilateral K: has commitment so on both sides: an exchange of promises to take place in the future. Product of negotiating process with “offer and acceptance.” Each party is both a promisor and a promisee. Offeree’s communicated acceptance constitutes in effect her promise to perform.
Offer:
Restatement §24à 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.
Casebookà direct, complete proposal that a contract be entered into, providing for an exchange of defined performances.
UCC does not define offer.
Preliminary Negotiations §26
A manifestation of willingness to enter into a bargain is not an offer if the person to whom it is addressed knows or has reason to know that the person making it does not intend to conclude a bargain until he has made a further manifestation of assent.
Acceptance of Offer Defined; Acceptance by Performance; Acceptance by Promise- Restatement §50:
Acceptance of an offer is a manifestation of assent to the terms thereof made by the offeree in a manner invited or required by the offer.
Acceptance by performance requires that at least part of what the offer requests be performed or tendered and includes acceptance by a performance which operates as a return promise.
Acceptance by a promise requires that the offeree complete every act essential to the making of the promise
Methods of Termination of Power of Acceptance §36
Offeree’s power of acceptance may be terminated by
Rejection or counter-offer by the offeree, or
Lapse of time, or
Revocation by the offeror, or
Death or incapacity of the offeror or offeree.
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.
Counter-Offer §39
A counter-offer is made by an offeree to his offeror relating to the same matter as the original offer and proposing a substituted bargain differing from that proposed by the original offer.
An offeree’s power of acceptance is terminated by his making of a counter-offer, unless the offeror has manifested a contrary intention or unless the counter-offer manifests a contrary intention of the offeree.
Purported Acceptance which Adds Qualifications §59
A reply to an offer which purports to accept it but is conditional on the offeror’s assent to terms additional to or different from those offered is not an acceptance but is a counter-offer.
Indirect Communi
e Pattberg revoked before Petterson rendered complete performance, the offer was revoked. Offeror’s duty to perform is created when offeree renders COMPLETE performance, so he can revoke at anytime before then, even if offeree is on the doorstep with the money.
Traditional Rule- Wiliston -Offeror performance only due after complete performance by offeree
May withdraw offer anytime prior to total performance by offeree, acceptance of offer= preformance
Cook v. Coldwell Banker- Modern Rule (Corbin)
∆ offered its employees a bonus to be paid in Dec. π qualified for bonus when ∆ changed it to say it would be paid in March. Π left company at end of year and ∆ told her she didn’t qualify bc didn’t stay until March. Reduction=promise and payment=act.
Rule (Modern)- In a unilateral K, an offeror loses the power to revoke once the offeree renders substantial performance.
Ameliorating Doctrines to traditional rule: Suspend Power of Revocation
Invitation of Promise or Performance §32
In case of doubt an offer is interpreted as inviting the offeree to accept either by promising to perform what the offer requests or by rendering the performance, as the offeree chooses.
Option Contract Created by Part Performance or Tender §45
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.
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 terms of the offer.
Divisible K- if one part of divisible K preformed, that part will be enforced
Restatement rule=power of revocation lost at beginning of performance
On exam also mention Coldwell Banker- substantial performance.
Beginning, or substantial performance, doesn’t bind offeror to perform, but limits offeror from revoking the offer. Offeror bound to perform once invited performance is completed.
Other Methods of Reaching Mutual Assent: UCC
Deals with transactions of goods (doesn’t include lease of goods).
More flexibility for what constitutes a valid contract (Common law requires you to see moment K formed and must have all material terms… UCC exact time doesn’t matter and some terms can be left open so long as you can see (1) parties intended K and (2) it is sufficiently complete to make a remedy.
If it doesn’t specifically deal with a problem, look to common law (Restatement)
Applies to consumer and commercial sale of products.
Consumer-consumer transaction
Consumer-merchant transactions
Merchant-merchant transactions.
