CONTRACTS OULINE
LLOYD
FALL 2010
1) OBJECTIVE THEORY OF CONTRACTS- CHAPTER 1
a) Objective Theory of contacts states that it is not important as to the “offeror’s” intent, but as to whether or not a reasonable person would think that the statement is an offer.
b) Regardless of whether anything has been signed or not or either party’s intent, if, given the situation, a reasonable person would think a contract has been formed, the law will side with the reasonable party.
c) Restatement 25 Option contract–
CASES
d) Lucy v. Zehmer
i. Facts
(1) Zehmer owned a farm. Several prior offers had been made to Zehmer to purchase the land, but Zehmer had turned them down, saying he wanted to leave the farm to his son. Zehmer offered the land to Lucy for $50,000 after a few drinks between the two and a long discussion about it. Zehmer wrote a note on the back of a piece of paper saying that he agreed to sell the land to Lucy and had Zehmer’s wife sign it as well. When Lucy gathered the money and went to close on the farm, Zehmer responded that the whole thing was a joke, and he was no longer going to sell the land to Lucy. Lucy sued Zehmer for specific performance. Trial court found for Zehmer and Lucy appealed. Judgment was reversed.
ii. Importance of the Case
(1) In regards to contracts, the importance is not necessarily the intentions of both parties, but instead what a reasonable person would interpret the meaning of the actions and words of both parties to be. That is the whole idea of Objective Theory.
e) Embry v. Hargadine, McKittrick Dry Goods Co.
i. Facts
(1) Embry was hired by Hargadine, McKittrick Dry Goods. Each year he signed a year long contract. At the end of the 1903, Embry went to McKittrick, the president of the company, and asked for his contract to be renewed on several occasions. The particular time in question, McKittrick was getting ready for a board meeting. The details of their conversation are in dispute, but Embry left feeling as if he had made an oral contract for the next year of work. A few months later, he was fired. He sued for breach of contract. Trial court and jury sided with defendant, because they said McKittrick did not intend to make the contract. Embry appealed. Judgment was reversed.
ii. Importance of the Case
(1) If a rational person would interpret both parties to have made a contract, it is a contract, regardless of each person’s intentions. The intentions of each party should be based upon how they act, what they say (actions and words), etc, not their secret feelings. The contract hinges on expressed intention; Mckittrick expressed intent and agreement to keep Embry on. Otherwise, no one could rely upon what people say as a contract.
f) Leonard v. Pepsico, Inc.
i. Facts
(1) Leonard thought he could get a harrier jet for 7,000,000 Pepsi points based on a Pepsi commercial
ii. Importance of the Case
(1) A basic rule of contracts holds that whether an offer has been made depends on the objective reasonableness of the alleged offeree’s belief that the advertisement or socialization was intended as an offer
(2) If it is clear to the reasonable person that an offer was not serious, then no offer has been made. Therefore, for actions or words done as an obvious joke, they cannot be held as an offer.
2) HAS AN OFFER BEEN MADE? CHAPTER 2
a) § 24—Offer defined
i. Offer is the manifestation of willingness to enter in to a bargain, made to justify another person in understanding that his assent to that bargain is invited and will preclude it
ii. When a person makes an offer, she is indicating that she is willing to be immediately bound by the other person’s acceptance, without further negotiation
b) Key analysis: was the offeree justified in believing that his or her acceptance would form a binding contract? Would a reasonable person think that they could from a contract by acceptance?
c) Factors to consider:
i. Language- shoeing intent through specific words used
ii. Specificity and Detail- the more specific it is, the more likely it is an offer (bigger deals more detailed by nature
iii. Customs and Practices in the Industry- an offer is one industry may not be an offer in another, and the offeree is expected to know the difference in believing it to be a contract or not. Also, lack of certain details depending on the industry may suggest it is not a contract
iv. The Multiple Acceptance Problem: Limited quantity advertised indicates a seller does not intend to be bound and are not soliciting offers; buyers should know that they will not risk selling more than they have (unless there is a specified timeframe); id solicitation is sent to several people with no limitations, not likely to be offer; however, if person receiving it reasonably does not know it is being sent to others, can be considered offer, also “first come first serve” likely to be considered offer
v. Context- if a person is reasonably led to believe a statement is an offer, chances are, it will be construed as an offer
d) Exam: Point out what was spelled out in the contract and what was not (and should have been); argue that for contract to be binding there should be other terms
e) An offer has four mandatory elements:
i. It is written, verbal, shown by conduct or an internet posting, etc.
ii. The person making the offer has to be willing to enter into a bargai
received offer of 22 ¾. Pl wired D saying he would buy for 23 cents and gave D shipping
(2) instructions. D refused to ship to Pl. Pl sued for breach of contract and D said he never made an offer. Trial court for Pl. D appealed. Judgment reversed
ii. Importance of Case
(1) Information or invitation to negotiate does not constitute an offer. While it is possible that samples, trade letters, circulars, etc. ultimately become contracts, they are more often expressions of willingness to negotiate. By the Defendant saying that he wanted a certain amount for the seed, the language is too general to constitute an offer.
(2) When you say “I am asking” you expect the other person to come back to you with a lower price (except in the stock market), thus, by saying that, it is just an invitation to negotiate. The courts decided that the language used was not precise enough for an offer. Using the word “ask” was all the courts needed to decide it was NOT an offer.
i) Southworth v. Oliver
i. Facts
(1) Southworth filed suit that Oliver is “obligated to sell” plaintiff 2,933 acres of ranch lands in Grant County. Defendant appeal from a decree of specific performance (which order the D to perform its obligation under the contract.) 1976, D decided to cut down ranch operations by selling part of his the land. It was decided that the sale “had to be on terms” rather than cash for income tax reasons. The land d was selling was adjacent to the pl land and was property hat he had always wanted.
(2) D went to pl ranch (May 20, 1976) to discuss interest in buying land. D gave the same information to other neighbors instead. Telephone call made on June 13, 1976 by pl to d. The Assessor was soon expected to have information needed to est. the value on the land. Letters June 17, 21, and 24. A letter was sent from the d to the pl with enclosed information about the ranch sales. D said that it was not an offer. Another letter was sent 21, saying that he did not want issues with the neighbors. The memorandum was for informational purposes only and that there was not bidding enforceable contract usually, but in this case it is an offer that was accepted and was a contract
