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Contracts
University of Toledo School of Law
Davis, Benjamin G.

Contracts I, Ben Davis, Fall 2011

Box 1: Classical Contracts

Background

Rule Background

§1 Contract

Promise or a set of promise for which the breach of which the law gives a remedy, the performance of which the law in some way recognizes as a duty

§2 Promise

Manifestation of intention to act or to refrain from acting in a specified way, so made as to justify a promisee in understanding a commitment has been made

o Look at if it was made in the heat of the moment, or if there was reflection.

§3 Agreement Defined, Bargain Defined

Manifestation of mutual assent on the part of two or more persons

Bargain: Agreement to exchange promises or to exchange a promise for a performance or to exchange performances.

§4 How a Promise May Be Made

In words either oral or written, or may be inferred wholly or partly from conduct

§17 Requirement of a Bargain

Formation of a contract requires a bargain in which there is a manifestation of mutual assent to the exchange and a consideration.

B. Theory of Contracts (F.L.E.R.C.(R.F.)) & Lawyering Background (C.A.N.D.)

Formalism

Apply black letter law only

Legal Realism

Policy decision; how decisions affect society; what social forces are at play

Economics

Efficiency; best allocation of resources; costs/benefits

Relational

Does a decision encourage or discourage relationships? (e.g., landlord & tenant

Critical Legal

How does a rule or decision affect the law; direct criticism of formalists

Critical Race

How does a rule or decision affect a race

Critical Feminist

How does a rule decision affect females

Role of an Attorney

C.A.N.D. Counselor, Advocate, Negotiator, Drafter

II. Questions to Ask in an Analysis

B. Is there intent to be bound?

Rules for INTENT TO BE BOUND

§21 Intention to be Legally Bound

Neither real nor apparent intention that a promise be legally binding is essential to form a contract, but a manifestation of intention that a promise shall not affect legal relations may prevent the formation of a contract

§18 Manifestation of Mutual Assent

Manifestation to mutual assent to an exchange requires each party either make a promise or begin to render a performance.

§19 Conduct as Manifestation of Assent

(1) Manifestation of assent may be made wholly or partly by written or spoken words or by other acts or failure to act

(2) 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

(3) Conduct of a party may manifest assent even though he does not in fact assent; in such cases a resulting contract may be voidable because of fraud, duress, mistake, or other invalidating cause

§20 Effect of Misunderstanding

There is no manifestation of mutual assent to an exchange if the parties attach materially different meanings to their manifestations AND

o Neither party knows or has reason to know the meaning attached by the other party; or

o Each party knows or each party has reason to know the meaning attached by the other.

§27 Formal Contract Contemplated

Manifestations of assent that are themselves sufficient to conclude a contract will not be prevented from so operating by the fact that the parties also manifest an intention to prepare and adopt a written memorial thereof; but the circumstances may show that the agreements are preliminary negotiations.

Adhesion Contracts

o Standard contract form and,

o Offered on a take it or leave it basis and

o Offered to consumers and

o Without a realistic opportunity to bargain

o Enforceable when

o There is plain and clear notification of terms and,

o Understanding consent and,

o Within reasonable expectations of the weaker party

If UCC (can be used when one party offers a price)

o UCC § 2-305 Open Price Term

o Parties can conclude a contract for sale even though the price is not settled

o Price is a reasonable price at the time for delivery if

§ Nothing is said as to price, or

§ Price is left to be agreed by parties and they fail to agree, or

§ Price is to be fixed in terms of some agreed market or other standard as set or recorded by a 3rd person or agency and it is not so set or recorded.

C. Is there an Offer?

o Words and/or conduct à promise à offer

o Offeror is the master of offer: has the power to define terms, creates power of acceptance, power to terminate offer up until time of acceptance

o Advertisements: Normally invitations to deals, not offers.

§ Indefinite: sellers should be able to choose who they deal with; directed to general public

§ Exceptions: definite terms, clear intent to bargain, invites a specific action wit

w that there has been a delay, a contract can be created by acceptance w/in the period which would have been permissible if the offer had been dispatched at the time that its arrival seemed to indicate.

§87(2) Pre Acceptance Reliance

Offer which offeror should reasonably expect to induce action or forbearance of a substantial character on part of offeree before acceptance and which induces such action or forbearance is binding as an option contract to extent necessary to avoid injustice

§ This is narrowly applied to solely a general contractor/subcontractor setting, as relief for a general contractor who relies on the subcontractor’s bid

Ways out from pre-acceptance reliance (ways for sub-contractor to get out)

§ General contractor knew or should have known there was a mistake

§ General contractor delays in acceptance sub-contractor’s bid after being awarded contract

§ General contractor starts to bid shop once it has been awarded contract

§ General contractor starts to bid-chop (tells-subcontractor to reduce price once been awarded contract)

§ Language of bid (clear it was revocable at any point)

§ Bid was mere estimate/predictions, opposed to offer

If UCC

§2-205 Firm Offers

§ An offer by a merchant to buy or sell goods in a signed writing which by its terms gives assurance that it will be held open is not revocable, for lack of consideration, during the time stated or if no time is stated for a reasonable time, but in no event may such a period of irrevocability exceed three months; but any such term of assurance on a form supplied by the offeree must be separately signed by the offeror.

§ Approaches: court either takes the time stated in contract (if exceeds 3 months) or uses three months (depends on jurisdiction.

§2-104 Merchant

Person who deals in goods of the kind or by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction or to whom such knowledge or skill may be attributed by his employment.

§1-201(37) Signed

Includes using any symbol executed/adopted with present intention to adopt/accept a writing.