Contracts I – Fall 2012 – Professor Davis
Casebook = Problems in Contract Law, Cases and Materials by Knapp, Crystal and Prince (Seventh Edition
2012) – Chapters 1-6
Box 1 – Classical Contracts
A. Rule Background
i. § 1. Contract Defined – 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.
ii. § 2. Promise; Promisor; Promisee; Beneficiary
1) A promise is a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made.
2) The person manifesting the intention is the promisor.
3) The person to whom the manifestation is addressed is the promisee.
4) Where performance will benefit a person other than the promisee, that person is a beneficiary.
iii. § 3. Agreement Defined; Bargain Defined – An agreement is a manifestation of mutual assent on the part of two or more persons. A bargain is an agreement to exchange promises or to exchange a promise for a performance or to exchange performances.
iv. § 4. How a Promise May Be Made – A promise may be stated in words either oral or written, or may be inferred wholly or partly from conduct.
v. § 17. Requirement of a Bargain
1) Except as stated in Subsection (2), the formation of a contract requires a bargain in which there is a manifestation of mutual assent to the exchange and a consideration.
2) Whether or not there is a bargain a contract may be formed under special rules applicable to formal contracts or under the rules stated in §§ 82-94.
B. Theory (F.I.E.R.C.R.F.) and Lawyering Background (C,N,D,A)
i. Formalism, Legal Realism, Economics, Relational, Critical Legal, Critical Race, Critical Feminist
ii. Counselor, Negotiator, Drafter, Advocate
C. Exam Approach Background IRAC
D. Study Approach
i. Outline as you go
ii. Learn elements of each rule by heart
II. Questions To Ask in an Analysis: What Law Applies, Intent to be Bound, Offer, Acceptance, Consideration, SoF, Meaning, PER, and Implied Terms (W.I.O.A.C.S. M. P.E.R. I.)
A. What Law Applies? (Is It Goods?)
i. § 2-105. Definitions: Transferability; “Goods”; “Future” Goods; “Lot”; “Commercial Unit”
1) “Goods” means all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale other than the money in which the price is to be paid, investment securities (Article 8) and things in action. “Goods” also includes the unborn young of animals and growing crops and other identified things attached to realty as described in the section on goods to be served from realty.
2) Goods must be both existing and identified before any interest in them can pass. Goods which are not both existing and identified are “future” goods. A purported present sale of future goods or of any interest therein operates as a contract to sell.
3) There may be a sale of a part interest in existing identified goods.
4) An undivided share in an identified bulk of fungible goods is sufficiently identified to be sold although the quantity of the bulk is not determined. Any agreed proportion of such a bulk or any quantity thereof agreed upon by number, weight or other measure may to the extent of the seller’s interest in the bulk be sold to the buyer who then becomes an owner in common.
5) “Lot” means a parcel or a single article which is the subject matter of a separate sale or delivery, whether or not it is sufficient to perform the contract.
6) “Commercial unit” means such a unit of goods as by commercial usage is a single whole for purposes of sale and division of which materially impairs its character or value on the market or in use. A commercial unit may be a single article (as a machine) or a set of articles (as a suite of furniture or an assortment of sizes) or a quantity (as a bale, gross, or carload) or any other unit treated in use or in relevant market as a single whole.
1) Predominant Purpose Test (Princess Cruises v. GE)
1) In dealing with mixed contracts, if it involves primarily services and not goods, common law doctrines, not the UCC, applies.
2) Factors Analysis
1) Language of the Contract
2) Nature of the Business of the Supplier
3) Intrinsic Worth of the Materials
4) Gravamen of the Harm
3) If it is goods – keep in mind UCC Sections
B. Is There Intent to be Bound?
i. Objective Theory of Contracts (words and/or conduct) – MoMA
1) Ray v. Eurice
1) A unilateral mistake does not prevent the formation of an enforceable contract.
2) A party will not be bound by their signature where there is fraud, duress, or mutual mistake.
3) It follows that the test of a true interpretation of an offer or acceptance is not what the party making it thought it meant or intended it to mean, but what a reasonable person in the position of the parties would have thought it meant
3) § 17. Requirements of a Bargain
4) § 18. Manifestation of Mutual Assent – Manifestation of mutual assent to an exchange requires that each party either make a promise or begin or render a performance.
5) § 19. Conduct As Manifestation of Assent
1) The manifestation of assent may be made wholly or partly by written or spoken words or by other acts or by failure to act.
2) The 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) The 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 invalidated clause.
6) § 20. Effect of Misunderstanding
1) There is no MoMA to an exchange if the parties attach materially different meanings to their manifestations and
a. Neither party knows or has reason to know the meaning attached by the other; or
b. Each party knows or each party has reason to know the meaning attached by the other.
2) The manifestations of the parties are operative in accordance with the meaning attached to them by one of the parties if
a. That party does not know of any different meaning attached by the other, and the other knows the meaning attached by the first party; or
b. That party has no reason to know of any different meaning attached by the other, and the other has reason to know the meaning attached by the first party.
7) § 21. Intention To Be Legally Bound – Neither real nor apparent intention that a promise be legally binding is essential to the formation of a contract, but a manifestation of intention that a promise shall not affect relations may prevent the formation of a contract.
8) § 22. Mode of Assent: Offer and Acceptance
1) 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.
2) A MoMA may be made even though neither offer nor acceptance can be identified and even though the moment of formation cannot be determined.
ii. As Opposed to Subjective Theory – Meeting of Minds
1) Ray v. Eurice – A mistake prevents a meeting of the minds, thereby preventing the formation of an enforceable contract between the parties.
iii. In more informal setti
n in understanding that his assent to that bargain is invited and will conclude it.
iii. Is there an Invitation of Promise or Performance?
1) § 32. Invitation of Promise or Performance – 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.
iv. Is there Certainty? § 33. Certainty (See Above)
v. Is there a method of termination of the power of acceptance? § 36. Methods of Termination of the Power of Acceptance
1) An offeree’s PoA may be terminated by,
1) Rejection or counter-offer by the offeree, or
2) Lapse of time, or
3) Revocation by the offeror, or
4) Death or incapacity of the offeror or offeree.
2) In addition, an offeree’s PoA is terminated by the non-occurrence of any condition of acceptance under the terms of the offer.
vi. Is there Indirect Communication of Revocation?
1) § 40. Time When Rejection or Counter-Offer Terminates the PoA – Rejection of counter-offer by mail or telegram does not terminate the PoA until received by the offeror, but limits the power so that a letter or telegram of acceptance started after the sending of an otherwise effective rejection or counter-offer is only a counter-offer unless the acceptance is received by the offeror before he receives the rejection or counter-offer.
vii. Is there Pre-Acceptance Reliance?
1) § 87(2). Option Contract – An offer which the offeror should reasonably expect to induce action or forbearance of a substantial character on the part of the offeree before acceptance and which does induce such action or forbearance is binding as an option contract to the extent necessary to avoid injustice.
viii. If UCC, is there a Firm Offer?
1) 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 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.
2) UCC 1-103. Construction of UCC to Promote Its Purposes and Policies; Applicability of Supplemental Principles of Law
a) The UCC must be liberally construed and applied to promote its underlying purposes and policies which are:
1) to simplify, clarify, and modernize the law governing commercial transactions;
2) to permit the continued expansion or commercial practices through custom, usage, and agreement of the parties; and
3) to make uniform the law among the various jurisdictions.
b) Unless displaced by the particular provisions of the UCC, the principles of law and equity, including the law merchant and the law relative to capacity to contract, principal and agent, estoppel, fraud, misrepresentation, duress, coercion, mistake, bankruptcy, and other validating or invalidating cause supplement its provisions.