Chapter 1 The Agreement Process
Preliminary notes concerning Agreement:
· Agreement = agreement is essential to a contract and is defined as a manifestation of mutual assent on the part of 2 or more persons.
· Bargain = agreement to exchange promises or a promise for a performance or to exchange performances
· Promise= manifestation of intent 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
· Contract= a legally enforceable agreement
· Note- UCC (uniform commercial code) applies to the transactions in goods (goods = all things movable)
o Remember to begin essays with citation to UCC 2-102/2-105 when telling which law applies (common law or UCC)
Section 1. Intent to Contract
· R2d §21 Intention to be legally bound- There need not be real nor apparent intention that a promise be legally binding to formation of a contract, but a manifestation of intention that a promise shall not be legally binding may prevent the formation of a contract.
§ Exception to that rule- With spouses, the presumption is that there is not a legally enforceable agreement when spouses make promises to each other, so for spouses an outward manifestation that an agreement shall be legally binding is necessary for formation of a contract
· RULE: serious offer + serious acceptance = agreement
· The Objective Theory of Contracts- Undisclosed intentions do not matter; Outward manifestations, specifically, words and acts judged by a reasonable standard may manifest an intention agree
· §22 Mode of Assent: Offer & Acceptance- Manifestation of assent normally takes form of offer and acceptance, but mutual assent may be made even though neither offer nor acceptance can be identified and even though the moment of formation can’t be determined
Section 2. The Offer
· R2d §24- Offer defined: 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
· §26 Preliminary negotiations- manifest. of wlngnss. 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 manifest. of assent
· NOT OFFERS (normally)
o Invitations to make an offer
o Estimates & price quotes generally
o Catalogues & brochures
o Preliminary negotiations
§ Offer v. Preliminary Negotiations
· Usage of trade – What have others in the trade done/understood in the past?
· Subject matter- property = more specificity
· Look at language, words of commitment
· Initial communication v. response to inquiry
§ Unless the Advertisement is clear, explicit, and leaves nothing open for negotiation or if it is a reward
· Regarding Auctions and Construction Industry (in general)
o The Bidder is the Offeror
o Normally, the Offer may be withdrawn up until the close of bidding for the item, unless otherwise specified by auction rules
· An Agreement to agree is not a contract
o Courts require specificity in a contract, especially with regard to property contracts, otherwise it is impossible to determine a breach
· To determine offer- Was the buyer justified in understanding that there was an Offer, to which further manifestation of assent will conclude the bargain
Section 3. Intent to Memorialize and Agreement to Agree
· §27 Intent to Memorialize- A contract may exist where written memorial is contemplated, if there has been manifestation of assent to by Offeror & Offeree (See Pennzoil case below)
· Agreements to agree are not enforceable
· Agreement, to be legally enforceable, must be sufficiently definite to determine the performance required by both parties. The court needs to determine if there was a breach, and what the remedy would be
· There is a duty to negotiate in good faith after you enter into a contract, but not before entering into a contract
Section 4. The Acceptance
· Definition of Acceptance
§ R2d §50 Acceptance of Offer Defined; Acceptance by Performance; Acceptance by Promise
1. 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.
2. Acceptance by performance requires that at least part of what the offer requests be performed or tendered and includes acceptance by performance which o
that the Offeror receive the acceptance seasonably
· §69 Acceptance by Silence or Exercise of Dominion
o Note- Default rule is that silence is not acceptance
1. Where an Offeree fails to reply to an offer, his silence and inaction operate as an acceptance in the following cases only:
o Where an Offeree takes the benefit of offered services with reasonable opportunity to reject them to know that they were offered with the expectation of compensation.
o Where the Offerer has stated or given the Offeree reason to understand that assent may be manifested by silence or inaction, and the Offeree in remaining silent and inactive intends to accept the offer.
o Where because of previous dealings or otherwise, it is reasonable that the Offeree should notify the Offeror if he does not intend to accept.
2. An Offeree who does any act inconsistent with the Offeror’s ownership of offered property is bound in accordance with the offered terms unless they are manifestly unreasonable. But if the act is wrongful as against he Offeror it is an acceptance only if ratified by him.
· Additional Notes on Acceptance
§ Unilateral Contract- full performance for a binding contract to be achieved
§ Bilateral Contract- exchange a promise for a promise at the time of agreement
§ With rewards, a reasonable Offeror is asking for a manifestation of assent by full performance.
§ The Offeree must have knowledge of the offer before being able to manifest assent to the offer.
§ So, even if performance has begun without knowledge of an offer, but knowledge of the offer is gained before full performance has been rendered, and then full performance is completed, then there is a contract.
§ Contract implied in fact- a form of an enforceable contract; one that is inferred from parties’ conduct, not solely from their words