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Contracts
University of Toledo School of Law
Pizzimenti, Lee Ann

Background Information

Source of Law: Common Law & Some Statute [UCC Article 2: Sale of Goods] Statute Trumps Common Law!
Uniform Commercial Code
§ 1-102 Modifications OK but need “good faith” and R [care] § 1-103 Acceptable To Use Common Law When UCC Does NOT Apply To That Particular Issue
§ 1-201(19) Definition: “Good Faith”
§ 1-203 Obligation of “Good Faith”
§ 2-102 Scope; Certain Security and Other Transactions Excluded From This Article [i.e. “land” is NOT “goods”] § 2-103(1)(b) Merchants: R Commercial Standards
§ 2-104 Definitions: “Merchant” [goods of the kind or holds self out as having particular knowledge or skill] § 2-105 Definitions: “Goods” [moveable at time of purchase]

Interpretation: Question of Law—“de novo” review
Question of Fact—reverse if clearly erroneous [problem w/ facts]

I. Intent to Contract [O+A=Mutual Assent]

A.) Objective Theory of K
1.) Reasonable Person Test: used to determine if there was assent, by looking at the situation from the point of view most favorable to the P, and evaluating the “objective manifestations” of the D.
2.) Secret Intentions do NOT count.

B.) If Intent Found, Then K AND If NO Intent Found, Then NO K
1.) K=[O+A]+C

C.) NO Intent
1.) family relationships (generally)
2.) gentleman’s agreement
3.) joke
4.) sham
5.) mistake—Would a R person have known it was a mistake?

D.) Court CAN look at entire situation to determine intent.

E.) Applicable Restatements

1.) Restatement § 16– Intoxicated Persons: Only avoid K if so drunk (1) unable to R understand consequences OR (2) unable to act in a R manner in relation to “T”

2.) Restatement § 18– Manifestation of Mutual Assent: Requires each party to (1) make a promise, OR (2) begin or render performance

3.) Restatement § 19– Conduct as Manifestation of Assent: (1) “objective manifestations” by words, whether written or spoken, OR by actions, (2) conduct is NOT assent, unless the party knows or has reason to know the other party might “infer” conduct as assent, (3) conduct of a party may manifest assent even though he in fact does NOT assent; secret intentions do NOT count

4.) Restatement § 20– Effect of Misunderstanding: (1) NO assent if parties attach materially different meanings to their manifestations AND (a) neither party knows the others intent, OR (b) each party knows the meaning of the other party. (2) Assent is operative w/ attached meaning by one party IF (a) the party does NOT know any other meaning attached, and the other party knows the first party’s meaning, OR (b) if other party is unaware of any other attached meaning, and knows the meaning of the first party.

5.) Restatement § 21– Intention to be Legally Bound: Manifestation of intention that a promise shall NOT affect legal relations may prevent the formation of a K [Example: Balfour –family

3.) invitation to bid [bid is offer] 4.) price quotes
5.) preliminary negotiations [Restatement § 26] 6.) estimates
7.) agreement to agree [same as preliminary negotiation]

G.) Factors to Consider

1.) Language [complete, specific, and unequivocal] 2.) Is communication the initial communication OR an answer to an inquiry?
3.) How “selective” is offer?
4.) Is offer directed to 1 person or many?
5.) Custom: UT [usage of trade], CD [course of dealings] 5.) External circumstances

H.) Bids & Auction Sales

1.) Restatement § 28—Auctions
a.) auctioneer takes bids [offers] 2.) UCC § 2-328(2) Sale By Auction
a.) sale complete when the auctioneer announces the fall of the hammer
b.) auctioneer has the discretion to reopen bidding

I.) Applicable UCC

1.) UCC § 2-204 Formation in General
Example: (3) only need intent; as long as R certain
2.) UCC § 1-205 UT and CD [explained] 3.) UCC § 2-311 Options & Cooperation Respecting Performance
Example: (2) “default rule”—acceptable to make definite arrangements for shipping and such later

J.) You can revoke an offer before acceptance!