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Contracts
University of Toledo School of Law
Porter, Nicole Buonocore

MUTUAL ASSENT

§ 17. Requirements of a Bargain

(1) . . . the formation of a contract requires a bargain in which there is a manifestation of mutual assent to the exchange and a consideration.

Mutual assent IS OUR STANDARD: it looks to objective intent – what a reasonable person would think the contract said. (Case ex. – Ray v. Eurice Bros.)

The two main ‘manifestations of assent’ are offer and acceptance.

Offer and Acceptance

Offer: a manifestation to another of assent to enter into a contract if the other manifests assent in return by some action, often a promise but sometimes performance.

§ 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 offeror requests or by rendering the performance, as the offeree chooses.

Acceptance: the action (promise or performance) by the offeree that creates a contract (makes the offeror’s promise enforceable).

§ 36. Methods of Termination of the Power of Acceptance

1) An offeree’s power of acceptance may be terminated by
a. rejection or counter-offer by the offeree
b. lapse of time
c. revocation by the offeror, or
d. death or incapacity of the offeror or offeree

NOTES:
· because of the requirement of mutuality of obligation, both parties may withdraw from negotiations until the moment both are bound, when the offeree accepts the offer. So, the offeror can revoke the offer any time before acceptance.
· an original offer cannot be accepted after a counter-offer is made; there cannot be two offers in existence.
· all terms in offer must stay the same; if not, then the offer becomes a rejection and/or a counter-offer.
· acceptance of an offer is effective upon dispatch if using a time-stamped method of indirect communication (mailbox rule).

Bilateral and Unilateral Contracts

Bilateral Contract: contract where there are promises on both sides. Both parties are promising (sometimes implicitly) to do something. Most contracts are bilateral contracts.
· Promisor/offeror is seeking a return promise to perform
· Offeree accepts, promising to do what the offeror has asked him to do
· Offeree beginning the performance requested can also be acceptance, with implied promise
· Contract formed at the time of acceptance
· Offeror can revoke at any time before acceptance

Unilateral Contract: contract where only one party is making a promise to induce the other party to perform.
· Offeror is seeking an act of performance, not merely a promise to perform
· Reasons: Offeror doesn’t want to be bound until performance has been rendered, and offeree’s ability to perform is speculative
· Typical cases: reward (lost dog), real estate agent (gets paid after selling the house)
· Offer is not accepted until performance has been rendered
· Offeror can revoke at any time before acceptance

§ 45. Option Contract Created by Part Performance or Tender

1. Where an offer invites an offeree to accept by rendering a performance and does not invite a promissory acceptance, an option contract is created when the offeree tenders or begins the invited performance or tenders a beginning of it.
2. The offeror’s duty of performance under any option contract so created is conditional on completion or tender of the invited performance in accordance with the terms of the offer.

Application: Cook v. Coldwell Banker (unilateral contract)

Overview: At its March sales meeting, the brokerage firm announced a bonus program, which covered the period from January 1 to December 31 of that year, with bonuses immediately payable upon reaching certain sales levels. After achieving the first bonus level, it took several months to receive her bonus. At its September meeting, the firm announced that it would pay its bonuses in March of the following year. In January the agent left the firm’s employ. She filed an action for breach of bonus contract after the firm refused to tender her bonus in March. The jury returned a verdict in favor of the agent and the firm appealed. The court affirmed the verdict, finding that the firm made a unilateral offer, which induced the agent to remain, and that the agent substantially performed by earning a high level of commissions. The firm did not revoke the first offer by making the second offer because the agent had substantially performed on the original offer. Testimony regarding other firms’ bonus plans was irrelevant because the firm’s offer was not ambiguous.

Outcome: The court affirmed the verdict awarding the agent damages for breach of a bonus agreement.

Application: Normile v. Miller (timing issue)

Overview: Plaintiff-appellant potential purchasers made an offer to purchase defendan

nd that the fact that shipping and delivery terms were not completely settled during oral negotiations was unimportant. The court treated the written forms sent by the parties as confirmatory memoranda, which included the same shipment date of September to October and, more importantly, specified a “C.I.F.” shipping term. Under U.C.C. § 2-320(2), the C.I.F. contract was not a destination but a shipment contract, which was, thus, governed by U.C.C. § 2-504. The court found that only a material delay would justify the buyer’s rejection. Noting that under a recognized trade usage, a shipment term of September to October implied delivery by October to November, the court held that any delay in shipment was cured by a timely delivery of November 29. Finding that the buyer’s repudiation in October was premature and that the buyer instead should have demanded adequate assurances from the seller, the court held that the buyer breached the contract and awarded the seller the difference between the resale and the contract price.

Outcome: The court held that the buyer was not justified rejecting the steel shipment, that the buyer breached the sales contract, and that the seller was entitled to recover damages that were the difference between the resale price and the contract price.

UCC Reminders
· Only applies to contracts for the sale of goods (no services contracts, construction contracts or real estate contracts)
· Goods are defined as any tangible, moveable property
· Applies to transactions between merchants, merchant/consumer or consumer/consumer. Buying something at a garage sale is covered by the UCC
· There are certain provisions of the UCC that only apply to merchants, but those are clearly noted in the section
· Common law is still relevant if the UCC does not speak to an issue (i.e., it does not define offer)

CONSIDERATION

§ 71. Requirement of Exchange; Types of Exchange