What is a Contract?
§1: “A contract is a promise or set of promises for the breach of which the law gives a remedy, or performance of which the law in some way recognizes as a duty.”
However, the law does not enforce all promises.
§2: A promise is a manifestation of intention to act or refrain from acting a certain way, so as to justify a promise in understanding that a commitment has been made.
Therefore, if there is no promise, there is no contract.
Sources of Contract Law:
UCC Article 2: for the sale of movable [2-205(1)]goods; adopted as statutory law in most states.
Restatements (2d): Black letter law pulled from case law; secondary source.
How are Contracts formed?
§9: There must be two parties to a contract, a promisor and a promise, but there may be any greater number
§17: Requirement of a bargain: the formation of a contract requires a bargain in which there is a manifestation of mutual assent to the exchange and a consideration.
§19: Conduct of Manifestation of Mutual Assent: the manifestation may be made wholly or partly written or spoken words or by other acts or failure to act. The conduct of the party is not effective manifestation unless he intends to engage in the conduct and knows that the other party may infer from his conduct that he assents.
1. Ill. 2: A offers to sell B his library at a stated price, forgetting that his favorite Shakespeare, which he did not intend to sell, is in the library. B accepts the offer. There is a contract including the Shakespeare, unless B knows or has a reason to know of A’s temporary forgetfulness. Whether the contract is voidable for mistake depends on the rules states in Chapter 6.
2. Ill. 3: A writes an offer to B, which he encloses in an envelope, addresses and stamps. Shortly after, he decides not to send the offer, but by mistake he deposits it in the mail. It is delivered to B, who accepts the offer. There is a contract unless B knows or has reason to know of A’s error. Whether by mistake see Chapter 6.
Manifestation of Mutual Assent is the “meeting of the minds”; when two parties to a contract have the same understanding of the terms of the agreement; parties must intend to contract, and they must agree on the main terms of the deal.
“Each party to a contract manifests its assent to the contract by making a promise pr by beginning or tendering performance, and each promise or performance must relate to the other party’s. Rstmts. §§ 18 & 23.
I. Subjective view of contract formation is that the actual intention of the party rather than its actions determines the legal obligations.
II. Objective view of contract formation deals with the manifestation approach to make evident by showing or displaying i.e. executing.
Ray v. Eurice Brothers: “A person is bound by a contract objectively regardless of his subjective intent”.
Court found that by signing the contract even if they weren’t intending too bc the were not ‘aware’ of the specs added did not matter.
Test for intent: The objective measure of a party’s intention is, in most circumstances, what a reasonable person in the position of the other party would conclude that his objective manifestations of intent meant.
Offer and Acceptance
Bilateral Contract: An exchange of reciprocal commitments or promises (also known as offer and acceptance).
Unilateral Contract: one party makes a promise in exchange for performance (If A walks over a bridge, B will give him $100).
§22: Mode of Assent – offer a
. They were decided in order to ‘punish’. The general rule is that advertisements are not in themselves offers, but are seeking offers from potential interested buyers.
What are not offers:
Advertisements, gifts, promises, preliminary negotiations
Validity of particular kinds of offers (not valid):
1. Offers made in jest: this is not a valid offer even if accepted, so long as a reasonable person would understand it was made in jest.
2. Preliminary negotiations
§25: Option Contracts
A promise which meets the requirements for the formation of a contract and limits the promisor’s power to revoke an offer.
1. Ill. 1: A promises B under seal or in return for $100 paid or promised by B that A will sell B 100 shares of stock in a specified corporation for $5K at any time during thirty days that B selects. There is an option contract under which B has an option to purchase.
§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 the beginning of it
(2) The offerors 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.