Spring 2013 Halpern Contracts Outline
I. Overview
a. 7 Contracts Questions:
i. Has there been agreement or promise?
ii. Any reason why agreement/promise shouldn’t be enforced?
iii. What are terms of contract?
iv. Did each of 2 people do to what they agreed to do?
v. Is there any excuse for non-performance?
vi. What are legal consequences of non-performance?
b. Contracts can be written or oral, except when writing necessary to satisfy Statute of Frauds
c. UCC Article 2
i. Law in 49 States (not Louisiana)
ii. Applies to sales of goods
1. Goods= tangible, movable. NOT real estate or services
2. If mixed goods & services (e.g. hire painter to paint house)-Determine most important part of contract, most important facet (good or service) controls contract entirely
iii. 2003 revision not adopted and withdrawn in 2011
d. Restatement (Second) of Contracts
i. Section 90 (Promissory Estoppel)
II. Offer & Acceptance- Is there agreement or contract?
a. Offer= manifestation of willingness to enter into a bargain. Creates power of acceptance
b. Acceptance= Manifestation of assent to the terms in manner invited or required by offer
c. Bilateral Contract= Parties exchange promises
d. Unilateral contract= Exchange of offeror’s promise for offeree’s act
e. Objective approach- Reasonable person standard
i. Would a reasonable person think other party made an offer?
f. Lucy v Zehmer- Did Zehmers agree to sell land to Lucy? Yes
i. Reasonable person would’ve thought that Zehmers offered to sell
ii. Constituted an offer
g. How to determine if there is an agreement? 3 Stages:
i. Initial communication- Was it an offer (manifestation of commitment)?
1. Not necessary for all terms to be spelled out, but all important terms can’t be vague or ambiguous (watch for terms “fair,” “appropriate,” and “reasonable” in communication— May not be an offer)
2. Watch for requirements contracts (Exclusivity) (e.g. I’ll buy all the beets I need only from you for $5/lb.)
a. Makes offer sufficiently specific
b. 3 Key Words: “requirements”; “only”; “all”
3. Context of initial communication
a. Conversation at attorney’s office more likely an offer than conversation at a bar
b. Presumption of enforceability in business context
c. Presumption of unenforceability in domestic or social context
d. Advertisements generally not offers (unless they contain specific words of commitment, such as promise to sell particular number of units)
e. Offers made in jest that offeree knows or should know are made in jest not offers
f. Solicitation of bids not an offer (A “Would like to sell house for at least $100,000”, B cannot accept with “Here’s $100,000)
i. Item up for auction not offer, solicitation of offers from buyers. Items can be withdrawn, even after bidding starts
ii. If 2 parties agree (orally or in brief writing) on all points, but decide to subsequently put entire agreement in a formal writing, preliminary agreement may or may not be binding, depending on parties’ intentions
iii. Offers “killed” when:
1. Offeror (or offeree) dies
2. Offeree takes too long to respond (not w/in a reasonable time)
3. Offeror revokes offer before Offeree accepts
a. Offeror must unambiguously indicate revocation
b. Must be communicated to Offeree
i. Can be through words or conduct (Sell to another person after offering to Offeree)
4. 4 Situations when offers can’t be revoked:
a. Option- Offer plus a paid for promise not to revoke (Common Law)
i. Restatement- Signed option contract that recites payment of consideration will be irrevocable, even if consideration never paid
b. Firm Offer Rule- UCC- Only when seller is (1) a merchant who (2) promises not to revoke (3) in writing
i. No offer can be made irrevocable for any longer than 3 months w/o consideration.
ii. Can still be valid after 3 months, Offeror still must formally revoke
c. When offer has been relied on in reasonably foreseeable way
d. Unilateral contract- Once performance started (as acceptance of contract), no revocation
i. Applies only to beginning of actual performance, not preparations to perform
e. Bilateral contract- Offeree’s preparations will be make offer irrevocable if necessary to avoid injustice
iv. Offeree Response- Acceptance or Rejection?
1. Acceptance
a. Can only be accepted by person whom Offeror intended to create a power of acceptance
b. Must be in response to offer, not response to something else, like solicitation of offers
i. Uncle says “would like to sell truck, would probably take $7k.” Nephew responds “I’ll pay $7k in cash” not an acceptance, but an offer
c. Offeree must know of offer at time of acceptance
i. If reward offered for an act, person who performs cannot claim reward if he didn’t know about it
d. Offeror is “master of offer.” Offeror can control how offer is to be accepted. Can stipulate that certain mode must be used
i. Can suspend “Mailbox rule” by stating “no acceptance valid until received by Offeror.”
e. If not specified, then must respond using reasonable method under circumstances
f. Unilateral contracts accepted by full performance of requested act
g. If offer not clear how acceptance is to occur, can be through either promise or performance
h. Accommodation Shipping- UCC 2-206(1)
er to= acceptance.
1. If Offeree changes any part of offer before “accepting,” then no contract. Very strict
vi. UCC 2-207- “Battle of the Forms.” Content of 2 communications re: sale of goods different. UCC tries to find contracts
1. Usual fact patterns: 1st communication= offer; 2nd= response or 1st= terms of agreement; 2nd= restatement of deal, but another term added
2. Under UCC, there is contract (unlike Common Law)
3. New terms usually part of contract and constitute acceptance
a. Unless it’s a term of condition or is very different from material terms, then not acceptance.
i. Courts very reluctant to enforce, has to be very precise language
4. Additional terms from offeree as part of contract depends on if parties are merchants or not
a. If at least 1 party not a merchant, then additional only part of contract if Offeror explicitly assents to it.
i. Consumer sends purchase order to Seller, doesn’t mention how disputes are to be resolved. Seller acknowledges, adds in clause that disputes are to be arbitrated. Acknowledgement formed contract, but arbitration term not part of contract if consumer doesn’t assent
b. If both merchants, additional terms generally automatically part of contract; except:
i. If additional term alters a material term of contract
ii. If Offeror objects to having additional term in contract
5. If issue handled by offer, but not in acceptance, acceptance will be treated as applicable to all terms of offer, including issue(s) not addressed in acceptance
6. Knock-out rule- If issue covered one way in offer, but covered in a conflicting way on acceptance, court “knocks them out” of contract. UCC gap-filler provision used if one is relevant
3. Confirmation of Oral Agreements- Oral agreement later memorialized in writing
a. Additional terms in writing that are not in oral agreement part of contract unless:
i. Term materially alters oral agreement
ii. Party receiving confirmation objects to additional terms
b. If clause contained in confirmation different from term on same issue reached in oral agreement, new clause probably not part of agreement
c. Request to sign confirmations not enforceable, confirmation completes deal upon receipt
