RISCH SPRING 2015
– Was there mutual assent?
– Was there consideration?
– Past performance does not count
– Restatement (Second) – A contract is a promise or set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes a duty
– Restatement 2nd Section 21 – Neither real nor apparent intention that a promise be legally binging is essential to the formation of a contract, but a manifestation of intention that a promise shall not affect legal relations may precent the formation of a contract
– Want to have agreements to promote business
– Moral enforcement
– Contract law is a manifestation of imperfect human communication
– Contract law is the study of promises
– Every word matters
– Promises without remedies are legally irrelevant
– Not every promise has a legal remedy
– Breaching a moral commitment does not necessarily create legal remedies
– Without a legal remedy, the promise has no legal consequence
– Must be mutual assent and consideration for there to be a contract
– Mutual Assent – a bargain in which there is a manifestation of mutual assent to the exchange and a consideration; give and take of bargaining though process of offer and acceptance, ultimately reaching a deal, or breaking off negotiations; gathered from language, intention corresponding to reasonable meaning, judge by outward expressions, exclude unexpressed intention
1. Objective Theory of Contractual Intent: One is ordinarily bound or not bound to a K by the reasonable interpretation of one’s words and actions and not by the person’s “secret intent”
a. Ray v. William G. Eurice & Bros..: Should builders be legally bound to specifications for building a house set out in a contract which both parties signed if the builders now claim that they thought the specifications referenced in the contract were actually a different set of specifications that they had previously set out? Yes.
2. Invitations and Acceptance for Offers In Bilateral/Unilateral Contracts (Res. 2d §26, comment b): Rule Advertisements of goods by display, sign, handbill, newspaper, radio, or television are not ordinarily intended or understood as offers to sell
a. Policy:Parties engage in preliminary negotiation; next one party makes an offer; if other party manifests acceptance of offer in a legally effective way, then at that moment the contract comes into being; if not accepted, offeree can make counteroffer which may be accepted by offeror
b. To make an offer by an advertisement, there must ordinarily be some language of commitment or some invitation to take action without further communications.
c. Lonergan v. Scolnick: Was the land owner’s “form letter” to the interested party in response to a newspaper ad soliciting offers giving him additional details about the property an offer of sale? No.
d. Izadi v. Machado (Gus) Ford, Inc.: Is a misleading newspaper ad a legally binding offer of sale constituting a K even though the offeror intended the language of the ad to be understood a different way? Yes.
i. Corbin: A binding offer may be implied from the very fact that deliberately misleading advertising intentionally leads the reader to the conclusion that an offer exists
ii. True test = objective reading of ad
e. Normile v. Miller: Plaintiffs both attempted to purchase a piece of real estate from Defendant. Normile first submitted a bid, but P responded with a counteroffer. Prior to Normile’s acceptance of Defendant’s counteroffer, Defendant sold the property to Segal.
i. Rule: A counteroffer acts as a rejection of the original offer and does not contain the terms of the original offer. The counteroffer, like the original offer, must be accepted before it is revoked
f. Petterson v. Pattberg:
i. Rule: Offeror is free to revoke the offer until the offeree has tendered complete performance, An offer to enter into a unilateral contract may be revoked at any time prior to being complete or accepted.
g. True unilateral contract: where the offeror seeks only performance and not a promise
h. Cook v. Coldwell Banker: Incentive program to sell homes, after P receive first part of bonus was told rest of bonus contingent on continued employment; left job
i. Rule: An offer to enter into a unilateral contract may not be revoked once the offeree has made substantial performance
3. Incomplete Agreements
a. As long as the parties know that there is an essential term not yet agreed upon there is no contract
b. No contract unless he is reasonable in his belief and the other party ought to have known that he would so believe
c. Walker v. Keith: Is an option to renew a lease void for indefiniteness if no dollar value for the renewal rental price nor an exact method of computation were established? Yes. No adequate method of computing the rent included in option. Rent is a vital part of the K
i. Rule: Substantial certainty with regard to the material terms is required for a meeting of the parties’ minds to occur.
d. Quake Construction v. American Airlines: Plaintiff was informed that a written contract prepared by Jones would be received shortly. To aid the Plaintiff in securing subcontractors, Jones sent the Plaintiff a letter of intent Defendant told the Plaintiff that their involvement with the expansion was terminated Letters of intent may be enforceable if the parties intend them to be binding.
i. Parol Evidence Rule: Only look at evidence outside of contract if the contract is ambiguous; exclude extrinsic evidence that discloses an ambiguity and clarifies it if contract is complete and whole
a. A contract may be concluded either by acceptance of an offer or by conduct of the parties that is sufficient to show agreement AKA the price one pays for another’s promise
b. Can take a number of forms: money, property, a promise, the doing of an act, or even refraining from doing an act
c. In broad terms, if one agrees to do som
did not have to work for company), unilateral promise from company, substantial performance by Baker. Company benefitted retaining services of Baker; recital creates rebuttable presumption of consideration.
i. Rule: Sufficient consideration to create an enforceable contract where one party has made an illusory promise and the second party has made a promise of a unilateral contract that is contingent on the first party’s performance where the first party has performed to fulfillment of the contingency supports an agreement.
6. Contract Formation Under the UCC
a. UCC 2-201
i. (1) Except as otherwise provided in this section a contract for the sale of goods for the price of $500 or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker. A writing is not insufficient because it omits or incorrectly states a term agreed upon but the contract is not enforceable under this paragraph beyond the quantity of goods shown in such writing (requires contracts for sale of goods in excess of $500 to be evidenced by a writing signed by the party against whom enforcement is sought)
ii. (2) Between merchants if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of subsection (1) against such party unless written notice of objection to its contents is given within 10 days after it is received (object that contract exists, not terms)
iii. (3) A contract which does not satisfy the requirements of subsection (1) but which is valid in other respects is enforceable
1. (a) if the goods are to be specially manufactured for the buyer and are not suitable for sale to others in the ordinary course of the seller’s business and the seller, before notice of repudiation is received and under circumstances which reasonably indicate that the goods are for the buyer, has made either a substantial beginning of their manufacture or commitments for their procurement
2. (b) if the party against whom enforcement is sought admits in his pleading, testimony or otherwise in court that a contract for sale was made, but the contract is not enforceable under this provision beyond the quantity of goods admitted