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Contracts
Wayne State University Law School
Wellman, Vincent A.

Contracts
Wellman
Fall 2012


I.            Contract Law
a.       Contract
i.      Overview
1.       creates an obligation for which some sort of legal enforcement will be available if performance is not forthcoming as promised
2.       an agreement between two or more persons, with a common understanding as to something that is to be done in the future by one or both of them
3.       a document or set of papers in which such an agreement is set forth
4.       an agreement that has legal effect
ii.      Elements in a Transaction
1.       the agreement-in-fact between the parties
2.       the agreement as written
3.       the set of rights and duties created by (1) and (2)
iii.      Types of Contracts
1.       Express Contract: formed by language, oral or written
2.       Implied In-Fact Contract: formed by manifestations of assent other than oral or written language
3.       Unilateral Contracts
a.       a promise in exchange for performance
b.       formed when one party makes a promise or undertakes a performance
c.        accepted by rendering of performance by offeree, where the promisor is made aware that performance is complete
d.       only one promisor and one promisee
4.       Bilateral Contracts
a.       a promise in exchange for a promise
iv.      Breech
1.       failure to meet/fulfill the promise
2.       failure to preform
3.       case where a person may seek remedies or damage, if the promise or contract is enforceable
v.      Remedies
1.       expectation interest: the net value that the plaintiff expected to realize from due performance of the contract at issue
2.       restitution/reliance interest: the extent to which the defendant has been enriched by, or the plaintiff injured by, plaintiff’s action in reliance on the defendant’s commitment to perform
3.       specific performance: ordering the defendant to cooperate with the plaintiff in exchanging performances as originally agreed to
a.       Ownership
i.      protects the right of the “owner” to use, enjoy, and even consume that thing to the exclusion of all other persons, including:
1.       real property – land and the buildings on it
2.       personal property – tangible moveable property
ii.      includes the right to use and consume the thing owned
iii.      includes the right to transfer or convey the right of ownership to some other person in exchange for something else of value
iv.      any society that recognizes property rights, must also address the question of how it should respond when someone violates those rights


b.        
Mutual Assent
Overview
i.      Restatement (Second), §17: the formation of a contract requires a bargain in which there is a manifestation of mutual assent to the exchange and a consideration
ii.      Restatement (Second), §18: manifestation of mutual assent to an exchange requires that each party either make a promise or begin or render a performance
iii.      Restatement (Second), §22:
1.       the manifestation of mutual assent to an exchange ordinarily takes the form of an offer or proposal by one party followed by an acceptance by the other party or parties
2.       a manifestation of mutual assent may be made even though neither offer nor acceptance can be identified and even though the moment of formation cannot be determined
iv.      both parties must be bound or neither is bound; recriprocal
Requirements
i.      Meeting of Minds
1.       based on subjective standard
2.       reflects the parties’ actual intention, rather than the parties’ conduct
ii.      Manifestation of Intent
1.       based on the objective standard of what a reasonable person should know and expect
2.       however, it can be based on a subjective standard if it can be proved what the parties actually knew
3.       indicated by the parties’ writing, words and/or actions (e.g. signature, hand shake, beginning performance)
Presence of a Promise
i.      mere expression of present intention, predictions, or opinions do not constitute promises
ii.      it is important to determine whether a reasonable promisee would have relied on the promisor, and if the promisor should have known that
ALLEN V. BISSINGER & CO.
i.      Facts: after requesting copies of freight reports from P, D realized the reports were of no use and asked to stop receiving; D refuses to pay for the reports received
ii.      Rules:
1.       apparent mutual asset of the parties and the law imputes to a person of intention corresponding to the reasonable meaning of its words and acts
2.       if words or acts, judged by a reasonable standard, manifest an intention to agree to the matter in questions, that agreement is established
RAY V. EURICE BROS.
i.      Facts: D into a contract to build a house for P; after signing the contract, the parties disagreed as to which specifications were to be used and D refused to build the house
ii.      Rules:
1.       the intent to enter into a contract is determined from the objective intent of the parties as determined from the surrounding circumstances
2.       a contract does not have to be signed to be enforceable
3.       however, a signature acts as a physical manifestation of intent, regardless of what the parties actually though


Offer & Acceptance
Parties
i.      offeror
1.       the individual who issues the offer
2.       can revoke before the offer is accepted
3.       “the master of his offer”
ii.      offeree
1.       the individual who receives the offer
2.       has the power of acceptance
Offer
i.      Overview
1.       creates a reasonable expectation in the offeree that the offeror is willing to enter into a contract on the basis of the offered terms
2.       gives the power of acceptance to another party
3.       there is no requirement that one intends or understands the consequences …”damn fool” (Kathleen/Farnsworth/Wellman comment)
ii.      Restatement (Second), §24: an offer is the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it
iii.      Requirements
1.       an expression of a promise, undertaking or commitment to enter into a contract
2.       certainty and definiteness is the essential terms
3.       communication to the offeree
iv.      Non-Offers
1.       offers made in social settings amount to a social contract, but usually not a legal contract
2.       offers made in jest do not amount to a contract, provided both parties understand
v.      Invitations
1.       Overview
a.       invitations are not offers, but an opportunity for the recipient to make an offer
b.       incudes advertisements, form letters, etc.
c.        do not reflect the offeror’s manifestation of intent because they lack the specification of specific terms and are addressed to the public at large
d.       i.e. auctions, quotes, catalogs
2.       Restatement (Second), §26: a manifestation of willingness to enter into a bargain is not an offer if the person to whom it is addressed knows or has reason to know that the person making it does not intend to conclude a bargain until he has made a further manifestation of assent
3.       Advertisements
a.       Overview
i.      generally, advertisements are not offers, but i

                            i.      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
ii.      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
d.       Restatement (Second), §87:
i.       an offer is binding as an option contract if it
1.       is in writing and signed by the offeror, recites a purported consideration for the making of the offer, and proposes an exchange on fair terms within a reasonable time; or
2.       is made irrevocable by statute
ii.      an offer which the offeror should reasonably expect to induce action or forbearance of a substantial character on the part of the offeree before acceptance and which does induce such action or forbearance is binding as an option contract to the extent necessary to avoid injustice
e.        involves a promise to keep an offer open that is binding on the offeror
f.        if no consideration is given for the option, it will not be enforceable
g.        if offeror does not hold the promise open as agreed, there will be a breach of the option
h.       an option contract is formed upon the start of performance by the offeree
2.       Parts
a.       an offer that includes
i.      subject matter,
ii.      price AND
iii.      time period
b.       a promise not to revoke due to consideration given, such as
i.      money, OR
ii.      performance, OR
iii.      future money or performance
viii.      Counter-Offers
1.       Overview
a.       an offer made by the offeree to the offeror that contains the same subject matter as the original offer, but differs in its terms
b.       also known as qualified acceptance
2.       Effect of a Counter-Offer
a.       a rejection of the original offer
b.       a proposal of a new, counter-offer
c.        a transfer in power of acceptance
3.       NORMILE V. MILLER
a.       Facts: P Normile and P Segal both attempted to purchase a piece of real estate from D; P Normile first submitted a bid, but P responded with a counteroffer; prior to P Normile’s acceptance of D’s counteroffer, D sold the property to P Segal
b.       Rule: a counteroffer acts as a rejection of the original offer and does not