Abramowicz Fall 2013
Contracts A – Outline
I. Mutual Assent
A. Mutual assent (agreement) – In order to form a contract, there must be an offer and acceptance (i.e. mutual assent). If the OR has manifested a willingness to enter into a contract in such a way that the OE knows that assent is all that is necessary to cement the deal, and the OE accepts, the requisite mutual assent exists.
Basic formula for mutual assent: O + A = K
B. Testing for Mutual Assent
Objective Manifestations/Reasonable Person Standard:
Look to the outward expression of a person as manifesting his intention rather than to secret and unexpressed intentions.
Assess a person’s words and behavior according to how that behavior would be interpreted by a reasonable person.
Ex. Lucy v. Zehmer (Ferguson farm). Mutual assent found based on Z’s outward conduct in creating and signing contract, despite evidence of secret jest/joke
Implied In Fact Contract/Assent: Mutual assent, i.e., consent to contract terms may be found to exist despite the absence of an express agreement – It can be inferred from the parties’ conduct
Ex. Stepp v. Freeman (Lottery case) Implied-in-fact contracts: surrounding circumstances, conduct, declarations of the parties, can result in a “tacit understanding” that a contract exists if the surrounding circumstances make it “reasonably certain that an agreement was intended”
Compare: Express contracts: assent is expressed in form of oral or written O + A (oral or written WORDS)
Implied-in-law contracts: (not a contract) legal fiction created by courts. for equitable result. Dealt with Later in the term (Remedies)
II . The Offer
A. Offer Defined: An offer is the OR’s manifestation of his assent to the formation of a contract, a “yesable” proposition to the OE
B. Three Elements:
1. Communicated to the OE (not necessarily by the OR)
2. Demonstrates an OR’s commitment to the contract
3. It is definite in its terms
Identify verbs: I “agree,” “commit,” “promise,” “will sell,” etc.
Identify nouns: price, amount, quantity, brand, specifications, etc.
C. Special Types of Offers
1. Social Engagements – these do not give rise to contract liability even though they technically satisfy the requirements for an offer. (ex. Grandma didn’t come to Thanksgiving)
2. Professional Statements of Opinion – these do not rise to the level of an offer unless they are over the top (e.g. lawyer guaranteeing a client a specific result-Over the top).
General Rule: These are not considered to be offers based on public policy b/c
a. They lack detail concerning size, quantity
b. They would create an unlimited number of OE
Exception: Where an ad is clear, definite and explicit, and leaves nothing open for negotiation, it constitutes an offer
Ex. Lefkowicz v. Greater Minn. Surplus: (Lapin stole) – ad treated as offer b/c public policy problems (a & b) above satisfied (limited quantity; definite price/value; limit on no. of persons who could accept)
4. Self Service Stores/Grocery Stores: General rule is that the display of the item is the invitation to make an offer. The offer is made when the customer put item in cart.
5. Rewards: Rewards are offers to enter into a unilateral contract.
i) Public rewards do not need to be communicated in order to be accepted,
ii) Private rewards do need to be communicated to be accepted.
iii) Public revocation must be made under substantially similar publicity rule: Revocation must be published similar to offer (e.g. number of newspaper ads, time of poster hanging in window, etc.)
D. Written Contract to Follow
1. Most oral agreements are enforceable
2. If either party intends not to be bound in the absence of a fully executed document (as opposed to oral contract followed by written memorization), no amount of negotiations will result in the formation of a binding contract.
o Ex. Continental Laboratories v. Scott Paper Co: (Distribution of hotel paper towels) – Scott didn’t intend to be bound without a written agreement. “Draft” with Scott’s VP’s signature was not valid contract.
III. Acceptance (OE’s manifestation of mutual assent)
A. Acceptance Defined – Acceptance of the contract fixes the terms of the contract to those agreed upon in the offer. Parties are free to modify the contract with mutual agreement; unless the original contract reserves the power to do so one party may not unilaterally alter the contract by changing its terms.
Acceptance is the OE’s manifestation of assent, which cements the deal and terminates the OR’s ability to end the offer.
b) Received by a person authorized to receive the A
c) Deposited in a place where the OR has authorized for communications, e.g. place of OR’s business (does not have to be read)
a) Private Rewards:
If the person performing the act for which a reward is offered does not know of the reward before performance, there in no contract, and reward need not be paid.
BAD Public policy, and some jurisdictions have changed that.
b) Government-issued Rewards:
The person performing the act for which a reward is offered does not need to know of the reward before performance in order to be paid.
c) Police Officers are not allowed to collect rewards as a matter of public policy in order not to skew their priorities in their jobs.
d) Motive for action does not matter. Awareness of the offer is sufficient, it does not have to be the primary reason.
e) A published reward offer is revoked by “similar publication” rule or by lapse of time. What time is reasonable is a jury question
IV. Termination of Power of Acceptance –
A) Revocation – OR is free to revoke his offer at any time before it is accepted ***(Except for option contracts)***
1) Direct Revocation: OE receives notice of revocation from OR
Restatement §42 – An OE’s power of acceptance is terminated when the OE receives from the OR a manifestation of an intention not to enter into the proposed contract
Ex. Go to hell
2) Indirect Revocation: OE learns that OR has taken action inconsistent with offer and source is reliable; ; not just knowledge of 3rd party negotiations
R§43 – An OE’s power of acceptance is terminated when the OR takes a definite action inconsistent with an intention to offer to enter into the proposed contract and the OE acquires reliable information to that effect.
Ex. Dickinson v. Dobbs – (Sale of land); OR changed mind and sold property before expiration of promised time.