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Contracts
Wayne State University Law School
Zacks, Eric A.

Introduction to Contract Law
I. General Rules
A. What is a Contract?
1. An enforceable agreement which is the manifestation of mutual assent and a bargain.
B. RST = Background
1. §1 Contract Defined
a) A contract is a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty.
2. §2 Promise; Promisor; Promisee; Beneficiary
a) A promise is a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made.
b) The person manifesting the intention is the promisor.
c) The person to whom the manifestation is addressed is the promisee.
d) Where performance will benefit a person other than the promisee, that person is a beneficiary.
3. § 3 Agreement Defined; Bargain Defined
a) An agreement is a manifestation of mutual assent on the part of two or more persons. A bargain is an agreement to exchange promises or to exchange a promise for a performance or to exchange performances.
4. § 4 How A Promise May Be Made
a) A promise may be stated in words either oral or written, or may be inferred wholly or partly from conduct.
C. Purpose of Contracts
1. Provides legal remedies
2. Shows what parties have agreed to; establishes the record
3. Know the express intention of parties
4. Puts both people in a better position than they were in before
5. Protects peoples beliefs they will be better off
II. Cases
A. Shaheen v. Knight [11-13] (p sought steril. From D Dr who prom. immead. Steril.p had baby)
– p Claimed assumpsit or an action for a breach of an assumed responsibility that arises out of misperformance not non-performance
– Court said that there was no contract because there were no damages and to allow recovery would be against public policy.
Formation of a Contract
Reaching an Agreement: Mutual Assent
I. General Rules
A. With exceptions, contract formation requires manifestation of mutual assent and a consideration (RST §17)
B. Restatement (Second) of Contracts
§17. Requirement Of A Bargain
1. Except as stated in Subsection (2), the formation of a contract requires a bargain in which there is a manifestation of mutual assent to the exchange and a consideration.
2. Whether or not there is a bargain, a contract may be formed under special rules applicable to formal contract or under the rules stated in §82-94.
1. Comment c. “Meeting of the minds.” The element of agreement is sometimes referred to as a “meeting of the minds.” The parties to most contracts give actual as well as apparent assent, but it is clear that a mental reservation of a party to a bargain does not impair the obligation he purports to undertake. The phrase used here therefore is, “manifestation of mutual assent,” as in the definition of agreement in §3.
§18. Manifestation Of Mutual Assent
1.     Manifestation of mutual assent to an exchange requires that each party either make a promise or begin or render a performance.
§19 Conduct As A Manifestation Of Assent
1.     The manifestation of assent may be made wholly or partly by written or spoken words or by other acts or by failure to act.
2.     The conduct of a party is not effective as a manifestation of his assent unless he intends to engage in the conduct and knows or has reason to know that the other party may infer from his conduct that he assents.
C. Objective Theory of Assent
1. Two part test:
a) A reas. person would understand person was making as offer to be accepted
b) Promisee understood his words manifested assent (subjective value)
D. Reasonable Person
1. Hypothetical person: without promisee’s characteristics
a) Most frequent
2. Contextual person: someone with same background and characteristics as promisee
3. As presented to promisor: someone who promisor perceived promisee to be
II. Cases
A. Embry v. McKittrick(p approached D seeking contract, D said to get out & work) [290] – Rule: If what the promisor said would be taken by a reasonable person to be a contract and the promisee understood it to be a contract, then it constitutes a valid contract.
– Holding: McKittrick’s words, if followed Embry’s version, could reasonably be interpreted to be an offer and because Embry accepted them, would form a contract.
– Policy: If not objective, then no oral contract of sale could be relied upon.
B. Texaco v. Pennzoil
– Facts: Contract dispute, whether a contract was binding.
– Issue: Dispute over whether jury instructions improperly excluded non-manifested evidence of intent such as private conversations.
– Rule: The existence of a binding contract is not dependent on the subjective intent of the parties…but the objective manifestations of the intent of the parties.
a) “Conduct of a party is not effective as a manifestation of his assent unless he intends to engage in the conduct and knows or has reason to know that the other party may infer from his conduct that he assents.” (p. 296)
– Holding: Court ruled that is was proper under NY law to only include objective manifestations.
C. Lucy v. Zehmer(drinking farmers, Zehmer offered to sell a property as a joke to Lucy and Lucy accepted. They wrote out a bill of sale. Lucy sought to enforce the sale and Zehmer argued that it was a joke) [296] 1. Issue: Is a contract binding if there was no meeting of the minds because one party was joking about the offer?
2. Rule: Outward manifestations of intent are the key. Demonstration of the objective theory of assent which requires (1) that a reasonable person believes there is assent and (2) that the promisee believed there was assent.
3. Holding: Yes the contract is enforceable because Lucy acted in good faith believing they had a deal and Zehmer’s actions suggested assent to a reasonable person
4. Must look to the conduct of parties
Offers
I. General Rules
A. Restatement (Second) of Contracts
§ 22. Mode of Assent: Offer and Acceptance
(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.
§ 24. Offer Defined
2. “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.”
§ 26. Preliminary Negotiations
3. “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

ent of the parties fails to be fixed through fault of one party the other may at his option treat the contract as cancelled or himself fix a reasonable price.
(4) Where, however, the parties intended not to be bound unless the price be fixed or agreed and it is not fixed or agreed there is no contract. In such a case the buyer must return any goods already received or if unable so to do must pay their reasonable value at the time of delivery and the seller must return any portion of the price paid on account.
UCC § 2-308. Absence of a Specified Place for Delivery
Unless otherwise agreed
(a) The place for delivery of goods is the seller’s place of business or if he has none his residence; but
(b) In a contract for sale of identified goods which to the knowledge of the parties at the time of contracting are in some other place, that place is the place for their delivery; and
(c) Documents of title may be delivered through customary banking channels
§2-309. Absence of Specific Time Provisions; Notice of Termination
(5) The time of shipment or delivery or any other action under contract if not provided in this Article or agreed upon shall be a reasonable time.
(6) Where the contract provides for successive performances but it indefinite in duration it is valid for a reasonable time but unless otherwise agreed may be terminate at any time by either party.
(7) Termination of a contract by one party except on the happening of an agreed event requires that reasonable notification be received by the other party and an agreement dispensing with notification is invalid if its operation would be unconscionable.
C. § 2-310. Open Time for Payment of Running of Credit; Authority to Ship Under Reservation.                      
Unless otherwise agreed
(a) Payment is due at the time and place at which the buyer is to receive the goods even though the place of shipment is the place of delivery; and
(b) If the seller is authorized to send the goods he may ship them under reservation, and may tender the documents of title, but the buyer may inspect the goods after their arrival before payment is due unless such an inspection is inconsistent with the terms of the contract (Section 2-513); and
(c) If delivery is authorized and made by way of documents of title other than by subsection (b) then payment is due at the time and place at which the buyer is to receive the documents regardless of where the goods are to be received; and
(d) Where the seller is required or authorized to ship the goods on credit the credit period runs from the time of shipment but post-dating the invoice or delaying its dispatch will correspondingly delay the starting of the credit period.