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Contracts
West Virginia University School of Law
Titolo, Matthew

Contracts

Matthew Titolo

Fall 2012

Contracts

I. Intent to Contract: Offer and Acceptance

RSC §1: Contract- 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 as a duty.

Mutual Assent

Mutual assent is agreement by both parties, usually by offer and acceptance. Determined by objective standard- apparent intention of parties shown by their actions.

Cases: Lucy v. Zehmer- Two drunk guys write and sign a contract for a land sale on the back of an old receipt. Seller said he never intended to sell, but judge ruled that his actions showed intent, regardless of his state of mind. A reasonable person in the buyer’s (offeree’s) position would assume a valid contract- objective theory of contracts.

Stepp v. Freeman- p. 10

Offer

Offer is a promise to do or refrain from doing some specified thing in the future, conditioned on an act, forbearance, or return promise being given in exchange for the promise or its performance; a display of willingness to enter into a contract on specified terms, made in a way that would lead a reasonable person to understand that an acceptance, having been sought, will result in a binding contract. Slides- W1W

A. Preliminary Negotiations: Case: PFT Roberson, Inc. v. Volvo Trucks N.A. Inc.- Confusion on whether there was a contract formed or not. No definitive offers were made, and nothing was signed. Email not treated as an offer because it had no price, etc… p. 17

B. Statement of Opinion or Intention: Problem 5- Lawyers shouldn’t guarantee an outcome. Hardly anything is ever certain.

C. Solicitations: Ads typically are not offers, but the more precise and concrete they are, the more likely they will be enforceable. Problem 7- Disappointed student. Problem 8- Make it clear that the ad of land for sale are not an offer to sell, only to negotiate.

Case: Lefkowitz v. Greater Minn. Store- p. 23.

D. Written Contract to Follow: RSC §27- “Whether either party takes any action in preparation for performance during the negotiations.” Be explicit in negotiations about when a contract is formed and when it is not. Slides W1W-12. Problem 9- Watch what you sign, be careful.

Case: Continental Labs v. Scott Paper Co.- p. 27. A contract can be formed through actions even if not in writing. Factors p. 29.

Acceptance

Acceptance is offeree’s assent (express act or implication from conduct) to the terms of an offer in a manner authorized or requested by the offeror.

A. Effect of Acceptance: Problem 10- Looks like an adhesion contract. Unfair unilateral option. Problem 11- Can’t waive a right to jury trial from a sign on the window.

Cases: Kortum-Managhan v. Herbergers- p. 34. ProCD v. Zeidenberg- p. 42. Adhesion contracts generally not enforceable, unfair to buyer.

B. Manifesting Assent: UCC §2-204. Formation in General. Problem 12- Putting an item in a shopping cart is not intent to purchase. No breach of contract, maybe a tort. Problem 13- Written acceptance is an explicit requirement.

Cases: Beard Co. v. Krusa- No contract existed; offeror is master of his offer and terms of acceptance. Fujimoto v. Rio Grande Pickle Co.- Effective notice of acceptance is what’s important, complexities in a contract do not make it void.

C. Silence as Acceptance: Problem 14- Actions generally indicate acceptance or rejection. Court doesn’t want to stick people with unwanted deals.

Cases: Day v. Caton- p. 64. Wall builder. He had reasonable opportunity to object and did not, considered acceptance. Problem 15- Unsolicited mail merchandise=gift.

UCC §1-303: Slides- W2M

a. Course of Performance: sequence of conduct in a transaction that exists if- (1) agreement involves repeated occasions for performance by a party, and (2) the other party knows of nature of performance and accepts or acquiesces without objection.

b. Course of Dealing: sequence of conduct concerning previous transactions that serves to establish a common basis of understanding for interpreting the other party’s conduct.

c. Usage of Trade: practice in trade or vocation that is so common that it is expected to be observed in a transaction of that sort.

d. Practices that parties are, or should be, aware of can serve to supplement or qualify terms of a contract.

e. Hierarchy of terms: (1) express terms, (2) course of performance, (3) course of dealing, and (4) usage of trade.

D. Knowledge of Offer: Problem 17- Knowledge of offer is required for acceptance.

E. Motive: Problem 18-Motive for performance doesn’t really matter.

F. Mode of Acceptance: Case: Davis v. Jacoby- p. 70. Man in CA wanted his “daughter” and her husband in Canada to come help him after his wife died. Court ruled for daughter. Court said a bilateral agreement (promise for promise) and not a unilateral agreement (promise for performance). Therefore, promises were exchanged, and the contract is enforceable.

Termination of Power of Acceptance

A. Revocation by Offeror: Cases: Dickinson v. Dodds- p. 78Agreement to leave offer open, but option wasn’t purchased. Once buyer knew seller was going to sell to someone else, offer was effectively revoked. Petterson v. Patterburg- p. 82. Rule- p. 86, 1(c)- modern tender rule. Marchiondo v. Scheck- p. 89. Once performance starts on a unilateral contract, contract is formed.

UCC Checklist: (1) sale of goods, (2) merchant, (3) firm offer, (4) signed writing. Option has to have separate consideration- common law. UCC §2-205 “Firm Offer” Rule- offer must stay open for a reasonable time for merchants. Slides- W2W. UCC §2-104. Merchant definition, §2-328. Sale by Auction. Notes 8/29- Merchant Analysis.

B. Lapse of Time: RSC §41. p. 94. Cases: Loring v. City of Boston- 4-year offer not still good. Jury determines if “reasonable” or not. Phillips v.

ory terms but actually containing no commitment by the promisor. An illusory promise typically, by its terms, makes performance optional with the promisor. For example, if a guarantor promises to make good on the principal debtor’s obligation “as long as I think it’s in my commercial interest,” the promisor is not really bound.

Cases: Wood v. Lucy, Lady Duff-Gordon- “Best efforts” are implied in any contract, so his promise to sell was not illusory. Judge is realistic and practical in business. Sylvan Crest Sand v. U.S.- Language giving one party the option to cancel at any time does not make it illusory. Reasonableness read into contracts by looking at course of dealing, usage of trade, etc… One party shouldn’t be allowed to escape a bad deal on a technicality. UCC §2-309- Absence of specific time provisions. Slides W3W. McMichael v. Price- Valid requirements and output contracts are enforceable. UCC §2-306- Requirements- “I’ll buy all of the X I need from you this year.” Output- “I’ll buy all the X you produce this year.” Mutuality of obligation is only needed in bilateral agreements; performance is consideration in unilateral agreements. Corbin on Contracts §156. RSC §77- Illusory and Alternative Promises. Review- Slides W11M.

Past Consideration

An act done or a promise given by a promisee before making a promise sought to be enforced. Past consideration is not consideration for the new promise because it has not been given in exchange for this promise (although exceptions exist for new promises to pay debts from minors or debts barred by limitations (debts discharged in bankruptcy is another but not important)).

Cases: Hayes v. Plantations Steel- Company takeover triggered stoppage payments. No consideration from employee, bargained for nothing, gave up nothing. Promissory estoppel argument didn’t work because there wasn’t really any reliance. PE can be a substitute for consideration if there is reasonable reliance. Reasoning p. 184-187. Mills v. Wyman- Father agreed to pay rescuer for saving his son. Moral promises typically aren’t binding. Problem 48- Notes 09/07. Webb v. McGowin- Man fell with block to save boss, severely injured. When boss died, man sued estate to continue payments. This is a special case because it looks at fairness and justice rather than exact rules. Benefit usually isn’t a big question in consideration. RSC §86- Promise for Benefit Received, p. 197. Slides W3F, 19-24*. Review- Slides W11M.