Contracts Titolo Fall 2015
Tip: unless otherwise indicated, law school exam questions exist in an imaginary jurisdiction defined by the cases you read in the textbook. So in this class, you’ll analyze this step under both approaches, unless the question indicates otherwise.
§ 1 RST : Contract- a promise or set of promises for the breach of which the law gives a remedy, or the performance of which the law some way recognizes as a duty; enforcement of promises
Mutual Assent/ objective standard
Contract is strict liability- does not matter if there is no intent.
. *** Would a reasonable person believe the contract was formed?
“If the offeror has clearly manifested a willingness to enter into a contract in such a way that the other party, the offeree, knows that assent is all that is necessary to cement the deal, and the offeree accepts, the contract is created.”
INTENT TO CONTRACT: OFFER AND ACCEPTANCE
Lucy v. Zehmer (1954) Sup Ct of Virginia
Parties: W.O Lucy; AH Zehmer
Facts: Δ said that the note he gave to π to sell him his farm for $50,000.00 was a joke and that they were drinking and he was intoxicated. π thought it was real so he went to get 50% of the money from his brother and had the title examined then went to Δ the day after getting title examined
Issue: Is there objective manifestation of intent when one party thinks the other is joking
Holding: yes reversed and remanded
Reasoning: (1)Lucy objected to 1st draft (2) He wanted Δ’s wife to sign it (3) appearance of the contract (4) fact that it was under discussion for 40 minutes (5) Discussion of what was to be included in the sale (6) Provision for examination of the title (7) Completeness of instrument (8) Taking possession of by Lucy. ALL THESE FACTS SHOW IT WAS NOT A JOKE!! And Δ was not too intoxicated. Must look at outward expression not what Δ was thinking
Would a reasonable person in offeree’s position believe a contract was formed?
Stepp v. Freeman (1997) Ct of Appeals Ohio
Parties: Stepp (cheated out of lottery winnings); Freeman
Facts: π and Δ get in fight so when lottery tickets are purchased π is unaware and when group won Δ told π he was out of the group
Pro H: Δ appeals lower ruling in favor of π. π says there was a breach of implied contract and brought grounds for equitable estoppel (no judgment granted for party that has not acted fairly)
Issue: Does behavior over time give rise to an implied contract?
Holding: Yes there was a contract that Δ breached
Reasoning: (1) π was a part of the group with a role of copying the tickets
(2) The 20 person roster shows an agreement especially since all members who were no
longer part of the roster had a talk with Δ before they left
(3) Δ put money in for others when they were out of town or forgot, including π
(4) person who was on vacation still was part of group and won
***Contract was breached when Δ failed to inform π they were playing the lottery and when he was dropped from the group without being told.
THE OFFER- promise to do, or not do 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.
Preliminary Negotiations- anticipation can cause some parties to presume too early that other party has expressed their intent to contract.
PFT Roberson Inc. v. Volvo Trucks (2005) US Ct of Appeals
Parties: PFT Roberson; Volvo Trucks
Facts: π had contacted Δ to service its fleet as well as purchase new trucks. Several e-mails had went back and forth containing drafts which needed to be resolved. Volvo for whatever reason decided not to go through on the deal and π had went back to its original servicer but π still wanted the good deal Δ had to give.
Pro H: Jury awarded Roberson more than 5 million in damage for breach of contract
Issue: Do preliminary negotiations equal an offer?
Holding: No reversed in favor of Volvo
Rules: Illinois law- When negotiations say that agreement is subject to more definitive documents intent is not bound until the document has been prepared and signed.
Reasoning: This look nothing like the typical contract for a fleet agreement; the truck purchase clause, termination clause, maintenance cost, trade in, and exit clause were all left out. These are all required so even if π would have said “I accept” still no contract.
Notes: Roberson wanted to treat this as a unilateral contract. Court felt if it would let this happen parties would no longer want to negotiate
***Advertisements are NOT offers they are invitations to bargain —-à Solicitations
Leftkowtiz v. Great Minneapolis Surplus Store Inc. (1957) Sup Ct of Minnesota
Parties: π tried to purchase coats advertised in a newspaper
Facts: Each time π went to store to purchase coats for $1 he was told that even though he was first in line like the add stated, the add only applied to women
Issue: Did conduct of both parties show sufficient mutuality of obligation to constitute a contract of sale?
Holding: Yes, affirmed
Reasoning: Offer by Δ for sale of lapin fur was clear, definite, and explicit and left nothing open for negotiation. Π was 1st on at the store and was entitled to performance
***bait and switch advertisement- seller advertises for an item they do not really plan to sell
(FTC has power to prevent this)
Agreements to agree (written contract to follow) assent to be bound on acceptance
Continental Laboratories v. Scott Paper Co. (1990)
Facts: π and Δ entered into negotiations where π would supply hotel amenity products to Δ who would distribute products. There was a phone conversation in which both sides and their attorneys were present then Δ sent a “supply and distribution” agreement with a draft stamp on it. Two weeks later Δ informed π they were no longer interested. π felt there was an oral agreement and sued for breach of contract.
Pro H: Δ said there is no binding contract and it was conditional on a written document
Rules: Parties can make execution of a written document a condition precedent to the birth of binding contract
Issue: Did parties plan to be bound prior to the execution of written document?
Reasoning: Matter was large and both parties were represented by counsel w/ numerous drafts and many details were left unresolved. Here is a factor test
Restatement of Contract §27(c) Does any party take any action in preparation for performance during negotiations
(1)Whether contract is a class usually found in writing
(2) Is it a type needing formal writing?
(3) Whether it has few or many details
(4) Whether amount is small or large
(5) Contract common or unusual
(6) Details still remain to be resolved
(7) Whether negotiations show writing was discussed or contemplated
Preliminary writing to avoid inadvertent contract formation- “the parties to this writing do not intend it to be a binding agreement nor will they rely upon it as the final agreement; No agreement with legal consequences exists, if at all, until the parties’ final agreement is formalized in a written contact to be executed in the following manner.
II. ACCEPTANCE- an offeree’s assent, either by express act or by implication from conduct to the terms of an offer in a manner authorized or requested by the offeror so that a bin
it back. π worked for 14 months and then quit and Δ told them they were not owed bonus.
Issue: Did a contract exist between π and Δ?
Holding: yes, but jury should not have been instructed on how to compute net profits.
Reasoning: Offeree made no request for mode of acceptance. Offerees intent to accept can be silent.
UCC §1-303 Course of Performance, Course of Usage, and Usage of Trade
(a) A “course of performance” is a sequence of conduct between the parties to a particular transactions that exists if (10 the agreement of the parties with respect to the transaction involves repeated occasions for performance by a party; and (2) the other party, with knowledge of the nature of performance and opportunity for objection to it, accepts the performance or acquiesces it without objection
(b) A “course of dealing” is a sequence of conduct concerning previous transactions between the parties to a particular transaction that is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct.
(c) A “usage of trade” is any practice or method of dealing having such regularity of observance in a place, vocation, or trade as to justify an expectation that it will be observed with respect to the transaction in question. The existence and scope of such a usage must be proved as facts. If it is established that such a usage is embodied in a trade code r similar record, the interpretation of the record is a question of law.
(d) A course of performance or course of dealing between the parties or usuage of trade in the vocation or trade in which they are engaged or of which they are or should be aware is relevant in ascertaining the meaning of the parties’ agreement, may give particular meaning to specific terms of the agreement, and may supplement or qualify the terms of the agreement. A usage of trade applicable in the place in which part of the performance under the agreement is to occur may be so utilized as to that part of the performance.
(e) Except as otherwise provided in subsection (f) the express terms of an agreement and any applicable course of performance, course of dealing, or usage of trade must be construed whenever reasonable consistent with each other. If such a construction is unreasonable (1) express terms prevail over course of performance, course of dealing and usage of trade (2) course of performance prevails over courses of dealing and usage of trade and (3) course of dealing prevails over usage of trade.
§69 Acceptance by Silence or Exercise of Dominion
(1) Where an offeree fails to reply to an offer, his silence and inaction operate as acceptance in the following cases only:
(a) Where an offeree takes the benefit of offered services with reasonable opportunity to reject
them and reason to know that they were offered with the expectation of compensation.
(b) where the offeror has stated or given the offeree reason to understand that assent may be
manifested by silence or inaction and the offeree in remaining silent and inactive intends to accept the offer.