1) Introduction to Ks
i) R1 – K defined – A K 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.
ii) R3 – Agreement defined; bargain defined
(1) An agreement is a manifestation of mutual assent on the part of two or more persons.
(2) A bargain is an agreement to exchange promises or to exchange a promise for performance or to exchange performances.
iii) R4 – How a promise may be made
(1) A promise may be stated in words either oral or written, or may be inferred wholly or partly from conduct.
2) K formation
a) Reaching an Agreement
i) Manifestation of mutual assent is measured objectively
(1) Texaco v. Pennzoil – The question is not determined by the parties’ secret, inward, or subjective intentions.
(2) Lucy v. Zehmer – Regardless of the promisor’s intent, if her actions can be objectively interpreted as an acceptance and she knows or has reason to know that the promisee may interpret her actions as an assent her conduct may constitute mutual manifestation of assent.
(3) Embry v. Hargadine, McKittrick Dry Goods Co.(Mo. 1907) – Although a party may not subjectively intend to agree to an offer, if a reasonable man may interpret the party’s actions as an assent, and then understands those acts as an agreement, an agreement is reached. Embry gives us a two-part test objective-subjective for manifestation of agreement:
(a) Objectively, could the assent have been understood by a reasonably man as an agreement to the bargain?
(b) Subjectively, did the party on the receiving end understand the other’s words or actions as an assent?
(4) R 17: Requirement of a Bargain
(a) Except as stated in Subsection (2) the formation of a K requires a bargain in which there is a manifestation of mutual assent to the exchange and consideration.
(b) Whether or not there is a bargain a K may be formed under special rules . . . .
(c) Official Comment C. – The element of agreement is sometimes referred to as a “meeting of the minds.” The parties to most Ks 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. . . .
(5) R 18: Manifestation of Mutual Assent – MMA requires that each party either make a promise or begin or render a performance.
(6) R 19: Conduct as MMA
(a) MMA may be by written/spoken words or acts/failures to act.
(b) Conduct is not MMA unless the party intends to engage in that conduct and knows or has reason to know that the other party may infer assent from such conduct
(c) Note: If you intend to engage in that action, and you know or have reason to know that the other party may infer assent from that action → that’s conduct as far as MMA is concerned.
b) What is an offer?
i) Preliminary negotiations, including invites to bid and ads, are not offers.
(1) Nebraska Seed Co. v. Harsh – Letter lacked definiteness: 1800 bushels or thereabouts. If NSC had accepted, and a K come about, there is no way to provide a remedy b/c the terms are indefinite.
(2) Leonard v. Pepsico – In general, an advertisement does not constitute a Kual offer for lack of definiteness: it is an invitation to bid made to you and the whole world.
(3) R 22: Mode of Assent: Offer and Acceptance
(a) The manifestation of mutual assent to an exchange ordinarily takes the form of an offer or proposal by one part followed by an acceptance by the other party or parties.
(b) 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 identified.
(4) R 24: Offer Defined – 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. Embry v. McKittrick, yet again.
(5) R 26: Preliminary Negotiations – 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.
(a) More re Restatement R 26: Preliminary Negotiations, Official Comments (not in casebook)
(i) ‘Reason to know’ depends not only on the words or other conduct, but also on the circumstances.
(ii) In determining whether an offer is made relevant factors include:
1. [T]he terms of any previous inquiry,
2. [T]he completeness of the terms . . . , and
3. [T]he number of persons to whom a communication is addressed.
4. In other words the issue is decided “objectively”
(6) R 29: To whom an offer is addressed
(a) The manifested intention of the offeror determines the person or person in who is created the power of acceptance.
(b) An offer may create power of acceptance in a specified person or in one or more of a specified group or class of persons, acting separately or together, or in anyone or everyone who makes a specified promise or renders a specified performance.
(7) R 33: Certainty – There can be no offer, even if there is intent to make an offer, if the terms are not “reasonably certain.”
(a) Factors to consider regarding certainty:
(i) Completeness of terms
(ii) Number of parties
(iii) “Reasonable certainty” à Importance of Context
(iv) Words and conduct of parties
(v) Previous communications among parties regarding this potential K
(vi) Course of conduct in prior dealings
(vii)Usage of trade (i.e., how things work in the industry in question)
(8) UCC 2-204 – Formation in general
(a) A K for the sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a K
(b) An agreement sufficient to constitute a K for sale may be found even thought the moment of its making is undetermined.
(c) Even though one or more terms are left open a K for sale does not fail for indefiniteness if the parties have intended to make a K and there is a reasonably certain basis for giving an appropriate remedy.
(9) UCC 2-206 – Offer and acceptance in formation of K – unless otherwise unambiguously indicated by the language or circumstances, an offer to make a K shall be construed as inviting acceptance any by any medium reasonable in the circumstances.
c) Memoranda of Understanding: Offer, K, or what?
i) Empro Manufacturing Co. v. Ball-Co Manufacturing, Inc. – Because intent is objective in K law, and because Empro’s MOU with Ball-Co featured “subject to” language; because Empro sought return of its earnest money if the deal fell through; and because Ball-Co indicated that changes were necessary to the MOU before the company could accept, the court held that the MOU was not a binding K.
ii) Texaco v. Pennzoil – Based on the following four part test, the court held that Getty bound itself to Pennzoil in their memorandum of understanding.
(1) Poss. Express Reservations.
(2) Partial performance
iii) R27 – Existence of K where written memorial is contemplated
(1) Manifestations that are in themselves sufficient to conclude a K will not be prevented form so operating by the fact that the parties also manifest an intention to prepare and adopt a written memorial thereof; but the circumstances may show that the agreements are preliminary negotiations.
iv) Quickly written MOU can be binding K if there is
(1) intent to be bound and
(2) sufficient definiteness.
d) Revoking an Of
) An acceptance made in a manner and by a medium invited by an offer is operative and completes the manifestation of mutual assent as soon as put out of the offeree’s possession, without regard to whether it ever reaches the offeror; but
(ii) An acceptance under an option K is not operative until received by the offeror.
(3) R64: Acceptance by telephone or teletype – Acceptance by telephone or other medium of substantially instantaneous two-way communication is governed by the principles applicable to acceptances where the parties are in the presence of each other.
(4) R65: Reasonableness or medium of acceptance – Unless circumstances known to the offeree indicate otherwise, a medium of acceptance is reasonable if it is the one used by the offeror or one customary in similar transactions at the time and place the offer is received.
(5) R66: Acceptance must be properly dispatched – An acceptance sent by mail or otherwise from a distance is not operative when dispatched, unless it is properly addressed and such other precautions taken as are ordinarily observed to insure safe transmission of similar messages.
iii) Acceptance by Performance, or “Unilateral Ks”
(1) Unilateral Ks – those agreements that result from acceptance by performance.
(2) Carlill v. Carbolic Smoke Ball Co. – An offer may be accepted by performance, rather than promise. If an offer is accepted by performance, no notice of acceptance is necessary to make the acceptance effective unless the offer requests such notice.
(3) White v. Corlies & Tifft – The offeree must objectively manifest acceptance by performance (to the whole world, not just the offeror) to make a binding agreement. Objective manifestation of acceptance to the whole world, not the offeror specifically.
(4) R30: Form of acceptance invited –An offer may invite or require acceptance either by promise, or performance, or both.
(a) In other words, the offeror can choose the manner and medium of acceptance.
(b) If the offer does not specify the language or circumstances required for an acceptance to be valid, then acceptance can be made “in any manner and by any medium reasonable in the circumstances.”
(5) R 32: Invitation of Promise or Performance – In case of doubt, the offeree can choose between acceptance by promise or performance.
(6) R 45: Option K created by part performance or tender
(a) Where an offer invites an offeree to accept by rendering a performance and does not invite a promissory acceptance, an option K is created when the offeree tenders or begins the invited performance or tenders beginning of it.
(b) The offeror’s duty of performance under any option K so created is conditional on completion or tender of the invited performance in accordance with the term of the offer.
(7) R 54: Acceptance by performance: Necessity of notification to offeror
(a) Where an offer invites an offeree to accept by rendering a performance, no notification is necessary to make such an acceptance effective, unless the offer requests such a notification.