Contracts I Fall 2010: Comprehensive Outline
1. General
(1) §1 Contract Defined
(i) 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) Basic Elements of Contracts
(i) Bargain
(ii) Manifestation of mutual assent
(iii) Exchange
(iv) Consideration
(3) Policy: Why they Become Lawsuits
(i) 2 people enter into a valid agreement, but disagree with the nature of the agreement.
(ii) Dispute over Terms
(iii) Dispute there being a contract in the first place. One side says yes, the other says no.
(iv) One side there is enough there for a contract, made a promise, but its not legally enforceable. What distinguishes promises from contracts
Intent to Contract: Offer and Acceptance
(1) Offer – What is an offer?
1. A communication by the offeror; (oral or written)
2. creating a reasonable expectation in the offeree;
3. that offeror is willing to enter into a contract;
4. on specified terms;
5. that creates a power of acceptance.
(i) §24: Offer Defined
(1) Offer = 1) Manifestation of willingness to enter into a bargain;
a. 2) Made to justify to another person his assent will conclude the bargain
(2) Manifestation of willingness = “Outward expression, not secret unexpressed intent”
(i) Words: I promise to give you this for $500 dollars.
(ii) Acts: No words are spoken, but money is exchanged
(3) §17: Requirement of a Bargain:
(1) The formation of a contract requires a bargain in which there is a manifestation of mutual assent to the exchange and consideration.
(ii) §22 (1) Mode of Assent: Mutual Assent: agreement by both parties to be bound by a contract. Does not mean that parties must subjectively agree to the same interpretation at the time of contracting, rather, mutual assent is judged by an objective standard, looking to the express words, actions the parties used in the contract.
(iii) Policy:
(1) Subjective view: Meeting of the Minds “What they intended”. This is the old rule but is still seen in some cases. Courts often use Objective Theory.
(2) Objective View: Doesn’t look at intentions but words and actions. The reasonable person’s test – a reasonable person would believe, through their words and actions, to mean there is an offer and/or acceptance. Determine whether a REASONABLE PERSON would conclude that the other party constituted assent to a contract. Assent is the reasonable meanings of the manifested act.
(3) Intention is relevant only to the extent it is manifested in actions and/or language.
(4) Lucy vs. Zehmer: Plaintiff (Offeree) and defendant (Offeror) discuss the possibility of plaintiff buying defendant’s land Defendant casually mentions “I would never sell…”, Plaintiff says “I’ll buy it for 50k” Defendant says that he did not take offer seriously…yet proceeded to draw up a contract on the back of a receipt. Plaintiff and defendant talked for 40 minutes about the sale. Defendant Induces wife to consent to agreement. Delivers to plaintiff, wherein plaintiff offers to pay $5.
a. There was a contract based on Defendant’s (Offeror’s) expressed words and actions. The intention must be taken from these words and actions. Mental Assent not requisite.
(iv) Policy: Why isn’t the mental assent requisite?
a. Precedent: Could lead to acceptance of fraud
b. Proof: Difficult to prove what someone is thinking rather than doing
c. Encourage/promote certainty in contract making
d. Fairness: To both offeror, offeree
(2) Hypo: What if everyone knew that the contract in Lucy was joke? No contract, must have created a reasonable expectation in the offeree.
4. §22. (2) Surrounding Circumstances:
(i) “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.”
(ii) With some offers you have to start with surrounding circumstances, and move into the specific words and acts. Sometimes, neither offer nor acceptance can be readily identified. In these cases, an implied contract can be formed, which is a contract inferred from the conduct of the parties, a
fill those terms: clear, definite, explicit, and nothing left open to negotiation.
ii. Court held that Ad should have included the limitations. Because it didn’t, it was an offer that made clear and reasonably certain what the agreement was and the mode of acceptance necessary (show up to the store first). Seller had right to modify up to the point that customer showed up at the counter.
1. What is the difference between the first ad and second?
a. 1st one uses speculative language, does not give remedy in 1st ad. We don’t know what it is worth exactly
2. How do retailers use language protect themselves?
a. They must state: “While supplies last, prices subject to change without notice, etc.” to avoid making the offer too reasonably certain.
6. §26. Preliminary Negotiations:
(i) “Manifestation of willingness is NOT an offer if:
a. “Offeree has reason to know if offeror does not intend to conclude bargain until further manifestation.”
(ii) Can the individual terms from the preliminary negotiations constitute an offer? A: No, because the offeror does not intend to conclude the bargain, but is trying to shape the end offer.
(iii) In many cases, you have to decide whether you are looking at preliminary negotiations, a completed offer as a package, or smaller offers.
(iv) Should preliminary terms be considered smaller, individual contracts? Or non-contracts but pieced together in the big offer?
Policy – Chilling Effect of Negotiating: If offeror is forced to contract on some terms, it loses advantages in negotiating because it is stuck to those agreements. It degrades the “give and take” in the negotiation process. Also, an offeror could end
