Contracts Outline
Contract: A promise or set of promises for the breach of which the law gives a remedy or the performance of which in some way recognizes it as a duty.
I. Mutual Assent: Requires each party either make a promise or being to render a performance.
A. reasonable meaning of words oral or written and acts
1. Lucy v. Zehmer (guy gets drunk and sells his farm to Lucy for $50,000)
a. Determined by: ordinary meaning of language used, context (cause of negotiations, prior dealings between parties, custom and practices in trade or business (if any))
b. Unexpressed words and actions are irrelevant to the contract’s validity (must look to words (oral or written) and conduct of parties)
c. Each person must manifest assent based on a reasonableness meaning (Objective theory of contracts- should be followed unless one of the parties knows the subjective intent of the other party- then use subjective intent)
B. Objective Theory of Contracts
1. Manifestation of Assent
a. Judged from objective basis (don’t care about unexpressed intent)
b. Generally not what parties subjectively intend but reasonable meaning of words and acts that constitute manifestation of intent
c. would reasonable person in position of one party believe that the other person intended to agree to the contract (Lucy v. Zehmer).
d. Subjective intent of party controls if other party knew or had reason to know of other party’s actual intent (ex. whisper in Lucy v. Zehmer)
e. Specific performance- when court creates order forcing person to create contract (most often occurs with real estate)
2. Manifestation of Mutual Assent
a. must make a promise or render a performance (§ 18)
b. must be mutual, at least two parties
c. must have certainty of intent
d. must have a commitment
e. must look at the context in which the statement was said
f. what would a reasonable person think? (Leed v. First Allied Connecticut Corp.)
g. must look at everything that happened
h. If each party attaches different meanings to their manifestations, mutual assent did not occur (§ 20)
i. if a person can’t understand the contract and has limited capacity, contract is void (the other member of the contract can’t use this argument if they don’t have limited capacity) (§ 15)
3. Stepp v. Freeman (Lottery ticket case)
a. Implied-in-fact contract- don’t speak about it but agree to it; created through conduct; parties act like they have an agreement
b. expressed contract- created through language, either oral or
written; agreement to acts of a contract
c. implied-in-law contract- when the parties haven’t actually
agreed but the court orders one of the parties to act.
d. social engagements are not legally enforced because
generally people don’t intend to be bound by a legal contract in social engagements.
II. Offer: a 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.
A. Preliminary Negotiations
1. Restatement § 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.”
2. Leeds v. First Allied Connecticut Corp. (an alleged contact for sale of a nursing home which was signed by both parties but was on a single page and didn’t include important issues is not a real contract)
a. Restatement § 24 (defines an offer) An offer is a 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.
b. The intent that you’re looking to for is to close the deal. First are preliminary negotiations which is not to close the deal, it relies on the intent to conclude it if “I” agree. (in an offer, intent is concluded when the other party agrees)
c. Manifests intent to enter into it
d. Invites acceptance
e. Indicates acceptance and will conclude K.
f. 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.
g. The promise that generally starts the process and then the acceptance of that offer.
h
ng the proposal.
6. Continental v. Scott (Scott informs Continental that they are no
longer interested in doing business after a written document was signed by Scott but not Continental.)
a. Whether the contract is of a class usually found in writing, whether it needs a formal writing for its full expression, whether it has few or many details, whether it is a common or unusual contract, whether a standard form of contract is widely used in similar transactions, and whether either party takes any action in preparation for performance during the negotiation. (Restatement 27)
b. How do you make it clear that nothing is binding without a written formal contract signed by both parties? Have a preliminary agreement drawn up to that effect.
III. Acceptance (concludes the contract; closes the circle of assent):
a manifestation of assent to the terms thereof made by the offeree in a manner
invited or required by the offer.
A. Manifestation of Assent
1. Beard v. Krusa (Defendant signed purchase order for combine along with a counter check. Plaintiff never signed purchase order but alleges that there was an agreement. Court held that the purchase order unambiguously required the signature by plaintiff’s “dealer” in order to be a proper acceptance of defendant’s offer. Because plaintiff’s dealer never signed the PO, no contract ever existed.)
a. if offeror has to do something else before it can be concluded, it’s preliminary negotiations.
b. Offer + acceptance = K
c. Motive (intent to accept) + knowledge of offer= K (usually only a problem when it’s contract by performance)
Only having knowledge of contract, and not motive, still constitutes acceptance because you don’t have any way of knowing other people’s motivation (must look
