Contracts Martin-Scott Fall 2011
Contracts in General:
1) What is a contract
a) R 2d § 1—contracts defined:
i) A contract is a promise or set of promises that the law will enforce by remedy, or performance of which the law sees a duty to enforce.
b) Offer + Acceptance + Consideration = Contract (K)
2) Types of contracts:
a) Express:
i) Parties expressly agree to certain words and terms
b) Implied in fact (Stepp)
i) No expressed agreement
ii) Conduct of the parties implies an agreement from which an obligation in contract can be said to exist
iii) Treated the same way as express contracts
c) Implied in Law
i) Not a contract at all
ii) Recovery is created by the courts to attempt to do justice
3) Two styles of contracts:
a) Bilateral Contract:
i) A promise is exchanged for a promise
ii) Must mutually have an obligation
(1) Either both partied are bound or neither party is bound
b) Unilateral Contract
i) A promise is exchanged for a performance or something else
ii) Only one promise exists
iii) Person performing is not bound to perform the act, but if they being, the promise becomes enforceable
Promise
Full Performance
Partial Performance
Unilateral (promise for an act)
NO CONTRACT
CONTRACT
Option Contract
Bilateral (promise for a promise)
CONTRACT
NO CONTRACT
NO CONTRACT
Ambiguous (isn’t clear whether offer-or wants promise or act)
CONTRACT
CONTRACT
OPTION CONTRACT
4) Required Elements of a Contract
a) Bargain ( R 2d §17)
i) A formation of a contract requires a bargain which includes a manifestation of mutual assent and consideration
b) Mutual Assent
i) Takes place through offer and acceptance
ii) Requires that each party makes a promise and/or begins to render a performance
c) Consideration (R 2d §71)
i) A performance or return promise must be bargained for
ii) May consist of an act, forbearance, or changing legal relationships
5) Steps to determination:
a) First ask yourself does the UCC apply? Because it will change the enforceability, basically is this the sale of goods or something else?
i) Silence as A
ii) Firm Merchant Offers
iii) When is A received?
b) THE OFFER-OR IS THE MASTER OF THE OFFER
6) Definiteness:
a) How definite does a contract have to be?
i) Two schools of thought on the issue:
(1) Walker v. Keith:
(a) Agree on leave have option to extend price TBD, time comes for offer and they sue to have the court figure out the price (essential term of a contract)
(b) Court said they should not have to decide the rent when the term should have and could have been decided, they did not use gap fillers because these are not goods
(c) Should not apply UCC to non-good such as the rent on an option
(2) Rego v. Decker:
(a) Option to renew exact terms except the rent, tenant attempted to exercise right the option; the landlord refused to perform, claiming the terms were too uncertain to enforce.
(b) Went to court and when the terms of the option are too uncertain for the provision to be enforced
(c) Court plugged in the UCC gap fillers even though it was not a good
(d) Said it applied by analogy.
(3) There is a jurisdictional split on these.
The Offer:
1) What is an offer?
a) R 2d § 24 Offer Defined
i) An offer is the manifestation of willingness to enter into a bargain.
b) Martin-Scott:
i) A yes-able proposition which created the power of acceptance in the offer-ee
2) Elements:
a) Must be communicated Ö
b) Must have commitmentÖ
c) Must be definiteÖ
3) Communicated to the offer-EE
a) Offers are effective when they are received
b) Knowledge of Offer: you must know about an offer (reward) that is private before you can accept it
i) Exception: the government offers are exempt if you come forward with information you are entitled to the reward.
c) An offer-ee who learns of an offer before completing part of the requested performance my accept by completing the requested performance ( R 2d § 51)
4) Commitment to contract by the offer-OR
a) Objective manifestation of intent (Lucy v. Zehmer) “Did it appear that the parties intended to contract?”
i) To determine whether the parties intended to contract without a writing: (R 2d § 27 comment c)
(1) Whether the type of contract is normally in writing?
(2) Whether it must be written to be fully expressed?
(3) How many details the contract has?
(4) Whether the amount in questions is large or small?
(5) Whether the contract is usual or uncommon?
(6) Whether all the details have been agreed upon?
(7) Whether the negotiations show that writing was contemplated?
b) Motive for contracting is irrelevant
c) –OR is the master of the offer—terms will be constructed against –OR if unclear or indefinite (Beard Implement –OR’s form included requirement they sign the contract they didn’t sign not a K)
d) Social statements:
i) Not enforceable unless the parties intend that is has legal significance (i.e. was placed in writing)
5) Definite in Terms:
a) Usually refers to the subject matter of the offer:
i) Price, quantity
b) Indefiniteness—agreeing to agree is insufficient to form an offer
i) To be enforceable, a K to enter into future covenant must specifically all material and essential terms and leave nothing to be agreed upon as result of furniture negations
(1) In Walker, the went was left to be determined in a lease so K ruled indefinite
(2) Unlike Walker, REGO court states that they only need intent to rule there is a K. They should fill gaps to ensure fairness where the reasonable expectations of the party are clear.
(a) UCC uses same gap filler rule.
6) Advertisements as offer:
a) Generally ads are not offers unless they are sufficiently definite and limit the number of offer-EEs
i) Exceptions: Lefkowitz ad was limited to the offer-ees, definite in quantity, price, means of acceptance
b) Opinions are not offers for K unless there is guarantee (Dr. or att
l Friday. Next day A contracts with C and B is advised by his agent. B cannot bind A to his offer because B has knowledge (no consideration to hold offer open) (R 2d §43)
c) Revocation becomes effective upon receipt MBR does NOT apply
d) Any unilateral K may be withdrawn before the act requested be done has been performed, However once the offered beings performing (not mere preparation) the unilateral K offer is no longer revocable and the –OR is bound
i) Real estate transactions and brokers:
(1) Partial performance makes O irrevocable, broker spent time and money listing home –OR cannot revoke to avoid paying commission (Marchiondo)
e) Substantially Equal Publicity Rule:
i)
If offer was published for the public at large, revocation must be similarly published (for the same period of time the O was run) to be effectively communicated to the public. (R 2d § 46)
2) Lapse in Time ( R 2d Section 46)
a) –EE’s power of acceptance is terminated at the time specified in the offer, or it no time is specified at the end of a reasonable time.
b) Reasonable time is a question of fact (jury), depending on all circumstances existing when the O and attempted acceptance are made
i) Ex: Loring –OR places ad in paper to find arsonists, EE accepts 4 years later, O lapsed
c) Unless otherwise indicated by language or the circumstances, and subject to the rule stated in section 49, an offer sent by mail is seasonably accepted if an acceptance is dispatched by mail at any time before midnight on the day on which the offer was received
i) In face to face offers the O lapses when parties walk away
3) Rejection/Counteroffer: (R 2d section 38)
a) Offer-EE’s power of A is terminated by his rejection of the O unless the OR has manifested a contrary intention
i) If –EE counteroffer, it is a rejection, unless –OR indicated the O is still on the table
b) Manifestation of intention not to accept an O id rejection UNLESS the –EE manifests an intention to take it under advisement:
i) A tells B I will sell you my car for 1,000. B says how about 750?
(1) But negotiating a modification is not a CO “would you consider 750”
c) Must be a Mirror: at Common law if the A isn’t mirror the O it is a counteroffer, which is a rejection of the offer ending the power of acceptance for the offer-EE
d) Unequivocal rejection: I don’t want that
e) UCC 2-207 governs counteroffers when 1 or more merchants is involved (see A §)
