Contracts Outline

Contracts 1, Thomas M. Cooley Law School, Kevin Scott, Summer 2013
 
Introduction: Principle of Mutual Assent
 
Elements of a Contract
·         Offer
·         Acceptance
·         Consideration
·         Legal capacity to contract
·         Legal purpose – not barred by law or public policy
 
·         Intent – The law imputes to a person an intention corresponding to the reasonable meaning of his words and acts.  If his words and acts, judged by a reasonable standard, manifest an intention to agree, it is immaterial what may be the unexpressed state of his mind.
·         Social Engagements – Social engagements don’t contain the necessary assent to be enforceable contracts; they are understood to be casual agreements. Courts generally don’t involve themselves in social contracts or familial contracts, unless the contract pertains to a business relationship.  Everyday promises and agreements not enforceable.
·         Social Contracts – family members can enter into enforceable business contracts; however, courts usually avoid involvement in domestic agreements involving relationships within the home.
·         Types of Contracts
o   Expressed Contracts – a promise or commitment through their verbal or written statements
o   Implied in fact Contract – a contract between parties where assent is shown by surrounding circumstances, including the conduct and declarations of the parties, and is sufficient for monetary reward.
§  In implied in fact contracts, elements of offer and acceptance are present, but must be inferred.
o   Implied in law is imposed by the court
 
Definitions
·         (1) “Merchant” means a person that deals in goods of the kind or otherwise holds itself out by occupation as having knowledge or skill peculiar to the practices or goods involved in the transaction or to which the knowledge or skill may be attributed by the person's employment of an agent or broker or other intermediary that holds itself out by occupation as having the knowledge or skill.
·         (k) “Goods” means all things that are movable at the time of identification to a contract for sale. The term includes future goods, specially manufactured goods, the unborn young of animals, growing crops, and other identified things attached to realty as described in Section 2-107
·          
 
Offer
·         Definition: a manifestation of willingness to enter into a bargain that justifies another person to believe that assent to the bargain is invited and will conclude it.
·         Elements of an Offer:
o   Be communicated to the offeree (a manifestation)
o   Demonstrate a commitment to contract (willingness to enter into a bargain that justifies another to believe assent to the bargain is invited)
o   Be definite in its terms – price and quantity (assent to the bargain will conclude it) (a definite value also allows the court to calculate damages when rewarding recovery)
 
 
·         Preliminary Negotiations often don’t represent an offer to contract.
·         Statement of Opinion or Intention – most of time doesn’t express intent to commit to contract.
·         Solicitations – where an offer is clear, definite, and explicit, and leaves nothing open for negotiation, it constitutes an offer, acceptance of which will complete the contract.  General rule is that ad solicitations do not constitute an offer because they lack sufficient detail to be definite, and they create unlimited number of offerees.  So they are commonly just invitations to enter into a contract.
o   When a merchant creates a purchase order and presents it to buyer, the buyer becomes the offerer, and the merchant becomes the offeree.
o    
 
·         Written Contract to Follow – verbal agreements may constitute a contract even if parties plan to memorialize contract in writing.  However, parties can make the execution of a written document a condition precedent to birth of contract.  And circumstances may show that the agreements are preliminary negotiations or that either party intended for the contract to be finalized only after written and executed.  To evaluate intent, courts consider the following factors:
·         Verbal agreement can be contract even if parties plan to execute written document
o   Parties can make execution of written document a condition of inception of contract
o   Circumstances may show that verbal agreement was only preliminary negotiations, and that one or both parties intended contract to be finalized only with written document, to evaluate intent –
§  Usually in writing
§  Need formal writing for full expression
§  Few or many details
§  Large or small amount
§  Common or unusual
§  All detail agreed upon?
§  Writing discussed or contemplated
 
Restatement §27. Existence of Contract where Written Memorial is contemplated.
Manifestations of assent that are in themselves sufficient to conclude a contract will not be prevented from so operating by the fact that the parties also manifest an intention to prepare and adopt a written memorial thereof; but the circumstances may s