Contracts I Outline
Intent to Contract: Offer and Acceptance
I. The Principle of Mutual Assent (O+A)
A. Contracts Defined:
1. A K is a promise that the law will enforce.
2. Contract Law exists to protect interests through the enforcement of promises.
B. Formation generally:
1. In order to form an enforceable K, there must be a meeting of the minds (Mutual Assent).
2. Each agrees to all terms and conditions, with the same sense and same meaning as the others.
3. If the Or has manifested a willingness to enter into a K in such a way that the Oee knows that assent is all that is necessary to cement the deal, and the Oee accepts , then MA exists.
4. The courts do not apply a subjective test, but rather an objective one to determine whether the parties have both assented or entered into an agreement.
C. Testing Whether there is MA:
1. Objective Manifestations/Reasonable Person Standard
a. Look to the outward expression of a person as manifesting his intention rather than to secret and unexpressed intentions.
b. Assess a person’s words and behavior according to how that behavior would be interpreted by a reasonable person.
c. ***Sometimes the impaired mental state of one of the parties prevents that a person from having the legal capacity to enter into a K.*** (In Lucy v Zhemer the court did not find that Z was too drunk)
EX: Lucy v Zehmer (MA found based on Z’s outward conduct in creating and signing K, despite evidence of secret joke) his outwardly behavior made it believable that he wanted to sell his land)
EX: I will sell you my car for $1200.
NON EX: I’m considering selling my car to you for $1200.
NON EX: Would it be a good deal if I sold you my car for $1200.
2. Expressed Contracts:
a. MA (the O and the A) are expressed in a form of oral OR written WORDS.
b. Lucy v. Zehmer was an expressed K.
3. Implied In Fact Contracts:
a. Consent to K terms may be found to exist despite the absence of an express agreement.
b. Here the parties meeting of the minds are shown by the surrounding circumstances, including the conduct and the parties’ declarations of the parties that make it inferable that the K exists as a matter of tacit (unspoken) understanding.
EX: Stepp v Freemen, where the parties were in a lottery pool and there were rules that everyone abided by. The MA here was based on the conduct of the parties as well as the surrounding circumstances.
4. Implied In Law Contracts:
a. These are not true K’s; they are a legal fiction used to effect and equitable result.
b. The court will make its own decision, even after not finding a K the court feels like an unfair or inequitable suit will occur
c. To make sure that there is no unjust enrichment.
II. Offer:
A. Offer Defined:
1. An O creates a power of A in the Oee and a corresponding liability on the Or.
2. An O is a yes-able proposition
B. Three General Requirements:
1. Under COMMON LAW the O must be communicated, committed and definite.
a. COMMUNICATED:
(1) Provides Oee with knowledge of the Or’s intent to K. There are different ways to communicate. (Not necessarily by the Or).
b. COMMITTED:
(1) Or must be committed to K with Oee.
(2) Issue here is if the Or has the intent to K. We don’t force people to do anything.
(3) We are looking at their willingness to enter into a deal.
(4) We are looking verbs of commitment.
· I agree to sell; I am committed to purchase; and I will buy.
c. DEFINITE:
(1) The O itself must be definite in terms.
(2) The issue here is whether the terms of the O are clear enough to enable a court to enforce the K.
(3) If the Oee does not accept ALL the terms of an O, then there is no MA, therefore no K.
(4) Terms relate to the K itself and the mode of A or how the Or as master of the O, wants the Oee to “accept” the terms.
(5) Terms vary; look at the nouns, such as the amount, quantity, brand, specifications, etc.
2. Under the UCC (sale of good):
a. For the elements of a K, the definite element is eliminated.
b. UCC §2-204(3) Formation of a K:
(1) Says “even though one or more terms are left open a K for sale does not fail for the indefiniteness if the parties have intended to make a K and there is a reasonably certain basis for giving an appropriate remedy.
C. Special Types of Offers
1. Preliminary Negotiations:
a. These are not offers because the requirements do not exist.
b. Negotiations are done in anticipation or before the parties enter into K.
EX: I might want to sell my car.
2. Social Engagements:
a. The existence of familial relationship may affect the ability to create an enforceable K.
b. Courts do not get involved within marital relationships.
c. A husband and wife are not precluded from enforcing such agreements as they may make in a commercial transaction, but matters essential to the marital relationship are viewed with great suspicion.
d. These do not give rise to K liability even though they technically satisfy the requirements for an O.
3. Statements of Opinion or Intention:
a. These do not rise to the level of an offer unless they are over the top
EX: lawyer guaranteeing a client a specific result.
4. Solicitations:
a. GR: These are not considered to be offers on public policy b/c
(1) The lack detail concerning size, quantity
(2) They would create an unlimited number of Oees
b. EXCEPTION: Where an ad is clear, definite and explicit and leaves nothing open for negotiation, it is clear, definite, and explicit and leaves nothing open for negotiation, it constitutes an offer. When the number of Oee is limited
(1) Here the Store becomes the Or and the customer becomes the Oee.
· X: Lefkowicz v Greater Minn. Surplus Store (when the D bought the mink stole). Store wanted to be Oee, they wanted the store’s ad to be an invitation, but it was so clear, definite and explicit and left nothing open.
· NON EX: Ad in paper says: Radial snow tires, major brand, four for $99 each, now through July 5 at Tire Warehouse, Inc., 44 E. Main Street.
This is does not fall under the GR b/c it is not explicit, clear & definite; it just says major brand and not a specific brand.
c. Deceptive Practices:
(1) A bait and switch ad is a solicitation for the sale of a product that the seller does not really plan to sell.
(2) The purpose of this ad is to get there customer into the store (or the seller into the customer’s living room where the advertised product will be disparaged and more expensive one promoted.
5. Written K to follow:
a. Provides the best evidence of the actual agreement and gives the parties greater certainty as to the terms to which they are bound.
b. Even though no writing is generally required under the law for the particular type of agreement at issue, the parties did not intend to be bound until writing was executed.
EX: Continental Lab. v Scott Paper Co, (Cont wanted Scott to distribute their hotel amenity products around US). D said they were only bound by a written document and P says they were bound expressly.
c. Factors in determining whether a K is concluded even though an anticipated writing is never executed:
(1) Restatement (Second) of Contracts §27:
· The extent to which express agreement has been reached on all the terms to be included:
· whether the K is of a type usually put 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 K,
· whether a standard form of K is widely used in similar transactions
· And whether either party takes any action in preparation for performance during the negation.
III. Acceptance
A. Acceptance Defined:
1. The signification by the O
EX: Day v Cayton, where the P built a wall on a certain lot, and half of the wall was on another lot of land which belonged to D. D stood by and let the wall be built without offering any type of verbal communication saying that he did not want it built.
· When one stands by in silence and sees valuable service rendered upon his real estate by the erection of a structure, such silence, accompanied with the knowledge of his party that the party rendering the services expects payment, therefore, may be treated as evidence of an A of it, and as tending to show an agreement to pay for it.
(b) Where the Or has stated or given the Oee reason to understand that assent may be manifested by silence or inaction and the Oee in remaining silent and inactive intends to A the O.
(c) Where because of previous dealings or otherwise, it is reasonable that the Oee in remaining silent and inactive intends to A the O.
EX: If 2 companies have done business on a formal basis, agreeing among other things that all items were delivered for immediate purchase at the invoice price. Eventually they stopped using formal Ks. A 5 year period of extensive dealings was followed by a slack of period of one year in which they had no dealings. Then suddenly one of the parties sends a shipment of goods along with a bill.
(d) Where the Oee takes action inconsistent with the Or’s ownership of the property.
D. Knowledge of Offer
1. In order for a Oee to A they have to have knowledge of the O.
2. There is an Exception to this rule:
a. Most jurisdictions will hold that if a reward offer is made by a governmental entity, the usual rules of a K do not apply, and any citizen who performs the requested service e is entitled to the reward, even if the claimant had no idea that the reward was even offered.
b. When it comes to private rewards, the claimant needs to be fully aware of the O in order to A, and receive the reward.
E. Motive
1. A person cannot be forced to A.
2. It is pretty much irrelevant.
F. Mode of Acceptance:
1. Affects parties’ rights and obligations.
2. In a true K there is always a promise on at least one side, and sometimes on both.
3. Where 2 promises are exchanged for one another is a bi-lateral K.
a. EX: I promise to buy your car, and I promise to sell it to you.
4. A unilateral K is a promise for an exchange for an act or a forbearance to act.
a. EX: I promise to give you $20 if you wash my car.
b. EX: I promise to pay you $50 if you don’t tell Mom what time I got home.
5. Unilateral v Bilateral K’s (Underlying Assumptions)
a. Or only wants a return actor from Oee
b. Or only wants a return promise from Oee.
