Contracts Outline

what is lawyering about

applying competing rules competitively

what are the time frames of making a contract

• The before the fact transacting

• The during

• The after the fact dispute resolution

models and contracts

• Sometimes a particular model matches the given fact pattern really well and sometimes it doesnt

• Sometimes one model gives an advantage to one person over the other

how does prof feel about the rules of contracts

• The rules are only meaningful in the context of the dispute you are trying to solve

• There is no coherent set of rules in his opinion

how to phrase your rule

if x then y

definition of a rule

A generalized statement of an outcome if the required conditions are present

restatements

• Source of the contracts law

• NOT law, just rules courts have applied in resolving disputes, or rules professors think courts SHOULD apply in resolving dispute

UCC

• Most important statutory body of contract law

• Very little about offer, acceptance, and consideration

• Applies to transactions in goods

2-105, definition of a good

All things which are moveable at the time of identification to the contract for sale other than the money in which the price is to be paid

contract define R2K 1

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

Promise definition

(1): A promise is a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made

Agreement Defined

An agreement is a manifestation of mutual assent on the part of two or more persons. A bargain is an agreement to exchange promises or to exchange a promise for a performance or to exchange performances.

How a Promise May Be Made

A promise may be stated in words either oral or written, or may be inferred wholly or partly from conduct.

Intoxicated Persons

• A person incurs only voidable contractual duties by entering into a transaction if the other party has reason to know that by reason of intoxication

  • (a) he is unable to understand in a reasonable manner the nature and consequences of the transaction, or

  • (b) he is unable to act in a reasonable manner in relation to the transaction

Requirement of a Bargain

• (1)Except as stated in Subsection (2), the formation of a contract requires a bargain in which there is a manifestation of mutual assent to the exchange and a consideration.

  • (2) Whether or not there is a bargain a contract may be formed under special rules applicable to formal contracts or under the rules stated in §§ 82-94

Conduct as Manifestation of Assent

(1): The manifestation of assent may be made wholly or partly by written or spoken words or by other acts or by failure to act.

Acceptance of Offer Defined

(1): Acceptance of an offer is a manifestation of assent to the terms thereof made by the offeree in a manner invited or required by the offer.

Consideration Definition

To constitute consideration, a performance or a return promise must be bargained for.

Bargained for exchange

A performance or return promise is bargained for if it is sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise.

predominant purpose test

• Is the service or the sale of the good the more significant aspect of the transaction?

  • If the sale of the good is the most important part, and the service component is incidental, article 2 applies

• If the sale of goods is ancillary to a services transaction, the common law applies

problem with predominant purpose test

• How do you determine the most important part?

  • The value of each one?

gist/gravemen test

• What is the gist of the problem

  • If its the good, UCC

  • If its the service, common law

problem with gist/gravemen test

Gives you two different answers in the same case, and therefore more to argue about

implied warranty of merchantability UCC

Unless it gets correctly excluded or modified….a warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind

what is a merchant

A person who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction

what happens if you are a merchant?

If you are a merchant who sells a good, unless you provide otherwise, there is an implied warranty that it is merchantable

what applies unless displaced by UCC

common law

truman show comparison

• Bubble is the UCC

• The door (escape out of UCC) is 1-103

  • Must show UCC doesnt displace

what does it mean for UCC to displace

• The black hole of consumer to consumer contracts

• UCC doesnt have a provision with respect to conditions on qualify if non merchant makes sale of a good to non merchant

subjective states of mind and contract law

not as important

central rule of objectivity and manifestations

• “We are legally bound to a contract not by our unexpressed intentions but by the reasonable interpretation of our words and actions”

assignment default rule

• Your rights in a contract are personal property

  • So when you sell that it is called an assignment

    • Default rule: If you do not provide otherwise, by default, the contract is assignable

    • If you dont want it to be assignable, put that in contract

rule in lucy v zehmer

• your subjective state of mind doesnt make any difference

  • It is the objective import of what you manifest by words that matters

joke defense

• Cant get out of contract because subjectively in your mind it was all part of a joke

  • Is the objective manifestation there?

    • Would the community think it was a joke?

leonardo v pepsico takeaway

• Joke worked

  • The assessment of whether its a joke is also substantive from the point of the jokee, not just joker

    • Just because you subjectively thought it was serious, we dont give weight to subjective intentions 

    • Would a reasonable person think this 

      • This is objective standard

        • Community standard

        • Fact-issue

achter v SWT takeaway

• Acceptance of an offer is a manifestation of assent to the terms thereof made by the offeree in a manner invited or required by the offer

  • So is it a manifestation of assent……?

    • what you manifest is significantly more important than what you think

    • If the X changes, does the legal consequence change

batsakis v demotsis rule

courts generally do not like express of adequacy of consideration

racially restrictive covenants

• If there is a racially restrictive covenant, then the rule is that the 14th amendment does not allow that covenant to be enforced, therefore it is unenforceable - shelley v kramer

  • But overruled corrigan v buckley

    • That said it was a bargain that was pro-racist provision

specific performance

• an equitable remedy available in contracts for the sale of land

mode of assent, offer and acceptance

• The manifestation of mutual assent to an exchange ordinarily takes the form of an offer or proposal by one party followed by an acceptance by the other party or parties.

• (2) 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.

offer denied

An offer is the 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.

option contracts

An option contract is a promise which meets the requirements for the formation of a contract and limits the promisor’s power to revoke an offer.

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.

form of acceptance invited

• An offer may invite or require acceptance to be made by an affirmative answer in words, or by performing or refraining from performing specified act, or may empower the offeree to make a selection of terms in his acceptance.

• (2) Unless otherwise indicated by the language or the circumstances, an offer invites acceptance in any manner and by any medium reasonable in the circumstances.

invitation of promise or performance

In case of doubt an offer is interpreted as inviting the offeree to accept either by promising to perform what the offer requests or by rendering the performance, as the offeree chooses

offerees power of acceptance

• An offer gives to the offeree a continuing power to complete the manifestation of mutual assent by acceptance of the offer.

• (2) A contract cannot be created by acceptance of an offer after the power of acceptance has been terminated in one of the ways listed in § 36

methods of termination of the power of acceptance (5)

• (a) rejection or counter-offer by the offeree, or

• (b) lapse of time, or

• (c) revocation by the offeror, or

• (d) death or incapacity of the offeror or offeree.

• (2) In addition, an offeree’s power of acceptance is terminated by the non-occurrence of any condition of acceptance under the terms of the offer

rejection

• An offeree’s power of acceptance is terminated by his rejection of the offer, unless the offeror has manifested a contrary intention.

• (2) A manifestation of intention not to accept an offer is a rejection unless the offeree manifests an intention to take it under further advisement.

counter offers

• A counter-offer is an offer made by an offeree to his offeror relating to the same matter as the original offer and proposing a substituted bargain differing from that proposed by the original offer.

• (2) An offeree’s power of acceptance is terminated by his making of a counter-offer, unless the offeror has manifested a contrary intention or unless the counter-offer manifests a contrary intention of the offeree

lapse of time

• An offeree’s power of acceptance is terminated at the time specified in the offer, or, if no time is specified, at the end of a reasonable time.

• (2) What is a reasonable time is a question of fact, depending on all the circumstances existing when the offer and attempted acceptance are made.

• (3) Unless otherwise indicated by the language or the circumstances, and subject to the rule stated in § 49, an offer sent by mail is seasonably accepted if an acceptance is mailed at any time before midnight on the day on which the offer is received

option created by part performance

• Where an offer invites an offeree to accept by rendering a performance and does not invite a promissory acceptance, an option contract is created when the offeree tenders or begins the invited performance or tenders a beginning of it.

• (2) The offeror’s duty of performance under any option contract so created is conditional on completion or tender of the invited performance in accordance with the terms of the offer.

effect of performance by offeree where offer invites either performance or promise

• Where an offer invites an offeree to choose between acceptance by promise and acceptance by performance, the tender or beginning of the invited performance or a tender of a beginning of it is an acceptance by performance.

• (2) Such an acceptance operates as a promise to render complete performance.

time when acceptance takes effect

• Unless the offer provides otherwise,

  • (a) an acceptance made in a manner and by a medium invited by an offer is operative and completes the manifestation of mutual assent as soon as put out of the offeree’s possession, without regard to whether it ever reaches the offeror; but

  • (b) an acceptance under an option contract is not operative until received by the offeror.

prof use of R2K 17

• An “how it all fits together” provision

  • Recase it as an overview of the kinds of disputes that can arise when people are arguing about whether their manifestations really created a legally binding contract

formation disputes

did we even form a contract?

enforceability

was agreement enforceable?

what happens once an offer has been made

the offeree has been given the power of acceptance

if offerer waits to accept, what is considered a reasonable time?

fact question

counter offers and POA

• What happens to POA

  • Goes to original offeror

  • All of the rules for offerors and offerees in terms of acceptance and the termination of the power of acceptance run the other way

all offers are what

promises, if its not a promise, its not an offer

prototype of the offer concept

“I offer to sell ____ for ____”

prototype of advertisement concept

“I am willing to sell ____ for ___”

an offer is a promise without what

consideration

when does an offer become a contract?

When there is acceptance by return promise or performance

the POA stays with the offeree until when

terminated in the R2K 36 ways

mirror image rule

• By making an offer, you are deemed to have created a power in the offeree

  • That gives the offeree…power

• But power is limited to what the offeror created

offeror as master of the offer

The offeror creates the power of acceptance, and has the freedom to state the conditions under which acceptance of the offer must occur

three exceptions where silence means acceptance

offeree has reason to think silence means acceptance, pattern of conduct, expectation of compensation

R2K 691c

• You show that there's a pattern of conduct in previous dealings making it reasonable to think, as a matter of fact, that the silence meant acceptance

R2K 691A

Where an offeree takes the benefit of offered services with reasonable opportunity to reject them and reason to know that they were offered with the expectation of compensation.

R2K 56 Acceptance by Promise; Necessity of Notification to Offeror

unless the offer manifests a contrary intention, it is essential to an acceptance by promise either that the offeree exercise reasonable diligence to notify the offeror of acceptance, or that the offeror receive the notification seasonably.

default rule of silence

• Its meaningless

• If the narrative presents you in response to an offer is silence, then you really have nothing to discuss, and it’s likely that the question will be whether the power of acceptance eventually terminated due to lapse of time

restitution

• a rule in equity that says if someone does something for me and we dont have contract but as a matter of law we can say that if we had thought about it ahead of time we wouldve treated it as though it were a contract

  • Quasi contract

  • Restitution is really about whether a benefit should, after the fact, be considered as though it was a bargain or it was a gift

what can you do if you are a gratuitous promisor

• You essentially have the freedom to let your promise ride, and therefore keep the power of acceptance open

• Or you can renege on your promise, which is a revocation of the offer

what scenaior regarding POA is often used on the exam?

An offeree’s power of acceptance is terminated when the offeror takes definite action inconsistent with an intention to enter into the proposed contract and the offeree acquires reliable information to that effect.

when is offer, revocation, and rejection effective

when the other party receives them

mailbox rule

• If you have the power of acceptance, your acceptance is effective when it leaves your control, even if the offeror doesn’t receive it, as long as the power of acceptance has not been terminated.

• §42: The PoA is terminated when the offeree receives a manifestation of intent not to enter into the contract

when is acceptance affect

when it leaves control

when you drop it in the mailbox, event if offeror doesnt receive it

bilateral contract

• Contract accepted by return promise to perform

• Promise for a promise

unilateral contract definition

• Promise on one hand in exchange for acceptance by doing what offeror is asking you to do

rule of patterson v pattburg

Where an offer is made that invites performance of the offeror’s promise upon the payment of money by the offeree, performance is complete when the offeree either tenders performance or promises to pay with the present intention and ability to pay

new solution for breaking symmetry

• If you're going to do it theres a period of time

  • So offer remains open until the time specified

• Offeree doesn't have to accept

• Offeror is constrained

• By beginning to perform you get the option to complete the performance

  • But if you dont complete the performance, you dont get a right to whatever the offeror promised

option contract

• Offeror cannot revoke the offer but offeree can choose to accept or reject

when is the only time when option contract applies

where the offer accepts by performance

what if offer is ambiguous

• §32 of restatement

  • Effectively offeree has option to decide which one to do

  • In case of doubt an offer is interpreted as inviting the offeree to accept either by promising to perform what the offer requests or by rendering the performance, as the offeree chooses

    • Comment

      • It is not always easy to determine but because bilateral contract protects both parties, there is favor to presume bilateral

promise for benefit received

A promise made in recognition of a benefit previously received by the promisor from the promisee is binding to the extent necessary to prevent injustice

option contract binding

• An offer is binding as an option contract if it

  • (a) is in writing and signed by the offeror, recites a purported consideration for the making of the offer, and proposes an exchange on fair terms within a reasonable time; or

  • (b) is made irrevocable by statute

conversion

tort that occurs when you own something and someone else takes it and they had no right

what were the theories being litigated in King

contract, charitable pledge, statute of limitations, laches

charitable pledge

Oral or written promise to do certain acts or to give real or personal property to a charity for a charitable purpose

special questions

• the jury decided the factual questions under each legal theory and then the judge applied the law to those factual conclusions

laches

• The equity equivalent of the statute of limitations

  • Elements:

    • You delayed in asserting your claim

    • We relied on that dely to our detriment

elements of a promise

• Manifestation of an intention to act.

• Made in a way to justify to another

• That a commitment has been made

to constitute consideration

• a performance or a return promise must be bargained for.

If the facts present to you a circumstance in which someone thinks they can get out of commitment because there was no consideration

you are looking for whether they made a deal
was something bargained for

past consideration

• Fact narratives in which one of the parties doesnt want to perform an apparent agreement

  • Argument is that it really wasn’t a bargain, and since it wasn’t a bargain, it fails the consideration portion of the legal logic of enforceability

different consideration problems between the competing prototypes

• One side: bargain concept

  • Promise for promise as prototype

• Middle: past consideration?

• Other side: gratuity concept

  • Gift as prototype

bargain concept prototype

promise for promise

gratuity concept prototype

gift

executory promise

• a promise that has been made but not executed upon