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Intent to K

Lucy v. Zehmer
Supreme Ct of VA, 1954
Facts: Lucy () sues Zehmer () for specific performance of K. owns Ferguson farm,
sold to for $50,000 cash when he wrote K on back of restaurant receipt. claims it
was all in jest, they were drinking, he had no intention to actually sell farm. claims it
was real and valid K, took actions like calling his lawyer, securing $ for payment, and
actually believed K was binding
Procedure: Lower Ct ruled failed to establish right to specific performance, dismissed.
Appealed to this court.
Issue: Whether K was valid and binding if claims his intention was not to sell (in jest).
Holding: Yes. K is valid based on outward expression of a person manifesting his
intention rather than his secret and unexpressed intention
Reasoning: There appeared to be a good faith offer and good faith acceptance,
followed by delivery of K. The actions of have but one reasonable meaning, and his
undisclosed intention is immaterial except when an unreasonable meaning which he
attaches to his manifestations is known to other party. (see restatement 71).
Disposition: entitled to specific performance of K sued on. Reversed & remanded.

Texaco Inc v. Pennzoil, Co


Court of Appeals, TX, 1987
Facts: Appeal from J awarding Penn () damages for Texa () tortuous interference w K
between Penn and Getty Entities (Company, Trust, & Museum)
Dec 28, 1983: Penn makes unsolicited public offer for 16 mill shares of Getty
Jan 1-2, 1984: Memo of Agreement drafted w terms, Getty board rejects it, makes
counter proposal for $ (110/share), Museum layer recommends more, then counter
offer is 110/share plus $5 stub. Getty board agrees 15-1 to approve counter
proposal.
Jan 4, 1984: Getty Oil & museum lawyers draft press release. Penn issues identical
press release later that day. Penn lawyers work on formal transaction agreement.
Getty lawyer contacts more companies, Texaco meeting.
Jan 5: Wall street journal announces Getty-Penn agreement. Texaco meets to
authorize officers to make offer to Getty, Museum agrees to sell to Texaco. They
meet w trustee Gordon Getty, he signs letter of intent to sell to Texaco.
Jan 6: Getty board votes to withdraw counter proposal to Penn, merger agreement
w Getty oil and Texaco signed, stock purchase agreement w Museum signed.
Jan 8: stock exchange agreement w trust signed
Procedure: Lower Ct jury found Getty intended to bind themselves to Penn agreement,
Texaco knowingly interfered & Penn suffered damages, Texaco actions were
intentional, willful & wanton disregard, punitive damages to Penn ($3 billion)
Issue: Was there sufficient evidence to support jury finding that Getty intended to bind
themselves to the agreement w Penn?
Holding: Yes. Conditional language of press release did not clearly express intent of
parties NOT to be bound
Reasoning: NY law says intent > form. If oral agreement, not writing it down doesnt
make it not K immaterial unless intention not there (outwardly). Determine intent by
examining words & deeds of parties that constitute the objective signs of intent.
Factors to determine:

1. Party expressly reserved right to be bound only by written agreement signed


o Subject to definitive merger agreement intent not sharply expressed.
Standard language of K. Can be conditional upon language but not always
o Agreed in principle also can go both ways (intend no binding K or standard
lang)
o After execution/delivery of agreement standard K introductory phrase.
2. Partial performance
o Little evidence to show partial performance, but this factor alone is not
enough to establish that no K existed
3. All essential terms of alleged K agreed upon
o Jury determined only mechanics and details left to be established in K
4. Formal executed writing of K expected bc of complexity/magnitude of transaction
o Yes formal K needed, but this factor alone is not enough
Disposition: Affirmed. Punitive damages reduced to 1 billion

The Offer
Hawkins v. McGee
Supreme Ct of NH, 1929
Facts: H suing Dr. M for breach of K. H had scar on hand, but hand was usable. Dr. M said
he would operate (skin graft) & H would be in hospital for 3-4 days then back to work
w good hand. Dr. M also said that he would guarantee to make the hand one
hundred percent perfect. Evidence that he repeatedly solicited opportunity to
experiment w skin grafting. Jury was instructed that they could find for H for (1) pain
& suffering & (2) for injury above what he had before.
Procedure: Trial Ct directed verdict for Mr. M on negligence. Jury awarded H $3,000 for
breach of K. Ct said verdict too high, remit anything over $500. H refused, verdict set
aside.
Issue: (1) whether the statements regarding medical procedure constitute a promise? (2)
What is the appropriate formula for damages?
Holding: (1) 3-4 days statement was an opinion, and therefore not a promise & J as
matter of law appropriate. Guarantee statement shows intention & inducement for
granting consent for operation, and is a promise.
(2) Measure of damages should be difference bt value of perfect hand as promised
and the value of hand in present condition including consequences w.in contemplation
of parties when K was made.
Reasoning: (1) 3-4 days statement was predictionno reasonable person would think
it was K under reasonable person test. The guarantee statement, bc of repeat
solicitation, reasonable basis that words show intention that they should be accepted
at face value, that it was inducement to get consent to operate, and was accepted by
H.
(2) Purpose of damages is to put in position he would have been had kept
his K. Damages based on what should have given . So perfect hand as
promised minus hand in present condition is damages (Expectation Model). Pain &
suffering not consideration bc it was price willing to pay for good hand. Also
prejudicial to to submit to jury damage for change in worsened condition
Reliance model, would recover less).
Disposition: New Trial. NOTE: they ended up settling.

Leonard v. Pepsico
SDNY, 1999
Facts: L saw ad for Pepsi that featured Harrier Jet for 7,000,000 pepsi points. Ad for
pomo campaign catalogue of items to be bought w Pepsi points. Jet not listed in
catalogue or order form. Directions say merchandise may be ordered only w original
order form. If lacking points, you can buy them for 10 cents/point. L submitted order
form, 15 original pepsi points, check for $700,008.50, & wrote at bottom of form 1
Harrier Jet. Pepsi wrote him ltr explaining not included in catalogue or order form,
only available items redeemable. L writes back saying commercial offers jet & must
honor commitment. Ad co says clearly a joke to make commercial funny, no
reasonable person would think offer was real. L sues for specific performance.
Procedure: Pepsi moves for Summ J (FRCP 56).
Issue: Did the commercial constitute an offer?

Holding: No. No language of commitment or invitation, and mere notices and


solicitations for offers create no power of acceptance in the recipient. Merely Ad,
reasonable person would recognize joke in Ad, no writing to satisfy statute of frauds.
Rule: Willingness to enter a bargain is not an offer if 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. (Restatement)
Reasoning: No K formed until advertiser accepted order form & processed payment.
Exception is when Ad is clear, definite, explicit, leaves nothing open for negotiation
Lefkowitz: 3 brand new fur coats, first come first served, $1 each. Mr gets there
but house rules say offer only open to Ms. Ct held bc Mr fulfilled terms of Ad &
Ad specific & nothing open for negotiation, K formed.
o This distinguished from Lefkowitz bc not specific Ad, details of offer in
separate writing. Commercial had no mention of steps to be taken by
offeree.
Farnsworth: detailed proposal suggests it is an offer, omission of many terms
suggests it is not.
o Absence of words of limitation first come first served means indefinite, no
K formed. Otherwise risks multiple K for limited supply.
Obvious joke would not give rise to Kobjective reasonable person test (Lucy).
Alleged K doesnt satisfy statute of fraud bc commercial not in writing.
Disposition: Grants Pepsi motion for Summ J.

Fairmount Glass Works v. Crunden-Martin Woodenware Co.


Court of Appeals, KY, 1899
Facts: (1) C (buyer) makes inquiry to know lowest price on an order for 10 car loads
(particular quantity) of mason jars. (2) F (seller) gives price quote (w detailed terms)
for immediate acceptance. (3) Buyer accepts quote. (4) Seller says output is sold
out.
Procedure: J in favor of C. F appeals, says J erroneous.
Issue: Did the seller have the right to decline to fill the order (was the 2 nd letter an
offer)?
Holding: Yes.
Reasoning: Quotation price not offer to sellcompleted K will arise out of giving order
for merchanise accordance w proposed terms. Transaction not complete until order
made is accepted. Turns on language used.
Reading as whole, (1) letter lang means C wanted to know what price it would sell
the jars at. In letter (2) F wrote we quote youfor immediate acceptance which
must mean intended as proposition to sell at prices if accepted immediately. Look
for intention of parties to make offer.
F argues that Specification attached to ltr (3) uses new clause. F insists was not IN
their offer, and it was not accepted and not bound. BUT F did not give goods UNITL
it got this letter w stipulation & did not complain abt words used.
F says K was indefinite bc quantity. But 10 car loads is expression, so is quantity.
Offer to sell diff sized jars gave buyer right to name quantity of each size, & buyer
had right to fix delivery time.
Sale of goods is fast moving type of interaction. Responded to specific inquiry w
quantity. Price quote reasonably interpreted as offer.
Disposition: J affirmed.