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What is a Contract? A promise that is enforceable – that the law can require to be enforced or ensure some remedy if it is breached Express Contract – where there is absolutely no ambiguity in the contract Implied Contract – it is reasonable to assume from the situation that there is a contract implied REASONS FOR CONTRACT LAW: Basic social organization within communities, fairness, morality, a belief that good, honest people keep their promises, ethical/moral reasons, political benefit in a system that wants to encourage free trade growth of business (that needs stability) Consideration is something given in exchange for a promise – some kind of a benefit given or a detriment that the promisor forbears Legal remedy means you can go to court and get money damages; Equitable remedy means that a judge can require that something be done Elements of a Contract: Intent Offer and Acceptance Consideration Future Action • Any contract that tries to force someone to do something that is against the law, is not enforceable
THEMES OF CONTRACT LAW
Freedom of Contract vs. Need to Protect People from Abuses – the idea is that contracting is voluntary and people should have the autonomy to make their own decisions, particularly in a democracy, there is a value in encouraging parties to make their own agreements, set their own terms, etc.- if people are left to their own devices, they will generally negotiate a contract that works for both parties the value of freedom of contract is that it gives people the greatest opportunity but a drawback is that it can sometimes be unfair and sometimes people need protection the law will NOT enforce an illegal contract and there are also laws to protect those who are too weak to enter into a contract (the mentally incompetent or the very young) Stability in Law / Change vs. Need to Adapt the Law – one of the foundations of the legal system is stability, following precedent – stare decisis – there must be a sense that rules are fairly made an uniformly followed – a belief that the courts are following uniform rules in a consistent/fair matter - As society and technology changes, sometimes it is necessary for the law to adapt and there is a continuing tension between the forces that require stability in the law, and forces that require the law to adapt through time
Contracts and Effects on the Economy – enforcing contracts which have effects on the economy in the best way possible Contracts and Ethics and Morality – enforcing contracts which may have all of the elements which may make business sense but may raise ethical or moral issues What is contract law based on? Statutory Laws Common Law – precedents/decisions made by judges in court cases – the compilation of case decisions – there are difficulties with this because the foundation goes back to English common law hundreds of years ago Today, U.S. contract law is essentially decided by the state – some states are more probusiness, some rule in favor of freedom of contract, some states are more consumer and are interested in protecting the needs of the people in the contract RESTATEMENT OF CONTRACTS (first done in the 1930s, and modernized several years later) o Statutes – the Uniform Commercial Code (UCC) – it is not law but all states but Louisiana have ratified it – sets basic parameters/guidelines and establishes uniformity in contract law – the goal of the UCC is to provide uniformity or guidelines while still permitting parties to enter into contracts with terms that they would like to establish on their own o Default rules – backup rules used when contract does not specify its own rules - UCC must be followed, HOWEVER, parties can define the rules specific to their contract if they like When does the UCC apply? o § 2-102 – “unless the context otherwise requires, this Article applies to transactions in goods; it does not apply to any transaction which although in the form of an unconditional contract to sell or present sale is intended to operate only as a security transaction…” What are goods? § 2-105 “Goods” means all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale other than the money in which the price is to be paid, investment securities, and things in action, INCLUDING ANIMALS – i.e. UCC does NOT cover real estate because it is not movable, does not cover services, etc. All things movable (including specially manufactured goods) at the time of identification to the contract for sale other than the money in which the price is to be paid, investment securities. Also includes the unborn young of animals and growing crops and other identified things attached to realty as described in the section on goods to be severed from realty (once you harvest it) Bailey v. West Caretaker of horse suing the person who bought the horse, Strauss was the original owner, Kelly the driver, the buyer’s trainer and delivery person. Held: the defendant that there is no implied contract because there is no mutual agreement – there has to be intent on both sides - Objective Manifestation of Intent – there is subjective intent (do you really intend in your heart of hearts to keep a promise) and objective intent (your words and your actions) Elements of a Quasi-Contract: A benefit conferred upon defendant by plaintiff Appreciation by defendant of such benefit Acceptance and retention by defendant of such benefit under such circumstances that it would be inequitable to retain the benefit without payment of the value thereof 2
Bolin Farms v. American Cotton Shippers Association This case is taking place in Louisiana so the UCC does not apply here; Louisiana state law applies in the Federal Court - Cotton sellers suing cotton buyers at step one in the trial court because they would like to deem the contract null and void - “Futures” contract – months ahead of time, buyers and sellers enter into a contract and agree to a price today to pay “x” dollars – both parties bargain, negotiate, offer, acceptance, consideration. A contract is a contract is a contract no matter what! Theories of Contracts: Bargain Theory, Will Theory, Economic-Efficiency Theory, Stability vs. Change, Effect of Social Policy, Fairness (sometimes a contract is so grossly unfair that it does not have to be enforced) General Ideas of Contract Law 1. Is there an enforceable contract? 2. If there is a contract, has it been breached? 3. If it has been breached, what is the remedy?
PROMISSORY LIABILITY – INTRODUCTION TO CONSIDERATION
Consideration - an act, a forbearance, or the creation, modification, or destruction of a legal relation ; performance or return promise may be given to the promisor or to some other person ; something given that is bargained for and mutuality – each one does something in exchange for something else Kirksey v. Kirksey Plaintiff gave up her own home and traveled 60 miles to get to the brother-in-law’s house - He did not offer her a home because he wanted her to travel and be inconvenienced – he did not bargain for her inconvenience - Her detriment of being inconvenienced does not constitute consideration because it was NOT bargained for Hamer v. Sidway Detriment is that the nephew gave up gambling, smoking, drinking . There was a detriment here and this is sufficient consideration because it was a performance or returned promise bargained for because it was SOUGHT in exchange for the money by the promisor
ADEQUACY OF CONSIDERATION
Restatement § 79 – Adequacy of Consideration; Mutuality of Obligation If the requirement of consideration is met, there is no additional requirement of a gain, advantage or benefit to the promisor or a loss, disadvantage, or detriment to the promisee, or equivalence in the values exchanged, or mutuality of obligation - This is pretty much wide-open laissez-faire – restatement says that it does NOT have to be a benefit or a detriment and it does NOT have to be equivalent, either. Langer v. Superior Steel Corp. In order to get the pension, I had to forbear the opportunity to work for a competitor there is consideration because Mr. Langer did NOT get the pension as a gift – he was 3
HELD: the promise is enforceable because she was paying the one pound for rent to the executors of the estate . one pound a year seems to be sufficient consideration There are some exceptions for purposes of trade where contract will be enforceable for certain limited commercial purposes Formality – by exchanging consideration. Prudential-Bache Securities. EVEN in small value – here.getting the money in exchange for his forbearance . it appears to release her claim on getting the $10.300 from the sale of the house . here is this ex-wife who is told at the divorce that she is entitled to a certain sum of money.A few years later.majority opinion seems to be looking towards fairness – they are saying. and maintains the house. the wife signed a release – by the language of this document.The peppercorn is not necessarily the reason for the transaction therefore it is not necessarily a true exchange – this however may not be such a big deal in a family setting Apfel v. consideration is that as long as it is given in exchange for something else. aware that you are bound by it Evidentiary – something is more likely intended to be a contract when parties have bargained for an exchange for one promise of performance Peppercorn Theory of Consideration . it is a sign that both parties intend to be bound because each is giving something in exchange for something else Cautionary – giving something in exchange for something else. they enter a very detailed written contract that requires payment for a certain number of years . she will own the house. Traditionally. Thomas Husband on his deathbed says that he wants his wife to have one of his houses and there are witnesses . Inc. it is a bargained for exchange. Apfel sold Prudential a computer program for creating stocks and bonds electronically without paper and Prudential sees value in it. the wife would be entitled to $10.300 – at the closing of the sale. other people are using this same idea and a court determines that it is not a novel idea and it is now in the public domain. Bogigian The couple had a house that they owned and part of the divorce settlement was that when the husband sold the house.he agreement basically says that as long as she pays one pound per year rent. 4 . Held: Valid contract and must be enforced – the lack of novelty. in and of itself. and this is not fair that she should not get what she thought she was getting Thomas v.Langer says that it is a benefit of the company not to have the former employee competing – the court is looking for a benefit or a detriment in the case – a benefit or a detriment can be evidence or an indication that something was truly bargained for – that there is some consideration Promissory Estoppel – used sometimes when a contract is not enforceable for some reason – then the court finds another way to enforce it Promise should induce some action – Promisor reasonably intends to induce an action Promisee reasonably relies on promise to his detriment Injustice can be avoided ONLY by enforcing the PROMISE Bogigian v. HELD: Says that the release is NOT valid because it was not supported by consideration – it was not argued and accepted by both parties .
and to pay the rent for four years on the apartment in exchange for her to give him $1 and “other good and valuable considerations” – this contract is made at the end of their relationship . that it is absolutely shocking.CONSIDERATION CANNOT BE SOMETHING THAT IS UNLAWFUL AND IT ALREADY HAPPENED IN THE PAST (i.this is done to ensure that claims made in bad faith or have no objective backing cannot be used as adequate consideration even if it ultimately turns out that the claim is NOT valid – this will encourage settlements and still have a safety net to keep out extortion Restatement § 74 – Settlement of Claims – forbearance to assert or the surrender of a claim or defense which proves to be invalid is NOT consideration unless the claim or defense is in fact doubtful because of uncertainty as to the facts or law. marketing the product.Generally won’t have a case where the court finds unconscionability without BOTH substantive AND procedural issues In re Greene Promised his mistress money per month. her love and caring for him) Fiege v. he declares bankruptcy. that a judge cannot in good faith enforce its terms.does not demonstrate a lack of value .He pays for a while. then he stops – when he stops.Prudential’s own actions indicate that they got value from it by signing the agreement. when he is found not to be the father after all .Court had consideration forbearing from bringing a claim in Fiege 5 . a life insurance policy. Star Credit Corp. or the forbearing or surrendering party believes that the claim or defense may be fairly determined to be valid .The fact that he was married at the time he was living with her means that the relationship was UNLAWFUL – it was adulterous and against the law . and cannot be enforced UCC § 2-302 – Unconscionable Contract or Clause . and she sues to enforce the contract to make him keep paying . deceptive. Brooks .There is nothing here that says HOW MUCH consideration should be given Haigh v.if a court finds a contract unconscionable. Boehm Was her forbearing from bringing a paternity suit adequate consideration for paying all of this money.focuses on the process of making deals . so unfair. so shocking to the conscience – if it is one-sided and unfair. a court can renege the contract or modify it in some way . selling the product Jones v.Plaintiff’s were welfare recipients who bought a freezer that was over $1200 and they only paid $600 at that point and Star was contending that they owed another $800 .Elements of good faith – the threat in Greene looks to be extortion or a sham.e. then the contract is unconscionable and the court may modify or NOT enforce that part of a contract o Prongs of Unconscionability: Procedural – the way that the contract was made – the fairness of the process Substantive – if the substance of the deal itself is so oppressive. it may be found to be unconscionable – the actual terms of the contract Restatement § 71 . makes a big change from the traditional view of enforcement . but in Fiege there also seems to be a good faith in the intent .contract is seen as unconscionable.Something is unconscionable if it shocks the conscience – if it is so one-sided and oppressive and unfair.
he sues him for the full rental – shop owner said that there was an agreement and this should be enforceable – NO CONSIDERATION . he can then sue you because there was a pre-existing duty to an agreement – in order to change the agreement.the job is in a REMOTE LOCATION and the season is SHORT – work must be done within a certain time period .There is an average increase of 20-25 units per year. they may take it more seriously Alaska Packers’ Association v. there has to be some consideration Levine v.PREEXISTING DUTY RULE AND CONSIDERATION Pre-existing Duty . Blumenthal Agreed upon rent. contract law is shifting from more of a focus on the formalities to more of a focus on flexibility and being commercially reasonable – i. but this one year there are 400 new units – there is an unexpected.The workers know that they are needed in a remote location where they cannot find replacement workers and if they don’t work the season will be lost and there is a large investment – the fishermen threatened to walk out Agreement made under duress to perform a pre-existing duty is NOT VALID because they are demanding more under coercive circumstances and the court says that they are not going to agree to promote this sort of extortion Angel v. the $1 theory is harder to justify today because there is more concern about fairness and flexibility Restatement (Second) § 89 – Modification is binding without consideration o If modification itself is fair and equitable o If it is based on unanticipated changes o If it is totally voluntary (not under duress or coercion) 6 . get answers and look at statistics and cost . Murray Agreement with a waste collector to collect waste yet in this case there is a change made to increase the fee to do the same type of work that was agreed upon before and HERE.DURESS AT ALL IN THIS CASE – there was an open hearing of the town board to hear all the facts and reasoning to understand the basis for it – there was a process to ask questions.e. and if they reduced the rent by $25 a month until times get better.Modifications are refused to be supported by no consideration Without new consideration. the court chooses to ENFORCE the agreement .if you got an agreement and you are obligated to pay $1000 in exchange for a service and you have a business setback and you pay him $500. Domenico There is a contract between the fishery and the workers and the workers are initially to get an agreed upon price .increase in salary was REASONABLE A Court may enforce a modification without new consideration if: o Unexpected change in circumstance o open and fair process made in good faith without coercion o a reasonable and fair adjustment *Over time. shop owner says they can’t pay the amount of rent. unforeseen major change in circumstance . it is like a gift – when people have to give consideration for a promise. then at some later time.
The effective use of bad faith to escape performance on the original contract terms is barred.e. and the extortion of a “modification” without legitimate commercial reason is ineffective as a violation of the duty of good faith Therefore.You MUST read the official comments after the section Official Comment 2: However. if someone painted a mural for you and charged $1000 but the contract was faulty. and the 7 . then it is illusory. and the party who suffers the breach is reimbursed for his losses (and is left in the same position he would have been had their been no breach in contract) Specific performance – when the court establishes that you have breached the contract and when something is truly unique. more complete and perfect justice is achieved than by awarding damages for a breach of contract.Expectancy Damages o Contract law is commercial law and interested in having an efficient system of commerce and economy – not interested in punishing/rewarding people o The goal of expectancy damages is to place the aggrieved party in the same position as if the contract were performed and as if there was no breach Efficient breach .grants the plaintiff what he actually bargained for in the contract rather than damages (pecuniary compensation for loss or injury incurred through the unlawful conduct of another) for not receiving it. fair commercial practice – meets these guidelines fair modification under the UCC MUTUALITY OF OBLIGATION AND CONSIDERATION Illusory Contracts • The court normally is looking for a bargained-for exchange – the baseline is no consideration. Rescission and Waiver (1) An agreement modifying a contract within this Article needs no consideration to be binding this almost sounds like under the UCC. taking advantage of a better opportunity. § 2-209 – Modification. however. then the contract is not enforceable • Contract Path – under the contract. but you could infer that the parties meant their “contract” in good faith Contract Remedies • Traditional Contract (Expectancy Damages) what you should get through the original contract • Restitution – remedy is to disgorge the unjust enrichment of the added value she did not pay for o The unjust enrichment is determined by what the added benefit to the party was – i.the breaching party winds up ahead. when they leave themselves with a way out of the contract. you may have disgruntled employees . no contract – EXCEPT o When you have a pre-existing duty to do something that is normally not consideration might still suffice • Contracts that are illusory. it is EASIER to make a modification under the UCC Good faith. . thus specific performance is an equitable rather than legal remedy. you could modify your contracts all the time with NO LIMITATIONS! But this is not true. the true remedy is to make you live up to the contract – if you do this. standard. By compelling the parties to perform exactly what they had agreed to perform. modifications made there under must meet the test of good faith imposed by this Act. if there is a way out.
Lady Duff-Gordon Lucy gives her endorsements to other people without Wood’s permission . price of whisky shot up and Walker would not sell to Rehm the whisky due by the contract. v. THEREFORE. Rehm is saying that Walker promised to supply his needs and then did not give him his stock. Held: in favor of D because court says it was not enforceable because there was a way out. so he will still have a deal to sell – this protection would be negotiated at the beginning of the contract drafting Wood v. not enforceable McMichael v. Walker Co. Lucy.Lucy says that this contract is illusory because even though she agreed to give Wood 50% of the profits. the promise was illusory . but they are risky – so the parties must follow these contracts under § 2-306 of the UCC *Output or Requirement Contracts could set a minimum or a maximum in the contract – this way.• mural was found to add $200 to your home’s value.seller of sand contracting with the sand company to buy all of the sand which he can sell – sand company breached and did not provide what was contracted . Rehm bought less than stipulated. he goes elsewhere. when price goes up and he gets a better deal from the original distributor.sand company said that this was an illusory contract because he can chose to sell nothing . Price quantity of the sand “depends” . Price of whisky went up. it is left open – EACH SIDE HAS A FREE WAY OUT in these types of contracts • Output Contract – when buyer agrees to buy seller’s output • Requirement Contracts – seller agrees to supply all the goods required by the buyer UCC § 2-306 .negotiated AHEAD OF TIME and parties enter into an agreement w/ uncertainty because the amount is not specified. Held: contract would not make sense unless he used his best efforts. F.NO evidence of bad faith – there appears to be the intent of good faith Two businesses would enter a contract like this because it is very difficult to predict what one’s needs or output will be in any given year OUTPUT AND REQUIREMENT CONTRACTS Output and Requirement Contracts . and this means that there is a hint of bad faith – when the price is low.G. the buyer will set a cap so he won’t have to worry about having too big an order. she is saying that he is not going to do anything. he goes back to them this leaves him a “way out” – it is illusory. and the seller can set a minimum. we are going to imply that there is an 8 . then this $200 is the unjust enrichment that would be paid to the painter Reliance/Promissory Estoppel – when a promise is made and someone relies on it and the other party later reneges – measure of reliance is the amount of expenses incurred Rehm-Zeiher Co.Output and Requirement Contracts are enforceable IF ACTUAL output or requirements Duty of good faith Should not be unreasonably disproportionate compared to estimates or prior use (UCC is saying that they don’t want business people to be precluded from entering into these types of contracts.
that would be severe detriment.There is a reluctance for a court to enforce a promise to reward a good Samaritan – because this is a matter of conscience and is not something for a court to enforce. Seattle-First National Bank Court ruled that it was not illusory – court ruled that this “report” was not a “way out” because it was a common practice in the area and it was a means of the buyer protecting their interests MORAL OBLIGATION AS CONSIDERATION Mills v. not unjustly enriched. agreement in writing voluntarily conferred and acted upon Restatement (Second) of Contracts § 86 – Promise for benefit Received (1) A promise made in recognition of a benefit previously received by the promisor from the promise is binding to the extent necessary to prevent injustice (2) A promise is not binding under Subsection (1) (a) if the promisee conferred the benefit as a gift for other reasons the promisor has not been unjustly enriched. and value is not disproportionate to the brief 9 . it was a DIRECT BENEFIT TO THE RECIPIENT Normally. and he pays until he dies. severe benefit. not a gift.The grateful party promises to pay him an amount to acknowledge his gratitude. McGowin Webb was crippled after jumping off the building with a cinderblock in order to save the health and life of someone else and being injured himself . Wyman Stranger takes in a 25-year-old sailor and helped him and nursed him back to health – sailor’s father says he will pay the stranger for helping his son. Held: No consideration not enforceable b/c promise as a moral obligation is b/w you and your conscience Webb v. enforcement is necessary to prevent injustice. or (b) to the extent that its value is disproportionate to the benefit Exception: Emergency medical treatment will allow for “past consideration” to enforce a contract for policy reasons Restatement (Second) of Contracts § 86 When it would be an injustice NOT to enforce the contract – as per Restatement (Second) § 86 Promise based on prior benefit. both of them will suffer Omni Group v. and the executor of the estate stops payment and Mr. therefore it is NOT the consideration . and then he never pays The consideration in this case was a “past good deed” that engendered this promise. repaying a good Samaritan is not going to be sufficient consideration EXCEPT: o IMPLIED CONSENT o Very compelling instances of moral obligation (under Webb. Webb sues because he says that this was a binding agreement and instructs the executor to keep paying . Held: there was sufficient consideration because the P was injured and the D received the benefit from his action – in this case.“implied duty” that the person who wants to be her exclusive agent will make his BEST EFFORTS – because without his work.
you promise to do something in the future.If she did not quit her job.should there be a remedy when someone reasonably relies on a contract to be enforced? Restatement of Contracts § 90 .Moral obligation is sometimes an exception to consideration – but this is done on a case by case basis Harrington v. and is NOT DISPROPORTIONATE . etc.Scothorn relied on getting the money so she quit her job which was foreseeable by grandfather.Rest. when you said something. if it is NECESSARY TO PREVENT UNJUST ENRICHMENT. Taylor Neighbor intervened in a domestic dispute and caught the axe as it fell and got hurt The Court in this case took the traditional approach saying that it was VOLUNTARY. this is a basis of enforcement of the contract .) Held: Where a promise leads someone to reasonably rely on a promise. expected it to be believed and reliance occurred from it) o Not a statement of fact. Scothorn Grandfather’s promise did not have a “bargained for exchange” therefore it is a gift – he did not require that she quit her job .Under the Restatement. Equitable Estoppel o If you are stopped from doing something due to your actions. and NO CONSIDERATION . experience. § 86 says that a promise made in recognition of a benefit previously received by the promise will be binding if it is NOT A GIFT.o We determine when promise is NOT a gift when there is more of an intent to repay for the huge service done to me . suffers a detriment (job salary.Promisor can foresee or anticipate that promisee will act in reliance o Must have a promise o Promisee does reasonably act in reliance o Promisee suffers a detriment o Injustice can be avoided only by enforcing the promise (to degree necessary to prevent injustice) o Even if there is a basis. they rely on it to their detriment (promissory estoppel) o Equitable estoppel – someone is reasonably relying on a FACT o Promissory estoppel – someone is reasonably relying on a PROMISE Ricketts v.e. there is no promissory estoppel because of no detriment 10 . Harrington case – there is an injustice if she is not compensated – and her actions were not a gift because her actions were a split-second decision Enforcement of Contracts Step 1: Is it a traditional contract? Step 2: Promissory Estoppel (reliance theory)? Step 3: Restitution based on unjust enrichment? PROMISSORY ESTOPPEL Promissory Estoppel . the remedy may be limited Promissory v. equitable estoppel (i.
suffered a detriment and injustice can be avoided ONLY by enforcing the promise . Modern view . Held: injustice can be avoided ONLY by enforcing the promise Grouse v. just say they have it.Modern view says that reliance is an alternate way to complete a contract – you might not get full contract damages because you do not have a contract – you should get the measure of what you lost by relying on the promise Promissory Estoppel (a.Cardozo says that this is a traditional contract . she would suffer an injustice. tort of misrepresentation. Judge Posner breaks this ruling down into economic terms one action CANNOT lead to three overlapping causes of action (breach of contract. but reliance in detriment.Group Health loses on the basis of Promissory Estoppel All-Tech Telecom v. so the remedy is to enforce the contract as written (full remedy) -Williston’s view tries to make the contract whole – he wanted to fill in that “consideration” gap by filling it with promissory estoppel idea 2.If there is enough reliance. you get full contract damages – when there is no consideration. Williston view .a. not just a condition of the promise (as per Cardozo) .Allegheny College v. Pfeiffer Co. it is a policy decision to make charitable contributions enforceable . Company says this is employment at will (because there is no employment contract) Court looks to promissory estoppel claim based on Grouse’s reliance on the position Grouse reasonably relied on the promise.Belief that charities provide services to society that government does not. Feinberg v. Amway Corporation Overlap of contract and torts here – two corporate entities made a promise to each other and breached that duty .Promissory estoppel is ONLY an alternate claim for when you do not have a strict contract claim Under Promissory Estoppel remedy should be: 1. and the remedy should be only so much to avoid injustice .Reliance damages should be limited to costs incurred due to reliance – restatement view is that what is the injustice to be avoided.Lower court granted Summary Judgment for D – on appeal P says promissory estoppel. makes the contract enforceable. the reliance serves as consideration.37 years of work service not consideration because it was part of the past and a pre-existing duty to do her job well Feinberg works after the offer is given and she REASONABLY RELIED on the promise . Inc. reliance) – based on the idea of relying on a promise to your detriment – you are estopped (prevented) from saying that you don’t owe someone something when your own words and actions led to another person’s injury 11 . Group Health Plan.Retried and then immediately became ill so she was unable to get a new job – she relied on getting the pension and if this contract is NOT enforced. promissory estoppel) . there may be grounds for promissory estoppel o The π probably wont have to prove their reliance. Based on past service therefore no consideration .where you have reliance.The commemorative attachment to the $5K gift in naming a fund after Johnston is the consideration.k. National Chautauqua Bank Restatement (Second) § 90(2) – “a charitable subscription…is binding under Subsection(1) without proof that the promise induced action or forbearance” .
an offer is given in such a way that it gives the other party the power to accept. the talked about the contract for a while and added their wives names. the most important thing is to look at the OBJECTIVE MANIFESTATION – people cannot rely on hidden feelings. then you don’t have a contract (traditional view) • Objective view is that inner thoughts do not matter – you have to look at the outer manifestation – you have to look at what the parties do and say – if someone does and says something that sounds like and looks like an offer.” there were signatures. and by accepting to create a contract . Man’s employment contract was about to expire -threatened to quit if he didn’t get a new contract – boss said something to “agree” to reemploy P and then P was fired in less than a year.making the other person justified in thinking that his agreement will make that an enforceable promise . gave a price. wrote an agreement on a napkin with their own & wives’ signatures.intentions as measured by your words in actions matter in these types of cases . Held: Boss’s words constitute assent to a valid contract of reemployment . they wrote the contract out on a napkin that identified the property.An offer is the manifestation of willingness to enter into a bargain. Attorney examined the title and Lucy then approached Zehmer with the $50000 and Zehmer refused. so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it .The whole idea of a contract is to bind people when they agree to make a future action – enforceable promises for a future action Restatement of Contracts § 24 Offer Defined . and now he raised his price) . There is no meeting of the minds in this case – however. Hargadine. even if he does not intend it. changed “I” to “We. Held: Contract was binding. and the Boss’s inner intention is not what counts – what you do. it does not matter (modern view) Embry v. Zehmer said he was drunk and joking so no agreement.THE AGREEMENT PROCESS – OFFERS Offer and Acceptance • Two parties bring a contract claim – one party says the other breached the contract and the other party says it was not an enforceable promise/not a real offer/not a complete contract/still in the preliminary stages/we had not concluded a full offer and acceptance • Subjective view would be that if you do not intend to contract. you look at the outward manifestation (objective view) – if someone conducts himself in a certain way. McKittrick Dry Goods Co. there was a history (he had offered to pay less for it before. the size of the farm. A party is entitled to rely on the words and the conduct without having to look into the inner psychological intentions Lucy v Zehmer Two men make an agreement for sale of Ferguson Farms for $50.000.even though we want to have a meeting of the minds.OBJECTIVE – do you make the offer in such a way that by accepting it they are accepting the offer? Restatement of Contracts § 26 12 . what you say and how a reasonable man would interpret it and how they would react.
. the words “first come first served” usually make advertisements enforceable – also. After finding the land acceptable. ad is ONLY for the items in the catalogue and the jet plane was NOT in the catalogue or on the order form . it is different than another advertisement • If most advertisements were enforceable. then there is nothing left to negotiate – the person showing up can seal the deal – the contract is not open-ended the store’s argument that the sale was only for women does not matter because it was a subjective intent of the case and the advertisement did not stipulate this Restatement § 24 – Offer Defined – an offer is the manifestation of willingness to enter into a bargain. the offeror must articulate a specific offer. when quantity is listed in the ad and where there is a limited quantity. Pepsico.there was no quantity and no instructions for how to get the jet plane because it was not in the catalogue. D answered P’s questions told him to act quickly before the land was sold. In order to establish an offer. D already accepted offer of a third party.” When P went to buy coat. Scolnick Defendant advertised land for sale without listing a price and sent form letter to interested purchasers setting the rock-bottom price at $2. First Come.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. Held: No contract unless the minds of the parties have met and mutually agreed upon some specific thing. P initiated an escrow in order to proceed in accepting the land offer. Held: Will not force Pepsi to give the jet plane to Leonard reasonable person standard – they say it was in the context of a humorous situation .no need for a jury b/c this is an issue of law and by deciding 13 . One party making an offer that is accepted by the other party usually evidences this event. First Served. P responded to ad and asked about location of the land and how to find it.is it reasonable for the person hearing the offer to think that if they agreed. not merely engage in preliminary discussions.P wanted specific performance for the Harrier Jet and D wants the case dismissed on Summary Judgment . so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it Advertisements – generally ads are NOT offers. Under §24.500 cash. there is an understanding that a merchant WILL NOT have an unlimited supply Leonard v. Held: This ad constitutes a true offer and the advertiser is contractually obligated to fulfill upon acceptance by the customer (the critical factor in this case is SPECIFICITY – if something is absolutely specific with all of the terms laid out. D refused. Meanwhile. Great Minneapolis Surplus Store D placed ad in newspaper saying that “Saturday at 9am it would offer a fur coat for $1. then they would be concluding the deal? ACCEPTANCE Lonergan v. it would open the doors to too many lawsuits – generally. Inc. this is NOT a valid contract – it is not expected to conclude a deal because D let P know that there were still other people that could buy the farm Lefkowitz v.no reasonable person would think that this was a real offer – it was a joke .
he had to follow the terms of acceptance AUCTIONS Equitable Life Assurance Society v. The lower court confirmed the sale. In an auction with reserve. As a result of the default.Southworth court said that this was an offer – there was nothing left to do except ACCEPT the offer .Bretz set up the terms of the execution of the agreement – the court says that PGE never followed those terms – and in order to really make a binding deal.the case of Summary Judgment. Though Equitable tried to stop the auction. he may be stuck with a deal that he did not intend IF a reasonable person would believe that what he did constituted an offer Southworth v.NOT a binding contract based on the language and based on Bretz’s original terms that acceptance had to come by his difficult formula that he set out on the Summer 1983 letter to PGE . so D loses . terms. Held: We have to figure out the intent – we have to figure out whether or not this really was an enforceable offer and acceptance . The auction wasn’t declared to be “without reserve. Even if Bretz says that PGE confirmed on the telephone that sending a letter would have completed the deal. how much to pay down. etc. the details of the land. PGE says that this did NOT seal the deal. Equitable put the house on auction. or in anyone or everyone who makes a specified promise or renders a specified performance . and the auction for the home already began when Equitable received the transfer. value. acting separately or together. First National offered to buy out Equitable’s first mortgage. – this makes it seem that there is nothing left to do but accept the offer Bretz v. and Equitable. FNB. Portland General Electric Co.” Then.specificity of this “offer” is hard to deny – it lays out in detail the information/enclosures.Court held that specific performance was necessary. and the Olsons appealed. the court is essentially saying that no reasonable juror could possibly find that this is a serious offer therefore no need for trial Invitations to Offer are very fact sensitive so business people have to be very careful because if a merchant has a practice of dealing with someone where he names a price and the person accepts the offer. Notice of the transfer of funds to Equitable arrives late. the buyer does not necessarily know that they have the power to conclude a deal and the seller can still withdraw their goods – unless an auction is EXPRESSLY without reserve. First National Bank Olsons defaulted on both their first and second mortgages. the auction continued and the house was sold. Held: Auction was WITH RESERVE. Equitable holds the first mortgage and First National holds the second mortgage. then offeree is not sure whether or not his bid will mean that he is definitely accepting the offer § 2-328 – Sale by Auction 14 . Oliver seller says that this was an information chart that was sent to four people at the same time – it was like a notice/ad Restatement §29 – To Whom an Offer is Addressed o The manifested intention of the offeror determines the person or persons in whom Is created a power of acceptance o An offer may create a power of acceptance in a specified person or in one or more of a specified group or class of persons.
and after the auctioneer calls for bids the goods cannot be withdrawn unless no bid is made within a reasonable time. no withdrawal of goods unless no bid was made within a reasonable time 4) buyer can take the sale at the last good faith bid prior to completion of the sale if auctioneer knowing receives a bid n the seller’s behalf Restatement (Second) of Contracts § 28 – Auctions 1. unless a contrary intention is manifested. an offer invites acceptance in any manner and by any medium reasonable in the circumstances UCC § 2-206 (1) unless otherwise unambiguously indicated by the language or circumstances a.a seller can reserve the right to withdraw the offer at any time before the gavel falls. the auctioneer makes an offer to sell at any price bid by the highest bidder. posting or other publication of which bidders are or should be aware. bids at an auction embody terms made known by advertisement. whether or not the auction is without reserve. an auctioneer invites offers from successive bidders which he may accept or reject b. c. and when the auctioneer sounds the gavel. WITHOUT reserve. as modified by any announcement made by the auctioneer when the goods are put up Auctions . at an auction. unless a contrary intention is manifested a. the seller could take it off the market and if all the bids are lower than he wants • Without reserve. that means the highest bid will get it. when goods are put up without reserve. if the price is not high enough. this is the offer. but a bidder’s retraction does not revive any previous bid 2.*does not apply in this case because UCC is reserved for sale of GOODS not sale of property 1) separate sale for each part of a “lot” of goods is OK 2) simultaneous bidding/closing of auction is up to discretion of auctioneer 3) in an auction WITH reserve auctioneer can withdraw goods anytime before announces completion of sale. even if the highest bid was less than what the seller was hoping for • The highest bidder can change their mind up until the gavel slams – can withdraw their bid up until the gavel slams to protect from overexhuberance Bilateral contract – accepting by a return promise Unilateral contract – accepting by performance – not one-sided but means that the offeror makes a proposal offering a promise and the offeree accepts by performing an action Restatement (Second) of Contracts § 30 (1) an offer may invite or require acceptance to be made by an affirmative answer in words. 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 to make a contract shall be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances 15 . this accepts the bid as the offer • With reserve . when the bidders know that the seller is auctioning without reserving the right to withdraw his goods. or by performing or refraining from performing specified act. a bidder may withdraw his bid until the auctioneer’s announcement of completion of the sale.A notice of an auction is an invitation for offers • When one of the attendants of the auction makes a bid.
Behee offers to buy real estate. but such a shipment of nonconforming goods does not constitute an acceptance if the seller seasonably notifies the buyer that the shipment is offered only as an accommodation to the buyer (2) where the beginning of a requested performance is a reasonable mode of acceptance an offeror who is not notified of acceptance within a reasonable time may treat the offer as having lapsed before acceptance *so flexible that it can even be accepted by sending nonconforming goods unless offered by accommodation only La Salle National Bank v.Vega did not have the power to conclude a deal as per the rider ***Where a contract includes language for a specific method of acceptance. so Vega says that this is out of his hands because he did his part. *as soon as it is put out of the offeree’s possession. an acceptance under an option contract is not operative until received by the offeror. only if it is approved by the bank trustees. Hendricks holds escrow . a. Held: we have to start with the language of the contract.against the ruling of the MAILBOX RULE Restatement (Second) of Contracts § 63 .b. Behee Behee is buyer. Held: Notice is a two-way street – homeowner should have contacted the 16 .. without regard to whether it ever reaches the offeror – there is still a contract EVEN if the offer is lost in the mail UNILATERAL CONTRACT Ever-Tite Roofing Corp. without regard to whether it ever reaches the offeror. If the terms of the rider say that ultimately the contract is enforced. dinner bell. but b. v. Held: No contract until acceptance of an offer is communicated to the offeror – an uncommunicated intention to accept an offer is NOT an acceptance . that will always be followed by the court’s ruling Hendricks v. then offer was mailed to the Smiths. an order or other offer to buy goods for prompt or current shipment shall be construed as inviting acceptance either by a prompt promise to ship or by the prompt or current shipment of conforming or non-conforming goods.the contract will become binding ONLY upon acceptance by an authorized officer or by starting the work itself . then Behee calls real estate to retract his offer and he had not received acceptance or notice of acceptance of his offer. 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.Time When Acceptance Takes Effect Unless the offer provides otherwise.It is not enough for a sales rep to sign – not a binding contract unless there is the approved authorization or the work has started . then Smith signed the offer. flower pots.A rider to this contract to be signed by the trustee for the purchase AND the seller . Vega Vega owns some land that he is selling to a trust that is managed by a bank . Ever-Tite is a roofing company .The company has the ultimate power of acceptance as per this contract because it will not be enforced until the boss signs or the roofers start the work. then the bank trustees are reserving the right of ultimate acceptance – the offer would be giving the agreement back to the purchasing agent signed by Vega . Green Green’s were homeowners.Vega could say that the initial contract was the offer and Vega authorized it and closed the deal by signing it – BUT the trustee did not sign it. Smiths are sellers.
not knowing that there was a reward – when someone gives the desired performance but was unaware of the offer. Jewish War Veterans of United States search for someone who has commit a crime. but on that day they ordered 1000 vials – they wanted to use the secret information to get it at a low price.company and withdrew their bid and said they were using someone else – 9 days was a reasonable time sufficient to commence performance Corinthian Pharmaceutical Systems. Inc. then where an offer says you can accept by any other way.Getting the flu is a CONDITION of acceptance. she did not know that there was a reward . then they get 1000 pounds. and continual use of land constitute acceptance of this agreement –company continued to use the land for three 17 . that was the notice – she came to claim the reward – she accepted by performance and there was no further notice necessary Restatement (Second) of Contracts § 54 – Acceptance by Performance. Normally. and still gets the flu. then the offeree has to exercise reasonable diligence to see that the offeror knows he is accepting – this is here to avoid abuse and to distinguish situations where long distant contracts may not be aware of the start of performance – trying to enforce good faith and set a commercial standard Glover v. Necessity of Notification to Offeror 1) unless the offer specifically says that you have to give notice. terms are $150 a day. knowing that the price was going up . if the offeror says you can accept by performance HOWEVER if it is a situation where the person accepting has reason to know that the offeror may not be aware of it. Lederle Laboratories Price of a drug rose by a huge amount (from $51-171 dollars per vaccine) . v. It was to her detriment that she got the flu but getting the flu was merely a condition to accept – she did everything and still got the flu . the ad is VERY specific – the court said yes.prices were about to raise by a huge amount – distributor decided to order 1000 vials the day before the price changed and before it was made public that the price was going to triple the next day – they had always ordered around 50 vials a day. offer that said if you want to use our land.The contract did NOT require advanced notice – when she turns up at their doorstep and lets them know that she did everything they asked and got sick anyway. but it is NOT consideration because it is not what the company was bargaining for .A performance cannot be acceptance of the offer unless you know of the offer at the time that you accept OTHERWISE it just happens to be a coincidence ACCEPTANCE BY SILENCE Russell v. where advertisements are too general they do not constitute a contract. the ad is specific enough to be an offer – she met the requirements of the ad. the acceptance is the performance itself 2) as a rule. Texas Co. whether or not there has been a contract established – at the time she gave the information.Court came out AGAINST the buyer because they felt that they were acting improperly with secret information COUNTER-OFFERS Carbolic Smoke Ball Carbolic Smoke Ball is supposed to protect you from the flu – anyone who takes the ball three times a day for two weeks.
but could also be deemed an acceptance of the offer outward manifestation Ammons v.there are aspects of bad faith. Then seller has not heard and assumes there is no acceptance and sells to someone else. Held: Must act in good faith and by simply ignoring the offer. the manufacturer would generally accept it by filling the order and sending it within a week . seller sends offer to wrong address. Lindsell parties arguing over a contract for delivery of wool – this agreement is decided by the mailbox rule – first. etc. and then seller receives acceptance from original buyer – Held: There was a contract because acceptance was valid when mailed . the contract was very clear. if he has certain indications to make it seem that he is authorized – sometimes this apparent authority is enough to be upheld in court – the company has imbued this agent with certain indications that would make him appear to be authorized to a reasonable person looking at him Adams v. then buyer gets the offer a little bit late but immediately sends out acceptance.In this case.the best and most stable option because the offeror controls the terms – because the offeror is setting the terms. he could say in the offer that a contract will be formed upon acceptance of your notice or be more specific if he wants to protect himself more . there is no defense to say that they rejected the offer it after squeezing out the benefit . Wilson & Co. One side sent an order and once the order was received. so seller notifies buyer twelve days after he sent in the order that he has declined the offer – the price has increased in that time.offeree should notify offeror if he does not intend to accept 18 . Held: Restatement 69c .e.Acceptance by Silence or Exercise of Dominion – “where because of previous dealings or otherwise.mailbox rule is the “default” rule when there is no other provision – ONLY applies to acceptance of an offer – purpose is to protect an offeree who acts in good faith – once it is out of his hands there is a binding contract • Mailbox rule applies to the limited situation of an acceptance and ONLY when there is nothing in the contract otherwise stating when the acceptance will be deemed effective Acceptance can be made through silence when: • past practice .goods are not shipped within the week.history of practice between the two parties .weeks after this notice was sent out. . next day the response would normally be due but was not received because of the delay. it is reasonable that the offeree should notify the offeror if he does not intend to accept” § 69(1)(a) – if you grab the benefit then you have accepted the offer by silence – § 69(1)(a) Russell case § 69(1)(b) – where the offer itself gives you reason to believe that if you do nothing you have accepted – if parties agree that you can accept by inaction Two kinds of authority: o Actual – the company has actually imbued this agent with the power to conclude contracts on behalf of the company o Apparent – the principal places the agent in a role where outside people “think” he has authority (i. it was D’s fault that they did not get the acceptance on time because they had originally misdirected the offer originally The Mailbox Rule . then company declined the offer after three weeks .where there is a conversion or a “taking” could be punished as a tort.
whoever the last party to send a document was. etc. you can avoid misunderstandings.A manifestation of assent to the terms thereof made by the offeree – acceptance has to be of the same terms as the offer – this provides certainty. all disputes must be resolved in the state of New York or manufacturer is limited only to the price of the product.The offer was made 2000-5000 tons and pricing may be based on quantity – a lesser quantity may create a higher price. etc.e. and no contract is concluded until an offeror creates a new offer and accepts it Minneapolis & St. it could be considered a counteroffer under the common law . offer was for 2000-5000 tons. Two people negotiate for sale of steel/iron rails.• • where the offer itself gives reason to believe if you do nothing you have accepted if you grab the benefit then you have accepted the offer by silence “Mirror Image” Rule – Restatement § 50 . and man “accepted” contract for 1200 tons. it was not shipped but started performance – seller could say that if there is no notification within a reasonable time then you can consider it having lapsed. Columbus Rolling-Mill Co. business men have their own standardized forms that they like to use – the front side of the receipt has all of the specific terms that the parties bargain over and sometimes on the back of the form in fine-print are “boiler-plate” standardized forms i. Seller refused to sell here because the acceptance did not match the terms of the agreement. sets up a new offer. then that becomes the controlling document because the party who accepted delivery was accepting the goods and those terms (traditional common law approach) UCC § 2-207 (huge change from common law b/c it no longer has to be identical) • 1) Definite and seasonable (timely fashion acceptance of the agreed-upon terms) expression of acceptance OR a written confirmation will operate as acceptance even though it states add’l terms the may be different UNLESS it is expressly conditioned on accepting the new or different terms – interested in preventing people from weaseling out of the contract on a slight difference – although 19 . but just ONE day is NOT long enough Problems with the “mirror-image” rule • If the acceptance does not mirror the offer. Held: This is a case governed under the common law approach – modern commercial law has modified this – the common law approach is the “mirror image” rule where acceptance has to be of the same terms as the offer .Where the parties thought they had an agreement on the big terms but a variation on a small term causes a dispute – boilerplate on both sides that are inconsistent with each other Last Shot Rule – if a document with different terms (even slightly) becomes a counteroffer.under common law.Sellers usually want to limit their liability and court litigation by putting this boiler-plate language on the receipt – the buyer and seller are going to wind up in court if there is conflicting language in the “boiler-plate” and the agreed-upon terms BATTLE OF THE FORMS • • Battle of the Forms . Under 2-206.Accepting the delivery with the new or different terms was deemed an acceptance of the new terms – the problem here is that sometimes a party is left having accepting something that he did not really know that he was accepting • Very often. . . acceptance under differing terms destroys the initial offer. v. Louis Railway Co.
• • there may be some differences. what are the governing terms of the contract – however. denied both SJ motions because it found material facts that are in genuine dispute – each side was saying that they are not arguing over the facts. Seller files for arbitration and buyer says he does not have to arbitrate b/c he did not agree to arbitration. or if additional terms materially change contract. you look to the UCC to fill the gaps – the UCC has a provision § 2-314 which is an Implied Warranty: Merchantability: Usage of Trade Liquidated damages – parties agree ahead of time that if there is a delay. you can infer that the other side will object to it! Leonard Pevar Company v. v.rule rejects the mirror image rule and tries to set forth a system to determine when there is a difference. it operates as acceptance o if offeror makes acceptance conditional. Evans Products Co. or there is notification of objection to the terms after they are received 2-207 . then this is only a counteroffer not an acceptance o additional or different terms in this step 2) What are the terms of this contract once we say there is acceptance? Additional terms are not automatically included they are mere proposals so we need acceptance for them – “additional terms” – become included unless offer limits acceptance. BMH and Company.. This is not an acceptance under 2-207(1) but just because the terms do not make a contract. and expressly conditioned Arbitration is a different form of dispute resolution – court litigation can be very costly and time consuming so arbitration is cheaper – an arbitrator will be a neutral party to hear both arguments – it is often quicker. cheaper and more streamlined than a court case but the downside is that the parties have to pay the arbitrator and have less leeway as to introducing evidence and you are usually stuck with the decision that the arbitrator made and can only be overturned for pretty outrageous reasons – a court will 20 .people engaged in the business professionally Additional terms are only a proposal unless: o between merchants and there is no express limitation o do not materially alter the contract o no objection to these new terms. then the new terms will be included in the contract o Sometimes you must distinguish between an additional or a different term – where it is a different term. the court says that this is not the end of the story because one side sent the wood and the other side accepted the wood and paid for it therefore a contract by conduct (under 2-207(3)). if there is a timely and definite acceptance. you accepted the limitation on warranty. A . When there is a contract by performance. Buyer says goods are defective so he will not pay. No acceptance under 2-207(1) b/c there is an expressly made condition. Inc. Ct. Inc. Textile sent in purchase orders and response to purchase order is definite. a solution often creates its own problems – sometimes result does not seem fair or is so ambiguous that different courts construe it differently § 2-104 – Definition of Merchant . Buyer sues for breach of warranty b/c there was a defective product – in purchase order there was no reference of warranties or remedies but on the reverse side of the acknowledgment of the purchase order says no warranties in a disclaimer – by accepting the lumber. timely. we both agree that the parties will pay damages for each day that they are delayed Textile Unlimited. they are arguing over the law.
Court also disagrees that the vendor controls the terms because here the purchaser offers to make the purchase. Buyer says they were not aware of the terms and did not agree to the terms. negotiate all the terms upfront and do not try to impose a term in the “shrink-wrap” after he has accepted all the other terms E-COMMMERCE ISSUES Hill v. HELD: Says that it is unfair and unreasonable to allow the seller to sneak in the extra term without advising the buyer of it before and by simply saying that if you don’t like it you can return the computer. that does not prevent it from being a valid contract • Electronic commerce is consistent with contract law and you can create contracts electronically as long as all of the contract terms are met Specht v. but in arbitration. E-Sign (statutes to provide certain safeguards because there is a bigger risk of fraud when you order things online) • If you have an otherwise valid contract. court says that 2-207 should apply here. than the buyer had 30 days to return it and they agreed to all of the terms INCLUDING the arbitration clause. will not prevent it from being a valid contract – if your contract is sound and the only difference is that the signature is electronic. and included agreement terms in the package. and not fair that just by clicking download that a reasonable person would be assenting to the terms. HELD: consumer should have read the terms and that it would be impractical to notify the consumer of the terms beforehand through oral recitation or otherwise.never require people to arbitrate UNLESS they have both agreed to it in a contract Mediator does NOT have the power to impose a ruling. therefore. Gateway 5 days after product was bought via telephone. Klocek v. the mere fact that it was signed electronically rather than manually.Court is concerned about one party adding these new terms after an agreement has been reached the thought being that if you are going to negotiate. Here were have people clicking on the agreement button and below the button were stipulations about arbitration. acceptance is constituted. the arbitrator does have the power to impose a ruling . Buyer should have expected some terms to come with the package and if the buyer did not like the terms. 21 . under 2-207 the terms should not automatically become part of the agreement so arbitration is not a part of the contract because the new terms will NOT be accepted. § 2-207(2) applies only between two merchants that additional terms can become part of the contract. HELD: Downloading of software was not binding where the P’s could not be aware of the terms unless they scrolled down before clicking the download button. Said that 5 days is NOT sufficient . Wanted to bring a class action invasion of privacy suit. Netscape Communications Corporation (2002) Parties entered into an agreement electronically when people who used Netscape “clicked” on to this agreement and were concerned that Netscape was invading their privacy. Terms were not accessible enough.acceptance to those terms should be more explicit! E-Commerce • Uniform Electronic Transactions Act. Gateway 2000 Order for computer made over telephone – negotiated over price and delivery and includes paper in shipment that says if customer does not respond w/in 30 days.
or c. revocation of an offer is effective WHEN RECEIVED Dickinson v. rejection or counter offer by the offeree. D says that it is enough that the buyer was aware that the seller revoked his offer. In addition. An offeree’s power of acceptance may be terminated by a. death or incapacity of the offeror or offeree 2. The offer is open and P says that revocation was not communicated. an offeree’s power of acceptance is terminated by the non-occurrence of any condition of acceptance under the terms of the offer ***An offer.TIMING OF AN OFFER Restatement (Second) § 35 – “The offeree’s power of acceptance” 1. which can be second-hand or indirect knowledge Restatement § 42 – “Revocation by Communication From offeror Received by Offeree” – An offeree’s power of acceptance is terminated when the offeree receives from the offeror a manifestation of an intention not to enter into the proposed contract Restatement § 43 – “Indirect Communication of Revocation” – 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 • If he has no reliable information telling him that the deal has been revoked. but on June 11th he heard that someone else had already been sold the property. b. or d. or. counter-offer. HELD: You have to have communication. lapse of time. An offer gives to the offeree a continuing power to complete the manifestation of mutual assent by acceptance of the offer 2. you are still good – the counteroffer that arrives later does NOT terminate the possibility of making a contract 22 . knowledge. but limits the power so that a letter or telegram of acceptance started after the sending of an otherwise effective rejection or counteroffer is only a counteroffer unless the acceptance is received by the offeror before he receives the rejection or counteroffer . Dodds D offered property to P and gave P until June 12 th to accept and P did not accept until June 12th. a contract cannot be created by acceptance of a an offer after the power of acceptance has been terminated in one of the ways listed in § 36 Restatement (Second) § 36 – “Methods of Termination of the Power of Acceptance” 1. then the acceptance came before the rejection P wins – “race of the clock” – what comes first • Notice of inconsistent action ends the ability to accept – no notice or knowledge and accepting before the revocation comes across contract * a revocation is effective ONLY on receipt by offeree Restatement § 40 – Time When Rejection or Counter-offer Terminates Power of Acceptance Rejection or counteroffer by mail or telegram does not terminate the power of acceptance until received by the offeror.if your acceptance arrives before the counteroffer. revocation by the offeror.
in writing.An offer by a merchant to buy or sell goods in a signed writing which by its terms gives assurance that it will be held open is not revocable. during the time stated or if no time is stated for a reasonable time. Where an offer invites an offeree to accept by rendering a performance and does not invite a promissory acceptance. HELD: Additional terms were negotiations and an option contract is different from the underlying contract. The revocation 23 . in writing. v. Westside Investment Corp. Is made irrevocable by statute 2.Restatement § 25 – 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 *Under common law – in writing. Scheck (1967) Scheck. recites a purported consideration for the making of the offer. but in no event may such period of irrevocability exceed three months. offered to sell real estate to a specified prospective buyer and agreed to pay a percentage of the sales price as a commission to the broker. and proposes an exchange on fair terms w/in a reasonable time b. with consideration. First letter says P will accept the option but wants the D to check the power lines before they buy counteroffer which usually terminates the power of accepting the offer. Scheck. but any such term of assurance on a form supplied by the offeree must be separately signed by the offeror Humble Oil & Refining Co. The offer fixed a six-day time limit for acceptance. on fair terms. it breaks the process and creates a counteroffer which ends the power to accept the original offer. for lack of consideration. an option contract is created when the offeree tenders or begins the invited performance or tenders a beginning of it 2. An offer is binding as an option contract if it a. Is in writing and signed by the offeror. 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 Marchiondo v. signed by offeror. Seller says that by adding new terms. and for a reasonable time – this allows the parties to VOLUNTARILY make the offer irrevocable (aka FIRM OFFER) OPTION CONTRACTS Restatement § 87 – Option Contract 1. Simply negotiating the terms of the “big contract” does NOT invalidate the option contract Ways to Form Option Contracts • absolutely make an agreement with consideration • part performance and by acting in reliance Restatement § 45 – Option Contract Created by Part Performance or Tender 1. (1968) Humble sent letter asking to have utilities included in the purchase of real estate. The buyer changes his mind along the way. revoked the offer. An offer which the offeror should reasonably expect to induce action or forbearance of a substantial character on the part of the offeree before acceptance and which does induce such action or forbearance is binding as an option contract to the extent necessary to avoid injustice UCC 2-205 – Firm Offers .
where the contract invites acceptance by performance. they are not asking for the GC to rely on it and submit it to the school district. Paving subcontractor says he relied on the Ds bid and says there is a option contract. agreement must be in writing.Offer where you will not accept by writing. will be held as an option contract when necessary to prevent injustice (this has been applied now to the subcontractor cases) INSUFFICIENT/UNCERTAIN AGREEMENTS Raffles v. The condition is full performance by the offeree. Later that day. CA law requires that GC contacts the subcontractor to let him know that he bid was selected. simply a return promise. claiming breach of contract. HELD: part performance by the offeree of an offer of a unilateral contract results in a contract with a condition. he lines up subcontractors. No contract. HELD: When they sent out for bids. Option Contracts • Express agreement in writing (if not merchants. D gave bid for school construction job and P relied on Ds bid for his overall bid. School district accepts the bid and Gimbel telegraphs revoking the offer.there were two different ships so there were two different varieties of cotton. Wichelhaus Dispute is over cotton that was shipped and in the contract it was testified that it would be arriving on a ship from Bombay called the Peerless and apparently there were two different ships called the “Peerless”. Submitting a bid is NOT partial performance. and consideration) • Performance . HELD: If the mistake is SO GREAT that the difference is very obvious. Drennan v. not binding.was received by the broker on the morning of the sixth day. the broker. an offer that would reasonably anticipate reliance and that does induce substantial reliance. He sends out notices to various companies asking them what they will charge for their service for that part of the deal. Marchiondo. with fair terms. an option contract is concluded when an offeree tenders or begins the invited performance Baird v. General contractor coordinates everything and in order to coordinate a job. then it would not be reasonable to rely on that bid – if the error is so gross that it makes you stop and remark on the disproportionality of all the other bids. HELD: Offer and acceptance have to match – therefore. the broker obtained the offeree's acceptance. Gimbel Bros. sued Scheck for the commission stated in the offer. The GC found another subcontractor which was more expensive than the original bid and then sued the reneging subcontractor for the difference in price. then that should put the GC on notice to call and make sure that the bid is correct o More often than not. Part of the deal involved linoleum and a subcontractor sent in a bid for linoleum and the GC RELIED on it to submit his total bid. no option. Star Paving Co. if one party agrees to October Peerless and the other agrees to December Peerless there is no agreement Restatement § 20 – “Effect of Misunderstanding” 24 .
Ditmars Man wants to quit and boss offers to give him a “fair share of the profits” if he stays on. v. then there is no contract ***Objective reading of the terms of the contract and if there was no contrary prior dealings b/w the parties or industry dealings.20 and the CEO knew that it was a more expensive piece and the CEO ordered the system to be shut off. Spokane Computer Service. Because each party attributes different meaning to “fifty-six twenty” then there is no contract. Actor says that terms of K are not clear b/c there is no start date for filming. Restatement § 33 – Certainty • Terms of contract must be reasonably certain • Terms are reasonably certain if they provide a basis for determining the existence of a breach and for giving an appropriate remedy • The fact that one or more terms of a proposed bargain are left open or uncertain may show that a manifestation of intention is not intended to be understood as an offer or as an acceptance Restatement § 34 – Certainty and Choice of Terms. HELD: A “fair share of the profits” is too ambiguous.1) There is no contract if both parties don’t know what they others are agreeing on. Inc. There is no way to measure the “fair share”. the contract may be enforced anyway Varney v. When K 25 . HELD: K enforceable. There is NOT sufficient certainty that we can be sure both parties intended to be bound by this contract and there is no guideline for what the remedy should be in this case. Effect of Performance or Reliance • Some terms that are uncertain are okay as long as it is clear enough to be enforced • Part performance may remove uncertainty and establish an enforceable contract • Action in reliance on an agreement may make a contract appropriate even though uncertainty is not removed UCC 2-204 – Formation in General • Contract for sale of goods may be made in any manner sufficient to show agreement • An agreement sufficient to constitute a contract may be found even though its making is undetermined • Contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy ***Where there is enough evidence to show that the parties intend to be bound. Scheider Actor in studio agreed to do a pilot and then a TV series but after filming pilot actor does not want to do the series. MGM Inc. and no contract if both parties know that the other party has a different understanding 2) the party that does not know that there is a problem will then enforce the contract in their favor – this is to avoid the elements of bad faith when there is a misunderstanding and truly both parties are NOT agreeing on the same thing – if they are both unaware. Man ordered a part thinking it was only $56. then the shipping of something that is identical to the dictionary meaning of the goods. with starting date provided by industry practice. HELD: NO MEETING OF THE MINDS – no manifestation of mutual assent. then the contract can be enforced Konic International Corporation v.
omits a material term but course of dealings between parties (prior negotiations and dealings. not the conduct – the trend in modern contracts is not to the subjective inner thoughts. but to the objective Majoritarian contract approach – there is a missing term and they would follow the majority approach by following what most people would do – this takes away from the autonomy of the contract-making process. Schumacher At renewal of lease D wanted $900 a month and P wanted to pay the fair market value of only $545 a month for the store. We cannot create an agreement where one does not exist b/c court has no solid basis for issuing a remedy. The contract says that the rent should be set at a reasonable rate after 5 year term. v.e. Ball-Co Manufacturing Inc. HELD: Court has no way of filing in the renewal rent.Ambiguous – parties don’t agree on what the term means . practice of industry that both parties participate in). Delicatessen. then the court should resolve or “fill in the gap” so parties won’t be stymied simply b/c of this ambiguity CONTRACT How to Determine Certainty of a “Contract” Prior dealings Specificity of the terms of the “contract” – Language of the Agreement Conduct of the parties during negotiations Course of Performance – what has happened during the negotiations and since Industry Customs Hypothetical contract approach – what the parties would have done by looking at the language and circumstances. Indefiniteness shows that parties never reached an agreement NO CONTRACT (i. as if they had actually filled in the terms of the contract – this is more specific to the circumstances. etc. Inc.. Inc. Indications that parties intend to be bound and the uncertainty can be resolved in a reasonable and fair way.g. a great deal of negotiating and then one 26 .) indicates intent to have enforceable K and missing term can be provided by an objective method (e. part performance.Vague – “a fair share of the profits” . v. UCC 2-201 2-312 – UCC’s provisions for figuring out terms that are missing from terms Empro Manufacturing Co. $56. There was a letter of intent. Peerless case. but trying to infer what each one was thinking is subjective and is going to the intent. INDEFINITE TERMS OF A CONTRACT “Indefinite Terms” . and it may enforce terms that they never agreed to or never would have agreed to.Missing Terms Uncertainty can go in one of two directions: 1. K is enforceable.20 case) 2. Jr. but this is not bad because it encourages better drafting and discourages sloppy drafting and leaving things out (MOST COURTS ADOPT THIS METHOD) Joseph Martin. A corporate deal where one company was buying the assets of another company for millions of dollars..
then the other party is not bound. HELD: The provision in the contract was actually evidence that there were conditions that allowed the parties not to be bound. Red Owl Stores (1965) Hoffman was interested in obtaining a franchise of one of D’s stores. The jury found in favor of Hoffman for promissory estoppel. one should look to the following: Past dealings Industry practice – is this the kind of contract that is traditionally finalized in a formal writing Conduct/whether there has been part performance – a court will be more reluctant NOT to enforce where no one has acted on it Writing to see whether or not there is an express provision that says that something will not be enforceable UNTIL a final agreement is signed – express language that will trump everything else – some parties may try to put this in so that they will not be bound until it is ultimately signed Whether or not all the terms are agreed upon Texaco. Hoffman bought the store and it became profitable w/in three months. press releases. Court will look to these criteria to fill in price: o past dealings o language to make sure that nothing in the contract says that the price must be filled in o industry practice o specificity of the writings o conduct – have the parties already shipped/accepted goods? This strengthens enforcement even where there are missing pieces Enforcing a Letter of Intent Where the letter anticipates a final document and it never happens. Red Owl representative told Hoffman he should buy a grocery store to get the experience. leaving in the cold Pennzoil who had been negotiating for months and months – Pennzoil tries to sue Getty for specific performance to make Getty go through with the agreement they had made months and months ago – DE suit. Ball-Co says that Empro gave itself the ability to walk so if one party is not bound.party backs out and the other party says that there was a complete agreement. P was told to move to a bigger city and Hoffman sold his bakery and lost money and incurred expenses to move. If buyer or seller acts unreasonably to set an unfair price. Hoffman v. Texaco comes along from out of the blue and makes a higher bid to the Getty company and Getty accepts it and decides to go with Texaco. Courts are willing to fill in the price for sale of goods b/c it is easier to find the market value of a good than a service or real estate. letter of intent. that will not be enforced. The deal for the Red Owl Store failed b/c the company wanted $34K for franchise instead of the $18K they had said was originally sufficient. § 2-305 – Open Price Term – Price will be filled in as long as it is done in good faith. Pennzoil asking the court to make Getty drop Texaco and to finalize the contract it had with it and DE court says NO – specific performance is very rarely done and the court says that they should try to go on 27 . Empro says that the final writing in a technicality b/c both parties intended to be bound and there is enough here for a court to enforce the contract b/c the provision is just a formality. but all big terms are already agreed upon. Pennzoil and Outposts of Contract Law A planned merger of a few giant companies for a multi-million dollar deal. Months of negotiating. HELD: P brought grocery store expecting it to be temporary experience gaining venture and a new trial should be assigned for this damage amount.
Baskin Robbins U. then he might not be able to obtain these necessaries INCAPACITY: MENTAL ILLNESS OR DEFECT Restatement § 15 – Mental Illness or Defect 28 . all we have is a letter of intent – Pennzoil then goes after Texaco under tort law for Tortious Contractual Interference who is suing for redress of an injury. Capacity to contract may be partial and its existence in respect of a particular transaction may depend upon the nature of the transaction or upon other circumstances A natural person who manifests assent to the transaction has full legal capacity to incur contractual duties thereby unless he is Under guardianship An infant Mentally ill or defective Intoxicated “Void” – elements that can NEVER be enforced (i. it may force the court to overlook the fact that he was an infant. HELD: Copeland cannot recover for lost expectations (profits) because there is no way of knowing what the ultimate terms of the agreement would have been or even if there would have been an ultimate agreement INCAPACITY: INFANCY Restatement § 12 – Capacity to Contract No one can be bound by contract who has no legal capacity to incur at least voidable contractual duties. then the minor cannot simply rescind. Presence of a guardian is NOT sufficient to overcome incompetence. Sperry (1962) Minor buys car with aunt’s money and in her presence and disaffirms the contract when the car turns out to be a lemon. Where a contract made by a minor involves a necessary (something essential for their wellbeing).e. There was a break in negotiations by B.R. HELD: The jury found in Pennzoil’s favor. he must pay the value of the necessary because if he does not.other claims first – we did not even have a finalized contract between Getty and Pennzoil.” ”Necessaries” – a product that is necessary to the life of the plaintiff. The cost component was not yet determined.’ Months of negotiations went by and Copeland received a specific letter of sale from the company where he accepted the terms of the co-packing agreement but some terms were still up in the air. HELD: A minor may rescind a K for the purchase of a car which is not vital to his existence or a “necessary.S. that Texaco tortiously injured Pennzoil and Texaco was left with a huge liability Copeland v. and Copeland sued for breach of contract and damages from “lost profits” from a three-year co-packing agreement. (2002) Man entered into an agreement with Baskin Robbins for a ‘co-packing deal. illegal acts) “Voidable” – elements that can be made void later on for one reason or another Bowling v. If it was necessary.A.
Mistake Defined – A mistake is a belief that is not in accord with the facts § 152 – When Mistake of Both Parties makes a Contract Voidable (1) Mistake of both parties at time a contract was made as to a basic assumption on which the contract was made has a material effect on the agreed exchange of performances. v. Ltd. The burden of proof will be the same for mental incompetence – clear and convincing evidence that he could not act in a reasonable manner MISTAKE § 151 . Her family members claim that she did not have the mental capacity to make that kind of contract. or the person must be unable to understand the nature of the consequences ***fair terms. no knowledge of mental defect. then the court will NOT rescind solely because of a mental condition it is not only the goal to protect the incapacitated party. (v) relation of trust and confidence between the parties to the transaction. have a material effect. Phillips Mrs. (iii) the adequacy of consideration. Gholson. and does not bear risk § 153 – When Mistake of One Party Makes a Contract Voidable . account is taken of any relief by way of reformation. (iv) whether or not the transaction was improvident. but also wants to protect the party that does not know of the mental defect Heights Realty. (ii) the person’s physical condition. an old woman.unilateral mistake will ONLY be remedied if it is so harsh and severe OR if the other party had reason to know of the mistake and did nothing about it – must be a basic assumption. but there is more of a balance to protect both parties – on one hand the law wants to protect the mentally disabled party.- if someone is unable to act in a reasonable manner because of his mental condition. and does not bear risk 29 . Relevant evidence in a competency case includes (i) the person’s prior or subsequent condition. she lie on the couch the whole time. Restatement § 16 – 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. of material effect. During the transaction. mutual mistake must be a basic assumption. restitution. part-performance. and it would be unjust to the other party to rescind. the contract is voidable by the adversely affected party unless he bears the risk of the mistake under the rule stated in § 154 (2) In determining whether the mistake has a material effect on the agreed exchange of performances. or otherwise *basically. then the other party NEEDS TO KNOW. HELD: A person is incompetent when there is no evidence that the result of the transactions is not one which a reasonable competent person might take. entered into an agreement to sell her house with a real estate company. or (b) he is unable to act in a reasonable manner in relation to the transaction “intoxication” – by alcohol or by other substances.
they are not automatically precluded from using mistake defense to rescind Beachcomber Coins. OR (b) the other party had reason to know of the mistake or his fault caused by the mistake § 154 – When a Party Bears the Risk of a Mistake – Risk Allocation (“as is” clause) A party bears the risk of a mistake when (a) the risk is allocated to him by agreement of the parties.e. Boskett Coin seller and part-time coin buyer were mistaken about the nature of the coin . Walker 30 . HELD: Mattefs followed the “standard level of care” and that when a mistake happens here. v.both thought coin was real but it was not. or (i. FIVE ELEMENT TEST FOR UNILATERAL MISTAKE 1) mistake was material 2) enforcing of the contract would be unconscionable 3) mistake did not result from culpable negligence 4) party to whom bid was submitted will not be prejudiced except by the loss of the bargain (can allow loss of windfall) 5) prompt notice of error was given Boise Junior College District v. Inc. the have assumed the risk) (c) the risk is allocated to him by the court on the ground that it is reasonable in the circumstances to do so. Unconscionable: not just a reduction in profit. not fraudulence or a lack of good faith. or (i. Origin of mistake: from a clerical error. Mattefs Construction courts will normally rescind for unilateral mistake in construction contracts because this whole area is somewhat prone to error . through an “as is” clause) (b) he is aware.000 loss if D forced to comply. just a failure to save extra money. but a $10. at the time the contract is made. the person has some doubt or has not fully investigated – where someone has reason to be doubtful but does NOT take action. the contract is voidable by him if he does not bear the risk of the mistake under the rule stated in § 154 and (a) the effect of the mistake is such the enforcement of the contract would be unconscionable. Notice of Error: adequate and immediate notice was give. HELD: Granted rescission b/c both parties believed that they were buying and selling a genuine coin and neither had reason to suspect otherwise the court rescinded the contract Sherwood v. Hardship: Equity loss would be none on the P. that he has only limited knowledge with respect to the facts of which the mistake relates but treats his limited knowledge as sufficient.D makes a mistake by omitting glass and plumbing in his bid and D says that he cannot perform after he submits his bid and it is accepted – UNILATERAL MISTAKE ANALYSIS: Material: omission of an item representing 14% of the total cost is material.e.- Where a mistake of one party at the time a contract was made as to a basic assumption on which he made the contract has a material effect on the agreed exchange of performances that is adverse to him.
prenuptial agreement 3. Western Union Telegraph Co. e. Telegraph company transmitted telegraph b/w Bangor and Philadelphia and made a mistake in the price in transmitting the telegram so the seller had to sell at that price and lost money. Marriage – i. D wants his cow back. Sale of Land – land is permanent. a dowry promise would have to be in writing. Messerly Pickles bought land from Messerlys. is Western Union responsible? It is proper for Western Union to pay the difference because they are RESPONSIBLE for sending an accurate message – there is an implied contract here that they will sell the accurate telegram and this also could be look at as negligence in tort – Western Union has a duty to perform and it is foreseeable that its errors could cause injury to someone else and might even be a basis for a negligence claim – the mistake is made by a third party and the court finds that the buyer gets to buy at the lower price but Western Union must play the difference THE STATUTE OF FRAUDS Categories under the Statute of Frauds (not enforceable UNLESS they are in writing) 1.g. HELD: Mutual mistake of fact warrants rescission. HELD: D wins b/c the Ps could have found out on their own about the problem with the land and in the purchase contract there is an “as is” clause that transfers the risk of any unknown defect to the buyer. Walker contracted to sell Sherwood a cow that both parties thought was barren. it would be doubly unfair – it is a serious matter to assume the burdens of someone else – this is for a great need of protection 2.10? Ct. should the seller have refused the sale once he became aware that the offer went out for two dollars instead of $2. Cow was actually fertile so worth a lot more money. The value of the land is now next to nothing and he might be liable to pay cleanup costs.e. One Year Rule – if the act that is agreed upon is not completed within one year from the time of making the contract. Original owners violated the heath code and Pickles thought that the property he bought would bring his rent but the land was condemned and uninhabitable. contracts dealing with the sale of land MUST be in writing 5. The difference b/w the prices was a lot of money on a large quantity. society needs to have boundaries and needs to know what land belongs to what owners so historically and to the present day. says that the seller was correct to sell it for two dollars b/c the seller and the buyer are both innocent parties to the mistake 2. Lenawee County Board of Health v. MISTAKE IN TRANSMISSION Ayer v. Court has to look to the two issues: 1. Sale of Goods ($500) – this is covered by the UCC – sale of goods in excess of $500 31 . In transmission the word “ten” was omitted and it was really essential to the offer and the P accepted. Executor – Answer for duty of another – you agree to “guarantee” someone else’s debt – a promise to act on behalf of another – this should be in writing b/c it involves someone else’s wellbeing as well – if you were falsely held to something without written proof. then it must be in writing to be a contract 4. The essence of the contract was shifted b/c the cow was not barren and now worth 10x as much. A court does not have to grant rescission in every mutual mistake case. Suretyship.
C. the one-year provision of the Statute does not prevent enforcement of the promises of other parties North Shore Bottling Co. – you can pass the statute of frauds test and still be unable to win SALE OF GOODS UNDER STATUTE OF FRAUDS UCC § 2-201 – Formal Requirements. the plaintiff still has prove everything else in a contract – you still have to prove that there was offer. HELD: Statute of Frauds does NOT apply because the agreement permitted the brewer to terminate its relationship with the bottler within a year of its formation by discontinuing its sales of beer in the area in which the bottler operated. Inc. etc. If the goods are to be specially manufactured for the buyer and are not suitable for sale to others in the ordinary course of the seller’s business and the seller. does it fall within exception that might allow it to satisfy the Statute of Frauds? If there is no exception. Schmidt could have stopped selling beer in less than a year and so it is not within the Statute of Frauds and the oral agreement can be enforced. is there a writing sufficient to satisfy Statute of Frauds? If not. has made either a substantial beginning of their manufacture or commitments for their procurement. (2) When one party to a contract has completed his performance. 32 . Alleged breach of oral contract. is there alternate remedy for someone who has lost money in reliance or someone who has been unjustly enriched b/c the parties started to act on the contract before they realized that there was a statute of frauds problem? Restatement of Contracts § 130 – Contract Not to Be Performed Within a Year (1) Where any promise in a contract cannot be fully performed within a year from the time the contract is made. v.Analysis • • • • Does Agreement fall within the Statute of Frauds? If yes. Statute of Frauds (1) Except as otherwise provided in this section a contract for the sale of goods for the price of $500 or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker. all promises in the contract are within the Statute of Frauds until one party to the contract completes his performance. (2) Between merchants if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents. or. consideration. ***even if the Statute of Frauds is not a bar. but notice of repudiation is received and under circumstances which reasonably indicate that the goods are for the buyer. it satisfies the requirements of subsection (1) against such party unless written notice of objection to its contents is given within 10 days after it is received. acceptance. A writing is not insufficient because it omits or incorrectly states a term agreed upon but the contract is not enforceable under this paragraph beyond the quantity of goods shown in such writing. Schmidt & Sons. Agreement for company to be exclusive distributor as long as Schmidt stays within the New York area. (3) A contract which does not satisfy the requirements of subsection (1) but which is valid in other respects is enforceable a.
you are hiring a famous photographer to do a family picture – is that sale of goods? 33 .Contracts is always concerned with autonomy but at the same time also to have some general guidelines and rules How do you find the essence of something that seems to be both a good and a service? i. 2-606) Basically. a contract within the Statute of Frauds is enforceable if it is evidenced by any writing. that in itself satisfies the statute of frauds – this only removes the agreement to the extent of the performance. there is the proof that it really was a contract – under the CL some parties were taking advantage of the system – the technicality of not writing here should not bar enforcement c.b. how to figure out when/how the contract will go down. Testimony or admissions in court is an exception to take something out of the statute of frauds b/c if it is under oath. If the party against whom enforcement is sought admits in his pleading. it is not as necessary to have the terms in the contract . 2-201(1) says: Sale of goods >$500 needs a writing sufficient to indicate contract and it must be signed by the party against whom the contract would be enforced. that satisfies the statute of frauds (this acknowledges business reality and efficiency) 2-201(3) says: a. must evidence a sale of goods Restatement § 131 – General Requisites of a Memorandum Unless additional requirements are prescribed by the particular statute. or c. Writing must have a quantity. which (a) reasonably identifies the subject matter of the contract. signed by or on behalf of the party to be charged.e. and state with reasonable certainty the essential terms – §2-201 only wanted the price specified . Performance – if the party accepted the goods and did not want to pay for them and then claims that there is no contract.Under the Restatement. With respect to goods for which payment has been made and accepted or which have been received and accepted (Sec. you must identify the subject matter. the essential terms must be stated with reasonable certainty – the whole purpose of the UCC is to make uniform and consistent commercial practices and where the UCC has these gap fillers. For specially manufactured goods there is evidence that the item is made to the customer’s tastes – this is enforced out of fairness and because specifications are evidence of the contract so lack of writing will not bar enforcement b. and the writing will not fail just because it has a mistake or it is not complete but MUST have quantity specified 2-201(2) says: Exception where a writing is acceptable EVEN IF it is NOT signed if it is a confirmation b/w merchants – if the party receives it and does not object w/in ten days. and (c) states with reasonable certainty the essential terms of the unperformed promises in the contract *§131 does not mention quantity. testimony or otherwise in court that a contract for sale was made. must be signed by the party you want to enforce it against. this subsection says that when there has been some kind of performance and you have accepted goods/payments. (b) is sufficient to indicate that a contract with respect thereto has been made between the parties or offered by the signer to the other party. but the contract is not enforceable under this provision beyond the quantity of goods admitted.
anticipated reliance.Look to the purpose – do you really want the photographer and his or her skill or do you really want the picture that hangs on the wall? There is both a service element and a product and you need to decide under the facts which one is more important. typewriting or any other intentional reduction to tangible form. specifically because they list four other exceptions – many commentators have said that by the language of the statute the exceptions are limited to those listed in 2-201 and cannot invoke reliance Statute of Frauds analysis: 34 . HELD: No contract. Mrs. Subsequently. Brown denied under oath that a contract had been made and DF said that if brought to trial she might admit in a deposition that a contract existed b/w the two. Brown (1988) DF wants to by a chair from Mrs. Restatement § 132 – “the memorandum may consist of several writings if one of the writings is signed and the writings in the circumstances clearly indicate that they relate to the same transaction. P claims breach of employment contract and D denies this breach. The chair was designed by him as well – called the “Willits Chair. **if you are disputing something that is attached to the ground then it is NOT a movable good and therefore NOT governed by the UCC Crabtree v.’” The word ‘sign’ has been defined to include intention to adopt a record by an ‘electronic sound.” DF says that Mrs. Mrs. Elizabeth Arden Sales Corp . Brown who lived in a house designed by Frank Lloyd Wright.’” DF Activities Corporation v. symbol. or process.Criteria for satisfying §139(2): • Are there other remedies available? Substantial reliance? Reasonableness of reliance? • *Extent to which the action corroborates the terms of the promise • Extent to which the action or forbearance was foreseeable by the promisor .” “A ‘writing’ included ‘printing. Brown had agreed to sell the chair to him for $60K but Mrs. and injustice if no remedy were provided and the remedy can be limited and injustice can be avoided only by enforcing the promise but it does not mean that the court will not grant full expectancy damages and will be limited to allay damages .the fact that the UCC does not include reliance as an exception is evidence that they did not mean for reliance to be an exception. Brown then sold the chair for $198K to someone else. SIGNATURE AND QUANTITY both must be present to get out of the statute of frauds analysis Restatement of Contracts § 139 – Enforcement by Virtue of Action in Reliance – offers the possibility of reliance damages where a contract cannot be enforced because it fails to satisfy the statute of frauds. no deposition necessary. reasonable reliance. Brown has no recollection of this conversation and says that she did not intend to sell the chair. HELD: unsigned office memo together with two signed payroll cards were sufficient under the statute of frauds to establish an employment contract with a tenure of two years. All three documents on their face refer to the same transaction. Promise.§139 indicates that it is going to be tougher to get around the Statute of Frauds with a reliance argument than it is to get around a lack of consideration argument with reliance in §90 because the purpose of the Statute of Frauds is to reduce the risk of fraud .
the victorious party may also recover interest on sums of money withheld and. bad faith in the form of preventing or hindering the other party’s performance or failing to cooperate Basic remedial policies: 1. but he aggrieved party is entitled to recover damages for breach 2. it calls for setting the parties in the same position as if there was performance. the parties have the power to substitute arbitration or some other dispute resolving mechanism for the judicial process 7. the process of translating losses a. A non-material breach does not give the option to cancel. in the discretion of the court. a repudiation of the promise or bargain 3. Preference for money damages awarded over specific performance 3. A material breach by one party gives the non-breaching party the option to suspend its performance or to cancel the contract and sue for damages. not the risk of an additional amount for punishment 5. the parties should be limited to putting the party in the same position they would have been if the contract had not existed or if it had been enforced. a basic assumption is that the aggrieved party should be put in the position that it would have been in if the defendant had fully performed 4. the costs associated with the litigation. the P has a “duty” after the breach to make all reasonable efforts to avoid the consequences of the breach 6. the P must prove that the breach was the substantial cause of the loss and that the amount of the loss caused with reasonable certainty b. the provable losses caused by the breach must have been reasonably foreseeable to the D at the time of contracting c. a failure without justification to perform a contractual promise or bargain at the time agreed 2. Policy analysis: Contracts are voluntarily entered and parties should be encouraged to live by their promises but when they breach. Efficient breach – breach of contract would be okay if the contract is more advantageous monetarily to the seller – this is why contract law prefers expectancy damages b/c the aggrieved party will have to be put in the same position as if he lived up to the contract Specific performance – where money damages will not put the aggrieved party in the same position Remedies are triggered when there is: 1. it does not call for punishment or deterrence. Is the alleged agreement even within the statute of frauds? Is there a writing sufficient to satisfy the statute of frauds? Does it fall within an exception? INTRODUCTION TO CONTRACT REMEDIES **When a contract is breached. But the attorney fees are NOT awarded to the victor in the absence of agreement 35 . punitive damages for breach of contract are rarely awarded – you need to consider only the probability that a judgment for compensatory damages will be imposed.
Effect of Performance or Reliance §35 – The Offeree’s Power of Acceptance §36 – Methods of Termination of the Power of Acceptance §40 – Time When Rejection or Counter-offer Terminates the Power of Acceptance §42 – Revocation by Communication From Offeror Received by Offeree §43 – Indirect Communication of Revocation §45 – Option Contract Created by Part Performance or Tender §50 – Acceptance of Offer Defined. Requirements and Exclusive Dealings §2-314 – Implied Warranty: Merchantability. Recission and Waiver §2-302 – Unconscionable contract or Clause §2-305 – Open Price Term §2-306 – Output.RELEVANT UCC AND RESTATEMENT SECTIONS UCC §2-102 – Scope: Certain Security and Other Transactions Included in this Article §2-104 – Definition of Merchant §2-105 – Definition of Goods §2-204 – Formation of a Contract In General §2-205 – Firm Offers §2-206 – Offer and Acceptance and Formation of Contract §2-207 – Additional Terms in Acceptance or Confirmation §2-209 – Modification. Mutuality of Obligation §86 – Contracts Without Consideration. General Requisites of a Memorandum §132 – Statute of Frauds – Satisfaction of The Statute by a Memorandum. Usage of Trade §2-328 – Sale by Auction Restatement §12 – Capacity to Contract §15 – Mental Illness or Defect §16 – Intoxicated Persons §20 – Effect of Misunderstanding §24 – Offer Defined §25 – Option Contracts §26 – Preliminary Negotiations §28 – Auctions §29 – Making of Offers – To Whom the Offer is Addressed §30 – Form of Acceptance Invited §33 – Certainty §34 – Certainty and Choice of Terms. Acceptance by Promise §54 – Acceptance by Performance. Necessity of Notification to Notification to Offeror §63 – Time When Acceptance Takes Effect §69 – Acceptance by Silence or Exercise of Dominion §74 – Settlement of Claim §79 – Adequacy of Consideration. Promise for Benefit Received §87 – Option Contract §89 – Modification of Executory Contract §90 – Promise Reasonably Inducing Action or Forbearance §130 – Contract Not to be Performed Within One Year §131 – Statute of Frauds – Satisfaction of SoF by a Memo. Acceptance by Performance. Several Writings 36 .
§151 – Mistake Defined §152 – When a Mistake of Both Parties Makes a Contract Voidable §153 – When a Mistake of One Party Makes a Contract Voidable §154 – When a Party Bears the Risk of a Mistake 37 .