Contracts I

is acceptance or assent

Conduct which imports acceptance or assent

i. Offer ii. Acceptance iii. Consideration iv. Competent Parties v. Legal Purpose vi. Comply with Statute of Frauds

Construction of a contract?

Klocek v. Gateway

Different court than previous two cases ii. § 2-207 applies, even though only one form, because it does not say anything about being limited to 2 forms iii. Buyer = Offeror Additional terms, not between merchants, are mere proposals

Supervening illegality terminates an offer and a binding contract even without notice

Does supervening illegality terminate a revocable offer?

Majority Rule - The supervening insanity terminates a revocable offer, even without notice on the part of the offeree Minority Rule (Swift) - If the offeree enters into a contract with the offeror, who becomes insane after making an offer but prior to the acceptance of the offer, then the offer is not revoked unless the offeree knew or should have know that the offeror was insane.

Does supervening insanity terminate a revocable offer?

UCC 2-204 (3)

Even though one or more terms are left open a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is reasonably certain basis for giving an appropriate remedy.

Public Policy Exception i. If you are terminated for refusal to violate a public policy, then the at-will presumption is overcome. ii. Whistle blower statutes, termination for refusing to participate in criminal acts, and instances where an employee is placed in a harmful or life threatening situation. iii. It is the nature of the act, not the magnitude. iv. You cannot contract away public policy rights. b. Personnel Manual Exception i. Whether a personnel manual modifies any particular relationship is a question of fact. ii. If the personnel policy manual says anything about employee termination, then it may become part of the employment contract. c. Good Faith and Fair Dealing Exception i. Unless expressly stated in the contract, it is presumed that there is no implied promise to act in good faith.

Exceptions to at-will presumption?

If fixed price and fluctuating prices, then the lapse period is going to be short, because you do not want to take the risk If market price, then the lapse period is going to be longer, because the offeror is more willing to take a risk

Fixed Price v. Market Price Without Express Lapse Period(??)

Look at depth of investment and fungibility

How do we determine the duration term for a franchise relationship?

Apply Lucy principle to negate the contract if there is term within the box that is manifestly unreasonable (i.e., "You now owe us an extra $10,000")

How do you handle a "Manifestly unreasonable term"?

The death of the offeror terminates a revocable offer, even without notice on the part of the offeree

How does the death of the offeror affect the existence of an offer?

Apply predominate factor test. Look at LANGUAGE and BILLING.

How is a determination made for application of UCC when the contract is a "hybrid contract" involving both goods and services?

A prescribed method of acceptance is the means used to overcome the indifference presumption.

How is the presumption that an offer is indifferent overcome?

a promise to perform

If a reverse unilateral offer is made, then the act of acceptance is

performance of the act

If a unilateral offer is made, then the act of acceptance is the ___________.

bilateral

If a________ offer is made, then the act of acceptance is a promise to perform the act.

:)

If absent therein, then it is the court's responsibility to assign price term and they usually will put the reasonable price of the act.

indirect revocation

If it is not from a reliable source, then it is not a revocation regardless of the truth

then the lifespan of the offer is a reasonable amount of time

If no duration is given...

implied promises

If the fact was merely brought to his attention upon a single occasion and casually, if he had little opportunity to notify the other that he did not desire the work and should not pay for it, or could not do so at the expense of much time and trouble, then no implied promise has been made.

The offeror is warranted, under common law theory, to sue in tort for conversion or in contract for breach of contract. This is only possible if the terms of the offer are not manifestly unreasonable.

If the offeree acts in a way that is not consistent with the act of saying no, then their conduct means yes.

The exception to the common law rule is that the offer is irrevocable once the performance of the offer has begun

If the offeror stops the offeree from performing, then it is presumed that the performance has been completed and the contract has come into existence

If plaintiff has an opportunity to reject the offer, then there is valid implied acceptance.

If the parties had a long-term business relationship and the course of conduct over a period of time was enough to infer that there was an expectation that defendant would pay, then the defendant had knowledge of plaintiff's expectation.

indirect revocation

If the revocation comes from a reliable source, then it is a revocation only if it is true

made a counteroffer

If you change the prescribed method, then the offer has not been accepted and you may have

FACT

If you have two offerors, then the death of one of those offerors terminates a revocable offer because of death

Equal publicity rule

If you make an offer, then you must make the revocation in the same manner and for the same amount of time that you allowed to offer to live.

Day v. Caton

Implied promise to act if: 1. Plaintiff (offeror) has expectation that defendant (offeree) would act, and 2. Defendant had reason to know that plaintiff was so acting with that expectation, and 3. Defendant allowed Plaintiff to act without objection a. Defendant MUST have an opportunity to reject the offer.

has no way of knowing that performance was completed

In a unilateral contract, the offeree must communicate his acceptance of the offer to the offeror when the offeror

the offeree finishes performance of the specified act

In a unilateral offer, Contract comes into existence when.....

when they are no longer face-to-face

In common law, the rule is that an offer made face-to-face lapses

Fact

It does not matter if the prescribed method is entirely unreasonable. This prescribed method is the sole means of acceptance regardless.

Create

LUCY PRINCIPLE CAN ONLY NEGATE A CONTRACT THAT YOU BELIEVED TO BE THERE. CANNOT _________A CONTRACT.

to revocations

MAILBOX RULE DOES NOT APPLY

Quasi Contractual Recovery/ Unjust Enrichment

Occurs when an estimate is given that is wrong, but not misleading, and the estimator did the work with the belief that he was going to get paid. It is a legal obligation to prevent unjust enrichment

acceptance by act of dominion

Occurs when the offeree takes possession goods offered by the offeror, but indicates that the terms of the offer are not accepted.

partial revocation

Offeror changes a part of the initial offer, but does not revoke the entire offer.

hospitality

Offers of __________ typically are not made with the intention to be bound by legal consequences

When, however, the consideration allegedly supporting an option fails or is nonexistent, the option is no longer irrevocable but rather it becomes "a mere offer to sell, which can be irrevocable by the optionor at any time before acceptance"

Once the option is exercised by the optionee a binding contract is created that may be enforced through a decree commanding specific performance

2-305(1)(B)

Parties can conclude a contract for sale even if the price is not settled. In such a case the price is a reasonable price at the time of delivery if the price is left to be agreed by the parties and they fail to agree.

unilateral offer

Promise seeking an act

E-commerce

Reasonably conspicuous notice of the existence of contract terms and unambiguous manifestation of assent to those terms by consumers are essential if electronic bargaining is to have integrity and credibility. We hold that a reasonably prudent offeree in plaintiff's position would not have known or learned, prior to acting on the invitation to the download, of the reference to SmartDownload's license terms hidden below the "Download" button on the new screen."

"Shall be" appears less emphatic than only, but this is an instance when you must take the fork in the road and explain both paths

Rebutted when the words in the offer are as emphatic or more emphatic than the word only

by the offeree

Revocations are only effective upon receipt

by the offeree (If you revoke the offer to some 3rd party, then no revocation.)

Revocations are only effective upon receipt

almost always occurs in reverse unilateral contracts. Act seeking a promise (explicit or implicit).

Silence as acceptance

Fact

Subjective intent is not required to accept a bilateral offer; all that is required is an outward manifestation of intent to contract.

reverse unilateral

The act (offer) must be completed in order to seek a promise (acceptance)

Exceptions to the fact that ads are not offers

The advertisement is "clear, definite, and explicit, and leaves nothing up for negotiation." (the advertisement is specific and includes a promise, quantity, quality, and price.)

:)

The offeree must have knowledge of the offer in order to accept it. Only the person or entity to whom the offer is made can accept the offer. Parties who sign contracts will be bound by them regardless of whether they have read them or understood them

a communication of rejection

The offeror cannot require...

offer

The offeror is in control of the terms of the offer, so the first place we look for our acceptance rules is in the ___.

reverse unilateral offer (same acceptance rules as a bilateral contract) The price term is often absent in reverse unilateral contracts

"Act seeking a promise"

advertisements and order forms

"mere notices and solicitations for offers which create no power of acceptance in the recipient." Restatement (Second) of Contracts

UCC 2-105

1. "Goods" means all things (including specially manufactured goods) which are moveable at the time of the identification to the contract for sale, other than the money in which the price is to be paid, investment securities, and things in action. "Goods" also includes unborn young of animals and growing crops... 2. Services and real estate are NOT goods for UCC purposes

a prescribed method is addressing "whether" the contract was accepted at all, while an authorized method is looking to "when" the contract was accepted.

A prescribed method differs from an authorized method, because

"For immediate acceptance" in the context of a price quote may rebut the rule that price quotes are not offers.

A price quote is presumptively not promissory, but the language in a price quote can rebut the presumption

Fact

A promise is NOT sufficient to accept a unilateral offer!

anytime before the performance is completed

A unilateral offer is revocable at....

you do some act in the presence of the offeror that conveys the message of assent. It is VERY important that the offeror is in the presence when the offeree performs.

Acts of acceptance in a bilateral contract may be promissory if

Hill v. Gateway

Additional terms included in a box shipped by the seller do become part of the contract between the parties, even if the purchaser is unaware of the additional terms and the purchaser's acceptance of the terms is by not returning the item purchased.

:)

All the offeree can do is accept. If they attempt to alter the terms of acceptance, then they are now they offeror.

DON'T FORGET THAT AN OFFER NEEDS A PROMISE!!!

An offer is a promise to do or refrain from doing some specified thing in the future conditioned on the other party's acceptance. There is NO offer without a promise.

In this case, the buyer had seen advertisements giving him knowledge of the warranty term

Buyers must have knowledge that there are terms within the box

Rebutted: a. Where the offeror has given the offeree reason to believe silence will act as an acceptance and the offeree intends by silence to accept; b. Where the parties have mutually agreed that silence will operate as consent; c. Where there is a course of dealing so that silence has come to mean assent; (Hobbs v. Massasoit Whip Co.) d. Where the offeree accepts services with reasonable opportunity to reject them, and should reasonably understand that they are offered with expectation of payment. (Day v. Caton)

The presumption is that silence ordinarily does not give rise to an acceptance of an offer

the contract comes into existence.

The unilateral offer is irrevocable once....

Would a reasonable person in the position of the buyer/seller be warranted in believing that the other person intended to be bound?

Theory of contract?

bilateral contract

There is no obligation to notify the offeror that you are performing the act in a

The offeree must intend to accept the offer at the time of performance

This presumption is rebuttable if they said or did anything to rebut the promise that they intended to accept the offer at the time of the performance.

i. Unilateral- promise seeking an act ii. Bilateral - promise seeking a promise iii. Reverse Unilateral - act seeking a promise

Types of contracts?

2-310

Unless otherwise agreed, payment is due at the time and place at which the buyer is to receive the goods even though the place of shipment is the place of delivery.

If not clearly present, then indifferent offer principle.

We are not going to find a prescribed method UNLESS it is clearly present.

Lucy Principle

We must look to the outward expression of a person as manifesting his intention rather than to this secret and unexpressed intention

Duration Term 1. How long will the contract last into the future?Terms of Payment 1. Lifespan of the offer 2. Method of acceptance

What are elements that are sometimes there, but not always?

Expressions of opinion, statements of intention, hopes or desires, inquiries or invitations to make offers, catalogs, circular letters, invitations to make bids, and price quotations are not offers.

What are not offers?

1.Employment contracts without a duration term are presumptively terminable at-will contracts and this is the gap-filler. 2.NEVER fill in the gap with perpetuity

What do you do when the duration term is indefinite and essential?

The offeree may sue the offeror for breach of contract, because the Mail Box Rule applies, but the offeror would use estopel to estopp the Mail Box rule from applying because his reliance on the rejection letter constitutes the use of estoppel

What happens when an offer is accepted by an authorized method, but then the offeree uses a quick means of transmission to transmit a rejection of the offer and then the offeror enters into a new contract reliant on the offeree's denial of the offer?

If it is not an authorized method, then the Mailbox Rule is inapplicable and the acceptance is valid if and when it is received.

What happens when the method of acceptance is not an authorized method?

UCC §2-310 Unless otherwise agreed (a) payment is due at the time and place at which the buyer is to receive the goods even though the place of shipment is the place of delivery. If the state has applied §2-310 to service contracts, then the UCC may be used as a gap filler. When things are custom made, it does not benefit your client if you leave the terms out because no reasonable person wants payment on delivery for custom made goods.

What happens when the terms of payment are not in the contract?

Nearly impossible to determine a remedy because it is there to protect people from risk of unlimited liability exposure. (rebuttable)

What happens when you lack the requisite quantity term?

i. An authorized method of acceptance is implicit within a bilateral offer. ii. I.e., If I send an offer via Federal Express, then the implicit authorized method of acceptance is acceptance sent via Federal Express, but the acceptance might be reasonable if send by a means similar (i.e. UPS). iii. Prescribed method = authorized method!

What is an authorized method of acceptance?

Something equivalent to or more emphatic than "I will."

What is the linguistic standard for a promise?

i. Clear proof is required to show that the doctor made a promise to the surgical result. ii. Usually, a court will not recognize a promise by a medical professional because they are tort cases. iii. If a doctor repeatedly induces a patient to allow him to operate, then the situation may constitute a promise (Hawkins v. McGee) iv. Fault does not matter in determining a breach of contract. Do not mention this torts term. v. Some patients/client may take statements of opinion and transform such statements into firm promises in their own minds, especially when they have been disappointed in the event. (Think how this applies to attorneys, engineers, architects, surgeon, and other professionals)

What is the standard for determining if a medical professional promised a specific result?

Unless otherwise indicated, an offer may be accepted in any manner reasonable under the circumstances Indifference allows the manner of acceptance to be bilateral or unilateral, because the theory is that the offeror does not care.

What occurs when the offeror fails to specify the manner of acceptance?

iWhen an agreement to agree is present in a contract for the sale of goods, the Uniform Commercial Code § 2-305 may apply as a gap-filler. The parties if they so intend can conclude a contract for sale even though the price is not settled. In such a case the price is a reasonable price at the time of delivery if a. Nothing is said as to price; or b. The price is left to be agreed by the parties and they fail to agree; c. The price is to be fixed in terms of some agreed market or other standard as set or recorded by a third person or agency and it is not so set or recorded

What occurs when the parties leave the price term unsettled?

power

When an offer is made by the offeror, the ________ is shifted to the offeree. If there is no shift of power, then there was no offer to begin with.

Contract comes into existence at the time the offeror receives the offeree's promise to act, when the offeree sends the promise (Mailbox Rule), or at the beginning of a promissory act that is in the presence of the offeror.

When does a bilateral contract come into existence?

1) Lost acceptance 2) revocation of the offer before receipt of acceptance 3) Rescinded acceptance --> offer is sent by an authorized method and the offeree attempts to rescind the acceptance before it is received, then the Mailbox Rule becomes important because it prevent the rescission of the acceptance. If it is sent by an unauthorized method, then you can revoke the acceptance by phone or some other means of communication as long as the acceptance has not be received.

When does it matter whether a method is authorized? (Three Circumstances)

i. An acceptance in a bilateral contract is effective at the time the acceptance is sent if it is sent by an authorized method of acceptance. ii. If the medium of communication is reasonable, the acceptance will be effective when sent and even if it lost or delayed. (Mailbox Rule) 1. Reasonable if sent by same medium used by the offeror or it is customary in similar transactions at the time and place the offer is received. iii. The mailbox rule DOES NOT apply to offers, revocation of offers, options, face-to-face communications, or phone communications iv. The purpose of the Mailbox Rule is to protect the offeree from the offeror revoking the offer in the time between the sending of the acceptance and the receipt of the acceptance

When is an acceptance in a bilateral contract effective? (Mailbox Rule)

i. Duration is an essential term of a contract when there is a relationship between the parties that will extend into the future. ii. If the duration term is explicitly stated, then we MUST NOT superimpose a gap-filler from Haines or Wagenseller over the present duration. iii. If an unreasonable duration is a term in the contract, then you must use this duration term. iv. A contract can be perpetual in nature only when it is expressly stated that it will be so.

When is duration an essential term of a contract? (dickard term)

1. Did a party expressly reserve the right to be bound only be a written contract? 2. Were all essential terms of the alleged contract agreed upon? 3. Did any partial performance occur? 4. Was the contract of a magnitude and complexity that a reasonable person would expect a written contract?

When there is an oral memorialization of a contract, what criteria should be used to determine if there was intent to contract? (Texaco v. Pennzoil)

Two Principles 1.If the parties do not intend to be bound to an agreement until it is reduced to writing and signed by both parties, then there is no contract until that event occurs. 2.If the parties do intend to contract orally, the mere intention to commit the agreement to writing does not prevent contract formation before execution of that writing.

When there is an oral memorialization of a contract, what criteria should be used to determine if there was intent to contract? (Texaco v. Pennzoil)

consideration

Without_________ an option is an unenforceable gift.

i. If it was his theatre, then "first class theater" may not be sufficient because the details probably matter, but he is the one who put the term so not a big deal. Parties had an understanding. ii. "White paint" - what if you're buying paint for a gas station. Is the specific white chose a factor? What about durability? Depends on the situation. iii. Car color - You do not specify a car color. You get a beige Ferrari. Does the color matter? Yes, nobody wants a beige Ferrari. You get a beige Mercedes. Does the color matter? No, everyone gets beige. What about a Prius? Color doesn't matter because buying for mileage.

Words can be vague and still be sufficiently definite. It is only important that the people using the words know what the words mean. (Gilroy)

There is a rebuttable presumption that form letters are NOT promissory. 1. It can be inferred that the letter is not personal and you are not the only one receiving the letter. If it is a form letter, but does not state so, then a reasonable person could possibly believe that there was intent to contract under the Lucy Principle.

Would a reasonable person believe that there was intent to offer when correspondence is in the shape of a "form letter?"

contract

a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty.

option

agreement to keep an offer open that requires consideration to give it its irrevocable character

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

an offer to make a contract shall be constructed as inviting acceptance in any manner and by any medium reasonable in the circumstances (b) 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 goods or non-conforming goods but such a shipment of non-conforming goods does not constitute an acceptance if the seller seasonably notifies the buyer that the shipment is offer only as an accommodation to the buyer.

Balfour Rule

greements made between husband & wife, when living in amity, will not have legal consequences, unless you agree on legal consequences before agreement.1. Presumption is rebuttable if it can be proven that the parties did in fact foresee legal consequences, or if reliance on the agreement is to the detriment of one party (estoppel)

implied promise

inferred from the conduct, situation, or mutual relations of the parties. Wilhoite v. Beck

Quantum merit

is the equitable remedy used to recover "the reasonable value of services."

vendor!

master of the offer =

unordered merchandise

merchandise mailed without the prior expressed request or consent of the recipient.

estoppel

principle is that quotes/estimates are not promises, but if the misled person relied upon the misleading information, and it was to his detriment, then the mislead person can estop him from relying on the principle and the estimate becomes promissory. At this point, the person only has to pay the estimator the price quote. See problems 11 and 17 on page 37 for an illustration

Price-Value Disparity

the greater the disparity between the offer price and the value, the less likely there was intent to be bound. See Harrier Jet example in Leonard v. PepsiCo.

b. The shipment of non-conforming goods to the offeror does not constitute acceptance if accommodation is sent to the buyer. i. Offer is sent for 200k blue bottles, but the offeree sends 200k clear bottles with a letter stating "these are being sent as an accommodation to you." ii. The offeree has now sent a counter offer and is the offeror and accepted is no longer made at shipment. iii. If no accommodation with non-conforming goods, then the contract is binding, but the offeror can sue the offeree for breach of contract

§ 2-206 Explained a. It essentially says that the acceptance occurs when the shipment goes out or is promised to go out regardless of whether the goods are conforming or not i. Does not matter if the buyer (offeror) accepts the goods or rejects the goods at delivery.

ProCD v. Zeidenberg

§ 2-207 does not apply to cases in which there is only one form. If the terms are not on the box, then there must be some notice that they are within the box and the seller must give the buyer the opportunity to return the item.