Mutual Assent

The question is whether the parties who plan to reduce their agreement to writing mean to have a legally binding agreement immediately, the terms of which will be included.... What is the rule?

"Manifestations of assent that are in themselves sufficient to conclude a contract will not be prevented from so operating by the fact that the parties also manifest an intention to prepare and adopt a written memorial thereof; but the circumstances may show that the agreements are preliminary negotiations." Restatement (2nd) of Contracts § 27

Agreements required to be in writing are contracts involving the sale of any interest in real estate or contracts for the sale of goods in excess of $_______

$500

Some factors courts will consider in deciding whether to grant or to deny specific performance:

(1) Conduct of the parties (2) Hardship that specific enforcement might impose on the defendant (3) Overall considerations of justice (4) The public interest (5) Difficulties of enforcing the award

Elements of a contract

(1) Promise(s) (2) Enforcement

Objective theory requires establishing not only that a reasonable person would have understood, but also ____________________ & ___________________

(1) The offeror intended to be bound (2) The offeree understood that intention

Fairness rationale

-To allow a party to avoid the reasonable meaning of his words and conduct is unfair to those with whom he deals. -If courts decided whether there was agreement based on what a party actually, privately thought rather than on what a reasonable person would understand his words and conduct to mean, the reasonable expectations of the other party would be frustrated. -The law therefore promotes the security of transactions making the status of their legal relations depend on outward conduct.

Where is specific performance usually applicable?

-Usually only applicable for where money damages are deemed inadequate -Often money damages are inadequate because the land is unique

What is required to create a contract?

A bargain in which there is a manifestation of mutual assent to the exchange and a consideration

Promise

A commitment as to the happening or non-happening of some future event

Enforcement

An award of damages or some other order by a court of law

Rule of Law from Gleason v. Freeman

Ebay home sale case RoL: Ongoing negotiations evidence a lack of mutual assent to definite terms.

What kind of relief is specific performance?

Equitable relief, so it is discretionary and requires a "balancing of the equities."

What are contracts devices for?

For dealing w/ uncertainty by allocating risks of future changes

Does agreement mean there is a contract?

No, agreement is formed when there is "meeting of the minds" between parties on all essential terms of the proposed transaction

Do parties have to show that their agreement was meant to have a legal repercussion in order to have specific performance

No, b/c (1) If it did require the parties to intend for their agreement to be legally enforceable, many standards commercial agreements would fail to qualify as contracts (2) Most parties give no thought one or another to whether they expect the agreement to be enforceable (3) If they did think about it, they probably do intend for it to be enforceable

Does the law require that as a condition of enforceability, that a promise be accompanied by an express statement of the promisor acknowledging her intention to be legally bound by her promise?

No, express manifestation of intent to be bound is not required in order to a promise to bind the promisor, rather, it is inferred from the very act of making the promise

How is mutual assent established?

Ordinarily takes the form of an offer or proposal by one party and acceptance by the other

Exchange relationships

Relationships where A's promise was motivated by the return promise from B, which, in turn, was induced by A's promise

Subjective (Will Theory) Theory of Contracts

The subjective approach to mutual assent - sometimes called the "will theory" - asks whether both parties intended to form a contract. -There must be a "meeting of the minds" for there to be a contract, meaning that both parties must actually intend to be contractually bound to the same terms at the same time. -The parties' subjective intentions must coincide on whether to have a contract and on the terms of that contract.

If the parties have not expressly manifest their intentions, how does the court decide whether they meant to have reached a final agreement?

They look at the objective facts

Objective Theory of Contracts

Whether there is mutual assent is determined by how a reasonable person would understand the parties' words and conduct, not by the parties' secret intentions.

Specific performace

court enforcing a contract

"Freedom of Contract" policy

parties are free to bargain about the terms of their deal, but once the deal is struck there is no turning back

Resolutions made w/ a view of ____________

self-control

Promises made w/ a view of _____________

self-interest

"Statute of Frauds"

some agreements in order to be enforceable, must be evidenced by a written note or memoranda "signed by the party to be charged"

When is agreement formed?

Agreement is formed when there is "meeting of the minds" between parties on all essential terms of the proposed transaction

Specific Relief

-Such remedies are designed to give the aggrieved party the very performance promised. -The usual form of specific relief is an injunction by the court ordering the breaching party to perform his promise.

What reasons support the general rule that courts should not get involved in family disagreements?

-Reasonable expectations of the parties -Institutional competence (a) Courts should generally not intervene in the private, intimate , and nuances of family relationships

2 Components of Objective Theory

(1) What a reasonable person would have believed the parties' words and conduct meant; and (2) What the offeree actually believed.

What are reasons why the law supports the objective theory?

(1) You can't read someone's mind to see what their private intentions are (2) It would create a slippery slope to everyone trying to get out of their contracts later (3) Creates consistency in the law

The objective theory of contracts assures in the marketplace ____________ & _____________

(1) certainty (2) predictability

What reasons support the law's adopting the objective theory of contracts?

(1) fairness rationale (2) efficiency rationale

What do courts look at when the words of the contract leave the intent of the parties' in doubt?

(1) the situation (2) acts and conduct of the parties (3) the attending circumstance

In most cases, how does assent occur?

-Assent occurs simply by mutual concurrence and understanding of the parties -Most modern contracts are actually formed without an identifiable "offer" and acceptance

Transactional efficiency

-Commercial interaction is more efficient if business people can rely on the objective manifestations of assent. -Otherwise, contracting parties would be obliged to attempt ascertaining what their bargaining partners really meant when they said and did things.

Why should the law respect 'gentleman's contracts"?

-For the same reason the law would enforce any agreement -This is perfectly consistent w/ the objective theory -If the parties have agreed that their arrangement should have no legal consequences, the only way to give effect to their intentions is to deny legal enforcement of their agreement

Subjective (substitutional) Relief

-Such remedies are designed to give a substitute for the promised performance. -The usual remedy is money damages designed to put the aggrieved party in the economic position he would have occupied had the promise been kept.

Contract

Promise or set of promises that the law will enforce

Judicial efficiency

Proving subjective intentions is too difficult. It depends on the party's own self-interested and unverifiable testimony regarding his or her private state of mind. Focusing on subjective intentions requires the impossible, viz. to probe the minds of the parties to discern their private, subjective intentions

Rule of Law from Leonard v. Pepsico, Inc.

RoL: An advertisement does not constitute an offer unless its terms are sufficiently clear and leaves nothing open for negotiation and an advertisement intended to be a joke cannot be sufficiently clear.

Rule of Law from Lucy v. Zehmer

RoL: The objective, outward expression of a party's intent to be bound in an agreement, as opposed to that party's subjective mental assent to the agreement, is all that matters when determining the existence of a valid and enforceable contract.

What is the general rule regarding intoxication as a defense against contract formation?

The general rule is that voluntary intoxication is not a defense to contract formation

Mutual Assent

The meeting of the minds of both or ail the parties to a contract; the fact that each agrees to all the terms and conditions, in the same sense and with the same meaning as the others