formation of the contract
1. offer- mutual assent; if the offeror has clearly manifested a willingness to enter into a contract in such a way that the other party knows that assent is all that is necessary to cement the deal and the offeree accepts.
1.1.1. offer and acceptance; each person has power at their step. Once real offer made, offeror is at complete mercy of offeree.
1.2. lucy v. zehmer joke bar farm your thoughts and words matter in determining mutual assent not your unexpressed thoughts.
1.3. social contracts; courts dislike becoming involved in marriage disputes of two otherwise happily married people. COUrts don’t like to enforce social contracts, and existence of familial relationship may affect ability to create enforceable contract. (U.N. Owne example).
1.4. Implied in fact contracts;
1.4.1. stepp v. Freeman wining lottery ticket from work group. Implied in fact shows by circumstances that there is mutual assent. Here history of actions and reasonable expectations. IT was a legal implied in fact contract.
1.5. preliminary negotiations;
1.5.1. Leed v. first allied conneticut corp. nursing home negotiations. Is a letter of signed intent to do something, equal to doing something? No, this letter was only an intent to do something, not a contract to do it. Unreasonable to conclude that this short contract represented a complete negotiation (under the circumstances of the deal). To have a valid contract parties have to agree on major terms that parties think are important (based on their words and actions).
1.6. Statement of opinion or intention;
1.6.1.1. advertisements
1.6.1.1.1. lefkowitz v. greater
1.6.1.1.2. note on deceptive trade practices and bait and switch.
1.6.1.1.3. carbolic smoke ball case; this ad is an offer for a unilateral contract, because it is specific (in duties of the offeree), sincere; gave example of money in bank (as to that they were serious). Time wasn’t specified, but then is construed to mean for a reasonable time.
1.6.2. written agreements;
1.6.2.1. continental laboratories v. scott paper negotiations to decide to distribute & provide hotel sundries. One said written contract was only memorial of oral agreement, one said never intended to be bound by oral only written. Clear from actions that one never meant to be bound by oral contact. (it is parties intent which will determine the time of the contract formation). List of things to consider when determining intent to be bound by oral/written contract;
1.6.2.1.1. is contract of class usually to be found in writing?
1.6.2.1.2. is of type needing formal writing for full expression?
1.6.2.1.3. are there few or many details?
1.6.2.1.4. is amount of $ large or small?
1.6.2.1.5. is contract common or unusual?
1.6.2.1.6. are all details agreed upon or some still to be resolved?
1.6.2.1.7. do negotiations show a writing was discussed or contemplated?
2. acceptance of offer; Restatement (second) of contracts §50; acceptance by performance; acceptance by promise- 1. acceptance of an offer of a manifestation of assent to the terms thereof made by offeree in manner invited or required by the offer. 2. acceptance by performance requires that at least part of what the offer requests be performed or tendered and includes acceptance by performance which operates as a return promise. 3. acceptance by a promise requires that offeree complete every act essential to the making of the promise.
2.1. beard implement co. v. krusa; sale for farm combine. Filled out contract without signing. Invalid, because the dealer never signed the contract (which he wrote). Contracts generally read against drafter.
2.1.1. UCC regarding formation in general §2-204
2.1.2. fujimoto v. rio grande pickle employment contracts, written signed contract, but employees didn’t return signed contract to company. And no instructions to. Court held; Contracts were accepted. You don’t have to expressly confirm acceptance of contract, nonverbal actions can show acceptance. *full outline page 16.
2.1.3. Carlill v. Carbolic smoke ball; ad in newspaper reward to any person who uses ball and contracts flu…court held; this ad is offer intended to be acted upon and when acted upon and conditions performed, constituted a promise to pay. An ad in a newspaper should be read as if by an ordinary person. specific, serious offers should be taken seriously, just as an advertiser would like a reader to do.
2.2. §69-acceptance by silence or exercise of dominion;
2.2.1.1. where offeree takes benefit, knowing that offeror expects payment
2.2.1.2. where offeror says ok to accept by silence
2.2.1.3. where it is reasonable because of previous dealings. (only to notify if not accepting).
2.2.1.4. Day v.
2.2.2. knowledge of offer-must know about offer when accepting or acceptance not good. Except for reward cases in govt.
2.2.3. motive- the reason to accept doesn’t have to be why you accepted as long as you mean to accept. If you know about offer and peform the deed, it has rebuttable presumption that you meant to accept.
2.2.4. mode of acceptance. In a true contract there is always a promise on at least one side. Sometimes both.
2.2.4.1. bilateral-default- two promises.
2.2.4.2. unilateral-more unusual- one promise in exchange for an action.
2.2.4.3.
3. termination of power of acceptance; §36.
3.1.1.1.1. offeree’s power may be terminated by;
3.1.1.1.1.1. rejection or counter-offer by offeree or
3.1.1.1.1.2. lapse of time, or
3.1.1.1.1.3. revocation by the offeror or
3.1.1.1.1.4. death or incapacity of the offeror or offeree.
3.1.1.1.1.5. also by non-occurrence of any condition of acceptance under the terms of the offer.
3.1.1.2. revocation by offeror
3.1.1.2.1.
3.1.1.2.2. You can promise to hold the offer open, but the promise is not enforceable in absence of consideration.
3.1.1.2.3. patterson v. pattberg. D said you can pay off mortgage early. P got ready to do that and went to door. D refused to open and revoked. Unilateral contracts may be withdrawn before the act requested has been performed (you could argue whether his getting money together was part performance, but it is also getting ready to perform.
3.1.1.2.4. note; tender must be cash. Also man walking
3.1.1.2.5. Partial performance of a unilateral contract turns the contract into an options contract or a contract with conditions.
3.1.1.2.6. marchiondo v. scheck. Real estate broker. Worked to sell house and then d revoked. If it was partial performance then the offer is unrevokable and it results in a contract with conditions. The condition is full performance by the offeree.
3.1.1.2.7. a rejection or counteroffer by offeree does not terminate the offer in an options contract.
3.1.1.3. lapse of time. Terminated at time specified or reasonable time (depending on circumstances).
3.1.1.3.1. Acceptance by midnight on the date the offer was received, if offer through mail and also acceptance would be timely.
3.1.1.3.2. loring v. city of
3.1.1.3.3. note on reward poster, how to revoke, poster in same location or specified time on poster.
3.1.1.3.4. when offer is made face to face it is revoked at end of conversation.
3.1.1.3.5. Philips v. moor. Hay sold but not delivered then burned down. Whose was it? If the sale is for specific goods (that brown car) then no matter where the goods are they are property of buyer. If the sale is for general kinds of goods, (any honda civic) then it is property of seller until delivery.
3.1.1.3.6. this is generally not as true now, because we have insurance, the risk of loss is usually who has possession.
3.1.1.4. termination by death or incapacity of offeror or offeree.
3.1.1.4.1. Death terminates offer, but not contract. important to know if bilateral or unilateral when discussing offer revoked at death (if unilateral can’t accept until finish performance-so no good if dies before).
3.1.1.4.2. §48 death or incapacity of offeror or offeree. Means legal incapacity.
3.1.1.5. termination by rejection,
3.1.1.5.1. counteroffer counts as rejection if materially different and then becomes new offer, going opposite way.
3.1.1.5.2. §38 rejection; offeree’s power of acceptance is terminated by rejection of the offer, unless the offeror has manifested a contrary intention. But it is not a rejection if the offeree manifests an intention to take it under further advisement.
3.1.1.5.3. Morrison v. Thoelke; offered contract for sale and purchase in mail. P accepted by mail and then tried to revoke. Acceptance is good when posted in
3.1.1.5.4. this works for “dispatch” like fed ex etc. means right address and sufficient postage. (can pretty well argue extension to email etc.). Only works for acceptance, and not on options. Acceptance by mail has to be reasonable as well.
3.1.1.6. termination by counteroffer and the battle of the forms
3.1.1.6.1. common law;
3.1.1.6.1.1. livingstone v. Evans. “offer to sell” “send lowest cash price, will give (less number) in cash” “cannot reduce price”. Offer, counteroffer (which acts as rejection). But then renewal of offer in ‘cannot reduce…” this was valide contract.
3.1.1.6.2. when is a counteroffer a rejection v. acceptance with conditions. Q; is your condition a deal breaker? Is it your intention to accept regardless of condition?
3.1.1.6.3. common law insisted on mirror image rule. Acceptance must look like offer. Or else it is a counter offer.
3.1.1.6.4. battle of forms taken out. §2-207 book page 102.
3.1.1.7. indefiniteness. Hard to define. You can’t have a contract where the parties are unclear as what is required of them. However. Never do you find a contract where everything is crystal clear. As a general rule no mutual assent exists and thus no contract unless agreement of the parties is sufficiently certain.
3.1.1.8. corbin on contracts; people do business in an informal fashion. A transaction is complete when the parties meant it to be.
3.1.1.9. walker v. keith lease “with monthly rentals fixed on a comparative of rental values…” Here they only agreed to agree. Contracts must specify all material and essential terms. Either clear fixed amount or Must be able to be calculated by courts.
3.1.1.10. courts should not expend their powers to establish contract rights where the parties who had the opportunity to do so have failed. But in reality many courts take different approaches.
3.1.1.11. rego v. decker rent gas station agreed to pave, given option to purchase. Contract never specified security for option to purchase. Hold; such uncertainty should not result in unconditional denial of specific performance where vendee has entered into possession in part in reliance on the option to purchase agreement (remanded to determine if they meant to make a security provision).
3.1.1.12. let it be saved rather then destroyed. (phrase in latin).
4. consideration.
4.1. something of legal value that is bargined for. Something of legal benefit to promisor or legal detriment to promisee.
4.2. a promise has no legal duty or legal remedy, by itself. Contract is defined as a promise the law will enforce. To be enforced it must also have consideration. Which concerns the exchange of things.
4.3. §71 requirement of exchange; types of exchange.
4.3.1.1. 1. to constitute consideration, a performance or a return promise must be bargained for.
4.3.1.2. 2. a performance or return promise is bargained for if it is sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise.
4.3.1.3. 3. the promise may consist of
4.3.1.3.1. a. an act other then a promise, or
4.3.1.3.2. a forbearance, or
4.3.1.3.3. the creation, modification, or destruction of a legal relation.
4.3.1.4. 4. the performance or return promise may be given to the promisor or to some other person. it may be given by the promisee or by some other person.
4.3.1.5. Hamer v. Sidway uncle promised nephew if refrain from drinking, swearing etc. until 21, he would pay him 5,000. Court held; forbearing from something that you have a legal right to do is consideration.
4.4. sufficiency. Common law; courts will inquire into sufficiency of consideration, but not adequacy. Sufficiency is if of legal value. Adequacy is quantity/quality of amount exchanged.
4.4.1.1. an executory contract is one that hasn’t been performed on both sides. When we perform we execute. a promise to you and promise to me.l these promises are intangible consideration one for the other.
4.4.1.2. A contract is a legal obligation that results from our actions that bind us legally to something we were not previously obligated to do.
4.5. adequacy of consideration.
4.5.1. Batsakis v. demotsis greek case during war. 2,000 us. Dollars in return for 5,000 drachmae (which is worth 25 dollars) now. Does the difference in consideration void contract. NO adequacy doesn’t matter, unless straight money, in this case it was money and also factor of when and where money available.
4.5.2. schnell v. Nell contract for 200$ to parties named in wife’s will. Consideration; loving memory of wife, her hard work and 1 cent. Cent merely nominal and intended to be so. Nominal consideration not ok. Others moral consideration alone will not support the promise.
4.5.3. exception for consideration rules; §87 option contracts; offer binding as an option contract if
4.5.3.1.1. a. in writing and signed by offeror. And it recites consideration for the making of offer and the contract is otherwise fair and reasonable. Ok if consideration nominal or not paid.
4.5.4. forbearance as consideration.
4.5.4.1. fiege v. boehm; mom said wouldn’t sue for bastardy if father paid support. But now tested not father. If a forborne legal claim is so lacking in foundation as to make its assertion incompatible with honesty and a reasonable degree of intelligence, then insufficient consideration. Or if party, who forbears to bring an action, had an honest intention to prosecute litigation which is not frivolous…and which he believed to be well founded, then it is sufficient consideration.
4.5.4.2. §74 settlement of claims.
4.5.4.2.1. 1. forbearance to assert or the surrender of a claim or defense which proves that it is invalid is not consideration unless;
4.5.4.2.1.1. a. the claim of defense is in fact doubtful because of uncertainty as to the factors of the law or
4.5.4.2.1.2. b. the forbearing or surrendering party believes that the claim or defense may fairly determined to be valid.
4.5.4.2.2. 2. the execution of a written instrument surrendering claim or defense by one who is under no duty to execute it is consideration if the execution of the written instrument is bargained for even though he is not asserting the claim or defense and believes that no valid claim or defense exists.
4.6. Illusory promise
4.6.1. lady duff Gordon creator of fashions, agent. They agreed only agent could sell her stuff, then he would get a percentage. Court holds; there was an implied consideration of good faith effort to sell her stuff. An exclusive agency implies an obligation of duty and is sufficient consideration.
4.6.2. sylan crest sand and gravel v.
4.6.2.1. Two options and each is valid as consideration then it’s valid?????
4.6.3. McMichael v. Price parties agreed that d would provide all p needed (requirements contract). P was bound by something, he couldn’t buy anywhere else. This contract was valid and had mutuality.
4.6.3.1. General rule in construing contract is where consideration on one side is offer to sell and other side is offer to buy. The obligation of the parties to sell and buy must be mutual.
4.6.3.2. §77 illusory and alternative promises. A promise or apparent promise is not consideration if by its terms the promisor or purported promisor reserves a choice of alternative performances unless
4.6.3.2.1. A. each alternative performance would have been consideration alone.
4.6.3.3. B. one of the alternative performances would have been consideration and there is or appears to the parties to be a substantial possibility that before promisor exercises his choice events may eliminate the alternative which would not have been consideration?????
4.6.3.4. Consideration must be bargained for.
4.7. Past consideration
4.7.1. Hayes v.
4.7.1.1. Mills v. Wyman D’s son taken ill and P took care of him until he died. D said he would pay for that care and then backed out. Mere moral obligation doesn’t constitute consideration, unless it there was good consideration (at one time).
4.7.1.2. §82; promise to pay indebtedness; effect on statute of limitations.
4.7.1.2.1. a promise to pay all or part of an antecedent contractual or quasi contractual indebtedness owed by promisor is binding if the indebtedness is still enforceable or would be except for the statute of limitations.
4.7.1.2.1.1. a voluntary acknowledgement to oblige admitting to present existence of antecedent indebtedness. Or
4.7.1.2.1.2. voluntary transfer of money negotiable instrument or other thing by obligor to oblige made as interest on or part payment of or collateral security for the antecedent indebtedness or
4.7.1.2.1.3. statement to the oblige that statute of limitations will not be pleaded as a defense.
4.7.1.2.2. webb v. mcgowin p saved d’s life at harm to himself. D promised to pay d 15$ every two weeks for the rest of p’s life. He did until he died. Because P saved d from death and d subsequently agreed to pay him for services rendered it was a valid and enforceable contract. Saving a life is more then sentimental value. It is a material benefit. In this case we presume that a previous request for service was made. Because if there was time we can assume he would have asked.
4.7.1.3. mere moral obligation is not sufficient consideration unless there was a prior legal or equitable obligation. BUT if the promisor, himself, takes an extreme or huge material benefit, then it is valid.
4.7.1.4. §86 promise for benefit received. A promise made in recognition of benefit previously received by promisor from the promise is binding to the extent necessary to prevent injustice.
4.8. The preexisting duty rule.
4.8.1. Harris v. Watson on ship promised workers would pay over wage for seaman to exert themselves to get out of danger. No good. Seamen had already contracted to do a good job sailing the ship. Consideration can’t be something you are already contracted or bound to do.
4.8.1.1. Stilk v. Myrick on ship. Captain told crew that they would have wages of deserters if they got ship back. No, they were already obligated to get ship back to port. And consideration can’t be something you are already bound to do (might be different if they had been at liberty to quit vessel at stop).
4.8.1.2. lingenfelder v. wainwright architect who threatened to quite work while building. They agreed to pay him more to get him to finish. No consideration because he was already under contract to do so.
4.8.1.3. when the party merely does what he is obligated himself to do, he cannot demand an additional compensation therefore, and although by taking advantage he gets a promise for more, The law will regard it as nudum pactum and will not lend its process to aid in the wrong.
4.8.1.4. Good if modification of contract is new duties on both sides.
4.8.1.5. or good if parties agree to throw out old contract and create new one.
4.8.1.6. §89; modification of executory contract.
4.8.1.6.1. a promise modifying a duty under a contract not fully performed on either side is binding
4.8.1.6.1.1. a. if the modification is fair and equitable in view of circumstances not anticipated by the parties when the contract was made; or
4.8.1.6.1.2. b. to the extent provided by statute; or
4.8.1.6.1.3. c. to the extent that justice requires enforcement in view of material change of position in reliance on the promise.
4.8.1.6.2. example hard rock in cellar contract agree to pay extra bound.
4.9. Accord and satisfaction; an agreement to substitute a different agreement. And satisfaction is the performance of accord. Must start with a genuine dispute. Where the consideration is for giving up the right to file a suit and for giving up right to full amount of money (contract performance).
4.9.1. MUST BE A GENUINE DISPUTE / bona fide
4.9.2. accord is the agreement, satisfaction is the performance of accord WHICH WAIVES RIGHTS.
4.9.3. sometimes called executory accord (because the accord itself does not discharge the duty.)
4.9.4.
5. Promisory estoppel, also called reliance.
5.1. §90 1. a promise which the promisor should reasonable expect to induce action or forbearance is binding if injustice can be avoided only by enforcement of the promise. 2. a charitable subscription or marriage settlement is binding without proof that the promise induced action or forbearance.
5.2. elements;
5.2.1. 1. promise
5.2.2. 2. that promisor should reasonably expect to induce action or forbearance
5.2.3. 3. does induce such action or forbearance
5.2.4. 4. only enforceable to avoid injustice.
5.3. Universal computer systems v. medical services association of
5.3.1.1. In promissory estoppel cases, damages are only just what you =spent in reliance (or lost). No more. Also doesn’t make agreement a contract. Only makes it an enforceable promise.
5.3.1.2. James baird v. Gimbel brothers contractors and subs. Subs sent out offer to contractors to sell tile at…price. Then sent back revoke, after contractor relied to make bid. Both parties must be bound to contract or none. In this case, contractor wasn’t bound to use that sub (if later he found a cheaper price) so sub wasn’t bound to him.
5.3.1.3. Branco Enterprises v. delta roofing sub contract said ok we’ll do it we understand conditions. Then later said wouldn’t couldn’t get certification. Here there was elements of estoppel, because condition was clear, it was clear they were relying on it. why valid? Difference from last case; contractor actually called to confirm and bind himself to subcontractor. It was conditional offer. That is ok.
5.3.1.4. Limits of doctrine;
5.3.1.4.1. Hoffman v. red owl stores going to sell franchise. Kept leading p on and got him to sell bakery etc. kept upping $ needed. Here there is promissory estoppel, gets damages, but only the money he put in (not profits he lost etc.) also this case adopted promissory estoppel in wi. And they also said isn’t just to substitute for consideration. Don’t need to be so particular with contract elements. And added 3rd person.
5.3.1.4.2. reasons for avoiding promissory estoppel; not available if enforceable contract exists. Also damages less.
1 comment:
I love the Hamer v. Sidway case! It was the first one I learned about.
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