Blaw 280-Contracts Review

8/3/2019 Blaw 280-Contracts Review

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Contracts

. OverviewA. DefinitionA contract is a promise or a set of promises for

1. the breach of which the law gives a remedy; or2. the performance of which the law in some way recognizes as a duty

B. ElementsA legally recognized contract must have (all elements)

1. An exchange relationshipBoth parties must benefit in a reciprocal arrangement in which each party give up something

a) No exchange exists fori) Giftsii) Family promises / relationshipsiii) Promise to do something which would have been done anyways

2. A voluntary agreement

A contract must be voluntarily agreed upon by both parties in the exercise of free willa) Objective TestMutual agreement is tested by an objective test evidenced by the parties apparent intent as

shown by their overt acts and words.i) Reasonable Person TestA reasonable interpretation of a manifestation is from the perspective of the party

who observed it, taking into account his1) Attributes

a. Experienceb. Trainingc. commercial sophistication

2) background information he possessed3) relationship between parties4) context of transaction

ii) Undisclosed subjective intention irrelevantIf the words or acts of one of the parties have but one reasonable meaning, his

undisclosed intention is immaterial except when an unreasonable meaning whichhe attaches to his manifestations is known to the other party.

iii) Subjective jesting irrelevantA person cannot set up that he was merely jesting when his conduct and words would

warrant a reasonable person in believing that he intended a real agreement. Lucyv Zehmer(sale of farm while drinking at restaurant)

iv) No writing requiredAvoid additional costs in exchange for cases like Kabilv) Policy

1) Encourages clarity of contract2) Efficiency of market transactions3) Protects a partys expectations based on her reliance on a manifestation to

the extent that her reliance was reasonableb) Subjective manifestations admissible only as evidence of objective

manifestations


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Subjective intentions of entering into a contract are admissible as evidence of the requiredobjective intentions ONLY IF the jury is not misled that such subjective intentions arenothing more than evidence bearing on the behavior and the perceptions of the parties tothe agreement. Kabil Development Corp. v Mignot (evidence allowed showingsubjective opinion regarding helicopter contract)

i) If testimony is consistent with prior behaviors, may lead to evidence of objectiveii)

If courts based assent on subjective manifestations instead of objective manifestations,the other partys reasonable expectations would be defeated, which could undermine thesecurity of transactions

c) No voluntary agreement exists IFi) Coercion

3. At least one promiseA contract must have at least one promise that is (all elements)

a) Future looking

b) Regardless of one-sidedi) E.g. A promise of a reward to anyone who returns a lost pet

c) Not a promise existing as the basis of another contract (Pre-existingduty rule)

4. Legal EnforceabilityA contract must be able to be enforced, for policy reasons, by a court which is (all elements)

a) CompetentThe court must be in a good position to make the determination about the enforceability of

the contracti) A court does not need to enforce a promise of anonymity between the press and a

news source as the press has an interest in keeping such promises or their sourceswill run out. Cohen v Cowles Media Co. (reporter promises to keep a sourcesname anonymous and breaks it)

b)The proper branch of lawContract law must be the proper tool to remedy the dispute in question as opposed to tort law

the legislature, etc.

A court may also take into account other policy and values considerationsc) Freedom of ContractFreedom of contract is a part of personal liberty, protected by the Constitution, to formulate

and enter into contracts

d) Morality of PromiseAn ethical and legal obligation exists to keep a contractual promise

i) The court may not be the appropriate place to enforce merely a moral obligationCohen v Cowles Media Co.

e) Accountability for Conduct and ReliancePeople should be held accountable for reasonably manifesting intent to contract

i) Individuals have a right to rely on contractsii) Society is encouraged to participate in commerce

f) Social Justice & Protection from unequal bargaining power


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Modern law is sensitive to coercion, dishonesty, and an imbalance of powerg) FairnessIn the context of societal standards and expectations, the doctrines of good faith and

unconscionability address issues of fairnessh) Economic considerationsA court may consider economic goals of contract law

i) Facilitate commerce

ii) Regulate the manner of dealingsiii) Enforce commercial obligations

A court must balance their decision betweeniv) Free market (economic efficiency) vs. regulation (social/moral values)v) Flexibility (fairness, judicial discretion with policy) vs. predictability (security in

transactions)

C. Law GoverningThe law governing contracts for

1. Sales of goods

The UCC Article 2 governs as the law for a contract consisting ofa) Goods which consist of things movable at the time of identification to contract for saleb) For sale which pass title from the seller to the buyer for a pricec) Exceptions

i) Louisiana

2. Sales of goods AND servicesThe UCC Article 2 may apply based on the courts use of either the

a) Predominant Purpose TestThe UCC Article 2 applies IF the transaction as a whole evidences that its predominant

purpose was the sale of goods, with labor incidentally involved; else if the predominant

purpose was the provision of a service, with goods incidentally involved, common lawapplies.

i) Factors which evidence the predominant purpose, although none alone aredispositive, are (all elements)

1) Language of the parties contract2) Circumstances of the parties

a. nature of the business of the supplier of the goods and servicesb. the reason the parties entered into the contract

3) Final product bargained for4) the respective amounts charged under the contract for goods and for

services

Pass v Shelby Aviation, Inc. (airplane serviced with goods incidentally involved)b) Gravamen TestThe UCC Article 2 applies IF the portion of the transaction, broken apart, which has been

complained about is the goods; else if the thing which has been complained about is theservices, common law applies.

i) Protects consumers from defective products1) Merchant is in the best position to determine reliability and safety of the

product


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ii) Allows contract to be severed into parts, thereby frustrating the goal of the UCCto simplify, clarify, and modernize the law

3. Anything elseThe common law applies for the sell of anything which does not involve the sale of goods.

D. Remedies for breach

If a contract is breached by either party the other party may bring an action in court for (any element)1. Expectation damagesA court orders the breaching party to pay damages representing the economic loss suffered as a

result of the breach, measured by the amount of money needed to put the non-breaching party inthe financial position it would have occupied had the contract not been breached.

a) Direct damagesActual loss under the contract itself

i) E.g. contractor / sub-contractor relationshipb) Consequential damagesLosses beyond the contract that resulted from the breachc) Incidental damages

Expenses incurred in dealing with the effects of the breachd) Mental distressA person cannot recover damages for purely mental distress in an action for breach of

contract, but must be accompanied by physical pain Keltner v Washington County (girlsuffers mental anguish after her identity is released as being a contributor of information)

2. Specific performanceA court orders the breaching party to perform the contract. Such remedy is available only in limited

circumstances, such as in land, where a financial remedy is insufficient compensation. Specificperformance is limited because (all elements)

a) Could be burdensome

i) Requires the sheriff or special master to monitor complianceii) Refusal to comply may strain judicial system since held in contempt

b) Award of damages as a substitute is more efficientc) Close to involuntary servitude 13th Amend.

E. Types of Contracts1. Unilateral ContractA contract is unilateral if the offer makes acceptance possible only by performing a stipulated act,

such that the offerees performance is complete at the point of contract formation.2. Bilateral ContractA contract is bilateral if both parties have made promises to be performed at a future date.


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Offer and Acceptance Model

I. OfferA. DefinitionAn offer is the manifestation of willingness to enter into a bargain, so made as to create a reasonable

expectation in the offeree that his assent to that bargain is invited and will conclude it.

B. InterpretationInterpretation of whether there exists an offer belongs to

1. the judgeIF there is NO contextual evidence extrinsic to the documenta) Four corners analysis

2. the jury IF there IS contextual evidence extrinsic to the document

C. Elements of an OfferA legally recognized offer exists IF there exists (all elements)

1. An objective manifestation of willingness to enter into a bargainObjective manifestations are evidenced by (any element)

a) Language used

b) Surrounding circumstancesi) Where an offer is clearly and objectively made in jest, it is understood in this

context, and is not an offerLeonard v Pepsico, Inc. (Pepsi jokes about giving away a harrier jet)

c) Prior Practice & Relationship of the partiesi) Industry Customs may be pertinentFairmount Glass Workers v Grunded-Martin Woodenware (ten car loads of jars)

d) Certainty and Definiteness of termse) Method of communicationThe broader the communicating media, the more likely it is that the courts will view the

communication as merely the solicitation of an offer, except for reward offers

i) AdvertisementsAn advertisement does NOT constitute an offer, but merely a solicitation of an offer,

such that it is an announcement of prices at which the seller is willing to receiveoffers.

1) Exceptionsa. where the advertisement is clear, definite, and explicit, and

leaves nothing open for negotiationb. where the advertisement calls for performance of a specific act

without further communication and leaves nothing for furthernegotiation

Lefkowitz v Minneapolis (first come, first served)

2. Clear, definite, and explicit terms, nothing open for negotiation, forimmediate acceptance

An offer must be clear, definite, and explicit, and leave nothing open for negotiation, such thatacceptance will complete the contract. Lefkowitz v Minneapolis (first come, first served)

In determining whether an offer is sufficiently definite, a court considers (all elements)a)Terms to identifyAn offer must identify

i) The Offeree


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1) Or a class to which she belongs in order to create the power of acceptanceLefkowitz v Minneapolis (First come, first served)

ii) The subject matteriii) The Priceiv) The time of payment, delivery, or performancev) The quantity involvedvi) The nature of the work to be performed

b) Requirements for Specific Types of Contractsi) Sale of GoodsIn a contract for the sale of goods, the quantity being offered must be certain or

capable of being made certain.Exceptions

1) Output agreement, such that quantity is an ascertainable amount(e.g. all wheat harvested)2) Exclusive agreement, such that quantity is all that a person may need

ii) Real EstateAn offer involving realty must identify the land with some particularity and the

price terms, in which the court will NOT supply reasonable price or mortgageterms.

iii) EmploymentIn contracts for employment, the duration of the employment must be specified. If

not, the offer, if accepted, is construed as creating a contract terminable at the willof either party.

c) Missing TermsMissing terms may be supplied by the court with reasonable terms consistent with the parties

intent as otherwise expressedi) Price Term reasonable price UCC 2-305

ii) Specific Time reasonable time UCC 2-309iii) UCC 2-2004Even though one or more terms are left open, a contract for sale does not fail for

indefiniteness if the parties have1) Intended to make a contract2) There is a reasonably certain basis for giving an appropriate remedy

d) Vague termsIncluded terms, but too vague to be enforced, manifest an intent that cannot be determined.Vague offers will defeat the formation of the offer UNLESS there is some way in which the

offer is capable of being made certain

i) Cured by part performanceii) Cured by acceptanceIf uncertainty results because the offeree is given a choice of alternative

performances, the offer becomes definite upon the communication of the choice

e)Terms to be agreed on in the futureMaterial terms to be agreed upon in the future make the offer too vagueException UCC reasonable price term


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The offer must be sufficiently definite in its terms to lead the offeree to understand that a bargainis being proposed People v Braithwaite (vague terms of sell of cocaine)

3. Communication to offereeThe offeree must have knowledge of the offer

D.Types of Offers

1. Unilateral Contract OfferA contract offer is unilateral if the offeror makes acceptance possible only by the offeree performing

a stipulated act.2. Bilateral Contract OfferA contract offer is bilateral if the offeror makes acceptance possible by the offeree making a promise

to be performed at a future date.3. Indifferent Manner of acceptanceUnless a method of acceptance is unambiguously prescribed as exclusive, the offeree may accept by

any method that is within the terms of the offer and is reasonable.


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II. Termination of the OfferAn offer may be terminated, such that the power of acceptance created by an offer ends, IF (any element)

A.Termination by acts of partiesAn offer may be terminated by the (any element)

1. Offeror RevocationAn offeror may retract an offer IF (all elements)

a) Communicated to the OffereeA revocation of an offer may be communicated to the offeree by (any element)

i) Direct CommunicationA revocation may be directly communicated via (all elements)

1) The offeree2) An agent of the offeree3) PublicationOffers made by publication may be terminated by publication through

comparable meansii) Indirect CommunicationA revocation may be indirectly communicated if the offeree (all elements)

1) Receives correct information2) From a reliable source3) That the offeror revoked the offerOf acts of the offeror that would indicate to a reasonable person that the

offeror no longer wishes to make the offerDid the offeree have reason to believe that the offerors

actions were inconsistent with the intent to enter into thecontract?

Hendricks v Behee (indirect communication when offeree learned from areliable friend that the offeror had made another offer to someone else, suchthat offeree was aware that the offeror had changed his mind)

b) Effective revocation before effective acceptanceA revocation becomes effective when (all elements)

i) Received by the offereeA revocation may be received by the offeree if communicated via (any element)

1) The offereeRevocation effective immediately.2) An agent of the offereeRevocation effective immediately.Hendricks v Behee (revocation communicated to agent of offeree)3) PublicationRevocation effective on the date of publication4) NO mailbox rule

ii) Before effective acceptanceSee acceptance below

1) Agent of the offeree


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A mere private act of the offeree to accept to their agent does not constituteeffective acceptance Hendricks v Behee

iii) NO mailbox rule for revocation

c) Even if the offeror has promised not to revoke for a certain periodwithoutconsideration

d) Exceptionsi) Options / ConsiderationAn offeror cannot revoke an offer if the offeree gives consideration for a promise by

the offeror not to revoke an outstanding offer, forming a separate option contract,distinct from the ultimate contract.

An option contract will be formed IF (all elements)1) Sufficient ConsiderationSufficient consideration will be found IF (any element)

a. Actual considerationb. Mere recital of considerationMere recital of consideration will suffice IF (all elements)

1. In writing2. Signed by the offeror3. Proposes exchange on fair terms within

reasonable time4. Regardless of any actual consideration given

Restatement 2nd 87Consideration compensates the offeror for the risk he assumeswhen he commits to keeping the offer open, but the requirementsare not cumbersome at such an early stage so as not to foilconsummation of the ultimate contract.

2) Regardless ofThe offer of the ultimate contract remains in effect even IF (any element)

a. Attempted revocation by the offerorb. Rejected by offereec. Counteroffer by offereed. Death or legal incapacitation of the offeror

ii) Firm Offers UCCAn offer by merchant to buy or sell goods in a signed writing that, by its terms,

gives assurances that it will be held open is not revocable for lack of considerationduring the time stated, or a reasonable time not exceeding 3 months. UCC 2-205

iii) Detrimental RelianceWhere the offeror could reasonably expect that the offeree would rely to her

detriment on the offer, it will be held irrevocable as an option contractfor a reasonable length of time. At the very least, the offeree would beentitled to relief measured by the extent of any detrimental reliance

Rest. 2d 871) Construction bidding


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Drennan v Star Paving Co. (sub-contractor held to a bid made to the generalcontractor even after it refused to perform because of a mistake in the bidbecause the general contractor relied on the mistaken bid in its own bid tothe letting party and did not know if the mistake at the time of making itsbid (contrasted withJames Baird Co. v Gimbel Bros., Inc. inwhich the general contractor did know of the mistake))

Pavel Enterprises v A.S. Johnson Co.

Different ways of proving the existence of a contractual obligation between ageneral contractor and a subcontractor

a. Option Contract with considerationb. Conditional bilateral contractc. Detrimental reliance

iv) Part PerformancePart performance may prevent a revocation IF (any element)

1) Unilateral Contract OfferAn offer cannot be revoked IF (all elements)

a. Performance has begun

1. Even though the unilateral contract will notbe formed until the total act is complete.

b. Within a reasonable time to completeperformance

1. Even though the offeree is not bound tocomplete performance

2. Protects the offeree from revocation afterthe non-instantaneous act of acceptancehas begun

c. IF required, notification of the start ofperformance

Restatement 2nd 45

Carlill v Carbolic Smoke Ball Co.U (woman performed bycontracting influenza in response to offer of 100)Harms v Northland Ford Dealers (woman performed by hitting ahole in one in response to offer of new car, without specifyingrules further)

2) Indifferent Contract OfferUnless a method of acceptance is unambiguously prescribed as exclusive, the

offeree may accept by any method that is within the terms of the offer andis reasonable.

A bilateral contract may be performed upon the start of performance, such thatan offer cannot be revoked IF (all elements)

a. Performance has begun1. Contract is complete2. Such an acceptance operates as a promise

to render complete performance Restatement2nd 62

b. Performance is a reasonable method ofacceptance


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c. IF required, notification of the start ofperformance

UCC 2-206

2. OffereeAn offeree may reject an offer by (any element)

a) Express Rejection

An offeree may expressly reject an offer with a statement by the offeree that she does notintend to accept the offer. Rest. 2d 36

b) Counteroffer as RejectionAn offeree may reject an offer with a counteroffer by

i) Proposing new termsDeclining to the contract on the terms proposed by the offeror, but suggesting a

contract on different terms which so fundamentally deviates from the transaction-specific terms of the offer that the response cannot fairly be deemed anacceptance.

ii) Conditional AcceptanceThe acceptance makes it clear by the use of specific language that the offerees

acceptance is conditional upon the offerors agreement to the offerees terms.iii) Communicating too late / not according to procedureA response may also be a counteroffer, even if it doesnt not propose substantive

terms different from the offer, but it is communicated too late or not in accordancewith prescribed procedure

c) Lapse of timeAn offeree may reject an offer which expires within

i) Specified TimeAn offeree will have allowed an offer, which specifies that it will remain open for

acceptance only until a definite date or a measurable period, to terminate if notaccepted within the specified time.

ii) No specified timeAn offeree will have allowed an offer, which does not specify that it will remain

open for acceptance only until a definite date or a measurable period, to terminateif not accepted within a reasonable time, thought to be satisfactory to theofferor by a reasonable man in the position of the offeree.

1) Routine Commercial TransactionsQuestion of reasonable time for acceptance may be decided as a matter of

law.2) All elseQuestion of reasonable time for acceptance is a question of fact and

depends on the circumstances surrounding the transaction

a. Nature of the contractb. Relationship between the partiesc. Usages of the particular business

Vaskie v West American Insurance Co. (question of reasonable time issue of factfor jury where waited to accept settlement until after statute of limitations run)Keller v Bones (deadline applied only to the time by which the sellers wererequired to sign the document to indicate acceptance, not time in whichcommunication was necessary)


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B.Termination by operation of law

1. Death of insanity of partiesIf either party dies or becomes mentally incompetent prior to acceptance, the offer terminates,

regardless of any communication to the other party.a) No contract can be created if the offeror has lost the ability to form contractual intent

before acceptance.

2. Destruction of Subject MatterDestruction of the subject matter of the contract terminates the offerees power of acceptanceRest. 2d $ 36

3. Supervening Legal Prohibition of proposed contractIf the subject matter of the proposed contract becomes illegal, the offer will terminate.Rest 2d 36


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V. AcceptanceA. DefinitionAn acceptance is the manifestation of assent to the terms of an offer in the manner prescribed or authorized

in the offer.

B. Elements of Acceptance

A legally recognized acceptance exists IF there exists (all elements)1. Membership of the party whom the offer is directed

2. Unqualified assent to the contract terms - substantive

a) Common Lawi) Unequivocal / Mirror Image RuleUnequivocal assent requires exact correspondence between the offer and the

acceptance, as any different or additional terms in the acceptance make theresponse a rejection and counteroffer.

The acceptance must be (all elements)

1) Clear2) Positive3) Unambiguous

The acceptance mustNOT (all elements)1) Change2) Add to3) Qualify the terms of the offer

Roth v Malson (signed in counteroffer space instead of acceptance space)

ii) Last Shot RuleGive precedence to the terms in the last communication before performance began

b) UCC sale of goodsNon-conforming goodsA shipment of non-conforming goods does not constitute an acceptance if the seller

seasonably notifies the buyer that the shipment is offered only as an accommodation tothe buyer; otherwise grounds for breach of contract.

UCC 2-206 (1)(b)Additional or Different Terms UCC 2-207Additional or different terms from those offered are treated as forming

i) A ContractA contract will be recognized IF (any element)

1) Seasonable and definite expression of acceptance ORWritten confirmation sent within reasonable time

a. Additional TermsAdditional terms are to be construed as automatically a part of the

contractexcept IF (any element)1. Offer limits acceptance2.Terms materially alterA term is material IF (all elements)


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i. It relates to an important aspect of thetransaction

ii. It is one of the significant benefits that a party tothe contract reasonably bargained for in making

iii. It deviates from the usual custom and usage andits adverse effect on the offerors rights is severeenough to qualify as hardship

3. Notification of objection4. Either party not a merchantA party may qualify as a merchant IF (any element)

i. He deals with goods of that kindii. By his occupation, he represents that he has

knowledge or skill peculiar to the practicesinvolved in the transaction

iii. By his occupation, he represents that he hasknowledge of skill peculiar to the goodsinvolved in the transaction

iv. He employs an intermediary with that

knowledge or skill, so that the intermediarysexpertise is attributable to him

UCC 2-104 (1)b. Different TermsDifferent terms, depending on policy approaches, are treated as

(any element)1. Discarded2. Same as additional3. Knockout rule

2) Performance - conduct by both parties recognizing contractEven though the writings do not otherwise establish a contract, a contract

exists and consists of (all elements)a. Terms agreed upon in the parties writingsb. Additional AND different terms both thrown outc. Replaced with Gap Fillers from the UCC

ii) No ContractNo contract will be recognized IF (any element)

1) Expressly conditional acceptance - counteroffer

3. An objective manifestation of assentAcceptance must be a knowing, voluntary, and deliberate act

a) UCC sale of goods UCC 2-204A contract for the sale of goods should be recognized if either the words or conduct of the

parties show an intent to make an agreement.i) Regardless of the exact moment of the contracts making cannot be determinedii) Regardless of some terms left open IF

1) Intent of parties clear2) Reasonably certain basis for giving an appropriate remedy


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ProCD, Inc. v Zeidenberg (The vendor may propose limitations on the kind ofconduct that constitutes acceptance. Shrinkwrap license held enforceable as contractformed when buyer opened package and read contract terms, with option to return)POLICY HERE

4. Communication to offeror in the proper time and manner proceduralAcceptance must be communicated to the offeror, in accordance with the offers terms of (all

elements)

a) Proper manner / methodi) Reasonable meansUnless an offeror unambiguously limits acceptance to a particular means, an offer

may be accepted by any medium reasonable in the circumstances, if itperforms the same function and serves the same purpose as the authorized method

UCC 2-206Osprey L.L.C. v Kelley Moore Paint Co. (upheld fax as a reasonable means of

acceptance when the offer authorized acceptance in writing)ii) Acceptance by Unauthorized means

An acceptance transmitted by unauthorized means or improperly transmitted byauthorized means may still be effective if actually received by the offerorwhile the offer is still in existence.

iii) Represented by an agentCommunication to an agent of the offeree is not sufficient to communicate acceptance

to the offeror and does not bind the offeror Hendricks v Behee

b) Proper Timei) Mailbox RuleAcceptance by mail or similar means takes effect when deposited in the mail IF (all

elements)

1) Applicable to an acceptancea. NOT a revocationThus, if the offeree mails acceptance before receiving a revocation,

acceptance is effective.2) Method is expressly or impliedly an authorized medium of acceptance3) Exceptions

a. Offer stipulates acceptance only upon receiptb. Option contractsc. Offeree sends a rejection first, then acceptanceWhichever one is received first is effective.

4) Specified Time

An offeree must communicate acceptance within the specified time of anoffer, which specifies that it will remain open for acceptance only until

a. a definite dateb. a measurable period

1. Are business days included? Holidays?ii) No specified timeAn offeree must communicate acceptance of an offer, which does not specify that it

will remain open for acceptance only until a definite date or a measurable period,


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within a reasonable time, thought to be satisfactory to the offeror by areasonable man in the position of the offeree.

1) Routine Commercial TransactionsQuestion of reasonable time for acceptance may be decided as a matter of

law. (e.g. stock market transaction)2) All elseQuestion of reasonable time for acceptance is a question of fact and

depends on the circumstances surrounding the transactiona. Nature of the contractb. Relationship between the partiesc. Usages of the particular business

Vaskie v West American Insurance Co. (question of reasonable time issue of factfor jury where waited to accept settlement until after statute of limitations run)Keller v Bones (deadline applied only to the time by which the sellers wererequired to sign the document to indicate acceptance, not time in whichcommunication was necessary) split the difference as possiblealternative?

c) ExceptionsA contract may be formed without any communication of acceptance IF (any element)

i) Express waiver in offerii) Act as acceptanceDoing an act to manifest a promises, as opposed to acceptance of unilateral contract

by performanceiii) Silence as acceptanceAlthough silence / inaction usually lapses the offer, silence can be acceptance IF

(any element)1) An offeree takes the benefit of offered services with reasonable

opportunity to reject them and reason to know they were offered with the

expectation of compensation2) Offeror has given the offeree or the offeree has reason to understand

silence or inaction may operated as acceptance and the offeree intendssuch

3) Previous dealings suggest that the offeree should notify the offeror if hedoes not intend to accept

Rest. 2d 69

C. Acceptance of different types of contracts1. Unilateral ContractIn accepting a unilateral contract, an option contract is performed and an offeree must (all

elements)a) Act with knowledge of the offerAcceptance is impossible unless the offeree knows of the existence of the offerGlover v Jewish War Veterans of the US (no contract for private reward because claimant

didnt know of the offer for a reward when giving the desired information and did not actwith the intention of accepting the offer)

i) Exception Public rewardsb) Be motivated by the offerc) Give Notice of Performance


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Notification of performance is usually not required in order to form a unilateral contract, butthere may be a duty to notify IF (any element)

i) Offeror requests notice of acceptanceii) Act would not normally come to offerors attentionIf the offeree has reason to know that the offeror has no adequate means of learning

of the performance with reasonable promptness and certainty, there is no contractunless (any element)

1) Offeree notifies the offeror of acceptance with reasonable diligence2) Offeror learns of acceptance within a reasonable time3) Offer dispenses with notification of acceptance

d) NO promise to complete performanceThere is no promise to render complete performance (otherwise this would be a bilateral

contract)

2. Indifferent manner of acceptanceIn accepting a contract which specifies no exclusive method of acceptance, a bilateral contract is

formed even if acceptance is by performancea) Acceptance by performance

If an offeree accepts by performance, the offeree must (all elements)i) Promise to render complete performanceA promise to render complete performance forms a bilateral contract.Restatement 2nd 62ii) Give Notice of Performance

1) UCC Notice required within reasonable timeIf notice of acceptance is not communicated to the offeror within a reasonable

time, the offeror may treat the offer as having lapsedUCC 2-206 (2)2) Restatement Notice required if offeror unaware of

performance


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ConsiderationV. Elements of ConsiderationConsideration is required for enforceability of a contract in the courts because it is (all elements)

Evidence of a promiseThe formal requirements of consideration help testify that the promise was actually made Caution of a promiseThe formal requirements of consideration enforce to the individual that something serious is occurring

Channeling of enforceable promisesThe formal requirements help courts easily separate the promises which should be enforced

Consideration exists for enforceability of a contract in the courts IF there is a (all elements)A. Bargained-for ExchangeA bargained-for exchange exists if there is a reciprocal inducement such that (all elements)

1. The promisors promise induces the promisee to sustain a detrimentSomething is bargained for if it is given by the promisee in exchange for the promisors promise

Restatement, 2nd 71

2. The promisees detriment induces the promisor to make the promiseSomething is bargained for if it is sought by the promisor in exchange for his promise Restatement,

2nd 71Patel v American Board of Psychiatry & Neurology, Inc. (Board of psychiatrys promise to waive the

requirement of a post-graduate internship unenforceable because Patels detriment did not inducethe Board to make the promise and as such was not bargained for)

3. Exceptionsa) No GiftsNo bargained exchange exists, even if the promisors promise induces the promisee to sustain

a detriment in his performance or return promise, if such inducement was not sought by

the promisor. Any promise or intention, by either party, to make a gift does not constitutebargaining with consideration.

i) No written gratuitous promisesEven if a written gratuitous promise evidences an intent by the promisor to be bound,

does not constitute consideration.ii) No Conditional gratuitous promisesThe detriment must be the price of the exchange, and not merely fulfillment of

certain conditions for making the gift (e.g. come to my house and I willgive you..)

iii) Competing policies1) Gift promises shouldnt be enforced

2) Parties freedom of contract

b) No Past ConsiderationPast consideration cannot be a bargained-for benefit or detriment since it has already

occurred and accrued before the promise was madeCarlisle v T&R Excavating, Inc (prior secretarial services not consideration for promise to do

excavation work because already occurred in the past. Also, sharing of income from aspouses business is not consideration because one is already entitled to share in maritalincome)


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i) Exceptions1) Debt barred by a technical defenseIf a past obligation would be enforceable except for the fact that a technical

defense to enforcement stands in the way (e.g. statute oflimitations), the courts will enforce a new promise IF (any element)

a. In writingb. Partially performed

2) Promise to pay for past requested act3) Terms of new promise binding

c) No Moral Consideration

B. Legal ValueLegal value is measured in terms of the legal detriment to the promisee or the legal benefit to the promisor,

and depends on the jurisdiction.

1. Definitionsa) Legal detriment to promisee

A legal detriment to the promisee will result FROM (any element)i) A promiseii) An act other than a promiseiii) A forbearanceiv) The creation, modification, or destruction of a legal relationHamer v Sidway (Refraining from a legal right to drink, smoke, swear, and gamble

held as sufficient consideration for a promise because any damage, suspension, orforbearance of a legal right will constitute a legal detriment)

Restatement 2nd 71Congregation Kadimah Toras-Moshe v Deleo (Allocation in the budget of donation ofmoney via oral promise not consideration because a hope or expectation, even though

well founded, is not a legal detriment or reliance)

b) Legal benefit to promisorA legal benefit to the promisor is conferred vie the forbearance or performance of an act by

the promisee which the promisor was not legally entitled to expect or demand and mayconsist of (any element)

i) A rightii) Interestiii) Profitiv) Benefit

2. JurisdictionsThat which is bargained-for is considered oflegal value according to

a) Majority Rule IF (all elements)i) Legal Detriment to the promiseeii) Regardless of legal benefit to the promisor

b) 1st Restatement / Minority IF (any element)i) Legal Detriment to the promisee


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ii) Legal benefit to the promisor

c) 2nd Restatement IF (all elements)i) Bargained-for Exchangeii) Regardless of legal detriment / benefit

3. Regardless of adequacy of consideration

Courts of law will not normally inquire into the adequacy of consideration, as long as something isregarded by the promisor as beneficial enough to induce the promise. As long as the partiesbargain for an exchange, even if the disappointed party tries to avoid a promise it had made onthe grounds that it had gotten little in return, courts will enforce.

Apfel v Prudential-Bache Securities, Inc. (Court does not inquire into adequacy of considerationbecause bargained for an idea, not its novelty)

Batsakis v Demotsis (500,000 drachmas in exchange for $2,000 US)a) Exceptions

i) UnconscionabilityWhen the exchange is particularly unbalanced or where the risk of untoward behavior

is particularly acute, courts of equity may deny a remedy.

ii) Fraudiii) Sham ConsiderationConsideration of $1 or some other insignificant amount, which is never actually paid

or intended to be paid, will likely not be deemed consideration.

4. Exceptionsa) Pre-existing legal dutyA pre-existing legal duty cannot serve as consideration for a contract because anything that is

received in exchange for a promise to do what one is already obligated to do is a meregratuity or a bribe.

i) Exceptions

1) New or different consideration promised / Modification ofcontract

2) Voidable obligation3) Pre-existing duty owed to 3rd party4) Honest dispute as to duty Restatement 2nd 73State v Avis (private investigator given reward because cannot be said to

possess a constant duty to investigate and report criminal activity. Alsothe policy of encouraging private citizens to aid and assist publicauthorities in detecting and punishing crime outweighed the pre-existingduty)

5) Unforeseen circumstances

b) Forbearance to sueA promise to refrain from suing on a claim is consideration ONLY IF (any element)

i) Claim is validii) Claim is invalid AND (any element)

1) Doubtful because of uncertainty to the facts or the law2) The claim has a reasonable basis for support (objective) AND is made by

the claimant in good faith (bona fide / subjectively) and not frivolous,vexatious, or unlawful


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Fiege v Boehm (Promise to forbear bastardy proceedings in exchange forpaying child support by putative father upheld as sufficient considerationbecause made in good faith)

Restatement 2nd 74VI. Mutual and Illusory PromisesMutual promises must exist such that consideration exists on both sides of the contract. But there is no requirement

that the parties be bound to a contract at the same time, to the same extent, or under the same circumstances.

Mutuality will be found to exist in certain situations even though the promisor has some choice or discretion(all elements)

A. Conditional Promises as ConsiderationConditional promises are enforceable IF (all elements)

1. The conditional event is uncertain or unknownIacono v Lyons (promise to share gambling winnings may be consideration because uncertain)

a) NOT entirely within the promisors control2. Regardless of the remoteness of the contingency

B. Discretionary Promises as ConsiderationDiscretionary promises are consideration if the promise seems seriously and reasonably made

1. Satisfaction as to commercial value or quality, operative fitness, or mechanical utilityDissatisfaction cannot be claimed arbitrarily, unreasonably, or capriciously to a reasonable

person

2. Satisfaction as to fancy, taste, or judgmentDissatisfaction cannot be claimed unless in good faithA promise to buy if satisfied with goods is not illusory since one cannot reject them unless

dissatisfied in good faith. UCC 1-304

C. Best Efforts ImpliedUsually in exclusive marketing agreements, the court will find an implied promise to use the best efforts and

sustain agreements that otherwise appear illusory.Woody v Lucy, Lady Duff-Gordon (promise to pay half of profits and revenues resulting from the exclusive

agency and to render accounts monthly was a promise to use reasonable efforts to bring profits andrevenues into existence)

D. Requirements and Output ContractsA term which measures the quantity by the output of the seller or the requirements of the buyer are

enforceable IF (all elements)1. Obligation to act in good faithSuch actual output or requirements as may occur in good faith

a) Exceptions

i) Unreasonable disproportionateNo quantity unreasonably disproportionate to any state estimate or in the absence of a

state estimate to any normal or otherwise comparable prior output or requirementsmay be tendered or demanded

2. Obligation of best effortsThe seller must use best efforts to supply the goods and the buyer must use best efforts to promote

the saleUCC 2-306Eastern Air Lines, Inc. v Gulf Oil Corporation (obligation to act in good faith was implied upon Eastern)


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VII. Substitutes for considerationWhile valuable consideration is required to make an executory bilateral agreement fully enforceable, certain

substitutes for consideration can make an agreement at least partially enforceable in equity (all elements)

A. Promissory Estoppel / Detrimental Reliance

1. Policy

a) Protect a promisee who detrimentally relies on a promise by changing their positionb) Dont want to enforce gratuitous promises because

i) People may promise impulsivelyii) Allow givers a chance to change their minds

c) Terms of promise vs. reliance of promiseeDifferent jurisdictions require different elements, depending on whether they are more

concerned with thei) Intention of the promisor to be bound

1) These courts see reliance as merely a substitute for consideration2) Focus more on the nature of the promise in terms of it being definite and

clear because a very clear and definite promise is more likely to induce

reliance, more so than a vague and incomplete promiseii) Harm to the promisee

1) These courts may require less in terms of the promise2) Focus more on the nature and extent of the promisees reliance

d) Non-commercial vs. Commerciali) Commercial promises are more seriously, thoughtfully, and knowingly made, so

any reliance on gratuitous promises may be unreasonable

2. Elements of Promissory EstoppelA promise is enforceable although it lacks consideration IF (all elements)

a)The promisor should reasonably expect to induce action or forbearanceThe action or forbearance (reliance) must be (all elements)

i) Reasonable1) East providence Credit Union v Geremia (mortgage company promise to

pay premium on insurance for vehicle upheld because reliance reasonableand forbearance of procuring insurance themselves upheld viaconsideration doctrine, but willing to apply promissory estoppel)

2) NOT Employment at willSome courts hold that employers should not be held to vague promises of

employment for an indefinite duration, even in the face of substantialreliance because reliance is unreasonable

But See Lord v Souder(promise to protect employee from reprisal upheld asreasonable reliance because modified pre-existing employment at will)

3) NOT precontractual negotiationsGruen Industries v Biller(reliance in incurring expenses to draft contract

documents unreasonable because promises made informally and weresophisticated businessmen. Every businessman faces the risk that thesubstantial transaction costs necessary to bring about a mutually beneficialcontract will be lost if the negotiations fail to yield a satisfactoryagreement)


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a. ExceptionHoffman v Red Owl Stores, Inc. (Red Owl strung the Hoffmans

around and induced them to incur many expenses)ii) Good-faithiii) Based upon an actual promise

1) Ypsilanti v General Motors Corp. (GMs taking of a tax abatement fromthe township wasnt a promise of continued production and employment,

but mere puffery or expressions of hope or expectations. Even if was apromise, reliance on continued employment wouldnt have beenreasonable)

iv) Courts more concerned with the intention of the promisor to bebound

1) May require the promisor to intend to induce the promiseeto rely

2) May require the promise to be definite and clear

b) Such action or forbearance is in fact induced

The promisee detrimentally relied on the promisei) Exceptions - Charitable / family subscriptionSome jurisdictions have adopted this to a limited extent.Regardless, reliance may be found IF (any element)

1) Pledge has been paid ona. Allegheny College v National Chautauqua County Bank

(charitable pledge enforced after began paying on it)2) Pledge has been used to get other pledges

a. In Re Morton Shoe Company (charitable pledge enforcedbecause relied upon in using pledge it to get other pledges)

b. In re 375 Park Avenue Associates, Inc (charitable pledge to

support Holocaust Museum enforced because relied on whencommenced creation of the Archives and used pledge ascollateral for other funds)

3) Induced quitting of joba. Ricketts v Scothorn (grandfather intended to induce his

granddaughter to quit her job and alter her position for theworse and receive $2,000)

4) Prevented knowledge of natural parenta. Wright v Newman (promise to provide child support upheld

even after finds out he is not the father because relied uponpromise to detriment in refraining from identifying and seeking

support from natural father after he put his name on the birthcertificate and gave him last name)

5) May not be enough to move residencea. Kirksey v Kirksey (promise to provide home if move held as

gratuitous promise and not enforced)ii) Exceptions - Marriage settlement

c) Injustice can only be avoided by enforcement of the promiseRestatement 2nd 90


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d) REGARDLESS of compliance with Statute of FraudsRestatement 2nd 139

i) Exceptions1) Cant be completed within 1 yearStearns v Emery-Waterhouse Co. (deny promissory estoppel avoiding the

statute of frauds for employment contracts that require longer than one

year to perform)a. Pre-employment actions of reliance dont serve the evidentiary

function of the writing required by the statue of fraudsb. Exception may avoid statute of frauds when an employee

establishes an employers fraudenlent conduct by clear andconvincing evidence and recover for damages for deceit

c. Focus remains on employers conduct rather than employeesreliance

2) Sale of Land

3. RemediesA promisee who detrimentally relies on a promise may be given a remedy of (any element)

a) ExpectationPut the party in the economic position they would have been in had the contract been

performedb) RelianceIn the alternative of expectation damages, reliance damagesc) RestitutionGive the party back what they have already paidd) Limited character, as justice requires Restatement 2nd 90e) NO extra-contractual damages (e.g. emotional damages)

i) Exceptions1) Breach is accompanied by an independent tort, which is willful and

supports the extra-contractual damages in its own right2) Specific statutory provisions

Deli v University of Minnesota (athletic director agrees not to watch an obscene videotape if woman gives it to him)


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B. Promises in Writing1. Common LawFew states hold that consideration is not necessary FOR (all elements)

a) Promises is in writingA promise in writing, alone, does not need consideration merely because it is in writing.

2. UCC

Most states hold that consideration is not necessary FOR (any element)a) Modification of a contractA modification to an existing contract doesnt need consideration IF (all elements)

i) Written or Oral1) ExceptionA contract must not prohibit oral modifications

ii) Made in good faithUCC 2-209

b) Firm OffersA promise to keep an offer open doesnt need consideration IF (all elements)

i) Between merchantsii) For a period of time

1) ExceptionThe period of time must not exceed 3 months

iii) The offer states in its termsiv) Signed by the offeree

1) ExceptionThe offeror must sign as well if the offer form is supplied by the offeree

UCC 2-205

C. Promises to pay legal obligations barred by law

D. Reaffirmation of voidable promiseE. Promises under seal


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Defenses to a Contract

VIII. Defenses to FormationA. Absence of Mutual Assent

1. Mistake2. Misrepresentation

B. Absence of Consideration

C. Illegality

IX. Defenses based on lack of capacityA. Legal incapacity to contract

1. Minority2. Mental incapacity3. Intoxicated Persons

B. Lack of Volitional Consent1. Duress / Coercion2. Fraud in the inducement

X. Defenses to EnforcementA. Statute of FraudsB. Unconscionability


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Causes of Action

XI. ContractA. ExpressAn express contract is an actual contract with express assent to the contract.B. Implied in factA contract implied in fact is an actual contract, but instead of an express assent to the contract, assent is

implied from their acts in the light of the surrounding circumstances.Such an implied in fact contract may arise in circumstances where (any element)

1. Customary performance for compensationA promise to pay the reasonable value of the service is implied where one performs for another, with

the others knowledge, a useful service of a character that is usually charged for, ant he latterexpresses no dissent or avails himself of the service.

XII. Promissory Estoppel

XIII. Unjust EnrichmentThere is no agreement or contract, but a benefit has been conferred upon a party

A. ElementsA separate and independent cause of actions arises IF (all elements)

1. One party has benefited economically from the other party2. It would be unjust for that party to keep the benefit without compensating

the other partyEnrichment is NOT unjust IF the benefit was given without a reasonable expectation of

compensation (any element)a) VolunteersA volunteer confers a benefit (all elements)

i) with a gratuitous intentMartin v Little, Brown & Co. (volunteering of information to a book company about

copyright infringement not held as unjust enrichment)Estate of Cleveland v Gorden(A gratuitous intent will be presumed from family

members, but may be overcome by proof of an express agreement forcompensation or that the accepting relative knew or should have known that theconferring relative expected compensation)

b) Officious IntermeddlersAn officious intermeddler confers a benefit (all elements)

i) Without asking permission to do soii) Without justification for not askingThe failure to ask may be justified IF (any element)

1) Emergency Situation

The law presumes that the recipient of emergency care would have wanted thecare even though she could not ask for it if the situation requiredimmediate action and the recipient was unconscious and unable to contract

Feingold v Pucello (Attorney doesnt discuss payment for representation required bythe ethical rules isn't unjust enrichment because performed services before a contractcould arrange for payment)

B. RemedyThe remedy granted for unjust enrichment is (any element)

1. Restitution


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Restitution may consist of an order for the return of the benefit itself if possible, or a moneyjudgment for its value.

a) Quantum meruitRefers to the market value of the servicesb) Quantum valebantRefers to the market value of the goods

XIV. Moral Obligation

Documents

Blaw 280-Contracts Review