Download Contract Law: Offer, Acceptance, and Performance and more Lecture notes Contract Law in PDF only on Docsity!
Contracts Outline
2.3. Offer is the manifestation of willingness to enter into a bargain (RK 24)
8.1. Statute of frauds are rules that require some contracts in writing (RK
1.1. Contract with incapable people is voidable at incapable’s discretion (RK 12, 14) .................................................................................................. 38 1.2. Statement in the contract to claim capacity cannot validate the contract (Kiefer) ........................................................................................................ 38 1.3. Seemingly adult can not validate the contract (Kiefer) .......................... 38 1.4. Exception to capacity rule ......................................................................... 38 1.5. Adults can void or affirm a contract entered into when they were minors .......................................................................................................... 38 1.6. Voiding incapable people should pay restitution.................................... 38
2. Duress and Pre -existing duty................................................................................ 38 2.1. No reasonable alternative choice is the test for duress (RK 175) .......... 38 2.2. Duress makes the contract voidable (Alaska Packers)........................... 38 2.3. Modification of contract with good explanation is okay (RK 89; UCC 2- **209) .............................................................................................................. 38
- Concealment and Misrepresentation................................................................... 39** 3.1. Active concealment makes the contract voidable (RK 160) ................... 39 3.2. Fraudulent or material misrepresentation of facts makes the contract voidable (RK 162, Kannavos) ................................................................... 39 3.3. Non-disclosure of facts only in some occasions makes the contract voidable (RK 161) ...................................................................................... 39 3.4. Experts can benefit from the intentional non-disclosure ....................... 39 3.5. Statement of opinion should not make the contract voidable in arm **length transaction....................................................................................... 39
- Adhension contracts and Unconscionability ....................................................... 40** 4.1. Conscionable exculpatory clause is enforceable (O’Callaghan) ............ 40 4.2. Procedure unconscionability ..................................................................... 40 4.3. Adhesion contract ...................................................................................... 40 **4.4. Substance unconscionability ..................................................................... 41
- Mistake and Frustration of purpose.................................................................... 41** 5.1. Overview..................................................................................................... 41 5.2. Immaterial mistake (tough) can not void contract (Stees; Transatlantic) ................................................................................................................ 42
3.3. Specific performance under UCC 2-716 .................................................. 51
**4. Remedy rule under UCC ...................................................................................... 51
- Diminution in value rule ....................................................................................... 52** 5.1. Diminution in value rule would apply, if expectation damage would cause unreasonable economic waste. (Jacob & Young; Peevyhouse; RK 348-2) ........................................................................................................... 52 **5.2. Real desire of the party should be respected (Grove)............................. 52
- Liqudiated damages .............................................................................................. 52** 6.1. Pros: more certain between the parties.................................................... 52 6.2. Cons: could be unconscionable ................................................................. 52 6.3. Reasonable liquidated damages would be upheld (RK 356; UCC 2-718). ................................................................................................................ 52 6.4. Unconscionable liquidated damages is unenforceable............................ 52
Chapter 1 What Promise Ought We Enforce
1. WHY WE ENFORCE PROMISE 1.1. Moral claim (Foundational) 1.2. Efficiency / Mutual exchange : we can not exchange things simultaneously. 1.3. Reliance: somebody relies on the promise and changes his plan. 1.4. Will theory: somebody makes the promise means he wants the promise to be enforced. 1.5. Benefits unjustly retained. 2. PROMISE WITH GOOD CONSIDERATION 2.1. Bargain for exchange is the test of good consideration 2.1.1. Bargain for exchange is the test of good consideration (RK 71) (a) 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 2.1.2. No requirement on the equivalence in the values exchanged (RK 79) 2.1.3. No requirement on the causality between the promise and what is bargained for (RK 81) (a) If promisee performed not for the promise, the promisor will still be bound 2.1.4. Policy: (a) bargain shows the seriousness and reveals the true intention of the parties (b) If contract is made by real intention, the social welfare would increase (c) Covenant can not substitute consideration since it is easily induced 2.1.5. Detriment to promisee sought by the promisor is good consideration
(b) There is substantial possibility before the promisor exercises his choice events may eliminate the alternatives which would not have been consideration 2.5. Conditional promise could be good consideration 2.5.1. For those contractual conditions whose satisfaction can not be claimed arbitrarily, unreasonably or capriciously, and whose good faith standards could be sought, there is actually good consideration in these types of conditional contracts. ( Mattei ) Satisfaction could be determined by: (a) Reasonable commercial standards (commercial transaction) (b) Good faith (personal judgment) 2.6. Good consideration could be implied 2.6.1. In the exclusive marketing agreement , the promise of the agent towards the principal forming good consideration could be implied. ( Wood ) 2.6.2. The implication should be made in good faith (a) Good faith means honesty in fact and the observance of reasonable commercial standards of fair dealing. 2.6.3. Quantity by the output of the seller or the requirements of the buyer means actual output or requirements in good faith (UCC^1 2-306) (a) No reasonably disproportionate the any stated estimate. Or normal or prior output or requirements 2.6.4. Exclusive dealing agreements in kind of goods impose seller and buyer the obligation to use best efforts to supply goods and promote the sale.
3. PROMISE PROMISEE RELIES ON (PROMISSORY ESTOPPEL^2 ) 3.1. Mere gratuity could be enforceable if it caused the detriment of the promisee
(^1) UCC applies to sales of good (^2) The principle that a promise made without consideration may nonetheless be enforced to prevent injustice if the promisor should have reasonably expected the promisee to rely on the promise and if the promisee did actually rely on the promise to his or her detriment.
3.1.1. If the promisor intentionally influences the promisee to alter his position to the worse by the promise, the promise even as the mere gratuity is enforceable. ( Ricketts ) 3.2. Reliance test (RK 90-1) 3.2.1. Promisor should reasonably expect the promise to induce action or forbearance 3.2.2. Promise did induce action or forbearance 3.2.3. Injustice can be avoided only be enforcement of the promise 3.2.4. Remedy may be limited as justice required ( reliance damage ) 3.3. More liberalization under 2nd^ restatement 3.3.1. Deletion of “a definite and substantial character”of the reliance in 1st restatement 3.4. Reliance damage should be compensated 3.4.1. Promisor does not have to realize promisee’s expectation on the gratuity. ( Barcardi ) 3.4.2. Promisor has to compensate promisee’s damage caused by his reliance on the gratuity. ( Barcardi ) 3.4.3. In at-will employment, the relocation expenses are reliance damage, the future wages are expectation damage. ( Barcardi ) 3.4.4. Restricted to reliance damage under 2nd^ restatement (a) 1 st^ RK granted expectation damage, while 2nd^ RK only grants reliance damage (RK 90-1, See difference in Feinberg ) 3.4.5. Suit based on breach of contract (expectation damage) is preferable than reliance suit (reliance damage)
4. UNJUST ENRICHMENT (RESTITUTION) 4.1. Elements of restitution 4.1.1. Benefit
(b) Reasonable value of health could worth more 4.4. Restitution could exist in martial relationship 4.4.1. Restitution exists in marital relationship provided one spouse inures solely to the benefit of the other by the time of dissolution. ( Pyeatte )
5. MISCELLENEOUS 5.1. Promise to pay indebtedness is enforceable even if run out of statue of limitation (RK 82) 5.2. A charitable subscription or a marriage settlement is binding without consideration (RK 90-2) 5.3. Covenant does not matter 5.3.1. Policy: even promise in good formality could be induced and may not be the serious and true intention of the promisor.
Chapter 2 Formation of Contracts
1. MUTUAL ASSENT 1.1. Subjective theory 1.1.1. Cons (a) Too much facts finding (b) Damages to reliance 1.2. Objective theory 1.2.1. Video capture rule –current rule (a) A bargain is a manifestation of mutual assent to the exchange (RK 17) (b) Reasonable standard should be applied. 1.2.2. Pros (a) Demands for security and certainty in business transactions 1.2.3. Cons (a) Hard to determine the objective standards, which in fact is a usually social main stream standard. 1.2.4. Gaps filled by court (a) Cons (i) Objective standards (ii) Imposing on contractual parties 1.3. Contract in jest is enforceable 1.3.1. Objective manifestation of assent determines the contract, the unexpressed intention is irrelevant. ( Lucy ) 1.3.2. Unless there is evidence that the other party knew the true intention. 1.4. Latent ambiguity and ambivalent assent make no contract
2.4.1. Policy: (a) Ad is usually indefinite as to quantity (i) Seller may find his offer overaccepted (b) Sellers ought to be able to choose with whom they deal 2.4.2. Ads could constitute an offer, if ( Lefkowitz ) (a) The performance is promised in positive terms in return for something requested; and (b) The ad is clear, definite and explicit and left nothing open for negotiation (i.e. including terms like first come first serve which definite the quantity) 2.5. Offer needs to be reasonably certain 2.5.1. See requirement of definiteness 2.6. The moment of reaching assent could be undetermined (RK 22-2, UCC 2-204-2)
3. ACCEPTANCE 3.1. Offeree can accept by promise or by performance, if not required by offeror (RK 30, UCC 2-206-1) 3.1.1. Under UCC, shipment of non-conforming goods is not acceptance if the offeree (seller) seasonably notifies the offeror (buyer) that the shipment is offered only as an accommodation to the buyer. (UCC 2-206-1) 3.2. Acceptance by promise (RK 56) 3.2.1. Bilateral contract: contract exchange promise for promise 3.2.2. Notification to offeror is required (a) The fact that offeree sends the offeror a sample request letter is the notification of acceptance ( Int’l Filter Co .) (b) Examined by offeree’s reasonable diligence to notify or the offeror’s receipt of the acceptance seasonably (RK 56) 3.2.3. Unless the offeror dispenses the notification requirement ( Int’l Filter Co .)
(a) Offeror accepts the offer invitation saying in the offer that notification is not required 3.3. Acceptance by performance (RK 54) 3.3.1. Unilateral contract: contract exchange promise for performance 3.3.2. Notification is not required (RK 54-1) 3.3.3. Unless the offer requests such a notification (RK 54-1) 3.3.4. Unless the offeror can not reasonably know that (a) Performance could be notification provided there is no reasonable delay (Ever-Tite) (b) Failure to notify may discharge offeror’s duty to perform, if offeree has reason to know that the offeror has no adequate means of learning of the performance with reasonable promptness and certainty, unless (RK 54-2) (i) The offeree exercises reasonable diligence to notify the offeror of acceptance, or (ii) The offeror learns of the performance within a reasonable time, or (iii) The offer indicates that notification of acceptance is not required. 3.3.5. Offeror may treat the offer as having lapsed before acceptance, if not notified within a reasonable time (UCC 2-206-2) 3.4. Silence generally can not constitute acceptance with some exceptions (RK 69) 3.4.1. Offeree benefits from the offer (RK 69-1-a) 3.4.2. Relational contract ( Hobbs and Bronz; RK 69-1-c)
4. THE REQUIREMENT OF DEFINITENESS 4.1. The material terms need to be certain in the offer
(a) Further advisement –offer term remains the same (RK 39 comment c) 5.2. Counter-offer is rejection (RK 39) 5.2.1. Any kind of variation in acceptance (qualified acceptance) is counter-offer and terminates the original offer - Mirror image rule 5.2.2. An acceptance varying from the offer is a rejection. The other party, having once rejected the offer, cannot afterwards revive it by tendering an acceptance of it. ( Minneapolis railway Co. ) 5.2.3. Inquiry and request in the acceptance is not rejection 5.2.4. The court may mitigate the mirror image rule by (a) Finding implied term in the offer ( Fairmount ) (b) Finding the language of the acceptance related to an additional or different term is only precatory 5.2.5. The parties may use rigorous mirror image rule to deny promise 5.2.6. In practice, the party that sends the last form before performance usually prevails. 5.2.7. Exception under UCC 2- (a) See battle of form 5.3. Lapse of time (RK 41) 5.3.1. Specified time in the offer; or 5.3.2. Reasonable time (a) Matter of fact (RK 41-2) (b) To be determined by all circumstances (RK 41 comment b) (i) Nature of contract (ii) Purpose of the parties (iii) Course of dealing (iv) Usage of trade
(c) General principle: the time would be thought satisfactory to the offeror by a reasonable man in the position of the offeree. (RK 41 comment b) 5.3.3. Offer made in face to face conversation lapses when conversation ends (a) An offer made by one to another in a face to face conversation is deemed to continue only to the close of their conversation, and cannot be accepted thereafter ( Akers ) 5.3.4. If offeree has begun requested performance, an offeror who is not notified within a reasonable time may treat the offer as having lapsed before acceptance. (UCC 2-206-2) 5.4. Revocation 5.4.1. By manifestation of intention (words) (RK 42) 5.4.2. By definite action inconsistent with the intention to enter into the proposed contract (RK 43) (a) Offeree should acquire reliable information to that effect
6. FIRM OFFER (OPTION CONTRACT) 6.1. Offer is a promise conditioned on acceptance 6.2. Option contract is binding with good consideration ( Dickinson ) (RK 25) 6.3. In firm offer with no consideration, the offeror generally can revoke at any time before acceptance ( Dickinson ) 6.3.1. Restitution and reliance may seldom provide remedy to the firm offeree in case of revocation 6.4. Exception under RK 87 (recital of purported consideration) 6.4.1. Option contract in writing and signed by the offeror 6.4.2. Recitals of purported consideration (not necessarily actual); and 6.4.3. Proposes an exchange on fair terms within a reasonable time 6.4.4. The offeror may not revoke within the proposed time
