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Contracts

 

I.                     Introduction

a.        Definition of contract (§ 1): A contract is a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty

b.       Types of Contracts

                                                               i.      Expressed – explicitly states that a contract exists along with the terms

                                                             ii.      Implied-in-fact

1.        No expression is made but a contract is assumed based on actions/conduct

a.        Bailey v. West – horse case of Balsom’s Folly

                                                                                                                                       i.      Must be mutual agreement to be IIF contract

                                                                                                                                      ii.      Other factors

1.        pl sent bills to 2 different people

2.        did not talk to the def

3.        no prior contact bt pl and def

2.        Intent to contract

3.        Elements

a.        The def requested the pl to perform work

b.       The pl expected the def to compensate him for those services

c.        The def knew or should have known that the pl expected compensation

                                                           iii.      Quasi-Contract

1.        Do not need intent

2.        Do need obligation with three elements:

a.        Benefit conferred upon def

b.       Appreciation by the def of such benefit (accepts benefit)

c.        Acceptance and retention of benefit and unfair for the def not to pay for it

3.        Another factor may be opportunity for the def to decline benefit given by the pl

c.        Promise

                                                               i.      If I will…you will

                                                              ii.      Spooner – workers want bonus (also see illusory promise)

1.        Did not explicitly promise

2.        Right to revoke included

d.       Damages

                                                               i.      Must be two things before damages recovered

1.        exists a contract or promise

2.        show the def breached

                                                              ii.      Three types

1.        Expectancy Damages

a.        As if the contract were completed

b.       Puts the pl in the position would have been in if no breach

c.        Pain and suffering compensation allowed above what would have existed in the contract

2.        Reliance Damages

a.        As if contract never happened

b.       Puts the pl back to before contract existed

3.        Restitution Damages

a.        Puts the def back to before the contract

                                                            iii.      Will not get pain and suffering in commercial cases

                                                            iv.      Sullivan v. O’Connor – nose job

1.        pain and suffering compensable for 3rd surgery bc out of contract terms (only 2 surgeries originally)

2.        Reliance damages bc expectancy too much and restitution too meager

e.        Illusory Promise

                                                               i.      § 77

1.        A promise or apparent promise is not consideration if by its terms the promisor or purported promisor reserves a choice of alternative performances unless

a.        Each of the alternative performances would have been consideration if it alone had been bargained for; or

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 the promisor exercise his choice events may eliminate the alternatives which would not have been consideration

                                                              ii.      No promise being made – language exists that it is optional

                                                            iii.      Bolin Farms

1.        Employer had option to rescind bonus program

2.        just illusory bc gave option of terminating promise

II.                   The Bases of Promissory Liability

a.        Bargain Contract: Promise Plus Consideration

                                                               i.      Bargain Requirement

1.        Consideration

a.        § 71

                                                                                                                                       i.      To constitute consideration, a performance or a return promise must be bargained for

                                                                                                                                      ii.      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

                                                                                                                                    iii.      The performance may consist of:

1.        An act other than a promise, or

2.        A forbearance, or

3.        The creation, modification, or destruction of a legal relation

                                                                                                                                    iv.      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

2.        Benefit-Detriment

a.        An enforceable contract is a loss to the promisee and a benefit to the promisor

b.       Kirksey v. Kirksey – brother-in-law asking to live with him

                                                                                                                                       i.      Found this was a mere gratuity (gift)

                                                                                                                                      ii.      Opinion states that her moving could be a detriment and tending the land was a benefit to the def

c.        Tramp Hypo

                                                                                                                                       i.      First look for a promise – I will, you will

                                                                                                                                      ii.      Then look for bargain

1.        sought by the promisor and given by the promisee

2.        Look for the seeking to incur a benefit to the promisor

3.        Williston Aid

a.        If the happening or condition will be a benefit to the promisor then consideration

b.       Where the promisee has incurred a detriment on the faith of the contract, the detriment was consideration

4.        Consideration can be doing nothing - forbearing

5.        Consideration = bargain -> sought by promisor -> given by promisee -> in exchange for promise

6.        Analysis

a.        Broad

                                                                                                                                       i.      Langer Steel

1.        Almost on the edge of a gratuity

2.        Court found that consideration existed by the pl refraining from work – something he has a legal right to do

                                                                                                                                      ii.      Consideration is inferred

                                                                                                                                    iii.      Consideration can flow from a 3rd party

b.        Narrow

                                                                                                                                       i.      Brogigian

1.        benefit or detriment is not agreed to by the pl and def

2.        Pl did not agree to releasing liability and therefore her release of the house was not consideration

                                                                                                                                      ii.      Consideration must be expressed

                                                                                                                                    iii.      Consideration from the promisor

7.        Nominal Consideration

a.        Nominal means in name only (NOT little or small)

b.       Nominal consideration will not be binding or sufficient consideration

c.        Why nominal consideration

                                                                                                                                       i.      Promise to make a gift binding

                                                                                                                                      ii.      Do not want an exchange, just the binding effects

d.       Dressing up something to look like consideration is not enough

e.        It is ok to make a bad bargain as long as it is a bargain and not a pretense

f.         Blackacre

                                                                                                                                       i.      Given land for $1

                                                                                                                                      ii.      Nominal consideration and will not be binding (but this is not absolute)

g.       Courts will not look at the substance of the agreement unless it is nominal

8.        Functions of Form (look at contract wo considering the terms)

a.        Evidentiary

                                                                                                                                       i.      If giving something and getting something in return, more evidence that a promise is there

b.       Cautionary

                                                                                                                                       i.      If in a form of a bargain then less likely to rely on a bargain entered into haphazardly

c.        Channeling

                                                                                                                                       i.       Narrows down the type of promise

                                                                                                                                      ii.      makes people realize that only certain promises will be enforceable and we are not going to try to enforce every promise

                                                              ii.      Sufficiency of Exchange

1.        In General

a.        § 79

                                                                                                                                       i.      If the requirement of consideration is net, there is no additional requirement of

1.        a gain, advantage, or benefit to the promisor or a loss, disadvantage, or detriment to the promisee; or

2.        equivalence in the values exchanged; or

3.        mutuality of obligation

b.       Forbearance of a legal right to do something is adequate

                                                                                                                                       i.      Hammer v. Sidway

1.        pl given money to refrain from drinking, smoking, and gambling

2.        Since pl had a legal right to these activities, consideration is fulfilled

                                                                                                                                      ii.      Narrow view – has to be something can do legally and forbearing

                                                                                                                                    iii.      Broad view – can be something illegal (such as drinking underage) as long as forbearing

c.        Haigh v. Brooks

                                                                                                                                       i.      Def said not binding bc no consideration

                                                                                                                                      ii.      This is close to nominal consideration (above)

                                                                                                                                    iii.      Court deemed that if something is important enough to one party – they really want it – that is enough for consideration

                                                                                                                                    iv.      The def wanted the guarantee and that was sufficient to the court even though no obvious reason as to why he would want it

                                                                                                                                     v.      As long as it is sought by the promisor, value does not matter

                                                                                                                                    vi.      Peppercorn Theory

1.        something may look small, and almost nominal, but may still have value

d.       Value of Bargain

                                                                                                                                       i.      As long as a bargain is present, unequal value does not matter

1.        Apfel

a.        Novelty is not an issue in this case

b.       Unequal value upon the parties is irrelevant if there is a bargain

c.        Here the pl knew what they were getting into and decided after being exposed to the def program to buy it

2.        May have a novelty argument if you do not know what you are bargaining for an already possess it

                                                                                                                                      ii.      Unconscionability

1.        UCC § 2-302

a.        If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract wo the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result

b.       When it is claimed or appears to the court that the contract or any clause thereof may be unconscionable the parties shall be afforded a reasonable opportunity to present evidence as to its commercial setting, purpose and effect to aid the court in making the determination

2.        Caveat Emptor used to be the general rule, but now want to prevent oppression and unfair surprise

3.        Jones v. Star Credit Corp

a.        Refrigerator case

b.       Uneducated, poor, unknowing – unconscionable to charge over 3x’s the value

4.        Look for:

a.        Mathematical disparity

b.       Limited financial resources of buyer and if the seller knew the limitation

c.        Unfair bargaining power

                                                                                                                                                                                                               i.      No other options

                                                                                                                                                                                                              ii.      Education

5.        Policy

a.        Moral sense in the community

b.       Private individuals have a right to contract freely – but here the court steps in

                                                                                                                                                                                                               i.      Protect a vulnerable party

                                                                                                                                                                                                              ii.      Will change credit availability

e.        If something is illegal, courts will not enforce under consideration

                                                                                                                                       i.      In Re Greene

1.         Promise to marry although already married – illicit affair

2.        Promises made were illegal and therefore will not be enforced by the court

3.        Also a notion of nominal consideration in this case

f.         Forbearance of Suit

                                                                                                                                       i.      § 74

1.        Forbearance to assert or the surrender of a claim or defense which proves to be invalid is not consideration unless

a.        The claim or defense is in fact doubtful bc of uncertainty as to the facts or the law, or

b.       The forbearing or surrendering party believes that the claim or defense may be fairly determined to be valid

2.        the execution of a written instrument surrendering a 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

                                                                                                                                      ii.      Even if a suit is not a valid claim, the forbearance of suing is sufficient consideration as long as the pl has a reasonable belief in the suit being forborne

1.        the parties must know that there is a bona fide question bt them even if there is no such question

2.        have to have:

a.        hones belief (subjective)

b.       reasonable belief (objective)

                                                                                                                                    iii.      Three different views on forbearing a suit

1.        surrender of an invalid claim is not consideration

2.        it may be good consideration if honestly believed to be valid claim

3.        good faith is all that is needed

                                                                                                                                    iv.      Fiege v. Boehm

1.        pl agreed to forgo a paternity suit if def supported child

2.        court found this was sufficient consideration even though the def was not actually the father of the child – the pl has an honest and reasonable belief that he was

2.        Pre-Existing Duty Rule

a.        § 89

                                                                                                                                       i.      A promise modifying a duty under a contract not fully performed on either side is binding

1.        if the modification is fair and equitable in view of circumstances not anticipated by the parties when the contract was made; or

2.        to the extent provided by statute; or

3.        to the extent that justice requires enforcement in view of material change of position in reliance on the promise

                                                                                                                                      ii.      Rules to apply

1.        modified before fully performed

2.        for unanticipated circumstances

3.        modification must be fair and equitable

b.       UCC § 2-209(1)

                                                                                                                                       i.      An agreement modifying a contract wi this Article needs no consideration to be binding

c.        In order to modify a contract, you must have a new and independent consideration

d.       Still looking for a benefit-detriment

e.        Levine v. Blumenthal

                                                                                                                                       i.      Rental of a store during the depression – allowed a reduced rental fee until able to pay the rest

                                                                                                                                      ii.      The test is whether the promise of the debtor is something are not legally bound to do already

                                                                                                                                    iii.      There was not a new consideration and therefore not binding – still renting for the same time period and the same store

f.         Gotcha/Hold-up Game

                                                                                                                                       i.      When a promisee ups the cost to the promisor when the promisor is in a situation where have to accept

1.        Alaska Packers

a.        Fishermen who went out and refused to continue to work unless paid more

b.       No additional consideration

c.        Already legally obligated to do job

                                                                                                                                      ii.      Often found in situation such as construction where the person can refuse to finish unless pay more

g.       Change in circumstances

                                                                                                                                       i.      Angel v. Murray

1.        Trash collection – increase in homes

2.        Found that this situation was not anticipated and therefore constituted something new – namely collecting from an abnormal increase in homes

h.       Minority Rule     

                                                                                                                                       i.      Some states allow the consideration of forbearing a breach in contract

                                                                                                                                      ii.      If a party agrees not to breach if new terms are met, then consideration is sufficient

i.         Look for:

                                                                                                                                       i.      Unanticipated difficulties

                                                                                                                                      ii.      Other party has choices and voluntarily entered into modification

3.        Mutuality of Obligation

a.        UCC § 2-306

                                                                                                                                       i.      A term which measures the quantity by the output of the seller or the requirements of the buyer means such actual output or requirements as may occur in good faith, except that no quantity unreasonably disproportionate to any stated estimate or in the absence of a stated estimate to any normal or otherwise comparable prior output or requirements may be tendered or demanded

                                                                                                                                      ii.      A lawful agreement by either the seller or the buyer for exclusive dealing in the kind of goods concerned imposes unless otherwise agreed an obligation by the seller to use best efforts to supply the goods and by the buyer to use best efforts to promote their sale

b.       Contract must be mutual to be binding

c.        If a contract is not binding on one side, it is not binding on the other – lacks mutuality

                                                                                                                                       i.      Rehm-Zeiher v. FG Walker

1.        pl allowed to buy as much or little as it wants and can refuse to buy for any unforeseen reason

2.        Since the pl is not obligated to buy, the def is not obligated to sell

d.       If an buyer agrees to buy all of something from the seller that the buyer will need then it is mutual

                                                                                                                                       i.      McMichael v. Price

1.        pl agreed to buy all the sand he needed from the def

2.        Although an amount is not stipulated, it is mutual bc agrees to buy all needed

3.        has to make a good faith effort

e.        Mutuality can be implied by the conduct expected

                                                                                                                                       i.      Wood v. Lucy Lady Duff-Gordon

1.        the pl had an employment contract giving him exclusive rights to the def designs

2.        The court implied mutuality bc of the following

a.        Given exclusive rights

b.       If not a mutual obligation, then def would not make a profit

c.        Pl had duties under the agreement

d.       In the marketing business

e.        Kept financial records for the profits

f.         Just bc a contract contains a condition does not mean it is not exclusive

                                                                                                                                       i.      Omni Group v. Seattle-First National Bank

1.        pl had a condition that the property must be satisfactory in the feasibility reports

2.        This is still a mutual obligation – not out of the ordinary to require this and the pl is not able to get out of the contract for no reason

3.        if there is something left to the promisor’s satisfaction, that duty to exercise the discretion in good faith is enough of a consideration to support the contract

b.       Moral Obligation: Promise Plus Antecedent Benefit

                                                               i.      § 86

1.        A promise made in recognition of a benefit previously received by the promisor from the promisee is binding to the extent necessary to prevent injustice

2.        A promise is not binding under subsection (1)

a.        If the promisee conferred the benefit as a gift or for other reasons the promisor has not been unjustly enriched; or

b.       To the extent that its value is disproportionate to the benefit

                                                              ii.      Courts will not generally enforce moral obligations

                                                            iii.      Timing Problem

1.        Mills v. Wyman

a.        Father promised to pay grown son’s medical bills after he died

b.       Promised to pay something that already happened so it was not sought by the father

c.        Has a moral obligation to pay but that is not enough to make the promise binding

2.        Courts will impose the obligation to pay a debt promised for if the statute of limitations has run out under a moral obligation (since already promised to pay before the contract was formed)

                                                            iv.      Material Benefit Rule

1.        promisor has received something of value therefore a moral obligation exists

2.        promise afterwards that will be paid

3.        courts say must also have an expectance to be compensated for the benefit

a.        Manwill v. Oyler

                                                                                                                                       i.      Court did not agree that consideration existed solely on the moral obligation to reimburse the pl for land and cattle

                                                                                                                                      ii.      There was no expectation on the pl part to be compensated originally

4.        Some courts will impose a moral obligation if material benefit received

a.        Webb v. McGowin

                                                                                                                                       i.      Pl injured himself in order to save the life of the decedent (def is decedent’s estate) when he was hauling wood blocks off the second story of a building

                                                                                                                                      ii.      Court determined that moral obligation is enough for consideration if there is a material benefit to the def even if there was no original duty or liability resting on the promisor

                                                                                                                                    iii.      There is a subsequent promise that affirms or ratifies what the pl had done and therefore raises the presumption it was done at the def request

b.       Harrington v. Taylor

                                                                                                                                       i.      Moral obligation with a material benefit is NOT enough for consideration

                                                                                                                                      ii.      Here the material benefit was saving a husband’s life when wife tried to kill him

c.        Factors that might come into play when deciding

                                                                                                                                       i.      Time frame bt incident and promise (time to think about it)

                                                                                                                                      ii.      What exactly was offered – just that will pay expenses or a specific amount – the more specific the better

                                                                                                                                    iii.      How long/how much paid

                                                             v.      When evaluating

1.        Start with the traditional rule of consideration

a.        Traditionally moral obligation will not be enough

2.        Then look for a material benefit

3.        Look to see if just being a Good Samaritan

c.        Promissory Estoppel: Promise Plus Unbargained-for Reliance

                                                               i.      § 90

1.        A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires.

2.        A charitable subscription or a marriage settlement is binding under subsection (1) wo proof that the promise induced action or forbearance

                                                              ii.      Elements of Promissory estoppel

1.        first look for a promise

2.        then look if the promisor reasonably expects to induce action or forbearance of the promisee – start with the language of the promise itself

3.        then look to see if it does actually induces action or forbearance

4.        finally, can injustice be avoided only by enforcement of the promise (may have situations where someone relies on a promise but will not be an injustice)

5.        If there is a reliance – then must look at the remedy granted – may be limited as justice requires

                                                            iii.      Types of estoppel

1.        Equitable Estoppel – misstatement of fact

2.        Promissory Estoppel – promise relied upon for the future

                                                            iv.      Promissory estoppel

1.        Ricketts v. Scothorn

a.        Granddaughter quit her job after being promised $2k so she would not have to work

b.       Ruled that it was an equitable estoppel (promissory estoppel not yet termed as such although it was promissory) bc of her quitting job in reliance of the offer

                                                             v.      Charitable Contributions

1.        Allegheny College

a.        Decedent promised $5k for a scholarship program at the college upon her death

b.       Cardozo states that promissory estoppel is good for the public policy – in general it is good for the public

c.        Still finds consideration in this case

                                                                                                                                       i.      Decedent receiving a benefit by having her name on scholarship

d.       Dissent notes that this was a gift and not consideration

                                                            vi.      Employment

1.        Feinburg v. Pfeiffer

a.        Pl promised retirement pay after 37 years of service had already been performed – new president refuses to pay stating that it was just a gift

b.       Past performance of her job cannot be sufficient consideration – timing problem

c.        Could add to the agreement that she would have to work an additional amount of time to get the benefits but be careful not to make it nominal

d.       She later became ill and the court denied this argument in that she relied on the promise when she quit and her becoming ill years later is not relevant to the reliance

2.        Grouse v. Group Health Plan

a.        Pl relied on a job offer, quit his job, and declined another position – the def hired someone else after the offer was made

b.       Court deems that it would be unjust for the pl not to be compensated

c.        The def contended that this would mean that he would have been able to be fired on the first day and not have a suit

                                                                                                                                       i.      Court denies this argument

                                                                                                                                      ii.      Pl must be allowed to make a good faith effort to perform job responsibilities

d.       Pl has a duty to Mitigate damages – cannot just sit around being paid, must look for a job

                                                          vii.      Remedies

1.        Factors to take into consideration when determining remedies

a.        Policies implicit in the transaction type (charitable, employment, family, etc.)

b.       Reason for the non-performance

c.        Degree of disproportion associated with enforcement of the promise

d.       Any historical patterns of enforcement associated with the transaction type

2.        Many authorities state that remedies should be limited to the extent of the reliance

3.        Others believe that the full range of remedies should be available whether regarding consideration or reliance

III.                 The  Bargain Relationship

a.        The Agreement Process: Manifestation of Mutual Assent

                                                               i.      Ascertainment of Assent: The Objective Test

1.        The test of assent is objective – only outward manifestations matter

2.        Look at the context of the situation to determine the meaning of the words

3.        Determine what a reasonable person would think

4.        Examples:

a.        Embry: renewal of work contract – boss says to go ahead and get men back to work

b.       Lucy v. Zehmer: made deal in a bar to sell land

                                                                                                                                       i.      Negotiated for 40 minutes

                                                                                                                                      ii.      Tried to get out of it bc of drinking

                                                                                                                                    iii.      Outward manifestations is that he knew what he was doing

                                                                                                                                    iv.      Also said it was a joke – look at fair market value

5.        Typically, social agreements and family agreements are not enforceable

                                                              ii.      Offer: Creation of Power of Acceptance

1.        In order to be an offer there has to be intent with a fixed purpose

a.        If you have reason to know that it is a fixed purpose and that the person giving the promise is not waiting to give back assent, then an offer

2.        Restatement § 24

a.        An offer is the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it

3.        An advertisement is a unilateral offer and is generally considered an invitation – a price list is also considered an invitation

a.        Exception: if the offer is clear, definite, explicit, not open to negotiations then considered an offer

b.       Leftkowitz: ad to sell fur coats – the ad was clear, definite, explicit, and not open to negotiations

4.        Courteen Seed: says I am asking and therefore not an offer bc not I will sell you

5.        Less likely to be an offer the more people it is sent to but a court may enforce an offer that is made to more than one person

6.        Test

a.        Look at language – words of promise

b.       Who sent it – the more people sent to the less likely it is an offer

c.        How definite – describe the product, terms, etc

7.        Auctions

a.        Do not have to take highest bid at all times – can reject as in a rejection of an offer

b.       If without reserve, then can reject bid – if with reserve then have to take highest bid

c.        Can withdraw bid before it is accepted

                                                            iii.      Acceptance: Exercise of Power of Acceptance

1.        Method and Communication of Acceptance

a.        The offeror is the master of the offer

b.       General Rule: look at if a reasonable person would believe it is an offer and if there is a fixed purpose

                                                                                                                                       i.      Can only have acceptance once there is an actual offer

c.        Once an offer is made – have to see if there is acceptance

                                                                                                                                       i.      Have to accept according to the mode specified in the offer

                                                                                                                                      ii.      An offer can be withdrawn as long as not accepted yet – the acceptance must be communicated and not just intended

1.        Behee: sale of real estate – did not communicate acceptance and therefore the withdrawal is binding

d.       Have to accept using diligence or by notification

e.        Do not have to notify if performance indicates acceptance

                                                                                                                                       i.      Ever Tite Roofing

1.        Although someone else was hired to re-roof the customer’s home, performance already began and withdrawal was not communicated

2.        The court in this case extended performance beyond what a typical court would deem beginning of performance

f.         An accommodation is a favor and NOT an acceptance if accompanied with a letter giving the buyer an option along with non-conforming goods

                                                                                                                                       i.      Corinthian Pharmaceutical

1.        Order of 1k vials of DPT bc of price increase

2.        Sent 50 vials at the old price and allowed buyer to cancel remainder of the order – accommodation

3.        If there is no notification that the shipment is an accommodation, then accepting offer

4.        The buyer said the automated tracking number received was an acceptance – cannot be an acceptance bc it is automated

g.       Cannot send a confirmation unless actually accepted

h.       Mirror image

                                                                                                                                       i.      If sending something non-conforming, then must be a mirror image under the common law

                                                                                                                                      ii.      If it is not a mirror image, then it is a counteroffer

i.         Able accept and breach at the same time

                                                                                                                                       i.      A shipment of non-conforming goods under the code is considered to close the bargain, but is also a breach

                                                                                                                                      ii.      If the buyer accepts the non-conforming goods, then binding – can always deny acceptance

j.         Carbolic Smoke Ball

                                                                                                                                       i.      Ad was sincere

                                                                                                                                      ii.      Did not need to notify – performance was enough

                                                                                                                                    iii.      Court was worried about the offer being too vague

1.        Got around this by using the wording of the ad to indicate a reasonable person would determine a specific time frame from use

k.        Rewards

                                                                                                                                       i.      Have to know about reward in order to accept it

                                                                                                                                      ii.      Glover v. Jewish War Veterans

1.        Information given before reward was made known

2.        Did not act in reliance of the reward bc did not know about it

l.         If there is acceptance by performance, and you perform but do not intend to accept, then must say that you do not accept – cannot perform and later say you do not accept

                                                                                                                                       i.      Fulton Industries – did not want to accept but used the broker services anyway – acceptance bc did not say not accepting

m.      Three ways to accept

                                                                                                                                       i.      Performance only – notification not needed

                                                                                                                                      ii.      Promise only – has to have notification

                                                                                                                                    iii.      Not specified – offeree can choose either method

                                                                                                                                    iv.      Part performance can be a path to acceptance

1.        Restatement § 45

2.        Partial performance is not acceptance until the performance is completed

3.        Cannot withdraw once performance has begun

4.        Part performance created an option contract (offeror cannot revoke but the offeree still has an option as to whether to accept or not)

n.       Mailbox Rule: once acceptance leaves the offeree’s hands into the mail, the acceptance is binding – if mailing an acceptance and a rejection at the same time, then whichever gets there first rules – if a rejection gets there first and then acceptance, then the acceptance is a counteroffer

                                                                                                                                       i.      Does not matter when or even if the acceptance is received

                                                                                                                                      ii.      This rule does NOT apply to face-to-face communication

                                                                                                                                    iii.      If revoked by mail, the revocation must be accepted before in effect

                                                                                                                                    iv.      Rejection not in effect until received

o.       Restatement § 69 – acceptance by silence

                                                                                                                                       i.      Applies in the following situations

1.        where an offeree takes the benefit of offered services with a reasonable opportunity to reject them

2.        where the offeror has stated or given the offeree reason to understand that assent may be manifested by silence or inaction

3.        where it is reasonable that the offeree should notify the offeror if he does not intent to accept (such as previous dealings)

                                                                                                                                      ii.      Smith Scharff Paper: sold paper bags and the buyer decided not to buy the remaining bags when going out of business – has to buy bc of the long relationship

p.       Authority: the power of the agent to affect the legal relations of the principal by acts done in accordance with the principal’s manifestations of consent to him – may be expressed or implied

2.        Nature and Effect of Counter-Offer

a.        Cannot institute a counteroffer and then when it is rejected accept the original offer

                                                                                                                                       i.      Columbus Rolling Mill: quoted for rails for a certain amount – tried to order a lesser amount and it was rejected – cannot go back and order the quoted amount bc that was already rejected

b.       If there is an oral agreement and it is followed by a confirmation, then the terms of the confirmation are not binding

                                                                                                                                       i.      This is true except when the offeree says it is only accepting if the offeror assents to the new terms

                                                                                                                                      ii.      Additional terms are proposals for additions to the existing contract

                                                                                                                                    iii.      The offeror decides if the proposals get in the contract unless they are merchants

1.        if merchants, then automatically get in unless:

a.        the offer expressly limits acceptance to the terms of the offer

b.       the proposals materially alter the contract (this includes warranties) – cannot change price, quantity

c.        notification of objection to them has already been given or is given within a reasonable time after notice of them is received

                                                                                                                                    iv.      Two possibilities

1.        Rotolith: it is not an acceptance but a counteroffer

a.        New terms

b.       If goods sent and accepted then accepted with new terms

c.        This goes right back to problems with mirror image rule

2.        consequence of a clause conditioning acceptance on assent to the additional or different terms is that as of the exchanged writings, there is no contract

                                                                                                                                     v.      Knock out Rule: both of the new terms are knocked out

                                                                                                                                    vi.      Fall out Rule: the first of the new terms are accepted and the 2nd falls out

                                                            iv.      Termination of Offer: Destruction of Power of Acceptance

1.        Dickinson v. Dodd

a.        Potential buyer knew that the seller sold to someone else

b.       Offer revoked if the buyer knew of the new buyer

c.        Did not have to keep offer exclusive just because a date was given

d.       No consideration was present – if there had been consideration then would have to keep offer open until the date came to pass

2.        Other ways an offer can lapse

a.        Offeror dies

b.       Specific time frame mentioned in offer – time frame must be reasonable given the situation

                                                             v.      Irrevocable Offer: Nondestructible Power of Acceptance

1.       Option contracts

a.        Consideration for offer – nominal consideration is okay

b.       Option contract is enforced when there is consideration – not necessarily the big contract

c.        Can give a counteroffer which is usually a rejection – in an option contract a counteroffer is a negotiation

d.       Can accept original terms within the length of the option even after a counteroffer is rejected

e.        Offer will NOT lapse in the case of death

2.        The only way to end an option contract is to allow the time to lapse

3.        Narrow interpretation

a.        Petterson: allowed to pay off mortgage but the offeror revoked before opening the door

                                                                                                                                       i.      The court says revoked before completed bc the money was not in the offeror’s hands yet when the offer was revoked

b.       Baird: no contract even though relied on the pricing for a bid

4.        Broad interpretation

a.        Drennan: relied on price and therefore a contract

                                                                                                                                       i.      This is the more modern rule

                                                                                                                                      ii.      If you send out an offer where you expect action or forbearance of substantial character on the part of the offeree before acceptance, and does induce such action, it is binding as an option contract

                                                                                                                                    iii.      This rule protects the general contractor who relied on a price when bidding

b.       Still able to bid shop – not protecting the subcontractor in this case

b.       Insufficient or Defective Formulation of Agreement: Indefinite, Incomplete, and Deferred Terms

                                                               i.      Indefinite Agreements

1.        Courts will not enforce an indefinite agreement

a.        Varney

                                                                                                                                       i.      Employee promised a fair share of the profits

                                                                                                                                      ii.      They agree there was a promise BUT No way to determine what a fair share actually is

                                                                                                                                    iii.      If this was a case referring to goods, then could use fair market value

                                                                                                                                    iv.      Argument that could recover on the theory of quantum meriut – as much as he deserves

2.        There is no mutual assent unless the agreement is certain

                                                             ii.      Incomplete and Deferred Agreement

1.        MGM v. Scheider

a.        Agreed to everything except start date

b.       The court determined that industry standards and customs could be used to infer the term left out – start date

2.        If the contract begins and the court can use objective standards to determine the terms that are left out then there is a contract

3.        Can agree to agree, but must state how it will be done in the contract

a.        Can use fair market value

b.       Schumacher

                                                                                                                                       i.      Lease stated that they will agree to the rental amount when renewal occurs

                                                                                                                                      ii.      Did not give a way to determine the rent so not enforceable

c.        Have to negotiate in good faith

4.        Oglebay

a.        Had two pricing mechanisms in the contract and they both failed

b.       Court determined that they could set price based on testimony and could appoint mediator for future problems

c.        First, have to look at whether there was an intent to be bound – here there was a long relationship bt the parties

5.        UCC provides gap fillers to ensure contract is able to be enforced

a.        Do not like to fill in quantity

b.       Will fill in price based on reasonableness (fair market value)

c.        Will fill in terms like shipping method, etc.