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.