Contracts I Short Outline - Professor Rose 1999

  1. Consideration
    1. Promise was part of a bargain
      1. To be consideration, a return promise or performance must be bargained for and must be induced by the promise. R2d71, Hamer v. Sidway
      2. The pretense of a bargain won't constitute consideration, nor will an illusory promise, but a satisfaction clause is not illusory. R2d77, Strong v. Sheffield, Mattei v. Hopper.
      3. A performance can be an action, or a forbearance. A promise can be no more than a limitation of future freedom such as "If I buy X, I'll lease it to you."
      4. Forbearance to sue is only consideration when there is a reasonable basis in fact and law and forbearing party has a good faith belief in the validity of the claim, no matter how small the perceived chance of success. R2d74, Fiege v. Boehm.
      5. A requirements contract entered in good faith is enforceable, even though exact quantities aren't specified. UCC 2-306(1), Eastern v. Gulf.
      6. The court may imply a promise based on the circumstances in order to give effect to the intent of the parties. Best efforts in exclusive dealings are implied by UCC 2-306(2). Wood v. Lucy, Lady Duff-Gordon.
    2. Promise was not part of a bargain - no "real" consideration
      1. Was the promise given in recognition of a material benefit previously conferred on the promisor by the promisee, thus making him morally bound? If so, the promise may be enforceable to prevent injustice, such as unjust enrichment of promisor. R2d86, Webb v. McGowin.
      2. Under quasi-contract, a doc can get restitution for emergency aid given even without a promise. Cotnam v. Wisdom.
      3. A non-compete agreement in at-will employment may be enforced if followed by sufficient employment, especially when D acts in bad faith. Central Adjustment Bureau, Inc. v. Ingram
      4. A promise of an at-will job may be enforceable under R2d90. Grouse.
      5. A (1)promise which the promisor should (2)reasonably expect to induce reliance by the promisee and which (3)does induce reliance is binding if (4)injustice can be avoided only by enforcement. Remedy may be limited as justice requires. R2d90, Ricketts v. Scothorn, Feinberg v. Pfeiffer.
        1. Remedy is often based on ease of computation. Choices are: expectation (cost of lost opportunity), reliance (return to status quo), restitution (amount of unjust enrichment), specific performance (force perf of contract rare)
  2. Offer and Acceptance, Mutual Assent
    1. Primary objective is to give effect to the expressed intent of the parties as reasonably interpreted under the circumstances. The unexpressed state of mind is immaterial. Laserage.
    2. An Offer must have (1)intent to be bound, (2)definiteness of terms, (3)identified offerees.
      1. Ads are generally not offers, but are offers to negotiate. Craft v. Elder & Johnston, Lefkowitz.
      2. When prices are requested on an order, a vendor has offered to fill the order when he responds with a price. Fairmount Glass.
      3. Under Kastorff, rescission may be had for mistake if the mistake is
        • Material to the contract and
        • if the other party can be placed in Statu Quo
        • party seeking relief must give prompt Notice of his election to rescind
        • if enforcement of the contract as made would be Unconscionable, and
        • was not the result of neglect of a Legal Duty,
      4. An option is created by beginning performance or when consideration is given for a promise to keep offer open. Line between preparation and performance can be manipulated by court to get "right" result. R2d45, Ever-Tite Roofing, Ragosta v. Wilder
      5. A bid by a subcontractor is construed as an option if the general contractor relies on it. Drennan v. Star Paving.
    3. Acceptance - requires intent (closing deal, no further comms) and communicated in proper manner (prom or perf if unspecified)
      1. Acceptance of an offer must be manifested in such a way as to be communicated to the offeror. White v. Corlies & Tift.
      2. Offeror is master of the offer, and may specify mode of acceptance, requiring only that mode, or even dispensing with communication requirement.
      3. When a method of acceptance is suggested, others aren't ruled out unless the offer explicitly says only that way.
      4. Silence ordinarily not acceptance. R2d69.
      5. Power of acceptance can be terminated by
        1. death - or incapacity, doesn't have to be communicated
        2. revocation - either express or by actions inconsistent with offer
        3. rejection - either express or by counter-offer
        4. lapse - at specified time, or reasonable time, end of conversation if verbal bargaining.
      6. Mailbox rule - acceptance is effective when put out of the offeree's control if it is timely and in proper manner. Acc of option is eff on receipt. Revocation effective upon receipt.
      7. Common law Mirror Image Rule says no contract if the terms of the acceptance vary from the offer. This is a counter-offer. If seller accepts buyers offer by shipment, buyer's "last shot" terms win.
      8. UCC bifurcates formation and terms, making formation much easier to find. Any reasonable method will work unless another is unambiguously indicated.
      9. UCC 2-207 repeals mirror-image and last-shot rules - you don't get stuck with the terms just because you took the goods.
      10. Between merchancts additional terms are presumed effective unless they materially alter the contract (surprise or hardship), offer has an express limitation, or offeree objects.
      11. firm offer by a merchant in signed writing may be irrevocable 2-205
      12. The knockout doctrine cancels conflicting terms in confirmation forms such as those exchanged after a telephone agreement. (narrow view)
  3. Precontractual Liability
    1. Orthodox contract doctrine says that neither party is bound until the offer has been accepted.
    2. Modern courts may protect reasonable reliance by using discretion of when acceptance occurred. R2d90.
    3. A promise lacking sufficient detail to be an offer can be binding under promissory estoppel. Hoffman v. Red Owl.
    4. A letter of intent stating that the lessor will take the unit off the market is enforceable if the lessor uses it to obtain financing. Channel Home Centers v. Grossman.
  4. Policing the Bargain
    1. Attempt to protect freedom to contract, and freedom from contract.
    2. Capacity
      1. Minors - a minor may disaffirm a contract up until shortly after reaching majority, he must return anything still possessed that was received under the contract.
      2. Mental capacity - a person incurs voidable contractual duties if they are (1)incapable of reasoning or understanding the nature and effect of the transaction, or (2)is unable to act in a reasonable manner toward the transaction and the other party knows of the mental deficiency. R2d15, Ortelere.
      3. The other party may recover under restitution theory when the contract is for necessary subsistence goods.
    3. Fairness
      1. Contracts containing oppressive terms are not reasonable, and won't be enforced. McKinnon v. Benedict.
      2. In a land contract, the court will grant specific performance as a matter of course if the contract is otherwise unobjectionable. Tuckwiller.
      3. Courts don't inquire into the adequacy of consideration. Black Industries v. Bush.
    4. Overreaching
      1. Pre-Existing-Duty Rule - Performance of a legal duty owed to a promisor is not consideration. Alaska Packers.
      2. A modification made to meet unforeseen changes in circumstances operates as partial rescission, and is enforceable. Watkins & Sons v. Carrig.
      3. Good faith is required in contract modifications. Changes made under duress are voidable when (1)threat to withhold needful goods, (2) can't obtain the goods elsewhere, (3) ordinary remedy for breach would be inadequate. Austin v. Loral.
      4. For a sale of goods under the UCC, a modification requires only good faith, no consideration required.
    5. A contract is voidable on the ground of duress when it is established that the party making the claim was forced to agree to it by means of a wrongful threat precluding the exercise of free will.
    6. A Full Payment Check will discharge a debt when the receiving party has notice of the terms upon which he accepts it. Kibler v. Garrett.
      1. look for notice, disputed amount, imputed assent by cashing check, PED rule, used to help weak party
  5. UCC Offer/Acceptance checklist
    1. Sale of goods, UCC governs.
    2. Are they merchants?
    3. If any terms are missing, consider custom/gap fillers
    4. Argue both sides of is/isn't offer or acceptance.
    5. If K Form under 207(1), different negot. terms kills def. exp Acc
    6. Balance offeror mastery with 2-207(2)
    7. What is an appropriate remedy?