4th week note - American Contract law lecture notes PDF

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Embry v Hargadine - "Manifestation of Mutual Assent"

[SOUND] Today we explore the concept of mutual assent 合意的概念 by examining the case of Embry versus Hargadine, and some relevant provisions of the Uniform Commercial Code. Mutual assent describes an agreement between two parties that intend to form a contract. Before we take a look at Embry, let's discuss why mutual assent is such an important concept. As you know, parties often have extensive negotiations before signing the contract. These negotiations happen over time that are subject to the parties' choice and not predetermined by law or circumstance 意定非法定. Parties can discuss everything from price, quantity, quality, the method of payment, which party will bear certain risks, the distribution of the relationship, the duration of the relationship, and so forth. At some point, the parties will end the negotiations and might agree to be bound by contractual obligations. In other words, they might bring the contract into formal existence. Freedom from contract is just as important as freedom to contract. Individuals don't have to be bound by contractual promises unless they want to. So figuring out whether they want to be bound is important. As we go through the next few lessons, including this one, keep in mind this guiding question. How do courts tell when there's been sufficient agreement to form a contract? A contract usually is formed when there's mutual assent. I think of this as the moment the bell rings 教 堂 等 的 撞 钟 人 , a kind of transubstantiation 圣 餐 变 体 论 ； 改 变 that changes legal duties of the parties. Mutual assent describes the act of agreeing to the terms of the contract, it's agreeing to the exchange of promises. 合意意味着同意允 诺 的 交 换 A related concept that is sometimes treated as a synonym 同 义 词 is the meeting of the minds. Meeting of the minds describes a situation where there is a common understanding In the formation of the contract, a common understanding of what has been exchanged. Phrased differently, there is a meeting of the minds when both parties agree to the promised exchange 允 诺 交 换 总 是 有 合 意 . Mutual assent usually contains two components, offer and acceptance 合意的构成要素是要约和承诺. Offer and acceptance are elements that traditionally were required for the formation of a legally binding contract. The person who makes an offer is often called the offeror 要 约人 约人, and the person who hears and considers the offer is the offeree 受要约人. If I ask, would you like to buy this pen for $50, I am an offerror making an offer, you are the

offeree. If you say, yes, then that is an acceptance . With bother offer and acceptance, there is also mutual assent. In this example the two of us have mutually assented to the contract through the process of offer and acceptance. The Uniform Commercial Code, which governs the sale of good has a number of provisions concerning mutual assent, as well as offer and acceptance. We will now introduce these provisions, and they are frequently cited in many of the cases we will learn, so it's good to be familiar with them. First, let's look at UCC 2-204. It deals with contract formation in general. And it states that a contract for a sale of good can come into being in a variety of ways, as long it's clear that the parties have reached agreement. The agreement can be found from conduct or behavior, so does not always have to be in writing. The provision also states that agreement is enough to be a contract, even if we don't know when the contract started, when it was formed. The timing of a contract can be of crucial importance in some contract disputes, so it’s always helpful to ask when the contract is formed, or as I sometimes think of it, when the bell rings. UCC 2-205 deals with what are called firm offers. If a merchant makes an offer in writing and is explicit that the offer will be held open , then the offer is not revocable for a period of up to three months. 如要约人书面要约，且明示不可撤销，则要约获得 3 个月的不可撤销期间 It's going to be held open, non-revocable, for a reasonable time, but up to three months.（不可撤销要约的三个特点） And in this way, the sense that the offer is not revocable, it's called firm. You'll notice that there's no consideration in the case of a firm offer, because the offeree hasn't done anything or paid anything to make the offer firm. However, this provision is explicit that at least a merchant offeror is obliged to keep a firm offer open for this period of time of up to three months. Phrased differently, a firm offer is an irrevocable offer. This is an exception to the general rule that most offers can be revoked by the offeror at any time before they're accepted. UCC 2206 is an unusual default rule, which says that an offer invites acceptance by an reasonable means, unless the offeror or circumstances unambiguously indicate otherwise. This suggests that courts require unambiguous evidence to overturn the strong presumption that offers intend to be acceptable by any reasonable means. The provision qualifies the common law idea that the offeror is master of her offer. At common law, if an offeror says something like, I'll sell you my car for $10, but you can only accept by skywriting across the sky in New York City, law and economics rocks. And you respond to this by saying thanks, I accept. Well, we don't have a contract, because you haven't met my conditions for acceptance. As master of my offer, I can condition your acceptance on you doing something crazy, like skywriting. Under the UCC, in contrast, I'd have to be careful as the offeror to unambiguously make skywriting the only means of accepting the contract. [MUSIC] We just went through three very important provisions of the Uniform

Commercial Code. It's okay if you're confused or didn't keep track of everything perfectly, let's answer two questions to review. Number one, I offer you a pen for $100, and you nod and pay me the $100 and take the pen. Do we have a contract and which section of the UCC applies? Well, the answer is, this is a valid contract. UCC 2-204 states that conduct is sufficient for agreement. All right, number two, a merchant posts an ad to sell a pen for $100 and states the offer is good until next Friday. You show up on Tuesday and the merchant has raised the price to $120. What price are you supposed to pay and which section of the UCC applies? [SOUND] Well, the answer is that you should be able to buy the pen for $100. The merchant made a firm offer and is bound by that under UCC 2-205. 广告的性质是 不可撤销要约。 Let's turn now to the case of Embry versus Hargadine. In this case, Embry, the plaintiff, is an employee of the defendant, Hargadine. Embry told the president of the company that he would quit his job if he were not given a renewed employment contract for the following year. According to the plaintiff, the president replied, quote, go ahead, you're all right, get your men out and don't let that worry you, unquote. At this point, the plaintiff believed he had an employment contract. The president argues he never intended for this to be a contract, and plaintiff was an employee at will throughout this period. And an employee at will is somebody that can be fired for good, bad, or no reason. When employment was terminated early, the plaintiff sued for breach of contract. The trial judge instructed the jury that to find for plaintiff, they had to find both that the president uttered the aforementioned 上述 上述的 的 phrase, and that both parties intended by having such conversation to contract for plaintiff's reemployment. The jury found for the defendant, and the instant court reversed and remanded to find out what words were actually used by the employer. [MUSIC] So, is this an implied-in-fact or an expressed contract.? [SOUND] While not the main focus of the opinion, note that this case lies somewhere in the middle of the spectrum between implied-in-fact contracts and expressed contracts. 本案中既是一个明示合同也是一个默示合同。 The employer did not expressly say that he was rehiring Embry , so it's probably better to think of this as an implied-in-fact contract. That is, words and conduct, if anything, suggested or implied a promise. [MUSIC] So, under the plaintiff's theory of the case, who is the offeror, here? [SOUND] Well, the answer is that the plaintiff, Embry, is the offeror, who offered to be rehired for another year, presumably at the same rate of pay. And under the plaintiff's theory, Hargadine accepted the offer by saying, go ahead, you're all right, get your men out, etc. The main issue in this case is this. If the plaintiff was reasonable in interpreting defendant's behavior, is it still necessary for the defendant to have an intention to contract for the contract to exist? Or in other words, is it what you say, or what a reasonable listener would have understood you to mean, that

determines whether a contract exists? The court held that it is not necessary for the defendant to have an intention to contract. What matters is the expressed intention.重要 的 不 是 意 思 本 身 ， 而 是 意 思 表 示 Although a meeting of the minds is the usual requirement of contract formation, plaintiffs will be held to their expressed intention, even if they secretly harbor contrary thoughts. The court is clear that it's really the objective manifestation of consent that controls. What the speaker subjectively meant or what the listeners subjectively believe the speaker to mean doesn't count. Parties that intend, but don't manifest, don't have a contract. Parties that don't intend, but do manifest, do have a contract. Evaluating people's objective manifestation of intent might make a lot of sense it first. Imagine if you agree to a contract, but cross your fingers behind your back. We certainly don't want you to be your left out of the contract, that would be a gross injustice. However, the reasonable person standard 理 性 人 标 准 that the court adopts can create a lot of ambiguity. The court says that the plaintiff's version of events, if true, was sufficient to be taken by any reasonable person as an assent to the demand. Do you think that's really true? Some might view the president's speech as a polite brush off 脱 落 , rather than the acceptance of the employee's offer. Also, notice that the court took the decision away from the jury. It found the issue as a matter of law, because no reasonable juror could find differently. This seems quite an extreme position to take, given the ambiguity in what the president actually said. [MUSIC] Today, we examined the question of mutual assent. Mutual assent describes an agreement between two parties to create a contract, and is a necessary condition of most contracting. We took a look at important provisions in the Uniform Commercial Code, which we will encounter many more times in the rest of this course. The provisions defined offers and acceptance, and when they constitute the formation of a contract. Finally, we discussed the Embry case, which held that the test for agreement is the objective, reasonable listener.

Lucy v. Zehmer - Joking Offer Manifested assent 意思表示 In this lecture, we continue our discussion of the manifestation of mutual assent by considering Lucy versus Zehmer, a 1954 Virginia case in which the promisor appeared to assent to a contract but later claim that his offer was merely a joke. In Lucy versus Zehmer, the defendant, Zehmer, drafted and executed a short written agreement on the back of a restaurant receipt to sell his farm for $50,000 to the plaintiff Lucy. Zehmer subsequently refused to consummate the sale, asserting that he didn't ever believe Lucy had $50,000 and that the offer that he had made was just in jest 俏 皮 话 . Lucy sought specific enforcement of the sale agreement. The trial court 初审法院 found for Zehmer but the instant court 终 审 法 院 reversed. So, what's the central issue? Did Zehmer's action bind him contractually despite his claimed subjective intent to joke? The court held that it did, concluding that the agreement, "constituted a binding contract of sale between the two parties," whether it was, "the result of a serious offer by Lucy and a serious acceptance by the defendants or was a serious offer by Lucy and an acceptance and secret jest by the defendants." To reach this conclusion, the court sided the rule that, "the law imputes to a person and intention corresponding to the reasonable meaning of his words and acts 意思表示 理论不是探查其内心的真实意思，而是发现他 言语和行为 的合理 意思的表现 意思的表现." This is another example of the objective listener standard. In other words, the court applied the objective theory of manifestation of mutual assent 客观的合意意思表示理论 that we discussed in the last lecture. The undisclosed intention of the promisor is immaterial if his outward actions would lead a reasonable person to conclude that he intends to form a contract. This case is arguably the poster child 榜样 for a very formalist version of the objective theory. At a minimum, the case stands for the rule that courts should look at a party's outward expression rather than the internal intention of the party. In this case, there's actually the outward manifestation of two parties on the two sellers in the sense that both Zehmers, both of the spouses manifested intent to contract and that even if one of those sellers was jesting, I think it's important that the other spouse also signed helps to add to the court's willingness to enforce the contract. Now an opinion by one of America's most famous and aptly named 任美国联 国联 国联邦 邦法官长达 40 多年，因其才 其才华 华横溢 judges, Judge Learned Hand, 汉德 汉德法 法官， 担任美 的风格及富有逻辑的推理，被誉为“法律的缔造者”。他的话常常被法律学者和联邦最高法院

的法官 的法官们引用 们引用 们引用，其引 ，其引 ，其引用频率 用频率 用频率之高 之高 之高，是其 ，是其 ，是其他地方 他地方 他地方法官们 法官们 法官们望尘 望尘 望尘莫及的 莫及的 莫及的。因而 。因而 。因而，虽其 ，虽其 ，虽其从未在 从未在 从未在最高 最高 最高法 法 院任职，但却 院任职，但却被认为是美国 被认为是美国 被认为是美国历史上最伟大 历史上最伟大 历史上最伟大的法官之一。 的法官之一。 provides with an extreme statement

of the objective theory of agreement. Hand said, "A contract has strictly speaking nothing to do with the personal or individual intent of the parties. A contract is an obligation attached by mere force of law to certain acts of the parties, usually words, which ordinarily accompany and represent a known intent. If however, it were proved by 20 bishops that either party when he used those words intended something else, then the usual meaning which the law imposes upon them, he would still be held, unless there were some mutual mistake or something else of that sort." So why should this be the rule? Even if some people attach idiosyncratic 特 质 的 meaning to their words or actions, it may be more efficient to make those people change rather than to make the majority change. The idiosyncratic bargainers could probably adjust their behavior more easily and at a lower cost than the majority. Part of the efficiency from the objective listener standard is that it allows contract law to avoid jury questions, and have disputes decided instead on the papers. Under a subjective theory, a defendant might cause almost any case to go to trial to decide whether both parties really intended to contract. One way to justify Zehmer's liability in this case is to focus on how inconsiderate the Zehmer's defense is with regard to other contract writers. If Zehmer wins, written contracts become less useful.归谬法 A completely subjective theory of intent also creates a serious moral hazard problem. Parties who later wished to get out or modify regrettable bargains could claim idiosyncratic meanings 特 殊 意 义 after the fact. As Frank Easterbrook puts it, "If unilateral or secret intentions could bind, parties would become wary 谨 慎 的 and the written word would lose some of its power." This is a case where the future written contract sellers are likely rooting against Zehmer. So, after signing the agreement, imagine that Zehmer immediately tells Lucy that it was all a joke and he doesn't intend to sell his farm. Under this objective theory, is the contract binding? The answer's yes. An offeror may revoke an offer until it is accepted but not after it's accepted. 要约人可 在承诺前撤销要约。 If Zehmer's outward actions imply that the offer is serious, a contract is formed as soon as Lucy accepts it under the objective theory. If it is too late for Zehmer to revoke by revealing that he was secretly joking, then he can't retract the contract. In fact, in Lucy versus Zehmer, Zehmer argued that he did tell Lucy that the whole thing was a joke immediately after the contract was signed and he realized that Lucy was serious, but that wasn't enough to avoid Zehmer's liability. But is this really a good rule? Malcolm Sharp, who emphasizes the freedom from contract, argues that in light of the cost individual freedom, the objective tests should be employed only where the

defendant has induced actual unjustified reliance by the plaintiff. If Zehmer told Lucy that he was joking before Lucy left the bar, then what difference does it make to Lucy? Lucy hasn't yet relied on the promise. So, it's no worse off than he would have been had Zehmer told him it was a joke immediately before signing and refusing to sign. Sharp's reliance approach is not perfect however. Whether the promisee relied on the promise can itself be a matter of dispute that may require jury adjudication of whether there was actual unjustified reliance. There would be fewer summary judgements and directed verdicts if there was a reliance requirement. So, let's recap. For two parties to establish a valid contract, there must be a manifestation of mutual assent by both parties. Under the objective theory, whether assent is manifested is determined by the actions of the parties, and so a party may be bound despite a hidden contrary intent. The reasonable listener standard determines whether someone has manifested assent.

Lefkowitz v. Great Minn. Surplus Store - Ambiguous Offer 特定广告构成要约 Our next case comes from the Supreme Court of Minnesota in 1957, and deals with the role of advertising and forming a contract. On Friday, April 6th, 1956, the Great Minneapolis Surplus Store published an advertisement very much like the one you see here. It advertised, Saturday 9 AM-sharp- 3 brand new fur coats worth to $1,000. First come first serve $1 each. The very next day Morris Lefkowitz went to the store, was the first to present himself at the appropriate counter, asked for the coat and indicated his readiness to pay the sales price of $1. But the store refused to sell it to him, telling him that they had a house rule that the advertised offer applied only to women. The following week on Friday the 13th, the Great Minneapolis Surplus Store again placed an ad in the newspaper, this time advertising scarves 围 巾 and stoles 披 肩 . In particular, it advertised one black Lapin stole, beautiful. Worth $139.50. $1, first come first serve. Mr. Lefkowitz again went to the store, again was the first to ask for the stole, but they once again told him that they would not sell it to him. And that he already knew the house rule. Lefkowitz then proceeded to sue the store for the value of the furs they refused to sell him. The court in this case faced the question of whether there was a contract at all. Lefkowitz argued that advertisements constituted offers, which he had then accepted by showing up at the Great Minneapolis Surplus Store at the appointment time and ready to pay $1. The store on the other hand argued that the ads were just invitations for an offer and not offers themselves. The store's argument is equivalent to the saying that the ads were soliciting 恳 求 offers from perspective customers. Justice Murphy had it decide whether the advertisements in this case were offers that become binding contracts when Leftkowitz accepted them. There are three different ways we can view advertisements. First, they could be as Leftkowitz argues, simply offers. Once they are accepted, they become binding contracts. Second, they might instead be just notices that the seller plans to make offers at a particular time and place in the future. Or third, they might be solicitations, notices that the seller would like to receive offers from interested buyers. In general advertisements nowadays are usually interpreted belong to a categories 2 and 3. Category 1 is rather exceptional. 大多数广告是第二种和第三种含义，第一 种非常罕见。 The court lays out a rule for when advertisements, constitute an offer, saying that where the offer is clear, definite and explicit and leaves nothing open for negotiation, it constitutes an offer...