Contracts Jiminez(3) 2018 PDF

Preview

Summary

Outline...

Description

Breach of contract prima facie case = What plaintiff needs to prove There was mutual assent between parties (Ch. 2) I.

Offer a. Creating i. Objective Theory of Assent 1. Two components, only one of which is purely objective a. Would a reasonable person in the position of the offeree understand from the offeror’s words and the conduct an intent to be bound (objective) AND b. Did the offeree in fact believe so (subjective) 2. Important Exception a. People who know that an offer is a sham is not able to accept it and create a contract 3. Case a. Lucy v Zehmer i. P went to D’s restaurant and bargained with D to buy land until he was offered $50,000 ii. D and his wife signed a contract but alleged they did it jokingly with alcohol involved iii. There was a valid contract and P is entitled to specific performance iv. Must look to the outward expression of a person as manifesting his intention rather than secret and unexpressed intention ii. A statement will be considered an offer if a reasonable person would think that they can complete the deal by simply giving their assent (R2C 24) iii. Offers can be explicit, or in certain situations, implicit iv. Advertisements 1. General rule is that an advertisement does not constitute an offer. It is either a notice soliciting offers or just that goods will be offered. 2. The exception to the general rule on ads is where the advertisement is clear, definite, explicit, and leaves nothing for negotiation. a. Sateriale v. RJ Renyolds Tobacco Company i. P collected C Notes for D’s campaign ii. After sending letter that campaign was open for 6 more months, D cancelled campaign and P could not redeem C-Notes iii. Yes there was an existence to enter into a unilateral contract, whereby D promised to provide rewards for going through the process. 1. Law has exception for offer of a reward, including offers of a reward for the redemption of coupons. 2. Common law was made to address specific problem of over-acceptance (not applicable here since D is in control of C-note distribution and require registration) v. Case 1. Leonard v. Pepsico Inc a. P collected Pepsi point to get harrier jet from D’s commercial b. Objective principle in contract law: what would objective, reasonable person have understood commercial to mean? c. Obvious joke or jest would not give rise to contract

d. The tongue in cheek attitude of commercial would not cause a reasonable person to conclude that a soft drink company would be giving away fighter jets as a promotion. 2. Lonergan v. Scolnick a. P and D exchanged letters about P buying land, P went into escrow after being told he should act fast. b. If from a promise, or manifestation of intention, or from the circumstances existing at the time, the person to whom the promise or manifestation is addressed knows or has reason to know that the person making it does not intend it as an expression of his fixed purpose until he has given a further expression of assent, he has not made an offer. c. Clear from the correspondence that it was the intention of D that the negotiations were purely preliminary. d. No offer given b. Destroying i. Rejection - done by offeree ii. Revocation - done by offeror 1. Offeree has to have reason to know offer is no longer on table 2. Case a. Dickinson v. Dodds i. D wrote to P offering to sell P property and P had until Friday at 9am to accept ii. P was told D was going to sell property to someone else iii. P tried to accept twice but was told it was already sold iv. Indirect revocation- neither principle nor authority for proposition that there must be an express and actual withdrawal of offer v. D allowed to withdraw because before any attempt of acceptance by P, he was well aware that D had changed mind and agreed to sell property to someone else iii. Lapse 1. An offer lapses after the period stated in the offer or, if no duration is stated, after a reasonable time a. Courts look at the circumstances surrounding the offer to determine what constitutes a reasonable time 2. Mailbox Rule- acceptance is valid when it is mailed. 3. Case a. Minnesota Linseed Oil Co v. Collier White Lead Co. i. July 31- P offered for D to buy oil at 58 cents/gal ii. August 3 - D accepts offer iii. August 3 - P says they withdraw offer iv. D’s acceptance was not deposited in the telegraph within reasonable time. v. Seems clear that the intention of P was to make offer with immediate. Fair opportunity for consideration, acceptance given the fluctuation of price. iv. Death/ Incapacity of the Offeror/Offeree 1. An offeree’s power of acceptance terminates when the offeree or offeror dies or is deprives of legal capacity to enter the proposed contract. a. This is true even if the still living party did not know of others death. 2. Death only kills an offer, not a contract c. Preserving (Option Contracts)

II.

i. Option is a contract collateral to an offer to sell whereby the offer is made irrevocable for a specified period ii. Creating Option Contracts 1. Common Law (Burgess v. EMU) a. Recital of consideration creates a rebuttable presumption that consideration was actually given, but no contract if party can prove consideration did not change hands. 2. R2C 87: Option Contract a. Written statement that consideration was given actually counts as consideration as long as minimal equitable standards are satisfied 3. UCC 2-205 a. Written signed option offer does not need consideration if i. Offer is a merchant AND ii. Option is for 3 months or less (if no time is stated) iii. Power of acceptance under option contract is not terminated by rejection, counter offer, revocation, or death or incapacity of offeror. (R2C 37) iv. Cases 1. Beall v. Beall a. P had option to buy D’s land supported by consideration b. The option was extended but without consideration c. P wants to exercise option but D refuses to sell d. Reversed dismissal of complaint e. Trial court found no consideration on the final extension and did not consider whether there was a valid offer and acceptance. f. If purported option agreement is not supported by consideration, it is deemed to be a mere offer, which the offeree can specifically enforce if the offer is accepted before it expires or is otherwise revoked. 2. Board of Control of Eastern Michigan University v. Burgess a. P has a 60 day option to buy D’s land with $1 consideration b. P wants to exercise option but D rejects c. D alleges she never received any consideration that was promised d. No option contract because consideration was never paid e. Failure of consideration affects only collateral contract to keep offer open , not the underlying offer. Acceptance a. Offerors control over manner of acceptance i. Offeror dictates rules of acceptance ii. Can you accept by promise or performance? (3 rules for acceptance to look at for an exam, if for sale of goods look at UCC) 1. Davis v. Jacoby (traditional/ common rule) - distinguished between unilateral and bilateral contracts and required all contracts to fall in one of those categories (formalistic, unusual rule today) 2. R2C 30(2) and 32- ambiguous offers can be accepted by performance or promise 3. UCC 2-206: offeree can accept by any reasonable manner unless the offeror specifies otherwise iii. Cases 1. La Salle National Bank v. Vega a. P and D made a deal to sell land b. Both P and D had to sign contract; D signed but P did not c. The offer is valid after D signs d. Without execution by D there was no offer to accept, so no contract

e. Language of offer may govern mode of acceptance required, and where offer required written acceptance, no other modes may be used 2. Ever-Tite Roofing Corp v. Green a. P will re-roof D’s house b. Document said it is binding if signed by P OR upon commencing of work performance c. About a week later, P sent workers to start the job, but there were other workers to start job, but there were other workers doing job already. d. D not justified in breaching e. What is reasonable time is a question of fact depending on nature of contract proposed, usages of business, and other circumstances of the case which the offeree at the time of his acceptance either knows or has reason to know f. D gave no time limit specified to start work and there was no unreasonable delay 3. Davis v Jacoby a. P, niece of Mr W., told she would inherit everything if she goes down to see Mr and Mrs W who are both unwell b. O answers she will come soon c. P gets there to find out Mr. W’s will left everything to others d. Yes, there was an offer in the letter by Mr. W to enter a bilateral contract (promise for a promise) and answer was promise to come soon. e. Contract may be unilateral and bilateral depending upon the intent of the offeror and the facts and circumstances of each case, but in case of doubt it is presumed offer invites formation of bilateral contract. b. Acceptance By Promise (bilateral contract) i. Effective upon the offeror’s receipt of the acceptance 1. Exception- Mailbox Rule a. An acceptance communicated via mail effective on dispatch (when it is mailed out) i. This is true, however, only if it is reasonable for you to accept by mail ii. Also works for email in some jurisdictions iii. Used to work for telegraph b. Only works for acceptances; everything else is upon receipt c. If rejection and acceptance both sent out, first to arrive is the one that will be enforced d. Case i. Minnesota Linseed Oil Co. V Collier White Lead Co. 2. Promissory acceptance needs to be communicated; uncommunicated intention to accept offer is not an acceptance 3. Communication of acceptance to agent of offeree is not sufficient and does not bind offeror. 4. D can withdraw offer at any time before acceptance and communication of fact to him 5. Case a. Hendricks v. Behee i. D wants to buy land from Smiths and writes the offer ii. Smiths signed the proposed agreement iii. Before D was notified of Smith’s acceptance, D notified the Smith’s agent of withdrawal. iv. D’s withdrawl was proper, thus there was not contract

c. Acceptance by Performance (unilateral contract) i. If a party makes a unilateral offer (acceptance by performance only), then, unless they specify they want notice, performance of the act alone is sufficient 1. But offeree does have to notify offeror of finished performance within a reasonable time. ii. When acceptance by performance become valid 1. Common law required complete performance for acceptance (allowed offeror to revoke offer at anytime before then) 2. Modern Rule: R2C 45: option contract created by part performance or tender a. Also requires complete performance for acceptance, but says that if the offeree begins performing, they create an option contract that makes the offer irrevocable for a reasonable period of time iii. Cases 1. Carlill v. Carbolic Smoke Ball Co. a. D offers 100 pounds to anyone who inhales smoke ball for three times a day for two weeks and gets flu b. P did it for two months and got flu c. D is obligated to pay 100 pounds d. If notice of acceptance is required, the person who makes the offer gets notice of acceptance contemporaneously with the notice of the performance of the condition e. D did not expect nor require notice of acceptance apart from notice of performance, so it can be implied. d. Acceptance by silence or inaction i. General Rule: silence or inaction alone are not sufficient to constitute an acceptance ii. Exceptions: where the silence or inaction do act as acceptance (R2C 69) 1. Where an offeree takes the benefit of offered services with reasonable opportunity to reject them and reason to know that they were offered with the exception of compensation. 2. Where the offeror has stated or given the offeree reason to understand that assent may be manifested by silence or inaction, and the offeree in remaining silent and inactive intends to accept offer. 3. Where because of previous dealings or otherwise, it is reasonable that the offeree should notify the offeror if he does not intend to accept. iii. Case 1. Laredo National Bank v. Gordon a. D told P, they need to know immediately what P’s fee is which P responded $12,500. b. D never responds and later says $12,500 is too much c. D did accept P’s offer despite not saying anything d. If relationship between parties is such that offeror is justified in expecting a reply, or the offeree is under a duty to reply, the latter’s silence will be regarded as an acceptance. e. Imperfect Acceptance (UCC 2-207) i. Ways of analyzing 1. Gresser Rule: Mirror image rule with two exceptions a. If change is immaterial b. Or it’s a suggested modification 2. More liberal version of what constitutes an acceptance (R2C 59 & 61) a. An acceptance which requests a change is not a rejection, unless the acceptance is made to depend on agreement to changed term b. If not made to depend, the contract is formed in original terms

3. UCC 2-207: Additional Terms in Acceptance or Confirmation a. A definite and seasonable expression of acceptance or a written confirmation which is sent within reasonable time (when there is a contract?) operates as an acceptance even though it states terms additional to or different from those offered or agreed upon UNLESS acceptance is expressly made conditional on assent to the additional or different terms b. The additional terms are to be construed as proposals for addition to the contract– between merchants such terms become a contract UNLESS i. The offer expressly limits acceptance to the terms of the offer ii. They materially alter it iii. Notification of objection to them has already been given or is given within a reasonable time after notice of them is received. c. Conduct by both parties which recognize existence of contract is sufficient to establish a contract for the sale although the writings of the parties do not otherwise establish a contract. In such case the terms of the particular contract consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any provision of this act. i. Working through UCC 2-207 1. Always start with (1), if there is a contract under (1), move to (2)…(2) is for additional terms not different. 2. If contract under (1) but terms are different, courts apply one of three approaches. a. Knock out- terms knock each other out and neither is part of contract. b. Drop out- term that was last sent drops and is not part of contract c. Apply 2-207 and pretends it says additional or different terms. ii. Case 1. Gresser v. Holtzer a. P sends unsigned purchase agreement for D’s land b. D changes several terms, initialed them, and signed agreement c. P initials changes, and makes own changes to delivery date and closing date d. D accepts another offer after being given P’s purchase agreement. e. Purchase agreement not legally binding because date changes to the purchase agreement precluded contract formulation as a matter of law. f. Mirror Image Rule: acceptance must be coextensive with the offer and may not introduce additional terms or conditions g. Only minor changes that do not substantially alter the performance obligation of the parties may be immaterial 2. Dorton v. Collins & Aikman Corporation a. P sues D for bad quality carpets and D moves for stay pending arbitration

b. Acknowledgement form said order was “subject to all of the terms and conditions on the face and reverse side. c. Court says subject to language is not sufficient to acceptance outside 2-207(1); not clear enough to make expressly conditional. d. Since 2-207 applied, remanded to district court to determine whether terms were different or additional. 3. Diamond Fruit Growers Inc. v. Krack Corporation a. Form disclaimed all liability for consequential damages and limited liability to replacement or repair; also says made conditional on purchaser accepts the terms b. This is the sale of goods so UCC applies c. Way to get out of UCC 2-207(1) is to use exact language d. No contract under 2-207(1) so court moves 2207(3) i. Additional terms did not become part of contract because both parties continued to act as if there was one. e. Disclaimer of liability not part of the contract. III.

Deficient Agreements a. Misunderstood Terms i. Parties agree on all aspects of agreement, but mean different things ii. Case 1. Raffles v. Wichelhaus a. P shows up willing to sell but D refused to accept and pay P for goods. b. P meant one ship named Peerless and D meant a different one. c. No contract because terms not clear d. Establishes R2C 20 iii. R2C 20: Effect of Misunderstanding 1. Translations: no contract formed if a. Neither party is at fault, or if b. Both parties are equally at fault 2. Translation: there is contract if one party is at fault 3. A party may be bound by a negligent manifestation of assent if the other party is not negligent. b. Incomplete and indefinite terms i. Parties never agree on all particulars, either by not defining what they meant or by never discussing topic at all ii. Illusory Promise 1. A promise is illusory if it does not actually bind the promisor to do anything 2. Case a. Community Design Corp v. Antonell i. P worked overtime on Christmas to get promised bonus and vacation ii. Exact amount of bonus disputed, but enough evidence for jury to find an oral contract which supports an award

iii. When existence of a contract is clear, its exact terms may be determined by the jury, so long as there is sufficient evidence. Jury found for P iii. Case 1. Varney v. Ditmars a. P worked for D with promises for a profit share in exchange for certain successes by P b. P out of work for a while and D denied agreement was made and did not pay c. Rule: In order for promise to be enforceable, the intention of the parties must be expressed with a level of certainty sufficient to allow the courts to determine that intention with a reasonable degree of certainty. d. Statement made by D about fair share of profits is too vague, amount left subject to will of D by use of word “fair” c. Postponed Agreement (agreements to agree) i. Common Law “formalist” rule (Walker v. Keith) 1. Strictly construes agreements to agree to agree; courts impose “reasonable terms and good faith standards” 2. Focus more on intent of parties. Use terms of agreement as indicators of what parties meant, but ok to look outside contract 3. Case a. Moolenaar v. Co Build Companies i. P buys land for 5 years with 5 year extension renegotiable ii. Original rent $375 a month iii. Land sold to D, who knew of lease and renewal clause iv. At negotiation, D said new lease is $17,000 per month v. Renewal clause valid and should be $400 per month vi. Clause intends renewal at reasonable rent and market conditions ascertainable with sufficient certainty to make clause enforceable. vii. Value should be based on agricultural or animal husbandry purposes only, intent of original signatories for lease

AND consideration OR consideration substitute (Ch. 3) A.

“Bargained for” (Reed/ R2C 71) i. Traditional view (formalist) 1. An individual’s act or promise counts as consideration if it benefits the other party or is a detriment to the individual. ii. Modern View (R2C 71: Requirement of Exchange; Types of Exchange) 1. Consideration is anything that is sought by one party and that the other party gives in order to satisfy that party. 2. R2C 17 Comment B 3. In the typical bargain, the consideration and the promise bear a reciprocal relation of motive or inducement: It is not enough that the promise induces the conduct of the promise or that the conduct of the promise induces the making of the promise; both elements must be present or there is no promise. iii. Case 1. Reed v. University of North Dakota and North Dakota Assn for Disabled

a. P suffered injury and disability from running in races and sues D for

B.

C.

negligently not having adequate water and medical services at the race. b. D defends on contract theory alleging registration form signed by P released D from all liability. c. Consideration can be any benefit conferred or detriment suffered. d. Forbearance of legal right to sue is a legal detriment which constitutes good consideration. e. P surrendered legal right in exchange for let him run on course during D’s race. One promise as consid...