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Contracts Ch. 1- Intro The nature and history of contract Shaheen v. Knight The Nature and History of Contract. A doctor and his patient can bargain and contract for a particular result, which, if not achieved, can be the basis for an action for breach of contract. (Shaheen v. Knight) Restatement (second) of Contracts §1. Contract Defined 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.

§ 2. Promise; promisor; promisee; beneficiary A promise is a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made. The person manifesting the intention is the promisor The person to whom the manifestation is addressed is the promisee Where performance will benefit a person other than the promisee, that person is a beneficiary

§ 3. Agreement defined; bargain defined. An agreement is a manifestation of mutual assent on the part of two or more persons. A bargain is an agreement to exchange promises or to exchange a promise for a performance or to exchange performances.

§ 4. How a promise may be made. A promise may be stated in words either oral or written, or may be inferred wholly or party from conduct.

Ch. 8- Principles of enforceability Six core principles of enforceability Party-based principles the will principle According to this principle, commitments are enforceable b/c the promisor has willed or freely chosen to be bound by his commitment. The reasonable or objective meaning of assent may be overridden by proof of a contrary subjective agreement between both parties and when a promisee has access to the subjective or actual understanding of the promisor, he may not rely on the objective, or reasonable, meaning of the promisor's conduct.

the reliance principle the reliance principle is based upon the intuition that we ought to be liable in contract law for harm caused by our verbal behavior (whether oral or written), in much the same way and for the same reasons that we are held liable in tort law for harmful consequences of other types of acts.

the restitution principle Another reason for enforcing a commitment is to prevent the unjust enrichment of a promisor who seeks to go back on his word.

Standard-based principles the efficiency principle According to this view, legal rules and practices are assessed to see whether they will expand or contract the economic benefit the benefits to be gained must exceed the costs

the principle of substantive fairness This attempts to evaluate the substance of a transaction to see if it is fair

Process principles the bargain principle § 71 in 2nd restatement:

To constitute consideration, a performance or a return promise must be bargained for. 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. Under this approach all that matters is that each party's promise or performance is induced by the other's.

applying the principles of enforceability to a case Michelle Marvin v. Lee Marvin Applying the Principles of Enforceability to a Case. Express agreements between nonmarital partners will be enforced unless they rest on unlawful meretricious consideration, and absent such an express agreement, the courts may look to other equitable remedies to protect the lawful intentions of the parties. (Michelle Marvin v. Lee Marvin)

Ch. 2- Damages for breach of contract The three damage interests Expectation, reliance, and restitution interests In general, the amount of the award is measured by the promisee's expectation interest or, as it is sometimes called, "the benefit of the bargain." The court attempts to put the promisee in the position in which the promisee would have been had the promise been performed. If the promisee changed its position to its detriment in reliance on the promise - as by incurring expenses in performing or preparing to perform - the court might award a sum of money intended to compensate for this loss. Recovery would then be measured by the promisee's reliance interest, in an attempt to put the promisee back in the position in which the promisee would have been in had the promise not been made. If the promisee conferred a benefit on the promisor in the course of the transaction as by delivering something to the promisor or improving the promisor's property the court might award the promisee a sum of money intended to deprive the promisor of this benefit. Recovery would then be measured by the promisee's restitution interest, in an attempt to put the promisor back in the position in which the promisor would have been had the promise not been made. This type of recovery is less generous than the other 2 above interests (expectation and reliance) Hawkins v. Mcgee The Three Damage Interests. The true measure of a buyer's damages is the difference between the value of the goods as they would have been if the warranty as to the quality had been true and the actual value at the time of sale, including any incidental consequences within the contemplation of the parties when they made their contract. (Hawkins v. McGee) Mcgee v. US Fidelity & Guaranty Co. J.O. Hooker v. Roberts Cabinet The Three Damage Interests. A party is only entitled to recover damages for expenses in storing goods that it would not otherwise have incurred absent the other party's breach. (J. O. Hooker & Sons v. Roberts Cabinet Co.) The termination of a contract is an "extreme" remedy that should be "sparsely granted." Termination is permitted only for a material breach. A breach is material when there is a failure to perform a substantial part of the contract or one or more of its essential terms or conditions, or if there is such a breach as substantially defeats its purpose, or when the breach of the contract is such that upon a reasonable construction of the contract, it is shown that the parties considered the breach as vital to the existence of the contract In awarding damages for breach of contract, the court's purpose is to put the injured party in as good a position as he would have been in but for the breach. Contract damages are ordinarily based on the injured party's expectation interest and are intended to give him the benefit of the bargain by

awarding him a sum of money that will, to the extent possible, put him in as good a position as he would have been in had the contract been performed. Sales Contracts: The Uniform Commercial Code § 1-103 Supplementary general principles of contract law appicable Unless displaced by the particular provisions of this act, the principles of law and equity, including the law merchant and the law relative to capacity to contract, principal and agent, estoppel, fraud, misrepresentation, duress, coercion, mistake, bankruptcy, or other validating or invalidating cause shall supplement its provisions.

§ 2-102 Scope; certain security and other transactions excluded from this article Unless the context otherwise requires, the article applies to transactions in goods; it does not apply to any transaction which although in the form of an unconditional contract to sell or present sale is intended to operate only as a security transaction nor does this article impair or repeal any statute regulating sales to consumers, farmers or other specified classes of buyers.

§ 2-105 Definitions: transferability; "Goods" "Goods" mean all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale other than the money in which the price is to be paid, investment securities (article 9) and things in action. "Goods" also includes the unborn young of animals and growing crops and other identified things attached to realty as described in goods to be severed from realty.

§ 2-106 Definitions: "Contract"; "Agreement"; "Contract for Sale"; "Sale"; "present sale" In this article unless the context otherwise requires "contract" and "agreement" are limited to those relating to the present or future sale of goods. "Contract for sale" includes both present sale of goods and a contract to sell goods at a future time. A "sale" consists in the passing of title from the seller to the buyer for a price. A "present sale" means a sale which is accomplished by the making of a contract

Ch. 3- Other Remedies and causes of action Specific performance and injunctions intro to equitable remedies When a plaintiff seeks an equitable remedy, particularly a coercive one, the rule is that he may have the remedy only if the remedy at law is inadequate Contracts for land Traditionally, land has been presumed to be unique, so in land sales contracts the presumption actually shifts in favor of specific performance. In sales of personal property, however, there is no such presumption and uniqueness or some other reason why damages are inadequate must be established by the victim of the breach. Loveless v. Diehl Specific Performance and Injunctions: Contracts for Land. In a contract for the sale of real property, the court may award the remedy of specific performance as a matter of course irrespective of the adequacy of the remedies at law. (Loveless v. Diehl) The right to specific performance is not absolute, but is a matter of discretion with the chancellor. While this is true, the discretion is a sound judicial discretion, controlled by established principles of equity, and where the contract is in writing, is certain in its terms, is for a valuable consideration, is fair and just in all its provisions, and is capable of being enforced without hardship to either party, it is as much a matter of course for a court of equity to decree its specific performance as for a court of law to award a judgment of damages for its breach.

Ch. 4- Reaching an agreement Formation of a contract requires two basic elements: the mutual assent of the parties and some showing that this assent is the kind that the law will enforce

The objective theory of assent It must, to constitute a contract, appear that the two minds were at one at the same moment of time and that the existence of the same mind between the two parties is essential in point of law to the making of an agreement. Embry v. Hargadine The Objective Theory of Assent. A meeting of the minds that is essential to the formation of a contract is not determined by the secret intention of the parties, but by their expressed intention. (Embry v. Hargadine, McKittrick Dry Goods Co.) Intention is immaterial till it manifests itself as an act. The law imputes to a person an intention corresponding to the reasonable meaning of his words and acts. If his words and acts, judged by a reasonable standard, manifest an intention to agree to the matter in question, then that agreement is established. The law imputes to a person an intention corresponding to the reasonable meaning of his words and acts. It judges his intention by his outward expressions and excludes all questions in regard to his unexpressed intention. If his words or acts, judged by a reasonable standard, manifest an intention to agree in regard to the matter in question, that agreement is established, and it is immaterial what may be the real but unexpressed state of his mind on the subject. The objective theory of assent: a problem Lucy v. Zehmer The Objective Theory of Assent. If his outward manifestations of assent otherwise create a contract, the claim that the assentor was not serious is not a defense to a claim on the contract. (Lucy v. Zehmer) The mental assent of the parties is not a requisite for the formation of a contract. If the words or other acts of one of the parties have but one reasonable meaning, his undisclosed intention is immaterial unless this undisclosed intention is known to the other party. It is a traditional axiom in law that a contract requires a "meeting of the minds," but as the present case demonstrates, this is not entirely true. What is necessary is the outward manifestation of a meeting of the minds, and a secret intention will not defeat an otherwise valid agreement. An agreement or mutual assent is of course essential to a valid contract but the law imputes to a person an intention corresponding to the reasonable meaning of his words and acts. If his words and acts, judged by a reasonable standard, manifest an intention to agree, it is immaterial what may be the real but unexpressed state of his mind. Restatement (second) of contracts § 17 Requirement of a bargain (1) except as stated in subsection (2), the formation of a contract requires a bargain in which there is a manifestation of mutual assent to the exchange and a consideration. (2) Whether or not there is a bargain a contract may be formed under special rules applicable to formal contracts or under the rules stated in § § 82-94.

Rest. 18. Manifestation of mutual assent manifestation of mutual assent to an exchange requires that each party either make a promise or begin or render a performance

§ 19 Conduct as a manifestation of intent (1) The manifestation of assent may be made wholly or partly by written or spoken words or by other acts or by failure to act. (2) The conduct of a party is not effective as a manifetation of his assent unless he intends to engage in the conduct and knows or has reason to know that the other party may infer from his conduct that he assents. (3) The conduct of a party may manifest assent even though he does not in fact assent. In such cases a resulting contract may be voidable b/c of fraud, duress, mistake, or other invalidating cause.

What is an offer?

Section 24 of the Restatement (Second) of contracts defines an offer as "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." preliminary obligations Nebraska seed v. Harsh Preliminary Negotiations. An advertisement of a product is not an offer if it contains general, nonspecific terms. (Nebraska Seed Co. v. Harsh) The rule here can be found in the Restatement (Second) of Contracts. In §26, it states: "A manifestation of willingness to enter into a bargain is not an offer if the person to whom it is addressed knows or has reason to know that the person making it does not intend to conclude a bargain until he has made a further manifestation of assent." The case here presented a fairly close question on that issue, but the "thereabouts" language tipped the scales in Harsh's (D) favor. If a proposal is nothing more than an invitation to the person to whom it is made to make an offer to the proposer, it is not such an offer as can be turned into an agreement by acceptance. Proposals of this kind, although made to definite persons and not to the public generally, are merely invitations to trade; they go no further than what occurs when one asks another what he will give or take for certain goods. Such inquiries may lead to bargains, but do not make them. They ask for offers which the proposer has a right to accept or reject as he pleases. Leonard v. Pepsico Preliminary Negotiations. An advertisement is not an enforceable offer when it could not be considered by an objective reasonable person as a true offer, rather than as an obvious joke. (Leonard v. Pepsico) The general rule is that an advertisement does not constitute an offer. Advertisements of goods by display, sign, handbill, newspaper, radio or television are not ordinarily intended or understood as offers to sell The exception to the rule that advertisements do not create any power of acceptance in potential offerees is where the advertisement is clear, definite, and explicit, and leaves nothing open for negotiation. In that circumstance, it constitutes an offer, acceptance of which will complete the contract. It is quite possible to make a definite and operative offer to buy or sell goods by advertisement, in a newspaper, by a handbill, a catalog or circular or on a placard in a store window. It is not customary to do this, however; and the presumption is the other way. Such advertisements are understood to be mere requests to consider and examine and negotiate; and no one can reasonably regard them as otherwise unless the circumstances are exceptional and the words used are very plain and clear. What kind of act creates a power of acceptance and is therefore an offer? It must be an expression of will or intention. It must be an act that leads the offeree reasonably to conclude that a power to create a contract is conferred. This applies to the content of the power as well as to the fact of its existence. It is on this ground that the court must exclude invitations to deal or acts of mere preliminary negotiation, and acts evidently done in jest or without intent to create legal relations. An obvious joke, of course, would not give rise to a contract. Restatement (second) of contracts § 22. Mode of assent: offer and acceptance (1) The manifestation of mutual assent to an exchange ordinarily takes the form of an offer or proposal by one party followed by an acceptance by the other party or parties. (2) A manifestation of mutual assent may be made even though neither offer nor acceptance can be identified and even though the moment of formation cannot be determined. §24. Offer defined

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. §26. Preliminary Negotiations A manifestation of willingness to enter into a bargain is not an offer if the person to whom it is addressed knows or has reason to know that the person making it does not intend to conclude a bargain until he has made a further manifestation of assent. §29. To whom an offer is addressed (1) The manifested intention of the offeror determines the person or persons in whom is created a power of acceptance. (2) An offer may create a power of acceptance in a specified person or in one or more of a specified group or class of persons, acting separately or together, or in anyone or everyone who makes a specified promise or renders a specified performance. §33. Certainty (1) Even though a manifestation of intention is intended to be understood as an offer, it cannot be accepted so as to form a contract unless the terms of the contract are reasonably certain. (2) The terms of a contract are reasonably certain if they provide a basis for determining the existence of a breach and for giving an appropriate remedy. (3) The fact that one or more terms of a proposed bargain are left open or uncertain may show that a manifestation of intention is not intended to be understood as an offer or as an acceptance.

Sales contracts: the uniform commercial code §2-204. Formation in General (1) A contract for sale of goods may be made in any manner sufficient to show agreement, including offer and acceptance, conduct by both parties which recognizes the existence of a contract. (2) An agreement sufficient to constitute a contract for sale may be found even if the moment of its making is undetermined. (3) Even if one or more terms are left open, a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy. §2-206. Offer and acceptance in formation of contract (1) Unless otherwise unambiguously indicated by the language or circumstances (a) an offer to make a contract shall be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances: (b) an order or other offer to buy goods for prompt or current shipment shall be construed as inviting acceptance either by a prompt promise to ship or by the prompt or current shipment of conforming or nonconforming goods, but the shipment of nonconforming goods is not an acceptance if the seller seasonably notifies the buyer that the shipment is offered only as an accommodation to the buyer.