Contracts Outline PDF

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Intro a. Contract as a Legally Binding Agreement i. Elements of contract (1) Offer (a) Promise (b) Clear and definitive terms (i) UCC 1. Quantity must be specified by court can gap-fill items 2. Parties, price, subject matter, time, and place for performance must be specified (c) Communication (2) Acceptance (a) Manifestation of willingness to enter a bargain (b) Mutual assent (i) Both sides acknowledge (3) Consideration (a) Each side has something to gain or lose (b) Establishes bargain for exchange (c) Quid pro quo ii. Performance (1) Fulfilling the contractual obligations (2) Simultaneous performance (a) Exchange at the same time (3) Sequential performance (a) Exchange is delayed  potential for breach iii. Other things to look out for (1) Capacity (a) Can’t contract if not mentally capable, if infant, if intoxicated (2) Legality (a) The content of the agreement must be lawful (3) Statute of frauds (MYLEGS must be written contracts) (4) Good faith iv. UCC (1) Sale of goods (a) One party must be a merchant (someone who regularly deals with the goods involved in the transaction) v. Contracts are judged on objective standard (1) Not the parties’ subjective beliefs b. Basic types of claims Bailey v. West

i.

Rule: No contract because no basic elements of contract, no quasi contract, no implied in fact contract Facts: racehorse transaction where boarder tries to recover for costs of care for horse

Contract Law and Morality (1) Can’t back out of contract if price of product changes unfavorably Bolin Farms v. American Cotton Shippers Assn.

Rule: Changes in market pricing will not void a predetermined contract, price and circumstances at the time of the contract are determinative Facts: Cotton farmers and market peak

(2) Unconscionability issues (a) Absence of meaningful choice on the part of one of the parties to contract, combined with contractual terms which are unreasonably favorable to other party

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Ora Lee William v. Walker-Thomas Furniture Co.

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Rule: When an element of unconscionability is present at the time of contract formation, the resulting contract is not enforceable Facts: unfair furniture where company tries to take back all purchased items if you’re late on debt of 1

(b) Procedural unconscionability (i) Results from inequalities between the parties as to age, intelligence, and relative bargaining power (ii) Discloses that both parties did not freely consent to all terms proposed. (c) Substantive unconscionability (i) It means that the objective terms of the contract are unfair (ii) When contract terms are excessively oppressive or harsh. c. Implied-in-Fact contract i. Express (1) Explicitly agreed (a) Oral or written ii. Implied (1) Implicitly agreed iii. 2 elements (1) Mutual agreement (2) Intent to promise iv. May be implied through actions of parties d. Quasi Contract i. Duty based on doctrine of unjust enrichment (1) When a person retaians money or benefits that belong to another fairly ii. Elements (1) Benefit conferred upon D by P (2) P rendered performance with expectation of being paid (3) P was not acting as volunteer iii. Unjust enrichment if D doesn’t pay P e. Legal theories Consideration a. Intro a. Exchange where each sides gives something of value to the other side b.

c.

b. If one side lacks value, no consideration= no contract Detrimental reliance Kirksey v. Rule: A promise to provide free land for a residence that is fulfilled for a finite Kirksey amount of time and then revoked is unenforceable despite inducing the promisee to move residences in reliance on the promise. Facts: sister-in-law leaves house to live with brother-in-law Hamer v. Rule: Adequate consideration sufficient to form a valid and enforceable contract Sidway may consist of either a right, interest, profit, or benefit accrued to one party, or some forbearance, detriment, loss, or responsibility given, suffered, or undertaken by the other. Facts: rich uncle will pay for nephew to not play billiards Cohen v. Rule: When one of two parties did not think they were entering a contract, the Cowles Media contract is not enforceable. Facts: newspaper gets info from politician in exchange for his anonymity Promissory Estoppel As Consideration i. §90

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Rule: A new promise to pay a debt binds the debtor for a new statute of limitations period. It is possible to revive debt through express or implied promise. Facts: Serial borrower, 6 years passed, new consideration is not needed (1) an equitable remedy which permits enforcement of even a gratuitous promise if the promisee incurs a definite and substantial detriment while relying on the promise, and injustice can only be avoided by enforcing the promise. (2) Promise that intend to induce forbearance is enforceable (3) Elements (a) Promise First Hawaiian Bank v. Zukerkorn

(b) Reasonable would induce action of promise (c) Induces action of promise Rule: Remedies are up for grabs with promissory estoppel because it is offLanger v. Superior Steel Corp. contract; consideration as forbearance (not working for another comp.) Facts: pension promised to worker was not paid Rule: Consideration consists of a benefit to the promisor or a detriment to the Pennsy Supply Inc. v. promise American Ash Facts: Consideration was that Pennsy got rid of AggRite that American Ash Recycling Corp. wanted to dispose of d.

b.

Past Consideration i. An intent to undertake a legally enforceable commitment is not enough to make one i. Prior legal obligation ii. Prior moral obligation Mills v. Wyman

Webb v. McGowin

Rule: A promise based on moral obligation without legal consideration is not enforceable unless tied to preexisting legal obligation Facts: boy got sick on voyage, Mills finds him, he died; father promises to pay Mills Rule: You can make a promise based on past benefit (§86); must be proportionate to the benefit conferred Facts: Webb throws thing down, boss underneath, catches thing, suffered physical and psychological damage, McGowin promised to pay him for rest of his life, McGowen died and didn’t mention him in will

Intent to contract i. An intent to undertake a legally enforceable commitment is not enough to get you one Rule: Nominal payments and vague statements of consideration are insufficient In re Edwin to support a contract. Farnham Facts: The contract was one-sided because Greene was giving the mistress Greene money to avoid giving it to the creditors, and the mistress gave nothing in return (it was not even nominal consideration). c.

Nominal consideration Dan Cohen v. Cowles Rule: No consideration needed when parties do not intend to make a contract Media Co. (not mutual) Facts: Newspaper gets info from politician for his anonymity

d.

Mixed Motives and Adequacy of Consideration Samuel Thomas v. Rule: The equality of the consideration need not be equal in order for a contract Eleanor Thomas to be in place. Facts: Sympathetic widow who was granted life estate, but husband didn’t leave it her in the will Robert C. Browning Rule: Waiver of claim is valuable even if in hindsight contract one was not v. O. Arthur Johnson enforceable; Constitutes consideration because it enhances consideration of seller

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Facts: two contracts, first was made on a mutual mistake Robert C. Apfel v. Prudential-Bache Securities, Inc.

e.

Modification to contracts William Levine v. Rule: Modification is not valid unless there is consideration Anne Blumenthal Facts: Landlord sued tenant for last month of rent & for the extra $25/month that was original lease; Modification was unsupported by consideration; Modification not enforceable Rule: Modification must have fresh consideration to be enforceable Alaska Packers’ Association v. Facts: Manager agreed to fishermen’s $100 pay increase; Fishermen want their $100; Modification did not have fresh consideration; Modification was not Domenico enforceable; Would not be enforceable because manager was under duress Rule: Modification with fresh consideration is enforceable. Humble Oil & Facts: real estate purchase through option contract Refining Co. v. Westside Investment Corp.

f.

Preexisting Duty Rule Alfred L. Angel v. John E. Murray, Jr.

g.

Illusory promise Rehm-Zeiher Co. v. F.G. Walker Co. W.M. McMichael v. Harley T. Price

Ottis F. Wood v. Lucy, Lady DuffGordon Omni Group Inc v. Seattle-First National Bank (1982)

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Rule: A contract is enforceable and has valid consideration even if the idea surrounding the contract is not novel. Facts: Apfel gave ideas to Prudential, sufficient consideration because idea had value

Rule: The preexisting duty rule will not be applied when there are unforeseen circumstances and the opposing party agrees to compensate for those unforeseen circumstances. Facts: Angel brings taxpayer suit because he doesn’t want to pay extra tax for the new housing units

Rule: Without mutuality of obligation, there is no consideration and the contract is unenforceable. Facts: promise to pay for alcohol, promise to deliver alcohol Rule: Where the consideration on one side is an offer or an agreement to sell and on the other side an offer or agreement to buy, the obligation of the parties to sell and buy must be mutual. Facts: If Price buys sand, he must buy from McMichael (Exclusivity), promise was not illusory Rule: exclusive privilege=not illusory Facts: Wood will put Lady’s name on clothing; Lady gives her name to other people Rule: Making a promise dependent upon a condition does not make it illusory. Facts: Buyer has right to get inspection on development property; Buyer can walk away if not satisfied; Seller attempts to use that as reason that it could walk away; Buyer sues for specific performance/ breach; not illusory

Promissory Estoppel a. Promissory Estoppel Definition Andrew D. Ricketts Rule: Promissory estoppel—promise that is enforceable by law v. Katie Scothorn Facts: Grandfather wants grandchildren not to work; Gave them $2,000; Grandchildren quit her bookkeeping job William F. Langer v. Rule: where there is consideration in promissory estoppel, it can be enforced Superior Steel Corp. Facts: D promised to pay $100/month per the rest of the year b.

Charitable pledges Allegheny College v.

MINORITY Rule: promissory estoppel renders charitable gift enforceable; not

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National Chautauqua County Bank of Jamestown Congregation Kadimah TorasMoshe v. Robert A. DeLeo 3.

needed because there is consideration Facts: Mary promises to give college $5,000 after she dies to support students study; Mary Johnston Memorial Fund; Decides she doesn’t want to give the rest of the money Rule: §90 of restatement needs reliance or consideration Facts: Decedent made oral promise to give promisee, a synagogue, money for a library. Estate-person wouldn’t give money, DeLeo was granted summary judgment

Agreement a. Manifestation of Mutual Assent Rule: Needs to be an Outward/objective assent Embry v. Hargadine, Facts: Manager who wants his contract to get renewed; He says he won’t make McKittrick Dry his guys work until he is renewed; McKittrick said go ahead, don’t worry about Goods Co. it; Busy preparing for board meeting W.O. Lucy v. A.H. Rule: The mental assent of the parties is not requisite for the formation of a Zehmer contract, needs to be vocal assent Facts: Real estate in VA, Zahmer has farm, Lucy is trying to buy it; Defense-Levity of liquor, Joking; Zahmer owed the house to Lucy; Objective theory of contract Raffles v. Wichelhaus Rule: No meeting of the minds if there are two objective definitions “Peerless” Case Facts: Peerless; Confusion between October and December Peerless; Cotton shipment b.

Implied-in-Fact Agreement Rule: When a party requests another party to disclose an idea and understands Wrench LLC v. Taco Bell Corp. that the other party discloses it with an expectation of compensation for the use of the idea, an implied-in-fact contract is created. Facts: Creators of psycho chihuahua marketing; Taco bell doesn’t attribute it to them; Used Gidget (chihuahua) Rule: Where the offer is clear, definite, and explicit, and leaves nothing open for Morris Lefkowitz v. negotiation, it constitutes an offer, acceptance of which will complete the Great Minneapolis contract. Surplus Store Facts: Ad for woman’s coat by store; Lefkowitz accepted by showing up for the ad

c.

What is an Offer? Joseph Lonergan v. Albert Scolnick

J.W. Southworth v. Joseph Oliver John Leonard v. Pepsico, Inc d.

Rule: Offeror is master of the offer-- Lapses within reasonable time Facts: Plaintiff Lonergan, responded to an ad placed by Defendant, Scolnick for land the Defendant was interested in selling. Plaintiff corresponded with Defendant through a series of letters. Defendant sold the land to a third party. Rule: Specific ads are enforceable offers Facts: sale of land where neighbor asked for specific information then made an offer Rule: When an offer is a joke, it is not enforceable Facts: harrier jet ad

Modes of Acceptance i. Offeror is the master of the offer Rule: The offeror is the master of his or her offer—they can offer and set up the La Salle National Bank v. rules/attach conditions Facts: real estate contract; Vega sold to 3rd party Mel Vega ii. Acceptance by performance

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Louisa Elizabeth Carlill v. Carbolic Smoke Ball Co. Mary Glover v. Jewish War Veterans of US Ever-Tite Roofing Corp. v. G.T. Green

Rule: One can accept a contract by performance Facts: reward for any person who used the smoke ball as directed and got the flu, Carlill accepted by performance Rule: You must know about an offer in order to accept it Facts: P sought to recover an award offered for info about a murder, but she did not know of the award before giving the info Rule: Commencement of performance= acceptance Facts: contract to re-roof home and homeowners backed out

iii. Acceptance by promise Industrial America, Inc. v. Fulton Industries, Inc.

Rule: When a promise of an offer exists and there is acceptance by performance, the contract is enforceable Facts: broker suing company for broker’s fee that was promised in an ad

iv. Mirror image rule Corinthian Pharmaceutical Systems, Inc. v. Lederle Laboratories Minneapolis & St. Louis Railway Co. v. Columbus Rolling-Mill Co. v.

Rule:  Common Law: If acceptance exactly mirrors the offer, there is acceptance; If acceptance doesn’t mirror, there is no acceptance  UCC: wants to keep the contract alive; change would’ve been a counteroffer Facts: vaccine sale; change of price Rule: Altered terms are not a mirror image Facts: deal to buy steal with new terms

Contrary Manifestation Theodore Russell Rule: If you are tortuously using another’s property, silence is not an excuse v. Texas Co. to breach (restatement 69) Facts: D tortuously using P’s land without paying – P sent letter with $ charge

vi. Acceptance by silence Rule: Restatement Section 72: courts will look at the past history of R.L. Ammons v. Wilson & Co. transactions between the parties, circumstances may lead to an implied acceptance Facts: meatpacking/shortening order, corporation waited 12 days to decline the order S. Allen Schreiber Rule: When there is no intent to contract and there is not acceptance, contract v. Olan Mills cannot be enforced Facts: Schreiber sends letter to Mills telling them if they call him again, he will charge a listening service; If you don’t cease and desist, I will fine you Beneficial National Rule: Silence can be acceptance if the K explicitly gives a time frame to respond Bank USA v. Facts: credit card holder sues bank and bank brings new suit saying that it Payton should be arbitrated under the new contract terms vii. Acceptance by partial performance AA Marchiondo v. Rule: If you terminate mid-deal, a broker can still be paid if he partially Frank Scheck performed Facts: real estate sale where D made a unilateral offer in an ad and agreed to pay a percentage to a broker as a commission

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viii. Mailbox Rule Adams v. Lindsell

e.

Termination of Offers Steve Hendricks v. Eugene Behee

i.

Rule: as soon as you put a K in the mail and send it, it is accepted and it’s binding on the date that you send Facts: contract sent by mail and timing was off—sold to a third party

Rule: The offer can always be withdrawn before it’s accepted Facts: real estate transaction, buyer made an offer but pulled out before it had been accepted by telling the sellers’ real estate offer

Implicit withdrawal George Dickinson v. John Dodds James Baird Co. v. Gimbel Brothers, Inc.

Rule: No obligation to keep an offer open if there is no consideration – offeror can still withdraw at any time Facts: property sale and D said that the sale offer was open until Friday at 9am MINORITY Rule: A bid does not constitute an enforceable contract, nor can this be enforced under the guise of "promissory estoppel". Facts: General contractor wants to submit bids; Subcontractor miscalculates how much material they need; General contractor relies on that, and choose subcontractor

ii. Contract versus Promissory Estoppel William Drennan v. Star Paving Co.

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MAJORITY Rule: A general contractor may enforce a subcontractor’s bid where there is reasonable detrimental reliance under a theory of promissory estoppel. Facts: Star paving made mistake, so Drennan couldn’t use them

Special Problems in the Agreement Process i. Problems in agreement process (1) Forum selection clause DTE Energy Technologies, Inc. v. Briggs Electric, Inc.

Rule: UCC 2-207: When acceptance is accompanied with additional terms, it may or may not become part of the contract; if it materially alters the contract, it does not become part of the contract Facts: forum selection clause was in fine print and not enforceable

(2) Arbitration clause Textile Unlimited Inc. v. A. BMH and Co. Inc. Rich Hill v. Gateway 2000

William Klocek v. Gateway

Rule: When there is no consent of the singing party and the term alters the contract, an arbitration clause is not enforceable (2-207) Facts: yarn selling; seller did not require acceptance of the buyer (shown because they just shipped the yarn) so without express acceptance the seller cannot sneak terms in Rule: When the arbitration is visible and consented to with generous time, it is enforceable Facts: gateway computer case, P wants to return it but didn’t see the terms and agreement that said the buyer only has 30 days to return—could’ve returned to disagree with arbitration clause Rule: 2-207 applies- Additional terms are material alteration; Not incorporated into the contract Facts: second gateway computer case, P wants to return but didn’t see the

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terms and this time the buyer had 5 days to return Rule: Would a reasonable person be bound to the arbitration clause? Facts: “click-wrap case” where D tried to compel arbitration after a dispute about an internet software; not enforceable because it was hidden and there wasn’t notice

Christopher Specht v. Netscape Communication s Corporation (3) Terms of use Cairo, Inc. v. Crossmedia Services, Inc.

Rule: Were the parties given notice of the arbitration clause? Facts: forum selection clause tucked into internet contract – must be litigated in Chicago, Illinois; upheld because P knew

ii. Indefinite Agreements and Gaps (1) Indefinite agreement George Varney Rule: If a contract is too vague, indefinite or uncertain, it will be unenforceable v. Issac Facts: employer offered increased pay and a share of profits but fired him Ditmars later (2) Price interpellation Oglebay Norton Co. v. Armco Inc

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