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Contracts Midterm #1
Modules 1-4
| Term | Definition |
|---|---|
| Contract | A promise or set of promises for the breach of which the law gives remedy. Legally binding obligation arising from a promise. (Restatement §1). |
| Elements of Contract Formation | Mutual Assent. Consideration. Two or more parties. Legal capacity to make the contract. No legal prohibition precluding the formation of a contract. |
| What are Restatements? | seek to state the principles and rules of the common law as reflected in judicial opinions. Persuasive commentary about the law, they are not in themselves actually law unless a court adopts a provision in an opinion (case law) or legislature enacts. |
| Uniform Commercial Code (UCC) | For all commercial matters and transaction of goods. Article 2 (rules for contracts for the sale of goods). |
| Elements of a Breach of Contract | A valid contract existing between the parties. Performance (did the parties not follow through with specified performance) Breach Damages |
| Promise | A ______ is a statement of commitment to the person on the receiving end of the promise (promisee) that the primsor will do or refrain from doing a specified act. *Remember the three c's! (Commitment, certainty, communicated). Restatement §2. |
| The Three C's | Commitment Certainty Communicated |
| Subjectively Judged | Meaning what the person is thinking at the time. Based on personal opinions and feelings rather than hard fact. |
| Objectively Judged | Meaning what a reasonable person would think that the communication meant. Based only on hard facts. |
| Assent | Expression of approval or agreement. Contrasts with consent because any person regardless of legal age can participate in the activity of assent. |
| Mutual Assent | "Meeting of the minds". Offer and acceptance are NOT needed to show this but can be. You can look at totality of the circumstances to see if it amounts to offer and acceptance. Use an objective lense in determining this. Restatement §18. |
| An agreement | This is a manifestation of mutual assent on the part of two or more persons. Restatement §3. |
| Commitment | A promise to act or do something in a particular way. Judged by an objective standard. (Lucy vs. Zehmer) |
| Consideration | Money, something of value, which holds the offer open or holds the promisee to their promise. |
| Certainty | Sufficient content to justify the promisee in understanding that a commitment has been made and may be relied upon. |
| Communicated | Clearly and effectively brought to the attention of the promisee. |
| Embry vs. Hargadine, McKittrick Dry Goods. Co | Argument over meaning of spoken words and if misinterpretation created intent and therefore a valid contract (R §21). Issue concerned the remployment of Embry through a verbal contract with his boss. |
| Lucy vs. Zehmer | Sale of farm property was a jest by one party but the other party meant it. (Outward expression/intent matters in contract formation, not secret intentions ) |
| Raffles vs. Wichelhaus (Two Ships Named Peerless) | Did buyer breach contract of cotton sale when parties attached different meanings to their words? Misunderstanding is when parties agree upon two completely different things and therefore prevents contract formation completely. Restatement §20. |
| Illusory Promises | Words of promise which by their terms make performance entirely optional with the "promisor" do not constitute a promise. These are not real promises! Restatement §77. Termination at will clauses lead courts top believe that a promise is this . |
| Effect of Misunderstanding | No manifestation of mutual assent to an exchange if the parties each attach materially different meanings to their manifestations and neither party knows or has reason to know the meaning attached by the other. Prevents contract formation. R §20. |
| Oswald vs. Allen | Swiss coin collection. Example of Restatement §20 -- Effect of Misunderstanding. Similar to Raffles vs. Wichelhaus. |
| Indefinite or Incomplete Terms | Promise contains time restraints, vague terminology, missing terms. Court reluctant to enforce these types of contracts. (UCC Article 2-204 & 2-205 state leaving out some terms and $ is ok, so long as intention is present & reasonably certain basis. R §33 |
| Quake Construction vs. American Airlines (Jones Construction Co.) | Regards a preliminary agreement over construction work (R §26). A letter of intent to enter into a contract will be enforceable if the parties intended the letter to be contractually binding. |
| Sun Printing & Publishing Ass'n vs. Remington Paper & Power Co. | Disagreement over specified time for shipments of paper. Restatement §41. |
| Academy Publishers vs. Cheever | Contract may be enforced even tho some contract terms may be missing or left to be agreed upon, if the essential terms are so uncertain that there is no basis for deciding whether the agreement has been kept or broken, there is no contract . ( R §33) |
| Conduct as Manifestation of Assent | Restatement §19. Intention, promise can be made in part or wholly by words or conduct. |
| Effect of Misunderstanding | Restatement §20. Attach materially different meanings to their manifestations and each party knows or haas reason to know or neither party knows the meaning attached by the other. |
| Whose Meaning Prevails | Restatement §201. Lucy vs. Zehmer. Party had no reason to know the other attached a different meaning and where the meaning differs it is interpreted in accordance w/ that meaning. R§20. This Restatement tells you which meaning stands in matter of law. |
| Restatement §18 | A manifestation of mutual assent to an exchange requires that each party either make a promise or begin or render a performance. |
| Restatement §19 | Manifestation of assent may be made wholly or partly by written or spoken words or by other acts or failure to act. Intention to assent is needed to satisfy this Restatement. |
| Restatement §20 | Misunderstanding. Attaching different meanings to different key terms. Ex; Raffles vs, Wichelhaus. |
| Restatement §3 | Agreement is a manifestation of mutual assent on the part of two or more persons (usually in exchange for performance or promises). |
| Restatement §22 | Mode of Assent: Offer and Acceptance. Usual way of making a proposal and a party accepting to create mutual assent and therefore a contract. |
| Restatement §33 | Missing or incomplete terms do not create a valid contract. This restatement reinforces the idea of certainty of terms in contract formation. These usually terms that prevent a contract from being enforced are time, price, vague terminology, etc. |
| Restatement §24 | Offer. Manifestation of willingness to enter into a bargain so made as to justify another person in understanding that his assent to bargain is invited and will conclude it. |
| Elements of Offer | 1)Communicated to one or more parties 2)Intention to be legally bound 3)Certain and definite terms in the offer |
| Advertisements/Quotes/Rewards | Generally NOT considered offers which can be legally enforceable bc they tend to be missing terms or be vague in their requirements (price, quantity, time, etc). Restatement §26. Lefkowitz vs. Great Minneapolis Surplus Store, Inc, and Leonard vs. PepsiCo |
| Lefkowitz vs. Great Minneapolis Surplus Store, Inc | Issue is whether or not the advertisement constituted an offer for fur coats and black lapin stole. Rule we derive is the offer must be clear, definite, and explicit, and leaves nothing open for negotiation. Black stole was an offer bc specified terms. |
| Leonard vs. PepsiCo | For an ad to constitute an offer a reasonable person would need to believe such. Advertisements need to contain who would be able to accept it in order for it to constitute an offer (along with price, quantity of item(s), and other elements. No offer . |
| Power of Acceptance/ Restatement §35 | Offer gives to the offeree the power of acceptance; to complete manifestation of mutual assent by acceptance of the offer. |
| Methods of Termination/ Restatement §36 | An offerees power of acceptance can be terminated in 4 ways. 1)lapse 2)death 3)counteroffer/rejection 4)revocation |
| Lapse | Time in an offer or if no time is stated, a reasonable time (which is usually at the end of the conversation). Restatement §41 |
| Death or incapacity | Earle vs. Angell; if death happens after offer is accepted then offer still valid. If acceptance of an offer happens after the offeror dies, power of acceptance is too late. |
| Rejection/ Counteroffer | Language that terminates the offer or suggests alternatives. Restatement §38 (rejection) and §39 (counter-offer). |
| Revocation | Revoked offer either indirectly or directly. Restatement §42 and §43 (Indirect). Learns from reliable source, direct expression no intent to further continue with manifestation of assent. |
| Restatement §35 | Offerees Power of Acceptance explained. |
| Restatement §36 | Methods of Termination of the Power of Acceptance explained. |
| Restatement §38 | Rejection Restatement-terminates power of acceptance generally. |
| Restatement §39 | Counter-Offer Restatement--terminates power of acceptance. Differs from rejection bc it has capability of being accepted by offeror. |
| Acceptance | A manifestation of assent to the terms thereof made by the offeree in a manner invited or required by the offer. R§50. |
| Restatement §21 | Intention (INTENT) to be legally bound to a promise or contract. |
| UCC Article §2-204 | Formation of a Contract in General. Sale of Goods. |
| UCC Article §2-205 | Firm Offers. Three month rule of an offer being held open. Sale of Goods. |
| UCC Article §2-206 | Offer and Acceptance in Formation of Contract. Any manner and method unless explicitly stated is invited. Shipment of non-conforming goods with a note =counteroffer and acceptance. Shipment of non-conforming goods with no note =breach and acceptance. |
| UCC Article §2-207 | Additional Terms. Gap filll additional terms if materially alter, limit acceptance to the terms of the offer , or notification of objection within a reasonable time has been given then there is acceptance (2). Conduct of parties is accepted(3) |
| UCC Article §2-305 | Open Price Terms are acceptable as long as parties intend to be bound by there being no stated price (one will be fixed later, market price). Sale of Goods. |
| No Mirror Image of Contract involving Sale of Goods | UCC Article §2-207. Involves Sale of Goods contracts that do not conform to the mirror image rule in R§59. |
| Counteroffer | Proposes alternative terms. R§39. |
| Bilateral Contract | Mutual exchange of promises. R§50. |
| Unilateral Contract | Only one party makes the promise and acceptance only by performance until the offeree completes the performance. Preparations to perform are not sufficient to bind the contract. R§45. |
| Option Contract | Created when offeree begins performance under Restatement §45. Offeree is free to not complete performance if they chose. Make a contract irrevocable. |
| Rejection | Restatement §38. Terminates offer. |
| Revocation | Offerors intention not to enter into the contract previously proposed. Terminates power of acceptance for the offeree. Restatement §42 and §43. Must be expressed or implied through reliable information |
| Mailbox Rule | Communication of acceptance becomes effective upon dispatch and revocations and rejections effective upon receipt. Restatement 63. Effective at time of dispatch even if lost in the mail. UETA governs electronic mail. |
| Restatement §50 | Acceptance Defined restatement. |
| Restatement §61 | Restatement that states acceptance in which requests a change of terms. |
| Restatement §63 | Take when acceptance takes place restatement. |
| Acceptance by Slience or Inaction | Generally does NOT constitute acceptance. R§69. |
| Ardenete vs. Horan | Conditional elements to be included in the offer may result as rejection of the offer. Offeree must communicate his acceptance to the offeror before any contractual obligation can come into being. (R §59 (b) ) |
| Meyer vs. Uber | If a term becomes part of an agreement upon acceptance depends on if facts establish there is reasonably conspicuous notice of contract terms and unambiguous manifestation of assent to those term. (Specht standard) (UCC Article 1-201 defines conspicuous) |
| First Development Corp of Kentucky vs. Martin Marietta Corp | Based on Indirect Revocation; R§43. MM had revoked its offer before FDCK's acceptance bc Polite knew before the acceptance was delivered that the land was no longer available and was off the market. |
| Conspicuous | UCC Article 1-201 is based on the totality of the circumstances. Other factors considered safe harbor factors, bold, text, size, display, symbols, etc. |
| ASD Specialty Healthcare LLC, vs. Cmty. First Healthcare of Illinois (2023) | No assent was needed for the additional terms of the late fee interest on Remdesivir drug but still a contract formed and no assent was needed for additional terms. §2-207 in use in this case. |
| Hybrid Transactions (mixed transactions) | Predominant Purpose test to see if UCC Article 2 applies when you have sale of goods + services, software license, intangible property, real property, lease of goods, etc. Type of transaction under UCC Article 2. |
| Can you use all provisions of UCC Article §2-207 together to show acceptance when you have additional or different terms in a contract ? | No, you can only use UCC §2-207 sections (1) and (3) or sections (1) and (2) to together in order to determine if there is acceptance with additional or different terms. |
| Mirror Image Rule | Restatement §59. Common law rule states that a statement of acceptance is effective only if it is a mirror image of the offer and expresses unconditional assent to all of the terms and conditions imposed by the offeror. |
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