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CONTRACTS FINAL OUTLINE
Restatement // UCC
Rules of Formation
Statute of Frauds & Exceptions
Legal Basis For Recognizing & Enforcing Promises 1) Promissory liabilitya) Contract: promise or set of promises for the breach of which the law gives remedy, or the performance of which the law in some way recognizes a duty (§1 of resentments).
Not all promises are contracts.
our requisites for a contract under Contract Law:
(1) CAPACITY - only a "person" can make a contractually binding promise - persons may be natural persons or constructs of the law, e.g. a corporation. Corporations can make contracts through agents.
(2) CONSENT - Contract liability - promissory liability - arises from a manifestation of assent. Chapter 2 beginning at 161 is mainly about rules for discerning the necessary assent.
(3) CONSIDERATION - under traditional rules, something must be given or promised in exchange for a promise - that topic will follow.
(4) LAWFUL OBJECTIVE - a promise to carry out an unlawful act or an act deemed by the courts to be contrary to firmly established public policies will not be enforced.
b) Promise: manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding a commitment has been made ( §2 of resentments)
Promises can be stated in words, either oral or written, or may be inferred wholly or partly from conduct (§4 of resentments).
c) Uniform Commercial Code Article 2 deals with contracts of goods.
UCC 2-102: Defines article two as applying only to goods ii)
UCC 2-105(1): defines "goods" as 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 to be paid, investment securities, and things in action.
Hawkins v McGee
(1) Doctor saying he "could," give you a stronger hand than before post-op is not an enforceable promise because "could," is not a guarantee.
(2) Hawkins v. McGee (NH): Dr. McGee (D) did make an enforceable promise when he told Hawkins (P)
he could give him a 100% good or perfect hand. Hawkins was induced by McGee to do the surgery,
and gave McGee the opportunity to practice skin grafting. Breach occurred in failed surgery (3) Rule: when the defendant fails to perform his part of the contract, the plaintiff is entitled to their portion.
2) Remedying Breacha) Restatement §344 states what interests are protected under remedies for breach of contract. Expectation interests (a),
Reliance Interests (b), and restitution interests (c).
Expectation interests: Plaintiff having the benefit of his bargain by being put in as good a position as he would have been had contract been performed
(1) an amount intended to put the Plaintiff in the position he would be in if the contract had been performed, or presumable, at the Plaintiff's election ii)
Reliance Interests: interest in being reimbursed for loss caused by reliance on the contract by being put in as good a position as he would have been in had the contract not been made
(1) In the same or better position as he would've been, had the contract not been made
(a) In the Sullivan v. Connor → defendant argues that the patient cannot be entitled to the pain and suffering of the first 2 operations, as she should've expected this to occur regardless
Restitution interests: his interest in having restored to him any benefit he has conferred to other party
(1) To receive this →
(a) the injured or breaching party may seek restitution if they already rendered partial performance
(b) The injured party may seek restitution if they completed full performance, and if the breaching party still owes non-monetary performance
(2) 2 types of Restitution Remedies
(a) Restitution Damages: i the form of sum of money, with the amount calculated by:
Reasonable value of given performance OR enrichment of other party's interest
(b) Specific Restitution: which allows a party to recover a specific thing, rather than an amount of money
(3) A breaching party can NOT sue for specific restitution, only restitution damages
(4) Quasi - Contracts → A party may be able to recover restitution even when there is not an enforceable contract or even any contract at all
(a) One party confers benefit to the other → the court may imply a unjust enrichment
Ex: Jack is a doctor and saved Larry with services that can be reasonably charged at
Jack has a restitution interest and acted in good faith, thus can sue for the 10,000 b) Case on Remedying Breach i)
Hawkins v. McGee (discussing allocating remedies)
(1) Measure of damages in case was expected because the goal was to give Hawkins a difference in value to him of a perfect or good hand and hand at current state.
Sullivan v. O'Connor
(1) Dr. O'Connor (D) made an enforceable promise by telling Sullivan (P) that he would give her a more pleasing nose in two surgeries. Breached by giving her a worse nose in three surgeries. Court saw reliance interest as best because unlike Hawkins, they see expectation as best for commercial agreements rather than procedures. But rule Sullivan was entitled to pain and suffering from the third surgery in both reliance and expectation measurements.
(2) NOTE: While the court carefully stresses that the instruction encompassed both plaintiff's reliance interest and a part of her lost expectancy, you should remember this case mainly as an explication of the RELIANCE INTEREST as defined in Rest. 2nd sec. 344(b).
c) Case on Remedies on Specific Relief i)
Morris v. Sparrow (1) Morris (D) promised Sparrow (P) $400 for ranch work for 16 weeks total. Sparrow also said Morris promised a horse called Keno (which Morris did not deny, but was conditioned on Sparrow doing a good job)
(2) Because Sparrow broke a green horse and brought it near to being a good roping horse, Keno had a unique value to Sparrow.
(3) If Keno had a unique value to Sparrow, damages would be an inadequate remedy
(4) Equity usually doesn't enforce, by specific performance, but it will do so where special and peculiar reasons exist - Sparrow turning a pony into a roping horse.
(5) Rule: Equity will not use the remedy of specific performance to enforce a contract for the sale of chattels unless special circumstances exist which make it impossible for the party to recover damages in an action at law.
d) Case on Stipulated Remedies and Punitive Damages i)
White v. Benkowski
(1) Punitive damages are awarded to the injured party as a punishment to the defendant, rather than to compensate the injured party for his or her losses. Although punitive damages may be awarded for a breach of contract in the tort context, no tort was alleged in this case.
(2) Rule: punitive damages are not available as a remedy on a breach of contract claim even if breach is intentional. (Rest 2nd. Sec 355)
(a) Can only be recoverable in cases where the conduct constituting the breach is a tort (i.e. Bad
Faith Breach of Promissory fraud)
(3) Nominal Damages: If the breach caused no loss or if the amount of the loss is not proved under the rules stated within, a small sum fixed without regard to the amount of loss would be rewarded as nominal damages (Rest.2nd
Creating Contractual Obligations1) The Nature of Assent a) Rest. 2nd Sec 17(1) Requirement of a Bargain : except as stated in subsec (2), the formation of a contract requires a bargain in which there is a manifestation of mutual assent to the exchange and a consideration b) Objective v. Subjective i)
Multiple things a party could be thinking at the time of an agreement
(1) What a party was thinking at the time of the communication (her subjective meaning)
(2) What the other party understood (his subjective meaning)
(3) And what the reasonable person would have understood (an objective meaning)
Objective meaning is most important when analyzing a contractual promise and the subjective meaning plays a subsidiary role c) CASES
Lucy v. Zehmer
(1) Lucy is suing because Zhemer says they didn't actually have a contract when Zehmer and his wife both singed a piece of paper in the bar that said they agree to sell the ferguson farm to Lucy for 50k
(2) Z said that he didn't think L would take him seriously and come up with the money because they were both drinking and Z didn't INTEND on really selling the land to him, Z says that hes told L and others multiple times that he will not sell the land
(3) But it turns out that even tho Z didn't intend to sell he never said this and he did sign the paper so this is a binding contract between the two parties so the land is now rightfully Lucys
(4) Rule: the objective, outward expression of a party's intent to be bound in an agreement, as opposed to that party's subjective mental assent to the agreement, is all that matters when determining the existence of a valid and enforceable contact.
(5) Lucy subjectively believed that the Zehmers were selling him the land.
(6) Objectively (more important here) the Zehmers conveyed that they were selling.
Specht v. Netscape Communications Corp. (1) Rule: An offeree, regardless of apparent manifestation of his consent, is not bound by or charged with having inquiry notice of inconspicuous contractual provisions of which he is unaware, displayed in a format that would be not obvious as contractual to a reasonably prudent offeree.
(2) Bc of the unique circumstances of Netscape's license-agreement placement, the Netscape-user plaintiffs are not bound to the terms of Netscape's license agreements for SmartDownload.
(3) They can't be made to consent to arbitration based on their agreement to the licensing terms contained in Communicator bc Communicator is a completely separate product from SmartDownload.
(4) Objective: a reasonable person reading the offer on the screen would not have scrolled down to find the agreement.
(5) Subjective: they did not scroll down so they didn't know they were agreeing on arbitration; The plaintiffs testified that they didn't know about the attached license terms - subjectivity - so they are not bound by arbitration.
2) The Offer a) Offer: is an expression or manifestation of willingness to undertake an obligation or refrain from acting (Rest 2nd.
has to be manifestation of commitment ii)
a promise can be one sided but an offer is two sided
Owen v. Tunison
(1) A wrote to B: Will you sell me your specified prop for 20k? B said- because of improvements it would not bexa possible to sell it unless I were to receive 30k?. Did either A or B make an offer?
(2) At first A made an inquiry not an offer, B made an invitation to the offer but not an offer, he wrote I
will sell unless not I will sell for
(3) Rule: General statements made in negotiation do not create a binding offer if they do not indicate a party's intent to be bound by those statements.
(4) Owens subjectively thought this was a real offer.
(5) Objectively a reasonable person would not have taken this as an offer.
Boulton v Jones (188 #3)
(1) Held: for Jones; when a contract is made …. No other person can interpose or adopt the contract"
Fairmount Glass Works v. Crunden-Martin Woodenware Co.
(1) Buyer contacted seller regarding mason jars, asked for a quote and the seller replied with his quote including figures and how fast they could get them the jars. The buyer then sent his order and the seller said sorry we are sold out. They looked at if the their was a breach of contract and if the communication re the quoted prices was an offer accepted
(2) Court held that FG's quote which listed the prices was considered an offer to CM
(3) Rule: Where a party quotes prices and invited acceptance by another party, a binding offer has been made that cannot be revoked once accepted. (4) Court said no there was a contract (an offer and an acceptance).
(a) The court's aim is to find intention - the intentions of the parties.
(b) The court must look to the context and the whole of the correspondence in the record.
(c) In the court's opinion, the words "for immediate acceptance" conveyed a willingness to enter into a bargain.
Moulton v. Kershaw (191)
(1) A to B: dear sir: we are authorized to offer Michigan fine salt, in full car load lots of 80 to 95 barrels,
delivered at your city, at 90$ per barrel, to be shipped per your specified railroad company. Shall be pleased to receive your order. Did A make an offer to sell salt?
(2) There was no offer here even tho they used the words offer, they didn't specify the quantity and the parties didn't agree yet → no commitment here f) Advertisements as Offers (192)
Advertisements are generally not offers because:
(1) It is understood not as a promise to sell but as a general promotion or a statement of present intent or an invitation for customers to come in and begin a bargaining process
(2) They usually doesn't specify any quantity and so could be for any quantity for each customer
(3) Usually don't limit the number of possible contracting partners and cant reasonably be understood as a commitment to any specific recipients
(4) They often omit essential terms or leave them uncertain
(5) Are sometimes "too good to be true" or otherwise too promotional to be reasonably considered a commitment ii)
Consumer Contracts → contracts between businesses and consumers
(1) Creates concerns as it goes the standard doctrine of a contract where there is equal bargaining power
(2) In consumer contracts, businesses tend to have superior bargaining power iii)
(1) Lefkowitz v. Great Minneapolis Surplus Store
(a) The plaintiff is suing for damages and breach of contract and this started because def refused to sell plaintiff a fur piece that he advertised in a news paper, this advertisement said that who even came into the store first could get each thing for 1$ (fur, pink scarf and black stole)
(b) he was always the first to show up and then def would refuse to sell the stuff first he said it was for women only; and said that the ad was a unilateral offer and he could withdraw it without notice
(c) it was held that the store owner was wrong because the plaintiff accepted the offer and he couldn't withdraw it so he had to sell him the items
(d) Rule: An advertisement constitutes a binding offer if it is clear, definite, and explicit, and leaves nothing open for negotiation.
there are numerous cases where courts have found advertisements to be offers - even when advertisements are addressed to the general public.
The test - as articulated by the court - is: "whether the facts show that some performance was promised in positive terms in return for something requested."
(e) While an advertiser has the right at any time before acceptance to modify his offer, he does not have the right, after acceptance, to impose new or arbitrary conditions not contained in the published offer.
(2) Leonard v. PepsiCo
(a) Plaintiff is suing because of the ad that included a harrier jet; he said he followed all of the rules and filled out an order and added the money needed to make up the pepsi point and wrote in the catalog "jet" because it wasn't there already
(b) Pepsi moved to dismiss because they said it was a joke and that any reasonable person wouldn't think they could honestly buy a jet and it wasn't even in the catalog (c) The judgment showed 3 reasons why the plaintiff couldn't prevail- (1) the commercial was merely an ad not an offer (2) could not conclude that a reasonable person would think a soft drink company is giving away fighter planes and (3) the statute of frauds is omitted g) Construction Contracts h) Mistakes in Offers i)
Tend to occur in situations where the contracting process is complex ii)
especially in the construction industry where the bids are considered offers made in response to invitations for bids.
(1) Elsinore Union Elementary v. Kastoroff
(a) Kastoroff provided the school a bid including costs of his contracting services, however,
mistakenly forgot to include his costs for plumbing
(b) He immediately notified the school of the mistake and that he could not perform the job, but the school refused to release him from the contract
(c) K refused to perform and the school sued for breach
(d) Held: in favor of Kastoroff; the bid had been submitted as a result of an excusable and honest mistake of a material and fundamental character
(e) Rule: if an offeree knows or has reason to know, of the offeror's material mistake at the time of acceptance, the offeror is not bound 3) The Acceptance
b) After an offer has been made, the offeree gains the power of acceptance- the offeree can create a contract by assenting to the offer c) The offeree could also instead make a counter offer, reject the offer or remain silent and let the offer lapse d) Rest. 2nd 50: Acceptance: the response to an offer that makes the contract i)
(1) An acceptance must manifest the assenting party's commitment to be bound to the terms, and it must be communicated to the other party in an appropriate manner ii)
(2) acceptance by performance requires that at least party of what the offer requests be performed or tendered and includes acceptance by a performance which operates as a return promise iii)
(3) acceptance by a promise requires that the offeree complete every act essential to the making of the promise e) BILATERAL v UNILATERAL CONTRACTS
BILATERAL: A contract where each party seeks the commitment of the other to a future performance in order to seal the deal instead of an immediate performance
(1) Here both parties made promises
(2) The offer is "offer for bilateral contract" because it seeks the commitment of the other party through a promise that constitutes acceptance ii)
UNILATERAL: An offeror can specify that the manner of acceptance must be by actually performing the specified acts, not by promising
(1) If acceptance is to be made only by performance, then no contract is formed until the offeree completes the performance (2) Called unilateral contract because only one party makes a promise
(3) Here both parties eventually perform and its unilateral because only one party promises to perform,
the other party assents by performing, but does not promise in advance to do so f) CASES
Wucherpfennig v. Dooley
(1) Rule: The acceptance of an offer must be absolute, unequivocal, and unconditional, and it may not introduce additional terms or conditions.
(a) A contract requires mutual assent to the same terms.
(2) The sister (dooley) stated that she would be willing to offer her land for $200 per acre; Wuch's attorney sent a letter to Dooley stating that his client (wuch) has made arrangement so secure funds to purchase the land and was ready to proceed
(3) Sister backed out and Wuch sued for breach
(4) Court held that Wuch's attorney;'s letter was not sufficient to be a valid acceptance to Dooley's offer ii)
International Filter Co. v. Conroe Gin, Ice & Light Co.
(1) Rule: If contracting parties intended for their contract to become binding immediately upon acceptance, then the offeree does not need to notify the offeror of the acceptance to make the contract binding.
(2) The general rule -- An offeree's acceptance of an offer must be timely communicated to the offeror for the contract to become binding. (not the case here)
(3) In this case, notification of internationals approval of the contract was not necessary - the writing clearly indicated that a contract was binding when approved by International and no notice of acceptance was required.
White v. Corlies & Tift
(1) Rule: To form a binding contract, acceptance by performance must be sufficient to manifest or communicate the acceptance to the offeror; if an offeree accepts an offer made when the parties are not together, acceptance must be manifested to the offeror.
(a) To manifest the acceptance to the offeror, the act must be sufficient enough that the
offeror has understood the acceptance
(b) To accept an offer through the commencement of performance, it must be obvious to the offeror that the performance is strictly related to the contract
(c) W/o a perceivable indication that performance of the subject agreement has commenced,
acceptance by performance cannot occur and no binding contract is formed.
(2) In this case, the commencement of performance by purchasing materials and working on those materials was not sufficient to communicate to the defendant that performance had begun, so acceptance by performance was not effective and no binding contract was formed.
(3) "upon agreement" is used, meaning this case is a bilateral contract - one party had to perform acceptance by mail for the other to perform the contract.
(4) Since C&T never heard back they couldn't know if they were going to do the job or not.
(5) White tried to say the case was unilateral, but the court opinion was that the defendant intended a bilateral contract meaning there needed to be notice of acceptance -> the deal that was made was for the defendant to exchange money for whites services - money exchange for goods/services is a bilateral contract.
Ever-tite Roofing Corporation v. Green
(1) Rule: A contract may be created by acceptance to the offer within a time frame specified by the offeror, if no time is specified, within a reasonable time.
(2) The basis of the judgement appealed was that defendants had timely notified plaintiff before
"commencing performance of work" notice to plaintiffs workmen upon their arrival with the materials that defendant did not desire them to commence the actual work was sufficient and timely to signify their intention to withdraw from the contract.
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