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Contracts Outline

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Contracts Spring Outline Questions:

1. Did the parties intend to contract?
a. Assent to contract

2. Was there mutual assent?
a. Assent to same terms

3. What is the operative offer?
a. Who is the offeror?
b. Who is the offeree?

4. Was there timely and effective acceptance?
a. Mirror image rule b. 2-207

5. Was assent compromised?
a. Duress b. Misrepresentation c. Unconscionability

6. What is required in the contract?
a. Parol Evidence i. What terms do the contract include?
b. Interpretation i. What do the terms mean?
c. Conditions d. Good faith

7. Did the parties perform as required?
a. Interpretation b. Breach c. Partial and Substantial performance

8. If not, is there an excuse for non-performance?
a. Mistake b. Impossibility c. Impracticality d. Frustration

9. If not, what are the damages for breach?
a. Damages Stages of Agreement:

1. Negotiation

2. Agreement

3. Performance

1 Defining a Contract: A. An agreement with specific terms between two or more persons or entities in which there is a promise to do something in return for a valuable benefit known as consideration B. Mutual Assent a. Where parties agree to the same thing in the same sense i. Agree to contract ii. Agree to same material terms b. Meeting of the minds C. Intent to have an agreement a. Objective standard, would a reasonable person think that there was an agreement?
i. Embry: employer instructed employee to keep working, objectively that indicates an agreement to extend the contract b. The parties' intentions are imputed from the reasonable meaning of the parties' outward expression (TEST- words, actions, writing, circumstances) i. Lucy (High as a Georgia Pine): subjectively joking was irrelevant, reasonable person would think napkin contract was valid (rewrote contract, wife signed, good price)

1. Restatement 20-2(b) party should be aware of other's misunderstanding c. Rebuttable Presumption i. Party asserting contract has the burden of proving a contract rather than an unenforceable familial relationship

1. Morrow: son took care of mother, presumed gratuitous D. Intended Meaning of the Terms a. No fractions of a day, the entire day upon which a contract expires is open for compliance with it i. Tilbert- man died day contract expired, but still eligible for benefits E. 2 Types of Mistakes (Are we making the buns?) a. Does each party understand what they intend?
b. Does each party understand what the other intends?
c. Do they agree on the same terms?
i. If no to each of the above, there is a mistake and no mutual assent

1. UNLESS other party knows of mistake d. Unilateral i. One party makes a mistake about the terms of contract ii. Was there reliance? If so, can't get out of contract even with mistake

1. Cargill- Restatement 20-2(b)- if mistake is reasonably relied in good faith on and acted upon it stands; 35k bushels of wheat v. 3500 reasonably relied because it was written; party should be aware of other's misunderstanding e. Mutual i. Both parties are mistaken about the terms of the contract, if mutual mistake then, no contract ii. Material mistake, no mutual assent [?] contract iii. Elements of Mutual Misunderstanding:

1. Mutual misunderstanding

2. About ambiguous and 2

3. Material terms a. Terms you need in order to perform b. Terms in a contract that are considered essential, they describe: i. The goods ii. Fix the price iii. Quantity iv. Set delivery date iv. Restatement Second of Contracts 20-1(a)

1. Raffles v. Wichelhaus- parties were talking about two different ships [?] contract a. No contract because no mutual assent f. Contract Despite Misunderstanding i. If offeror knows that the offeree has misunderstood and takes no action to correct misunderstanding contract continues ii. Misunderstood meaning deemed to be part of the valid contract

1. Dickey- an answer of acceptance was all that was needed since offeror didn't specify he wanted payment a. 20(2)(a) party aware of other's misunderstanding

-------------------------------------------------Offer--------------------------------------------------I. Definition a. An expression by one party of her assent to be bound to certain definite terms, provided b. A legally sufficient offer must contain: i. The parties ii. The consideration iii. The terms including:

1. Time of performance

2. Place of performance

3. Mode of performance c. The terms above must be: i. Clear ii. Definite iii. Explicit and iv. Leave nothing to negotiate II. Newspaper ads a. Usually these are unilateral contracts that can be withdrawn without notice b. Whether an ad is an offer or invitation depends on the legal intentions of the parties and the surrounding circumstances c. An ad to the general public is binding if: i. Facts show that some performance was promised in positive terms in return for something requested

1. Lefkowitz- ad only relevant to one person (first person to arrive), so one dollar mink scarf ad is a valid offer III. Ask v. Offer a. I am asking is not the same as I am offering b. Look at the language of the document i. Courteen 3

1. No offer, letters were general IV. Price Quotes a. Price quotes are usually not an offer, but by examining surrounding circumstances it can constitute an offer i. Southworth- price quote is an offer because letter had definite terms, they had spoken before, and only backed out because he didn't want to get involved in the conflict between the neighbors V. Has an offer been made?
a. Depends on the objective reasonableness of the alleged offeree's beliefs that the advertisement or solicitation was intended as an offer i. Reasonable offeree's point of view

1. Leonard v. Pepsico, Inc. a. Joke was clearly a joke no reasonable person would agree with plaintiff's analysis of the commercial b. Focus in on reasonableness of offeree's belief that advertisement was an offer

------------------------------------------------Acceptance-------------------------------------------I. II.

III. Last step in contract formation Definition a. Voluntary manifestation of assent to the terms of an offer made by offeree in a manner invited or required by offeror, thereby creating a contract i. Must be in an overt manner b. Terms and manner of acceptance are set by offeror c. Duration of offer is set by the offeror + reasonable ness d. Termination is done by revocation by offeror or counter-offer by offeree EFFECTIVE ACCEPTANCE a. MIRROR IMAGE RULE i. Offeree must communicate definite and unequivocal acceptance ii. Equivocal, conditional or limited acceptance= counter offer[?] mirror image iii. Counter offer by offeree requires acceptance by original offeror

1. Ardente v. Horan a. Wanted to buy a house as long as came with furnishings b. This was considered a counter offer [?] acceptance c. See Restatement Section 58

2. Collins v. Thompson a. State sends prisoners mistake offer, prisoners aware of mistake and accepted either the mistake or the date that was intended b. NOT considered a counter offer b. When definite i. Offeror has right to convey terms and offeree is bound to those terms ii. Any departure from those terms (time and manner) [?] contract because not valid acceptance

1. Eliason v. Henshaw 4

a. Accepted by mail instead of wagon, did not accept according to terms so even though they received in a reasonable time [?] acceptance c. UCC 2-206(1)(a)- Offer and Acceptance in Formation of Contract i. Any reasonable manner unless unambiguously stated otherwise d. When Mode of Acceptance is Suggestive and not definite i. Partial performance

1. In accordance with the terms is effective acceptance when offeror is aware Rest SS 32 and SS 54

2. Partial Performance Acceptable Example a. Allied Steel and Conveyors Inc. v. Ford Motor Co. i. Several documents went back and forth, one did not have indemnity clause voided; Defendant started working and plaintiff knew of acceptance ii. Because the mode of which acceptance was suggestive and not definite partial performance was a reasonable mode of acceptance- other mode not precluded

3. Partial Performance NOT Acceptable Example a. White v. Corlies i. Builder bought materials to begin project but offeror did not have effective notice that offeree accepted, so partial performance was not acceptable manner of acceptance e. Silence/Inaction [?] Acceptance i. EXCEPTION: See Restatement Section 69

1. Silence is Acceptance When: a. Offeree gets benefit, there was opportunity to reject and knowledge that offeror was expecting compensation i. EXCEPT 39 USC Section 3009

1. Mail unordered merchandise that cannot expect compensation; treated like a gift b. Reason to believe silence is okay c. Custom; previous history of dealings which make silence reasonable

5 IV.

Battle of the Forms a. UCC 2-207- Additional Terms in Acceptance or Confirmation i. When you have parties making a contract with conflicting terms how to decide what terms control (has to be two conflicting forms) a. Hill v. Gateway i. Only one form so no 2-207 offeror establishes terms

2. Unlike mirror image, if act like a contract, there is a presumption that there is a contract b. Steps i. First,

1. Is there a contract?
a. Are there definite and seasonable terms, which operate as acceptance despite conflicting terms?
i. If yes- then contract

1. UNLESS: acceptance is made conditional on an agreement of different/added terms ii. Second,

1. If there is a contract, what are the terms?
a. If both parties are merchants i. Additional terms are part of contract

1. UNLESS: a. Limits acceptance b. Materially alter (if change would result in surprise or hardship) c. Notification of objection ii. Different terms see step three b. Both parties are not merchants i. Additional terms are not part of contract iii. Final Step

1. If there is not a contract, but parties act like there is: a. Use Knock Out Rule and UCC Gap Fillers c. Explanation of UCC 2-207 6

i. Route 2

1. If offeror on Form 1, limits acceptance to his terms, FORM1 controls,

2. But if, they don't limit acceptance continue to Route 1 a. Stemcor v. Trident i. Steel casings, enforcement of arbitration clause ii. Stemcor was original offeror iii. Trident in their acceptance included that its acceptance was contingent upon Stemcor accepting trident's terms iv. Even though stemcor sent a third form, trident's form still controlled v. IF YOU ARE GOING TO USE LIMITING ACCEPTANCE IT MUST CLEARLY EXPRESS LIMITATION ii. Route 1

1. If offeror on Form one, doesn't limit, then Form 2 is controlling as a counter offer a. Then: Are they merchants?
i. If yes, additional terms are incorporated UNLESS:

1. Limits acceptance

2. Materially alter (if change would result in surprise or hardship) a. Step-Saver: i. Was a contract between customer and software company ii. When goods, there was additional terms on box top that were not previously mentioned or discussed iii. Box-top warranty disclaimer materially altered the agreement so it was deemed not part of agreement

3. Notification of objection ii. If no, additional terms aren't incorporated iii. Route 3

1. If there is not a contract, (writings aren't enough to make a contract) but parties are acting like a contract exists, knock out rule and gap fillers

2. Contract= matching terms + gap fillers d. Definitions i. Different: different or contradictory to an existing contract terms ii. Additional: extra or supplemental to an existing contract term

----------DURATION OF OFFER- Restatement (Second) of Contract Section 36----------I.

Methods of Termination of the Power of Acceptance a. Rejection or counter-offer by the offeree, or 7

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