Contracts New PDF

**Promises and Agreements** **Promise --** A promise is a (1) manifestation of an intention to act in a (2) specified way, so made as to (3) justify a (4) promisee in understanding that a (5) commitment has been made. The promisee can also promise to *not* act in a specified way. Manifesting an i...

**Promises and Agreements** **Promise --** A promise is a (1) manifestation of an intention to act in a (2) specified way, so made as to (3) justify a (4) promisee in understanding that a (5) commitment has been made. The promisee can also promise to *not* act in a specified way. Manifesting an intention to act can be done through words, actions, or a combination of words and actions. Context of words and actions have legal significance. **Pappas v. Bever (1974)** **Statement of Intent --** A statement of intent is not a promise, but merely an expression of a state of mind put in such a way as "neither to invite nor to justify action in reliance by another person" Partial performance does not, *by itself*, turn a statement of intent into a promise. **Contra Proferentem** -- Against the offeror. Even if the meaning of a form's words was uncertain, doubtful language in a written instrument is construed against the party who selected the words. **Mixed Test of Contract Formation** -- Objective reasonable person standard + 1 party's inner meaning **Embry v. Hargadine, McKittrick** **Mixed Test** Regardless of a party's subjective intention, if: 1. What a party said would have been taken by a reasonable person to be an acceptance **and** 2. The other party actually understood the utterance that way 3. Then the utterance constitutes a legally valid accetance **Bargains --** A bargain is an agreement between parties for an exchange. A bargain can be a bad deal for a party. **Consideration --** A bargained for exchange. Stuff being exchanged. A this for that and that for this. Can be promises or actions. **Contract --** An enforceable promise. A promise is enforceable when there is consideration. A promise has consideration when it is bargained for. Bargained for means that promisor is seeking this in exchange for that and promisee is exchanging that in exchange for this. **Hamer v. Sidway** **Forbearance --** A promisor's receiving a right, interest, profit, or benefit counts as consideration. A promisee's undertaking a forbearance, detriment, loss, or a responsibility also counts as consideration. Consideration must exist for both parties for a K to be enforceable. The promisor does not have to benefit from the promisee's action/forbearance for that action/forbearance to count as consideration. **Two Part Test for Consideration** 1. Did promisor receive a right, interest, profit, or benefit? OR 2. Did promisee undertake a forbearance, detriment, loss, or a responsibility? \[Must be satisfied on both sides\] **Offer --** 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. The offeror commits to the terms of the offer if and only if the offeree accepts. "Conclude it" means other party's assent will form the contract. **Termination of Offers --** An offeree's power of acceptance may be terminated by: 1. The offeree's rejection or counteroffer 2. Lapse of time 3. The offeror's revocation, or 4. The offeror's or offeree's subsequent death/incapacity **Lucy v. Zehmer** **Defense of Incapacity --** Intoxication is not a defense to a contract unless the person is unable to "comprehend the nature and consequences of the contract." The other party must have reason to know the person is intoxicated. Contract is then voidable but not automatically voided by the intoxicated person. A person cannot claim they were joking to invalidate their acceptance or offer if the Mixed Test is satisfied. **Preliminary Negotiations (R2K)** -- A manifestation of willingness to enter into a bargain is not an offer if (1) the person to whom it is addressed \[potential offeree\] (2) knows or has reason to know that the person making it \[potential offeror\] (3) does not intend to conclude a bargain until he \[potential offeror\] has (4) made a further manifestation of assent. During negotiations, parties may switch back and forth between who is the potential offeror or potential offeree until one of the parties makes a valid offer. **Reasonably Certain** -- A purported offer is not a valid offer unless its terms are reasonably certain. The terms of the offer must be certain enough to determine what constitutes a breach and what could be appropriate remedies. **Offeror is Master of the Offer** -- Only an offeree can accept an offer. Scope of the offer determines who the offeree or offerees are. **Form of Acceptance Invited:** 1. An offer may invite or require acceptance to be made by an affirmative answer in words, or by performing/refraining from performing a specified act, or may empower the offeree to make a selection of terms in his acceptance. 2. Unless otherwise indicated by the language or the circumstances, an offer invites acceptance in any manner and by any medium reasonable in the circumstances. **Fairmont Glass Works v. Crunden-Martin** **Lonergan v. Scolnick (1954)** **Offers, Promises, Statements of Intent** An offer is a manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent will conclude it. A promise is a manifestation of an intention to act in a specified way so made as to justify a promisee in understanding that a commitment has been made. A statement of intention is not a promise, but merely an expression of a state of mind, "neither to invite nor to justify action in reliance by another person." **Lefkowitz v. General Minneapolis Surplus Store** **Leonard v. PepsiCo (1999)** **Ardente v. Horan (1976)** **Mirror Image Rule --** \[Traditional contract doctrine\] Acceptance must be on the terms proposed by the offer *without the slightest variation.* The offeree's promise, embodied in the acceptance, must be identical with the offeror's promise, embodied in the offer. The offeror, as master of the offer, enjoys freedom from contract, except on the terms of the offer. **Additional Terms \[Acceptance\] --** An offeree can communicate a legally effective acceptance thereby forming a contract AND propose additional terms or propose to modify terms of the offer **if and only if** the acceptance unequivocally states that the offer is accepted **whether or not** the original offeror assents to the proposed changes. **Adams v. Lindsell (England, 1818)** **Acceptance by Performance** **Unilateral Contract(s) --** A unilateral contract is where the acceptance is made by an act/performance. The offer is: I will make this promise if you do that act. **Bilateral Contract(s) --** A bilateral contract is where the acceptance is made by a promise. I will make this promise if you make that promise. **Implied-in-Fact Contract(s) --** An implied-in-fact contract is where the legal significance is implied from what a person does (implied from act/performance) **Implied-in-Law Contract(s) --** Implied in law contracts is where the legal significance of words, conduct, and/or circumstances is created by the law itself, often to achieve justice, fairness, or other public policy goals. **Petterson v. Pattberg (1928)** **Davis v. Jacoby (1934)** **Options and Termination of Offers** **Termination of Offers \[R2K\]:** An offeree's power of acceptance may be terminated by: 1. The offeree's rejection or counteroffer 2. Lapse of time 3. The offeror's revocation **or** 4. The offeror or offeree's subsequent death or incapacity **Direct Termination of Offer --** Offers are directly terminated when the offeree receives from the offeror a manifestation of an intention not to enter into the proposed contract. **Indirect Termination of Offer --** Offers are indirectly terminated when the offeror (1) takes a definite action inconsistent with an intention to enter into the proposed contract **and** (2) the offeree acquires reliable information to that effect. **Dickinson v. Dodds (1876)** **Termination of Offers \[Repeat\]:** An offeror's power of acceptance may be terminated by (1) the offeree's rejection or counteroffer (2) lapse of time (3) the offeror's revocation or (4) the offeror's or offeree's subsequent death or incapacity. **Baird and Drennan** **Consideration and the Bargain Principle** **Kirksey v. Kirksey (1845)** **Requirements of Exchange \[R2K\]** 1. To constitute consideration, a performance or a return promise must be bargained for. 2. 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. **Whitten v. Greeley-Shaw (1987)** **50 Cent v. Tompkins** **McInerney v. Charter Golf (1997)** **Barfield v. Commerce Bank (2007)** **Adequacy of Consideration** **Purposes of Legal Formalities:** 1. Evidentiary Function -\> function to provide "evidence of the existence and purport of the contract, in case of controversy." 2. Cautionary Function -\> may also perform a cautionary or deterrent function by acting as a check against insufficiently thought-out action 3. Dictionary/Channel -\> Direct towards a particular goal/object 4. Channeling Function -\> A framework/procedures for the legally effective expression of certain aspects of autonomy. **Schnell v. Nell (1861)** **Batsakis v. Demotsis (1949)** **Rule:** Mere inadequacy of consideration will not void a contract **Unconscionability Rule --** A term is unenforceable if: 1. At the time a contract is made there is an **absence of meaningful choice** (procedural unconscionability) for one party **and** 2. The contract term is **unreasonably favorable** (substantive unconscionability) to the other party. \[Based on sliding scale\] a. Vulnerabilities of disadvantaged party (age, education, experience with contracts) b. Hidden/complex terms c. Relative negotiating power (who drafted? Negotiable?) (problematic terms explained?) d. Deceptive sales tactics (logistics of sale undermine choice? -\> place, speed, people involved) e. Were alternatives available to the disadvantaged party? a. One sided contracts (Outrageous, shocking to one's conscience) b. Overall imbalance in the rights and obligations c. Is the one-sided term necessary for the advantaged party to stay in business? d. Were other businesses offering similar or better terms? **UCC 2-302: Remedies for Unconscionable Terms --** If the court, as a matter of law, finds the contract or any clause of the contract to have been unconscionable at the time the contract was formed, the court may: (1) refuse to enforce the contract, or may (2) enforce the remainder of the contract without the unconscionable clause as to avoid any unconscionable result. **Fiege v. Boehm (1956)** **Past and Moral Consideration** **Mills v. Wyman (1825)** Consideration is a general rule for the protection and security of people who may make insufficiently throughout promises without any equivalent. **Naked Promises Rule:** A naked promise is only enforceable if it expressly revives a prior promise that had legal consideration. Revival is needed because the prior promise/contract became inoperative by law. Examples include debts barred by the statute of limitations, debts incurred by minors, debts discharged by bankruptcy. Policy implication -\> Revivable because there was initially a quid pro quo that has been revived, creating a moral obligation, that had been dispelled by law. Promise was previously enforceable. **Contract Modification & Consideration** **Stilk v. Myrick (1809)** **Alaska Packers Association v. Domenico** **Unanticipated Changes in Circumstances** **Angel v. Murray (1974)** **Modification to Contracts \[Per UCC\] --** (1) an agreement modifying a contract (2) for the sale of goods (3) does not need new consideration for both parties to be binding. A modification must meet (4) the test of good faith. A contract modification is unenforceable if (5) it was obtained by extortion, (6) without a legitimate commercial purpose. **Note:** UCC modifications -\> one party receives new consideration, and other party does not need anything new. Duty of parties to act in good faith is a non-waivable duty in any contract for the sale of goods. Parties c/n contract around the duty of good faith. **Making an Offer Irrevocable:** 1. Option Contract -\> By forming a separate contract where the terms are an exchange of a promise to forbear revoking a certain offer in return for something of value. 2. Offeree's detrimental reliance -\> Reasonable detrimental reliance alone can convert a revocable offer into an irrevocable offer to the extent necessary to avoid injustice. 3. Merchant Firm Offer Rule -\> UCC rule. Pertains only to the sale of goods and only if the offeror is a merchant. **Merchant Firm Offer Rule (UCC 2-205)** An offer (1) by a merchant (2) to buy or sell goods (3) in a signed writing (4) which gives assurances that the offer will be held open - Is not revocable, for lack of consideration, during the time stated or if no time is stated for a reasonable time. **But,** the period of irrevocability cannot exceed three months. **Promissory Estoppel** In order to have an enforceable contract, the parties' agreement must have consideration, which means that there must be a bargained-for exchange. Each person must seek the other's promise in return for their own. If there is no consideration, then you will not have an enforceable bargain contract. The promise is unenforceable, it is a **gift/gratuitous promise.** Courts have been dissatisfied, in terms of achieving justice, with some cases where non-bargained-for promises are unenforceable due to lack of consideration. Consideration and bargained for exchanges are the first thing to search for in a matter. Contains the strongest basis for enforcement. If there is no consideration, consider whether promissory estoppel will allow the promisee to enforce the promise. **Types of Damages** Expectation Damages -\> Damages in the amount so as to put the plaintiff in the position it would have been in if the K had been fully performed. Awarded for breach of contract. Reliance Damages -\> Damages in the amount so as to put the plaintiff in the position that she would be in if the contract (or promise) had never been made. (Starting position) Awarded for promissory estoppel actions. Restitution Damages -\> Damages in the amount so as to remove a defendant's unjust gain. Awarded for unjust enrichment actions. **Promissory Estoppel Rule** 1. A clear and definite promise that 2. Induces the promisee (or third party) to detrimentally rely on the promise 3. The promisee's reliance was reasonable 4. The promisor had reason to expect that reliance 5. Injustice can be avoided if the promise is enforced Narrative: A clear and definite promise that induces the promisee (or 3^rd^ party) to detrimentally rely on the promise is enforceable if the promisee's reliance was reasonable and the promisor had reason to expect that kind of reliance, and injustice can be avoided only if the promise is enforced. Abbreviated: (1) PROMISE (2) INDUCES DETRIMENTAL RELIANCE (3) RELIANCE REASONABLE (4) REASONABLY EXPECT RELIANCE (5) AVOIDS INJUSTICE Pro\[mise\] I DR Reason x2 injustoose. **Feinberg v. Pfeiffer Co. (1959)** **Hoffman v. Red Owl Stores (1965)** Hoffman ran small bakery and wanted to obtain Red Owl Store. Enter preliminary negotiations about where would be built and Hoffman gets store. Hoffman had 18k to invest, Red Owl said was sufficient. Hoffman buys grocery store to gain experience. Red Owl checked, and store was profitable. Red Owl promised larger store. Red Owl tells Hoffman to sell bakery -\> loses 2k. Red Owl keeps requiring more \$\$. Never had a fully formed offer. **Promissory Estoppel:** A (1) clear and definite promise that (2) induces detrimental reliance from the promisee/a third party (3) is enforceable if the promisee's reliance was reasonable and (4) the promisor had reason to expect that kind of reliance and (5) injustice can be avoided. **Negotiations -\>** Traditionally, negotiations do not require the parties to act in good faith before a contract is formed. **Unjust Enrichment** **Britton v. Turner (1834)** **Unjust Enrichment Rule:** Unjust enrichment occurs when 1. a benefit is conferred upon recipient by benefactor 2. the benefit was not conferred as a gift 3. recipient appreciates that benefit 4. recipient accepts and retains that benefit, and 5. under such circumstances, it would be inequitable for recipient to retain the benefit without paying benefactor for the value of that benefit. **Narrative Unjust Enrichment Rule:** Unjust enrichment occurs when (1) a benefit is conferred upon recipient by benefactor (2) the benefit was not intended as a gift, (3) recipient appreciates that benefit (4) recipient accepts and retains that benefit, and (5) under such circumstances, it would be inequitable for recipient to retain the benefit without paying benefactor for the value of that benefit. In contrast, a person who officiously confers a benefit on another is not entitled to restitution. **Implied in Fact v. Implied in Law** A. Express Contracts -\> Bargain Contracts where words are used. If some, but not all parts of contract formation are implied-in-fact, then it's an express contract. B. Contracts Implied-in-Fact -\> A contract implied entirely from the acts of the parties. The terms, offer, acceptance, and consideration, are inferred from the acts of the parties in context. **Non-Promissory Unjust Enrichment** Non-promissory unjust enrichment is a theory of recovery to prevent unjust enrichment when one or more aspects of contract formation (offer, acceptance, and/or consideration) are missing. Terms are imposed by the court rather than the parties. - Last resort when there is no enforceable contract or promissory estoppel. - Can be called quantum meruit, quasi-contracts, constructive contracts, or implied-in-law contracts. - They are not contracts. Unjust Enrichment refers to all such claims. **Cotnam v. Wisdom (1907)** **Non-Promissory Unjust Enrichment -\> Emergency Care:** 1. Benefactor provided services in an emergency without recipient's knowledge or consent 2. Benefactor acted inofficiously 3. Benefactor expected payment for the services 4. The services were necessary to prevent recipient from suffering serious bodily harm or pain 5. Benefactor had no reason to know that recipient would not consent and 6. It was impossible for recipient to consent. **Battle of the Forms -\>** Parties often form contracts by exchanging forms with negotiated material terms but differing boilerplate terms. Nobody reads or understands boiler plate terms. The parties then act as if a contract was formed despite the acceptance not satisfying the mirror image rule. **Knock-Out Rule --** Common terms govern and all different terms are knocked out. Knocked out terms are replaced by UCC gap fillers, course of performance, course of dealing, and trade usage. **Klocek v. Gateway (2000)** Klocek ordered a computer, received it with standard terms. Terms stated that had 5 days to object to terms by returning computer. Included arbitration clause. UCC 2-207 controls even if there is only one form used after an oral contract was formed. UCC 2-207 (1) and (2) apply where an oral contract is followed by one or both of the parties sending formal memoranda embodying the terms fo far agreed and adding terms not discussed.