Contracts Outline PDF

***Purpose of Contract Law*** - Promise- commitment to do, or not to do something - Fairness - Predictability& Security - Commercial Reasonableness - Freedom of Contract Sources of Contract Law - Statutory Law - Uniform Commercial Code (UCC) - Other statutory law...

***Purpose of Contract Law*** - Promise- commitment to do, or not to do something - Fairness - Predictability& Security - Commercial Reasonableness - Freedom of Contract Sources of Contract Law - Statutory Law - Uniform Commercial Code (UCC) - Other statutory law - Ex: statute of Frauds - Common Law - Judicial opinions - restatements ***Choosing the Right Law, UCC v. Common Law***  - - - - Does not include money, securities, property, services - Includes specially manufactured goods - - - This includes all that the UCC does not -   ***Predominant Factor Test***  *For determining Choice of Law on Hybrid Contracts* Rule: For hybrid contracts, courts use the predominant factor rule, determining whether goods or services were the predominant factor in the contract and applying the corresponding law to all issues  - a. b. c. d. e. Application: Language - How did the contract describe the transaction - \"165 yds Masterpiece \#2122-Installed very specific and vague on services, suggests good were primary (*Pittsley v. Houser*)  - \"services to be performed\", referred to seller as contractor - (*Farmer v. Drill*)  Primary Reason  - Was the buyer seeking goods or services? - Pittsley entered the contract for the purpose of obtaining "carpet off certain quality and color   - (*Pittsley v. Houser)* Relative Cost of Goods & Services  - Which cost more? The good or the service - The contract price was \$4,319 and installation was \$700 - (*Pittsley v. Houser)* Primary Nature of the sellers Business - Does the seller specialize in a certain service   ***Consideration***  Key element for the Formation of a Contract *Rule:* A contract requires consideration. Consideration requires a bargain, which is when each person seeks the other person\'s promise or performance in exchange for their own promise or performance   Application:   - Benefit Detriment Test - The promise must either give a benefit or suffer a detriment in exchange for the promise - Not required, but can be helpful in showing what the promise is giving up or trying to exchange - *Ex: Hammer v. Sidway* - Uncle promised his nephew \$5,00 if he would stop drinking and smoking, it counts as consideration because he gave up his legal right to do something - Bargained-for-exchanged - the promisor (making the promises )and the promise (giving the consideration in return) must be reciprocally motivated (induced) by what the other party is giving  - Ex:   \* **Things that COUNT as consideration***  *Forbearance from a legal righ*t  - - Doubtful Claim - Uncertainty of facts, could be valid but also could be invalid - Unfounded but made in good faith - Unfounded means that it is an invalid claim and certain to fail - Good Faith - **Goof faith standard**: promisor believes that it is "just" to bring a claim and it is not to make the claim to vex or harass the other party - This allows forbearance to assert a claim that is Unfounded (invalid) to count - But: if the claim is unfounded, it is less likely the party asserted in good faith - *Dyer v. National By-Products* ***Things that do NOT count as consideration**:*  ***Gift** **promise***  - Gifts do not count because there is no exchange or bargain, therefore there is no enforceable contract - ***False Recital*** or Nominal Consideration - - - - No, the \$1 was a false recital ***Past benefits/ Moral Obligations*** - Do not count as consideration because they are not sought by the promisor in exchange for their promise - Because they occurred in the past - Ex: Appeal of Clark - Charles and his wife are suing Mr. Clark's estate. They helped take care of Mr. Clark after he had a stroke. Mr. Clark recognized and appreciated their kindness and promise to pay them \$700. There would be no consideration because the exchange was for past services, not future services. The promise of the money was a moral obligation. ***Adequacy of Consideration*** - The court will not assess whether the value of the things exchanged in a bargain are equivalent  **Special Rules**   ***Conditional Donative (Gift) Promise vs. Bargain***  - Donative Promise- Unenforceable - Baragin-enforceable - Gift promises are not worth enforcing - - - - Ensure that the promise was made deliberately - Donative Promise Test - - - If you walk to the store, I will buy you a coat - The walk to the store is merely a condition in order to receive the gift - - They signed a liability release an agreement to maintain the pump that the city lent them, this was a conditional gift because the city did not benefit anything from this ***Illusory promises***  - - - - Something that appears to be a promise, but does not actually bind or obligate the promisor to anything. - No promises exist if the promise or retains an unlimited right to decide later that the nature or extent of his performance - Consider the statement in the context in which the alleged promised was made - **Example**: Airline entered a requirements contract with Jet Fuel Co., under which Airline agreed to purchase all of the fuel it needed from Jet Fuel, and Jet Fuel agreed to supply Airline with all of the fuel it requested, for a specified price over a two-year period  - Spotting the issue: - Look for a contract that gives one party right to choose any amount to buy or sell and to terminate at any time. - Unfettered right to: - Termination clause that give someone the right to terminate at any time they want - Promise to buy or sell that does not actually promise to do anything. - - *PickKwick v. Tensor*   ***Pre- Existing Duty Rule***  \"performance of a **legal duty** owed to a promisor which is neither doubtful nor the subject of** honest dispute** is not consideration; but a similar performance is consideration if it **differs** from what was required by the duty in a way which reflects more than a pretense of a bargain  - - Hypo: Rianna Rich\'s \$200,00 necklace was stolen. Oscar Officer is the detective assigned to the case. Rich agrees to pay Officer a bonus of \$5000 if he recovers the stolen necklace. The officer does recover the necklace, but Rich refuses to pay. Is there consideration?  - Is there consideration?   - Police detective is already obligated to solve crimes  - Against public policy- We don't want public officials to be influences by tips when deciding what to investigate  - Use the pre-existing duty rule  - ***Contract Modifications***  - A)occur before the contract has been fully preformed on either side  B\) is fair and equitable   - - - C\) is prompted by  circumstances not anticipated when the contract was made  - ***Promissory Estoppel*** **Issue:** first determine whether there was consideration; if there was not, then consider one alternative applies. Allow promises without consideration to be enforced **Rule**: For promissory estoppel, five elements must be met: (1) clear and defeinit promise, (2) promise induced the promise to actually rely, (3) Promisee's reliance was reasonable, (4) promisor had reason to expect this reliance, and (5) injustice can be avoided if the promise is enforced Example: *Conrad, v. Fields*  - - - - - - Holding- Court agreed under promissory estoppel, Conrad entitled to \$87,314. ***Promissory Restitution*** Alternatice basis to enforce a promise that has no consideration. There are two different ways to get promissory resititution 1). Based on a past unenforceable contract and 2). Based on moral obligation plus (R2 § 86). Option 1: Past Contract - 1. 2. a. b. c. 3. - Option 2: Moral Obligation Plus  - 1. 2. 3. - - 4. - -   A closer look at requirement 3: \"necessary to prevent injustice\"  - - - - - - Examples:  Don Detailer owns a car detailing business.  He arrives at the Law School's parking lot in his van, which is marked with the company logo.  He notices that your car is a mess, and he takes it upon himself to clean it for you.  He did an excellent job, and he now seeks payment of \$100 (which is a reasonable rate for the services he performed).  Assume instead that you were not there when Detailer arrived and did the work, but afterwards, you promised to pay Detailer \$100 for the work he did.  If you later change your mind and refuse to pay, is Detailer entitled to recover \$100 from you?  ***Nonpromissory Restitution*** Use only as a last resort when there is NOT an enforceable contract or promise   1. - - 2.   Requirements for Non-Promissory Restitution: Emergency Care  - 1. 2. - 3. 4. 5. Requirements for Non-Promissory Restitution: General  - 1. 2. - - -   Expectation of Payment  - 1. - - 2. 3. - - Example: assume instead that you were not there when Detailer arrived and did the work, and you never promised to pay for it.  Should Detailer be entitled to recover \$100 from you?  Indefiniteness Rule: to be enforceable, a contract must be sufficiently definite so that a court can determine that: 1. - 2. - Example: Academy Chicago Publishers v. Cheever - - - - - - -   **How Definite Must the Terms be?**  R2 § 33: the terms of the proposed contract must be reasonably certain so that the court can determine whether the contract has been breached and give an appropriate remedy     Gappfillers The courts are willing to fill in gaps under objective standards  Courts are not willing to fill in gaps under subjective standards  ***Offer and Acceptance*** The Restatement (Second) contains a typical definition:    - **Objective Test**  - - - - - - - - - - **Invitation to a buyer to make an offer, not and offer to sell **  **Advertisements**  Traditionally ads are not considered offers, then are considered an invitation  - - - - - - - - - Example:  After seeing the "Pepsi Stuff" commercial, John Leonard set out to collect the 7,000,000 Pepsi Points necessary to obtain a Harrier Jet.  (A Harrier Jet cost about \$23,000,000.)  Pepsi Points could be amassed by buying Pepsi or purchasing points for 10 cents each.  Realizing that he could not drink that much Pepsi, Leonard instead sent Pepsi a check for \$700,000 to buy 7,000,000 Pepsi Points, and he requested the Harrier Jet.  Pepsi, however, returned his check with a letter explaining that the Harrier Jet was not part of the Pepsi Stuff collection.  Leonard sued, claiming that Pepsi's commercial constituted an offer, which he had accepted by submitting the proper number of Pepsi Points.  You are representing Pepsi.  Please work in your law firms to develop Pepsi's argument that its commercial did [not] constitute an offer to sell the Harrier Jet for 7,000,000 Pepsi Points.  The commercial omits essential terms for a contract. The commercial doesn\'t include specific terms of a contract, it is not definite. Too good to be true, \$23,000,000 for jet but only gave 700,0000. Private citizen cannot own a military jet. Promotional commercial, meant to be funny. No words of limitations, giving away countless jets ***Method and Manner of Acceptance*** - - - - - Bilateral Contract- Mutual exchange of promises - If an offeror makes an offer for a bilaterial contact, then, at the moment the promises are exchanged, the contract is created an both parties are bound  Unilateral Contract- only one party makes a promise - If an offeror makes an offer for a unilateral contract, the offer is not accepted until the performance is complete, then the offeror is not bound until that moment and would therefore be free to withdraw the offer  R2 §§ 32 and 62  If an offer is silent, vague, or ambiguous with respect to whether performance alone is permitted as a manner of acceptance, the offer will be understood as proposing a bilateral contract.  The offeree may alternatively except through contact that may reasonably be understood as signaling and agreement, in the beginning of performance is understood to be such a signal  Once the offeree begins performance both parties are bound   - Preparation does not count as performance  **R2 § 32: Invitation of Promise or Performance:**  - In case of doubt an offer is interpreted as inviting the offeree to accept either by promising to perform what the offer requests or by rendering the performance, as the offeree chooses.  **R2 § 62: Effect of Performance by Offeree Where Offer Invites Either Performance or Promise**  - \(1) Where an offer invites an offeree to choose between acceptance by promise and acceptance by performance, the tender or beginning of the invited performance or a tender of a beginning of it is an acceptance by performance.  - \(2) Such an acceptance operates as a promise to render complete performance Silence as Acceptance: R2 § 69  - - 1. 2. 3. 4. Example: You subscribe to a basic cable package.  All of a sudden, you started receiving free HBO, which is a premium channel not covered by your package.  Happy to have it, you started watching Succession.  When your cable company figured out its mistake, it billed you for the additional cost.  Must you pay for the months you watched HBO?  Probably, yes there is a contract, but it is unfair  R2 § 69 (1) (a); you used it knowing the cable company expected compensation  Statutes sometimes override common law rules. (example; federal statute overrides R2§ 69 (1)(a) for unordered merchandise sent through the USPS)  ***Acceptance of Online Agreements*** Test for Assent to Online Agreement  - 1. Categories of online contracting  - - Example: Meyer v. Uber Technologies **The Mirror Image Rule**  - - - - - - Acceptance  - - - - - - - Common Law  - 1. - 2. - 3. - -   ***Ways to Terminate Power of Acceptance*** - - - -   Lapse  - - - - - - - Death or Incapacity of the Offeror or Offeree  - - - Rejection  - - - - - Counter-Offer  - - - - Revocation  - - - - - - -   Four Ways to Block Revocation  Offeree can block an attempted revocation by showing that:  1. 2. - Based on consideration; or  - R2 § 45: beginning performance of unilateral contract  3. 4. -   Limits on Power to Revoke: Option Contract  - - - - Ways to Establish an Option Contract  - 1. 2.   Option Contract: Consideration  - - - - - Option Contract: R2 § 45  Issue Spotting- look for unilateral contract and completion of performance  - 1. 2. - - - - - - - - - - UCC Firm Offers UCC § 2-205 is an important rule that makes some firm offers irrevocable for a time even though they are not option contracts 1.     There must be a **offer;**  2.     The offer must be to buy or sell **goods**;  3.     The offeror** **must be a ** merchant**;  4.     The offer must be made in a **signed writing**;  (Note: if the offeree supplies the form, the offeror must initial the firm offer term)  5.     The offer must give **explicit assurance** ** **that it will be **held open **  6.     Duration  **a.**     The offer is irrevocable for the **amount of time expressed or** if none, a **reasonable  time**  b.     Max time: **3 months**  Time of Acceptance - - - - - - - - Mailbox Rule:  - - - - - - Battle of the Forms Rejection of the Mirror Image Rule: UCC § 2-207 Dtermining whether a contract was created by the exchange of the forms - Definite seasonable expression of acceptance - Blocking acceptance with a conditional on aassent clause -