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Contracts Outline| Priscilla Shelby Bullitt

Contract Law general areas


1.
Contract formation
2.
Contract defenses
3.
Contract meaning
4.
Contract performance and breach
5.
Contract remedies
I.
I.
II.

III.

IV.

V.

INTRO TO CONTRACTS, HISTORY POLICY AND SOURCES


2 requirements for contract
1.
Voluntary exchange
2.
Enforcement
What happens when we lack adequate enforcement?
1.
One of two scenarios, either you become extremely cautious
about only doing business with those you know
2.
Or black markets and other methods of exchange occur ( when
you can't count on the law to back you, you resort to threats and
violence to enforce your contract)
Sources of law
1.
Common law
Uniform Commercial Code
a)
UCC 1-103(b)
b)
Article 2 applies to the sale of goods
UCC 2-105(1) - def of goods
"Goods" means 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 is to be paid, investment
securities [] and things in action. "Goods" also includes
the unborn young of animals and growing crops
[remainder omitted]
Restatement (2nd) of Contracts
c)
Courts are not bound to follow the restatement, it is not
binding
Hypothetical scenarios for determining whether common law or UCC governs
1.
Hypothetical- is a purchase of an airline ticket governed by
common law (services and immovable objects) or UCC (moveable
goods) ?
a)
A ticket is a tangible moveable object, but it is really a
contract for a service, therefore is governed by common law
2.
Hypothetical - is a contract to build an apartment b/w a landlord
and a contractor under common law or UCC?
a)
The building is an immoveable object, so common law
3.
Hypothetical - is a contract for sale of 1 billion dollars of car
manufacturing equipment under common law or UCC?
a)
Although the equipment may be fixed at the factory,
during the transaction it is movable and transferrable
Hybrid Transactions
1.
Predominating purpose test
a)
What was the predominate purpose if the transaction
2.
Gravamen test
1

Contracts Outline| Priscilla Shelby Bullitt

VI.

II.

a)
Does the controversy relate to the goods component of to
the services/other component
The primary contract law policies
1.
Predictability
2.
Freedom of Contract
3.
Fairness
4.
Consistency
5.
Efficiency

MUTUAL ASSENT
Restatement (2nd) of contracts 17(1)
Except as stated in subsection (2), the formation of a contract requires
a bargain on which there is a manifestation of mutual assent to
the exchange and a consideration
I. Meeting of the minds is required for a contract, however in Lucy v. Zehmer
the court moved away from meeting of the minds to a more objective
standard of whether a reasonable person would belief from the persons
actions that they were serious
1.
Under the objective theory the rule is first persons
words/actions, judged by a reasonable standard, must manifest an
intention to agree to the deal. This is in contrast with the subjective
standard where meeting of the minds is required
2.
Second person must not know first person did not intend to
agree to the deal

II. Contract Formation & Mutual Assent


1.
Prong 1
First persons words/acts, judged by a reasonable standard, must
manifest an intention to agree to the deal, and either
2.
Prong 2A
First person intends to agree to the deal, or
3.
Prong 2B
First person does not intend to agree to the deal, but second
person believes first person intends to agree to the deal.
III. Take away points for mutual assent
1.
Mutual assent- the objective and subjective prongs
2.
Policies supporting the mutual assent framework
3.
How applied in different factual frameworks
4.
Preliminary negotiations v. mutual assent
5.
Presumption in social/familial settings
III.

OFFER
Offer and acceptance are not required to form a contract, it is just one way to
form mutual assent.
Restatement (2nd) of Contracts 24
An offer is a 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.
Restatement (2nd) of Contracts 26

Contracts Outline| Priscilla Shelby Bullitt


A manifestation of willingness to enter into a bargain is not an offer if
the person to whom it is not addressed knows or has reason to know
that the person making it does not intend to conclude a bargain until
he has made a further manifestation of assent
1.

Maryland Supreme v. Blake


a)
Price quotes are generally not offers, but the attendant
circumstances can change this.
2.
Sateriale v. R.J. Reynolds Tobacco Company
a)
Can an advertisement constitute a binding offer?
UCC 2-204
(1) A contract for sale of goods may be made in any manner sufficient
to show agreement, including conduct by both parties which
recognizes the existence of such a contract.
(2) An agreement sufficient to constitute a contract for sale may be
found even though the moment of its making is undetermined.
(3) Even though one or more terms are left open a contract for sale
does not fail for indefiniteness if the parties have intended to make a
contract and there is a reasonably certain basis for giving an
appropriate remedy.
UCC 1-201(3) def. of agreement
Agreement, as distinguished from contract, means the bargain of
the parties in fact, as found in their language or inferred from other
circumstances, including course of performance, course of dealing, or
usage of trade as provided in Section 1-303.
Restatement (2nd) 26
A manifestation of willingness to enter into a bargain is not an offer if
the person to whom it is addressed knows or has reason to know that
the person making it does not intend to conclude a bargain until he has
made a further manifestation of assent.
II. Take away points on offers
1.
Offer and acceptance v mutual assent
2.
What an offer is and isnt, and relationship to modern theory of
contract formation
3.
Price quotes and ads generally arent offers
4.
Why price quotes and ads generally arent offers
5.
Exceptions to these general rules
6.
Role of industry standards/practices (esp. UCC) and UCCs
approach (reflecting business practices)
III. DESTROYING THE OFFER
Restatement (2nd) 24
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.
Restatement (2nd) 36
a)
2.
REVOCATION
a)
Direct
b)
Indirect
3

Contracts Outline| Priscilla Shelby Bullitt


Restatement (2nd) 42
a)
2.
Dickinson v. Dodds
a)
Could Dodds revoke his offer before the agreed time of
Friday, June 12th?
(1)
Yes, he could revoke the offer, it was a nudum
pactum (naked offer), just a promise with no
consideration and therefore not enforceable
b)
If so, did Dodds revoke the offer successfully and in time?
(1)
Yes, he did.
Restatement (2nd) 43
a)
Copy from powerpoint, emphasis on reliable
3.
In Dickinson v. Dodds if Berry was not a reliable source,
Dickinson may have had reason not to believe the deal with Allan was
going forward, and the revocation may not have been valid
4.
Take away points
a)
Methods of termination
b)
Effects of rejection and counteroffers
c)
Direct and indirect revocation def
d)
How indirect revocation is ineffective
e)
Risks of indirect revocation
f)
Offers to hold offer open need consideration naked
promises are not enforceable
g)
How to revoke public ad offers
5.
LAPSE
Restatement (2nd) 36
(1)
An offerees power of acceptance may be
terminated by
(a)
Rejection or counter offer by the offeree, or
(b)
Lapse of time, or
(c)
Revocation by the offeror, or
(d)
Death or incapacity of the offeror or offeree
b)
Minnesota Linseed Oil Co. v. Collier White Lead Co
(1)
Two issues
(a)
Withdrawal
(b)
Lapse
(2)
Excellent example of lapse of time as well as
circumstances existing such as a volatile market in which
an immediate acceptance is required
Restatement (2nd) 41 lapse of time
1)
An offerees power of acceptance is terminated at the
time specified in the offer, or, if no time is specified, at the end
of a reasonable time.
2)
What is a reasonable time is a question of fact, depending
on all the circumstances existing when the offer and attempted
acceptance are made
Take away points on lapse
(1)
If time for lapse is stated in the offer, then open until then (unless terminated
earlier)

Contracts Outline| Priscilla Shelby Bullitt


(2)
If no time stated, offer stays open for reasonable time (determined by the
circumstance)
(3)
Face to face offer generally terminates once face to face meeting ends
(4)
Draft to avoid ambiguities in language
2.
DEATH OR INCAPACITY OF THE OFFEROR OR OFFEREE
Restatement (2nd) 48
an offerees power of acceptance is terminated when the
offeree or offeror dies or is
Restatement (2nd) 37
Notwithstanding 38-49, the power of acceptance under
an option contract is not terminated by rejection or
counter-offer, by revocation, by death or incapacity of the
offeror, unless the
a)
Takeaway points on death of offeror or offeree
(1)
Death of offeror/offeree terminates power to accept (unless reserved)
II. PRESERVING THE OFFER
Restatement (2nd) 25 definition of an option
An option contract is a promise which meets the requirements
for the formation of a contract and limits the
Restatement (2nd) 87 whether option is valid w/o consideration
UCC 2-205 Firm offers
an offer by a merchant to buy or sell goods in a signed writing
which by its terms gives assurance that it 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 in no event
may such period of irrevocability exceed three months; but
such term of assurance on a
UCC 2-104 (1) definition of merchant

II.

1.
Beall v. Beall
2.
Board of Control of EMU v. Burgess
MODES AND METHODS OF ACCEPTANCE
1.
LaSalle National Bank v. Vega
The offer itself governs the means of acceptance
2.
Ever-tite Roofing v. Green
Notice of acceptance is required, however the terms of this
contract waived the notice requirement. Therefore this explains
how they allowed the contract to commence when work begins.
Why do we say that commencement begins with loading the
trucks and not when the actual work on the roof begins? Well
because loading the trucks and driving over does involve
resources.
Additionally, the Greens had all the contact information for
evertite, and easily could have contacted them to say the offer
was rejected.
When the offer specifies a specific manner or manners of
acceptance, the offeree must comply with the terms if he wants
to accept the offer, otherwise a contract is not formed.
3.
Davis v. Jacoby
a)
Unilateral contract- accept by doing the thing asked for
b)
Bilateral contract- accept by promising to perform
5

Contracts Outline| Priscilla Shelby Bullitt


Restatement (2nd) 30
(1) An offer may invite or require acceptance to be made by an affirmative
answer in words, or by performing or 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.
Restatement (2nd) 32
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.
UCC 2-206 Offer and Acceptance in Formation of Contract.
(1) Unless otherwise unambiguously indicated by the language or
circumstances
(a) an offer to make a contract shall be construed as inviting acceptance in
any manner and by any medium reasonable in the circumstances;
(b) an order or other offer to buy goods for prompt or current shipment shall
be construed as inviting acceptance either by a prompt promise to ship or by
the prompt or current shipment of conforming or non-conforming goods, but
such a shipment of non-conforming goods does not constitute an acceptance
if the seller seasonably notifies the buyer that the shipment is offered only as
an accommodation to the buyer.
(2) Where the beginning of a requested performance is a reasonable mode of
acceptance an offeror who is not notified of acceptance within a reasonable
time may treat the offer as having lapsed before acceptance.
Restatement (2nd) 50
(1)
Acceptance of an offer is a manifestation of assent to the terms thereof
made by the offeree in a manner invited or required by the offer.
Restatement (2nd) 42
Restatement (2nd) 56
Mailbox rule: common law creation describes in section 63 of the restatement
i. Acceptance is valid when sent, revocation is valid when received
ii. But mailbox rule is not important is options contracts
Restatement (2nd) 63
II. INDEFINITENESS
CONSIDERATION
I. CONSIDERATION AS AN ELEMENT OF A CONTRACTUAL OBLIGATION
II. EXCHANGE OF PROMISES AND ILLUSORY PROMISES
III. CONTRACT MODIFICATION AND CONSIDERATION
IV. PAST CONSIDERATION AND MORAL OBLIGATION
Exceptions to past consideration rule

III.

V. SUBSTITUTES FOR CONSIDERATION


POLICING THE BARGAIN
I. STATUTE OF FRAUDS
II. UNCONSCIONABILITY
III. MISTAKE
V.
CONTRACT INTERPRETATION
IV.

Contracts Outline| Priscilla Shelby Bullitt


I.
II.
III.
VI.
I.
II.
III.
IV.
VII.
I.
II.
III.
IV.

THE PAROL EVIDENCE RULE


AMBIGUOUS TERMS
IMPLIED TERMS
PERFORMANCE AND BREACH
CONDITIONS
UNFORSEEN EVENTS
ANTICIPATORY REPUDIATION
MATERIAL BREACH, PERFECT TENDER, & RIGHT TO CURE
REMEDIES
EQUITABLE RELIEF
LIQUIDATED DAMAGES
MONEY DAMAGES: EXPECTATION MEASURES
RESTRICTIONS ON DAMAGES: MITIGATION, FORESEEABILITY, &
CERTAINTY
V. THE RELIANCE MEASURE OF DAMAGES
VI. THE RESTITUTION MEASURE OF DAMAGES
VII. MONEY DAMAGES: THE UCC APPROACH