alternative conract formation

Question 1

intention to be legally bound

Answer 1

• The concept of intention to create legal relations can potentially be applied in two ways:
o The presence of a manifested intention to be legally bound can justify the enforcement of commitment that lack either bargained-for consideration or detrimental reliance
o The absence of manifestation to not be legally bound might prevent the enforcement of even bargained-for commitments or those that have induced reliance

Question 2

commitments should be enforcenced

Answer 2

• Persons’ commitments should be enforced when they have manifested their intention to be legally bound.
• Consideration serves as an evidenciary function: shows intent to the bound to the agreement; intent to be bound to legal action

Question 3

21. Intention to be Legally Bound

Answer 3

“Neither real nor apparent intention that a promise be legally binding is essential to the formation of a contract, but a manifestation of intention that a promise shall not affect legal relations may prevent the formation of a contract. “

•

Question 4

The case in which a contract is denied on the ground that there is no intention to involve legal liability may be divided into two classes: commercial

Answer 4

o Commercial agreement: intention is presumed and must be rebutted by the party seeking to deny it.

Question 5

The case in which a contract is denied on the ground that there is no intention to involve legal liability may be divided into two classes: social family domestic agreements

Answer 5

o Social, family or other domestic agreements: the presence or absence of an intention to create legal relations depends upon the inference to be drawn by the court from the language used by the parties and the circumstances in which they use it. -> where formality plays great role

Question 6

intentions and reasonable standard

Answer 6

IF a reasonable person would assume there is no intention to be bound, there is no contract. F the parties expressly declare or indicate their rejection of contractual obligations, the law accepts and implements their intention. Mere social engagements, if accompanied by the requiste technicalities, such as consideration, may be enforced as contracts.

Question 7

policy of formality

Answer 7

• evidentiary function – compliance with formalities provides reliable evidence that an agreement exist
• cautionary function – going through the trouble of a formality makes you more cautious -> serious act of volition
• channeling function – once courts recognize a particular formality as basis for finding an enforceable contract, then parties will choose that particular formality when they want their agreement to be enforceable.
o Clarification- party, when make their contract in writing, they are more likely to work out details not contained in their oral agreement
o Regulatory and fiscal end – to educate the parties their obligations, to provide public notice of the agreement, and manage efficiency in an organizational setting.

Question 8

Seals

Answer 8

o RS 95: A promise is binding without consideration if it is in writing and sealed (and if the document containing the promise is delivered and names the parties for identification)
o The affixing of a seal to a writing evidencing a contract for sale or an offer to buy or sell goods does not constitute the writing a sealed instrument and the law with respect to sealed instruments does not apply to such a contract or offer
o UCC has abolished seal as valid consideration, but can still be used to show intent as a formality in limited situations

Question 9

Nominal Consideration

Answer 9

• Comment d to Restatement (Second) § 79: Disparity in value, with or without other circumstances, sometimes indicates that the purported consideration was not in fact bargained for but was a mere formality or pretense. Such a sham or “nominal” consideration does not satisfy the requirement of §71.

Question 10

when nominal consideration does and doesn’t work

Answer 10

• Nominal considerations are binding with respect to options contracts, § 87, but are not recognized in attempts to make gifts enforceable, §71, p729.

Question 11

Schnell v. Nell (693)

Answer 11

• The one penny payment cannot be consideration for the agreement since it’s obviously a “sham” exchange and not a viable amount for a $200 contract, nor is the defendant bound by his love and devotion
• So intent to be bound isn’t shown when exchanging fixed values like money and obviously not even close in value
• Also - love and devotion is moral consideration with no pre-existing legal obligation

Question 12

Exception to nominal consideration:
Option Contract
87

Answer 12

• Exception: Option Contract: I offer to give you a dollar if you promise to leave the contract open for a week. Courts are likely to enforce that because in this case of nominal consideration, consideration has cautionary and evidentiary function, so they give them more time to for consideration. The dollar is not a gross disparity of value here.

(1) An offer is binding as an option contract if it
(a) Is in writing and signed by the offeror, recites a purported consideration for the making of the offer, and proposes an exchange on fair terms within a reasonable time.Aka. is in writing and is signed; recites the purported consideration, and proposes an exchange on fair terms within a reasonable time;

Question 13

Recitals

88

Answer 13

RS 88 – performance of a contractual obligation is binding if the promise is in writing and signed by the promisor and recites purported consideration (formality requirement)

Question 14

Smith v Wheeler

Dollar in option contract is cosid

Answer 14

The recital of the one dollar consideration gives rise to an implied promise to pay which can be enforceable to other party. Recital is evidence that consideration given in an option contract. Because the agreement makes the $1 payment a detrimental obligation to pay, this is sufficient consideration (as a formal recital put into writing) on the part of the P, and the case should have gone to trial for fact-finding on the promise. (Obligation/promise to pay is consideration)

Question 15

Written Intention to be legally bound

Answer 15

When a statute provides in effect that a written contract or instrument is binding without consideration…, in order to be subject to the statues a promise must either

(a) be expressed in a document signed or otherwise assented to by the promisor and delivered
(b) be expressed in a writing or writings to which both promisor and promisee manifest assent

Question 16

Thomas v. First

Answer 16

Held that under the Uniform Written Obligation Act, the release on the form was valid and enforceable because there was an expression of intention of being legally bound which plaintiff signed and assent to it.

Question 17

Kay v. Kay

Answer 17

The court held that the agreement was enforceable because although the agreement is not supported by consideration, there was an expressed clause stating that the appellant (husband) intended to be legally bound by the agreement. The Uniform Written Obligation makes the agreement enforceable in presence of such statement.

Question 18

Lack of Intention to be Legally Bound

Answer 18

• If a party explicitly says that it does or does not want to be bound to a contract, that explicit intention should be recognized and the contract should be enforced as the expression demands
• Policy: Individual autonomy – if people want to be bound to an agreement, the courts should let them be bound, and vice versa.

Question 19

Ferrera v. Nielsen (714) (Not an implied contract)

Answer 19

• Claim can be denied if “the employer has clearly and conspicuously disclaimed intent to enter a contract limiting the right to discharge employees”
• Disclaimer has manifested an intent to NOT be legally bound, a lack of intent to be legally bound = no substitute for consideration, so no contract
• Because the disclaimer explicitly says “handbook is not a contract…” and was placed clearly and conspicuously at the beginning on the handbook, the employee had no reason to understand the handbook as a manifestation of the employer’s intent to be bound or committed to a contract and

Question 20

Eiland v. Wolf

Disclaimers

Answer 20

• Catalog said “subject to change” and reserved privilege for medical school to withhold awarding of a degree to anyone deemed unfit (scholastically or personally)
• These explicit disclaimers and the reservation to withhold the degree show a lack of intent to be bound and prevent the catalog from being a binding contract

Question 21

Evenson v. CO

Employee hand

Answer 21

• The employee handbook may have presented a disclaimer but personnel and human resources supervisors believed that the handbook was binding and acted under this belief, so reasonable that an employee would view this position as intent to be bound to the handbook as a contract.