Contract Formation

Question 1

Corenswet v. Amana Refrigeration 5th Cir. 1979, 364

Answer 1

Defenses, Limits on Enforceability, Unconscionability, Public Policy

Key Facts
π and ∆ had distributor agreement of “indefinite duration” terminable with 10 days notice. After 7 years ∆ gave notice because wanted to switch distributors. Π sued saying termination was “arbitrary and capricious.”
Holding /Takeaway
Ct. Appeals reversed injunction. Reasonable notice is required [in Iowa, not rule everywhere] but where the contract specifies that contract can be terminated for “any reason” there is no good faith requirement.
Dissent/Critique

Question 2

Vohs v. Donovan WI 2009, 373

Answer 2

Certainty Doctrine

Key Facts
Donovan’s promised to buy Vohs’s house. Contract stipulated sale would go through if the Vohses “obtained the home of their choice before Feb. 20.” Vohses got a new house in time but Donovans didn’t buy the old one. Π’s sued for $50,000 for breach of contract. ∆’s argued that the contract was indefinite and illusory.

Holding /Takeaway
Indefinite means that there is no objective way of knowing if the contract is met. Πs knew that ∆s had made a counteroffer on a home due to be accepted on Feb. 19. That makes contract definite. Illusory means that one party’s performance is based entirely on events within their own control. This is not true either because if the counteroffer was accepted they were bound to buy the house.

Dissent/Critique

Question 3

Raffles v. Wichelhaus, England, 1864, p. 294Raffles v. Wichelhaus, England, 1864, p. 294

Answer 3

ambiguity, vague promises

Key Facts
Peerless – defendant thought agreement was to ship on the october peerless, plaintiff thought agreement was about december peerless. Neither party had reason to know about other’s understanding.
Holding /Takeaway
no consensus, contract not enforcable. Fatally ambiguous
Dissent/Critique

Question 4

Flower City Painting v. Gumina Constr., 2d Cir. 1979, p. 295 Flower City Painting v. Gumina Constr., 2d Cir. 1979, p. 295

Answer 4

ambiguity, vague promises

Key Facts
sub contractor thought required to only paint interior walls, contractor thought interior and exterior walls.
Holding /Takeaway
no contract existed. both readings of the contract possible and plausible, and neither party had reason to know that other party held different view
Dissent/Critique
court avoiding restitution issue

Question 5

Dickey v. Hurd, 1st Cir. 1929, p. 297Dickey v. Hurd, 1st Cir. 1929, p. 297

Answer 5

ambiguity, vague promises

Key Facts
plaintiff thought only an answer was required by date to accept contract, defendant thought full payment required. Defendant found out P thought only answer. D contended acceptance ineffective.
Holding /Takeaway
If offer is ambiguous, but one party learns of other’s interpretation party has a duty to clarify
Dissent/Critique

Question 6

Embry v. Hargadine McKittrick Dry Goods Co., Missouri 1907, p. 300Embry v. Hargadine McKittrick Dry Goods Co., Missouri 1907, p. 300

Answer 6

ambiguity, vague promises

Key Facts
renewal of plaintiff’s employment contract. Defendant did not intend internally to create contract, but objectively the conversation between them would be taken by reasonable person to be a valid contract of employment for the year
Holding /Takeaway
must look at what intention is manifest by the words/actions of the parties, not internal intention. Here conversation resulted in unambiguous contract (objective standard, how would reasonable person perceive promise)
Dissent/Critique

Question 7

New York Trust Co. v. Island Oil, 2d Cir 1929, p. 303New York Trust Co. v. Island Oil, 2d Cir 1929, p. 303

Answer 7

vague promises

Key Facts
apparent sales of oil and substantial balances due were shams. purpose to evade the law
Holding /Takeaway
though contracts depend on legal meaning not subjective intent of parties, no one in the setting they were used would believe contracts were not a joke/sham
Dissent/Critique

Question 8

Blinn v. Beatrice Comm. Hosp. and Health Center Inc., Nebraska 2006Blinn v. Beatrice Comm. Hosp. and Health Center Inc., Nebraska 2006

Answer 8

indefinite promises

Key Facts
oral representations made by employer to employee. Employee thought constituted offer for unilateral contract, employer did not.
Holding /Takeaway
oral representation must be reasonably definite. Here, not reasonably definite
Dissent/Critique
usually promissory estoppel could replace consideration here, does not require reasonable definiteness, just reasonable and foreseeable reliance. Nebraska doesnt allow though

Question 9

Empro Mfg. Co. v. Ball-Co Mfg. 7th Cir 1989 (p. 379)Empro Mfg. Co. v. Ball-Co Mfg. 7th Cir 1989 (p. 379)

Answer 9

Offers

Key Facts
Buyer submitted preliminary decision letter of intent to purchase, with purchase to occur after appraisals. Buyer backed out.
Holding /Takeaway
Letter was not an enforceable K. Letters of intent are only Ks when: 1) they constitute an agreement to memorialize, or 2) they constitute an agreement to agree.
Dissent/Critique

Question 10

Petterson v. Pattberg NY 1928 (p. 315)Petterson v. Pattberg NY 1928 (p. 315)

Answer 10

Offers

Key Facts
P was executor of third-party’s will (third-party owned real estate parcel). D was owner of bond executed by third-party, for which third-party took out third mortgage on real estate parcel. Some money remained unpaid and was owed in installments. D sent letter to third-party offering option to owe less if he paid before a certain date. The letter proposed making a unilateral K (in which third-party could accept promise by performance of act requested - paying off debt before deadline). Third-party died, but P paid off the debt before that deadline. D had sold mortgage to another creditor that did not keep D’s end of the deal.
Holding /Takeaway
Dismissed P’s complaint. Third-party had notice that D could not perform his offered promise once he was no longer the creditor. No contract was made because D withdrew beforehand. P had to have accepted D’s offer or performed before D withdrew.
Dissent/Critique
Offer was binding because P gave requested consideration.

Question 11

Cobaugh v. Klick-Lewis, Inc. PA 1989 (p. 326)Cobaugh v. Klick-Lewis, Inc. PA 1989 (p. 326)

Answer 11

Offers

Key Facts
P got hole-in-one at golf course on hole that advertised “HOLE-IN-ONE wins this [car]” on a sign posted on a car at that hole. P attempted to claim the car, but D refused because D had offered that car as a prize for the charity golf tournament it had held two days prior, and had not yet removed the car and sign.
Holding /Takeaway
P wins car. An offer is a “manifestation of willingness to enter into a bargain, so made as to justify anotehr person in understanding that his assent to that bargain is invited and will conclude it. […] It has generally been held that ‘the promoter of a prize-winning contest, by making public the conditions and rules of the contest, makes an offer, and if before the offer is withdrawn anothe rperson acts upon it, the promoter is bound to perform his promise.’” Acceptance of the offer is simply performance of teh act requested. It was reasonable for offeree to believe it was an offer, and there was consideration.
Dissent/Critique
Hole-in-one is luck, not skill. Therefore, it can’t be consideration.

Question 12

Moulton v. Kershaw WI 1884 (p. 313)Moulton v. Kershaw WI 1884 (p. 313)

Answer 12

Offers

Key Facts
P made “offer” of special salt. D accepted, and withdrew next day.
Holding /Takeaway
Not an offer, but more of an ask for money, because not the language a businessman would use in making an offer for a definite amount, just the language of an advertisement.
Dissent/Critique

Question 13

Davis v. Jacoby CA 1934 (p. 336)Davis v. Jacoby CA 1934 (p. 336)

Answer 13

Offers

Key Facts
P is Ws’ niece. BW got sick and RW asked P to come. P’s husband said P would visit in 2 weeks if Ws wanted. RW asked P’s husband to come help with business affairs in a letter, offering all of the inheritance to P as consideration. P unequivocally stated acceptance, arrived, and fully performed. BW died and Ps learned Ws’ will was incorrect and they would get nothing.
Holding /Takeaway
Specific performance granted. State favors bilateral Ks, which means Ws’ offer was accepted at point P verbally accepted, not at point P completed performance.
Dissent/Critique

Question 14

Jordan v. Dobbins MA 1877 (p. 341)Jordan v. Dobbins MA 1877 (p. 341)

Answer 14

Offers

Key Facts
P sold goods to M on credit, relying on D’s earlier written agreement to guarantee payment of any sums not paid by M. D died before sale and P had made advances in gredit not knowing D died. M failed to pay, so P sued D’s estate.
Holding /Takeaway
Judgment for D’s estate because there’s no consideration passed to D at time he executed writing to become M’s guarantee. Rule is that death/incapacity of offeror/offeree terminates power of acceptance.
Dissent/Critique

Question 15

Panhandle Eastern Pipe Line Co. v. Smitly WY 1981 (p. 335)Panhandle Eastern Pipe Line Co. v. Smitly WY 1981 (p. 335)

Answer 15

Offers

Key Facts
Offeror wanted no handwritten notes (alterations) on contract; offeree signed and doodled on it.
Holding /Takeaway
Offeree couldn’t get out of deal. The offeror is the master of the offer. Fairness demands that when there is a dispute concerning mode of acceptance, offer must clearly/definitely express exclusive mode. Must be no question that offeror would accept proscribed mode.
Dissent/Critique

Question 16

Thomason v. Bescher NC 1918 (p. 267)Thomason v. Bescher NC 1918 (p. 267)

Answer 16

Offers - Option Contracts

Key Facts
Ds were tenants in common of land and signed and executed a writing under seal promising in consderation of $1 paid by P to sell and convey to P a described tract of timber on land, provided that P demand a deed and tender payment by set deadline (OFFER). P notifed D that he would take timber and promised to pay the next week (ACCEPTANCE). Before P tendered the money, D notified him that the “option” the gave him was withdrawn (WITHDRAWAL).
Holding /Takeaway
Affirmed holding for P and ordered specific performance. Under seal, no consideration is required. Offer was binding and P accepted offer and was ready to comply.
Dissent/Critique

Offers - Option Contracts

Key Facts
Ds were tenants in common of land and signed and executed a writing under seal promising in consderation of $1 paid by P to sell and convey to P a described tract of timber on land, provided that P demand a deed and tender payment by set deadline (OFFER). P notifed D that he would take timber and promised to pay the next week (ACCEPTANCE). Before P tendered the money, D notified him that the “option” the gave him was withdrawn (WITHDRAWAL).
Holding /Takeaway
Affirmed holding for P and ordered specific performance. Under seal, no consideration is required. Offer was binding and P accepted offer and was ready to comply.
Dissent/Critique

Question 17

Marsh v. Lott CA 1908 (p. 270)

Answer 17

Offers - Option Contracts

Key Facts
D gave P option in writing to buy land for $100,000 ($30,000 down and rest over years). Writing acknowledged D’s receipt of $0.25 paid by P and provided that option would expire on a certain date, “with privilege of a 30-day extension.” On deadline, P notifed D in writing that he elected the 30-day extension. The next day, D revoked the option and took the property off the market. Before the end of the 30 days, P accepted the option in writing and tendered the down payment, and D refused it.
Holding /Takeaway
Trial Court erred in denying P specific performance. Price fixed for land was adequate, so D’s attempted revocation was ineffective.
Dissent/Critique

Question 18

Smith v. Wheeler GA 1974 (p. 270)

Answer 18

Offers - Option Contracts

Key Facts
Optioner contends that option K was unilateral in nature, and, because he withdrew his offer prior to tender and payment of one dollar as consideration, option is null and has no legal effect.
Holding /Takeaway
Option has a legal effect. T.C. erred in ruling failure of consideration.
Dissent/Critique

Question 19

James Baird Co. v. Gimbel Bros 2nd Cir 1933 (p. 272)

Answer 19

Offers - Option Contracts

Key Facts
D (general contractor) made offer for subcontractors, but then realized that he had underestimated the amount of linoleum he needed and notified them immediately. P (a subcontractor) got D’s initial offer and bid on it. Public authorities accepted P’s bid the same day D confirmed withdrawal of the origianl offer. P sought estoppel that D can’t revoke offer.
Holding /Takeaway
Affirmed judgment for D. P didn’t accept offer just by submitting bid. This is an offer pre-consideration, not a K.
Dissent/Critique

Question 20

Drennan v. Star Paving CA 1958 (p. 275)

Answer 20

Promissory Estoppel

Key Facts
D refused to perform certain paving work according to bid. P relied on D’s bid.
Holding /Takeaway
Affirmed judgment for P. Part performance as consideration or acting in reliance makes bid binding. D wanted P to rely on bid, which misled P as to cost of paving.
Dissent/Critique

Question 21

Hoffman v. Red Owl Stores WI 1965 (p. 286)

Answer 21

Promissory Estoppel

Key Facts
Ps owned and operated a bakery. P began discussions with D about opening a franchise store. P mentioned he only had $18,000 to work with and D assured him that would be enough. Relying on D’s assurances, P bought fixtures and infrastructure to open a store. P ran it and made business decisions under D’s advice, and D frequently advised P to invest more, until P had to borrow $13,000 from his father-in-law. P told D he could no longer go along with D’s proposal and terminated negotiations. P sued D for fraud.
Holding /Takeaway
Affirmed jury’s judgment for P and approved jury’s award of $2,000 damages for loss incurred by P in sale. An action for fraud cannot be predicated on an unfulfilled promise unless promisor intended not to perform; there is no evidence that D intended not to perform, but it would be unjust not to grant P some relief.
Dissent/Critique

Question 22

Morrison v. Thoelke FL 1963 (p. 304)

Answer 22

Acceptance - Mailbox Rule

Key Facts
Mailbox rule - Ps made offer to sell property. Ds executed K for sale and mailed to Ps. Ps executed K and mailed to Ds’ attorney. After mailing K but before Ds received it, Ps called Ds’ attorney to cancel and repudiate execution and K.
Holding /Takeaway
Acceptance is effective upon mailing, not receipt, therefore repudiation was invalid. Summary decrees for Ps is reversed.
Dissent/Critique

Question 23

Trinity Homes v. Fang VA 2003 (p. 310)

Answer 23

Acceptance

Key Facts
Fax case - S faxed agreement to N and then ran an errand; S’s fax machine was old and did not provide verification. No phone record to prove transmission happened. N called S to cancel offer, not knowing S had attempted to fax acceptance.
Holding /Takeaway
Mailbox rule only works for delayed transmission. Burden was on S to prove transmission occurred, and S failed to meet burden.
Dissent/Critique

Question 24

Hobbs v. Massasoit Whip Co MA 1893 (p. 490)

Answer 24

Acceptance

Key Facts
P sent eel skins to D and D kept them and then destroyed them. D claimed he never accepted them.
Holding /Takeaway
Silence can create acceptance, regardless of party’s state of mind, when prior course of dealing creates duty to speak. D did not need to accept skins verbally for there to be acceptance given previous relationship.
Dissent/Critique

Question 25

Austin v. Burge MO 1911 (p. 493)

Answer 25

Acceptance

Key Facts
D’s FIL paid for 2-year subscription to P’s newspaper, to be sent to D. After subscription ran out, P continued to send newspaper. D paid bills for continued service twice, and both times D directed service to be stopped. P still sent it, and D still read it.
Holding /Takeaway
Judgment for P. D accepted and must pay. If you continue to receive and use it, under circumstances where you have no reason to think it’s a gratuity, you’re held to have agreed by implication to pay for it.
Dissent/Critique

Question 26

Livingstone v. Evans Alberta 1925 (p. 459)

Answer 26

Rejection - Counteroffer

Key Facts
D offered to sell land for $1800. P offered to pay $1600 and said “send lowest cash price.” D refued to reduce price. P accepted D’s original offer.
Holding /Takeaway
There was a binding K and P is entitled to specific performance. P’s offer for $1600 terminated D’s original offer and constituted a counter-offer, but D’s refusal renewed original offer. When P accepted, a K was formed.
Dissent/Critique