Contracts I: Cases To Midterm 1 Flashcards
The law does not look into the subjective, secret heart of the parties but instead uses what is called an “objective test:” a reasonable person standard, which looks to the words and actions of the parties in the exchange. It is asked whether a reasonable and disinterested person watching and listening to the parties would conclude that a contract was formed; if so, the law will conclude that is was.
Lucy v. Zehmer (1954)
The subjective, secret intent of the parties does not matter in the inquiry as to whether there was a contract or not. The applicable test is that of an objective observer, a reasonable person, and whether or not such a person would believe that a contract was made in the circumstances. The beginnings of “reasonable reliance” is working into this opinion.
Embry v. Hargadine, McKittrick Dry Goods Co. (1907)
The Objective Person Standard is applied to commercials when an alleged offer is made in order to see whether or not a reasonable person would believe an offer was made. The main finding from using this standard in this case was that there was no way that a reasonable, objective person could reasonably have concluded that the commercial actually offered consumers a Harrier Jet.
Leonard v. Pepsico (1999)
A manifestation that is an invitation to receive offers is not in itself an offer. Instead, this is an example of the situation where a manifestation exists and the person to whom the manifestation is addressed knows or has reason to know that the person does not intend it as an expression of his fixed purpose until he has given a further expression of assent, but he himself has not made an offer. Additionally, when a person sends a communication to multiple recipients, but only has one thing to sell, a reasonable person would not expect it to be an offer but a manifestation that can be responded to with a potential offer.
Lonergan v. Scolnick (1954)
When an offer, found in an advertisement, is clear, definite, explicit, and leaves no room for negotiation, it is a binding obligation that becomes a contract upon acceptance. Though other advertisements are often found non-binding by the court until the seller accepts the buyer in front of them, ads that present a “reward” situation are most often found to be offers that become binding upon acceptance.
Lefkowitz v. Great Minneapolis Surplus Store (1957)
When a manifestation is an expression of a willingness to negotiate and not an express offer to sell, no binding contract exists. Because contracts are inherently derived from the intention of the parties that enter into them, a mere expression to negotiate is not enough to constitute an offer—the word “offer” was not used. Note: The court seems to not have considered all the evidence in this case, so remember that all parts of the context need to be considered in the decision of whether an offer was made to see if the communication used did in fact show a deal trying to be finalized, or an offer being made.
Courteen Seed Co. v. Abraham (1929)
A contract includes not only what the parties said, but it also includes what is necessarily implied by what they said. Thus, even when the word “offer” and other words of promise are not used, only a price quotation is listed, the manifestation is sent to multiple people, or some other phenomena occurs that is usually indicative of an offer not being made, the circumstances surrounding a case can still cause a binding offer to be made. If the words and actions used in a situation would lead a reasonable person to believe that an offer was made, then the law will also conclude that a binding offer exists, which can go against the general rules of understanding whether an offer has been made. People very rarely express their true intentions when entering into offers, but the court still must discern what occurred in the eyes of the law and, in doing so, can consider the reasonable person standard, the language used between the parties, the definiteness of the named parties, and the definiteness of the proposal.
Southworth v. Oliver (1978)
If either party in a contract situation stipulates that the execution of a written document is the only path to creating a binding contract, then an oral agreement will not suffice as a binding contract. To decide whether this intent exists or not, the court can consider several factors surrounding the offer, its details, and the encounters between the parties over time. Note: no magical list captures all of the factors that should be considered by a court when determining this intent; common sense will suffice in deciding which factors to consider.
Continental Laboratories v. Scott Paper Co. (1990)
An industry’s customs can play a substantial role in deciding whether a contract exists between two parties. If the most essential terms to a certain industry exist in a contract, and the parties have a good faith understanding that missing terms will be filled in as soon as possible according to industry or trade practice, then a technically incomplete contract to a layperson can constitute an enforceable contract between two parties. In this situation, the agreement between the two parties of the same industry is the basis of a contract.
Metro-Goldwyn-Mayer v. Scheider (1972)
The offeror is the master of their offer, unless they decline to use that mastery and make an offer that robs them of their control of the offer. When performance is a way in which an offer can be accepted, it must be accepted within a reasonable time in order for it to constitute a binding contract between the two parties. If performance is the acceptance method chosen, the offeree does not have to give notice to the offeror that performance has begun unless that is an exact stipulation of the contract or unless the offeror has no way to know about the performance. Note: This was the case where two very different interpretations of “when work commenced” changed the outcome between the district court and the appellate court.
Ever-Tite Roofing Corp. v. Green (1955)
An offer must be accepted per the exact terms stated in the offer itself when the terms are unambiguously indicated by the language or circumstances. Thus, if the offer unambiguously requires the signature of both parties to create a written contract, then an oral agreement will not legally suffice in the face of an incomplete written contract. Pay special note the to the language of a form used in an offer, as the form’s language is what makes the buyer the offeror or not.
Beard Implement Co. v. Krusa (1991)
When it is unknown whether the intent of a party was to establish a unilateral or bilateral contract, it should be assumed that the offering party meant to enter into a bilateral contract with the other party. This means that instead of assuming that performance is the default acceptance, it should be assumed that promise is the default acceptance.
Davis v. Jacoby (1934)
If the language of an advertisement is plain and clear that a reward can be obtained by a person who performs the conditions associated with the offer, then an offer exists and when the person performs the action, the offer has been accepted.
Carlill v. Carbolic Smoke Ball Co. (1893)
The acceptance of an offer occurs when a person places their properly mailed, stamped, and addressed acceptance in the mailbox. This rule, however, is only a default rule and applies only when an offeror has not made it an expressly condition that the contract begins on his receipt of the acceptance. If an offeror is made uncomfortable by this rule, they have the power to list that they must receive the acceptance in order for a binding contract to commence.
The Mailbox Rule (1818)
Offers that are not accepted within a reasonable time after being made are expired and thus do not make binding contracts when accepted after the reasonable time has passed. When there is no set time limit on an offer as to when it can be accepted, then the law looks to what a reasonable time of duration of the offer would be by looking at the circumstances surrounding the situation and specifics of the industry, business, or other entity in question. For example, for the oil market, where prices are constantly moving, four days is an unreasonable time for the offeror to have to be bound by their offer when accepted.
Minnesota Linseed Oil Co. v. Collier White Lead Co. (1876)
