Contracts II - Contract Formation - Cases Flashcards
According to the restatements, what kind of assent must there be for a contract to be formed?
Mutual assent. Restatements differ between mental assent and mutual assent.
Mental assent, referring to the intentions, do not matter. What matters are the acts and words of the parties the way they are being interpreted by a reasonable person.
The expression of mutual assent, not the assent itself, is the essential element in the formation of a contract.
What is the difference between tenancy by entirety, joint tenancy, and tenancy in common? What happens to the property when one party dies?
Tenancy by Entirety:
Parties Involved: Limited to married couples.
Ownership: The property is owned by the marital unit, not as separate interests.
Survivorship: If one spouse dies, the surviving spouse becomes the sole owner of the property.
Joint Tenancy:
Parties Involved: Can involve any two or more individuals, not limited to family relationships.
Ownership: Each co-owner has an equal and undivided interest in the property.
Survivorship: If one co-owner dies, their interest passes directly to the surviving co-owner(s) without going through probate.
Tenancy in Common:
Parties Involved: Can involve any two or more individuals.
Ownership: Each co-owner has a distinct, separately transferable interest in the property.
Survivorship: Unlike joint tenancy, there is no automatic transfer of the deceased owner’s interest to the surviving co-owners. Instead, it becomes part of the deceased owner’s estate and passes through probate.
What is the argument for agreements between spouses or friends not being contracts?
The parties did not intend that they should be attended by legal consequences.
Gault v. Sideman (1963) involved a medical case. What would be the appropriate remedy if a patient sues a doctor for breach of contract?
Reliance (or tort). Tort might have the higher outcome.
In Gault v. Sideman (1963), the court protected the doctor from a claim from a patient. What were the main arguments?
1) The doctor gave an opinion, not a promise. Doctors also cannot be fully transparent as this might influence the outcome of the treatment / surgery.
2) Public policy element. Medical science is not an exact science.
The court did NOT apply the reasonable person test.
If the doctor tells the patient that they have a treatment with a success rate of 25%, when success rates are involved, is there a promise?
Professor says no. There was no breach of contract. If the probability might have been 99%.
Venture Associates Corp. v. Zenith Data Systems Corp. (1996) involved an agreement to negotiate in good faith. Is it enforceable?
No, most courts would not enforce it. Besides, proving bad faith in negotiations is difficult.
In Venture Associates Corp. v. Zenith Data Systems Corp. (1996), we had a question of precontractual liability. What are the two approaches that a negotiating party could follow to recover for losses or costs?
1) Reliance damages. Need to prove that there was a promise through consideration or reliance.
2) Quasi contract.
In Arnold Palmer Golf Co. v. Fuqua Industries (1976), we had two parties drafting a memorandum of intent for further negotiations. Can such a memorandum itself already be a contract? What does the restatements say?
Mutual manifestations of assent that are in themselves sufficient to make a contract will not be prevented from so operating by the mere fact that the parties also manifest an intention to prepare and adopt a written memorial thereof; but other facts may show that the manifestations are merely preliminary expressions.
Arbitron, Inc. v. Tralyn Broadcasting, Inc. (2005) dealt with an escalation clause. The court held that UCC 3-305 was applicable. What does that mean?
3-305 is the gap filler for price. A reasonable price would have to be determined.
What are the gap fillers in the UCC? (there are five)
2-305: Price fixing, parties can have a contract even if the price is missing, standard price: reasonable price
2-307: Single delivery is required unless specified
2-308: Standard place of delivery (seller’s business)
2-309: Standard time for delivery: Reasonable time
3-310: Standard time of payment: When buyer has received his goods
If a topic is not covered in the UCC, what does the UCC refer to?
Common law.
For an advertisement to be an offer, it needs to be clear, definite, and explicit. Can this be said for offers in general?
Yes.
However, for advertisements we also added that it does not leave room for negotiation.
Is the scenario below a contract?
Scenario:
A says to B, “I am going to sell my car for $500.” B replies, “All right, here is $500, I will take it.”
According to the analysis in MURRAY ON CONTRACTS, the absence of words indicating a promise or commitment makes it challenging to establish a contract. In this case, A’s statement is seen as a present intention rather than a clear commitment to sell. The significance of language is crucial, and without explicit commitment, the scenario tends to be construed as an invitation for an offer or preliminary negotiation, indicating the absence of a binding contract.
Under which circumstances may a price quotation be considered a promise?
Is a price quotation sent to several people not a promise?
While a price quotation, standing alone, is generally not regarded as an offer, there are situations in which, when considered in conjunction with relevant facts and circumstances, a price quotation may constitute an offer. This offer, if accepted, can lead to the formation of a binding contract. It is acknowledged that such offers can be extended to multiple individuals, and the mere act of sending a price quotation to more than one person does not automatically negate its status as an offer.
In the case of Arbitron, Inc. v. Tralyn Broadcasting, Inc. (2005), where there was an implicit assumption in the license agreement giving Arbitron the right to increase fees, could the counterparty argue that this right was not exercised? Is it permissible to increase fees retroactively? What argument could be made?
The situation raises a question of interpretation in contractual obligations. The license agreement might have included an express or implied obligation for Tralyn to inform Arbitron about changes in circumstances.
Additionally, the argument could be made that Tralyn did not act in good faith, applying the reasonable person test. If a reasonable person would have known about the obligation to inform the counterparty, Tralyn’s failure to do so may be questioned.
Are offer and acceptance different concepts from consideration in contract law?
Yes, offer and acceptance are distinct from consideration. While acceptance is typically consideration, it is not always the case. For instance, an illusory promise, like saying “I might pay you for the car,” does not constitute acceptance.
Moreover, something might qualify as acceptance but still lack consideration. Both offer and acceptance, along with consideration, must be present to establish a valid contract.
For example, in a scenario where a fireman agrees to save someone’s daughter from a burning house, this might be acceptance, but it cannot be consideration due to the pre-existing legal duty of the fireman to perform such duties.
According to the Restatements, when is a manifestation of willingness to enter into a bargain not an offer?
A manifestation of willingness to enter into a bargain is not considered an offer when 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 further manifestation of assent.
In other words, if the party making the manifestation does not intend to conclude the deal until additional steps are taken, it does not qualify as a legally binding offer. There exist no conditional offers.
Where do we find a definition of preliminary negotiations in the restatements? Are they offers?
According to the Restatement (Second) of Contracts § 26, (1981), Preliminary negotiations are not considered offers. Examples of preliminary negotiations include
- invitations to bid,
- price quotations, &
- proposals.
