first quarter

Question 1

1 Contract Defined

Answer 1

A contract is a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty

Question 2

§2: Promise, promisor, promisee, beneficiary

Answer 2

1. What is a promise? (1) A manifestation of intention to act or refrain from acting in a specified way (2) so made as to justify a promisee in understanding that a commitment has been made.
2. The person manifesting the intention is the promisor
3. The person to whom the manifestation is addressed is the promise
4. Where performance will benefit a person other than the promise, that person is a beneficiary

Question 3

§3 Agreement Defined; Bargain Defined

Answer 3

An agreement is a manifestation of mutual assent on the part of two or more persons.
A bargain is an agreement to exchange promises or to exchange a promise for a performance or to exchange performances

Question 4

§4: How a Promise May Be Made

Answer 4

A promise may be stated with words, either oral or written, or may be inferred wholly or partly from conduct

Question 5

Bilateral Contract

Answer 5

A bilateral contract is one in which a promise by one party is exchanged for a promise by the other party. The exchange of promises is enough to render them both enforceable.

Question 6

Unilateral Contract

Answer 6

A unilateral contract is one in which one party promises to do something in return for an act of the other party (such as monetary reward for finding a lost dog). Unlike a bilateral contract, in a unilateral contract the offeree’s promise to perform is insufficient to constitute an acceptance; The offereee must perform the act (find the lost dog) to accept the offer (the reward)

Question 7

Formation requires

Answer 7

1. The mutual assent of the parties, and

2. Some showing that this assent is the kind that the law will enforce

Question 8

The Objective Theory
(Meeting of the Minds)
(Embry)

Answer 8

1. Manifestation of intent to be bound
   • Conduct: Words, silence, acts, omission. Outwards manifestations
   • Was the conduct intentionally engaged in? (19)
2. Reasonable person in the position of the promisee believe that a commitment has been made
3. Requires promisee to actually believe that such conduct manifested consent and to act on that consent (Subjective reasonable belief/action of the promisee)

Question 9

§17.Requirement of a Bargain

Answer 9

The formation of a contract requires a bargain in which there is a manifestation of mutual assent to the exchange and a consideration

Question 10

§18 Manifestation of Mutual Assent

Answer 10

Manifestation of mutual assent to an exchange requires that each party either make a promise or begin or render a performance

Question 11

§19. Conduct as Manifestation of Assent:

Answer 11

(1) The manifestation of assent may be made wholly or partly by written or spoken words or by other acts or by failure to act
(2) The conduct of a party is not effective as a manifestation of his assent unless he intends to engage in the conduct and knows or has reason to know that the other party may infer from his conduct that he assents
(3) The conduct of a party may manifest assent even though he does not in fact assent. In such cases, a resulting contract may be voidable because of fraud, duress, mistake, or other invalidating cause

Question 12

Embry v. Hargadine, McKittrick Dry Goods Co. (264

Answer 12

The Embry Test: If a reasonable man would believe that another man’s actions constituted consent to terms of a contract and then acted upon those actions, then the parties are bound by their express actions to the terms of the contract.

Question 13

Reasonable Standard

Answer 13

Intention is judged by outward expressions and excludes all questions in regard to his unexpressed intentions. If his words or acts, judged by a reasonable standard, manifest intention, that agreement is established. Subjective intent is immaterial.

Question 14

Texaco v. Pennzoil

Private Convos are subjective

Answer 14

Rule: “objective manifestations, not subjective intent”; private conversations NOT between both parties of a contract are considered subjective, secret manifestations

Question 15

Lucy v. Zehmer (270)

Answer 15

Holding: Contract for sale of land is legally binding on Zehmer since at no point in the lengthy conversation with Lucy prior to drafting the contract did he indicate expressly that he was acting only in jest, so Lucy reasonably relied on his signature as consent

Question 16

Why make a contract? Policy considerations

Answer 16

• Certainty of terms – Be aware of the risks involved, identify what people intend
• Legal enforceability – Legally obligating ourselves to something we otherwise wouldn’t have to do
• Better spot: Contracts improve one’s situation

Question 17

Law is concerned about

Answer 17

o Intentions: What both parties intended
o Reliance: Detriment and legal enforcement of that
o Certainty – Certainty that everyone’s position improves

Question 18

Contract form policy

Answer 18

• Court wants to protect the reliance of one party
• The objective theory reflects the pragmatic reality that the law must be largely based on externals rather than the whim of subjective perception,
• It protects the basis for economic exchanges in our commercial system by enforcing the expectations caused by reliance on external manifestation, and
• It preserves the hallmark principles of freedom of contract and personal autonomy

Question 19

S24. Offer Defined

Answer 19

An offer is the (1) manifestation of willingness to enter into a bargain, so made as to (2) justify another person in understanding that his assent to the bargain is invited and (3) will conclude it

Question 20

things to look for

Answer 20

1. Look at factors such as certainty of terms, was there an out for someone which would indicate further assent needed (contingency: Texaco), how many people received the offer (Nebraska Seed), etc.
2. Would a reasonable person looking at surrounding circumstances (Lucy drinking, custom of industry), believe it was an offer?

Question 21

offers are not

Answer 21

Offers are not promises. An offer, once accepted, is a promise.

Question 22

certainty

Answer 22

1. Even if a manifestation is intended to be seen as an offer, it cannot be accepted as so if those terms are not reasonably certain
2. The terms of a contract are reasonably certain if they provide a basis for determining the existence of a breach and its remedy
3. The fact that one or more terms are left open may show that manifestation of intent is not intended

Question 23

26. Preliminary Negotiations

Answer 23

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 intent

Question 24

Nebraska

Preliminary negotiation

Answer 24

Rule: When a party sends out letters to a number of dealers, they are invitations to bid. Not intended as a final proposition, but a request or invitation for bids.
• Holding: Telegram was not an offer because of vagueness and status as invitation rather than an agreement that could be binding on acceptance

Question 25

Advertisements

Answer 25

• Advertisements of goods by display, sign, handbill, newspaper, radio or television are not ordinarily intended or understood as offers to sell. There must ordinarily be some language of commitment or some invitation to take action without further communication
• An advertisement is generally nothing more than an invitation to enter into negotiations,

Question 26

Pepsico

Reasonable Person?

Answer 26

Holding: No reasonable person could interpret the tongue-in-cheek commercial as a serious offer that would be binding upon acceptance. The commercial was merely an invitation to drink Pepsi and participate in the program.

Question 27

Written Memorial

Answer 27

o Letter of intent or intermediate writings made during negotiations are not final or binding unless a final agreement is reached and signed to (would signify final acceptance and complete bargain)

Question 28

Empro

Answer 28

o Offer may have been made, but conditions imposed do not indicate an acceptance to that offer as negotiations are continuing. Still have terms to be ironed out

Question 29

Texaco

Answer 29

o Signed writing may help show intent to be bound, but this factor alone is not determinative enough to show intent

Question 30

Unilateral Offer

Accepted only by Perfomance

Answer 30

o One party makes clear in the offer that acceptance is through performance only. No matter how trustworthy the other is, a promise to perform does not constitute acceptance of a unilateral offer.

Question 31

• You are a painter. I give you a paint strip with a color, and tell you that I will give you $2,000 if you paint my house this month. Two weeks later, you come to my house and begin to paint it. I see you. Can I revoke my offer at that time?

Answer 31

• You are a painter. I give you a paint strip with a color, and tell you that I will give you $2,000 if you paint my house this month. Two weeks later, you come to my house and begin to paint it. I see you. Can I revoke my offer at that time? No. This is a type of option contract, similar to if you had paid me to keep the offer open. Your reliance on my promise should be protected.

Question 32

S36. Methods of Termination.. Revocation

Answer 32

• Methods of Termination of the Power of Acceptance – Power of acceptance terminated by revocation of the offeror: An offeree’s power of acceptance may be terminated by a rejection or counter offer by the offeree, or lapse of time, revocation, death or incapacity, or non-occurrence of any condition of acceptance.

Question 33

42. Revocation by Communication

Answer 33

o RS 42 – An offeree’s power of acceptance is terminated when offeror communicates the manifestation of intention not to enter into the contract

Question 34

43. Indirect Communication

Answer 34

o RS 43 – Indirect communication of revocation is evidence when the offeror takes a definite action that would be inconsistent with intent to enter into a contract with offeree (i.e., selling the land that offered to offeree) and the offerre acquires reliable information to that effect

Question 35

revocation rule

Answer 35

If the offeror can say “I revoke” before the offeree accepts, the offer is terminated

Question 36

Dickinson v Dodds (302)

Performance and Communication

Answer 36

o Rule An offer to sell terminates when the offeree learns the offeror agreed to sell to someone else
o Holding: Dickinson’s acceptance doesn’t form a contract because Dodds obviously revoked by selling the property – Dickinson was too late in accepting and could see that the offer was gone

Question 37

Performance and communication

Answer 37

• Performance and communication from both parties is necessary to give notice to the offeror that the offer cannot be revoked
• If offeree was not aware that the offeror had revoked – then there could be a breach. (No communication)

Question 38

50. Acceptance Defined

Answer 38

1. Acceptance is a manifestation of assent to the terms thereof made by the offeree in a manner invited or required by the offer.

Question 39

acceptance by performance

Answer 39

2. Acceptance by performance requires that at least part of what the offer requests be performed or tendered and includes acceptance by a performance which operates as a return promise.

Question 40

acceptance by promise

Answer 40

3. Acceptance by a promise requires that the offeree complete every act essential to the making of the promise.

Question 41

Mirror Image Rule

Answer 41

o An acceptance should mirror the offer. Offeror is the master and can dictate the form of acceptance (30)

Question 42

mirror image 2

Answer 42

o “An offer of a bargain by one person to another imposes no obligation upon the former unless it is accepted by the latter according to the terms on which the offer was made. Any qualification or departure from those terms invalidates the offer, unless the same is agreed to by the party who made it. Where negotiations are by letters, they will constitute no agreement unless the answer to the offer is a simple acceptance, without the introduction of any new term”

Question 43

61. Acceptance must be definite and unequivocal

Answer 43

An acceptance which requests change or addition to the terms of the offer is thereby invalidated unless the acceptance is made to depend upon an assent to the changed or added terms. (Changing things continues the negotiation)

Question 44

Ardente v Horan

Acceptance must be definite (61 applied)

Answer 44

• – P’s letter of “acceptance” imposed additional conditions that needed to be addressed before contract could be considered binding, so is more a conditional acceptance or counteroffer.
• Holding: Not absolute acceptance. Imposed a condition upon acceptance. The language used is not consistent with absolute acceptance accompanied by a request for a gratuitous benefit.

Question 45

30. Form of Acceptance Invited

Answer 45

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.

Question 46

32. Invitation of Promise or performance

Answer 46

In cases of doubt an offer is interpreted as inviting either by promising to peform what the offer requests or by rendering the performance, the offeree chooses

Question 47

54. Acceptance by Performance

Unilateral

Answer 47

. Where an offer invites an offeree to accept by rendering a performance, no notification is necessary to make such an acceptance effective unless the offer requests such a notification

2. If an offeree who accepts by rendering a performance has reason to know that the offeror has no adequate means of learning of the performance with reasonable promptness and certainty, the contractual duty of the offeror is discharged unless
   a) the offeree exercises reasonable diligence to notify the offeror of acceptance, or
   b) the offeror learns of the performance within a reasonable time, or
   c) the offer indicates the notification of acceptance is not required

Question 48

62. Effect of Performance

Answer 48

Where an offer invites an offeree to choose between acceptance by promise and acceptance by performance, the tender or beginning of the invited performance or a tender of a beginning of it is an acceptance by performance. (2) Such an acceptance operates a promise to render a complete performance

Question 49

White v. Corlies & Thrift (332)

Not Perform.

Answer 49

Rule: Because P did not respond to the written offer in a similar manner, but rather just began working on the construction project without notifying them, the contract is not binding as no acceptance was issued.
Could have mailed a letter and mailbox rule would have applied, but instead, tried to performance.

Question 50

Carlill v. Carbolic Smoke Ball co.
(Performance)
(Notification not necc.)

Answer 50

• Advertisement was a reward offer since it specified a manner of acceptance (follow the directions on the box) and because it insulated its promise by depositing 1000 pounds in the bank for a reward fund (shows intent to uphold promise)
• Performance manifested acceptance in this case because the company marked/implied it as the specified manner of acceptance by detailing the instructions for use of the Ball
• RS 54 – If performance is specified as the method of acceptance, no notification is necessary unless offer requests notification

Question 51

25. 45 Option Contract

Answer 51

• RS 25 – Option Contracts are where a promise meets the requirements for formation of a contract and the promisor’s power to revoke an offer is limited
• Options are open for a period of time where you cant revoke your offer.

Question 52

Option Contract Created by Part Performance or Tender

Answer 52

(1) Where an offer invites an offeree to accept by rendering a performance and does not invite a promissory acceptance, an option contract is created when the offeree tenders or begins the invited performance or tenders a beginning of it
(2) The offeror’s duty of performance under any option contract so created is conditional on completion or tender of the inivited performance in accordance with the terms of the offer

Question 53

Unilateral Contract Exception

Answer 53

• Offer is not accepted until the performance is completed (so can partially perform and then walk away with no penalty)
o Contrast with a bilateral contract: acceptance may be made by a return promise or beginning performance if permitted by the offeror
o RS 45 – Unilateral contract cannot be revoked once performance requested in the offer has begun

Question 54

• Example: If I say “I promise to pay you $2,000 if you agree to paint my house,” you can agree by saying so, or by starting to paint the house. If start to paint, you have agreed, and there is a contract. If you walk off the job, you have breached. This is different from in a unilateral contract because

Answer 54

the offeror is the master of the offer and has not made this a unilateral contract seeking performance. By asking for agreeing to paint, starting painting makes it look like a promise to paint and breaching that promise by walking off the job is a breach.

Question 55

Petterson v Patterberg

Answer 55

• Because D’s offer was withdrawn before acceptance had been tendered, the contract was not binding. Performance that would accept the offer/exercised option: paying the whole of the mortgage. Preparation: coming to pay the mortgage
• Before a tender of the money had been made the defendant informed Petterson that he had sold the mortgage. That was a definite notice to Petterson that the D could not performed his offered promise and that tender would be ineffective.
• Complete performance constitutes acceptance – offer could not have been revoked if this had been done already

Question 56

63. Mailbox Rule

Acceptance upon Dispatch

Answer 56

• Mailbox Rule – acceptance is effective upon dispatch of it (“As soon as it is put out of the offeree’s possession”) (RS 63)
o RS 65 – The medium of acceptance must be reasonable, customary in similar transactions at the time and place the offer is received.
o Option contract: Acceptance effective when offeror receives, the offeror needs notice that the option is going to be exercised and he is now bound (63 -2)

Question 57

69. Acceptance by Silence

Answer 57

• Silence or Inaction Silence or inaction operates as acceptance in certain instances

(1) Takes benefit of services without rejecting them
(2) Offeror states that silence is acceptance
(3) Reasonble situation calls for someone to say they don’t accept
(4) Offeree’s silence is not inconsistent with normal customs of business

Question 58

Hobbs v. Massasoit Whip

Answer 58

• Because of the previous dealings (RS 69) between the parties, D should have made it known if they did not wish to accept, as their silence manifests an intent to be bound as per usual (customary response) (343)