Contracts Outline (Regan 1)

7/31/2019 Contracts Outline (Regan 1)

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CONTRACTS OUTLINEPROFESSOR REGANSPRING 2010

I. INTRO: ENFORCING PROMISES AND REMEDIES FOR BREACH

a. The importance of Promise

i. A contract is a promise or 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

ii. A promise is a manifestation of intention to act or refrain from acting in a specified way, somade as to justify a promisee in understanding that a commitment has been made

iii. Implied-in-Fact Contract

1. Has the same legal effect as an express contractthe only difference between themis the means by which the parties manifest their agreement

2. The parties agreement is inferred, in whole or in part, from their conductbut

must still have discernable terms3. The parties much exhibit mutual expressions of agreement

iv. Quasi-Contract

1. The obligation arises, not from consent of the parties, as in the case of contracts, ex-press or implied in fact, but from the law of natural immutable justice and equity

b. Remedies

i. Types of breach that tripper remedies

1. A failure without justification to perform a contractual promise or bargain at thetime agreed

2. A repudiation of the promise or bargain

3. Bad faith in the form of preventing or hindering the other partys performance orfailing to cooperate

ii. A material breach by one party gives the non-breaching party the option to suspend its per-formance or to cancel the contract and sue for damages

iii. A non-material breach does not give the option to cancel, but the aggrieved party is entitled

to recover damages for breach

1. Suspension or cancellation, when available, are self-help remedies: they do not de-pend on a court judgment

iv. Aggrieved party should recover both net gains prevented by the breach (expectation) andany other uncompensated losses resulting from the breach

v. The primary purpose of contract remedies however measured is to compensate theaggrieved party for losses suffered rather than to punish the contract breacherdeter-rence is almost never an objective in contract remedies


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vi. RESTATEMENT 344 (see restatement document)

1. Expectation

a. Interest in having the benefit of his bargain by being put in as good a posi-tion as he wouldve been in had the K been performed

b. Put in position where theyre supposed to be

2. Reliance

a. Interest in being reimbursed for loss caused by reliance on the K by beingput in as good a position as he wouldve been in had the K not been made

b. Bring back to the original

c. Put in position where they were BEFORE the contract

3. Restitution

a. Interest in having restored to him any benefit that he has conferred on the

other partyb. Do you have anything of value that they gave you? Give it back

vii.UCC 2-715(2)

viii. RESTATEMENT 351

ix. Anticipatory Breach/Repudiation

1. Not a breach until the time comes in the future, but telling you now that I plan onbreaching

2. Mitigation immediately

c. Breach of Contract and Permissible Remedial Responses

i. A promisor commits a breach of contract when he or she fails without justification toperform when a promised performance is due

1. If the promisee has fully performed the agreed exchange, the remedy for breach islimited to an action for damages or specific performance

2. If promisee still has duties to perform under the agreed exchange, the breach, if ma-terial, may also discharge those remaining duties

3. Material breach by promisor promisee has both affirmative and defensive reme-dies

a. Defeat in a significant way your expectation (total non-performance)

4. RESTATEMENT 241

ii. Another type of breach occurs when a promisor, by words or conduct, repudiates a perfor-mance not yet due under the agreed exchange


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1. Promisee has both affirmative and defensive remedies and these remedies can beinvoked before the time set for performance

2. RESTATEMENTS 250-257

iii. Final type of breach occurs when a promisor violates the duty of good faith and fair deal-ing by preventing or hindering the performance of the other party or by failing to cooperatein performing the agreed exchange

iv. 250 Repudiation a statement by the obligor to the obligee indicating that the oblig-or will commit a breach that would of itself give the obligee a claim for damages for totalbreach under 243, or a voluntary affirmative act which renders the obligor unable or appar-ently unable to perform without such a breach.

v. UCC 2-610 Anticipatory Repudiation (1) If either party repudiates the contractwith respect to a performance not yet due the loss of which the substantially impair the val-ue of the contract to the other, the aggrieved party may:

1. For a commercially reasonable time await performance by the repudiating party; or

2. Resort to any remedy for breach, even if the aggrieved party has notified the repu-diating party that it would await the latters performance and has urged retraction;and

3. In either case suspend performance or proceed in accordance with the provisions ofthis Article on the sellers right to identify goods to the contract notwithstandingbreach or to salvage unfinished goods

vi. (2) Repudiation includes language that a reasonable person would interpret to mean that theother party will not or cannot make a performance still due under the contract or voluntary,affirmative conduct that would appear to a reasonable person to make a future performanceby the other party impossible

II. FOUR THEORIES OF LIABILITY FOR BROKEN PROMISES

a. Not all promises are contracts

b. 4 types of enforceable promises or contracts

i. Promise plus consideration

ii. Promise plus recognition of an antecedent benefit

iii. Promise plus unbargained for reliance

iv. Promise plus form

c. Bargain Exchange: Consideration

i. Consideration: either a benefit to the promisor or a detriment to the promisee

ii. RESTATEMENT 71

iii. Consideration implies that something happened, a bargain or exchangethe bargain theoryis the generally accepted idea of consideration


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iv. A promise of mere gratuity can be broken...no consideration

v. If a performance, such as the destruction of a legal relationship, is bargained for, there isconsideration. And if the requirement of consideration is met, there is no additional require-ment of equivalence in the values exchanged.

d. Unconscionable contract or clause

i. If K unconscionable at time it was made, court can refuse to enforce K, or it may enforce

the remainder of the K without the unconscionable clause, or limit the application of anyunconscionable clause as to avoid any unconscionable result

i. Basic Test: Whether, in the light of the general commercial background and the commer-cial needs of the particular trade or case, the clauses involved are so one sided as to be un-conscionable under the circumstances existing at the time of the making of the K.

ii. Options upon finding of unconscionability:

1. Refuse to enforce contract

2. Excise the objectionable clause

3. Limit the application of the clause to avoid a bad result

e. Pre-existing Duty Rule

i. The performance or the promise to perform a pre-existing duty does notconstitute consideration

1. Test: Whether there is an additional consideration adequate to support an ordinarycontract, and consists of something which the debtor was not legally bound to do orgive

2. An act or forbearance required by a legal duty owing to the promisor that is neither

doubtful nor the subject of honest and reasonable dispute is not sufficient consider-ation

3. A promise to do what the promisor is already legally bound to do is an unreal con-sideration

ii. RESTATEMENT 73 Performance of Legal Duty

iii. The court requires an independent consideration for a modification

iv. Primary purpose of the pre-existing duty rule is to prevent the hold-up game as in Alas-ka

v. RESTATEMENT 89 Modification of Executory Contract

vi. RESTATEMENT 90 Promise Reasonably Inducing Action or Forbearance

vii.RESTATEMENT 69

viii. UCC 2-209 and Restatement69 are the same test

1. General requirements:

a. Parties voluntarily agree undergood faith


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b. The promise modifying the contract was made before the contract

c. The underlying circumstances which prompted the modification were unan-ticipated by the parties

d. The modification is fair and equitable

i. Remember that judges do not normally police adequacy of consider-ation

2. Bottom Line : Once all indications of bad faith dealing are eliminated, the courthas no reason to enforce the pre-existing duty rule on a modification

a. Balance: Good faith vs. duress

f. Mutuality of Obligation

i. When an event is beyond the control of the promisor and, upon the failure of it to occur, heor she acts promptly to call the deal off, the courts normally will protect a privilege to with-

draw without liability

1. If one side is not bound, the other side is not bound

ii. Bilateral k where one of the parties has a free way out of the contract

iii. Rule: If a promise is unaccompanied by a bargained for consideration, it is a naked prom-ise and is unenforceable

1. Nudem pactum naked promise

iv. Fundamental issue: One side has made a flat out promise, the other side wants to en-force it but has a free way out which abolishes the mutuality of obligation

v. UCC 2-306 Output, Requirements, and Exclusive Dealing

1. Analysis :

a. (1) Permits output ks, except for quantities unreasonablydisproportionate

b. To escape liability, must point to some issue that was reasonably unforeseenat the time of k

vi. RESTATEMENT 205

vii.Mutuality of Obligation Analysis:

1. Bilateral K

2. Terms of K look like one party has free way out

3. See if party can be held liable for breach of free way out condition

a. If No promise is illusory no k ever existed

b. If Yes promise contains consideration valid K


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i. Look to implied duties, ex: good faith (Wood v. Lucy, Lady Duff-Gordon)

viii. Note: Rule - A party cannot create an enforceable k by waiving the conditionwhich renders his promise illusory

ix. A personal satisfaction clause does not render a promise illusory

x. UCC 2-204

xi. RESTATEMENT 228

g. Moral Obligation

i. Quasi Contract

1. A contract implied in law (or quasi-contract) is not a contract at all, but an obliga-tion imposed by law for the purpose of bringing about justice and equity withoutreference to the intent or the agreement of the parties and, in some cases, in spite ofan agreement between the parties

2. It is a non-contractual obligation that is to be treated procedurally as if it were acontract

3. Defendant received a benefit which it would be inequitable for him to retain

4. ELEMENTS:

a. The Defendant received a benefit;

b. An appreciation or knowledge by defendant by the benefit;

c. Under circumstances that would make it unjust for defendant to retain thebenefit without paying for it

d. Measure of Recovery: The value of the benefit conferred on Defendant(Defendants gain) and NOT detriment incurred by plaintiff

5. Quasi contract

a. Without intent to act gratuitously (not a volunteer)

b. Confers a benefit (measurable benefit)

c. Opportunity to decline/appreciate

i. Exception: emergency/legal duty

ii. Contract implied in fact

1. ELEMENTS:

a. The Defendant requested plaintiff to perform work;

b. Plaintiff expected Defendant to compensate him for those services;

c. Defendant knew or should have known that plaintiff expected compensation


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d. Recovery: the amount the parties intended as the contract price. If no ex-pressed pricereasonable market value

iii. RESTATEMENT 86

iv. MAJORITY VIEW: Past consideration is the legal equivalent of NO consideration

1. Past consideration doesnt qualify as sufficient valid consideration to creating abinding contract

a. Unenforceable promise

2. A saves Bs life, B promises to pay for As treatment, B doesnt pay.A cant sueto enforce K because it was past consideration (the detriment to A and gain to Bhappened BEFORE the promise was made)

v. MINORITY VIEW: A MATERIAL BENEFIT constitutes valid consideration for a promise

1. A saved Bs lifeB promised to pay A money for the rest of Bs life.Valid con-sideration, enforceable contractb/c there was a material benefit and THEN Bmade a promise

h. Promissory Estoppel

i. Serves as a consideration substitute in contract law that renders certain promises other-wise lacking in consideration binding and enforceable. In such cases, the promiseesreliance is treated as an independent and sufficient basis for enforcing the promise. Promis-sory estoppel can be viewed as a legal device that prohibits the promisor fromdenying the existence of a contract for lack of consideration.

ii. Elements: In general, the elements of PROMISSORY ESTOPPEL are:

1. A promise reasonably expected (should have known) by the promisor to in-

duce action or forbearance;

2. Action or forbearance by the promisee injustifiable reliance on the promise(i.e. detrimental reliance); and

3. Injustice can be avoided only through enforcement of the promise.

iii. A promise for past benefits, not enforceable unless there is a moral obligation1. Involves substantial unbargained-for reliance by promisee upon promisors promise

2. Unbargained-for reliance becomes consideration substitute

3. By way of legal fiction a k exists

iv. Only applies when the bargain exchange fails, i.e. the parties do not get to yesand/or there is no consideration in return for promisors promise

v. Merely a promise, unsupported by consideration (gift), that leads to detrimental re-liance that is reasonably foreseeable by the promisor

vi. RESTATEMENT 90

vii.REASONABLE DETRIMENTAL RELIANCE


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viii. Promissory estoppel does not apply to a warranty because its not a promise

1. Promises forward looking

2. Warrantiesbackwards looking

3. Since warranties are promises, they can become the basis for promissory estoppel,but only in limited circumstances

4. However, promissory estoppel only applies when there is a promise that is unac-companied by consideration

5. When there is an express k governing the relationship out of which a promiseemerged, and no issue of consideration, there is no need for promissory estoppel

a. Here, parties had a k covering the warranty

i. Thus, no need for promissory estoppel since the parties can resort totypical k law remedies

ix. UCC 2-313

x. UCC 2-314

xi. UCC 2-315

i. The Significance of Formalities Sealed Instruments Statute of Frauds

i. Sealed Instruments

1. Requirements: Need the word seal somewhere in the text

2. Significance:

a. Sealed writing is binding with or without consideration

b. No SOL concerning sealed documents it is enforceable forever

c. Only applies to non-goods

d. RESTATEMENT 95

i. Requirements:

1. Signed, sealed, delivered, Im yours

2. Promisor and promisee must be named

ii. In the absence of statute a promise is binding without considerationif

1. It is in writing and sealed; and

2. The document containing the promise is delivered; and

3. The promisor and promisee are named in the document or sodescribed as capable of identification when it is delivered

ii. Statute of Frauds


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1. Concerns oral agreements between parties

2. Certain types of oral agreements must be in writing (in addition to o/a and consider-ation requirements)

a. Upon any agreement that is not to be performed under 1year from the date of k

b. Rule: If it is possible a k can be performed in under 1 year, it

takes it out of the SoF and the oral k is enforceable

3. General analysis:

1. Is the type of transaction within the Statute of Frauds

i. Property transaction

ii. An agreement not to be performed under 1 year

iii. Sale of goods over $500

2. Does the agreement satisfy the requirements?i. Is there a signature by the party to be charged?

3. UCC 2-201

4. Predominant Factor Test

i. Involves contracts involving both goods and services

ii. Must determine whether it is predominantly goods or predominantlyservice

iii. So that is may fall under UCC 2-201

iv. Test is whether it is the rendition of service, with goods incidentally in-volved or the transaction of sale, with services incidentally involved

5. 1 year provision

i. In order to satisfy the 1 year provision, there must be no conceivableway in which performance of the agreement can be completed in under1 year

ii. If conceivable not within statute of frauds enforceable oral agree-

ment

iii. If not conceivable within the statute of fraudsmust meet writingrequirements in order to be enforceable

1. Only applies to agreement that, by their terms, are incapable ofbeing performed within one year

iv. Death is not considered performance of the k, but is an excuse for non-performance


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v. Where any of the promises of the bilateral k cannot be fully performedwithin one year, all promises are within the 1 year provision, unless oneparty to such a k completely performs what he has promised. Whenthere has been such complete performance, none of the promises of thek is within the 1 year provision

vi. Court holds that so long as a sufficient connection between the docu-ments (signed and unsigned) is established by a reference to the same

subject matter or transaction, that the writing requirement will be satis-fied

vii. Thus, allows signed and unsigned documents to merge, considering theyrefer to the same subject matter or transaction (RESTATEMENT 132)

1. Only one of the writings must bear the k of the party to becharge

2. Documents need to contain the essential elements of the agree-ment

viii. Court must rely on solely the documents themselves in reaching thisconclusion

6. SoF and Estoppeli. Be aware of how to apply promissory estoppel to SoF caseii. Return to Restatement 139. Enforcement by Virtue of Ac-

tion in Reliance1. (1) Test is reasonably foreseeable detrimental reliance2. (2) Provides guidelines for judges:

a. Availability of other remediesb. Definite and substantial character of the reliancec. Extent to which the reliance corroborates evidence of the

agreementd. Reasonableness of the reliance

e. Extent to which the reliance was foreseeable

III. BARGAIN EXCHANGE REVISITED: GETTING TO YES CONTRACT FORMATIONd. The Agreement Process: Manifestation of Mutual Assent

i. Individual bargainers will define their wants in a rational way and seek to satisfy themthrough a process of voluntary exchange

ii. 2 objectives of the bargain relationship are consistent with consideration1. Agreement2. Performance

iii. Here we are focused on offer + acceptance1. Specifically whether the parties to the bargain got to yes

iv. Getting to yes is very important because:1. It creates the island of expectation2. The point at which parties to the bargain are held accountable

e. Ascertainment of Assent: The objective test

i. Words matter, and we measure how they matter by interpreting them by the objective stan-dard of the reader/listener

ii. Assent to a k is measured by the listeners reasonable interpretation ofthe express manifestations of the speaker

iii. Policy: When the person who says I did not mean it throws words into the commercialmarket place, they must be held accountable


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1. Objective manifestations are relied upon

a. Helps to create island of expectation that what was said reflected what theparty meant

i. Thus, idiosyncrasies, i.e. I said this, but meant that, are irrelevant

iv. General analysis:

1. What was said?

2. Was the listeners interpretation reasonable?

v. Ask: Was an offer made? Would a reasonable person interpret an accep-tance?

1. Person making the offer exposes himself to K liability

a. But they can revoke the offer up until acceptance

2. Going to look at the timeline from offer to acceptance

a. Look at the rules at how all of these communications play out

vi. Manifestation looks like this:

1. If offer, we use reasonable person test from listeners side

a. Focusing on the manifestation of an offer

vii. Context is a relevant consideration in determining intent to contract and reasonableness

viii. The objective, manifestation of mutual assent is essential

ix. RESTATEMENT 21x. Social engagements are ordinarily not thought to be legally binding

1. Reasonable person did not intend for legal obligations

xi. Objective theory makes it possible for one to be held to a K without any real intention toassume a legal obligation

xii.Its all about the manifestation

1. Somebody who intends contract, but does not manifest, has no contract

2. One who manifests, but does not intend, has contract

3. What I subjectively mean to do, doesnt always happen in contracts

4. I didnt mean it.. doesnt matter

f. Implied-In-Fact Agreement

i. Implied in fact K exists when the intention to enter into a K is not manifested by direct orexplicit words between the parties but instead is inferred from conduct, language or othercircumstances surrounding their relationship


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ii. Implied-in-fact K requires mutual assent and consideration and is treated in all other re-spects like an express k

1. Test: Look to the acts and conduct of the parties to determine whether the essentialelements of an express k have been established

g. Offer: Creation of Power of Acceptance

i. Focuses on when a valid offer has been made

ii. Rule: An offer creates the power of acceptance in the offeree

1. Binding once accepted

iii. Ways to terminate any offer:

1. Revocation prior to acceptance

2. Deadlines

a. Ex: You have 10 days to accept. 11 days pass. Offer is terminated

iv. Offeror is master of the offer:

1. Substance terms and conditions of offer

a. Ex: I offer to sell you my car for $2,000

2. Procedure how offer is to be accepted

a. Ex: The only way for your to accept this offer is to appear at my office andsign a form

v. Rule: Counteroffers destroy offers

1. Ex :

a. A: I offer to buy your car for $2,000.

b. B: No, I offer to sell you my car for $2,500.

i. As offer to buy for $2,000 is destroyed

vi. RESTATEMENT 24

1. Objective TestWould a reasonable person consider Xs conduct as an offer?

vii.RESTATEMENT 26

1. Preliminary negotiations

a. Manifestation of willingness to enter into a negotiation is NOT an offer ifperson to whom the manifestation comes knows or should know that themanifestor wants the last word

viii. Advertisements can be offers

1. General rule is that presumption of an advertisement is mere solicitation BUTsometimes an offer


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2. Test: Whether some performance was promise in positive terms in return for some-thing requested

a. Exception to general rule: Where the offer is clear, definite and ex-plicit and leave nothing open for negotiation, it constitutes an offer, accep-tance of which will complete the k

3. Restrictions must be present in the advertisement itself and cannot be raised after

acceptance4. Rule: Offeror has the right at any time before acceptance to modify his offer

5. ONCE CONTRACT BELL HAS RUNG, A CONTRACT HAS FORMED

a. Cant undo previous actions

6. Advertisement analysis:

a. Presumption is solicitation

b. To be a K, must be clear, definite and unambiguous

i. If it contains ambiguous terms, it is not an offer but a solicitation

c. Offeree must adhere to terms

i. Look for restrictions

7. MUST BE REASONABLE

8. TINALEA This Is Not A Legally Enforceable Agreement

a. You cant have a contract without an offeryou need 2 people to get toyes

ix. General rule: Price quotations, standing alone, are not offers

1. Exceptions: Certain circumstances that give sufficient indication of willingnessto enter a bargain (24)

x. Reasonableness guidelines:

1. Reasonable interpretation Main Event

a. Totality of the circumstances

i. Whether all of the facts and circumstances would lead a reason-able person in the position of to have understood the letter tobe an offer to sell the land

b. Language

i. Words of promise, undertaking or commitment preliminary nego-tiations

1. Exception: Strong contrary evidence

c. Parties to whom purported offer is addressed


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i. Identify party offer

d. Definiteness of proposal

i. Definite offer

xi. MAKE SURE YOU DISTINGUISH BETWEEN OFFERS, COUNTEROFFERS ANDMERE REQUESTS TO ALTER PREEXISTING OFFERS

h. Acceptance: Exercise of Power and Acceptance

i. Acceptance by Promise

1. Bilateral Ks

a. Watch the chronology of fact patterns

b. Make you sure you properly identify offeree and offeror

2. Rule: Offeror is master of the offeror (substance terms of offer; procedurehow you accept)

a. If terms of acceptance are unambiguousmust be followed

b. If terms of acceptance are ambiguous can accept in any fashion

3. K Analysis

a. Was there an offer?

i. Objective Test

b. Was there an acceptance?

i. Look to terms of offer4. Rules for Bilateral Contracts

a. Acceptance of offernotice of acceptance is essential and must be commu-

nicated

i. Note: Communication of acceptance to an agent of offeree is not

sufficient and does not bind the offeror

b. Withdrawal of offerunless the offer is supported by consideration, an of-

feror may withdraw his offer at any time before acceptance and communica-

tion of that fact to him

i. Note: Notice of withdrawal to an agent of offeree prior to notice of

acceptance is sufficient

c. RESTATEMENT 30

d. RESTATEMENT 42

e. RESTATEMENT 56


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ii. The Mailbox Rule - 63

1. An acceptance is made as soon as it is out of offerees possession

2. Unless the offer provides otherwise, cannot mail acceptance

3. Offers are very susceptible to revocation

4. An exception to the general rule ofcontract law in common law countries that ac-ceptance takes place when communicated. The posting rule states, by contrast, that

acceptance takes effect when a letter is posted

5. The main effect of the posting rule is that the risk of acceptance being delivered late

or lost in the post is placed upon the offeror. If the offeror is reluctant to accept this

risk, he can always require actual receipt before being legally bound.

6. However, if the offeree mails a rejection and then sends an acceptance (or otherwise

changes his mind), whichever communication is received by the offeror first con-

trols.

iii. Default rule: Bilateral Ks, notice of acceptance is essential

1. Exceptions:

a. Offeror waives notice of acceptance

b. Mailing of acceptance is sufficient

iv. Policy:

1. Fairness

2. Wants to promote mailing system

v. NOTES

vi. (2) Signature, if invited or required as a method of acceptance, constitutes assent to the pro-posed bargain, including a promise to perform the agreement. A signature is not partperformance of the proposed exchange.

vii.Default Rule: An offer can be revoked any time to acceptance.

1. Methods of revocation:

a. Notice

b. Passage of time as express in K

i. Ex: This offer will be revoked within 3 days.

c. Passage of reasonable amount of time if not expressed in contractviii. Default rule: Notice of acceptance is essential

1. Exception: Where the terms say otherwise (and/or Mailbox Rule)ix. RESTATEMENT 62x. UCC Sale of Goods

1. Cant have K without an offer (and then acceptance)a. 24: Objective test = Reasonable person + justificationb. 26 ExceptionNo offer is a reasonable
http://en.wikipedia.org/wiki/Contract_lawhttp://en.wikipedia.org/wiki/Contract_law


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2. In determining whether there was an acceptance, look to the offer3. UCC 2-206

a. (1)(b)i. Shipment + letter = accommodation

1. Also, accommodation turns shipment into a counter-offer be

cause it is not what offered to buy

a. Remember: Counteroffer alters terms of offer

ii. Under 2-206(1)(b) it is possible to accept by shipping non-con-

forming goods and by shipping non-conforming goods breaching

their k

1. Non-conforming goods = acceptance + breach seasonable

notification of accommodation

2. Non-conforming goods has serious consequences for a busi-

ness

i. Acceptance by Performance Not a Promise

i. Unilateral Contract Promise for Performance

1. 1 party offers promise, the other party acts

a. Ex: I promise to bay $100 to whoever finds my dog

2. Only FULL AND COMPLETE PERFORMANCE can constitute as a contract

3. Formation occurs at its completion

4. Distinction:

a. Bilateral : If you want a promise, notice of acceptance is essential

b. Unilateral : If you want performance, acceptance is performance

5. Butreasonable time to complete once they start performance

a. Performance is acceptanceno need for notice of acceptance

6. Mere PREPARATION is not tender of a performance

7. Must be SUBJECTIVE awareness of the offer

a. (Glover)no acceptance if offeree doesnt know the offer exists

8. RESTATMENT 51

9. RESTATEMENT 53 (3)

10. Rule: When writing is ambiguous, construe against the writer


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ii. Bilateral Ks

1. Caveat 1 : Offeror can waive notice of acceptance (default) rule

a. Ex: Vega acceptance was signature unfortunately Trust did not sign

2. Caveat 2: Mailbox Rule

3. Rule: Revocation must be communicated prior to acceptance

a. Notice effective upon receipt

i. Contrast with Mailbox rule which only applies to acceptances

Unilateral BilateralIssueNotice of No 54 YesessentialAcceptance 56

32, 2----------------------------------------------------------------

Effect of Option K Both are boundPart 1 side bound, other side 62Performance has reasonable choice.(on offeree) 45

Offeree bound, offeror has

Option

iii. RESTATEMENT 46

1. Analysis : Must revoke through similar means as offer was communicates

iv. RESTATEMENT 45

1. Analysis :

a. Only applies to unilateral offers where only performance is demanded

b. Creates an option k for unilateral ks

c. If somebody commences performance in unilateral option k land, there is no

k until the performance is completed


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d. Reasoning is that when people are invited to perform, once they begin they

have an option k

e. Option k in this scenario, anybody who starts performance, has a reasonably

opportunity to complete it

i. Will not revoke on people until reasonable time has passed

f. Legal fiction applied to unilateral

g. Each step of performance is like a down payment similar to hypo below

h. Note: Must have actually commenced performance

i. Basically, if you have commenced performance you have reasonable

time to finish

i. Option k who is bound? Only one side (offeror).

i. Cannot revoke on performers who have begun, but can revoke on

performers who have no begun

ii. However, performer can revoke (but cannot change his mind)

v. Heading back to bilateral ks:

1. An offeror can revoke any offer any time prior to acceptance

a. Must get notification

i. Mailbox Rule is a balance against that

vi. To make an acceptance of an offer, you must know of the offer

1. Minority: Even if offeree does not know, you should pay them if you get the perfor-

mance you want

2. Majority: Notice of offer is essential

vii.Intent to perform, and not motive, is essential in unilateral ks

1. Different from Glover (reconcile)

a. Glovers main issue was performance came after performance was achieved

viii. Rule: Unilateral k may be enforceable when the promisor has received the desiredservice even though the service was primarily motivated by a reason other than the offer

ix. Follows that unilateral k may arise even though at the time of performance the offeree didnot rely subjectively, i.e. was not primarily motivated by, the offer

x. 53: creates rebuttable presumption of acceptance arising from performance when the of-fer incites acceptance by performance (unilateral k)


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1. Law thus imputes to a person an intention corresponding to the reasonable meaningof his words and deeds

xi. RESTATEMENT 26

1. Solicitation Subjective Offeree knows or has reason to know that the offerordid not intend to be bound

xii.Review:

1. Bilateral

a. Offeror is master of offer

b. Promise for promise

c. Default Rule: Notice of acceptance is essential (Hendricks v. Behee)

i. Exception: Waiver of notice of acceptance; revocation; passage of

time (reasonable amount of time or terms of offer (i.e. you have 10

days to accept)

2. Issue : Effect of part performance by offeree in bilateral and/or unilateral ks

a. Restatement 62. Effect of Performance by Offeree Where

Offer Invites Either Performance of Promise

i. (1)Where an offer invites an offeree to choose b/w 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 accep-

tance by performance

a. Note: Offeror must want either as sufficient forms of

acceptance

ii. (2) Such an acceptance operates as a promise to render complete

performance

3. Unilateral

a. Acceptance comes from complete performance

i. Notice of acceptance is not required, unless expressly required byofferee

b. Often, complete performance will be evident to the offeror of acceptance

(Dog reward)

i. But sometimes it may not be (Carbolic)

xiii. Issue: 2-205 requires writing, but here argues that firm offer was oral

1. Court rejects this argument:


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a. Merchant + firm offer (deadline by which it may not be revoked) + writing

= 2-205 is satisfied

2. However, if you use firm offer orally, it has a similar effect to a writing

a. The purpose of 2-205 is only to establish a type of offer that, although no

supported by consideration, is nonetheless irrevocable.

j. Acceptance By Conduct or Silence

i. RESTATEMENT 69

ii. Default Rule: Silence is NOT acceptance

1. Exception: Conduct Silence is acceptance because Defendant is acquiring a ben-

efit

iii. Application:

1. Conduct = acceptance

a. Acceptance not communicated verbally, but by conduct b/c is receiving a

benefit

b. 69 Acceptance by Silence of Exercise or Domain

c. Both an implied and express contract

iv. UCC goods

v. Court holds there may have been an implied acceptance based upon prior conduct

vi. Significance is that previous dealings set an island of expectation in the formation arena

1. When I do something, and you do not reply, I assume you have accepted

vii. Here, offer + silence in the context of previous dealings in which they had never declined

verbally and had always shipped within a week (Ammons)

viii. Counter-arguments: The fact that had not sent the product within 7 days indicated

that they did not accept s offer

ix. Restatement 69. Acceptance by Silence or Exercise of Dominion

1. (c)Where because of previous dealings previous dealings included effectu-

ated deals w/silence silence creates reasonable island of expectation the deal had

gone through

x. Restatement 69. Acceptance by Silence or Exercise of Dominion

1. (b) where the offeror has stated or given the offeree reason to understand that as-

sent may be manifested by silence or inaction, and the offeree in remaining silent

and inactive intends to accept the offer


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a. One of the extraordinary moments in k law where we will get subjective,

not objective

b. Place where person manifesting is allowed to express subjective beliefs re-

garding his acceptance of the offer

c. Will most commonly use (a) and (c)

k. Time When Acceptance is Effective

i. Mailbox Rule Revisited

1. How do you get around the mailbox rule?

a. Master of offer terms:

i. Create a deadline in the offer

ii. State that it will not be accepted until received by offeror (not sent)

iii. Impose that acceptance cannot be mailed

b. Otherwise, default rules apply reasonable medium

2. Rule : Mailbox rule only applies to acceptances

a. Unless otherwise provided goes to offeror as master of terms of accep-

tance

b. Restatement says that it will apply even if the mail is sent, but does not get

there

i. Note: Must be sent

ii. RESTATEMENT 40

1. Analysis: One consequence of rejecting in the mail (not effective until received) the

offerees power of acceptance is nullified

2. When acceptance is received after rejection, it becomes a counter-offer

a. They get to say yes or no and bind you

l. Nature and Effect of Counter Offer

i. Default Rule: C-O destroys power of acceptance and thus destroys previous offer

1. Note: Either offeror or offeree can K around this rule

ii. C-O makes C-O party the new offeror

1. Grants new offeree the power of acceptance

iii. C-O is bound by new offer if accepted


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iv. RESTATEMENT 39

v. RESTATEMENT 59

vi. RESTATEMENT 61

1. Differentiates

a. Conditional acceptances not acceptances at all; depend on changed terms(59)

b. Genuine acceptance accompanied by mere inquiries, suggestions (accep-tance)

i. Note that added term may be no more than what is already expresslyor impliedly stated in k, if so, the extra terms are not C-O (not dif-ferentiating from offer)

m. Assent in Electronic Communication

i. Objective manifestation is not really applicable in cyber space

ii. K terms do not quite apply in cyberspace

1. Policy : Fairness

n. Termination of Offer: Destructions of Power of Acceptance

i. RESTATEMENT 36

ii. Revocation

1. In formation realm

prior to acceptance (unilateral

performance; bilateral

communicated acceptance via promise)

iii. RESTATEMENT 46

iv. RESTATEMENT 42

v. RESTATEMENT 43

o. Irrevocable Offer: Option Contracts

i. RESTATEMENT 87

ii. RESTATEMENT 25

iii. RESTATEMENT 37

iv. RESTATEMENT 64

1. Unless the offer provides otherwise,

a. (b) an acceptance under an option k is not operative until received by the of-

feror


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i. OPTION KS ARE EXCLUDED FROM MAILBOX RULE

b. Rule: Option Ks C-O does not terminate original offers

v. Option is a k, the negotiations for the making of which are concluded by the execution anddelivery of the option

1. Minds have met

2. Distinctive feature: Promisor binds himself to keep the option open for the electionof the promisee for and during the time stipulated or implied by law

vi. Under an option, the act necessary to raise a binding promise to sell is not an acceptance ofthe offer, but rather the performance of the condition of the option k

1. Thus, the rule peculiar to offers to the effect that a conditional acceptance is a rejec-tion of the offer is not applicable to an option k, supported by consideration and fix-ing a time limit for election

vii.Rule: Irrevocable offers (option ks) C-O or other negotiation does notterminate the power of acceptance

1. Option k unilateral k

a. Money for performance (exercise of option)

viii. At most waiver is rejection of right, but waiver not supported by consideration oran estoppel can have no effect upon subsequent assertion of right

ix. An option holder may complete a k by communicating his acceptance despite the fact hehas previously rejected the offer

x. Where before the acceptance the option offeror has materially changed his position in re-

liance on the communicated rejection (selling or contracting to sell the subject matter ofoption k elsewhere), the subsequent acceptance will be inoperative

Contracts Outline (Regan 1)

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