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INTENT TO CONTRACT A. Mutual Assent 1. An essential prerequisite to the formation of a contract is an agreement: a mutual manifestation of assent to the same terms established by a process of offer and acceptance. 2. It is possible to have mutual assent even though it is impossible to identify the offer and the acceptance. B. Objective and Subjective Assent and Intent 3. Objective manifestation of Intent What a party says and does rather than what a party subjectively intends or believes or assumes. 4. Objective theory under this theory the mental assent and intent of the parties is irrelevant. The acts manifesting assent must be done either intentionally or negligently. 5. Objective approach under this approach a contract has nothing to do with the personal, or individual intent of the parties. A contract is an obligation attached by mere force of law to certain acts of the parties, usually words, which ordinarily accompany and represent a known intent. 6. To act intentionally means to act with the intent to do the acts and not necessarily to desire the consequences. C. Intention to be Bound or Intend Legal Consequences 7. Parties to a contract need not manifest an intent to be bound or think about any legal consequences that might flow from their agreement. 8. If, from the statements or conduct of the parties or the surrounding circumstances, it appears that the parties do not intend to be bound or do not intend legal consequences, then, under the great majority of cases, there is no contact. 9. The intent not to be bound or to intend legal consequences need not be explicitly stated; it may be inferred from the circumstances. The inference is that the parties did not intend legal consequences with the result that there is no contract. INFORMAL CONTRACT WITHOUT MUTUAL ASSENT OR CONSIDERATION B. Reliance on a Promise as Ground for Enforcement: The Doctrine of Promissory Estoppel. 1. Conduct in reliance on a promise is sufficient reason for specific enforcement in equity but not for giving a judgment for damages. 2. In some cases, the doctrine of promissory estoppel will justify the award of an equitable remedy when it does not justify a judgment for damages. 3. The equitable remedy does not have to be specific enforcement of the promise. Equity had power to award damages in lieu of specific enforcement. It could award restitutionary remedy measured by the benefits received instead of following the usual rules for measuring damages. It could moderate the damages awarded by restricting them to the amount by which the plaintiff was actually out of pocket, without attempting to compel the defendant to pay over the full expectation damges. 4. The remedy given to a plaintiff who sues for breach of a promise on which the plaintiff reasonably relied can be made dependant on the extent of the action or forbearance in reliance (reliance damages). At the same time the court should make the value of the performance promised by the defendant the maximum that is recoverable. As in other cases the burden of proof is on the plaintiff. 5. An oral contract for the sale of land for an agreed price, that is unenforceable solely by reason of the Statute of Frauds, should be much more readily enforces because of 1

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conduct in reliance than should a gratuitous promise to convey land, even though the latter promise is in writing. 6. In determining whether conduct in reliance on a promise is sufficient to make that promise enforceable, a number of questions need to be answered, First, was the conduct in reliance actually bargained for by the promisor and given by the promisee in exchange for the promise. If yes, we have a case of true consideration. If no, additional questions are suggested. a) Was the conduct of the promisee actually induced, in part or in whole, by the promise? b) Was the action or forbearance substantial, constituting a material change of position by the promisee? c) Did the promisor desire or request it, even though not offering the promise in exchange for it? d) Did the promisor have reason to foresee such action or forbearance as a probable result of the promise? e) Was the promised performance costly or difficult? f) What ration does the cost or value of the conduct in reliance bear to that of the promised performance? g) In light of the answers to the foregoing questions, what remedy, if any, will be just and equitable? Full Money Damages Restitution Reliance Damages Specific Performance II. PROMISSORY ESTOPPEL C. Introduction 7. Created as a separate and specific doctrine in the 20th century. 8. Prior to that, the doctrine was used in a limited way to include: Family promises A promise to make a gift of land Gratuitous agencies and bailments Charitable subscriptions Marriage settelements D. Restatement, First 1. Elements required for the doctrine to operate: A promise is required. The promise must be one which the promisor should reasonably anticipate will lead the promisee to act or forbear. The reliance must be of a substantial character The promise will be enforced only if injustice can be avoided by enforcement of the promise. Although not stated, the notion is that the promise will be enforced as made or not at all. E. Restatement, Second 1. Four important changes in the formulation of the doctrine:

a.) Text has eliminated the requirement that the reliance be definite and substantial. b.) A new sentence was added permitting flexibility of remedy. Thus the promise need not be enforced as made but may be enforced to the extent of reasonable reliance. c.) It provides for the contingency of reliance by a third party. d.) It contains a provision that a charitable subscription or a marriage settlement is binding without proof that the promise induced action or forbearance. 2. Present approach to gift promises. a.) Initially the courts used promissory estoppel as a substitute for consideration, with the impetus given to the doctrine by the two Restatement, it is fair to say that the present tendency is to use promissory estoppel in just about any case where the necessary elements are present. 3. The doctrine has been used in a Business Context. To make an offer irrevocable To enforce a promise that is part of an otherwise unenforceable defective contract. To enforce a promise made during the course of preliminary negotiations.