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GENERAL INFO o Contracts Form of an agreement Elements: Offer Acceptance Consideration

INTENT TO CONTRACT o LUCY v. ZEHMER Sale of land/ real property requires contract in writing (statute of fraud) Zehmer did not intend to actually buy land from Lucy Zehmer argues he was joking However, his outward expression was serious Lucy rightfully concluded that Zehmer was serious about purchasing land and that his writing out a memo constituted a contract MAIN: Objective theory: reasonable person concludes if contract by other persons outward expression EXTRA INFO: o As a general rule if there is a lack of capacity to make a contract, if mentally impaired, or taken controlled substance, law would protect you if didnt have the capacity to make a contract o In this case there was enough evidence to show that they were not intoxicated i.e. the
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lengthy conversation. Not intoxicated to the extent of being unable to comprehend.

o BALFOUR v. BALFOUR

Made agreement that Mr. would pay 30pounds to Mrs. while in England After awhile, they split Mrs. says she still wants her 30 pounds bc made contract= wrong MAIN: Reasonable people wouldnt expect legal consequences in this case bc of the relationship and circumstances MAIN: Legal intent has to be present during the formation of the agreement, cant go on later and enforce agreement

o K.D. v. EDUCATIONAL TESTING CENTER Before taking exam, KD signs contract that states that center can refuse to send scores if suspicious KD argues that contract was contract of adhesion, forced to sign it MAIN: Although KD is right that is was a contract of adhesion, thats not a bad thingupholds integrity, policy KD also given reasonable opportunity to retake test for free

THE OFFER
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A promise to do or refrain from doing some specified thing in the future conditioned on the other partys acceptance.

o The Offeror makes and Offer to the Offeree, which creates the power of acceptance within the Offeree
o

Usually offers contain some offers or promisesand the offereree contributes a promise or act.

o **However it is important to note that promises are not always explicitly stated and there are a number of expressions that border on, but are not promises.

o HAWKINS v. McGEE Dr. McGee solicited Hawkins to repair his burned hand Mcgee promised to repair his hand back to normal make hand 100% Dr. failed to do so, actually made hand worse, regardless, his specific promise was not fulfilled MAIN: If promise is very specific then must be upheld, or would be breach of contract EXTRA INFO o Contract Damages

Damages is the difference between what you got and what you should have hand (i.e. perfect hand v. messed up hand)

o CRAFT v. ELDER Ad in paper says Thursday only special for a sewing machine for $26 , normally $175 Accepted by showing up and tendering the money Def refuses sale, and plaintiff sues for $149, benefit of the bargain
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MAIN: In general, ads are not offers; rather, invitations for customer to bargain and make an offer for you to buy it and the vendor to either accept or deny offer ; you get damages via consumer protection laws but not through contract law

o LEFKOWITZ v. GREAT MINNEAPOLIS SURPLUS STORE

Exception to the general rule that ads are not offers In ad, said first come first served $1 each 1 black lapin stole beautiful, worth $139.50 for $1 Plaintiff tenders $1, def says house rules only women can buy Plaintiff files suit, sues for monetary damages The black lapin stole ad is the only one that has a specific price or $139.50 Def argues that he is just inviting customers to make an offer, ads are not offers MAIN: When the ad is very definite, specific, explicit then its an offer

Promissory aspect in this ad is first come first serve ; leaves nothing left open for negotiation; the second restatement says ads can be offers if it has promissory language like first come first serve

o LEONARD v. PEPSICO Plaintiff wants to get the harrier jet in the Pepsi commercial Collects Pepsi points and buys the rest of the remaining pts for $700,000
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Pepsi commercial: satirical, exaggeration Jet is not in the Pepsi catalogue Two reasons why there is no contract bc there is no offer bc: It was an ad, which means its not an offer, its an invitation The commercial was not sufficiently definite, did not mention steps on how to accept a jet, not in the catalogue (does not fulfill exception)

Even if you found this to be an exception, which is not, we have another reason why this isnt an offer, bc no reasonable person would think this is an offer (lucy v. zehmer), objective standard, reasonable test; was a joke, exaggerated fantasy, $23 million for jethuge price differential, etc. What if the person truly believed that the offer was serious? Doesnt matter, bc they used an objective standard, dont care what you thought, would a reasonable person think this is a serious offerno

OFFERS DISTINGUISHED FROM PRELIMINARY NEGOTIATIONS AND PRICE QUOTATIONS o These are NOT offers o Estimates

Estimates are like advertisements, the inquiry to start the bargain process, it is NOT an offer, its an invitation to negotiate Exception: Estimates CAN BE offers, just bc you use the word estimate in your contract doesnt mean there is no offer In response to an inquiry, give an estimate, which may be a legit offer that may be accepted
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o LONERGAN v. SCOLNICK Scolnick selling 40 acres of land Lonergan is a potential buyer Communication through correspondence/letters Def places ad in paper, invitation to negotiate In response to the inquiry to the ad, the def writes letter to plaintiff describing the property, etc. Def writes back that this is the property and the rock-bottom price is $2,500 and its a form letternot an offer yet, just a continuation of the ad, more explicit ad, fact sheet Plaintiff responded to form letter with question about banks no definite words of promise, not an offer yet Def writes back that bank is ok, but there are other pple interested in property so act faststill negotiating, not an offer Def sells property to third party Plaintiff thought that the land was going to be his, started to do escrow to try to make it a legit offer MAIN: never offer bc preliminary negotiations

o FAIRMOUNT GLASS WORKERS v. CRUNDEN MARTIN WOODENWARE Cruden makes inquiry Fairmount responds with quote prices and specifics Cruden reply to Fairmount, asking for 10 car loads of jars per quotation Fairmount says cant fill order
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Cruden says there was a deal, bc they sent specifics via letter Farimount said it was just a quote, not offer Generally quotes are not offersbut this case is exception

MAIN: Pulled out 3 items that determined it as offer:

o

For immediate acceptancereasonable person would think that it was an offer bc these words indicate it Specifics in their quotethe prices, latest date to ship, quantity, etc. [lapin stole] Quote in response to an inquiry, not just sending out ads to everyone, NOT a form letter

o Factors in determining between quote and offer If its a form letter v. to specific party Does the buyer know that the seller is bargaining with others, less likely being offer, more invitation Is the potential the seller responding to a specific inquiry or initiating the communication (i.e. Fairmount) Is the offer/quote specific enough for it to be an offer Is there promissory type language, especially in real estate What does the thing call itself, offer or quote but depends Is it real property?

INTENT TO MEMORIALIZE AND INDEFINITENESS o Intent to memorialize

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Parties are going to have a writing, whats the significance of the writing Three scenarios:

The parties make it clear that they do not intend to have a contract at all until actually they memorialize it in writing, do not intend legal ramification until we have a signed writingcontract forms when they have the actual signed writing (if you dont want to get caught into a contract, you should make clear that you dont have a legal contract until you have a signed writing) Parties do say they want memorialization, nothing than a record of their deal; make clear that verbally made contract now, and have the receipt to prove it Make it clear that they intend to have a memorialization, but do not say what it represents, do not say that have a deal when have writing or dont have a deal

Restatement 27= parties can make it clear that they dont have a deal until they have a signed writing

TEXACO case [ example of intent to memorialize] Pennzoil v. Getty Penn v. Getty working the deal, penn wants to buy getty and their shares Tortuous interference with a contract, tort to convice another party to breach their contract Penn suing Texaco, bc Texaco interfered with an existing contract First have to determine if contract exists before knowing its a tort
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Deal between penn and getty, are they pretty far along with getty? o They met, negotiated on a price o Met with the boards, and came to an agreement with price o They didnt work every single detail, but have they done enough to strike a deal without intent to memorialize? o Both had press releases saying they reached an agreement They outline their deal, price

The next morning, the investment banker goes to Texaco to find a better deal, Getty ends up going with Texaco, deal goes through Penn files suit for tortuous interference Trial court found binding agreement between penn and getty MAIN: It is the parties expressed intent that controls which rule of contract formation applies; to determine intent a court must examine the words and deeds of the parties, bc these constitute the objective signs of such intent Several factors to determine if waited to have a writing or not: o 1) whether a party expressly reserved the right to be bound only by a signed writing Texaco says language in press release was hesitant Court says that its not clear that the party said we dont have a deal until we have a writing, so can have a deal earilier
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o 2) was there any partial performance Did penn perform under this deal at all? Texaco says Penn didnt really do anything, i.e. building signs, etc. court agrees, but not a determinative factor

o 3)whether all essential terms of the alleged contract had been agree upon Texaco claims that they didnt work out all the other terms Court says that they did agree on the essential terms, not the other terms which is not as important

o 4) whether the complexity of the transaction expects a formal writing

This is a big deal Plays in Texacos favor But not determinative factor; court needs to look at entire circumstance

Court says contract had been formed when Texaco came in NOTE: If there had been too many holes, indefiniteness, no deal would have existed, so tort would have been committed

o Indefiniteness We have an agreement, the parties have agreed on something, offer and acceptance, as part of process, is there a chance we have something missing? Do we have terms missing? Do we have contract if there are terms missing?
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Missing terms in an oral agreement, a written agreement; in general in any agreement, so we have too much indefiniteness? Three types of missing terms:

They have addressed the terms but never reached an agreement on the terms, but talked about it NEVER AGREE ON TERMS The parties left terms it outNEVER TALKED ABOUT TERMS Agree to agree cases, the parties agree that theyll agree to agree on a term, do we have a contract even if they did not agree on the contract, but rather the term? AGREE TO AGREE cases

Courts didnt like indefiniteness, courts tend to fill gaps, less likely to void an agreement on missing terms as long as they are not important; modern courts try to salvage contracts if they think contract exists

HAINES v. City of NY (example of indefiniteness) NY trying to protect water source, contracting with these towns whereby NY will maintain repair sewage plants bc they dont want their water to be contaminated by these towns Haines wants to construct residential complex and link to sewer lines Sewer lines cant accept, dont have room Haines wants city to build a new sewer plant bc still expanding Theres no longer a contract enforced, bc left out term durationwe have a missing term city says that bc of missing term, the contract is terminable at will We have a missing a term, its indefinite
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Court is gap filling, says reasonable period of time , Haines wins on this issue bc court fills in missing element of duration The second issue, interpretation, now we have terms, what do they mean? Haines thinks city needs to build new plant to maintain city NY was responsible to maintain sewer, but not to expand and build new plants, bc thats not interpreting terms in a reasonable fashionHaines loses on interpretation issue, contract enforced but doesnt cover him

o WAGENSELLER case

Theres a missing term in the employment contractduration Most employment deals lack duration After trip of not partaking in obscene behavior, harassment began, fire her and contend that she was an at will employee

RULE: We can terminate you at any time for any reason, bc no indication of duration in contract for employment= fired at the will of the employer for any reason: EXCEPTIONS to at-will:
o

Public policycan fire for no cause, reasonable cause but not a bad cause; cant fire for morally wrong reasons [the majority rule]; Look at it objectively; Anything thats against the law= morally wrong Contractrequires proof of an implied in fact promise of employment for a specific duration, as found in the circumstances surrounding the employment relationship
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Implied in law covenantthe employment contract an implied-in-law covenant of good faith and fair dealing and have held employers likable in both contract and tort for breach of that covenant

Indecent exposure at retreat= crime Fired bc didnt violate the law= bad reason for being fired (plaintiff wins this aspect) Policy manual part of her contract, indicates procedure for termination; question is if the policy manual is part of contract, if it is then she cant get fired Court feels that the policy manual was most likely part of the actual contract Court doesnt like CA rule (good faith and fair dealing), doesnt apply it Modern trend towards Good faith and fair dealing approach NOTE: In general, courts are looking to rescue contracts, they want to be deal makers instead of breakers; not traditional rule in common law; overtime began to fill gaps

o SOUTHWEST ENGINEERING case Dealing with a sale of goods, generators Southwest go to Martin to get lighting materials to do their job Quote not an offer, looking for promissory language, however, exception in subcontracting situations Martin said that generator is $18,500 Southwest then put in their bid with this price Then meet in person, Martin raises price to 21,500, Southwest then agrees with itseems like they have deal at this point
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Martin writes back 3 weeks later, hereby withdraw all verbal quotations. Court has to determine if there is a contract at this point and if so what terms are missing? Martin says that they never agreed on the terms of payment, not found in contract they had, they discuss the terms but not full discussion and they dont agree on it, its a missing term, its material, and therefore, we dont have a dealtrue that terms are missing

o UCCuniform commercial code Not a full set of laws, control certain aspects dealing with the sale of goods only (movable stuff) There is no fed laws dealing with sale of goods; there are uniformed laws that are adopted by states These codes are sent out to states, states have option of adopting them Doesnt deal with services or real estate UCC is a deal maker not breaker, encourages contract formation UCC applies to merchants and non-merchants; merchant provisions may apply, but UCC applies bc theres a sale of goods New provisions to UCC, article 2, made it gender neutral, and substantial changes; no state has adopted the new provisions of article 2 BMC case (example of UCC) is this the sale of goods? Barth says it was a sale of goods
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Predominant Factor test to determine if sale of goods o Is the predominant factor the goods or services o Look at the language If says buyer and seller then denotes goods purchase order Billing terms

Court says that it was predominantly sale of goods (language, terms, etc.) Although it involves a lot of service work, you are basically buying equipment MAIN: UCC applies bc it was a sale of goods

UCC GAP-FILLERS, applies when dealing with indefiniteness, 3 types 2-204 (3)FORMATION IN GENERAL o Even though one or more terms are left open a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonable certain basis for giving an appropriate remedy. Determines if court should fill gap But first have to determine if they intended to have contract Court will gap fill if they intended to have a deal The more you have open, the less likely they intended to have a contract

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THIS SECTION IS SATISFIED BC THEY DID INTEND TO HAVE A CONTRACT (in Southwest) Now, can we gap fill for the missing terms?

2-310(a)PAYMENT TERMS missing o payment is due at the time and place at which the buyer is to receive the goods even though the place of shipment is the place of delivery. o Has to do with time of payment which is the omitted term in question o So gap fill for terms of payment

2-305 (1)PRICE TERMS missing o UCC gap fill when intended contract, with reasonable price o (4) (if parties dont want gap filling, say that dont want a contract until we come up with a price, so no gap fill)

2-308PLACE OF DELIVERY missing o If intended contract, then UCC will gap fill with the Sellers place of business

2-309 (1)TIME OF SHIPMENT missing o Gap fill with reasonable time

2-309 (2)INDEFIENTIE IN DURATION o Open for a reasonable time but terminable at will

o Agree to Agree cases WALKER v. KEITH Already have a 10yr lease, theres an option to extend the lease
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Give someone the choice, if they wish to exercise, to renew the lease Lessee gave proper notice, but unable to agree on price Option, rental will be fixed in such amount as shall actually be agreed upon Going to agree to agree on a lease renewal term on price Court concern, do we have a contract? Price is a material term, important Trial court gap filled, $125/month, a reasonable price A complete oversight, is totally left it open so we will fill it for you But in this case they agreed to agree, court says theres no agreement there at all, we dont write contracts for you, havent reached agreement Majority view for agree to agree cases: not a contract, thus, will not gap fill, parties must make deal themselves (non UCC) [ some jurisdictions use different viewpoint] An agreement to agree simply does not fix an enforceable obligation.

BASKIN ROBBINS case UCC not involved bc sale of property in question CA jurisdictiondiff rule in agree to agree cases, bc it is a diff state than Walker case Copeland wants to buy plant from Baskin Co-packing critical term Intended to have a deal Is there a missing term, agree to agree term?
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o Price of ice cream, co packing agreement Baskin will negotiate about co packing term, never reached agreement Baskin stops negotiating, dont want to go through deal Copeland says we have a deal, ya we have the copacking agreement as an agree to agree term, tells court to fill it for us, you know we had a deal, Copeland could have done that Does CA follow a more progressive approach or the traditional approach seen in previous case? o It is still the general rule that where any of the essential elements of a promise are reserved for the future agreement of both parties, no legal obligation arises until such future agreement is made. o Traditional jurisdiction o Not going to enforce contract o They didnt negotiate the co packing term in good faith Case is about that co-section, they agreed to negotiate and Baskin broke that promise this was infuse with this obligation to negotiate this co packing deal Copeland wins bc Baskin breached their deal to negotiate, not in good faith, damages for failure to negotiate is not loss profit bc that would mean agreement was enforced, Copeland gents out of pocket costs for negotiating with Baskin

OGLEBAY NORTON v. ARMCO [ extreme example in agree to agree arena] Trial court has four findings: o Both parties intended to be bound by contract
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o If pricing mechanism fails, then price shall be reasonably based on circumstances at the time the service is rendered o Parties must continue to comply with the alternative pricing provision contained in the 1957 contract o **If trial court held that if the parties were unable to agree upon a rate for the upcoming seasons, then the parties must notify the court. Court will gap fill, if cant then the parties would have to negotiate and will be forced to agree on a price 33 example of where courts will gap fill in agree to agree cases, incorporate UCC-like practices, but not UCC Policy: court is trying to protect, salvage a dying market, if dont come up with some price when pricing mechanism was destroyed then would have a ripple effect on entire steel industry, court worrying about Ohio businesses, dont want it to fail [ different states, different solutions]

ECKLES v. SHARMAN The court follows traditional viewoption clause is just agree to agree , the contact is not enforceable Pension planned undefined, so unenforceable Court says that parties have duty to define it, agree, if cant agree than thats your business, not courts job The parties agree that if any of the clauses fail then the rest of the deal is validseverability clause (not controlling) o Cant sever essential parts of the agreement and still have a deal

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o Would Sharman have entered into this contract without these terms (no pension plan, no 5% ownership ), Sharman says no o Company says not that essential bc Sharman did nothing to define it, never pressed the issue Court cant determine, remand back to trial court, but they cant decide if they can include these terms, they have to determine how important these terms are to determine if there was a contract, will not gap fill these terms [PROBS p.100]

Acceptance o Offeror makes offer to offeree and the offeree accepts Other things to think about 1. Objective reasonable person (lucy v zehmer) 2. Did parties anticipate legal consequences (balfour v balfour) 3. Intent to memorialize (Texaco) 4. Indefiniteness

o Unilateral and Bilateral contracts There are at least two parties in a contract, you can have two parties making promises (bi) or one party making parties (uni) UNILATERAL: Hypo: parties will live in ny, A says I will pay B $100 to walk across bridge, if B walks across the bridge B gets $100, there is only one promise made by A; if B doesnt walk then A cant sue, but if B does walk and A doesnt pay then B can sue Asking for performance, to do the act, the act is the acceptance, not B saying I promise I will walk
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Acceptance by performing the act, completion of walking across the bridge When does the contract form? o Not until B finishes the act o The contract and obligations under the contract form when performance is completed

What if B is walking across the bridge and A says stop walking, offer is longer on the table? o Can revoke it before the contract is finished, but a lot of exceptions

BILATERAL: A will pay $100 if B promises to walk across bridge, now looking for a promise= 2 promises, contract is formed when B says yes, I accept If B doesnt walk, then shes breached the contract and she can be sued, once contract forms when she says yes then she needs to follow through with the legal obligations, if not she is breaching the contract and can be sued If something is very clear, then you can assume its there, if some things are questionable, discuss both sides, analyze it, dont assume and have a conclusion, must show knowledge

o Preliminary Issues with Respect to Acceptance UNILATERAL CONTRACT

1. Offerees Knowledge of Offer (does the offeree have to know about the offer?) Hypo: A publishes in newspaper, very specifc as that hereby offering a valid offer to promise to pay $100 to the first 50 people to walk across the bridge from
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12:01am to 2am on a specific date, and this is a valid offer o B didnt read about the offer in the paper, was walking on bridge for fun, she was part of the first 50 pple, but she didnt know about the offer, A says you cant get $100 o Offer is to induce someones action STATE v. MALM o Reward was offered in this case o A reward is a classic example of an offer looking to a unilateral contract

o Governor of state made an offer reward to those you provide info about guilty person o You do the act and once the act is performed then contract formed and obligations there o Did the plaintiff perform the deed? Yes, she did

o But will not be paid, why? She provided the info too early, before the reward was offered She did not know about the offer when performed the act

o **the Offeree has to know about the offer to accept it** o **The person performing has to know about the offer** o In order to be induced by the offer, must know about the offer

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Exception: This is not under contract law but Grant theory: governmental offers, some states if its an offer looking to a unilateral contract that is made by govt agency the state will nonetheless pay even if the person doesnt know about it; bc benefiting society, its a policy issue, we want to result, so if provide the result then get rewardUSE ONLY IF govt agency [not all jurisdictions use this]

2. Offerees Intent to Accept Hypo: B knows about the offer, its clear, and you do walk across the bridge, do we have to know about your intent? In order for you to collect do you have to prove (who has the burden of proof) your intent was to accept the offer? o Are we going to infer that you had the intent or do we need proof? INDUSTIRAL AMERICA v. FULTON INDUSTRIES o Plaintiff, broker specialist, gets paid when finds businesses to merge o Plaintiff finds Fulton industries, who wants to merge o Plaintiff takes Fulton and matches with BH, so they merge o Plaintiff wants the commission o Was an offer made in this case? And by whom? Fulton made an offer to plaintiff, that brokers fully protected

o Is this an offer looking to a unilateral contract or bilateral? Unilateral, bc looking for act, Fulton says that we promise to pay plaintiffs fee if you find a merger partner
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Plaintiff did perform the act, and knew about the offer Plaintiff says pay me your fee Fulton says will not, wants plaintiff to prove that you did this in order to accept the offer Plaintiff says why should I prove this, shouldnt you just assume

Minority view: the offeree knew about the offer and that she had intent, puts burden of proof on offeree Minority view talks about consideration, that you were induced by the offer, showing some intent

Majority view: were going to have a presumption that you performed the act so you intend to accept the offer, Unless theres words or conduct to the contrary that proves otherwise

CARBOLIC SMOKE BALL CO. (England, 1893) Plaintiff is Louise, saw ad in paper, follows instructions but still contracts influenza Court found that this was an offer, this ad is an offer bc it was specific and had promissory language This is a unilateral contract bc offer expecting performance as response (i.e. I lost my dog, return my dog and Ill pay) She does the act, thats how you accept a unilateral contract, she accepted via performance, in a unilateral contract acceptance=performance
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3. Who is the offeree? Or the potential offeree in this case? Anyone who read the offer, its not limited, most contracts are limited but in this case its not, so unlimited number of offerees

4. Does the offeree have to give notice of her intent to accept? That is, that she is about to perform?

NO, you do not have to give notice of your beginning/ starting of acceptance, which is performance when looking to a unilateral contract (i.e. theres no requirement to call and say im starting to look for your dog) Exception: However, if offeror indicated that there needs to be notice then the offeree would have to give notice to claim reward (when someone brings dog back theres no need to say that im notifying you that Ive finished performance, its inherent in what shes done, its apparent. ) Shes done the act bc shes there to collect reward inherent

Court concluded that Carbolic must pay

o Must know about the offer to accept it When person looks to a unilateral contract the offeree doesnt have to give notice to start performing

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What happens if you know about the offer on your way ? when do you have to have knowledge of the offer?

Knowledge: In state v malmthey say it dep on juris

o

MAJORITY/modern: as long as you find out before you complete the acceptance ,which is the completion of performance MINORITY/traditional: have to know about the offer before you start to act, bc the motivation for your act is the offer

Intent to accept:
o

Majority: if you perform the act than were going to presume that you have intent to accept, unless words or conduct to the contrary (Fulton case)

o She didnt ask for the reward, she was silent so this would be conduct to the contrary o By remaining silent can be construed as intent not to accept; Counteryou can say that as a friend theyll ask for the reward later
o

Minority: we dont have the burden on the owner, offeree has to prove

o 3 VIEWS on Notice

TRADITIONAL Small minority: is no requirement to give notice under any circumstances unless the offeror requires it, be careful when making offers MODERN Majority restatement: there is no inherent requirement to give notice, but in situations where the oferror wouldnt know about the performance of the offeree then they would have to be notified in a reasonable manner; the offeror knows within a reasonable time; the offeror says notification not required
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o 54 Acceptance by performance; Necessity of Notification to Offeror (1) where an offer invites an offeree to accept by rendering a performance (i.e., an offer looking to unilateral K), no notification is necessary to make such an acceptance effective unless the offer requests such a notification (2) HOWEVER,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 that notification of acceptance is not required o there is no contract if not met; did the plaintiff use reasonable time and reasonable means to notify D? Yes, if we assume its reasonable time, did the person use reasonable means?yes letter okay

o When does the contract actually form under this view? Contract forms at the time of acceptance, when gurantor completes performance

More MODERN Minority: its exactly the same as when to give notice (restatement) the only difference is when the contract forms, full performance hasnt been fulfilled until notice is given
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o In this case contract formed when letter is sent Yes theres still a contract in this case, bc the P sent the letter= contract forms at that time, doesnt matter that D didnt receive it But what if offer is revoked before letter is sent There would be no contract bc the contract is formed when letter is sent under this view (but would be contract under view 1 and 2)

o Acceptance by Silence Can you force someone to accept your offer by their silence? Hypo: Unsolicited painter sends email, makes an offer promise to paint your house ,all specifics there, for a state priceno question that valid offer, but you say if I dont hear from you by this coming Monday at noon, I shall assume you have accepted this offer Lets say I dont want my house painted do I have to affirmatively call and say no, can he force me to accept bc I was silent? NO, its not fair, cant force someone to accept by silence

What if I like your offer, and I do want to accept, if I stay silent as in Im accepting. But painter backs out. Can you accept by remaining silent?

2 VIEWS on if person can accept be remaining silent:

o

Vast Majority: an offeree can accept by remaining silent, if the silence was intending to accept; burden is to prove it
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Minority: we want to be consistent, we just cant accept by silence, you cant force someone to accept and you cant accept via silence, you have to communicate your acceptance

EXCEPTIONS to forcing someone to accept via silence DAY v. CATON Plaintiff builds brick wall that falls on both parties land The def is also benefiting from wall Plaintiff says agreement that def was going to pay half, def denies Def wants specific jury instructions o The plaintiff can recover in this case only upon an express agreement o You cant force me to accept things by my silence (general rule) Def is there, def sees wall being built, the def doesnt stop the plaintiff You might infer from the silence of the def, who had knowledge of this act, and it was benefiting the def, then if the plaintiff doing the act had expectations of being paid-- a subjective standard, def knows should have known that plaintiff was expecting money objective standard If all this happens and def doesnt say anything, there was a contract bc acceptance via silence Whats offer being accepted?
o

Reverse unilateral contractperson performs act first, so offer is the performance of the act for the hope for an acceptance back
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So acceptance by silence Lets say that def had knowledge the plaintiff was building wall, if merely watching the wall being built, is that merely enough for acceptance via silence-- no What if def had knowledge of wall and that plaintiff had expectations of money, and that the def knew that plaintiff expected money then you have acceptance if you remain silentyes We assume that the def knew that plaintiff expected money bc a reasonable person would have known plaintiffs expectations, also def benefits from wall also did not object to it

WILHOITE v. BECK Second cousin comes to lives with Beck for over 20 years, unexpected and uninvited Beck is asking for money after second cousin dies Beck says she provided services, benefited def, aware of it Beck said that she had expectations of benefitsubj standard Would a reasonable person in cousins shoe that Beck expected payment?maybe Looking to see if offer, reverse unilateral contract, performance first and then expectation of payment Do we know if there was an express agreement between the parties? o We dont know o No evidence of convo, bc it was never allowed in bc cousin is dead, cant defend herself, not fair
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Is there a rule this case brings up? o Issue is whether the parties are family o If family members, really close, like sisters, would there be expectations of payment?

EXCEPTION TO DAY v. CATON exception: No, theres presumption, when theyre family the court says that theres a presumption that when you provide resources for them you dont expect payment, and the person receiving the resources wouldnt know that you expect it They were relatives, can be someone that is like a family member, treated like family= presumption will arise But can be rebutted We will consider them family BUT can rebut the family presumption if they didnt act like family So can pull away the family presumption, and just look at a reasonable person standard o Didnt act like family o Cousin was indp woman, didnt want to be cared for We have overridden presumption So expectations stand o Acceptance by silence is valid

HOBBS v. MASSASOIT WHIP CO.

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Plaintiff sent def eel skins Def ends up throwing them away Skins sent unsolicitedplaintiff send you accepted eel skins so contract But cant force someones acceptance by silence Doesnt fit Caton fact pattern Lets say Plaintiff and Def had never done business, if you dont return eel skins that you have accepted cant do that But in this case, the Plaintiff and Def knew each other, had done business before, prior dealings, had sent eel skins in the past that were paid for Does the burden ship to def then? o Expectation is different

PRIOR DEALINGS EXCEPTION: o They had prior dealings before, so silence by def amount to acceptance

Common Law Exception:

Dominion over something Situations where somebody sends you something unsolicited Cant force someone to accept by silence But Exception is the DOMINION EXCEPTION NOT an exception any longer bc of state law and fed law 3009 o If the recipient of unsolicited goods exercises dominion of the goods then that would be acceptance
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Using it like its yours, taking control of it You have taken ownership of it Acting in a way thats inconsistent with the owner

3009 Mailing of unordered merchandise o Statute says that if you get something unsolicited, you can treat it as a gift, you get to keep it o If person sends it to you and says you have to pay them then keep it without payingsends message to them, deter them from sending stuff o But if you sign up for it, you want to receive products, then you have to pay, you are obligating yourself **so undone the DOMINION exception**

In HOBBS, we say that had prior dealings but can also be bc he exercised dominion over the goods

ProCD case Weak acceptance, questionable acceptance Would buy software from store Says by opening shrink wrap, by breaking seal, you have accepted these terms= weak acceptance, bc accepting just by opening seal Case says that yes, you have agreed to terms bc you broke shrink rap Electronic area of acceptance:

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o Click wrap I accept term, when downloading software o Browse wrap you agree to the terms on this website, click this link to see what it is

o When may an Offer to a Unilateral Contract No Longer be Revoked? When completes the walking/performance then the acceptance is complete Can he revoke the offer in the middle of the performance?

Yes, you can do that, so in the middle of walking or painting can revoke the offer bc not completed= traditional view In a bilateral contract this is not an issue bc you have to promise first and then do the performance o GEN. RULE: Theres a general rule in contracts that generally an offer can be revoked prior to acceptance o So in bilateral situation, offeror can revoke the offer any time before acceptance

The rule is the same for unilateral contract= can revoke prior to acceptance

3 views

PETTERSON v. PATTSBERG o P is the debtor, owes money on a mortgage o Pattberg is the creditor o Def writes to P, I will reduce payment if you pay off the mortgage all at once

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o Pattberg says I promise to pay you 780 if you do this act of paying full mortgage before this dateunilateral contract, so completion of the payment would be acceptance o Plaintiff goes to def house and knocks on the door , says who he is, pattberg says you cant pay for it bc I have already sold the mortgage o That is, pattberg revoked offer, through the closed door o Then he opens the door and sees Petterson with the money saying here When is an acceptance of a unilateral contract? Full Performance, performance has to complete When the performance finishes thats the acceptance i.e. walking all the way across the bridge

almost done with the performance and then the offeror revokes the offer

First view, traditional rule standard basic contract rules, can be revoked at anytime before acceptance, before full completion of performance (Petterson v patberg) o theres no contract bc no acceptance bc he revoked, but will still be, bc have done something, some benefit , unjustly enriched if you dont pay something (quasi contract)

if the offeree is not bound to perform, part of logic is that the offeror shouldnt be bound either Many courts view this trad rule a bit differently: o STATE v. WHEELER
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Crim law case Def was offered a plea bargain We promise to give you a better deal if you plea to a lesser charge, or name other people, etc. Unilateral contractofferor is state, will promise in exchange for your act, for you doing this plea bargain At some point, state withdraws this offer before the def has a chance to enter plea bargain, before the act is done, the offer is revoked The court says that this is effective, until performance is complete an offer looking to a unilateral contract it can be revoked (patburg) Court is more liberal with the trad rule: if the offeree relies to their determinet and does something maybe you couldnt revoke that offer, but no evidence in this case

Second view, minority view, discounted by contract scholar, almost absolete: if the offeree starts to perfrom the act looking to a unilateral contract, then at that moment that performance starts that unilateral contract turns into a bilateral contract o In a way, once theres performance theres acceptance looking to a bilateral contract o Under this view, once you take first step on bridge a bilateral contract is created, which means that you are bound to perform bc you have accepted to perform through your first step, unintended consequences now the
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offerree is bound, once you start you cant stop otherwise you would breach contractviewed as illogical, thats why minority view

Third view, majority viewalleviates harshness of Trad rule: preserves the nature of the unilateral contract
o

Once an offeree starts performance at that moment the offer become irrevocable, it becomes an Option Contract Means that the offeror cant revoke the offer, it means you cant stop the offer, offeree says its my option to accept Furnished consideration to have offer opened at my option to make the full contract, if I dont im not obligated to go forward with that Starting to walk has provided that they have each done something they didnt have to do (some detriment) they have furnished some consideration Its at your option to finish, your not obligated to perform, but offer is still there, cant remove offer

PREPARTION IS NOT PERFROMANCEapplied in Majority view When does he end preparation and performance start At some point when his substantial detriment, when started to do something Dep on facts In this case, the person went out in reliance of this and got another loan, didnt help offeror, so it would preparation not performance
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Other cases lean more towards WHEELER

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Idea of detrimental reliance, relying on someones offer to your detriment, did the borrower rely on the lenders promise?yes, reasonably Some courts look at detrimental reliance So in this case the person did start to perform because he had reliance, it wasnt just preparation Second and Third view triggered by performance o Both views dep on the start of performance or just preparation

BILATERAL CONTRACT Bilateral contract, can revoke, Anytime prior to acceptance offeror can revoke the offer, once say ok then you cant revoke Problem is when youre not there to hear the acceptance, and up to what point can you revoke Is there an exclusive method of acceptance, i.e. only by mail, email, etc. If an offer is not clear, whether looking at unilateral or bilateral contracts, what do we do?

If the offer is not clear it defaults to a BILATERAL CONTRACT, should be accepted by a promise, can be implied by ones conduct (i.e. raking of leaves in front of you) A writes to B, will you paint my house by next week, if you do I will give you $10,000not very clear if bi or unibut at default would fall to bilateralso you would accept by saying I promise or performing in front of the person If its unclear whether is bi or uni contract then you can accept by a promise or performance as long as you tell
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the person youre going to perform, as soon as the person starts performing and tells the person or promises its like saying its a bilateral contract bc it forms at that moment BRACKENBURY case Mom lives in Maine, writes to daughter and son-in-law to come to the old home and take care of Mom Court says that this is an offer to a unilateral contract Probs start arising between mom and daughter/soninlaw, so mom wants them out acceptance was the perfrmonace moving to the house by how is the act completed if they took care of her for only 3 weeks? (dont need to know for midterm) If someone prevents you from performing that person is fault, we deem there to be an acceptance bc youve done as much as you can

What would we do if letter was unclear? Dont know if uni or bi When unclear it defaults to bilateral contract, so looking for promise, so we can imply that her moving was the promise/acceptance, acceptance by implication

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MAIL BOX Rule (MBR) o General Info If a rejection is sent, the mailbox rule does not apply to rejections, rejections effective upon receipt, not by dispatch Offeror on revoking the offerwhat if the offeror sends letter revoking offerrevocations effective upon receipt, not by dispatch

o When is an acceptance effective? As soon as it is put in the mail box, refers to email, faxes, couriers, ups, etc.

They say the acceptance is effective on dispatched, as soon as the offeree sent the acceptance in the mail there was a contract, so buyer prevails If a rejection is sent first, MBR is not applicable, its only effective upon receipt, same thing goes for revocation

Can override MBR= If theres an exclusive method of response that the offeror has said, then you must follow those rules for it to be acceptance and thus, contract= offeror being master of his offer So you have to do that, but what if no method is given, then use reasonable method

o HYPO:

1)Offeror sends offer offeree sends acceptance (MBR= K) offeree sends rejection offeror recivees acceptance first offeror recives rejection Contract when offeree sent acceptance, upon dispatch

2) Offeror sends offer offeree sends accept (k) offeree sends rej offeror received rej by phone offeror receives acceptance

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AN OVERTAKING REJECTIONthe offeror sees rejection first Contract form when offeree sends acceptance **Caveat= what if you are the offeror and you receive a rejection by fax, offeree gets rejection first, so offeree thinks that rejected so go makes an offer with someone else, ONLY WHEN THE OFFEROR RECIEVES REJECTION BEFORE THE ACCEPTANCE
o

if the offeror relies to their determinant on this rejection, and then you receive the acceptance in the mail, then you can STOP THE MBR if you have relied on the rejection by making another contract with someone else

3) OR Offer OE sends rej OE sends accept OR receives accept (k) OR receives rej

MBR doesnt apply bc REJ SENT FIRST, BUT FIRST thing RECIEVED was the ACCEP, so CONTRACT, but dont use MBR

4) OR Offer OE sends rej OE sends accept OR receives rej OR receives accept MBR doesnt apply, offeror receives rejection first so NO MORE OFFER, no contract, offer off the table and this acceptance acts as a new acceptance

Interference with phone, cell phone, party line, IM We know that MBR would apply when acceptance is dispatched, thats words of acceptance spoken into the words When on cell phone are they at distance or face to face?

TWO VIEWS: court by court view, not juris

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Contract commentators and some courts= almost always that parties on the phone are face to face Majority courts= considered parties at a distance

o Parties at a distance When words of acceptance spoken into phone then its dispatched and contract formed then But still can be a problem o If I know that my acceptance would never be received bc of interference or no reception, then a reasonable person would want to verify this o There is a contract formation but the person speaking words of acceptance knows that other party didnt hear so wouldnt have contract o Parties in each others presence If offeror didnt hear and not offerors fault, like phone company interfered, then it wont be an acceptance, What if the offeror is just not listening, this is the offeror fault so there is an acceptance

o What if you dont send you acceptance in a reasonable means? TWO VIEWS:

Traditional view: MBR will not apply if not sent via reasonable means, acceptance is not effective until upon receipt Modern view: if you send it by an unreasonable means, as long as it gets there within the same time frame then it would have been received if sent by a reasonable means, and if it gets there
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o What if I said it by a reasonable means, but I dont have due care, like I misspell the address, no postage TWO VIEWS:

Traditional view: if you dont take due care in sending then acceptance not effective until upon receipt , so MBR wont apply Modern view: if you misspell it but it still gets there within the same time frame then MBR applies

What if you give the acceptance to an employee and hand delivers to the person? If you give it to your own employee you havent dispatched it, it still yours bc theyre you agent, its still in your possession so its dispatched when you hand it to the offeror

o What if give it to a private messenger service? Its effective upon dispatch when you give it to the private messenger

Mistake in Transmission
o

Who has the burden, or takes the risk, when theres a mistake in transmission?

Rule: message as transmitted is operative, the offer as transmitted is operative unless the other person knows or has reason to know that there is a mistake

Puts in the mail by mistake But the party that receives it didnt know it was a mistake so can accept the offer, negligence on part of offeror, should have been careful

Termination of Revocable Offers o AJUDICATION/INCOMPENTENCY SWIFT v. SMIGEL

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defs estate arguing about incompetency, they say that the moment that Smigel is adjudicated incompetent then that moment offer terminates, so cant be accepted by Swift, so contracts that were accepted after smigel was adjudicated incompetent then those offers cant be accepted bc end once Smigel is declared incompetent

So someone that has adjudication, incompetency

Majority view: sees this exactly as death, if the offeror is adjudicated incompetent, then the offer is terminated then and there regardless of the offerees knowledge of such adjudication Minority view (swift case), modern: terminated only if the offeree should have had knowledge about the adjudication of incompetency

o Since there is no court adjudication, adjudication is a defining moment, most parties dont go through a court adjudicated incompetency hearing

General rule: when there is NO court adjudication, then the offer is still valid and is terminated only when the offeree knows or should have known of the offerors incompetency Cant ignore signs that mentally incapacitated, you would be taking advantage of the person

o What happens when an offeror dies? Offer is on the table, theres no acceptance yet, that means ,there s no contract

General rule: OFFER TERMINATES REGARLDESS OF offerees knowledge about the death

If theres no offeror then theres no offer

Small/Modern view: the offer is not terminated until the offeree should have known or known about the death of the offeror

TIME
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Prob. 88: Sent letter Jan 29 saying will give you 8 days to accept or reject. P receives on Feb. 2. On Feb. 8, P sent acceptance which D received Feb. 9. 1 2 3 4 5 6 7 8 9

29 30 31 10

I----I----I----I----I----I----I----I----I----I-------I-----------I-----------------I Start Trad. Date of letter Start Modern Letter Recd OE acc. Acc. Recd MBR by OR

Was acceptance timely? When does the eight days start?

o o

Old view: The date from the date of the letter Modern view: Start with the date the letter was received

o No clear majority Do we start counting from the date of the letter or the day after?

Older View: No clear majority. o Split Trad. Starts 1.29/1.30 (8 days later) Modern Starts 2.2/2.3 (8 days later)

Modern View: Start on the date received or the day after.

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Would the result be different if there was a delay in transmission of the offer and without delay the offer would have arrived Jan 30?

Sub-rule: If there was a delay and the offeree knew or reasonably should have known that there was a delay in transmission (receipt of the mailing), then you dont get the benefit of the delay and the start date is the date when the letter should have been received. Incumbent upon court to determine when they should have normally received it

Difficult to determine standards of how long it takes to mail something

o If youre in contemporaneous conversation with someone, it can be on the phone, iming, if its contemporaneous communication, when you break the contemporaneous conversation and havent concluded, hang up phone, anything then the offer expires
o

Some courts pov on late acceptance: if a reasonable time has passed its not an acceptance, its actually a counter offer Progressive courts, minority: trend to make a deal, if the acceptance is late but could be argued that plausibly in a reasonable time, its still not an acceptance but actually becomes a counteroffer, what changes is that counter offer puts burden on the original offeror that they have to affirmatively reject it, if they stay silent then they would accept it Prob. 96 If the main subject matter of the offer, the item or the person integral to that offer, like a building or painter, then it terminates the offer, logical

o Can you make a contract for something illegal? No , its not legally forcible, after you made offer then there was intervening reason that terminates offer before you can accepts

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o Any communication that states or implies that the offeror no longer intends to enter into the proposed contract ,thats viewed as the revocation of the offer o An offer terminates when the offeree acquires reliable information that the offeror has engaged in conduct that would indicate that offer is no longer open Conduct like it is already sold to someone else What if B didnt know that offer was already accepted and theres no language that says subject to prior sale? S would be in trouble, so two pple could accept, problem

MIRROR IMAGE rule and the BATTLE OF THE FORMS

o

Common law mirror image rule: To accept an offer you would say I accept you cant come back with different terms, you cant add terms, you just need to accept; requires a perfect reflection of your offer, which is I accept then you have an acceptance [non UCC]

o If its not a mirror image, it is not an acceptance, its a counter offer o The original offer is terminated by the counter offer o UCC undos Mirror Image Rule

You dont need to be a merchant for the UCC to apply OFR sends order form (offer) to the OFRE (seller) Order form contains a lot of terms, warranty, insurances, quality, etc. Seller get the form and sends back an acceptance form that he will fill the order

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Sellers form will have terms on it/will not be mirror images

2-207 (1)

There is a contact even though the forms are not a mirror image Contract UNLESS acceptance is expressly made conditional on assent to the additional or different terms PROVISO: So offeree says I wont accept unless offeror affirmatively agree to my terms, otherwise im not agreeing

Lets say that seller send the form and doesnt have this express language/proviso, if a contract forms under 2207(1) then we have to go to 2-207(2)

2-207 (2)Addresses ADDITIONAL TERMS [ONLY use when have (1)] So lets say you have an order and the sellers acceptance form adds something, nonetheless we have a contract, so what do we do with the additional terms Additional terms distinguish between if we are merchants (both parties) (business in dealing with goods) and non-merchants Lets assume we are merchants

Between merchants such terms (additional) become part of the contract unless: a. the offer expressly limits acceptance to the terms of the offer; or b. they materially alter it; or

c. notification of the objection to them has already been given or is given within a reasonable time after notice of them is received.
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The additional terms that the seller is adding, if were merchants it become part of the contract unless one of the 3 things come up If we are NOT merchants
o

Between non-merchants, the additional terms in the acceptance are mere proposals looking to modify the agreement only if the non-merchant offeror accepts them. They do not become part of the contract. If not accepted, they merely fall between the cracks and are non-operable.

o We have a contract but the Additional terms become proposals If seller wants to make sure that his terms are controlling o Go back to 2-207(1) proviso, has to be expressed condition o Offeree doesnt give affirmative acceptance= we dont under 2-207(1) o But what if they still accept the goods DIFFERENT TERMS What if you have DIFFERENT terms?code doesnt say , 3 views
o

View 1: different terms treated as additional terms , so use 2-207 (2) View 2: different terms do not become part of the contract unless the different terms are accepted by the offeror View 3: knock-out, the different terms cancel out and we refer to the UCC gap fills (dont need to know what it will gap fill for warranty, but know for time of delivery, etc.) (most popular interpretation)
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2-207 (3)

If contract not formed at 2-207(1) bc if didnt follow proviso (affirmatively accept terms), then 2-207(3) is a catch-all, contract will be formed if we act like we have a contract, This section has its own mechanism with dealing with different and additional terms o Additional terms are NOT added o Different terms are canceled out and Gap filled

Irrevocable Offers o Offers are always revocable but there are some exceptions:

When we have some consideration Became irrevocable bc gave payment, something of value to keep offer open, so if you pay then you have option to accept that offer

o When is acceptance effective? When face to face acceptance immediately effective If parties at distance then offer accepted upon dispatch, MBR

o RULE when offer is IRREVOCABLE: acceptance for an offer thats irrevocable is NOT governed by MBR

Offeror must know about the acceptance, cant use MBR, cant dispatch acceptance on 60th day, the offeror must know about the acceptance on that 60th day Prob 109. Says offer is irrevocable for 30days; even if offeror said that it will be irrevocable in 10 days, can you pull out offer at any timeYES just bc it says its irrevocable doesnt mean it is, its your decision, its not considered a breach Have there been consideration paid, then it truly would have been irrevocable
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o UCC 2-205

ONLY APPLIES TO OFFERS BY MERCHANTS If youre a merchant in a signed writing thats specific enough and says its offer not irrevocable then your offer cant be revoked An offer by a merchant in a signed writing which by its terms give assurance that it will be held open is not revocable, for lack of consideration, during the time state or if no time is stated for a reasonable time, but in no event may such period of irrevocability exceed three months; but any such term of assurance on a form supplied by the offeree must be separately signed by the offeror

Consideration o Mutual assent (ch1) + Consideration (ch 2)= CONTRACT o Giving of something of value o Offeror promises to pay 15,000 if you paint my house Consideration
o

Offeror= 15,000 Offeree= services to paint house

Need consideration for enforcement of contract

o Gift promises not enforceable if lack consideration o ELEMENTS of CONSIDERATION, must have all of these: 1. Promisee must suffer a legal detriment 2. The detriment that promisee suffers must induce the promise 3. The promise must induce the detriment [bracket=BARGAINED for]
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o ELEMENT 1: means that the promisee is giving up something of value That is, they must do something, or promise to do something, that the promisee is not otherwise legally obligated to (i.e. painting a housesomething of value, but not legally obligated to do) You have the right to do it but you are giving up the right (i.e. you have the right to sue for a tort but your giving up that right for something else)

ELEMENT 2: the promisor is making his or her promise because of what the promisee is going to do; I want that action that is why Im making the promise I am making the promise because I want them to do the thing this is what is motivating me, I want him to paint the house (I want him to do the thing that is detrimental to him)

o ELEMENT 3: promisee is induced to doing act bc motivated by the promise of the promisor, the promise thus is inducing the promisees detriment

HAMER v. SIDWAY [ELEMENTS MET] Uncle Bill says to nephew if you stop gambling and swearing till 21 youll get 5,000, nephew accepts= contract formed Nephew carries this out, and writes to uncle saying this The offer was already accepted, a contract forms, so know an obligation of Uncle Bill to pay Estate says we dont want to pay bc this contract fails bc lacks consideration o 1. Does the nephew suffer a legal detriment? Refrained from doing something he was legally entitled to do

o 2. How does the detriment induce the promise?

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Uncle wanted nephew to change his ways, the motivating factor for Uncle to make promise is to make nephew stop behavior

3. Was the nephew induced by the promise?yes

KIRKSEY v. KIRKSEY [ELEMENT 2 NOT MET] P is the wife of the defs deceased brother The def, the brother in law, invites P to come to house and puts her in the nice place Def puts P in comfortable house and gives land to cultivate and Def removed her into the woods, and eventually required her to leave P sues, says that there was an offer made for me to come here and I accepted, you promised things and you breached it, plaintiff awarded money Def appeals, was there valid consideration? [no bc #2 not met] o 1. P moved , left home o 2. Did the detriment induce the promise? [not satisfied] it was a gift I made this promise to be nice, so detriment (to move out) didnt induce the promise (to help, be nice, im not making this promise bc I want you to move out of your house, im just giving you the option/gift)

o 3. She moved bc of defs promise to put her in the house o Can have combination of gift and bargain for detriment, doesnt have to be a huge detriment, can be anything, but
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smaller the detriment start questioning the bargaining component THOMAS case Court says that we do have a contract with consideration, even though the detriment was very small and it was bargained for, and a small detriment, we can still have a contract even it was a gift bc there was consideration

o Good Faith standard

Majority view/1st restatement = there would be valid detriment if

1) the claimant asserted claim in good faith and 2) a reasonable person could believe claim was well founded FIEGE case: Applied here that Hilda asserted in good faith that def was father and that a reasonable person would believe that he was the father

Modern view/ 2nd restatement: requires that either the claimant had a good faith belief that claim was valid OR a reasonable person could have found the claim well founded

o You have a third party suffer detriment on behalf of the party= still valid consideration o Passed Consideration=No consideration cant bargain for detriment that has already occurred Lets say job is done and promises 15,000 but gives 10,000
o

No not valid k, bc the detriment is already done, its already passed, and passed consideration= NO consideration=no K
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Prob 4. offers in general are revocable any time prior to acceptance, death of the offeror can also terminates an offer unless it is irrevocable, and it becomes irrevocable if there is consideration was there a valid consideration o the offeree suffered a detriment BUT the consideration is not valid in this case must be detriment suffered by offeree, must be bargained for, BUT in this case it couldnt have been bc its PASSED consideration= no consideration= so offer is not irrevocable

So when offeror dies, then offer ends with it bc the offer is not irrevocable bc the consideration is not valid when its passed consideration

When you have a mix of passed consideration(bad) and valid consideration(good) then the whole becomes valid So would need one part of it to be valid consideration if together with passed/bad consideration

Not being able to breach a contract is not a valid detriment

o Pre-Existing Duty Rule If one is already obligated, under K, to do something, then, say, if one party wants more money for doing the thing that they are already obligated to do, and this is agreed to, the modification fails for lack of any new consideration.

i.e. Police dept puts out reward for stolen car, officer finds it and asks for rewardwont get it bc inherent in its job, theres no consideration= no additional detriment bc officer under pre-existing duty rule if theres an agreement to pay more for the same job without rescinding contract it would fail bc
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would be lacking consideration, but rescinding a contract and entering into a new one is okay Why do we have pre-existing duty rule?

To prevent shake-downs, hold-ups, theres no valid consideration for this new modification

Potential problem with rule: prevent legit medication contracts where there is no shake down dynamic BUT REMEMBER parties can always modify a contract to, for example pay more money for the job already contracted if the other party is taking on new detriment -- say agrees to do something more for the extra money. EXCEPTIONS to Pre-existing Duty Rule

2nd Restatement: there can be a K modification without new detriment if the 4 requirements are met.

1) the parties voluntarily agree and 2) promise modifying the original contract was made before the contract was fully performed on either side and 3) the underlying circumstances which prompted the modification were unanticipated by the parties and i.e. Didnt expect all this development that resulted in so much garbage

4) the modification is fair and equitable

Angel v Murray [ex of 2nd restatement] the trash collector guy just wanted more money for doing what he was already legally obligated to do. Traditional rules would prevent valid K modification
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but RI happens to be a jurisdiction which uses the 2nd rest. view -- So this modern trend is an exception to the pre-existing duty rule -- basically, no new consideration is needed to modify an existing K, if the 4 factors are met

o "Shake-downs" will still be prevented by the pre-existing duty rule even in these modern trend-2nd rest. jurisdictions (because they would not meet the 4 req). UCC 2-209(1) o Consideration is not necessary for a contract modification, undoes pre-existing duty rule
o

Must be voluntarily agreed to, good faith, unanticipated, etc.so it uses the same four factors but not as explicit in the code

If the offer is made only to one party then, C making offer to A, there is no detriment, theres pre-existing duty, failed for consideration
o

BUT Theres been a growing trend that it some instances when you have a third party comes in and offers to one side, even though they have a pre-existing duty, why does some juris say it is a forceable contract?

Bc it doesnt smell like a shake-down Courts will sometimes see that if theres benefit flowing to the third party, C, then we might be willing to enforce this bc even though A is not experiencing detriment there is a benefit going to the owner, C.

Accord and Satisfaction

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o The accord is simply the agreement or promise to accept the amount paid as being full performance in discharge or satisfaction of the obligation or debt. o Involves debts/obligations growing out of a previous K or relationship. The debtor offers to pay creditor a lesser amount if the creditor will agree (promise) to accept the amount as payment in full. Undisputed/Liquidated Debts: If the debtors debt to creditor is undisputed (liquidated), the promisors promise to accept the lesser payment as total satisfaction of the original debt is without considerationthe promisee had a preexisting duty to pay the full debt. Majority rule, but has faced some criticisms. The UCC allows good faith in modifying a K, does not need new consideration. Even under the traditional rule, if the promisee agrees to do something different from or in addition to his pre-existing duty to the promisor, this is usually found to be consideration for promisors promise to accept the newly agreed-to amount as payment in full. Disputed/Unliquidated Debt and Obligations: If the promisees obligation or debt is, in good faith, disputed/unliquidated, his performance (payment of newly agreed-to amount) will generally suffice as consideration to support Promisors promise/agreement to accept the payment as full satisfaction of the obligation. Check Cashing cases: When the debtor simply sends a check for an amount less than the purported obligation, and on the check or in an accompanying note, writes payment in full. That writing is an offer for payment conditional upon creditors agreeing to accept the lesser amount of the check as payment in fullthis is the accordmust be very clear For Undisputed Debts, there is a pre-existing duty to pay the full amount and the new agreement is not adequately supported by consideration. For Disputed/unliquidated amounts, a check marked payment in full is generally deemed supported by consideration and binding, even if the creditor crosses out the words or otherwise makes note of the check is being cashed under protest.

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