Common Law: Real Estate, Services, Intangible Property

Adhesion Contract: A type of contract, a legally binding agreement between two parties to do a certain thing, in which one side has all the bargaining power and uses it to write the contract primarily to his or her advantage.

For offer/acceptance  objective test  whether a reasonable person would believe the offeror/offeree intends to offer/accept the terms to form a contract?

Common Law: real estate, services, intangible property

UCC Article 2: transactions of goods

Express Contract: agreement manifested in words

Implied-in-Fact Contract: agreement manifested by conduct

Unilateral Contract: results from an offer that expressly requires performance as the only method of acceptance.

- Acceptance = rendering performance or promise of performance

Bilateral Contract: offers for other methods of acceptance (typically commitments on both sides)

Mutual assent looks at the conduct of the parties from the perspective of a reasonable person (objective)

-What a reasonable person in the position of the parties would have thought the words meant.

-Doesn’t take into account subjective beliefs, assumptions, underlying intentions, etc.

RS 3 pg. 163
“an agreement is a manifestation of mutual assent on the part of two or more persons. A bargain is an agreement to exchange promises or to exchange a promise for a performance or to exchange performances.”
RS 19 pg. 169
Conduct as Manifestation of Assent

-Meeting of the minds  looks at the intention of the parties (subjective) (not used to interpret contracts except in a few exceptions)

Merchant: UCC 2-104 (pg. 23) a person who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction or to whom such knowledge or skill may be attributed by his employment of an agent or broker or other intermediary who by his occupation holds himself out as having such knowledge or skill.

1. IS THE CONTRACT PREDOMINATELY FOR GOODS OR SERVICES?

 Services, real estate, intangible property? Apply common law

- includes copyrights, patents, etc.

 Goods? Apply UCC

 Mixed contract of goods and services?Predominate Purpose test:

language of the contract
nature of business of supplier
intrinsic worth of materials
nature of breach
Jannusch v. Naffziger:  Ct weighed the value of what was contained within the contract (food truck’s good reputation (intangible), trade name (intangible), equipment, trailer, and food inventory (tangibles). Ct determined that value of goods was greater than value of intangibles so applied the UCC.

2. IS THERE A CONTRACT?Offer + Acceptance = Mutual Assent

Offer?:

-CL: price & description

-UCC: quantity and intent to be bound

Offer been terminated or revoked?

-1. Rejection by offeree

-2. Counter-offers

rejection of counter-offer by offeror

-3. Lapse of time

-4. Revocation

Was offer irrevocable?

-Options

-PE creating one-way binding

-Firm Offer Rule

Was there an acceptance?

-Battle of the forms

-UCC mutual knockout rule

-Internet agreements

Was there mutual assent?

-Was there an offer?

RS 24 pg. 171
“An offer is a manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it.”
Content Requirements:
Common Law  offer must have price and description
UCC  offer must have quantity and intent to be bound
§ 2-204: formation in general
Contract can be made in any manner sufficient to show agreement.
Conduct by both parties that recognized the existence of the contract is sufficient.
Even if some terms are left undefined, contract does not fail so long as:
1. Parties intended to make contract AND
2. There is a reasonably certain basis for giving an appropriate remedy.
Be wary of offer to bargain/negotiate, rather than offer to contract/bind!
RS 26 pg 171 “a manifestation of willingness to enter into a bargain is not an offer if the person to whom it is addressed knows or has reason to know that the person making it does not intend to conclude a bargain until he has made a further manifestation of assent.”
Lonergan v. Scolnick: case where guy posted form letter in paper that he wanted to sell land and communicated with P about details, then sold to someone else. Ct says intention of D was to find out if P was interested, rather than to make an offer to P.
Other insufficient offers:
Advertisements (generally)
Price quotes
Invitations to bid
Recital of work offer
Putting contract out for bids
^^^typically all fail for lacking essential terms

-Has the offer beenterminated / revoked?

1. Rejection by offeree
2. Counter-offers
rejection of counter-offer by offeror
3. Lapse of time
4. Revocation

RS §35 pg. 175  “a contract cannot be created by acceptance of an offer after the power of acceptance has been terminated.”
Means of termination  RS §36 pg. 175
RS §38 Rejectionpg. 176
“an offeree’s power of acceptance is terminated by his rejection of the offer”
***Option Contracts RS §37
Power of acceptance of option contracts not terminated by rejection, counter-offer, by revocation, or by death of incapacity of the offeror (unless requirements are met for the discharge of a contractual duty)
RS §39 Counter-Offers pg. 176
“A counter-offer is an offer made by the offeree relating to the same matter as the original offer and proposing a substituted bargain differing from that proposed by the original offer.”
Power of acceptance is terminated by offeree making a counter-offer.
Normile v. Miller: real estate agent shows property to P and P offers, but stipulated on the offer that it must be accepted by 5:00. D makes changes to the offer constituting a counter-offer. A different person buys the property even though P signed and returned counter-offer before 5:00. P thought that they had an option contract. Ct says: when D changed P’s offer, it wasn’t a qualified acceptance but a rejection of the original offer and contained no language of option nor did it contain the time-for-acceptance provision, so no mutual assent and no contract.
***mere inquiries regarding the possibility of different terms, a request for a better offer, or a comment on the terms often do not suffice as counter-offers.
RS §41 Lapse of Time pg. 177
Power of acceptance is terminated at the time specified in the offer, or if no time is specified, at the end of a reasonable time. (reasonable time based on analysis of the circumstances)
Revocation by Offeror
Power of acceptance is terminated if offeror manifests an intention not to enter into the proposed contract. RS §42 (Petterson v. Pattberg: case where P goes to offeror’s house to pay off discounted mortgage rate and offeror revokes offer prior to accepting P’s payment  ct said no contract because offer withdrawn before became binding)
Power of acceptance is terminated if offeror takes action inconsistent with intention to enter into contract and offeree received reliable information of this. RS §43
General offer (advertisement/newspaper) revoked when termination is given publicity or there is general notice of revocation. RS §46
Death or Incapacity? Offeree’s power of acceptance is terminated when the offeree or offerror dies or loses legal capacity to contract. (UNLESS it’s an irrevocable option contract offer!)

-Was the offer irrevocable? Option contracts, firm offers, unilateral contract part-performance rule

Option Contract: a promise that meets the requirements for the formation of a contract and limits the promisor’s power to revoke an offer. RS §25 pg. 171
Under common lawPromise to keep an offer “open” is not an option unless consideration is paid for that offer. (If no consideration for the offer to remain open, promise is just a gift promise and is unenforceable.)
Options are 2 contracts: 1 contract to keep option open and another that actually pertains to the bargained-for exchange
** cases tend to count nominal consideration as real consideration.
Under RS RS §87 pg. 198: an offer is binding as an option contract if it:
1. Is in writing and signed by the offeror, recites a purported (fake) consideration for the making of the offer, and proposes an exchange on fair terms within a reasonable time OR
2. Is made irrevocable by statute.
Promissory estoppel one-way binding option created by reliance: If offeror should reasonably expect to induce action/forbearance of a substantial character by offeree before acceptance, and offeree does substantially act/forbear based on inducement from offer, then can be binding as option contract. RS §87(2) and RS §90
An offer cannot be revoked if there has been:
Reliance that is reasonably foreseeableand detrimental. RS §90 pg. 200
Drennan v. Star Paving Co.: case where D submitted bid to P for paving job (which they accidentally miscalculated as too low) and P submitted his total bid based on D’s bid. Ct held that P’s reliance on D’s bid made D’s offer irrevocable  P had no reason to know that D had made a mistake.
RS §87(2)  reliance on an offer prior to acceptance.
RS §90  applies more generally to other types of detrimental reliance.
Binding option created by part performance or tender: where an offer invites an offeree to accept via performance and does not invite a promissory acceptance, an option contract is created when the offeree tenders or begins the invited performance. RS §45 pg. 178
Firm Offer Rule  UCC §2-205 pg. 32
An offer by a merchant to buy or sell goods in a signed writing which by its terms gives assurance that it will be held open is not revocable, for lack of consideration, during the time stated, or if not time is stated, for a reasonable time, but in no event may such period of irrevocability exceed 3 months; but any such term of assurance on a form supplied by the offeree must be separately signed by the offeror.
1. Must be a merchant.
2. Must include terms of assurance of open offer.
3. Must be signed by offeror so he knows he is making a firm offer.
4. Offer will remain open for no longer than 3 months. (can be less than 3 months if length is agreed to in firm offer)
5. Consideration doesn’t matter.
Binding option created through part performance: RS §45 pg. 178
Where an offer invites an offeree to accept by rendering a performance (unilateral contract) and does not invite a promissory acceptance, an option contract is created when the offeree tenders or begins the invited performance.

-Was there an acceptance?

Acceptance of offer: manifestation of assent to the terms thereof made by the offeree in a manner invited or required by the offer.
Acceptance by performance: requires that at least part of what the offer requests be performed/tendered. offer can only be accepted by performance if the offer invites such an acceptance RS §53
Acceptance by promise: requires that the offeree complete every act essential to the making of the promise. Must exercise reasonable diligence to notify the offeror of acceptance. RS §56 pg. 182. ^^RS §50 pg. 180
Distance & Delay in Communications
RS §63  acceptance made in same manner/medium invited by offeror is sufficient as soon as it is out of offeree’s possession, w/o regard to whether it ever gets to offeror.
Mailbox Rule: Acceptance is complete when placed in the mail, so long as offeree took ordinary precautions to ensure accurate delivery. RS §66
Acceptance under option contract  not complete until received by offeror.
Reasonable medium is one customarily used in similar transactions or is medium used by the offeror. RS §65
Expressly conditional acceptance is no acceptance! (it’s a counter-offer)
Expressly conditional acceptance = “accept” + “if, only if, provided that, so long as, on condition that,…” etc.
“Subject to the following terms and conditions…” is usually not sufficient to classify as an expressly conditional acceptance.
Common law: conditional acceptance rejects and replaces the offer  silence by original offeror indicates acceptance of the new conditions
UCC: conditional acceptance rejects and does not replace the offer.

Additional terms to contract with acceptance: BATTLE OF THE FORMS!!!!!
COMMON LAW 
Mirror Image Rule:response to an offer that adds new terms is treated like a counter-offer, not an acceptance. (no contract!)
 the two forms have to match each other, if they don’t, no contract!
Last Shot Rule: offeror makes an offer and offeree responds with new terms and offeror performs contract  the last document controls the contract.
Princess Cruises v. GE: P enters into contract with D for inspection and repair of ship – P sends purchase order with terms and D sends acceptance with different terms. (Parties pay no attention to specific conditions…battle of the forms) ct says have to follow terms of of D’s “agreement” (which is actually a counter-offer under CL) bc of last shot rule.

UCC additional terms constitutes as an acceptance under 2-207
Additional terms become part of the contract only if:
1. Both parties are merchants AND
2. A: Offer does NOT limit acceptance to terms of offer
if the offer expressly limits acceptance to the additional terms then they do not become part of the contract
B. Additional term is NOT material
If it is material, it does not become part of the contract
C. Notification of objection to term has not been given within reasonable time, AND
If objection has been given to the additional term within a reasonable period of time, they do not become part of the contract
3. Offeror does not object to the additional term
Mutual Knockout Rule: APPLIES WHEN THE WRITINGS OF PARTIES DON’T CONSTITUTE A K, BUT THEY PERFORM AS IF THERE WERE ONE.
(protection to offeror)
UCC §2-207(3) If parties begin to perform on a contract (conduct in recognition of the existence of a contract), the contract to be enforced consists of the terms on which the writings of the parties agree. (If parties don’t perform, there is simply no contract because there was never a real agreement anyway)
1. Match up forms where they agree  these terms are applied to the contract
2. Where the forms don’t agree  knock out rule applies and contradicting terms are not enforced unless there is a manifestation of agreement to them through conduct or oral statements.
Brown Machine v. Hercules: D purchased machine from P and was injured by it. They had exchanged boilerplate forms that had differing T’s & C’s but began performing on the contract. Ct found P’s indemnity provision materially altered the contract and D did not expressly accept it, thus it did not get into the contract.

INTERNET AGREEMENTS

Clickwrap, Shrinkwrap, Browsewrap: Electronic Acceptances
Clickwrap before completing the purchase of the product, the purchaser must scroll through the seller’s terms of sale and click “I agree”
Typically for software, services, or tangible products
Feldman v. Google: P sues D for recovery from fraudulent click charges in ad-service. D says there was forum selection clause in clickwrap contract that P says he never saw. Ct says, there was reasonable notice that P should have read T&C’s before clicking “agree” and an RPP would have known existence of terms.
Shrinkwrap applies to when a purchaser buys something wrapped in shrinkwrap and there’s a notice on the outside that T’s & C’s are contained within and use or not returning within specific time constitutes acceptance.
Majority Rule: when purchaser places order, vendor is the one making the offer by shipping product with T&C’s included  If vendor states that purchaser accepts offer by retaining product for certain amount of time, purchaser is bound by terms if he does not return the product within the allotted time period. (Purchasers are not bound until they receive the products and terms, inspect them, and decide whether or not to keep them. (ProCd Rule from DeFontes v. Dell, Inc.
Browsewrap information made available on seller’s website, usually free of charge, and usually information that the user accesses but down not download. Typically, T&C’s say that by using the website, you agree to T&C’s. Not required to click an “agree” button. 
Whether a website user has actual or constructive knowledge of a site’s T&C’s prior to using the site? (Hines v. Overstock.com, Inc: ct says P never had notice of the existence of T&C’s on website and an RPP user would have had notice either.

3. DID THE PARTIES HAVE AUTHORITY TO CONTRACT?

People who can’t contract:

-Children

-Mentally ill people

-Drunk people if other person knows they’re drunk

-Actual authority: (discussed in Plowman v. Indian Refining Co.)

Express Corporation explicitly confers authority to act as a specific agent. (usually shareholders and board of directors)
Implied Particular officer repeatedly takes action and board has knowledge of this but doesn’t object.
Inherent By virtue of position you have authority (most jurisdiction’s would say president of company has authority to do acts that bind the company as long as in scope of ordinary business.)
Apparent company can be legally bound if party leads other party to reasonably believe that the agent does indeed have the actual authority to do the act in question.

-Persons who cannot contract:

RS 13: those under guardianship because of mental illness/defect
RS 14: infants (contracts voidable up until the beginning of the day before the 18th birthday)
RS 15: mental illness or defect (pg. 166)
RS 16: intoxicated persons  person enters into only voidable contractual duties if other party has reason to know that by reason of his intoxication he is unable to understand the nature/consequences of the transaction and he is unable to act in a reasonable manner in relation to the contract.

4. WAS THERE VALID CONSIDERATION?(if not, promissory estoppel and restitution may still allow recovery!)

** Remember: consideration is subjective! (personal preferences/desires factor in  think Williston tramp hypo)

Consideration

Promissory Estoppel

Restitution

Implied in fact contracts

-Court imposes enforcement bc of conduct

Promissory Restitution

-Material benefit rule

CONSIDERATION:

-BENEFIT / DETRIMENT TEST: RS §71 pg. 188

To constitute consideration  performance/return promise must be bargained for.
The performance may consist of:
An act other than a promise or,
A forbearance, or (Hamer v. Sidway relinquishing a legal right = consideration)
The creation, modification, or destruction or a legal relation.
Unequal consideration = VALID CONSIDERATION!
Batsakis v. Demotsis: the value of Greek money in American dollars significantly less than what P thought, but this doesn’t matter. (policy reasons for allowing uneven consideration = if the ct didn’t allow uneven consideration it would be an impediment to the free market and there would be more litigation)
Insufficient Considerations:
Illusory promises: RS §77 where the performance is entirely optional to promisor, this does not suffice as consideration.
Past consideration = NO CONSIDERATION! RS §79 pg. 192
Dougherty v. Salt: “you’ve always done for me” monetary note for nephew in unenforceable because no consideration.
Gifts  donative, charitable, gratuitous, in the future, upon death.
Moral consideration = NO CONSIDERATION
Token consideration (worthless/impossible promise or act) = NO CONSIDERATION.
Performance of pre-existing duty = NO CONSIDERATION RS §73
Caselaw for consideration:
Cobaugh v. Klick-Lewis: ct said P taking shot for the hole in one to win free car was sufficient consideration because he did not legally have to take the shot and D received publicity, goodwill, and advertising.
Marshall Durbin v. Baker: (promise for performance) ct said sufficient consideration was paid when Baker remained at company until triggering event for his payment plan occurred.

PROMISORY ESTOPPEL  detrimental reliance