6/28/12 Lawrence Siry

What is a Contract? (1)
•  Contract Formation
•  Offer
•  Acceptance

Enforcing a Contract (2)

Terms of Contract (3)

Modification and Avoidance of Contracts (4)
•  Consideration
•  Statue of Frauds
•  Parol Evidence Rule
•  Interpretation of Contracts
•  Promissory Estoppel
•  Voiding Contracts
•  Performance Problems

Performance and Breach (5)
•
•
•
•
•

Execution of Contractual Duties
Warranties
Non-Performance
Remedies
Discharge
Other Parties (6)
•  Assignment and Delegation
•  Third Party Contracts
 An
Agreement between two
or more parties which creates
rights and obligations
between the parties, with the
intention of the parties to
create legally binding
responsibilities.
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1 6/28/12  Is
•
•
there a Contract?
Offer v.
Invitation to treat- an expression of a
willingness to negotiate.
•  Shop window displays.
•  Advertisement of price.
•  Auction offerings.
•  Invitation for bids.
•
Consumer protection Laws do however
limit the above.
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 Offer
v. Invitation to Treat
(1979)
(1974)
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2 6/28/12 7
  Conservatives
gained control over local
government.
  Wanted to privatize local council houses.
  Instituted
tenants.
a policy of selling houses to
  Labour
regains control and wants to end
program, but announces that they will
honour contracts that had already been
entered.
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  Storer applied to buy his unit.
  Clerk wrote back “I understand
that you wish to
purchase your council house and enclose the
Agreement for Sale. If you will sign the Agreement
and return it to me I will send you the Agreement
signed on behalf of the Council in exchange.”
  Labour won control of the Manchester City Council
and decided to only honour executed contracts.
  Held: There
was a contract. The Council’s intention
was to be bound by the agreement once Storer
signed and returned the agreement.
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3 6/28/12   Conservatives
government.
  Wanted
gained control over local
to privatize local council houses.
  Instituted
a policy of selling houses to tenants.
  Labour
regains control and wants to end
program, but announces that they will honour
contracts that had already been entered.
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  Gibson
sends a letter to thee council expressing
his interest in purchasing his unit.
  Council responds that it “may be prepared to sell
the house to you at the purchase price of…
£2180.” “If you would like to make a formal
application to buy… please complete the
enclosed application form and return it … as
soon as possible.”
  Gibson completed the application and returned
it.
  Political control changed. The Council decided
to proceed only with sales where contracts had
been executed.
  Gibson sued for Specific Performance on the
Contract.
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: No contract because there was no
offer capable of acceptance was made by
the Council.
•  “may be prepared to sell”
•  Invitation to treat
•  WHAT WOULD AN OUTSIDER THINK???
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4 6/28/12  What
is an Offer?
 §24. OFFER DEFINED
•  An offer is the 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.
•  An offer generally may be revoked until its
accepted.
 What
is an Offer?
 A:
Would you sell me Siry’s Irish Pub for
50.000 Euros?
 B: I would not sell it for under 70.000.
 Is
there an offer?
at the language.
 Also…
Advertisements and rewards?
 Look
 When
might an offer be revoked or
terminated?
 Death
of offeror.
of person necessary to
performance.
 Counter-offer.
 Revocation
 Expiration.
 Death
5 6/28/12  What
is not an Offer?
 Options
 Letters
of intent
to submit a bid
 Price estimates
 Advertisement, catalogues or mass
mailings
 Auctions with reserve
 Invitations
•  Hyde v. Wrench (1840)
•  Brogden v Metroploitain Railway Co (1877)
•  Butler Machine Tool v. Ex-Cell-O Corp. (1979)
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  Traditional Approach
•  Clear acceptance
•  Acceptance by performance (unilateral)
  Modern
30(2).
Approach (UCC 2-206, Restatements
Acceptance by any reasonable means.
•  Performance with knowledge of offeror.
  Acceptance
by silence.
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6 6/28/12 -An Offer can dictate when it is effective.
-If silent, Acceptance is effective when it is sent.
-Why does this matter?
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 Communication
of Acceptance to the
Offeror
•  Implied Waiver
•  Postal Rule
•  Postal Rule applies only to acceptances, not
offers or revocations.
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 An
Agreement between two
or more parties which creates
rights and obligations
between the parties, with the
intention of the parties to
create legally binding
responsibilities.
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7 6/28/12  “…which
creates rights and obligations
between the parties…”
 Consideration
is where one party
essentially pays for a good or a service
from another party. The consideration
can be for something in the future, but
not the past.
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 Different
Approaches:
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: Each party receives both a
benefit and detriment.
Example: Angela buys a horse from Nicolas for 100 E
Angela’s detriment is that she has to pay 100E, her benefit is
the horse. Nicola’s detriment is that he has to give up his horse,
his benefit is the 100E.
But at times problematic: Hamer v. Sidway
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8 6/28/12  Hamer
v. Sidway (NY 1891)
•
At his nephew’s wedding, Uncle, in presence of
guests and family, promised that if nephew
“would refrain from drinking, using tobacco,
swearing and playing cards or billiards for
money until he became twenty-one years of
age he would pay him a sum of $5,000”
•
Nephew “assented” and fully performed by
not drinking, smoking etc.
•
Uncle died and his estate refused to pay.
•
Uncle’s Estate- no consideration because nephew
benefited rather than harmed by refraining from
various activities.
•
Court found that the promise was enforceable.
•
Consideration consists of either a benefit received
by
or detriment suffered by promisee
because of promise.
•
Nephew refrained from doing things that had right
or power to do he therefore suffered detriment.
: Each party view his
performance as the price of the other party’s promise or
performance.
Bargain = Consideration.
Bargain need not be equal value unless unconscionable.
“adequacy of a bargain will not be disturbed by the courts
unless grossly unequal. Equity v. Common Law
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9 6/28/12 :
Nominal Consideration
Unreasonable claims to forgo legal claims
Illusory Promises
Promises to do things already legally required
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.
:
Nominal Consideration
Exception where nominal consideration is acceptable: option
contracts
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Bargain Promises: Caveat.
When are bargains not enforceable:
Unreasonable claims to forgo legal claims –will be held valid,
only if
a) reasonable
b) held, by both parties in good faith
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10 6/28/12 Bargain Promises: Caveat.
When are bargains not enforceable:
Illusory Promises- a statement that has the form of a promise, but
lacks substance.
-Agreements must have Mutuality
: Miami Coca Cola Bottling v. Orange Crush
(1924)
-Promises to perform excluded.
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Promises to do things already legally required to perform.
-public v. private/contractual duties
-Example: cops and witnesses
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  An
Accord is an agreement that substitutes
that which is demanded under the terms of
the Contract, for another term.
  Satisfaction occurs when the party (for
whom the change of obligation was made)
performs her duty under the modified
terms- then the original contractual duty is
satisfied.
  Until performed, it may not be enforceable
(executive accord)
11 6/28/12   Past
acts can not be good consideration (not
enforceable).
(1842) (good horse)
  Present
acts are most common for of
consideration.
  Future
acts are perfectly acceptable.
(1842)
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•  Relied upon v. unrelied upon
•  Exceptions: Past debts barred by time
  Implied promise
  In writing
  New promise before the time has run
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.
  Thomas
v. Thomas (1842)
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12 6/28/12 37
Restatement §71. Requirement of Exchange
  (1) To constitute consideration, a performance or a return promise must
be bargained for.
  (2) A performance or return promise is bargained for if it is sought by
the promisor in exchange for his promise and is given by the promisee
in exchange for that promise. . . .

Today American contract law has moved away from benefit/
detriment analysis. Consideration is seen as any performance
or promise that is bargained for and given in exchange for
promise.
 An
Agreement between two
or more parties which creates
rights and obligations
between the parties, with the
intention of the parties to
create legally binding
responsibilities.
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  Offer
  Accord
  Acceptance
  Satisfaction
  Bargain
  Donative
  Detriment
  Implied
  Consideration
  Writ
  Promissor/promissee
  Assumpsit
Certain contracts
MUST be reduced to writing.
 Marriage.
 Land.
 Contracts that take longer than a year.
 Executor
 Surety
 IT
IS RAISED AS A DEFENSE
14 6/28/12  Terms
of Contract (3)
•  Parol Evidence Rule
•  Interpretation of Contracts
lawrence.siry@uni.lu
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