Anglo-American
Contract and Torts
Prof. Mark P. Gergen
Class Ten
Objective theory
Offer and acceptance
Statute of Frauds
“A promise that the law will enforce”
Contract is thought of as “private legislation.”
A forward-looking commitment to another
that can be enforced in court.
Concept of contract excludes gift, misstatement,
etc. . .
Doctrine of consideration generally
defines what promises are legally
enforceable. Presence of consideration
can be understood as a surrogate for
requirement of an intent to be legally
bound.
In US reliance/promissory estoppel is an
alternative basis for enforcing a promise.
In England promissory estoppel can be used
negatively or defensively but not positively or
affirmatively.
Obligation in contract requires
1)
2)
3)
An apparent expression of intent to
undertake an obligation (e.g., by
promise, agreement, offer & acceptance .
. .)
A legal basis for enforcing the obligation
such as consideration.
Sometimes written evidence of the
obligation under the statute of frauds.
Objective theory
When there is a misunderstanding about the
existence or meaning of a contract, the law
adopts the more reasonable view.
For example, generally a party is held to the terms of a
contract he signs even if does not read the contract.
If you order something at a restaurant without looking at
the price, then you are obligated to pay the menu price
even though you would not have ordered what you did
had you known the price.
See Adams v. Lindsell, p. 131. D mails an
undated offer that is mis-addressed and so
delivered late. P mails immediate acceptance.
D sells goods in interim. There is a contract.
D was more at fault in the misunderstanding
about the timeliness of the acceptance.
Contract does not require a “meeting of the minds.” A
person may conclude a contracting not intending to do so.
Common law rejects the “will theory” of contract. A contract is
a product of outward manifestation of intent. Not actual
intent.
But assent is not always determined objectively.
Generally the law gives effect to shared subjective
understanding.
A and B pretend to make a contract to fool C. There is
no contract between A and B.
A known and sometimes even a suspected error in
communication cannot be exploited.
A gives B papers to sign knowing B will not read them
carefully. A craftily includes among the papers a
contract A knows B would never agree to. There is no
contract though B signs. A may be liable for fraud for
knowingly misleading B.
Raffles v. Wichelhaus, p. 133.
Contract for India cotton to be delivered by the “Peerless.” B
understands this to mean the Peerless that sailed from India
in October. S understands it to mean the Peerless that
sailed in December. B refuses to accept delivery of cotton
from the later vessel.
Milward makes 2 argument at p. 134: i) the
misunderstanding was immaterial; ii) evidence there were 2
ships is inadmissible to challenge written agreement.
Mellish argues there was “consensus ad idem” (“no
meeting of the minds”) and so no contract. Court
agrees.
Unstated premise is that neither party was more at fault. If
point of disagreement is material and performance has not
been received and accepted, then there is no contract.
The contract fails based on “mutual misunderstanding.”
Contract is voidable, not void. Either party may
opt to affirm the contract by embracing the other
party’s understanding.
The misunderstanding must be material.
Review
Objective theory--if there is a misunderstanding about
existence or terms of contract, then courts generally adopt
the more reasonable view.
Courts will give effect to shared subjective understanding.
A party may not take advantage of an error in
communication if he knows or has good reason to know of
the error.
Mutual misunderstanding on a material term makes a
contract voidable.
“An offer is the manifestation of a 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.”
Restatement 2nd § 24
Did the sender reasonably appear to intend to invite
the recipient to conclude a contract by acceptance?
An offer terminates if a stated time limit passes, after a
reasonable time, if it is rejected, if it is revoked, if the
offeror dies, etc . . . . pp. 125-129.
An acceptance must be unequivocal and on the terms of
the offer to be effective. pp. 129-130. “Mirror image
rule.” This is relaxed by UCC 2-207.
Carlill v. Carbolic Smoke Ball Co., p. 124
Advertisement in newspapers to pay £100 to anyone who
bought and used “smoke ball” as instructed and who
contracted influenza.
Is the advertisement an offer that becomes binding if
someone bought the ball? Did the defendant reasonably
appear to intend to give all readers of the advertisement
that power? What fact did Lindley LJ think was crucial?
See p. 124 bottom.
Livingstone v. Evans, p. 126.
(1) S offers land to B for $1800
(2) B counter-offers $1600 and asks S for his lowest price.
(3) S replies “Cannot reduce price.”
(4) B accepts original offer.
Is there a contract? Did B reasonably believe initial offer
was still on the table when he accepted? Why?
Re Cowan & Boyd, p. 127. Landlord offers to renew lease
at increased rent. Tenant rejects and offers to renew at
current rent. Landlord responds he will visit to talk the
matter over. Walsh says this is a harder case. Why?
An offeror is presumed to have the power to revoke an offer.
Generally an offer is irrevocable only if the offeror explicitly
promises to hold offer open and there is a legal basis for
enforcing the promise, including
•Consideration
•UCC § 2-205 (firm offer for sale of goods in writing signed
by merchant)*
•Promissory estoppel/reliance
* Binding for a reasonable time not more than 90 days.
In European law there is a general rule that such a commitment is binding.
See Unidroit Article 2.1.4(2)(a). And an offer stating a fixed time for
acceptance is interpreted as a firm offer. CISG Art. 16(2)(a); Principles of
European Contract Law 2.202(3)(b).
Adams v. Lindsell, p. 131. D mails an undated
offer that is mis-addressed and so delivered
late. P mails immediate acceptance. D sells
goods in interim.
The contract is formed when P mails the acceptance.
This is called “the mailbox rule.”
P’s power to accept would be terminated if D communicated
the fact it had sold goods to another before P accepted and P
received this communication.
Rules on offer and acceptance determine assent when
parties communicate by post or other remote means.
Many of these are background rules. They can be altered
by a clear expression to the contrary.
Other rules determine assent in other situations, such as
the effect of a preliminary agreement when execution of a
written contract is contemplate.
Statute of Frauds
Types of agreements “within” the statute include (there
are others) . . .
A sale or other conveyance of an interest in land
(with an exception for short-term leases). See p.
145 top.
A sale of goods of sufficient price--10 pounds in
Statute of 1677. Now $500 under § 2-201 of the
Uniform Commercial Code. See p. 145 bottom.
Statute provides a defense to a claim on a contract if
there is not sufficient written evidence of the
contract.
Section b p. 146 indicates there is a difference on what it
takes to satisfy the statute.
UCC 2-201 takes a minimalist approach. Any writing
signed by the party trying to assert the statute as a
defense that is “sufficient to indicate that a contract for
sale has been made . . .” Only the quantity need appear
in the writing.
Often in real estate law there is a requirement that the
writing state the “essential terms.”
Purposes served by the statute of frauds and by contract
formalities more generally . . .
•Evidentiary
•Cautionary
•Channeling
These purposes assume legal formalities serve to enable
people to determine their legal obligations for themselves.
Statute of frauds provides a defense to an otherwise
enforceable agreement for a contract “within the statute” in
the absence of a writing “to satisfy” the statute.
UCC 2-201(3)(pp. 145-146) provides several grounds to
overcome the defense:
• By admission
• Part performance (payment made and accepted or
goods received and accepted)
• Substantial investment in specially manufactured
goods
Two of these exceptions can be explained on evidentiary
grounds. The last exception brings to mind a nonstatutory exception with another rationale . . .
Goldstein v. McNeil (Cal. App. 1954), p. 147 (pre-dates
enactment of UCC).
Oral sales agreement for 14 used cars for a price of
$29,450. The buyer (the defendant) paid the seller (the
plaintiff) $910 for shipping costs. The seller spent $210 on
permits and shipped the cars to California.
Held defendant was estopped from asserting statute of
frauds as a defense because of plaintiff’s change of position
and inequity (“unconscionable loss”) that would result from
enforcing statute.
The loss was due to the drop in the price of used cars!
Goldstein v. McNeil (Cal. App. 1954), p. 147
Oral sales agreement for 14 used cars for a price of
$29,450. The buyer (the defendant) paid the seller (the
plaintiff) $910 for shipping costs. The seller spent $210 on
permits and shipped the cars to California.
The claim was not within the statutory exceptions, which
required that the goods be received and accepted or that the
buyer have made part payment for the goods. See p. 147
top for provisions. Estoppel is a non-statutory exception.
Obligation in contract requires
1)
2)
3)
An apparent expression of intent to
undertake an obligation (e.g., by
promise, agreement, offer & acceptance .
. .)
A legal basis for enforcing the obligation
such as consideration.
Sometimes written evidence of the
obligation under the statute of frauds.
In the US reliance—perhaps even a foregone opportunity—
can supply 2) and overcome 3).