CONTRACTS OUTLINE
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Is it governed under UCC or common law?
Has K been formed?
What the material terms of the K?
Have those material terms been performed?
Has the nonperformance been excused or is it a breach?
What is the remedy?
I. Is it a good?
A. a tangible, moveable thing
B. (For services or real property, use common law)
II. Has a K been formed?
Offer + Acceptance + [Adequate + Sufficient consideration]
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Agreement doesn’t necessarily constitute a K
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Something has to be given or promised in return
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Look at WHEN there was offer & acceptance
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If it has consideration, it doesn’t need a writing (unless falls within the SF)
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If you don’t do a writing, you must have consideration
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§ 2-204(1): UCC doesn’t care who the offeror and offeree is > “A K for sale of goods may be made
in any manner sufficient to show agreement, including conduct by both parties which recognizes the
existence of such a K”
Conscionability
 Was it conscionable at the time it was made?
Ex: Hill v. Gateway
- The minute after they did not return it in 30 days, the offer was accepted
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Was the contract unconscionable at the time it was made?
§ 2-302 Unconscionable K or clause
Ex:
Brower v. Gateway
- Arbitration clause was not conscionable
- The cost to arbitrate at the cite in Chicago was unreasonable b/c it was more
expensive than the cost of the computer itself
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Material Terms
- the stuff you bargain for
- different terms = contradictory
- Restatement § 20 Effect of misunderstanding
1) NO K
 There is no manifestation if attached materially different meanings
 Both parties are protected b/c they either both know (innocent) or both don’t
know (fraud/evil > both capitalizing on it)
2) K IF > There is manifestation if meaning attached by one party
 gives advantage to person who deserves it
 innocent party controls
 a) innocent + evil knows > I didn’t know but you knew what I meant
 b) innocent + evil should’ve known> I have no reason to know but you should’ve
known better
Objective & Subjective Theory
Reasonable person
- the person the ct considers reasonable (e.g. reasonable merchant, reasonable law student, etc.)
Objective
- reasonable impression created in the mind of the offeree by the words used & the conduct engaged
in by the offeror
- would a reasonable person in the position of the offeree understand from the offeror’s words &
conduct an intent to be bound?
Subjective
- did the offeree in fact so believe?
III. Is it bilateral or unilateral?
Bilateral
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If language is unclear, assume bilateral!!!
promise going one way
promise to promise = K
“just kidding” is breach
Unilateral
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promise & return performance
as soon as you begin, you are promising to complete
can’t be sued for breach until the person has started the performance
technically not completed until completion
promise is not sufficient; want completion
Carhill v. Carbolic Smoke Ball Co.
- If it is reasonable to assume one has intended a promise, performance is required, even if
consideration is only implied
- Acceptance by performance is fine when acceptance by notification is not requested
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Was there an offer?
Restatement § 24
Restatement § 26
Restatement § 27
Restatement § 50(1)
An offer is the manifestation of willingness to enter into a bargain & other person
would reasonably agree
Lonergan v. Scolnick
Not an offer if other person knows or has reason to know person making offer
doesn’t intend to conclude bargain
Manifestations of assent, preliminary negotiations
Advertisements
Rule: Advertisements are mere invitations to offer
Ex: Leonard v. Pepsico
Ex: Lonergan v. Scolnick
Exception to rule: If the advertisement is so explicit it is an offer
Ex: Carbolic Smoke Ball
Offers made in jest
Rule: If an offer is so clearly made in jest, it is NOT an offer
Ex: Leonard v. Pepsico
Exception to rule: If an offer is not clearly made in jest, it is an offer
Ex: Lucy v. Zehmer
Mere negotations
- from which either party may walk away w/o liability
- a quotation of prices is not an offer to sell > Fairmount Glass Works v. Grunden-Martin
Woodenware Co.
- when a specific amount has been said back, it is more than a mere invitation to make an offer, it is an
offer (Carbolic Smoke Ball)
Rule: Negotiations for an agreement do not bind the offeror to a K
Ex: Smith v. Boyd
Firm offers
- UCC only
- Doesn’t matter if additional consideration is given for the open offer, within stated time, reasonable
time (trade usage), or within 3 months (revocable after 3 months)
- In writing, signed
- By a merchant
- Either says “I will hold it open” or words it so “reasonable” person would believe it to be held open
- Hypo: If a non-merchant who was offeror puts offer in writing > can’t use UCC b/c only applies to
merchants
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When is an offer destroyed?
Mere negotiations
- If still negotiating, can’t say accept
Rejection
- if face-to-face, when you walk away, the offer is rejected
- unless you say “you have time to consider this”
Lapse of time
- 2-309
- 1-205
- Minnesota Linseed Oil Co. v. Collier White Lead Co.
- Offer will lapse on its own accord unless you accept it in reasonable time
Death or incapacity of the offeror
- Restatement § 41 & 48
- Renders completion of the K impossible
- Cuts off offer b/c there can’t be a meeting of the minds
- New Headley Tobacco Warehouse Co. v. Gentry’s Ex’r
When can an offeror revoke an offer?
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The offer, so long as it remains open, confers on the offeree power of acceptance > At what point
can the offeror no longer revoke? > When there’s an optionK OR in a unilateral offer to be only
accepted by performance
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When you want performance for promise, once performance beings, the offer cannot be
revoked > notice of beginning performance would prevent revocation.
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Even when offer states it is not irrevocable, it still can be revoked w/o consideration
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CANNOT revoke when offeree says, “I’m about to start performance”
Ex: Hendricks v. Behee
- When there is no consideration for acceptance of an offer, the offeror has the right to revoke his
offer if he communicates the revocation before communication of the acceptance is given
- An authorized agent can do the same as the principal
Direct revocation
- the offeror directly tells the offeree
Indirect revocation
- hears it from another party
- lapse of time
- UCC 2-205 must have consideration
- Dickison v. Dodds
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How does one preserve an offer?
Consideration
- a bargained-for exchange (of mutually beneficial things)
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has to be legal & measurable
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Restatement § 71, 76, 79, 87
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UCC 2-209
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that which motivates a person to do something, especially to engage in a legal act
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The thing that goes between 2 parties
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Offer + acceptance – consideration = mere offer (revoke)
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Common law = has to be consideration
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UCC merchant = no consideration necessary
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Board of control of Eastern Michigan University v. Burgess
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When any benefit conferred or detriment suffered occurs, that is considered consideration and K is
valid (Reed v. Univ. of ND & NDAD, Inc.)
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See also Hooters > agreement was unconscionable & not supported by consideration; illusory
agreement & rules
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When a party merely does what he has already obligated himself to do, he cannot demand an add’l
compensation (Alaska Packers)
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Past consideration is not present consideration
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Can be a promise of a thing
Promises
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something that the person who is making the promise is asking for in exchange
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something (such as an act, forbearance, or a return promise) bargained for and received by a
promisor from a promisee
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The promise to make a gift is not legally enforceable but you can use under promissory estoppel
(Kirksey v. Kirksey) Promise is legally binding if 1) given in return for some benefit to the person
who gave his promise and/or 2) promise incurs detriment b/c he relied on it (worse off by broken
promise than before promise ever given)
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Distinguish between promise & obligation
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Each side’s set of promises needs to be supported by consideration to be enforceable
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Bilateral Ks are enforceable > both sides have obligations that are due
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The promises support each other as consideration even when parties haven’t done anything on
reliance (reliance is out of consideration)
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Option K
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When an option K is completed, you can can negotitate the original K but you cannot revoke your offer
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Restatement § 87(2)
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Forbearance: the act of refraining from enforcing a right, obligation, or debt
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Survive death
- but original offer may not
- have to have consideration OR be a firm offer if UCC applies
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Beall v. Beall
- Failure of consideration destroyed the irrevocability of the option
- Option must be supported by consideration in order to be irrevocable
- To say consideration has passed, is not sufficient consideration > actually has to have been passed
- Including perhaps the mere recital of consideration
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Michigan v. Burgess
- Failure of consideration affects only the collateral K to keep the offer open (option K) not the
underlying offer
- She effectively revoked her offer to sell before the P accepted that offer b/c there was no
consideration
Was there acceptance?
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the manner of acceptance stated in a document must be executed to create a K
Ex: LaSalle Nat’l Bank v. Vega
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if there is no time limit on the acceptance of the offer, then it is within reasonable time
Ex: Ever-Tile Roofing Corp. v. Green
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when an offer has indicated the mode & means of acceptance, an acceptance in accordance with that
mode or means is binding on the offeror
Ex: Davis v. Jacoby
Acceptance by silence/inaction
- Restatement § 69
Acceptance by the mailbox rule
- Ex: Adams v. Lindsell
- When acceptance enters, there’s a K
Imperfect acceptances
- § 2-207
- Only need quantity under UCC (Nora Beverages)
- If parties intend to be bound, the cts will endeavor to enforce that intention even if the parties’
expression of that agreement is unclear or incomplete (Moolenaar v. Co-Build Companies, Inc.)
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Remedies
1. Expectation
- money damages
- what most people end up getting
- can’t give expectation damages for promissory estoppel b/c there was no K anyway
2. Reliance
- I relied on the deal & want you to pay damages now
3. Restitution
- look at what D got that unjustly enriched so you’re no better off for breaching
- take away unjust enrichment
4. Specific performance
- I want what I asked for
- Unique goods
When you don’t have a K, you go for remedies under a K, but also for remedies under a quasi-K such as
promissory estoppel
Estoppel
Promissory estoppel
- Future
- If you do this, I will do that
- Quasi-K
- Some sort of promise that was misleading, person purposefully mislead, & other person relied on
that person
- can claim remedies like restitution & reliance by not expectation or specific performance
- can’t give expectation damages for promissory estoppel b/c there was no K anyway
1. Misleading act
2. Intent to mislead
3. Detrimental reliance by innocent person
Equitable estoppel
- Past
- Was done
- Fraud
Unenforceable contracts
- social Ks
- no consideration
- unconscionable
- statute of limitations
- statute of frauds
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How to attack the question:
1. Is it UCC or common law?
2. Make a list of the facts (checklist)
3. Was there an K?
 Was there an offer?
o Was the offer revocable?
o Was it supported by consideration?
 Was there acceptance?
o By performance? > Unilateral
o By promise? > Bilateral
4. Is it an agreement that should be enforced?
 Statute of Frauds > If it’s signed and not an issue in the hypo, I say, “The Statute of
Frauds is satisfied” and move on
 Consideration > Promissory estoppel