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Preliminary Negotiation and Agreements to Make a Contract or Agree on Terms
- Traditional Position: no contract exists until both parties fully agree during a "meeting of the minds"
- Need good faith and commercial reasonableness
- Contemporary contract finds a middle ground
- How to determine if legally bound: 1)have the parties, through their words and actions, manifested an intent to be legally bound?, 2) If so, what have they bound themselves to?
- Contracts need: a clear offer
- a clear acceptance
- competence of the parties (minors can back out of contract)
- lawful sunject matter
- mutuality of agreemen (must be voluntary)
- Consideration- true give and take
Offer and Acceptance
- A definite proposal to enter into a contract
- 1) an offer must be a definite proposal
- 2) that proposal must be made with the intention of committing oneself to a contract
- 3) the offer must be communicated to another party in order to be effective
- 4) offer must be definite and certain and specific
- Acceptance: a legal agreement whereby a person accepts an offer to make a contract when he/she assents to its terms. The acceptance must agree exactly with the terms of the offer and be communicated to the offeror. When an offer is accepted, a contract has been made.
- Express contract: terms clearly laid out
- Implied contract: ex) sticky note on a pen saying $1
James L. O'Keefe v. Lee Calan Imports, Inc.
- Facts: the advertised station wagon for sale in the Chicago times was advertised at the wrong price
- Lee Calan Imports employee refused to sell at advertised price
- Issue: Whether a newspaper ad constitutes an offerr which can be accepted to form a contract or whether such an ad is merely an invitation to make an offer. Holding: Court denied the plaintiff's motion for summary judgment and granted defendants motion.
- Rationale: ads are understood to be mere requests to consider and negotiate
- Court finds that a newspaper ad that contains an erroneous purchase price through no fault of the defendant advertiser and which contains no other terms, is not an offer which can be accepted so as to form a contract (no meeting of the minds)
- only an invitation to offer
A legal arrangement whereby a person accepts an offer to make a contrtact when he or she assents to its terms. The acceptance must agree exactly with the terms of the offer and be communicated to the offeror. When an offer is accepted, a contract has been made.
Sandra J. Sorg v. Fred Weisz and Associates
- Facts: Russell's own 40 acres in Los Angeles
- Paul McClintock leases 1 of these acres and dumped 200-300 tons of waste material
- Russell's requested removal and their attorney sent a letter to McClintock with terms that if the waste stays, he will agree to pay a daily "fine"
- Defendant removed waste and plaintiff's say this act shows that he knew he was in the wrong
- Issue: Whether the plaintiff was "entitled to be compensated pursuant to the terms and conditions in the letter.
- Holding: A judgment was entered for the plaintiff.
- Rationale: creating a contract by letter and stating a price on the theory that silence is acceptance has been rejected by the courts
- unless there is a previous relationship where silence would be understood as an acceptance there is no acceptance
- Silence and inaction did not constitute acceptance.
- Judgment is REVERSED.
Pre-Hale v. Brewster
- An illegal consideration is not sufficient to create a contract
- Default Judgment: a ruling granted by a court or judge. Default judgments arise in circumstances whereby one party to a suit has failed to perform a court-ordered action, and subsequently that failure has not only prevented the issue from being presented to the court but also results in the court settling the legal dispute in favor of the compliant party.
- Consideration: the exchange of value btwn contracting parties that is required to support a contract. Regardless of its form, consideration always involves a token of committment to the contractual relationship, a concrete manifestation of the intent to be bound. Lack of consideration is a defense to the claim of breach of contract
- Note: a promissory note, a written statement of debt by one or more people to one or more people, with a statement of a specific amount owed or due, date it is due, interest on the amount, and other terms such as install merits, penalty for late payment, full amount due if delinquent, how secured, and attorneys' fees and costs if required to collect on the note.
C. Verne Hale, Jr. v. Jerry Dean Brewster
- Facts: A summons was delivered to Jody Brewster and Jerry Brewster did not know about until he recieved the default judgment
- Hale was assigned as legal counsel to Brewster
- Brewster claims defense because plaintiff took a note from appellant when appellee was appointed by the court to represent on a criminal charge and paid $85
- Issue: Whether an attorney taking compensation for representation of an indigent charged with a crime when he has been appointed by the court to represent the indigent and has been paid by the court for the services rendered.
- Holding: Motion to vacate is denied. Reduced judgment previously entered by the amount of $85, being the payment from the court fund
- Rationale: Since paid $85, appellant was given credit for this amount on judgment previously entered
- If payment of a fee by the state makes the note executed by appellant invalid becuase lacking consideration
- *Can't get extra money for doing their job thay are already paid for
- Appellant did not receive anything he was not entitled to receive without payment of any amount, therefore no consideration.
- REVERSED and REMANDED
Formal Requisites of a Contract
- Statute of frauds requires contracts to be written in order to be valid
- Contract over real property needs to be a written contract
- Oral contracts are harder to prove- need to be a meeting of the minds
- Contracts need to be dated, signed, and delivered to both parties
- Integrated contract: totally written contract; governed by parol evidence prior to contract, oral or written unless to aid in the interpretation
- No oral contract if parties intended to have a written contract
M.T. Bonk Company v. Milton Bradley Company
- Facts: Bonk created "Play it Again Juke Box"
- Met with Milton Bradley to discuss research and development on the game and informed the product may be removed from review at any time
- Defendant sent copy of their standard licensing agreement to plaintiffs attorney for review
- Defendant determined Bonk did not have a right to use the copyrighted song lyrics under "the Fair Use Doctrine"- can use if educational; need copyright permission
- -> all negotiations canceled and game was withdrawn from review
- Issue: Whether an oral contract between Bonk and Milton Bradley had been established.
- Holding: A jury returned the verdict in favor of Milton Bradley about alleged breach in contract.
- Rationale: Bonk wanted a new trial, can only be granted only if the verdict is against the clear weight of the evidence
- To determine if their was an oral contract there must be a meeting of the minds and that the parties intended to be bound by the agreement.
- An oral contracts terms must be definite and certain
- No evidence of the meeting of the minds and continual negotiations= no agreement therefore not definite and certain
- The parties did not intend to be bound without a written agreement
- Primissory Estoppel: (detrimental reliance) a legal principle that prevents a person who made a promise from reneging when someone else has reasonably relied on the promise and will suffer a loss if the promise is broken; 1) defendant did not make ambiguous promise, 2) plaintiff relied on "promise", 3) his reliance was not expected nor predictable, 4) plaintiff relied on "promise" to his detriment.
Factors Affecting Formation of a Contract
- Freedom of Contract: Assumes ppl know what they are doing and what they are getting themselves into in a "meeting of the minds" and people aare agreeing freely to enter into a contract; must be voluntary
- Voluntary character of agreement and the reality of consent are important issues in the law of contracts
- A contract can be nonexistant or noninforceable if there is a mistake, ignorance, fraud, duress, and undue influence.
- A Mistake of Law: a party, having full knowledge of the facts, comes to an erroneous conclusion as to their legal effect; one or both parties are still bound to the contract
- A Mistake of Fact: involves either 1) unconscious ignorance or forgetfulness of a fact, past or present, that is material to a contract, 2) belief in the present existence of a thing material to the contract that does not exist or in the past presence of a thing that has not existed; ex) fire- no meeting of the minds therefore no contract
- Mutual Mistake of Law: does not render a conract enforceable
- Mutual Mistake of Fact: contract invalid because ther is no meeting of the minds
- Unilateral Mistake: error by one party will not render a contract unenforceable; unless the mistake is due to the fault of the other party or the other party knows or has reason to know there is a mistake
City of Syracuse v. Sarkisian Brothers, Inc.
- Facts: defendant made a bid proposal however there was a reduction of close the four times the original reduction. On the same day the error was found, defendants asked bid to be withdrawn completely. Plaintiff's chose defendant's bid with the mistake for a contract. Defendants declined and plaintiff's awarded a contact in an amount of the defendant's intended bid.
- Issue: Whether the unilateral mistake makes the contract enforceable.
- Holding: Defendants's summary judgment, rescinding contract(to back or cancel), was denied by Special Terms.
- Rationale: Criteria for rescission, 1) enforcement of bid is unconscionable (unjust), 2) mistake is material (very important to the contract), 3) mistake occurred ddespite ordinary care by bidder (careful yet accident occurred), 4) it is possible to place the other party in status quo (taking them back to square one without injury to the plaintiff)
- Defendants gave prompt and actual notice of error
- Never a meeting of the minds
- Defendant has no legal obligation to fulfill its bond
- REVERSED with costs; defendant's motion granted; complaint dismissed; Syracuse pay for court and attorneys fees of the defendants
- Duress: physical force or the threat of face to a person, or a threat to property (sometimes combined with undue influence)
- Economis/Business Duress: does not invalidate a contract
- Not seen as vulnerable or in need of protection
- Issue in voluntariness
- Not freely enter into a contract
- Undue Influence: psychological pressure or abusing a relationship of trust; harder to prove
City of Miami et al. v. Delores Kory
- Facts: Kory was working at the Department of Management and Budget on probation and could be fired at any time with out cause or reason
- Her supervisor Surana, the Assis. Dir. of the Dept., fired Kory by a memorandum for her termination
- Kory instead wrote her resignation to she could try to get another job through the city
- Surana does not have the authority to fire
- Kory got legal counsel after she could not get another job
- Issue: Whether the resignation was the product duress created by the invalid notice of dismissal.
- Holding: Trial judge ordered Kory's reinstatement to her position she held as a non-probationary employee.
- Rationale: To establish duress, need to show 1) that the act was involuntary and not an exercise of free choice, 2) condition of mind was caused by some improper and coercive conduct of the other side (the court believes that neither exists in this case)
- Kory voluntarily resigned and it was not suggested or forced upon her
- City had the right to fire her
- Only thing improper is Surana firing her Surana was acting in good faith
- Kory had other options such as being fired and then suing and being reinstated
- REVERSED and the cause remanded with direction to dismiss the complaint.
Contracts in Violation of Law
- Court will not enforce a contract that involves a violation of the law
- If parties agree to do something illegal, they are left to themselves if the contract is breached
Frohlich and Newell Foods, Inc. v. News Sans Souci Nursing Home
- Facts: plaintiff is a whole sale provider and wants $2,211.55 owed to him
- Defendant concede they owe the amount and counterclaim for $6,475.00 for which they were overbilled
- Plaintiff submitted false bills to the nursing home for food delivered and to "kick back" in cash to the home's operators that part of the payment which did not reflect food actually delivered
- Issue: Whether the contract should be legally enforced.
- Rationale/Holding: The contract is not illegal per se
- A businessman of ordinary intelligence like Frohlich could infer that false billings were being put to an illegal use.
- Willingly supplying false bills, tantamount to the crime of criminal facilitation, money feloniously obtained from the state on the basis of false bills
- Complaint and counterclaim DISMISSED.
- in pari dilecto: in equal fault; equally guilty
Performance or Nonperformance
- Substantial Performance: a defense that may be offered if there is a suit for breach of contract in cases where a contract's terms have not been followed to the letter but the objectives of the contract have essentially been accomplished; ex) subtract cost of work not done; began with construction contracts
- Substantial Performance requires the party seeking compensation to demonstrate: 1) the claimant made an honest attempt in good faith to perform the contract, 2) results of the work are beneficial to the other party, 3) the benefits have been retained by the other party
- Partial Performance: the injured party may sue for damages to cover the cost to him/her of getting completed whatever work the nonperforming party failed to finish
Ira M. Weiss v. Nurse Midwifery Associates
- Facts: plaintiff seeks recovery of $750 fee paid to defendant for pre-natal and post-natal care
- Plaintiff allegates the defendant failed to render adequate services by not being at the child birth
- Defendant's presence was not guaranteed.
- Issue: Whether there was a breach in contract and compensation due.
- Rationale/Holding: Failure to perform only one facet, the attendance at the child birth did not necessarily constitute a material breach of the contract.
- The defendant performed a substantial portion of the obligations which arose upon the formation of the contractual relat. and did not materially breach the contract
- Defendant made best efforts tomake it to the child birth
- Obligation would only arise if proper notification was given and it was not in this case.
- Failure of notification to the defendant of the impending birth should relieve defendant of obligation to attend the event.
- The plaintiff's action to recover payments made to the defendant should be dismissed in its entirety.
- Plaintiff's cause of action is not based in substantive law and shall be dismissed.
Substantive Law: The part of the law that creates, defines, and regulates rights, including, for example, the law of contracts, torts, wills, and real property