Contracts II

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Contracts II
2014-03-29 16:32:21
Contracts CWSL Kim

ContractsII, Kim, CWSL
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  1. K law is enforcement of private agreement between two parties
    a. Voluntary agreement

    b.Law only comes in to enforce the agreement
  2. What happens when a party disagree on what the terms mean?

    Whose story should the court believe and take sides. (K law is all about intent of the parties)

    K law adopts an objective theory of contracts

    - looks at what a reasonable person would think based on outward words or conduct of the parties

    - the k is based on the overt acts of the parties

    - words or conduct



    -  Objective with subjective elements

    - Look at what a reasonable person standing in the offer-ees shoes would think-

    o Reasonable on what that person knows

    -  Sometimes there is no difference
  3. What if a K / offer is a Joke?
    In the Pepsi commercial / jet plane - what would a REASONABLE person think of the offer?

    Lucy v. Zehmer 

    Offer to sell land on napkin was a joke. 

    Mental assent not needed. If buyer thinks offer is legitimate then K has been formed. 

    Joke should be funny - doesn't matter what a third party might think.
  4. When interpretation issues arise
    1. 2 parties mean different things  (but don’t know it)

    • 2. 2 parties mean different things but 1 party
    • knows what other means and other party does not know what other party means

    a. Party A and B believe different things but party B knows what A is thinking

    3. 2 parties mean different things

    • a. But they know that each other is thinking
    • incorrectly

    4. Parties didn’t think about what happened
  5. Frigaliment Importing Co. v. B.N.S. Intern. Sales Corp. 
    Chicken Case - FI wanted fryers and was given broilers. 

    • Depends on what a reasonable person thinks. 
    • IF both believed it to be something different then no K existed. 

    If one party was more "reasonable" then that party would prevail.
  6. Assent -
    An essential prerequisite to the formation of a contract is an agreement, i.e., mutual assent to the same terms. Consent is not mutual, unless the parties all agree upon the same thing in the same sense.

    Mutual assent is ordinarily established by a process of offer and acceptance. To discover whether parties have assented to an agreement courts examine both their words and deeds.
  7. Objective Theory of Assent
    Assent should be determined solely from objective manifestations of intent, namely what a party says and does rather than what he subjectively intends or believes or assumes? Under the objective theory, the mental assent and intent of the parties is irrelevant. The objective theory has been dominant. A party's intention will be held to be what a reasonable person in the position of the other party would conclude his manifestation to mean. (Lucy v. Zehmer (1954 Sup.Ct. VA) 84 S.E.2d 516.)
  8. Subjective Theory - Assent
    Should the assent of the parties be actual mental assent so that there is a "meeting of the minds"
  9. Interpretation
    1. Look at what a reasonable person would have thought standing in the room.

       a.  And knowing what they know.

    2. When both interpretations are reasonable then there is no K.

    • 3. If there is a misunderstanding then
    • there is no mutual assent.

    4. Other requirements for a K:

    •    a. Mutual assent: both parties are talking about the same thing.
    • i.  No misunderstanding.

    b. Offer and acceptance:
  10. Parol Evidence Rule
    The parol evidence rule is substantive law that renders preliminary negotiations, written documents, conversations, and verbal agreements inadmissible at trial because they are merged into and superseded by the subsequent written contract. Even if a court allows such evidence, its veracity still has to be proved to the jury. The rule controls only what type of evidence is allowed, not whether such evidence is credible.
  11. Parol Evidence Rule - Integration
    A writing is integrated if it is adopted by the parties as “a final expression of one or more of the terms of an agreement.” (Rest. 2d. § 209(1).)

    1.A writing is partially integrated if the parties did not intend for it to include all the terms of the agreement.

    2.A writing is completely integrated if the parties intended it to include all the terms of the agreement. (Rest. 2d.§ 210(1).)
  12. When Parol Evidence is Admissible
    1.Evidence of prior agreements or negotiations may supplement a partially integrated agreement, provided this evidence does not contradict a term of the writing.

    2.When an agreement is completely integrated, not even evidence of a consistent additional term is admissible to explain or supplement it. (Rest. 2d. § 216.)

    3. Some courts treat contemporaneous oral agreements as prior oral agreements. Others assert that the existence of a contemporaneous oral agreement automatically proves that the writing is only partially integrated.

    4. Parol testimony is admissible to prove a condition precedent to the legal effectiveness of a written contract if the condition does not contradict the express terms of such written agreement.

    5. Even if the writing is a complete integration, parol evidence is admissible to show fraud, mistake, or duress in the inducement of the contract. Most courts hold that a merger clause should not be held a bar to actions for fraud.

    • 6. Evidence of subsequent oral agreements will not be barred by the parol evidence rule. The rule only applies to agreements made prior to the final contract.
    • a. To avoid the admission of this type of evidence, some parties insert no-oral-modification clauses that find statutory support from UCC § 2-209(2).
    • b. An attempted oral modification of a contract that contains a no-oral-modification clause is effective as a waiver only if it is reasonably relied upon.
  13. Parole Evidence - UCC Version
    1. A writing intended to be a final expression of an agreement may not be contradicted by evidence of a prior written or oral agreement or of a contemporaneous oral agreement. (UCC § 2-202.)

    2. The writing may be explained or supplemented by course of dealing or usage of trade even if it is a complete integration, unless the course of dealing or trade usage is carefully canceled by the contract’s terms. (UCC § 2-202(1).)

    3. The writing may be explained or supplemented by evidence of consistent additional terms unless the court finds the writing to be complete and exclusive. (UCC § 2-202(2).)
  14. What is a quasi-contract
    A plaintiff:

    confers a benefit on a defendant and

    plaintiff reasonably expected to be paid and

    defendant realized unjust enrichment if the plaintiff is not compensated.
  15. What is a unilateral contract?
    offer that expressly requires performance as the only possible method of acceptance.

    Example:rewards, prizes, contest, offer expressly requires performance for acceptance.
  16. Third-party beneficiary
    Not a party to the contract, but able to enforce contract others made for their benefit.
  17. What is the Mirror Image rule?
    Under common law, a response to an offer that adds new terms is treated like a counteroffer rather than an acceptance.
  18. What is the mailbox rule?
    • Occurs when the offeror and offeree are in different places and there are conflicting communications.
    • 1. all communications other than acceptance are effective only when received.
    • 2. acceptance is generally effective when mailed.
    • 3. if a rejection is mailed before an acceptance is mailed, then neither is effective until received.
    • 4. you cannot use the mailbox rule to meet an option deadline.
  19. Who can accept an offer?
    • A person who knows about the offer, and
    • is the person to whom it was made.
  20. Elements of an offer
    • Intent to enter bargain
    • Definite terms, subject matter, price, quantity
    • Directed at particular offeree
  21. If a revocation of an offer is sent in the mail, when is it effective?
    When it is received.
  22. What is an Offer?
    • 1. A manifestation of a willingness to enter into a bargain, so made as to justify another
    • person in understanding that his agreement to that bargain is invited and will conclude it
    • 2. Offeror must have an intent to enter into a K, show that he or she is willing to enter
    • into the offer right at that moment
  23. What is acceptance?
    A voluntary act by an offeree whereby he exercises the power given to him by the offeror
  24. Are advertisements offers?
    • Ads are an invitation to make an offer and not an offer itself
    • Exception: where the offer is clear, definite, explicit and leaves nothing open for negotiation, it constitutes an offer, acceptance of which will complete the contract
  25. Termination of power of acceptance
    • 1. Rejection or counter offer by the offeree
    • 2. Lapse of Time
    • 3. Revocation by the offeror
    • 4. Death or incapacity by the offeror or offeree
  26. Dispatch Rule
    Acceptance must be done by a method that is as fast or faster than the method the offer was made in for the mailbox rule to apply
  27. What is an Option Contract?
    • 1. The offeror makes the offer then promises not to revoke (keep the offer open for an amount of time)
    • 2. Part performance