Contracts Outline

Contracts - Professor Kevin Kordana

1. Mutual Intent: threshold for agreement to allow enforcement

   1. Objective vs. Subjective Theories of Contracts

      1. Objective Theory of Contracts: contract speaks for itself regarding intent to contract

         1. Few use the pure version, and instead look slightly beyond

         2. Policy:

            1. Tool for the prevention and perpetuation of opportunism (e.g. hidden intentions/dishonesty changing the content of a contract or making a contract of something in jest)

            2. Less work for judges

      2. Subjective Theory of Contracts: internal intentions are taken into account (not common)

      3. Lucy v. Zehmer

         1. Sale of farm: evidence of intent discussion, dickering, wrote down sale, two iterations, signed on napkin, “delivery” of contract

         2. “We must look to the outward expression of a person as expressing his intention rather than to his secret and unexpressed intention”

      4. Middle Ground: Low Lucy

         1. Examines conduct + state of mind and uses inferences about them to fill in the gaps as it believes the parties would have

      5. Middle Ground: High Lucy

         1. Examines only the conduct and the terms of the conduct to fill in the gaps

   2. Often shown via offer and acceptance

      1. R.2d 22: (1) intent shown normally through proposal and acceptance, (2) but does not necessarily need offer and acceptance and also does not require a definite moment of acceptance

   3. Evidence: bargaining, statements, reliance, consideration, writing and signing, formality, offers + acceptance

      1. Reliance: Lucy v. Zehmer and going to the lawyer

      2. R.2d 17: bargain required to show mutual acceptance, but subject to some exceptions

   4. No Intent:

      1. Duress

      2. No Capacity

      3. Mistaken views of actions/meanings

      4. Indefiniteness

2. Indefiniteness - proving intent on the face of the contract

   1. Walker v. Keith:

      1. Facts: Agreed to a lease with an option to renew but “agreed to agree” on price terms for renewal based on “comparative business conditions of the two periods”

      2. Reasoning: much higher cost for courts to determine the lease price than for them to decide themselves (they were the LCAs)

   2. UCC 2-204

      1. First must show that an agreement exists, can be shown through conduct

      2. Does not need a definite moment of contract

      3. Open terms do not make it indefinite if there is a clear manifestation of intent

   3. Evidence of Definiteness

      1. Price

      2. Quantity

      3. Date of Delivery

      4. Definition of Goods: UCC 2-105

         1. If it is a good under this definition, it fits UCC for terms of quantity/delivery

   4. UCC 2-305: Open Price Terms

      1. You can use open price terms (i.e. none, left for agreement, or based on a certain set of factors) if you can show intent

      2. If you “agree to agree” and you do not agree then it is invalid

      3. Policy: used to combat courts that strike down too many open price terms even when there’s intent

      4. Note: only applies to sales of goods in UCC jurisdictions

   5. If it is so incomplete that it’s indefinite (threshold) then the court rules that it lacks Intent

      1. Does not need to account for all foreseeable possibilities

      2. Spectrum

   6. Indefiniteness Over Time

      1. Hoffman v. Red Owl Stores: not indefinite

         1. Facts: agreed Hoffman would open a ROS supermarket, Hoffman relied by giving up store/property, bought a smaller store, had to sell it, Red Owl kept increasing the $ he would have to put upfront, negotiations broke down

         2. Ruling: even though they had never agreed on price, date, etc. they did have intent and thus an enforceable contract where Hoffman could recovery reliance interest for breach

         3. “Everything is ready to go. Get your money together and we are set.”

            1. Affirmative confirmation

            2. Monetary connotation

            3. Coaxing of other party to move forward with plans

      2. When does it become definite enough to prove intent?

   7. Cannot introduce Parol Evidence to show definiteness (that is for the terms)

      1. Contract must be definite enough on its face before using Parol Evidence

   8. Example Cases

      1. Webb - not indefinite

         1. Facts: P saved D from certain death by falling alongside heavy block. D agreed to pay P until he died.

         2. Duration of K was “until death” but the parties didn’t specify what would happen if the payer died before the payee. Court was willing to fill in the gaps.

      2. Lefkowitz - one definite element, one indefinite one

         1. Facts: D guaranteed that “first in line” would be allowed to buy the item but refused to sell it to P (either because he was a man, or because he was D’s rival)

         2. “First in line” is a definite enough term to make K enforceable. Seller can’t withdraw from K after making this offer.

         3. “Worth to $100” was an indefinite term in the first offer, thus not an enforceable contract

            1. K wants them to figure this out or just punish them for putting in $100 by saying it’s worth $100

   9. R.2d 20(a)

      1. Mutual mistake works similarly to indefiniteness by voiding terms to which the parties ascribe different meanings. If parties can’t agree over meaning of a word they couldn’t have mutually intended to contract to it.

      2. See Raffles and the two “Peerless” ships

      3. Ex: French vs. American chickens

   10. Policy: Regulation vs. Restraint

       1. “Court may assert right not to be imposed upon” (Walker)

          1. i.e. Court does not want to clog itself up with frivolous cases

       2. Can the judge effectively fill in the gaps

       3. There may be good business reasons to have indefinite terms (e.g. iron smelting next to mine, quantity = “all”)

       4. LCA here is the court vs. the parties: who has the lower cost to fill in the gaps?

3. Capacity to Contract - negates formation of a contract. Four factors from R.2d. 12

   1. Infant

   2. Under guardianship

   3. Mentally Ill

   4. Intoxication

      1. Unable to understand reasonable consequences

      2. Other party has reason to believe you are intoxicated

      3. Lucy v. Zehmer: Intoxication must be both evident and to the degree that the party didn’t understand what he was contracting.

4. Legality - Threshold

   1. Greene: no contracting to bankruptcy fraud

      1. Example of where it may exist though it did not come up in the case

      2. Also, prior sex cannot be legal consideration

5. Consideration/Promissory Estoppel

   1. Consideration

      1. Traditional - ...

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