McGlone Contracts

OUTLINE FOR CONTRACTS

Common Law Contracts for Civil Law Students

Professor David Gruning, Spring 2000

  1. Offer and Acceptance:
  1. Dickinson v. Dodds: When a party learns that the other party has rescinded his consent to the contract, he cannot then accept an offer. There is no existence of the same mind, and that is essential to making an agreement. Contract was revocable and was revoked by indirect communication.
  2. See Restatement 17 & comment, 18, 22, 24, 25, 35, 36, 37, 42, 43
  3. See UCC 2-206 and 2-205
  4. Objective Theory of Assent:
  1. Embry v. Hargadine, McKittrick Dry Goods Co.: To constitute a contract there must be a meeting of the minds of the parties and both must agree to the same thing in the same sense. The inner intention of parties to a conversation subsequently alleged to create a contract, cannot either make a contract or prevent one from arising. It is only such intention as the words or acts of the parties indicate. The law imputes to a person an intention corresponding to the reasonable meaning of his words and acts. It judges his intention by his outward expressions and excludes all questions in regard to his unexpressed intention.
  2. The conduct of a party is not effective as a manifestation of his assent unless he intends to engage in the conduct and knows or has reason to know that the other party may infer from his conduct that he assents.
  3. Lucy v. Zehmer: Look to the outward expression of a person as manifesting his intention rather than to his secret and unexpressed intention. The mental assent of the parties is not requisite for the formation of a contract. If the words or other acts of one of the parties have but one reasonable meaning, his undisclosed intention is immaterial except when an unreasonable meaning which he attaches to his manifestations is known to the other party.
  4. See Restatement 19
  5. U.S. v. Braunstein: If either party knows that the other does not intend what his words or other acts express, this knowledge prevents such words or other acts from being operative as an offer or acceptance. Doubts arising from ambiguity of language are resolved in favor of the latter. The courts do not like to force parties into a contract.
  1. Offer:
  1. Nebraska Seed Co. v. Harsh: If a proposal is nothing more than an invitation to the person to whom it is made to make an offer to the proposer, it is not such an offer as can be turned into an agreement by acceptance.
  2. See Restatement 26, 29, 33, 27
  3. See UCC 2-204, 2-305, 2-308, 2-309
  4. Empro Manufacturing Co. v. Ball-Co Manufacturing, Inc.: Intent must be determined solely from the language used when no ambiguity in its terms exists. Parties may decide for themselves whether the results of preliminary negotiations bind them, but they do this through their words.
  5. 4 Factors to determine that parties do not intend to be bound without a formal writing:
  1. Whether parties expressly reserve right to be bound only when written agreement is signed.
  2. Any partial performance by one party that the party disclaiming the contract accepted.
  3. Whether all essential terms of the contract have been agreed to.
  4. The complexity and magnitude of transaction is such that a formal writing would be expected.
  1. Acceptance:
  1. Mailbox Rule:
  1. Morrison v. Thoelke: An acceptance is effective when the letter is deposited in the mail.
  2. Langdell: Contract valid at receipt because the hardship is on the buyer, and it is better because the owner would be in a contract that he does not know exists.
  3. Llewellyn: Contract valid upon receipt because only in a few cases does acceptance go awry. If offeror hears nothing, it is more likely that offeror would check on the offeree to see if he is still interested. The offeree will not check that acceptance is received; he will assume the contract exists.
  4. Louisiana Civil Code: Irrevocable offers and options are effective upon receipt; revocable offers are effective upon transmission.
  5. See Restatement 63, 64, 65, 66
  1. Acceptance by Silence:
  1. Hobbs v. Massasoit Whip Co.: conduct which imports acceptance or assent is acceptance or assent in the view of the law, whatever may have been the actual state of mind of the party. Previous trade or custom or usage is important.
  2. See Restatement 69
  1. Acceptance by Performance and Unilateral Contracts:
  1. Carlill v. Carbolic Smoke Ball Co.: If the offeror shows by his language and the nature of the transaction that he does not expect and does not require notice of the acceptance apart from notice of the performance, there is a valid offer.
  2. White v. Corlies & Tifft: Where the act uninterpreted by concurrent evidence of the mental purpose is accompanying it, is as well referable to one state of facts as another, it is no indication to the other party of an acceptance, and does not operate to hold him to his offer.
  3. See Restatement 30, 32
  4. Crook v. Cowan: The rule that filing an order completes the contract, is confined to unconditional and specific orders.
  5. Petersen v. Ray-Hof Agencies, Inc.: If an offer for a unilateral contract is made, and part of the consideration requested in the offer is given or tendered by the offeree in response thereto, the offeror is bound by a contract, the duty of immediate performance of which is conditional on the full consideration being given or tendered within the time stated in the offer, or, if no time is stated therein, within a reasonable time.
  6. See Restatement 45 and 50 p. 422-23.
  1. Interpreting Assent:
  1. Agreements to Agree:
  1. Sun Printing & Publishing Assn. v. Remington Paper & Power Co.: The terms of a contract must be reasonably enforceable in order to form a contract. Support for filling gaps: Contra perferentum: interpreting ambiguity against one who writes the contract.
  2. See Restatement 34, 204 page 433-434. See UCC 2-204(3); enforce contract if reasonably certain formula for remedy.
  1. Illusory Promises:
  1. Louisiana C.C. Art. 1975: It is within the power of the obligor to decide if he is bound to contracts under a potestative condition.
  2. New York Central Iron Works Co. v. United States Radiator Co.: In supply or production contracts, both parties to such a contract are bound to carry it out in a reasonable way. The obligation of good faith and fair dealing towards each other is implied in every contract of this character. An example of bad faith is using the terms of the contract for speculative purposes.
  3. Eastern Air Lines, Inc. v. Gulf Oil Corp.: In requirements contracts, such output or requirements are allowed as may occur in good faith, except that no quantity unreasonably disproportionate to any stated estimate or in the absence of a stated estimate to any normal or otherwise comparable prior output or requirements may be tendered or demanded.
  4. Wood v. Lucy, Lady Duff-Gordon: A promise may be lacking, and yet the whole writing may be instinct with an obligation, imperfectly expressed in order to form a contract. Obligation of means – use reasonable means to make money.
  5. See UCC 2-306 p. 449
  1. Interpreting Assent Subjectively or Objectively:
  1. Raffles v. Wichelhaus
  2. Oswald v. Allen: When any of the terms used to express an agreement is ambivalent, and the parties understand it in different ways, there cannot be a contract unless one of them should have been aware of the other’s understanding.
  3. See Restatement 200, 201, 202 and UCC 1-205 and 2-208 p. 465-468; LA CC Art. 2474.
  4. Weinberg v. Edelstein & Frigalment Importing Co. v. BNS International Sales Corp.: In interpreting a contract consider dictionary/ terms of art; pattern of practice; trade usage; trade custom; legislation.
  1. Consideration:
  1. The Bargain Theory of Consideration:
  1. To constitute consideration, a performance or a return promise must be bargained for. A performance or return performance is bargained for if it is sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise.
  1. Distinguish Bargains form Gratuitous Promises:
  1. Johnson v. Otterbein University: A promise to pay an existing debt will not be sufficient consideration as there was already an obligation to pay the debts.
  2. Hamer v. Sidway: A valuable consideration may consist either in some right, interest, or benefit to the one party, or some forbearance, detriment, or loss suffered by the other. A waiver of any legal right at the request of another is sufficient consideration.
  3. See Restatement 24, 71, 81 page 666-668.
  1. Past Consideration:
  1. Moore v. Elmer: A contract for services rendered is limited to cases where the request implies an undertaking to pay, and do not mean that what was done as a mere favor can be turned into a consideration at a later time by the fact that it was asked for.
  1. Moral Consideration:
  1. Mills v. Wyman: A moral obligation is a sufficient consideration for an express promise, is to be limited in its application, to cases where at some time or other a good or valuable consideration has existed.
  2. Webb v. McGowin: Where the promisee cares for, improves, and preserves the promisor, though done without his request, it is sufficient consideration for the promisor subsequent agreement to pay for the service, both because of the materail benefit received.
  3. See Restatement 86 p. 686.
  1. Contract Modification and the Preexisting Duty Rule:
  1. Stilk v. Myrick: A contract to do that which one is already bound to do for more money is unenforceable for lack of consideration.
  2. Alaska Packers Assn. v. Domenico: The party who refuses to perform, and thereby coerces a promise from the other party to the contract to pay him an increased compensation for doing that which he is legally bound to do, takes an unjustifiable advantage of the necessities of the other party. The promise cannot be legally enforced although the other party, although the other party has completed the contract in reliance upon it. The doctrine of promissory estoppel will not apply.
  3. Brian Construction and Development Co.v. Bighenti: Where the subsequent agreement imposes upon the one seeking greater compensation and additional obligation or burden not previously assumed, the agreement, supported by consideration, is valid and binding upon the parties.
  4. See Restatement 89 and UCC 2-209 p. 697-698.
  1. Adequacy of Consideration:
  1. If the requirement of consideration is met, there is no additional requirement of a gain, advantage, or benefit to the promisor ro a loss, disadvantage, or detriment to the promisee or equivalence in the values exchanged, or mutuality of obligation. Pretended exchanges will not be enforced.
  2. Dyer v. National By-Products, Inc.: Forbearance to press a claim, or a promise of such forbearance, may be a sufficient consideration even though the claim is wholly ill-founded. The fact that the claim is ill-founded is not in itself enough to prevent forbearance from being a sufficient consideration for a promise. The claim must be asserted in good faith, not being made frivolously.
  1. The Intention to be Legally Bound:
  1. Contracts Under Seal:
  1. The seal takes the place of proof of consideration. And in the absence of fraud makes the promise enforceable without it. The defense of want of consideration is not available in an action.
  2. See Restatement 95 and UCC 2-203 p. 724-725.
  1. Promissory Estoppel:
  1. Promissory Estoppel as a Substitute for Consideration:
  1. Family Promises: Ricketts v. Scothorn: Equitable estoppel is the effect of the voluntary conduct of a party whereby he is absolutely precluded, both at law and in equity, from asserting rights which might perhaps have otherwise existed, against another person who in good faith relied upon such conduct and has been led to change his position for the worse.
  2. Promises to Convey Land: Greiner v. Greiner: A promise which the promisor should reasonably expect to induce action of forbearance of a definite and substantial character on the part of the promisee is binding if injustice can be avoided only be enforcement of the promise.
  3. Charitable Subscriptions: Allegheny College: Promise of money to a college treated as consideration not promissory estoppel.
  4. aPromises of a Pension: Feinberg v. Pfeiffer Co.: See Restatement 90 above.
  5. Construction Bids: Drenan v. Star Paving Co.: If an offer for a unilateral contract is made, and part of the consideration requested in the offer is given or tendered by the offeree in response thereto, the offeror is bound by a contract, the duty of immediate performance of which is conditional on the full consideration being given or tendered within the time stated or a reasonable time. Merely acting in justifiable reliance on an offer may serve as sufficient reason for making a promise binding. The bid creates an option contract that cannot be revoked by the offeror if the offeree uses it in his bid for the job.
  6. An offer which the offeror should reasonably expect to induce action or forbearance of a substantial character on the part of the offeree before acceptance and which does induce such action or forbearance is binding as an option contract to the extent necessary to avoid injustice.
  7. Functions of Consideration or Promissory Estoppel:
  1. Formality
  1. Caution
  2. Channeling
  1. Promissory Estoppel as an Alternative to Breach of Contract:
  1. Goodman v. Dicker: Justice and fair dealing require that the one who acts to his detriment on the faith of another’s actions should be protected by estopping the party who has brought about the situation from alleging anything in opposition to the natural consequences of his own course of action.
  2. Hoffman v. Red Owl Stores, Inc.: The court must determine if the promise is one which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promise, if the promise was such to induce action or forbearance, and if injustice could be avoided only by enforcement of the promise. Where damages are awarded in a promissory estoppel instead of specifically enforcing the promisor’s promise, they should be only such as in the opinion of the court are necessary to prevent injustice. Damages usually include reliance and restitution damages.
  1. Modern Application and Limits of Promissory Estoppel:
  1. Blatt v. University of Southern California: In order to apply the doctrine of promissory estoppel, there must be some type of promise to induce action on the part of the promisee. If there is no promise, there can be no reliance.
  2. Spooner v. Reserve Life Ins. Co.: There must be a real promise to be enforced. Action in reliance upon a supposed promise creates no obligation on an individual or corporation whose only promise is wholly illusory.
  3. Alden v. Presley: Since the promisee had learned prior to there be a legally enforceable agreement constituting her reliance that the defendant would not honor that promise, such reliance is not reasonable and would not entitle her to invoke promissory estoppel.
  4. Cohen v. Cowles Media Co.: Promissory estoppel will only apply when it will avoid injustice.
  1. Damages:
  1. Damages are the preferred common law remedy. The Civil Law prefers specific performance. Article 1986 states that specific performance shall be awarded unless it is impracticable. Article 1994 states that an obligor is liable for the damages caused by his failure to perform a conventional obligation (nonperformance, defective performance, or delay in performance). Article 1995 limits damages only to the loss sustained by the obligee and the profit of which he has been deprived.
  2. Three Damage Interests:
  1. Expectation: Puts the promisee in the position in which the promisee would have been had the promise been performed.
  2. Reliance: Put the promisee back in the position in which the promisee would have been in had the promise not been made.
  3. Restitution: Put the promisor back in the position in which the promisor would have been had the promise not been made. Deprives the promisor of any benefit received in the course of the transaction.
  1. Hawkins v. McGee: “Hairy hand case.” The measure of the vendee’s damages is the differences between the value of the goods as they would have been if the warranty as to the quality had been true, and the actual value at the time of the sale, including gains prevented and losses sustained, and such other damages as could be reasonably anticipated by the parties as likely to be caused by the vendor’s failure to keep his agreement, and could not by reasonable care on the part of the vendee have been avoided.
  2. Restatement 347: Damages are measured by:
  1. The loss in value to him of the other party’s performance caused by its failure or deficiency, plus
  2. Any other loss, including incidental or consequential loss caused by the breach, less
  3. Any cost or other loss that the promisee has avoided by not having to perform.
  1. Hooker & Sons v. Roberts Cabinet Co.: Contract damages are ordinarily based on the injured party’s expectation interest and are intended to give him the benefit of the bargain by awarding him a sum of money that will, to the extent possible, put him in as good a position as he would have been in had the contract been performed. In this case, the court refused to allow damages for storage costs, as they would have been incurred regardless of whether the contract was breached; but it did allow the reimbursement of the manager’s salary since the court determined that he could have spent his time on other projects if there was no contract with defendants.
  2. Tongish v. Thomas: Under UCC 2-713, the measure of damages for nondelivery or repudiation by the seller is the difference between the market price at the time when the buyer learned of the breach and the contract price together with any incidental and consequential damages but less any expenses saved in consequence of the seller’s breach. The application of the general theory of expectation theory rewards the seller for breaching the contract. The market theory of damages discourages the breach of contracts and promotes a more efficient market.
  3. Three Limitations to Damages:
  1. Foreseeability of Harm:
  1. Hadley v. Baxendale: Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probably result of the breach of it. If the special circumstances under which the contract was actually made were communicated by the plaintiffs to the defendants, and thus known to both parties, the damages resulting from the breach of such a contract, which they would reasonably contemplate, would be the amount of injury which would ordinarily follow from a breach of contract under these special circumstances so known and communicated. When the special circumstances are not communicated to the party in breach, there can be no damages.
  2. Hector Martinez and Co. v.