Contracts I - Teaching Master Outline

A contract is defined as “a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty” (Restatement (Second) of Contracts §1). The objective theory of contracts assesses intent based on how a reasonable person would interpret the offeree’s actions or words, not the subjective intent of the parties (Restatement (Second) §21). In *Lucy v. Zehmer* (1954), Zehmer’s signed agreement to sell land, despite claiming it was a joke, was enforceable because Lucy reasonably relied on the objective manifestation. Conversely, *Raffles v. Wichelhaus* (1864) illustrates mutual mistake where differing ship names (“Peerless”) led to no meeting of the minds, voiding the contract due to ambiguous intent.

Contracts are categorized as bilateral or unilateral. A bilateral contract involves mutual promises between parties, where each is both a promisor and promisee (Restatement (Second) §1, Comment d). For example, *Embry v. Hargadine* (1907) upheld a bilateral promise when a manager’s assurance led to continued employment. A unilateral contract is accepted by performance rather than a promise, as seen in *Carlill v. Carbolic Smoke Ball Co.* (1893, UK), where using a product accepted a reward offer. Partial performance in unilateral contracts can make the offer irrevocable under the “option contract” doctrine.

An illusory promise lacks a binding commitment and cannot serve as consideration. For instance, “I’ll buy if I feel like it” offers no obligation (Restatement (Second) §2, Comment e). However, *Mattei v. Hopper* (1958) held that a promise to buy land “subject to satisfactory leases” was enforceable due to an implied good-faith obligation, refining the illusory doctrine.

An offer requires (1) a manifestation of intent to be bound, (2) sufficient certainty in terms (e.g., price, quantity), and (3) communication to the offeree (Restatement (Second) §24). *Lonergan v. Scolnick* (1954) ruled a letter with vague terms was not an offer, emphasizing intent and clarity. *Embry v. Hargadine* (1907) showed intent can arise from context, not just words. Preliminary negotiations, as in *Allied Steel v. Ford Motor* (1966), are not offers unless specific.

Advertisements are generally invitations to negotiate, not offers (Restatement (Second) §26), unless specific, as in *Morris Lefkowitz v. Great Minneapolis Surplus Store* (1957), where a $1 coat ad bound the store. *Leonard v. PepsiCo, Inc.* (1999) denied offer status to a humorous ad for a Harrier jet, lacking intent. Rewards and auctions follow similar rules, requiring clear terms.

An offer terminates by (1) lapse after a reasonable time or specified period (Restatement (Second) §41), (2) revocation if communicated before acceptance (Restatement (Second) §42), (3) rejection or counteroffer (Restatement (Second) §36), or (4) death/incapacity of the offeror (Restatement (Second) §48). *Earle v. Angell* (1908) held an offer lapsed upon the offeror’s death.

Acceptance must be a manifestation of assent to the offer’s exact terms, per the mirror image rule (Restatement (Second) §50). *Ardente v. Horan* (hypothetical) shows a counteroffer when new terms (e.g., furniture) are added, rejecting the original offer. The rule ensures mutual assent (Restatement (Second) §59).

Acceptance varies by contract type. Bilateral contracts accept with a promise (Restatement (Second) §32), while unilateral contracts require performance (Restatement (Second) §45). Silence is acceptance if the offeree takes benefits (*Day v. Caton*, 1868) or prior dealings imply it (Restatement (Second) §69).

Revocation is effective upon receipt by the offeree (Restatement (Second) §42), while the mailbox rule holds acceptance effective upon dispatch if properly transmitted (Restatement (Second) §63). *Adams v. Lindsell* (1818, UK) established this principle.

Unilateral acceptance occurs upon performance, but notice may be required if the offeror wouldn’t learn of it (*Cook v. Coldwell*, 1847). The UCC §2-206(2) allows reasonable time for notice in goods contracts.

UCC Article 2 applies to transactions in goods—movable, tangible items at identification (UCC §2-105). Services or real estate fall under common law unless the predominant purpose test deems goods dominant (*Bonebrake v. Cox*, 1974). This test weighs contract terms, objectives, price ratio, supplier nature, and goods’ intrinsic value. Mixed contracts (e.g., construction with materials) require analysis—e.g., *Quake Construction v. American Airlines* (hypothetical) might hinge on material costs.

A merchant’s signed writing offering to buy or sell goods is irrevocable for the stated time or up to three months if unspecified, without consideration (UCC §2-205). *Drennan v. Star Paving* (1958) supports reliance-based irrevocability. This differs from common law, where consideration is needed for options.

Acceptance can be a promise to ship or shipment of conforming goods (UCC §2-206(1)). Non-conforming goods are not acceptance unless sent as an accommodation with notice (UCC §2-206(1)(b)). *Egan Machinery Co. v. Mobil Chemical* (hypothetical) might involve shipment disputes.

UCC §2-207 addresses form discrepancies in goods contracts, a complex area due to standard business practices. Subsection (1) states that a definite and seasonable expression of acceptance or written confirmation operates as acceptance, even with additional or different terms, unless expressly conditional on assent to those terms. Subsection (2) adds that between merchants, additional terms become part of the contract unless they materially alter it, are objected to, or are limited by the offer. Subsection (3) applies if no acceptance occurs but parties’ conduct recognizes a contract, using matching terms and UCC gap-fillers. *Brown Machine v. Hercules* (1985) upheld acceptance with new terms absent conditionality, while *Dorton v. Collins* (1972) found a conditional response a counteroffer.

Delving deeper, UCC §2-207 resolves the “battle of the forms” by balancing commercial efficiency with fairness. Subsection (1) allows acceptance despite new terms, except when the response is explicitly conditional (e.g., “only if you agree to X”), as seen in *Step-Saver Data v. Wyse Tech* (1991), where a warranty disclaimer was excluded as material. Subsection (2) treats additional terms as part of the deal between merchants unless they alter core rights (e.g., liability limits), with objections or offer limitations overriding. Subsection (3) steps in when forms don’t align but performance occurs, applying matching terms and UCC defaults like price (UCC §2-305) or delivery (UCC §2-308), as in *C. Itoh v. Jordan Int’l* (1986). The majority rule knocks out different terms (*Roto-Lith v. Bartlett*, 1962), while the minority preserves the offeror’s terms (*Dorton v. Collins*), creating a jurisdictional split.

UCC §2-204 allows contract formation in any manner sufficient to show agreement, even without all terms. §2-305 sets reasonable price if none agreed. §2-309 implies reasonable time for performance. These provisions ensure flexibility, as seen in *Meyer v. Uber Tech. Inc.* (hypothetical) for service-goods hybrids.

Consideration is a benefit to the promisor or detriment to the promisee, bargained for in exchange (Restatement (Second) §71). *Hamer v. Sidway* (1891) upheld forbearance (e.g., not drinking) as detriment. It must induce the promise, distinguishing it from gifts.

Illusory promises lack obligation (*Mattei v. Hopper*, 1958, with good-faith salvage). Forbearance is consideration if the claim’s validity is reasonably believed (*Dyer v. National By-Products*, 1923).

Promissory estoppel binds if reliance is reasonable and detrimental (*Ricketts v. Scothorn*, 1898). Restitution enforces promises for past benefits (*Webb v. McGowin*, 1935). Emergency aid liability also applies.

Minors (under 18) can void contracts except for necessaries (*Webster Street v. Finn*, 1926). Mental incapacity voids if the party cannot understand or act reasonably, and the other party knew or should have known (*Fingerhut v. Kruse*, 1968).

Intoxication voids if the other party knows of inability to understand (Restatement (Second) §16). Mutual mistake voids if material and not assumed as a risk (*Sherwood v. Walker*, 1887).

Misrepresentation voids if intentional or material (*Vokes v. Arthur Murray*, 1968). Duress requires an improper threat with no reasonable alternative (*Totem Marine v. Alyeska*, 1978). Undue influence arises from dominating a vulnerable party (*Odorizzi v. Bloomfield School Dist.*, 1966).

Unconscionability voids if procedurally or substantively unfair (*Williams v. Walker-Thomas*, 1965). Public policy voids illegal contracts (*United States v. Meadors*, hypothetical).