contracts (bowers) study guide

8/3/2019 Contracts (Bowers) Study Guide

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Contracts/Obligations (Bowers)

Study GuideFall 2006

Overview Sheets Topic Page Number

General Statements of Contract Law . 2What is a contract (formalism) .. 3What is an offer ((ir)revocability) . 6What is acceptance 9What makes a contract enforceable ... 11What is a donation . 14Overview of the Uniform Commercial Code 16Random Bower-isms . 18

Case briefs (in alphabetical order) 19


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General Statements of Contract Law

A contract is an agreement between two or more parties creating obligations thatare legally enforceable or otherwise recognizable; more simply put, a contract is apromise

o In making a promise, we are inherentlyrestricting our own freedom

o We rationally desire to restrict our ownfreedom because the choices we might

make for ourselves are not necessarily thechoices that we should make for the

betterment of society at large This is the economic principle of

prisoners dilemma As the economy evolves, so too does our understanding of what is

best for societyo A breach of contract is a violation of a contractual obligation, either by

failing to perform ones obligation, or by interfering with another partysperformance

o A cause of action is a factual situation that allows one party to obtain alegal remedy from another party

Contract law is designed to incentivize good behavior and decentivize badbehavior

Common law versus civil law in contractso Common law looks at contracts objectively (i.e. what would the sober guy

at the end of the bar think) Common law is a ex post decision making strategy (deciding after

the fact)o Civil law looks at contracts subjectively (i.e. was there a meeting of the

minds) This idea of subjectivity in the civil law system comes from the

idea of the autonomy of you; if two parties agree, there issomething magical about two autonomies being in sync

Civil law is an ex ante decision making strategy (deciding beforethe fact)

o Downsides to both systems: Common law downside if someone else is determining who is in

a contract and who isnt, people may enter contracts withoutintending to or realizing that they have

Civil law downside people lie; since swamis do not exist, peoplecan say they never agreed, and who is to know the difference?

Also, can we really plan the future of contract law?

Questions to ponderWhy do we enforce promises?Is life better off if we enforce

promises?


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What is a contract? (formalism)

COMMON LAW CIVIL LAW

Whatisa

contract?

Contract = promise (1 of Restatements)

Promise = manifestation of intent that thepromisee can justifiably rely on (2 ofRestatements)

Contracts require consideration

Contract = obligation

Art. 1906 (Definition of contract) A contract is anagreement by two or more parties whereby obligatioare created, modified, or extinguished.

Contracts require cause

Howisacontractformed?

A promise is formed when both parties can beseen as reasonably intending to enter a contract; itmust begin with an offer from the offeror to theofferee

Note: this means that the parties should havemutual assent in order to enter a contract;however, when mutual assent is questioned, it is tobe determined from the perspective of the guy atthe end of the bar (i.e. third party); therefore, thismeans mutual assent is determined by the partiesoutward actions (Lucy v. Zehmer, Virginia 1954);in other words, mutual assent should be anobjective determination

Art. 1927: A contract is formed by the consent ofthe parties established through offer andacceptance.

Additionally, the consent concept of a meeting of tminds is carried over from the 1870 Code(BelgardConstruction Company v. Collins, Louisiana 1993);meeting of the minds is a subjective determination

Art. 1798 of CC of 1870: As there must be twoparties at least to every contract, so there must besomething proposed by one and accepted and agreedto by another to form the matter of such contract; thwill of both parties must unite on the same point.

What

isthebenefitof

contractrequirements? There are no real formalities required in a

common law system, so contracts are not limitedto the elite

Requiring the minds to meet and the formalism ofan offer and acceptance ensures (more than atcommon law) that contracts are truly and intentionamade

Whatist

hedownsideofthe

contractrequirements?

Allowing mutual assent to be determined byoutward actions allows for the misinterpretation ofwhen contracts are/are not formed.

This problem would be solved if we had either (a)swamis that could read peoples intentions or (b)an unmistakable formality (ex: grunt and slither)that identified mutual assent [disadvantage wouldbe increasing formalism increases the price ofcontracting]

Requiring a true offer and acceptance can lead tomindless formalism, which can in turn make theestablishing of offer and acceptance arbitrary (NorthLouisiana Milk Producers Association v. The

Southland Corporation, Louisiana 1977)

Meeting of the minds is ridiculous because there wilalways be details left out (ex: color of delivery truckthis is an idiosyncrasy)

Solution: swamis! (grunt and slither may be harder civil because meeting of minds is too subjective)

Civil law is more formalistic in the manner of determiningif there was a contract than common law


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COMMONV.CIVIL

Both common and civil include the idea of a contract including an offer and an acceptance, but civil lawlays out more formalistic requirements of identifying what the offer and acceptance precisely were

Both common and civil law include the idea that the two parties should agree on the contract, but civil ladoes this through a subjective meeting of the minds, while common law does it through an objective

mutual assent

The requirements in both systems create the formation of contracts that are unintentional and vice versa(Common examples: Embry v. Hargadine, McKittrick Dry Goods and Oswald v. Allen)

In other words, neither system is perfect in establishing when a contract is/isnt made.

Contract/Formality Cases

CASE A ARGUMENT CASE B

Embry v. McKittrick(created) Oswald v. Allen(not created)

North Louisiana Milk Producers(created)

Contracts are unintentionally created/not created Belgard Construction (not creat

Contact/Formality StoriesAdvantage of having formalism:

If we have formalism, then the contractual jaws will not be shut on anyone unknowingly Ex: Im studying in the library for exams. A colleague of mine has been eyeing my car for weeks now

because I have a hybrid and get great gas mileage. My colleague walks up to my cubical on the second floand says he will buy my hybrid for $2,000. I wave my hand up because I dont want anyone bothering meIm studying! He interprets this as me saying, we have a deal, while I mean this as, get the hell away frme. Since there is a lack of swamis in the library around exam time, theres no way to tell if we both wanthere to be a contract. If we have no formalism whatsoever, the relaxed 3L on the other side of the second

floor who saw the whole scene may say that my hand raising appeared to be a gesture of acceptance (ex: Lv. Zehmer) Therefore, I may have very well entered myself into a contract to sell my hybrid without evenknowing it.

From a societal perspective, we dont want people to be able to unknowingly enter into contracts, becausethen people will be hesitant to begin to make deals with one another at all, out of fear of getting caught in acontract that they did not intend to enter.

Advantage of not having formalism:

If we do not have formalism, the cost of contracting is far less Ex: Same scenario of me studying and a colleague wanting to buy my hybrid. This time, there are a set of

detailed rules as to how the sale of a hybrid can take place in a law library, and the rules involve me gruntiand slithering five times with a French accent to show my acceptance. This is going to be a big expense onme because I: (a) dont know all of the rules yet since Ive only been through 1 semester of law school, (bIm not very good at grunting and slithering, and (c) my French accent is lousy at best. So in order for meenter into this contract, I need to: (a) hire an attorney from the local bar to teach me the rules, (b) hire aninstructor to teach me to grunt and slither properly, and (c) hire a French native to help me work on myFrench accent. All told, this is going to be a very expensive contract for me to enter into, and since Im jus


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law student and have student loans to worry about, there is no way I will be able to enter into the contract iwanted to

From a societal perspective, we dont want to make it so expensive that everyone save the Bill Gates of theworld cannot enter into a contract

Balance:

The best thing for society is for there to be a balance between the two extremes, and that balance should bejudged on a case-by-base basis

We want people to enter into contracts with one another, because when they do, they are inherently restricttheir own individual freedoms because they have tied themselves to another person (ex: I sell my hybrid tmy colleague, I cannot sell it to someone else); when people tie themselves to one another, the decisionmaking process is changed from what is best for me? to what is best for the group? (ex: it may be besme to drive 70 mph an hour down Dalrymple because I can get to school quicker, but now that Ive contracto sell my car, that decision is not good for my colleague and I because I may wreck the car and then not bable to sell it to him) [this is represented theoretically in the game theory principle of prisoners dilemma]

When people make decisions that are better for society-at-largeRandom points of formalism:

Ex (words as formalism): Words have meaning, but the meaning is based on the context, as Dudley Mooshowed us inBedazzled. For example, if I walk into Calandros to buy meat, I tell the butcher, Give me ahalf-pound of that pastrami, customary practices say I am not asking for a donation, though the definitionmeaning of my words implies such.

Idiosyncrasieso The person with the idiosyncrasy is in the best position to ensure the idiosyncrasy is met (i.e. I only

want to be paid for my hybrid by someone wearing red clown shoesthats just odd-ball of me)

o An idiosyncrasy is whatever is against customary norms of the industry (ex: if its customary thatwhen I sell my car, I include the tires on the car, too, then if I remove the tires of the car before I seit, I am being idiosyncratic; or if its customary that it does not matter what color shoes my colleagis wearing when he pays me, then if I require him to wear a certain type of shoe I am beingidiosyncratic)

o Civil law cases: Idiosyncratic party bears burden: Lyons Milling Co. v. Cusimano Non-idiosyncratic party bears burden: Ouachita Air Conditioning, Inc. v. Pierce


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What is an offer? ((ir)revocability)


Whatisa

noffer?

24 of Restatements: An offer is themanifestation of willingness to enter into abargain, so made as to justify another person inunderstanding that his assent to that bargain isinvited and will conclude it.

Every contract begins with an offer from theofferor to the offeree.

The outcome of a case may depend on who wasthe offeror and who was the offeree; these rolesare not as set in stone as one might like

An offer is a unilateral declaration of will that a pers(offeror) addresses to another (offeree)

Offers must be precise and complete

Whenisanofferrevocable?

36 of Restatements: An offerees power ofacceptance may be terminated byrevocation bythe offeror

In common law, unilateral contracts [unilateralcontract = promise made by one party that iscontingent on the other partys action] arerevocable up until the point of action (Petterson v.Pattberg, New York 1928)

Note: a unilateral contract is different from abilateral contract [bilateral contract = promisemade in exchange for a promise]

Art.1928: (Irrevocable offer) An offer that specifiesperiod of time for acceptance is irrevocable during ttime.When the offeror manifests an intent to give theofferee a delay within which to accept, withoutspecifying a time, the offer is irrevocable for areasonable time.

In civil law, an offer is not automatically revocable.

Whatarethepro

blems

withrevocability?

Determining the point of action is difficult

Partial performance of a unilateral contract hasbecome to be accepted as a point of action suchthat the offer is irrevocable (Marchiondo v.Schnek, New Mexico 1967), but that begs thequestion, when has enough performance occurredto become partial performance?

Whos standard do you use as a reasonably amounttime that an offer must be open? The offeror or theofferee?

Isanadver

tisement

anoffer?

If the advertisement is extremely specific, it canconstitute an offer (Lefkowitz v. GreatMinneapolis Surplus Store, Minnesota 1957)

If the advertisement is not specific, it is not anoffer, but a solicitation for the buyer to make theseller an offer (Mesaros v. U.S., Federal Circuit1988)

If the advertisement is from a merchant to a consumit is more likely to be considered as an offer (Johnsov. Capital City Ford Company, Inc., Louisiana 1955

If the advertisement is from a merchant to a merchanit is less likely to be considered as an offer, but asolicitation for the buying merchant to make theselling merchant an offer (North Central Utilities, Inv. Walker Community Water System, Inc)


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COMMONV.

CIVIL

Unless otherwise stated, civil law requires offers to be irrevocable for a reasonable amount of timeCommon law allows offers to always be revocable, unless there has been partial performance

Both systems strive to incentivize good behavior and decentivize bad behavior:In civil law (Louisiana) this means protecting consumers from merchants (note: Bowers does not think tgoal is achieved through the Louisiana obligations law because it decreases the worth of consumers offer

In common law this means restricting bait and switch advertising.

Offer/Revocability Cases

CASE A ARGUMENT CASE BPetterson v. Pattberg (alwaysrevocable)

COMMON LAW: Offers are alwaysrevocable/offers are revocable until

performance

Marchiondo v. Schnek(revocabuntil performance)

CIVIL LAW: Offers are irrevocable for reasonable amount of time (Art. 1928), unless otherwise stated

Lefkowitz v. Great Minneapolis

Surplus

(enforceable)

Mesaros v. U.S.

(not enforceable)

Johnson v. Capital City Ford

(enforceable)

Advertisements can/cannot beenforceable [if enforceable ad is an

offer; if not, ad is a solicitation for anoffer]

North Central Utilities v. Walke

Community Water System

(not enforceable)

Offer/Revocability Stories

Advantage of having offers be continually revocable:

If offers are always revocable, then the offeror has the advantage of keeping up with the market and havingthe heads I win, tails you lose scenario

Ex: Im offering to sell my colleague my hybrid now for $2,000, and hes mulling the idea over in his heafor the night. In the middle of the night, every hybrid manufacturing plant in the U.S. explodes, so there isinstantaneous shortage in the supply of hybrids, thus the demand for my used hybrid has shot up over nigh

If I cannot take back my offer, then Im stuck taking a price for the car ($2,000) that is far below the markeequilibrium price at the time of the actual sale. This means that the most efficient point in the market is nobeing achieved.

From a societal perspective, we always want the equilibrium price to be reached because that is when thegreatest gains are made to society overall; also, since we want people to enter into contracts, if we make ofirrevocable, then offerors are less likely to make advanced offers (ex: I offer to sell my car, but you have tsay yea or nay on spot no chance to go home and consult your wife) because they do not want to get stucwith a bum deal. The fewer offers there are, the less advantageous it is for buyers, because there are feweroptions, so all of the options become more expensive.

Advantage to having offers be continually irrevocable: If offers are always irrevocable, then the offeree has the advantage of keeping up with the market and havi

the heads I win, tails you lose scenario

Ex: Same scenario with the hybrid plants exploding. My colleague would be nuts and behaving irrationalhe didnt buy my car the next day because the demand for hybrids is skyrocketing due to the decreasedsupply! And, if instead hybrids begin mass producing themselves like bunny rabbits, then my colleague caturn down my offer because the supply has increased, thus lowering the demand, and decreasing theequilibrium price.


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From a societal perspective, then buyers are less likely to consider entering contracts out of fear the contrawill be pulled away from them at the last minute. (Ex: Say my colleague needed a loan to buy my hybrid $2,000 is a lot for a 1L. Why would be go through the trouble of getting a loan from the credit union whenthe offeror, may take the offer away from him at the last minute?)

Balance:

The best thing for society is to have a balance between offers being always revocable and always irrevocabthat allows both offers and acceptances to keep up with the market, without giving either party the heads win, tails you lose advantage

Common law does this stating that contracts are revocable until partial performance (Marchiondo v. Schneo The question then becomes, what constitutes partial performance? The answer is determined by a

judge

Civil law does this by stating that all offers are irrevocable for a reasonable amount of time, unless otherwistated in the contract (Art. 1928)

The advantage for common law in this sense (theoretically) is that common law determines if the contractshould/shouldnt be revocable ex post because it allows the judge to say there was or wasnt partialperformance based on the facts of the case

o Civil law attempts (theoretically) to make these decisions ex ante by having a blanket rule that offeare irrevocable, though history and case law has shown that reasonable amount of time in civil lais a very short amount of time, so in many ways the civilian outcome is no different than the commoutcome


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What is an acceptance?


Whenisanoffer

accepted?

Common law uses the mailbox rule forestablishing acceptance for all contracts

Irrevocable offers are accepted when the offerorreceives the acceptance.(Art. 1934)(Ambrose v.M&M Dodge, Inc.)

Revocable offers and option contracts are accepted vmailbox rule (Art. 1938) [option contracts = acontract whereby the parties agree that the offeror isbound by his offer for a specified period of time andthe offeree may accept within that time (Art. 1933)]

Whenmustoffer

beaccepted?

An offer must be accepted in a reasonableamount of time (Akers v. J.B. Sedberry, Inc.,Tennessee 1955)

For conversations, this means by the end of theconversation unless otherwise stated

Offers, both irrevocable and revocable, must beaccepted within a reasonable amount of time. (Art1931: A revocable offer expires if not accepted witha reasonable time.)

Howmustanofferbeaccepted?

Offers must be unequivocally accepted (Ardente v.Horan, Rhode Island 1976)

Acceptances, however, need not be verbal orwritten; acceptances can be shown in silence, too(Cole-McIntyre-Norfleet Company v. Holloway)

Offers and acceptances can also be implied,such that they are never verbalized (Seaview Assnof Fire Island, N.Y., Inc. v. Williams) [implied-in-fact contract = contract to which the parties are

presumed to have intended because of a tacitunderstanding (assumption) that the contractexists; i.e. a fake contract]

Art. 1927 Unless the law prescribes a certainformality for the intended contract, offer andacceptance may be made orally, in writing, or byaction or inaction that under the circumstances isclearly indicative of consent. Unless otherwisespecified in the offer, there need not be conformit

between the manner in which the offer is made an

the manner in which the acceptance is made.

When action is not clear, there is no consent (IllinoiCentral Gulf Railroad Company), but acceptances c

follow whatever means of acceptance is provided foin the contract (Ever-tite Roofing Corporation)

Acceptances can be implied if implication isreasonable (Ryder v. Frost); acceptances can not beimplied (Cardinal Wholesale Supply, Inc. v. Chaisso

Acceptance=

co

unteroffer?

If acceptances are not unequivocal, they can beviewed as counteroffers

If the terms of the original contract are acceptedby the offeree after the original offer has expired,this acceptance turns into a counteroffer(HoustonDairy, Inc. v. John Hancock Mutual Life

Insurance Company, Fifth Circuit 1981)


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COMMONV.CIVIL

Civil law requires irrevocable offers to be accepted via the receipt rule and revocable offers to beaccepted via the mailbox rule. Common law requires all offers to be accepted via the mailbox rule.

In both systems, offers must be accepted in a reasonable amount of time.

In both systems, offers can be accepted by silence, implication, or whatever means is provided for in thcontract; frequently though, there are cases that fall on both sides of the issue

This means that in both systems, the rules for acceptance are far from perfect and leave judges with a lot

leeway to determine when an offer was accepted.Acceptance Cases

CASE A ARGUMENT CASE B

Akers v. J.B. Sedberry Offers must be accepted in areasonable amount of time (what is

reasonable and to whom?)

Art. 1931

Seaview Assn of Fire Island

(implied acceptance)Cole-McIntyre-Norfleet

(acceptance in silence)

Ardente v. Horan

(no contract because acceptancwas not unequivocally stated)

Ryder v. Frost

(implied acceptance)

Acceptance can be implied, andsometimes acceptance has to be

unequivocally stated

Cardinal Wholesale Supply v.

Chaisson;

(not implied acceptance andunreasonable amount of time)

Illinois Central Gulf Railroad v

International Harvester

(not implied by silence)

Acceptance Stories

Advantage of having acceptance via mailbox rule: If acceptances are made via mailbox rule, then when the buyer deposits his letter of intent in the mail, th

the contract is made; this means the buyer cannot revoke the contract based on new information and have aheads I win, tails you lose advantage of the buyer

Advantage of having acceptance via receipt rule:

If acceptances are made via receipt rule, then the seller actually receives the letter of the buyers intent, thecontract is made; this means the buyer does not get trapped into a contract too quickly

Advantage of having acceptances be implied:

No formalism requirements (see formalism)Advantage of having acceptances not be implied:

Parties need not worry about getting stuck in a contract they did not intend to enter (see formalism)


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What makes a contract enforceable?


Wh

enisacontract

enforceable?

Consideration makes a contract enforceable.

Consideration = exchange of something of value forsomething of value

Art. 1966 (No obligation without cause) An obligationcannot exist without a lawful cause.Art. 1967 (Cause defined; detrimental reliance) Cause ithe reason why a party obligates himself.

Cause = reason (Litvinoff = purpose, motive, or end);

(Bowers = sense)

Whatimplicationsdothe

cause/considerationdoctrineshave?

The consideration doctrine originally led courts to holdthat only bargained-for contracts could be enforceable.

However, fake bargained for contracts (when theconsideration was only nominal), were not enforcedbecause there was not true consideration (Schnell v.Nell, Indiana 1861)

On the flip side, the inadequacy of consideration is notenough to negate a contract because the court does not

want to judge why one party values something at acertain level (Batsakis v. Demotsis)

When a bargained-for contract is based on somethingworthless there is no contract (Newman & Snells StateBank v. Hunter) Peppercorn Doctrine

The cause doctrine is much broader than the consideratidoctrine

Bargained-for contracts are easily enforceable, as are otcontracts, such as donations. This is an advantage of thcivil law society

LegalDetriment

90 of Restatements: A promise which the promisorshould reasonably expect to induce action orforbearance on the part of the promisee or a third personand which does induce such action or forbearance isbinding if injustice can be avoided only by enforcementof the promise. The remedy granted for breach may be

limited as justice requires.

90 allows makes a promise enforceable when thepromisee has relied on it, provided it was reasonablyexpected that the promisee would rely on it (Feinberg v.Pfeffier Co)

90 is subjective because its based on ...as justicerequires. This means the court can hold the exactopposite in a similar case (Hayes v. Plantation Steel Co)

Detrimental reliance includes:

Not engaging in legal behavior (Hamer v. Sidway) Forbearance to litigate (Dyer v. National By-

Products, Inc.)

Art. 1967: A party may be obligated by a promise whehe knew or should have known that the promise wouldinduce the other party to rely on it to his detriment and tother party was reasonable in so relying.Reliance on gratuitous promise made without required formalities isnot reasonable.

Louisiana, theoretically, does not need Art. 1967 becaulegal detriment would be cause, provided it is legal

There must be a promise, a reasonable reliance, and thereliance must be detrimental


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Legality

Common law does not enforce contracts in which anillegality was the consideration

Also has a public policy unenforceability section ( 178-179 of Restatements)

Art. 1966 cause must be lawfulArt. 1968: The cause of an obligation is unlawful whenthe enforcement of the obligation would produce a resuprohibited by law or against public policy.

If a cause is repugnant to public policy (ex: marriage), inot enforced (McMahon v. Hardin) who decides publpolicyjudge or legislature?

Cause must be lawful, so gambling between the parties

cannot be the cause in Louisiana (Lamy v. Will), but if ygive someone money to gamble, that may be lawfulcause (Lauer v. Catalanotto)

Moraldu

ty

Traditionally, a moral obligation is not alone consideration (Mills v. Wyman)

This goes against what the consideration doctrine wasdesigned to do enforce promises that were actuallymade; is it likely contracts based on moral obligationswere actually made? Yes.

This evolved to say that a moral obligation that creates a

great material benefit can be enough consideration(Webb v. McGowin) Doctrine of Moral Consideration

Louisiana theoretically does not need natural obligationarticles because they should be covered under cause(Bowers argument)

However, in Louisiana, a moral duty can give rise to anatural obligation. Natural obligations cannot be enforc(Art. 1761), but if a natural obligation was made, theexchange cannot be transcended.

A moral duty gives rise to a natural obligation if: Moral duty must be felt towards a particular person, not

persons in general

Person making the moral duty must feel strong about itsuch that he feels he owes a debt

Duty can be fulfilled by payment The offeror must recognize the obligation by either

performance or promised performance

Fulfillment must not impair the public orderA promise to perform a natural obligation moves thenatural obligation to a civil obligation, and is therefore,enforceable. (Thomas v. Bryant)

Donations

Promise to make a donation is unenforceable(Congregation Kadimah Torahs-Moshe v. DeLeo)

Once a donation has been made, it cannot be undone

SEE DONATIONS SECTION

Promise to make a donation is enforceable (BaptistHospital v. Cappel andLouisiana College v. Keller)

Once a donation has been made, it can be undone if notdone properly (Spanier v. DeVoe)

SEE DONATIONS SECTION

Rem

ittingdebt Pre-existing duty rule established that if the duty is

going to change, there must be new consideration (ex: Iam going to remit your debt; when I do, we must havenew consideration you should give me a hawk and arobe (Foakes v. Beere) Restatement 73)

This was taken to a formalistic extreme

Promise to remit a debt is lawful cause (Hicks v. Hicks)promise to remit a debt is not cause because it is only amoral obligation that has not risen to the level of a naturobligation, so it is not enforceable (Service Finance Co.Baton Rouge v. Daigle)


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Error

Common law vitiates contracts based on mistake(Chapter 6 of Restatements)

Restatements 151: A mistake is a belief that is not inaccord with the facts.

Art. 1948: Consent may be vitiated by error, fraud, orduress.Art. 1949: Error vitiates consent only when it concernscause without which the obligation would not have beenincurred and that cause was known or should have beknown to the other party.

Civil law vitiates some obligations based on error(Calhoun v. Teal and Saunder v. NOPS), but the errormust be of the principal cause (Oil City Realty v.

Bordelon)

Question: error seems to be a separate doctrine fromcause, but why need error at all

COMMON

V.CIVIL Goal of doctrines: make sure that only promises that were truly made are enforced

Problem of doctrines: they both allow promises that should have been enforceable to fall through the cracks

Multiple causes: If there are multiple causes, the Civil Code does not tell us how to determine which cause should be used

o Ex: The purpose behind me selling you my car is to make $2,000 so I can pay my fee bill for seconsemester. But I won the lottery last night and am now a millionaire, so I dont need the $2,000 for school...since my cause is not present anymore, can I call off the deal?

Say I had two causes: (1) to get the money for my fee bill and (2) to get rid of my car so Iforce myself to bike to school everyday to get in shape; I win the lottery so my first cause mnot be present anymore, but I still need to get in shape, so the second cause is aroundwhicstory should the judge listen to?

Say my cause was to get the money and my colleagues cause was to be able to get to schoolbecause his car recently broke down and hes otherwise stranded in Riverbend every mornin

if I win the lottery, my cause may be gone, but his cause is still presentwhos cause shouljudge listen to?

o This is the downside of the cause doctrine we get fascinated with words and forget to get at the heof the issue: was there a deal? If so, we should enforce it

Example of a bad cause case: Carpenter v. Williams (cause = moving for work, so thepurchase of the house not enforceable)

Problem with consideration:

Consideration is lawyers taking formalism of words and running wildo Foakes v. Beere gave us the hawk or a robe line, but that did not mean every promise needed a ha

or a robe

o Lawyers have spent 600+ years taking those words and applying the utmost formalism to them, to tpoint of absurdity The real solution is to ask: was there a promise? If so, what was it? That is what should be enforced


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What is a donation?


Whatisadonation

?

Civil law establishes a spectrum between gifts andcontracts.

GIFT (Art. 1523)Gratuitous donation donation made for nothing(ex: I will give you X regardless of what you do ordid)

Onerous donation donation on which charge is othe donee (ex: you have to do X in order to get Y)

Remunerative donation donation made torecompense the donee for services provided (ex: youdid X so I will give you Y)

Contract obligation between parties (ex: I give yoX in exchange for Y)

CONTRACT (Art. 1906)

Whataretherequirementsforenforcingan

actualdonation(i.e.onethathastakenplace)?

Common law requires all actual donations to bemade via donative intent and delivery

Gratuitous donation of an immoveable or incorporeamoveable requires an authentic act (Art. 1536)

Gratuitous donation of a corporeal moveable requirethe rules of obligations (i.e. offer and acceptance)

Onerous donation and remunerative donation requirthe rules of obligations (i.e. offer and acceptance)

Note: offer and acceptance in these cases is usuallyeasy to find, especially as acceptance can be implied

Whatarethe(dis)

advantagesofeachsys

tem? The advantage of only requiring donative intent

and delivery is that once a donation is made, it

cannot be rescinded

The disadvantage of requiring an authentic act to masome donations is that it allows some donations to b

rescinded because of mindless formalism (2 witnessand 1 notary) (Spanier v. DeVoe, Louisiana 1900)

The advantage of the civil law system is that itrecognizes that there is a spectrum between gifts andcontracts, so some gifts can be reclassified as formof contracts and still enforces (Succession ofLawrence, Louisiana 1995)


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Whata

retherequirementsfor

enforcin

gapromiseddonation? Technically in common law you cannot enforce

promised donations. Enforcement requiresconsideration (consideration = exchange ofsomething of value for something of value), so if adonation is exchanged for something of value,then it isnt really a donation, but a contract

Common law does have the principle ofpromissory estoppel in which an otherwise

unenforceable gratuitous promise enforceablewhen the promisee has relied upon the promiseand thereby incurred injury

In civil law, the same rules apply to donations that aactually made and donations that are merely promiseto be made.

Wha

tarethe(dis)

advantag

esofeachsystem? You cannot enforce promised donations under a

common law system (Congregation KadimahTorahs-Moshe v. DeLeo, Massachusetts 1989)

You can enforce promised donations under a civil lasystem (Baptist Hospital v. Cappel, Louisiana 1930)

COMMON

V.CIVIL

In civil law, promised donations can be enforced.In common law, promised donations cannot be enforced.

In civil law, actual donations can be rescinded.In common law, actual donations cannot be rescinded.


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Overview of the Uniform Commercial Code (UCC)

2-204 of the UCC says a contract can be found in any matter that there is anagreement

o Therefore, the manner in which the deal was negotiated is irrelevant(Empire Machinery Co. v. Litton Business Telephone Systems)

o This is good because it takes away any rules of formalism and allowspeople to make unformalistic contracts when they sell goods; there are toomany types of contracts out there to impose formalistic one-size-fits-allrules

Ex: I want to be able to sell my car in the libraryI shouldntneed a roomful of lawyers to do it

o Note: this seems mighty similar toLucy v. Zehmero The downside to no formalism is people get trapped in contracts

unknowingly and before they intended to

2-209(1) establishes that an agreement modifying the sale of goods needs noconsideration to be binding

o The preexisting duty rule does not prevent parties from modifyingcontracts when unexpected or unanticipated difficulties arise during thecourse of the performance of a contract, as long as the parties agreevoluntarily (Angel v. Murray and Gross Valentino Printing v. Clarke)

Incorporation Doctrine look at the manner of past dealings between the partiesand how the industry works

Shrink wrap contracts are okay by the UCC (ProCD, Inc. v. Zeidenberg)o The majority of contracts are for goods, and the majority of goods are

mass produced Mass production means mass contracts If contract law should incentivize good behavior, how can that be

done when in todays world everything is on a supersize scale how are incentives given and taken?

The free market is the great incentivizer Therefore, it is irrelevant if an individual buyer does not

negotiate for an individual contract for every goodpurchased

o The idea of mass goods being directed by themarket allows for mass contracts directed by themarket

o Buyers are still bound by the contracts of sellers,regardless of a lack of negotiation

o The benefits of allowing shrink wrap contracts is it lowers the cost ofcontracting

Ex: if I have to haggle with Bill Gates every time I want toupgrade my Microsoft, it will be outrageous for me to buyanything

o The downside (according to consumer advocates) is that it hurts the buyerbecause the buyers power to negotiate is taken away

This is really a bunch of bull the free market is the buyersprotection


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Ex: say Microsoft starts putting in their shrink wrapcontracts a clause that says, everyone who purchasesWindows has to send their first born son to the Microsoftcampus to do one year of cleaning, and if you do not sendyour firstborn son, then we will charge you$500,000news of this will travel across country asquickly as jokes pass through law firms, and no one willbuy Microsoft products

Battle of the Forms first form out the door winsto a point (Ionics, Inc. v.Elmwood Sensors, Inc.)o Mass contracts do have a negative effect they create mass pre-created

contracts I send you my form which has a pre-printed contract on it (i.e. fine

print), and you respond with your form which has your pre-printedcontract on it

o When parties conduct themselves as if there is a binding contract, thenterms adopted after the original expression of assent to the contract arenullified if the contradict and the default rules of contract law (asestablished by the UCC) take affect

The good thing about having pre-made contracts is you dont haveto haggle over the process of contracting Ex: Im selling my hybrid I dont want to haggle over

how we are going to transfer the title, I just want to do it

This also means that the cost of all idiosyncrasies are bornby the idiosyncratic party


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Random Bower-isms

Risk

Both parties want the lowest cost risk possible, and the party that can bear the riskthe cheapest should bear it (Losecco v. Gregory, Louisiana 1901)

Contractors and Subcontractors

Contractors make their bids by calling subcontractors for the lowest number upuntil the last second (traditional imagery: men in business suits running down

Florida Boulevard from their pay phones to drop off the bid first; men in businesssuits standing at the courthouse door on their cell phones, waiting to shoot theirbid in the basket)

o If a contractor has relied on a subcontractors bid, the subcontractor cannotlater increase his bid (Drennan v. Star Paving Company); he may,however, bid chop

o A contractor may bid shop after he wins a contract (Southern CaliforniaAcoustics, Inc. v. C. V. Holder, Inc.)

General problem with trying to pre-write law

You cannot plan for pink elephants falling from the sky, just like you cannot planwhat shirt you will wear in 2 months

o This is the downside to civil laws ex ante decision making strategy youcannot pre-plan the law!

Similarities in doctrines outcomes

Facts of social life drive results, not the doctrineMindless formalism

We dont have swamis Its absurd that a promise made in front of 40 bishops and a rabbi cannot be

enforced, whereas a promise made in front of two witnesses and a notary is

enforceable


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Case Briefs for Contracts/Obligations (Bowers)

This covers the majority of cases discussed in Contracts/Obligations, but it is inevitably lacking a few


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20

Akers v. J.B. Sedberry, Inc. (Tennessee, 1955)

Factso Akers and Whitsitt visit their boss, Sedberry, to tell her of the financial

straights the company is in at the Tyler, Texas officeo They offer their resignation at the beginning of the conversation as a

good faith gestureo Sedberry pushes away their resignation, speaks to them, and sends them

back to Texas

o A few days later, Sedberry telegrams to accept their offers of resignation Procedural Background

o Trial Court ruled in favor of Akers and Whitsitt Legal Issue

o How long can an offer be accepted? Offers can be terminated by:

The offeree rejecting the offer The offeree not accepting the offer within the allotted time The offeree not accepting the offer within a reasonable

amount of time What is a reasonable amount of time?

If the offer and acceptance is verbal through the course ofconversation, the offer expires at the end of theconversation

Holdingo BLACK LETTER LAW: An offer made during the course of a face-

to-face conversation expires either by its terms or at the end of the

conversation if no express expiration is provided

o Affirmed trial courts decision


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Ambrose v. M&M Dodge, Inc (Louisiana 1987)

Factso buys a lemon from , so and work out a deal for how the will

pay the for the defects of the car The deal does not include (at least in writing) any mention of what

to do about the s loan s attorney inquires about the loan aspect after the two parties

have verbally agreed to a deal (contract) and the papers plus the

check are sitting on the s desk, signed, but unsent to the says no deal because loan isnt in the contract

Procedural Backgroundo Trial court denied s claim of res judicata

Legal Issueo Was the contract agreed to?

No because the never received the contract Art. 1938 Reception of revocation, rejection, or acceptance: A

written revocation, rejection, or acceptance is received when itcomes into the possession of the addressee or of a personauthorized by him to receive it, or when it is deposited in a place

the addressee has indicated as the place for this or similarcommunications to be deposited for him.

o Was there a true meeting of the minds? It is debatable that the answer is no, because the signed thinking

there would be a loan repayment, while the thought no, therewould not be a loan repayment

If you require the minds to meet, then there is always thepossibility of people coming back and saying they didnt agree we dont have swamis

Subsidiary rules try to tell us that people agree (signing,sendingetc.)

Does the mailing actually give us any extra informationabout whether or not the minds meet? If dispatch is required, then you have to do the dance and

do all the formalitieso This is leading us to the idea that the idea of minds meeting probably

isnt a viable theory, but

Holdingo Affirms trial court decision (no contract)


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Angel v. Murray (Rhode Island, 1974)

Factso Maher () is the city garbage man; he has a 5 year contract (which hes

had for 20 years) that says the city will pay him X amount for collectingand removing all combustible and noncombustible waste products fromthe city

o 3 years into his 5 year contract, the number of units in the city grows by400

o Maher goes to the city council and asks for an additional $10,000 to do thejob hes already been hired to do because of this increase in units City council questions him about it in a public meeting, and then

agrees to give him the extra moneyo Same scenario next yearo Civil action law suit brought against city, city CFO (Murray), and Maher

Procedural Backgroundo Trial court ruled in favor of

Legal Issueo Does a modification to a pre-existing contract have to go through

consideration if it needs to be modified because of unexpected

circumstances? No: UCC 2-209(1): An agreement modifying a contract within

this Article needs no consideration to be binding This establishes that an agreement modifying the sale of goods

needs to consideration the sale of services was a sale of goods, soa modification in the agreement needed no consideration

Holdingo Reverse and remando Black letter law: The preexisting duty rule does not prevent parties

from modifying contracts when unexpected or unanticipated

difficulties arise during the course of the performance of a contract, as

long as the parties agree voluntarily.


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Ardente v. Horan (Rhode Island, 1976)

Factso Ardente made an offer to purchase Horans house; Horan agreed and had

paper work drawn upo Ardente sent the paper work back, signed, and included a note asking if

other items were also included (i.e. furniture)o Horan did not sign the papers and pulled out of the deal

Procedural Backgroundo Trial court dismissed the case

Legal Issueo Was Ardentes letter and acceptance with independent

conditions/limitations, or was it a counteroffer? Acceptances must be unequivocal and clear that whether or not the

other conditions are accepted by the offeror, the offeree isaccepting the original offer

The letter form Ardente implied the offer was contingent on thesell of the additional items

Holdingo When acceptance is accompanied by further demands, the offeree makes a

counter-offer, terminating his power of acceptingo Acceptances must be unequivocal in order to be acceptances and not

counter offerso Trial court affirmed


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Baptist Hospital v. Cappel(Louisiana, 1930)

Factso LA Nursing Board threatened to pull s nursing standing (like

accreditation) if the did not build a new nursing facility needed to raise $100,000

o signed a $500 pledge card, to be paid in 4 installments pays first installment and then does not pay the last 3

Procedural Backgroundo Trial court found for

Legal Issueo says he never would have signed pledge card if he had known where the

hospital was going to be built This is ridiculous because clearly you have to build the building

somewhere other than where the building is currently located The reason he gave money (he claims) was to keep nursing school

standing, but that has already been accomplished, so who cares ifhe pays the rest?

This desire has not been lessened, so what he was suppose to getout of promise has been achieved he must pay up his end

Holdingo Affirmed ( is bound by his pledge)

Note: this shows how the cause doctrine is all about who has a better story of theirreason for making a promise had the said the reason he wanted the nursing schoolto remain in its location was because he owned the hamburger stand across the street, thatmay have been justifiable cause to rescind his donation


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Batsakis v. Demotsis (Texas, 1949)

Factso was stuck in Greece during WWII and borrowed money from

acknowledged she got the money from in a letter that said shewould repay the $2000 with 8% interest

o actually only loaned $25 says forced her to sign the contract in order to get the $25

Procedural Backgroundo Trial court found there was inadequate consideration to enforce thecontract, but rules in favor of in the amount of $1,163.83

This figure is $750 plus interest (court saying the drachmas wereworth $750)

o appealing saying he wants the entire $2000 plus interest Legal Issue

o Was there sufficient consideration for the contract to exist? Yes the transaction was essentially a sale of 500,000 drachmas

for $2000 This basically says that a court will not interfere in what parties

deem as valuable

If thought 500,000 drachmas were worth $2000, so be ito The promisor has to take into account the likelihood of ever getting this

money paid back

Holdingo Reversed and remandedo Black Letter Law: Mere inadequacy of consideration will not void a

contract.


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Belgarde Construction Company v. Collins (Louisiana, 1993)

Factso Collins store is destroyed; Belgarde comes in offering his consulting

services to help her Consulting services include figuring out how much insurance

should give her (so insurance company doesnt screw her), helpingbidding for a contractor, etc.

Fee for consulting is 25% of additional money Collins gets frominsurance company

o Collins thinks Belgarde is a contractor; thinks she may really becontracting with the engineer Belgarde hired to do an inspection

Collins tries to pay engineer and he says hes already been paid (byBelgarde)

o Belgarde says they had a contract that she accepted the terms of when sheasked Belgarde to drop off some plans in Alexandria

She says she did not know he was a consultant and never made acontract with him

Procedural Backgroundo Trial court found they did not have a contract

Legal Issueo Was there a meeting of the minds?

Court says no (Bowers thinks this is fishy) If no meeting of the minds, there is no contract

Holdingo Affirms trial court holding, but says Collins must pay the engineers fee


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Calhoun v. Teal(Louisiana, 1901)

Factso sold to what he promised would be 250 acres of land for a set price of

$7/acre (total = $1,750) actually only sold 198.65 acres demanded his money back for the missing 51+ acres and reach a compromise that will give 50 acres and not

have to pay back the money then sells the land to a third party (Swafford)

o Ten years go by. learns that she actually did sell 250 acres like sheoriginally promised; the surveyor screwed up

Now wants back the 50 acres that the said she screwed up forwhich she paid him 50 acres

Procedural Background Legal Issue

o There was a mutual mistake contract annulled Holding

o For - has to give the extra 50 acres back


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Cardinal Wholesale Supply, Inc. v. Chaisson (Louisiana, 1987)

Factso has company CMD that at one time had co-owners Kreig and

Delahoussaye Co-owners K and D signed a personal guarantee in order to get

credit from Cardinal for purchases for CMD Guarantee had a waiver of written acceptance

o Credit application was denied, but Cardinal put guarantees in a safetydeposit box without signing them

o K and D sell their part of the CMDo Chaisson obtains credit from Cardinalo 8 years later, CMD becomes insolvento Cardinal signs the guarantees and seek sot enforce the guarantees

Procedural Backgroundo Trial court found for Chaisson

Legal Issueo Notice of acceptance was waived, but that doesnt mean there isnt the

necessity for an acceptance a contract must contain an offer and acceptance Cardinal never accepted original guarantees (they never gave CMDcredit)

Holdingo Affirm trial court no contract

Note: It is hard to reconcileRyderand Chaisson because in one the Court does not forcethere to be an acceptance and in one the Court does force there to be an acceptance


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Carpenter v. Williams (Louisiana, 1983)

Factso lives in Lafayette; works in Camerono Employer orders to move closer to worko contracts to buys house to comply with employers orderso Employer rescinded its orders; now refuses to buy the house


o says the only reason he was going to buy the house was to comply withthe employers orders and was aware that was the reasoning behind thepurchase

o Since was aware of this, when the reason for the purchase ended, thenthe cause for the purchase ceased, so the contract became unenforceable

Holdingo Hold for


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Cole-McIntyre-Norfleet Co. v. Holloway (Tennessee, 1919)

Factso Holloway placed an order for 50 barrels of meal from Cole, but the order

(aka offer) was never accepted or rejectedo When the barrels of meal were due for delivery, Holloway asks for order,

but Cole says they dont have a contract

Procedural Backgroundo At Tennessee Supreme Court on appeal after Circuit Court inferred the

existence of a contract due to the unreasonable delay in notifying Legal Issue

o Can acceptance be inferred from an unreasonable delay? Yes, especially in a task like selling goods where there is a time

limit to how long you can wait Contracts must be accepted/rejected in a reasonable amount of

time, or they will presume to be accepted

Holdingo Black Letter Law: When the subject of a contract, either in its nature

or by virtue of the conditions of the market, will become

unmarketable by delay, the offerees delay in notifying the offeror of

rejection or acceptance will amount to acceptance by the offereeo Acceptance may be inferred from silence where the circumstances afford a

basis for such an inferenceo Affirmed Circuit Courts holding


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Congregation Kadimah Toras-Moshe v. DeLeo (Massachusetts, 1989)

Factso A dying man orally promised (multiple times) the Rabbi of to give the

$25,000o Man dies with no will; no money given to , so sues Estate

Administrator for money

Procedural Backgroundo Trial court and Appellate court find summary judgment for

Legal Issueo Is an oral contract without consideration or reliance enforceable?

Consideration something of value exchanged between parties ina contract (what did the dying man get in return? Nothing, i.e. noconsideration)

Reliance dependence or trust on the words or actions of anothero Donative promises are rarely enforced

Donative promises are often difficult to prove rarely in writing Usually they are made with little thought Would create too much work for courts and infringe upon rights of

family, friends, etc.

o The consideration doctrine seems absurd in this case because there isreally no doubt that the dying man wanted his money to go to the sowhy not enforce his wishes?

The consideration doctrine was (poorly) designed to make sure wehave a lot of confidence that the promise was actually made by thepeople claiming they were promised money.

The consideration rule says the promises that wereprobably actually made were only those that werebargained for this rule, however, means that gift/donativepromises sometimes fall through the cracks

Holdingo Affirm no contracto Black letter law: It is against public policy to enforce an oral promise

of a charitable donation if made without consideration or reliance


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Davis v. Jacoby (California, 1934)

Factso Mrs. Davis is Whiteheads niece and the two families are very close

(closer than any other relative)o Both Whiteheads fall ill and via letter, ask Mr. and Mrs. Davis to come

help take care of them and their finances Mr. Whitehead promises to leave them their assets when they die

o Mr. Davis sends a letter back to Mr. Whitehead promising to come andhelp

o Before Mr. and Mrs. Davis reach California, Mr. Whitehead dies and hedoes not change his will

o The Davises take care of Mrs. Whitehead (unknowledgeable about theunchanged will)

o When Mrs. Whitehead dies, their assets are given to a different nephew Procedural Background

o Supreme Court of California is taking an appeal for a lower courts refusalto grant specific performance

Specific performance court forcing a party to keep a promise Legal Issue

o Was the letter a unilateral or bilateral contract? Bilateral contract contract in which there are mutual promises

between two parties to the contract; each party being both apromisor and a promise

If it was a bilateral contract, then Mr. Davis promise was all thatwas needed to enter the contract that promise was given throughthe letter

If it was a unilateral contract, the Davises had to get to Californiato act before the contract became valid

Holdingo Reversedo Black Letter Law: When the intent and circumstances surroundingan offer to contract are ambiguous with respect to whether the offer is

for a bilateral or unilateral contract, there is a presumption that the

offer was for a bilateral contract

o An offer to contract is presumed to be bilateral rather than unilateral whenthe offer is ambiguous


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Deutschmann v. Standard Fur Company, Inc. (Louisiana, 1976)

Factso ordered a fur coat with special features from

paid $400 as a deposit on the coat used verbage that has special meaning in fur industry, but could

mean something else in lay terminology Coat did not meet s standard so she returned; suing for her

deposit

Procedural Backgroundo Trial court dismissed

Legal Issueo Consent vitiated by erroro was in the better position to correct the mistake because he knew the

industry terminology; he bears responsibility

Holdingo Reverse


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Drennan v. Star Paving Company (California, 1958)

Factso Drennan is a general contractor bidding for a construction job

Gets bids from subcontractors, including , so he can make hisoverall bid

o gives the subcontracting bid of $7,131.60o wins the overall bid, but when he goes to s office to say the bid was

accepted, says the bid was wrong and was actually $15,000

o has to find a new company to do that paving, and that costs him $3,817more than originally was going to cost him Procedural Background

o Trial court found for Legal Issue

o Is an offer revocable once the has relied upon the offer? No. 90 fits this case like a glove

90 of Restatements: A promise which the promisorshould reasonably expect to induce action or forbearanceon the part of the promisee or a third party and which doesinduce such action or forbearance is binding if injustice can

be avoided only by enforcement of the promise. s offer was reasonably expected to induce action (reliance) on the

part of the o s reliance on the offer = consideration

Holdingo Affirmed

Black letter law: an offer is not freely revocable if the offeree has substantially

relied on the offer


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Dyer v. National By-Products, Inc. (Iowa, 1986)

Factso loses his foot on the job; promises lifetime employment in

exchange for not suingo Thereafter, is fired by

Procedural Backgroundo Trial court dismissed on summary judgment because there was no

evidence of a reciprocal promise to work for the employer for life and the

only claim against the should have been workers comp Legal Issue

o Can forbearance to litigate a claim, even though unfounded and invalid,provide sufficient consideration to enforce a contract?

Yes courts prefer people to settle outside of court Forbearance can provide sufficient consideration if the claim is

made in good faith

This favors compromise and disfavors parties that try totest the compromise

There are material facts still in question, so summary judgment isinappropriate

o The court is not automatically throwing out the case because the s claimis based on a worthless claim (no legal basis should have gone throughworkers comp); instead it is asking the trial court to investigate the issueof what subjectively knew about the validity of the claim

This means that at the next trial, the needs to say, I reallythought I had a good case in court.

Holdingo Reversed and remandedo Black letter law: Forbearance to litigate a claim, even though invalid,

may provide sufficient consideration to enforce a contract as long as

there was a good faith belief in the claim


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Edinburgh v. Edinburgh (Louisiana, 1988)

Factso Third partys house destroyed in Hurricane Betsyo Third party makes a deal with and : they fix the house and pay the

mortgage (they were married at the time), and the third party will leavethe house to them in her will

o (husband) fixed the house and paid the mortgageo and divorceo Third party dies and leaves the house to the (wife) only sues to quiet the title; reconvenes to get his half

Procedural Backgroundo Trial court held for

Legal Issueo relied on the promise to his legal detriment because:

Representation was made by third party that she would give himthe house

He justifiably relied on that promise Holding

o Reversed in part ( and each get half)


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Embry v. Hargadine, McKittrick Dry Goods (Missouri, 1907)

Factso Embry was an employee at McKittrick Dry Goods and he was a on a year-

to-year contracto Upon this contract running out, he sought to extend his contract for the

next yearo After many attempts at speaking to McKittrick about the contract, he

cornered McKittrick in his office one day and asked to discuss the terms

of the contract, saying if they couldnt talk about it now, he would leaveand look for another job

o McKittrick said he didnt have time at the moment, but to go back to worko Embry interpreted this as a contract for the following year at the same

terms he had the previous yearo McKittrick fires Embry three months into the next yearo Embry sues McKittrick for a breach of contract

Procedural Backgroundo Trial court rules in favor of McKittrick

Legal Issueo Was a contract made?

Under the same thinking of Lucy v. Zehmer, yes, a contract wasmade because a reasonable man could interpret the conversationbetween Embry and McKittrick as a contract of employment

o If a contract was made, what terms were agreed to? Embry believes the contract agreed to had the same terms as his

previous contract, however those terms are never specificallyspelled out

Court found that Embrys version of the conversation withMcKittrick is correct, and thus a reasonable man could haveinterpreted the terms of the contract to be the same as they werepreviously

o What does ruling mean for the long run employer/employee relationship? Potentially, employers may be less willing to enter intoconversations with employees for fear of beingbullied/tricked/obligated into a contract

Employers will hire fewer employees if they believe it will beharder to exit a contract with them (France is a prime example of alegal system that has created practically lifetime employment, butthe disadvantage is a high unemployment rate)

o Could we institute more rules or formalities to prevent employers andemployees from entering into contracts without knowing the terms?

Yes, but the more formalities implemented, the higher the cost forentering into a contract

The rule most regularly implemented is the one that says thecontract will not change unless x, y, and z occur.

Holdingo BLACK LETTER LAW: Both parties need not subjectively intend to

enter into a contract in order to find that a contract has been validly

formed

o Court reversed trial courts decision


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Empire Machinery Co. v. Litton Telephone Business Services (Arizona, 1977)

Factso Litton sells an undeveloped telephone system to Empireo Empire signs the paperwork for the system, which under the rules

established by Litton, constitutes an offer to buy the system The offer must still be accepted by Litton

o Litton can accept the offer by signing the contract at the headquarters, butthey never do

Litton does, however, send notice to Empires old telephoneservice provider that they are now the telephone service providerfor Litton

Procedural Backgroundo Trial court found in favor of Litton, saying a binding contract was never

consummated

Legal Issueo Even though the ESA (Equipment Sales Agreement) was never signed, did

they still have a contract? Yes because the conduct of Litton indicated acceptance, even

though the manner laid out for accepting wasnt met The negotiation process is not the important part the question is amatter of fact: was there a deal

HOLDINGo Reverse and remando Black Letter Law: Conduct by an offeree tending to indicate

acceptance may create a binding contract notwithstanding the

offerees failure to accept in the manner prescribed by the offeror

Note, this outcome is strikingly similar to the outcome in Lucy v. Zehmer. The concept behind the UCC is the same as the conceptbehind law in general: good behavior should be rewarded, bad behavior punished. What is good and bad is what society says is good

and bad, and that can change from case to case. The UCC allows for more liberal interpretations so people do not feel caught byfirm rules of offer and acceptance, though it is arguable people were never caught by the rules.


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Ever-tite Roofing Corporation v. Green (Louisiana, 1955)

Factso and wrote up a contract for to do reroofing work for o had not sent a written acceptance of the contract back to the , BUT,

the contract said it could be accepted by sending in written acceptance ORupon commencing performance of the work.

o When went to go commence the work, the had hired someone else todo the reroofing job

o suing for damages (lost income) from job Procedural Background

o Trial court says there was no contract and the owes nothing to the Legal Issue

o Louisiana law forces contracts to be irrevocable for a reasonable amountof time, and can be accepted in writing or by whatever means is set forthin the contract

If nothing is set forth in the contract, then the dispatch rule isautomatically in effect; however an offeror can protect himselffrom the dispatch rule by having some other means of acceptance

If an offeror has another means of acceptance, then the partiesmust (a) negotiate over that means of acceptance and (b) abide byit

Background rules allow parties not to reinvent the rulesevery time they make a contract having the backgrounddance steps be the steps that will trap the fewest people isgood

o 8 to 9 days is a reasonable amount of time, so the offer was irrevocableduring that time period

o And regardless, the contract could be accepted via commencing work Holding

o Reverse trial court find for


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Feinberg v. Pfeffier Co. (Missouri, 1959)

Factso starts working for when shes 17o At a board meeting one day, the board decides they are going to make a

retirement package for whenever she retires at $200/montho Two years later, retires and pays outo s original CEO dies; his wife takes over

She keeps paying until she gets ill and her son takes over andcuts her check to $100

o gets cancer and is unable to work Procedural Background

o Trial court and appellate court find for Legal Issue

o Past consideration is not sufficient to make a promise legally enforceable,but contends that she lost her opportunity for employment by retiringand based that decision on the $200/month check she had been promised

She quit her job based on the promise by to her legal detrimento 90 of restatements: a promise which the promisor should reasonably

expect to induce action or forbearanceon the part of the promisee and

which does induce such action or forbearance is binding if injustice can beavoided only by enforcement of the promise

Holdingo Affirm

Note: reading this case withHayes v. Plantation Steel Co. makes you question if there isanyway to really restate the law. Bowers says, no, you cannot really restate the law andwhat you should ask is, Was there a promise? If so, what was the promise, and thenenforce that promise.


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Gross Valentino Printing Co. v. Clark (Illinois, 1983)

Factso Clarke () is the publisher of Cinefantastique (a magazine)o agrees to have print the magazine for $6,695

says some changes need to be made to the layout, but it can bedone in house free of charge; then says theyll have to send itout and up the price

o gets a letter from saying the work will cost $9,300o receives first 5,000 magazineso signs purchase order with higher price on it, but only pays $4,650o receives other 15,000 magazines and tells he wont pay the higher

price Claims lack of consideration and business compulsion and fraud

Procedural Backgroundo Trial court granted summary judgment for and awarded $5,116.20

Legal Issueo Does a modification of a contract for the sale of goods require

consideration in order to be legally enforceable? No. UCC 2-109(1) says that the modification of a contract for

the sale of goods does not require consideration UCC 2-107 says goods are all things, including specially

manufactured goods that are movable at the time of identificationto the contract for sale

Florida case (Cardozo v. True) considers the UCC 2-107broadly and includes books as goods, so magazines seen asgoods

Holdingo Affirm trial courto Black letter law: The modification of a contract for the sale of goods

does not require consideration to be enforceable


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Hamer v. Sidway (New York, 1891)

Factso Uncle promises to pay his nephew $5K if he doesnt smoke, drink, swear

or gamble prior to age 21 (Bowers: wine, women, and song) Nephew is successful, but uncle holds on to the money and dies

before paying himo goes to will executor to get money, but the executor will not pay him

Procedural Backgroundo Trial court ruled in favor of

Legal Issueo Is giving up wine, women and song consideration?

Yes, but it is waiving a legal right Legal detriment, or the forbearance of legal rights, is considered

consideration

Holdingo Affirmo Black letter law: In general, a waiver of any legal right at the request

of another party is a sufficient consideration for a promise.


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Hayes v. Plantation Steel Co., (Rhode Island, 1982)

Fatso Hayes () works for for 25 yearso s original owner says they will take care of upon his retirement;

give him $5,000/yr, though this money is never agreed to by the board ofdirectors

o New boss takes over and cuts off the checks Procedural Background

o Trial court said there was an implied-in-fact contract and that the theory ofpromissory estoppel applied; ruled in favor of Promissory estoppel in contracts, a doctrine that makes an

otherwise unenforceable gratuitous promise enforceable when thepromisee has relied upon the promise and thereby incurred injury

Implied-in-fact contract where there is no express agreementbetween the parties, but the facts and circumstances between theparties makes it reasonable to infer the existence of a contractunder law

Legal Issueo The problem with this case is that had decided to retire prior to

making any promises did not give consideration for the $5K

o The difference between this and Feinberg is who relied on what In Feinberg, relied on the check and factored receipt of the

check into the decision of whether or not she would retire InHayes, did not factor the check into his decision about

retirement and did not rely on the checko Note: the court is using the old consideration doctrine to say there was no

promisethey can do this because of the subjectivity of 90 of theRestatementsbut it does beg the question, can you really restate the law?

Holdingo Reverse and remando Black letter law: Promissory estoppel is inapplicable where the

promises does not actually induce reliance

Note: how does this reconcile with Feinberg v. Pfeffier? It doesnt, really, because theholdings are exactly opposite. Bowers says this shows us that there is always a case andcounter-case, so the law cannot really be restated. Instead we should ask was there apromise? If the answer is yes, then we should figure out what the promise was, and thenenforce that promise.


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Hicks v. Hicks (Louisiana, 1919)

Factso Mother sells son () a plantation worth $10,000

He agrees to pay $500 installments He pays the first one He send notes for the next five installments, but she cancels the

notes (i.e. she remits the money) in front of a notaryo Mother dieso Other coheir is suing to say the plantation should be equally divided and does not own more of the plantation

Procedural Backgroundo Trial court held for

Legal Issueo Once the debt has been remitted, it is irrevocable

Holdingo Reverse hold for


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Houston Dairy, Inc. v. John Hancock Mutual Life Insurance Company (Fifth Circuit,

1981)

Factso John Hancock approves Houston Dairy for a loan, but the terms of the

loan must be accepted within a certain amount of timeo Houston Dairy returns the proper paperwork and deposit to accept the

loan, but after the deadline for the original offero Thereafter, Houston Dairy wants to pull out of the agreement and get their

deposit back; John Hancock claims there is a contract Procedural Background

o Trial court said there was a contract, so the deposit was lost to HoustonDairy if they pull out

Legal Issueo Was there actually a contract?

Houston Dairy did not accept the offer by John Hancock within thetime limit originally set, so the original offer technically expired

The acceptance by Houston Dairy became a counteroffer,making John Hancokc the offeree

The offeree has to accept the offer, which John Hancockdid not verbally do

o John Hancock says they accepted by depositingHouston Dairys cashier check, but Houston Dairyunaware the check was cashed

Holdingo Reversedo Black Letter Law: An acceptance of an offer that has expired by its

own terms acts instead as a counter offer that must be accepted by the

original offeror in order to form a binding contract

o A purported acceptance of an offer after time has expired for doing so isinstead a counter offer


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Illinois Central Gulf Railroad Company v. International Harvester, Louisiana 1979

Factso leased land to for a specific purpose for a number of yearso Value of the land increased (building of Superdome across the street) and

wanted to change the purpose of the land said no, but eventually did it anyway

o For 16 months did not object to change in the land (unclear if theyactually knew the change occurred)

o says they accepted the offer by the to change the land by their silence; says the broke the original contract and they never accepted newterms of the contract

Procedural Backgroundo Trial court held for the o Appellate court held for the

Legal Issueo Was there a second offer by the , and if so, did the consent to it?

It is clear there was an original offer and acceptance The original contract (offered by and accepted by ) said

the land could be used for one specific purpose

The may have made an offer, but the never consented to it, sothere was no different contract from the original one. A delay by the in answering is just part of the problem of

large corporations you cannot take their silence as anacceptance

Holdingo did not imply consent through their silenceo Affirm trial courts decision

Why would a company care whatpurpose land was used for?

If value of land increases, leasingcompany wants to be able to re-negotiate the contract and get a

piece of the increased value.


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Ionics, Inc. v. Elmwood Sensors, Inc. (1st

Circuit, 1997)

Factso Ionics makes water dispensers; Elmwood makes thermostatso Ionics bought thermostats from Elmwood to use in the water dispenserso Water dispensers catch on fire due to defect in thermostato Forms each company sent to the other were in direct opposition:

Ionics contract said the remedies would be cumulative, whereas theElmwood contract said their liability would be at their discretion

Legal Issueo Whos contract wins?

The UCC, 2 (207) covers the battle of the forms by saying thefirst form out of the gate wins

Former rule was the last form out of the gate wins Any terms that are in disagreement are nullified and the default

terms expressed in the UCC are put into place

Holdingo Black Letter Law: What contracting parties express assent

conditional on the other partys acceptance of new terms and

subsequently conduct themselves in a manner that indicates the

existence of a contract, UCC 207 operates to nullify the new terms tothe extent they contradict any new terms added by the other party, or

the terms of the original offer.

o 207 find seller responsible


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Johnson v. Capital City Ford Company, Inc. (Louisiana 1st

Circuit, 1955)

Factso put out ad in Baton Rouge newspapers advertising that said if you buy a

54 Ford, then when the 55 Fords came out, you could trade up for free(sans sales tax)

Note: this is a merchant making an offer to a consumero purchases a cheap 54 and then wants to trade up for a 55

Procedural Backgroundo District Court ruled the advertisement constituted an offer and the dealerwas bound when the accepted

Legal Issueo Was the advertisement an offer?

The advertisement was not overly specific, but it was an offernonetheless

In Louisiana, this promotes the idea that offers merchants make toconsumers are offers

The effect of this is that merchants always begin with offersthat are so bad, a consumer wont want the offer

This also leads to consumers promises not being worthmuch (the signed a paper saying only the material on thepaper was part of the contract advertisement wasnt onthe paper)

Had the pointed out to the clause that said the contract onlyincluded what was on the paper, the might have been able to winthe case (note: this is an important distinction when you look atNorth Central Utilities)

Holdingo Affirm District Court


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Kethley v. Draughon Business College, Inc. (Louisiana, 1989)

Factso teaches at s schoolo asks to teach an extra class; agreeso is not compensated for the extra class, though there was no agreement

as to whether he would be or not

Procedural Backgroundo Trial court held the contract be rescinded, but .the can get relief

Legal Issueo It was reasonable for the to think that if he taught 2 courses instead of 1,

he would get paid more, therefore, he relied on the promise to hisdetriment

o The promise here is implied Holding

o should get damages


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Lefkowitz v. Great Minneapolis Surplus Store (Minnesota, 1957)

Factso Lefkowitz responds to an advertisement that says the first person on a

particular day will receive a fur stole for $1o First time Lefkowitz responds to the advertisement, the store owner tells

him the store policy is to only sell to womeno Lekfowitz responds to a second advertisement that more specifically states

the first person to arrive will get the free stole

Legal Issueo Is the advertisement an offer?

In Mesaros v. U.S., advertisements were not offers, but in thiscase, the court says they are because of the overly specificlanguage

Does it matter that Lefkowitz knew the store policy to not sell tomen? (court does not answer this question)

Why does the court rule this way? To stop or cut down on baitand switch advertising

Holdingo BLACK LETTER LAW: When an advertisement is clear, definite,

and explicit, and leaves nothing open for negotiation, it may beconstrued as an offer

Law is about behavior.Law tries to incentivize goodbehavior and decintivize bad

behavior.


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Lamy v. Will(Louisiana, 1962)

Factso and were gambling at a bar; lost $150

Next day paid $15 in cash to and gave him a check for $135 tomake up difference

Check was not honored when tried to cash it (insufficient funds) Procedural Background

o Trial court held for Legal Issue

o Art. 2983 says you cant collect money won via gamingo Art. 1893 says obligations without cause or with unlawful cause have no

effecto claims it isnt gambling money, but money he gave the as an advance

Cites cases (Clemons and Brand) that say lending money to agambler even if you know the money will be used for gambling should still be enforced to be repaid

o The court would side with the (and they feel bad for the ) if the wasnot a participant in the gambling, i.e. if he was a third party

Holdingo Reverse hold for


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Lauer v. Catalanotto (Louisiana, 1988)

Factso gave $10K to gamble in Vegas and the two would share in the

gains/losseso borrowed $1,300 to gamble himself

Procedural Backgroundo Trial court dismissed s claim and upheld s claim to reconvene for a

loan of $1,300 given to

Legal Issueo It is irrelevant that the gambling happened in Vegas where its legal its

not legal hereo As for the borrowing.it must be mutual illegal intent to gamble, and the

intent must be communicated to the other party in this case that didnthappen

Holdingo Affirm trial court


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Levine v. Blumenthal(New Jersey, 1936)

Factso rents retail space from for $175/month for the first year, and

$200/month for the second year Great Depression hits and cant afford second years higher price

o pays first year rent for second year and then leaveso sues for difference

Procedural Backgroundo Trial court demurred for

Legal Issueo Parties are legally bound to do what they have promised to do (pre-

existing duty rule) and any modifications must be based on consideration

Holdingo Affirms trial courto Black letter law: An accord and satisfaction must be supported by

separate consideration. Accord and satisfaction an agreement to use a substituted

performance to satisfy a pre-existing debt and the receipt of thatperformance fully discharges the pre-existing debt


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Louisiana College v. Keller (Louisiana, 1836)

Factso Keller promises to give $500 for a subscription to the collegeo Keller doesnt pay


o says there in was insufficient legal consideration, so the promise shouldbe invalid

was not getting anything in exchange for his donationo Contract says the parties will waive all informality in this obligation

Cannot do that because formality is required for donations (toprevent false donations?)

Holdingo has to pay (we want to enforce charitable subscriptions)

State did their part; his consideration was the education of childrenThis would not have been consideration under common law because the college didntgive up anythingCause (sense) is what rules in civil society


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Lyons Milling Co. v. Cusimano (Louisiana, 1926)

Factso ordered flour from through brokers

has two plants: one in Lyons and one in Hudson Hudson produces low gluten flour Lyons produces high gluten flour wanted high gluten flour; shipped low gluten flour refuses to pay for it because he needs the flour to make macaroni

and that requires high gluten flour Procedural Background

o Trial court ruled for o Appellate court ruled for

Legal Issueo was operating in good faith when he rejected the flour

Holdingo Reverse appellate court; hold for


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Lucy v. Zehmer (Virginia, 1954)

Factso Lucy offered to buy a farm owned by Zehmero The offer was made (and arguably agreed to) at a bar with a contract

written and signed on the back of a bar tabo Zehmer claimed he never meant the contract to be serious, it was all done

jokingly; Lucy wants Zehmer to be forced to sell him the farm

Procedural Backgroundo Trial court dismissed the case, saying Lucyscomplaint failed to establish his right to specific

performanceo Lucy appealed the dismissal

Legal Issueo Is a contract, or a promise, made, even when one party thinks the contract

is a joke? If a reasonable man would believe that the

parties outward actions were the formationof a contract, then the parties mutual assentis not a prerequisite; in other words, mutual

assent is determined from the reasonablemans perspective

The basic concept is the undisclosed intent of a person, or whathe/she is thinking, cannot be known by the outsider; theref

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