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CONTRACTS

MGMT 217

INTRODUCTION:

IN GENERAL, THERE ARE FOUR REQUIREMENTS FOR A CONTRACT:

1. MUTUAL CONSENT GENERALLY EVIDENCED BY AN OFFER AND AN ACCEPTANCE;

2. CONSIDERATION;

3. TWO OR MORE PARTIES HAVING LEGAL CAPICITY TO ENTER INTO A CONTRACT; AND

4. AN OBJECT OF THE AGREEMENT THAT IS NOT PROHIBITED BY LAW.

EXPRESS AND IMPLIED-IN-FACT CONTRACTS

QUASI CONTRACTS

MANIFESTATIONS OF ASSENT: GENERALLY EVIDENCED BY AN OFFER AND AN ACCEPTANCE

OFFERS

1. GENERAL RULE: AN OFFER IS DEFINED AS A COMMUNICATION WHICH GIVES THE RECIPIENT OF THE COMMUNICATION THE POWER TO CONCLUDE A CONTRACT BY ACCEPTING. THE BASIC TEST OF WHEN A COMMUNICATION AMOUNTS TO AN OFFER IS WHETHER THE RECIPIENT COULD REASONABLY BELIEVE THAT THE ONE COMMUNICATING INTENDED TO GIVE HIM THE POWER TO CONCLUDE A CONTRACT. WHETHER IT IS REASONABLE FOR THE RECIPIENT TO BELIEVE THAT AN OFFER HAS BEEN MADE IS DETERMINED FROM THE WORDS AND ACTIONS OF THE PERSON MAKING THE ALLEGED OFFER, AND THE CIRCUMSTANCES SURROUNDING THE MAKING OF THE COMMUNICATION.

ALTHOUGH IT MAY BE DIFFICULT TO DETERMINE WHETHER AN OFFER EXISTS IN A PARTICULAR CASE, COURTS HAVE CONSIDERED THE FOLLOWING FACTORS IN MAKING THE DETERMINATION:

2. AQUOTE@ AND OFFERS. GENERALLY, THE USE OF THE TERM AQUOTE@ INDICATES THAT NO OFFER IS INTENDED, WHILE THE USE OF THE TERM AOFFER@ INDICATES THAT AN OFFER IS INTENDED. AT THE SAME TIME THE TERM IS NOT DISPOSITIVE OF THE RESULT.

3. DEFINITENESS OF COMMUNICATION

4. INQUIRIES AND INVITATIONS FOR OFFERS

5. NUMBER OF OFFEREES

6. ADVERTISEMENTS

7. AUCTIONS: WITH OR WITHOUT RESERVE

8. STATEMENTS MADE IN JEST OR ANGER

Four theories for enforcing promises

1. promise is supported by consideration

2. reliance on the promise by the promisee

3. promise is in writing and Asealed@ (in those few states where a Aseal@ substitutes for consideration).

4. unjust enrichment of a party

Special Topics

1. Adequacy of consideration

General rule: courts will not examine the adequacy of consideration; but see section 2-302 of the UCC which may render unconscionable contracts unenforceable; gross inadequacy may give rise to capacity considerations (i.e., is the person sane?); It is not necessary that the promisor derive any benefit from the promisee or the act given as consideration.

2. Pre-existing duty

A to B: AI will give you $100 if you promise not to assault my child.@

3. Performance of similar duty

4. Illusory promises

A to B: AI promise to give you a practice exam if I feel like it.@ This is really no promise, and will not furnish good consideration for a return promise.

A to B: AI promise to do X, but reserve the right to cancel at any time.@

5. Nominal consideration

A to B: AI convey all my property worth 400,000 to you for $1.00.@ Is this an attempt to disguise a gift as a contract.

6. Promissory estoppel; Restatement '90

A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee, and which does induce such action or forbearance, is binding if injustice can be avoided only by its enforcement.