Ch 2. Creating contractual obligation , p.116
Sec, 1 the nature of assent
- P Lucy buyer, D Zehmer seller ; p.117 See p.134 Lefkowitz
- D denied contract on the ground that (1) D was drunk when making contract , (2) the contract was a joke
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Do- interpretation of contract is a matter of law ; for the purpose of statue of fraud., Zehmer (a person to be charged) should sign on it, if Lucy sue,
Fairmount Glass Works v. Crunden-Martin Woodenware Co.,
- P (purchaser) wrote a letter to seller (D), “please advise us the lowest price on our order for ten car loads of Mason green jars” ; the seller replied “we quote you Mason fruit jars … $5.40 … for immediate acceptance …” ; the purchaser sent telegram “… enter order ten car loads as per your quotation …” ; in response to the telegram, seller wrote “impossible to book your order. Output all sold.” The purchaser filed a breach of contract action. ; found for purchaser
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- While a quotation of prices is not an offer to sell, but, here, the quotation is an offer ; i) asked for “the lowest price” , as opposed to just asking for just price, ii) reply includes … “ for immediate acceptance”
Lefkowitz v. Great Minneapolis Surplus Store, Inc.,
- To first person, $139 for $1 ; P was the first person to present himself on both occasions, where D refused to sell to the P, saying that by “house rule” the offer was intended only for women
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- whether newspaper ads is an offer or invitation for an offer depends on the legal intention of the parties and the surrounding circumstances à. Whether some performance was promised in positive terms in exchange for something requested ; whether the offer is clear, definite and explicit and leaves nothing open for negotiation
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Kas tor ff,
- P school district, D building contractor Kas- tor- ff;; D contractor’s bid for plumbing omitted allowance for plumbing work, which was honest clerical error ; the omission amounted one third of the bid, which the school district should have known the omission ; next morning, D contractor informed the school of his error ; two days after award of the contract, D requested a release of the contract again ; written notification of award to Kastorff ; P received additional bids and filed a suit to recover the difference between the bid by Kastorff and the new bid
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- (i) mistake is material to the contract, (ii) enforcement of the contract as made would be unconscionable, (iii) the party who made mistake, not due to neglect of legal duty, (iv) the party, prompt notification of his intent for rescission, (v) restore to the other party what he has received, (vi) the other party know or should have known of the mistake, (vii) the other party should be placed in status quo
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- DO- if the school spent money for new round of bid, which would be against the duty to mitigate damage ;
Ever-Tite Roofing Corp. v. Green ,
- P is roofing company. D is homeowners. D signed an instrument for the purpose of obtaining the service of P in re-roofing their residence ; Upon the arrival at D’s residence, the workmen found others in the performance of the work
- offer may be withdrawn before its acceptance ; if contract does not specify the time within which it was to be accepted or within which the work was to have been commenced, a reasonable time must be allowed ;
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- Cf. a promise not to revoke offer is not legally binding, coz no consideration except i) option contract, ii) firm offer
Dickinson v. Dodds, 1876, < revoke offer > p.171
- Buyer happened to know that seller sold it to someone else
- The offer was treated as being revoked, without direct notice to offeree by offeror
- Revocation of offer - offer no loner exists - cannot accept – no binding contact
ProCD, Inc. v. Zeidenberg ,.
- “Shrink wrap contracts” are license agreements or other terms and conditions of a (putatively) contractual nature which can only be read and accepted by the consumer after opening the product. ; ( retail software packages are covered in plastic or cellophane “shrink-wrap,” and some vendors have written licenses that become effective as soon as the customer tears the wrapping from the package.)
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- The shrink wrap license was to be treated as ordinary contract, and enforceable , coz, purchaser has opportunity to review the terms and conditions and (to reject the product) before being legally bound
- Purchaser of software is bound by the terms and conditions inside the box, after an opportunity to review the terms and to reject the product
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Hill v. Gateway 2000, Inc. ,
- Purchase of computer through telephone order ; terms provide that terms governed sale unless returned within 30 days ; customer did not read the terms ; issue is whether arbitration clause in the terms binds customer
- A contract need not be read to be effective ; people who accept without reading terms, risk that the unread terms may prove unwelcome
- like in ProCD, shrink wrap contract is to be treated as ordinary contract coz purchaser has an opportunity to review the terms and to reject the product before being legally bound,, the rationale is true of here arbitration clause
- See in Carnival Cruise Lines case, enforced the forum-selection clause that was attached to a cruise ship ticket
- Other rationale – i) cashier cannot read 4-page-long statement before taking buyer’s credit card number , ii)
Drennan v. Star Paving Co., , p.222 (see Kastorff p.139)
- P general contractor , D sub-contractor ; P was the lowest bidder for paving work for school district, and was awarded the contract ; next day D informed P that D made a mistake ; D refused to work ; P sue D
- <promissory estoppel,> A promise which the promisor should reasonably expect to induce promisee into action or forbearance (of definite nature) and which actually induce such action or forbearance,,, is binding,,, if injustice can be avoided only by enforcement of the promise ; promissory estoppel is a sort of consideration
- Here, the promise between P and D which the promisor (D) should … à. D’s bid induced P into bid based upon D’s bid
- <no rescission for mistake here> unlike in Kemper, or Kastorff, P had no reason to know that D had made a mistake in submitting its bid
- Do- Distinction between Drennan and Kastorff,, in Kastorff, plumbing was omitted, the school should have known it. (there was no plumbing item on the bid, the school should have asked the contractor “I can’t see plumbing here”),, However, here in Drennan, neither general contractor or the school knew or had reason to know the subcontractor was wrong because there was paving work item in the bid.
Markov v. ABC Transfer & Storage Co.,
- P landlord , D tenant , did not intent to renew lease, but wanted to have the premise occupied during negotiation
- Held, landlord's representations that lease would be renewed for three years, in circumstances where tenant reasonably relied upon such representations, constituted an actionable promissory undertaking. ; failure to keep promise was actionable as overt deceit.
- <fraud> fact which is (i) material and (ii) false ; speaker’s (iii) knowledge of falsity and (iv) intent that statement should be acted on by person to whom it is made, such person (v) ignorance of its falsity and (vi) reliance on its truth, (vii) right to reliance, .
- misrepresentation : “the mere prediction do not necessarily constitute misrepresentation”
Hoffman v. Red Owl Stores, Inc.
- D Red Owl property owner , P Hoffman ; D’s (Red Owl) promise that he would be able to <obtain a store for franchise> for $18,000 ; D finally demanded more than that so that P was forced to abandon it ; P sold property at a lower price, lost money, moved family
- <fraud , deceit> here, no evidence that D made promises in bad faith with any present intent that they would not be fulfilled by Red Owl
- <promissory estoppel> A promise which the promisor should reasonably expect to induce promisee into action or forbearance (of definite nature) and which actually induce such action or forbearance,,, is binding,,, if injustice can be avoided only by enforcement of the promise
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- <damage> the damages should be only such as are necessary to prevent injustice ; the wrong is not in depriving the P of the promised reward, but in causing the P to change position to his detriment ; the damage is less than the loss caused by the change of position
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Hill v. Waxberg , implied in fact contract v. implied in law contract p.231
- P Waxberg helped D in getting financing ; P made several trips to Seattle at the request of Hill to do things which were instrumental in getting financing, e.g. surveying the property ; after financing secured, D hired another contractor
- “implied in fact” contract v. “implied in law” contract ,, distinction in terms of measure of damages ,
- “implied in fact” contract is based on intentions of the parties. The parties intended to make a contract but failed to articulate their promises. compensatory damages applicable (DO- the court fill the gap, like the price under UCC) ;
- “an implied in law” contract – one who is unjustly enriched at the expense of another is required to make restitution to the other. Nothing or less to do with the intentions of the parties. Restitution is limited to the value of the benefit which was acquired.
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Cyberchron Corp. v. Calldata Systems P.234
- Nevertheless, Cyberchron produced some of the equipment upon insistence of Calldata, but none was ever delivered, nor was any payment made
- <promissory estoppel> A promise which the promisor should reasonably expect to induce promisee into action or forbearance (of definite nature) and which actually induce such action or forbearance,,, is binding,,, if injustice can be avoided only by enforcement of the promise
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- <overhead expense> Cir. allows recovery of reasonable overhead costs when … there is a demonstrable past history of ongoing biz operations, without requiring proof that a specific alternative project would have absorbed the overhead costs at issue ß i) nearly every biz incurs overhead expenses, ii) indirectly incurred expense are both actual and out-of-pocket
- <shutdown cost> shutdown cost is allowed to the extent that the cost was incurred due to reliance on the Calldata promise
Channel Home v. Grossman ,
- P (prospective tenant) , D (Grossman, property owner), both parties signed a letter of intent which stated that Grossman (D) would withdraw the store from rental market and negotiate to completion
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- The test for enforceability of an agreement (i) whether both parties manifested an intention to be bound by the promise , (ii) whether the terms are definite , (iii) whether consideration
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Toys, Inc. v. , , p.249.
- Option provision in the lease ; “the fixed minimum rental shall be renegotiated to the then prevailing rate within the mall”
- <whether the option agreement is enforceable>
- Whether an option agreement is enforceable, depends on whether the option agreement contains all material and essential terms ; not necessary it include all essential terms as long as a practicable, objective method of determining the essential terms ; e.g. just agreement to agree is not enforceable
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- <whether P effectively exercised its option>
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- <whether P waived the right of renewal through its conduct>
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Oglebay Norton Co. v.
- Steel company (Armco.) and Oglebay (transportation co.) both pricing mechanism failed ; contract still enforceable ?
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- Given long-standing and close relationship between the two parties
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- (Rest) when parties intend to conclude a binding agreement, with some terms missing, court may attach a definite meaning if possible
- (Rest) when the parties intend to conclude a contract for a sale and price is not settled, the price is a reasonable price at the time of delivery
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- specific performance is necessary when difficulty of property ascertained damage
