Interpreting Select Restatements and U.C.C.
Restatement(2d) Contracts
Chapter 1 – Terms
§1 Contract Defined
A contract is an enforceable promise.
§2 Promise; Promisor; Promisee; Beneficiary
Promise: Intent to act or refrain from acting in a specified way.
Promisor: Person manifesting intent.
Promisee: Person who the manifestation is directed towards
Beneficiary: Third-party who benefits from performance of the promise
§4 How a Promise May Be Made
Words either oral or written. Can also be inferred by conduct.
Chapter 3 – Mutual Assent
§17 Requirement of a Bargain
A contract requires a bargain where there is mutual assent (both parties agree) to an exchange and consideration (see Chapter 4).
§19 Conduct as Manifestation of Assent
- Mutual assent can be inferred by written or oral words, actions, or failure to act.
- Conduct is not mutual assent unless they intend to engage or can infer that the other party believes they will engage.
- Conduct can show assent, even if they don’t mean to show assent. However, this can be voided through “fraud, duress, [or] mistake….”
Relevant case:
Allen v. Bissinger & Co.– Was there an acceptance? Extensive Report, acceptance through letters.
§21 Intention to Be Legally Bound
One does not have to intend to be bound by the contract to be in fact bound by the contract. This is true unless a party expressly says that they do not intend to be bound.
Relevant Case:
Ray v. Eurice – Building a nit-picky home. Meeting of the minds does not matter.
Quake Construction, Inc. v. American Airlines, Inc. – Construction. If intent is ambiguous in the contract, look at the intent of the parties.
§22 Mode of Assent: Offer and Acceptance
Mutual assent usually = offer + acceptance. However, offer and acceptance does not have to be defined to be enforceable.
§24 Offer Defined
Invitation from offeror to enter a bargain. The offeree then understands that acceptance will conclude the offer and result in a contract.
§25 Options Contracts
Is a contract that limits the promisor’s ability to revoke the offer.
Relevant Case
Normile v. Miller – Real estate. Option comes from the promisor, not promisee.
§26 Preliminary Negotiations
Willingness to enter a bargain is not an offer if the other party has reason to believe that there is no conclusion until there is additional assent (i.e. advertisements).
Relevant Case:
Lonergan v. Scolnick – Preliminary Negotiations. Checking out the property. Could have expected additional assent.
§27 Existence of Contract Where Written Memorial Is Contemplated
A written memorial (statement) does not change the effective date of the contract (can be earlier than statement), unless the circumstances show that the earlier exchanges were only preliminary negotiations.
§29 To Whom an Offer is Addressed (Offeree)
Offeror chooses who the offer goes to (can be an individual or a group).
§30 Form of Acceptance Invited
An offer may be accepted through words, performance, or refraining from performance according to reasonable circumstances.
§32 Invitation of Promise or Performance
If there is doubt about the offer requiring a promise to perform or an actual performance, the offeree can choose which to do.
§33 Certainty
An offer must include terms of a contract that are certain (certain means that there is a way to tell if there’s a breach and how to provide a remedy).
Relevant Cases
Walker v. Keith – Option to Renew Lease. Best practice is to come up with a way to determine what the terms are.
§35 Offer’s Power of Acceptance
The offeree can assent by accepting an offer. This power can be terminated as outlined in §36 below.
§36 Methods of Termination of the Power of Acceptance
- Rejection or counter-offer from offeree
- Lapse of time
- Revocation from offeror
- Death of either party
- Don’t meet the terms of acceptance outlined by the offer.
§38 Rejection
Rejection is showing your intent not to accept unless the offeror says you can reject but accept later.
§39 Counter-offers
Offer made by the offeree proposing a substituted bargain of the same matter (i.e. 10 instead of 15 for a horse). Treated as a rejection (power of acceptance is terminated).
Relevant Cases:
Normile v. Miller – Option in real estate. There was a counter-offer, which serves as a rejection. Thus, can’t expect to include same terms of original offer (such as option).
§40 Time When Rejection of Counter-Offer Terminates the Power of Acceptance
I can’t imagine this being on the final, but from my understanding… Rejection or Counter-offer must be received by the offeror to cancel power of acceptance. If an acceptance is received before a rejection or counter-offer, there is an agreement.
§41 Lapse of Time
Power of acceptance is gone after:
- Time specified in the offer
- Reasonable time has passed
- Reasonable time depends on the circumstances and facts of a case
§43 Indirect Communication of Revocation
Power of acceptance can be terminated when the offeror takes definite action to revoke the offer. The offeree must receive reliable information about the termination.
§45 Option Contract Created by Part Performance or Tender (Unilateral?)
When acceptance is based only on performance, an option contract is formed when the offeree begins to perform. However, the offeror has no duty to perform until the offeree has performed.
Relevant Cases:
Cook v. Coldwell Banker – Real estate commission (met the tiers), substantial performance. Think swimming the English Channel.
Sateriale v. RJR – C-Cash
§50 Acceptance of Offer Defined; Acceptance by Performance: Acceptance by Promise
Acceptance is assent by all parties. Acceptance by performance requires part action while Acceptance by promise requires all actions are complete.
§58 Necessity of Acceptance Complying with Terms of Offer
Acceptance needs to follow the terms of the offer.
§59 Purported Acceptance Which Adds Qualifications
If acceptance adds terms, then it is a counter-offer (move to §39).
§60 Acceptance of Offer Which States Place, Time, or Manner of Acceptance
If place, time, or manner of acceptance is required, the offeree must meet those requirements. They don’t have to if it is only suggested.
§63 Time When Acceptance Takes Effect
Acceptance is made after the offeree has accented, regardless of whether the offeror hears about the acceptance.
§69 Acceptance by Silence or Exercise of Dominion
Silence is not an acceptance unless:
- Offeree benefits
- Offeror says that silence can be treated as acceptance
- Previous experience shows that there is no reason to notify the offeror of acceptance.
- Offeree acting inconsistently with offeror’s ownership of the property.
Chapter 4 – Consideration
§71 Requirement of Exchange; Types of Exchange
Consideration is a bargained promise or performance.
Something is bargained for if “it is sought by the promisor in exchange for his his promise and is given by the promisee in exchange for that promise.”
Performance can include:
- Act (other than a promise)
- Forbearance
- Legal relations
Relevant Cases:
Hamer v. Sidway – William Uncle and Nephew, “I won’t drink”. Forbearance counts, even if it was good for him.
Pennsy Supply Inc. v. American Ash Recycling Corp. of Pennsylvania – Pavement. Detriment. Does not need to be explicitly bargained.
Doughtery v. Salt – “good boy”. Gifts are not consideration
Plowman v. Indian Refining Co. – Pension during depression. No consideration for past actions.
Marshall Durbin Food Corp. v. Baker – Chicken farm. Act is consideration
§77 Illusory and Alternative Promises
Alternative promises from promisor is not consideration unless:
- On their own, alternative promises would have been consideration
- One of the alternatives would be consideration and the other alternatives are eliminated.
Relevant Case:
Marshall Durbin Food Corp. v. Baker – Chicken farm. Not an illusory promise.
§79 Adequacy of Consideration; Mutuality of Obligation
If consideration is met, there does not need to be:
- Advantage to the promisor and disadvantage to the promisee.
- Equivalence of value (Horse can be worth 15,000 but the courts won’t look at if the horse was paid for only 15).
- “Mutuality of obligation” (Same as equivalence of value but instead focus on performance).
Relevant Case:
Dohrmann v. Swaney – Fraud of the estate. Equivalence is not examined unless so grossly inadequate to show fraud might have occurred.
§81 Consideration as Motive or Inducing Cause
A bargain does not need to induce a promise or performance to be consideration.
U.C.C.
1 – General Provisions
§1-102 Scope of Article
The article applies to transactions.
§1-103 Construction of U.C.C. to Promote Its Purposes and Policies; Applicability of Supplemental Principles of Law
Purposes of the U.C.C. are to simplify commercial transactions, expand commercial practices through custom, and make laws uniform across jurisdictions.
§1-302 Variation by Agreement
Each agreement may vary the applicability of the U.C.C. through party agreement of certain standards and reasonability.
§1-303 Course of Performance, Course of Dealing, and Usage of Trade
Course of Performance is sequence conduct to a particular transaction if there is
- Repeated occasions for performance
- Acceptance of performance
Course of Dealing is a sequence of conduct for previous transactions.
Usage of Trade is a regular observance of a practice to expect certain things of a transaction.
Each of the above can be used to determine meaning of agreements between parties.
2 – Sales
§2-102 Scope; Certain Security and Other Transactions Excluded From This Article
U.C.C. applies to transactions in goods.
§2-103 Definitions and Index of Definitions
Buyer – Person who buys
Good Faith – Honesty and observance of reasonable standards.
Receipt – Taking possession of goods
Seller – Person who sells
§2-104 Definitions: “Merchant”; “Between Merchants”; “Financing Agency”
Merchant – Person who deals in goods of the merchant’s occupation (i.e. Ford dealer is a merchant in Ford vehicles).
Financing agency – Banks, or others who collect payment under the contract.
Between Merchants – Transaction between two parties who are both merchants
§2-105 Definitions: Transferability; “Goods”; “Future” Goods; “Lot”; “Commercial Unit”.
Goods – movable at the time of identification (i.e. support beam is a good when building a home, but is not a good after home is built).
Future Goods – Not identified as existing goods yet.
Commercial unit – Goods with commercial value, can be a singular unit or several to create a “single whole.”
§2-201 Formal Requirements; Statute of Frauds
If a sale of goods is over $500, the contract needs to be written down. A contract can still be enforceable without meeting this requirement if:
- Goods are manufactured specifically for the buyer
- Testimony that a contract was made
- Payment for the goods has been made
Relevant Case
Jannusch v. Naffziger – Food Truck. Predominantly Goods. Down payment for truck has been made and means to pay in whole were obtained.
§2-204 Formation in General
Conduct can be enough to show an agreement is made, even if the moment of making is undetermined and some terms are left open.
Relevant Case
E.C. Styberg Engineering Co. v. Eaton Corp. – Manufacturing Brakes. Missing terms. Terms were so undetermined that contract was unenforceable.
§2-206 Offer and Acceptance in Formation of Contract
An offer is made under the following circumstances if it is unambiguous.
- Inviting reasonable acceptance
- An order to buy goods is “inviting acceptance”.
If there is no notification of acceptance within a reasonable time, the offer could have expired, even if one party began to perform.
§2-207 Additional Terms in Acceptance or Confirmation
Merchant to Consumer requires the consumer to agree to the additional terms.
Merchant to Merchant – additional terms automatically become part of the contract unless they meet one of the three exceptions:
- Offer limits acceptance to original terms
- Material changes (Agreement for one breed of horse and additional terms are for a different breed of horse)
- Objection to new terms are already rejected.
Conduct can establish a sale, even if the writings do not.
Relevant Cases
Princess v. General Electric – Cruise Boat. Predominant purpose of goods. Which form did they act on?
Brown Machine, Inc. v. Hercules, Inc. – “Cool Whip”. Which form did they act on? Were additional terms agreed to (Offer limits and material change means that they would have needed to agree).
Paul Gottlieb & Co., Inc. v. Alps South Corp. – Fabrics. Materially altered fabric.
§2-209 Modification, Rescission and Waiver
Modification of an agreement does not need consideration. An agreement cannot be modified if it says that it can’t be modified. In that case, there needs to be a new agreement. Any modifications need to follow §2-201.
§2-305 Open Price Term (Agreements to Agree)
A contract does not need a settled price to be a qualified contract. A price can be settled by a third party. However, if the parties require a price to be fixed, there is no contract made.
Because of real life situations, the UCC will allow contracts to be enforceable without a material term. However, although allowed, this is not the preferred method of making contracts!
Relevant Case
Walker v. Keith – Option to Renew Lease. Price was not set.
§2-306 Output, Requirements and Exclusive Dealings
Practice good faith and best efforts to meet output and sale terms.
Restatement (Third) of Agency
Relevant Case
Plowman v. Indian Refining Co. – Pension during depression from oil company. Agent did not have actual or apparent authority.
§1.01 Agency Defined
Where one person (principal) gives another person (agent) authority to act on the principal’s behalf.
§2.01 Actual Authority
When the principal wishes the agent to act in a certain way and the agent does so.
§2.02 Scope of Actual Authority
Actual authority extends to the agent’s reasonable understanding (objective standard) of the principal’s objectives.
§2.03 Apparent Authority
When a third party feels like authority has been given to the agent from the principal. The emphasis is on the principal.
§3.01 Creation of Actual Authority
Principal tells the agent what is to be done and the agent agrees.
§3.03 Creation of Apparent Authority
Is created when a third-party believes the agent to be acting as authorized by the principal.
§4.01 Ratification Defined
When an agent is acting with apparent authority, the principal agrees with those actions. An act can be ratified by
- Manifestation of assent of those actions
- Conduct that makes an assumption of agreement
Not ratified unless:
- Act is ratifiable
- Has capacity to ratify (requires a principal)
- Ratification is timely
- Ratification encompasses act
§4.02 Effect of Ratification
Apparent authority + ratification = Actual authority
§4.06 Knowledge Requisite to Ratification
A principal is not bound to ratify if they do not have knowledge of the facts in the act (even when the other person is unaware of the lack of knowledge).
In other words, claim of apparent authority from a third-party does not automatically mean ratification.
§8.01 General Fiduciary Principle
Agent must act in accordance with loyalty to the principal.
Disclaimer
The content contained in this article may contain inaccuracies and is not intended to reflect the opinions, views, beliefs, or practices of any academic professor or publication. Instead, this content is a reflection on the author’s understanding of the law and legal practices.
