Contracts 2021 

(Breen, LUC)
 
Was A Contract Formed? 
I. Contract Formation 
a. (1): What is a contract? 
1. A promise or a set of promises which are enforceable under the law  
 Not every promise is a contract (Rest. §1 (Pg. 157)) 
 Learned Hand standard- not intent but subjective 
b. Rule: A contract is formed when there’s an offer and two parties express assent to
a bargain where there is consideration 
 Assent: Agreement to the exchange 
 Bargain: Agreement to exchange promises or to exchange a
promise for performance or to exchange performances 
 Consideration: Each party gives up something of value 
 What one gets back from the bargain must be beneficial of
what the other is giving up 
2. Rest. §17. Requirement of a Bargain (Pg. 163) 
 (1) Except as stated in Subsection (2), the formation of a contract
requires a bargain in which there is a manifestation of mutual assent to the
exchange and a consideration. 
 (2) Whether or not there is a bargain a contract may be formed
under special rules applicable to formal contracts or under the rules stated
in §§82-94. 
c. Unilateral and Bilateral Contracts 
 Unilateral Contract: A contract in which the offeror
unambiguously requires the acceptance in the form of performing the very
act the offeror is seeking when making her offer is the only manner of
acceptance  
 Only one party performs an act making a promise  
 No consideration required  
o [ex]: Give up smoking b/c good for your health  
 Bilateral Contract: A contract in which the offeror requires an
acceptance to be in the form of a return promise 
 Both parties make promises 
 Consideration is required 
II. Offer & Acceptance 
1. Offer 
An offer must contain clear and definite terms and must convey power of acceptance to the
offeree.  
a. Certainty of Terms (QTPPPS) (Rest. §58-69, 33: A valid offer contains clear and
definite terms: 
Q: Quantity of goods, services 
T: Time for the contract to be performed 
I: Identity of the parties who are contracting 
P: Price 
S: Subject matter of Contract 
b. If the classical contract contains those elements, then acceptance is merely an
expression of assent. Missing terms are evaluated on a fact-specific basis with gap fillers
used as required.  
 
c. Manifestation of mutual assent to an exchange ordinarily takes the form of an offer or
proposal by one party followed by an acceptance by the other party or parties 
 Rest. §24 (Pg. 165) 
 Offer: Manifestation of willingness to enter into a bargain, made
as to justify another person assent 
 Special Offer Rules:  
 [a]: Advertisements 
o Invitations to receive offers from the public where
the advertiser has an option to accept, negotiate, or reject
the public’s offer 
o Obvious jokes in communications are not offers 
 [ex]: Leonard v. Pepsico – An ad doesn’t
constitute an offer unless its terms are sufficiently
clear & leave nothing open for negotiations  
 [b]: Price Quotes 
o Invitations for offers 
 [ex]: Fairmount v. Cruden: When a party
quotes a price & invites acceptance by another
party, a binding offer has been made that cannot be
revoked once accepted 
  [c]: Letters of Intent 
o Two Enforceable Letters of Intent: 
 [a]: Letter sign intending to sign contract in
the future; or  
 [b]: A contract one actually signs with
intention to enforce in the future  
 [ex]: Store Properties v. Neal 
 [ex]: Diesel Power v. ADDCO 
 [d]: Request for Bids 
o When a general contractor seeks bids from
subcontractors, the general contractor’s request for bids is
an invitation for others 
 The offeror is the one who can change the
manner of the rules 
3. Acceptance (Rest. §30, 32, 50-53, 56) 
 Manner of Acceptance: An offer may invite or require acceptance to be made by
an affirmative answer in words, or by performing or refraining from performing a
specified act, or may empower the offense to make a selection of terms of one’s
acceptance 
 Unless otherwise indicated by the language or the circumstances, an offer
invites acceptance in any manner & in any way reasonable under the
circumstances 
 Silence & Dominion of Acceptance 
 Rule: Mere silence is not an acceptance 
 Silence signifies mere acceptance where offeror has stated or given the
offeree a reason to believe that assent may be given by silence or inaction and
the offeree in doing so intends to accept  
 
 The Mailbox Rule 
 Rest. §63. Time When Acceptance Takes Effect 
o (a) An acceptance made in a manner and by a medium invited by
an offer is operative and completes the manifestation of mutual assent
as soon as put out of the offeree’s possession, without regard to
whether it ever reaches the offeror; but 
 o (b) An acceptance under an option contract is not operative until
received by the offeror.  
 When the acceptance is out of the offeree’s hand, the
acceptance is therefore accepted, regardless of whether it is
received by the offeror. 
 
 [RS § 18] – Manifestation of mutual assent  
i. Manifestation of mutual assent requires that each party either make
a promise or begin or render a performance.  
 
 [RS § 19] – Conduct as manifestation of assent  
i. (1) The manifestation of assent may be made wholly or partly by
written or spoken words or by other acts or by failure to act.  
ii. (2) The conduct of a party is not effective as a manifestation of his
assent unless he intends to engage in the conduct and knows or has reason to
know that the other party may infer from his conduct that he assents  
iii. (3) The conduct of a party may manifest assent even though he
does not in fact assent. In such cases a resulting contract may be voidable
because of fraud, duress, mistake, or other invalidating clause. 
 
 Mutual Assent (Rest. §§18-19) 
i. Mutual Assent: Both parties agree to make a contract  
Communication of Present Commitment 
i. Each party must communicate a present commitment to
form a contract 
ii. One party’s expression of commitment is an offer & the
other party’s expression of commitment is an acceptance; when
both parties communicate a present commitment, mutual assent
is present 
iii. Only need an outward manifestation of assent to enter
into a bargain  
iv. Does not have to take the form of offer and acceptance 
 Embry Objective (Reasonable Man) Standard: Regardless of the parties’
subjective or actual intent, if a reasonable man could infer from their conduct
 (outward action/expression) intent to enter into a binding and enforceable contract, a
binding and enforceable contract is presumed to exist.   
i. (1) An objective man knowing what was knowable to the promise
would have concluded an acceptance was made, and  
ii. (2) The promise did in fact so conclude. [Subjective à he did in
fact understand it as such]  
1. [objective reasonable man + subjective twist]  
 If you make an offer but then revoke it or it lapses before acceptance, then there’s
no contract 
 If you make an offer and it is accepted, then there is a contract 
 If you make an offer and it is accepted but then you try to revoke it, you cannot.
There is already a contract & failing to follow through is a breach of contract 
III. Consideration  
a. Consideration can take the form of: 
 [1]: Money; 
 [2]: Property; 
 [3]: Promise; or 
 [4]: Act or forbearance 
b. Rest. §71. Types of Exchange (Pg. 179) 
 (1) To constitute consideration, a performance or a return promise must be
bargained for. 
 (2) A performance or return promise is bargained for if it is sought by the
promisor in exchange for his promise and is given by the promisee in exchange for
that promise. 
 (3) The performance may consist of: 
 [a] an act other than a promise; 
 [b] a forbearance; or 
 [c] the creation, modification, or destruction of legal relation.  
c. Types of Consideration: 
 [1]: Adequacy of Consideration: A promise, act, or forbearance. Consideration
must be adequate, of reasonably exchange of value 
 Nominal consideration is not adequate consideration 
 [2]: Past & Moral Consideration: Both are insufficient for consideration 
 [3]: Pre-existing Duty  
  Rule: If there is a pre-existing duty, there is no consideration; a promise to
do what one is already obligated to do is not consideration.  
 Rest. §73. Performance of Legal Duty (Pg. 180) 
o Performance of a legal duty owed to a promisor which is neither
doubtful nor subject to honest dispute is not consideration; but a
similar performance is consideration if it differs from what was
required by the duty in a way which reflects more than a pretense of
bargain. 
 [4]: Accord & Satisfaction 
 Accord & Satisfaction: An agreement between two parties to a contract,
which has a legal claim against the other, released the other party from its
obligation in return for some form of compensation  
o Agreement – accord; compensation – satisfaction  
o [ex]: A contract between a creditor and a debtor for settlement of a
claim by some performance other than which is due