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1 George Mason School of Law Contracts I IV.Offers F.H. Buckley

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1 1 George Mason School of Law Contracts I IV.Offers F.H. Buckley

2 Last classes Contract law solves the trust problem of PD games and permits credible commitments 2

3 Last classes Contract law solves the trust problem of PD games and permits credible commitments This results in a society which is wealthier, happier, freer and more open 3

4 Last classes Promising and contract law assume the existence of promissory conventions (Hume) The libertarian (non-consequentialist) explanation of promising therefore appears to founder So too natural law explanations 4

5 Last classes Promising and contract law are content-independent Quasi-contract (restitution) as contract-dependent Was there really a benefit? 5

6 The Five Ws Who What Where When Why 6

7 Basic Questions of Formation Who are the parties What happens to non-parties? What Where When Why 7

8 Basic Questions of Formation Who are the parties What did they agree to? What are the terms and conditions Where When Why 8

9 Basic Questions of Formation Who are the parties What did they agree to? Where was the contract formed? Under which law When Why 9

10 Basic Questions of Formation Who are the parties What did they agree to? Where was the contract formed? When was it formed? Pre-contractual rights Limitation periods Why 10

11 Basic Questions of Formation Who are the parties What did they agree to? Where was the contract formed? When was it formed? Why did they enter into the contract The doctrine of consideration 11

12 Who are the parties? Restatement § 2 (1) A promise is a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made. (2) The person manifesting the intention is the promisor. (3) The person to whom the manifestation is addressed is the promisee. (4) Where performance will benefit a person other than the promisee, that person is a beneficiary. 12

13 Who are the parties? Restatement § 2 (4) Where performance will benefit a person other than the promisee, that person is a beneficiary. The old rule of privity of contract 13

14 What counts as a contract? 14 The need for a meeting of the minds Quinn J. in Williams v. Walker-Thomas at 53

15 Non-promises 2(1) A promise is a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made. What does this exclude? 15

16 Non-promises (1) A promise is a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made. I may sell my car to you I expect to see you at lunch tomorrow 16

17 Secret reservations How about: I will sell you my car tomorrow (while privately resolving not to do so) 17

18 The Objective Standard Restatement § 2(1) A promise is a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made. A remedy for false promising 18

19 Lucy v. Zehmer at p

20 Lucy v. Zehmer at p

21 Lucy v. Zehmer 21 Back on State 40 about a half mile from the junction with County 613 the traveler comes upon the FERGUSON PLACE; … The two sections are connected by a passagewaycommonly called a colonnade, though quite innocent of columns. The wide-boarded floors, flat-head nails, massive locks, H and L hinges, and hand- carved mantels attest the antiquity of a house well worth the restoration it has not received.

22 Why does the drinking matter? 22

23 Why does the drinking matter? 23 Capacity: Restatement § 16 (1) A person incurs only voidable contractual duties by entering into a transaction if the other party has reason to know that by reason of intoxication (a) he is unable to understand in a reasonable manner the nature and consequences of the transaction, or (b) he is unable to act in a reasonable manner in relation to the transaction

24 Why does the drinking matter? Restatement § 2(1) A promise is a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made. 24

25 Lucy v. Zehmer 25 What is the role of intention to create legal relations? Restatement § 21: Neither real nor apparent intention that a promise be legally binding is essential to the formation of a contract, but a manifestation of intention that a promise shall not affect legal relations may prevent the formation of a contract.

26 Lucy v. Zehmer 26 What remedy is sought and why did that matter? Recall Mansfield in Moses v. Macferlan

27 Lucy v. Zehmer 27 Even if a contract was made on the Saturday, why couldnt Zehmer retract on the Sunday?

28 Lucy v. Zehmer 28 Even if a contract was made on the Saturday, why couldnt Zehmer retract on the Sunday? Has there been either any beneficial or detrimental reliance at that point?

29 Lucy v. Zehmer 29 Even if a contract was made on the Saturday, why couldnt Zehmer retract on the Sunday? Has there been either any beneficial or detrimental reliance at that point? Does the Coase Theorem help?

30 Lucy v. Zehmer 30 Suppose Lucy knew that Zehmer acted in jest? Restatement §20. EFFECT OF MISUNDERSTANDING (1) There is no manifestation of mutual assent to an exchange if the parties attach materially different meanings to their manifestations and (a) neither party knows or has reason to know the meaning attached by the other; or (b) each party knows or each party has reason to know the meaning attached by the other.

31 Leonard v. Pepsico at 18 31

32 Leonard v. Pepsico at Was this really an offer to sell a jet for $700,000?

33 Leonard v. Pepsico at No objective person could reasonably have concluded that the commercial actually offered consumers a Harrier Jet.

34 Leonard v. Pepsico at 17 34

35 Bargains: Rest. § 3 A bargain is an agreement to exchange promises or to exchange a promise for a performance or to exchange performances. 35

36 Bargains: Rest. § 3 A bargain is an agreement to exchange promises or to exchange a promise for a performance or to exchange performances. Wholly executory contracts: promise for promise Wholly executed contracts: performance for performance 36

37 A wholly executed contract: Gleinicke Bridge, Berlin,

38 Formation as a Coordination Game 38 You have to meet someone here in the United States. You dont know anything about him and he knows nothing of you. You dont know where or when to meet. It could be anywhere in the US and it could be any day or any time.

39 Formation as a Coordination Game 39 You have to meet someone here in the United States. You dont know anything about him and he knows nothing of you. You dont know where or when to meet. It could be anywhere in the US and it could be any day or any time. What day?

40 Formation as a Coordination Game 40 You have to meet someone here in the United States. You dont know anything about him and he knows nothing of you. You dont know where or when to meet. It could be anywhere in the US and it could be any day or any time. What city?

41 Formation as a Coordination Game 41 You have to meet someone here in the United States. You dont know anything about him and he knows nothing of you. You dont know where or when to meet. It could be anywhere in the US and it could be any day or any time. Where in NYC?

42 Formation as a Coordination Game 42 You have to meet someone here in the United States. You dont know anything about him and he knows nothing of you. You dont know where or when to meet. It could be anywhere in the US and it could be any day or any time. What time?

43 What side of the road to drive on? Coordination Games 43 RightLeft RightHappy, HappyDeath, Death LeftDeath, DeathJoy, Joy Player 1 Player 2

44 Formation as a coordination game 44 PromiseNo Promise Promise10, 10-10, 0 No Promise0, -100, 0 Player 1 Player 2

45 Bargaining errors as an avoidable accident 45 What we got here is a failure to communicate

46 Two kinds of Promissory Accidents 46 Type I: Promisors are found to promise when they really didnt intend to do so (false positive) Lucy v Zehmer? Type II: Promisors are not found to promise where they intended to do so (true negative) Leonard v. Pepsico

47 How to reduce promissory accidents? Offer and Acceptance 47 Restatement § 22(1). The 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.

48 Offers 48 Restatement § 24. An offer is the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it.

49 Acceptance 49 Restatement § 50. Acceptance of an offer is the manifestation of assent to the terms thereof…

50 How to reduce promissory accidents? 50 What if we could identify the party who could at least cost eliminate the accident?

51 How to reduce promissory accidents? 51 What if we could identify the party who could at least cost eliminate the accident? Who was this in Bailey?

52 How to reduce promissory accidents? 52 What if we could identify the party who could at least cost eliminate the accident? And in Zehmer?

53 The source of promissory accidents 53 What counts as an offer?

54 The source of promissory accidents 54 What counts as an offer? What counts as an acceptance?

55 The source of promissory accidents 55 What counts as an offer? What counts as an acceptance? How long do offers and acceptances stand (i.e., what about retraction?)

56 What counts as an offer? 56 Offers to the world: unilateral contracts Offers vs. Invitations to treat Offers vs. mere puffs

57 Offers to the Public Courteen Seed v. Abraham What did the flyer say? Could that have been accepted as an offer?

58 Offers to the Public Courteen Seed v. Abraham What did the flyer say? Plaintiffs wire on Oct. 8 Could that have been accepted as an offer?

59 Offers to the Public Courteen Seed v. Abraham What did the flyer say? Plaintiffs wire on Oct. 8 Defendants response (I am asking 23 cents a pound) Could that have been accepted as an offer?

60 Offers to the Public Courteen Seed v. Abraham Offer v. Invitation to treat Does a course of dealings change anything?

61 Offers to the Public Fairmont v. Cruden-Martin Can you distinguish this case?

62 Offers to the Public Fairmont v. Cruden-Martin Can you distinguish this case? for immediate acceptance?

63 Offers to the Public Audio Visual v. Sharp at Why might a presumptive rule that ads or flyers are not offers make sense?

64 Offers to the Public Audio Visual v. Sharp at Why might a presumptive rule that ads or flyers are not offers make sense? Cf. Newspaper Ad on 213

65 Lefkowitz Offer or Invitation to Treat?

66 Lefkowitz 66 Could the offeror revoke his offer?

67 Lefkowitz 67 Could the offeror revoke his offer? Restatement 36(1) An offerees power of acceptance may be terminated by: (c) revocation by the offeror

68 Lefkowitz 68 Did the offeror revoke in time? Could the offeror revoke through a privatehouse rule?

69 Lefkowitz 69 Did the offeror revoke in time? Could the offeror revoke through a privatehouse rule? Restatement §42. An offeree's power of acceptance is terminated when the offeree receives from the offeror a manifestation of an intention not to enter into the proposed contract.

70 Lefkowitz 70 Suppose that the Π had written to the Δ and said I accept? Could it be accepted in that way?

71 Lefkowitz 71 Suppose that the Π had written to the Δ and said I accept? Could it be accepted in that way? Buyers could only accept by showing up with the $1.

72 Lefkowitz 72 Suppose that the Π had written to the Δ and said I accept? Corbin at 206: unilateral vs bilateral contractswhat is the difference?

73 Lefkowitz 73 Suppose that the Π had written to the Δ and said I accept? Unilateral Contracts: Where the offeree can accept only by performance Bilateral Contracts: The offeree accepts by return promise

74 Lefkowitz 74 Suppose that the Π had written to the Δ and said I accept? Was Lefkowitz obliged to buy the coat?

75 Lefkowitz 75 Why did the store insist on the offeree showing up at the store?

76 Why is it so hard to get from one store to another at Pentagon Mall? 76 Pentagon City Mall

77 Offers to the Public Carlill v. Carbolic Smoke Ball 77 How did the Π accept the offer?

78 Carlill v. Carbolic Smoke Ball 78 Does the offeree have to communicate acceptance in a unilateral contract?

79 Carlill v. Carbolic Smoke Ball 79 Rest. § 54. Where an offer invites an offeree to accept by rendering a performance, no notification is necessary to make such an acceptance effective unless the offer requests such a notification.

80 Carlill v. Carbolic Smoke Ball at Should this have been seen as an Invitation to Treat? How do you tell?

81 Carlill v. Carbolic Smoke Ball at Can you think of a reason why the Δ might WANT to assume liability?

82 Carlill v. Carbolic Smoke Ball at Whats a mere puff

83 Mere puffs: Simple commendations do not oblige one 83 simplex commendatio non obligat

84 The need for certainty 84 Restatement § 33(1). Even though a manifestation of intention is intended to be understood as an offer, it cannot be accepted so as to form a contract unless the terms of the contract are reasonably certain.

85 Self-service stores Barker v. Allied at 215 How would you analyze this? 85

86 Cole v. Sandel at 215 What was the standard idea agreement? And why wasnt it an agreement? 86

87 The Law of Offers serves coordination and efficiency goals Must seem objectively like real offers Secret reservations Invitations to treat Certainty of terms Cannot be mere puffs 87


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