1. Introduction to Contracts and Agreement
Chapter 8
Introduction to Contracts and Agreement
Chapter 8: Introduction to Contracts and Agreement

2. Chapter 8 Case Hypothetical Zsa Zsa Hilton, a wealthy socialite living in Beverly Hills, was frantic. Her best friend in the world was her pet poodle Caboodles, and Caboodles had been missing for three (3) days. Having searched her estate exhaustively, Zsa Zsa decided that her next best option was to post a reward for her beloved Caboodles. Zsa Zsa carefully prepared a poster advertising a reward for the return of her pet. The heading of the poster exclaimed “Please find Caboodles—Reward--$25,000!!!” Below the heading was a color “glamour shot” of the animal and Zsa Zsa’s contact information, including her address and cell phone number. After soliciting the assistance of her butler, her maid, and her best friend Eva Ritchie, Zsa Zsa displayed and distributed one thousand of the posters throughout the greater Beverly Hills metropolitan area. Later in the week, Dane “Bulldog” Sheppard showed up at Zsa Zsa’s front door. When she answered the door chime, Dane said “I am pleased to meet you, Ms. Hilton. I saw your ad for the return of your lost poodle, and I am your man. I will find him, Ms. Hilton, and let me say in advance that I really appreciate the $25,000 bounty, um, reward money!” Is there a contract between Dane “Bulldog” Sheppard and Zsa Zsa Hilton?
Chapter 8 Case Hypothetical: Zsa Zsa Hilton, a wealthy socialite living in Beverly Hills, was frantic. Her best friend in the world was her pet poodle Caboodles, and Caboodles had been missing for three (3) days. Having searched her estate exhaustively, Zsa Zsa decided that her next best option was to post a reward for her beloved Caboodles.
Zsa Zsa carefully prepared a poster advertising a reward for the return of her pet. The heading of the poster exclaimed “Please find Caboodles—Reward--$25,000!!!” Below the heading was a color “glamour shot” of the animal and Zsa Zsa’s contact information, including her address and cell phone number. After soliciting the assistance of her butler, her maid, and her best friend Eva Ritchie, Zsa Zsa displayed and distributed one thousand of the posters throughout the greater Beverly Hills metropolitan area.
Later in the week, Dane “Bulldog” Sheppard showed up at Zsa Zsa’s front door. When she answered the door chime, Dane said “I am pleased to meet you, Ms. Hilton. I saw your ad for the return of your lost poodle, and I am your man. I will find him, Ms. Hilton, and let me say in advance that I really appreciate the $25,000 bounty, um, reward money!”
Is there a contract between Dane “Bulldog” Sheppard and Zsa Zsa Hilton?

3. Chapter 8 Case Hypothetical Carter Morley and Erena Erickson live side by side in town homes joined together by a shared wall. Both residences are in need of new exterior paint. On Monday, Morley calls a painter, Tom Sizemore, having selected his name from the classified section of the phone directory. Morley describes his address, the physical dimensions and structure of his home, and he agrees with Sizemore that the work will be performed that Friday. Sizemore estimates that with his crew of five, and given the relatively small size of the home, the work will only take one day to complete. Morley advises that although he will have to work a fourteen-hour day on Friday, he would like to have the work completed in his absence. In passing conversation with his neighbor Erickson, Morley advises her of his “home improvement” plans. Early Friday morning, Sizemore and his team arrive at the address, but by mistake, they begin work on Erickson’s side of building. Although Erena is home, she does not object to the work, nor does she inform Sizemore and his crew of the mistake. Midway through the day, she offers them fresh-squeezed lemonade and ham sandwiches, and they heartily accept. Upon completion of the work at 7:00 p.m. Friday evening, Sizemore knocks on Erena’s door and asks if “the man of the home” is present, that he would like Morley to review the work and pay the agreed-upon price for the work. Erena chuckles, and “breaks the news” that the painting crew has made a mistake, one to her benefit. Erickson proclaims “I do not owe you one dime, because you do not have a contract with me; I will give you ten minutes to remove yourself and your materials from my property, or I will call the police.” Do Erickson and Sizemore have a contract? If so, why? If not, are there any other theories of recovery available to Sizemore?
Chapter 8 Case Hypothetical: Carter Morley and Erena Erickson live side by side in town homes joined together by a shared wall. Both residences are in need of new exterior paint. On Monday, Morley calls a painter, Tom Sizemore, having selected his name from the classified section of the phone directory. Morley describes his address, the physical dimensions and structure of his home, and he agrees with Sizemore that the work will be performed that Friday. Sizemore estimates that with his crew of five, and given the relatively small size of the home, the work will only take one day to complete. Morley advises that although he will have to work a fourteen-hour day on Friday, he would like to have the work completed in his absence. In passing conversation with his neighbor Erickson, Morley advises her of his “home improvement” plans.
Early Friday morning, Sizemore and his team arrive at the address, but by mistake, they begin work on Erickson’s side of building. Although Erena is home, she does not object to the work, nor does she inform Sizemore and his crew of the mistake. Midway through the day, she offers them fresh-squeezed lemonade and ham sandwiches, and they heartily accept.
Upon completion of the work at 7:00 p.m. Friday evening, Sizemore knocks on Erena’s door and asks if “the man of the home” is present, that he would like Morley to review the work and pay the agreed-upon price for the work. Erena chuckles, and “breaks the news” that the painting crew has made a mistake, one to her benefit. Erickson proclaims “I do not owe you one dime, because you do not have a contract with me; I will give you ten minutes to remove yourself and your materials from my property, or I will call the police.”
Do Erickson and Sizemore have a contract? If so, why? If not, are there any other theories of recovery available to Sizemore?

4. Chapter 8 Case Hypothetical Tom Garrity, Bill Simmons, and Edward Yang were close friends. Their friendship had developed over their mutual love for vintage stereo equipment, and the three often spent hours with each other, admiring their electronic collections, monitoring online auctions for vintage receivers and speakers, and playing music. On several occasions, Edward expressed his interest in a particular stereo receiver Tom owned, the classic Marantz Model Edward often told Tom that if he ever wanted to sell the receiver, he would like to be first considered as the buyer. Last Saturday morning, Tom and Bill were at Tom’s house. During their conversation, Tom stated “Bill, I know how much Edward loves my Marantz 4400 receiver, and I have too much stereo equipment in the house. In fact, Sarah (Tom’s wife) has given me an ultimatum: Either a good portion of the receivers and speakers go, or I go! I have decided that I will sell my Marantz 4400 to Edward for $200. It’s worth at least $600, and it’s the only Marantz receiver that I own, but I’ve decided that I would like to continue to live in this house, and my wife hasn’t given me any other options except to sell some of this stuff!” Later that day, Edward appeared at Tom’s house. Edward enthusiastically proclaimed “Tom, Bill told me about your offer, and I will take the Marantz 4400 for $200. This is the classic receiver as far as I am concerned, and I am forever grateful to you! I promise I will take care of it, and you can have lifetime visitation rights! Oh, and please tell Sarah I said ‘thanks’!” Tom was perplexed. After his conversation with Bill on Saturday morning, he had decided to keep the Marantz 4400, and sell all of his other receivers. He knew that his next statement would test Edward’s friendship: “Edward, I’m sorry, but I have decided not to sell the Marantz We can discuss selling any of my other receivers, but the Marantz is ‘off-limits’.” Edward’s reply? “We have an agreement, Tom. You made me an offer, and I accepted your offer. Here is the $200. Where is the receiver?” Is there a contract between Tom Garrity and Edward Yang?
Chapter 8 Case Hypothetical: Tom Garrity, Bill Simmons, and Edward Yang were close friends. Their friendship had developed over their mutual love for vintage stereo equipment, and the three often spent hours with each other, admiring their electronic collections, monitoring online auctions for vintage receivers and speakers, and playing music. On several occasions, Edward expressed his interest in a particular stereo receiver Tom owned, the classic Marantz Model Edward often told Tom that if he ever wanted to sell the receiver, he would like to be first considered as the buyer.
Last Saturday morning, Tom and Bill were at Tom’s house. During their conversation, Tom stated “Bill, I know how much Edward loves my Marantz 4400 receiver, and I have too much stereo equipment in the house. In fact, Sarah (Tom’s wife) has given me an ultimatum: Either a good portion of the receivers and speakers go, or I go! I have decided that I will sell my Marantz 4400 to Edward for $200. It’s worth at least $600, and it’s the only Marantz receiver that I own, but I’ve decided that I would like to continue to live in this house, and my wife hasn’t given me any other options except to sell some of this stuff!”
Later that day, Edward appeared at Tom’s house. Edward enthusiastically proclaimed “Tom, Bill told me about your offer, and I will take the Marantz 4400 for $200. This is the classic receiver as far as I am concerned, and I am forever grateful to you! I promise I will take care of it, and you can have lifetime visitation rights! Oh, and please tell Sarah I said ‘thanks’!”
Tom was perplexed. After his conversation with Bill on Saturday morning, he had decided to keep the Marantz 4400, and sell all of his other receivers. He knew that his next statement would test Edward’s friendship: “Edward, I’m sorry, but I have decided not to sell the Marantz We can discuss selling any of my other receivers, but the Marantz is ‘off-limits’.” Edward’s reply? “We have an agreement, Tom. You made me an offer, and I accepted your offer. Here is the $200. Where is the receiver?”
Is there a contract between Tom Garrity and Edward Yang?

5. Chapter 8 Case Hypothetical Keith Avondale is in the market for a new “big screen” flat-panel television. While reviewing the Sunday newspaper, he notices a full-page advertisement from “Transistor Town.” The advertisement includes a 45-inch flat-panel television for $299. Surprised by the remarkably low price, and eager to purchase his new luxury item, Avondale makes plans to “open the store” on Monday morning. Avondale is the first customer to arrive at the store on Monday, waiting outside when the front doors open. He rushes into the store and announces to the first sales representative he sees, “I will take a 45-inch flat-panel television for $299!” The sales representative immediately refers Avondale to the store manager, who directs Avondale to his office. The store manager explains to Avondale that the advertisement was an unfortunate mistake, resulting from miscommunication between Transistor Town and the newspaper publisher. The manager goes on to say that the intended advertise price was $2,999, but that he would be willing to sell the described television to Avondale for $2,449, Transistor Town’s cost for the television. Avondale objects, demands that Transistor Town sell the television for $299, and informs the store manager that his brother is a trial lawyer. Who wins?
Chapter 8 Case Hypothetical: Keith Avondale is in the market for a new “big screen” flat-panel television. While reviewing the Sunday newspaper, he notices a full-page advertisement from “Transistor Town.” The advertisement includes a 45-inch flat-panel television for $299. Surprised by the remarkably low price, and eager to purchase his new luxury item, Avondale makes plans to “open the store” on Monday morning.
Avondale is the first customer to arrive at the store on Monday, waiting outside when the front doors open. He rushes into the store and announces to the first sales representative he sees, “I will take a 45-inch flat-panel television for $299!”
The sales representative immediately refers Avondale to the store manager, who directs Avondale to his office. The store manager explains to Avondale that the advertisement was an unfortunate mistake, resulting from miscommunication between Transistor Town and the newspaper publisher. The manager goes on to say that the intended advertise price was $2,999, but that he would be willing to sell the described television to Avondale for $2,449, Transistor Town’s cost for the television. Avondale objects, demands that Transistor Town sell the television for $299, and informs the store manager that his brother is a trial lawyer.
Who wins?

6. Definition: A set of legally enforceable promises
Contract
Definition: A set of legally enforceable promises
A contract is defined as a set of legally enforceable promises.

7. Elements Required For Contract Formation
Agreement (Offer and Acceptance)
Consideration (Bargained-For Exchange)
Contractual Capacity (Legal Ability to Enter Into Binding Contract)
Legal Object
Elements required for contract formation include an agreement (represented by a valid offer and a valid acceptance,) mutual consideration (meaning that both parties must give value in order to support the enforceability of the agreement, in the form of a bargained-for exchange) contractual capacity (the legal ability to enter into a binding contract,) and legal object (meaning that the contract cannot be either illegal or against public policy.)

8. Defenses to Enforcement of Contract
Lack of genuine assent (fraud, duress, undue influence, misrepresentation)
Lack of proper form requirements (statute of frauds writing requirement)
Defenses to the enforceability of a contract include the lack of genuine assent as a result of fraud, duress, undue influence, or misrepresentation, and lack of proper form requirements, usually indicating non-compliance with the statute of frauds, a rule of law requiring that certain types of contracts be in writing in order to be enforceable.

9. Sources of Contract Law
State common law
The Uniform Commercial Code (Article 2)
-Governs contracts for the sale of goods
Sources of contract law include state common law, as well as Article 2 of the Uniform Commercial Code, which governs contracts for the sale of goods.

10. Classification of Contracts: Bilateral or Unilateral
“Bilateral” Contract: Exchange of promises
“Unilateral” Contract: Promise in return for performance of act
Contracts can be classified as either “bilateral” or “unilateral.” A bilateral contract involves an exchange of promises between contracting parties, while a unilateral contract involves the exchange of a promise in return for the performance of an act.

11. Classification of Contracts: Express or Implied
“Express” Contract: Based on written or spoken words
“Implied” Contract: Based on conduct or actions
-“Quasi-Contract” (“Implied-in-law” contract): Imposed in certain cases to avoid unjust enrichment, even if all elements of contract formation not satisfied
Contracts can be classified as “express” or “implied.” An express contract is based on written or spoken words, while an implied contract is based on the conduct or actions of the parties. A “quasi-contract,” also referred to as an “implied-in-law” contract, is imposed in certain cases to avoid unjust enrichment, even if all elements of contract formation are not satisfied.

12. Classification of Contracts: Valid, Void, or Voidable
“Valid” Contract: All elements of contract formation satisfied
“Void” Contract: Illegal purpose/subject matter; unenforceable
“Voidable” Contract: One or both parties can withdraw from contract
Contracts can be classified as “valid,” “void,” or “voidable.” In a valid contract, all elements of contract formation have been satisfied. A void contract involves an illegal purpose and/or subject matter, and is therefore unenforceable. A voidable contract allows one or both parties to withdraw legally from the contract.

13. Classification of Contracts: Executed or Executory
“Executed” Contract: All terms of contract fully performed
“Executory” Contract: Some duties under contract not performed by one/both parties
Contracts can be classified as “executed” or “executory.” An executed contract means that all terms of the contract have been fully performed. With an executory contract, some duties under the contract have not been performed by one or both parties.

14. Classification of Contracts: Formal or Informal
“Formal” Contract: Must meet special form requirements
-Examples: Contracts under seal, “recognizances,” letters of credit, and negotiable instruments
“Informal” Contract: No formalities required in making; a “simple” contract
Contracts can be classified as “formal” or “informal.” A formal contract must meet special form requirements. Examples of formal contracts include contracts under seal, “recognizances,” letters of credit, and negotiable instruments. An informal contract requires no formalities; it is a “simple” contract.

15. The Agreement: Offer and Acceptance
A legally enforceable agreement includes a valid offer and a valid acceptance.

16. Elements of a Valid Offer
Manifestation of offeror’s intent to be bound
-Intent determined by objective, “reasonable person” standard
-Preliminary negotiations and advertisements do not constitute offers
Definite and certain terms (including subject matter, price, quantity, quality, and parties)
Communication of offer to offeree (or offeree’s agent)
In order for an offer to be valid, there must first be a manifestation of the offeror’s intent to be bound by contract. Intent is determined by an objective, “reasonable person” standard. Preliminary negotiations and advertisements do not constitute offers. A valid offer also requires definite and certain terms, including subject matter, price, quantity, quality, and the names of the contracting parties. Finally, a valid offer requires communication of the offer from the offeror (or the offeror’s agent) to the offeree (or the offeree’s agent.)

17. Auctions Auction With Reserve
-Seller merely expresses intent to receive offers
-Auctioneer (as representative of seller) may withdraw item from auction at any time before “hammer falls”
-Before hammer falls (signaling acceptance of offer), bidder/offeror may revoke bid
Auction Without Reserve
-Seller must accept highest bid
Auctions can be classified as either “with reserve” or “without” reserve. In an auction with reserve, the seller merely expresses the intent to receive offers. The auctioneer, as a representative of the seller, may withdraw the item from the auction at any time before the “gavel falls.” Before the gavel falls (signaling acceptance of offer,) the bidder-offeror may revoke his or her bid. In an auction without reserve, the seller must accept the highest bid.

18. Termination of Offer Revocation by Offeror Rejection by Offeree
Death/Incapacity of Offeror
Destruction/Subsequent Illegality of Subject Matter of Offer
Lapse of Time/Failure of Condition(s) Specified in Offer
Events that terminate an offer include revocation of the offer by the offeror, rejection of the offer by the offeree, death or incapacity of the offeror, destruction or subsequent illegality of the subject matter of the offer, and a lapse of time specified in the offer or the failure of another condition specified in the offer.

19. Acceptance
Represents offeree’s intent to be bound by terms of offer and resulting contract
Silence generally does not constitute acceptance
Terms of acceptance must be identical to terms of offer (“Mirror-Image” Rule)
Effective when communicated by offeree to offeror
If no method of communicating acceptance specified in offer, any reasonable means of acceptance effective (Examples: telephone, mail, fax, )
Acceptance represents an offeree’s intent to be bound by the terms of the offer and the resulting contract. Silence generally does not constitute acceptance. According to the “mirror-image” rule, the terms of the acceptance must be identical to the terms of the offer. Acceptance is effective when it is communicated by the offeree to the offeror. If no method of communicating acceptance is specified in the offer, any reasonable means of acceptance is effective, such as by telephone, mail, fax, or .

20. The Mailbox Rule
Acceptance by mail effective when placed in mailbox; however, revocation of offer effective only when received by offeree
The mailbox rule holds that acceptance by mail is effective when it is placed in the mailbox; however, revocation of the offer is effective only when it is received by the offeree.