1. 1 George Mason School of Law Contracts I Formation F.H. Buckley fbuckley@gmu.edu

2. Exam  Writing on your laptop 2

3. Next day  Consideration Scott 41-52, 127-47 Restatement §§ 17, 21, 71, 72-74, 79, 81, 86, 95-98 3

4. How are contracts formed?  Quasi-contract  Offer and Acceptance  Consideration  Promissory Estoppel 4

5. Contract and Quasi-contract  Unjust enrichment  Restitution 5

6. Bailey v. West: p. 5 6

7. Bailey v. West 7  Was there a contract?

8. Bailey v. West 8  Was there a contract? Express and Implied Contracts  Restatement § 4 (“inferred from conduct”)  Restatement § 19(1) (“by other acts”)

9. Bailey v. West 9  Was there a implied contract? Restatement § 19(2) What did Kelly tell the plaintiff?  What did the Δ tell Kelly?

10. Bailey v. West 10  When is quasi-contractual liability imposed?

11. Bailey v. West 11  When is quasi-contractual liability imposed? Benefit conferred on defendant by plaintiff Appreciation by defendant of the benefit Acceptance and retention of benefit by defendant

12. What counts as a benefit? 12  I think orange aluminum siding is neat. When you are on holiday I cover your house with it. A benefit?

13. What is a benefit? 13  No recovery for “officious” benefits And just how do you tell?

14. What is a benefit? 14  What about the Good Samaritan?

15. What is a benefit? 15  What’s the difference between aluminum siding and the Good Samaritan?

16. What is a benefit? 16  What’s the difference between aluminum siding and the Good Samaritan? The informational problem Could the informational problem be cured by negotiation?

17. Bailey v. West 17  When is quasi-contractual liability imposed? Levmore, 71 Va. L. Rev. 65

18. What is a benefit? 18  So was the care of Bascom’s Folly officious?

19. Contract Formation: Offer and Acceptance  Suppose you were a reporter… What would you want to know about a contract? 19

20. The Five W’s  Who  What  Where  When  Why 20

21. Basic Questions of Formation  Who are the parties What happens to non-parties?  What  Where  When  Why 21

22. Basic Questions of Formation  Who are the parties  What did they agree to? What are the terms and conditions  Where  When  Why 22

23. Basic Questions of Formation  Who are the parties  What did they agree to?  Where was the contract formed? Under which law  When  Why 23

24. 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 24

25. 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 25

26. Who are the parties?  Restatement § 2 Promisors Promisees Beneficiaries  Abolition of doctrine of privity of contract 26

27. What makes a contract  Restatement § 2 Not an intention but a “manifestation of intention” 27

28. What makes a contract  Agreements and Bargains: Rest. § 3 Agreements: mutual assent Bargains: Consideration Contracts (which are binding) 28

29. What makes a contract  Agreements and Bargains: Rest. § 3 Agreements which aren’t Contracts  Eg no consideration 29

30. What makes a contract  Agreements and Bargains: Rest. § 3 Contracts which aren’t agreements  Comment a: promissory estoppel 30

31. What makes a contract  Agreements and Bargains: Rest. § 3 Contracts which aren’t bargains:  Promises to make a gift, under seal 31

32. What makes a contract  Agreements and Bargains: Rest. § 3 Bargains which aren’t Contracts: Comment c: illegal contracts 32

33. What makes a contract  Agreements and Bargains: Rest. § 3 Agreements which aren’t bargains:  No consideration 33

34. What makes a contract  A Bargain, a manifesation of mutual assent, consideration: Rest. § 17 34

35. What makes a contract  Bargains: Consideration  Exchange of Promises  Promise for performance or Performance for performance 35 Exchange of spies, Glienicke Bridge, 1986

36. Offer and Acceptance  Offer + Acceptance = Binding Contract: Restatement § 22  Restatement §§ 50(1)  “meeting of the minds”  Consensus ad idem 36

37. Formation as a Coordination Game 37  Ideally both parties should know at what moment the contract is binding

38. What side of the road to drive on? Coordination Games 38 RightLeft RightBliss, BlissDeath, Death LeftDeath, DeathBliss, Bliss Player 1 Player 2

39. Formation as a coordination game 39 PromiseNo Promise Promise10, 10-10, 0 No Promise0, -100, 0 Player 1 Player 2

40. Bargaining errors and efficiency considerations 40  Who is in the best position to cure the problem?

41. What counts as a offer? Three Problems  The necessity of an intention to create legal relations  Offers vs Invitations to Treat Offers to the Public Offers vs Preliminary Agreements 41

42. Intention to Create Legal Relations 42  When is there a manifestation of an offeror’s intention to be bound to a contract?

43. Lucy v. Zehmer p.13 43 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 passageway—commonly called a colonnade, though quite innocent of columns. The wide-boarded floors, flat-head nails, massive locks, and hand-carved mantels attest the antiquity of a house well worth the restoration it has not received.

44. Lucy v. Zehmer 44  Did Zehmer have the capacity to contract? Restatement § 16.

45. Lucy v. Zehmer 45  Did Zehmer intend to create legal relations?

46. Lucy v. Zehmer 46  Do secret reservations negative consent?

47. Lucy v. Zehmer 47  Do secret reservations negative consent? The “objective theory” of contracts

48. Lucy v. Zehmer 48  How would you apply Rest. §§ 21, 24 Rest. §§ 19, illustration 2 Rest. §§ 21, illustrations 1, 5

49. Lucy v. Zehmer 49  What remedy is sought and why did that matter?

50. Lucy v. Zehmer 50  What remedy is sought and why did that matter? Common law and equity

51. Leonard v. Pepsico 51 Harrier Fighter

52. Leonard v. Pepsico 52

53. Two kinds of Promissory Accidents 53  Type I: Promisors are found to promise when they really didn’t intend to do so (false positive)  Type II: Promisors are not found to promise where they intended to do so (true negative)

54. How to reduce promissory accidents? 54

55. How to reduce promissory accidents? 55  What if we could identify the party who could at least cost eliminate the accident?

56. How to reduce promissory accidents? 56  What if we could identify the party who could at least cost eliminate the accident? Who was this in Bailey?

57. How to reduce promissory accidents? 57  What if we could identify the party who could at least cost eliminate the accident? And in Zehmer?

58. Offers vs. Invitations to Treat:  Dyno v McWane p. 205 58

59. Offers vs. Invitations to Treat: Dyno v. McWane  Was the Nov. 8 (13) price list an offer? 59

60. Offers vs. Invitations to Treat: Dyno v. McWane  Was the Nov. 8 (13) price list an offer? If so, what was the effect of the Nov. 22 telephone call? And would there have been a warranty?  Gap fillers 60

61. Offers vs. Invitations to Treat: Dyno v. McWane  Was the Nov. 8 (13) price list an offer? What was the effect of the Nov. 22 telephone call? Offers vs “Invitations to treat”  Restatement § 26 61

62. Offers vs. Invitations to Treat: Dyno v. McWane  So what was the contract? 62

63. Invitations to Treat: Offers to the Public 63  Audio Visual v. Sharp at 213 Why might a presumptive rule that ads or flyers are not offers make sense?

64. Invitations to Treat: Offers to the Public 64  Audio Visual v. Sharp at 213 Why might a presumptive rule that ads or flyers are not offers make sense?  Cf. Newspaper Ad on 212

65. Invitations to Treat: Lefkowitz 65  Suppose that the Π had written to the Δ and said “I accept”? Could it be accepted in that way?

66. Invitations to Treat: Lefkowitz 66  Suppose that the Π had written to the Δ and said “I accept”? Could it be accepted in that way? Offeror as master of form of acceptance  Restatement § 50(1)

67. Offers to the Public Carlill v. Carbolic Smoke Ball at 224 67

68. Offers to the Public Carlill v. Carbolic Smoke Ball at 224 68 Should this have been seen as an Invitation to Treat? How do you tell?

69. Offers to the Public Carlill v. Carbolic Smoke Ball at 224 69 How did the Π accept the offer? Restatement § 54(1)

70. The Need for Communication of Acceptance  Buyer is in SF and Seller in NYC. Buyer asks seller to custom make a product for buyer. On receiving the order, seller begins work on it immediately. A month passes before seller notifies buyer that seller has begun work. Has seller accepted the contract? Restatement §§ 56, 54(2) 70

71. When does silence constitute acceptance?  Seller sends you goods. You don’t respond but keep them. Must you pay the price?  Restatement § 69, illustration 1 and 2 71

72. The Mailbox Rule  Offeror mails offer to offeree on Sept. 1 72

73. The Mailbox Rule  Offeror mails offer to offeree on Sept. 1  Offeree receives offer on Sept. 10 and mails letter accepting the offer the same day. 73

74. The Mailbox Rule  Offeror mails offer to offeree on Sept. 1  Offeree receives offer on Sept. 10 and sends letter accepting the offer the same day.  Offeror telephones offeree on Sept. 11 to revoke the offer 74

75. The Mailbox Rule  Offeror mails offer to offeree on Sept. 1  Offeree receives offer on Sept. 10 and sends letter accepting the offer the same day.  Offeror telephones offeree on Sept. 11 to revoke the offer  Offeror receives offeree’s acceptance letter Sept. 13 Is there a contract? 75

76. The Mailbox Rule  Offeror mails offer to offeree on Sept. 1  Offeree received offer on Sept. 10 and send letters accepting the offer the same day.  Offeror telephones offeree on Sept. 11 to revoke the offer  Offeror receives offeree’s letter Sept. 13  Is there a contract? Restatement § 63, 65 76

77. The Mailbox Rule  Offeror mails offer to offeree on Sept. 1  Qu. If offeree accepts by Fedex? Restatement § 63, 67 77

78. The Mailbox Rule  What if the offeree had communicated his acceptance by email and it ends up in a spam folder? Restatement § 64, Illus. 2 78

79. Revocation  Restatement §§ 35(2), 36, 42 79

80. Revocation  Offeror mails offer to offeree on Sept. 1  Offeree receives offer on Sept. 10 and sends letter accepting the offer the same day.  Offeror mails revocation on Sept. 9 to revoke the offer; offeree receives this Sept. 11.  Is there a contract? Restatement § 42 80

81. Revocation  Offeror mails offer to offeree on Sept. 1  Offeree receives offer on Sept. 10 and mails letter accepting the offer the same day.  Offeror telephones offeree on Sept. 9 to revoke the offer  Is there a contract? 81

82. Revocation  Offeror mails offer to offeree on Sept. 1  Offeree mails a rejection on Sept. 10.  Offeree accepts the original offer by phone on Sept. 11.  Offeror receives the counter-offer on Sept. 12. Is there a contract? Restatement §§ 40, illus. 1 82

83. Revocation  The Brooklyn Bridge example on p. 232. Offeror terminates when offeree is halfway across the bridge. 83

84. Revocation  The Brooklyn Bridge example. Offeror terminates when offeree is halfway across the bridge. Restatement §§ 25, 45 Promissory estoppel … 84

85. 85 George Mason School of Law Contracts I Formation F.H. Buckley fbuckley@gmu.edu

86. Next day  Promissory Estoppel Scott 147-84, 191-200 Restatement §§ 90, 86, 82  Irrevocable Offers Scott 232-45 Restatement §§ 90, 25, 32, 34, 37, 45 UCC § 2-205 86

87. Offer and Acceptance  Acceptance is effective on dispatch, if the mailbox rule is satisfied  Thereafter the offeror can’t revoke the offer  If offeree rejects and offeror receives the rejection, thereafter the offeree can’t accept the original offer 87

88. Offer and Acceptance: Three questions 1.Where there is an attempted revocation, we need to know when the offer was accepted 2.What counts as a rejection (counter- offers) 3.The Battle of the Forms, where there is a contract 88

89. When does acceptance take place? Green 216  Was the rejection in time? “a reasonable time”?:Restatement § 41(1) Restatement § 45(1 ) 89

90. When does acceptance take place? Ciaramella p. 218  Why did Brieant hold that there was a deal? Could Eisenberg accept for Ciaramella?  Why did the Circuit Court reverse? 90

91. When does acceptance take place? Ciaramella p. 218  Why did the Circuit Court reverse? Relevance of clauses 10 and 13? 91

92. When does acceptance take place? Ciaramella p. 218  Is this consistent with the Leval test of Adjustrite on 227? 92

93. Acceptance vs. Counter-offer  What happens when the offeree adds or varies terms of the offer? Restatement §§ 36(1)(a), 39 93

94. Acceptance vs. Counter-offer  Corinthian Pharmaceutical at 225 Was the delivery of 50 vials an acceptance of the offer? 94

95. Acceptance vs. Counter-offer  Corinthian Pharmaceutical at 225 Common Law mirror image rule: Restatement § 59  Counter-offers are rejections of the initial offer and constitute a fresh offer: Restatement § 39 95

96. Offer and Counteroffer  After a counter-offer, can an offeree unilaterally revive the contract? Restatement § 38(1)  But not option contracts: Restatement § 37 96

97. Counteroffer as Rejection: Dataserv Equipment p. 245  When was the purported acceptance/  Had the offeree counter-offered before this?  Could the counter-offer be revoked? 97

98. Revoking a revocation  Offeror mails offer and offeree counter-offers by mail.  Before offeror receives the revocation letter, offeree telephones his acceptance Restatement § 40, illus. 1 98

99. The Battle of the Forms  What happens where: There is performance and indisputably a contract There has been a “Battle of the Forms” 99

100. The Battle of the Forms  What happens where: There is performance and indisputably a contract There has been a “Battle of the Forms”  The Last Shot Doctrine as a corollary of the mirror image rule 100

101. Counteroffers under Article 2  Where there is a Battle of the Forms, what are the possibilities under UCC § 2-207? 101

102. Counteroffers under UCC § 2-207  Where there is a Battle of the Forms, what are the possibilities under 2-207?  The contract is based on the offer § 2-207(1) before the comma 102

103. Counteroffers under UCC § 2-207  Where there is a Battle of the Forms, what are the possibilities under 2-207?  The contract is based on the counter-offer § 2-207(1) after the comma: Roto-Lith (?!?)  The old last shot doctrine, rejected in Ionics 103

104. Counteroffers under UCC § 2-207  What are the possibilities under 2-207?  The contract is based on the counter-offer: 2-207(2)  if between merchants  No material change  Offeror hasn’t limited acceptance or has objected to the new terms 104

105. Counteroffers under UCC § 2-207  What are the possibilities under 2-207?  The contract is based on the terms common to both plus terms implied by law: Ionics 2-207(3) 105

106. Counteroffers under UCC § 2-207  Can the offeree opt out of 2-207 Clause 5 in the box top license in Step-Saver p. 263 106

107. Counteroffers under UCC § 2-207  Can the offeree opt out of 2-207 Clause 5 in the box top license in Step-Saver p. 263  The third approach at p. 266: not “a willingness to forego the transcation” 107

108. Counteroffers under UCC § 2-207  Can the offeree opt out of 2-207 What if there is no real battle of the forms?  Gateway p. 268 108

109. 109 George Mason School of Law Contracts I Consideration F.H. Buckley fbuckley@gmu.edu