Contract: an enforceable promise

I.  Intent

• Objective Theory of Contract:
  • party’s intent deemed to be what reasonable person in position of other party would think the 1st party’s objective manifestation of intent meant.
    • Ex. Marco says to Joanna, “I’ll sell you my car for $100.” If a reasonable person in  Joanna’s position would believe that Marco was serious, Marco would have made an enforceable offer.
  • Secret intents are irrelevant in determining bargain’s enforceability.
• Legal enforceability:
  • Intention of parties determines legal enforceability
    • Both parties desire agreement to not be enforceable; it won’t.
    • Both parties intend for agreement to be enforceable, but don’t think it will; it will.
  • Ambiguous Intent:
    • When intent is ambiguous, court follows these rules:
      1. Business: presume that parties intended agreement to be legally enforceable
      2. Social/Domestic: presume that parties did NOT intend agreement to be enforceable
• Intent to put into writing
  • Parties’ intent determines enforceability, even if parties agree to draw up a formal written agreement.
  • Ambiguous Intent:
    • When intent is ambiguous, court follows these rules:
      1. Contract exists as soon as mutual assent is reached
      2. For very large deals, no intent to be bound parties sign the formal document.

II.  Definitions

Offer: manifestation of willingness to enter into a bargain

• creates power of acceptance
• justifies other party in understanding that his assent can solidify bargain

Acceptance: manifestation of assent to the terms thereof made by the offeree in a manner invited or required by the offer.

Bilateral Contract: Contract in which both sides make promises.

Unilateral Contract: Contract that involves the exchange of the offerer’s promise for the offeree’s act.

• Promise to perform does not constitute acceptance.

III.  Offer Validity

• Offers distinguished from opinion
  • Offer must feature a promise or commitment, not just an opinion.
• Offers made in jest
  • If the offeree knows or should know that an offer is made in jest, it is not a valid offer.
  • Acceptance does not mean a contract is created.
  • Leonard v Pepsico, Inc.
• Offers distinguished from preliminary negotiations
  • A solicitation is not an offer; it is a basis for preliminary negotiations.
• Offers distinguished from price quotes
  • Quantity–> likely an offer
  • No specific individuals–> not likely an offer
  • Use of words such as “quote” –> not likely an offer
  • Power to close the deal with the proposer –> not likely an offer
• Offers at auctions
  • An item up for auction is a solicitation of offers, not an offer in itself.
    • Unless done  “with reserve”
• Advertisements as offers
  • Advertisements need to contain sufficient words of commitment to constitute offers.
  • With specific words of commitment or words of commitment: offers to sell.
• Offers distinguished from invitations
  • Invitations to submit bids do not constitute offers.
• Offer in a seller’s response to inquiry
  • A seller’s responding to a customer’s inquiry (with quantity) with what items seller has for sale –>likely an offer
• Indefinite offers
  • Mutual assent must be reached on essential terms of agreement in order to give rise to a valid contract and to avoid indefiniteness.
    • parties
    • subject
    • time
    • price