Contract Formation

CONTRACT FORMATION

Which of the following are contracts? If not, please explain which element(s) is defective.

Offer: A promise or commitment to do or refrain 1. Intent from doing a specific thing in the future. 2. Definiteness/certainty 3. Communication

1. Bert's computer, worth $2,000, goes down for the third time in as many days. He says to his roommate, Ernie, "I'd sell this hunk of junk for $5!" The next day, Ernie gives Bert $5 and expects Bert to give him the computer. Do Ernie and Bert have a contract?

2. Suzy Q says to her friend Joe Blow, "I think I'll buy a Honda Accord for $10,000." Joe happens to have a Honda Accord and says "Sold!" Do Joe and Suzy have a contract? 3. You see an advertisement in the Sunday paper that says "Go to your local UV dealer and lease a Jetto for $219/month, no money down." You go to the dealer and say, "I accept your lease offer." Do you have a contract with the dealer?

4. Amos advertises a reward if anyone will return his lost dog. Andy finds the dog, and without knowing about the reward, returns the dog. Does Amos have a contractual obligation to pay Andy the reward?

5. Mutt offers to sell Jeff 20 bushels of wheat for $5/bushel and sends that offer through the mail. Before Jeff accepts, Mutt sends a letter withdrawing the offer. Jeff says he accepts anyway. Do Mutt and Jeff have a contract?

a. What if Jeff turned down other offers based on the offer Mutt made?

b. What if Jeff had placed an acceptance in the mail before he received word of Mutt's withdrawal?

c. Assume Mutt never withdrew his offer. What if Jeff counter offered at $4/bushel and Mutt said no. If Jeff then said, "OK, I'll pay $5/bushel," would Mutt have a contractual obligation to sell to Jeff?

2 Acceptance A voluntary act (either words or conduct) that shows assent or agreement to the terms of the offer.

1. Persons Magazine sends you a magazine you didn't order. They do so again the next month and the month after. You never send the magazines back or call or write Persons to let them know you do not want the magazines. The magazine then sends you a bill for the magazines, saying that you have a contract. Is Persons right?

2. Kathy offers to sell Mary 20 widgets for $2,000 if Mary accepts within 30 days. On the 31st day, Mary calls Kathy to accept. Do Kathy and Mary have a contract?

a. What if Kathy hasn't sold the widgets to anyone else?

Consideration: The value (such as money) given in return 1. Legal value for a promise (such as the promise to sell a. Act an item upon receipt of payment) b. Forbearance c. Creation of relationship 2. Bargained-for exchange

1. June is uneducated and has poor credit. She needs a new refrigerator. Paymore agrees to sell the refrigerator to her despite her poor credit but says she must pay $5,000 for a refrigerator that is only worth $500 and she must pay 28% interest. June accepts. Do June and Paymore have a contract?

3 2. Gary and Frank have a contract wherein Gary agrees to paint Frank's house for $1,000. When Gary is half finished, he tells Frank that unless Frank pays him an additional $500, Gary will not complete the job. Frank accepts. Do Gary and Frank have a contract?

3. Sally and Stew have been married for 25 years, but Stew forgot their anniversary. The day after, Stew gave Sally this note: "In consideration of 25 years of marriage, my dearest, I will buy you a diamond pendant." Do Stew and Sally have a contract?

4. Your friend is injured in an accident and loses her memory. A Good Samaritan takes your friend in and cares for her until she is well. Out of a sense of obligation and duty, you tell the Good Samaritan that you will pay for his services. Do you have a contract with the Good Samaritan. How about your friend?

5. Tammy Teacher agrees to tutor Sam Student on her own time for free. She decides after three weeks that she does not want to tutor anymore. Sam wants to force Tammy to continue helping him by alleging that they have a contract. Will he be successful?

a. What if Sam turned down other offers from other tutors based on Tammy's offer?

4 Capacity Legal ability to enter into a contractual relationship

1. John, age 15, enters into a contract with Bill, age 19, to buy Bill's stereo for $300. Bill gets a better offer and wants out of the contract. Can he get out? How about John--can he get out?

a. What if Bill was drunk when he agreed to accept $300 for his stereo that is really worth $3,000?

Genuineness of assent Mistakes, fraud, undue influence, duress and adhesion contracts all indicate that the offer and acceptance are not genuine and that the contract is unenforceable.

1. The Captain agrees to sell Tennille Blackacre for $400 based on the description of the property found in county records. The Captain and Tennille later discover that the description is incorrect and that Blackacre is really half the size they thought. Is Tennille still obligated to buy Blackacre for $400?

2. You fill out an employment application indicating that you are an experienced widget maker, but, in fact, you have never made a widget in your life. Based on your "experience," Widgets, Inc. hires you as the supervisor of widget production. You are performing your job with no apparent difficulty when your boss discovers the truth about your previous level of experience and fires you. Do you have an enforceable contract with Widgets, Inc.?

3. Gertrude Grandmother is elderly and housebound. Her housekeeper/nurse, upon whom she is very dependent, tells Gertrude that if she does not make her the beneficiary in her will, she will stop helping her. Gertrude agrees. Does Gertrude have a contract with her housekeeper?