TodayRecapTermination by Operation of LawFamily Video CaseMailbox RuleInternet AgreementsE-SignaturesPreliminary NegotiationsHouse Flipping Case – FactsHouse Flipping: Binding Contract?House Flipping Case – AnalysisCounteroffers and SilenceFour Elements of a ContractConsiderationThree Forms of ConsiderationMarket Value and ConsiderationHamer v. SidwayConsideration in PracticeConsideration in PracticeNext ClassToday•Finish chapter 12•Apply chapter 13Recap•Offer + Acceptance = Agreement•Agreement: definite, not vague, meeting of minds•Unjust enrichment: benefit received, opportunity to reject, expectation of payment•Acceptance: mirror image rule, counteroffersTermination by Operation of LawOffers can terminate automatically, before acceptance1) Lapse of time2) Destruction of property3) Death/incompetence of either party4) IllegalityFamily Video Case•Written offer to buy Home Folks restaurant•Restaurant burns down. Contract?•Court: no contract, even if Home Folks didn’t know of the fireMailbox Rule•Auto insurance policy renewal•March 14: mailed check•March 15: expiration date•March 16: car crash•March 17, 22: received and cashed check•Court: valid renewal if sent before expiration date •What if check were lost in the mail?Internet Agreements•“Click-wrap” agreements•Reasonable person, not whether you actually read it•Legal philosophies?•Legal realism vs. natural law? Meeting of the minds?•Forum-selection, choice-of-law provisionsE-Signatures•Valid in most business situations (e.g., PDF)•Some exceptions (e.g., UCC, banking, wills)•This class: common law contracts, not UCCPreliminary Negotiations•Letter of Intent (LOI) or Term Sheet•Framework for future deal?•Or enforceable contract?House Flipping Case – Facts •Mr. Davis and A&E TV: “Flip this House”•Davis: share revenue 50/50•A&E: no real estate risk•A&E: “ok, ok I get it” and board approval•13 episodes produced; $8 million revenueHouse Flipping: Binding Contract?•In isolation vs. in context•“Would a reasonable person in Davis’ shoes be justified in believing there’s agreement”?•Court: yes, enough context to show oral contract existed. Davis wins $4 million.House Flipping Case – Analysis •NY court: “oral contracts are just as binding as written contracts under NY law.”•A&E’s intent to continue negotiating?•Finalize details after filming the show?Counteroffers and Silence•McGurn v. Bell Microproducts•Severance after 12 months or 24 months?•Court: reasonable person would understand acceptance of counteroffer, due to silence.Four Elements of a Contract•Agreement•Consideration•Capacity•LegalityConsideration•Relevant to modern business?Definition Bargained-for exchange where each party gives something of legal value(not a gift)Three Forms of Consideration•Three forms of consideration•Promise, with no prior duty•Action, with no prior duty•Refrain from action, with legal right to act (forbearance)Market Value and Consideration•Consideration usually obvious in business•Apple gives you an iPhone. You pay money.•“Even a peppercorn will suffice”•Except for fraud, undue influence, duress•Motorcycle for $5? For $50,000?Hamer v. Sidway•Famous case from 1891. Why relevant?•Uncle’s promise: $5,000 for clean living•Enforceable contract?•Court: forbearance equals consideration to form binding contractConsideration in Practice•Preexisting duty•Construction company example•$100K becomes $150K•Court: need bargained for exchange. Only valid if you get something in return for price increase.Consideration in Practice•Past consideration•Now that you’re a VP, we need a noncompete!•Court: continued employment is not enough. Need something new in return for noncompete.Next Class•Finish chapter 13 (consideration)•Discuss chapter 14 (capacity and