Created by Pamela S. Evers, Assoc. Prof., for Educational Purposes © 2001 (w/updates)Contract signed by Orson Welles to direct play Native SonContract: legally binding agreement (promise or set of promises) creating an obligation (duty) to perform for the breach of which the law gives a remedy(1) agreement (2) between competent parties (3) based on genuine assent of the parties that is (4) supported by consideration, (5) made for a lawful purpose, and (6) in the form required by law, if anyPromisor: person who makes a promise; a binding promise creates duty for promisor, or obligorPromisee: person to whom the promise is made; a promissee claims benefit of the obligation or duty under a binding promise, thus is an obligeeParties to a contract stand in privityAgreement arises when a person (offeror) makes an offer and the person to whom the offer is made (offeree) accepts. Offer and acceptance required to form agreementParties to a contract must have intentto enter binding agreementFacts: Jackson bought Connecticut Lotto “Quick Pick” ticket for 10/13/1995 drawing and won, but claimed his prize in person 3 days after final day allowed to claim prizeTicket had instructions to claim prize online & warning: “Prize must be claimed within 1 year from the drawing date.” Connecticut Lottery Corp. (CLC) denied Jackson‟s claim since 1 year had elapsedProcedural History and Issue: Jackson sued for breach of contractIssue: Is lotto ticket a contract?Trial Court Ruling: Parties entered valid, unilateral contract by purchase of a Lotto ticketCLC made a prize offer, Jackson accepted offer Consideration ($) supported contractTrial Court Ruling:One-year presentment rule incorporated into contract whether or not Jackson knew of itPublic policy: without claim period, regulatory scheme of lottery system would be compromisedMotion for summary judgment grantedFormal or informalExpress or impliedBilateral or unilateralValid, voidable, or voidExecuted or executoryExpress: agreement of parties manifested by written or oral wordsImplied: agreement not shown by words, but by acts and conduct of partiesDifference between express & implied contracts relates to manner of proving the existence of the contract, not the effectSome terms are implied by law based upon the context of words that are otherwise vague, or by acts and conduct of the parties, or according to industry practice. E.g., word “loan” on check will imply agreement to repay amount; going to work each day and receiving a paycheck implies an employment contractPrecision not required, especially with “magic words” (e.g., good cause)Implied terms often depend on industry“sack” of flour means one thing to a consumer and another to restaurants• Indefinite terms implied by industry practice in a requirements contract (to buy all requirements of buyer from the seller) or outputs contract (producer must sell entire production to buyer)Broiler farm makes requirements contract with feed producer and “poultry integrator” (e.g., Tyson) makes outputs contract with farm based on pound of meat producedValid contract: agreement binding and enforceableVoidable contract: agreement otherwise binding, but because of circumstances surrounding execution or lack of capacity, may be rejected at option of one partyVoid contract: agreement without legal effect because prohibited by lawOption contract: the parties make contract that gives one party absolute right to refuse or enter into 2nd contract later; the option holder generally pays $ for the righte.g., stock option – buyer pays seller a premium to have the right (but not obligation) to buy or sell stock for agreed price at a later dateRight of First Refusal: contract imposes duty to make first offer to party with right of first refusal. E.g., NBC had right of first refusal with Paramount for the TV show Frasier:“If there is no agreement reached by March 1, 2001, Paramount will submit its last offer („Last Offer‟) to NBC. If NBC rejects said Last Offer, Paramount is free to negotiate with third parties, subject to the matching rights of NBC set forth below.”Uniform Commercial Code applies to sales contractsAn obligation imposed by law (i.e., “implied by law”) to prevent unjust enrichment of one party in certain circumstancesExample 1 (quantum meruit or value of labor): Plumber performs work thinking that work is justified under the contract. Other party, who receives benefit of work, denies payment claiming work unjustified.Example 2 (reasonable price): Minor buys car and wrecks it. Contract void by law, but minor (or parents) must pay damages based on reasonable value of benefit conferred on minor17 year old driver killedA promise conditional on an act, return promise, or forbearance (refraining from doing something) and requiresintent to create binding obligationAn invitation to negotiate (e.g., seller sending out flyers, catalogs listing prices, or “for sale” ad in newspaper or yard ) is not an offer Sales puffery is not an offer: “HARRIER JET FIGHTER 7,000,000 PEPSI POINTS.”Offer and resulting contract must be definite and certain and communicated to offereecannot be vague re: major points “I‟ll paint your house until I‟m tired” is vague, but “I‟ll finish painting your house in three days” is definiteHeadhunter Corp.‟s promise to “place Mr. Z in a good job” is vague, but a promise to “arrange at least 10 interviews by Nov. 10 for jobs with annual salaries > $25,000” is certainRevocation: if revoked & communicated to offeree before offer accepted Counteroffer: any change to offer as part of attempt to accept offer is a counteroffer that rejects original offerRejectionLapse of time: offer expiresDeath or disability of either partySubsequent illegalityAcceptance must be by clear expression by offeree of intent to be bound by terms of offerOnly offeree may accept offerSilence may be acceptanceSending unrequested merchandise does not obligate paymentIf offer calls for performance, then performance is the acceptanceOfferor may specify manner of acceptancee.g., “notify me of your acceptance in writing”OFFERACCEPTANCEAGREEMENTConsideration is legal value given in return for a promise or performancegenerally, money or goods constitute considerationconsideration can be a covenant not to sue or doing something not otherwise required to doE.g., Gottlieb v. Tropicana Hotel and Casino: participating in promotion that benefited the
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