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Law 2101 - Mar. 18.docx

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Department
Law
Course
Law 2101
Professor
Assorted
Semester
Winter

Description
Law 2101 Tuesday March 18 Commercial Law Introduction to Contract Law Intuitions: • Sam and the million dollar house o Sam walks to school every day down a parkway. She sees a house that she loves, and it has a for sale sign. She finds that it’s for sale for $1 million. Since she doesn’t have the money, she puts it out of her mind. Three weeks later she wins $10 million, so she knocks on the front door of the house and says she accepts the offer. o Do the owner of the house and Sam have a contract? o There is no contract because there was no offer that could be accepted by Sam. • Donna and the gift to the university o Donna is a rich alumnus of UWO, and she pledges to give $200,000. She signs a pledge form, but changes her mind a couple of weeks later. o Do Donna and the university have a contract? o There is no contract on the facts of the case. Even though something was signed, the university didn’t give consideration to Donna. • Gabrielle and her Dad’s promised car o Gabrielle’s dad promises her a car if she gets a B+ average. Gabrielle gets an A- average, but her dad tells her that she shouldn’t need him to promise her a car to get an A-. o Do Gabrielle and her dad have a contract? o No, because Gabrielle and her dad didn’t have an intention to enter into a contract since they are family members. Contract law has 2 functions: 1. Facilitates exchange – without being sure that the other side will do what you’ve agreed upon, it is hard to facilitate exchange • eg. no one would build a building with a promise of $100 million unless they could be guaranteed that they would receive the money 2. Separates legal from moral – there are certain promises the law will enforce (legal), and there are certain promises that they will not enforce (moral) • Atiyah: “Nobody can seriously propose that all promises should be enforceable; to abolish [the rules of contract formation], therefore it is simply… In our legal system, almost all contract law is judge made. Why? 1) Tradition (that’s how we do things in the common law) 2) Practicalities (no matter how smart we are, we can’t design a code to deal with every situation) Special Contracts  The main area of contracts has been left to the judges, but there are special contracts that are laid out Technical Aspects of Contract Formation 1) Offer and Acceptance 2) Consideration 3) Intention to Create Legal Relations Offer  “An offer is an expression by one party of his assent to certain definitive terms, which looks forward to acceptance by the other party to the exact same terms.” – Corbin  Offeror: the one making the offer  Offeree: the one to whom the offer is made  Requirements: o Inclusive Terms  The offer has to say both what the offeror will do, and what the offeree will do  eg. I will sell you my house for $500,000, and the acceptance would be, “I will purchase your house for $500,000” o Outward Directed Expression  It has to be something that a reasonable person would think is directed towards them  eg. If you make an offer to Joe for your car but Mark accepts it, it is not a valid offer  An offer cannot be a joke o Sufficiently Certain  The court has to know what both sides will do  Contracts to agree or to negotiate are not sufficiently certain enough to be enforced • Example: Scammell v. Ouston (in textbook) o Objective Standard  Whether or not there has been an offer and acceptance is judged objectively  It doesn’t matter what you thought you were saying – we care what a reasonable person would think  Case: Storer v. Manchester City Council • Storer was living in a rental house, and City Council decided everyone should be given the opportunity to own their own house. They sent a letter to Mr. Storer, he signed it, and agreed to all of the terms. In the meantime there was an election, and the government changed. The new government thought the state should own all housing, and they declined to go through with the contract. Storer sued, and the City Council said they didn’t have a contract because the clerk didn’t know what he was doing. • Lord Denning: “In contracts you do not look into the actual intent in a man’s mind. You look to what he said what he did.” • The court said there was a contract even though the clerk didn’t know what he was doing. o Time Requirements  The offer must come before the acceptance.  You must be able to think of the process of contract formation as offer, followed by acceptance.  Two identical offers sent by different parties to one another do not make a contract but rather are cross-offers both awaiting acceptance o Willingness to be Bound  To count as an offer, the statement must show a willingness (seriousness) to be bound.  Statements of intent (“we intend to sell widgets at $5) do not constitute offers  Price questions (“we sell widgets at $5 per unit”) do not constitute offers  Calls for information do not constitute offers  These are all invitations to treat Offer vs. Invitation to Treat  The common law makes a distinction between an offer, and invitation to treat  Pharmaceutical Society v. Boots Cash Chemists o The sale took place when the customer put the item in their basket. Why? o Offer: The display of merchandise with a price was an offer made by Boots (pharmacy) o Acceptance: It was accepted by the customer when they put the item in their basket. o Therefore: The sale was not under the supervision of a pharmacist since the pharmacist could not refuse to accept the customers payment o Boots:  The sale did not take place until the goods were paid for at the cash register. Why?  Invitation: The display of priced goods was an invitation to treat  Offer: The customer made an offer to the cashier  Acceptance: Which the cashier accepted under the supervision of the pharmacist. Therefore the pharmacist could refuse to sell if there was a problem. o Boots won because the court decided it was the most realistic interpretation.  General rule: The display of merchandise is not an offer which can be accepted, but an invitation to the customer to make an offer to the merchant. Unilateral Contracts and Offers to the World  There are two types of contracts: 1) Bilateral  Example: A & B are negotiating over the purchase of a horse. • B’s offer is to promise to sell the horse for $100. A’s acceptance is to promise to buy the horse for $100.  It is a bilateral contract because it is a promise exchanged for a promise.  This is the most common type of a contract. 2) Unilateral  Example: B promises to pay A $100 to mow the lawn. A’s acceptance of the offer is to actually mow the lawn.  It is a unilateral contract because it is a promise exchanged for an act.  Both types of contracts are equally enforceable, the only difference is in the type of acceptance.  Problems with Unilateral Contracts: o The person performing has mixed motives for performing  eg. A billionaire promises to pay $100 million to whatever Maple Leaf scores the winning goal in the playoffs. The problem is that the hockey player has a contract with his team to play hockey, and would also be in a contract with the billionaire.  The law says that it doesn’t matter if there are mixed motives, as long as it is seen as possible to an outside observer that you could be performing the contract with the billionaire. o What if the act is performed in a situation where the promise is not known by the offeree?  eg. A person finds a dog and returns it to the owner. After they return the dog, they find a sign that is offering a reward for the return of that dog to the owner. Is there a contract even though the offeree didn’t know of the offer? The law says there is no contract because the rescuer must know of the reward.  You can’t accept an offer that you are ignorant of. o What happens when the act is to be performed in a place where it will not be obvious to the offeror (in secret) that the offer has been accepted and
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