Contracts
Class Notes
How
do you reconcile this case with McDonald?
In Kari, the disclaimer is on the last
page of the handbook, italicized, and outlined
in red.
What
other differences are there? In both
cases, the employers didn’t intend to promise anything; that’s the subjective
intent of the employers. In Kari, the court’s willing to say as a
matter of summary judgment that Kari either got that message or should have
gotten it. In McDonald, they’re not
willing to give summary judgment.
Kari
is an engineer, whereas McDonald is a technician. Kari has more sophistication and
education. It’s easier to enforce a
disclaimer against someone who is particularly literate and educated.
What’s
involved in the two cases? In McDonald, it’s a termination
procedure. McDonald wants a hearing
before he’s fired. In Kari, it’s a separation
allowance. It’s not exactly a gift from
the employer, but it’s close to it. It’s
easier to disclaim the latter than the former.
There are a lot of factors at work that the court might consider.
Another
thing to think about in these cases is consideration. What did the employee give for the employer’s
promise (assuming we can find a solid promise by the employer in the employment
manual)? One thing the employee usually
doesn’t give is the promise to work for a particular period of time. An employee typically doesn’t commit himself
to stay on the job for a certain amount of time. What’s the consideration? When you take a job, what do you want from
your employer? You want money! In particular, what money do you want? You want what’s promised: the salary, which
you take into consideration when you accept the job. You also want benefits. You want insurance and stuff! You want a 401k and all that!
So
what’s your consideration for all the employer’s promises? You work.
Adequacy is immaterial. If you
work one day, you earn the bundle of promises from the employer.
It’s
different! The plaintiff is trying to
turn the defendant into a seller. The defendant
doesn’t want to be a seller. The defendant
sends the plaintiff a letter talking about selling salt. The plaintiff responds, and says that the defendant
can ship him 2,000 barrels. The defendants
refused to ship the barrels. The plaintiff
wants $800 in damages. How would you
measure the $800 in damages? This would
be the market price minus the contract price.
The contract price was $1,700 total, so the market price (or in modern
terms, the cost of cover) is $2,500.
That would be fine if there had been a contract.
But
the court here says that there is no contract.
How come? The court notes that
the word “sell” was not used by the defendants.
But do you need the word “sell” to make a contract?
The
court says that there is no offer. The court
also says that most advertisements are not offers. How do you know which ones are? What’s an offer? The UCC doesn’t talk about it; rather, it’s
filled in by common law. In fact, the common
law definition will apply. We can find
that definition in the Restatement.
§ 24. Offer Defined
An offer is the manifestation of willingness to
enter into a bargain, so made as to justify another person in understanding
that his assent to that bargain is invited and will conclude it.
But
what the hell does that mean??? We can
get more help from Professor Sharp. It
turns out that an offer is a promise. An
offer is a promise or commitment to do something if the other party
gives the agreed exchange. The agreed
exchange may be a promise and it may be a performance. It’s a promise to be bound in exchange for a “yes”
answer. An offer plus a “yes” makes a
deal.
Why
aren’t most advertisements offers? It’s
not the absence of the word “sell” or any other magic word. In this particular case, there is no quantity
mentioned. Also, the letter appears to
be a form letter; it’s not addressed to any particular person.
If
orders will create contracts, the defendant may have a problem because the defendant
may have only a limited quantity of salt available. The defendant could get caught with a whole
bunch of acceptances that would make it liable to deliver more salt than they
have. If they breach a lot of contracts to
deliver salt, they could be liable for a whole bunch of money.
The
court infers that the defendant is not making offers, but rather notifying
people that he’s going to accept offers.
The letter in this case is more in the nature of a preliminary
negotiation.
§ 26. Preliminary Negotiations
A manifestation of willingness to enter into a
bargain is not an offer if the person to whom it is addressed knows or has
reason to know that the person making it does not intend to conclude a bargain
until he has made a further manifestation of assent.
We
want to avoid the problem of the proposer ending up with more acceptances than
he can handle.
Whenever
quantity is open to the extent it is here, it will be difficult to find that
manifestation of willingness to be a commitment to be bound.
There’s
no contract when I say, “I offer to sell you my bike” and you say “I agree to
buy the bike for 50 cents.” When
important terms are left out of an offer, it tends to show that there is no
commitment. What we probably have
instead is a preliminary negotiation.
The
reason most ads aren’t treated as offers is related: when you advertise
something and treat that as an offer, you might get caught with a lot more
acceptances than you can possibly handle.
Some advertisements are plainly not offers. Most advertisements are just meant to drum up
interest in their brand name. They don’t
deal with their potential customers directly anyway. In no way is anything being offered in, for
example, a beer commercial or a car commercial.
In Lefkowitz
v. Great Minneapolis Surplus Store, the ads were held to be offers. How come?
The ads gave times, quantity, and price.
When you put these terms in an ad, it shows your commitment. It shows that your commitment is reasonably
restricted.
What
kind of ads today are offers? Ads that
have coupons offering a bargain price for a limited time at certain places show
a commitment. You bring in the required
money and the coupon and you’ve got a deal.
What
about the “house rule” against men? Does
that prevent Lefkowitz’s claim? No,
because the house rule was not communicated in the ad. The store’s truthful meaning probably was “women
only”, because it doesn’t help business to have big burly guys barge up to the
counter and buy the goods. Lefkowitz
doesn’t know this. On the basis of
objective mutual assent, he should get the contract the first week. It would seem, however, having been told the
house rule the first week, he wouldn’t have any excuse for the second week.
However,
the actual result of the case was that Lefkowitz recovered for the second
week, but not the first week.
How come? The first ad said that
the coats were worth “to” $100.
Therefore, there isn’t necessarily proof of loss. However, the second ad said that the stole
was “worth” a certain amount. The court
awards money even though he knew the offer wasn’t open to him the second week.
What
about supermarkets? When do you make a contract
in a typical self-serve supermarket? The
contract is formed at the checkout counter.
When the sale is rung up, you’ve got a contract.
Sometimes
courts manipulate the court so that contract formation occurs earlier. The courts do it when what you take off the
rack is soft drinks in glass bottles and one of the bottles explodes and hurts
you. There is a huge advantage to the plaintiff
to be able to proceed on the basis of a sale.
If no sale has occurred, then your only basis for liability will be negligence. If a sale has occurred, you have strict
liability in tort and you have breach of warranty, which are both strict
liability provisions. If you want to
help the plaintiff out, the court tends to find the contract early on. They only do this in personal injury cases.
Most
advertisements aren’t offers. You might
have false advertising problems, but there are ways to police that through the
states’ Attorneys General. It’s a rare
advertisement that will amount to an offer.
Hypotheticals
related to UCC § 2-305
Suppose
that last spring, Oliver Orchard, the operator of an apple farm agreed to sell
his apple crop to a merchant buyer of fruit and agreed to deliver it on
November 1st, price “to be agreed upon”. Oliver doesn’t deliver, and the merchant sues
for breach. Can the merchant recover?
Suppose
a buyer and a seller, after a lengthy negotiation, agree to the sale of a
famous painting. They agree to delivery
in three months, price “to be agreed upon”.
The seller repudiates. Can the
buyer recover for breach?