Assent and Offer--Intro

The Bargaining Process

 
 

I. The Assent

assent: agreement, approval, permission

 
 

§17: mutual assent to the exchange and a consideration is essential to a K (R2C sect. 17)

§18- Manifestation of mutual assent to an exchange requires that each party either make a promise or begin to render a performance

 
 

Key question: What kind of assent is necessary to bind a K?

 
 

There are two theories: Objective and Subjective

1) Objective (L. Hand)- (more common in legal system) A K has nothing to do with the intent of the parties A K is only an obligation, enforced by law, to certain acts of the parties (usually "acts" are words which represent a known intent).

Criticisms: This theory, the RP from Tort law was transferred into Contract law, treating virtually all varieties of K the same way and deeming the actual intentions of the parties to the K as legally irrelevant. The only intent that matters is the outward manifestations of it.

Objectivists want legal symmetry and uniformity which serve the aesthetic well but little else.

 
 

2) Subjective (J. Jerome Frank)- (aka: "Actual Intent," "Meeting of the Minds," "Will Theory") stresses unique motivations of the individual and not actual external expressed

Criticisms: destroys legal certainty and stability that is demanded by modern commercial society

 
 

 
 

 
 

 
 

II. The Offer

 
 

Offers are usually not "clean cut" and in one go. Instead, they involve rounds of revisions… When the ultimate agreement is reached, it is often expected to be in a written form that will be exchanged b/n the parities at a closing.

 
 

(Corbin K guy in treatise): An offer is an act where one person confers upon another the power to create a contractual relationship b/n them. Through the act, the offeror gives the offeree the power to accept. The act must be an expressed will or intention and alert the offeree about the impending agreement.

 
 

R2C: §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."

 
 

Offers must:

1. Be communicated
   
2. Indicate a desire to enter a K
   
   1. What performances to be exchanged
      
   2. What terms will govern the relationship
      
3. Be directed at some person or group
   
4. Invite acceptance
   
   1. It may not indicate how and when. If it does, however, those terms must be followed
      
5. Create the "reasonable" understanding that upon acceptance by the offeree, a K will arise w/o any further approval from the offeror
   

    
    

    
    

   Not offers:
   

   -Invitations to deal
   

   -Prelim. negotiations
   

   -acts or proposal that's obviously a joke or without intent to create legal relations
   

    
    

    
    

    
    

Power struggle

 
 

Offeror=master of the offer

 
 

OFFER

ACCEPTANCE

REJECTION

COUNTEROFFER

(=rejection and new offer)

Contract on the terms of the offer

NO contract

Offeror accepts

Offeror rejects

Offeror makes new counteroffer

Contract on terms of counteroffer

No contract

 
 

And so on...

 
 

Proving subjective intent:

-What if the assenting party knows the other is kidding but the external manifestations of the offeror say otherwise? (What if Lucy had known secretly that Zehmer was kidding but went along with it anyway because of the benefit?)

• Safeguards include pretrial discovery, a jury's ability to tell when someone is lying, multiple sources and witnesses that can reveal, collectively, true intent (in cases where a company is being sued)
  

 
 

Intent to be Bound:

-A promisor may not be bound if the promise is insufficiently serious

-Some factors and circumstances have made cts and legislatures reluctant to enforce promises:

-Optimistic statements made by documents to patients

-Statements made b/n intimates

-Statements made for social purposes

 
 

Quality of Assent: What quality of assent is required to make a promise binding?

"Freedom to/freedom from contract"

-Good legal rule would make the ability to enter a contract available to non-lawyers who will take the pains to clarify their ideas as to what they want to contract about but yet not so esy that it would hook the unwary signer or casual promisor.

 
 

Gentlemen's agreements are a type of promise that has an express provision that prevents the courts from enforcing their promises—2 situations where such agreements have been used:

1. "Firm commitment underwriting" in the stock industry where a letter of intent is issued

2. Bonus and Death Plans. Employers may want to mention the plan in order to take advantage of the resulting incentive but keep the administration of the plan within its uncontrolled discretion.

 
 

When a formal or written K is pending, parties who agreed (informally, unwritten) may still be bound. There are two common law principles:

 
 

1. Absent an expressed intent that NO contract exists, mutual assent between parties, either oral or written, is enough to create a binding K

2. To avoid the obligation of a binding K, at least one of the parties must express that they do not want to be bound by it BEFORE it goes down in writing

 
 

 
 

What's an Offer: Southworth

Friday, September 26, 2008

9:33 AM

 
 

• Owen v. Tunison
  
• Southworth v. Oliver
  
• Harvey v. Facey
  

   
   

   
   

  Rules:
  

  Offer is defined in R2C set. 24:
  

  "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."
  

   
   

  R2C sect 26: Prelim 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 intent
  

   
   

  Contracts REQUIRE mutual assent and intent to be bound
  

 
 

Owen v. Tunison

Supreme Judicial Ct of ME, 1932

 
 

Parties:

Π=Owen

Δ=Tunison

 
 

PH:

-BOC case

 
 

Facts:

-Π writes letter to Δ offering him $6K for property

-Δ responds by letter: Not possible to sell unless I was to receive $16,000

-Π responds by letter: I accept your offer

-Δ responds: No way, Jose. I'm not selling.

 
 

Issue:

Was Δs letter (quoting $16000) a valid offer? (Did Δ give Π the power to create contractual relations b/n them?)

 
 

Rules:

-Damages may be due when there is a willing buyer who is left in a lurch when the owner refuses to tender a deed after the owner has made an offer in writing and it has been accepted.

 
 

 
 

Analysis:

-Δ's letter was simply an opening of negotiations, nothing more

-When language is general and not "I offer to sell you" the offer is non-existent

 
 

 
 

Conclusion:

-Δ did not make an offer to sell. J is for Δ.

 
 

Notes:

 
 

-If Δ had worded it a little bit better, this whole thing could have been avoided: "I would be willing to consider an offer of at least $16K"

 
 

Southworth v. Oliver

Supreme Ct of Oregon, 1978

 
 

Parties:

-P is Southworth, cattle rancher in Bear Valley wants to buy property

-D is Oliver, cattle rancher in Bear Valley, prospective seller to Oliver

 
 

Facts:

-D wants to sell some of his land and grazing permits

-D goes to P and tells him that he (D) is interested in selling the land

-D goes to other neighbor to try to sell the permits

-P responds that he is very interested in buying the land

-There seemed to be a tentative agreement b/n P and buyer of permits to work out something

-D and P get out a map and they point to specifically what land is going to be part of the deal (Definiteness of scope of property)

-D leaves it at him needing to pull the figures together and he would get back to P. When P gets that info, he was to pull the money together and let D know if he was still going to buy.

-In the interim, P calls D to confirm the land is still for sale, that D is still interested in selling, etc. D says "yes"

-D finally gets numbers together (value of land, terms of sale, sale date options, etc). He sends this info in a letter to P and three other families

-D gets nervous

 
 

The four guides from Murray's Treatise Ct says it should take into consideration in determining whether D made an offer:

Whether a RP in the offeree position would believe an offer had been made
Whether the language used contained words of promise or commitment Whether the proposal was addressed to a specific party or parties Whether the proposal was definite in its terms (eg. Price, financing, dates, description of property for a sale of real estate)

 
 

 
 

Court's Analysis:

-Using four guides, Ct found that D had made an offer to sell.

Why D's letter to P was an offer:

• A reasonable person would believe this was an offer.
  
• Terms were definite(sale date, terms of the sale, property was described very clearly by tax map)
  
• It did not come out of the blue. The parties had previously discussed the matter
  
• It was addressed to definite group of people
  

 
 

Sources of the definition of Offer:

-Korbin

-Restatement

-Murray's Treatise

 
 

 
 

 
 

Harvey v. Facey

Jamaican case that I failed to see on the syllabus

 
 

Parties:

P is harvey, prosp. Buyer

D is Facey, owner

 
 

Facts:

-Harvey wanted to buy property

-Existing negotations, town wants to buy it from D for 900 lbs

-

 
 

PH:

-Trial ct-->for D. Dismissed action as non-K

-Supreme ct reveresed (to P)

 
 

Issue on Appeal:

Was there an offer by D and an acceptance by P? (Was this an enforceable K?)

 
 

Reasoning of judicial committee:

-1st telegram was an offer to sell but it didn't say specifically that D would sell to H and it stated only the lowest price at which D would be willing to sell

-The telegram that P intended to be the acceptance of D's alleged offer, but it was actually only an offer in itself, which D then had the power to accept or reject.

 
 

Result:

-Reversal. Harvey's acceptance of Facey's offer was not an acceptance at all but an offer that gave Facey the power to accept.

Murray's Treatise

 
 

You always want to be the master of your own offer! Meaning: you want to "accept," not "create" the offer

 
 

How to write the telegram so it would clearly NOT be an offer to sell:

"I'm willing to entertain offers…" (I want you to make me an offer so that I have the power to accept, not you)

"How much more than 900lbs are you willing to offer me for it?

"I am willing to consider offers starting at 900"

"We have an offer from another party at 900lbs, are you willing to offer me more?"

 
 

 
 

 
 

Does it matter that Harvey knew there were other ppl wanting to buy the property?

The more ppl who are involved in the negotiation, the less definite it looks. (Definiteness requirement) If you are aware that there's a negotiation going on, you have less of a strong argument that you thought the offeror was talking only to you…. See R2C sect. 26

R2C sect. 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 intent

 
 

Problem p. 134:

-Non compete in Vet clinic

-Vet is willing to release employee in exchange for $40,000 cash-buyout

 
 

1. Would a RP in Dr. Hopper's position believe that an offer has been made to her?
   

   a.
   

2. Did Dr. Johnson's lang. contain words of promise or commitment?
   
   1. "I release you" "If you want to accept, I'll draw up papers and we're done…" -The "I will" language
      
3. Was it specific as to who offer was addressed?
   
   1. Yes
      
4. Was the offer definite in its terms?
   
   1. Yes. Dr. J has done the math.
      

   *here, the last 3 questions answer the 1st
   

 
 

 
 

What's an Offer cont'd--Fairmount

Sunday, September 28, 2008

9:47 PM

 
 

• Fairmount Glass Works v. Crunden-Martin Woodenware Co.
  

 
 

Fairmount Glass Works v. Crunden-Martin Woodenware Co.

Court of Appeals of Kentucky, 1899

 
 

Parties:

P is Crunden-Martin Co. (appellee)

D is Fairmount Glass Works (appellant)

 
 

PH:

-P sues D for damages for BOC

-J for P

-D appeals

 
 

Facts:

-P writes D a letter (4/20/1895): can you tell us your price for specific # lids/caps plus delivery ...(see text for EXACT quote. Exact language mattters for analysis)

-D answers with price quote based on specific terms (immed. Acceptance) plus specific shipment day, industry jargon galore

-P sent telegram the next day: "We got your letter. Enter our order. "Specifications" to follow in mail."

-In response, D sent "Impossible to fill your order. No more stock."

The "specifications" were just details about how P wanted to proceed w/ receiving the shipment.

 
 

Issue on Appeal:

Was D's letter an offer?

….Or was it just an invitation to deal?

 
 

P's argument:

-By its telegram sent (the following day) in answer to the letter it rec'd from D, the K was closed for the purchase of the terms of the K.

 
 

D's argument (3 parts):

1. The K was not closed by the telegram
   

   -D had right to decline to fill the order at any time
   

2. Based on a sentence in the P's "specifications" which demanded "first-class goods," D contends that "first class goods" were not a part of its offer and so the offer was not accepted as it was made, so D is not bound.
   
3. The K was indefinite b/c the qty of each size of the jars was not fixed/that ten car loads is too indefinite a specification of the qty sold/that P had no right to accept the goods to be delivered on different days
   

    
    

   Rule:
   

   A legal obligation will arise when an order for merchandise is given in accordance w/ the proposed terms
   

    
    

   Court's Analysis:
   

   Language of the correspondence matters in the primary goal of the court which is to arrive at the intention of the parties.
   

    
    

   Analysis as it Corresponds to Part's of D's argument:
   

4. P's letter was a simple inquiry as to prices. D's response, however, was more than a simple response. It was an offer and was sealed when P replied via telegram (when P responded "immediately")
   

   -Although D used the word "quote," we think his letter was more than a quotation of prices
   

   -D used highly specific terms for not only prices, but financing and shipping as well
   

5. D declined to uphold the K b/c it got the "specifications" in the mail
   
6. There is evidence that "ten car loads" is an expression used in the trade/the offer to sell the different sizes at different prices gave the purchaser the right to name the qty of each size/the offer being to ship not later than 5/15 gave the buyer the right to fix the time of delivery @ any time b/f that.
   

    
    

   Conclusion:
   Affirmed (J for P)
   

    
    

    
    

    
    

    
    

 
 

 
 

Ads as offers?

Q: What if the amount of demand of an advertised product exceed's shopkeeper's inventory?

Sunday, September 28, 2008

7:42 PM

 
 

• Lefkowitz v. Great Minneapolis Surplus Store
  

In France, most authorities consider an ad to be an offer, even if it can be accepted only by one of those to whom it is addressed. But such an offer is subject to the condition, as to each offeree, that it has not already been accepted by a quicker-acting offerer.

• Advertisements are usually proposals. They are general and aimed at a wide audience.
  
• They are not offers but rather invitations to make an offer, but there are always exceptions…
  
  • As the seller, you want to be the offeree, not the offeror (you want the buyer to be the offeror). The offeree keeps the power in the deal.
    
    • Therefore, Ads are invitations by the seller to the buyer to make an offer to purchase.
      
• Ads are generally NOT offers unless they state a limited qty. or have other attributes indicating that the advertiser actually indended to make an offer
  
• States have laws regarding false advertising (Uniform Deception Trade Practices Act)
  
  • Federal law: sect 5 of Federal Trade Commission Act
    
• Also have legislation against, "bait-and-switch" practices.
  

   
   

Geismar v. Strauss (Dist. Ct. 1981): Frustrated shopper sues department store for refusing to sell $280 set of dishes @ advertised price of $39. Customer lost in court but was awarded "damages" of $50 (NY statutory provision).

"Bait-and-switch": the failure to have available a sufficient qty. of the advertised product to meet reasonably anticipated demands, unless the advertisement clearly and adequately discloses that the supply is limited

How to tell the difference b/n an offer and an ad:

-Use the usual process (as in other offers) of interpreting its apparent reasonable intent (as interpreted by the READER/customer, not the advertiser) in light of the its language in context.

 
 

General indicators courts have identified to distinguish an offer from a preliminary proposal:

1. The words used in the communication
   
   1. "Offer," "quote," "proposal" may help but are not conclusive if the context indicates that they were not used in their legal meaning
      
2. The comprehensiveness and specificity of terms in the communication
   
3. The relationship of the parties. Any previous dealings b/n them; prior communications, etc.
   
4. Common practices or trade usages
   

 
 

Lefkowitz v. Great Minneapolis Surplus Store

Minn. 1957

 
 

Parties:

P is first customer to arrive on at the store on the day of the sale

D is the department store who placed the ad

 
 

PH:

-P sued D for failure to uphold a binding legal obligation

-Lower court held for P. P received $138.50 in damages

-D appealed

 
 

Facts:

-D published ad in newspaper advertising mink skin scarfs for a $1

-P is 1st to arrive on the day of the sale

-D refused to sell to him b/c of a "house rule" that the offer was intended for women only

 
 

Issue on appeal:

-Whether D's advertisement constituted an offer

 
 

Rules:

-Test of whether ads can be source of binding obligation, even if addressed to general public: "Whether the facts of show that some performance was promised in positive terms in return for something requested."

-An offer is clear, definite and explicit and leaves nothing open for negotiation

-The acceptance of it will complete the contract

 
 

D's argument on appeal:

-"House rule" that barred men from receiving the bargains advertised.

 
 

Analysis:

Whether an ad is an offer depends on the legal intention of the parties and the surrounding circumstances.

-We think D's ad was clear, definite and explicit and left nothing open for negotiation

-It set up exactly what P had to do to perform his side

-The ad made no mention of gender restriction

 
 

Advertisers have the right to modify their offers at any time BEFORE acceptance but does not have the right to modify AFTER acceptance.

 
 

Conclusion:

Affirmed.

 
 

 
 

Exercise: offer and an advertisement … the difference

Sunday, September 28, 2008

7:47 PM

 
 

Problem 1, p. 150

 
 

Facts:

-Newspaper had typo: 1995 car was advertised @ the price of a 1994 car

-Dealership failed to proofread the ad copy

-CA statute: illegal to fail to sell a vehicle to any person at the advertised total price exclusive of taxes and certain other fees

-Buyer did not know mkt price of the 1995 car

 
 

1. Does an advertisement for a specific used car at a designated price constitute an offer that may be accepted by tendering the purchase price?
   
   1. Possibly.
      

       
       

2. Does a statute that prohibits the car dealer from refusing to sell a vehicle at an advertised price affect the answer?
   
   1. Yes.
      

       
       

3. Does the answer change if the erroneous price inserted in the ad was the result of an error?
   
   1. No.
      

Do this! The "answers" are the book's!

 
 

 
 

Jokes/hoaxes

 
 

• Lucy v. Zehmer
  
• Keller v. Holderman
  
• Leonard v. Pepsico
  
• Owen v. Tunison
  

  General rule: A court will not enforce the offeror's promise if the offeree actually k new or should have know (by RP std.) that the offeror did not actually intend to be bound.
  

 
 

Lucy v. Zehmer

Supreme Court of Appeals of Virginia, 1954

 
 

Parties:

Π = Lucy bros.

Δ =Zehmers, husband and wife

 
 

Facts:

-One night while drunk at a bar, Δ and Π start talking nonsense

-According to Δ, in an effort to get Π to admit he did not have $50,000, Δ offers to sell Π a piece of his property, the Ferguson Farm, for $50,000

-This goes on for a while. Facts are unclear but the price of the property is discussed at some point prior to an agreement being reached

-Δ then scribbles out on a piece of paper "We hereby agree to sell Π the Ferguson Farm for $50,000 title satisfactory to the buyer." Signed by Δ and wife and dated.

-The record shows there were a couple of drafts of the note made by Π before the final one

-When note was complete, Π picked it up, started walking out of the bar

-On Π's way out of the bar, Δ told him it was a joke. Π insisted the offer stood

-It later comes up that Δ's wife suggests he drive Π home… Suggests something about the levels of inebriation of the two parties

-Over the following days, Π took affirmative steps to completing the transaction. He brought his brother in as a half-buyer, he hired an attorney to inspect the offer…

 
 

Issue on Appeal: Will the K still be binding if Δ lacked true intent (opposing to the external "fake" intent he demonstrated at the time of the offer)?

 
 

PH:

-Suit brought by Π for performance of K which was an agreement to transfer land to Π

-Lower ct entered J for Δs, holding Πs failed to establish their right to a specific performance by Δ

-Π appeals

 
 

Issue on Appeal:

Whether the writing signed by the Δs was an enforceable offer?

 
 

Δ's argument on appeal:

-There is ample evidence to support that this was

1. a bluff to make Π admit he did not have $50K,

2. the whole thing was a joke,

3. no binding K was ever formed b/n the parties

In any of the cases, this was not an offer b/c Δ never intended to actually sell the property.

 
 

Rule:

"The mental assent of the parties is not requisite for the formation of a K. If the words or acts of one of the parties have but one reasonable meaning, his undisclosed intention is immaterial except when an unreasonable meaning which he attaches to his manifestations is known to the other party" Restat. Vol. 1 § 71

In other words:

-The law imputes to a person an intention corresponding to the reasonable meaning of his words and actions. If his words and acts under a RP std show an external intention, his internal intent is immaterial…

 
 

Analysis by Ct of Appeals:

-Court is not impressed by Δ's argument. The Δ's contention that he was drunk is inconsistent with his attempt to testify, in great detail, about what exactly was said and done that night. This contention is also contradicted by other evidence as to the condition of the parties, including Δ's wife's testimony. Therefore, the record does not indicate that Δ was FUBAR so badly he did not know what he was doing.

-Facts show this was a serious business transaction and not a joke (negotiation before the writing, the drafts of the note, completeness of the wording of the note, etc)

 
 

-Even if it was a joke on the part of the Δ, Π's actions the next day prove that he didn't know it was a joke and he intended to treat it like a legally binding obligation. Here, Δ's actions were very different that what he claims were his intentions and at the time, it was reasonable to assume Δ was serious about the sale… External intentions trump internal.

-Δs actions at the bar would make a reasonable person assume he was serious

-Π took immediate affirmative actions towards fulfilling the obligation

-Δ did not recant the offer until 2 full days had elapsed

*Plus, Δ's atty admitted that Δ was not too drunk to enter a K at then time

 
 

-Despite minor factual disputes, there was:

A good faith offer

A good faith acceptance

Execution and delivery of the written instrument

*It wasn't until after all of what's above happened did Δ indicate that it was a joke.

 
 

 
 

 
 

 
 

 
 

Conclusion:

Reversed and remanded for entry of J in Π's favor.

 
 

-Is this decision consistent with the objectivist theory of assent? The subjectivist?

It's more objectivist.

 
 

*The court should determine whether there was a requisite assent to form a K by examining the outward manifestations in order to infer intent?

Court starts with your outward gestures and then work slightly inwards to figure out what you meant. Courts don't like to read minds.

 
 

 
 

Notes 1-3 pp.123-125

 
 

1. Agreements that are a joke:

 
 

Keller v. Holderman:

Π=Keller

Δ =Holderman

 
 

Facts:

-Δ gave Π a check for $300 in exchange for a $15 watch

-Δ forgot to write "VOID" on the check. There was no money in the account.

 
 

PH:

-Π sues for amount of check

-Lower ct holds for Π

-App. Ct reverses. The whole transaction was a joke. Neither party thought it was for real and nor would any reasonable person.

 
 

2. Leonard v. Pepsico, 1999: Pepsi ran TV ad with an absurd joke. Held for Pepsi because "the commercial was obviously absurd… no RP would have concluded the commercial actually offered a Harrier jet based on the context of the commercial (Harrier jets attack in war, they do not transport teenagers to school…). Plus, the value of such a jet is $23M… any reasonable person would know that $700,000 price would be too good to be true.

 
 

 
 

Even if Pepsi had included a Harrier jet in its catalog among the items that could be obtained by the redemption of points, the absence of any words of limitation, like "first come, first served" renders this alleged offer sufficiently indefinite that no K could be formed.

 
 

 
 

Mistaken bids

Sunday, September 28, 2008

6:52 PM

 
 

• Elsinore Union Elementary School District v. Kastorff
  

Notes:

Revocability- usually, a general contractor is allowed to revoke a bid before its acceptance unless the K is for the state or local gov't because statutes and ordinances usually provide against rescission after bids have been opened.

 
 

R2C sect. 153 liberalizes the rule stated in frmr. Sect. 503 to take account of the trend of allowing avoidance although only one party has been mistaken.

 
 

Courts usually grant relief for clerical errors opposed to judgment errors

 
 

All courts say that if the offeree knows or should know of the offeror's mistake, the offeror is NOT bound.

-The challenge is proving that the offeree "should" have known.

-Good defenses for the offeree: lack of familiarity with the field, no notice of mistake

 
 

Online sales proposals are more likely to be treated as offers b/c errors are different for sellers to discover b/f they are snapped up by buyers.

-Typo insurance

Elsinore Union Elementary School District v. Kastorff

Supreme Ct. of California, 1960

 
 

Parties:

P is school district

D is contractor

 
 

PH:

-P files an action in lower ct to recover damages resulting when D refused to execute a K pursuant to his previously submitted bid to build additions to P's school.

-Ct holds for P

-D appeals

 
 

Facts:

-P called for bids, D prepared a bid to be submitted by P's deadline (8 p.m. on 8/12/1952)

-D gets to work on his bid-- bids from subs start coming in

-He works the numbers several different ways

-At the last minute, his plumbing sub lowers his bid by $3K. D grabs the bid sheet, subtracts $3K (thinking it was the higher bid version) and submits the bid

-He grabbed the wrong one. Now there is NO allowance for plumbing work--> D is in the hole by $3K

-D is the lowest bidder at the bid opening. The school board asks him if his figures are correct. D calls his office from the hall, confers w/ person who helped prepare the sheet, goes back inside and tells the board that the #s are correct

-Board then votes to award him the K

-D discovers the errors the next morning

-Drives to L.A. immediately, goes straight to architect firm to disclose the error (Rendon is architect's name)

-Rendon concludes that it was a clerical error (he later testifies this as well)

-Same morning as his meeting w/ Rendon: D calls P w/ same request

-Aug 15, after receiving the letter, board held a special mtg and voted NOT to grant P's request

-August 28: D is given a written notification that the K was awarded to him, actual K to follow to be signed.

-Sept. 8: D returns K unsigned w/ another letter requesting to withdraw his bid

-P thereafter receives add'l bids for project

-P lets the K go to that lowest bidder in the amount of $102,900

-P wants to recover the difference b/n new lowest bid and D's bid

Difference is $12,906 plus P also wants $4,499.60 for its surety of terms for D's bid

 
 

 
 

Analysis of Trial Court:

-The trial ct found fact in what happened that led to the error but found that it was NOT true that the right hand column of figures on the bid sheet was used for the purpose of arriving at D's total bid

-Court also found that P did not know at any time D's bid was intended to be less than $89,994 (the amt of the "wrong" bid)

• In his haste to rescind, D failed to make it clear the reason WHY he was withdrawing his bid
  
• If P had known about the honest mistake but still tried to take advantage of him, things might be different
  

-From the evidence, D did NOT objectively intend to bid work at $99,494 figure

-Therefore, it would be NOT unequitable and unjust to require D to perform his K

Conclusion of Trial Court:

-Judgment for P in amounts sought

 
 

 
 

**Mistaken bid case. Contractor makes error on a bid submitted for a project. This is a common occurrence b/c of industry practices.

 
 

Rescind: to abrogate or cancel (a K) unilaterally or by agreement

 
 

Uses the "objective" test for intent

 
 

Issue on Appeal:

Whether D was obligated to execute the K or was he allowed to w/draw his bid?

 
 

D's argument on appeal: He made a clerical error should be allowed to rescind.

1. Honest error. He thought and intended he was bidding $9500 more than he actually did.
   
2. When D discovered his mistake, he immediately took actions to notify P and rescind it
   
3. Bases his argument on Kemper case where it was held that when a contractor makes a mistake on a bid for public work he is entitled to rescind
   

   In-Class Analysis of 6 elements of Rule for this case:
   

4. Yes. D quickly let them know of the error via actual notice
   
5. Yes. We're about 10% of value of the total bid, which is enough. *prior holding by court*
   
6. No. it was an honest mistake
   
7. No. Not only was he giving free plumbing, he was actually paying them $3000 to do the plumbing
   
8. Yes. There were other bidders willing to do the work. There was not a huge reliance interest by P
   
9. Yes. D called P the day after his bid was submitted as soon as he realized the error. He hadn't yet gained anything of value under the K.
   

    
    

    
    

    
    

Analysis of Supreme Ct

Rule:

-Binding precedent in this case from earlier, similar case that weighed in when rescission is allowed when there's a mistake of fact these elements have to be present**:

1. One party knows or has reason to know of the other party's mistake
   
2. Mistake is material to the K
   
3. Was not a result of neglect of a legal duty
   
4. If enforcement of the K would be unconscionable
   
5. If the other party can be placed in the status quo ante (put other party back into position it was in)
   
6. The rescinding party must give prompt notice but also restore or offer to restore to the other party everything of value he has rec'd under the K.
   

   **These are to be factored conjunctively
   

 
 

Analysis:

*Same analysis in analogous ("on all fours" w. instant case) Kemper case: "The type of error here will sometimes occur in the conduct of the reasonable and cautious businessman and we cannot say as a matter of law that it constituted a neglect of legal duty such as would bar the right to equitable relief"

• The court does not apply the above rule element-by-element in this case and instead relies on its prior analysis from Kemper, which it DID conduct its analysis element-by-element
  

 
 

-Here, D did not neglect a legal duty by failing to check his final bid. He only made on mistake: he gave the wrong answer when the board asked him if his bid was correct.

-The context of the mistake (plumbing) was a mutually intended provision that was omitted by D's mistake.

-If the table were turned, the Supreme Ct has no doubt the school district would demand and expect rescission.

-Both parties intended for the plumbing and so the school district must have understood that this bid intended to include money for it

 
 

Conclusion:

The "bargain" is too sharp for law and equity to sustain the lower court's holding for P. Reversed.

 
 

 
 

Amounts:

-Something about percentage of error being larger than a prev. case in determining whether the amount of the plumbing bid omitted from being material. See last paragraph.

• A: Prior case, court held that >10% is sufficiently material to the case
  

Neglect of legal duty = NO EQUITABLE RELIEF

 
 

Here, we have the recission of a mistaken offer, not of a contract after it has been accepted.

 
 

 
 

 
 

Sunday, September 28, 2008

8:45 PM

 
 

Texaco Inc. V. Pennzoil (Tx. App. 1987)

-A handshake deal between Getty Oil Co. and Pennzoil occurs after a negotiation of sale of stock. Later, Getty refuses to perform and instead sells to Texaco.

-Pennzoil first rushes to stop Getty under BOC but fails

-Later, sues the sh*t out of Texaco for interfering w/ its K with Getty

-Wins verdict for $10.53 BILLION…. Bankrupts Texaco. Later, settlement comes in at a cool $3B

 
 

Where to file this?