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Contracts – Prof. Merges

      Feb. 3, 2011
          Pyeatte v. Pyeatte
• History

• Facts
    Why a restitution claim?


• Contract “indefiniteness”

• Still relevant?
     What can be claimed?
• Amount of claim in Pyeatte?

• Time limits on claim?

•  Cal Fam Code § 2641 (10 years or
  more, no separate recovery)
        Dementas v. Tallas
• Good case to suggest need for reform?

• Is the result unfair?
         “Seminar Topic”
• Balfour v. Balfour: “where the King’s
  writ shall not run . . .”

• Marvin v. Marvin: bringing contracts
  into the “intimate” sphere
  You lookin' for trouble,
  Doniphan?


You aimin' to help me
find some?
Assent
Lucy v. Zehmer
Lucy v. Zehmer
          Lucy v. Zehmer
• Procedural history
          Lucy v. Zehmer
• Facts
          Lucy v. Zehmer
• Facts

• What are the uncontested facts?
          Lucy v. Zehmer
• Facts

• What are the uncontested facts?

• The signed document
“We hereby agree to sell to W.O
 Lucy the Ferguson Farm
 complete for $50,000.00 title
 satisfactory to the buyer.”

/s/ AH Zemer
  Ida P. Zehmer
We hereby agree to sell to
 W.O Lucy the Ferguson
 Farm complete for
 $50,000.00 title satisfactory
 to the buyer
  The story surrounding the
          document

• Seller’s story (The
  Zehmers)
  The story surrounding the
          document

• Seller’s story (The
  Zehmers)
• Drinking, bluffing, not
  sober enough to drive
• No serious intent to K; “it
  was all a joke”
 The story surrounding the
         document

• Buyer’s story (The Lucys)
  The story surrounding the
          document

• Buyer’s story (The Lucys)
• Two drafts of the document
  (naming both Zehmers, as
  coowners; provision for
  inspection of the title)
• Lucy allowed to keep the
  document
Aside: 2 consideration issues


• Issue spotting
  Aside: 2 consideration issues

• Zehmer thought it wise to pay over
  $5 to “seal the deal”

• Wood/Mattei v Hopper : Illusory
  promise due to title “satisfactory”
  clause? (“Title satisfactory to the
  buyer”)
 Legal status of the parties’
          dealings

• “The answer admitted . . .”
  [P. 118, 1st full ¶ ]
  Legal status of the parties’
           dealings

• “The answer admitted . . .” [P. 118, 1st
  full ¶ ]

• Lucy’s “offer” was a joke, so the
  Zehmer’s actions must be seen in that
  light
  What remedy was sought?

• Specific performance

• Why? Land/real estate is presumed to
  be unique, difficult to find clear market
  value, hard to award expectation
  damages
Who has the burden of proof
          here?
 Who has the burden of proof
           here?

• Plaintiff, of course

• BUT: The defendant’s defense of
  unenforceability must overcome
  plaintiff’s introduction of the document
  signed by the defendants – by “clear
  and convincing evidence”
         Statute of frauds

• Transactions involving property usually
  have to be in writing

• A signed writing will create a
  presumption of enforceability of the
  agreement
 Zehmer’s “drunk” defense


• What is the argument?
  Zehmer’s “drunk” defense


• Legally, what is the
  standard?

• “unable to comprehend the
  nature and consequences”
            Facts
• Mrs. Z suggested that Mr. Z
  drive Lucy home

• So how could Mr. Z be too
  intoxicated to understand
  the “nature and
  consequences” of the
  writing?
     Focus on the document

• P. 119, ¶ 3:

• “Appearance of the document, 40
  minute discussion, redrafting,
  examination of title, discussion of what
  was to be included, Lucy’s taking
  possession of it . . .”
What if Zehmer had been
         joking?
   What if Zehmer had been
            joking?

• “The evidence shows that Lucy did not
  so understand it”

• Subsequent actions, completing
  transaction
         Lucy’s belief


• How relevant?

• What if he had badly misread
  the situation?
             Lucy’s belief

“Not only did Lucy actually believe, but
 the evidence shows that he was
 warranted in believing that the K
 represented a serious business
 transaction . . . .”

-- P. 119, ¶ 5
  “Outward manifestation of
         intention”

• It is not that intention is not important;
  it is that the objective, observable,
  outward manifestation of intent is all
  we have to go on (reliably) to determine
  what the intent really is
Why is there a K here?
     Why is there a K here?


“There had been what appeared
 to be a good faith offer and a
 good faith acceptance, followed
 by the execution and delivery
 of a written K.”

P 120, ¶ 2
What does this mean?
     What does this mean?

• “The mental assent of the parties
  is not requisite for the formation of
  a K.”

•?
        So what of this?


• “An agreement or mutual
  assent is of course essential to
  a valid contract . . .”
           Mutual assent

• To be judged objectively, from the point
  of view of a disinterested spectator or
  observer

• Would the reasonable observer believe
  that K behavior was occurring?
    Role of price/payment


• Why might it make a difference
  if the farm had been sold for $
  5.00, or $50?
Judge Learned Hand
    Formal K Contemplated

• P. 124

• Letter of intent/“Deal Points” – vs.
  formal, executed, binding K

• Contracting as a process or spectrum
    Intent not to be bound


• Will be honored

• If it is clearly and consistently
  expressed
   Consarc, Stein v. Gelfand
Stein v. Gelfand, 476 F.Supp.2d 427
  (S.D.N.Y., 2007): No intent to be bound

2 drafts of deal points offered by
  potential partner, but never accepted;

Cellular phone licenses at issue, complex
 subject matter – usually in writing
 Empro Manufacturing Co, Inc v Ball-Co
 Manufacturing, Inc, 870 F2d 423 (7th Cir
                 1989).

The 3-page agreement “will be subject to
 and incorporated in a formal, definitive
 Asset Purchase Agreement signed by
 both parties.”

No binding K; “agreement in stages is a
 valuable business tool”
              Proposal

• Omri Ben-Shahar, Preclosing Liability,
  77 U. Chi. L. Rev. 977 (2010)

• Proposing “intermediate liability”: as
  each term is agreed to in negotiations,
  it becomes binding

				
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