A contract is and “agreement between two or more persons ...



Contractual Relations

A contract is an “agreement between two or more persons which creates an obligation to do or not to do a particular thing,” (Black’s, p. 322). To further delve into what a contract is, however, one must understand what the law views as an “agreement.” Therefore, legal definitions find that an “agreement” is a “meeting of two or more minds; a coming together in opinion or determination; the coming together in accord of two minds on a given proposition,” (Black’s, p. 67). The initial requirement for there to be an enforceable contract, therefore, must be the existence of an “agreement.” For there to be an agreement sufficient for a court to enforce a contract there is a requirement that (1) the parties assent to be bound and (2) that their agreement is definite enough for it to be enforced (Farnsworth, p. 112).

Part of expressing assent involves the expression of an offer and the acceptance of that offer, which are required elements for a contract to exist (Farnsworth, p. 135). An offer is a definite enough statement that an objective person who hears it or reads it would believe that if they do or perform a certain act they will have accepted the offer and could complete a contract (Farnsworth, p. 135). An acceptance is a full agreement to the terms of the offer (Farnsworth, pp. 148 – 149). Another required element for there to be a contract is consideration, or the exchange of something of value (Farnsworth, p. 43).

Consideration can consist of anything that can be said to have “value,” such as money, property, a performance, or even a promise in exchange for a promise (Farnsworth, p. 45). A final, fourth element necessary for there to be a contract is the requirement that the parties involved have the mental capacity necessary to understand the terms of their agreement (Farnsworth, p. 227 – 228). Capacity does not relate to the intelligence of a person nor to his or her skill in negotiation (Farnsworth, p. 227 – 228). In general, the law specifies that minors and those with mental infirmities (such as the insane, those with dementia, etc.) lack the capacity necessary to enter into a contract (Farnsworth, § § 4.5 and 4.6).

Whenever there is a question as to whether valid offers or acceptances, sufficient to create a contract, were exchanged, courts use the objective theory of contracts to determine the result (Farnsworth, pp. 118 – 120). The objective theory finds a contract is created when an objective party, outside the situation, would view the words and actions of the parties as being definite and sufficient enough to show that an offer had been made and an acceptance given (Farnsworth, pp. 118 – 120). A clear example of the use of the objective theory can be seen in Leonard v. Pepsico, Inc., 88 F.Supp.2d 116 (S.D.N.Y. 1999), aff’d 210 F.3d 88 (2d Cir. 2000).

Leonard involved a case where a person claimed that a television commercial made an enforceable offer for him to acquire a jet (Leonard). The court disagreed (Leonard). The court held there was no offer because it was an advertisement and advertisements have traditionally not been regarded as offers because they are not definite enough for an objective person to accept (Leonard). For example, unlike a unilateral contract where the offer is definite and specifies what needs to be done to claim the reward, neither the commercial in Leonard nor advertisements in general provide such specific detail. As a result, advertisements are considered invitations to negotiate, not offers (Leonard). Moreover, the court said, no objective person would have taken the commercial as an offer as it was clearly a joke (Leonard).

The mayor’s advertisement on eBay can clearly be said to be a joke which no objective person would view as a true offer, as the court found in Leonard. Also, although eBay is a place where people do make offers to bid to the public, eBay also has a history of joke bids being offered, which again supports the Leonard decision (Barr).

References

Barr, R. (NA). The 12 Most Awesomely Ridiculous eBay Auctions. . Retrieved June 27, 2008, from

Black’s Law Dictionary, 6th Edition. (1990). St. Paul, MN: West Publishing Co.

Farnsworth, E.A. (1990). Contracts, Second Edition. Boston: Little Brown and Company.

Leonard v. Pepsico, Inc., 88 F.Supp.2d 116 (S.D.N.Y. 1999). Retrieved June 27, 2008, from

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