Applying the Basic Law of Contracts

1. Purpose of Assignment

   This assignment will use interview information to apply the basic law of contracts to a case.

   Competency

   Determine the validity of contracts.

   Scenario

   Paralegal Helen Davis greeted them after they talked to the attorney.
   June stated:“We are supposed to tell you basically what happened. The guy, Leo, owner of River Way Construction of Your Town, Your State, USA, said he would re-roof our one-story house for a lower price than what anyone else bid. We showed him a bid from Rite Fix Construction and that was what we thought was a good bid, but he seemed to study if for a while and smile. We didn’t know why he smiled, but we think we do now!”
   Helen, “What happened?”
   Ron, “Leo said he and his River Way crew would do the roof for exactly $6,500, which was $800 less than the Rite Fix written bid. A neighbor witnessed this statement and that he was looking at the Rite Fix bid when he said it. The Rite Fix bid included soffits and fascia.”
   June, “Anyway, we are not satisfied about how this worked when we saw how he did it. The roof is not just exactly what we wanted and the soffits and fascia were not done, unlike the other contractor’s written bid. We should have had him do his own bid, but he just started work right away and we were so busy, we forgot. Trusting, I guess. So, what do we have to do?”
   Helen stated, “I am here to gather information, not to give advice. I will report to the lawyer, Bridget Johnson, and make a new appointment for you to visit Ms. Johnson about this.”
   They went on, both talking at once, but what they stated was roughly this:
   The soffits and fascia are not done and he won’t come back and do them. Helen, “What about the roof? Was a good steel roof put on?”“Yes.”“Was it about the same quality?”“Yes.”Ron, “We aren’t paying the labor and materials invoice he sent. We forget which is soffits and which is fascia, but they are below the roof and we wanted them done at the time the roof was done.”
   June, “Or, anyway, even if not, it is what he said he would do. Well, he said “roof” but he meant to match the bid, but at a lower cost. The first lawyer we talked to, on the phone, not in person, said we had a case, but didn’t take the case, so I suppose that’s no good, anyway.”
   Ron, “Our neighbor Dan Webster was with us for the whole time we talked to Leo, so I am guessing he might be a kind of witness, but he didn’t sign as a witness, just heard it all.
   So, does that count? Never, mind, you said the lawyer has to decide. I see you are ready to ask for more, but we have to run.Bye.”
   June, “By the way, Leo left a major mess for like two weeks before he cleaned up. The bid from the other guy said the mess would be removed in one week or less.”

2. 

   Instructions

   By submitting your assignment to this dropbox you agree to abide by the Academic Misconduct Policy set forth in the course syllabus. You acknowledge that your failure to do so could result in being expelled from the course.
   Do not repeat the directions or questions in your paper.
   Based on the client interview about an oral contract, complete the following:

   1. In your own words, why might an attorney recommend that an oral contract be put in writing even when an oral one is valid and there are plenty of witnesses to the terms? Use the lesson notes. Comment personally on the transcript of the client interview. How do you feel about the way Helen, the paralegal, did this interview? What would you change?
   2. If you were the interviewer, would you use a printed intake form and mark with handwriting? What other method might you use to make notes?
   3. Recommend three, open-ended questions to ask the client at a follow up interview and two questions asking for documents.
   4. Based only on what you know so far, was the oral agreement based on a complete offer or incomplete offer? Argue both sides, based on the lesson notes. Specify areas of uncertainty.
   5. To bolster your answer
      

   
   Download Application Table

   • Use and complete the application table to compare incomplete and complete offers and identify characteristics of a complete offer. This partially completed table will help you to apply facts of the assignment scenario to legal issues, facts, and cited authority from the readings.
   • Quote and cite a portion of this week’s online lecture notes as authority. Copy and paste the table below your answers.

   Format:

   • Your paper should be 3 – 5 pages in length, with at least three (3) references and formatted according to Bluebook standards. You may use and cite the lesson notes as well.

   The basis of a contract is a legal offer.

   1. A complete legal offer contains:A promise of future performance
   2. A description of what each side gets
   3. A way to determine when each side has to perform

   If the offer is accepted, it immediately becomes a contract that is enforceable in court. An example is a clothes washer purchased on a “rental with option to buy” or “rent to own” plan. The seller has to deliver the washer described in the contract at the time of the contract. There cannot be uncertainty about which item is being sold. The time of delivery should be specific as well. (There may be a few days of leeway on delivery). The offer dollar amount needs to be filled in. The exact times of payment need to be covered in the offer.

   • BARGAINING OFFER IS NOT A LEGAL OFFER

     Unfortunately for beginners to contract law, the term “offer” is often used by business people in a very informal and different way than the law uses the term. A business person could “offer” to sell the washer at 10% off if the buyer agrees to also purchase one of the floor model clothes dryers. This use of the term “offer” mixes and muddles the legal sense of the term. Do not get confused by the informal bargaining sense of the term “offer” while working on contract law matters! Keep testing every offer by asking if a judge could enforce it if it was simply accepted exactly as it was stated. Ask yourself: Does it leave uncertainties that a judge would not accept? Can you imagine a judge trying to guess which dryer was meant and how much the price would be if the person had accepted that offer?
     Note that throughout this Module we will be frequently referencing Restat.2d of Contracts. Please navigate to the specific sections identified from the Table of Contents. This section is referencing Restat. 2d of Contracts, sec. 24, and it covers offers.

   • ENFORCEABLE OFFER: PRICE, CONSIDERATION, AND SUFFICIENT TERMS

     Imagine that Bill wants to be hired by Ron and June to paint their house. All of the terms are oral except for a brief unsigned bid that is not a complete sentence: “Paint Ron and June’s siding on their house, $1500 for labor, homeowners to pay for supplies, to be completed this summer.” The rest of the terms are oral and include information such as it is a workmanlike job, Bill is to scrape and paint with a primer and finish coat, he must use the paint that Ron and June choose, and Bill needs to bring his own ladders.
     A writing that is not complete may be part of an oral offer. Bill’s oral offer was complete and became a contract. Oral offers are often complete and become a contract when the other side accepts the offer. Any part of the offer that is in writing is “a writing.” Writings that are complete in themselves can become written contracts. Written contracts including ones made out by an attorney and signed and ones that are made by two or more writings will be explained more in later modules of the course.
     A writing may be used to show some of the contents of an oral contract or offer. The partially done bid is an example of one done before the performance. A payment or partial payment by check, an invoice or statement may also be used. In fact, many states allow a contract to be proven by an “undisputed account stated” meaning an invoice was sent and no dispute of it was made in a reasonable time. “An account stated is prima facie evidence of the accuracy and correctness of the items noted thereon, as well as the liability of the party against whom the balance refers” Erickson v. General United Life Ins. Co., 256 N.W.2d 255 (Minn., 1977).
     The common law does consider this services contract offer to be enforceable if accepted by Ron and June. It is partially due to the nature of the services offered. An exact time of performance, or painting, is not possible in most climates due to rain, wind, or other conditions. A judge can use common practices as part of the guidelines on how much needs to be specified. Although some contracts need to have all the key terms in writing, this one can be oral or partly oral since it is a service contract that can be completed in one year. Restat. 2d of Contracts, sec. 110 explains the times when a writing is or is not needed.

   • OFFER: ACCEPTED BY PROMISE

     Technically, the offer above was made by Bill, the painter. If he is not paid until he is done with the job, Ron and June would accept the offer by promise, saying, “We accept.” That also fulfills something called the mirror image rule. They have to accept the exact offer; they cannot change it. If they change it, they fail to meet that rule.What if Ron and June say, “We will hire you to do that, at that price, but only if you also stain our deck”? That fails the mirror image rule. They promised something different than what was offered. No contract was made. Restat. 2d of Contracts, sec. 50 gives two options for accepting: by promise or by performance.

   • OFFERS: ACCEPTED BY STARTING PERFORMANCE

     Bill responds to the bargaining of Ron and June like this: “I will add the deck to the job but for an additional $600. I will also I will replace the two bad boards before I stain it.” That is called a counteroffer, since he did not accept what Ron and June said to him.
     Finally, Ron and June say, “Okay, $2,000 for the siding and the deck, with replacement of the two bad boards. The rest of the details are as we discussed, which are on your bid. Think it over. If you start work within a week, you have accepted our offer.” Bill starts work the same day! He has accepted the offer by starting to perform. Restat. 2d of Contracts, sec. 50.

   • WRITTEN OFFERS FAVORED BY ATTORNEYS

     
     There could be a breach of contract, which is a failure of one side to keep the promises made. Most of the time, all of the people who made promises will tell the whole truth in court as they remember it. Almost everyone has heard of times when people lie in court, but generally those times involve love, hate, death, large sums of money, or long-term imprisonment. People who dispute contracts are generally not desperate enough to risk a perjury charge. There are also many incidents where contracts, although not in writing or fully in writing, have witnesses of the promises. There are often also witnesses that performance has been made. For example, as Bill is painting outside, neighbors may see him do so. A check may be written to Bill for half of the payment and that becomes proof that there was a contract as well as the price.Despite the truth-telling tendencies of people and the ability of judges to sort facts should a dispute go to court, attorneys favor getting it all in writing, even when oral contracts are fully enforceable. Why? People die, people may forget details, and people may not need to go to court if the entire accepted offer (contract) is fully in writing and signed.
     Lawyers also make promises that are an “implied agreement” in their attorney client relationship with anyone who seeks legal advice. The lawyers may not specifically promise to each client to follow the ethical code, but those promises are a part of every agreement to perform services, by law.
     The promise is to do their best in not just applying the law to the facts but to protect the client’s legal and financial interests by being careful. Rule 1.1 and Rule 1.3 of the ABA Model Rules of Professional Conduct provide for competence and diligence. Attorneys make a clear choice against advising clients to use an oral contract and advise using a written contract. There is a good chance to win in court, if the parties remember all the terms. But, it is much better to win without even having to sue. If the terms are in writing and clear, court cases are normally not needed. People do not want to go to court.
     Lawyers also are usually prudent. They wish to avoid having to pay a large deductible and added future insurance premiums for their malpractice insurance if they are found to have been negligent. They should hire a good proofreading paralegal to make sure contracts are complete, clear, readable, and grammatical