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A law blog by Robert Lombardo on The Whole 9

Attorney Robert Lombardo came from the creative world and then began practicing law in 1995. The diversity of his professional life (years of which were spent in Europe, Australia and Japan) gives him a unique perspective on the law. Currently Robert is focusing on entertainment law (which encompasses nearly all creative industries) and brings this firsthand experience and desire to make the law accessible to the The Whole 9 community.

Do We have a Deal?

Lenny was a bit pressed for money (well, $30 M in the hole and homeless) so he decided to sell his $400,000 Rolls-Royce Phantom before he loses it through bankruptcy.

On Monday morning, Lenny e-mailed his big-spending buddy Nicholas that he wants to sell his ride:  “you know the car – the Rolls that I took you for a ride in last year in Vegas – I know you love it – I was thinking I might take $100,000 for it.”

The next day, Tuesday, Lenny received an email from Nicholas:  “I will buy your Rolls-Royce for $100,000.”

On Wednesday, Lenny e-mailed back to Nicholas: “OK, it’s a deal.”

Later that day, before Nicholas had a chance to check his e-mail account and see Lenny’s e-mail, Lenny received a phone call from Nicholas.

Nicholas tells Lenny that he just got a notice from the government that claims he owes $10M in back taxes.  So, although it goes against his instincts, he will have to pass on the Rolls-Royce.

You are the judge.

Did Lenny and Nicholas have a contract on Tuesday?  Or on Wednesday?  Or was there no contract?

 

Any Resemblance to Actual Events or Persons Living or Dead is Purely Coincidental.

Answer below in Comment #6.

  1. Hmm, this is a good one. It sounds like it will be up to whether or not an email is more like a verbal contract or a written contract. Nicholas might get off the hook since he never signed anything. It could also be hard to prove that he didn’t see Lenny’s last email.

  2. Lenny made an offer and Nicholas accepted it – that’s a contract.

  3. Contracts w/friends and family? I real friend, no. A crap friend, yes. Only an idiot would ask a friend to buy his (anything) anyway.

  4. I agree atomictangerine, a bad move

  5. Hmmm…now, I remember a similar scenario and my memory is a little fuzzy, but I believe until the actual terms have been set (when the money will be paid, when the goods will be picked up, etc.) that it’s not a legal deal.

    Do tell…

  6. The first requirement of any contract is that the parties must come to a “meeting of the minds.” That generally takes the form of an offer by one party and an acceptance of that offer by the other party.

    In this case, Lenny’s original e-mail was not an offer but rather a statement soliciting an offer.

    Nicholas’ e-mail on Tuesday (I will buy your Rolls-Royce for $100,000) was the offer.

    Lenny’s e-mail on Wednesday (OK, it’s a deal) was the acceptance and it was effective the moment he e-mailed it. A contract was formed.

    This was a simple contract. If it had other terms – such as “when the money will be paid or when the car can be picked up, etc.” – and both parties weren’t in complete agreement on those terms (did not have a “meeting of the minds”), then a contract would not have been formed.

    Additionally, since this contract was for the sale of goods over $500, the contract had to be in writing and signed. (Not all contracts need be written or signed.)

    Courts have ruled that an e-mail bearing the typed name of the party is sufficient to satisfy the “in writing and signed” requirement.

    Some other types of contracts that must be in writing:
    Contract of an Executor or Administrator (people who answer for a decedent)
    Contract of Suretyship (where a person promises to answer for the debts of another)
    Contracts in consideration of Marriage
    Contracts related to an Interest in Land (does not include a real estate brokerage contract)

  7. A contract needs an offer, acceptance and consideration to be enforceable and also survive any defenses to formation of the contract. Plus, the contract has to be for a legal purpose (i.e. a contract to kill someone is not enforceable). Here, if Lenny was attempting to get rid of the car before bankruptcy that may be considered a frauduent transaction which would void the whole contract.

    But assuming it’s not, here is the answer:

    “The next day, Tuesday, Lenny received an email from Nicholas: ‘I will buy your Rolls-Royce for $100,000.’” This is the offer.

    “On Wednesday, Lenny e-mailed back to Nicholas: ‘OK, it’s a deal.’” This is the acceptance.

    The consideration is the $100k purchase price.

    So far, so good, looks like we have a contract. But wait, there is a thing called the “Statute of Frauds” which requires that some contract have to be in writing in order to be enforceable and this is one of those cases. The car is a “good” and sales of good over $500 require “a writing.” The e-mail may be sufficient to serve as a writing because it was from the buyer to the seller.

    Unless here is some kind of fraud with the bankruptcy and/or the tax, which would make the purpose of the contract illegal, it looks like they have a contract.

    You may ask why Lenny’s initial e-mail to his friend was the not the contract. It’s because a contract has to contain “definite and certain terms.” Here, Lenny was merely thinking about selling:

    “’you know the car – the Rolls that I took you for a ride in last year in Vegas – I know you love it – I was thinking I might take $100,000 for it.’”

    Lenny was merely entertaining the idea of an offer.

    An offer has to contain “definite and certain terms” which creates a “power of acceptance” in the offeree (Lenny), i.e. it gives the offeree the power to accept the offer.

    Btw, the sale of goods are covered by the Uniform Commercial Code (UCC) which modifies the “common law” rule of contracts by making it easier to have enforceable contracts and additional terms.

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