Contract Law for Consideration and Legal Intention

In the given case, the arguments regarding whether the contract formed between Berry and Blaire was legally binding involves two essential questions. Firstly, whether the statement made by Blaire was in jest such that it cannot be considered as acceptable by Berry’s performance[2]. Secondly, whether the statement made by Blaire amounted to a valid offer to form a contract that is acceptable on Berry’s performance, even if such statement was not made in jest. In regards to the first question whether any agreement made in jest can be considered as binding contract, the legal principle has been explained in Lucy v Zehmer [1954][3]. The objective theory of assent was applied by the court in this case. The defendant attempted to exempt from his contractual liabilities on the ground that he was joking while the agreement was made or that he did not have any legal intention to fulfill the promise he made to the plaintiff.

The Supreme Court of Virginia held that if the words and conduct of a person is construed by a reasonable standard, it manifests an intention to agree irrespective of the fact whether such conduct or words were merely a state of mind. Therefore, under such circumstances, a person cannot state that he was joking or jesting while the agreement was made. If the words or the conduct of the person is such that any prudent person would believe that, such person had legal intention to bind the contract agreement. In the Lucy’s case, it was held as immaterial whether the writing that the defendant signed was the outcome of the serious offer that was made by Lucy and accepted by the defendant or whether such offer and acceptance between the parties was held in jest. Under either circumstance, it amounted to a binding sale contract between the parties.

Further, in Mullen v Christiansen [Alaska 1982][4], the court held that a party who averts his/her contractual obligations, which otherwise is considered as a valid contract, shall bear the onus of proof that the parties did not have any legal intention to form a valid contract, despite the presence of objective manifestations of assent. The fact that there were differences that arose subsequently between the parties to the contract cannot be considered as sufficient evidence to establish validity of the original contract. Furthermore, the self-serving testimony of the parties to the contract with respect to their subjective intentions is not sufficient evidence to establish whether the parties have entered into the contract[5]. 

In Berry’s case, in regards to the first formation issue whether the statement made by Blaire was in jest such that it cannot be considered as acceptable by Berry’s performance, it can be stated that Berry’s performance makes it clear that the statement made by Berry did amount to formation of a contract. This is evident from the fact when Blair stated the winner should receive a new Toyota[6]. As the contest advanced, Blair told Berry that he is not sure whether the contest winner would receive a Toyota truck, van or car, but she would have to pay registration fees on the vehicle. Any prudent person would have comprehended from the statement made by Blair that is was not made in jest and was a contract. He further blindfolded Berry and led her to the parking lot of the restaurant, which signifies that she was to be rewarded with the alleged Toyota Car. Therefore, his conducts as well as his words establishes the fact that it manifests an intention to agree irrespective of the fact whether such conduct or words were merely a state of mind. Furthermore, any prudent person would believe that, Blair had legal intention to bind the contract agreement from his conduct and words.

In regards to the second issue whether the statement made by Blaire amounted to a valid offer to form a contract that is acceptable on Berry’s performance, even if such statement was not made in jest, the court found similarity between the nature of offer made in the Carlill v Carbolic Smoke Ball Co. [1893][7]. In Carlill, the defendant offered a £100 reward to anyone who contacted influenza despite using the flu treatment as per direction of the plaintiff. The offer made was held valid by the court as Carbolic made a valid offer that any person who uses the treatment as directed but still catches cold shall be rewarded and that Carlill had accepted such offer that makes it eligible to receive the rewards. The escrow deposit mentioned and made by Carbolic is the evidence of the sincere intention of the parties to the contract. The validity of the offer cannot be avoided on the ground that the reward was offered to any person who chose to accept the offer of using the smoke ball as per instructions[8].

The court further stated that the acceptance made by Carlill could not be defeated on the ground that she failed to acknowledge Carbolic that she has an intention to use the advertised treatment for two weeks as intended. Carbolic made a continuing offer that could have only be accepted by using the smoke ball as per its instructions. Furthermore, the only notice that was required to be sent to Carbolic was the notice in case, the advertised treatment failed to work as per instructions. Courts have opined that valid offers for unilateral contracts in reward offers and in prizes do not necessitates the offeree to establish that the offeror was at fault, but by merely performing certain act that the offeree was otherwise not obligated to perform, it establishes that the offeror was wrong[9].

In Las Vegas Hacienda, 359 P.2d at 86, the Nevada Supreme Court held that any offer made by one party to provide specified compensation on performing a certain act as a proposition to all persons who accepts such offer and comply with its conditions, shall be considered as a promise made by the offeror[10]. The performance of such act forms the consideration for such promise, which leads to the formation of contract enforceable at law. Further, to determine whether employer-initiated prizes amounts to enforceable contracts when the employees are already obliged to work on behalf of the employees, it is important to decide whether the obligation is pre-existing or an additional requirement not imposed by law previously. In the event, the contract requires an additional obligation to be performed by the employees, especially, when the law did not impose such obligation previously, such contract shall sustain by consideration and held valid.

Offers made in unilateral contracts becomes legally binding upon the offering employer if an employee commences to perform the conditions of the offer in reliance of such offer[11]. Under the given facts of the case, the Hooters contest was not a simple drawing for winning the Toyota. Berry had to sell most of the beer at her restaurant for qualifying to win the Toyota. This was necessary for her to stay employed at Hooters, which was optional for her not to do; hence, she was encouraged to put in additional effort to get herself into the drawing to win Toyota, thus, amounting to consideration that is important to form a valid contract[12].

Therefore, from the above discussions, it can be held that the contract entered between Blair and Berry was valid and enforceable. In unilateral contacts, an offer and acceptance is valid when the offeree relies on such offer and performs the conditions of the offer[13]. As stated above, valid offers for unilateral contracts in reward offers and in prizes do not necessitates the offeree to establish that the offeror was at fault, but performance of certain act that the offeree was otherwise not obligated to perform, establishes that the offeror was wrong. Further, the fact that she had to sell most of the beers would get her into the drawings to win a Toyota, which were not her pre-existing obligations. Hence, this amounts to consideration that further renders the contract valid. When the conduct or words of a person is construed by any prudent person that the party has legal intention to be bound by the contract, it manifests an intention to agree irrespective of the fact whether such conduct or words were merely a state of mind. Thus, the contract was not made in jest and was enforceable in the court of law.

Reference list

Berry v Gulf Coast Wings Inc

Caranta, Roberto. "Remedies in EU Public Contract Law: The Proceduralisation of EU Public Procurement Legislation." Review of European Administrative Law 8.1 (2015): 75-98.

Carlill v Carbolic Smoke Ball Co. [1893] 1 QB 256

Frazier, Adrian. "Irish Acting in the Early Twentieth Century." The Oxford Handbook of Modern Irish Theatre. 2016.

Fried, Charles. Contract as promise: A theory of contractual obligation. Oxford University Press, USA, 2015.

Las Vegas Hacienda, 359 P.2d at 86

Lucy v Zehmer [1954] 84 S.E.2d 516

MacQueen, Hector Lewis. "Illegality and Immorality in Contracts: Towards European Principles." (2014).

McKendrick, Ewan. Contract law: text, cases, and materials. Oxford University Press (UK), 2014.

Mullen v Christiansen [Alaska 1982] 642 P.2d 1345, 1350

Poole, Jill. Textbook on contract law. Oxford University Press, 2016.

Veasey, E. Norman, and Jane M. Simon. "The Conundrum of When Delaware Contract Law Will Allow Evidence Outside the Contract's" Four Corners" in Construing an Unambiguous Contractual Provision." Business Lawyer 72.4 (2017).