Memorandum on Contract Formation Research Paper

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New York Court of Appeals

The Honorable Jenny Rivera

African Diaspora Case

Should the court should affirm the appellate court's decision and reject summary judgment in favor of GYYC? Answering this overriding question requires examining whether the parties entered into a contract, but the issue of whether the contract was breached is a factual issue, which should be solved at trial, not through the summary judgment process. There are four issues related to whether or not the parties' actions formed a contract. First, is the Protocol an offer or, instead, a solicitation for an offer? If the Protocol is an offer, what are the terms of the offer? How does the Protocol evidence an intent by GGYC to be bound? Bound to what? If the Protocol is an offer, how can the offer be accepted? Has ADM accepted the offer? What is the consideration in the contract alleged by ADM? If the Protocol is an offer, and ADM accepted it by its application, does GGYC have complete discretion to reject a Defender Candidate application?

Analysis: While Golden Gate Yacht Club (GYYC) argues that the language of the protocol African Diaspora Maritime Corporation (ADM) "insists that the rules of a contest constitute a contract offer and that a participant's entry into the contest constitutes an acceptance of that offer."

The America's Cup is clearly a contest, as it is a sporting event pitting one boat against another. However, that fact does not necessarily mean that GYYC's invitation for applications is also a contest. However, when one sees that the different applicants are being asked to apply for an opportunity to race against one another, in order to qualify to race in the America's Cup, it becomes clear that it is a contest. In fact, the majority opinion of the appellate court, Judge Acosta determined that ADM did state a breach of contract claim, interpreting the rules of offer and acceptance, not as it would in a business scenario, but as it would in the event of a contest.

"It is hornbook law that the rules of a contest constitute a contract offer and that the participant's [entry into] the contest 'constitute[s] an acceptance of that offer, including all of its terms and conditions.'"

In other words, a contest is not governed by the same offer and acceptance rules that one would use to judge the existence of a contract in other circumstances. To find this, the court relied heavily on the decision in Sargent.

Moreover, because articles 8 and 9 of the Protocol were explicit, definite, and certain in their details for how to apply to be a Defender Candidate, the Protocol constituted an offer. ADM accepted the offer by tendering its application to become a Defendant Candidate. This is reinforced by the fact that ADM used the exact language in their application that GYYC specified was to be used in the Protocol.

Therefore, there was not only an offer by GYYC, but also an acceptance by ADM. Combined with consideration, which was transmitted in the form of a $25,000 application fee, all of the requisite elements of contract formation were present: offer, acceptance, and consideration.

In his dissent, Justice Tom states, "Dispositive of the question of contract formation in general is whether indeed an offer has been made. If so, whether the offer invites acceptance by the means used; and whether all conditions required for a valid acceptance have been fulfilled."

Justice Tom believes that the Protocol is merely extending an invitation for applications. However, the fee attached to the application seems unduly burdensome if it does not trigger some duty. It is, in fact, a request that the applicants tender consideration, not a request for a donation or gift. The giving over of this application fee suggests that the parties are entered into a contract, not a contract that obliges GYYC to name ADM a Defender Candidate, but a contract that then obliges GYYC to review ADM's application in good faith to determine whether it satisfies GYYC's qualifications for a candidate.

Knowing that it is an invitation for a contest, the Protocol becomes an offer and the application acceptance. However, it is important to examine what GYYC is offering. The lower court determined that "there is nothing in the language of the Protocol which indicates an intent that GGYC be bound upon the receipt of a Defender Candidate application and the accompanying fee to do more than review said application. Indeed, the acceptance of a Defender Candidate application is dependent upon both GGYC being "satisfied" with the resources and experience of the applicant, and upon GGYC deciding to hold a Defender Series in the first instance. Thus, Article 8.3 of the Protocol does not constitute an offer that creates a power of acceptance, or that would impose contractual duties applicant upon the submission of a compliant application and the required fee."

In other words, GYYC's acceptance of an application does not obligate it to deem an applicant sufficient to be a Defender Candidate. Therefore, the logical question is to ask whether there has been a breach, and, if so, what duty GYYC breached.

In all contracts the parties have explicit duties to one another, which are outlined in the terms of the contract. However, contracts also contain implicit duties that govern the behavior of the parties towards one another. Those duties include a duty of good faith and fair dealing. These are elements that are always present in contractual obligations; "implicit in all contracts is a covenant of good faith and fair dealing in the course of contract performance."

Therefore, the factual question of whether GYYC and ADM acted with good faith and dealt fairly with one another is a question of fact, not a question of law, and should not be determined in a summary proceeding.

When ADM submitted its application, it triggered duties owed by GYYC. Under the terms of the Protocol, GGYC agreed to review the application and accept the applicant if it was satisfied that the applicant had a reasonable chance of winning.

These duties required GYYC to act in good faith towards ADM. Whether or not GYYC acted in good faith towards ADM remains in dispute, with the parties in disagreement about GYYC's actions. However, determining that issue is not necessary; simply establishing that GYYC had a duty to act in good faith towards ADM is enough for ADM to defeat a summary judgment.

In fact, while it is true that "here is nothing in the unambiguous language of the Protocol or within the four corners of the contract that would impose a contractual duty upon defendant to accept an applicant for Defender Candidate upon submission of a compliant application," Justice Tom was examining the wrong issue.

The issue was whether the tendering of the application and the application fee created any type of contract between the parties. It did; even Justice Tom acknowledges that "the solicitation of applications initiates a process of evaluation of the credentials and capabilities of the applicants for the purpose of determining those that are most suitable for a particular purpose."

Therefore, whether or not GYYC did indeed engage in a good faith evaluation of ADM as an applicant would naturally be a factual issue for the parties to prove at trial, not to be evaluated in a summary judgment proceeding.

Conclusion: The court should affirm the appellate court's decision and reject summary judgment in favor of GYYC, because there is evidence that a contract was formed. Whether the contract was breached is a factual issue, which should be solved at trial, not through the summary judgment process.

Because GYYC's protocol is a request to compete, it is similar to the rules for a contest. The rules for contract formation in a contest are different than the rules for contract formation in other scenarios, and the issuance of an offer that would be considered an invitation to apply in other scenarios becomes an offer within the context of contests. This makes GYYC's Protocol an offer.

The rules of contract interpretation require looking to the explicit terms of the contract for interpretation. Doing so, the terms of the offer become clear: in exchange for ADM's $25,000 and completed application, GYYC will examine their submission to be one of the Defender Candidates. However, contracts interpretation is also governed by some external, generic rules. Implied in that offer are that GYYC will use good faith in its dealings with ADM. This means that GYYC should treat ADM as it would treat any other applicant. Whether or not GYYC was objective and fair in its consideration of ADM's application is a factual issue, which the parties dispute, and should not be subject to summary judgment.

The Protocol provides evidence of s an intent by GGYC to be bound it states that GGYC will accept an applicant if it is satisfied that an applicant has a reasonable chance of winning. Therefore, GGYC is not bound to accept an applicant as a Defender Candidate; it…[continue]

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"Memorandum On Contract Formation" (2014, October 24) Retrieved December 2, 2016, from http://www.paperdue.com/essay/memorandum-on-contract-formation-193039

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