Contract Formation Issue -- Hunt

CONTRACT FORMATION ISSUE -- HUNT V. MCLLORY

Case Background and Decision

Hunt owned and operated a farm. He borrowed $175,000 from Mcllory Bank and the two parties also discussed long-term financing for the farm. The discussions about long-term financing were oral and there were no specific terms ever agreed upon about the dollar amount, repayment terms, or interest rates. Hunt signed a promissory note for the loan and eventually defaulted on it. The bank foreclosed on the farm and other collateral for the loan. Hunt countersued arguing that the bank had breached the oral agreement to provide long-term financing to the farm. The court ruled that no contract for long-term financing had ever been created because the oral discussion did not create a contract since it left open all of the terms about the specific dollar amount of the loan and the other related terms such as for repayment and interest rates.

Issue Analysis

In order for a valid contract to be formed, all of the essential terms must be specified. Otherwise, there is no "meeting of the minds" and no enforceable contract is formed. Where an agreement is too vague to form an enforceable contract, courts will not revisit the negotiations to determine what the terms should have been. Generally, the necessary elements for a valid contract are a specific agreement whereby one each party knows exactly what is required of him by the contract and what is required by the other party. In this case, a valid contract would have required a precise amount of the future financing, repayment terms and conditions, interest rates that applied to the loan, the collateral accepted for the loan, the conditions under which that collateral would be forfeited, and the exact dates of a payment schedule for repayment.

MARKETING ARTICLE SUMMARY

Levere, J.L. "Airlines Focus Rewards on Those Who Pay More" The New York Times,

(October 17, 2011). Accessed online from:

http://www.nytimes.com/2011/10/18/business/airlines-focus-rewards-on-those-who-pay-more.html?_r=1&pagewanted=print

Recently, American commercial airlines have begun changing their frequent flyer programs to defray some of the increased costs of operations, largely because of high fuel costs. In general, the frequent flyer programs are examples of marketing concepts designed to promote customer brand loyalty, in this case, to particular airlines. The idea is that if airlines provide a benefit that is valued by its customers for using their product (airline flights) repeatedly, customers are more likely to make the effort to continue using the same airline instead of choosing flights by other criteria, such as convenience or even the bottom line. In principle, customers factor in the price and any inconvenience of using a specific airline as part of the benefits equation based on the value to the customer of the rewards furnished in return by the airline for customer loyalty. Usually, airlines issue free tickets for flights and/or free upgrades based on the total number of eligible miles a customer flies with them.