Contracts Outline – Law School 1L


Essential Supplements for Success in 1L Contracts:

1L Law School Contracts outline based on the following books:

I.Breach and Remedies

 

A.Types of Relief

 

1.Expectation Damages

 

a)Introduction to Expectation Damages

 

Expectation damages: Your current situation compared to what you expected to
have if the contract were fulfilled

Usually the largest
(Plaintiff would want this)

Put the non breacher in
as good a position as they would have been if no breach was made.
Was gonna buy a car for $10000, Steve backs out, you pay $15000
for car. Expectation would be $5000. Focus on non breacher.

Most common type of
damages asked for.

Hawkins (P) v. McGee
(D)

Expectation damages,
difference between his expected 100% hand versus the hand he got.

Sullivan v. O’Connor

Pain
and suffering (expectation damages) for 3rdunexpected
surgery because it was not originally accounted for. She cant
recover lost earnings because she cant prove that there was any
loss.

 

b)Measurement – Cost of Completion vs. Diminution in Market Value

 

 

If CoC is less than
diminution court will award
If CoC costs more than
diminution then the court will ask:

Subjective/objective?
Willful? minor/material? Grossly disproportionate in value? Would
the breacher benefit?

Restatement §
348(2)
If a breach results in unfinished or defective
completion the non-breacher may recover damages based on

a) the diminution in
market price cause by breach OR

b) the reasonable CoC
performance if the cost is not grossly disproportionate to the
possible loss in value

Jacog & Young v
Kent
Court awards Kent the
difference/diminution in value because

 

 

  • It
    was not a material breach and
    did not frustrate the purpose of
    the K

  • The
    cost to replace all the piping was grossly and unfairly out of
    proportion as compared to the diminution of value to the house

 

Groves
v. John Wunder
Wunder contracts
to get gravel, from Groves property and leave it at the same
grade as the road

 

 

  • Wunder takes all the good
    gravel and leaves the place a mess

  • Holding

  • Court awards full amount,
    ~$60,000 to complete the grading of the land

 

Influenced
because it was a willful breach,
as opposed to unintentional breach

 

 

  • The contractor knew it
    would cost ~$60,000 to grade the land

  • Breach
    clearly benefitted
    the breacher, and hurt the breacher

  • Major
    breach
    : Breach changed the
    purpose of the contract (Land owner wanted good land)

 

Peevyhouse
v Garland
Coal company pays farmers to dig for coal but
promised to fix holes

Holding (See
Dissent)

Gave diminution of
market value (probobly should have been Spec Perf or $$$ to
complete)

Full performance would
cost substantially more to repair the land, awarded $300. Yes
$300

– Found that the
contract was about mining coal, not about the land being ruined


Farmers got lots of money for the coal, objective
value
 contract

 

 

  • Farmers didnt ask for
    specific performance, only money adding to the reasoning that it was
    objective.

 

Dissent,
got this one right, says that awarded the breacher by letting
them give up their end of the deal, they made ~$25,000 and would
have only broken even had they fixed the land. However they knew
this going in to be a possibility.

Didnt
ask for specific performance because the
lawyer screwed up
probably would
have won

 

2.Reliance
Damages

 

Reliance:
Where you are now versus where you would be if no contract had
been formed

Awards detrimental loss,
places promisee back in the position that it would have been in if
no promise was made. Should not be harmed because of breach.


Reliance can sometimes be more certain because it is a known
factor where you were before the
contract.

– less the loss the
breacher can prove, burden of proof is with the breacher to prove
his losses.

 

3.Restitution Damages

 

Restitution:
Place the breacher back into the position as if no contract was
formed to prevent unjust enrichmen
t
Smallest (Defendant would want this)

§ 373 Restatement

IF there is either “a
breach of nonperf that gives rise to a claim for damages for
total breach” OR “a reputiation

THEN the injured party
is entitled to restitution for any benefit he conferred on the
other party

§ 373(2) Restatement

The injured party has
no right to restitution IF

He has performed all
of his duties under K AND

No perf by the other
side is due other than payment, because payment is easy to
enforce.

 

4.Specific
Performance and Negative Injunctions

 

a)Land and
Goods

 

Specific
Perf is the default remedy for sales of land (land is
unique)

goods that are
unique or irreplaceable

 

 

  1. When there is no adequate
    remedy at law

  2. where goods are peculiar,
    sentimental, unique (ie heirlooms)

  3. scarcity hard to replace,
    hard to provide adequate cover

 

Loveless
v. Diehl

Lovless owned a farm
which he leased to the Diehls for three years $100 per month

During the lease the
Diehls had option to buy for $21,000

The Diehls made several
improvements to the farm planning to buy it but couldnt afford
it.

Diehls tried to sell to
another party, Loveless refused to uphold option to buy.

Court gave Spec Perf,
but dissenting judge says it should not have been because they
just wanted to sell it for money

Cumbest
v Harris (Fancy stereo)

We hold that the
chancellor erred in not finding the property to be sufficiently
unique to justify specific performance. Courts are interested in
moral standing, the ducking and dodging showed that Harris was
shady!

Reversed
and remanded to trial (because
court still has the
option of
providing specific performance)

Scholl
v. Hartzell

private sale of
corvette, seller backs out

P never made strong
argument that car was unique, instead just felt entitled to it
because of K

Court
didnt find it unique because of
bad argument

Sedmak
v Charlies Chevy

Ordered customized pace
car, dealer tried to make them bid

Holding: Spec Perf,
because the car was special to these collectors had special
options. And dealership was just trying to extort more money.

Coase
Theorem

Parties
will contract always as long as there is no transaction costs.

Always have trans cost,
but shows what will happen when trans costs are low.

Specific performance
depends ultimately what the parties will do (are they going to
rip out the walls to replace the pipes? no probably not)

 

b)Personal
Services

 

Personal
Services are performed by a specific person.

Courts NEVER grant spec
perf for Personal Service (Slavery, Indentured servitude)

IF performance is
unique, ie Actor, Athlete, a negative injunction might be
granted to say you cannot do Y because Y is related to X

Negative injunction
doesnt just hurt breacher, it can help non breacher

 

B.Limitations on
Recoverable Damages

 

1.Foreseeability

 

Hadley
v. Baxendale
Hadley sends crankshaft out to be fixed sues for
expectation when part is late

Rule: Damages for
breachers are only available when it is “foreseeable”

Foreseeability
is tested at the time the contract is made

Restatement § 351
Damages are not recoverable for loss that the party in breach did
not have reason to foresee as a probable result of the breach when
the K was made.

If you tell FedEx you
will loose $1 million a day if part is late and it is late, they
dont owe because the agent doesnt have the power to subject them
to that liability.

Objective test: What a
reasonable person would have or should have done

Subjective: What the
person actually did, INTENT. What they were thinking when they did
it

Damages are
foreseeable when:

Damages would be
perceived by a reasonable person

or the parties were
informed when the K was made.

Tacit Agreement Test
(Not Used Commonly)

Must prove more than
mere tacit (unspoken) knowledge, must appear that the party agreed
to assume risk.

Anglia TV v Reed

Holding
Anglia was permitted to
obtain damages even before the contract was made because it was
reasonably foreseeable at the time of contract that the investment
would be wasted in direct result to Reed’s breach of K

Chicago Coliseum v
Dempsy

Rule(s)
The general rule is that a
plaintiff can only recover damages that naturally flow and are a
result of the breach of contract

Reasoning
No expectation damages: The
profits from the event were too speculative. The success or
failure of the event rests on several outside factors, weather,
other simultaneous events, promotion.

No damages for the
Promoters attempt at specific performance. The attempt to force
Dempsey to fight were taken at the Promoters own risk.

Yes on Reliance damages.
The court agreed that the plaintiff should recover damages, from
the signing – to breach, for costs that incurred. In effect
placing the plaintiff back in the position as if no contract was
made.

 

2.Certainty

 

Certainty
is a major limitation on damages, and profits are only awarded
when they are certain to be had

Protects breachers, we
cont want the jury punishing them too severely, the purpose is to
help non-breachers not to punish breachers.

Hypothetical

Actor
offered $1 million for movie deal 10% of ticket sales

Studio cancels movie

$1 million is
recoverable (Certain)

10% not replaceable
(speculative)

Expectation can only be
given predictable profit.

Revenues – Costs =
Profit (Expectation)

 

3.Mitigation

 

Major
limit on damages

Avoidability by
reasonableefforts

Luten bridge is pinnacle

Mitigation varies by K
type, employee must accept employment unless it is inferior or
different in kind.

Lost Volume Seller

 

Jetz
v Salina Prop
, cannot avoid losses by re -leasing/selling
because they have enough inventory to support more volume. Volume
sellers still obligated to mitigate in a different way ie dont
leave washers out in rain.

Jetz as a “lost
volume” lessee, because Jetz could have supplied laundry to
both Kansas locations therefore lost profits on one K

Luten Bridge v
Rockingham County

Rule
Avoid-ability
of Harm After
the plaintiff had received notice they should have done nothing to
further the damages and should have desisted from further work.
Luten should not have finished the bridge after receiving notice
to cease construction

Neri v Retail Marine

Put deposit on boat, got
sick cancelled order at same time as delivery

It follows that Neri is
entitled to his deposit of $4250 less the profit for Marine for
$2759 and the incidentals, boat storage of $674 equal to $3253

Shirley
Maclaine v 20
th
C Fox

Plaintiff is only
required to accept employment by a reasonable effort that is
substantially similar or comparable. The difference in status of
the role and the drastic change in location were what was used to
back this.

 

4.Emotional Disturbance

 

Emotional
damages are recoverable in certain situations based on the
intrinsic nature of the contract

§ 353 Emotional damages
are recoverable based on the type of contract, not entirely on
foreseeability. K for house building not recoverable, Breach of K
for funeral services recoverable.

 

C.Liquidated Damages
Clauses

 

Rule

“liquidated damages”
enforceable. Damages for a breach as a LDC but only an amount
reasonable compared to the actual anticipated loss, or when proof
of the loss is difficult.

“penalties”
are unenforceable (can the damages be easily calculated? is the
clause too broad, any minute breach? Punitive
damages are not recoverable unless the breach is also a tort

Courts
will find a wider range of LDCs to be reasonable when damages are
difficult to determine.

After breach

Determine damages

Prove damages

Choose a measure for
damages

At time of K

Proved what the parties
were thinking

What was the forecasted
potential damages

Benefits
of LDC

Ease of litigation

Parties can make own
remedies and be aware of damages

Reduces need to prove
damages such as lost profits etc, then it is much easier to base a
decision on

Kemble
v Farren

Theater K with Comedian
to perform shows for four seasons

Stipulation that if
either party neglect or refuse the agreement or any part then they
pay £1000

In second season comedian
refused to act

Holding

Found that because the
£1000 stipulation was for any minute breach that it was a penalty
and unenforceable

Stuck with £750 award

Wassenaar
v. Towne Hotel

Employee hired for 3 yrs
fired after 2

LDC was for full salary
of K, Supreme Ct upheld LDC because once the LDC has been found to
be reasonable it should not be reduced. Because it was a sliding
scale based on time left in K, not a lump sum. No duty to mitigate
in this case by finding a new job because LDC was reasonable.

 

 

D.Breach

 

1.Material
Breach

 

Material
breach by the counter party allows you to pursue rescission
restitution OFF the K

Material breach by
counter party also allows you to suspend performance

On contract: There
was a K, this was supposed to happen, they breached, MAKE IT
BETTER….expectation, reliance, spec perf, neg injunction

Off Contract:
There was a material breach (you can now stop performing), I spent
money for this…K failed I want restitution. Restitution is
always off K. Not available for a partial breach.

Is it Material?

Did the breach deny the
counter party of the benefits they were to receive and frustrate
the purpose of the K?

Did the non breacher
already get most of the benefit of the K??

Was damage caused?

What degree of hardship
to the breacher and non-breachers

What was the breachers
intent? Intent to perform = good. Intent to breach = bad

The nature of the
performance

The equity of finding a
breach, the results of determining a breach.

B&B equip v.
Bowen pg907

B&B partener
retires, Bowen hired to replace. Doesnt perfom his partner duties.

Holding: Breach was
material K rescinded because, D performance was defective, it was
willfull (had opportunity to fix), unfair to
penalize B&B, hard to determine damage incurred by B&B

Shawn
Kemp
was his breach material? Maybe, good arg both ways

Lane
Ent. v. LB Foster

Foster was to supply
bridge components to Hammond for OH bridge

Foster K with Lane to
coat the metal phase I & II

Lane coated the metal
didnt meet 0% standard

Lane says it cant meet
0% on pahse II\

Foster still owes a
little for Phase I, with holds payment requesting adequate
assurances

Lane stops working and
wont work becase Foster wont pay

Holding: Foster
didnt materially breach because it only withheld a small % that it
owed not a breach acc to § 241

Lanes failure to
Adequate Assurance pII was an Anticipatory Breach “we cant”

Foster wins – $42,055
(from Lane), extra it had to pay to fix – $7000 cash it still owed
Lane.

If a party demands
adequate assurance and none is provided then it is a repudiation.

Perfect
Tender Rule

Another reason you can
rescind. Only applies to GOODS, overlaps w UCC

If the seller doesnt
produce the exact goods expected buyer may reject

If the goods are
presented before K is due seller has unconditional right to fix
the imperfect goods

After the date of K
seller still has a right to fix within reasonable time

After acceptance buyer
may only rescind if the defect is serious

Ramirez
v. Autosport

K to buy van, seller
keeps delaying because of defects.

After
a few tries Ramirez P wont by van. P wants recision, D says they
want damages cuz P didnt buy van

Holding: P wins
because Perfect Tender rule, buyer can reject goods if they are
defective. Awards rescission restitution damages for fair market
value of the van

 

2.Anticipatory
Repudiation and Adequate Assurances

 

Albert
Hochester v. Edger De La Tour

D hires P to travel as a
courier

D repudiates before jobs
is to start (June 1), P immidiately sues

Holding: If the
other party renounces his intention to perform the other party
may, without waiting until perf is due, sue immediately

P did get a new
identical job July 4, so his damages are only the lapse from June
1 – July 4 where he was out of work (so as not to double
compensate him

Harrell v. Sea Colony

P makes K to buy condo
from D

Pays $5000 deposit
(stated in K as LDC)

Sends letters and calls
requestingto be releived from K

Harrell then sells Condo
to someone else at a &7100 profit, keeps $5000 deposit

Holding Reversed,
a MERE REQUEST IS NOT A BREACH. The must be undisputed intent that
repudiator absolutely will not perform.

Scott v. Crown

P sold and delivered
16000 bushels of whet to D payment due 4/13

Made 2 more similar K, P
heard that D was shady

Refused to laod new
wheat because couldnt get ahold of D

Sent letter demanding
Adequate Assurances

Holding in favor
of D, because P suspended performance before asking for assurance
in writing. Never said specifically when they called why they were
worried.

You cannot modify your K
when you request assurance ie demand to be paid NOW

Rule: UCC § 2-609
pg904

When reasonable
insecurities arise either party may, IN WRITING, request adequate
assurances. If assurance isnt given THEN you can suspend perf.

If you suspend before
written request then YOU breached (ex Scott P)

 

 

II.Making an
Enforceable Agreement

 

A.Offer

 

1.Objective/Subjective
Nature of an Offer

 

Subjective:
INTENT. The intent of the party, did you intend for them to THINK
that there was a K? ( the person accepting must believe you were
offering)

Objective:
ACTIONS. The interpretation of the actions, A reasonable person
would interpret your actions as offering a K

Lucy v. Zehmer

Both drunk at bar, Lucy
says ill buy your farm for $50K way over market

D says no you wont you
dont have enough. Writes 2 K then he and wife sign.

Whispers to wife JK! P
doesnt know this

Holding Lucy gets
Spec Perf and gets the farm, he didnt know if was joke. If he had
overheard JK then there would be no K and he wouldnt get.

Specific Performance
is default remedy for land sales

UCC doesnt govern
this…only GOODS

Suppose reversed, Lucy
woke up and regretted buying. Then NO because it would fail
Subjective (Intent) test because Zhemer knew that it was a joke

 

2.Preliminary
Negotiations

 

When
Examining offers would an ORP think there was an offer?

Adverts not generally
offers unless very specific (Mink coat case)

Preliminary
Agreements

 

 

  1. Was there partial
    performance by one party that the other party (claiming no K)
    accepted?

  2. Were all the essential
    terms agreed, no loose ends?

  3. Did either party expressly
    agree to be bound ONLY on final written K?

  4. Was the complexity of the
    K so great that it obvi requires a written K?

 

Nebraska
Seed v. Harsh

Harsh sends ou ad for
seeds

Nebraska sends letter to
“accept” sues, wins at trial

Holding Reversed
in favor of Harsh D,

It was only an advert, if
it was offer then it would open them up to be sued by everyone. Ad
was a request for bids

Not specific, who what
when where, no exact amount/price/delivery time

Empro Manuf v Ball-Co
Manuf

Deal to buy securites
goes south, Ball Co negotiates with someone else to

Empro files suit

Ball-Co looses beacsue
Empro wasnt under obligation in K

Parties didnt intend to
be bound (mmeting of the minds)

???????

Just a framework not a
full K

Leonard v. Pepsico

No ORP would belive you
could buy a military jet.

Court gives a shit about
Leonards subjective belief that there was an offer to K

Texaco v. Pennzoil
pg323 Ct App TX 1987

Pennzoil negotiating
with Getty to buy Getty shares

Texaco swoops and buys
Getty shares

Texaco wins at trial
Pennzoil appeals saying there is a K at law

Holding Pennzoil
wins because

 

 

  1. Accepted performance? No,
    but K only valid for 24hr really too soon

  2. All essential items
    agreed? Toss up

  3. Complex? Yes supports
    Texaco, but not enough.

 

3.Revoking
an Offer

 

Ways
to Kill an Offer

 

 

  1. Revocation

  2. Rejection, including a
    counter offer

  3. passage of time, after a
    reasonable amount of time the offer is gone (default rule is
    reasonablebut can bespecified by parties)

  4. Death or incapacity of the
    offeror

 

 

Option
Contract: Limits the power of offeror to revoke the offer

 

 

  1. Can A, acting alone make a
    K if he wants to?

  2. Can A’s counterpart take
    away A’s power to accept and make a K if he wants to?

 

Yes to
1 and No to 2 → Options K

Yes to 1 and Yes to 2 →
Only an offer, NO OPTION K

Mirror
Image rule

The
acceptance must be exaclty the same as the offer

It
cannot include any changes to the original offer, (you can
unequivocally accept and SUGGEST changes)

Mailbox
rule: acceptance
is valid when
sent if dispatched in a reasonable matter

Revocation
is valid when received

Mailbox is a default
rule and can be changed

Mailbox does not apply
to Options K (ie its when the acceptance is received)

Firm
offer under UCC

Easy way for merchants
to make an Option K, must be by a merchant IN WRITING. Cannot be
revoked for a period of time

 

 

  1. An offer AND

  2. by a merchant AND

  3. to buy and sell goods AND

  4. in a signed writhing AND

  5. By its terms it cannot be
    revoked for a period of time

 

 

Who
is a Merchant you might ask…

Merchant: 2-104

A
person who regularly deals in goods of the kind

Car
dealership

Someone
who holds himself out as having knowledge or skill peculiar to the
practices or goods involved

Auto
mechanic selling a car

Someone
who has an agent who fits that description

Used
car dealer to sell your car for you

 

A
Counter Offer Is: 1.
A rejection of the original offer AND 2.
A new offer

Dickenson
v. Dodds

D gives P a signed
letter saying he has until Friday 9am to buy property

P aware that D was
selling to someone else leaves notice with D mom, and sends agent,
and goes personally to accept 7am Friday

D says nope its already
sold, P wins at trial

Holding Reversed
D wins because P knew that the property had been sold.

! If the facts were
different and P didnt know property was sold then it would pass
Objective(actions) and Subjective(intent) and would have won

! D
can still revoke the offer before acceptance but after acceptance
cannot revoke.

nadum pactum: a
bare naked promise, “ill sell you land until fri” not binding
by promise alone, he can revoke any time before acceptance

Dickenson could have
created an Option K by placing a deposit

 

B.Acceptance

 

1.Objective/Subjective
Nature of Acceptance

 

Subjective:
THINK did you think you were making a K? You need to have
thought you were making a K for it to be valid. (if you knew it
was a joke then no K

Objective:
ACTIONS Would a ORP interpret your actions to be acceptance

 

 

  1. Embry v. Hargadine,
    McKittrick 1907 Test

    1. Employee working on a 1
      year K that is about to expire

    2. Embry goes to
      McKittrick’s office to discuss new K and says I want a new K or
      else I quit

      1. McKittrick says “dont
        worry about that get back to work”

      2. Objective – Would an ORP
        observing think there was a K? YES

        1. Subjective – Did
          offeree think a K was being made? YES

        2. Did McKitt think he was
          offering? NO

      3. HOLDING
        Yes a K can be made without both
        parties subjectivly thinking there was a K. Because It meets to
        OBJECTIVE (outsider) and SUBJECTIVE (on Embry only) then a K was
        made

  2. Lucy
    v Zehmer

    1. Both drunk at bar, Lucy
      says ill buy your farm for $50K Zemher says OK (but is joking)

    2. He and his wife sign the
      K

    3. HOLDING
      Lucy wins SPECIFIC PERFORMANCE and
      gets the farm

      1. because Objectively
        (observer) would think there was a K. AND Lucy SUBJECTIVE thought
        there was a K

      2. Would have been
        DIFFERENT OUTCOME if Lucy knew it was a joke (which is debatable
        cuz he probably did)

 

2.Acceptance
by Promise vs. Acceptance by Performance

 

 

  1. An offer
    may specify how it can be accepted (ie by Promise OR Performance)

  2. The offeror can specify if
    the offer is accepted by promise or silence

  3. If the offer doesnt
    specify the restatement DEFAULT RULE is that it can be accepted by
    promise OR performance

  4. If the K begins ONLY on
    performance then the offeror has made an options K. In this case
    once the offeree begins perfomance then offeror cannot revoke.

    1. Perparing for performance
      does not constitute acceptence

  5. If
    acceptence is based on performance OR acceptence, then starting
    performance is acceptance and a K has been formed

  6. When inaction implys
    consent then a K has been made. Like the lawnmower or Massasoi whip
    case

    1. Carlill v. Carbolic
      Smoke Co.

      1. Guarantee for anyone who
        gets influenza after using Ball

      2. HOLDING P wins
        because the language of the offer “does not expect and does not
        require notice of acceptance”

    2. Restatement
      § 54

      1. Where an offer invites
        an offeree to accept by rendering performance, no acceptance
        notification is necessary unless the offer specifically says so

      2. If the performer knows
        that the offeror has no adequate way to hear of the performance
        promptly then their contractual duty is discharged UNLESS

        1. The offeree tries hard
          to notify OR

        2. The offeror learns of
          performance in a reasonable time OR

        3. the offer indicates
          notification of performance is not required

    3. Restatement
      § 45

      1. When an offer can only
        be accepted by performance once performance is begun then it
        creates an option contract.

      2. The offeree now has an
        OPTIONS K (he does NOT HAVE TO COMPLETE PERFORMANCE) once
        performance is begun then the offeror cannot revoke the offer.

    4. Restatement
      § 62

      1. If it can be accepted by
        performance OR acceptance, the beginning of a K is when
        performance starts and IS BINDING ON Both PARTIES

      2. Different then §45
        because you can accept both ways.

    5. Barnes
      v Treece

 

,Punchboard
maker “ill give you $100,000 if you find a crooked board.
Bartender found 2 crooked boards

 

        1. HOLDING Court
          said offer was valid, P got the $100,000

 

      1. Bilateral
        K:
        Regular K, ie Agreement to sell, accept then buy

      2. Unilateral K:
        Acceptance by performance, you cant accept by saying you will
        perfom, You have to perform first (BUYER CAN NEVER SURE FOR BREACH
        IF ACCEPTENCE BY PERFORMANCE ONLY)

      3. White v. Corlies

        1. P contractor remodling
          offices for D

        2. D sends acceptance note
          “upon agreement you may begin at once”

        3. P gets
          note and starts buying supplies without notifying D

        4. D sends note later in
          the day reneging

        5. Can builder start with
          performance?

        6. HOLDING No, the
          builder needed to accept by informing D that he would start.

      4. Restatement
        § 30

        1. (1) an offer may require
          an acceptance to be made by an affirmative answer in words (ie
          upon AGREEMENT) OR by performing may empower the offeree to choose
          his form of acceptance (if offeree can choose then the acceptance
          is binding)

        2. (2) unless otherwise
          indicated by the language (which Corlies did indicate by asking
          for agreement) the offer invites acceptance by any
          reasonable means including performance.

      5. Patterson
        v. Pattberg

        1. P owed D for mortgage, D
          offered to lower mortgage.

        2. P goes to pay D says
          sorry already sold it to someone else

        3. HOLDING An offer
          for a unilateral K can be revoked any time before performance.
          Because P hadn’t performed the revocation is valid. (P probably
          would have won if he handed out a bag of money at the door :()

      6. Hobbs
        v. Massasoit Whip Co.
        Hobbs is a
        trapper send Eel skins to Massasoit as he had done before Eel skins
        were for making whips Under the circumstances of the prior dealings
        Hobbs formed a pattern of doing business.

      7. Restatement
        § 69(1)(a)
        Where because of
        previous dealings or otherwise, it is reasonable that the offeree
        should notify the offeror if he does not intend to accept.
        (b)
        Only offerees who intended to accept with silence can be held to
        this (you can make a rediculous offer, “ill sell you a pen for
        $1000, to accept say nothing to reject write congress”)

 

 

 

 

C.Special
Topics

 

1.Form
Contracts

 

a)§ 211(3)
Form K are generally enforceable. UNLESS the drafter had reason to
know that the counter party would not have assented if they knew of
the provision; then the K is NOT Valid

 

b)§ 206
says form K construed against the drafter

 

c)§ 205
from K subject to good faith and fair dealing

 

d)§ 208
form K subject to uncontionability/fairness

 

e)Public
policy prevents validity of certain types of form K § 207, § 178-96

 

f)§211(1)
Where a party to an agreement…manifests assent to a [form K], the
terms of the form K are enforceable.

 

g)Carnival
Cruise Lines v. Shute

 

(1)P bought
cruise ticket, slipped and fell on baot

 

(2)Ticket
had forum selection clause

 

(3)HOLDING
forum valid, because as long as the clause is fundamentally fair
then it is enforceable, public policy supports allowing cruise line
to only have to litigate in FL (This is a luxury item, not a
nececity)

 

h)Caspi
v. MSN

 

(1)

 

(2)HOLDING
MSN wins, because a party is bound by terms even if they didnt
read them. AND forum selection is generally valid UNLESS it was the
result of fraud OR it would be overwhelmingly inconvenient to
adjudicate in chosen forum

 

(3)t

 

2.E-Commerce

 

a)Use the
Embry Test and apply it to e-commerce

 

(1)Objective
Would an ORP observing think the counter party had manifested
assent

 

(2)Subjective
Did the person asserting the K actually think the counter-party had
manifested assent

 

b)Specht
v. Netscape

 

(1)The K was
in a small link hidden at bottom of the page, Netscape tries to say
that the act of downloading is assent to the K

 

(2)Subjective
YES, Netscape thought they were making a K

 

(3)Objective
– FAIL, the user had no idea there was a K

 

(4)HOLDING
No, Specht wins BECAUSE a license agreement that is not expressly
accepted by the user is not binding

 

c)Register.com,
Inc. v. Verio, Inc.

 

(1)By
submitting a WHOIS query you agree to the terms not to abuse data/use
robots

 

(2)Subjective
– YES, Register.com thought they were requiring K to access data

 

(3)Objective
YES, obvi after the second time Verio pulled the page they
were well aware of the Ks

 

(4)HOLDING
Register.com wins, BECAUSE Verio was well aware of the terms (maybe
not the first time, but obvi they saw this page several times) AND
they accepted the benefit of the data.

 

 

 

 

 

 

III.Scope of
Agreement and Interpretation

 

A.Misunderstandings
and Vagueness

 

1.Ambiguity
:: When the two parties think they a contracting for two different
things

 

a)If neither
party knew or had a reason to know the other party had a different
understanding then there is no K

 

b)If person
A knows/has reason to know that B had a different meaning, BUT B
doesnt know A had a different meaning

 

(1)Then we
Enforce B’s interpretation

 

2.Vagueness
:: When the parties disagree about the scope of what they agreed
too. There is a different interpretation of the same word

 

a)Eg Dress
case, chicken case

 

b)LOOK TO :>

 

(1)Terms
of the K
– does it define the term? This is weightier then 2-5

 

(2)Look
at course of negotiations
– what were the parties thinking
OBJ/SUBJ when they made the K?

 

(3)Course
of Current Performance
– in the course of THIS K how have the
parties been performing/acting?

 

(4)Course
of Past Dealings
– in PAST K between the parties, how did they
treat those K’s?

 

(5)Trade
Usage
– ie in the Horseshoe biz, what does the term usually
mean in the Horseshoe biz?

 

3.Restatement
§ 201

 

a)Whose
Meaning Prevails

 

(1)If both
parties think something (both agree on definition to he term eg
bananas = machine guns), well then that is what it means

 

(2)Exception
the the general rule of 3 (Course of Perf). When can the party still
enforce?

 

(a)If one
party knows the other party understands a different meaning (eg Party
A knew that party B expected Peerless shipment in Oct, NOT Dec!!)
Unfair to sandbag the other party. This will meet the Obj/Subj test
because the buyer and an ORP would think they are making a K and Subj
the buyer believes he is making a K

 

(3)If the
parties have different meanings of the term then neither party can be
bound by the others meaning

 

4.Wienberg
v. Edelstein “What is a Dress?”

 

a)P dress
seller and D blouse seller own retail stores in same mall

 

b)P has
clause in lease that no other dress sellers are allowed in mall

 

c)HOLDING
in favor of D at the time the P’s K was made, he knew or should
have known the dinstinction of the Vague Terms in his K. Court
belives the absence of “skirts and blouses” in the lease K was
intentional. P should have included these if he wanted to prevent
this type of competition

 

d)NOTE
should have sued landlord NOT the other retailer (there was no K
between these two parties)

 

5.Frigaliment
Import. Co. v. BNS Int. Sales Corp. “What is a chicken?”

 

a)BNS(NY)
makes K with Frig(Swiss) to sell “Chickens”

 

b)BNS
delivered both young broilers and low quality stewing chix

 

c)HOLDING
burden of proof on the party demanding enforcement (P) Frig
failed to establish that Vague Term “chicken” should be
interpreted as young only

 

d)Parol
evidence is admissible to show the meaning of a vague term to
interpret the K.

 

6.Raffles
v. Wichelhaus

 

a)P makes K
to sell cotton to D on “Peerless” netiher party knew there were 2
Peerless ships. D thought cotton was coming on Oct ship. P thought it
was Dec ship. D refused the delivery in Dec. P(seller) sues D(buyer)

 

b)HOLDING
D(buyer Wichelhaus) wins because there was no meeting of the
minds, terms Ambiguous two different things!

 

(1)Parol
Evidence allowed here to show that the term was Ambiguous because
each party thought it was a different shipping date.

 

c)Objective:
would an ORP think there was K

 

(1)Buyer:
Yes for Oct

 

(2)Seller:
Yes for Dec

 

(3)PROBLEM
Meets the Embry Test but you CANT ENFORCE BOTH, so we must
throw it out

 

7.Oswald
v. Allen

 

a)D(Allen)
made K to sell all her “swiss coins”

 

b)Two
collections

 

(1)Swiss
collection

 

(2)Rarity
Collection (Included several Swiss coins)

 

c)HOLDING
No K because you cant enforce both K!!!x

 

B.Battle
of the Forms

 

1.UCC §
2-207 UNDER UCC!!!

 

a)§2-207
When there is an acceptance that includes different terms from the
offer it IS NOT treated as a counter offer UNLESS:

 

(1)It is
explicitly stated that acceptance is conditional on the acceptance of
the new terms

 

b)§2-207(2)
UCC – By default such an acceptance with new terms is
treated as an acceptance of the original offer

 

(1)The
new terms are treated as proposals to modify the K

 

(2)If the
K is between Merchants the new terms are automatically incorporated
into the K UNLESS

 

(a)The
offer expressly forbids modifications

 

(b)If the
new terms materially alter the K

 

(c)If the
new terms were objected to within a reasonable time

 

c)§
2-207(3)
When the parties writings do not create a K BUT the
actions of the parties indicates a K then the terms ARE:

 

(1)Any terms
the parties had in writing (if payment due on delivery then thats a
term)

 

(2)If there
are any GAPS then they are filled with the UCC GAP FILLING PROVISIONS
(Default Rules)

 

d)WHO IS A
MERCHANT?

 

(1)Deals in
goods of that kind

 

(2)By
occupation claims to have expert knowledge or skill

 

(3)An agent
hired by third party to be an expert

 

2.Step-Saver
Data Systems, Inc. v Wyse Tech, and TSL

 

a)SSD sets
up computers for Dr. and Lawyers

 

b)SSD sells
a bunch of Wyse computers with TSL software

 

(1)SSD
made phone order

 

(2)SSD
sends Purchase Order

 

(3)TSL
sends back Invoice

 

(4)TSL
sends order with box top form K (TSL claims this is the K)

 

c)HOLDING
SSD P wins because the boxtop license materially altered the
agreement and therefore is not automatically incorporated under the
UCC §2-207(2) AND the parties recognize there is a K even if
writings dont comport §2-207(3)

 

3.Union
Carbide v. Oscar Mayer Wiener (1991)

 

a)K for
wiener casings

 

(1)UC sends
Price Book

 

(2)OM sends
Purchase Order

 

(3)OM pones
UC with qty

 

(4)UC ships
wieners

 

(5)OM sends
Release Order

 

(6)UC sends
invoice

 

(a)5
interactions, 4 documents

 

b)On back of
Invoice(6) and Price Book(1) it says buyer responsible for all taxes

 

c)UM says
buyer has to pay taxes any time

 

d)OM says
only has to pay taxes included on invioice

 

e)UM claims
OM owes them back taxes (after audit)

 

f)HOLDING
Oscar Meyer Wins for two reasons

 

(1)If the
taxes were part of the K then UM looses because they should have
charged up front

 

(2)OR if
taxes not in K then UM looses because it would be a material change
of the K violating §2-207(2).

 

C.Warranties
and Disclaimers

 

1.Two main
types under UCC → Express and Implied, BOTH CAN BE DISCLAIMED by
the K terms

 

a)CANNOT
DISCLAIM ::

 

(1)Defectiveness

 

(2)Professional
Malpractice.

 

2.Defines
the expectations of the parties

 

a)Express
warranties
, explicitly state the terms of the warranty (On
the midterm “realistic faces in two (2) hours” is express
warranty)

 

(1)Ex the K
says what the warranty is

 

(2)Not
everything said is an express warranty, some can be mere puffery!

 

(3)An
express warranty is an affirmation of fact that becomes part of the
bargain.

 

(4)Reliance
is NOT necessary
to create an express warranty

 

(5)Generally
something is a warranty if the seller asserts a fact of which the
buyer would be otherwise ignorant

 

(6)PUFFERY
is an expression of opinion when it is a general statement that
includes no special knowledge, buyer should excersise judgement
(These items are the hottest! = Puffery → NOT WARRANTY)

 

b)Implied
Warranties
default rules inserted if the parties dont espress

 

(1)UCC
provides Two (2) Implied Warranties

 

(a)Implied
Warranty of Merchantability

 

 

(i)Only applies if
the SELLER is a Merchant
(ii)WofM means the goods
have to be everything a buyer would NORMALLY EXPECT

 

(b)Implied Warranty of
Fitness for a Particular Purpose

 

 

(i)Implies that the
buyer is RELYING on the sellers ability to furnish suitable goods
for a specific purpose
(ii)The seller must know
of this particular purpose AND know that buyer is relying on this
purpose
(iii)DOES NOT REQUIRE
anyone to be a MERCHANT

 

(c)Implied warranties
OUTSIDE UCC

 

 

(i)Tort Law
(a)Non-defectiveness
(b)Professional Standard
of Care
(c)Property Law
(i)Warranty of
habitability

 

3.Royal Bus Machines
v. Lorraine Corp.

 

a)Lorraine
buys a bunch of copiers from Royal,

 

b)Loraine
has trouble with copiers

 

c)Loraine
sues for Breach of W, wins, then Royal(D) appeals

 

d)Alleged
Warranty Statements:

 

(1)
The copiers and components are high quality –
NO

 

(2)The
copiers rarely need repairs. – NO not specific, puffing

 

(3)Replacement
parts are readily available – NO statement of facts doesnt apply to
the goods sold

 

(4)Copier
maintenance costs will be less than 1/2 cent per copy. – YES its very
factually specific

 

(5)The
copiers were extensively tested and ready to be marketed. – YES, the
seller knows how much they were tested, buyer would not know

 

(6)Buying
these copiers will be very profitable. – NO the seller has no special
knowledge of this, buyer should know for himself if they will be
profitable.

 

(7)The
copiers will not catch fire. – YES because the seller would know if
they are prone to fire, the buyer cant tell when he looks at the
copier

 

(8)Copiers
will need to be serviced ~7,000-9,000 copies. – YES it is very
specific factual assertion that the seller knows and the buyer does
not

 

e)HOLDING
Not a Warranty UNLESS the seller
asserts a FACT, a mere OPINION is PUFFERY and NOT a Warranty

 

4.CBS
v. Ziff Davis Publishing

 

a)CBS
makes K to buy consumer magazines
from Ziff

 

b)CBS shows
concern over the accuracy of financial documents but BUYS ANYWAYS

 

c)HOLDING
CBS Wins, just because a buyer shows
doubt over the accuracy of a warranty does not release the warrantor
from its obligations. CBS relied on Ziffs assertions that the docs
were accurate.

 

(1)DISSENT
feels that because CBS had opportunity to review the docs and they
didnt think the docs were accurate and therefore COULD NOT HAVE
RELIED, thus NO Warranty

 

5.Cececi
v. Canio Const. Group

 

a)Builder
builds house, Floor sinks

 

b)Not a sale
of goods UCC doesnt apply

 

c)K states
none of the terms of the warranty will survive title closing

 

d)Probably
would have been out of luck if not for New York Housing
Default Warranty
.

 

e)HOLDING
Cececi wins because Housing
Default Warranty (NY)
states “That
the builder must construct a house free from material defects and in
a skillful manner wholly consistent…with the reasonable expectation
of the purchasers.” Common sense dictates

 

6.Schneider
v. Miller (As Is Impala)

 

a)P shopping
for new car, buys ’66 Impala from D

 

b)P
inspected AND test drove the car

 

c)Bought “AS
IS”

 

d)After
purchase P took car to get trunk and brakes fixed → finds RUST

 

e)HOLDING
D wins because the warranty was
disclaimed, UCC allows “AS IS” sales. Schneider should have taken
it to a mechanic or inspected it more thoroughly .

 

7.Warranty
Disclaimers – Exclusion or Modification § 2-316
.

 

a)UCC
§ 2-316(1)

A disclaimer is valid as long as it makes reasonable sense under the
circumstances. If it is unreasonable then not valid

 

b)UCC
§ 2-316(2)
If
you want to disclaim a warranty you need to be CLEAR and Conspicuous
(Remember vague/ambiguous terms interpreted AGAINST the drafter)

 

c)UCC
§2-216(3)(a) –
Clear language
that indicates there is no warranty WILL BE ENFORCED (this kills any
expectation or reliance on a warranty)

 

d)UCC
§2-316(3)(b) –
If the buyer
has inspected or refused to inspect and failed to notice something HE
SHOULD HAVE then there is NO WARRANTY (buyer should have known what
he was getting or hired someone to inspect)

 

e)UCC
§2-316(3)(c) –
The practice
of the parties over time can modify implied warranties, (Course of
Past Dealings/Current Performance)

 

8.Non-Disclaimable
(Torts)

 

a)Professional
Duty of Care (Malpractice)

 

b)Non-defectiveness
(Products liability).

 

D.Parol
Evidence Rule

 

1.Fully
Integrated Contract:
A final written agreement on ALL TERMS of
the K. (You should add a “Merger Clause” to indicate that it IS a
fully Integrated K)

 

2.Partially
Integrated:
Final written agreement on SOME TERMS of the K

 

3.Parole
Evid. Traditional vs. Modern interpretation

 

a)Difference
is the assumptions they make about a K

 

b)The extent
to which each rule allows you to use Parol Evidence to INTERPRET the
writing

 

c)Lastly CA
has an even more liberal version of the PE Rule, as long as you claim
it to be interpreting something

 

d)Traditional
version

 

(1)Assumes
a K is fully integrated unless the K says otherwise on its face. If
the K mentions a particular aspect then Traditional Rule
assumes that is fully integrated on that part

 

(2)Will only
allow PE to interpret writing in the K that is vague/ambiguous

 

(3)You CANT
supplement a Fully Int K

 

(4)You CAN
supplement a Part. Int. K

 

(a)Only
Partially Integrated if it appaears INCOMPLETE on its face ie:: a
Material Part is left out.

 

(5)You CANT
use PE to establish vag/amb.

 

e)Modern
Version

 

(1)Allows PE
to show if the K should be Fully VS. Partially integrated

 

(2)Allows PE
any time it is needed to ESTABLISH vagueness/ambiguity (Even if not
vag/amb on its face)

 

(3)You CAN
use PE to show vag/amb (goes to JUDGE first then jury if he doesnt
throw it out)

 

(4)More
EXPANSIVE view.

 

f)Parol
Evidence

 

(1)Contemporaneous
or Predates K (MUST PREDATE because after K is a modification!!)

 

(2)Cannot be
used to contradict the written agreement only to interpret terms ie::
amb/vag OR non-mentioned terms

 

4.Thompson
v. Libby

 

a)Thompson
agrees to sell Libby “all logs marked ‘HCA’ for the winter of
1882-83 for $10 per 100ft, boom scale at MN. Pay cash as fast as
scale bills are produced

 

b)Libby
refuses to pay because logs aren’t good quality

 

c)HOLDING
Parole Evidence inadmissible. P wins (D must pay for shitty
logs) No written warranty in the K means there is NO WARRANTY (Under
traditional view assuming fully integrated) BECAUSE the K did not
appear Incomplete on its face

 

Will
Parol Evidence be allowed that says:

Traditional
Rule (assumes Full Integration)

Modern,
Liberal Rule Rule (Not assumed Fully Integrated)

Shoulda
been $9

NO

NO

Shoulda
been a Warranty

NO

YES
(because the K’s not assumed to be fully integrated, and there is
no mention of a warranty)

(HYPO)
What
is “Certain
Logs”

YES
(Obviously Vague, Parol Evidence would be allowed)

YES
(Obviously Vague, Parol Evidence would be allowed)

d)Trad vs
Mod ^^^.

5.Brown
v. Oliver

a)Brown
bought land with Hotel (Oliver left the furniture)

b)Two years
later Oliver leases the Hotel

c)At the end
of his lease Takes the furniture and claims it was not part of the
sale 2 years ago

d)HOLDING
Parol Evidence is admissible to show the intent of the parties at
the time the K was made BECAUSE the furniture was not mentioned at
all in original K

6.Differences
between these two cases

a)Thompson
Case
: assumes the K is fully integrated (Traditional)

b)Brown
Case
: does not assume full integration (Modern)

7.PG&E
v. G.W. Thomas Drayage & Rigging (CA Supreme Ct 1968

a)Thomas K
wit PG&E to replace metal cover on Turbine “at its own risk and
expense” and indemnify the P from all loss “to PROPERTY” as a
result of the work

b)HOLDING
Yes, PE is admissible to determine the Definition of “PROPERTY”
under the K. This PE is to clear up Amb, NOT incompleteness or
inaccuracy (which would kill claim under Traditional Rule or Fully
Integrated K), also does not contradict the agreement.

8.Trident
Center v. Conn. Gen. Life Ins.

a)Group of
Attorneys (Trident P) borrow $56 million from Connecticut GLI for
building project

b)15 year
term at 12.25%, a reasonable interest rate for 1983, but by 1987
interest rates had dropped quite a bit

c)The K
states that the loan cannot be paid in advance in whole or in part
for the first 12 years

d)A later
clause says if the loan is defaulted in yrs 1-12 then the Connecticut
General has the option to accelerate payment and add a 10% prepayment
fee

e)HOLDING
Triton Groups
Parol Evidence allowed to show
ambiguity in an otherwise unambiguous K

(1)Judge
Kosinski believes it is impossible to draft a K in CA that is immune
to Parole Evidence Rule

9.Travelers
Ins. Co. v. Bailey

a)Bailey
bought life insurance when he was 19

b)Supposed
to be $500/yr 10 yrs certain

c)Scrivener’s
error s
aid $500/mo 100mo certain.

d)A
scrivener’s error
in guys favor was not caught for 30 year

e)P shows
they have no similar policies AND it would be ridiculous to sell a
$50,000 for $82 per year.

f)HOLDING
parol evidence allowed but the party wanting change must SHOW PROOF
BEYOND A REASONABLE DOUBT that the are entitled to reform the K
BECAUSE both parties intended the same thing this was just a
scrivener’s error.

E.Good
Faith

1.Duty of
Good Faith in not just about WHAT you do it is also about WHY you do
it AND how those actions fit with the parties intentions and
understandings of the K itself

2.Purpose of
this rule is to keep parties from shirking duties under the contract
to avoid performance or avoid giving the other party what they
expected under the K.

3.Every K
imposes upon each party a Duty of Good Faith and Fair Dealing in its
performance and its enforcement

4.Duty of
Good Faith is NOT DISCLAIMABLE

5.Examples
Good Faith vs. Bad Faith

a)Goldberg
v. Levy:
Intentionally hurt his business to lower sales = BAD
FAITH

b)Mutual
Life Ins. Co. v. Tailored Woman:
Moved the fur department to
upstairs location on different lease = Majority GOOD FAITH because
there was NO BAD INTENT (Dissent says they intended to avoid % sales
payment)

c)Stop &
Shop v. Ganem:
Expanded business to 2 new locations = GOOD FAITH
based on sound business judgement

d)Food
Fair v. Blumberg:
Opened stores nearby = GOOD FAITH simply trying
to expand their business in growing community.

 

IV.Which
Promises Should Be Enforced? Consideration and Other Requirements for
Contract Formation

A.Consideration

1.Intro

a)Courts
generally find consideration when there is a bargain (an exchange of
promises)

b)A GIFT is
NOT CONSIDERATION

(1)Because
offerors generally dont intend for them to be enforced
(2)More
likely to make a cavalier gift
(3)Usually
no evidence

c)Conditioned
Gift

(1)Usually
use NEGATIVE LANGUAGE, but not always
(2)HYPO I
promise to give you X-Box if you agree not to play until after
homework is done
(a)Conditioned
gift, because you dont have to do anything you wouldnt already do,
(You would be playing X-Box at all if I didnt give to you)
(3)HYPO
Promise George Lucas a new Video Camera if he promises not to use it
to make a new Star Wars
(a)Conditioned
gift, because George doesnt have to do anything (He could still make
a Star Wars with any other camera),

d)SOMETIMES
the court will find consideration when there is a benefit to the
Promisor OR a detriment to the Promisee

e)IF you a
seeking to enforce a K you FIRST ASSERT there was a BARGAIN

(1)Even IF
no bargain you may still be able to establish consideration if there
was a benefit to the promisor or a detriment to the promisee
depending on the jurisdiction
(2)Some
courts may also enforce gifts (like charitable donations, a gift to
save someone, or a widows agreement to pay the deceased’s debt)

f)Kerksy
v. Kerksy (1845)

(1)D was the
brother of P dead husband
(2)Said come
live on my land and tend it
(3)P sells
her home, moves 60 miles
(4)2 yrs
later D kicks P out (because he wants to claim under Fed Land Act)
(5)HOLDING
D wins, P cannot enforce a promise of a gift even though
she relied on it

g)Restatement
2
nd

(1)§
24
Offer Defined: (b) A proposal of a gift is not an offer, it
cannot be enforced as a K because there was no element of exchange or
bargaining
(2)§
71
To be enforceable performances must be exchanged in the form
of
(a)An act
other than a promise OR
(b)A
forbearance (giving up a legal right) OR
(c)The
creation, modification, or destruction of a legal relationship.

2.Adequacy
of Consideration

a)Courts
WILL ENFORCE BAD BARGAINS (they dont care if you made a bad deal,
judicial economy would be hurt if they had to determine every K)

b)BUT there
still HAS to be a Bargain! See §79 → .

c)Restatement
2
nd §79

(1)If the
requirement of consideration is met, there is no additional
requirement or…evidence in the values exchanged BUT
(2)§(d)
Disparity in value…sometimes indicates that the purported
consideration was not a bargain but merely a formality or SHAM
CONSIDERATION which DOES NOT satisfy §71 consideration req.

d)A gift
structured to look like a bargain is SHAM

(1)SOME
courts WILL enforce
(2)Because
the parties structured it like a bargain because they INTENDED it to
be enforced

e)Dryer
v. National By-Products

(1)Worker
looses foot in job related injury
(2)Agrees to
forgo legal action if given a job for life
(3)Employer
agrees then lays him off later
(4)Can you
“give up” a right you never had?
(5)HOLDING
YES there was a K because it meets the Embry Test
(a)P thought
he was making a bargain SUBJ
(b)The
companies agreement would be seen as a K to an ORP so it meets OBJ
(c)YES
there was a K
. even though he didnt really have a cause of action
since he was covered on workers comp
(d)You can
trick someone into making an unenforceable K

3.Pre-Existing
Duty Rule

a)PRE-EXISTING
DUTY RULE

(1)Will not
find consideration after renegotiation if one parties obligations do
not change
(2)To
prevent extortion
(3)The
parties can be more vulnerable after performance has begun (pilot
wants more money mid-flight)
(4)Discourages
parties from taking advantage.

b)Stilk
v. Myrick

(1)Captain
looses sailors who quit at sea
(2)Remaining
sailors demand more $ for extra work
(3)HOLDING
Captain wins because, no new consideration, the workers already
were under K to work (and there was a clause in the K that said
emergency duties may arise).

c)Alaska
Packers Assn. v. Domenico

(1)SF
workers K to work AL fishing season
(2)Flat $100
+ 2¢ per fish
(3)Demand
higher pay because nets were bad
(4)HOLDING
Cannery wins because there was no new consideration, the new
agreement was for the same obligations
(a)Background
shady because the Cannery may have given bad nets on purpose (Bad
Faith
)

d)UNANTICIPATED
CIRCUMSTANCES

e)Brian
Construction v. Brighenti

(1)Contractor
hires Sub to build a house
(2)Sub
discovers rubble under house
(3)Contractor
agrees verbally to pay sub for excavation + 10%
(4)Sub goes
back to work but then quits a few weeks later
(5)Contractor
seeking to enforce the K
(6)HOLDING
Yes NEW K VALID § 89(a)
(a)“when a
K must be performed under burdensome conditions not anticipated, and
not within the contemplation of the parties at the time the K was
made”
(b)MUST be
UnExpected AND a FAIR Increase

f)Five
Reasons to enforce Bargains not gifts

(1)Consent,
bargains are meant to be enforced
(2)Justice –
Reliance on a K after a bargain
(3)Cautionary
– Gifts are cavalier, Bargains are premeditated
(4)Evidentiary
– Much more evidence when there is a bargain
(5)Communicative
– Bargains require negotiations, Gift is “Here” → “Thanks”

g) On
Modifications → Restatement vs. UCC

(1)Restatement
§89(a)
(a)UNANTICIPATED
CIRCUMSTANCES Must be “fair and equitable in view of the
circumstances not anticipated by the parties when the K was made”
(b)MUST be
UnExpected AND a FAIR Increase

 

(i)Fishing Captain
wins under Restatement
(ii)Cannery would prob
loose because they anticipated the bad nets
(iii)Contractor wins
because this is the rule they used

(2)UCC § 2-209
→ Modification on the Sale of Goods
(a)Doesnt
require consideration
(b)ONLY
requires Good Faith (a catchall)
(c)Doesnt
require unanticipated circumstances

 

(i)Sailors Win
under UCC
(ii)Fisherman would win –
If acting in Good Faith
(iii)Contractor wins here
too.

B.Conditions and
Constructive Conditions

1.Condition
Precedent –
Must be met before a party’s obligation is
triggered. You buy fire insurance, your house must burn (condition
precedent) before you can collect. Promisee (homeowner) must prove
this condition was met
~~~~~~~~~~~VERY BLURRY LINE
:O~~~~~~~~~~~~~~

2.Condition
Subsequent –
Must be met after parties obligation is triggered.
Insurance policy has a SofL of 1 year. IF you file a claim late that
is a condition subsequent because it occurs after the
insurer’s duty to pay. Promisor (Insurance Co) must prove that it was
not met, ie that you didnt meet the SofL

3.Conditions
can be:

a)Express –
stated in K

b)Implied –
by wording in K

c)Constructive
– Court finds the parties would have made the condition if they had
thought of it

4.Internacio-Rotterdam
v. River Brand Rice

a)P orders 2
shipments of rice, D sent 1 shipment

b)Condition
Precedent was for Int to send notice by Dec 17th .

c)No notice
and River rescinds on the 18th

d)HOLDING
No K, recession valid → because the condition precedent was
not met, December delivery was the essence of the K because their
credit from the bank was extended only for Dec a Jan delivery would
provide no guarantee of payment

5.Howard
v. Federal Crop Insurance

a)P tobacco
crop ruined by rain damage, sold tobacco at a loss

b)Tilled
over land and replanted Rye to protect soil

c)Insurance
claims tilling the land voids the warranty because an inspection was
a condition precedent.

d)HOLDING
When doubtful the term should be construed as a PROMISE not a
Condition Precedent, an inspection of the untilled land was NOT a
CONDITION PRECEDENT therefore the insured grower will probably get
the insurance money, reversed and remanded.

6.Chirchella
(Aplnt D) v, Erwin (Aplee P)

a)Erwins K
to buy Chirchella’s house → closing APPROXIMATELY Oct ’71

b)Chirchella
refuses to close because their new home isnt finished and they cant
move in

c)HOLDING
Erwins WIN, because the date was merely a convenient date to
close, the Chirchella’s new house being ready was NOT a CONDITION
PRECEDENT

7.Restatement
2
nd § 227

a)§
227(1)
In resolving doubts as to whether an event is made a
condition of an obligors duty, and to the nature of such an event, an
interpretation is preferred that WILL REDUCE THE OBLIGEES RISK OF
FORFIETURE – UNLES the event is within the obligee’s control OR the
circumstances indicate that he has assumed the risk.

b)§
227(2)
UNLESS the K is of a type under which only one party
generally undertakes duties and it is doubtful whether

(a)Duty is
imposed in on an obligee that an event occur, OR
(b)The event
is made a condition of the obligors duty OR
(c)The event
is made as a condition of the obligor’s duty AND a duty is imposed on
the obligee that the event occur; then the first interpretation is
preferred if the event is within the obligee’s control

8.Three
doctrines that make Conditions LESS Harsh

a)Waiver
Giving up a right that you possess. By saying you waive OR by
the party receiving the benefit proceeding without the condition
being met

b)Estoppel
When the party with the benefit of the condition makes the
other party think they will move forward without it (“Dont worry
about that condition :D”) because the other party WILL RELY ON THIS
estoppel

c)Excuse
The court just EXCUSES the condition because they want
to (Prob fairness/justice/public policy)

9.Clark
v. West
(Waiver and Estoppel: Voluntary relinquishment of a
known right)

a)West
offers Clark $2/pg for Treatise → $6/pg if Clark writes sober

b)Clark
alleges express waiver of condition (Fact remanded for Trial)

c)HOLDING
YES for Clark BECAUSE a condition can be waived with no new
consideration

(1)HOWEVER
acceptance of performance is not a waiver, IF Clark cannot prove an
Express Waiver then he will only get $2/pg

d)Restatement
2
nd § 84 – Promise to perform s duty
in spite of s non-occurrence of a condition

(1)Except as
stated in (2) a promise to perform all or part of a condition under a
K without the condition being met is BINDING (a waiver) UNLESS
(a)The
condition was a material part of K and the promisee was not
responsible to ensure that it occur
(b)Uncertainty
of the condition was a risk assumed by the promisor
(2)If the
condition is waived the party waiving can renege by notifying the
other party
(a)As long
as there is still time for that party to make the condition occur
(b)Reinstatement
of the condition Cannot be UnJust
(c)The
promise is not binding unless it meets section (1)

e)JNA
v. Cross Bay Chelsea, Inc.

(1)JNA rents
to Chelsea for restaurant
(2)JNA had
in the past always given reminders of important lease requirements
(3)Chelsea
was supposed to renew but forgot to give notice
(4)HOLDING
Chelsea should get relief because They spent a ton on
improvements, they would loose all customers if they lost, AND they
were intending to renew
(5)DISSENT
– Chelsea was careless should have known, they had been in lease
for 24 years.

C.Statute
of Frauds

1.Requires
certain types of transactions to be confined to writing. Goal
is to protect parties from fraud, prevent people from “making up
K’s”

2.Transactions
that require Writing →

a)Restatement
2
nd § 110 Requires

(1)K of an
executor to answer for the duty of a decedent
(2)K to
answer for the duty of another
(3)K made
upon consideration of marriage
(4)K for the
sale of land interest
(5)K not to
be performed/completed within 1 year of its making

b)UCC §
2-201

(1)K for
sale of goods worth $500 or more
(2)
IF between Merchants you must reject in writing within 10 days of
receiving the goods
(3)Exceptions
(a)Specially
Manuf Goods
(b)If a
party admits there is a K then there IS a K up to the amount they
admitted to
(c)Goods
that have been accepted or paid for cannot use SofF to “un-enforce”
the K.

3.Boon
v. Coe

a)D says
come to TX live and manage my extra farm

b)P sells
all property moves from KY, farm isnt ready goes back to TX

c)Sues for
Reliance (lost property, travel expenses)

d)HOLDING
P CAN’T Recover UNLESS the D received a benefit
(Which would be Restitution to prevent unjust enrichment)

e)UNDER
RESTATEMENT §139 BOON WOULD RECOVER BECAUSE OF HIS RELIANCE
.

4.Riley
v. Capital Airlines

a)P claims
5yr K to provide water methanol

b)D says no
K, we have simply been purchasing from you consistently

(1)D argues
SofF kills K because 5yr K cant be completed in 1yr
(2)P
counters that it is EXCEPTED because the goods are SPECIALLY
MANUFACTURED so no writing is required
(a)Court
rejects this because he hasnt yet made the future goods, only the
goods he has already sold

c)HOLDING
P does GETS RELIANCE for all the expensive equipment purchased in
reliance/anticipation of the future K

(1)They
should sell the equipment because there is a duty to mitigate.

5.Restatement
§ 129 Action in Reliance

a)Offers
Specific Performance (Contrary to Boon view, but Boon was not a
Sale/Lease)

b)a K for
the SALE/LEASE of land may be Specifically Enforced without a writing
when justice can ONLY be had from Spec Perf, IF the party seeking
enforcement, is in reasonable reliance and there is continuing assent
by the counter party

6.Restatement
§ 130

a)When a
promise cannot be performed within one year all promises are within
the SofF (ie They must be in writing) until one party completes
performance

b)When one
party fully performs then the SofF doesnt
prevent enforcement of the counter parties perf

7.Restatement
§ 139

a)Reliance
is an exception to the SofF IF justice can only be provided by
enforcement (Probably would have given Boon
recovery because he relied)

8.Schwedes
v. Romain

a)Oral
agreement for the sale of land

b)Written
note “Concerning the Swan River Property you were interested
in…we have agreed to sell to yo ufor $60k cash if you are
interested”

c)P calls to
accept, D says sorry we sold already

d)HOLDING
No K because land sale has to be in
writing “if you are interested” is just an offer NOT a K

e)RESTATEMENT
§ 131 WOULD REVERSE the OUTCOME

9.Restatement
§ 131
Under §131 a SIGNED offer
will not be barred by the SofF

a)A writing
satisfies the Statute of Frauds if:

(1)Signed by
the party charged (or their agent)
(2)Reasonably
identifies the K subject mater
(3)Indicates
that either
(a)A K was
made OR
(b)Offer was
mage by the signatory (party signing)
(4)States
essential terms of unperformed promises with reasonable certainty

10.Restatement
§ 133
Says ^^^ writing need not be
a memo of the actual K.

D.Promissory
Estoppel

1.Intro to
Promissory Estoppel

a)Doctrine
that can make a promise enforceable when the counter party relies on
it even when there is not a traditional K with offer, acceptance, and
consideration

b)Began as
substitute for consideration, promisor was estopped
from arguing no consideration

c)SHEILD
– You sue for breach of K, the Promissory Estoppel is a DEFENSE to
a no K claim

d)SWORD
(USE THIS ON EXAM!)
– Promissory Estoppel is now its own cause
of action, enforces promises when there is NOT a K

(1)Still
probably want to assert breach of K along with the Sword PE claim.

e)Damages

(1)Full
range expectation, reliance, restitution BUT
(2)The court
has much greater flexibility when making awards.

f)Ricketts
v. Scothorn Shield

(1)Grandpa
says “ive worked something out so you dont need to work anymore,
because none of the other grandkids work” Signed note to pay girl
$2000/yr plus 6% interest anually
(2)Grandpa
dies, estate refuses to pay out
(3)HOLDING
Girl WinsHaving intentionally influenced the Girl to
act in her detriment (quitting her job) “it would be grossly
inequitable to permit the [promisor] to resist payment on the ground
that the promise was given without consideration.”

g)Goodman
(Guy/Frachisee) v. Dicker (Radio Co.)

(1)Guy plans
to buy Radio franchise
(2)Radio
assures him he will be aproved
(3)Guy
spends a bunch of money to prepare, DENIED franchise
(4)HOLDING
Guy wins, Radio estopped from claiming no K justice
and fair dealing require that even though there was no K the Guy
still relied on the promise and spent all that money

h)Hoffman
v. Red Owl

(1)Hoffman
owns grocery store, wants to Own Red owl franchise
(2)Red Owl
says sell you store, we will sell franchise for $18
(3)Hoffman
sells his store Red Owl raises franchise fee, Deal Falls Through
(4)HOLDING
Hoffman Wins because he relied on the promise of the store

i)Restatement
§ 90(1)

(1)A promise
which the promisor should reasonably expect to induce action of
forbearance (giving up legal right) on the part of the promisee or a
third party and which does induce that action → is binding if
injustice can only be avoided by enforcing the promise
(2)The
damages awarded may be limited to serve justice.

2.Elements
of Modern Promissory Estoppel

a)Almost
Always

(1)Some one
makes a Promise
(2)The
Promisee (or third party) acts on the promise
(3)The acts
a reasonable, definite and substantial
(4)AND done
in reliance of the Promise

b)Common
Variations

(1)Were the
acts intended/reasonably expected by the Promisor?
(2)Is
enforcement necessary to prevent injustice?

c)Spooner
v. Reserve Life Ins.

(1)“If
you do a good job…you will be handsomely rewarded…the boys will
get no bonus…more for the men!”
(2)Claims
breach of K
(a)Court
rejects NO K here
(3)Claims
SWORD Promissory Estoppel
(a)Promise?
No, at Reserves discretion (Illusory Promise) to pay bonus
(b)Promisee
Acted? YES
(c)Definite/Substantial?
Debatable
(d)Acts in
reliance? ——–^^
(4)Variations
(a)Acts
Intended/Expected? Maybe
(b)Enforcement
for justice? Prob not
(5)HOLDING
No contract, merely an Illusory Promise and there was an
EXPRESS CLAUSE reserving right to withhold bonuses at any time

d)Aldon
v. Vernon Presley

(1)Elvis
offers to pay off (Alden/ex-wife) mortgage after divorce, Elvis dies,
estate wont pay
(a)Promise?
YES
(b)Promisee
acted? YES took on mortgage
(c)Reasonable?
NO she already knew the estate was shirking if she divorced and she
divorced anyways (you cant rely on a withdrawn promise)
(d)Reliance?
YES she wouldn’t have filed divorce and took mortgage if Elvis hadn’t
promised
(2)HOLDING
Estate wins because (c) She acted unreasonably when she knew the
estate planned to not pay

e)Cohen
v. Cowles Media Co.

(1)Cohen
brings dirt on opponent to Media
(2)Media
promises not to name him, they do anyways.
(3)Cohen
clams
(4)Fraudulent
Misrepresentation: NO only applies to past/immediate events, not
future ones
(5)Breach of
K: NO because Cohen didnt think/SUBJ he was making a K
(6)Promissory
Estoppel SWORD
(a)Promise?
YES
(b)Act? YES
Cohen gave dirt
(c)Reasonable?
YES newspapers usually protect sources
(d)Reliance?
YES he was relying on anonymity
(7)Variant
(a)Acts
intended/expected? YES media expected docs, Cohen expected anon
(b)Enforce
for Justice? MAYBE both parties were shady
(8)HOLDING
Cohen wins, meets (a)-(d).

V.Implied
Excuses and Defenses

A.Implied
Excuses

1.Mistake

a)Restatement
§154
One party bears the risk of mistake when

(1)Allocated
by K
(2)is aware
at the time of K
(3)allocated
by the court

b)Restatement
§ 153
When mistake effects a material part, and risk not beared
by §154 the K is voidable IF

(1)Enforcement
would be unconscionable
(2)The
other party had reason to know the mistake OR it was other parties
fault.

c)An
erroneous belief as to facts existing at the time of K

d)Rest §
160
An action to hide a fact is equivalent to that fact not
existing BUT →

e)Rst §
161 ^^^ ONLY IF
that nondisclosure would prevent material
fraudulent misrep, would correct a basic inaccurate assumption,
violates good faith fair deailing, if the other party is entitled to
the fact because of relationship or trusyt.

f)In certain
circumstances allows a party to rescind K.

g)Bilateral
Mistake –
Both parties mistaken, and neither party is at
fault

(1)Must go
to basic assumption underlying K
(2)Must
materially affect K
(3)The party
bearing the brunt of the mistake must bear the risk
(a)A party
bears a risk when:

 

(i)The K assigns
that risk is “as is” “known risk”

(b)Conscious Ignorance

 

(i)Party knows that
his knowledge is imperfect but relies anyways

(c)The court determines the
risk is reasonable to allocate

 

(i)Usually when one
party is more experienced

h)Unilateral Mistake –
One party is mistaken

(1)Mistake
at time of K
(2)Goes to
basic assumption
(3)Did not
assume the risk of this mistake
(4)Tyra
v. Cheyney (p1074) (Unilateral mistake)

 

2.Impracticability
– Extension of “Impossibility”

a)Something
unexpected occurs to make performance VERY DIFFICULT

b)Impracticability
vs Mistake

(1)Mistake
is when parties are wrong about facts before K is made
(2)Impracticability
is about facts/events that take place after K is made

c)To recsind
under Impracticability, a party must establish that:

(1)It is
impracticable for ANYONE to perform the obligations under the K
(2)A basic
assumption of the K was violated
(a)Including
destruction/death of particular thing/person
(3)Party is
not at fault
(a)Except
for death, if you die you are off the hook
(b)CNA
v Phoenix (p1092) (River Phoenix died)
.

3.Frustration
of Purpose

a)Intuition:
Something unexpected happens that makes fulfilling the K pointless

b)Frustration
vs Mistake vs Impracticability

(1)Unlike
mistake, frustration of purpose focuses on events after the contract
was
(2)Unlike
Impracticability, it’s not more difficult to perform, it’s just
pointless
(3)Krell
v. Henry (p1099)
(Rents room for
King’s parade, parade canceled

B.Procedural
Defenses

1.Information
Problems: Not about the terms of the K but problems with HOW the K
was formed through misrepresentation, non-disclosure, lack of choice,
incompetence

2.Parole
Evidence always allowed to show misrepresentations/nondisclosures.

3.DAMAGES =
OFF-K Only → Rescission restitution because there is essentially
no K.

a)Misrepresentation
= False representation, of a material fact, that induces assent

(1)Recovery
allowed because reliance on the misrepresentation
(2)K is
about voluntarily assumed obligations AND
(3)You cant
actually “voluntarily assume” obligations that are
misreppresented
(a)Halpert
v. Rosenthal

 

(i)K to sell house,
no one knew about termites
(ii)Buyer alleges
misreppresentation → YES
(iii)Material fact → YES
(iv)Affect assent → YES
(v)Did dell misrepresent
on purpose → NO (Doesnt matter)
(a)Also a “bilateral
mistake.”

b)Nondisclosure
(Restatement §161) that nondisclosure would prevent
material fraudulent misrep, would correct a basic inaccurate
assumption, violates good faith fair deailing, if the other party is
entitled to the fact because of relationship or trust

(1)You
are selling a car you know is a salvage but dont tell →
Non-disclosure
(2)Baseball
card (stupid salesman) buyer knew high value seller didnt
(a)Fact not
disclosed → YES
(b)Known by
one not the other → YUP
(c)Violates
basic assumption → YAP
(d)Violates
good faith fair dealing → Nope Seller shoulda known.

4.Lack of
Meaningful Choice: Duress/Menace

a)If you
agree to avoid evil consequences then there is no voluntary
assumption of obligations.

b)Make this
K … OR ELSE!!!!!

(1)Or else
MUST be illegal. Buying Steve’s car cheap cuz he needs $ = NO duress
(a)Violence
(b)Tort (ie
defamation)
(c)Violation
of prior K
(d)Bad faith
behavior.

5.Lack of
Competence to Contract (Rest § 12)

a)Infancy (§
14) only have the capacity to incur voidable K’s until 18

b)Mental
Illness or Defect (§§ 13, 15) mental
defects preventer him from understanding what he is now obligated to
do

c)Intoxication
(§ 16) If you are so intoxicated that you
cannot understand the obligations he is assuming, then you have not
voluntarily assumed the obligation

d)Undue
Influence. Look for →

(1)Unusual
or inappropriate time OR unusual place
(2)Insistent
demand for urgency
(3)Multi
persuaders vs one party OR lack of 3rd party advisors
(attorney, acctnt).

C.Substantive
Defenses: Illegality and Public Policy

1.Substantive
Defenses

a)Began with
doctrince of illegality

b)K to
commit a crime or break the law is unenforceable

c)Over
history has expanded to include “Unenforceable as against public
policy

(1)Restraint
of trade
(2)Bribery
(3)Vote

d)Unenforceable
against public policy when:

(1)Legislation
says so
(2)Interest
in enforcing is clearly outweighed by
a countervailing public policy.

D.Unconscionability
(Unit 30 cont.)

1.Unconscionability
has BOTH procedural AND substantive aspects

a)Complicated
and fuzzzzy

b)Conceptually
important; RARE IN PRACTICE

2.REMEDIES
available when K is unconscionable

a)Void the
whole K

b)Strike the
offending term

c)Reform the
offending term

3.PROCEDURAL
unconscionability

a)Deficiencies
in the contracting process

4.SUBSTANTIVE
unconscionability

a)Objections
to the actual terms of the K

5.Williams
v. Walker-Thomas Furniture Co.
350 F.2d 445 (1965)

a)Furniture
sale “pro rata” ie nothing is paid off until everything is paid
off

b).POSSIBLE
DEFENSES

(1)Duress?
Probably not DO or You cant buy
(2)Or
else illegal? NO
(3)Infancy?
NO
(4)Drunk?
NO
(5)Mental
Illness? NO
(6)Undue
Influence? NO in store
(7)Consummated
in unusual place? NO
(8)Insistent
Immediate Demand? NO
(9)Extreme
emphasis on no delay? NO
(10)Were
there multiple persuaders against a single vulnerable

party? Doesnt seem to be
(11)Any
third party advisors to the vulnerable party? NO
(12)Did
store say no time to consult accountant? NO

c)Misrepresentation?

(1)False
statement? NO
(2)Non-Disclosure?
Not unless you say giving the K doesnt satisfy disclosure

d)Public
Policy

(1)Was there
a statute that says Pro Rata is not enforceable
(2)Illegal?
NO

e)Unconscionability?

(1)Meaningful
choice?
(a)Was it
for necessities? NO
(b)Did she
know what was in K? NO
(c)Unequal
bargaining power? YES
(d)Was
walker a monopoly? NO
(e)Were
competitors offering same? Dunno
(f)Form K?
YES
(g)Provision
easy to understand? NOPE
(2)When the
K was made to what extent did the terms make sense for both parties?
(a)Departure
from common practice? Dunno
(b)Inequitable
distribution? YES
(c)Rough
cost-benefit analysis?

 

(i)Maybe store can
lower price
(ii)Maybe store would not
have sold on installment without the term

(3)HOLDING
Court found unconscionability here
(maybe not the best holding)

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