COntracts Outline 1

8/6/2019 COntracts Outline 1

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Contracts

Important parts of a contract

1) Future looking2) Contains a Promise3) Exchange of Value

a) Law will recognize that there is a remedy for failure to perform the promise.b) Without three elements, it is not an enforceable contract

Courts do not enforce all promises, example: social engagements

Remedies

y Shall be liberally administered to the end that the aggrieved party shall be put in as good of aposition as if the other party had fully performed

1.) Damagesa. Expectation Interest

i. Putting the person back where they would be if the promise had beenperformed

b. Reliance Interesti. Put the person in the position they would have been in had the contract not

been made

c. Restitution Interesti. Interest in having restored to him any benefit that he has conferred on the

other party

1. Partial payment2. Furnishing services

2.) Buyers cover Remedy UCCa. After the sellers breach, a buyer may cover by making in good faith and without

unreasonable delay a reasonable purchase of or contract to purchase goods in

substitution for those due from the seller

b. A buyer may recover from the seller as damages the difference between the cost ofcover and the contract price along with any incidental or consequential damages

i. Incidental Damages-expenses reasonably incurred in inspection, transportationand care of goods rightf

u

lly rejectedii. Consequential Damages-any loss resulting from general or particular

requirements and needs which the seller at time of contracting had reason to

know and which could not reasonably be prevented by cover or otherwise

c. Failure of a buyer to effect cover does not bar him from any other remedy

Damages must be reasonably certain


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1. There must be some basis on which damages are assessed.2. If there is no way to determine amount of damages only nominal amount can be recovered

a. Goal is not to punish the breacher, but to restore the breached to where they wouldhave been had the contract been fulfilled.

3. Liquidated Damages Clausea. Clause in contract for specific amount to be paid upon breach

Damages must be foreseeable

1. Damages are not recoverable for loss that the party in the breach did not have reason to foreseeas a probable result of the breach when the contract was made. Restatement

Efficient Breach

1. Breach in which no party is injured2. More efficient to breach than to perform the contract

a. Devoid of moral obligationSpecific performance

1. Situations were monetary damages are insufficienta. Priceless/hard to find objects

2. Order the defendant to perform the contract3. UCC

a. Specific performance may be decreed where the goods are unique or in other propercircumstances

4. Personal Service Contractsa. Courts do not usually require specific performance on breach of employment contractsb. People with unique talents may be subject to other remedies

i. Injunctionii. Damages

Validation Process

1. Are there certain promises that should not be performeda. If there is no validation in connection with the promise, then courts wont uphold the

promise

i. Early law courts would not enforce laws without a sealb. Consideration for a promise

i. To constitute consideration, a performance or a return promise must bebargained for

1. A benefit to the promisor and a detriment to the promise, and2. A bargained for exchange

ii. Does not require equal valuec. PromissoryEstoppel

i. A promise which the promisor should reasonably expect to induce action orforbearance on the part of the promise or a third person and which does induce


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such action or forbearance is binding if injustice can be avoided only by

enforcement of the promise. Restatement

d. Moral Obligationi. Not in system of jurisprudence sufficient to enforce a contract on its own.ii. Must be consideration or primaryEstoppel, moral obligation is not on its own

binding

Intentionto be legally bound

Objective Theory

1. Cases where one party contests that they did not intend to be legally bounda. Court must not consider the defendants subjective intent, nor plaintiffs subjective

view of what is offered, but what a reasonable person would have understood to be

conveyed

2. CISG- requires an inquiry into the subjective intent so long as the other party was aware ofsuch intent

Interpreting Statements to Determine Legal Consequences

1. There are some statements that appear to be serious that are not intended to have legalconsequences

a. Physiciansi. Doctors therapeutic reassurance that his patient will be all right, not to worry,

must not be converted into a binding promise by the disappointed or the

quarrelsome.

ii. Doctor patient relationships should be treated differently1. Exception if doctor does too many things that are questionable

(soliciting patient, out of their field, specific promises)

iii. Good public policy to give doctors a little room.2. Contracts Made between husbands and wivesa. Cant be held to the same standards as business partners

a. Would overwhelm the courtsb. Dont believe there are legal consequencesc. Exception-if they enter into a business relationship

Express Statements Concerning Legal Consequences

1. Letters of intent and Express Statements Not to be Legally Bounda. Letter of intent

i. parties agree certain things in agreement will have legal consequences, andcertain things will not

b. Most just state they intend to continue in negotiationsi. neither party is legally bound to the other

c. Contract to negotiate in good faithb. Good faith is determined on a subjective basis.c. Restatement

a. Neither real nor apparent intention that a promise be legally binding is essentialto the formation of a contract, but a manifestation of intention that a promise

shall not affect legal relations may prevent formation of a contract


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Contemplation ofFinal Writing

1. Titles of Documents are not important; its whats in the document. Some letters of intent maybe binding; others may not be binding at all.

2. Signing memorandum of intent can create an agreementa. Even if there is still to be a final writing, the letter can still be binding.

i. The circumstances surrounding the signing must be examinedii. If the parties agree there is to be a final writing and all of the terms have been

worked out, then a contract has been formed

b. Parties can manifest that they dont intend to be bound until final documentc. Evaluation of circumstances surrounding the parties discussions

i. Question of factAgreements to Agree- Missing Terms

1. Parties dont always include all of the terms that they need in their contractsa. Older law, if there were missing pieces, there was no contractb. Modern view- even though all terms arent spelled out in advance, contract is formed.

i. Unless way too many terms are missing2. UCC 2-204 (3)

a. Even though one or more terms are left open a contract for sale does not fail forindefiniteness if the parties have intended to make a contract and there is a reasonably

certain basis for giving appropriate remedy.

3. UCC has gap fillers for when a term is not addressed in contract.a. Default rules

4. UCC open Price Terma. The parties if they so intend can conclude a contract for sale even though the price is

not settled. In such a case the price is a reasonable price at the time for delivery if

i. Nothing is said as to priceii. The price is left to be agreed on by the parties and they fail to agree

iii.

The price is to be fixed by some agreed market or by a third person and it is notset

b. A price to be fixed by the buyer or seller means a price for him to fix in good faithThe anatomy of agreements--offer and acceptance

Preliminary Negotiations versus offers

1. What a reasonable person would believe2. An offer is the manifestation of willingness to enter into a bargain, so made as to justify another

person in understanding that his assent to that bargain is invited and will conclude is.

Restatement

3. Case by case basis- examination of facts and circumstances4. Sellers listing real estate are inviting offers, not making one

Offer

Acce tanceRe ection

Counter-offerRevocation


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a. The definite or indefiniteness of the words used in opening the negotiation must beconsidered, as well as the usages of business, and indeed all accompanying

circumstances. Restatement of contracts 24

5. Public add usually is not an offera. Goes out to many peopleb. Many people are making offers/bidding

6. Price quotes are invitations to bid, not offersa. Unless asking for acceptance

a.$$$...for immediate acceptance7. Advertisements

a. If goods are advertised for sale at a certain price, it is generally not an offer, and nocontract is formed because of the statement of an intending purchaser that he will take

a specified quantity of goods at that price. Restatement of Contracts, second

b. Exception to rule: when advertisement is clear, definite, and explicit, and leaves nothingopen for negotiation

c. Have to consider all circumstancesd. If there is nothing peculiar about the ad, it will be deemed to be an invitation to

negotiate8. Owner, contractor, sub-contractor

a. SubK submits bids to GenK submits bids to ownerb. Contract not quote

a.Each party performs their partb.Can manifest contract through conduct in absence of words

1. If parties act like there is a contract, there is2. If they act like it was just an offer, it will be treated as such

c. Guarantees price9. Purchase orders are usually offers

a.Usually a request for purchase from the company first- invitation to negotiateb.

Then purchase order,

c.Acceptance is granted by fulfilling the order1. Objective manifestations not subjective intents

Identifying the offeror and offeree

1. Offeror-the one who makes the offera.Master of the offer

2. Offeree- the one who accepts the offer3. Contract can be formed by action of the offeree to perform the contract

a.Ordered truck but didnt sign contract

Duration of offers

1. How long offers remain in effect2. Statute of limitations

a. Amount of time a person has to bring suit3. An offeror can put any conditions on an offer they want

b. Dont have an obligation to make the offer in the first place4. Reasonable time is a common law concept

a.Default rule


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b.Up to a jury to decide based on all of the factsc.Depends on the how much/quickly the price fluctuates-reasonable amount of

time

1. Selling stock v. selling housec. Offeror can designate how they want offer accepted

4. Restatementa. An offerees power of acceptance is terminated at the time specified in the offer, or if

no time is specified, at the end of a reasonable time

b. Reasonable time is a question of fact, depending on all of the circumstances when theoffer and attempted acceptance are made

Termination of Power and Acceptance

Rejection

1. An offer is extinguished upon rejectionRevocations

1. An offer can be revoked anytime before acceptance is receivedMailbox rule

1. Default rulei) Offer is made when letter is receivedii) Accepted when mailed

(1) CISG-time for acceptance begins when letter is datediii) Rejection is effected when receivediv) Revocation is effected when received

(1) Court may not always apply default rules, based on circumstancesIndirect Revocation

1. It is sufficient to constitute a withdrawal that knowledge of acts by the offeror inconsistent withthe continuance of the offer is brought home to the offeree.

a. Dont have to be directly informed can be learned through a third party2. Restatement

a. An offerees power of acceptance is terminated when the offeror takes a definite actioninconsistent with an intention to enter the proposed contract and the offeree acquires

reliable information to that effect.

Counter offers

1. An acceptance of an offer with added stipulations that must be met, does not create a contract,it is a counter offer

2. Buyer can add suggestions, so long as they make it clear they will accept with or withoutfulfillment of their suggestions

3. Restatementa. The normal effect of the counter-offer is to reject the original offer. It terminates the

original power of acceptance in the offeree who is now the counter-offeror.

4. Different from a rejectiona. Seeks to carry on negotiations


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Death or incapacity

1. The death of an offeror revokes his offer or causes his offer to lapsea. Unless there is money put down for consideration, making the offer irrevocable.

Making Offers Irrevocable

1. Option Contract-rights of first refusala. Right of first refusal

i. Once an offer is received from someone else, then offeree has the option to buyit

b. Often on lease contracts where party wants to sell house2. Classical option contract

a. Restatementi. An option contract is a promise which meets the requirements for the

formation of a contract and limits the promisors power to revoke an offer

b. Separate contract makes an offer irrevokablei. Offeree wants time to decide without chance of offeror revoking

c. Pays amount of money for amount of time without possibility of revokingi. Does not always have to be cash, consideration can be in form of promises or

tasks to be done

d. Offeree must be given a reasonable amount of time to accept or refuse offeri. Once there is an option agreement for 90 days and on the 45th day reject,

usually still have 45 days to change mind and accept

a. So long as person has not relied on the rejectione. Typically acceptance of the offer is accepted upon receipt not upon mailing

3. Irrevocability through Reliance- Firm Offersa. Subcontractors and general contractorsi. Relationship of offers between two

b. When one party knows that the other party is relying on the irrevocability of theofferors bid, the bid is said to be irrevocable for a period of time.

i. Unless it is obvious a mistake had been madec. UCC 2-205

i. An offer by a merchant to buy or sell goods in a signed writing which by itsterms gives assurance that it will be held open is not revocable, for lack of

consideration, during the time stated or if no time stated for a reasonable time,

but in no event may such a period of irrevocability exceed three months; but

any such terms of assurance on a form supplied by the offeree must be

separately signed by the offeror

a. Merchant- a person who deals in goods and knowledge or skill peculiarto the profession

a. Signed writingb. Irrevocable

d. Restatementi. An offer which the offeree should reasonably expect to induce action or

forbearance of a substantial character on the part of the offeree before


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acceptance, and which does induce such action or forbearance is binding as an

option contract to the extent necessary to avoid injustice

e. CISGi. A contract is irrevocable if,

a. There is a date stating how long the offer is open, orb. If a party relies on the offer as being irrevocable

Irrevocability through Partperformance

1. Unilateral contractsa. An offer to enter into a contractupon the doing of a bargained for act by the offeree.

The performance by the offeree constitutes an acceptance of the offer and the contract

then becomes executed.

b. one duty, one promisei. contract is formed when duty is completeii. if performance of the promise becomes an illegal act through no fault of the

parties, court may excuse the performance

1. give monetary reimbursement instead2. Irrevocability upon part performance

a. Section 45 of the Restatementi. Where an offer invites an offeree to accept by rendering a performance and

does not invite a promissory acceptance, an option contract is created when the

offeree tenders or begins the invited performance

ii. An offerors duty of performance is conditional upon completion of theperformance.

b. Depends on how the offeror frames the argumenti. Whether it is unilateral or bilateral

c. Bilateral Theory (bad)i. Once performance begins, it becomes a bilateral contract1. Becomes a problem because it binds an offeree

The Nature of Acceptance

1. Knowledge and Motivationa. Knowledge

i. Person must at least have knowledge of the offer before performing theacceptance

1. Knowledge can come at the very end, right before acceptanceii. Public service cases

1. Dont have to have knowledge to collect rewarda. Want to encourage people to be good Samaritans

iii. Completed performance of the acceptance is necessaryb. Motivation

i. Performance does not have to be motivated by the offerii. Unless a contrary intent is manifested, persons motivation is assumed based on

their promise to accept the offer is clear evidence of their intent to accept.

1. Judged by acts not motivation


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2. The Requirement of Volitiona. Unilateral contract

ii. The acceptance comes at the time of the completion of voluntary actiona. The offeree has to have control over doing the actb. There can still be conditions that have to be met

Manner of Acceptance

1. The modern Analysisa. UCC 2-206

i. Unless otherwise ambiguous indicated by the language or circumstances: 1. anoffer to make a contract shall be construed as inviting acceptance in any manner

and by any medium reasonable in the circumstances.

b. Restatementi. The usual offer which either amounts to performance or constitutes a

promisethe offeror is often indifferent to which form an acceptance takes

c. Offeror is the master of the offeri. May insist on a particular manner for acceptanceii. Doesnt have to use mode of acceptance provided by offeree document

d. When one party solicits another, clearly specifying there is to be no contract untilratification by the solicitor, this is not an offer, but an invitation for an offer

e. Accommodationi. An order or other offer to buy goods for prompt or current shipment shall be

construed as inviting acceptance either by a prompt promise to ship or by the

prompt or current shipment of conforming or non conforming goods, but such

shipment ofnonconforminggoods does not constitute an acceptanceif the

seller seasonablynotifies the buyer that the shipment is offered only as an

accommodation to the buyer.

ii. Accommodation-an arrangement or engagement made as a favor to another1. Constitutes a counter offer

iii. Without Accommodation would be an acceptance and a breach1. Accommodation must arrive at a seasonable amount of time

a. Can come after in some occasionsi. Not too long after, not high reliance

f. Person may accept a contract by accepting the benefits of the contracti. External manifestation communicates acceptance

2. Silence as acceptancea. No way to know if the offeree has manifested assent.b. Where an offeree fails to reply to an offer, his silence and inaction act as an acceptance

in the following cases only


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i. Where an offeree takes the benefit of the offered services with reasonableopportunity to reject them and reason to know they were offered with the

expectation of compensation

ii. Where the offeror has stated or given the offeree reason to understand thatassent may be manifested by silence or inaction, and the offeree in remaining

silent and inactive intends to accept the offer.

iii. Where because of previous dealings or otherwise, it is reasonable that theofferee should notify the offeror if he does not intend to accept

3. The notice requirementa. Title of goods passes from the seller to the buyer in any manner and on any conditions

explicitly agreed on by the part

b. UCC 2-206 (2)i. Where the beginning of a requested performance is a reasonable mode of

acceptance an offeror who is not notified of acceptance within a reasonable

time may treat the offer as having lapsed before acceptance

1. What is a reasonable time for taking any action depends on the nature,purpose, and circumstances of such action

4. Warrantya. Express Warranty 2-313

i. Promise or affirmation of fact by the seller1. Relating to quality or feature of the goods

ii. Product must match its descriptioniii. Expressly stated

1. Example-Unbreakableb. Implied Warranty of Merchantability

i. Basic quality of goods buyer is entitled to receive1. What a reasonable man in the position of the buyer expects to receive

ii. Fit for the ordinary purposes of such goodsiii. Fair average quality

c. Implied warranty of fitness for a particular purposei. Whether the seller had reason to know at the time of the contract that the

buyer was relying on skill and expertise

ii. Applied to products where seller knows buyer requires a higher or differentstandard than the usual standard

iii. May be good enough for ordinary use, but defective for special use1. Relying on skill and expertise of seller

d. Seller can exclude express and implied warrantiesi. Selling as isii. Buyer examines goods before purchasing

1. Examination should have made clear to him


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5. SelfService Contractsa. Contract for sale-contract to sell goods at a future time

i. Shopping in a supermarket, intent to purchaseb. UCC 2-314

i. A warranty that the goods shall be merchantable is implied in a contract fortheir sale if the seller is a merchant with respect to goods of that kind

c. If the goods are found to have not been merchantable, then there is a breach ofcontract on the sellers side

d. Statute of limitations on breachi. 4 years

e. Create an option contract when product put into cart6. Auction contract

a. If an auction is done with reserve an auctioneer can withdraw the goods at any timeb. Without reserve, once bid is received, must go forward with sale

The DeviantAcceptanceB sends p/o to S- without arbitration clause

S sends acceptance to B- with arbitration clause

Common law- no contract- didnt match

1. Acceptance and counteroffersa. Common law mirror image

a. Acceptance had to exactly match the form of the offer1. Otherwise it was a counter offer

b. Dickered terms1. Terms the parties consciously considered when making the contract2. Change in dickered terms precluded formation of contract

b. Standardized formsa. Boiler termsb. Dickered terms match, boiler terms dont

1. Generally ignored, contract formed so long as dickered terms match2. Last shot principlevd

a. Boiler plate terms relate to litigation and warrantya. In conflict, person who fired the last shot won

1. Counter offer, therefore boiler terms acceptedb. Changed this

3. Modification of the matching acceptance rolea. UCC Additional terms in Acceptance or confirmation

a. A definite or seasonable expression of acceptance or a written confirmationwhich is sent with a reasonable time operates as an acceptance even though it

states terms additional to or different from those offered or agreed upon,

unless acceptance is expressly made conditional on assent to the additional or

different terms.


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b. The additional terms are to be construed as proposals for addition to thecontract. (between buyer and seller) Between merchants such terms become

part of the contract unless

1. The offer expressly limits acceptance to the terms of the offer2. They materially alter it3. Notification of objection to them has already been given, or is given

within a reasonable time after notice of them is received

c. Conduct by both parties which recognizes the existence of a contract issufficient to establish a contract for sale even though the writings of the parties

do not otherwise establish a contract

1. Expressly made conditional clause, go to C2. No expressly made conditional clause, go to B

b. Material Alterationa. Clauses that result in surprise or hardshipb. Something that is important

1. Clauses that limit warranties of ordinary fitness2. Arbitration clause

c. Can limit acceptance to only the terms of the offer. Disregards any boiler plate terms inthe acceptance

4. The knock out rule- conflicting terms- majority viewa. When the parties have contrasting boiler plate terms

a. Conflicting terms are knocked out and the gaps are filled by UCC rulesb. Go to paragraph C

b. Minority viewa. Additional= differentb. Go to paragraph B

5. Amendment to 2-207- not adopted, doesnt look like it will bea. When the terms dont match, but both parties recognize the existence of a contract, the

terms of the contract area. Terms that appear in the records of both partiesb. Terms, whether in records or not, both parties agree onc. Terms supplied or Inc. under any provision of this act(UCC terms)

6. Rolling contracta. In deals between merchants and consumers where terms of the contract are sent along

with the product, if after reading the terms the consumer does not return the product,

they accept the contract and all terms included in it

b. Acceptance spread over a long time and involves many stepsa. Payment for the productb. Receiving the productc. Reading the termsd. Accepting the contract and all terms, ore. Not accepting and returning the product

c. 2-207 does not apply because there are no additions to the contracta. Acceptance has not occurred until license agreement is acceptedb. One view


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Validation Notes

1. Introductiona. The function of validation devices

i. To determine which promises will a court enforceb. One measure

i. Whether there is a validation devicec. What are the devices

i. Formalistic Devicesii. Consideration

iii. Promissory Estoppeliv. Moral Obligation

2. Seals and other formalistic devicesa. Replaced the seal with the Restatement 87(1)

i. An offer is binding as an option contract if it1. is in writing and signed by the offeror, recites a purported considerationfor making the offer, and proposes an exchange on fair terms within a

reasonable time; or

2. is made irrevocable by statutea. Fair terms- applies to the underlying transactionb. Purported consideration- any exchange takes place

ii. Just another formalistic device1. Seal is no longer an acceptable validation device

b. UCC 2-203i. Seals Inoperative

1. The affixing of a seal to a writing evidencing a contract for sale or anoffer to buy or sell goods does not constitute the writing a sealed

instrument and the law with respect to sealed instruments does not

apply to such a contract or offer

c. Functions of devicesi. Creates an enforceable documentii. Supposed to be cautionary/warning to parties

iii. Some seals change statute of limitationsd. Restatement 98

i. Unless extrinsic circumstances manifest a contrary intention a written promiseby the promisor amounts to the adoption of any seal then on the document

3. Considerationa. Elements

i. Has to be legal value1. Impact of the transaction on the parties2. Benefit to the promisor or detriment to the promisee

ii. Bargained for exchange1. Promise induces the detriment

a. Promise to pay is induced by promise of deliveryb. Must all be related

b. Gifts are not considered to have consideration


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i. Detriment to the promisor, benefit to the promise1. Not enforceable

ii. Can be conditions on the gift that cause tiny detriment, not usually appliedc. Adequacy of Consideration

i. Dont generally inquire into the adequacy of the legal consideration1. Court does not require equivalence2. Dont value consideration, it is either there or not

d. Exceptions to refusals to Inquire into Adequacyi. Inadequacy in Equity

1. Restatement 364a. Specific performance or an injunction will be refused if such

relief would be unfair because

a. The contract was induced by mistake or unfair practicesb. The relief would cause unreasonable hardship or loss to the

party in breach or third persons

c. The exchange is grossly inadequate or the terms of thecontract are otherwise unfair

2. Can sue for damages, 364 will not be applicableii. The money exception

1. If money is exchanged for money, courts will look at the valueexchanged

2. There is no bargained for exchangea. No one would bargain to give more money than they were

getting

e. Nominal Considerationi. Person does not have to be motivated by consideration for contract to be

formed

ii. So long as there is a form of consideration, the motivation behind it is notimportant

1. Unless both parties know that the consideration is merely a pretensef. At will employment

i. Permanent job means not temporary1. Does not mean for life

ii. Employee handbook1. Usually guidelines not meant to be a contract2. Look for a unilateral contract and consideration

a. Only forms a contract ifi. It is sufficiently definiteii. Communicated to and accepted by the employee

iii. The employee provides considerationiii. At will employment

1. An employee can be terminated at any time by an employer for noreason

2. Over time courts have become more protective of employeesg. Recitals

i. Background of the agreement1. Usually in the beginning of a contract

ii. 87(1) Restatement of Contracts


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1. An offer is binding as an option contract if it,a. Is in writing and is signed by the offeror, recites a purported

consideration for the making of the offer, and purposes an

exchange on fair terms within a reasonable time

i. ****minority positioniii. Failure to pay nominal consideration does not void a contract

1. Must be recited, doesnt have to be trueh. Mutuality of Obligation

i. Another way of saying there is considerationi. Illusory Promises

i. A promise to perform unless a party changes their mind promises nothingii. No binding aspect

1. If there is no promise, then there is no contractiii. Cases where neither promise is enforceable for lack of consideration

1. Plaintiff fulfilled their part2. Defendant benefitted

a. Estopped from refusing performance based on these groundsb. Cannot raise grounds of lack of consideration

i. Performance is already completedj. The Illusion of Illusory Promises

i. Promises based on the happening of another event1. If I do this, then Ill do this

ii. Contract is formed when party does original act, bound to do second act theniii. The offer had to be accepted and communicated to the offeroriv. Once act is performed, offeror is bound

k. Requirement and Output Contractsi. 2-306 UCC

1. A term which measures the quantity by the output of the seller or therequirement of the buyer means such actual output or requirements asmay occur in good faith, except that no quantity unreasonably

disproportionate to any stated estimate or in the absence of a stated

estimate to any normal or otherwise comparable prior output or

requirements may be tendered or demanded.

2. A lawful agreement by either the seller or the buyer for exclusivedealing in the kind of goods concerned imposes unless otherwise agreed

an obligation by the seller to use best efforts to supply the goods and by

the buyer to use best efforts to promote their sale

(Requires more thangood faith, must makeeffort to sell)

ii. 2-103(1)(B) Good faith1. Means honest in fact and the observance of reasonable commercial

standards of fair dealing in the trade

iii. Requirement Contract1. The sellers requirement is to sell goods to the buyer in the amount that

the buyer requires

a. Buyer dictates amount requirediv. Output contract

1. Buyer has agreed to buy whatever the sellers output isa. Seller determines amount


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v. Buyer cannot demand an increase in amount that is disproportionate to originalestimate

1. Can purchase less than estimate so long as it is done in good faithvi. Duration of exclusive agreement

1. Reasonable time, or2. Terminable at will

vii. Must act to use their best efforts during contract1. In exclusive dealings2. Must try to make it work

l. Capacity to Contract- voidable promises and considerationi. Contract with a minor is voidable

1. Minor is only party who can voida. Not other contract party

ii. Can disaffirm at a reasonable time after they become of age1. Must return all benefits received under the agreement

iii. Claims can be made for1. minors,2. intoxication

a. (did not understand what they were doing if the other partyhad reason to know),

3. Person with diminished mental capacitya. (doesnt matter if other person knows or not)

m. The pre-Existing duty rulei. There is no consideration if a party is only offering something that they already

had a duty to do

ii. Change the obligation in some way1. Adds consideration

iii. Agreement to rescind the original contract and enter into a new oneiv.

hold-up rule

1. Courts will not enforce an agreement that has been procured by distressor coercion and will hold the parties to their original contracts

n. Modification of the pre-existing duty rulei. 2-209(1)

1. An agreement modifying the a contract for the sale of goods needs noconsideration to be binding

a. Must meet the test of good faithi. Not distress or coercion

ii. Restatement 89(a)1. A promise modifying a duty under a contract not fully performed on

either side is binding

a. If the modification is fair and equitable in view of circumstancesnot anticipated by the parties when the contract was made

o. Disputed claims, modifications, accord, and satisfactioni. Modification

1. Relating to good faith dispute and claim is consideration formodification of the underlying contract

ii. UCC 2-209(1)1. See above


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p. Accord and satisfactioni. Two parties have an existing contract

1. A lends $10,000 to B2. B doesnt have it at the time of payment3. Enter into second agreement

a. B will provide a vehicle to A in lieu of paying A $10,000 in cashii. Whether when they intend to hold first contract in suspense or discharge it and

enter into a substitute contract

iii. If suspend- obligation in accord1. When vehicle is provided, satisfied, both contracts are discharged

a. If 2nd breach may proceed for either car or money2. What did the parties intend

q. The invalid claimi. If a party uses forbearance on a claim as consideration

1. Claim is later found to be invalid2. Still held ass consideration so long as the party believed in good faith

that it was valid

ii. Restatement 741. Forbearance to assert or the surrender of a claim or defense which

proves to be invalid is not consideration unless:

a. The claim or defense is in fact doubtful because ofuncertaintyas to the facts or the law, or

b. The forbearing or surrendering party believes that the claim ordefense may be fairly determined to be valid

iii. Promise to forebear a claim where the claim turns out to be invalid1. Merely the good faith belief that you have a claim

4. Promissory Estoppela. Absence of bargained for exchangeAntecedents

i.

Restatement 901. A promise which the promisor should reasonably expect to induce

action or forbearance on the part of the promisee or a third person and

which does induce such action or forbearance is binding if injustice can

be avoided only by enforcement of the promise.

ii. Reasonably expect to induce and doesiii. Reliance on a promise

1. Substantial reliance is importantiv. Only way avoid injustice

b. Precontractual Reliancei. No final agreement reachedii. Relied on the promise that a contract would be formed

1. Other side could argue that reliance was not reasonableiii. Courts more often than not give expectation damages

1. Without a contract though, there is no way to know what the terms ofthe lease would have been- revenue, expenses and terms are all hard to

determine

2. Reliance damages can also be argueda. Usually will be granted all vs. nothing

iv. Restatement 90


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1. The remedy granted for breach of a promise may be limited as justicerequires

5. Moral Obligationa. Past Consideration

i. No considerationii. Already performed the services

1. Promise to give something for this afterwardsiii. No bargained for exchangeiv. Ethical problem

1. Cant negotiate a business deal with your client2. Must advise them to bring in another lawyer

b. The Material Benefit Doctrinei. Where a material benefit had been received and the recipient voluntarily

promises to pay for the past benefit, the promise is enforceable

ii. Promise made subsequent to the receipt of a material benefit1. Most jurisdictions do not follow this rule

iii. Restatement 861. A promise made in recognition of a benefit previously received by the

promisor from the promise is binding to the extent necessary to prevent

injustice

2. A promise is not binding under (1)a. If the promisee conferred the benefit as a gift or for other

reasons the promisor had not been unjustly enriched

b. To the extent that its value is disproportionate to the benefitc. Promises uniformly enforced through moral obligation

i. Old debts barred by the statute of limitations1. A promise from the debtor to the creditor promising to pay them even

though the statute of limitation applies is enforceable

ii.

Bankruptcy1. Upon bankruptcy debt is discharged2. Promise to pay it anyways, there is a new enforceable promise

a. Protection for consumers not tricked into paying them againOperative Expressions of Assent Notes

Statute of Frauds1. If a contract is of a certain type, then there must be a writing

a. If it doesnt fall within these types then it need not be in writing2. Types of catergories

a. Restatement 110i. The executor-administrator provisionii. Suretyship provision

iii. The marriage provisioniv. The land contract provisionv. The one year provisionvi. Sale of goods


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3. within the statutea. Falls under provisions of statute

4. without the statutea. Does not fall under provisions of the statute

5. Suretyshipi.

Debtor- obligorii. Creditor- obligeiii. Surety

a. Contract between the surety and the creditoriv. If the debtor doesnt pay you, I willv. Must be third party, not direct obligation

1. Otherwise not a suretyb. Nature of the contract can be determined by parties actionsc. Statute of frauds must be contract between surety and creditor

6. Main Purpose (leading object)exceptiona. If a party enters into an agreement as a surety to serve their own interest, then it is

without the statute and need not be in writing

i. Problem is that this argument can be made in almost any situation1. Wouldnt guaranty debt of another for no benefit to themselves

b. Extent of ownership, direct investment, economic reward7. Marriage agreements

a. Promises to marry are not within the statuteb. Promises in consideration for marriage fall within the statute

i. Wouldnt get into agreement but for getting marriedii. Wouldnt get married but for the agreement

c. Prenuptial agreementsi. Fall within the statuteii. Must be in writing

d. Exception Complete Performancei. One of the reasons for writing was to show that there was an actual agreementii. When people act according to the oral agreement it removes the question of

whether there was an agreement

8. Contracts for theSale of Landa. When deed is given after all the payments are made

i. Over a period of timeb. Must be in writingc. Exception Part performance

i. In order to fall without the statute of frauds1. There must be something more than money exchanged2. Taking possession of the land3. There must be improvements on the land

ii. Want to be strict if there is no writing1. Dont just give away peoples land

9. The oneyear provisiona. Contracts that are not performable within one year

i. If there is a way the court can find to ignore this class of contract and notrequire writing, they will do that


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ii. Does not apply if the contract conceivably can be done within one yeariii. If there is no way it can be done in one year, then it must be in writing

10.Contracts for theSale ofgoodsa. UCC 2-201

i. Contract for the sale of goods over $5000 must be in writing1. Not enforceable beyond the quantity of goods listed in the record

ii. If there is not written contract but within a reasonable time1. Seller sends receiver a written documentation and receiver does not

object within 10 days

iii. Even if a contract does comply with 1, it can still be enforcible1. If the goods are specially manufactured for the buyer and are not

suitable for sale to others and seller has made a substantial beginning

2. If party against which enforcement is sought makes an admission that acontract was made

3. If goods have been accepted or payment has been made11.Electronic Writings and signatures

a. Same as traditional writings12.Estoppel and theStatute of Frauds

a. The statute of frauds will allow promissory estoppel13.Admission that the contract was made

a. The party against whom enforcement is sought admits a contract was formed1. During litigation or pleadings2. Can be used as evidence

ii. External manifestation of assent1. Subjective thoughts not relevant

b. Admissions made during pleadings and motionsi. Must be clear and precise

1. When raising the statute of frauds as a defensec. how to assert the statute of frauds

i. must raise it as an affirmative defensed. if it applies, is the assertion the there is no contract?

i. consequences1. generally does not mean that the contract is void2. voidable

a. if statute never gets raised, contract is goode. CISG

i. No statute of frauds14.Restitution

a. Contract is unenforceablei. One party has conferred a benefit upon the other through part performanceii. party can get the money they put in back out

Parol Evidence Rule

1. Start at negotiations-------move to written contract


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a. Significant difference between what legal rules apply depending on the time linei. Oral agreement prior

1. Look at parol evidence ruleii. Oral agreement after written agreement

1. Not province of parol evidence rulea. Modifications

2. Whether agreement is integrateda. Was the written contract intended to be complete

3. levels of integrationa. Partial

i. There will be a determination made- fact finder will be allowed to hear theevidence, as long as it is not inconsistent with the written contract

b. Totali. No evidence of any other agreement will be submitted to the fact finders

c. Noi. The evidence of the prior agreement will be admitted

d. Five testsi. Appearance test

1. Face value of the contract2. Judge looks at appearance of contract3. Does it look like everything is there4. Judge determines as a matter of law

ii. The separate consideration test1. Made for separate consideration

iii. Natural Omission test1. Something that would naturally be written in a separate agreement

iv. Certain inclusion test1. Shift the burden to the person invoking PER to keep the evidence out

a.

They would have to show that the subject of the oral agreementwould most of the time be included in the written agreement

v. Writing omission test1. If the writing covers some aspect of the topic, then the writing is

considered integrated

e. Restatement uses test 2 and 3i. Pg 260 and 261 restatementii. Meets either one, oral testimony can be admitted

f. UCC 2-202i. Adopt certain inclusion test

1. More permissive about admitting prior oral testimonyg. Modern view

i. Should trust jurors1. Should be excluded only when the fact finder is likely to be misled

4. Merger clausea. States that the agreement is complete and final

i. Nothing else is to be included5. The UCC Parol Evidence RuleTrade Usage, Prior Dealings

a. 2-202


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i. Agreements in writing may not be contradicted by evidence of any prioragreement but may be supplemented or explained

1. By course of performance, course of dealings, or usage of trade, and2. By evidence of consistent additional terms unless the court finds the

writing to have been intended also as a complete and exclusive

statement of the terms of the agreement

b. Even in complete documents some evidence may be included to explain andsupplement the contract

i. Course of performance1. What the parties have done with the respect to the contract2. Did the parties behavior suggest what agreement about certain things

should be

ii. Course of dealings1. Refers to parties dealings of a particular time2. How they address issues over several contractual relationships

iii. Usage of trade1. How parties within industry do things

6. CISG and the Parol Evidence Rulea. Subjective intent is permitted where the other party has reason to know of their intentb. CISG contains no express statement on parol evidence

i. Allows for oral contractii. Gives due consideration to all relevant circumstances

7. Cases where the parol evidence rule does not applya. Reformation and the Parol Evidence Rule

i. Scriveners error1. Doesnt bar introduction of evidence that there was a mistake made in

the drafting of documents

ii. Reformation1.

Reforming a document to reflect its true intent

b. Condition Precedent, Fraud, and the Parol Evidence Rulei. Condition precedent

1. A condition that must occur before there is a contractii. Fraud

1. False intentions or trickery used to create a contractiii. Parol evidence can be considered by the fact finders when there are allegations

of fraud

1. Not a bar to consideration of evidence of fraudiv. Parol Evidence can also be heard when there are allegations of condition

precedent

Modification

1. UCC 2-209 (DO NOT APPLY TO COMMON LAW)a. An agreement modifying a contract needs no consideration

2. Modification that is not in writing (oral)a. If the contract is within the statute of frauds (3)

i. Must satisfy 2-201


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1. Sale of goods2. Quantity specified

a. Not applied in requirements contracti. No distinct amount by nature

3. Signed by party invoking SOF defenseii. If the original contract was required to be in writing then the modification must

be in writing

1. Majority of courtsiii. If the term modified must have originally been in writing, then the modification

must also be in writing

1. Minority viewb. No-Oral-Modification Clause NOM (2)

i. Clause where there can be no oral modification to the contract1. Private statute of frauds

a. Parties decide what has to be in writing and what doesntc. 2-209(4)

i. Allows enforcement of an oral modification to be enforceable where it is notenforceable under because of a NOM or the Statute of frauds is not satisfied

1. Buyer waived the requirement through oral modificationa. Look at who initiated modificationb. Extent of reliance on modificationc. Whether party is taking advantage of the other

d. 2-209(5)i. Party who has waived a part of the contract can retract it back to the original

terms

1. So long as there is reasonable notification2. And the other party has not changed their position in reliance on the

waiver

Interpretation

1. Attempting to determine what the parties meant by various terms in the contracta. No limitation on the extrinsic evidence of what the judge may hearb. Generally involves the interpretation of the written contractc. Judge looks at the document and determines if there is any ambiguity as to what the

terms meani. No ambiguity, no extrinsic evidence heard

d. Up to the lawyer to show that certain words can have more than one meaning2. Goal is to determine what the parties intended

a. Look at how that parties acted toward termb. Who wanted the term

3. Guides (only given limited weight)a. Contra preferentem


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i. When all other things are the same, the courts will look at the meaning theperson who wrote the contract intended it to have

b. Expressio Unius i. If there are items listed and an item is not included, then it does not apply

4. Vague or equivocal meaningsa. Where a word has a spectrum of applications or a double meaning

i. Must look at all of the extrinsic evidence to determine the meaning of the term5. Latent Ambiguity

a. Can cause a contract to be voidablei. Parties attach different meaning to the same word, neither know

1. Was no manifestation of assenta. there was no contract

ii. If both know the other person has attached a different meaning to the word1. no manifestation of assent

iii. seller thinks its one thing, buyer thinks it is another, but knows the seller thinksit is the 1

stthing

1. there is a contract based on the innocent partys belief6. Mistake

i. A belief that is not in accord with the factsb. Mutual Mistake

i. Both parties are mistaken1. Mistake on a basic assumption upon which the contract was made2. Must have a material effect

a. Would the contract been made had the mistake been knownii. If both conditions are met, then the contract is voidable by the adversely

effected party

1. Unless they bear the risk of the mistakea. If contract says he bears the riskb.

If buyer is aware that he has limited knowledge with respect tothe facts, but treats the knowledge as sufficient

i. Conscious ignorancec. The risk is allocated to the buyer by the courts discretion

c. Unilateral Mistakei. One party is mistaken

1. Mistake on a basic assumption2. Mistake has a material effect

a. Does party bear the riski. Agreementii. Conscious ignorance

iii. Courts discretionii. Is voidable if

1. Unmistaken party had reason to know of the mistake or cause themistake

2. Unconscionablea. Whether it is a bad deal

i. Will look at other parties detrimental reliance

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