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Consideration

A. Consideration, Absence of Consideration and Nominal Consideration pg 2-12

Simple Donative Promises

Donative Promises, Form and Reliance1. SIMPLE DONATIVE PROMISES

1. Tip: A promise to make a gift is unenforceable, unless it has beencompleted then it cant be rescinded

2. Hawkins v. McGee -

3. Dougherty v. Salt 227 NY 200 1919

1. F: Aunt promises 3K to nephew

2. R: A promise to make a gift is not enforceable No return promise.

A. law does not enforce gifts (donative promises)

B. donative promises are not enforceable because the promisee suffersno detriment as a result of the breach

C. Restatement 71(4) There was no return promise

4. Restatement 1 Contract Defined A contract is a promise or set ofpromises with legal remedy when breached, or performance of which law seesas a duty.

5. Restatement 2 What makes a promise?

6. Restatement 17 Requirement of bargain manifestation of mutual assentto exchange and a consideration.

3. Restatement82-94 Rules (contracts w/o consideration)

7. Restatement 71 What is Consideration? Consideration Return promise

or performance8. Tip: Four common scenarios on exam for consideration (p.154): 1.Promises to make gift not enforceable; 2. Promises to pay for past services Good Samaritan not enforceable when no reasonable expectation ofcompensation. Dont be fooled if a. unconscious person regains consciousnessimmediately after regaining consciousness, b. saviors happens to be someonewith experience like retired doctor, c. a relative who promises after fact topay, d. a promise to pay is made in writing in consideration for services.None of these have consideration.

Distinguished from emergency medical services by parties who would reasonably expect tobe paid emergency rooms and ambulances.

Dougherty v. SaltD - executor of estate (has fudiciary duty to maximizevalue of estate)

-doesnt appear to be a real bargain here-if the actual filling out of the note was somehow construedas being a viable bargain then this case would be different


2/79

assent is the agreement (offer & acceptance)bargain: offer & acceptance and agreement

if Reliance then consideration not required

Executory: an unperformed obligation

Consideration- a return promise, or performance (act orommission), It must be bargained forthe bargain must plausibly make sense to jury

-actual bargain, not just nominal

bargain doesnt have to be even, just has to go from sham toreal

bargain must come before agreement

Rule: Consideration requiredPurpose: promote caution in dealings

RULE PRINCIPLE

Marriage of Witten IVF embryo dispositionagreement is not binding

family reproductivedecisions require currentconsent (in that state)

Dougherty v. Salt K w/o consideration is notbinding cautionary?Were they careful when theymade statement

promise by friend to takeyou to the airport

K w/o consideration is notbinding

-cautionary-evidentiary (court cares ifthey can fig out what agrmtis)

Schnell v. Nell Oral promised possibly morelikely to not haveconsideration- less evidence

2. ELEMENTOF FORM

9. Schnell v. Nell 17 Ind. 29 1861

4. F: Husband made promise to honor wifes will though she hadnothing to leave to anyone. Consideration was love and affection for wife,help wife gave him, one cent, and abstaining from legal action.

5. R: There was no bargain - .01 for $600

D. Nominal consideration form, not substance of bargain. Amount so


3/79

small court may conclude as a factual matter there is no real bargainpresent at all. But if big enough to suggest a bargain, fact it isinadequate is irrelevant.

- If non-trivial payment not in fact made, most courts take thisad evidence no bargain present.

- Restatement 79 Comment D pretended exchange doesntsatisfy 71

E. Consideration is supposed to run from promisee to promisor

F. To constitute consideration promise or performance must bebargained for.

Schnell v. Nell

purported bargain here: 1 cent, agrmt not to sue, respect for wifes wishes,

appreciation of wife

-court says no consideration

channelling - set up rule that says what contracts we will enforce, channelswhat K's people write into what works

-Advantage: its easy as a lawyer-Disadvantage: case w/ no consid that are unfair(?)

The Seal - deals w/ evidentiary, cautionary, channeling-satisfies these in states that allow it

hypo: man desperate for 25 cents to make phone call offers $600 for 25 cents now-THIS IS PROBABLY COUNTS AS A BARGAIN

B. Causa and Consideration (H 1)

C. Promissory Estoppel (or Reliance): A Substitute for Consideration pg 12-25

Kirksey v. Kirksey

place to raise family-promise is unclear (therefore no consideration)remember- even if he gains nothing, it can still be a bargainWhat damages should they get here? Reliance, or maybe expectatn

Feinberg v. Pfeiffer-for it to be a promise, they must TELL her about itR. 2d - 90


4/79

Reliance - substitute for consideration

ethical issues: coaching client - did she actually rely on pension?

What damages should Feinberg get?

-expectation (position she would have been in if K went asplanned)reliance would be hard to do in this case

Keep issues separate: A- Reliance- reliance dmgs measure (also meanspromissory estoppel as substitute for consideration

B. Damage award on reliance

Generally courts use reliance to see if K is valid and THEN theyaward expectation damamges

Walters v. Marathon Oil-if breach doesnt cause you losses, then no damage award-occasional punitive damages but usually not

D. Adequacy of a Bargain pg 26-34 (also look at New Yorks version of Statute ofFrauds)

Hamer v. SidwayKey issue: Giving up a legal right constitutes consideration

Nephew could argue: hes paying me interest, thereforecould already be my $

Unilateral K - a promise for an act-only 1 promise

Statute of Frauds-in writing helps for evidencein Hamer v. Sidway, note from uncle probably qualifies as writing

-If you see Oral or verbal on exam, think statute of frauds

Statute of Frauds Rule: writing..., Principle: prove theres a K

Batsakis v. Demotsis-Duress case maybe


5/79

-taking advantage of economic duress-could claim she was forced to accept offer

-is there a bargain? - yes2000 for 500,000 DR

Post v. JonesUS Supreme Court (bc its admirality case)

P claims oil worth more and it was forced to accept (not real consent)

-this isnt a consideration case-no acceptance of deal via duress

Policy Issue: if K not enforced here then next time the D wont help such aship (Enforcement of K's critical to make commerce work

3 Points:1. there are limits to what courts will let you get away with2. limits to when it becomes duress3. Courts care not only about case at hand but also settin

precedent

Dif b/t Batsakis and Post v. Jones:-there was dramatic duress case in Batsakis, but THEY DIDNTARGUE DURESS-In Post v. Jones, they brought duress claim

Limits on Consideration

1. Executory and Illusory Bargains pg 48-65

Scott v. Moraques LumberQuestion is: how did he commit himself?

Scott says he didnt have to buy boat

Court says he bound himself by having only 2 alternatives:1. Buy vessel and provide delivery OR,2. not buy boat

-He gave up right to buy boat and not provide the service

If he doesnt buy the boat then no obligation-his sacrifice is not buying boat


6/79

Still a K? - yes-even if he waits a significant amount of time and

then says hes ready to deliver, still K prob enforceable

Buy Boat (The Condition) ---> Provide Boat (The Obligation)

Wickham v. BurtonDivisible contract long-term agreement, sellers promise illusory,but buyer places individual orders. Each offer a series of unilateralcontracts and each order an acceptance seller bound to fill.

6. Illusory promise gives one party total discretion on whether toperform.

G. Restatement 77: Illusory and Alternative Promises

H. If agreement to purchase all I need or require it would be binding,since limits realm of realm of choice.

-within reasonable standards (fight would be ovewr what reas. ishere)

-if you want unreasonable amount, the language must be inK

7. F: Seller (P) agreed to furnish buyer (D) with as much coal as buyer(D) would want to purchase from seller (P). Suit is over counterclaim byP in action brought by D that there was no contract.

R: No mutuality in K when obligation to sell, but not obligation topurchase, vice versa. If only one party is bound to do something, thepromise is illusory.

WB can choose not to buy here so its illusory (doesnt limit their choice)

-something outside of parties control is valid consideration-fact that FL did want lumber doesnt create consideration

parties think they are profitting from open ended K but are actuallyinvalidating it

Watch UCC -2-306-has 2nd section that works w/ exclusivity agrmts

-says you must use best efforts

Ask: why is there no implied promise in FL v Wickham?-b/c its too hard to pick a number and say that was the parties

intentions (but in Wood v. Lucy Lady-duff - reasonable expectation to seek a profit)

Unilateral K hypo: $100 to walk across bridge-walker under no obligation until act happens


7/79

Lindner v. Mid-continent

Requirement K'sOutput K's

Mattei v. Hopperleases satisfactory to purchaser

Satisfactory clause (2 types)1. Commercial value type - must be reasonable/in good faith

-in defining reasonable, you must point to something youdont like

2. Fancy taste type

Wood v Lucy, Lady Duff-Gordon-she clearly breached

-wording 1/2 of all profits and revenues is strange-did he make explicit promise? - No (cardozo says promise isimplied)

2 ways to imply terms in a K1. All K's have obligation of reasonable efforts2. This K does b/c of its structure

-if K said no stipulation besides explicit statementthan maybe court doesnt rule the same

Wood has reasonable expectation to seek a profit

Watch UCC -2-306-has 2nd section that works w/ exclusivity agrmts

-says you must use best efforts

Grouse v. Group Health Planpromissory estoppel here

Issue: what are they promising?-Elliot made promise even though he didnt have authority to

make that promise, its its reasonable to assume he had authority to make promise, it sticks-at will employment - can terminate at any time

-series of unilateral K's

How did Grouse rely?-quit job, turned down other job offer


8/79

to get promissory estoppel, you must be worse off than before promise

what makes reliance reasonable varies from state to state-you can poss. never rely on getting this

What damages could he get?-reliance damages

Either 1. lost wages at last jobOr 2. lost oppostunityprob not both.

What does this case say in Minnesota?-must give new hire (or new accepted offer) a reasonable chance toperform duties

PROF says: he likes result of Grouse for Grouse in his situation but its a

bad result for employers later-resonable chance to perform duties is too vague

What would have constituted reliance in Wickham v. Burton?-if Farmer Lumber promised clients coal at WB price and then WB

reneged on deal-but you could argue that its not reasonable reliance (maybe not

reasonable to rely on your own illusory promise)

to not be illusory, you must actually give up a legal right

Lingenfelder v. Wainwright Brewery Co.Issue: is there consideration for the promise to pay an additional5%?

P Arguements: 1. transaction was compromise of a doubtfulclaim (A disputed claim could lead to a settlement)

Prof says: there is no doubtful claim, if anything, Lingenfelder is wrong1. 1st K changed, new K started

2 strains against: duress, no considerationquantum meriut- unjust enrichment

If WB had paid Lingenfelder the extra 5%, id be tough to get it backPre-existing Duties pg. 65-84, (H 2)

A. Waiver of Condition (Restatement 2nd Ks 224, 84; U.C.C 2-209, (H 1Clark)

Foakes v. BeerSame q as Lingenfelder

-Court says they dont like rule but preexisting principles sayuphold old rule


9/79

Dif b/t Foakes and Lingenfelder?-prob no duress here

Did Foakes promise here?

maybe not, wording seems like if-sounds like unilateral K-therefore she cant sue for breach

His Defense: you promised not to go after the interest-not valid defense b/c its a Prior Obligation

-we want people to honor their obligationsUCC 3-311 - You must make sure it gets to the right person, it cant justslip through the cracks

Austin v. Loral

-duress is an issue here

R.2d.-376 - if duress, entitled to restitution for benefit conferred

to prove duress:-cant obtain from another source-ordinary breach remedy doesnt work-here, navy would be unhappy

Liquidated Damages Clause-If Loral fails to deliver, they owe X $ per day here

-not always enforceable, we want actual damages not apenalty

Angel v. Murray

Is there duress?-court says no

-angel thinks getting extra for what hes contracted to do

-all risk is on town -> if less than usual new units, contractor gets windfall

how much detail should go into K's?


10/79

maybe: no modification ruleor modification ok rule

-these would be law of state

K negotiation -> K Performance -> unanticipated circs + K renego. -> lawsuit

if no mod. rule than lawyers would throw in every possibility-this makes negotiations more expensive

if mods ok rule than renegotiations wont cost as much b/c yournegotiating only the problem clause

court cites restatement 89

dif than normal case b/c theres a gov't actor

Schwartzreich v. Bauman

like Lingenfelder-breach isnt a legal option is courts view

ceremony of tearing K to make it seem like mutual and starting fresh

-court not necess agree-seems iffy-court not sure who to beleive, may or may not be duress

Point of case: courts becoming more willing to allow K mods.

Clark v. West

1st promise is unconditional2nd promise is conditional

from mod pov, west not getting anything more to waive condition

Could argue unanticipated circs - book selling even though he drank

but court not using this

Main Point: you can only waive immaterial condition

-cant waive considerationMain Point 2: no need for consideration for waiver of condition-waiver can be revoked if reasonable time given, unless theresreliance

In a waiver case, question to ask is: Is the condition material?

here, look at $ amount, drinking clause is 2/3 of comp, seems material


11/79

Clark v. West could be viewed as modification of K or waiver

Prof thinks: drinking here is material (but you can disagree on the exam if goodpoint is made

Summary of Legal Duty Material (past exams page has this as well)Modification: normally modifying a promise, in some cases could be modifying acondition (not normally discussed)

Traditional rule: consideration required-duress needs to be examined

Modern Approach: R.2d-89 (a)

Application to sale of goods: UCC 2-209: no consideration req'd

good faith required

Waiver of Condition:

-must be non material-must be clearly communicated-retractable for future if no reliance

UCC 2-209-need good faith

Past Consideration pg 85-96

Mills v. WymanIssue: is moral obligation enough for consideration?

Enforceable in NY? yes, in this case its enforceable

-judge says not morally right, but right for the law

R.2d-86 ignoring the bargain

in absence of promise, could he still get $?-maybe

Whats result in future?


12/79

-might not effect decision making b/c its promises afterwards

What if Webb didnt get hurt? Still a K?-under R2d - 86 - NO-In this case- judge prob says yes

is it unjust enrichment?-not really, but thats a q for the court

Hypo: brother promises sister to pay her $10 per month b/c he told dead parents he would.She finds out its not true that he promised the parents. She promises to repay. Enforceable?

Rules for unjust enrichment:-if its forced on you, you need not pay (Ex: squeegy people)

R.2d. - 86 - if unjust enriched, than past consideration is enforceable

Dif b/t Wyman case and Webb v. Mcgowin:A. -2 dif states. B. Webb is self enrichment. Wyman is not self enrichment

C. time period difference

past consideration rule is illustration of consideration rule except loosened throughR.2d. - 86

Difference b/t Harrington v. Taylor and Webb v. Mcgowin? Nothing. Only the outcome.-You could aply R.2d. 86 to Harrington but court didnt.

Consideration Oral Arguments

Remedies

I. Intro to Damages pg 114-1343 Basic Measures

1. Expectation Puts promisee in position he would have been in if contractwas performed

-This is the normal measure. Courts want to give this.2. Reliance Puts promisee in position he would have been in if contractnot entered

-Generally, only given if theres a problem with expectationapproach

3. Restitution Restore to promisee what unjust benefit conferred onpromisor

-Generally, only given if theres a problem with expectationapproach

Hawkins v. McGee


13/79

* It must be a promise to bring contract law into play, prediction doesntcount.

Lower court gives reliance damagesAppeals (court here) gives expectation

Would there have been consideration w/o payment to dr.?-Yes, opportunity to do operation

Sullivan v. OConnor-Takes middle ground

-says gets reliance

Naval Institute v. Charter (Berkley)

*Copyright could give you disgorgement, BREACH WONT

Court says: expectation damages = lost hardcover sales in Sept.

Court awards expectation damages no disgorgement

Coppola v. Alfone

benefit of bargain expectation damage language

Trial Court says bad faithAppeals Court says no bad faith, disgorgementSupreme Court of Florida says paying her profits when they soldfor her property trustee relationship (?)

Coppola sold for $170,000-She should get difference between $170,000 and what shewould have had to pay (This is expectation measure)

-(as long as $170,000 didnt misrepresent MP)

Laurin v. Decarolis

Property w/ gravel: $26,900Property w/o gravel: $26,900

Worth of gravel: $6,480-NOT POSSIBLE-property w/ gravel must be undervalued (and worth$26,900 + $6,480)(unless building house on top of gravel couldobstruct extraction)

POINT OF CASE***


14/79

Willful breach leads here to disgorgement- very unsual, rare exception

Efficient Breach-shouldnt really discuss this on final at all

-Only points to remember:-Pareto-efficient transaction- makes at least one personbetter off and no one worse off-Kalder-Hicks efficient transaction (efficient breach) makes atleast one person better off and those better off couldrecompensate others to make no one worse off

-Courts routinely ignore efficient breach-bad argument, not a part of contract law-courts indifferent to whether contracts are efficient

J. Expectation Damages

1. Service Contracts pg. 135-152Louise Caroline Nursing Home Inc v. Dix Construction Co.-auditor wants to give expectation damages

-remember this case is commercial property not personal

2 possible formulas to use:1. diminution in value2. cost of completion

POINT OF CASE-illustrates problems that arise when choosing between dim.In val and cost of completion.

-Court says diminution in value would be too much(windfall) here-COST OF COMPLETION works better

Peevyhouse v. Garland Coal & Mining Co.Cost of Completion ($29K) or Diminution in Value ($300)

-BOTH DO EXPECTATION DAMAGE

-Court says Cost of Completion is grossly disproportionateto increase in property value here

Which measure to choose?Qs to ask:

Was the clean up a material element of thebargain?

--They gave up $3000 for it-sounds nonincidental

If court gives $29,000 then -$300 + $29k = $28700


15/79

-Wouldnt giving them this much be economic waste?

How would we hypothetically fix this for next time if we werePlantiff?

-Break it into 2 contracts

-1. For use of land2. contract for clean upIf 1st K completed THEN must do second

-Prof says: outrageous not to pay $29K if they will actuallyfix it

Cost of Completion is the normal damage # to give but sometimescourts will give diminution in value

-if CoC is grossly disproportionate-Courts probably gives CoC here if they actually think $ here goesto fix it.-Specific Performance not usually given for Ks like these

-hypo: Court could put $ in escrow? And give back if not used tofix.-then they surely use for the purpose. -would we be happierthan?

Restatement, 2nd Ks -348(2) Alternative to Loss in Value of Performance(2) If a breach results in defective or unfinished construction and the loss in

value to the injured party is not proved with sufficient certainty, he may recover damagesbased on:

(a) the diminution in the market price of the property caused by thebreach, or(b) the reasonable cost of completing performance or of remedyingthe defects if that cost is not clearly disproportionate to the probableloss in value to him

Eastern Steamship Lines v. U.S.-Court saying: Of course parties would have contracted this w/punexpected circumstance

-Difference b/t Eastern Steamship and Peevyhouse?-Eastern isnt attached to boat

City of Elmira v. McLane-good faith issue-court treats Defendant as having bad faith-aestetics were material, NOT INCIDENTAL

Advanced, Inc v. Wilks-if property has significance to owner then maybe cost of repairs-if simply an investment probably give dimunition in value


16/79

-3rd approach: diminution in value + personal attachment/feelings

-issue: will they repair it?

NOTES FOR FINAL: Even periferal issues should be mentioned. Err towards inclusion

rather than omissionAiello v. Nationwide Tractor-what damage does the owner want?

-owner is unhappy w/ formula but if formulas donecorrectly, they should all come out the same.

Aiello Court says:$21500 (Costs Incurred) + $3000 (Profits) - $10500 (Paymentsmade)

Restatement 2nd of Ks -347 Measure of Damages in General

Subject to the limitations stated in Restat 2

nd

Ks 350-53, the injured party has aright to damages based on his expectation interest as measured by:(a) the loss in the value to him of the other partys performance caused by

its failure or deficiency, plus(b) any other loss, including incidental or consequential loss, caused by the

breach, lessany cost or other loss that he has avoided by not having to perform

Aiello ISSUE: Was trail court using the right formula?

-As general matter, can normally ask for restitution-looked at as windfall sometimes

(BLACK LETTER) Restatement 2nd Ks 346 Availability of Damages(1) The Injured party has a right to damages for any breach by a party againstwhom the contract is enforceable unless the claim for damages has been suspendedor discharged.(2)If the breach caused no loss or if the amount of the loss is not proved under therules stated in this Chapter, a small sum fixed without regard to the amount of losswill be awarded as nominal damages

$33k (KP) - $10500 (PM) - $8500 (Cost Remaining) = $14000

-even of you would lose money on a contract, suing can sometimes lower losses


17/79

SELLER BREACH PROVISIONS (of UCC)

UCC 2-711:Buyers Remedies in General; Buyers Security Interest in Rejected Goods.(1) Where the seller fails to make delivery or repudiates or the buyer rightfully

rejects or justifiably revokes acceptance then with respect to any goods involved, and withrespect to the whole if the breach goes to the whole contract (Section 2-612), the buyermay cancel and whether or not he has done so may in addition to recovering so much of theprice as has been paid

(a) cover and have damages under the next section as to all the goods affectedwhether or not they have been identified to the contract; or(b) recover damages for non-delivery as provided in this Article (Section 2-713)

(2) Where the seller fails to deliver or repudiates the buyer may also(a) if the goods have been identified recover them as provided in this

Article(Section 2-502)(b) in a proper case obtain specific performance or replevy the goods as provided

in this Article (Section 2-716)(3) On rightful rejection or justifiable revocation of acceptance a buyer has a security

interest in goods in his possession or control for any payments made on their price and anyexpenses reasonably incurred in their inspection, receipt, transportation, care and custody

and may hold such goods and resell them in like manner as an aggrieved seller (Section 2-706)

MY NOTES: UCC 2-711- lists options

UCC 2-712:Cover; Buyers Procurement of Substitute Goods.(1) After a breach within the preceding section the buyer may cover by making in

good faith and without unreasonable delay any reasonable purchase of of or contract topurchase goods in substitution for those due from the seller.

(2) The buyer may recover from the seller as damages the difference between the costof cover and the contract price together with any incidental or consequential damages as

hereinafter defined (Section 20715), but less expenses saved in consequence of the sellersbreach(3) Failure of the buyer to effect cover within this section does not bar him from any

other remedy.

MY NOTES: UCC 2-712: CP (Cover Price) KP (Contract Price)UCC 2-713:Buyers Damages for Non-delivery or Repudiation

(1) Subject to the provisions of this Article with respect to proof of market price


18/79

(section 2-723), the measure of damages for non-delivery or repudiation by the seller is thedifference between the market price at the time when the buyer learned of the breach andthe contract price together with any incidental and consequential damages provided in thisArticle (Section 2-715), but less expenses saved in consequence of the sellers breach.

(2) Market price is to be determined as of the place for tender or, in cases of rejection

after arrival or revocation of acceptance, as of the place of arrival.UCC 2-714

MY NOTES: UCC2-713: MP KP

UCC 2-714:Buyers Damages for breach in Regard to Accepted Goods(1) Where the buyer has accepted goods and given notification (Subsection (3) of

Section 2-607) he may recover as damages for any non-conformity of tender the lossresulting in the ordinary course of events from the sellers breach as determined in anymanner which is reasonable

(2) The measure of damages for breach of warranty is the difference at the time and

place of acceptance between the value of the goods accepted and the value they would havehad of they had been as warranted, unless special circumstances show proximate damagesof a different amount.

(3) In a proper case any incidental and consequential damages under the next sectionmay also be recovered

MY NOTES UCC 2-714: value as promised value as accepted [When buyer isunsatisfied w/ quality of goods. What is a different quality? UCC 2-601 SAYS:ANYTHING) This differs from CISG. In CISG it must be a FUNDAMENTALdifference.

UCC 2-715:Buyers Incidental and Consequential Damages.(1) Incidental damages resulting from the sellers breach include expenses reasonably

incurred in inspection, receipt, transportation and care and custody of goods rightfullyrejected, any commercially reasonable charges, expenses or commissions in connectionwith effecting cover and any other reasonable expense incident to the delay or other breach.

(2) Consequential damages resulting from the sellers breach include:(a) any loss resulting from general or particular requirements and needs of which

the seller at the time of contracting had reason to know and which could not reasonably beprevented by cover or otherwise; and

(b) injury to person or property proximately resulting from any breach ofwarranty

MY NOTES on UCC 2-715: ID and CD

UCC 2-723Proof of Market Price: Time and Place(1) If an action based on anticipatory repudiation comes to trail before the time for

performance with respect to some or all of the goods, any damages based on market price(section 2-708 or Section 2-713) shall be determined according to the price of such goodsprevailing at the time when the aggrieved party learned of the repudiation


19/79

(2) If evidence of a price prevailing at the times or places described in this Article isnot readily available the price prevailing within any reasonable time before or after the timedescribed or at any other place which in commercial judgment or under usage of tradewould serve as a reasonable substitute for the one described may be used, making anyproper allowance for the cost of transporting the goods to or from such other place.

(3)Evidence of a relevant price prevailing at a time or place other than the onedescribed in this Article offered by one party is not admissible unless and until he has giventhe other party such notice as the court finds sufficient to prevent unfair surprise.

MY NOTES ON UCC 2-723: its about market prices

UCC 2-724 Admissibility of Market Quotations.Whenever the prevailing price or value of any goods regularly bought and sold in any

established commodity market is in issue, reports in official publications or trade journalsor in newspapers or periodicals of general circulation published as the reports of suchmarket shall be admissible in evidence. The circumstances of the preparation of such a

report may be shown to affect its weight but not its admissibility.

MY NOTES ON UCC 2-724: Its about market prices

2. Sales of Goods pg. 152-167

Continental Sand and Gravel v. K & K Sand and Gravel

Section of damages applied: U.C.C. 2-714 : Value promised value as accepted

Ask yourself is there a claim if no express warrantees?Answer: -could be an implied promise? In Common law (restatement) maybe butwe are dealing w/ U.C.C.

Implied warrantees in UCC: 2-314, 2-315: say if you dont explicitly get rid ofwarranty (as is sale) then its still there.

Egerer v. CSR

-Did he cover?-could argue: hes waiting for shoulder gravel to be available

-didnt cover at the time

-can a few years be a reasonable time to cover?-maybe yes-still brings up question of unreasonable delay


20/79

-could argue it just needs to be a reasonable time, doesnt need to be the MOSTreasonable time

-Not having the resources at the time to cover could poss. Make coveringunreasonable

-could damages have been prevented by cover? (Refer to UCC 2-715 (?))-Yes

-even if you covered you can still ask for 2-713 damages

-if getting better quality reduces expenses, this comes out of damages award.

BUYER CHOSE: U.C.C. 2-713 damages (b/c MP is $8.25)

-gave $8.25 b/c best substitute at time of breach

-UCC > common law-gives him UCC 2-713

POINT TO TAKE AWAY: If you offer someone a good deal on somethingvaluable to them, you better follow through or you could get sued and be heldliable.

Delchi v. Roto Rex

-voided contract-how can they do that under CISG?

-fundamental breach-what is fundamental breach?

-Court here says: It doesnt conform and thereforeits fundamental breach

-PROF doesnt like courts reasoning-not enough of a measure. They couldbe right but they need a bettermeasure

-PROF is not disputing its fundamental, butdid the court do enough here?-Courts treatment here of fundamental breachmakes it a perfect tender rule

-this is not great

-BE LEARY OF ALL CASES OFTHIS BEING FUNDAMENTALBREACH

-Is a sample a direct measure of what to expect?


21/79

-maybe not-mechanical devices vary. There will be fluctuation in quality

-This could matter. Expect some deviation-In this case, quality still is iffy. Very largepercentage

-the sample seems to not have been asked for in this case

-sample should have had a plus/minus range-PROF SAYS: ROTO IS WRONG HERE (CULPABLE)

--Buyer covered, so they can get consequential damages-CISG 74

A. Profits -Sales priceB. Variable Costs costs that are avoidable

C. Fixed costs - -fixed costs: not related to sales. Management, property taxes, etcetc.-not related to breach

-RED HERRING

-Still have to add in costs later, relates to fixed costs Should get compensated b/c cant avoid them.

-Labor costs the 4 days are FIXED, and unavoidable-Should be subtracted

-Must award lost profits but also ID and CD to make them whole

#5 modifications for Sanyo issue of fact-Is the price to convert to roto the same thing as set up for sanyo?

-Unclear is unsetting up from roto or set up from sanyo#6 4000 additional lost sales

-its speculative

POINT TO REMEMBER: If costs are fixed then they were incurred and duecompensation for them if related to breach

BUYER BREACH

2-501 * Concept of identification exists

2-712 buyer cover = 2-706 seller cover

2-710 incidental

2-709 action for price


22/79

-in seller breach = specific performance UCC 2-716

Consequential damages for seller when buyer breaches?-No

Neri v. Retail Marine

Deposits have NO legal significance-contracts are binding without a deposit-Maybe it could be a statutes of fraud issue?

-(evidence)

2-708

If Contract says: You breach, we keep deposit, that is a liquid damage clause-If the amount is more than what damage should have actually been then you cant

keep it. If deal falls apart, party doesnt necess. Keep the deposit.

UCC 2-718 says: Buyer gets back all of deposit besides $500(Liquid damage clause)

UCC 2-718 rules for getting deposit back2-718 (3) says substitute to seller right to recover

-(2-708) (1) MP - KP12587.40 12587.40 = GET $0

-go to UCC 2-708(2) if measure inadequate-why is 0 inadequate here?

-UCC 2-710 give incidental

-lost volume sale could have sold 2 instead of 1

-why does court give $4250 in restitution? They should have started at $3750 (4250didnt subtract the $500)

-2-718 (2) says should get $500 OR 20% (w/ deposits)

-2-718 (3) says you still get all damages you can show in other Sections

why not use UCC 2-706 here?-it would give nothing-It wont get you to 7-708 (2)

why not use 2-709?


23/79

You must give the goods

3. Limitations on Expectation Damages pg. 167-187

Rockingham County v. Luten Bridge Co.

-is the K price the measure if breach?-Yes, generally

Proper Damages for Luten Bridge: profits + costs incurred

Is the Feb 21st order a breach?-Luten must be sure they really breached or else in stopping theywould be in breach themselves

Steps for Luten to take to decide:1. Call for clarification2. Sue

March 3rd resolution a breach?- Luten needs clarification-Luten cant rely on this-County is trying to get them to stop w/o committing to officially

breaching

Is a bridge governed by the U.C.C.?-not not generally

Luten has duty to make reasonable effort to mitigate damagesEx: materials for bridge probably need to resell

Can injured party get compensated for costs of mitigating?-Yes

Is there a duty not to raise damages or to actually mitigate?

Covering helps eliminate consequential damages

Shirley Maclaine Parker v. 20th Cent. FoxIs Foxs letter a breach

-Yes, very clearly

If she took the 2nd offer could she sue on the 1st offer for damages?-No

This K says our obligation is to pay you regardless - pay or play


24/79

HYPO: She didnt have to take an inferior job but if she DOES TAKE IT, itdoes subtract from damages on first K

-If second offer was on the same level, shed probably have to accept or getnothing

-2nd K would be mitigation of damages on 1st

Does Mclaine have to go out and look for a 2nd job if studio didnt offer 2nd

K?-probably not

WHY IS THIS CASE DIF FROM LUTEN BRIDGE?

-If second job came up for Luten Bridge, theyd have to take it.

SAME? Neither Luten bridge or Mclaine have a duty to MitigateINSTEAD:

PARTIES HAVE A DUTY NOT TO AGRAVIATEDAMAGES, NO DUTY TO MITIGATE

- (Most likely, it is state by state though)

-what of Fox breached and then said we will make bloomer girl afterall, must she accept it?

-No but she wont get damages b/c its a comparable offer

Hadley v. BaxendaleRULE OF HADLEY: DAMAGES MUST BE FORESEEABLE

What could they sue for besides lost profits?-possibly workers wages (not if its in profit estimate)

Here: 2 kinds of expectation damages:1. damages from natural course of things

(maybe there was a second crank)2. Special Circumstances

Reliance would be the cost of shipping

Damages must be reasonably expected

Did carrier have this knowledge?-Maybe Yes


25/79

-seems maybe clerk knew but not higher ups

Shippers effort should be based on worth of effort to other party BUTshipper needs to know the worth!

UCC says in these situations: KP MP (you know what your on the hook for.-Different than Hadley

Rule nise (?)- unless something else happens in the meantime (?)

UCC 715 reason to knowCISG probable

BOTH ARE LOWER STANDARDS THAN GEN. COMMON LAW &UNIDROIT

Restatement 351 (3) if really out of control, you wont get it

HYPO If in Hadley, carrier called and said our wagon broke. Are they stillliable? (no?)

Rickcloth idea pg 176-177-court says no, wont get damages-PROF says if your buying a rickcloth, that might show its predictable

How does Fed Ex deal with these situations?-Liability waiver and insurance

Koufos v. C. Czarnikow (The Heron II)-Under Restatement do they get damages?

-Probable result?-50/50, not exactly

Reason for shipper to hurry boat?-No, they dont know if the price will go up or down

Ruling in this case is troubling but it still is law.-Theres a strong counter argument for this ruling

Card analogy shows court is unformfortable with probabilities25% ok2% not ok

(IN THIS CASE)

Kenford Co v. Erie CountyContract provisions:


26/79

K1st part

-We agree to negotiate-could you breach this?

-yes, if you dont negotiate (you agree to try to

agree)2nd part-if you fail to reach agreement then a 20 year management contractbecomes effective

Preliminary negotiations Q-At some point they become a binding K

If $ amount given in return for 20 year K, then they get damages-not full $ amount though (subtract expenses saved)

Lower court here says: we are not taking expert opinionsAppeals court says: we will but its not good enough

Should standard of info be higher for business people than courts?-No, lower. Business is voluntary (your own risk), court decisions are not

Kenford v. Eric Liquid damages stipulation-Liquid damages stipulations force disclosure

-makes parties aware of possible damages

liquid damages prove it or get nothing. Fair?

Default rule if you cant prove damages, you get $0

*** You could write a liquid damages clause in this case and it could be valid-But still, you need some measure for determining damages

Why is this contractvalid?-Why do they deserve any damages?

-courts will imply a duty-but efforts at negotiation might excuse obligations to build

-PROF SAYS: probably not here. Its not the fault of the negotiationsfailing, instead its the fault of the county

Rombola v. Cosindas

Uncertainty?-court says: no, we have data to figure it out.-still strange b/c not exactly putting them in expectation but rathercompromise


27/79

-Goes against restatement of probability

UNIDROIT 7.4.3. (2) would give it to them

Contemporary Mission Inc. v. Famous Music Corp

Chaplin v. Hicks-Do damages match loss?

Expectation Damages Question on EXAM

-On Exam make points AND counterpoints-Def hit important stuff-mention unimportant stuff if theres time

1.mitigation 2. Foreseeability 3. Certainty (can we calculate after the breach?)

-is Peavyhouse a Forseeability Q? Peavyhouse is not a certainty issue-no, it doesnt come up

Book and Bottleshop

Liquidated latin term means specified-Must it be a number?

-not necessarily-can be a formula-Its just a way of determining damages

Liquidated damages clause-cuts litigation costs-If its there to give incentive to perform then its a penalty (and thus not

enforceable)-They are viewed objectively. Not what parties say it is but rather what it looks like.-If the clause isnt enforceable then what do they get?

-Expectation damages

4. Liquidated Damages pg. 188-202

Wassermans Inc v. Middletown


28/79

-problem w/ gross receipt measure?-Should they have gotten expected revenue for the rest of the lease?

-no, they can mitigate and open a store somewhere else

-Revenue Reciepts are easier to show court than profits

profits = revenue costrevenue = $ taking in

Court says 2 alternatives here:1. Anticipated damages2. Actual damages

Court says trail court didnt scrutinize on the right basis and tells them how to doso.

Standard for reasonable test based on expected damages

WASSERMAN APPROACH: LIQ. DAMAGES CLAUSE- IF REASONABLEAMOUNT THEN ITS OK

-DIFFERENT THEN HUTCHINSON OR OLDSMOBILE

Lee Oldsmobile Inc v. KaidenInconsistent w/ Wasserman reasoning

Comparision:Wasserman said: reasonable in light of expected or actual amountOlds Mobile Says:Ease of Calculating Approach - if its easy to calculate damagesat the end, then we wont enforce liquidated damages clause, they say Liq.Damages only good when there is uncertainty

-this is not good b/c it makes negotiations uncertain, Oldsmobile ignoresthis

Hutchinson says: Difficulty of Calculating Approach - Clause stands if damagesare not readily ascertainable

-LACK OF CONSISTENCY-NO SET RULE FOR LIQ DAMAGES, you can only divide by different factors indifferent courts

UCC 2-718 liq. Damages clause says (?)

Hutchinson v. Tompkins-says liquidated damages clauses are okbut must be reasonable

EXAM: Liquidated Damages material


29/79

-If question is based in New York or an imaginary jurisdiction-you should say: here are the factors courts examine

-if exam states its in New Jersey-Use waserman

-if states Maryland

-use oldsmobileU.C.C. and the Restatement say: liquidated damages clauses are ok if reasonable atCONTRACT TIME or AT TIME OF BREACH (either)

Pembroke-Oldsmobile Approach

Kenford-Uncertainty at end

Argument for liquidated damages clauses it forces completion of promise

Late fees material-Late fees are a penalty

-forces performance?-damages for breach?

C. Specific Performance pg. 203-212

Europe:-In Europe its the default ruleProvision in Euro K Law: Art 9.102

-Euro approach comes back around and ends up in line with our law here-Specific performance when goods are unique

U.C.C. Action for Price antipragmatic-Courts typically dont force specific performance in employment contracts

-They will slack, etc etc-Courts dont want to supervise performance

-In sale of goods & real Estate Specific Performance happens more often

London Bucket Co. v. Stewart-often you can use multiple remedies-here court says: Pick 1

Without prejudice can revive remedy in case of appeal, etc etc

why do they want the contractor that just screwed up to come back?-Bucket could be broke-its better than nothing


30/79

Restatement 2nd Ks 360(c) - likelihood that damages can be collected

-court says no to performance-they might get nothing now if they cant collect

Penn Railroad (pg 206)

-why give specific performance here?-joint profit here

-ask self do they require supervision?-in railroad and aircraft case probably not

Stokes v. Moore

-even if specific performance agreed, court doesnt need to follow it but they canif they wish

KENFORD COURT wouldnt make them

Laclede Gas v. AmocoStructure of Contract:

-Master Contract that governs smaller Ks-each note is its own smaller K

-Sometimes you breach and cant just cut a check. Here they could still be doingbusiness for maybe 15 years

-Why not worry about supervision here?-Amoco is not going to mess with gas lines

Weathersby v. Gore-Court says: more willing then used to be to give specific performance BUT NOT

HERE

Specific performance on sale of goods ONLY WHEN UNIQUE

Sale of Land-Yes, will usually give spec. perf. b/c property normally unique

Employment?-no

Sample Consideration Exam Question


31/79

D. Reliance Damages pg. 213-218

Reliance (2 meanings) :#1 SUBSTANTIVE promissory Estopple en lieu of consideration

#2 REMEDIAL put injured party in position as if no K made

Restitution (2 meanings):#1 SUBSTANTIVE right to recover for unjust enrichment#2 REMEDIAL allow injured party to recover for unjust enrichment(could be either party), (Not just a damage measure for breach but alsosimple unjust enrichment)

Security Stove v. American RYS Express-Why not ask for expectation damages here?

-too vague, hard to prove-Gets back to new business idea in Kenford v. Erie-This case awards reliance-If expectation damages are too hard to show, a court can award reliancedamages unless you can prove its a losing contract

-b/c then breach didnt cause your problems

HYPO: if the convention was canceled, can you still recover?-No, b/c you cant claim failure to exhibit due to missing part,instead its the conventions fault

-its like showing it was a losing contract-means there is no loss here then-Causation issues

What about preexisting expenses (renting the convention space before thecontract was made, etc etc)?-Answer: Carrier has a common law obligation to ship (pg 216 bottom)

-P relied on this common law obligation-D is expected to realize that P will suffer preexistingexpense loss if D breaches

Reliance sometimes awardable because we think its the floor onexpectation damages (that cant be proven due to vagueness)

-in this case, they couldnt show expectation damages b/c they weretoo speculative

Are we worried about overly large expenses being sued over after breach?-No b/c the party that is sending stuff expects that most of the timethere wont be a breach and they will have to pay


32/79

REASON COURTS EVEN GIVING RELIANCE?-Answer: We think you are gonna make money in the end

-trying to vindicate expectation even when too vague

If D proved Dougherty was not interested then the case for reliance wont

work either

L. Albert & Son v. ArmstrongGENERAL RULE:

Expectation damages burden is on the P to prove profitsReliance damages burden on D to show profits would be nothing(K no good or a losing K)

Exp damages = Cost incurred + lost profits

if you scratch lost profits THEN:

damages = COST INCURRED ONLY this is reliance damage

WHAT ALBERT TELLS US ABOUT SECURITY STOVE-if Dougherty came in and said hes not interested in the stove, then profitsare negative, whole thing is a loss and courts are not going to award reliance

Is there a duty on Stoves behalf to try to cover?-If they could have reasonably covered and did not, they cant get damages

HYPO: If stove Co covered and found the part, theyd only get cost offinding the part, not any other reliance

E. Restitution Damages pg. 218-231

Osteen v. JohnsonUnenforceable b/c of statute of frauds?

(B/c its oral agreement)-NO, its under 1 year contract

ISSUE is Breach substantial enough to warrant restitution?

Promoting 2nd abum is conditional on success of 1st album

Why not ask for reliance?-Maybe shed get $2500 back but D could try to prove its a losing KWhy court ask for Substantial breach?

-When you have substantial breach by party A, party B canstop performing totally

When substantial breach happens, afterwards its like we are


33/79

ignoring rest of K and then just putting people back where they werebefore K happened

Restatement 2nd Ks 371 - two possible measures-In this case either what reasonable hourly rate would be to

breacher OR how much benefit Osteen received

-courts give least favorable option to party that breached

-courts often look to the contract for advice on whats reasonablevalue but it doesnt have to look at K

POINT OF CASE: You need substantial breach to get restitution

-but remember: any breach entitled you to expectation damages!!!(even a smaller breach)

Oliver v. CampbellSubstantial breach here?

Sometimes (not often), even with minor breach, if willful, courts cangive restitution

-If K is over, you dont get restitution, only could get expectation

Rule Contemplates: before K is completed, amount could be less.-In this case it is not though

-there could be additional benefits to P (publicity for winning thecase, etc)

Restatement 2nd ks 373 shows when you could get restitution

-in this case why is reasonable value so much higher than K price?-its just a bad K for P

-why go to restitution here and not expectation?-its a substantial breach-you can still ask for expectation but substantial breach

opens restitution route

U.S. v. Algeron Blair-losing K here

Coastals position Blair should pay for craneBlairs psotions Coastal should pay for crane


34/79

-Coastal walks off, if court finds Coastal responsible for crane thenCOASTAL breached


35/79

ON EXAM explain both ideas-Court Cites Restatement 2nd Ks -374 and updates a different

approach then common law-Some states may still allow seller to keep deposit (apply common

law)

-had there been a liquidated damages clause, we would determine if damageis reasonable-if K is unclear if there is a liquidated damages clause, you should just call itone to sway the court to award deposit

Lucy v. Zehmer-significance of the offer of $5 up front?

-no legal significance in K law

Courts issue with the manner of the K being taken-P took possession and D didnt object-Does this matter?

-Yes, b/c its an acceptance issue, once Lucy takes it, that is anacceptance

RULE FOR THE CASE: ONLY EXTERNAL ACTIONS MATTER

HYPO: if K said Buy it tonight, then Zehmer would win ruling

-We want people to rely on words and actions-not internal

Although: If both parties mental states are different then the words of the K(Reasonable view of the K), then internal governs instead

-Fact that he keeps it a secret & Wife knows-This doesnt help him

Reliance-If Zehmer says its a joke right away and Lucy acts on it, is that stillreliance?

-Yes, expressing a willingness to agree to a price is still reliance b/cyou gave valuable bargaining information (Revealing you will entercontract)

Prof says: Reliance begins when you give up info to the other party (lettingyour willing price be known)


36/79

To be enforceable Must objectively look like a K-Atleast one party must believe its a K

If sale was for $500 would the court enforce it?-No, seems unreasonable, a court probably wont give it the sameforce

Keller v. HoldermanUse Restatement 2nd Ks 20

& Restatement 2nd Ks 21

Courts rely on this: As long as both parties agree its not a K then its notvalid

Issue with price: helps court be ok with annulling the K b/c it looks like ajoke

Raffles v. WichelhausWhy isnt D mad about empty 1st ship?-strange-maybe price went down later-Prof is suspicious of Ds actions

Objective view here?-There is Cotton on the Peerless-Which view does this support?

-NeitherWhat could help D?

-argue you had plans for an Oct. shipmentHYPO: Suppose trade rule where first Peerless that comes in is one meantalways

-If so there is no case. D wins.

Restatement 2nd Ks 20 ***Restatement 2nd Ks 201 (? Means 21 maybe?)

Keller v. Holderman watch case Fits which?-Fits Restatement 2nd Ks - 201 (?)-Doesnt fit Restatement 2nd Ks 20Which does Raffles fit?

-Restatement 203 (b) express terms statingPeerless-authorizes use of trade usage

Lucy v. Zehmer uses Restatement 2nd Ks 20 (b)

Can you go outside K language?1st ask parties


37/79

2nd Course of Dealing Course of Performance-look to past parts of this K

3rd Look to past OTHER Ks between the parties4th usage of trade standards

-industry conventions

Oswald V. AllenIf collections were Coin Collection A & COIN COLLECTION B, whathappens?

-Oswald more likely to winOBJECTIVE VIEW

-Objective, like reasonable in parties position-Or Objective, like an outside observers view?

-Courts can use EITHER

Damages Oral Arguments

12/2 - outline additions:

IV. Contract InterpretationObjective and Subjective Interpretation 234-245

Embry v. Hargadinecourt thinks convo implied a new 1 year KIs Embry's belief enough?

-If he actually believes it and it is objectively reasonable.

Both parties need not intend KOnly 1 party believes and reasonably assumes its a K

-This case doesnt reach duress

V. Formation of ContractsOffer and Acceptance

Offers and Termination of Offers pg 268-290

Restatment 2nd K's - 24 -Whats an offer?Test: If someone says something to you and you can reasonably say yes and

form a deal then its an offer

CISG Art 14 - Gives good ex of whats needed for an offer generally-One or more specific persons-CISG looks for SUBJECTIVE here - indicate the intention-Include first come, first served?

Euro K law 2.201: more focus on determining actual intent (Very dif from Restatment)


38/79

Lonergan v. Scolnick

3/x - ad by seller

inquiry by buyer

3/26 - letter to buyer4/7 - letter from buyer, asking for more info4/8 - letter from seller act quick - offer?4/12 - seller sells to 3rd party4/14 - buyer says opening escrow4/17 - buyer opens escrow

Where would offer be?-act quickly is not an offer

How do we interpret the letter?

Restatement says what would reasonable person assume fromletters?-In this case, its not an offer b/c intends to sell to 1st comerbut reserves the right not to

-If promises to sell to first come than its an offer

To revoke an offer - often need to communicate it in same way as you sentoffer (but not always)

Regent Lighting v. CMT-Seller still has to do something, so its not an offer

-Sellers that include such provisions make it so that aresponse from buyer is a mere offer but not a K

Lefkowitz V. Great Minn.

1st offer not specific therefore not enforceable

2nd offer is definate

-Generally ads in newspapers arent offers

Offer under CISG Art. 14?

Ford Motor Credit Co. v. Russell

-Could you go and buy for cash?-maybe (or maybe not b/c they make $ on financing)

Q: is it reasonable for a person to read an ad and think they can def walk inand accept offer?


39/79

-no, not every potential buyer qualifies for financing-car is prob unique (W/ VIN #), fact that no VIN in ad means they prob

should have multiple

Fisher v. Bellad in window not offer, just invitation for offers

UCC 2-204 - Offer and Acceptance Rule-not very specific-UCC relies on Common Law here except for Battle of the Forms

Pepsi/Jet Hypo:-problems w/ offer?

-limited supply but unlimited offers

-bound w/ jacket but not with jet. Why?-Pepsi argued reasonable person knows its a joke-Courts are usually willing to say these offers are jokes-Statute of Frauds issue w/ pepsi deal?

-court would prob look at points book as a writing

Akers v. J.B. Sedberry-Did offer go away b/c of rejections?Or lapse of time?

-We might say by not accepting immediately-if not this then def. by end of day

-If she accepted offer then deal is:employee released from obligations after 90 days & viceverse for employer

-essentially it would be a new K

Why does rejection terminate power of acceptance?-if your offer is rejected, you want to go about your business w/oworrying about it

this case: maybe wouldnt have discussed stuff w/o job security

Questions to Ask:1. When does offer expire?2. If she doesnt say anything on that morning, does it constitute a

rejection of offer to resign? - talking about the job w/ themafterwards looks like a rejection

Guaranteed employer's performance - even if company goes bankrupt,


40/79

an individual promises to pay employees K's

Ardente v. HoranTimeline:-Seller offers for sale

Prob offer-->-Buyer bids $250KProb acceptance-->-Seller says bid acceptable, prepares p&s (if attorney says Iand if so, have to look into things, that could be a rejection

Then, reqst for gift-->-Buyer signs P & S, returns w/ check for $20000 and lettersaying Id like stuff, please confirm I can have it

-Seller says deals off

But courts dont take it as req for gift after an acceptance

Court says: offer was Seller says ok, prepares P&S-Buyer signs/returns is a conditional acceptance (Re: a

counter offer)-Seller response is rejection

-If buyer had said Ill take it under consideration, by the way is stuffincluded? - then offer still valid although seller can still revoke

Rhode Island Dept. of Transportation v. P & W Railroad.-K change doesnt add terms but rather its gift in not making them

remove tracks, so K is still valid-You can take terms away, just cant add them

R.2d. - 39pg 286: examples: Ex1 - its counter offer

Ex 2 - request, not rejection (court could say its counter offerbut prob not, Restatement says its a request)

Price v. Oklahoma College-Court says: signing under protest has no legal significance

Euro K law Art. 2.208Unidroit 2.1.11 (dif than Euro K 2.208)CISG Art. 19 is same as Unidroit 2.1.11 except it has spec. rules about whats material

US Common law is different from the European rules here-has Mirror Image Rule-you cant make any changes, change = counteroffer

UCC 2-207 w/ sale of goods, material change can SOMETIMES be ok.

IGNORE LIVINGSTONE v. EVANS for exam


41/79

REVOCATION - pg 291-306Dickinson v. Dodds

possible 2 things w/ memo p.s. statement1. lapse - if nothing happens, offer over Fri at 9am

2. Revocability - offer over fri at 9am and it cant be revoked

R.2d - 87 (1) - Option K's-Buyer has purchased right to enter into the contemplated K

R.2d-87 Very similar to UCC 2-205

-in Dickinson, its gratuitious option K-no consideration so not binding

was offer irrevocable?-no

did he revoke it?-not directly but P had reliable info of circumstances that showrevocation

CISG Art 16

Gen speaking, offers are revocable in US but not in Europe

Ragosta v. Wilder-unilateral K here

-showing up at bank and giving the $88K-performance is only way to accept

-P just showing up at bank is not enough, D must be therealso

Offer revoked on Oct 8th-If hypothetically, P won, would damages include stuff afterOct 8?

-no, must mitigate damages (like Luten bridge case)

What would be start of performance?-nothing before actually walking into bank

Why not equitable estoppel?-it was revoked and both parties knew all the facts

-Courts uncomfortable w/ estoppel in offer context-Unless otherwise noted, theres always implicit understanding ofrevocability

Is an offer a promise? - if its accepted, but conditional upon acceptance


42/79

Option K's have implicit promise to keep offer open

R.2d - 87R.2d - 90

-Prof thinks dif between the two is vague

POINT TO REMEMBER: Courts are not as likely to apply R.2d - 90 to justoffers as they are to apply it to offer AND acceptance ***

If in Ragosta the buyer had negotiated to make it an option K, then itwould have been binding

Rules from Ragosta:1. In unilateral K context, you must start performing (Actual

performance, not just preparing to perform - see R.2d -45).Then offer is irrevocable.

2. Offeree never bound in a unilateral K

Drennan v. Star PavingHypo: if contractor had reason to think bid was a mistake, it might not beenforceable - If it looks like a mistake, court may choose not to enforce it (mustbe a reasonable number)

-In contractor/subcontractor context, we have this rule about reliance onbids (ONLY HERE), its a widely adopted rule ***

-Suppose contractor made extra profit based on lowest bid by subcontractor, thensubcontractor can argue that should be subtracted from damages

Preload Tech v. A.B. & J Construction

REVOCATION ALLOWED REVOCATION NOT ALLOWED

In U.S. most offers are revocable UCC - 2-205

R.2d. -87(1)

Bid shopping/chiseling makes theserevocable again-------------------->

Drennan type case

----------------------------------------> part performance under R.2d - 45

The Mailbox RuleHYPO TIMELINE:

9/2: offer sent9/4: offer recieved


43/79

9/5 acceptance sent -> under restatement we have a K here9/7 acceptance expected9/8: goods sold/revocation sent9/9 revocation recieved9/10 acceptance recieved

-Under CISG we still have a K (CISG Art 18 (2) & CISG Art 16 (1)

-If acceptance sent properly, than under Restatement, even if not recieved then still a K-protects offeree, not offeror-if offeror, its better to find out before acting inconsistantly

-To deal w/ restatement rule, you can structure offer to state: I must recieveacceptance by such and such a date (there is a default rule but you can change itexplicitly)

ACCEPTANCE

Sequence examples:1. -Rejection sent

-Acceptance sent-Acceptance recieved-Rejection recieved

R.2d - 40 (Covers Rejections and Counteroffers) says:

its a K

2. -Rejection sent-Acceptance sent

-Rejection recieved-Acceptance recieved

-Normal rule is when acceptance is sent before rejectionrec'd..., but here its too messy - rejection sent first so prob not a K

-R.2d-40

3. -Acceptance sent-Retraction sent-Acceptance rec'd-Retraction rec'd

Not in restat (?)-Its a valid K since acceptance sent first

but offeror could call step 4 (retract rec'd) a recission


44/79

4. -Acceptance sent-Retraction sent (retraction of acceptance)-retraction rec'd (retraction of acceptance)-acceptance rec'd

Not in restat (?) -K formed when acceptence sent BUT, cases havegone both ways on this one

-Concerns about making this not a K:-suppose acceptance sent by slowboat

-retraction sent by telephone-retraction rec'd by telephone-acceptence rec'd by mail on slowboat

-Offeree can send acceptance slowly and use time in

between to see what price does (problematic)CISG Art. 22Klockner v. Green

-part performance or full performance gets you out ofstatute of frauds in most states

Issue of: Klockner would have performed regardless of agreement

Court says they have to not intend not to accept in order for it to be a K

In this case: theyd have to think it immoral to take $ from relativesto show they intended not to accept

dif b/t this and unilateral K?-w/ unilateral K, option K formed at start, obligation fully bound atend of performance

In this case: if unilateral K:-option K formed in 65-K binding at her death

-R.2d-45-think brooklyn bridge hypo

does he have additional obligation to care for her?-no, he must only agree to agree to continue

ISSUE OF CASE: ambigous act & if it can constitute acceptance


45/79

R.2d - 45 - always unilateral K

vs.

R.2d - 87 (2) - know it exists but ignore it - courts dont generally buy reliance on offer

outside of contractor context

Could tell client to try R.2d-90 - usually for bilateral K's but could poss. be unilateral butits more problematic

Decicco v. Schweizer

Simmons v. United Stateshow dif from Klockner?

Court says - must have knowledge of offer

Stephens v. Memphis Court said - no need have knowledge of offerin both it has to seem plausible that your conduct meant toaccept offer (or atleast meant not to not accept)

Bishop v. Eaton-unilateral K

Timeline:-Harry Eaton signs note

acceptance -->-B garantees itnotice of acceptance -->-B writes to other Eaton

lets Harry off the hook--> -term of note extendedwhy not reinstate K?--> -8/89 Other Eaton says to B - try to get H eaton to pay. If

not, I will.


46/79

hypo: last shot rule- first person to doanything binds


47/79

-why does K say salesman cant accept offer on own?-they dont want agent to do something they shouldnt do-form lists agents powers

-for agent to avoid it and accept, they could use a dif. form

this case like Vogt v. Madden: stringing them along and seeing which wayprice goes (treating it as an option)

-could cite R.2d-69-ask did they take benefit of offer?

Hobbs v. Massasoit is similar to this case

Louisville Tin & Stove Co v. Lay

Implied Contracts pgs 331-350

Nursing Care services v. Dobosquasi-contract & emergency aid exception-unjust enrichment theories

efficious intermeddler doctrine

here what is T3 K?-an implied in law K

-voluntarily accpeting could be implied in fact also

-if medicare wasnt paying ofor 2nd period, why assume they arepaying for 3rd?

Prof thinks medical providers should have the burden to ask whos paying.

-Restitution would cover unjust enrichment on ACTION 2

Restitution (2 definitions)1. a damage remedy2. remedies based on quasi K's & unjust enrichment

Day v. Caton-implied in fact k

-unjust enrichment here-R.2d 69 (a) acceptance by silence applies here

-like Dobos part 3


48/79

in implied in fact we IMPLY assent-if you can prove you did not assent then no K

Test for unjust enrichment generally, and test for implied in fact Kare gen. the same

Statute of Frauds applicable here?-no, part performance/reliance gets you out of it

D must have a reasonable opportunity to stop the construction

Bastian v. Gafford-if implied in fact, then dont need to prove unjust enrichment

-b/c its a REAL K

-whats the $3250 here?

-value of contractors time?-fact that no terms agreed on suggest plans done on specWagenseller v. SC Mem. Hospital

-3 exceptions (first 2 define bad cause)1. Pub Policu Exc.

-if cause violates public policy-concerns w/ this: boundaries are fuzzy-makes it unclear when you can firesomeone

-asking employee out?-prob not violating law, butbad policy?

1. Personal Policy Manual Exception

-why have any manuals?-to attract employees

manual in this case: provision 20 here:unarticulated statement tries to take awaypower from articulated provision

-to do this, employer must make itclear that manual not part of employment K

-its prob better to have no manual at all thenone that says this manual means nothing

1. Good Faith Exception-employee still gets benefits alreadydeserved before K ended


49/79

-comes up more in Europe

Pine State Bank v. Mex-wheres offer?

-receipt of handbook

-unilateral K-Performance (continuing work) is the acceptance and theconsideration here

-its ok b/c we are willing to believe they intednedacceptance by continuing work

-for employment manual agreement that gives you stuff,not reason to rhink they are not accepting

Pacific Bell

Is continuing to work acceptance here?-no we dont beleive itDo we want employers to be able to take rights away?

-Yes b/c if they cant take rights away then they will neverwant to give additional benefits (giving employers such aright makes them more willing to commit)

-Employers must give reasonabke notice of taking benefits away-Employees can just quit

Demasse v. Itt Corp-what must you do to get people to accept new deal?

-give them more and more until they accept new deal

What does case say for AZ?-you want disclaimers in employment manual, so you can backaway w/o giving more stuff

Preliminary Negotiations pg 352-373

Academy Chicago Publishing v. Cheever

governed by UCC?-no, its a license agrmt

At issue here:-pages-# of stories-dates-price


50/79

-satisfactoriness

-even if parties agreed on a K, its too vague for them to bind-instead of K, its an idea or a planProf thinks originally they agreed

Prof ok w/ results here

-if shed delivered the 12 worst stories then could show bad faithnegotiation

-publisher could have invalidated it as not satisfactory but thentheyd have to go negotiate other stories

Hypo: A will sell to B a reasonable quantity of shirts for a reasonable price.-is this a valid K under UCC?

-no-you could go fig out a reasonable price

-but very hard to fig out a reasonable quantity

-look at UCC 2-305 - this would be code to check but itsdoesnt seem to apply here SO its not a situation where you can pick

a reasonable price (statute is poorly drafted)

Cheever case & this hypo:-see Mistake Doctrine ***

-did someone bare the risk of the uncertainty?

how is output K or option K different?-gives a more structured quantity

Market Street Associates-on good faith-if its in negotiations phase, you can take advantage of your

knowledge-but NOT during contract phase

UCC Sections on page 357UCC 2-204UCC 2-305UCC 2-308UCC 2-309UCC 2-310

-gap filler sections-easier to fill gap for sale of goods then when not for sale of goods

R.2d 33R.2d 34


51/79

Teachers Insurance Accoc. v. Tribune

factors to determine whether other parties intended to be bound:1. express reservation of right not to be bound

-stipulation that board must authorize-might be proforma-either this means nothing or leans towards tribune

What if you agree to negotiate but all terms are open?-prob not binding.-it must be an agreement to negotiate on small stuff

Part Performance Issue-looks like its only preparing to perform

-an agreement on terms looks different then agrmy to negotiate-commitment letter here looks like agrmt ON TERMS-points to Tribune

Court thinks Tribune behaved badly-did they?

-not legally-Posner says no duty during negotiations

-behavior not bad until bound

Agrmt on Terms (can mean 2 things):1. We might or might not continue to negotiate2. We agree to binding obligations to negotiate in good faith to

resolve other terms

Prof thinks K shouldnt be binding either way

Question should be: did board have to give approval to bind K?-if board had discretion to say no then theres no K here

Judge assumes 1 party wouldnt commit if other party didnt but hes wrong:-think consideration section-parties do this a lot-to convince other party to commit

What could TIAA hypothetically get in damages?-Force specific performance to negotiate?

-not feasible-if $ damages?

-damages uncertain for expectation


52/79

-TIAA could get reliance if they spent money negotiating w/ Tribune and if Tribune negotiated in Bad Faith

-but prof says you would have to spend this in good faith orbad and if so, you shouldnt even get reliance (although youcould maybe deserve if negotiations were prolonged by bad

faith)

at what point have you negotiated in bad faith?-maybe if Tribune says: we want every open question decided inour favor-then TIAA goes we would have accepted all-then maybe could still get damages

-Court could avoid all this by just invalidating K and avoiding damageslitigation

Market Street Assoc v. Frey

implied K's - good faith obligation here to inform of Stipulation 34- not in K but court implies

Hypos:1. Buy prop for #100K. if you learn its worth more...is there a

duty to tell other party?-NO

2. Have option K under which other party can buy propertyfrom you for $100K (duty to inform here?)

-Maybe not comfortable extending duty here

Posner view - Duty not to trick

Question in Market Street: if reasonable to believe other party knows Kterms, even if you hope they don't know...

-PROF thinks there should be no duty to inform.-Posner thinks maybe theres a duty

Spectrum of duty: left to right:

Pre-K fraud K performance fidiciary duty(principle/agentrelationship)

No duty if info avail to bothparties, no duty

duty of good faith More obligations, Utmost good faith


53/79

Judge in this case saying: if you KNOW a provision thats useful to other party, youmust tell them, but you need not search

The Parol Evidence Rule

Parol- means oral but Parol Evi. includes more than just oral (also prior writtenargmts)

Mitchel v. Laththink of parts 2 & 3 on pg 375 as stating parol evidence rule, forget #1

-2 & 3 do same as restat provisions (but more clear)

Question is not if they had an agreement but rather should we pretend it doesntexist.

merger clause - extinguishes previous agreements

always works?-no, courts dont always honor them. Generally they work though-if there was fraud, then parol evidence clause doesnt apply

Mitchel v. Lath-inducement w/o intention to remove ice house could be fraud

Restat says: if ambigious, we assume its a promise

If icehouse was material condition, its probably ordinary to include it inwritten K

Test: would it naturally be expected to be in written K?

-judges typically make the decision of whether to allow parol ev. or not

-if mitchell had offered seperate consideration for the ice house, its morelikely court would enforce it

-what if icehouse came up after written K? Parol ev. issue?-no

enforceable?-no, no consideration. It would be a K mod. issue, could say itsgratiutus promise

R.2d-209R.2d-210

-they are circularR.2d-211


54/79

R.2d-213 (1) -its #2 in Mitchell v. LathR.2d-213 (2) -its # 3 in Mitchell v. Lath

R.2d 214 - can offer evidence of icehouse agrmy to show K not fully integrated

R.2d-215 - its evidentiary (dif. from 213 (1) b/c 215 discharges priot agrmts)-justification for 215: if agrmts discharged under 213, courts dont want towaste time hearing evidence about it

R.2d-216 - kinda #3 in Mitchell v. Lath-nothing comes in if its completely integrated

R.2d-216 (2)(b) - have to ask if naturally omitted from agrmt, look at evi.(2)(a) - seperate consideration

Prof theory on restatements: dif states deal w parol ev. differently and restat istrying to incorporate it all so states wont ignore it

Parol Ev issues: 1. inconsistency 2. ordinarily there-also: seperate consideration: not proof but just another point to make

PAROL EVIDENCE STEPS:1. Apply 216 (2)(a) - is it partial? or is it full?2. Apply 216 (1) - if it is partial, admit parol evi.

Hypo: -written agrmt A-written agrmt B-Oral agrmt C that breach of A is material breach of B and vice versa

Apply steps to hypo1. Apply 216 (2)(a) - is it fully integrated?2. Apply 216 (1)

-Courts could say A and B are 1 agrmtOR courts could say seperate and then say C is inconsistent

Mitchell v. Lath is considered the NY test

IF PAROL EVIDENCE COMES UP ON EXAM, FOCUS ON MITCHELL V. LATH

Material breach - releases parties from obligationsjust breach - gives damages but might not discharge obligations

-if not material breach but still breach, how much in damages for non removal of icehouse?


55/79

There is no objective way to see if a K is completely integrated

Nature of K: Evidence Admitted:

Completely integrated None, but entirely seperate K's

Partially Integrated A. Not inconsistent AND B. NaturallyOmitted. (Most K's end up here)

Not integrated Everything

Objective and Subjective Interpretation - pg 246-254Use of Extrinsic Evi. in Interp. - pg 254-258, 61-65, 396-412

MCC Marble v. D'Agostino-No statute of frauds under CISG (View Art. 11)

-if no payment, its material breach-if defective?

-its ok under CISG to give partail payment but must givenotice

-notice need not be writtenhere written notice required b/c K does change the law

POINT OF CASE: if one party has a subjective understanding differentfrom written terms and other party knows this alternative subjective intent, the subjectiveintent is binding

-BOTH UNDER CISG AND U.S. LAW

-how often will one party admit that they knew the subjective intent they arebeing sued over? - almost never

-to avoid an MCC situation, include a merger clause-doesnt always work, and wouldnt work here prof says

MCC is like Lucy v. Zehmer sortof

CASE: K ALTERED/INTERPRETED BY:

MCC-Marble Mutual contrary subjective understanding

Haines NY Court filling in or making up missing terms

Fox Co Trade usage

PG & E

Nanakuli Trade usage/Course of Performace

Haines v. NY


56/79

-adding missing termshow?-discusses K duration

-options: terminable at will (court wont give this here)

or perpetual: (court wont give here)

-Court makes it up: As long as city needs the water-is city giving consideration here?

-yes because its not entirely within the discretion ofcity if it needs water

Foxco v. Fabric World-if order hadnt been completed could they have canceled?

-no, cant cancel

-they essentially offered a recission and Foxco said no-saying :not taking them if 1 wrong thread amounts toanticipatory breach

Perfect Tender standards:-CISG: must give a chance to fix

-UCC 2-601 (among others)UCC Parol Evi Rule: UCC2-202 (basically same as restat)

POINTS TO REMEMBER IN FOXCO:-trade usage can come in.

-they should have been aware of what the standard first quality means

YOU CAN MODIFY UNDER UCC W/O CONSIDERATION

Form Contracts and other contracting problems

Pacific Gas & Electric v. G.W. Thomas-not a UCC case

-what does the indemnity clause cover?-3rd party only? or K party as well?

Legal Issue: do we want to listen to extrinsic evidence to determine what indemnityclause covers?

-do we listen to parties testimony or just look at K language?


57/79

-This court says we should listen to extrinsic evidence-Always do this? - not clear, Williston/Corbin debate

QUESTIONS TO ASK:1. What should be considered in deciding what is admissable?

2. What is admissible?-Answer: naturally omitted and doesnt conflict w/written terms (not inconsistent)

PG & E Nanakuli

What should be consideredin deciding whatsadmissible?

Listen to everyting everything, including tradeusage, course of dealing,course of performance (UCC2-207)

Whats admissible? Evidence relevant to provingmeaning to which contract is

reasonably suseptible(Corbin Approach)

If it doesnt completelynegate the contract

Why not Ship Peerless situation?-in that case, no reasonable interpretation-here there would be choice of reasonable interpretation

Parol Evidence vs Interpretation/Extrinsic Evidence-in parol evi. world, If interpretation question invovled,dont bring in Parol Evi. doesnt come into playinterpretation

Nanakuli v. Shell

Issue: is nanakuli price protected or not?

-Trade usage-could assume parties had understanding that K was like chevron K

What if price protect provision was explicitly in Chevron K?


58/79

-that would be bad for Nanakuli-if Chevron just does it and its implicit, this shows trade usage

question to ask: what did parties have in mind when they entered K?-stuff after 1969 not relevant

Course of Performance vs. WaiverCourse of Performance: trade usage compels performanceWaiver - could be waiving condition to pay posted price

-its plausible that shell thought it was obligated and then later acted like itdidnt

would merger clause have saved this?-no there was one here

Parol Evi Interpre/Extrinsic

Koehring v. Glowacki (VERY IMPORTANT, DONT OVERLOOK)

Hypo: suppose Glowacki shows up w/ truck and they put it in truck.-You apply UCC 2-207(3)-putting it on truck could constitute acceptance

-you still must have something that looks like an acceptance

-did parties look like they intended to accept the K?-here court says no

Battle of the Forms - acceptance can still be oral

UCC 2-207(1) doesnt have to be matching acceptance but still need anacceptance

Gardner Zemke v. Dunham Bush

First question to ask here:1. Is there a K under 2-207 (1)? Or under 2-207(3)?

2-207(1) - ask is there def & seasonable expression ofacceptance?

-Does acknowledgement constitute acceptancehere? - Under 2-207(1), YES


59/79

How do you make fine print on back of K binding?-Send acknowledgement form and then dont go through w/

transaction until other party accepts AND agrees!

-You must get assent and be able to show that you got assent to bindsomeone to your provisions

-doesnt need to be written, but it must be clear

Under UCC 2-207(1) - no last shot rule. Its craziness and we want to avoidit

What makes purported agrmt expressly condition on assent of other party?-It must be explicitly discussed

UCC 2-207 - eliminated last shot-makes it unlikely that conduct could show assent of other party

What if goods are transferred without assent?STEPS:

1. go to UCC 2-207(1)-you will find its no K2. go to 2-207(3)

3 WAYS TO CONTRACT UNDER UCC 2-207METHOD FOR EXAMINING IT:

1. start with (1)2. go to (2)3. go to (3)

Form contracts in commercial and consumer contexts1. UCC 2-201 Formal requirements; Statute of frauds

a. Except as otherwise provided in this section a contract for sale of goods forthe price of 500 dollars or more is not enforceable by way of action ordefense unless there is some writing sufficient to indicate that a contract forsale has been made between the parties and signed by the party againstwhom enforcement is sought or by his authorized agent or broker

b. Between merchants if within a reasonable time a writing in confirmation ofthe contract and sufficient against the sender is received and the partyreceiving it has reason to know its contents, it satisfies the requirements ofsubsection a against such party unless written notice of objection to itscontents is given within 10 days after it is received

c. A contract which does not satisfy the requirements of subsection a butwhich is valid in other respects is enforceable


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i. If the goods are to be specially manufactured for the buyer and arenot suitable for sale to others in the ordinary course of the sellersbusiness and the seller, before notice of repudiation is received andunder circumstances which reasonably indicate that the goods arefor the buyer, has made either a substantial beginning of their

manufacture or commitments for their procurementii. If the party against whom enforcement is sought admits inhis pleading, testimony or otherwise in court that a contract for salewas made, but the contract is not enforceable under this provisionbeyond the quantity of goods admitted or

iii. With respect to goods for which payment has been made andaccepted or which have been received and accepted.

2. UCC 2-207 Additional terms in Acceptance or confirmation

a. A definite and seasonable expression of acceptance or a writtenconfirmation which is sent within a reasonable time operates as anacceptance even though it states terms additional to or different from those

offered or agreed upon, unless acceptance is expressly made conditional onassent to the additional or different termsb. The additional terms are to be construed as proposals for addition to the

contract. Between merchants such terms become part of the contract unless:i. The offer expressly limits acceptance to the terms of the offerii. They materially alter itiii. Notification of objection to them has already been given or

is given within a reasonable time after notice of them is receivedc. Conduct by both parties which recognizes the existence of a contract is

sufficient to establish a contract. In such case the terms of the particularcontract consist of those terms on which the writings of the parties agree,together with any supplementary terms incorporated under any provisionsof the act.

3. NOTES FROM TEXT: Courts usually have been lenient in not ruling out

consistent additional terms or trade usage for apparent inconsistency with

express terms.

4. Notes of 2-207

a. Thel says that the first test is section a, which, if there is a contract found,proceed to section b

b. If there is not a contract found, then go to cc. Section a uses additional to or different, while section b says only

additional. Not sure if this means much5. Mirror image rule

a. If an acceptance changed anything about the offer, it was not an acceptanceand instead functioned as a counter-offer

b. If goods were shipped after sending a failed acceptance, they were treatedas forming a contract through performance on the last offer (last shot rule).Court

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