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					Contracts – Madison Fall 2001


WHAT GOVERNS THE CONTRACT?

Is the contract(K) governed by the UCC?
    Is the contract for a sale of goods?
       §2-105 = goods are all moveable things, unborn young of animals, crops,
       §2-107 = goods are minerals or the like (including oil, gas, timber) to be removed from realty; only a good if severed
        from land by the seller, not the buyer.

    Is the contract for a service and sale of goods?
       Predominant factor test = if sale of goods predominant factor of contract, use UCC
       Severance test = sever transaction into parts and use UCC over the goods portion of contract




MUTUAL ASSENT

R §17 Requirement of a Bargain
Formation of a contract requires a bargain in which there is a manifestation of mutual assent to the exchange and a
consideration.

OFFER

R §24 Offer (intent)
   intent = expression of willingness to enter into a bargain and be bound
   justifies another person thinking that his assent is invited and will conclude the bargain
   must be specific enough to be enforceable by a ct.
   advertisement ≠ offer. Ad = invitation to deal (exceptions: 1st come 1st served, price stated)

R §33 Certainty (see Indefinite Terms in Interpretation)
   If in offer, contractual terms aren’t reasonably certain, offer may not be accepted
   Reasonably certain if they provide a basis for determining a breach and for giving appropriate remedy
   Offer may be considered reasonably certain even if a selection of terms is available
   Not every term must be established to be certain
   Offer should make clear the subject matter of the bargain, price, quantity, but omission of one of these doesn’t
    necessarily mean its not an offer. If the court believes that there was intent to make it a contract, the court will read into
    it the indefinite terms within certain limits.
   An agreement to agree in the future on terms of contract is not enough to be an offer so such agreements are not
    contracts
   UCC§2-204(3) = A contract does not fail for indefiniteness if parties have intended to make a contract and there is a
    reasonably certain basis for appropriate remedy.
   Essential terms = parties, subject matter, time for performance, price
   UCC Gap-fillers = 2-305=price, 2-308=place of delivery, 2-309=time provision for delivery
   R §204 = Court may fill in an reasonable term if parties have not agreed to one that is essential to determination of
    rights & they are in a contract

Nebraska Seed Co. v. Harsh (proposed seed sale)
Harsh’s letter was a request for an offer and not an offer in itself because the terms were vague and incomplete (no time for
delivery, no fixed amount). Letter was a request for bid/invitation to trade.

R §26 Preliminary Negotiations
A manifestation of willingness to enter into a bargain is not an offer if the person to whom it is addressed knows or has
reason to know that the person making it does not intend to conclude a bargain until he has made a further manifestation of
assent.

Empro Manufacturing Co. v. Ball-Co Manufacturing, Inc.
Objective intent not to be bound by the “subject to” clause in the “agreement” in principle. D made clear that they did not
intend to be bound until the final contract. Letters of agreement in principle do no more than set the stage for negotiation.
No damages awarded.


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Texaco v. Pennzoil
Evidence that the preliminary agreement shows that Texaco intended to bind themselves to the agreement with Pennzoil. B/c
agreement on essential terms, magnitude/complexity of contract would necessitate formal contract.

Keeping Offer Open
   Binding Offer to Negotiate in Good Faith
      An agreement to negotiate in good faith, although not certain enough in terms to constitute an offer, may be
       enforceable if binding on both parties.

    Option Contracts Limits promisor’s power to revoke an offer
       Option = enforceable promise that you won’t revoke an offer; there has to be consideration; if not binding, not an
        option
       R §37 Power of acceptance under an option contract is not terminated by rejection or counteroffer, by revocation or
        death or incapacity of offeror unless the requirement are met for the discharge of a contractual duty.
       R §87(1)/common law = option created by offer = offer to keep offer open not binding if in writing, signed,
        and there’s consideration
       R §87(2) [≈R§90 promissory estoppel] = option created by reliance = an offer which the offeror reasonably
        expects will induce substantial action/forbearance from offeree and which does induce such action/forbearance is
        binding as an option contract to the extent necessary to avoid injustice.
       R §45 = option created by part performance = there’s a right to complete performance and get paid if the offer
        invited offeree to accept by performance and the offeree began performance. Performance must be substantial;
        preparation not enough. Offeror’s duty conditioned on completion of performance in accordance w/terms of offer.

UCC §2-205 Firm Offers
      A merchant’s written offer to hold an offer open is binding even               WHEN IS OFFER NOT REVOCABLE?
       without consideration during the time stated. If no time was stated,             (1) Promissory Estoppel
       then for a reasonable time, not to exceed 3 months                               (2) After acceptance
      If not merchant, can revoke at any time                                          (3) In options contracts §87
                                                                                        (4) Acceptance by performance: when
R §42 Revocation of offer                                                                   already commenced §45
   Offeree’s power of acceptance terminated when offeror send manifestation of
    intention to not enter proposed contract
   does not have to be straight from the offeror, can be another source
   At common law, an offer can be revoked at any time, an even though you gave a time period for the offeree to make up
    his mind, common law says you can revoke at any time within the time period.
   R §43 Indirect communication of revocation – when offeror takes definite action inconsistent w/intention to enter
    into proposed contract and offeree acquires reliable information to that effect, offeree’s power of acceptance is
    terminated.

Dickenson v. Dodds
D’s offer to sell property to P supposed to remain open to Friday; On Thurs. P learns D selling to someone else and then later
P delivers his acceptance. Held: offeror can revoke at any time, since no consideration had been given to hold the offer open.
UCC §2-205 doesn’t govern here.


ACCEPTANCE AND ASSENT

ACEPTANCE
  Completes the manifestation of mutual assent to a contract
  Manifestation of assent to terms of offer
  May be by performance of at least part of contract (unilateral K) or by a promise to perform (bilateral K)

R §35 OFFEREE’S POWER OF ACCEPTANCE
A contract can not be created by acceptance if offer has been terminated in one of the ways listed in R§36.

R §30 Form of Acceptance Invited
   offer can invite acceptance by
         1. affirmative answer in words
         2. performance or refraining from performance of some specified act
   if mode of acceptance isn’t specified by contract, any reasonable manner of acceptance is allowed


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UNILATERAL CONTRACTS (acceptance by performance)
  Offers that request performance and do not promise any compensation until performance is completed are generally
   revocable at any time before performance is completed.
  R §53 = Offer may be accepted by performance only when the offer invites it, implicitly/explicitly
  R §54 = If only performance is needed for acceptance, notification not necessary unless offeror requests it, or the
   offeree who accepts knows the offeror won’t learn about it. Then no contract unless:
        1. offeree has exercised reasonable diligence to do so
        2. offeror learns of performance w/in reasonable time
        3. offer indicates that no notification is required
  R §32 = when in doubt, offers are interpreted to give the offeree choice of performance or promise
  R §62 = if an offer says acceptance can be either performance or promise, the beginning of performance = acceptance
   by performance

R §56 BILATERAL CONTRACTS (acceptance by promise)
   essential to acceptance by promise
        1. the offeree exercises reasonable diligence to notify the offeror of acceptance, or
        2. that the offeror receives the acceptance seasonably

ACCEPTANCE STATING DIFFERENT TERMS FROM OFFER
   R §58 (Mirror Image Rule) = acceptance must comply w/requirements of offer as to the promise or performance to
   be rendered

    R §59 Acceptance which Adds Qualifications = reply to an offer which indicates acceptance but is conditional on
    additional/different term is not an acceptance but is a counter-offer

    R§39 Counter-offers
      Counter-offer = rejection of offer = substituted bargain = eliminates power of acceptance b/c offeree must accept
       offer as is w/o changes
      A request for different terms or an inquiry regarding terms of the offer does not terminate the power of acceptance.
       (e.g., Won’t you accept less?). Refers to UCC 2-207

    UCC §2-207 Additional Terms in Acceptance/Confirmation
      an acceptance that states additional or different terms from those offered
       may be effective unless acceptance is expressly made conditional on                  See BATTLE OF THE FORMS
       assent to the additional or different terms
      different terms are construed as proposals for additions. Btwn merchants, such terms become part of the contract
       unless
            1. the offer expressly limits acceptance to the terms of the offer
            2. they materially alter it
            3. notification of objection to them has already been given/given w/in reasonable time
      Knock Rule = if there are conflicting terms, the one objected to can just be knocked out
      Btwn non-merchants additional terms = counter-offers which may or may not be accepted
      Conduct by both parties that recognize existence of contract is sufficient to establish a contract even if there’s no
       writing to establish it.

R §19 ASSENT
   To constitute acceptance, an act must be manifestation of assent when evaluated under an objective standard
   Assent may be spoken/written by an act/failure to act
   Conduct will not constitute assent unless party intends to engage in conduct and knows that other party may assume
    from his conduct that he assents
   Conduct of a party may manifest assent even though he does not in fact assent. In such cases a resulting contract may
    be voidable b/c of statute of fraud, duress, mistake or other invalidating clause
   Even if offeree takes benefits w/o expressly accepting/requesting them, it is assent if the offeree would have accepted
    the benefits & agreed to compensate offeror for those benefits, given the chance
   Conditional acceptance = absolute acceptance accompanied by request for extra/gratuitous benefit, but does not depend
    on it. This is true acceptance
   In emergencies: when offeree unable to expressly accept the benefits (unconscious, mentally unable), but it is clear that
    a reasonable person would accept and agree to compensate the offeror, then assent may be assumed.



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Embry v. Hargadine, McKittrick Dry Goods Co.
Issue of meeting of the minds. Court applies an objective standard (reasonable person) and a subjective standard (person like
Embry) to see if belief that contract existed. Embry wins, people are entitled to rely on the objective manifestation of intent.
Employer’s undisclosed intent to enter a contact was immaterial.

Texaco v. Penzoil
The existence of a binding contract is not dependent on the subjective intent of the parties (secret mtgs btwn Ds), it is the
objective manifestations of the intent of the parties as expressed by words and deeds & to third parties.

Lucy v. Zehmer (restaurant check sale)
Court applies objective and subjective standard (what reasonable person and Lucy) thinks. Although Zehmer claims to have
been drunk and joking, his words and deeds showed that he intended to form the contract.

R §36 Termination of POWER OF ACCEPTANCE
   An offeree’s power of acceptance may be terminated by:
    1. Rejection or counter-offer by offeree;
    2. Lapse of Time (R §41) = terminated at time specified in offer; if not specified, at end of reasonable time
    3. Revocation by offeror (R §42);
    4. death/incapacity of either party
   If any condition of acceptance under the terms of the offer fails to occur

R §38 REJECTION by offeree
   Rejection = statement by offeree of intention not to accept an offer = termination of power of acceptance, unless
    offeree offers to consider further

WITHDRAWAL/REPUDIATION OF OFFER OF ACCEPTANCE
   R §63- Completes manifestation of mutual assent as soon as put out of offeree’s possession
   Mailbox Rule
      Acceptance goes into effect and offeror is bound when it is communicated to the other party or when placed in the
       mailbox
      Exception for e-mail: acceptance effective when e-mail sent
      §65 Medium of Acceptance reasonable if it is the one used by offeror or one customary in similar transactions
      Exception: Acceptance under an option contract is not operative until received by offeror.

Morrison v. Thoelke (land sale by mail)
Offeror has the power to revoke up to when offeree sends acceptance (mailbox rule)

Lewis v. Browning (telegraph me yes or no)
Offeror can contract around the default rule and set the terms of acceptance. It this case, contract valid upon offeror’s
receiving the acceptance.

    R §40 Time when Rejection/Counter-Offer Terminates Power of Acceptance
       Rejection of counter-offer by mail/telegram doesn’t terminate the power of acceptance until received

R §54 ACCEPTANCE BY PERFORMANCE; NOTIFICATION OF ACCEPTANCE
   For offers acceptable by performance, no notification is necessary unless specifically requested in offer, unless performer
    has reason to believe that offeror has no way of knowing of acceptance, and then must exercise due diligence to notify or
    the offer indicates notification is not required.

Carlill v. Carbolic Smoke Ball Co.
Carbolic obligated to pay Carlill. Was an offer, contract binding, acceptance= performance, and language used did not specific
notice was needed. While most offers require notice of acceptance, if offer says performance can constitute acceptance, then
do not need notice. (R. 54.1)

White v. Corlies & Tifft (carpenter)
Communication of acceptance is required and no contract w/o acceptance. The letter from the owner suggested that "upon an
agreement" to finish the offices, the builder could begin at once. The owner was looking for a promise, acceptance by words,
rather than acceptance by performance. Given that, the builder could not accept simply by purchasing materials and starting
to work. The builder had to at least indicate to the owner that he had accepted the contract. White only prepared for
performance, did not start performance.


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Crook v. Cowan (carpet)
Case of acceptance by performance. Offeror asked for acceptance by performance and did not ask for notice. Cowan ordered
to pay for carpet. Filing an order completes the contract is confined to when they are unconditional and specific orders.

R §69 ACCEPTANCE BY SILENCE
   Silence = acceptance only if
         1. if accepter takes benefit of offered services w/reasonable opportunity to reject, and reason to know that they
             were offered w/the expectation of compensations, or
         2. if offeror has stated that silence will be taken as acceptance and offeree intended to accept offer, or
         3. if due to previous dealings it is reasonable to assume that offeree will notify offeror if he does not intend to
             accept

Hobbs v. Massasoit Whip Co.
Facts: P had sent items to D w/o an order and D had paid for them.
RULE: P had a right to assume that the order was accepted when a long time passed after sending because they had prior
transactions (standing contract). This makes D obliged to send it back if they did not want it.


INTERPRETATION

IMPLIED-IN-FACT CONTRACTS
  TRUE contract; differs from normal K only in that parties’ assent while real is implicit rather than explicit

IMPLIED-IN-LAW CONTRACTS (QUASI-CONTRACTS)
  Created by a legal fiction for the sake of reimbursement
  Conduct that gives rise to an action at law for unjust enrichment

INDEFINITENESS OF TERMS
  No contract if terms are insufficient
  R §33 = terms must be certain enough to form a basis for remedy
  UCC §2-207 = contract will not fail for indefiniteness if
   1. parties intended to form a contract, and
   2. there’s a reasonable basis for deciding remedy
  Four essential elements an agreement must cover:
            (1) Parties to the contract; (2) Subject matter of contract; (3) Time of performance; and (4) price
Sun Printing & Publishing Assn. v. Remington Paper & Power Co.
Courts generally reluctant to hold a contract not binding especially if the breacher is the one who drafted the contract.
However, here court recognizes seller’s right to only agree to enter contracts on the terms they want, contract too indefinite
to be supported. Agreement to agree – parties left term to be determined by future mutual agreement, no mutual
agreement, no contract.


ILLUSORY PROMISES

UCC §2-306 OUTPUT REQUIREMENTS AND EXCLUSIVE DEALINGS
 Is seller obligated to sell whatever the buyer has demanded?
          Is buyer’s demand in good faith. If no, then no obligation.
          If yes, was there a stated estimate?
          If yes, is demand disproportionate? If yes, then no obligation
          If no, is buyer’s demand disproportionate to past demands? If yes, no obligation
          If no, then seller is obligated to supply buyer’s demand.
 Exclusive dealings assume obligation of best efforts

New York Central Iron Works Co. v. United States Radiator Co.
Court enforces the contract. In such an exclusive dealing contract, buyer can demand as much as their business needs. Only
if there is bad faith dealing, using for speculation in rising, then buyer would not be allowed to request so much. Look at
whether inventory is being stored, purchase in excess of reasonable business needs, not custom of trade, etc.

Eastern Air Lines, Inc. v. Gulf Oil Corp.
Gulf refused to supply to Eastern unless Eastern agreed to a higher price. Eastern sues for breach.
Gulf: Contract lacks mutuality of obligation; too indefinite to be binding (quantity and price not set)

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Courts: These contracts are now binding since the terms (quantity and price) can easily be ascertained. Also cites UCC 2-615
(impracticability as excuse). The lack of mutuality and indefiniteness were resolved since ct could determine the volume of
goods provided for under the contract by reference to objective evidence of the volume of goods required to operate the
specific business.

Wood v. Lucy, Lady Duff-Gordon
Wood sued b/c Lucy place endorsements on designs which Wood was supposed to have exclusive rights.
Lucy claimed no contract b/c there was no promise for Wood to do anything. He’ll work if he feels like it and will share half
his profits if there are any.
J. Cardozo finds there is a promise of performance. It may not have been explicit but it can be implied from the nature of the
contract. Why would Lucy give him exclusive privilege if there is no assumption that Woods would do something? It looks like
Wood is obligated to do something and has the obligation of good faith.

INTERPRETING ASSENT SUBJECTIVELY OR OBJECTIVELY

R §201 WHOSE MEANING PREVAILS
   when both parties agree to a meaning of a term, that meaning is used to interpret
   if one party had reason to know of the other’s party’s different meaning, innocent party’s meaning prevails
   if both parties have different meaning & neither knows of other’s meaning  No CONTRACT, e.g., Peerless

R §202 RULES IN AID OF INTERPRETATION
   Words & conduct interpreted in light of all circumstances. Writing interpreted as a whole. Usual meaning of words &
    technical terms, course of performance, course of dealings, course of trade.

Raffles v.Wichelhaus (Peerless) NO MEETING OF THE MINDS
No contract for the courts to enforce b/c no agreement in meaning of terms.
What if parties clearly and consciously manifest assent, but each has in mind an object or act that is wholly different from the
act or the object contemplated by the other?
Finding that there was no meeting of the minds (consensus ad idem), the court held for D since no contract or agreement the
court could enforce. Requirement for objective assent was not met: nothing in contract to show which ship was the right one.

Oswald v. Allen (Swiss coins) NO MEETING OF THE MINDS
Swiss coin collection and rare coin collection. P thinks he’s buying all the swiss coins including the rare coins while she thinks
it’s just the regular coins excluding the rare coins. Cites Raffles b/c each party does not understand what the other party is
thinking. There’s no objective basis to choose which party to go by since no meeting of the minds. No Contract to be
enforced.

TRADE USAGE & COURSE OF DEALING (R § 202, 220, 221, 222; UCC §1-205)
  Used in 3 situations
       1. To fill gap in contract
       2. to clear ambiguity in terms, but only if there’s no evidence at all as to the agreed meaning of the ambiguous
            term
       3. when there is a conflict btwn the words and the trade usage, and parties meant to use trade usage
  R §220 = agreement may be interpreted w/regard to relevant usage
  R §221 = agreement may be supplemented/qualified by reasonable usage if
       1. each party knew or has reason to know of usage
       2. neither party had reason to believe the other party would use usage
  R §222 Usage of Trade =
       1. definition = usage having regularity of observance in place, vocation, or trade that will reasonably justify an
            exception that it will be used (may include system or rules even they change form time to time)
       2. existence and scope = to be determined by trier of fact; if embodied in trade code/writing to be decided by
            court as a matter of law
       3. meaning/supplement of meaning = assumed that trade usage gives/supplements meaning if both parties know
            or have reason to know of usage, or unless specified by parties
  UCC §1-205 Course of Dealing/Usage of Trade
       1. course of dealing = sequence of previous conduct btwn parties; fairly to be interpreted as establishing a
            common basis for understanding and interpretation
       2. usage of trade = (exactly same definition as in R§222)




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UCC §2-208 COURSE OF PERFORMANCE
  if contract for sale involves repeated occasions for performance by either party w/knowledge of nature of performance
   and opportunity for either to object to it, the course of performance that has been accepted will be relevant in
   determining the meaning of the agreement
  express terms will shall control course of performance, course of performance shall control both course of dealing &
   usage of trade.

HIERARCHY: Express terms  course of performance  course of dealing  usage of trade

Weinberg v. Edelstein (What is a dress?)
P wants injunction to prohibit D from selling coordinating blouses and skirts. Court refuses to issue the injunction and decides
not to enforce the restrictive covenant. Looks at trade usage of what constitutes a dress.
Can come to a conclusion about the objective meaning of a dress by relying on trade usage which coincides with D’s
definition. D wins.
PAROL EVIDENCE RULE
The final expression of agreement is “integration”.

(R §213, UCC §2-202)
   if the contract completely embodies all the terms of the parties’ agreement, parol evidence (evidence of oral agreements)
    of prior agreements/negotiations is not admissible in determining whether contract is enforceable.
   Prior oral agreement that is independent (i.e., separate agreement for which separate consideration was given) is
    admissible
   R §213 = binding integrated agreement discharges any prior or contemporaneous agreement that contradicts express
    written terms
   R §213 = even when looking at final agreement, have to look at terms in light of all extrinsic evidence to construe their
    meaning. Meaning can not only be found except only in a context

   How to show an agreement is completely integrated:
       1. literal approach (Williston): contract = written document based on language; If contract appears to be
            complete on its face, ct will treat it as a completed contract and not allow parol evidence to be admitted. If the
            change in the contract that is being requested is about something that normally would be in a contract, the ct
            won’t allow it, b/c it would’ve been included, it was something that should’ve been there. The Plain Meaning
            Rule/Four Corners Rule
       2. loose approach (Corbin): contract = intent of the parties = meeting of the minds; considers whether the
            parties intended for the written document to be their final agreement. To find this out, you have to look at all
            the circumstances of the situation. If it seems like the parties intended for the written document to be the
            complete agreement no outside agreement will be admitted. If there were other issues that one of the parties
            wanted to include, the others evidence should be considered as part of the contract. Recognizes the fact that
            some agreements are purposely left out of documents. Accept extrinsic evidence to show whether agreement is
            complete or not. If agreement is shown complete, then extrinsic evidence can not be shown to jury.

   UCC 2-202 = express terms of a written agreement may not be contradicted by prior or contemporaneous oral
    agreement. Terms may be supplemented by course of dealing, usage, performance, trade and by consistent additional
    terms unless the terms would certainly have been included in a written contract. To be determined by the judge/not jury.

Thompson v. Libbey (Logs)
Breach of warranty, does not want to buy the logs after contract was made. Warranty of quality of logs was not in the written
contract. Q: should ct admit testimony that there was talk of warranty during negotiations. Can not admit it due to the Parol
Evidence Rule. Written contract is an integrated agreement. Including such information will give incentive for fraud.

Brown v. Oliver (hotel furniture)
Did furniture come with sale of hotel? Written statement did not conclusively establish whether parties intended it to be total
integration. Parol evidence was received to answer this and shows that writing deals only with real estate thus not total
(complete) integration. Since not total integration, P can introduce evidence that parties agreed to the furniture. Total
integration: if document is intended by parties to include all details of agreement. If document is not intended by parties to
include all details of the agreement then it is only partial integration and can introduce parol Sevidence that does not
contradict a term of writing.

EXCEPTIONS TO PAROL EVIDENCE
  Parol evidence of an agreement may be admitted to show:
       1. evidence of fraud

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         2.  scrivner’s error = mistake of integration- wrote down the terms incorrectly. Party that wants to reform has to
             establish that there was an agreement & also that it was put down in the wrong form
         3. estoppel (not commonly used)
   Condition to Legal Effectiveness Rule: Parol evidence is allowed when it’s evidence of an agreement that conditions the
    effectiveness of the written contract to a specific occurrence/non-occurrence

UCC §2-209 ORAL MODIFICATIONS TO CONTRACTS
  oral modification/rescission not allowed when agreement specifically calls for written          See
   modification                                                                                    Consideration
  oral modification, even if the above is not satisfied, may act as a waiver. Waiver may be
   retracted by waiving party w/reasonable notice and if not relied on

PLAIN MEANING RULE
  when the contract terms are reasonably certain and plain, it is not the function of the court to re-write
  the ct will use plain meaning (to a reasonable person) of written terms
  REJECTED BY R §212

R §212 EXTRINSIC(=Parol) EVIDENCE
   interpretation is directed to meaning of terms in light of circumstances
   questions of interpretation should be decided by trier of fact (jury) if:
         1. depends on credibility of extrinsic evidence, or
         2. there’s a choice btwn alternative facts presented extrinsically, or
         3. subject matter is extremely complex
   otherwise, treated as a matter of law (decided by judge)
   should only be utilized when plain meaning cannot be used
   extrinsic evidence must be relevant to prove a meaning to which the language of the contract is reasonably susceptible

Pacific Gas & Electric v. G.W. Thomas Drayage & Rigging
Words can not always be ambiguous, necessary to look at all the extrinsic evidence to construe meaning.

BATTLE OF THE FORMS

RESTATEMENT & COMMON LAW: MIRROR-IMAGE RULE
  Terms of an acceptance must be in the mirror-image of the offer
  Before acceptance, can counteroffer. Terms of the last offer will govern the action
  Reluctance to uphold this rule b/c sometimes other party did not know of terms

UCC 2-207 Additional Terms in Acceptance/Confirmation [opposite of Mirror Image Rule]
  an acceptance that states additional or different terms from those offered may be effective unless acceptance is
   expressly made conditional on assent to the additional or different terms
  different terms are construed as proposals for additions. Btwn merchants, such terms become part of the contract unless
        1. the offer expressly limits acceptance to the terms of the offer
        2. they materially alter it
        3. notification of objection to them has already been given/given w/in reasonable time
  Btwn non-merchants additional terms = counter-offers which may or may not be accepted
   Conduct by both parties that recognize existence of contract is sufficient to establish a contract even if there’s no writing
   to establish it.

Union Carbide Corp. (P) v. Oscar Mayer Foods Corp. (D)
P wants D to pay back taxes
2 reasons for rejecting P’s claim:
(1) Unenforceable under UCC 2-207 b/c it was a material alteration. D would not have consented.
(2) Clause does not mean what P means (ambiguity of clause)
No breach of contract since additional terms are not accepted as part of contract.

KNOCK-OUT RULE = if contract based on conflicting pre-printed forms, conflicting terms knock each other out and missing
terms are filled w/applicable gap-fillers by court. Gap-fillers: UCC gap-fillers, Trade usage, course of dealing, course of
performance, implied warranty

MERGER CLAUSES
  Often present in form contracts: “this agreement represents the complete agreement”

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   Usually unenforceable b/c ct assumes that no one reads these clauses

UNCONSCIONABLITY IN FORM CONTRACTS
  Law assumes that people don’t read form contracts or don’t understand them
  R §211 = standardized agreements = where party assents to writing and has reason to believe that like writings are
   regularly used to embody terms of agreements of that type, he adopts the writing as an integrated agreement w/respect
   to terms
  Where the party giving the contract has reason to believe that the party giving assent wouldn’t assent if he of a term,
   that term is not a part of the contract



ENFORCEABILITY
Marvin v. Marvin
Express contract or implied in fact sufficient for recovery

Marone v. Marone
Express agreement important since it’s hard to speculate intent of the parties. Implied contracts are void.

CONSIDERATION

R §71 REQUIREMENT FOR EXCHANGE
   to be consideration, performance/promise must be bargained for (R §17)
   It is bargained for if it is sought by promisor in exchange for his promise & given by promisee in exchange for that
    promise
   promisee must suffer legal detriment. Legal detriment =
          1. goods, property, money (an act other than promise)
          2. forbearance/detriment
          3. creation/modification/destruction of a legal right
   not enough that promise induces conduct of promisee or conduct of promisee induces making of promise; BOTH
    elements must be present or no bargain
   donative promises = not enforceable; even if false nominal consideration is given (Schnell v. Nell: $600 exchanged for a
    penny. Not allowed)

Johnson v. Otterbein (Promise to donate)
Gratuitous gift v. bargained for promise.
College’s promise to use the money to pay the debt is not really a bargain. Although Johnson’s gift was an inducement for
the Univ. to apply it to its debt but the Univ. paying off the debt is not the inducement for J to make the promise. Court finds
it’s a gratuitous gift, no consideration.

Hamer v. Sidway
Uncle promises to give nephew $5000 to stop drinking & swearing. Nephew complied. Held: nephew giving up legal right to
do something in exchange for money = consideration = bargained for legal detriment. Consideration is not only the benefit to
the promisor but rather can have detriment to the promise. Either one of those two can constitute consideration.

UNILATERAL vs. BILATERAL CONTRACTS
  Unilateral = promise exchanged for performance; performance = consideration
  Bilateral = promise exchanged for promise; promise = consideration

R §73 LEGAL-DUTY RULE
     performance of a legal duty ≠ consideration
     similar performance = consideration if it differs materially from performance that was required by the duty
     performance of a preexisting legal duty may be consideration if performed for the benefit of a 3rd party and not the
      original promisee
     see §89 = modification of a existing contract may not violate the legal-duty rule

INVALID AS CONSIDERATION
   R §74 Forbearance to bring an invalid suit
      although forbearance to bring a valid suit is consideration, forbearance to bring an invalid suit ≠ consideration,
       unless the forbearing party thinks the suit is valid in good faith


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        Lack of Mutuality/Illusory Promise
          mutuality of obligation = both parties must be bound, or neither is bound
          R §77 = promise is invalid as consideration if promisor reserves a choice of alternate performances, unless each
           alternative has its own consideration
          bargain for a chance is not illusory b/c the promisor’s desire is for the promisee to consider contracting w/him in the
           future (e.g., exchange is for something valuable)


    PAST CONSIDERATION

    R §82, §83 PROMISE TO PAY A PREEXISTING DEBT
       Promise to pay all or part of a preexisting debt is binding if indebtedness is enforceable (or is not enforceable only b/c of
        a statute of limitations)
       Facts which operate as a premise are:
        2. voluntary acknowledgement admitting existence of indebtedness
        3. voluntary transfer of money made as payment or part payment
        4. statement that statute of limitations will not be used as a defense
       An express promise to fulfill a debt is binding even if that debt is dischargeable in bankruptcy proceedings begun before
        promise was made (subject to being limited by Bankruptcy Act)

    Moore v. Elmer (clairvoyance)
    Promises regarding things that happened in the past. Mr. Elmer does not believe the clairvoyance powers of Ms. Moore. The
    writing was not done with consideration, it is just a bet. What probably happened was that Mr. Elmer paid for her to tell him
    his fortune, when she told him that, that deal was done. This second one was done afterwards and it was done without
    consideration—services provided were already in the past. Can not use a present promise to induce performance of the past
    [past consideration rule]. Where detriment is suffered before promise is made, that detriment can not serve as consideration
    in exchanged for the promise.

    Mills v. Wyman (sick son, moral)
    Sick son cared for by a good Samaritan. Should father pay for services? Father did not bargain for the man to care for the
    son nor did the father’s offer to pay induced the man to care for the son. For there to be an enforceable contract there has to
    be an offer and a contract.

  EXCEPTION TO PAST CONSIDERATION RULE: R§86 PROMISE FOR BENEFIT RECEIVED
    Promise made in recognition of a benefit previously received by promisor from promisee is binding to the extent
     necessary to prevent injustice
    Promise not binding: (a) if benefit was a gift or it wasn’t unjust enrichment; (b) to the extent its value is disproportional
     to its benefit

    Webb v. McGowin
    P was injured while saving D from certain death. D agreed to pay P money for life, but the payments stopped. Held: D owed
    P despite the lack of present consideration, b/c D has an obligation to pay P for the valuable material benefit received from P’s
    actions (§86). Also, there was an express statement to pay. If §71 was applied strictly, he would not win b/c $ did not induce
    P’s action. This is also a quasi-contract.

    QUASI-CONTRACT/Quantum Meruit (Restitution)
      May be formed when one party has received a material benefit from one another even w/o an agreement
      Ct. may enforce on the basis that the party who received the benefit has been unjustly enriched

    CONTRACT MODIFICATION

    WAIVER (R §84, UCC §2-209, 1-107)
      applies to present right to over a minor breach
      R §84 = if a party waives a condition, e.g., allows other party to not comply, he can’t restore it
      UCC §2-209 = unless he reasonably notifies the other party of the rescission of the waiver, allowing him to comply, as
       long as injustice would not result from the rescission
      May not waive a term which is material to the exchange


    MODIFICATION (R §89, UCC §2-209)
     Adjustment to an ongoing contract

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    R §89 = modification of a material term requires separate consideration. Modification of a contract where the contract is
     not fully performed on either side is binding:
          1. if modification is fair and equitable in view of circumstances not anticipated when contract was made if statute
               allows modifications
          2. to the extent that justice requires enforcement in view of material change in reliance on the promise
    generally on modifications that are agreed on by both sides are enforceable
    UCC §2-209 = Modification in good faith and for reasonable commercial reason (sales contract) needs no consideration,
     but
          1. may not modify if prohibited by the contract                                            Must meet test of good
          2. must comply w/statute of frauds (writing, signed by party to perform)                   faith; changes in the
                                                                                                     market is a legitimate
PRE-EXISTING DUTY RULE                                                                               reason to renegotiate
Stilk v. Myrick (Seamen)                                                                             agreement
Captain promised remaining crew the salary of two deserting crew members if they stay on the boat for the course of the
voyage. Upon returning from voyage, captain refused to pay this extra amount.
Ct held that as a matter of public policy, the agreement is utterly void since exorbitant claims can arise with people on such
voyages dying/deserting all the time. Only of this was made on land, in the absence of danger or emergency can it be
upheld.
Concurrance says not public policy but rather there is no consideration in this case. Sailors had already agreed to give their
services under all emergencies that could come up so there is no benefit to promisor.

Alaska Packers’ Assn. v. Domenico (fishermen)
Workers for the fishing season in Alaska refused to work unless superintendent increased the wages from the amount of their
contracts signed before they left SF to go to Alaska. APN refused to pay the wages in the new contract at the end of the
season. Court finds that workers did not have legitimate reason to refuse to carry out what they contracted to do. The new
contract (if superintendent has the power to contract) had no consideration since it was for the workers to render the same
exact services they has already contracted to render.

Brian Construction and Development Co. v. Brighenti (no extortion)
Subcontractor was supposed to excavate a site and pave it for further construction on the site. Contract said he was to do
everything requisite and necessary to finish the entire work properly. But in excavating, found a lot of rubble that needed to
be removed. Refused to do it until more money given. Holding: where an unforeseen, burdensome condition was discovered
during the performance of the original contract, the promise of additional compensation in return for the promise that the
additional work required would be undertaken is held to constitute a separate valid agreement. According to theory of
unforeseen circumstances, second agreement is binding. R §89.

UCC §2-209 Modification, Recission, and Waiver [rejects preexisting duty rule]
1) An agreement modifying a contract within this Article needs no consideration to be binding…
Comments: 1) section seeks to make effective all necessary and desirable modifications of sales contracts without regard to
technicalities which hamper such adjustments. 2) an agreement modifying a sales contract needs no consideration to be
binding. Modifications must meet the test of good faith provided in the Act (2-103) and the extortion of a modification
without legitimate commercial reason is ineffective. Such matters as a market shift which makes performance come to involve
a loss may provide such a reason even though there is no such unforeseen difficulty as would make out a legal excuse from
performance under 2-615 & 2-616.


ADEQUACY OF CONSIDERATION

        Lack of consideration = nothing was given in exchange for the promise
        Failure of consideration = party asserting there was no contract argues that he did not get what he bargained for.
         (i.e. buying box at supermarket but discover that box contained nothing. You were promised contents in box in
         consideration for payment but didn’t get anything so failure of consideration.
        Inadequate consideration = party buys box and gets exactly what he thought he was buying. But the item is not
         worth as much as he thought it was and he wishes he had paid less. Ct not willing to look at adequacy of
         consideration, parties are free to strike their own bargain. SEE R §79.

Adequacy of consideration may be considered by the court when looking at:
      Unconscionability to enforce K
      fraud in the bargaining process to enforce K
      mistake to enforce K
      lack of capacity to enforce K

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        remedies: if grossly inadequate consideration, Ct will deny specific performance

Intention to be legally bound- Formalities (not really a good way to get around consideration)
        (1) SEALS
        R §95. Requirements for sealed contract or written contract
        Absent statute, a promise is binding w/o consideration if it is in writing and sealed

         UCC §2-203 Seals Inoperative
         Use of seals abolished for the sale of goods

         Aller v. Aller
         Husband promises to give money to wife’s daughters and reneges. When there is a seal, agreements are
         automatically enforceable. No longer the law—can be challenged if consideration is lacking.

         (2) NOMINAL CONSIDERATION
         A small amount, consideration in name only. If exchange only includes a nominal consideration, it is not
         consideration (see Comment to §71: mere pretense of a bargain not suffice, false recital of consideration or where
         purported consideration is merely nominal.)

         Schnell v. Nell
         D wrote agreement to pay P money wife wanted to leave them. Agreement mentioned consideration of 1 cent. All
         things like affection for wife, etc. are past/moral consideration so unenforceable. 1 cent does not constitute
         consideration b/c:
                   (1) not enough to make agreement valid
                   (2) even tho, ordinarily would not inquire into adequacy of consideration, here will enquire b/c it’s an
                   exchange for money. Does not apply to the exchange of sums of money.
                   (3) consideration is nominal in name only and intended to be so. NO real bargain. Agreement is not
                   enforced.

         R §87. Option Contract
         Altho nominal consideration is not binding, such consideration for options ARE enforceable.

         (3) RECITALS OF CONSIDERATION

         Smith v. Wheeler (land option)
         Consideration of $1 for option to buy property but dollar not paid. The lack of payment of $1 does not make
         contract void. The consideration is not the physical dollar but the promise to pay the dollar. The recital
         can be the consideration. [IS this only limited to options contracts?]

         (4) WRITTEN INTENTIONS TO BE BOUND (Express terms)
         Usually not enough – states generally rely on bargained for consideration.


PROMISSORY ESTOPPEL (RELIANCE AS A SUBSTITUTE TO CONSIDERATION)

R §90 RELIANCE/PROMISSORY ESTOPPEL
   One side performs its portion of the contract in reliance on the promise
   A promise [was there a promise?]
    which promisor should reasonably expect to induce action/forbearance [was reliance intended and foreseeable]
    and which does induce action or forbearance [was there actual reliance?]
    is binding if injustice can be avoided only by enforcement of the promise [is remedy necessary to prevent injustice?]
   Remedy granted may be limited as justice requires
   Charitable subscription is binding w/o proof that promise induced action/forbearance (some jurisdictions)

Ricketts v. Scothorn
Grandfather promises granddaughter money so that she can stop working. She relies on this promise to her detriment and
quits her job. There is no consideration here. There was a promise, promissor attempted to induce action, actions promisee
takes are reasonable, promisee relied to her detriment. Equitable estoppel is used as a shield.




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Allegheny College (charitable subscriptions)
College wins. J. Cardozo is looking for consideration in this case. When talking about charities in the state of NY, promissory
estoppel would serve as consideration. But ct says there’s consideration in this case and it’s a contract and does not need to
rely on promissory estoppel.
Williston: Conditional gift v. bargained for exchange: ask whether the happening of the condition will be a benefit to the
promissory. If so, fair inference that the happening was requested as consideration.

Feinberg v. Pfeiffer Co. (promised pension)
Mrs. Feinberg was promised a pension if she chooses to retire. After she retired, she received some pension but after the
death of the company’s president, the new president stopped the pension and called it a gift.
No consideration: only past consideration (moral consideration) which doesn’t count. No consideration but promissory
estoppel, she relied to her detriment on the promise. Promise enforced.

        CONSTRUCTION BIDS
R §87(2): subcontractors & contractors

James Baird Corp. v. Gimbel Bros. Inc (minority view)
Subcontractor withdraws bid after P submits. P wins bid, D wants higher price to perform.
Does unbargained for reliance prevent withdawl of offer?
J. Hand held that promissory estoppel does not apply:
- no binding promise of an irrevocable offer
- no consideration for such a promise
- Ct unwilling to treat subcontractor’s bid as option contract b/c no reason to suppose that D meant to subject itself to such a
one-sided obligation [lack of mutuality]

Drennan v. Star Paving Co. (influential in subcontracting cases)
Contractor wins contract & accepts. Subcontractor withdraws bid.
Here is not a bilateral contract, but a unilateral contract
R §45 once performance started (contractor submits bid), offer is irrevocable                The two combined is enough
R §90 can impose liability even in the absence of consideration                              to make offer irrevocable

Offeree makes preparations not requires by contract but are necessary before performance may begin. His reliance can turn
the offer in to an irrevocable one.

R §87 (2) offer which offeror should reasonably expect to induce action or forbearance on the part of the offeree before
acceptance & which does induce such action is binding as an option contract to extent necessary to avoid injustice.
   As opposed to R §45 Unilateral Contracts once performance starts are irrevocable. Under R §87, may not hold offer to
    proposed contract as long as he is willing to reimburse offeree for any damages suffered by reliance.

    PROMISSORY ESTOPPEL AS AN ALTERNATIVE TO BREACH OF CONTRACT:
    RELIANCE w/o CONTRACT
   Reliance may apply when there is no contract, e.g., agreement to negotiate in good faith, contract barred by Statute of
    Frauds, when there’s been no consideration yet (preliminary negotiations)
   §90 only applied to reliance on a promise

Goodman v. Dicker (radio franchise)
P misled D in course of negotiations into believing that they had a contract. Promissory estoppel is not a substitute for
consideration in order to create a contract. P has to pay damages incurred by D’s reliance on promise. Damages: NOT
expectation damages (no contract) but reliance damages.

Hoffman v. Red Owl Stores
P misled by D during negotiations. Spent lots of money and effort to prepare for his franchise & negotiations failed b/c D
changed requirements. Not using Promissory estoppel as substitute for consideration to make a contract. D’s promises
reasonably induced P to act to his detriment. Recover all expenses & losses suffered in reliance on D’s promise.

MODERN APPLICATIONS & LIMITS OF PROMISSORY ESTOPPEL
Focus on “Promise”:
(1) Blatt v. University of Southern California (Order of the Coif)
P claims unilateral contract, ct disagrees: only way to hold contract is through promissory estoppel. No consideration b/c P
was not adversely affected by relying on promise. No promissory estoppel b/c P’s actions were not done specifically to join
the Order. Promise was fulfilled, he was considered as promised and entry was not promised.

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(2) Ypsilanti v. General Motors (tax abatement)
GM supposed to manufacture cars & create jobs in return for tax abatement. Now GM moving production elsewhere.
Promissory estoppel fails b/c there is no promise in this case. Even if promise was made, reliance has to be reasonable, it
wasn’t in this case.

Focus on “Reasonable Reliance”
Alden v. Vernon Presley (Elvis’ estate)
P relied on Elvis’ promise of buying mortgage & forgone getting money from husband in divorce settlement. Reliance was not
reasonable b/c she already knew that she was going to have difficulty getting estate to pay and did not tell the judge. Nor
was reliance detrimental since she could have asked court to make ex-hubby give more money (no injustice here).

Focus on “Injustice of Non-performance”:
Cohen v. Cowles Media Co. (reporter’s breach of confidentiality)
Court rejects that there was a contract. Difficult to enforce promissory estoppel because hard to tell injustice: neither side
holds the higher moral ground. Ct applies it anyway since both sides acknowledge that breach was a wrong. P wins.



PERFORMANCE AND BREACH

IMPLIED COVENANT OF GOOD FAITH

GOOD FAITH and FAIR DEALING (UCC §1-203, R §205)
  every party to every contract has a duty of good faith and fair dealing in performance of the contract
  UCC §1-201(19) Good Faith = honesty in fact in conduct or transaction concerned
  UCC §2-103(1)(b) Good Faith of Merchant = every contract or duty w/in this Act imposes an obligation of good faith in
   its performance or enforcement
  Interference w/other party’s ability to perform contract = Bad faith
  R §205 Every contract imposes a duty of good faith & fair dealing in its performance and enforcement
  Breach of good faith is not a basis to bring a cause of action—breach of contract would be the cause of action
  Only applies to contracts that is already created, not to negotiations (Red Owl does not apply). Unless agreement for
   good faith in negotiations, can’t seek remedies.

(1) Goldberg 168-05 Corp. v. Levy (divert biz to other store)
P alleges that D was diverting biz at his store to another store. D promised to pay rent that includes percentage of the biz to
P. D attempted to bring profits down in store to avoid paying percentage & can cancel lease. Ct finds D violating the implied
duty of good faith (see Lady Duff case).

(2) Mutual Life Insurance Co. of NY v. Tailored Women (moving furs upstairs)
D moved store of furs to 5th floor (fixed rent), landlord loses percentage of sales from rent in the previous floor. Majority does
not find breach of implied good faith.

(3) Stop & Shop v. Ganem (open new stores)
P rents store from D, pays minimum rent (substantial amt.) & percentage of sales. P opens other stores & closes store rented
from D. D wants to prevent P from opening other stores. Ct says P should be free to make biz decisions as he sees fit. If
there was evidence of spite (opening adjacent store), then outcome would be different: would be violation of good faith.


IMPLIED AND EXPRESS WARRANTIES

IMPLIED WARRANTIES
  in a sale of goods, there are implied warranties that can be used as gap-fillers
  UCC §2-314 Merchantability (if seller is a merchant)= goods will conform to ordinary purposes the goods are used
   for(usage of trade is basis for quality); if to be excluded, language must included “merchantability”
  UCC §2-315 Fitness = (1) seller has reason to know purpose for which goods will be used for; (2) goods must be fit for
   the particular purpose for which they are sold; (3) Buyer is relying on seller’s skill or judgment to select goods.
  Excluding warranties in contract – must be clear and obvious.
  UCC §2-714 Damages for Breach of Warranty: (1) Difference at the time & place of acceptance btwn the value of the
   goods accepted and the value they would have had if they would have been as warranted. (2) Incidental & consequential
   damages can be recovered. (3) Still need to mitigate damages.

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Step-Saver Data Systems, Inc. v. Wyse Technology
CT rejected Step Saver’s arguments. Implied warranty of merchantability: If someone knows of a substantial defect, they
would have to disclose this defect (acting in good faith).
Warranty of merchantability has not been breached [warranty exists, warranty breached, harm resulted]. Given that so many
of these monitors had been sold, but so few complaints. Monitors did work during Step Savers test so hard to show breach.
Also, the major defect contended was a compatibility with programs that are not required of monitors according to trade
usage.

EXPRESS WARRANTIES
UCC §2-313 Express Warranties by Affirmation, Promise, Description, Sample
(1) Affirmation of fact or promise which (2) relates to the good and (3) becomes part of basis for bargain;
Description of goods which is made part of the basis of bargain; not necessary that seller uses formal words like warranty but
affirmation of value of goods & statements only reflecting his opinion not warranty.

Royal Business Machines, Inc. v. Lorraine Corp. (copiers)
Does the warranties/promises become part of the bargain? Breaks down the various statements to determine which were
express warranties based on 3 prong test of UCC §2-313.

EXPRESS DISCLAIMERS
UCC §2-316 Exclusion or Modification of Warranties
  Words or conduct relevant to creation of express warranty and words or conduct tending to negate or limit warranty shall
   be construed wherever reasonable as consistent w/each other
  To exclude or modify implied warranty of merchantability the language must mention merchantability & in case of a
   writing must be conspicuous
  To exclude/modify any implied warranty of fitness, the exclusion must be a writing and conspicuous
  All implied warranties are excluded with expressions like “as is”, “with all faults”
  When buyer has examined goods as fully desired or has refused to examine, there is no implied warranty w/regard to
   defects which an examination ought in the circumstances to have revealed to him
  Implied warranty can be excluded/modified thru course of dealing/performance/usage/trade
  Remedies for breach of warranty can be limited by liquidated damages

Schneider v. Miller (used car)
P buys car and signs disclaimer that the car is sold “as is”. This is a disclaimer and P can not recover.

Morris v. Mack’s Used Cars
Seller can not avoid liability for unfair/deceptive acts/practices by disclaiming contractual warranties under the UCC since
consumer protection statutes may supplement the UCC making some duties owed by merchants some duties owed by
merchants to consumers immutable. Statutes can trump the UCC.


ANTICIPATORY REPUDIATION & ADEQUATE ASSURANCES

ANTICIPATORY REPUDIATION
  UCC §2-610 If A repudiates before performance is due: (a) B can await performance by A; or (b) B can resort to any
   remedy for breach (§2-703 or 2-711) even tho B has notified A he would await performance; and (c) B can suspend own
   performance. B can do both (b) & (c) at the same time.
  UCC §2-611 Within A’s rights to retract repudiation unless B changed his position or indicated he considers repudiation
   final
  Exception in common law: When A has fully performed, repudiation does not mean that A can file suit immediately. If
   payment is not due until a later date, A has to wait until that later date in order to sue.

Albert Hochster v. Edgar de la Tour
D hired P as courier for June 1st. D repudiates prior to June 1st. Can P sue before June 1st. Yes, repudiation can be treated
as a breach of contract when it occurs. P does not have to perform and can sue immediately.

Harrell v. Sea Colony, Inc.
Sea Colony tries to convert Harrell’s request to rescind as a repudiation. An anticipatory breach is only there if there is a
definite and unequivocal manifestation if intention on the part of the repudiator. A mere request for change in terms or
cancellation is not in itself enough to constitute a repudiation.


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ADEQUATE ASSURANCES

UCC §2-609. RIGHT TO ADEQUATE ASSURANCES OF PERFORMANCE
  When reasonable grounds for insecurity arises w/respect to performance of either party, may in writing, ask for assurance
   and may suspend performance until the assurance is given.
  Btwn merchants, reasonable grounds determined according to commercial standards.
  After receipt of justified demand, failure to respond with 30days is a repudiation of contract.

Scott v. Crown (wheat delivery)
Seller’s reason for wanting assurance is valid. But the way seller went about demanding it was not right, he told buyer’s
driver verbally. Need to be in writing.


SUBSTANTIAL PERFORMANCE, MATERIAL BREACH & PERFECT TENDER

MATERIAL BREACH
  R §241 Substantial performance = no material breach
  R §237 You don’t have to perform if your contracting partner was to perform first, he materially did not perform and he
   failed to cure it.
  R §242 (a) Look at R §241 to see if failure was material; (b) if waiting for cure means won’t be able to mitigate
   damages, then don’t need to wait; (c) extent to which agreement provides for performance w/o delay (date can be
   explicitly stated as a condition of contract)
  If one party substantially performs, other party has to perform (Does not apply to sale of goods)
  If injured party does not come thru after cure, curer can sue for breach

PERFECT TENDER RULE
UCC §2-601. TREATMENT OF NONCONFORMING GOODS
If goods at delivery fail to conform; buyer may:
     (a) reject it in whole
     (b) accept the whole
     (c) accept any units & reject the rest

HOW IT WORKS:
If seller delivers non-conforming goods, buyer can (§2-601):
(1) reject goods w/in a reasonable time & with modification (§2-602)
           (a) if time to perform has not expired, seller may cure (§2-508(1));
           (b) if seller had reason to believe goods were acceptable, he may have reasonable time to substitute a conforming
           tender (§2-508(2)
(2) Accept (by signifying he will retain despite non-conformity, by not rejecting it, by acting in a way inconsistent with seller’s
ownership (§2-606))
           (a) buyer can no longer reject (§2-607(2)) but
           (b) buyer may revoke his acceptance w/in a reasonable time after discovery of nonconformity if it substantially
           impairs its value. But goods must have been accepted (§2-608)
                      (i) on the reasonable assumption that its nonconformity would be cures, and it has not been seasonably
                      cured; or
                      (ii) Without discovery of the nonconformity due to difficulty of discovery or acceptance of seller’s
                      assurances.

REMEDIES
If Buyer accepts (§2-606), then buyer
          (a) must pay the contract rate (§2-607a) but
          (b) can recover damages for nonconformity (2-714)
If buyer rejects (§2-711), can cancel contract (§2-106(4))
          (a) cover and receive damages under (§2-712) diff btwn cover & contract price
          (b) recover damages under (§2-713) market price

Ramirez v. Autosport (summer van)
Seller keeps screwing up van. Buyer can reject goods that do not conform to the contract in any way. Buyer had rightfully
rejected the goods since seller failed to cure and can recover the price they had already paid.


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DEFENSES

STATUTE OF FRAUDS
   R §110 = following types of contracts are subject to statute of frauds and are unenforceable unless they’re accompanied
   by a written instrument
       1. a contract for the sale of an interest in land (the land contract provision)
       2. a contract that cannot be completely performed w/in 1 year from the time which the contract is made
       3. contracts for marriage, suretyship, executors of estates
   Exceptions
       1. oral contracts for land - if there has been a taking or conveyance will be enforced
       2. oral contracts that can’t be performed w/in a year – if it has already been fully performed w/in a year by one
            side will take it out of the statute of frauds

    Boone v. Coe
    D made verbal agreement w/P to lease land to P for a period of 1 year from the day P arrives. P arrive and D reneges on
    agreement. P wants reimbursement for travel expenses. Contract is unenforceable b/c agreement is within the Statute
    of Frauds under the 1 yr provision and lacks writing.

    Exception: action may be maintained on quantum meruit. If D has received benefits from the acts of part performance,
    the law implies a promise to pay. In Boone, D has received no benefit. P can not be awarded restitution damages.

    R §125 Contract for Land
    (1) Promise to transfer land is covered by Statute of Frauds
    (2) Promise to buy interest in land is covered by S. of F.
    (3) When transfer of an interest in land has been made, a promise to pay, if originally w/in S. of F. ceases to be w/in it
    [oral contracts become enforceable]
    (4) short term leases & contracts to lease, usually for a term not longer than a year are excluded from S. of F. [oral
    contracts enforceable]

    R §129 Action in Reliance; Specific Performance
    Contract for transfer of land may be specifically enforced even if failure to comply w/S. of F. if it’s established that party
    seeking enforcement, in reasonable reliance on the contract & on the continuing assent of the party against whom
    enforcement is sought, has so changes his position that injustice can be avoided by specific enforcement.

    R §130 Contract Not to be Performed w/in a Year
    (1) Where any promise in a contract can not be fully performed w/in a year from time contract is made, ALL promises in
    contract are w/in the S. of F. until one party to the contract completes his performance
    (2) When 1 party has completed his performance, the 1 year provision of S. of F. does not prevent enforcement of the
    promises of other parties

    UCC 2-201 = any contract for the sale of goods over $500 is not enforceable w/o
       1. writing sufficient to indicate that a contract for sale has been made between the parties
       2. signature by the party against whom enforcement is sought
       3. beyond specified quantity in writing
    Exceptions
       1. btwn merchants, one merchant can hand in writing & if other side fails to hand in writing, ct will interpret as
            they accepted the writing
       2. confirmation – if there has already been acceptance or payment
       3. estoppel – if both parties admit contract has been made; one party has relied on this admittance
       4. if goods are to be specially manufactured for the buyer and are not suitable to sale to others in ordinary course
            of seller’s business

Oral rescission, modification (except for land transfer) are enforceable despite the Statute of Frauds

SATISFYING REQUIREMENT OF A WRITNG

R §139 ENFORCEMENT BY VIRTUE OF ACTION IN RELIANCE
Promise enforceable even if w/in S. of F. [complementary to §90]. Even if there is consideration, will use promissory estoppel
to look at cases w/in S. of F. This is a fallback measure—if you can award restitution (quantum meruit?), then award it. If
§129 (land sale) applies, then award specific performance.

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        May not always prevent a party from obtaining some form of remedy
        Restitution may be awarded (unjust enrichment)
        Or can be estopped & awarded under §129, §139

Schwedes v. Romain (land sale, acceptance not in writing)
Offer was in writing but acceptance was not made in writing. NO contract to be enforced under the S. of F. – no recovery for
P. (1) No contract existed; (2) no basis on which to grant specific performance; (3) even if contracts existed, no part
performance nor estoppel to take contract out of S. of F.

R §131 GENERAL REQUISITES OF A MEMORANDUM
A contract w/in the S. of F. is enforceable if it is evidenced by a writing signed by party charged (D), which (a) reasonably
identifies the subject matter of contract (b) sufficient that a contract has been made btwn parties & states w/reasonable
certainty the essential terms of the contract.

Memo does not have to be in the form of a contract and does not have to be delivered.


UNENFORCEABLE ON PUBLIC POLICY GROUNDS

 Action violates public policy when it is “so obviously against the public health, safety, morals or welfare that there is virtual
  unanimity of opinion in regard to it.” When public policy is established, the court can “constitute itself the voice of the
  community and declare any action that offends the public policy void.” A court will not enforce a K which violates
  public policy.

    Shaheen v. Knight
     and  contract to make  sterile.  sues  when wife has a child, claiming that  breached warranty of cure in the K.
     claims that sterilization against public policy. Court rejects public policy argument (b/c no unanimity of opinion v.
    sterilization); and rules in favor of  because there were no damages – birth of healthy, normal child – and, in such a
    case, awarding damages would be against public interest.

    In the Matter of Baby M
     (husband) contracts with  to become surrogate parent (insemination with ’s sperm, carrying child to pregnancy,
    terminating parental relationship upon delivery of child, giving custody of child to Sterns, and allowing Mrs. Stern to be
    adoptive parent). After child born,  takes child and refuses to return her to . Authorities recover child and return to .
     sue for breach of K. Supreme Court rules that surrogacy K conflicts with laws (prohibiting use of money in connection
    w/ adoptions; making revocable the surrender of custody of child; strictly regulating termination of parental rights) and
    public policies (rights of natural parent equal; best interests of child; family values) of State of New Jersey.

 Individual freedom to contract v. judicial intervention to reach “right” result. These decisions illustrate discretion held by
  courts in deciding public policy and how localized public policy is.


LACK OF CONTRACTUAL CAPACITY

R §12 CAPACITY TO CONTRACT
Everyone had capacity to contract unless they are (1) under guardianship (2) an infant (3) mentally ill; or (4) intoxicated

R §15 MENTAL ILLNESS
   Person incurs only voidable contractual duties by entering into a transaction if by reason of mental illness:
        (a) unable to understand the manner/consequences of transaction (cognitive test easier to prove)
        (b) unable to act in a reasonable manner in relation to the transaction AND the other party has reason to know the
        condition
   Voidable: contract is not automatically void—a mentally ill person can enforce it against the other party but they can
    choose to get out of performing the contract.
   Where contract is made on fair terms & other party is w/o knowledge, power of voidance terminates to the extent that
    contract has been performed in part or in whole or the circumstances have changed so that avoidance would be unjust.
    Ct may grant relief as justice requires.

Ortelere v. Teacher’s Retirement Board of N.Y. (pension)
P changed her retirement plan when she was mentally ill. Ct finds contract is voidable.

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R §16 INTOXICATION
   If unable to understand, or unable to act, then can incur voidable duties. However, only voidable if other party knows of
    intoxication.
   Since intoxication is a voluntary state, some cts say involuntary drunkenness is an excuse, others say no excuse.

R§14 INFANCY
Unless a statute provides otherwise, a person has the capacity to incur only voidable contractual duties until the beginning of
the day before the person’s 18th birthday

Shields v. Gross
Child can disaffirm their own contract. Can also disaffirm consent that someone else had given on their behalf. Child can void
contract all the way to their 18th bday and for a small time after they reach 18. Cts reluctant to allow adults to disaffirm
contacts made on their behalf.


OBTAINING CONSENT IMPROPERLY

R §159 MISREPRESENTATION
Has to be an assertion [of knowledge] that is not in accord with the facts [not an opinion]
Quality of something = opinion               Quantity = knowledge
Value = opinion                              Market price = knowledge

   R §168 Reliance on Assertions of Opinion: Recipient of opinion as to facts not disclosed & otherwise not known to
    recipient may properly interpret it as an assertion if: (a) facts known to that person are not incompatible w/his opinion; or
    (b) he knows facts sufficient to justify him in forming it
   R §169 When Reliance on an Assertion of Opinion is not Justified. If opinion, recipient is not justified in relying
    unless: (a) relationship of trust & confidence; (b) recipient believes that compared w/himself, person whose opinion is
    asserted has superior expertise; (c) recipient for some other special reason particularly susceptible to a misrepresentation
    of the type involved
   R §162 Fraud/Material: Representation is fraudulent if maker intends to induce & (a) knows assertion is not in accord
    w/facts; (b) does not have confidence that he states/implies in the truth; (c) knows does not have the basis that he
    states/implies. Representation is material if it would be likely to induce a reasonable person to manifest his assent.
   R §164 When K is voidable: If manifestation of assent is induced by either fraudulent or material misrepresentation, in
    which they were justified in relying, contract is void by recipient. If misrepresentation is given by 3rd party not in
    transaction, contract voidable by recipient unless other party in good faith & w/o reason to know of misrep either gives
    value or relies materially on transaction.

Byers v. Federal Land Co. (land value)
P wants to cancel land contract b/c D had misrepresented the value of the land. Ct says a statement about value is an
opinion, especially where it’s something that does not have a definite value. An honest statement of opinion is not a
misrepresentation. If you know the value but is stating something different, then that can be misrepresentation.

Vokes v. Arthur Murray Inc. (dancing lessons)
P induced into buying dance lessons by excessive flattery from D. Flattery are opinions which can not be misrepresentation.
Exceptions: does not apply if (1) a relationship of trust & confidence; (2) one party has superior knowledge. P wins.

R §175 DURESS
     [a] If manifestation is induced by [b] an improper threat by other party that [c] leaves victim no reasonable
      alternatives, K is voidable by victim.
     If manifestation is induced by one who is not party to transaction, K is voidable by victim unless other party to
      transaction in good faith & w/o reason to know of duress either gives value or relies materially.

Improper Threats
R §176. When Threat is Improper
      When it’s a crime/tort
      Improper use of legal system
      Breach of good faith & fair dealing
      If resulting exchange is not on fair terms (if threat harms recipient w/o benefit to maker of threat, threat is an abuse
       of power



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Silsbee v. Webber (don’t tell hubbie)
Son steals from employer. To stop E from telling hubbie, P agrees to sign over her share of an estate. Duress only when
threat is illegal—in this case, E was not threatening anything illegal. However, Ct allows duress to be presented to jury.

Economic Duress
Hackley v. Headley (log sale & receipt)
Headley (P) sues Hackley (D) b/c D gave him less $ for logs than what he asked for and had him sign receipt. P claims duress
since at the time he was collecting the $ he needed it or would be financially ruined. Ct: no duress. What D did was not
illegal (failure to pay on time) and would not be duress under other circumstances. Also D did not cause P’s situation – had
he stopped other people to pay P and knew that P was in a financial bind as a result, then that would be duress.

Austin Instrument v. Loral Corp. (defense contract)
Loral (contractor to govt) sues Austin (provider of parts) for forcing it to agree to an increase in price under economic duress.
Ct applies Economic Duress test:
    (1) one party to a contract threatened to breach agreement by w/holding goods unless other party agrees to further
         demands
    (2) threatened party could not obtain goods from another source
    (3) ordinary remedy of an action of breach of contract would not be adequate. See R §175.

Ct finds these three conditions have been met and duress can be claimed.

UCC §2-209 Modification
Modifications w/o consideration are allowed but have to meet requirement of good faith. [Thus, Austin would have to show
business reasons.]

If duress is found, K is void. V is entitled to restitution and so is other party (treated as id K did not exist.)

R §177 UNDUE INFLUENCE
      Undue Influence is [a] unfair persuasion of a party [b] under the domination of the person exercising the persuasion
       [one person has to be influential or a longtime advisor]
      If [a] party’s manifestation of assent is adduced by undue influence, [b] K is voidable by V
      If party’s manifestation of assent is adduced by one who is not a party to a transaction, K is voidable by V unless
       other party to transaction in good faith & w/o reason to know of undue influence either gives value or relies
       materially

Odorizzi v. Bloomfield School District
P arrested for homosexual behavior. Seeks to rescind his resignation b/c of undue influence from school. Ct: consent that is
not freely given can be rescinded. Can find a claim based on duress.
P words complaint to include duress, fraud, mistake, undue influence & lack of capacity:
     (1) Duress: the threat has to be unlawful, unless party making the threat knows claim is false
     (2) Fraud:
          Actual fraud: nondisclosure of material fact which induces innocent party to enter K
          Constructive fraud: breach of judiciary duty which induces justifiable reliance by latter to his prejudice
     (3) Mistake of fact/law: if material facts of transaction were known to both parties. Not here b/c parties were just
          speculating on the future
     (4) Undue Influence: persuasion which tends to be coercive in nature, persuasion which overcomes the will w/o
          convincing the judgment

UNCONSCIONABILITY (R §208, UCC §2-302)
  contract terms unfair to one party, usually a weaker or less knowledgeable one
  procedural unconscionability = fraud, deceit, duress in the making of the contract
  substantive unconscionability = content of the contract is unfair. In some cases merely a gross disparity of price, if overly
   harsh, may render a contract unconscionable
  If Ct. finds K or clause to be unconscionable at time K was made, Ct may refuse to enforce the K or enforce remainder of
   K w/o clause or may limit application of clause as to avoid unconscionable result. When K or clause may be
   unconscionable, party shall be given reasonable opportunity to present evidence as to its commercial setting, purpose &
   effect to aid ct in making determination.

Williams v. Walker-Thomas Furniture Corp.
Hidden and intentional contract term for pro-rata installment payment plan was deemed unconscionable, esp. b/c dealing
w/poor people.

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Types of Unconscionability
(1) Absence of choice – procedural unconscionability in bargaining process. Did parties know what they were getting into?
Voluntariness of deal? Are terms negotiable? These facts are not enough, also need:
(2) Terms unreasonably favorable to the other party – substantive unconscionability. Ct does not really consider adequacy
except for this exception. Ct may also look at the terms of the deal to see if it’s unconscionable: are terms reasonable or was
it a one sided agreement?

Test for Unconscionability
(1) Bargaining process: terms in fine print that have not been read
(2) Substance of contract: terms too rough, not reasonable
(3) Bargaining power: alternatives to the other party?

Contracts of Adhesion & Unconcionability
R §211 Standardized Agreements
Party adopts writing as an integrated agreement w/r to terms included in writing
Where party has reason to believe party manifesting assent would not do so if he knew the writing contained the particular
term, the term is not part of the agreement.

Carnival Cruise v. Shute
Forum Selection clause saying all suits are to be settled in FL. WA Ps can not afford to bring in suit in FL, clause effectively
denies them their day in ct. Ct says no unconscionability and clause is enforced. Altho clause unnegotiated, that in itself doe
not make it unenforceable – only unenforceable if D put it in to discourage legitimate suits.

FAILURE OF BASIC ASSUMPTION

R §151 MISTAKE
A mistake is a belief that is not in accord with the facts.

MISUNDERSTANDING
Parties agree to the same word that does not actually mean the same thing. (Peerless)

R §152 MUTUAL MISTAKE
   Where mistake of [a] both parties at the time the contract was made as to [b] a basic assumption on which the contract
    was made has [c] a material effect on the exchange, e.g., decrease in value
   K is voidable by the adversely affect party, [d] unless he bears the burden of risk of mistake

Sherwood v. Walker (pregnant cow)
D sold P cow to be barren for a low cost. Cow turned out to be fertile and pregnant, so seller try to rescind. Rule: if it was a
difference in quality, then it can not be rescinded. But if the mistake concerns the substance of the bargain, then it can be
rescinded.
Holding: Whether cow is barren or not is the substance of the bargain so seller can rescind.
Dissent: rejects quality/substance distinction. Asks how parties would have allocated risk. Also accepts P’s version that there
was no mutual mistake—he was taking a chance that cow would breed.

Wood v. Boynton (diamond)
P sells stone to dealer w/o knowing that it was a diamond for $1. D did not know it was a diamond either. Ct says dealer can
keep diamond b/c there was no mistake as to the thing sold. Thing did not change after sale. P could have also checked the
real value before selling it.

Bottom line: in both Sherwood & Wood, Ct left property where it was. Won’t require performance if there’s mutual mistake
but won’t allow rescission after it has been performed.

R §154 BEARING THE RISK OF MISTAKE
   Party bears the risk of mistake when
        1. the risk is allocated to that party in the agreement (“as is” clause); or
        2. if, when the contract was made, a party knows he has less information but treats his knowledge as sufficient
             anyway (should have done his homework);
        3. if the ct decides it must be so for sake of justice (land sale)




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Lenawee County Board of Health v. Messerly (sewage)
Neither party was aware of illegal sewage system. Ct rejects concept of mistake of value/essence (Sherwood test). This
affects both value and property itself. Adopts Restatement—
        K voidable if:
     1. Mistake relates to basic assumption on which agreement was made
     2. Mistake materially affects the agreed performances of the parties
        Recission is not available to party who has assumed the risk in connection with mistake
Since there is a “as is” clause, buyers assume the risk and Ct finds for sellers.


R §153 UNILATERAL MISTAKE
   When mistake of one party makes contract voidable:
         1. Mistake is a basic assumption
         2. Mistake has a material effect on the agreed exchange
         3. Mistaken party does not bear the risk of mistake
         4. Enforcement is unconscionable
         5. Other party had reason to know of mistake or caused the mistake
   for rescission/voiding contract, notice of mistake must be given in timely manner
   If the non-mistaking party has already detrimentally relied on the agreement, the mistaking-causing party may have to
    pay reliance damages, but if there has been no damage done yet due to the mistake, the ct can just void the contract
    w/o making the mistake-causing party pay anything

Tyra v. Chaney (subcontract for school bldg)
Written bid omitted part of oral bid. P (subK) suing for restitution of the work in omitted part. Ct: D benefited from P’s work
& to prevent unjust results, P entitled to restitution damages. Altho allowing defense of unilateral mistake may give parties
incentive to be less careful, Ct makes exception he
re b/c D knew about mistake and knew that P was not assenting.
R §160. Action intended or known to be likely to prevent another from learning a fact is equivalent to asserting that the fact
does not exist

R §161. Nondisclosure of fact is equivalent to misrepresentation if:
(a) he knows disclosure of fact is necessary to prevent assertion from being a misrepresentation/fraud/material
(b) he knows disclosure would correct mistake of other party w/r to basic assumption
(c) he knows disclosure would correct mistake of other party as to contents or effect of writing
(d) relation of trust/confidence between the parties

Laidlaw v. Organ (post War of 1812 & tobacco)
P asked D if her knew any info about price change of tobacco. D remains silent although he knows that war is over and
embargo is lifted. Ct rules that although D had no obligation to give info to P, each side must take care not to say or do
anything tending to deceive the other.

MISTAKE IN TRANSCRIPTION
  when a scrivner’s error causes the written contract not to conform to the actual arrangement
  Parol Evidence Rule is not applied – verbal evidence of what the contract actually was is admissible
  Reformation of the contract is allowed when the reformed contract will be the actual agreement between the parties


CHANGED CIRCUMSTANCES

IMPRACTICABILITY/IMPOSSIBILITY
  Elements
        1. unexpected contingency
        2. risk of loss from contingency wasn’t allocated by the agreement/custom
        3. occurrence of contingency rendered performance of contract impracticable
  basic assumption = one which essentially creates the entire contract terms
  impracticable = commercially impracticable
  examples: extreme rise in cost due to completely unforeseen act – war, embargo, nature, etc.; destruction of a
   building/thing on which the contract is based




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    R §261 Discharge by Supervening Impracticability
       Four factors:
        1. Event made performance impossible
        2. Non-occurrence of this event was a basic assumption on which K was made
        3. Impossible event occurs without fault
        4. Party should not have assumed the risk
       Unless language or circumstances indicate otherwise (this is default rule which can be contracted around)

    UCC §2-615 Excuse by Failure of Presupposed Conditions
      Unless the seller has assumed a greater obligation, delay or non-delivery of goods is not a breach if performance as
       agreed has been made impracticable by the occurrence of a contingency, the non-occurrence of which was a basic
       assumption on which the contract was made. Seller must notify buyer seasonably.
      Neither the rise/collapse in the market = impracticability b/c that’s what business contracts are supposed to cover in
       their prices.
      A severe shortage in raw materials/supplies due to a contingency such as war, embargo, local crop failure,
       unforeseen shutdown of major sources of supply which causes an increased price/prevents seller from securing
       supplies = impracticability; However, if these things could’ve been foreseen, the risk of loss falls on the foreseeing
       party

    UCC §2-613 Casualty to Identified Goods
      When contract is for goods, & goods perish by fault of neither party before risk of loss passes to buyer
           1. contract may be voided if loss is total
           2. if partial loss, buyer may accept goods at a reduced price or void contract w/no further right against seller

    Taylor v. Caldwell (impracticability)
    P rented a music hall to be used for several concert. Hall burnt down before concerts, but P had spent money on
    advertising and he sued Hall owner for money spent on ads. Held: since the performance of the promise had become
    impossible, both parties were excused from contract w/o breach, and therefore no liability for damages D’s defenses: (1)
    express term: subject to God’s will; (2) general custom of trade; and (3) implied term: existence of theater critical to K
    and when it ceases to exist, both parties are excused.

    Eastern Airlines v. Gulf Oil Corp.
    To imply impracticability, need the four factors listed in R §261.
    Gulf can not raise this defense b/c: (1) rise in cost is not sufficient to excuse performance – has to be a dramatic one like
    an embargo; and (2) event was foreseeable. Could know that OPEC would raise prices and they should have contracted
    for that. Since they didn’t, they bear risk.

    Note: (2) is rough—hard to take into account every event that might happen. Can also look to see of party can shift risk
    to 3rd party, if so, risk should be assigned to the party who can shift the risk.

R §265 FRUSTRATION
   when, after a contract is made, a party’s [principal purpose] is substantially frustrated [w/o his fault] by an
    occurrence, the non-occurrence of which is a [basic assumption] of contract, any remaining duty to render
    performance is discharged

    Krell v. Henry (coronation event)
       Renter puts deposit down to rent room to watch coronation. Event is cancelled. Owner wants rest of money, renter
        wants deposit back. Owner does not get rest of money and renter should not get back deposit—let loss lie where it
        falls. This if the OLD RULE.
       This is not a case of mistake b/c mistake is about existing fact while frustration is a mistake about what will happen
        in the future. When event cancelled, renter has not purpose to rent room.
       Ct: Implied condition that something would continue to exist. Do not just look at contract itself, can look at
        surrounding circumstances to see what the basis of the K was. The purpose that was frustration must be the
        foundation go the contract.
       Test for frustration:
              1. What was the foundation of the contract? (procession on designated days)
              2. Was performance of K prevented? (Yes)
              3. Was event that took place not in contemplation of parties at the time K was made? (Yes)




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Lloyd v. Murphy
D rented store to sell cars. B/c of war, D wanted to get out of the contract since govt said can’t make consumer cars. P
mitigates damages by renting to someone else and sues.
D: frustration of purpose—I lease this to sell cars and the government has passed a law which frustrates my purpose.
Was the assumption of risk on the promissor?
The risk of the frustrating event can not be foreseeable. Absent of an express contract, the risk was assumed
The purpose that was supposedly frustrated was only restricted and that restriction is not enough to apply frustration.

REMEDIES:
       If ct determines that promisor is not entitled to relief, promisor breaches and can be liable.
       If either party has performed to some part, and the contract is divisible, then the party can recover at the contract
        rate. Most contract are not divisible, but one party has performed in part, then they can get restitution of the benefit
        conferred to the other party. (kinda different from deposit outcome in Krell v. Henry)
R §377 Restitution in cases of Impracticability, Frustration…
   a party may be entitled to restitution damages for any benefit conferred before the contract became impracticable

RISK OF LOSS
  if custom/agreement assigns the risk of loss to one or the other party, that party may not claim impracticability
  risk of loss is generally seen as being on the party in control of the goods

    UCC §2-509 Risk of Loss in Absence of a Breach
      if the seller = merchant, risk of loss passed onto the buyer upon his receipt of goods
      if the seller ≠ merchant, risk of loss passed onto the buyer upon when goods are sent
      if contract requires seller to ship goods
            4. if no destination specified, risk of loss passed onto the buyer upon when goods delivered
            5. if destination is specified, risk of loss passed onto buyer when goods are delivered to that place and are
                  available for his acceptance
      if goods are to be held by a bailee pending delivery w/o being moved

    UCC §2-510 Effect of Breach on Risk of Loss
      Seller breach = if goods aren’t as promised, risk of loss stays w/seller until acceptance, if any
      Buyer breach = seller may treat loss as resting on buyer for a commercially reasonable time

Allocation of Risk in Long Term Contracts
NIPSCO v. Carbon County Coal
NIPSCO has long term contract with coal company. But price of coal drops—thus cheaper for NIPSCO to buy energy than
create it. A force majeure clause excuses performance on specific conditions but does not apply in this situation. A f.m clause
is not meant to buffer a party from normal events (fluctuation in market).

What we should think about is if the parties have decided, how would they have wanted to assign the risk of contingency?



DAMAGES

In general
   R §352 = Damages must be reasonably certain or they won’t be awarded
   R §355 = punitive, exemplary damages not allowed
   R §353 = may not recover for emotional disturbance, unless an obvious result of breach

R §347 EXPECTATION DAMAGES
   Supposed to put injured party in the same position he would’ve been in if the contract was performed
   Expectation = value lost due to the breach + any other loss, including incidental/consequential loss caused by breach (i.e.
    storage costs) – any cost avoided by not having to perform (i.e. salvaging)

Hawkins v. McGee
Dr. gave patient a hairy hand, instead of a normal one. Held: patient could recover expectation damages - the diminished
value of the hand = difference between the value of the hand he got and the perfect hand he was supposed to get if Dr.
hadn’t breached. Did not include P&S (during operation b/c that was the cost in obtaining new hand nor of the bad hand b/c
that was calculated in the low value of the hand he got).


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Sullivan v. O’Connor
Botched nose job. Court does not award expectation damages but awards something between that and reliance damages.

    Diminished Value vs. Cost of Replacement
      Cost of replacement is preferred unless
           1. there’s gross disparity between cost of repair and diminished value (economic waste to repair)
           2. promisor acted in good faith and therefore is entitled to pay only diminution in value if it’s lower
           3. the defect is really not very different from a non-defective state
      Cost of replacement is often used for homes & other personal properties where the party cares more that contract is
       performed “just right.”
      In an commercial context diminution of value may be more appropriate, since parties don’t care as much about
       having it just as they wanted

    Jacob & Youngs v. Kent (Reading pipe)
    Owner contracts for Reading pipes but contractor puts in similar pipes of a different brand. The brand of pipe is minor in
    the contract and contractor had substantially performed. Brand name was not a condition for payment (not an expressed
    term). Since cost of replacement disproportionate to the diminished value, court awards the diminished value—the
    difference in value between pipes used and Reading pipes.

    Groves v. John Wunder Co. (Gravel extraction)
    Gravel extraction contract, party in breach was supposed to restore the grade of the land after term of lease. Cost of
    restoration cost more than what the land would be worth. Court awards cost of completion (replacement) since the
    breach was willful and party in breach would be unjustly enriched.

    Peevyhouse v. Garland Coal and Mining (coal mining)
    Cost to restore was $30k and diminished value of property w/defect was $300. Held: diminished value was appropriate
    damage to pay b/c restoration entailed such economic waste. Also contract fully performed except for restoration which is
    not the main reason for the contract.
                                                        Reading                Groves               Peevyhouse
     Cost of completion > Effect on market                  X                      X                      X
     value
     Promisee wins cost to complete                                                X
     Willful                                                                       X                     X*
     Wasteful                                               X
     Promisse’s intention in contracting                                           X
     (principal purpose, promisee’s intent on
     seeking damages)


    Cover
      UCC §2-712 = if seller breaches and buyer covers his needs by purchasing from another merchant at a higher
       price, seller may be liable in expectation damages to recover the difference between the cost of cover and the
       contract price plus incidental/consequential damages but also less expenses saved. (Compare w/Restatement &
       Common Law = if costs to complete exceeds contract price, breaching builder must pay homeowner the difference)
      UCC §2-713 = buyer’s damages if seller repudiates/non-delivery is also expectation damages

       UCC §2-701 = seller may cover & mitigate by selling goods elsewhere, and if at a loss from original contract price,
        buyer will be liable for the difference

       Also, seller may salvage the raw materials for use elsewhere, and recover the difference. Must use reasonable
        commercial judgment in deciding whether to sell or salvage

    Limitations on Expectation Damages (Certainty, Mitigation, Foreseeability)
       R §352 Certainty of Harm = damages may only be claimed which can be proven w/reasonable certainty; often
        this rule applies to lost future profits. Damages are not recoverable for loss beyond an amount that the evidence
        permits to be established with reasonable certainty.




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             1.   Chicago Coliseum Club v. Dempsey
                  Loss of profits not recoverable if they are speculative. Compensation for damages for breach of contract
                  must be established by the evidence from which the court are able to ascertain with a reasonable degree of
                  certainty.
                  Expenses incurred prior to contract is not chargeable to the breacher.
                  Reliance damages can be awarded—expenses incurred between agreement & breach that were necessary
                  to further performance is recoverable.

             2.   Anglia Television Ltd. v. Reed (Mike Brady)
                  P can recover for expenditures incurred prior to agreement if it was reasonable in the contemplation of the
                  parties as likely to be wasted if the contract was broken. Brady pays.

        R §350 Avoidability of Harm/Mitigation = Damages not recoverable for loss the injured party could have
         avoided w/o undue risk, burden or humiliation. Not precluded from recovery if made reasonable but unsuccessful
         efforts to avoid loss.
              1. injured party has a duty to mitigate damages, including a claim for lost profit
              2. victim of breach must avoid actions which increase the damages other party must pay, e.g., Rockingham
                   County v. Luten Bridge Co. – contractor kept building bridge after being told to stop. Held: contractor
                   only entitled to damages for performance up to date told to stop
              3. injured party doesn’t have to accept just any substitute performance. The substitute has to be comparable,
                   not different or inferior, e.g., Shirley MacLaine Parker v. 20th Century Fox – substitute offer for an
                   inferior role ≠ comparable performance requiring MacLaine’s acceptance in order to mitigate
              4. Exception = Lost volume seller UCC §2-708(2) = if seller has unlimited supply of standard-priced
                   goods, he may recover profit due to buyer’s breach, b/c even if he sells item to another buyer, he’s only
                   made one sale instead of 2, e.g., Neri v. Retail Marine Corp. – seller of boat was a lost-volume seller and
                   entitled to damages in amount of profit lost by buyer’s breach

        R §351 Foreseeability = damages from breach are not recoverable unless they were reasonably foreseeable to
         result from breach
              3. Hadley v. Baxendale – crank shaft delivered late, mill couldn’t run, not foreseeable at time contract was
                   made, so D not responsible for the damages of the mill not running. Only special circumstances
                   communicated at the time contract was made.
              4. Hector Martinez and Co. v. Southern Pacific Transportation Co. – dragline delivered was damaged.
                   P can recover for the loss in use value caused by the delay. In cases of machinery or capital good, it’s
                   foreseeable that delay will result in damages even if not communicated at time of contract.

    Expectation Damages for the Sale of Goods
      UCC §2-706 Seller’s Resale – (1)must give reasonable notice to buyer; (2) purchaser at resale takes goods free of
       any rights of original buyer even if seller fails to comply with UCC; (3) seller not accountable to buyer for profits
       made on resale.
      UCC §2-712 Seller breaches and buyer covers  buyer is entitled to extra he had to spend to cover + incidentals
      UCC §2-708 Buyer breached and seller covers  seller is entitled to lost amount if he had to sell for lower price (no
       expected profit); or the difference btwn the contract price and the value as salvaged plus incidental damages


RELIANCE DAMAGES
  Puts the injured party back in position he would’ve been in if the contract was never made.
  Injured party may choose to sue for reliance instead of, or as an alternative to expectation or restitution
  Reliance = outlays in performance + incidentals
  Ct will sometimes use reliance measure, when expectation measure is too hard to calculate
  R §349 Injured party has a right to damages based on his reliance interest (including expenditures made in preparation
   for/in performance) less any loss the party in breach can prove w/reasonable certainty that injured party would have
   suffered had contract been performed.
  R §371 Measure of Restitution Interest (1) value to other party of what he received in terms of what it would have
   cost him to obtain it from a person in claimants position or (2) extent to which the other party has been enriched
  R §373 Any benefit the injured party has conferred on the other party by part performance or reliance (?)


OTHER REMEDIES
R §374 RESTITUTION DAMAGES/QUANTUM MERUIT (=amount of value)
   party may sue off the contract for benefit conferred to the other party instead of or alternative to expectation or reliance

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   restitution for Plaintiff breach = if P has rendered valuable services to D before he breaches, he may sue to recover
    reasonable value of services (not to exceed contract price) rendered for which D has received a benefit in excess of the
    loss he has caused by his own breach
   restitution for a losing contract = if breacher is a party to a contract on which he expects to lose money, he may sue off
    the contract for benefit conferred to recover his actual expenditures
   restitution in a building contract = contractor may recover value of materials and thing “wrought into” the building
   contract is a losing one. Buyer is victim of breach but benefits from the breach—better to award restitution damages than
    expectation damages
   if liquidated damages are available, no need to go with restitution damages

    Restitution and “Quasi-Contract”
         Cotnam v. Wisdom
         Recovery can be sustained by a contract by implication of the law. Financial condition of a patient cannot be
         considered where there is no contract and recovery is sustained on a legal fiction which raises a contract in order to
         afford a remedy. Doctors can recover for their svcs thru an obligation imposed by law in order to bring about justice
         and equity.

R §§359-360 SPECIFIC PERFORMANCE
[UCC §2-716 Buyer’s Right to Specific Performance or Replevin]
   specific performance or injunction is not appropriate unless ordinary damages are inadequate. It is a discretional remedy.

   specific   performance may be requested by P or granted by ct if
        1.      contract is for unique goods
        2.      contract is for land (considered to be unique)
        3.      contract calls for arbitration and one party wants arbitration to be enforced, but the other doesn’t
        4.      agreements not to compete
        5.      contract controlling blocks of shares

   Ct. doesn’t like to enforce specific performance b/c
         1. employer-employee contracts
         2. ct has to oversee the specific performance and make sure a good job is being done; quite often this would be
             too hard and inefficient for the ct to manage

         CONTRACT FOR LAND
         Loveless v. Diehl (option contract for farm)
         Land is unique, specific performance should be awarded. To deny it would unjustly enrich Ds since P had invested in
         farm. It’s a matter of course for court of equity to decree specific performance. Contract is in writing, certain in its
         terms, is for a valued consideration, is fair & just and is capable of being enforced w/o hardship to either party.

         CONTRACT FOR UNIQUE GOODS
            1. Cumbest v. Harris (stereo, unique good)
               Criteria for awarding specific performance: no adequate remedy at law, articles or property are of peculiar
               sentimental value, due to scarcity the chattel is not readily obtainable. Specific performance is awarded.

                2.   Scott v. Hartzell (corvette sale- ad)
                     Corvette is not unique, P can cover for it, cannot claim replevin)

                3.   Sedmak v. Charlie’s Chevrolet (corvette- custom ordered)
                     Specific performance awarded because the customization of the limited edition corvette made it a
                     sufficiently unique good.

         CONTRACT FOR SERVICE
            1. Mary Clark (indentured servitude)
               Specific performance will not be awarded where services are required.

                2.   Lumley v. Wagner (opera singer)
                     Court claims that it is not awarding specific performance in making her sing at the theatre of P but grants
                     injunction to prevent her from singing elsewhere.




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             3.   Ford v. Jermon (performer)
                  Court will not award specific performance and will not award injunction to prevent her from performing
                  elsewhere since essentially the same effect. Forcing to perform is a form of imprisonment.

             4.   Duff v. Russell (actress w/tights)
                  Court issues negative injunction preventing her from performing elsewhere. Injunctive relief is allowed in
                  personal service contracts only if person’s services are unique and exceptional

R §356 LIQUIDATED DAMAGES
UCC §2-718 term fixing unreasonably large liquidated damages is void as penalty
   damages are predetermined by the contract
   they may not exceed a figure that’s reasonable in light of actual possible losses
   if they’re excessive, they may be unenforceable as a penalty; public policy prohibits private parties from imposing
    penalties for a breach
   actual loss must be difficult to prove, or expectation damages apply instead
   may not be applied in writing to all minor defects in performance, or they’re unenforceable
   may only apply to significant breaches – lateness of performance, total failure to perform
   Example: liquidated damage clause in a contract for construction of a building for $1000/day late may be enforceable if
    the figure represents lost rent & other expenses likely to be incurred by the owner. If not, may be unenforceable as a
    penalty
   Discourages efficient breaches as well as inefficient breaches
   Not in accordance with compensatory damages (could be punitive)

    1.   Kemble v. Farren (covent garden actor)
         Liquidated clause not enforced because the amount was too large for the consequences of D not paying a small sum.
         Should be looked at as a penalty clause so is not enforced by court.

    2.   Wassenaar v. Towne Hotel (hotel manager)
         Where stipulated damages clause is a valid provision for liquidated damages, mitigation of damages is not applicable.
         No duty to mitigate.

    3.   Lake River Corp. v. Carborundum Co.
         Liquidated damages v. Penalty Clause: if damages are easy to determine, or if the estimate greatly exceeds a
         reasonable upper limit, then it is a penalty clause.

UCC §2-719 CONTRACTUAL LIMITATIONS ON DAMAGES
  See liquidated damages – allowed if reasonable w/regard to probable actual losses incurred at the time contract was
   made; only applies to strike liquidated damages if figure is outrageously large
  If contracted damages clause provides damages too small, clause may be unconscionable
  Limitations on damages when injury to the person is result of breach is prima facie unconscionable
  Damages may be limited to replacement of nonconforming goods




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