Buffy's Contracts I _Alford_

CONTRACTS I I. Introduction A. Contract- a contract is a promise or set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty B. Three approaches to contract law 1. How do we decide if there is a binding agreement? 2. What are the terms of the contract ( the responsibilities/ rights)? 3. What will be the consequence of a breach? C. Questions and issues in contract law 1. Is there an enforceable contract? 2. Did the parties both assent to the enforcement of the contract? 3. Are there specific ssubstantive and procedural irregularities? 4. What are the obligations of the parties: performance/ in case of breach? D. Principles of contract law 1. Autonomy- ability of parties to act on own – this does tend to favor those with superior knowledge, skill, and risk allocationthe one with better bargaining skills 2. Social justice-if both parties benefit there is social justice- if there is a benefit by failing to keep a promise to one party and a detriment to the other party, the first is unjustly enriched 3. Efficiency/ Utilitarian- contract beneficial to both parties and to the world in general- all contracts are based on this in theory- this gives people the ability to rely on others—efficient breach where it is more efficient for one party to breach their contract than to fulfill (must make good to the promisee- they must be in as good a position as if you had performed) 4. Honesty/ integrity/ trust- Important in the executory agreement when benefit and reliance are in the future to enforce a promise of future action (so that prior to reliance there is a contract) 5. Fault/ responsibility- the party at fault must shoulder the responsibility cost—Two ways (1) money (2) specific performance 6. Judicial competence/ administrative ease7. Paternalism-law recognizes that not all are capable of entering contract and recognizes some have superior bargaining power so there are attempts to even the playing field E. Sources of contract law 1. Constitution of the US 2. Statutory law – UCC 3. Treaties – CISG (especially important in international areas 4. Case law—controlling authority (binding in that particular court) or persuasive authority (from other courts- not binding but influential) 5. Secondary Sources—Restatements and UNIDROIT principles F. Contract formation 1. Manifestation of intent 2. Offer 3. Acceptance 4. Validation 5. Legal effective II. Contract Remedies A. Specific performance 1. Court ordering the fulfillment of a legal or contractual obligation when monetary damages are inappropriate or inadequate B. Monetary damages 1. Expectancy a. ―The benefit of the bargain‖ b. Giving the person that suffered the breach everything he Would have received if the breach had not occurred c. MCA Television Ltd. v. Public Interest Corp. i. MCA sold first run rights to PIC. PIC breached halfway through the year. MCA sued for the entire amount of the contract price as well as damages for copyright infringement. ii. Issue-whether the damages were a penalty-a double recovery and were excessive iii. §124- contract law does not allow for punitive damages unless the breach of contract is also a tort for which punitive damages are available iv. §125- parties may not use stipulated damages provisions as a way to secure for themselves greater damages in the event of a breach than contract law would normally allow d. Freund v. Washington Square Press, Inc. i. WPI had contract with F. (a college prof) to publish his manuscript- WPI failed to terminate agreement- failed to publish the book in hard cover- F claimed (1) delay of academic promotion (2) loss of royalties (3) the cost of publication if F had done it on his own ii. §1002- money damages are “to put the injured party in as good a position as he would have been put by the full performance of the contract, at least the cost to the defendant and without charging him with harms that he had reason to foresee when he made the contract” e. Huntington Beach v. Continental Information Systems Corp. i. HB wanted to purchase a computer- invited bids- CIS was contracted to provide computer by a set date- CIS failed to deliver-all prior bids had expired so bidding process had to be redone- winning bid next round was $60,000 more than CIS ii. Cal Commercial Code §2712 (1) – a buyer can cover through ―any reasonable purchase‖ and failure to mitigate reduces recoverable damages only when the course of action chosen is affirmatively unreasonable or in bad faith iii. Cal Commercial Code §2715 (2) (a)- ―consequential damages resulting from the seller‘s breach include… any loss resulting from general or particular requirements and needs of which the seller at the time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise” iv. UCC §2-712 Official comment 2- ― the test of proper cover is whether at the time and place the buyer acted in good faith and in a reasonable manner, and it is immaterial that hindsight may later prove that the method of cover used was not the cheapest or the most effective‖ 2. Reliance a. Tries to put the party who suffered the breach back where they were prior to forming the contract 3. Restitution a. Gives to the party who suffered the breach the amount of unjust enrichment of the other party b. The compensation, reimbursement, indemnification, or reparation for benefits derived from or loss caused to another C. Duty to mitigate damages a. Requires the plaintiff, after an injury or breach of contract, to use ordinary care to alleviate the effects of the injury or breach; if the defendant can show that the plaintiff failed to do so, the plaintiff‘s damages may be reduced III. Validation- distinguishing the enforceable and the unenforceable A. Formalistic Validation devices 1. Seals are the oldest form a. Three functions: i. Evidentiary ii. Cautionary iii. Channeling effect- locus sigilli B. Consideration 1. Something of value (such as an act, a forbearance, or a return promise) received by a promisor from a promisee; is necessary for a contract to be enforceable 2. Four elements a. a performance or a return must be bargained for b. Bargained c. May consist of an act other than a promise, a forbearance, or the creation, modification, or destruction of a legal relation d. May be given to promisor or to another , by promisee or another 3. Davies v. Martel Laboratory Services, Inc. a. P. asserts that there was an oral contract between her and D. P would take on more responsibility- get MBA- title of VP P was terminated without cause b. was there an oral contract between P and D, was there consideration enough to support the existence of the oral contract? c. Any act or promise which is a benefit to one party or a disadvantage to the other is a sufficient consideration to support a contract (Hamilton Bancshares Inc. v. Leroy) C. Promissory Estoppels 1. The principle that a promise made without consideration becomes binding if: a. The promissory intends, or should reasonably expect, the promise to induce reliance, AND b. A party actually relies on the promise, AND c. Non-enforcement of the promise will cause detrimental injury or injustice 2. Allegheny College v. National Chautauqua County Bank of Jamestown a. D. attempted to repudiate promise of memorial scholarship donation after money had been set aside and memorial scholarship was set up (preliminary) b. Issue- Whether the enforcement of charitable subscription can be squared with the doctrine of consideration as qualified by the doctrine of promissory estoppel? c. A promise becomes binding if (1) the promissor intends, or reasonably expects, the promise to induce reliance (2) a party actually relies on the promise (3) non-enforcement of the promise will cause detrimental injury or injustice D. Moral Obligation 1. A duty that is based only on one’s conscience and that is not legally enforceable; in contract law, moral obligation may support a promise in the absence of traditional consideration, but only if the promisor has previously received some actual benefit from the promisee 2. Harrington v. Taylor a. D. assaults wife- wife goes to P‘s house- next day D. finds and attacks wife at P‘s house- wife attacks D with an ax- P prevents the death of D through intervention- P‘s hand was mutilated— D orally promised to pay P‘s damages –paid some but failed to pay in full b. Issue- is legally recognized consideration present? Is there a moral obligation to pay? c. D should aid the P because of gratitude, a voluntary humanitarian act is not consideration VI. Intention to be Legally Bound A. The Objective theory 1. Objective manifestation of Intent a. Doesn‘t matter what the parties are truly thinking or believe, what matters is their outward actions and if TARP would believe that a contract was formed 2.. Lucy v. Zehmer a. △ states that he was drunk and did not intend to sign over the land to --he claims that it was a joke between to drunk men b. Objective manifestation of intent i. Wrote out agreement twice ii. Bargained iii. Even if joking, △‘s actions made the other party believe that the offer was real (that is what matters) c. The conduct of a party may manifest and intent to be bound even though in fact thought he does not assent to such IN such cases, a resulting contract may be voidable due to fraud, duress, mistake, or other invalidating clause (§19) d. BELIEF NO BELIEF REASONABLE  believes/belief reasonable contract (Zehmer)  doesn‘t believe/belief Reasonable no contract NOT REASONABLE  believes/ belief not reasonable no contract (Pepsi)  doesn‘t believe/ belief not reasonable/ No contract e. The reasonable meaning controls unless the party means unreasonable and the other party knows it f. Court‘s ruling on intoxication—Did not have bearing here 3. Leonard v. PepsiCo a.  sued  for commercial that had a Harrier jet at the end for a certain number of Pepsi Points b.  filed for summary judgment (when there is a motion for summary judgment, the court takes the facts in the light most favorable to the one not making the motion and makes a decision) c. Issue—Would TARP understand that PepsiCo was not making an offer?—Yes d. Following the Objective theory of contracts, the court found 5 reasons why there was no reasonable belief that there could be a contract i. reasonable person would recognize ad ―Puffery‖ and that commercial was an adolescent fantasy ii. Unlikelyness of teenager flying a fighter plane iii. Traveling to school in a Harrier jet unreasonable iv. The Harrier is a military vehicle for war v. The sheer number of Pepsi points required is unreasonable and do not match the monetary value of the jet B. Interpreting statements to determine legal consequences—should a party who makes statements always be understood as intending legal consequences 1. Gault v. Sideman a.  went to  (Dr.)—who stated that a surgical procedure would cure the ‘s condition b. The application of the ordinary rules dealing with mercantile contracts to a contract entered into between a physician and a patient is not justified—peculiar relationship—not a contract to cure, but to provide ordinary skill in the treatment of  2. Balfour v. Balfour a. Husband promised wife ℒ30 a month-no contract because no intended legal consequences b. Issue—what is an enforceable contract between a husband and wife? Are there any? c. Contracts are only binding contracts when the parties intend them to be legally binding and the breach to have ramifications d. Manifest intentions-outward actions Subjective intention-what were they thinking e. Contracts between two strangers are often more enforceable than contracts in the context of marriage or personal relationships i. The closer the relationship, the more difficult to find a contract 3. Marvin v. Marvin a. A couple lived together had an agreement re: the ownership of the furniture b. Cohabitation leads to legal contracts that marriage doesn‘t because there is a legal vacuum in regards to the rights of the of the parties, so the parties act to protect themselves by making agreements C. Express statements concerning legal consequences 1. Letters of Intenta. A written statement detailing the preliminary understanding of parties who plan to enter into a contract or some other agreement; a letter of intent is not meant to be binding and does not hinder the parties from bargaining with a third party 2. Venture Assoc. Corp. v. Zenith Data Systems a.  wanted to sell a company,  sent letter w/ a proposal to acquire, letter expressly stated that it was ―merely a letter of intent‖- returned a letter stating that they would begin negotiations-accepted proposal to begin negotiations- & negotiated for 6 mos. W/no contract- broke off negotiations  sued b. Court found that the offer was ―merely a letter of Intent‖ and did not constitute a binding obligation c. If it had been found that the  had negotiated in bad faith, the  could recover expectation or reliance damages but the  must show that the negotiations broke down solely due to the bad faith of the  D. Contemplation of final writing 1. Arnold Palmer Golf Co. v. Fuqua Industries a.  attempting to buy out- memorandum of intent was written pulled out of negotiations b. Issue—whether there is any issue open for interpretation for a trier of fact c. Court held that there was a factual question as to obligation that the two companies had reached a general understanding—that there may have been an intent to be bound 2. Empro Mfg. Co. v. Ball Co. Mfg. a.  sent  a 3 page letter of intent to purchase the ‘s assets-the parties began negotiations- balked and began negotiations with another company- filed sued when they found out b. Issue—whether the letter of intent prohibited negotiation with others? Whether the open terms in the letter of intent were so important that a contract could not arise even if there was an intent to be bound? c. Parties who make their agreement subject to a later definitive agreement have manifested an objective intent not to be bound i. Intent to be bound must be determined solely from the language used d. ‘s insulated themselves from the binding effect, therefore,  were not bound either E. ―Agreements to agree‖—missing terms 1. Paloukos v. Intermountain Chevrolet Co. a.  and  agreed on the sale of a truck-completed a worksheet that stated the type of truck the purchase price and contained the signature of the -  paid a deposit-5 mos. later,  informed  that they were unable to deliver the truck-deposit returned b. Issue—whether there was a contract despite the missing terms? Was there an intent to be legally bound? c. UCC 2-204 (1) and (3)—contract formation/open terms d. In general, the more terms that are left open, the less likely that there was an intent to be bound—the UCC doesn‘t require that there be a document itemizing all of the specific terms of the agreement 2. Curing the omission—if the missing term which the  relies upon as making the agreement fatally indefinite can be legitimately inserted by the court (―cure‖ the omission) the agreement will be enforceable 3. UCC ―Gap Fillers‖—Only two elements are essential to form a contract, the parties must intend to be legally bound, and the court must have sufficient basis to effect a remedy (cannot gap fill price/delivery) V. The anatomy of agreements A. Preliminary negotiations versus offer—Look at language carefully 1. Price quote are generally not offers, but invitations for an offer 2. Immediate acceptance of an offer-implies a contract 3. Southwick v. Oliver a. Case of the rancher who wanted to sell land and some grazing rights-sent a letter to  re the sale of the items b.  argues that letter not an offer-that even if it was, there was no acceptance because  only offered to buy 1 out of 3 c.  argues that letter was an offer and there was acceptance d. Court held that that under all of the facts and circumstances existing at the time that this letter was received TARP in the position of the  would have understood the letter to be an offer by the  to sell the land to him=‘s letter was an acceptance of ‘s offer 4. Rhen Marshal, Inc. v. Purolater Filter Division a.  received ad circular, placed an order with - when  received the order,  called  and stated that the order was not accepted, there was no delivery or payment i.  claimed that the circular was an offer and the order was acceptance b. The circular was not an offer, and no contract was formed by the statement of the intending purchaser that he will take a specified qty of goods at that price…the advertisement is merely an invitation to make an offer 5. Lefkowitz v. Great Minneapolis Surplus Store a.  published 2 ads #1 stated that three new furs worth up to $100 would be given to 1st come 1st served-- was 1st and informed that offer only applied to women #2 stated that 2 mink scarves selling for $89.50 and one lapin stole worth $139.50 1str come 1st served-told that he knew the policy that they were for women only- averred that the ad was an offer b. Issue-was an advertisement a specific offer or an invitation for an offer, and did the ‘s behavior constitute an acceptance? c. Test-whether a binding obligation may originate in ads addressed to the general public is whether the facts show that some performance was promised in positive terms in return for something requested d. Court found that there was an offer for 2 nd ad because the value was specified, but not in the first ad because no value i. Offer found because the ad was clear definite and explicit (2 nd) in the 2nd ad was not specific (didn‘t know the color, type, or price) ii. Gap filling is only for small details 6. Maryland Supreme Court v. Blake a.  requested bids for supplying the construction job at hand- was the successful bidder—halfway through the job,  raised cost b. Issue—whether there was a contract c. Court held that there was a contract and that raising the price was fixed for the duration i. Letter was an offer-phone call was acceptance B. Identifying the offeror and the offeree 1. Antonucci v. Stevens Dodge a.  wanted to purchase a vehicle from - signed the printed order form--the form stated that upon signing,  became the offeror and the terms in the form were subject to acceptance by the -no signature by = no acceptance-never signed the form b. By not signing the contract, the  did not accept the offer of the  C. Duration of offers-UCC 2-309 1. An offer terminates upon the specified deadline for acceptance or where there is no specified deadline, the court must gap fill whether or not an offer lapsed due to an excessive passage of time 2. Vaskie v. West American Insurance Co. a.  in an accident- and  in settlement negotiations-12/1/86,  offered settlement of $25,000 (letter did not specify date of acceptance)-1/9/87,  responded w/acceptance by mailgram refused to pay arguing that the statute of limitations passed on the ‘s claim and therefore the offer expired b. Where no time specified, the offer must be accepted in a reasonable time-the reasonableness of the time an offeree takes to accept an offer is measured by the offeree c. In some cases (where exceedingly clear) a reasonable time may be judged as a matter of law, but it usually goes to a jury d. Tolling provision-there are provisions in contract law that during negotiations toll the statute of limitation on the claim to prevent the claim from being barred e. Offers need to be terminated after a reasonable time even if no specified time so that offers do not remain valid forever 2. Caldwell v. Cline a.  sent a letter dated 1/29/29 offering to purchase a piece of land in exchange for cash and another parcel of land-letter stated that  would give  eight days to accept or reject the offer- received letter 2/2/29 and on 2/8/29 wired the  that the offer was accepted- received the letter on 2/2/29 and refused to carry out terms- sued for specific performance b. Issue—When does the 8 days run? c. Before a mutual assent can occur, the words ―must strike the ear‖-so if by post, the letter containing the offer must come to the knowledge of the party to whom they were addressed before they legally exist 3. CISG Art. 20 (1) –Dispatch rule—time runs from the date on the letter/postmark not counting business days and holidays that prevent delivery or acceptance VI. Termination of Power of Acceptance A. Rejection 1. Chaplin v. Consolidated Edison Co. of New York a.  sent a settlement proposition (offer)- stated that if offer not satisfactory, all offer withdrawn-‘s lawyer stated that the ‘s would not accept the terms-the day that the ‘s refused the terms, the law changed in a way that would terminate the claims of the ‘s-‘s wanted to accept the offer b. Court held that once an offer has been terminated, an acceptance cannot be tendered c. Policy is to protect the offeror so that they are free to carry on with business without fear that a prior rejection will become an acceptance B. Revocations, Acceptance, and the ―Mailbox‖ rule 1. Farley v. Champs Fine Foods a.  had a purchase option to buy stock if he met quotas- didn‘t meet the quotas- and  began negotiations outside of the terms of the original agreement- orally revoked the terms of the letter- attempted to accept by letter b. Court held that the letter was mailed after the  revoked the offer c. A proposal may be revoked at any time prior to acceptance is communicated d. Consent is deemed to be communicated fully between the parties as soon as the party accepting a proposal has put his acceptance in the course of transmission to the proposed—rule here that when the acceptance was mailed, there was acceptance C. Variations on the ―Mailbox‖ (dispatch) rule 1. Common Law—revocations and rejections must be received to be effective, acceptances are effective upon dispatch 2. CISG (Art. 18-20)—offer begins to run on the date the letter is sent, acceptance/rejections/revocations occur when they are received 3. UCC (2-206)-Offer begins to run when the offer is received, acceptance occurs when it is received 4. Presence v. Distance a. The rationale for the mailbox rule disappears when the parties are in the presence of each other 5. E-commerce—electronic contracts a. Where persons interact using electronic messages, a contract is formed either when the acceptance is received, or, if the offer is accepted by an electronic performance when the electronic performance is received b. Contract formation between electronic agents bind a party using an electronic agent to the operations of such agent even if no person was aware if or reviewed the agent‘s of their results. D. Indirect revocation 1. Dickerson v. Dodds a.  letter states that the offer will be left over until… heard (prior to the date) that the  was considering an offer from another party- attempted to contact the  to affect a purchaseby the time the  reached the . The property had been sold to another b. Offer revocable at any time prior to acceptance,  knew that  was no longer planning upon selling to him (hence his exhaustive search for the ) 2. Restatement 2 nd §43—an offeree‘s power of acceptance is terminated when the offeror takes definite action inconsistent with an intention to enter a proposed contract and the offeree acquires reliable information to that effect E. Counteroffer 1. An offeree‘s new offer that varies the terms of the original offer and that therefore constitutes a rejection of the original offer 2. Ardente v. Horan a. ‘s were purchasing a house, signed the agreement, gave a deposit, and a letter requesting additional terms b. The letter was held to be a counteroffer—acceptance may not impose limitations or conditions on the offer- acceptance cannot be equivocal F. Death or incapacity 1. Beall v. Beall a.  wanted to accept an offer that was from 1 and 2 in the form of an option contract--2 died prior to ‘s acceptance b. Death or incapacity of the offeree terminates the offer G. An offeree‘s power of acceptance may be terminated by: 1. Rejection 2. Counteroffer 3. Lapse of time 4. Revocation by the offeror 5. Death or incapacity of the offeror or offeree VII. Making offers irrevocable—option contracts, firm offers, promissory estoppel Partial performance in a unilateral contract A. Option Contracts (§25) 1. A contract made to keep an offer open for a specified period, so that the offeror cannot revoke the offer during that period a. Has all of the steps of a contract: offer, acceptance, and consideration b. It is a contract to agree to try to contract for purchase 2. Orlowski v. Moore a.  leased property from  with the right of first refusal re: the purchase of the property i. Consideration-leasee pays rent to keep the option open ii. Offer- ‘s offered  right to 1st refusal iii. Acceptance- (not here) b. In an option contract, if one rejects the offer, the option remains open for the entire time of the option (rejection does not terminate the power to accept not does a counteroffer)—if there is not specified duration, the option will lapse after a reasonable time c. Here the right was only for first refusal, so the option remained open only until the leasee refused (in most other option contracts it is the acceptance B. Irrevocability through reliance—firm offers (UCC 2-205 CISG Art 16) 1. Pavel Enterprises, Inc. v. A.S. Johnson, Co., Inc. a.  prepared a bid to NIH- submitted a written scope of work proposal to  (7/27/93) NIH opened general contract bids (8/5/93) used ‘s bid to compute their bid-‘s bid second lowest-mid august the lowest bidder is disqualified and  gets the job and is notified that its bid will be accepted- met with the  to discuss the ‘s role in the work (8/26/93)- informs NIH that the  is the sub (8/30/93) notifies  that bid accepted (9/1/93), same day,  notifies  that there was an error in the bid and the price is too low- sought to withdraw the bid- notifies  that they will not allow the bid to be withdrawn (9/2/93)-NIH formally awarded the contract to -found substitute contractor at an increase of $32,000 b. Issue—was the ‘s offer irrevocable and if so on what grounds. If it was not irrevocable, was it revoked prior to acceptance? c. Hand theory—a bid was not an offer of a unilateral contract that can be accepted by performance, and promissory estoppel is limited to cases involving charitable pledges (contractor bound to its bid, but the subcontractor is not bound to the contractor to the detriment of the general contractor) d. Traynor theory—If the offeree knows that there will be reasonable reliance then the offer is irrevocable (subcontractor bound to the general contractor, but the contractor is not bound to the sub—bid shopping can occur) e. Lovanger theory (more modern)—there is a bilateral contract between general and subcontractor --the sub bid as a request for performance use of the sub-bid in the general bid constitutes part performance, which renders the offer irrevocable C. Irrevocability through part performance--§45 Restatements 1. Unilateral v. Bilateral Contracts a. Unilateral contract i. Promise for Performance—one right one duty ii. The contract is formed when the performance is completed b. Bilateral contract i. A promise for a promise—each has a right and a duty ii. The contract is formed when the promises are exchanged c. Dahl v. HEM Pharmaceuticals Corp. i.  conducted a study and all participants were told that upon completing the study, the participants would receive one full year of the drug for free- completed the study and  refused to comply ii. This was a unilateral contract and as performance was completed there was a contract—contract could have been revoked at any time prior to the completion of performance b. BC Tire Corp. v. GTE Directories Corp. i.  was the offeree,  could only accept through performance (printing the ad)—the ‘s application was merely an invitation to make and offer, when the  signed it he became the offeror-non-publishment was the nonacceptance that was specified in the offer 2. Part Performance Problem a. Theories designed to make offers irrevocable through part performance i. Traditional view- no contract until the performance is completed ii. Modern view—an option contract is created when performance begins or when part of the performance is tenders b. Petterson v. Patteburg i.  owned the mortgage of  and offered to cut him a deal if he paid his mortgage in full prior to a specific date-- tried to accept the offer,  told the  that he had already sold the mortgage to a 3 rd party- paid off the mortgage to the 3rd party, but received no discount ii. Court said that there was no acceptance because  could not and did not take the money, therefore the  could not accept the offer VII. The Nature of Acceptance A. Knowledge and Motivation 1. One cannot accept an offer that one doesn‘t know about-must have knowledge of the offer to accept, even if the actions would have otherwise fulfilled the performance required by the offer 2. Simmons v. United States a.  went fishing, caught fish worth $25,000- did not set out to catch the fish, but knew of his existence-claiming that the money was a gift for tax purposes, but if money was payment on a contract, then the money was taxable b.  knew of the offer and took the steps necessary to perform acceptance therefore contract 3. there is a certain category of offers that can be accepted without specific knowledge of the offer (an example is public reward cases etc.) B. The Requirement of Volition 1. Carlill v. Carbolic Smoke Ball Co. a.  placed an ad that stated that any person who used their product and got sick would be paid $100 and that the  had set aside $1000 as insurance against claims-- used the medicine and got sick b. Ad was offer because there were no terms left to negotiate- all that was required was the performance of the  c. Performance was the using of the medicine (not getting sick) because the performance required must be one that is done of one‘s own volition VIII. Manner of Acceptance A. The Modern Analysis 1. Empire Machinery Co. v. Litton Business Telephone Co. a.  wanted to install ‘s system—PO was the offer—the offeror was  and the offeree was the --the PO stated that it could only be accepted if it was signed by the offeree ()-- never signed but  did begin performance b. If the offer is not accepted in the stipulated manner, but performance is begun and both parties act like the offer was accepted, then the offer has been accepted (the offeror as the master of the offer can waive the requirement of acceptance if the offeree assents) 2. Corinthian Pharmaceutical Systems, Inc. v. Lederle Laboratories a.  had purchased product (in lots no larger than 100) from  in the past- was raising prices due to increased costs-on day prior to the price increase, the  attempted to place an order for 1000 units by telephone (phone was automated-only provided a tracking number)-- sent a partial shipment at the lower price as a courtesy because  generally shipped units at the cost on the day of shipping-letter enclosed by  stated that  could cancel the rest of their order b. Court held that phone order was the offer and that there was no acceptance prior to performance (the automated system could not constitute acceptance) the shipment of the partial order was not considered to be an acceptance by UCC 2-206 i. A seller accepts an offer by shipment of goods, whether they are conforming or not, but if the seller ships nonconforming goods and seasonably notifies the buyer that they are a mere accommodation, then the seller has not accepted the buyer‘s offer 3. Arduini v. Board of Education a.  was a teacher, at the start of the school year, the  gave  a letter containing new terms for the new year-continued to work for approx. 1 month after receiving letter b. Court found that the offer was the letter and that the acceptance was ‘s performance of his duties after receiving a letter and cashed the paycheck to which the new policy was attached c. After  began performance, a bilateral contract was formed that was irrevocable (option) B. Silence as Acceptance (Restatement §69) 1. Three ways silence can constitute acceptance a. Where because of previous dealings is reasonable that the offeree should notify the offeror if the offeree does not intend to accept b. Where an offeree takes the benefit of offered services with reasonable opportunity to reject them and reason to believe the offeror thought the offer was accepted c. Where the offeror has stated or given the offeree reason to understand that assent may be manifested by silence or inaction, and the offeree in remaining silent and inactive intends to accept the offer 2. Vogt v. Madden a.  and  had a sharecrop agreement for 1979 and 1980-in 1981,  states that  was told about his plan for 1981, and that he didn‘t say anything, but that the  had a belief that an agreement had been reached b. Silence can be acceptance but there must be intent for the silence to be acceptance C. The Notice Requirement 1. Peterson v. Thompson a. 3rd party owned a tractor,  contacted the 3rd party and he agreed to sell the tractor for $1000 as is, where is- agreed to pick up the tractor and pay the price- picked up the tractor (3/1) and 3rd party was notified at a later unknown date-the  contacted the 3rd party in mid-march about buying the tractor 3 rd party had not yet heard from the  so offered  the same offer- states that the tractor his b. The offer here was for performance—where was the acceptance i. Trial court held that loading the tractor was the performance, so  performed and therefore owned ii. Because the contract of sale was not complete until  accepted by picking up the tractor that acceptance was not lost in the absence of proper notice 2. Importance of notice (§54 §55) i. No duty to notify on the part of the offeree to notify unless the offeror requests ii. However, if the offeror has no way to know of the performance w/ promptness and certainty then the contractual duty of the offeror is discharged unless the offeree exercises reasonable diligence to notify the offeror of the acceptance D. Concept of Warranty 1. UCC 2-213 (express warranties) a. Four ways to get: i. Affirmation ii. Promise iii. Description iv. Sample 2. UCC 2-314 (implied warrant ability of merchantability) a. An implied promise that the goods will be up to reasonable standards 3. UCC 2-315 (implied warranty for a particular purpose) 4. UCC 2-316 (exclusions/disclaimers) a. Must be conspicuous 5. Exceptions- if the items have marginal imperfections or otherwise accepted as customary use E. Self-Service Contracts 1. Barker v. Allied Supermarket a.  picked up a Dr. Pepper from display in a ‘s store- can burst causing injuries- claims that he accepted the offer to pick up the soda, therefore the store was liable b. Court held that in self service areas that there are three ways to accept an offer i. the putting of the chosen goods in the cart w/ implied promise to deliver goods at checkout ii. delivery of goods to checkout iii. Promise to pay for the goods as evidenced (ii) c. Restatement §62-start of performance creates a bilateral contract d. UCC 2-204-formation of contract e. If a customer in a self serve situation returns the goods to the shelf, they have terminated the contract. A buyer or a seller may have the power to cancel a contract for sale under some situations. Cancellation occurs when either party puts an end to the contract for breach- the effect is the same as a termination, but the canceling party may also retain any remedy for the breach of the contract or for any unperformed portion UCC 2-106 F. Auction Contracts 1. UCC 2-328 2. Contract for sale complete when the hammer falls IX. The Deviant Acceptance—The Battle of the Forms—UCC 2-207 A. ―Matching Acceptance‖ and other ―Acceptances‖ Restatement §48 1. At common law, the acceptance must exactly match the terms of the offer, ‗mirror image‘ rule. If the terms suggested by the offeree would not have been implied and are new terms, the offeree‘s insistence upon such terms will constitute a qualified or conditional acceptance, which will treated as a counteroffer. 2. Traditional contract law has permitted an offeree to make suggestions or requests, which are added to but not conditional upon an otherwise clear manifestation of acceptance. The offeror may feel free to accept or reject such suggestions or requests. If the offeree‘s response is equivocal (there is some reasonable doubt as to whether the offer was accepted) the offeror is not required to guess or draw inferences B. The ―Matching Acceptance‖ Rule and Printed Forms 1. If the inflexible mirror image‘ rule is applied, then the last form that is sent between the parties prior to performance become the terms of the contract ―the last shot‖ C. The Modification of the ―Match9ing Acceptance‖ Rule—UCC 2-207 1. Acceptances and Counteroffers a. Itoh & Co. v. Jordan International Co. i. The form stated that ―express consent‖ was required, but with UCC 2-207, performance becomes the express consent because the conduct of the parties establishes the contract ii. The terms of the contract that is formed becomes: (a) The terms agreed upon by both parties (b) Gap fillers under the UCC iii. So in this case, the disputed arbitration clause drops out because there is no UCC gap filler for arbitration 2. ―Different‖ v. ―Additional‖ Terms a. Under UCC 2-207 ―mirror image‖ not required, even if there are different or additional terms, if there is a definite seasonable acceptance or written confirmation, there is acceptance unless, acceptance is expressly made conditional on the acceptance of the different or additional terms, there can still be a contract here , but if it exists, it is based on the conduct of the two parties b. If a contract is determined through conduct, how to determine the terms—terms that agree stay in those that don‘t drop out and the gap fillers and standard implied terms from the UCC are included (unless specifically excluded by the writings of the parties) c. Northrup Corp. v. Litronic Industries i.  submitted requests for offers stating that any purchase would be through a PO whose terms would override any inconsistent terms in the offer-- sent offer with 90 day warranty and same statement as to the terms-- rep accepts to the limit of his authority and states that a PO will follow—one month later there was a turn on letter from --PO later mailed, PO required that seller send back a written acknowledgement ( didn‘t,  didn‘t pursue)-over 1 year later, 3 of the 4 boards ordered arrived-6 months later,  returned the boards claiming they were defective-would not accept stating that the 90 day warranty had been exceeded ii. Issue- what are the terms of the contract? iii. Offer-formal offer by  Acceptance-turn on letter/phone call iv. How to interpret terms: (a)Majority view-Discrepant terms of the offer and acceptance drops out and are replaced with UCC gap fillers (b)Leading Minority-only the discrepant terms in the acceptance drop out (c)Minority (CA) view-Assimilate the definition of different and additional terms and apply UCC 2207—the different terms become proposals and outcome turns upon whether those terms are materially different v. Court here adopted the majority view favoring the  3. Confirmations with Different or Additional Terms a. Step-Saver Data Systems, Inc. v. Wyse Technology i.  purchased software from  and resold it- there were immediate problems with the goods-neither the PO nor the invoice had any statements regarding a warranty but there was a box top license on each software package— Box top states that the licensing agreement contains no warranty and that the terms of the box top are a final and complete expression of the contract ii.  has three arguments (1) the contract did not exist until  received the program and saw the box top terms (2)acceptance was conditional (3) through the repeated expression of the box top terms they were eventually incorporated into the contract iii. Court states that the integration clause and the consent by opening does not render the ‘s acceptance conditional- there was no real indication that the party was willing to forgo the transaction if the additional language was not included in contract-the box top was just a request for additional terms 4. CISG and the ―Battle of the Forms (Records)‖ a. CISG Analysis Article 19 5. Post-Purchase Terms a. ProCD, Inc. v. Zeidenberg i.  sold databases for two prices lower to consumer users and higher to business users,  purchased the database at the consumer price and then sold the goods to other users undercutting ‘s price ii. On the box of the goods, there was a label that stated that there were licensing terms contained in the box and that the use of the product was conditioned upon those terms—when  installed the program into his computer, there was a licensing agreement that one had to accept prior to loading the software iii. Court held that this label in the box was sufficient notice that there was post purchase terms- also  accepted those terms by loading the program onto the computer (had to accept to load the program) iv. Court view this as a UCC case because it was a mixed sale- both for goods and for a license (a) When there is a mixed sale, the court looks to which part is predominant 6. When there appears to be a Battle of the Forms a. Ask if there is a sale of goods—UCC International sale of goods—CISG Not a sale of goods—‗mirror image‘ rule b. Where are the offer and the acceptance? c. What are the terms? d. Is the acceptance conditional? e. What are the gap fillers? f. What to do about the additional terms? X. The Validation Process A. The Seal and other Formalistic Devices 1. Use and effect of the seal a. Warfield v. Balitomore Gas & Electric i. A contract with the words/scrawl/ or a wax seal the contract is then under seal b. In a limited jurisdictions, a contract under seal extends the statute of limitations B. Consideration 1. Elements of consideration (Restatement §71) a. There must be a benefit or a detriment on either side b. There must be a bargained for exchange—the benefit msut induce the detriment 2. General notes— a. A gratuitous promise given for nothing in return =there is no consideration therefore no contract i. Cannot contract around a lack of consideration, it is an immutable rule b. Purpose of consideration is to determine which contracts are enforceable c. Detriment may be an actual detriment or a legal detriment d. What is bargained for i. Promise to perform ii. Performance iii. Forbearance iv. Promise to forbear e. How to find a bargained for exchange i. Outward manifestation of intent ii. Look for reciprocal inducements (a) Was performance induced by promise (b) Was the promise induced by performance 3. The legal value element (―adequacy‖ or ―sufficiency‖ of consideration) a. Hamer v. Sidway i. ∆ told π that if he quit drinking, smoking, and gambling until 21st birthday, that ∆ would give π $5,000 ii. Benefit to promissor— Benefit to promissee— Healthy π $5000 Detrminent to Detriment to promisor— promissee— Pay $5000 Must forbear from a legal right iii. The detriment was induced by the benefit so there was a bargaqined for exchange b. Harris v. Time i. Kid gets Time junk mail which promised a new watch if he opened the mail—when the envelope was opened, there was additional action required to get the watch ii. Offer: outside of the envelope (requesting performance) Acceptance: Opening of the envelope (performance) iii. Consideration analysis: Promissor— valuable ad space—new subscribers Promissor— cost of mailing/ cost of watches Benefit Promissee— Possibility of watch Promissee— Time to open the mail Detriment iv. There was an inducement to open the envelope (the detriment was induced by the promised benefit) v. Court used its gatekeeper function to find that the detriment was not sufficient to support consideration—that the case was trivial and ―junk litigation‖ 4. Exceptions to the general refusals to inquire into adequacy of consideration a. McKinnon v. Benedict (inadequacy in equity) i. Lawyer got poor guy to sign contract for a loan—poor guy was unable to use the land as needed by the terms of the contract ii. The court held that there was a contract supported by consideration but that there may not be an equitable remedy available iii. As to contract formation, consideration either exists or it doesn‘t but as to remedies, courts may look to the adequacy of the consideration when determining what remedies are available b. Schnell v. Nell (the money exception) i. Dead wife promised money that she did not have in her will ($200 per)—husband decided to honor the will if the parties gave 1 cent in consideration and took payments over a perioid of three years ii. Offer and acceptance ok iii. Consideration—agreemnt stated that the consideration for the $200 was the 1 cent, wife‘s love and affection, was wife‘s desire for heirs to have $, and iv. Problems— (a) Love and affection of wife were not bargained for—past performance (b) The wife‘s desire for the money to go to the heirs was moral consideration and will not support a promise (c)The 1 cent was merely token—when looking at whether there was reciprocal inducements (were the parties really bargaining for the 1 centno it was just a token) v. No consideration—promise was simply one to make a gift 5. Nominal (formal) Consideration (bargained for exchange) a. Restatment 2 nd i. If there is simply an attempt to formalize arrangement with $1, it is not consideration—only a pretense a gratuitious gift is not consideration b. Thomas v. Thomas i. Guy tells the executors of his estate that he wants his wife to get more than his will states including the staying in the family home—executors do this in memory, but charge the woman ₤1 a year and upkeep ii. Consideration analysis Promissor—don‘ pay for upkeep on house--₤1 yearly Promissor—can‘t rent house out for higher rent Benefit Promissee—gets a place to live for low rent—doesn‘t have to move Promissee—can‘t get married—pay for upkeep and ₤1 a year Detriment iii. Motives behind the promise do not matter as long as there is consideration there is a contract 6. Promise of ―permanent‖ employment v. ―terminable at will‖ a. Fisher v. Jackson i. Baker quits his job for a job at a newspaper—the job was a permanent one (the baker interpreted this as meaning for life)—baker was fired 5 yrs later ii. Offer was for a full time permanent position—baker accepted when he took the job iii. Baker contend that there was consideration for a lifelong employment contract iv. Court held that there was consideration to support a terminable at will emploment, but not lifelong employment because there must be consideration beyond the normal consideration found in employment context (a) There was no consideration for the baker leaving his prior employ--∆ did not bargain for the π to leave the bakery, the π‘s leaving was incidental, they only bargained for the π to work for them v. Must be bargained for!!!! b. Anderson v. Douglas & Lomason Co i. π at work—stole pencils—was terminated—π claims that ∆ did not follow its rules in its handbook regarding the taking of company property—π claims that the handbook was a contract and that the ∆ breached ii. The court held that there was consideration to support at will employment , but the issue was whether or not the handbook was a contract iii. Handbooks are unilateral contracts if: (a) Sufficiently definite in its terms to create an offer (b) Communicated to and accepted by the employee so as to constitute acceptance (c) The employee provides consideration iv. Here there would be consideration to support the handbook as a contract, but there was a prominent disclaimer that demonstrates that the handbook was not a valid offer and therefore, there was no contract created by the handbook (no offer) c. Spriggs v. Diamond Auto Glass i. Black guy quit job due to racial strife—claims that he was constructively discharged (unable to work in that environment)—was the termination of π breach of contract ii. A lack of agreed upon duration does not invalidate the underlying contract (the consideration is ongoing because there is ongoing performance for pay) iii. Just because a contract is terminable does not mean that there are no enforceable rights that accompany it iv. An at will employee can be fired for a good/bad/or no cause at all but not an illicit cause (anything that violates a statute) so the constructive discharge of π due to racial harassment violated 42 U.S.C. §1981 and was therefore breach of contract (wrongful termination) 7. Effects of Recitals a. Lewis v. Fletcher i. π states that he entered into a contract for a sale of 360 acres and an option contract for 40 acres with $20 consideration to keep the option open (option was for 6 six years) ii. π claims that the two agreements were integrated and dependant--∆ claims that the two aagreeemnts were separate and that he never receieved the $20 consideration iii. Court found that the contraqcts were separate and distinct because they were signed four days apart and neither one mentions the other iv. The option contract must stand alone and therefore fails for a lack of consideration because the $20 considertation was never paid v. Majority of jurisdictions hold that a recitation of consideration is not sufficient is there is no actual consideration –it is a sham (Restatement 89) vi. A minority of jurisdictions will hold that a reciation of consideration is sufficient because (1) the party is estopped from contradicting their own writing (2) because the recitational consideration is an implied promise to perform 8. Absence of a detriment—―mutuality of obligations‖—―illusory contracts‖—requirements contracts a. Pick Kwik Food Stores, Inc. v. Tenser i. ∆ purchased gas station from 3 rd party who had a-purchase agreement with another party who sold their interest to the π—π is claiming that ∆ is in breach for not honoring the contract between the original parties ii. Court held that the original contract was a one sided at will contract (π was in complete control) therefore, there was no mutuality of agreement iii. Because the original agreement has no mutuality of agreement, there is no contract so any business that occurs between the parties is at will—because it is at will on the part of both sides, the termination by the ∆ was ok and the ∆ is not liable for future losses b. Hay v. Fortier i. ∆ owed $ to π--∆‘s attorney wrote letter stating that ∆ would make $100 payment and pay off in April if the π will not go forward with court case ii. A rescheduling of debt iii. There is an absence of consideration because the ∆ already had an obligation to pay the entire amount iv. However, although the π was not bound by the original promise to forbear, because he did forbear, the ∆ was unjustly enriched and so the ∆ must perform their part of the agreement –the ∆ is estopped from refusing to perform 9. Illusory promises a. Scott v. Moragues Lumber Co. i. There was an agreement that if the ∆ bought the boat that he would bring it to the π and π would charter--∆ bought the boat, but chartered it to a 3rd party ii. Illusory promise?—if ∆ purchases the boat (a) Whether or not the ∆ purchased the boat was totally under the control of the ∆--the ∆ controls the stipulated condition iii. The reason that it is not an illusory promise is because the ∆ fulfilled the stipulated condition—there was consideration at that point because the promise was no longer illusory iv. When analyzing, ask was ∆ in total control of the stipulated condition? (a) If yes—illusory 10. Requiremnt and output contracts a. McMichael v. Price i. Sand case—buyer agreed to buy all of the sand he needed from the seller requirements contract ii. Issue—the definiteness of the contract—quanitity is lacking—courts have accepted this as part of the requirements contract—it is ok iii. Be careful—there is the potential for illusory contract because the buyer could decide that there is no longer a requirement to be met—a free way out (a) There is a good faith requirement iv. Constant supply Benefit Guaranteed purchaser Can only buy Must fill the Detriment from seller requirements v. Not illusory—there is good faith (in all UCC there is a good faith requirement)—a company will not purposely go out of business to get out of the contract b. Empire Gas Corp v. American Bakeries Co. i. π entered an agreement with the ∆ to convert a fleet of trucks from gas to propane—terms:∆ would convert a # of vehicles monthly (to 3000 total)--∆ would purchase all required propane converters from the π ii. ∆ requirements went to 0 iii. Requiremnts can go to 0 if there is good faith (a) Good faith—stop purchasing because of obsolescence of what was previously purchased or there could be drastic changes in requirements due to technology or market changes (b) Bad faith—don‘t want to comply (better price elsewhere, etc.) iv. Here the ∆ was obviously acting in bad faith (a) There was no business reason not to fulfill (b) ∆ here never gave any reason for its decision— so there was no defense—court had to rely on the π‘s evidence (c) Usually where there is one party in control of the condition precedent it is an illusory promise, but here due to an obligation to purchase (require) in good faith it is not illusory, there is consideration (UCC 2-306) (1) Be careful—good faith is not always enough for consideration—―I promise to order all of the coal that I wish from X‖—no consideration because could still order nothing in good faith 11. Exclusive Dealing—―best efforts‖ a. Wood v. Lady Duff-Gordon i. π would get to use ∆‘s name and endorsement on products--∆ would get ½ of the profits ii. Use of famous ½ of the profits Benefit name Implied good Cannot sell products Detriment faith promise to under her own name use best efforts to promote business/make a profit iii. Does this case mean that we will always imply good faith in every case—there is not an impliled promise of best efforts and good faith in every contract (because there can be good faith but an illusory promise) it depends upon the terms of the contract—it can be implied due to custom and past dealings etc. b. Famous Brands, Inc. v. David Sherman Corp. 12. Pre-existing duty rule a. Slattery v. Wells Fargo Armored Service i. π worked for the police (polygraph examiner)— interogated the perpetrator—before the second interrogation, the perp confessed to the crimes--∆ had a reward posted for info leading to a conviction and for the return of the goods ii. District court held that there was no contract because the π did not accept the offer because he did not fully perform (gave info, but no recovery of goods) iii. Appellate court held that there was no contract due to the pre-existing duty of the π (a) π had a pre-existing duty to give all information to his employer that might aid the state attorney or the Dept of Public Safety (1) π already bound to give the info, so when the π tried to ―accept‖ the offer he was doing no more than he was required to do—π was already paid for acting in that capacity (2) No new benefit b. Alaska Packers v. Domenico i. π agree to fish in Alaska for $50—when they got to Alaska, they demanded more money knowing that the ∆ had no other options--∆ agrees but doesn‘t pay—π‘s sue ii. Cannot modify a pre-exitsing duty to protect the parties from coerced modifications—prevent the ―hold up‖ game 13. Exceptions to pre-existing duty rule (Restatement §89) a. Angel v. Murray i. Trashman agreed to 5 yr contract to collect all trash in the city—1967 &1968, trashman requested an additional $10,000 year due to tremendous growth of the city (400 units/ in the past only 20-25 units a year)—city approved—in this case, it was unexpected and the contract was modified voluntarily ii. Issue: was the contract modification due to an unexpected and unforeseen difficulty that arose during performance and therefore supported by sufficient consideration iii. Rule: in the event of an unexpected and unanticipated events during the course of the performance, a contract can be modified in good faith and the modifications to the contract are valid as long as the parties agree voluntarily iv. The events must be unanticipated by both parties b. Betterton v. First Interstate Bank of Arizona i. π couldn‘t pay his bills--∆ contacted the repo people—π went to the bank and made an arrangement for garnishment—∆ had the trucks repoed anyway ii. π had a pre-existing duty to pay so making a payment was not consideration (cannot reschedule a debt that is owed in full) but the garnishment was not a pre-exisiting duty—it was a new duty—therefore there consideration iii. If a new contract modifies a pre-existing contract in a substantial way, the pre-existing duty rule does not apply because there is a new benefit/detriment 14. Disputed claims, modifications, accord and satisfaction a. Ruble Forest Products, Inc. v. Lancer Mobile Homes i. ∆ purchase 11 truckloads of lumber--∆ not paying—π calls demanding payment--∆ refuses claiming defective ii. There is a pre-existing duty to pay--∆ refusing to pay because he wants a price cut due to low quality--∆ demanding compromise or refusing payment (like Alaska) iii. Court applies the UCC—there is no consideration needed to be binding for modifications to the contract because good faith is an obligation in the UCC— there was no bad faith in this case because the ∆ offered evidence that the lumber was defective iv. UCC good faith definitions—1-201 (19) and 1-203 2-103 (good faith for merchants) v. Claim in dispute doesn’t have to be valid, but must be made in good faith 15. Invalid Claim—Restatement §74 a. Dyer v. National By-products i. π lost foot in work related incident—returned to work and was fired—π stated that he had agreed to forbear bringing litigation and the ∆ agreed to employ him permanently—π states the agreement was in good faith ii. Claim is technically unfounded because of workmen‘s comp regulations iii. Issue: Whether good faith forbearance to litigate, which later proves to be invalid and unfounded is sufficient consideration to uphold a contract or settlement iv. Yes—as long as both parties believe the case is valid, it doesn‘t matter if the claim is not valid v. Compromise of a doubtful right is consideration Permanent job No litigation Benefit Didn‘t bring Detriment Had to employ π claim vi. If not a valid claim and the parties know that it is invalid, there is no true forbearance and no real benefit, therefore, no consideration so forbearance from a suit on a claim of doubtful validity is suffiecient consideration for a promise if there is a sincere belief in the validity of the claim vii. Analyze reasonableness to decide whether the claim is in good faith or not—must be good faith on the part of the forbearing party—there must be good faith and it must be reasonable C. Promissory Estoppel—Restatement §90 1. Absence of Bargained for Exchange a. Miles Homes Division v. First State Bank of Joplin i. Seller buying prefab homes—gave buyer a 2nd mortgagebuyer gets 1st mortgage from Joplin Bank for the land— Seller did not record the 2 nd mortgage, but sent a letter to the bank requesting notice from the bank if the buyer became delinquent—bank signed a form stating that they would notify the seller and would provide the seller the opportunity to make payments prior to a forclosurethe buyer didn‘t complete the house, became delinquentthe bank did not notify the seller—the note was purchased from the bank by and foreclosure proceededthe seller never knew of the sale, they had relied on the bank to notify ii. No consideration- no bargained for exchange Would get notice Benefit Obligation to Detriment notify seller Bank giving notice for nothing in return—seller getting notice for nothing in return iii. Was there promissory estoppel/detrimental reliance? (a) Was there a promise which the promissor (bank) should reasonably expect to induce action? (b) Did such action or forbearance occur and was it induced by the promise? (c) Can injustice only be avoided if the promise is enforced? iv. If the bank had not signed the note, the seller might not have entered into the 2 nd mortgage without more security 2. Early applications of promissory estoppel a. Allegheny College v. National Chautauqua County Bank of Jamestown i. D. attempted to repudiate promise of memorial scholarship donation after money had been set aside and memorial scholarship was set up (preliminary) ii. Issue- Whether the enforcement of charitable subscription can be squared with the doctrine of consideration as qualified by the doctrine of promissory estoppel? iii. A promise becomes binding if (1) the promissor intends, or reasonably expects, the promise to induce reliance (2) a party actually relies on the promise (3) non-enforcement of the promise will cause detrimental injury or injustice 3. Expansive theory of promissory estoppel a. Feinberg v. Pfeiffer i. Old lady promised a pension from her job—retires— company stops paying after 7 years--∆ claims no consideration ii. Court finds promissory estoppel iii. Promissory estoppel analysis— (a) The company reasonably foresaw that the old woman would rely on the promise (b) The woman did in fact rely on the promise for 7 years & quit her job while in good health in reliance of the promise (c) There was no other way to remedy the injustice b. Cohen v. Cowles Media i. Newspapers published the name of confidential source (source was a dirt-digger for the republican party) who gave info on a democratic candidate—π gave the information on the condition that he remain anonymous ii. π contends that there was a breach of contract and fraudulent misrepresentation--∆ claims that information was too important to the publoic good iii. Consideration analysis Get information Hurt the opposition Benefit Can‘t publish the Detriment name of the source iv. Court held that there was no contractual claim because reporters could not bind the newpaper (weak argument) v. Promissory Estoppel analysis (a) Is promise clear and definite—yes (b) Did the promissor intend to induce reliance on the promise—Yes (c) Did the promise induce action—yes (d) Must the promise be enforced to prevent injustice—yes v. Damages—how much are the damages—the amount of the reliance or something else 4. Restatement 90 i. Promise is clear and definite ii. Promissor intends or reasonably expects the promise to induce action or forbearance iii. Promisee acts in reliance of the promise iv. There is no way to avoid injustice unless the promise is enforced 5. Precontractual reliance a. Pop’s Cones v. Resorts International Hotel i. π wanted to rent space to move her business to ∆ location—π contacted the ∆ repeatedly—late 9/94 ∆ told π the contract was 95% there and that π should give notice and pack up—10/1/94 π‘s lease ended put everything in storage—through 1/95 π continued to attempt to contaqct ∆--1/30/95 ∆ wrote letter withdrawing the offer—after the deal fell through, π had to find another location—π was unable to reopen for business until 7/96 ii. Trial granted summary judgement—appeal to determine whether the promise was ambiguous enough for a jury to find reliance reasonable iii. 4 Step analysis (a) Was the promise clear and definite—yes, ∆ told the π to pack up and give notice (b) Did the promissor reasonable expect the promise to induce action—yes (c) Was there actual reliance induced by the promise and was it reasonable—yes, hired atty, gave notice, packed up business (detriment— yes) (d) Are damages the only way to avoid injustice— yes iv. Promissory estoppel can be used to make a contract, but can also be used in lieu of a contract to enforce promises v. Damages—do you award the amount relied upon (the reliance interest) or the amount promised (the expectation interest)— (a) Jurisdictions vary and award is determined by the facts but usually reliance interest 6. Flexible Remedy—reliance or expectation interest a. Goodman v. Dicker i. π agreed to sell ∆‘s goods—entered into a dealer franchise—π presold 40 radios—∆ pulled out ii. Here promissory estoppel is used to prove damages not to prove a contract—precontractual damages incurred in reliance iii. 4 Step analysis (a) Was promise clear and definite—yes π would get 30 –40 radios (b) Did the ∆ expect the promise to induce action— yes (c) Did the π act in reliance of the promise—yes π hired people/presold radios (d) Can injustice only be avoided by enforcement— yes, reliance damages (hiring etc/ what was done to prepare for the franchise) but no expectation damages (the profits) iv. Damages measured by factors in comment d (same as comment b) in Restatement §90—flexible no bright line b. Damages in general i. If a substitute to consideration—expectation interest ii. If used to remedy where no contract was made— reliance interest D. Past Consideration—moral obligation 1. Past consideration a. Passante v. McWilliiam i. π obtained a loan to start business—after π got the loan for the ∆, the ∆ promised the π 3% of the stock for getting the loan—π never got—when more stockholders came in, they wanted the π out—π was booted with no shares ii. Loan was obtained prior to the promise of the 3%, therefore there was no contract iii. No consideration for past performance and the stock was not bargained for in exchange for the loan 2. Moral Obligation a. Dementas v. Estate of Jack Tallas i. T typed an agreement and stated that he would change his will to give D $50,000 upon his death in return for all of the help that ha had given—T never changed his will ii. No consideration for past performance (no bargained for exchange element because of the past performance—can‘t bargain for something that happened in the past) iii. No enforceable contract (a) No consideration (b) No promissory estoppel—no promise that would induce action—no action induced—injustice cannot only be avoided by judgment (c) No moral obligation because the services were not rendered with the expectation of compensation 3. The material benefit doctrine a. In re Hatten’s Estate i. Dead guy had repeatedly promised throughout performance that woman would be payed after his death ii. Here services were rendered with the expectation of compensation—policy-there was an expectation of payment, so want to enforce that expectation iii. There are situations in some jurisdictions in which past debts can be held enforceable—Restatement §86 4. Promises that are uniformly enforced through moral obligation a. First Hawaiian Bank v. Zukerkorn i. Z got two loans (1965/1966) from bank and car loan in 1973—paid off car loan—1775, Z applied for credit— bank told him that he owed them money on an old acct and that getting the credit was conditional on paying the old acct off—bank claims that Z made a payment of $200 at the time of the agreement and subsequently payed $500—1978, bank sued Z on the 2 notes and the balance of the card ii. A new promise to pay a debt, whether then barred by the statute of limitations or not, binds the debtor for a new limitations period a. Rationale—the contract to pay the original debt was valid, so shouldn‘t be prevented on a technicality (Restatement §82) 5. Promises to pay debts discharged in bankruptcy a. If a debtor reaffirms a debt, the debtor is responsible for the debt XI. Operative Expressions of Assent A. The Statute of Frauds—forbids enforcement of certain types of contracts unless there is a writing or an applicable exception (evidentiary and cautionary purposes) 1. Suretyship Promises—a contract in which one agrees to answer for the duty of another a. Carter v. Allstate Insurance Company i. π and ∆ (Allstate insured) car in an accident—π sent letter to ∆ demanding settlement—π claims that the ∆ orally made an offer to settle and the π accepted orally— ∆ did not honor the oral agreement, claims that the agreement is not enforeceable due to the Statute of Frauds ii. Suretyship provision—Allstate was the surety, they had assumed responsibility to pay if the insured was legally responsible for the accident iii. Here the insured had not yet been found to be legally responsible so as of yet, there was no duty of the ∆ to answer for iv. The contract was found to be without the statute of frauds 2. Main Purpose (“Leading Object”) Exception a. Armbruster, Inc. v. Barron i. ∆ wanted to build a bowling alley, was 1/3 shareholder∆ guaranteed the debt to the π—RBR defaulted—π sought to enforce the guaranty--∆ contends that since the guaranty was oral that it was unenforceable due to the requirements of the Statute of Frauds ii. Main purpose exception—whenever the main purpose and object of the promissor, is, not to answer for the debt of another, but to subserve some pecuniary or business purpose of his own, his promise is not within the statute of frauds, although it may be in form a provision to pay the debt of another (a) Applies when the main purpose is own primary or business advantage (b) Ambiguity re: main purpose iii. Court here focused on the fact that without the ∆ as a surety, the business would have failed iv. A special direct or immediate benefit = without the statute of frauds v. Policy—commercial context provides evidentiary safeguards, less need for cautionary precautions and evidentiary formality than in other cases 3. Marriage Agreements a. Antenuptial agreements—generally upheld as long as the terms are not unconscionable and the agreement was entered into with the full knowledge of the parties without fraud duress, coercion i. Such agreements are unenforceable under the statute of frauds unless in writing and signed by the party to be charged b. Rossiter v. Rossiter i. Parties had an oral pre-nuptial agreement that if there was a divorce, the house would not be sold—court held that not valid because not in writing as per the statute of frauds ii. Statute of frauds requires that there be a writing “to charge any person, upon an agreement made in consideration of marriage” iii. Policy—to provide evidentiary proof regarding possible fraud at the time of divorce iv. Part performance—part performance does not satisfy the Statute of Frauds except in cases of contracts that can’t be completed in 1 year/ sales of land/ sales of goods 4. Contracts for the sale of land a. Part Performance and Remedies i. Cain v. Cross (a) Offer for the sale of land--$10,000 down payment paid—seller decided not to sell the property to him and sold it to a 3 rd party $50,000—C says that he partially performed and therefore the contract is without the Statute of Frauds (b) Voidable and not void (1) Voidable—not capable of being voided at the request of the person making the agreement (2) Void—completely ineffectual (c) Part performance in sales of land—for part performance in the sale of land to fall without statute of frauds must meet conditions (1) Pay the purchase price (2) Must take possession (3) Must make improvements in the land property in some way (d) Part performance in sales of goods—for part performance in the sale of goods to fall without the statute of frauds (UCC 2-201(3)) (1) They msut be specially made goods or (2) They must be accepted (e) In this case, part performance is irrelevant because it is an action at law (part performance is not acceptable in actions at law for damages) (f) Because of the importance of land, there must be proof of the agreement 5. Contracts that are not performable in one year from formation a. C.R. Klewin, Inc. v. Flagship Properties i. F hired K under an oral contract to complete a construction project—it was estimated that it would take 3-10 years to complete the project—fees structure was allowed to be changed depending upon the phase of the construction, so we can infer that K was to do the entire project—written contract for the first pahse only—2 years after the oral contract F unsatisfied with K and hired new contractor to finish ii. Critical test of possibility—contract must expressly state that will last for over one year (a) According to the terms of the agreement, is it possible for performance to occur within a year (b) Look to the possibility of the terms being discharged within one year 6. Contracts for the sale of goods (UCC)—Basic rule: need a writing if a contract for the sale of goods exceeding $500—work through UCC 2-201 (special merchant rules 2-201(2)—exceptions 2-201(1) &(3)) a. Azvedo v. Minister i. A depostited $20,000 in bank for hay—oral terms did not specify quantity—A ran out of funds said that he did not have any more hay—there was a confirming memoranda, it was an accounting of how mach hay had been hauled ii. Confirming memoranda—reason for encourages oral contracts and makes them binding through memoranda iii. Test—if the memoranda was between merchants and sent within a reasonable time—the memoranda satisfies subsection 1 unless it is rejected within 10 days b. CISG—there is no statute of frauds requirement in the CISG c. Sufficiency of the writing—electronic files 7. Estoppel and the Statute of Frauds a. Restatement 2 nd approach i. Alaska Democratic Party v. Rice (a) π offered position and entered into an oral contract with ∆ to work in Alaska for 2 years—π quit job in reliance of the offer—π was fired (b) Statute of frauds because the contract was for an express term of 2yrs—any express employment term of over one year is within the statute of frauds (c) Promissory estoppel application to the statute of frauds—can promissory estoppel create enforceablility notwithstanding the SOF (1) Restatemetn §139—promise is enforceable where justice can be avoided only by enforcement (d) Key differnce between §90 and §139—the specificity of injustice obligation (1) §139—to make a contract enforceable (2) §90—to make a contract (e) If a sale of land coupled with promissory estoppel--§129 b. UCC Statute of Frauds and promissory estoppel i. Columbus Trade Exchange, Inc. v. AMCA International (a) Can §139 be grafted onto UCC 2-201 (promissory estoppel and the statute of frauds in a UCC case) (b) UCC 1-103—list of common law provisions available under the UCC—includes promissory estoppel (c) UCC 2-201(3)—Statute of Frauds specific exceptions—promissory estoppel not listed, but the court here said that not all of the exceptions are not listed but are included by virtue of 1-103 (d) Promissory estoppel is applicable under the UCC 8. Admission that the contract was made a. Lewis v. Hughes i. π selling house (UCC) over $500 (S.o.F.)—there was a writing but did not satisfy the S.o.F.—in testimony, ∆ admitted that there was an agreement ii. Writing did not statisfy the S.o.F.—writing must be signed by the party aginst whom the enforcement is sought (∆) iii. Restatement §131—writing requirements outside of the UCC (a) Subject matter of (b) Reasonably certain terms (c) Signatures iv. An oral contract can be enforced when the ∆ admits to the agreement B. Parol Evidence Rule 1. General notes a. Policy i. Prevent fraud ii. Prevent the inclusion of non-terms/ negotiations iii. Easier to substantiate a writing b. Probelem with the parol evidence rule—makes it difficult to bring in something that really was left out of the contract but was agreed to by the parties 2. Application of the Rule a. Traudt v. Nebraska Public Power Distrcit i. ∆ purchased easement across π‘s land—π claims that ∆ orally agreed to pay the π more if any other land owners got more—the written agreement contained a merger clause ii. Oral agreement was made prior to the writing— subsequent agreements are not covered by the parol evidence rule iii. Tests (a) Nebraska Test—looks only at the writing (1) Completeness of the writing—is the writing completely integrated (2) Evidence contradicting the terms of the writing (3) Intent (conduct and language) of the parties and the surrounding circumstances (b) Restatement 1st test §240 (1) Natural exclusion test (c) Wigmore Test (intent) (1) Whether the writing was intended to cover a certain subject of negotiation— look at the conduct and the language of the parties and the surrounding circumstances iv. Court held that the written agreement was intended to be the final integrated agreement b. Masterson v. Sire i. D&R owned a ranch—conveyed it to M&L—when sold D&R put in an option clause (option to purchase on or before certain date for the same consideration plus the value of any improvements)—D went bankrupt—D‘s trustee and R wnt to M&L to exercise the option—M&L refused stating that there was an agreement that the land was to remain in the family ii. Court applies Natural omission (restatement 1) (a) Will allow proof of a collateral agreement if it is such an agreement that would naturally be made as a separate agreement iii. In this case, the court asks if the non-assignability clause would be naturally included in the agreement and if the agreement was integrated (a) No merger clause (b) Deed silent re: assignability (1) Difficult to include assignability clause in this type of agreemnt (2) Unlikely here that the parties understood the ramifications of not putting in the agreement (3) Case in which there would naturally be a collateral agreement (c) Parol evidence does not contradict (if the evidence contradicts, even if the agreement is not integrated, the parol evidence cannot be allowed and the written agreement stands—can only bring in extrinsic evidence that is consistent and adds or explains the agreement) 3. UCC Parol Evidence Rule—trade usage prior dealings a. Ralph’s Distributing Co. v. AMF Inc. i. π had a franchise agreement with multiple extensions--∆ pruduct unpopular and decided to discontinue & sell only Harleys and to get rid of product through harley dealership—π claims breach—says that there was an oral agreement that they had an eclusive idstribution contract ii. UCC Test (a) Is this a final agreement or only final as to the terms contained—certain inclusion test (b) Even if it is an integrated agreement, it can be supplemented with course of dealing, course of performance, trade usage (c) No contradicting evidence (d) If the agreement is not integrated then additional consistent terms are ok b. Columbia Nitrigen Corp. v. Royster Co. i. C contracted to purchase an amount of phosphate—3 year contract with the price per ton set, a price escalation provision and a delivery schedule—after the contract was signed the price of phosphate plunged—C was unable to resell at a competitive price—C ordered only a partial shipment—R agreed to lower price for 3 shipments—C offered to take phosphate at the market price, but R refused—C refused delivery—R had to sell elsewhere at a cost below that of the contract price—R sued—C claims that the price in the contract was meant to be able to be adjusted up or down by the market ii. In UCC, terms may not be contradicted, but may be supplemented by evidence of course of dealing, course of performance, or trade usage (even if the agreement was integrated) iii. Court here interpreted it broadly stating that the new evidence did not contradict because the contract was silent as to adjesmtment of prices and quantities to reflect declining markets—this type of interpretation could make it difficult to protect any agreement from parol evidence iv. Trade usage—industry standards Course of dealing—(1-205)—sequence of previous dealings between these parties Course of performance—(2-208)—relationship that has developed between parties since the formation of the contract 4. CISG and the Parol Evidence Rule a. MCC Marble Ceramic Center, Inc. v. Ceramica i. Agreement over ceramic tiles—π claiming breach due to ∆ failure to deliver--∆ claiming that π did not pay— π claimed that goods were defective—typed boilerplate supported the ∆, but π states that both parties had agreed not to be bound by those terms ii. CISG—no express statement re: parol evidence iii. Article 8 (a) 8(1)—looks at the subjective intent of the parties using affidavits etc. (b) 8(2)—if 8(1) does not apply, or is not reliable, look to the objective manifestation of intent (c) 8(3)—to understand the intent, give due consideration to all of the relevant circumstances, including negotiations iv. Under the CISG, parol evidence is ok, but parties can contract around with a merger clause or stating that Art. 8 of the CISG will not apply v. Lets in prior oral agreemtents and tells the factfinder that the relevance goes to the weight of the evidence not to the admission of the evidence—evidence may be discounted 5. Mistake in the writing a. Davenport v. Beck i. π contracted with ∆ for purchase of land—π claim that the note is fully paid—∆‘s claim that there was a mistake in the writing ii. Mutual Mistake—Where by reason of a scrivener‘s mistake an instrument omits or contains terms or stipulations contrary to the common interests of the parties—a court of equity will consider it a mutual mistake common to both parties and will therefore correct the error in a manner that will place the parties in the position that they would have occupied had the error not occurred 6. Condition precedent, fraud, and the parol evidence rule a. Smith v. Rosenthal Toyota, Inc. i. Guy conned into signing papers to his car over to dealership to get a new truck—dealer had told guy that nothing would be final until his wife okayed ii. Restatement §217—Where the parties to a written agreement agree orally that performance of the agreement is subject to the occurrence of a stated condition, the agreement is not integrated with respect to the oral condition iii. Evidence of a condition precedent to formation need not be accompanied by evidence of fraud of mistake iv. A merger clause does not preclude the admissabilty of evidence of a condition precedent b. Evidence of fraud or mistake is admissible under the parol evidence rule i. A merger clause does not preclude the admissibility of evidence of fraud or mistake 7. Steps to analyze the application of the parol evidence rule a. Restatement i. Is the writing a final and complete integration of the agreement (a) Use the appropriate test (1) Natural inclusion test—look at the circumstances to determine if the term was one which would naturally be included (2) Appearance test (if merger clause) (b) If yes—no parol evidence admitted ii. If no—is the parol evidence consistent (a) No—no parol evidence allowed iii. If yes—parol evidence is admitted to allow the finder of fact to decide if the parties had agreed to the additional term b. UCC i. Does the parol evidence contradict (a) If yes—no parol evidence admitted ii. If No—does the parol evidence constitute a course of dealing, course of performance, or trade usage (a) If Yes—allow the parol evidence to explain or supplement the agreement iii. If No—is the agreement integrated (a) Use the Certain Inclusion Test—if the term was one which certainly would be included (higher bar than natural inclusion test— harder to get to an integrated agreement) (b) If Yes—no parol evidence is admitted iv. If No—admit consistent additional terms to explain or supplement