1/7/04 Promissory Estoppel It usually acts as a substitute for valid consideration. Comes up in cases where there is typically a lack of valid consideration. Sometimes it is used to cure vagueness. Popovich promises to pay Alex $20,000 if she promises to paint his house. She agrees. What if Popovich tells Shannon that he promises to give her $2000 towards the vacation she has been wanting to go on. Shannon then goes out and makes plans and spends money towards the vacation. Promissory Estoppel – The restatements have been the cornerstone of this doctrine. 1. A promise which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promise and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. Common elements between 1 st and 2 nd restatement 1. Promise by the promisor 2. Foreseeable reliance on the promise by the promisee 3. The promisee must actually rely on the promise to his or her detriment 4. Injustice can be avoided only by enforcement of the promise Promissory estoppel can come up in a gift situation. It can also come up in the situation of a gratuitous bailment. Someone promising to do something for you as a favor. If I am going out of town and you promise to take care of my dog. If the dog dies are you responsible. There was a distinction between misfeasance and non-feasance. Historically if you never picked up the dog (non-feasance) then you were not responsible. If you picked up the dog and then fed it chocolate and killed it (misfeasance) then you would be responsible under the doctrine of promissory estoppel. The modern trend is that you are responsible regardless of misfeasance or nonfeasance. In charitable donation cases the biggest hurdle is usually the detrimental reliance issue. If I just call PBS and promise to donate $100 they are probably not detrimentally relying on the donation. Restatement 2 nd Part 1 is the same as above Part 2: A charitable subscription or a marriage settlement is binding under Subsection (1) without proof that the promise induced action or forbearance. This also applies to charitable donations as well.
This is a pretty big split in jurisdictions. Some apply the restatement second and some places do not. In those other places we still need to prove detrimental reliance. In some cases promissory estoppel is used as consideration to keep an offer open as an option contract. 1/12/04 In non-charitable cases generally the reliance must be shown to be fairly substantial. For promissory estoppel cases the damages are typically reliance damages. 2 views here depending on facts and circumstances. 1st restatement: use it as a substitute of consideration and thus enforce the contract in full. 2nd restatement: remedy would be tailored as justice requires. Problems 1. No. The question arises as to what is the promise. They intend to do, is questionable if it is a promise. Even if it is considered a promise, then we fall short on the breach of the promise, the school board did exactly what they said they would do, they rented it and proposed to voters. 2. First we have to see if there is valid consideration here. Promisee suffered detriment of $2,000 but was their a bargain for element. If no consideration then we can use promissory estoppel. The next issue is what is the remedy. Some traditional courts would say the promissory estoppel would fill in for the consideration and then we have a contract so $17,000 is the remedy. Some more modern courts may tailor the remedy to the reliance and award $2,000. 3. Yes, promissory estoppel applies. The right to use land once improvements are made is usually a simple case. 4. 5. Possibly consideration exists because the lien holder is giving up the right to foreclose. But the court did not find that there was an implied promise to give up the right to foreclose. So we move to promissory estoppel and the court did find promissory estoppel here. 10. In this case, there is not a very clear promise or estimate. A reasonable person would not rely on it. Parole Evidence Rule There is some contract that is in writing. The parole evidence rule deals with what is in the contract, is it just what was in the writing or can it be outside stuff as well. Interpretation
Not a dispute as to what words are in the contract, the dispute is to what the words mean. Parole Evidence is evidence that is prior to the final contract (Final Writing). Can the prior agreement be part of the contract? Can the prior agreement be admissible? Basically the answer is usually no. There can be preliminary negotiations and the final contract should take the place of all the preliminary negotiations. Extrinsic evidence is any outside evidence that tries to explain what the words in dispute mean. The moral of the story, when you have a contract in writing make sure you have everything in the contract and make sure all parties understand exactly what it means.
Before we determine if any other terms come in, the first thing we have to decide is, is the final writing a total integration or just a partial integration? A total integration is the final total expression of the agreement. Everything that has come before is integrated into this final writing. In these cases, parole evidence will not be admitted, you can not bring in anything to contradict or supplement the agreement. A partial integration is where the parties still intended this to be a final writing, but it is only a partial expression of the agreement, and does not contain the entire agreement. In these cases you still can not bring in parole evidence to contradict the partial integration, but you will be able to bring in parole evidence to supplement the final writing. Collateral Contract Theory – Old minority view, if it the parole evidence is so closely related to the final writing then it would be though of to have been covered in the final writing, so the final writing is considered a total integration. If the parole evidence is not so closely related, instead it is collateral, then the final writing is a partial agreement. Williston’s Rules – 3 DIFFERENT RULES 1) If there is a merger clause in the contract, (it says this contract shall represent everything or this is the final contract), it is conclusive to be a total integration. Exceptions are fraud, duress, mistake, or if the agreement is so incomplete on its face. 2) If there is no merger clause, the determination is made by looking at the writing itself, it is obviously incomplete on its face then we have a partial integration. 3) When the writing appears to be a complete instrument expressing the obligations of both parties, it is deemed a total integration, unless the alleged terms are supplemental and such that reasonable persons in the position of those parties would naturally enter into a separate agreement with regard to the additional terms. 1/16/04
Parole evidence rules. When you have a final writing, you can never have extrinsic evidence of contradictory terms. Can have evidence of additional terms (terms that are supplementary in nature) only if the final writing is a partial integration not a total integration. Corbin Rules He is not so hot on merger clauses. He says they are not conclusive, just a factor in determining if it is a total integration. He thinks that merger clauses are usually boiler plate, just thrown in for form reasons. He also believes that the intent is very important, and we can not determine actual intent just from the words of the contracts, so we should liberally allow evidence of intent in. UCC Rules Merger clause is strong evidence that the parties intended it to be a full integration. Not quite like Williston but almost as strong, almost always the merger clause is considered enough to determine that the final writing is a total integration. Section 2-202 – Basically the UCC’s way of determining whether a final writing is a partial or total integration. Notwithstanding a merger clause, it is a presumption that a final writing is only a partial integration unless the court find it clearly to be a total integration. 1/21/04 You can never admit evidence that contradicts the final writing. If the final writing is a total integration then you can never admit parole evidence that is supplementary to that final writing. If the final writing is a partial integration then we can admit evidence that is supplementary to the final writing. This whole parole evidence deal only applies after we have concluded that there is a valid contract. But we still have to go through the whole analysis to determine if there is a contract in the first place. In other words, we can always use parole evidence to prove that there was no contract in the first place. p. 319 1. There is no final writing here. We don’t get to the question of what kind of integration until there is a final writing, here the answer is no.
INTERPRETATION The plain-meaning rule. This is what it says, and we are reading within the 4 corners of the document and this is what we determine it to mean. This rule does not allow in any extrinsic evidence when a plain meaning can be ascertained. Only allow in other evidence when a plain meaning can not be found. California follows the Corbin view (see handout). This view is more of a broad interpretation.
All types of evidence can come in, the main point of this view is finding out what the parties really intended. All the evidence must be heard by just the judge, and then the judge decides if the contract can be ambiguous. Williston’s rules (see handout) UCC rules 2-202 – similar to parole evidence. Course of dealing – prior dealings with the two parties Usage of trade – what is common practice in a specific industry Course of performance – how has the contract been performed thus far Split of opinion, some say that the provisions under UCC 2-202(a) can in fact contradict what is in the contract, others say it can only be used to supplement or explain. 1/26/04 p.338 11. Yes the evidence is admissible. The UCC is very similar to Corbin rules, and is liberal in terms of allowing extrinsic evidence in. CAPACITY OF PARTIES There are severe limitation to the capacity of minors making contracts. Typically if they do make a contract the minor can avoid the contract. Minors are also called infants for legal contract purposes. The legal age of majority is 18. Basic rule – A contract that is entered into by an infant is voidable, historically they were void but now they are voidable, at the option of the minor. There are some exceptions, if a minor has parented a child and they have made a contract regarding the parenting of the child, those contracts are usually enforceable. There are also some statutes that by law minors are allowed to contract into (insurance laws, banking laws/credit cards, educational loans, military enlistment laws). How does the minor go about disaffirming the contract and when can they do so? Generally they can disaffirm it any time during the age of minority, and they can disaffirm it once they reach 18 if it is within a reasonable time. When the contract is for the buying or sale of real property with a minor, generally courts will not allow the minor to disaffirm the transaction until they reach 18. Once the minor disaffirms a contract, the disaffirming is irrevocable, it is done. Generally it is an all or nothing proposition as well. How can it be disaffirmed? Typically the minor has a long term contract to pay for something and the minor stops paying. Sometimes it can happen where the minor buys something for all cash, but then takes it back and says I don’t want it any longer, I want my cash back. That is the affirmative act of disaffirming the contract. Once the minor has disaffirmed the contract, is there any obligation on the part of the minor? Are they obligated to make restitution? The rules are different depending on whether the minor is the plaintiff or the defendant.
The Minor as a Defendant: Minor stops paying, the other party sues. The general rule is that the minor must return the item if they still have it, they are not liable for anything else. If the property is gone or damaged then that is too bad for the plaintiff. There are a couple of exceptions – if it is an item and you can trace the item to something, then that has to go back to the other party. There is also an exception for necessaries, if money is extended for food, clothing, shelter, or education then the minor is generally liable for the value of those necessaries. The Minor as a Plaintiff: Minor buys something and then wants his money back. The traditional rule is very similar to the above rule, if the minor still has the thing then they have to return it but not obligated for anything else. The modern rule (and now the huge majority) is Pettit v. Liston. They are going to be liable for restitution and for the wear and tear up to the amount they have initially paid. If it looks like the minor was taken advantage of then he will not be liable for anything and will be able to completely disaffirm the contract. The same deal applies with necessaries as well, minor is liable for the full value. How about ratification? What if a minor really wants to keep it? A minor can not ratify a contract if they are still a minor. Once they become 18 they can ratify it in a variety of ways. First of all they can simply not do anything, after the reasonable time expires then it is ratified. They can make an expressed ratification, they can also ratify it by ones conduct (continuing of accepting of services or continuing payment for a period of time). p.351 1. Yes, this is a fairly clear case. The settlement agreement is voidable by the minor here. The fact that the mother consented is immaterial, parents can not bind a child into a contract. There is a procedure where the minor can have an appointed guardian ad litem and the guardian can contract on behalf of the child, even then the court would have to approve the contract. 2. We have a disaffirming minor, reasonable time because it says immediately. What does he have to give back to the other person. Historically the P would only need to give the $100 back if they still had it. Modernly the P would have to give back $100. If two years had gone by then the contract would probably be ratified. 3. Here we have a situation because is it really for necessaries? Split, some courts say that as long as the loan was under the guidelines of being for necessaries then it is enforceable. Other courts say that you are taking a risk and because they were not used for necessaries then it is not owed back. The first view is more reasonable.
1/28/04 Generally, if a person is not mentally competent then the contract is voidable by the incompetent party. When is one incompetent?
Historically – whether the mind was so affected as to render him wholly and absolutely incompetent to comprehend and understand the nature of the transaction. Traditionally there is no requirement that the other person has to know. Basically if one party does not understand what is going on with respect to the transaction then they can void it later on, the other party does not need to know, but generally they should know. There is a fairly high threshold for incompetency because the person must be completely lacking of understanding of the situation. More modern or expanded definition – If you are unable to act in a reasonable manner in relation to the transaction and the other party has reason to know of your condition. You are acting in an unreasonable or irrational manner. How to disaffirm the contract? The incompetent person can do it himself. Sometimes a guardian is appointed and they can do it. Some courts say if the contract is fair, and the other person had no knowledge as to the mental capacity, then the contract can not be disaffirmed without restitution. Let’s assume the contract is disaffirmed, do they have to give restitution? If a reasonable person would see that the other party is incompetent (they don’t understand what is going on, they can’t understand the responsibilities), then there is generally no restitution required. Just like a minor, if they have the item they give it back, but otherwise no restitution. If the other party did not know or should not have known, then restitution is required. If there is a contract with respect to necessaries then the incompetent is responsible. How about ratification? They can not ratify the contract if they are still incompetent. If the person regains their competency they can ratify it either explicitly or implicitly with actions. Once a contract is ratified then the contract becomes irrevocable. p. 352 5. Yes, in the expanded definition it is required that the other person have knowledge. In this case it would be a legit contract. 6. (a) If we go under the first definition then the contract would be voidable but restitution would be required. Probably would have to pay the actual cost of the car to put the person back in original position. 7. If we presume that Icarus is not competent and the dealer does not know about this. The contract will be voidable but Icarus will have to provide restitution, there is some debate as to how much restitution will be, retail price or wholesale price. (b) If he had been adjudicated incompetent then there are some jurisdictions that treat someone adjudicated incompetent differently. Some courts say that in these cases the contract is just void. Other courts say that the contract is voidable and restitution is not owed. Other
courts just treat it the same (this is the majority). (c) At that point the dealer should have known and the contract will be voidable and no restitution will be required, still have to bring back the broken down car, but that is all. 8. Contract is voidable for lack of capacity, when they become sane again they can disaffirm or ratify the contract. In this case it is not clear whether the person was on notice that there was a contract. If they knew or should have known that there was some sort of contract (bills in the mail) then they have a reasonable time to ratify or disaffirm. Probably ratified in this case by actions (9 months use). 9. Intoxication is treated basically the same as other types of incapacity. This works for prescription or non-prescription intoxicants. Historically, self-induced intoxication was considered too bad. Nowadays that distinction is not really there anymore, but courts do take into account the egregiousness of the situation in determining remedies. You must be intoxicated to the point of not really understanding what is going on. 10. Generally you would think no because the lawyer knows of the incompetency so the lawyer should not contract with this person. But sometimes this is considered a necessary so the lawyer will be entitled to his fee. Here, because it is the 5 th time and nothing has changed then it may be considered frivolous and the lawyer may not be paid. CHAPTER 7 In some cases an otherwise good contract will be considered voidable because it was contaminated by something. Duress – Some wrongful act that is overcoming one’s free will. Basically they are acts of wrongful coercion. Historically duress was very limited, basically only if you were kidnapped or if there was a threat of death. Now it is much more liberal. Any threats of physical violence, blackmail, extortion. Must show that there was some threat or act that was improper (physical torts, threats to bring lawsuit). Must show that it was because of the threat that the party entered into the contract. Did the party feel that they were free to overcome this wrongful act. If they do not feel free then we have met this requirement. In these cases the contracts can be voidable. The party can claim restitution type damages because they were harmed. If the party ends up liking the contract they can ratify the contract. They can not ratify until the threat is over. Once the threat is over they can ratify the contract expressedly or by conduct. Economic duress can also be an issue, see first semester for that topic. p.357 1. No duress here, just aggressive business. Nothing unfair or illegal here.
UNDUE INFLUENCE – improper or unfair persuasion. Almost all of these cases have a person in position to exert undue influence. Some relationship where there is some confidence, some fiduciary relationship (attny/client, doctor/patient, pastor/person, employer/employee). Like duress, the contract is voidable by the person who was under the influence. 1. Must be some susceptibility in the party being influenced. (emotionally, physically, psychologically weaker) 2. Must be evidence of the opportunity to exercise inappropriate influence 3. Must be some sort of action exercised by this person (typically some act that initiates another to enter into a contract) 4. Must be evidence that the situation is unnaturally unfair. Doesn’t usually rise to the level of duress because there is typically not a threat. In California a marriage automatically gives rise to a confidential relationship, but that is not true in every state. Does not have to be a confidential relationship, can be a relationship of dominance. A person pretty much must abuse their position in a relationship. p.367 6. There is a susceptible person here, and there is a confidential relationship, but there is almost no evidence that the dominant person acted in any way to initiate a contract. The trend is that when you are in such a confidential relationship we will imply that something was done. The court will almost require evidence that you did not exert undue influence. They will take the prima facie case because the result is so unnatural. 7. Yes, prima facie case. Factors – 1. discussion of a transaction in an unusual place 2. the insistent demand that the business be finished at once 3. an extreme emphasis on adverse results if there is a delay 4. multiple persuaders 5. absence of 3rd party advisors for the susceptible party MISREPRESENTATION – FRAUD Someone is misrepresenting something Again the contract is voidable. Contract Fraud is easier to come by than Torts Fraud, but the remedy is not as great. Here you can just typically void the contract. Does not have to be intentional misrepresentation. When it is intentional the issue of materialness is not as big of a deal.
The person must have been deceived by the misrepresentation and relied on it. Misrepresentation > >- Fraud/Non-disclosure: someone misrepresenting something. >- Makes K voidable. >- Remedy: rescind K and restitution > > >2/4/04: Class Notes > >Misrepresentation: : can be either intentional or unintentional >- Typically w/ intentional misrepresentation, then materiality not that >great. If that particular person was deceived than can be legitimate enough >for voidability. >- Unintentional: materiality standard: would a Rx person find >misrepresentation be influced or know of mis representation. >- Person must be deceived by mis-Rep and have relied on it > > >Earl v. Saks >Gift can be rescinded if induced by fraud. if Saks made him think he had >bought coat for lower price. >- can concealment constitute fraud? Yes. > >Intentional >Deceived >Relied >Injury: not that important. >- not out money wise >- aEURoeinterest in making a free choiceaEUR? > >Misreprestation w/ respect to opinion if no fraudulent > > > >Vokes v. Arthur Murray (375) >Facts: P wanted to become an accomplished dancer, and she sought the >services of D. D authorizes franchise operators under its name to instruct >client on dance techniques. Initially, D sold Pl 8 A1/2 hr lessons to be >used w/i 1 month. Over a period of 16 months she was sold 14 additional >dance courses under separate Ks. During that interim D encouraged P
to >sign the subsequent Ks by assuring her that she had grace and poise; >rapidly improving and developing her dance skill; she was capable of >dancing w/ the most accomplished dancers. P soon discovered that she did >not develop in her dancing ability; she had no dance aptitude; and even had >difficulty hearing the musical beat. >- misrepresented their opinion of her to get her to buy more lessons > >Rule(s): A statement made by a party having superior knowledge may be >regarded as a statement of fact, although it would be considered as opinion >if the parties were dealing on equal terms. > >Rationale: It can be reasonably inferred that DaEUR(tm)s had aEURoesuperior >knowledgeaEUR? as to whether Pl had aEURoedance potentialaEUR? and as to whether >she was noticeably improving. Even in a KaEUR(tm)ual situation where a party >owes no duty to disclose facts w/i his knowledge or to answer inquiries >respecting such facts, the law is if he undertakes to do so, he must >disclose the whole truth. > >***do not protect everyone from their bad decisions!!!! Fine line. Here, >expert opinion that was relied on. How does it smell? > >Problems: >13: non disclosure does not generally give rise to MR/fraud. if needs to >fit into an exception. > >15: Fraud in the factum if sometime pulls a fast one on you. >- beyond misrepresentation, K deemed to be void. > >16: bank had no misrepresentation to her. Not going to be able to get out >of her K with the bank.
2/6/04 MISTAKE Contracts that can be voided because of some mistake. What kind of mistake?
Classically it is a mutual mistake about the item involved in the contract. Generally it is an honest mistake. Generally it is a mistake of fact, not a mistake in judgment, and the contract is voidable. There is something called conscious ignorance, and when there is this conscious ignorance and the other side does not exhibit any fraud or unfairness, then the sale stands even if it turns out to be a bad deal later on. The mistake must be more than just a mistake as to the quality, it must be a mistake as to what the thing actually was. Restatement (p.389) 1) When there is a mistake of both parties at the time a contract was made as to a basic assumption on which the contract was made. 2) The mistake must have a material effect. 3) Unless the party bears the risk. a) the risk is allocated to him by agreement of the parties b) he is aware, at the time the contract is made, that he has only limited knowledge with respect to the facts to which the mistake relates but treats his limited knowledge as sufficient (conscious ignorance) c) the risk is allocated to him by the court on the ground that it is reasonable in the circumstances to do so There can also be unilateral mistake in contracts. Traditionally for a unilateral mistake to give rise to a voidable contract, the other party must have known, or should have known that the mistaken party was acting under a mistaken pretense. This is very tantamount to misrepresentation. Modernly the mistake rule has been expanded, it includes the traditional but adds: Restatement – You can also avoid where the three requirements are met 1 – Basic Assumption, 2 – Material, 3 – Risk, AND the effect of the mistake is that the enforcement of the K would be unconscionable and you can return the parties back to where they were before the contract. These unilateral mistake cases almost always come up in bidding contracts only. 2/9/04 Typically the unilateral mistake cases say that the mistake must be a mistake of fact, not a mistake of judgment. Sometimes the party who made the mistake will be negligent in making that mistake, but that will not preclude the recision of the contract. If the party is grossly negligent then usually they can not void the contract for reasons of mistake. Problems p.396
17. Judgment for defendant, buyer beware when there is conscious ignorance or conscious uncertainty. They are taking the risk knowing full well that the calf may ha ve the condition. If they did not want to take the risk they should have put in some sort of warranty. 19. This falls under mistake of law. Here the mistake of the law of the zoning ordinance may possibly be a situation where the contract is voidable. This is a mistake as to the very nature of the item being contracted for. Here there is no expressed assumption of risk. Here there is no conscious ignorance, they did check the zoning on their own. Here the court ruled that the contract could be voidable. 20. Forget about the transfer to the wife at this point. This can fall in two different camps. Typically you are buying something on a gross basis, but you can also buy on an acre basis. On a per acre basis you typically have the option of either voiding the contract or keeping what you have and getting restitution. The problem looks like it is on a gross basis, and these contracts are voidable because of mutual mistake and this one was voidable. 21. Unilateral mistake. Is it going to the very essence? Yes. Is there issues of risk? Probably not. In this case the person who bought actually went out and looked at the property and knew of the houses. That was voidable because it is almost non-disclosure. What if the party did not check and know? Modernly we have to look at the unconscionability and that is not a very high threshold so it probably would be voidable because we can put the parties back to the status quo ante. 23. This is know as mistake in performance. If a party mistakenly thinks they have an obligation under a contract, then typically they are entitled to relief. REFORMATION Reforming the contract may be an option where a contract is otherwise voidable, this is an equitable remedy rather than a remedy by law. This means to rewrite the contract to the way it was supposed to be, it is not making a new contract. This is also not a very common remedy. This also needs a higher standard of evidence to prove. Typically you see this where there has been a mistake. Most often this is where the writing of the contract does not actually represent the agreement. 2/11/04 UNCONSCIONABILITY So bad that it is shocking to the conscious of the court. Remedy is that we can void the contract, the court can excise the unconscionable part, or they can reform the unconscionable part. There is substantive unconscionability – great disparity in prices that is shocking.
There is also procedural unconscionability – when the court finds that the contract was procured by fraud, or duress, or undue influence. Typically when a person is pressured to enter a contract, typically where there is a lack of sophistication with one party. This leads us back to contracts of adhesion, typically procedural unconscionbility. Standardized forms where there is no negotiation and unequal bargaining positions and typically a take it or leave it deal. Contracts of adhesion are not necessarily bad, it is just a description of a type of contract. Where contracts of adhesion go bad and become voidable are when there is something grossly unfair about the contract. This usually blends in with unconscionability. Duty to read? Do you have a duty to read? Yes you do have a duty to read a contract. Sometimes the duty to read may be excused and will be excused with all the things in chapter 7 (fraud, duress, etc.) Mistake is where it usually comes up, where there may be a mutual mistake and the parties do not properly read the contract and it is mistaken, the courts will usually allow the contract to be reformed or excused. Tougher in unilateral mistakes, but may be allowed if there is a connection with misrepresentation. Also sometimes the duty will be excused if there is something written in a place where you didn’t see, or where something is illegible. Chapter 8 PERFORMANCE OF CONTRACTS What is a breach of contract? This is where somebody does not fulfill their promise. Conditions – If this person does not give me an offer to buy my house in 3 days then I promise to pay you $25,000 to paint my house and you promise to paint my house. The condition is that this person must not give an offer in 3 days. The duty arises after this condition occurs. Promises are performed or not performed. Conditions are met or not met. There are conditions precedent, these conditions must occur first before there is any duty or liability that arises from the contract. There are also conditions subsequent, where somebody already has an obligation to perform, but it can be excused or relieved based on some condition that may occur. 2/13/04 Expressed Conditions Precedent – Audette case, there had to be a sworn certificate from a physician for the person to get money from the insurance company. This is a condition precedent, the sworn certificate must be gotten first, then the insurance company has an obligation to pay. If an expressed condition precedent has not been met then it will be strictly enforced.
An express condition precedent can be thrown out if it against public policy or if it is unconscionable. p. 417 1. The condition precedent is that the wife is alive at his death. The wife’s estate is typically going to have to prove that the condition is met. It is going to be hard to prove that the condition was met and the money will probably go to the husband’s estate. Simultaneous death statute – unless you can show otherwise it is presupposed that the other person died prior. In other words, the condition precedent will not have been met. 2. They did not request her to revoke the withdrawal, so the condition was not met and she can practice wherever she wants. 3. Must show proof of disability and then the insurance company will pay the premiums. The condition was not met here and the insurance company will not have to pick up the premiums.
DOES THE CONTRACT CREATE AN EXPRESSED CONDITION, A PROMISE, OR BOTH? I will promise to pay you $100 if you walk across the bridge. The walking across the bridge is a condition precedent. If you promise to walk across the bridge, I promise to pay you $100 if you in fact walk across the bridge. This is now a bilateral contract with a condition precedent. Chris now promises to walk across the bridge but that is also a condition precedent to Popovich’s obligation. If Chris does not walk across the bridge then Popovich does not have to pa y. Chris breach the promise and Popovich can sue him for breach of contract. The classic case of Glaholm v. Hays A has a ship in England, and B is living in the US and wants to charter this ship. They enter a contract with the critical term, “the vessel to sail from England on or before the 4 th of February.” Was sailing on the 4th a condition, a promise, or both? It could be construed as an expressed condition. If so, then B has no obligation to pay because the condition has not been met, but B can not sue for breach of contract. Let’s assume that is was a promise from A. A is in breach of contract, B can file suit. If it is a material breach of promise then B is excused from paying and can sue for any damages. If the promise breach is considered not material then B can not be excused from the contract, but can sue for breach of contract. Generally when the courts are not sure what it is, the courts find it to be a contract, because then the contract will go through. We could also interpret it as both. If both then B is excused from any obligation and he can sue for breach of contract.
2/16/04 When figuring out is something is a condition or a promise the courts will sometimes construe a contract in the light least favorable to the drafter of the contract. If the person doing the act is asking the non-actor to do something then it will be construed as a condition. non-negotiable note means that it can not be transferred at all. 2/18/04 Pay when paid clauses are usually interpreted as promises unless very clear that they are a condition precedent. What about the parole evidence rule? And what about a condition precedent to the formation of the contract? An exception to the parole evidence rule is that generally parole evidence is not a bar to show a condition precedent in an existing contract as long as the condition precedent is not contradictory to the contract. Also you can always bring in parole evidence to show a condition precedent to the formation of the contract because that goes to the very question of whether the contract existed in the first place. QUESTIONS ASK ABOUT POPVISH ABOUT MISFEASANCE AND NONFEASANCE ASK ABOUT INCOMPETENCY, AND ICARUS SENARIO. THE DEALER DID NOT KNOW ABOUT INCOMPETENCY, IS THERE A DIFFERENT RESULT UNDER TRADITIONAL OR MODERN TREND. 2/23/04 Promises don’t have to be met to the same extent as conditions precedent. We can have substantial performance. Also if it is not a substantial breach of promise that will not excuse the other party from performing. You can have damages but that is a different story. Is it a condition precedent to the formation of the contract, or is the contract formed and it is a condition precedent to an obligation. p.442 9. Either this is a promise or condition. The court ruled this was a condition, but ballsy. If it was a condition, then it was not met and the buyer did not have to buy. If a promise then we have to determine if it was a material breach or not. If a material breach then it is like saying that the contract was not substantially performed and the buyer does not have to pay. If not a material breach then the buyer must buy and then can sue for damages. Does sound more like a promise to us. The first restatement says, on the other hand, that the words are not those of the party doing the act. Words are of defendant and
the plaintiff was the one who was supposed to do the act. The first restatement says in these cases that the presumption is of a condition. After the first restatement this rule was kind of abandoned. 10. This was held to be a promise. 11. This is a condition precedent to the closing, there is also an implied promise for the buyer to use good faith in attempting to procure a loan. 13. They never taught them how to make paper. This is an example of an implied-in-fact condition. This is the exact same thing as an expressed condition, it is a condition that is in the contract, but is just not in the words. It is in the contract because logically it must occur before the other party can perform. If the payment was in cash, it would probably be considered a constructive condition, or a promise, which would then lead us to look and see if it is a material breach of promise. Constructive conditions Traditionally promises were independent of each other unless stated in the contract. Modernly we have constructive conditions. When one promise takes a long time and the other takes a short time, like a construction for money, then the payment of money will be contingent upon the person building. Expressed conditions must be performed exactly. Constructive conditions must be performed substantially before the other party must perform their end of the bargain. If parties obligations can be performed simultaneously then each will be conditioned on the others willingness to perform. No constructive condition precedent. In these situations the court will find a concurrent condition. Each party has to be ready to tender simultaneously. In looking to see if there is substantial performance we are pretty much looking to see if they got what they bargained for, is it basically what was contracted for. 2/27/04 p. 458 has factors to consider when determining if the breach was material. Modernly you need to give notice of the breach and if curable then the other party has a reasonable time to cure the breach. 3/1/04 16. We have a constructive condition that someone performs in building the new roof. If that is performed substantially then there is an obligation to pay. The question here is “Is this substantial performance?” Factors on page 458. Use an objective standard to look at performance. This court said that a roof has an important cosmetic aspect as well as a functional aspect. In this case they said this was not substantial performance. If it was a factory then there is a different story.
20. Here is where we look at timeliness in relation to substantial performance. Does a delay in performance constitute a material breach. First we look to see if it is an expressed condition, here the language is not strong enough, no time is of the essence clause or saying “must be performed by”. Generally this would not be considered a material breach. Very short delay and the transaction is pretty complex. A reasonable delay is considered substantial performance, while an unreasonable delay is considered a material breach. Constructive Conditions under the UCC. On the surface the UCC is not very liberal with respect to substantial performance. There is something called the perfect tender rule. You must ship what you are supposed to ship and you can not vary at all. But, the seller has the opportunity to cure the nonconforming item if he does so before the time of performance has expired. If the nonconforming item is one that the seller would reasonably believe would be acceptable to the buyer, then the seller has more time to cure. UCC sections 2-508, 2-601, 2-602, 2-606, 2-608 After finding the defect must give notice within a reasonable time to put the seller on notice and give him reasonable opportunity to cure. If state laws do not state otherwise, the UCC requires that buyers give timely notice of a breach in warranty otherwise they are barred from recovery. Generally you can fail to notify up to a few months after you discover the defect. Is filing a lawsuit considered valid notice? That varies by state. The notice can generally be in oral form or written form. 3/3/04 – Quasi Contracts Majority and traditional rule says that if someone has breached, has not substantially performed, then they don’t get anything. Modern trend is to recognize this thing called Quasi-Contract. Even though the contract itself was breach and is over, there still might have been a little contract there. The party who is breached is entitled to restitution for any benefit that he has conferred by way of part performance or reliance in excess of the loss that he has caused by his own breach. The modern trend is to provide this type of quantum-meruit restitution in cases where the breach is not willful. If the breach is willful probably not going to get anything if you are the breaching party. p.478 26. This is a UCC deal. § 2-718. If the buyer pays a portion and then does not pay the rest and we have a material breach. The buyer gets back his money, minus the lesser of 20% of the value of total performance or $500, minus any damages they have caused by the breach. This is the default UCC rule, but they can contract for something else.
Severability of Contracts We will see that construction contracts are generally not divisible. Other larger contracts can be divisible if it seems like you can separate the big contract into smaller contracts. Can we divide this big contract into little contracts. Most construction contracts are not divisible into separate contracts. Just because you have progress payments it does not mean that the contract is divisible, and Quantum Meruit is not always paid. They look to the parties intent but really they look to see had the parties thought about it as reasonable people would they logically accept that the contract could be divisible. p.481 29. Let’s assume the person has been paid monthly up until that time. Is that type of contract divisible, Common Law says that employment contracts are typically divisible, this is not taking into account any employment law. In this case the person is entitled to payment up through June, but probably a substantial breach for the month of July and no payment, but there may be some quantum meruit. 31. The sign builder is in breach that is for sure. In this case the signs are not interdependent, they are just separate signs. The court held that this was severable. The plaintiff was in total breach on one sign. The sign in the wrong place is up for debate as to whether that is a material breach. But the other signs were erected properly. Wrongful prevention and non-cooperation There are some situations where the fulfillment of a promise or a condition will be excused. 3 Types of cases 1. Excuse of conditions – a clear condition that will be excused 2. A breach of an implied promise 3. Excuse of non-performance Case where the nephew had a contract to take care of the uncle. The uncle points a gun at the nephew and says get out and stop caring for me. The nephew wants to get paid. There was a condition that the nephew had to perform the condition of caring before he gets paid, but in this case there may be an excuse of condition. A condition may be excused by prevention or hindrance of its occurrence through a breach of the duty of good faith and fair dealing in its performance and its enforcement. 3/17/04 Case where the plaintiff has the exclusive right to sell food and drink at the stadium, and the defendant would receive a portion of the profits. The plaintiff did not want to sell
alcohol at the stand and then the defendant basically said you are in breach of contract and we are going to get someone else in that will sell alcohol. There was no express agreement that the plaintiffs had to sell alcohol, but the court said that there was an implied duty to maximize profits so they held for the defendants. Stop and Shop was renting a lot and paying market value rent + a % of gross sales over a certain amount. After nine years they stopped operating the store and there was no express agreement to continue operating the store. Here the court found no implied agreement because the rent was high enough to not think that the operation of the store was necessary. If the rent was real low and if they opened up a store next door, then the Stop and Shop would have been done for. p.8 33. If the condition is in your control, then you have to make a good faith, reasonable effort to fulfill the condition. T does do this, he tries to obtain the license. At this point, T could just walk away because the condition was not met. T wants to walk away and sue, he is going to say that L hindered his getting the license. He is going to say that L breached his implied promise not to interfere with T performing the condition. 35. There is an express condition precedent. The sale must go through before the commission is to be paid. The duty to clear minor defects in title is a very clear and obvious duty, so this duty is implied and since the seller did not fulfill this duty he is said to have hindered the sale. The broker gets the commission. 36. The time of the essence was a condition but because the State hindered the project getting done, then they excused the time of the essence as a condition, and the company has a reasonable time to finish the building. WAIVER, ESTOPPEL AND ELECTION Waiver of conditions: Intentional 1) Prior to K being formed: negotiations 2) K formed and condition waived during contract but before condition occurs of fails to perform on condition 3) Absolve condition after lack of performance (called election) 1 and 2 are under the estoppel category. -- Exception to the parol evidence rule -- Waiver after K but before failure as a consideration substitute If Alex is to paint Popovich’s house but only if he does not get a full price offer in the next 2 days. Then before agreeing to the actual contract they agree that Pop just wants it painted anyways. They orally agree to waive the condition prior to contract formation. But Pop drew up the contract before and they sign in and it has the condition in it. Using the parol evidence rule we would not be able to permit evidence of the oral agreement that contradicts the written agreement, in saying that there is no condition. If Alex
detrimentally relied on the oral waiver then Pop would be estopped from retracting that waiver, if not we would have to go with the parol evidence rule. If she went out and bought paint or gave up other jobs then that may count in terms of detrimental reliance. 3/19/04 UCC has the perfect tender rule. This also means that when you set a date, then by default time is of the essence is assumed. Can you reinstate a condition that you have waived? Under common law we could reinstate a waiver unless the other party has detrimentally relied on the waiver. Under UCC § 2-209(5) a party that waives a condition may reinstate the condition unless it would be unjust in light of reliance on part of the other party. p. 507 38. (a) If this was a non-UCC case then we are almost getting into contract modification. If it is a material part of the contract then typically we need consideration to modify the contract. If it is an immaterial condition then it can be waived with no consideration. Now this is a UCC case and for a modification of a contract under UCC we never need consideration at all so the waiver was good and the delivery was good. (b) Here he is trying to reinstate the condition. To reinstate it they have to give clear notice that they are reinstating it, and we need make sure the other party has not changed their position in detrimental reliance. Here we need more facts, but logically the other party probably has not detrimentally relied on it. 39. Here this is not the UCC. We first need to look to see if this is an effective waiver. We need to look to see if the “time is of the essence” is a material condition, and generally it is not considered a material condition. So the waiver is good and then a reasonable time is substituted in its place. Then we need to see if X detrimentally relied on the waiver, here we know they did and we need to see if this is a large enough detrimental reliance and it looks like there is here. So Y would not be able to reinstate the waiver. Then we need to just look to see if August is a reasonable time to build it. On a job like this it is most likely reasonable. 40. Since the buyer insisted on the condition they are receiving the benefit of the condition. The party that can waive is generally the party that receives the benefits. The courts here find that this is not a material term. Here the condition has been waived and that does not allow the seller not to perform. 41. Here we have a bunch of repeated waivers after the conditions repeatedly had not been met. The rule is that generally repeated waivers do not become a waiver of further conditions unless there is some sort of detrimental reliance. The rule with late payments is that if you have a few late acceptances then it does not really affect anything, but if there were a lot of late payments that were acceptances then the pattern is that the payee is not really concerned with timeliness and the payor can detrimentally rely on this pattern. The payee can reinstate the conditions as long as he makes it clear and there is
no detrimental reliance. Here there is also a no waiver clause. There is a split in jurisdiction and some courts enforce the future no waiver clause, and other courts do not and will just go by the analysis we did above. 42. It looks like the Insurance Company waived the condition by conduct. They could have said, sorry, you did not send in the notice and we are not defending you. Instead they took on the case, here this is an election and generally when there is an election you can not withdraw it. RELIEF FROM FORFEITURE The general rule with express conditions is that they are strictly enforced. If you don’t meet a condition then you have forfeited and it is gone. But there are some situations where it is just too much and the courts will step in and provide equitable relief. This is not the norm, these are exceptions to the rule. 1st restatement – A condition may be excused without other reason if its requirement (a) will involve extreme forfeiture or penalty, and (b) its existence or occurrence forms no essential part of the exchange for the promisor’s performance 2nd restatement – To the extent where the non occurrence of a condition would cause disproportionate forfeiture, the court will be able to excuse the condition unless its occurrence was a material part of the exchange. The court can also find that there is no duty to read a contract. p.540 47. Here forfeiture would be extreme and the tenant was guilty of an excusable inattention. They allowed the tenant to renew. 48. This is an option contract. If you let the time pass then the option is finished. By agreement the time is the time. If there was a commitment to purchase then what? First we look to see if it is an extreme forfeiture, here 5.4% of the total price usually does not cut it. CONDITIONS OF SATISFACTION Satisfaction of a contracting party. Satisfaction of a 3rd party. Here these conditions will be expressed conditions, not implied. There is no such thing as an implied satisfaction clause. Party to the contract: Battle between subjective and objective. Generally the courts use an objective standard, of would a reasonable person approve or be satisfied, when the contract is for
mechanical, fitness, utility, marketability, etc. Generally in building cases, when there is something that can be measured. Generally the courts will use a subjective standard when the contract involves taste or personal judgment. Classic example is someone painting a portrait of you, if the person is honestly and in good faith dissatisfied, it can be unreasonable or not, then the condition is not met. This is more common in interior decorating then exterior decorating. But in these cases, sometimes quantum meruit is called for. 3rd party satisfaction: These almost always arise in construction cases where the architect must approve certain things. There is a split in authority here. The majority rule here is that you use a subjective standard of this 3 rd party “expert.” Here the 3 rd party can be unreasonable but again needs to use good faith. They must be acting independently as well. There are also some cases where the 3 rd party is grossly erroneous and then the courts will imply that that is bad faith. The small minority (Nolan Rule) says that 3 rd parties can not be unreasonable, basically they are held to an objective standard. When there is no satisfaction then the other party has a chance to cure that lack of satisfaction. 3/26/04 p.554 #50. Here the architect is not acting like a 3 rd party, instead he is acting like one of the parties to the contract. #51. The defendant is trying to say that the satisfaction of the architect trumps anything else. If the contract is found to read that the architect’s feelings were conclusive then that will be the end of it as long as the architect was acting in good faith and independently. In this particular case the court found that there were two promises, one to get the approval of the architect, and one to perform in the workman like manner. The court allowed the evidence in. SECTION 12 – PROSPECTIVE FAILURE OF CONDITION AND BREACH BY REPUDIATION Popovich has a contract with Alex that Alex is going to paint his house in 2 weeks. Alex gets hurt and is going to be in the hospital for 2 months. What now? Alex is not going to be able to perform, what can Popovich do. How about this: Alex and Popovich have the contract, but Alex continues to go out and get bids to perform other jobs, and word gets out that she accepted another job that conflicts with Popovich’s job. What can Popovich do now? At what point is there enough information that you can suspend what you are supposed to do, and that you can go out and form another contract.
ANTICIPATORY REPUDIATION What courts do is they say that there is an implied duty not to repudiate the contract, and if the person repudiates then they are in breach. Basically the non-breaching party can sue before there are actual damages. They have to make a reasonable effort to mitigate damages. Where it is clear that the other party is not going to perform we know the other party can sue, they can stop their own performance, they can suspend their own performance, they can cancel the contract and find some else to do it, they can also sue. There are also cases where it is unclear that the other party is going to perform or not. If a party is very vague, and just expressing some doubt, then this usually is enough that will allow the other party to suspend their performance. They usually have to give some notice or get some assurances. If they ask for assurances and don’t get any, then they can usually cancel the contract. To cancel you do need something that is pretty clear, does not need to be actual words. There are other cases where the other party becomes insolvent, or files bankruptcy. Let’s say you hear a rumor that the other party is in financial trouble, is that enough? Probably not. What if the other party is insolvent? Insolvent means that you owe more than you own. That is usually enough for you to suspend performance, but not enough to cancel. The fact that they might not be able to perform does not mean that they actually will not perform. It might be enough to ask for assurances that they will go through with the contract. What if the other party files for bankruptcy? This alone puts you on notice, and you can suspend your performance and ask for assurances. Much like solvency. 3/29/04 UCC § 2-609: When there is reasonable grounds that one party may not perform, then the other party may demand in writing assurances, and he may suspend his performance until he receives assurance. After receiving a justified demand for assurance, the other party has a reasonable time, not to exceed 30 days, to respond or it will be considered a repudiation. §2-611: After repudiating you can retract your repudiation as long as you give notice and the other party has not detrimentally relied. CHAPTER 11 – 3rd party beneficiaries Can the 3rd party beneficiary sue to enforce the contract? Modernly we see that the 3 rd party can sue to enforce the promise. If the 3rd party is considered an incidental beneficiary then they can not sue.
Historically, traditionally the 3 rd party could not sue because they were not in privity. Modernly this has been changed for certain 3 rd party beneficiaries. 3/30/04 There are mainly 2 kinds of 3 rd party beneficiaries. Creditor beneficiary, these kind can sue. Donee beneficiary – where the promisee is intending some donative or gift benefit to the 3rd party. Creditor beneficiary – Where the promisee knows they have an obligation or thinks they have an obligation to the 3rd party. The 2 nd restatement changes the language and calls them an intended beneficiary. Some jurisdictions say this is only true where there is actually an obligation, not when the person thinks they have an obligation. When someone buys a house and assumes the mortgage, they are promising to assume liability of that mortgage. When someone buys a house and takes it subject to a mortgage, they are not promising to pay that mortgage, so the bank is an incidental beneficiary and can not sue the buyer. They can foreclose though. 3/31/04 In Vrooman v. Turner we have an interesting case. Evans gets a loan from Vrooman in buying a house. Evans sells the house to someone who takes subject to the mortgage, then that person sells to someone else who takes subject to. Then Turner buys the house and assumes the mortgage. Vrooman tries to sue Turner but the court says that the assumption of the loan was not valid because the people before had already taken subject to. There is actually a split of authority on these types of cases. The trend is that Vrooman would be a valid 3rd party beneficiary because we only look at the actions of the person who assumes the mortgage and we don’t need to look at the chain. General principles about 3 rd party beneficiaries. We have talked about intended beneficiaries which can be creditor or donee beneficiaries. 1st restatement – If the promisee’s primary intent in contracting was to benefit the 3 rd party. That makes an intended beneficiary out of a donee beneficiary. 2nd restatement – This stops using the term donee or creditor beneficiary and makes them all intended beneficiary. The promissor must be aware that they will be held accountable by a limited group of people.
The basic test is that the promisee intended for this 3rd party to be benefited. Usually this is fairly clear. Some factors to consider where it is not clear in the contract that the promisee is intending to benefit a 3 rd party. 1) To whom does the benefit or the performance run? If the benefit runs from the promissor directly to the 3 rd party then it seems pretty clear. If, however the primary benefit runs to the promisee then it is more clear that the 3 rd party is an incidental beneficiary. 2) If there was a reliance by the 3 rd party, was that 3 rd party reasonable in relying on this contract? The restatement actually says that the 3 rd party does not even need to rely, but just need to able to say it would be reasonable for me to rely. The courts, however, usually need the 3rd party to actually rely. 4/2/04 When someone gets a will drafted they pay the attorney and the attorney gives them a will. They are the party to whom the benefit flows. Now the will does give things to others, making them intended beneficiaries. The person who drafts the will is clearly trying to benefit the people who the will gives stuff to. The intended beneficiaries are allowed to sue the attorney if they mess up. p.763 1. They are not qualified 3rd party beneficiaries. The money was not clearly intended to be only used to pay these people, it wasn’t part of the bargain. 2. Generally the public is not going to be a qualified 3 rd party beneficiary because the scope would be too broad. However, if the contract specifically provides for some liability and limits the scope of recovery then we will allow it. This is one of those classic cases where the suit is good. Does not need to limit number of people who can recover, might just limit the scope of liability. 4. Yes they are intended beneficiaries and can recover. 5. Incidental beneficiaries, no suit. 6. This problem does not really belong in contracts because statutes will overtake any rules. Before the statues came about this type of problem got mixed decisions. 10. Not strong enough to come up with intended beneficiary. No suit. 11. Macy’s can sue the landlord, they have a contract with them. What about against the contractor? It is not clear, it seems like they are intended but the benefit is flowing to the landlord. Here they found that Macy’s was just incidental beneficiary. VESTING AND RIGHTS OF PARTIES When does the rights of a 3 rd party beneficiary vest?
1. When they bring an action. 2. Where the 3rd party beneficiary materially changes his position in reliance on the agreement. 3. DEFENSES 1. Any defense that the promisor would have against the promisee. RELATIONSHIP BETWEEN THE PARTIES Who can the 3rd party beneficiary sue? They can sue the promissor. They can sue the promisee in a creditor type situation. They can sue both but will only get single recovery. In a donee situation, the person can sue the promissor but can not sue the promisee because there is no enforceable contract in a gift situation. 4/5/04 Vesting When can the promisor/promisee change their minds and cut out the 3 rd party. Novation is when once you have gone after one party, you give up your right to go after another party. Defenses that are available to the promisor. The promisor can bring up any defense against the 3 rd party that would be able to bring up against the promisee. Vesting only applies to valid 3 rd party beneficiaries. When can a promisor and promisee change an agreement that has a 3 rd party beneficiary? Until there is vesting. Under the first restatement a donee’s 3 rd party’s rights vest right away. A creditor’s 3rd parties rights vest when they rely on it. The second restatement says that 3rd party’s rights vest when: they sue; they materially change their position in justifiable reliance; they manifest his or her assent to the promise. Drewen v. Bank of Manhattan Can the promisee sue the promisor? Yes, because they have a contract. 4/7/04 The promisor can use defenses that they would have against the promisee, but can they use defenses that the promisee would use against the 3 rd party beneficiary? If the promisor assumes that note and agrees to pay the note regardless on what the promisee would actually owe on it, then can not use the defense. Alternatively, if the promisor agrees to pay whatever the promisee is obligated to pay, then he can bring up those defenses.
p. 776 16. If the note was taken subject to, then B would not even be a valid 3 rd party beneficiary and could not sue C. But since C has assumed the mortgage B can sue C. There is no limiting language here, it looks like a straight assumption so C would not be able to use a defense that A would have against B. STATUTE OF FRAUDS One year rule – If a completion of the contract within one year of formation would per se necessarily be a violation of the express terms of the contract, then the contract needs to be in writing and comply with the statute of frauds. Originally there were 5 types of contracts that must be in writing. To prevent fraud and to give people a chance to think about it before entering a contract. 1) a promise by an executor or administrator to answer damages out of the estate they are handling 2) surety ship provisions, indemnity provisions, or guaranteeing provisions 3) an agreement made in consideration of marriage 4) any contract for the sale of land or interest in land 5) any contract that is not to be performed within one year of the making of the contract In England they repealed the SOF except for provisions 2 and 4. In America, every state except Louisiana has adopted the original statute of frauds. It has actually been expanded in state statutes to include loans, etc. Why? To prevent perjury, it also has an evidentiary function, channeling function (channel people to lawyers), promotes certainty, cautionary function (make people think about what they are doing) 4/9/04 1) Contracts of an executor or administrator. 2) Surety ship provisions (basically somebody guaranteeing something) 3) Promises to Marry each other (this is no longer in the statute of frauds) Pre-marital agreements are not within the statute of frauds but most states have other statutes that require pre-marital agreements to be in writing. 4) Land contracts (sales, transfers, mortgages, easements etc.) 5) Contracts that are not to be performed within one year. UCC says: For the sale of goods that are $500 or more. Investment securities or other intangible assets. Proposed revisions changes the $500 to $5000. What constitutes a valid writing? It must constitute a memorandum that is signed by the party to be charged.
A memorandum must generally have: 1)Parties; 2)Description of the subject matter of the contract; 3)Must have the essential terms and conditions of all of the promises in the contract and by whom to whom the promises are made. Most states have adopted the Uniform Electronic Transfers Act. Writings that are done by computer or what not are going to satisfy the writing requirement. ONE YEAR The contract must be in writing if the contract can not be performed within one year of the formation of the contract. Why? The longer the contract, the more likely the parties will forget about the provisions. When the contract is stated to be for an indefinite duration, then it is not within the statute of frauds. We don’t care about the expectation’s of the party, we don’t care about reasonableness, we just look at the express terms of the agreement. What about a contract that is stated to last more than a year, but either party can terminate within the year? The majority view used to be that this is within the area covered by the statute. California does not like this and takes the different view, and now the majority view is that this type of contract does not fall within the statute of frauds. Still a minority takes the other view. 4/12/04 p. 824 1. No, this probably will not fall within the statute of frauds because the person could get out of his contract on that day and complete the contract within a year. 4. (a) Yes, within the statute of frauds. (b) No, not within the statute of frauds. (c) No, not within the statute of frauds. (d) There is a division of the courts with this type of ruling. The majority of courts will say this is not within the statute of frauds. Other courts will say that when there is a termination provision, the termination provision does not govern so it would fall within the statute of frauds. 6. This is called a non-competition clause, or a covenant not to compete. The general rule is that this is not within the statute of frauds because the person can die within a year and that would complete the contract within a year. Minority of jurisdictions say that this is within the statute of frauds. THE MEMORANDUM What is a qualifying memorandum?
The writing can be almost anything: a letter, a contract, a telegram, a telex, receipts, checks, electronic data. The writing must be signed by the party to be charged. When we have a bunch of writings then what? If every one of the documents are signed and it is clear they are referring to the same thing, then there is no problem. What if some are signed and others are not signed? If the unsigned documents are physically attached to the signed documents when the person signed then that is ok. If the unsigned documents clearly refer to the other signed documents then that is ok. Another view is that the documents simply must refer to the same subject matter or transaction to be sufficient. In these cases we will allow extrinsic evidence to allow the connection to be made. Extrinsic evidence will also be allowed in to help determine what the writing meant. But you can not use extrinsic evidence to gap fill essential terms that are missing. p.829 7. It is valid once it is signed. There is no requirement of delivery. The memorandum is valid. 8. Ad to this hypo that the defendant signed the offer. Here this is a valid memorandum that was signed by the party to be charged. This meets the requirements of the SOF. 9. What qualifies as a signature? It can be typed, stamped, initialed, etc. Basically is the instrument being authenticated, can we tell that this person is accepting, adopting, assenting to this writing. It also counts if some directs another to sign on their behalf. In this particular case the court found it to be a valid signing, other courts would find it not to be a valid signing. Here is says XYZ undertakes to perform , and the defendant is XYZ so that was the signature. The majority says the signing can be anywhere, the minority says the signature must be at the end of the document. Is there any relief from the rule of the statute of frauds? There is a large majority that says: If one party fully performs their duties under a contract (oral or written), the other party will not be able to raise the statute of frauds as a defense. There is a minority that accepts that rule but says that full performance must occur within a year. There is an even smaller minority that says even full performance within a year will not override the statute of frauds defense. 4/14/04 Part Performance in a contract that is within the 1 year SOF arena. Generally part performance is not enough to create a full enforceable contract with respect to the one year provision. It can be enough in some land contracts or suretyship provisions. Promissory estoppel is an exception to the statute of frauds. There is a very small minority that does not use promissory estoppel to be an exception to the statute of frauds.
p.835 12. Here one party has fully performed so that is one argument. Also can argue that this is not within the SOF because the dude could have paid the money back within a year. 18. Generally not within the SOF because the dude could die soon. ASSIGNMENT AND DELAGATION In a normal bilateral contract, generally either party can assign their rights or benefits that they are to receive, to another person. An assignment is a present transfer of a right that you have under a contract. Lets say X and Y are in a contract. Y is going to assign his benefits to Z. Y is called the assignor, Z is the assignee, and X is the obligor. Delagation Delagation is not an assignment. This is delegating one’s duties under the contract. Let’s assume X and Y are in a contract again. X delatages his duties to U and now U owes the duty to perform to Y. X is either the delagator or the delagant, U is the delagatee or the delaget, Y is the obligee. For the 3rd party beneficiary the contract must be made with the 3 rd party in mind. With an assignment or delegation the contract already exists and then one party assigns one’s benefits or delegates duties. ASSIGNMENT The assignee is the one who steps into the shoes of the assignor. Y’s rights are being transferred to Z. Generally Y losses all rights to the K. Old history assignment was not allowed without permission, this is the same for delagation. Modernly almost all contract rights are assignable. 4/16/04 You can have an assignment and a delegation, this is basically transferring the whole contract. With respect to assignment, the assignor is out of the picture if he assigns his benefit. With delegation, the delagator is still liable under the original terms of the contract even if he does delegate his duties. Traditionally courts did not allow any assignments or delegations. That is gone, modernly most rights and duties can be assigned or delegated. Popovich hires Alex to paint his house for $40,000. Popovich wants to assign his benefit to Nadia. No, can’t do that because it is materially changing the contract. Alex was going to paint Popovich’s house, not Nadia’s (her house is much bigger).
ASSIGNMENT To be a valid assignment, it has to be some kind of transfer. Some manifestation of some indication to make a present transfer of a party’s contract rights. Sometimes the courts have differences in interpreting the language of an assignment, the court must interpret it as a present transfer of rights. p.779 1. Yes, it is an assignment. When you sell something it means you are presently transferring title. 2. No assignment. Separate contract to pay for C to pay A. 3. No, there must be some indication that C transfers his rights to A. This is merely a request. Once an assignment is made, it is irrevocable. Assignments can be gratuitous or for consideration. Gratuitous assignments are not irrevocable, they are revocable and they are automatically revoked under certain circumstances: 1. At death of the assignor 2. If reassigned by the assignor 3. If the assignor revokes by giving notice to the assignee or the obligor It is made irrevocable upon delivery of some instrument symbolizing delivery of the gift (usually a writing). A written notice of the assignment that is delivered will suffice. You can also assign the benefits of a possible future contract. 4/19/04 DEVIANTS FROM THE NORM If you have a donative assignment and the assignee reasonably detrimentally relies then the concepts of promissory estoppel come into play. On the Exam. Modernly most contract rights are assignable. Some however can not. Not assignable when: Restatement 2 nd is pretty good. If the assignment would (1) Materially change the duty of the obligor; (2) Materially increase the burden or risk imposed on the obligor (This is dealt with in insurance a lot. You can just say to your insurance company, hey don’t insure me now I am assigning the benefit of this insurance to Chi); (3) materially impair the obligor’s chances of obtaining return performance or materially reduce its value to the obligor; Also, you can provide for a non-assignment clause in the contract.
Also if the assignment is forbidden by statute or against public policy then it can not be done.
Often when someone takes over another company they basically take over the contracts and this is an assignment and delegation, it is sometimes just loosely called assignment of the contract rather than assignment of the benefits of the contract and delegation of the duties of the contract. Common law says you can not delegate duties. Modernly you can delegate duties unless they are prohibited for some reason. Can not be delegated if there is a non-delegation clause or if it is against public policy. Can also not be delegated if the contract is personal in nature. If the contract is for personal services where there is some skill involved. UCC says that delegation is ok unless the other party has a substantial interest in having the original party perform the duty. Where the performance by the delegatee would vary materially from the performance of the delegator. Don’t assume that just because there are personal services it can’t be delegated. If the personal services are more mechanical in nature, general in nature then they can be delegated. When something is being done by a corporation (a big outfit) the chances are that the person talked to is not going to be the person doing the work. So if it is fairly mechanical then it is not that much of a leap to delegate those duties. Nexxus is a hair care product company. Best has a deal with Nexxus where they are the exclusive distributor of Nexxus products. They buy products from Nexxus and re-sell them to salons and barber shops. Best is bought by Sally who is a competitor of Nexxus. The benefit of the contract to best is that they have the exclusive distributorship. The duty is to make a good faith effort to distribute the product and buy those products from Nexxus. A party may perform his duty through a delegatee unless the party has a substantial interest in having his original promisor perform or control the acts required by the contract. Here they said they have an interest in someone other than a direct competitor performing the contract. UCC 2-210(2) All rights can be assigned except where the: Read UCC.
Tenant rents out a commercial space. If the tenant makes improvements the landlord will reimburse the tenant. The tenant makes the improvements and says, hey landlord pay Aldana instead of me. The landlord pays the tenant instead and Aldana sues. The landlord points to the lease and it says, you can not assign the lease to anyone. The court says they are not assigning the lease, they are just assigning a benefit of the lease. Be more specific if you have an anti-assignment clause, here they are not assigning the leasing benefits, they are assigning some other lesser benefits. 4/21/04 Remedies. See handout. Non-Compensatory Damages – We are not compensating you pursuant to the contract. Yes the other party was wrong but how were you harmed. Nominal Damages where you have not been harmed, maybe you got someone else to do it for less. The court will give you a stamp and a $1. On the other end of the spectrum there are punitive damages. Very rare, in fact, all by themselves in a contract dispute there are no punitive damages. Usually comes into play when there is duress or fraud. REVIEW With promissory estoppel we started out saying PE is a substitution for consideration so the full contract will be enforced. As we move forward the remedy is becoming fairly flexible, maybe benefit of bargain but probably just a fair remedy, not the whole contract. In regards to the SOF, it is a modern view to say that we are using PE as a way of getting around SOF as a defense. Now it would be logical to say that this is a modern view in the first place, so the modern view for remedies would probably apply, make a fair remedy and don’t enforce the whole contract. But some courts don’t like the SOF 1 year provision so much that if they find promissory estoppel, that is it, SOF out the door and now we have a full contract and it will be enforced. Questions: For promissory estoppel, is the distinction between misfeasance and nonfeasance still heavily used? Still heavily used in gratuitous bailment situations. Modern trend is not to use it. What about knowledge of the competent party in the modern view on incompatancy? Either don’t understand anything that is going on at all. Or modern trend just can’t make rational decisions. The reasonableness of the seller goes to the restitution part. Parole Evidence, in the collateral contract approach and Williston approach, who looks at the additional terms? Judge? Jury? Not sure, not important. Is waiver of a condition prior to formation of a contract a contradictory term? And which approaches allow contradictory terms in? No contradictory terms. Even under Corbin, or UCC no contradictory terms.
Is a condition of satisfaction a condition precedent? If not met then no analysis needed as to whether the breach is material or not? It is a condition and if not met, then no material analysis. For Quasi-Contractual recovery under the UCC, we learned it as money back minus. What if the money out in the first place is not enough, then will the breaching party have to come out of pocket? That will not add to your liability. When there is time of the essence “I promise to pay you 1000, you promise to build me a dog house by May 5th, time is of the essence.” Is that a promise or a condition? Both a promise and a condition if clear enough to be a condition. The condition depends on how clear it was that it was important. The promise part is if the term is in complete control of a party. I will give you $5000 if you build me a 5 story doghouse by May 5 th. If the doghouse is not 5 stories high and built to the satisfaction of this 3 rd party (the dog) then you will not be compensated at all. In general if those conditions are not met, then I have no duty to pay but also have no ability to sue for damages. Now on May 1st I really can’t say, well I am not insisting on a 5 story house anymore, just one story will be enough and it does not need to meet the satisfaction of my dog either. But on May 6th I can? And if I do elect to waive those conditions then I must pay, but can I sue for damages? And Why? I though only sue for damages in breach of promise situations.
Can a 3rd party B elect a condition?