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Contracts Law Outline For the Law School

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Contracts Law Outline For the Law School Powered By Docstoc
					Contracts 08/24/04
―Contract‖—promise of set of promises that the law will enforce or at least recognize in some way Cotton farmers promised to sell cotton @ .30/lb.; this promise is enforceable; they said they’d sell it for that much, but now they want .80/lb. How do we enforce promises? Can we obtain punitive damages? Can we have them thrown into jail? We are talking about remedies Two fundamental assumptions made by courts in enforcing promises: 1. Relief of promises to redress breach 2. Relief granted to the aggrieved promise should generally protect the promisee’s expectation We, as buyers counsel, are trying to do two things: 1. We are interested in compensating client (cotton buyers) 2. We are trying to put the promisee (our buyers) in the position they would’ve been in if they would’ve performed ―Promisor‖—person whose promise we are trying to enforce (usually Def.) ―Promisee‖—person promise made to; injured party (usually Plaintiff) Who broke their promise? Promisor Who was injured by the broken promise? Who was the promise made to? Whose expectations were not met? Promisee Cotton cases: Promisors = cotton farmers Promisees = buyers (our clients)

US Naval Institute v. Charter Communications, Inc. Plaintiff: Naval – hardback (promise) Defendant: Berkley – paperback (promisor) Facts: Charter not to publish book ―not sooner than 1985‖; Charter shipped it early in Sept. and it was on the paperback best-seller list and sold a lot History: Naval unsuccessfully sought an injunction to stop publication and case was dismissed at trial court level; District and Appellate Court interpreted ―not sooner than October‖ differently; Naval appeals and wins and appellate sends it back to district court to find damages; On remand, Naval got damages for what they lost and Berkley’s profits; they both appeal Issue: When party breaches contract, do we measure by Berkley’s gain? Or by Naval’s losses? We measure by promisee’s actual losses caused by breach In publishing industry, when they say ―not sooner than October‖, it means something different than it does to us, so what do they mean when they put it in a contract? At what point do you become bound by industry practice? 1

The purpose of contract remedies is to bring Naval back to the position they would’ve been in if everything had gone as planned, if Berkley hadn’t breached their promise; we are trying to compensate them, the injured party, for their actual losses caused by the breach Trying to figure out Naval’s actual losses, why were any profits wrong? That would be punitive instead of compensatory; If it exceeds the actual losses, then it is punishment; NO punitive damages for breach of contract Profits that Berkley made are not the same as the loss Naval suffered

08/26/04 Hardcover sales were already declining and did decrease in September; although they lost some sales b/c of paperback, but some people would never buy hardcover to begin with How do we quantify that loss? How did the court come up w/$35,000? § 352 Uncertainty as a Limitation on Damages Damages are not recoverable for loss beyond an amount that the evidence permits to be established w/reasonable certainty Naval would have to prove losses Doubts resolved against breach people Damages cannot be speculative Expectation is only one of three interests which may be protected; you can’t figure out expectation (certainty is a limit on that), you might fall back on reliance and restitution Expectation—put promisee in position would have been in if promise performed; what did they expect; if there is a breach, presumeabley, the promisee is in a worse off position then before Naval was worse off; tried to give them a sum for those lost sales; so they are kinda in the same position they would have been in had Berkley not published Reliance—put promisee in position would have been if promise never made (usually less than expectation); trying to put the injured party in the position they would have been in had the promise never been made; there’s not always reliance Restitution—put promisor in position would have been if promise not made (usually less than expectation); restore any gains that came out of the contract; there’s not always restitution Why would anyone choose less than expectation? Promise-----------------------Performance X x x x x X x x May change position in reliance to promise; so worse off then if promise was never made i.e.)hire a painter; he buys paint; owner breaches; want to protect painters reliance interest and give him the price of paint; he’s paid for paint or hired workers and paid them, he’s incurred expenses; we would compensate him for expenses incurred Restitution would require promisor to disgorge that benefit; would have to pay painter for putting primer; restore 2

Sullivan v. O’Connor Nose expected (promised) 2 surgeries Pay 2 hospital stays ($100/piece) Pay Dr. ($300) Nose before operation (where began) Nose received/Nose after operation Bulbous, uneven Undergo a 3rd surgery Pay another hospital fee Dr. is promisor and promised her a beautiful nose and Sullivan is promise Promise was broken Received bulbous nose What did Sullivan have to do to get the prettier nose? Go through two plastic surgeries Pay hospital stays @ $100/piece Pay Dr. @ $300 How would we measure her expectation? The difference in value between the nose she got and the nose she received The money for the first two surgeries is not recoverable b/c she was going to do that anyway, it was part of the bargain; if the process went perfectly, she would have paid; not caused by the breach; can recover for the 3rd b/c it is over and above; needless suffering incurred What did she suffer as a result of the three surgeries? Reliance—she is trying to get back to the nose she had before she started; it worsened in value and she had made all of those expenditures; she has had pain and suffering; different from expectancy b/c you are only going from nose after operation to nose before operation She waived her right to the pain and suffering for the first two surgeries, but she would be able to recover b/c she went downhill from original nose to nose after surgery He just needs to give back $300 that she paid him for the first two surgeries Dr.’s fees $300 Hospital fees $100/piece Surgeries $3000/each Expected nose $20,000 Loss in value due to nose she got $10,000 $300 = Drs Fees $300 = Hospital Fees 3

$10,000 = loss in value due to disfigurement $9,000 = all 3 surgeries $19,600.00 for Reliance $20,000 = nose expected $10,000 = disfigurement $3,000 = extra fee for 3rd operation $100 = hospital fees $33,100.00 for Expectation Court maybe didn’t believe Dr. promised her a beautiful nose, but many patients get the impression that a Dr. is promising; Dr. wasn’t negligent; she got $13,500.00 b/c the loss in value due to disfigurement and expected nose figures were uncertain numbers; not wanting to disallow the claims, but also not wanting to overcompensate her, so they went up the middle Punitive damages are not allowed in contracts—not allowed to punish the Dr. or Berkley

08/31/04
pp.17-19 1. Punitive Damages No trend towards punitive Whites v. Benkowskis Defendant promisor Benkowskis maliciously turned off water Jury gave Plaintiff punitive damages; it was reversed; we don’t punish those who try to break their promises Why do people break promises? Berkley—they didn’t think they were breaking their promise and neither did the 1st court that looked at the case O’Connor Doctor—didn’t intend to break promise Do you want the other party to be able to collect punitive damages? Do you want to be punished for breaking a contract? Somethings might deter you from breaking a contract 2. ―specific performance‖—when we say enforce, we are not punishing promisor, trying to compensate the promise Sullivan v. O’Connor—reliance, restitution 3. Relief is substitutional—injured party money damages; we don’t order promisor to perform; promisee doesn’t get promise, we give the promisee some money; promisor doesn’t have to perform, just pay damages 4

You have to prove money damages won’t due and order the other party to perform We assume w/money, we can fix the injury Painters Painters don’t paint, we give you money, you go get someone else to do it EXCEPTION (land a/k/a property): Each piece of land is different and unique, money damages won’t repair your injury; they will order the seller to convey the house

p. 1 Cotton Buyers One of the cotton buyers walks into your office and says cotton farmers won’t sell it to them, you would tell them it is highly unlikely you can get the other guy to perform; court will give you the difference in promised price and market price, or promise price and new price Maybe you can get specific performance if there is not cotton anywhere If you are going to get the judge to order them to sell it to you, you have to prove to him that there is no cotton anywhere, no market for cotton (highly unlikely) You can make farmers pay the difference between .30 and .80; your client will have to spend more but they will get the difference If you can’t find anything else, or find a substitute, or use a different quality, judge will order them to perform, but you have to convince the court there is no substitute You’d have to prove that money won’t do But the likelihood of all of that is highly unlikely

Arbitration Some contracts require arbitration, saying you can’t go to court, must pursue arbitration Less costly Procedures are more flexible Favored Question is usually if parties agree to arbitration

Contract Remedies Nobody wants to litigate or go to court, people like to settle Cotton buyer is thinking about how to get cotton, people are thinking about how to get their business done What promises do we enforce? Clearly we don’t enforce every promise ever What has to accompany a promise to make it enforceable in law **Consideration** makes a promise enforceable Consideration gives us evidence the promise was made Cautionary function—makes promisor think about what they are doing We want to enforce certain kinds of promises Consideration includes everybody wanting something in exchange for what they gave 5

You want something in exchange for your money Consideration is usually not a problem in most commercial settings—a good or service in exchange for money; everybody wants something in return When someone gives you money w/out anything in return Should they be enforceable? Can we enforce it? Clearly some promises aren’t enforceable, but they can be enforceable Why not?

Hamer v. Sidway
Issue: Plaintiff is trying to enforce the promise to get the money—is it an enforceable promise? Promisee—Nephew Story, Jr. Promisor—Uncle Story, Sr. Uncle Story’s executor argued that b/c Nephew benefited himself, the promise wasn’t supported for consideration Consideration requires some detriment by promisee or some benefit to the promisor Nephew gave up his legal right to do those things, it was a legal detriment, doesn’t matter that it benefited him; there was a detriment to the promisee So was there a benefit to the promisor? And do we need both? Executors are arguing there was no detriment to himself, therefore there was no consideration Did Uncle get anything good out of promise?

Benefit/detriment theory of consideration Uncle never renigged on promise Executor argues promise to pay $5000 was unforceable b/c it had no consideration What was the consideration for the promise to pay $5000? Uncle  $5000  Jr. Uncle  Refrain from drinking, smoking, gambling  Jr. (this is the detriment) Executor arguing there was no detriment b/c giving up that stuff actually benefited him; no detriment Why is it a detriment anyway? He gave up something he had a legal right to do; he did it b/c of the promise of $5000; ―legal detriment‖—even if in the end he is a better person, we don’t care b/c he gave up something he could legally do b/c of the promise

Did the Uncle benefit/get anything out of it? He wanted to see his nephew live a good life Was trying to get his nephew to act differently 6

Maybe Uncle wanted to control his lifestyle Free of damage to Uncle’s reputation Sidway is executor of Story’s will Hamer had the assignment Considerations—not a pure gift, but it is not a commercial transaction either Usually what it is a benefit to one is a detriment to another; one mirrors another Expectation interest—he got $5000; restitution would be really hard Uncle Story’s promise was enforceable; estate had to pay $5000 b/c there was consideration If Uncle wouldn’t have wanted anything in return, it would have been a promise to make a gift Benefit v. Detriment To be enforceable Benefit to promisor OR Detriment to promise Only needs to be a legal detriment, not necessarily a literal

p. 32 gratuitous promises are unenforceable If you have executed the gift, you can’t get it back, you can’t talk about consideration Law recognizes gratuitous transfers, so why not recognize gratuitous promises? Is it a problem of proof? Not sure if he/she made a promise; maybe it is in writing Is it that we don’t care enough to enforce; they serve no social purpose? Are some gift promises are different from others? What role do benefit/detriment play in the Restatement (71 & 79) Restatement 79—you don’t need a benefit and detriment Restatement 71—introduces the concept of bargain in a specific sense (1) ―To constitute consideration, a performance or a return promise must be bargained for‖ (2) ―A performance or return promise is bargained for if it is sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise‖ Bargain—reciprocal inducement; one is inducing the other (1) In Hamer v. Siday, the performance is the not drinking, smoking, and is sought in exchange for $5000 (2) Performance given by Nephew has been given in exchange for the promise of the $5000; he was motivated to quit all that junk by the money Reciprocal inducement—both have to induce each other Can return performance be a forebearance? Can it consist of refraining from doing something? YES So is Hamer v. Sidway good under Restatement 71? YES, good behavior by Nephew was bargained for

Other motives: p. 31 Note (2) 7

There is a distinction between why one choses to do a certain act vs. consideration I.e.) promise to paint a portrait for $5000; motive may be fame and income; nonetheless, he is bargaining for the $5000—clearly consideration there; even though they might get fame, they are bargaining for the $5000 (reciprocal inducement)

Adequacy of consideration: p. 31 Note (3) We don’t look at sufficiency/adequacy of consideration, we don’t care about the adequacy of consideration; courts don’t want to do it; we don’t look at if it is enough You may intend to make a gift to your daughter w/elements of bargain Part of your motive may be to make a gift to her We are only looking at the $50,000 for the $300,000 houseelement of bargain is enough for us We don’t evaluate the value

p. 33 Note (1) On the other hand, you can’t make a gift good by a token payment Can’t have a pretense of a bargain when you are doing a gift

p. 33 Note (2) Taxpayers are doing so much and getting little in return, that doesn’t it amount to a gift? Insufficient consideration; Court says you got enough to me; if there is no pretense of bargain, court won’t get into adequacy of consideration If it’s too lopsided, like commercial parties w/consumers, it can be knocked over PROBLEM p. 32 Restatement § 71 Promisor—Thomas Hurley (promise not to compete) Promisee—Marine Contractors Promisor/Hurley  Promise not to compete  Promisee/Marine Contractors  Pay share immediately  |  Trust Clearly a detriment to Hurley, not a detriment to Marine b/c it’s coming out of the Trust funds pocket

Fiege v. Boehm
Promisor—Fiege Promisee—Boehm 8

Promisor/Fiege  pay support/expenses  Promisee/Boehm  won’t bring paternity suit  Issue: Fiege’s promise is or is not enforceable b/c her claim of paternity is invalid? No consideration b/c claim turned out to be invalid Forebearing from asserting a claim can be consideration Consideration in this case—refraining from bringing a suit **Will any claim due?** Society likes claim settlements; we encourage claim settlement - One way to do that is to enforce settlement claims, as long as they meet the requirements of a valid contract - On the other hand, people sue just to sue, so it is worth the money to pay them off

09/07/04
Promisor—Fiege pay support/expenses  Promisee—Boehm  not bring paternity suit/forebearnce  Fiege broke his promise, which is a breach of contract, unless the promise is unenforceable He’s saying the promise is not enforceable b/c his promise is not supported by c consideration Forebearance can be consideration (HAMER v. SIDWAY) Forebearing from asserting a claim CAN be consideration, requirement of contract law Refraining from bringing a lawsuit Society likes claim settlements 90% of cases are settlements On the other hand, we don’t want to encourage settlements against frivolous litigation Note 3, p. 39—My saying I won’t bring suit if you pay me money is frivolous b/c I don’t have a claim Claim—not bringing a paternity suit, she forebore from asserting an invalid claim What if we make the rule, forebearing from asserting a claim is only good if one asserts a valid claim it is consideration There is no way to tell if it is a valid claim, so it that rule can’t work How would you know if it is a valid claim? You really don’t know if it is a valid claim; you know it looks strong or good or not so good or this is what usually happens, but you can’t know ahead of time; you can think you know ahead of time The only way you really know is if you litigate it Court comes up w/a test: Is there good faith in asserting the claim? Did they honestly and reasonably believe they had a valid claim? Subjective: Honest and Reasonable Objective: Reasonable basis for support—neither absurd in fact from the standpoint of a reasonable person; Court finds consideration here Did Boehm have a reasonable basis for support? 9

They spend the night together; they had relations She took him to court Jury believed her Court believed her Court of Appeals believed her, too No proof of fraud; she believed she had a claim b/c she had relations w/him; so her not bringing a claim is consideration What if she believed babies came from hugging and kissing? No reasonable basis for support Court added the objective requirement Could she have sued two possible fathers? She could believe she had a claim against one of them As long as she had relations w/both of them There was no test to tell who the father was back then, either Could she have sued ten possible fathers? Or hundreds? At some point, it becomes unreasonable and not honest Does she honestly believe she has a claim against each one of them Restatement § 74 She was w/him, it could’ve been him She honestly believed she could’ve had a claim Non-disclosure—She knew she had more than one partner and didn’t tell Fiege Requirement of exchange: Reciporcal inducement—must induce each other Consideration is induced by the promise; both of to induce the other STORY—Better behavior was induced by $5000 FIEGE—I won’t bring paternity suit, if you pay me the money

FEINBERG v. PFEIFFER CO. $200/month for life to Feinberg Promisor—Pfeiffer Co. Promissee—Feinberg Promisor Pfeiffer Co.  $200 for life  Promisee Feinberg   1. 37 years of service 2. Worked for another 1 ½ years 3. Feinberg retired Pfeiffer Co. is saying $200/month for life was a gift Did they ask anything of her? 10

They told her she could retired anytime she wanted; she could be fired any time They thanked her for her service Told her she could retire or stay or whatever she wanted Why is company saying it wasn’t obligated to pay? They viewed it as a gift b/c there was no consideration; the promise is not enforceable Promises to make a gift are unenforceable Promise is only enforceable if there is consideration What is conceded by both parties? 37 years of faithful service cannot be consideration Why didn’t 37 years of faithful service work? 37 years of service proceded promise of $200/month for life If you already perform when a promise is made, then what you did can’t be induced by the promise If they had promised Feinberg retirement when she walked in the door, it would be different She didn’t know of the promise when she worked for them for 37 years Pfeiffer Co. may have given her the pension, induced by her performance Pension was induced by 37 years of service 37 years of service were not induced by pension NOT RECIPROCAL Why doesn’t working for another 1 ½ years work? There’s nothing in resolution that says Feinberg had to work that time in order to receive pension Her continuing to work was no sought by Promisor to pay her They said she could take it whenever she wanted and she could quit at anytime That’s not what they were bargaining for Why didn’t retirement work? They weren’t seeking her retirement They said they hoped Feinberg stayed on They didn’t try to induce her retirement Retirement’s not consideration There is no reciprocal inducement Pfeiffer not trying to get anything out of her in exchange for the pension Could we have made this enforceable? p. 43: Would drafting have made this enforceable? Saying ―in consideration‖ does not make it so How could we have made it enforceable? Required her to stay for a certain amount of time Required her to retire On consideration, Feinberg loses, there is no consideration But there are other ways to make a promise enforceable 

MILLS v. WYMAN Same ―action in the past‖ problem 11

Promise to pay is broken, promise was in writing No exchange, no reciprocal inducement, no consideration Mills clearly induced payment Was taking care of the son induced by the promise of the money? NO—he did it before the promise was made; caring for the son was not induced by the promise of money

09/08/04
MILLS V. WYMAN Promise to pay the money was definitely induced by the previous care for the son Taking care of the son was NOT induced by the promise of money What if Mills had e-mailed Wyman about Levi Wyman’s illness and Wyman e-mailed back that he would pay Mills to take care of him? YES, there is now a bargain for exchange; services would’ve been rendered at request of father Consideration can run to a 3rd party; doesn’t matter Wyman is taking care of dad and not son Wyman made promise in letter, which makes you feel more confident b/c it is in writing, as opposed to over the phone Court said Wyman should keep his promise to pay Mills for taking care of Levi Wyman His non-payment is disgraceful Represents a moral duty Execution of payment is up to Wyman’s conscience Should moral obligation make promises enforceable? Who would be figuring out what is moral and what’s not? Courts would decide what is and is not moral If you go w/moral obligation, you would have to enforce every promise made **Would Mills have had a claim for restitution?** p.45 Note (2) Promises subject to statute of limitation Promises to pay debts subject to bankruptcy Promises by minors In each case, there is a pre-existing obligation, but have become unenforceable But at some point, there was consideration WEBB V. MCGOWIN Basis of Restatement § 86 Promisor/McGowin $15 for life Promisee/Web 12

 saved his life 

NO CONSIDERATION—NO BARGAIN Court says there was good consideration for this case McGowin received a material benefit b/c his life was saved Moral obligation is enough No original liability or obligation/duty resting on McGowin, until he made this promise How is this case different? Webb suffered a detriment—to save his life, he had to hurt himself McGowin enjoyed the material benefit of his saved life Sounds like benefit/detriment Same result under Restatement § 71—Bargain ? - There can’t be reciprocal inducement b/c promise happened after the first part of the inducement (FEINBERG V. PFEIFFER) - Promise of payment didn’t make Webb save McGowin from harm - No exchange - McGowin had already been saved when he made the promise; he made nothing from the promise Court is saying this is the ―right‖ thing to do Can we reconcile Mills v. Wyman and this case? Is there the same material benefit contemplated in Webb, as in Mills? No In Mills v. Wyman, no injury suffered Mills is 100 years before In Mills, promise was never acted upon McGowin v. Wyman McGowin paid for 9 years Wyman never paid We want to be sure payment was paid, Payment kind of implies promise was made MORAL OBLIGATION ONE WAY TO TAME—a promise was made in both cases McGowin and Wyman didn’t have to promise to pay p.49 (2) No Good Deed… Promise to pay is made after the action was taken Promise to pay damages only, not like in McGowin ($15/2 weeks for life) Only paid a small sum, McGowin paid for 9 years Are we confident the promise was made? This promise wasn’t enforceable 13

Obligation for promises made about past action Traditional View—mills v. wyman, Harrington v. taylor Legislative solution—NY statute P. 49 (3) Restatement 86 Would’ve been valid except for the timing:  Mills—yes  Webb—no, b/c there was no writing  Harrington—no, b/c there was no writing  Feinberg—yes Statute is too broad in scope; making too many promises enforceable Too restrictive in form b/c promises have to be in writing to be enforceable

Restatement 86 Promise for Benefit Received Under ―Contracts Without Consideration‖ Binding to extent of injustice Exceptions:  Benefit as a gift or  Promise hasn’t been unjustly enriched or  Extent that its value is disproportionate to the benefit

09/14/04
“MATERIAL BENEFIT RULE” Webb. V. McGowin Promise in recognition of benefit previously received by promisor Binding to extent to prevent injustice 1. Benefit conferred as gift 2. Promisor not unjustly enriched 3. Value promise disproportionate to benefit Restatement § 86 Webb  would’ve won under Restatement 86 Harrington  he made promise b/c she kept his head from being bashed in; yes, he should pay b/c she saved his life and her hand was mutilated; he promised to pay her damages Pfeinberg  Mills  consideration running to a 3rd party 14

REQUIREMENT OF BARGAIN We’ve been looking at what was given by promise had already taken place when promise was made Shifting to Restatement § 71 If what was given by promisee was actually sought by promisor in exchange for his promise; when they made the promise, were they actually seeking the performance they got in exchange for promise If promise is gratuitous, subsequent action not sought in exchange, doesn’t make promise enforceable—it’s a question of fact—was promisor bargaining for action in exchange for their promise; was promisor’s intention to induce an exchange? In business, this is an easy concept What we’re looking for is if they’ll withhold promise if they don’t get their return performance Will cell phone company withhold service if they don’t get payment; conditioning service on if you make payment They may not be seeking return performance on promise p. 52 problem (1) Tramp going around corner is not consideration for a coat trying to give gift of coat employer to employee ―If you come to my office, I’ll give you a gold watch‖ purpose of promising watch is to give them the gift of the watch pension ―I want to give you a pension, come to office once/month to pick it up‖; not trying to get them to come to office, trying to give them pension Tiffany’sdifferent than tramp; father wants daughter to come talk to him, so he offers to give her the ring

KIRKSEY V. KIRKSEY How did court read it? Gift?—gift is unenforceable Executed gift is fine Court read his promise as a gratuitous gift GIFT 1. Motivated by kindnessher life was bad at the time 2. His brother’s death 3. Her welfareconcerned about her BARGAIN 1. Looking for her presence 2. He might need someone to help tend the land 3. Do right by brother

* She sold her property in reliance on his promise, should that make it enforceable?? * 15

Does language in Hamer v. Sidway sound more like a bargain now? Yes, getting something in exchange

p. 51 (2) Consideration was using the information from the swipe Bargaining on them using their card—that is consideration

CAB, INC. V. INGRAM Part I Covenant not to compete agreement—employee agrees that once they leave they won’t compete w/company they just left Restraining the employee from working in certain kinds of employment for a certain period of time These covenants must be - geographically specific - activity prohibited must only protect employer - time must also be specific Part II Employment-at-will pp. 52-53 Rule is that employment is at will—you can be fired at any time for any reason and you have no recourse Promise of employment is an empty promise b/c they’re not promising anything at all Some promises can be of so little value, they amount to nothing and are not therefore valid consideration Strong v. Sheffield illustrates this Employee can be fired for any reason, but a few exceptions, which vary by state: * sex, race, etc. * you are in a union

Should be able to test this against Restatement 71

09/16/04
Ingram/Goostree/Bjorkholm  promise is not to compete  CAB  goose signed next day Promise was not to compete, but was there consideration? If there was not, it is not enforceable Ingram had been there longest, signed week after working He said he didn’t want to sign it, under threat of termination he signed a few weeks later He was consistently promoted 16

Goostree had 2 years later, prior to beginning not told about covenant He singed shortly after starting Bjorkholm signed 3 weeks after he was hired; that agreement was lost and he signed against 3 months later $50 raise and no promotions Was there any bargain here? PROBLEM IN ALL OF THIS IS TIMING What was consideration for: GOOSTREE—part of original agreement; this was bargain; EMPLOYMENT IS SUFFICIENT CONSIDERATION He signed the day after he began; he can walk out, but how likely is he to walk out Court says as long as it is signed w/or soon after, it is considered part of original agreement Signing agreement did not induce him working there INGRAM—if employer can fire you at anytime, and they refrain from firing you if you sign the covenant, is there bargain for exchange?? YES—you’re benefiting from continued employment; there is mutual inducement; employer is forbearing from something he has every legal right to do Never this explicit; what usually happens is they put it in front of you w/all the other stuff and you sign it all together, so there is no evidence of that Court finds consideration in all these cases, what is consideration here? What is sufficient? - Benefits, promotions, continued employment, the actual employment will do - Some sufficient period of time - What if they had fired them? Did they act in good faith? - They are actually doing something—a performance gave back by CAB through employment Why is promise of employment is problematic? At-will employment—not promising very much at all; ―naked promise‖

Unilateral  promise 
 performance 

Bilateral  promise 
 promise  (performance) *bilateral is much better Bilateral promise won’t due b/c the promise back would be employment and that is an empty promise b/c it’s at-will employment Court says not overruling Ray Moss, saying it’s different and it’s a different rule In Ray Moss they only address if return promise is enough Here, you actually perform the promise Court is taking invalid bilateral contract and converting it into a valid unilateral contract Promise alone doesn’t work here b/c of nature of promise INGRAMwhat did he get in return? (strongest case and actual threat of termination floating around in background of Ingram) 17

-

promotions raises 7 years work @ CAB

GOOSTREE - promotions - raises - 5 years work @ CAB BJORKHOLM (weakest case in terms of performance in return) - raise - 2 years work @ CAB Dissent, given contract doctrine bargain theory, is right b/c: There is no evidence they bargained for any of this stuff (raises, promotions) They didn’t seek that in exchange for their covenants not to compete No evidence they sought to induce

EMPLOYEE HANDBOOK CASES p. 62 Bargain stuff doesn’t work in these cases Employee claiming he is forbearing from quitting, which is something I have legal right to do That is consideration Metille is making same argument—promise for performance—by staying on job, accepting a unilateral contract—although free to leave, it is performance and is necessary consideration to follow employee manual  manual procedures   stay on job 

IN RE CERTIFIED QUESTION p. 63 Case should not be governed by unilateral contract theory Employer really just wants to create a good work environment Since it’s not a contract, employer can change its policies They said they had to decide if they could change procedures in, if you can change procedures, you will be ahead of the game REWARDS pp. 64-65 Action’s not bargained for b/c it wasn’t given by promisee in exchange for the promise; promissee must be trying to take advantage of the exchange Couldn’t recover award b/c he didn’t know about the reward If you know of award after you capture, but before you turn him in—you can still get award

18

If you know of award before, and turn him in b/c you are concerned w/mob violence—it works b/c you can have more than one motive FISH PROBLEM p. 66 Knows about prize, he doesn’t know about fish, says he got prize but it was a gift, so he doesn’t have to pay taxes What if you didn’t read employee handbook? Is there bargain here anyway? There’s no real exchange How do you find bargain or reliance? Induced by a promise he didn’t know about

(D) PROMISES AS CONSIDERATION p. 66 Vast majority of contracts are bilateral; assume bilateral and work backwards to unilateral You want promise and performance, both With the promise, you get more p. 68 Methods of performance Remedies if you don’t perform a promise

09/21/04
PROMISES AS CONSIDERATION 99% of contracts are ―bi-lateral‖ Case of mutual promises Bi-lateral contracts, you get more, you get the promise and performance Promises can be enforced p. 68 Methods of ensuring performance Why do we make promises enforceable w/out any reliance by promise? p. 66 Lucy v. Zehmer No reliance by promise Lucy said he relied on promise Binding mutual exchange of promises Even if 2 minutes later someone changed his mind, it is still a binding promise Problem w/saying it’s only enforceable if you rely on it, is 1. You’d have to figure out how much reliance is enough 2. Promisee could never rely on promisor doing something 3. (p. 67) Bilateral are much more important than uni-lateral contracts Why are bilateral contracts must more important than uni-lateral contracts? In unilateral all you get is performance, you have to wait and see b/c w/out promise they are not bound ahead of time If you make no promise to do it, you don’t have to do it 19

Bilateral are for future action, you want them to be enforceable when you make them, not when you perform them Widget-master want to make contracts w/suppliers so they are on the hook when it comes time to make the widgets, don’t want to wait and see if they’re going to perform Key difference is that promise exchange in bilateral makes it binding and enforceable there and then—if they don’t, they have a lawsuit against them Restatement 71—Return promise is enough, don’t hasn’t to be performance Restatement 75—When promise is bargained for, it is consideration only if promised performance would be consideration Next 4 cases talk about Ilusoriness as a defense In only one case is the promise actually found to be illusory Don’t be too quick to find promises are illusory

STRONG V. SHEFFIELD Promisor/Louisa  promised to pay if hubby doesn’t  Promisee/Uncle Strong  forebear/promise to forebear collecting $  ―until I want my money‖ Louisa’s saying there is no consideration for her promise to pay if husband does not Way to figure out promisor—who’s promise are we trying to enforce? Husband owes Uncle some money ―demand note‖—he demands when he wants money; payable on demand Sheffield makes a demand note to Uncle Strong Sheffield was broke, though, so Uncle Strong didn’t think that was enough Uncle Strong wants wife’s endorsement—if husband doesn’t pay, she’ll pay Note is due and payable (he has right to go and get money) What about forebearance, could that be consideration? Uncle has a legal right to collect note, he forebears from collecting note Request (promise), followed by performance, works (unilateral) What if she said I’ll be responsible for debt if you don’t bother him about it for two years? That works b/c she’s signing note and he’s forebearing from collecting money She’s bargaining for it, she’s asking for his performance What is the problem here? Wife was bargaining for Uncle to not collect money and she wants him to promise not to do it; she didn’t bargain just for performance, she bargained for promise to forebear and performance B/c on demand, he can just take the money, she wants piece of mind that he won’t seek money When you bargain for promise, you bargain for performance, then when breached, you can seek damages Court says it was a case of mutual promises 20

You don’t have to have mutual promises She wanted his promise to not come for the money in addition to his forebearance She wouldn’t be bound unless Uncle entered into an immediate and reciprocal obligation to forebear Uncle made a promise—―I will hold it until such time as I want my money‖ Why doesn’t that work? That’s what he had the right to do anyway  he is not promising anything  ―illusory‖—he’ll do it if he wants to, he’s not promising anything, just that he would forebear until such time as he wants it, that could be immediately; he couldn’t be in breach b/c he could take it an hour later, he would’ve fulfilled his promise

CAB case is inconsistent A promise of employment at will is not enough But fact that they performed was enough Court says they took invalid bi-lateral contract and turned into a valid uni-lateral contract In Strong, she bargained for performance This court did it for what was made, not what was done under it Court refused to turn invalid bi-lateral contract into valid uni-lateral contract How about Uncle will not demand his money until he has a special need for it? Distinction between this and he’ll take it when he wants to Is he undertaking a special need? Does Good Faith help? Good Faith—read what seems like an insubstantial promise to give it some weight Strong v. Sheffield is end of spectrum for ―I will if I want to‖

MATTEI V. HOPPER Each piece of property is considered to be unique If seller breaches, remedy is specific performance No other land will do, and that includes house sitting on the property Sale of real estate—slow formal Sale of goods—more quickly UCC doesn’t apply to real estate Promisor/Hopper  Promise to sell land  Promissee  Buy land ―subject to‖  Hopper’s saying it lacks consideration She would argue it was illusory b/c he could walk out of it at anytime Had to be satisfactory to Promisee His satisfaction is discretionary and can avoid obligation Court REJECTS this 21

Court says he has to act in Good Faith How would court apply satisfaction? 2 kinds: good faith and reasonable person When would court apply reasonable satisfaction test? - commercial value or quality - operative fitness - mechanical utility  Could you bring in an expert witness to determine objective stuff When would court apply good faith? - fancy - taste - judgment Difference between satisfaction in painting law school itself (it’s objective) and painting a portrait (it’s subjective judgment) Why isn’t standard entirely subjective?

09/23/04
Return promise being so insubstantial that it doesn’t really promise anything at all Satisfaction clauses appear to have the potential to be totally discretionary Performance seems to be at the sole discretion of the promisee Sounds illusory, BUT these clauses DO restrain promisee’s actions MATTEI V. HOPPER SETS STANDARDS 1. reasonable satisfaction—mechanical fitness, utility; reasonable person standard 2. good faith satisfaction—fancy, taste, of judgment Is good faith entirely subjective? What restrains Mr. Mattei? Dissatisfaction has to be genuine He’d have to show from performance there was a reason he was dissatisfied  can’t just put in ―any reason‖ clause; that is illusory Hopper  sell property  Mattei/promise  buy property/subject to satisfactory leases  Court said it matters depending on judgment, there are too many factors involved, too varied, so they can’t use the reasonable-person standard Couldn’t really use experts to do reasonable satisfaction b/c there were no shopping malls at that time in 1958 No standards set yet No objective standard for what lease looks like People who deal in real estate like subjective standard b/c judge will decide is there is reasonable dissatisfaction 22

No one wants it to go to jury

p. 75 Note Different satisfaction standard w/ ―subject to my lawyer’s approval of our agreement‖ vs. ―subject to my lawyer’s approval of documents tendered when the deal is closed‖? ―approval or our agreement‖  atty’s judgment—good faith standard ―approval of documents‖  more objective—reasonable person All these cases turn out not to be illusory; good faith restrains the part

SALES OF GOODS quickly informally by phone, fax, e-mail less demanding standards for contracts same people, same types of goods, manufacturer, vendors

Often this means parties will develop standards/relationship w/each other Trades develop practices, which add to the agreements Lawyers take those practices into account ―sooner then October‖ what it means in that practice, not to us Standardized contracts Unlike land, goods are easily replaced So if there is a breach by a buyer, seller can sell the goods to someone else Governed by UCC, which is a statute enacted in all states (except LA and D of C) ** UCC (P. 76) CODE APPLIES TO CONSUMER CONTRACTS ** * NOW THERE IS A REVISED UCC * Not that different, but they will show us where it is

UCC § 2-306 OUTPUT, REQUIREMENTS AND EXCLUSIVE DEALINGS p. 82 (test) Output Contracts Output contracts—buyer promises to buyer all of seller’s output w/in time; seller agrees to sell output; treated same as requirement contracts 23

Requirements contracts—buyer promises to buy all requirements for a particular good from seller

EASTERN AIR LINES, INC. V. GULF OIL CORPORATION Potential for buyers promise to be illusory b/c they can perform w/out any goods at all Indefiniteness—to be enforceable a contract has to have definiteness/specificity; can’t have too many fuzzy terms; can’t leave out major terms, so we can figure out whether we can enforce it or not - leave out quantity Both Eastern and Gulf trying to find a way to account for price changes Intent in terms of prices  Eastern would bear price as price went up w/market oil costs; pegged it to West Texas Sour Went out of their way to put price in contract to reflect market price BUT IT DIDN’T WORK b/c of unprecedented price control Promisor/Gulf  Supply fuel requirements  Promisee/Eastern  Buy fuel requirements in specific cities  Eastern only purchased 10% of their needs from Gulf Gulf says there’s no consideration b/c there was no promise to buy anything b/c Eastern is buying what they require—Eastern only purchased 10% of their needs Gulf’s saying Eastern could reduce their requirements to 0% ONE RESTRAINT—Eastern has to buy in stated cities from Gulf Court says there is something restraining Eastern’s actions What restrains Eastern’s actions? Their Good Faith; conduct business in Good Faith UCC 2-306 (1) You can put stated estimate of fuel in contract, or in absence of stated estimate, Put requirement that is similar to previous requirements Court looks at UCC Comments, also But Comments are not binding and are not enacted by legislature Can’t cite them like they are the code They are part of case law in FL b/c FL has relied on it and talked about it How do we define good faith here? GOOD FAITH—honesty in fact and the observance of reasonable commercial standards of fair dealing in trade; GOODS—all things (including specially manufactured goods) which are movable at time of identification to the contract for sale other than the money in which the price is to be paid investment excurities and things in action; also includes unborn young of animals and growing crops

24

09/28/04
EASTERN AIR LINES V. GULF OIL Requirements contract for jet fuel There was no consideration b/c Eastern could or could not perform at whim If they had it between either Gulf or Amoco, that would illusory b/c they could buy from Amoco UCC 2-306 (1) Used to figure out consideration Good faith—as long as they act in good faith; these parties have relied on good faith in the past (for 20 years) Eastern promised to buy from Gulf in those cities, and Gulf would supply it, and they would figure amount required to buy in good faith Fact that only 10% is being purchased from Gulf shows there is some play Did they put anything into contract that would decide what requirements would be? They put in estimated requirements; look at our previous activity, what have we done before Fuel requirements went around estimates, but it was elastic UCC says all of this is ok How do they define good faith? Definitional cross-reference section GOOD FAITH—honesty in fact and the observance of reasonable commercial standards of fair dealing in trade (p. 110 of supplement) What kind of contracts does UCC apply to? UCC applies to sale of goods vs. property in Mattei v. Hopper GOODS—all things which are movable, but does not include information (2-105, new code 2103(1)(k)) What about cotton on p. 1? It is a sale of goods GOODS include growing crops (@ 2-105, refers us to 2-107), even though they are attached to realty, they are intended to be sold, like unborn animals, oil, etc. First question you should ask before using UCC, ask is it a sale of goods? And take it through the code, is it movable, etc.? Real estate and land are not movable Buyer runs the risk the price will go up You are Gulf’s attorney, any drafting techniques to reduce the risk your client will be forced to sell oil at the cheaper price? - try to fix price to move w/the market (what they tried to do in Gulf) - put in an estimate o say you estimated 120 million gallons, you have to be somewhere around that, they contemplated elasticity, now it’s way over estimate w/400 million  center around which parties think variations will occur  no estimates might be unreasonably unproportional to prior requirements 25

-

maximums and minimums

REMEDY was SPECIFIC PERFORMANCE Problem is can they go out and get into another long-term contract for jet fuel They probably could not at this point in time Code talks about unique or other proper circumstances may include inability to find a substitute when it talks about specific performance Substitute is a long-term fuel supply contract

WOOD V. LUCY, LADY DUFF-GORDON LDG  exclusive  Wood  nothing  She’s arguing no consideration b/c he didn’t have to go out and do anything and he didn’t make any promises She’s saying she gave everything—an exclusive Wood didn’t do anything and he concedes that He says it’s archaic to go w/only express promises can be enforced It’s implied in fact promise Implied-in-fact promise Wood has to go out and sell product is implied promise given back He has implied promise to make a good faith, reasonable efforts to sell as part of their bargain, they just didn’t express it very well, it was poorly drafted ** this is different from implied-in-law promise ** How did they apply this promise? - By accepting the license, he said ½ the profits go to her o If he had no duties, she’d get nothing - He had to account monthly - She gave him exclusive o It’s unreasonable to think she would give him the exclusive right if she didn’t want anything back  She couldn’t use her name for a year; would she do that if she couldn’t use her name for a year

p. 85 NOTES (1) Rationale would have been intention of the parties b/c parties imperfectly expressed their intention; both intended to profit from this agreement - Exclusive part is the biggest one UCC § 2-306 codifies the outcome They will imply duty on behalf of Wood Code says when there is an exclusive right, parties must intend best efforts, unless they say they don’t mean best efforts What if Lady Duff Gordon was suing Wood? We’d have to figure out what best efforts mean Best efforts is more than good faith (acting honestly, don’t be a liar), reasonable efforts is affirmative duty to go out and do something 26

Court found an implied promise from the facts Court felt compelled to go through all of those factors Can’t just add facts, you have to go through why (3) Termination clauses Notice clause in lady duff Gordon, after a year, he or she can walk out w/30 days notice Starts to sound illusory—it is illusory if there is a right to immediate cancellation at any time for any reason Courts will look for some commitment so it isn’t illusory TERMINATION CLAUSES Note 3, p. 85 Promise is illusory if promissee has a right of immediate termination; can walk out anytime for any reason Courts will try to find detriment by promissee * Cancellation upon 30 days notice * If invoice not piad w/in 10 days of receipt—cancellation upon cause * Subject to cancellation if seller cannot obtain widget—cancellation for cause, not illusory UCC 2-309 (3) termination requires reasonable notification If you fix nature and timing of notice, it is enforceable; solidifies notion parties can lay out terms on which cancellation can take place Agreement can dispensed w/notice in way that it puts to much oweness on one party, courts will not like it MOST TIMES, COURTS FINDS PROMISES ARE NOT ILLUSORY Doesn’t mean you shouldn’t think about it being illusory, don’t jump to it Most find some restraint on promissee, they have given something in return RELIANCE Reliance is a basis for enforcement GIFT PROMISES—enunforceable; kirksey/Feinberg PROMISES IN RECONGITION OF MORAL OBLIGATION—mills v. wyman PROMISES IN WHICH PROMISEE WAS NOT AWARE If you had sympathy think why? Did party rely on promise and change their position and promise is unenforceable Should reliance be a basis for enforcement? Should we get rid of consideration and b/c a party relied on promise, it was enforceable?

RICKETTS V. SCOTHORN He didn’t want her to work 27

Was her reliance reasonable? She was making $520/year he was promising $120/year He never took it back, even thought about selling some of his property to pay the note The promise was to motivate her to quit Did he require her? He wanted her to quit—he wanted to motivate her to quit b/c of what he said to her If he required her, there would’ve been consideration, bargain for exchange No, she quit but it was voluntary Would he have paid if she didn’t quit her job? Probably yes He exacted no quid pro quo, he required nothing in return, he wanted something, but he didn’t require it and requirement is consideration Consideration means you have to require it If we don’t have consideration? What do we have? It’s a promise to do what? It’s unenforceable b/c it’s a gift or gratuitous promise Ordinarily not enforceable It’s enforceable b/c it’s made on RELIANCE She did quit her job Did he induce this change in position? Yes, she quit her job b/c of promise of money B/c he induced that change in position Court says you did something to induce change, they are going to stop him from saying promise is unenforceable b/c of lack of consideration Lack of consideration doesn’t count anymore He said ―you don’t have to work‖ and tells her to abandon her employment and rely on him He contemplated she would give up employment b/c of his gift Much harder to argue she quit her work on reliance on promise of income b/c of demand note Note alone wouldn’t justify any specific action like quitting job Do we want any reliance to make a promise enforceable? This reliance is foreseeable and reasonable b/c of his promise to pay What if she went out and bought a car w/his money? Should promise be enforceable? Do we want to enforce all promises b/c promissee goes out and does something, anything? Do we want to blur line between gifts, promises for gifts, etc.? We made it enforceable b/c he said stuff to induce her to quit her job We are looking for foreseeable reliance 28

We feel comfortable b/c of what he said, so we want to enforce it Does this sound more like Hamer (partying) or Kirksey (out in woods)? Kirksey—he intentionally influenced her actions, for the worse; this reasoning helps Kirksey EQUITABLE ESTOPPEL p. 89 ―Promissory estoppel‖—principle that a promise made w/out consideration may nonetheless be enforced to prevent injustice if the promisor should have reasonably expected the promisee to rely on the promise and if the promisee did actually rely on the promise to his or her detriment Reliance on a promise, we preclude asserting defense of lack of consideration Estate could no longer say unenforceable b/c of lack of consideration p. 91 RESTATEMENT 90 Promise Reasonably expect to induce action Definite and substantial character Induce that action/forebearance Binding to the extent to avoid injustice Kirksey—she relied on promise by giving up a place to live and moving; could promisor reasonably foresee that she would take this action? Yes Yes, she did something substantial (of definite and substantial character) Should it be enforced to avoid injustice? Yes, she sold house and moved 60 miles in 1845 MEASURE OF RECOVERY p. 91 You relied by buying a car for $1500, but were promised $3000 This guy says once you said it is enforceable, it’s enforceable, like as if there was consideration and you should get your expectation Making the whole promise enforceable, the reliance needs to be big What did Scothorn recover? Reliance? Expectation? She expected $2000; got her expectation Reliance as basis for enforcement; reason we enforce is b/c of her reliance DIFFERENT THAN reliance as a measure for recovery You can recover on reliance and use expectation when measuring damages  Ricketts v. Scothorn

FEINBERG V. PFEIFFER They promised her pension for life Was reliance on promise intended or foreseeable? Could they foresee she would retire? 29

YES, and we know by examining their statements; facts are important When they made the resolution, they contemplated she would r

retire

Was it of definite/substantial character? YES, she retired from a good position b/c she thought she would have money coming in Is remedy necessary to avoid injustice? YES, she’s older and can’t get another job and she’s sick and she has no income They didn’t have to make promise, if she’d retired for another reason, they wouldn’t have to pay her

p.93 Measure of Recovery He decided to retire before they gave him anything or said anything He would’ve retired anyway

10/05/04
Contracts Without Consideration Restatement 1 1. Promise 2. Foreseeable reliance of definite and substantial character 3. Induces reliance foreseen 4. Injustice demands enforcements Under 1st Restatement, there had to be a promise, you had to have reliance foreseeable by the promisor—only affected by reliance she could see foresee by their actions; this had to be of definite and substantial character; it’s not any old reliance; enforcement must be necessary to prevent injustice—depends on reasonableness of reliance, how big was it Restatement 2nd 1. Promise 2. Foreseeable reliance of definite and substantial character 3. Induces reliance foreseen 4. Injustice demands enforcements 5. Third party 6. Remedy can be limited as justice requires 30

Promise in both Restatement 1 and 2 SIMILARITIES Reliance has to be foreseeable by promisor Must rely on the promise Condition for enforcement for justice DIFFERENCES 1st says of definite and substantial character—were going to enforce entire promise and give them their expectation 2nd eliminates reliance being definite and substantial character and say no longer have to enforce the entire promise, remedy can be limited as justice required; can give a lesser measure of recovery and lesser measure of reliance; no longer all or nothing; degree of reliance is linked to recovery EXAMPLE: Gordon offers me $3000 to drive to school; I purchase a car for $1500 * Under 1st Restatement, would you get $3000 or $1500? $3000 b/c enforcement of the entire promise * Under 2nd, you may only get $1500 b/c you can limit the remedy; maybe or maybe not b/c of what justice requires; what does justice demand? Introduces an element of uncertainty Remedies to Restatement 90 are GREAT Depends on what court believes justice requires - Reasonableness of reliance - How solemnly was promise made? In writing? Repeated several times? - Have evidentiary been satisfied - If it looks like good faith is lacking, they may give expectation and be more generous - If large disparity, expectation was high #, reliance would be smaller, they might tip it towards reliance o Reliance interest is difficult to calculate, they will push it towards the other - Often courts will give expectations o Ricketts—gave her expectation; can’t say if recovery is based on reliance, you must get reliance; she got her expectation p. 93 Note 1 ScothornHow would you figure out reliance measure? In what way did she rely? She quit her job What did she lose? Loses her salary and might like her job; she went back to work b/c he breached Expectation is $2000 (easy b/c she expected $2000) FeinbergExpectation or reliance? She expected a pension ($200/month for life) How did she rely? She left her job; unlikely to work again How do you measure that? Justice? Does it lean towards full amount? Enforceable b/c of reliance on promise and they gave Feinberg her expectation KirkseyExpectation? She expected to have a place to live after moving for as long as she needed to raise her family Expectation is murky, so that might push the court towards reliance—how much did she give up on funds? Difficult to measure value of the promise and to determine $ value 31

Contrast that to expenses she expended in moving Might be easier to add up the numbers on No definitive answers, but court might weigh towards one or another? Uncle/Nephew problem FORESEEABILITY—Uncle couldn’t have foreseen Nephew would spend $2000 Recovery can’t exceed value of the promise

p. 96 Problem 1 It wasn’t foreseeable he would just go buy the wood He should’ve said ―yes‖ or ―no‖ first Clearly seeking reply first Was reliance reasonable in D&G Stout?

D&G STOUT, INC. V. BACARDI IMPORTS, INC. General could sell out, but Bacardi promised to continue acting for General in Indiana; but then withdrew their account; then General’s other supplier withdrew; General back at table w/National, but in much weaker position than before Bacardi screwed them Trying to recover difference between 1st offer and price actually sold for in reliance What did General rely on? Relied on promise Bacardi would stay w/them Note 2 on remand court found promise to stay w/them was contingent So where there really a promise? Assurance? You should see how it could be argued it wasn’t a promise or something different What was nature of General’s reliance on promise? How did they rely? They turned down original offer from National b/c of this promise What was the effect? They had no negotiating leverance at all when they finally went to table w/National; the only thing they could do was liquidate b/c they have to sell Was it reasonable to rely? 1st District Court said no, and on remand, sounds like they wanted to say ―no‖, too They said it wasn’t reasonable Relationship was terminable at will; illusory promise Bacardi never said they would be w/General for a specific period; this promise not legally enforceable and w/out consideration and was illusory Does it make sense to rely on a promise that was illusory? District court said no How does Court of Appeals deal w/this? What do they say? 32

Guy quit his job and moved, relied on new job and paid expenses to move; might be able to obtain reliance costs, not expectation b/c he has no expectation of future wages Promise was illusory—can’t make new employer take you on and keep you, that would make it enforceable Maybe could collect what lost in reliance General’s negotiating leverage on National, lost out p. 102 Note 2—dependent on future events b/c subject to conditions that General would continue to meet Bacardi’s expectation in sales and no market changes would occur Unenforceable—if one party wants to leave, the other party can’t enforce it In Sullivan—forego opportunity to have someone else operate on her nose, but who knows what would’ve happened to her; she lost her expectation

ELEMENTS OF PROMISSORY ESTOPPEL There has to be a promise that was made and broken Did they rely on promise? Was reliance induced by promise? Examine foreseeability on part of promisor of promissee’s reliance Promisor has to have reason to expect what would happen, would happen

In each case, promisor expected reliance which occurred Feinberg, Kirksey, Scothorn Promisor will not be liable if they had no reason to expect reliance at all Or had reason to expect reliance, but not the kind the occurred Objective standard and look at facts, evidence—what would person in place of promisor have expected to happen? Remedy under Restatement 2—can limit as justice requires, but don’t have to Reliance has been expanded beyond consideration

RESTITUTION AS AN ALTERNATIVE 33

Can be an alternative Recovery in absence of a promisedifferent than promises and enforcing them, like we’ve been looking at Based recovery on ―unjust enrichment‖ Elements: 1. person claiming restitution must have conferred a benefit of some kind a. can be transfer of property, services (shrubbery) b. retention of that benefit must be unjust i. p. 103 is a case where you can retain a benefit 1. not required to pay for benefits forced on you 2. keeping those benefits is not unjust EXAMPLE: Car accident and you are unconscious, would you want a dr. to try to save you? Isn’t that an example of benefits being forced upon you? Is the doctor an officious intermeddler or deserving meddler? Restatement 86 notes Reform of consideration Next two cases

10/07/04
 Confer a benefit - Shrubs, medical services  Retaining benefit is unjust RESTITUTION Confer 2 things: 1. Benefit of something 2. Retaining that benefit must be unjust You don’t have to pay for benefits forced upon you Is a doctor an officious intermeddler or a deserving claimant?

COTNAM V. WISDOM Harrison is unconscious the whole time, couldn’t have expressly or implied-in-fact assented to Contract in fact—everything we’ve seen thus far is an actual contract, until this case; we find them in writings of parties, in verbal communications between parties (can be oral); we find them in actions of the parties; a mutual understanding (includes Wood v. Lady Duff-Gordon); meeting of the minds 34

Contract implied by law—rests upon no real evidence; no actual existence; it is a mythical creation of the law; they are making it up; law is saying there was a promise when there was no promise; created for the sake of a remedy; it rests on legal obligation Harrison couldn’t have made a promise b/c he wasn’t conscious and therefore, incapable of contracting How is this case like the Sceva v. True case mentioned on p. 104? Certain people are incapable of contracting—insane person, an idiot, or person utterly bereft are incapable of contracting; their contracts are no good There can be no meeting of the minds But we do compensate those who give them the necessaries of life  Infant on street can contract for an apt; same for food Even though he died, Harrison received a benefit, so we will compensate the doctor How do we compensate the doctor? Fair compensation of his services; no expectation here b/c there is no promise to base expectation on So we give them reasonable compensation for services rendered Should not base recovery on wealth In emergency situation, should be based on services Maybe compensation should’ve been based on graduated services p. 106 Note (1) This promise is actual; work on my dad and save him (services) in exchange for payment Promise would received services Consideration can run to a 3rd party There you would recover on contract and that would effect compensation That would be recovery on contract This is recovery based on quasi-contract p. 106 Note (2) If you do something gratuitously, you are doing it to be a good person Society presumes services are rendered gratutitously Can be rebutted if they are excessive, expensive, or burdensome Overcome presumption when you do things in a professional capacity Cotnam v. Wisdom—doctor expects to get paid for rendering professional services; very important that he was a physician, same w/a nurse

p. 106 Note (3) Did Webb’s actions create a quasi-contractual obligation on McGowin’s part? Is McGowin now required to pay? What if McGowin makes no promise to pay, is he required to pay? Clearly there is a great benefit, does it create a quasi-contractual agreement? 35

Was he unjustly enriched? If someone saved you from a fire and they were disfigured You can pay them, you can promise them We presume in these situations someone did it out of the goodness of their heart We don’t consider they got injured We don’t compensate cops, fireman outside of their duty; they don’t get anything extra; if you want to promise them to pay extra money, so be it

RESTATEMENT 86 We noted Webb could recover under Restatement 86 McGowin made a promise--$15 every 2 weeks Could it be argued that Webb conferred benefit as a gift? There may have been no thought for compensation, but that’s not the same as a gift; we’re looking for a gift-giving state of mind He was being a good person, he was doing it as a gift; looking for evidence he was doing it in the gift-giving state of mind Note (d.) You have to prove Webb was in a gift-giving state of mind Likelihood is that he wasn’t thinking it was a gift, he probably wasn’t thinking anything Exception 2  You have to prove they actually intended to make a gift ―Promissory restitution‖ restitiutionary promisor has to be unjustly enriched; unlike pure restitution cases, we are enforcing a promise that’s why it works in Webb, b/c there was a promise he has been enriched, the reason he is not unjustly retaining it is b/c he is paying every 2 weeks

p. 107 (5) Does it matter if it is implied-in-fact or implied-in-law? Lady duff-gordon is implied-in-fact; agreement not expressed well You have make distinction to decide damages We look for expectation Implied-in-law: there are no intentions; it is a quasi-contract, recovery is what services was conferred on other party

CALLANO V. OAKWOOD Pendergast  $$$  Oakwood  House  Pendergast  $$$  Callano 36

 Shrubs  Callano  trying to recover from  Oakwood Quasi-contract case Think about why did attorneys go after Oakwood Callano’s trying to collect for shrubbery from Oakwood Callano said Oakwood was unjustly enriched from Pendergast There is no question about the enrichment Oakwood received Value of property was increased by shrubbery Is there an obligation to pay for it b/c the value of property was increased by shrubbery? Court distinguishes quasi from express contracts In actual contract, obligation rises from consent In quasi contracts, obligation rises from law or equity; we impose obligation Contracts—intentions of parties are the essence of the contracts In quasi—there are no intentions Actual contract—defines the duties, rights, obligations are In quasi—duty defines the contract; trying to create a remedy in these siatuions b/c somebody got something they should have to give back Equitable principle of not being allowed to be enriched unjustly at another’s expense You have to prove two things: 1. Someone has been enriched a. Oakwood has been enriched 2. Retention of that benefit w/out payment would be unjust a. For Oakwood to retain that benefit w/out paying for it would be unjust What else does the court say you have to show to show unjust enrichment? Expecgted renumeration from the defendant Callano never expected renumeration from Oakwood, they expected it from Pendergast Some direct relationship between parties or a mistake No direct relationship between the two; Callano had express contract w/Pendergast Can’t use quasi contract to subsitute one promise for another Callano already has a promisor Point is to provide remedy where none exists Callano could go after the estate and sue the estate Why didn’t Callano go after the estate? It could be more difficult b/c the Pendergast estate in Massachusetts for this small claim Why not sue the Grantges (the ones who bought the house)? p. 110 (1) - If they paid more for the house, they were not unjustly enriched 37

- If they paid the same price for the house, there might be enriched, but it’s not necessarily unjust enrichment, just lucky

p. 110 (2) They did exhaust their remedies b/c they sued Doziers, but they are bankrupt Callano did not exhaust their remedies b/c they didn’t sue estate of Pendergast Doziers knew more than Oakwood b/c they consented and had knowledge We should permit restitution of a benefit to a stranger, when the claim against Pendergast had failed, then they can go for Oakwood Professor Dawson: If you can’t recover against party you contracted with, you might be able to go after party who benefited

p. 110 (3) How much did they pay for the shrubbery Or, increase in value of the property

10/12/04
General  services  Owner  $ $ $  ^ $ | services Subcontractor CALLANO p. 111 Note 5 There is a general contractor, who makes deal w/the owner The general contractor then makes deals w/subcontractor What if general contractor doesn’t pay subcontractor Can subcontractor go against owner? NO—under Callano, they have no contract w/the owner and no restitution; they expect renumeration from general contractor and you can’t substitute another promisor for another promisor But you can proceed against a property in lien Lien rights against the property; no clean title You don’t have a personal claim against the owner You have to meet technical requirements of Lien Statute

38

They come into your office and want their money  Pendergast  house in Massachusetts  House—no lien; you cannot get a lien against the house b/c NJ statute says you can only get debts contracted by the owner  Gantges—no enrichment  Oakwood— PYEATTE V. PYEATTE Breach of contract doesn’t work Promise to put her through school isn’t enforceable—contract was too vague and indefinite (not enough to tell what he actually promised) When won’t we let you get restitution w/in a marriage? When it is considered to be gratutitous There was a promise b/c she expected something and she made extraordinary and uni-lateral effort solely to his benefit In this kind of situation, court said restitution was appropriate Why did they reverse award of $23,000 This is quasi-contract, not contract Reasonable value of services to husband? She paid his living expenses, his tuition Or increase of value to him? Value of his degree Two ways to measure it Would it be different if there was property? Yes, a lot of state’s have a ½ rule What if there was alimony? Maybe, if he was paying alimony, she was being compensated Professionals don’t get alimony, it’s usual the person who doesn’t work What if she had made the claim ten years later? Yes, b/c she was living off the fruits of that law degree Is he still unjustly enriched if she lives off the fruits of his law degree for five or ten years? p. 113 Note 2 Generally restitutionary claims between spouses fail; services in marriages are presumed to be gratutitous Only reason in this case it isn’t is b/c of her extraordinary effort and he received all the benefits

39

REFORM OF CONSIDERATION Should there be a legal mechanism that allows parties to make promises binding w/out consideration or reliance? There have been attempts to do this b/c a lot of people who don’t like consideration One way, make the writing sufficient; writing is evidence a contract was made; formality of writing kind of satisfies the cautionary function, you are more conscious of what you are doing Under UCC, firm offers don’t require consideration Under UCC, if you want to modify contracts, you don’t need consideration DEMENTAS V. ESTATE OF TALLAS Based on past consideration, so it’s not enforceable It’s in writing, he signed it, but he didn’t sign it to say he’s been legally bound Promise to change his will isn’t really intent to be legally bound Not clear this promise is an express agreement Dementas notarized it and sent it to the other party, but never changed will (maybe he didn’t know he had to notarize it) p. 118 Note 4 There is a lot of hostility to the doctrine, but it’s still alive and kicking 99% of contracts, it is very clear Even in situations where results seem to be harsh, consideration is still alive and kicking He loses b/c there is not consideration for the promise

THE BARGAINING PROCESS
OFFER AND ACCEPTANCE NATURE OF ASSENT How do parties manifest their intention to enter into a contract? Once you reach the stage of contract, you’re bound Mutual assent is about offer and acceptance; manifesting by some discernable means the intent to be bound by an agreement Offer + Acceptance = K Offer and acceptance as instrument for how consideration is exchanged (p. 65) Mutual assent—There may be oral expression, commencement of some performance, etc.

LUCY V. ZEHMER 40

Offer + Acceptance = K Offeror If you do/say certain things, we are going to attach something to those things and it doesn’t matter what was going on in your head Attach an objective meaning to acts Objective vs. Subjective Lucy wants specific performance for the Zehmer farm Lucy offered to buy the land for $50,000 cash Offeror—Lucy; Offeree—Zehmer Zehmer didn’t believe it was a real offer, at first And since he thought the offer was in jest, he wrote out an acceptance, then re-wrote I to We, so his wife could sign it Lucy offered Zehmer $5 to seal the deal and took the slip; Zehmer tries to take it back b/c it was a joke and he had no intention of selling it to him Is it too late at this point? Offer + Acceptance = Contract, if there has been an acceptance, it’s too late Issue: Whether there was an acceptance or assent by the Zehmers. Zehmer said his acceptance was no good b/c they were all drinking and joking; he said it was a bluff or a dare p.122-123 His outward actions indicated he accepted the offer, we look at the outward expressions of a person as manifesting his intentions; we don’t look at his secret and unexpressed intentions; law imputes to a person an intention to a person who corresponds to the reasonable meaning of your words and acts What shows he outwardly made acceptance? He wrote it down, he re-wrote it (more than one draft), he allowed him to take, they discussed the completeness of the title, they talked about it for awhile, Zehmer seemed to be sober (you can be too drunk to make a contract) All of this indicates a reasonable person would believe he was accepting What facts indicate Lucy honestly believed that Zehmer intended to accept (subjective)? Lucy offered $5 to seal the contract; got money; took the title to an attorney All of this indicates that his outward actions seemed he thought Zehmer was accepting What facts show it could have been a joke? They did it at a bar, they wrote it on the back of a restaurant check All of this indicates that this was not so reasonable First court said Zehmer got to keep his farm What facts indicate Lucy didn’t know Zehmers were kidding? Whispered conversation between Zehmers not heard by Lucy, Zehmer wrote it out and signed it so Lucy wouldn’t know it was a joke 41

What if it was for $50? That is not a realistic price; not reasonable; what meaning could a reasonable person attach to it Any price too high or too low should seem like it’s not a real offer to a reasonable person p. 124 Note 2 A low-price signals not binding is suggested at all Would a reasonable person conclude the commercial actually offered a harrier jet? Should a distinction be made between jesting or bluffing? Should a joke be enforced if it’s made?

10/14/04
INTENT TO BE BOUND Promisor may not be bound if promise doesn’t appear to be serious (lucy v. zehmer) b/c of the content or circumstances around it’s making (claim zehmer’s were trying to make) )ther circumstnacese where promisor may not be bound Doctors and patients  Sullivan v. o’connor—statements from doctors might be transformed into promises by patients who take optimistic hope out of context p. 126 Note 1 MI says if doctor makes that promise, it has to be in writing Statements made between intimates or for social purposes Notes 2,3,4 Those don’t count; here parties do intend to keep promises; difference is they don’t intend legal consequences if they break the promise Dating, dining, hunting, co-habiting Not thought of as creating obligation Not enforceable unless there is an agreement to share expenses (i.e. a wedding) People don’t think you can be hauled into court for breaking these kind or promises Note 2 Promises to Marry Before, you could be sued; now, it’s just sad These used to be enforceable, but all of that has changed Engagement is now about love If you get left at atler doesn’t count Promises between husbands/wives are not enforceable Legal consequences not attached Pyeatte case is exceptional b/c benefits/burdens were so exceptional Unmarried cohabitants Marriage gives a lot of presumptions and benefits Different then marriage b/c you don’t have those protections Since you don’t, you may have to rely more on contract law, then rights marriages use 42

Gentlemen’s agreements * Parties can agree that there promises will not be enforceable by a court * These agreements are usually upheld Promises will not be enforceable 1. underwriting agreements where they say that won’t be legally bound 2. employee pensions are an exception difference is w/underwriting agreements you have parties w/equally bargaining power and you have sophisticated parties that can take care of themselves vs. beneficiary situation where employee may have little bargaining power or resources Formal contract contemplated Parties can agree there is no contract (don’t intend to be bound) before there is a formal writing Other scenario is you can be bound before you execute an agreement as long as there is assent—offer, acceptance, contract Question is how to determine which  goes to parties’ intent, intent to be bound before formal agreement is execute (more likely) Consarc p. 128 Assumption is mutual assent will do it; once you agree on terms you are bound whether you have a legal writing or not That assumption will hold unless one party somewhere expresses that they don’t intend to be bound until agreement is executed The best way to do that if you don’t intend to be bound until you actually write it out and sign it is to just say it  ―don’t intend to be bound until formal execution of a written agreement‖ Winston p. 128 Trying to figure out what parties meant and want Factors to determine what parties intend, which court looks at: (1) whether there has been an express reservation (you say it, you won’t be bound until formal execution of writing), (2) whether there has been partial performance (if they start performing, it indicates they intended to be bound before execution of a formal writing), (3) whether all terms of alleged contract have been agreed upon (if they have agreed on everything, it leans towards binding), and (4) whether it’s the kind of agreement that is usually in writing, if it is, then it leads towards no agreement until written up

THE OFFER
Offer + Acceptance = K (Offeror) (Offeree) Offer—(p.130) an act whereby one person confers upon another the power to create contractual relations between them (to create a contract); is it an act to lead offeree to reasonably believe he/she has the power of acceptance and that will close the deal Restatement 24 Offer defined Something that gives the other person reason to believe they have the power to close the deal 43

Trying to isolate statement that is claimed to be the offer Factors How specific is language used in purported offer How much terms of the deal do they give Does offeror give indication they intend to be bound Where is the communication located in the sequence of correspondence This can change whether it’s an offer or not Circumstances surrounding transcatoin Were there a lot of people? Was there a lot going on? What are we trying to exclude 1. acts apparently done in jest 2. invitations to deal; inviting an offer 3. acts done w/out intent to create legal relations 4. preliminary negotiations (restatement 26) In doubtful cases, our inclination is to say it’s not an offer B/c we’re not trying to force people into contracts There are no ―magic words‖ Just b/c it says ―offer‖ it’s not necessarily an offer Look at all words/phrases in context

OWEN V. TUNISON 1. Owen wrote, ―Will you sell me property for $6,000?‖ 2. B/c of improvements not possible for <$16,000 a. Is this an offer to sell property? Did it empower Owen to close the deal? b. What if Tunison had said ―I will sell for $16,000‖? i. This is more definite and sounds more like an offer c. What if Tunison had said ―I will not entertain an offer for less than $16,000‖? i. Looks like Tunison is asking Owen to make an offer for anything not less than $16,000 3. Accept Issue: Whether there was an offer made. Court says b/c of what Tunison said about not selling for less than $16,000 looks more like 2c Does he express a clear intent to sell? And do we know the price at which he would sell? We know the price is not less than $16,000 We don’t know the price at which he would sell Tunison was inviting more offers If Owen had offered $15,000 and Tunison came back and said not less than $16,000, this would be a much closer case b/c they are in the same ballpark So close it sounds like one party is saying they are in the same ballpark We changed the first statement, and the second started to look different; this is where we look at stuff in sequence of events

44

HARVEY V. FACEY 1. Will you sell us BHP?—telegraph lowest cash price 2. Lowest price £900 a. I will sell you BHP for £900 b. Lowest price at which I will entertain offer is £900 3. Accept Was it an offer? Court held that there was not an offer b/c Facey only answered the second part of a two-part question He never indicated he was going to sell If he said Yes, I will sell you BHP for £900, that would be an offer Court says the third telegram is the offer and seller could accept/not accept that offer Generally advertisements and price quotes (catalogs, price circulars) are not viewed as offers; they’re considered invitations for offers It’s made to too many people There’s no limitation on quantity You can’t satisfy the potential demand Too indefinite

FAIRMOUNT GLASS WORKS V. CRUNDEN-MARTIN WOODENWARE CO. Buyer—Plaintiff/appellee April 20th—Buyer: please advise us your lowest price for 10 carloads of jars April 23rd—Seller: we ―quote‖ you for immediate acceptance April 24th—Buyer: enter our order If you were seller’s atty you would argue they didn’t make an offer b/c a price quote is not an offer to sell Court says on bottom of p. 135 You get catalog, it gives you a price, you place an order (this is the offer), and the other party can accept your offer/order or not Question is what makes this price quote an offer? It’s b/c we look at the communications as a whole, and then b/c of looking at them altogether, it becomes more than a price quote Each case turns on the language use; what is it that makes the other party believe they had the power to close Look at first telegram—they requested an offer, there is a lot of detail, it is specific Look at reply—reply seems to make such an offer, gives the price for each item, ―immediate acceptance‖, it gives terms and delivery terms Look at whole sequence of events and the original communication is crucial b/c it supplies the quantity term 45

W/out the quantity term, you have the same case as the case in Note 2 (p. 137)

10/19/04
FINAL: Don’t need to know case names, UCC sections; USE THE MATERIAL If you can’t use it in a problem, you don’t know it

FAIRMOUNT GLASS WORKS Quote turns out to be an offer Looked like they were looking for an offer Then court looked at the reply which seemed to make that offer

p. 137 Note 2 Does ―shall be pleased to receive your order‖ Why does court conclude it is not language a businessman would use to make an offer? Sounds like proposal in Fairmount Glass The KEY is there is no limit on the quantity; it’s possible for offeree to accept at a quantity the supplier can’t supply When there is no quantity, it becomes more like an advertisement; it’s more like a quote b/c there is no upper-limit on the quantity What if they said they were offered to authorize 1-25 carloads? More like an offer b/c there is an upper-limit This is different b/c we have a quantity term They specified the quantity in the first letter in the Fairmount case You look at communications as a whole What is a reasonable quantity? There is too much uncertainty You would be implying a contract by saying advertiser intended to be bound for a contract We don’t try to force people into contracts, we try to figure out what they intended and if they left out a bunch of stuff then they probably didn’t intend a contract What if we said we are authorized to sell you all the salt you can order? There is still no upper-limit, quantity term; quantity is still indefinite Offer is the order and seller can accept that ** You read the communications as a whole ** Fairmount to teach us that First communication provided quantity and requested an offer; detail in reply seemed to make that offer pp. 135-136 is key to the reasoning 46

In Fairmount, said contract was indefinite - they also said acceptance did not mirror the offer o acceptance must mirror the offer

ADVERTISEMENTS Generally held to not be offers Ads, price quotes, catalogs circulated to a wide group of people Why do we say that ads are not offers? What if demand exceeded the supply?

p. 138 Note 2 Lots of consumer protection statutes to protect against bait-and-switch

What about reward notices? Do they empower offeree to accept and close the deal? It can only be accepted by party that performs the service One person can accept—it does empower to close the deal LEFKOWITZ V. GREAT MINNEAPOLIS SURPLUS STORE Price is clear, first come first served, and limited to one quantity; there is nothing open to negotiation This constitutes an offer They avoid the difficulty at the root of the general rule

p. 140 Note b Offer was not addressed to him and he knew that You can discriminate w/respect to sales

p. 140 Note 1 Pepsico This is not like Lefkowitz Commercial wasn’t sufficiently definite and said details are in the catalog You go to the catalog and they don’t talk about the jet In Lefkowitz they identified person who tried to accept No one identified who can accept No limitation on quantity in Pepsico

BIDS p. 140 Note 2 47

Bid is the offer in competitive bidding Bid is an offer can be accepted/rejected by party who gives the bid They may decline to accept the offer; the power is in the hands of the seller This applies a lot in building contracts * If the bid is an offer, like all offers, offers are revocable at any time before acceptance *

CONSTRUCTION CONTRACTS Construction contracts are for the most part governed by common law and not the UCC General contractor is selling a service; sub-contractors may be selling goods/services, but the services overtake A real possibility for error So far no liability for error by software company Complex plans and specifications On-line bidding Generally they use rules on the site ELSINORE UNION ELEMENTARY SCHOOL DISTRICT V. KASTORFF Owner (Elsinore)   Contractor (Kastorff) 08/12—K awarded 08/13—Error discovered by Kastorff 08/14—Kastorff notifies Elsinore of mistake in bid 08/28—Elsinore say ―no, not letting you‖, they are awarding contract, he says he won’t perform Elsinore went out and had building fixed and sued Kastorff for difference Offer = bid Why is it too late to revoke here? p. 149 Note 1—there was a statute prohibiting revocation of the bid pp. 146-147 Court says it is an ―irrevocable option‖, a contract right that has to rescinded Court goes on to see if Kastorff meet the requirements to rescind option contract If there is a mistake in the offer? Is it material? Is it important? Mistake is a lot of money w/terms of this contract Was there a neglect of a legal duty on the part of Kastorff? Was he so negligent? Performance would be unconsiecenable; school would be getting a contract w/out paying for plumbing at all Did he give prompt notice he wanted to rescind? Yes, the next day CA Statute they note that deals w/this (bottom of p. 148) What position would school district be in if there was no mistake? 48

They would’ve accepted the next lowest bid; status quo is the cost of the job w/the plumbing estimate; they would’ve gotten another contractor to do the job w/the plumbing Is there a different result if the sub-contractor is trying to withdraw their offer w/the general contractor’s bid? Could we restore the status quo there? Will answer this in Drennen v. Star Paving p. 149 Note 2 Does it matter if it is a mistake in calculation versus a mistake in judgment? Do we care? A judgment mistake would be materials needed, time needed, how many workers, labor and materials, etc. That kind of mistake we will hold you to; just bad judgment; if contractor has bad judgment, we hold him to that Anyone can make a clerical error

p. 149 Note 3 What is offeree knows of offeror’s mistake? At the time of acceptance, the offeror is not bound; you can’t snap up someone’s mistake The problem is proving offeror knew or should’ve known about the mistake A lot of times, they say there is a real sizeable difference, so offeror should’ve known (like in Kastorff)

10/21/04
Offer + Acceptance = K Offeror makes offer, offeree accepts Offer is act that leads offerre to believe she can close the deal Offeree closes the deal by acceptance This is all mutual assent Wht is an acceptance? Voluntary act by oferre where he xercisers power given by offer and with acceptance, they create legal obligation called a contract Both parties are bound unless they both want to get out of it, they can always rescind You will incur liability if you try to get out What kind of acts close the deal and constitute an acceptance? First place to look is the actual terms of the offer—what does it say Offeror has power to determine what acts determine acceptance What offeror has bargained for, two things: 1. Returned promise a. Almost all bargainers i. Student loan—you want them to promise to give you money; if they don’t promise to show up w/money, they don’t have to show up w/money ii. Cell phone service—you want them to promise to give you service b. You bargain for promise, you get more, you get promise and performance 49

i. Cell phone service—you want them to promise to get you service and for the phone to work when you turn it on ii. Commercial offerors almost always bargain for return promises 1. They want to know in advance offeree will perform 2. Returned performance a. Offerors of rewards bargain for a performance i. Lost dog = $25; they want you to show up w/dog, not promise to do it; they want only a performance Return promises are acceptances, what suffices as a promise? Words? Specific words? Can we infer it from conduct? Have to notify acceptance?

INTERNATIONAL FILTER CO. V. CONROE GIN, ICE & LIGHT CO. Int’l Filter—seller, plaintiff, appellant, plaintiff in error Conroe—buyer, defendant, appellee, defendant in error Filter trying to sell water filters to an ice company Ice company is saying maybe not 2/10—Seller (Int’l Filter) proposal to furnish filter, which will become a contract when it is accepted by purchaser (Conroe) and approved by Power to close deal is in the seller, the seller is the offeree who accepts the offer Buyer Conroe makes the offer Endorsed ―OK‖ is the acceptance 2/14—Water analysis 2/28—Too late to try and back out p. 155 Note 1 - Offeror is Conroe - International Filter prepared the offer - Acceptance is when Engle accepts offer - 2/14 Notified Int’l accepted Note 2 Are they indicating they are accepting? First language in Note 2 is not very affirmative; it’s doubtful so we go w/are they really trying to commit themselves Is it really language of commitment? 2/14 Int’l letter was stronger than in Note 2 Do they need the samples to decide if they want to go forward? Could be; not certain Note 3 Company wants to keep deal w/in control so they would want to submit it to the main office They want total control—if guy is out there trying to make a sale, add terms Do using home office approval contracts Offeror can revoke before acceptance Evertite—greens tried to revoke before acceptance 50

RESTATEMENT 56 Must be notified of acceptance or they must find out sometime Can offeror dispense of notice? ―Except where the offer manifests a contrary intention…‖ Offeror can dispense of notification ―Becomes a contract‖ language; states that parituclar mode of acceptance is enough; doesn’t look like notice is required Rules about notice don’t require a specific form UNLESS parties say they want it in a particular form Court finds even if notice was required, it was given in 2/14 letter If you were Int’l Filter’s atty, how would you advise them after this case? How would you make sure they couldn’t even talk about how they could change notice? Allied v. Ford—they went back and changed form You would put ―no notice is necessary‖ Int’l Filter is drafting offer, you can put in words saying we don’t want any notice, we don’t need notice, then there is no litigation over notice Can offeror specify the method/manner of acceptance? Can offeror require acceptance to be in words? Writing? Specific acts/act? If it’s unclear, then what method of acceptance do we use? WHITE V. CORLIES & TIFT Negotiations to fit an office ―Upon an agreement‖… writer ―will call‖  crucial language Who made the offer? Terms are in negotiations back and forth written/oral, ilncuding specifications, estimate Then it looks like they are making an offer Offeror—Corlies & Tiff Seems like he is bargaining for a promise and performance Offeree—White Only way White can say he has a claim is if he has a contract He’s saying by going out and buying wood that he accepted and he doesn’t have to say ―I promise‖; he began performance and from those acts you can imply a promise This does not turn into a uni-laterial contract; these acts equal a promise If you go out and start to look for lost dog, you can stop at any time b/c you didn’t promise to find lost dog What means of acceptance by promise does it invite? Corlies is saying they want a written/oral promise; they say they didn’t want assent based on acts

10/26/04
51

WHITE V. CORLIES & TIFT Court found September 29th note was an offer White said he didn’t have to make the promise in words Said he made the promise when he began working on the deal (beginning the work is the same as saying ―I promise‖) Corlies & Tift said they wanted a written or oral promise, they didn’t want to have to figure out from the acts whether White accepted or not What if Corlies & Tift had written ―if you want to do the work then let me know by email and you can begin at once‖? What does it sound like they were inviting? A written promise or agreement RESTATEMENT 60 If it says place time or manner of acceptance, it has to be that way. But, if it merely suggests, then another method of acceptance is not precluded RESTATEMENT 62 If you get a choice, it’s a bi-lateral contract, if you can choose by acceptance by performance or acceptance by promise; in an uni-lateral contract, the only way you can accept is by showing up and doing it Can we infer a promise? Are you preparing to perform or beginning the performance? Court says he’s a carpenter and he buys wood, so it doesn’t seem he is departing from what he usually does; how can you infer a promise for those kinds of acts?; seems like he is ―preparing‖ to perform; ―preparing‖ is a crucial part of beginning RESTATEMENT 50 Manifestation of assent—(1) can be made in the way required by offer; (2) acceptance by performance requires at least part of what offer requests be performed and include acceptance in a uni-laterial contract When have they done enough to show they intended to perform? At what point have they accepted by beginning accepted performance? EVER-TITE ROOFING V. GREEN Written acceptance or Commencing performance

What if somebody at company doesn’t sign documents? Reason for ―commencing performance‖ There had to be a credit check, which is why there was a delay Offeror—Greens (we know b/c Ever-Tite controls acceptance) Offerree—Ever-Tite Roofing Greens are arguing they revoked their offer to Ever-Tite before they had a chance to accept it You don’t have to say ―I revoke‖; any action inconsistent w/offer open 52

Too late to accept after an offer has been revoked Once you learn they are doing something that’s inconsistent w/offer still out there signifying they are revoking offer, you cannot accept What were Greens bargaining for? They were looking for a promise; clearly a bi-lateral contract NOTE: If you accept by performance, you can stop in the middle b/c acceptance by performance has to complete the whole performance How can they make a promise here? They could have written, intialied, orally, in writing, or commenced the work RESTATEMENT 30 You can do it in words, action, or say choose Ever-Tite said when they loaded up truck, that was the beginning of performance Loading up the truck is commencing performance which is acceptance RESTATEMENT 62 (2) If you can choose between promise and performance (bi-lateral) acceptance, acceptance by performance operates like a promise Could court have construed in favor of Green? You could argue commencing performance was starting the work on the roof rather than loading up the truck RESTATEMENT 50 Acceptance by performance involves at least part of what offer request performed White v. Corlies & Tift—said they were only preparing to perform; preparing to perform may be essential to the performance NOTE: Preparations (even if not acceptance) may result in some pre-contractual reliance How much are activities that are said to be acceptance to the offer? The extent to offeror that it is performance The more benefit to offeror, the more they actually began performance Communication between parties What happened in the trade Might help to find out if it’s referable to this offer or if it’s just what the carpenter did ALLIED STEEL V. FORD Indemnity clauses—says who is liable for injury, be it people who work there permanently or people who put in machinery More than one document is making up the offer Indemnity clauses included which says Allied accepts full responsibility for all the injuries of this job They void it out in 1955 53

July 1956, Purchase Order - September 5th—Injury - November 10th—Written acceptance Who made the offer here? Ford made the offer on its purchase order and amendment What did they want in return? A promise Why is Allied saying indemnity clause is not in effect? B/c indemnity clause wasn’t accepted Other means of acceptance not precluded Allied accepted by coming on job; Ford let them on the premises and Allied began performing the work No one could back out after Allied began performing (p. 164) RESTATEMENT 62 Offer + acceptance = K; same as saying ―I promise‖; both parties are bound once performance begins Allied went on premises and began work; they thought they had an agreement; they were on Ford’s property doing the work, that’s how the accident happened Court also said clause was to protect Ford, they can waive it if they want Offeror can also prescribe the exclusive manner of acceptance, but must be very explicit in doing so If that’s the case, it’s the only way they can accept, you can’t deviate from that RESTATEMENT 60 If an offer prescribes place, time, manner of acceptance, that is the only way to do it; but if it only suggests, it doesn’t preclude another manner of acceptance Can Ever-Tite and Allied be distinguished from Corlies & Tift? In Ever-Tite and Allied, a promise was sought and implied from offerror seeking a promise; they said they were seeking promises; and they got the promise by the other party commencing performance Ever-Tite, contract said it could be by written of commencing; clearly didn’t want a promise b/c it said written or by commencing Allied said they wanted it to be sent back after signed off on; seems like they wanted a promise, but it wasn’t in terms that made it exclusive White was acceptance upon an agreement; looks like they wanted them to say promise Note 1—Commencing performance is acceptance; as soon as Allied gets on premises and starts work, it is clearly acceptance Made it easier to accept How do you figure out what manner of acceptance offeror is inviting? Look at offer—what does offeror appear to want? p. 165 Would UCC apply here? It is goods and services Services—to provide a service of manufacturing 54

Goods—machinery to produce stuff

10/28/04
Would UCC apply in Allied v. Ford? Sale of goods, machinery is goods, but also a sale of services, but on property to sell machinery What was predominate purpose of the contract? Does Code get us anywhere? Are we doing it b/c Code will help us? 2-204 UCC You can make a contract for sale of goods in any manner sufficient to show agreement You can accept in any manner (Restatement) by any medirum reasonable under circumstances (Restatement 30 paragraph 2/UCC 2-206) You can accept an offer by promising in writing, return and sign a printed form or document, initials You can accept orally, make the promise You can begin the promise performance Restatement 32—If there is doubt, offer is interpreted as either Either method of acceptance is by promise Restatement 62—Once you begin you promise Restatement 30—Offeror can require a specific manner of acceptance Corlies & Tift You can invite method of acceptance Allied v. Ford—if it’s suggested, it doesn’t preclude other methods of acceptance; clearly didn’t preclude another manner of acceptance; there is a contract b/c they were on premises installing machinery Uni-lateral Contracts p. 160 In bi-lateral, offeree has to take steps to notify offeror of acceptance Offeror can dispense w/notice; notice is for benefit of offeror Int’l Filter—becomes a contract Ever-tite—doesn’t say there needed to be notice Usually notice isn’t a problem b/c offeror can witness a promise Restatement 54—Invite acceptance by performance; don’t need notice unless offeror says you need notice When does acceptance become effective, is what we’re talking about? Paragraph 2—Maybe offeror doesn’t learn of acceptance; if offeree knows or should know offeror won’t find out by acceptance, contractual duty is discharged unless offeree exercises reasonable diligence to notify offeror, unless offeror learns about performance; or offer indicates notice of acceptance isn’t required Carbolic Smoke Ball Company Company bargaining to get people to buy smoke balls Good uni-lateral promise situation—they wanted performances, not promises to buy smoke balls Conditional payment—don’t have to pay unless you get the flu 55

Why was it notice required? Why did everyone who bought smoke ball have to notify them? Performing dispenses w/notice Company didn’t want notice; Company probably didn’t want everyone who bought one to notify them Restatement 54 terms—Offeror thinks we don’t need notice; Something about offer indicates notification was not required Most of the time, offeror knows what’s going on b/c they witness it; Part 2—deals w/what if they don’t Note 2—what if offeror doesn’t know? Note 3—what if offeror doesn’t know and offeree knows offeror might not know of acceptance and doesn’t notify? Offeror’s obligation is discharged if that notice isn’t given Reasonable time—by what means was offer, acceptance made, letters take longer than phone calls, email suggest immediacy, facts determine what’s ―reasonable‖ in the circumstances SHIPMENT OF GOODS AS ACCEPTORS UCC 2-206 Offer invited acceptance by any manner reasonable in circumstances If buyer tries to revoke offer after goods has shipped, it’s too later, b/c goods are acceptance and there is a contract Preparing to ship doesn’t count (Note p. 165) We draw the line at shipment; once goods are shipped, we know seller’s responding to this specific offer Prompt promise to ship Send back your fax/email and say you’re going to ship goods on whatever date

CORINTHIAN PHARMACEUTICAL SYSTEMS, INC. V. LEDERLE LABORATORIES (1989) Manufacturer, Seller, Offeree—Defendant Distributor, Buyer, Offeror—Plaintiff ―All offers subject to acceptance at home office‖ and ―submitted w/out offer‖ and ―prices are subject to change w/out notice‖ Lederle is very clear Offer—buyer for 1000 vials @ $64 of DTP vaccine p. 168 defines what an offer is and why this is an offer Price quotes are generally not offers, but can be (Int’l Filter) b/c of stuff that went before it Lederle went to great lengths to make sure it wasn’t an offer Communication: No power to close from letters 56

Letters were supposed to come out after the price increase What constitutes acceptance? Acceptance has to mirror the offer, under common law; you can’t accept w/different or changed terms UCC 2-207 No longer true b/c forms don’t mirror each other What means of acceptance did offeror invite? What did offeror want to happen? Ship the vials or promise to ship the vials 2-206(1)—acceptance by any manner Did anything happen before shipment? Tracking #--Court says that act can’t be acceptance, but Note 2 on p. 170, is there something wrong w/computer’s response? b/c it was automated? Or b/c it was a ministial act Revised UCC 2-204—electronic agents and individuals Even under this, company wasn’t making assent by giving tracking code and that was the only thing that happened before shipment They ship 50 vials and sent a letter w/it, was that acceptance? And they gave the opportunity to cancel UCC 2-206(1)(b) was it an acceptance? No, 50 vials fall under non-conforming goods Acceptance is 50 vials @ $64 w/a letter saying the rest will be billed at the higher price Price may be the same, but the quantity not the same 2-106 goods are conforming when they are w/in obligations of the contract How do we know that was an accommodation? Letter said it was an exception, as an accommodation, so it clearly comes w/in UCC Acceptance—seller - 50 vials at $64 - letter Did seller make an offer to the buyer here? Non-conforming goods; shipment is not an acceptance, it is a counteroffer Buyer can accept of reject a counteroffer What means of acceptance does a counteroffer invite? Any manner and by any medium reasonable in the circumstances Works us through UCC: Clearly a sale of goods

SILENCE NOT ORDINARILY ACCEPTANCE (p. 170) Silence is not ordinarily acceptance Restatement 56—when you accept by making a promise, offeror should be notified unless they dispense w/notice Restatement 54—when you accept by commencing performance, notice is less of a problem, but if it is, tell them 57

If you say, ―if you don’t answer, I assume you accept‖, is that an acceptance? NO, offeror can’t make silence acceptance You can accept, it is a contract (Restatement 69(1)(b)) you can take advantage if you want to, but you don’t have to What is about the cases in the book that make silence acceptance? What if we were car dealers and we always did this? Would there be a different result?

11/02/04
Restatement 69—silence is not acceptance Why in these cases is silence acceptance? Regular business If you don’t want cars, you call and say you don’t Would silence = acceptance? Yes, previous dealings, like the Webb case—b/c of our previous dealings, it becomes reasonable you should notify me that you don’t accept Silence along w/retention of goods for a reasonable amount of time Restatement 69(1)(c)—previous dealings where previously silence constituted acceptance 2-204 Termination of power of acceptance, four possibilities 1. Lapse a. Offers don’t remain open forever 2. Revoked a. Take back offer 3. Rejection a. Offerree may reject offer 4. Terminates upon Death of offeror a. Power of acceptance terminates upon death/incapacity of offeror LAPSE OF THE OFFER p. 173 At some point, offers will lapse; they don’t generally last forever An offer may state when it will lapse Offeror might say ―respond in 24 hours‖ Even if no time is stated, offer will relapse after a reasonable time Reasonable time—depends on circumstances; - what kind of offer, - how does market fluctuate, o it is fluctuates a lot, offer may lapse in a short time (i.e. stock prices, gasoline); o in a market that doesn’t rapidly fluctuate, it may stay open longer (i.e. offer to sell house); o you look at what is the ―usual‖ time in the trade; - parties may have dealt w/each other before

58

Face-to-face lapses at the end of the conversation, unless offerer manifests a different intention, then it won’t lapse at the end of the conversation Default rule—what if parites don’t’ say anything, what will we imply If there is a written offer, maybe it doesn’t lapse at end of convo p. 173 Lapse of an Offer Offer made in 1837, accepted in 1841, court looks at: - Purpose of award: to alarm public to be more vigilant o Emergency passed; offer no longer in effect p. 174 Note 3 Too late to accept? Terms of offer seem to limit it to the show He had to get another # to call, that might be a sign So does offer lapse at the end of the program? Is re-broadcast a renewal of the offer? One offer lapsed at the end of the program, too late to accept it Note 2, what if acceptance comes too late? If acceptance comes after offer has lapsed that means it’s not longer open to be accepted, you can no longer accept It might be a counteroffer and if so, original offeror has to accept that offer, and silence alone doesn’t equal acceptance REVOCATION p. 175 Generally offer can revoke her offer at any time before acceptance Doesn’t have to be the rule, in some civil rule countries Ever-tite, LA case, they talked about offer being open for a reasonable time (only b/c in LA) Offer is revocable at any time before acceptance If offers are revocable, what is revocation? What do you have to do? Restatement 42—if you receive a manifestation of intention not to enter into the proposed contract; any direct communication from offeror Do you have to say ―I revoke‖? NO p. 175 Hoover Enough to be a revocation b/c it indicates they didn’t intend to enter into the contract Is this consistent w/Owen v. Tunison and Harvey v. Facey? Saying ―I don’t want to go through with it.‖ - Doesn’t work as an offer; doesn’t amount to an offer - Works as a revocation Keeps you out of a contract in both situations Owen—we don’t have an offer to accept 59

Courts don’t like to force people into contracts Restatement 43—revocation by indirect communication; offerree’s power of acceptance is terminated when offerror takes definite action inconsistent w/an intentiont to enter into the propsose dontract and offerree acquires reliable information to that effect Two Possiblities: 1. Direct a. ―I don’t want to do it.‖ 2. Indirect a. Find out he doesn’t want to do it p. 175 Option Contract Offeror can make a contract that limits her offer to revoke Either consideration or reliance by offerree to make promise enforceable or you can make a firm offer under the code Under code you can make promises to revoke unenforceable w/out consideration Three ways to make them irrevocable DICKINSON V. DODDS Promise to sell property for £800 Open until 9am Friday, June 12 He decided to accept Thursday, June 11, in the morning

Buyer was going to close the deal, so despite language used, June 10th note was merely an offer Key language that says even though it starts off seeming like their minds have met is in the P.S. it says the offer is to be left open b/c he still wanted to consider Parties intended to let him have time to consider it When did he decided to accept in his mind? Decided to accept on the 11th, but he thought he had until Friday He got nothing for this promise; not binding; empty promise from Dodds to keep it open Before acceptance, Dodds could revoke What’s sufficient to terminate power of acceptance? When was Dickinson no longer able to accept? Dodds maybe got an offer from someone else or made an agreement w/someone else, does it make a difference whether he heard about entering into a binding agreement w/Allen or that he agreed to sell property Allen? NO, b/c it shows manifest of intention that he might want to revoke and doesn’t want to go through w/it What if buyer hadn’t learned about it? Revocations are good upon receipt; you have to received reliable information offeror has taken action inconsistent w/intent to enter into this agreement p. 179 Revocation of General Offers 60

Note 3 p. 179 Restatement 46—how to revoke offers made to general public All you have to do is to notify of revocation like you notified of the offer, b/c you can’t notify every person What about taking posting down? Is that enough? If you can do something better, you should do it Notification should be at least equal to offer and if possible better, but not less than the offer Look at how it was publicized and then decide how to take it down based on how it was publicized Revocatoin takes place upon posting the notice of revocation p. 179 Problem What happens when you receive reliable but false information? Should offeror be able to back out anyway? Offerree has already accepted, so probably not Point of rule is to let offeror off the hook when they want to get out of it, why should we let them off the hook here? They ddin’t revoke, they didn’t take action inconsistent w/intent to enter into the deal We probably should not We noted in Dickinson, he could’ve paid to have it held open p. 180 Sale of Property Works well for sale of property, but not so well for sale of goods b/c transactions usually happen quickly for the sale of goods So it doesn’t make sense to go through the option contract 2-205 Two ways to keep it open 1. pay for it 2. make an offer under the code, which means it’s a sale under the code a. You don’t need consideration to make it unrevokable Only merchants can make firm offers, people regularly engaged in business Has to be signed in writing Signed is defined in 1-201—any symbol executed or adopted… something to indicate that it’s you, letterhead, whatever Irrevocalbe for a reasonable time which doesn’t exceed 3 months If it says 4 months, it’s still 3 months, it can’t be longer than 3 months If it doesn’t state a time, it’s what’s reasonable in the specific facts (w/in 3 months) What’s trade practice? 61

Have they dealth w/each other in the past? If offer is on form supplied by offeree It has to be separately signed by offeror

11/04/04
To make an offer irrevocable Pay consideration (Dickinson  if he would’ve piad to hold over) o called option contracts Restatement 45—uni-lateral contracts only Make a firm offer under the Code (only applies to sale of goods) o makes it irrevocable w/out consideration o 2-205 Make offers irrevocable firm offers - has to be in writing - must be some kind of authentication, i.e. letterhead, etc. - it’s irrevocable for time stated, which cannot exceed 3 months - if it’s on a form by offerree, must be signed by offeror - only merchants can make firm offers under the code - UCC does apply to non-merchants - Ever-titeGreens couldn’t make a firm offer - p. 180 Note 1 2-204 defines a merchant—person who deals in goods or otherwise by occupation has knowledge or skills particular to goods involved in transaction; specialized knowledge as to goods, business practices, both Purpose of restricting it to merchants is to make sure consumers aren’t making firm offers; trying to prevent people like us from making firm offers on forms supplied by offeree - p. 181 2-314—Implied warranty; you assume if you buy something in the store that it will work When they talk about merchants in this section, when a merchant is warranting goods, we want the party extending those kinds of warranties to have special knowledge of those goods and who regularly deal w/goods of that kind Conroe—ice; Ford—cars  Being in business is not enough for implied warranty Ford warrants the car they sell b/c they regularly make and sell cars Probably don’t warrant the sale of the office furniture b/c they don’t regularly engage in that kind of sale, so not making implied warranties; but can make express warranties as to anything they want * Consumers can make irrevocable offers, but it has to be supported by consideration o p. 181 Note about NY Statute  has to be in writing, signed by offeror (Greens), has to state it is irrevocable, if it does, it is irrevocable for time set forth or reasonable time  Greens could make an offer here b/c it was in writing and stated it was irrevocable o No need for consideration, no time limit, it appears to permit consumers to make firm offers (always going to be doing it on a form provided by the offeree)

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RAGOSTA V. WILDER  Ragosta makes an offer and send a check for $2,000 62

 Wilder returns check  Rejection and offer is now done  Makes a counter-offer o Seller was seeking performance, not a promise, so it is a uni-lateral contract Trial court found it and so did this court Note after case said they couldn’t accept over the phone b/c it was a uni-lateral contract Could seller revoke the offer? Was there consideration? No consideration—there was a check and Wilder returned it Ragosta and did stuff so why is it not consideration? Sellers saying it is not a detriment b/c they didn’t want it, there was a detriment to promisee (which is not enough) but there was no bargain Did the seller revoke? Yes—October 8 they called and said they didn’t want to do it Was it too late? Restatement 45—only applies to uni-lateral contracts; you cannot promise; option contract created when offerree tendered Ragosta began to perform, but did not perform Must tender part of actual performance to begin performance, he was preparing to perform If consideration works, there are substitutes, like reliance In uni-lateral contracts, you can decide not to accept after you already showed up Irrevocable if: - Consideration - Firm offer under Code - Restatement 45 o Uni-lateral contracts only - Reliance?? Is this a promise on which you could reasonably rely? Wilder said they would sell it to Ragosta, unless he sold it to someone else This case is a good example of why we don’t like uni-lateral contracts DEATH OF AN OFFEROR Restatement 48—Offeree’s power of acceptance is terminated when offerree or offeror dies or is incapacitated; this applies to formation, not if you already entered into contract Option contracts—they can still accept p. 185 PROBLEM Does Mr. Earle have a claim? What do you have to figure out? You need to know if it was performance or promise? Is she seeking performance or promise? If she is seeking performance, does he have a claim? No, she’s dead b/c offer dies w/her; but he couldn’t perform until she died 63

If it’s a promise? Did he ever make the promise? You can tell him what the law is, he might be tempted to alter the story, but we assume they will still tell the truth Rules say clients have a right to know what the law is The point here is that it’s not clear what she was seeking—was it bi-lateral or uni-lateral

REJECTION p. 186 Once offeree rejects an offer, power of acceptance is terminated Good for offeror b/c they know that it is done and over What is a rejection? “Mirror Image” Rule p. 186 Traditionally acceptance had to be on the exact same terms as the offer Anything else is a counter-offer, a rejection of the offer Court may find additional terms in acceptance is actually not different from offer b/c it was implied in the offer Fairmount Glassworks p. 136 Added terms about jars being 1st quality, court found in the trade, those words conveyed the same meaning as the word used in the offer, so they were mirror images Additional language is just a request You have contract on offeror’s terms who can decide whether to alter contract by accepting Could be construed as proposals or suggestions What if neither mitigators work and parties move forward anyway? Two types of disputes 1. Arrest case—one party claims no contract; for some reason they want to get out 2. Where there has been performance, so there was a contract, so have to figure out what the terms were a. Good thing about mirror offer is that the acceptance has to reflect the offer

11/09/04
MAILBOX RULE People debating whether to apply Mailbox Rule to email Email not read; eaten by a virus; destroyed by spamware If it is another form or correspondence, mailbow might be used to work out what we do 64

Mailbox Rule—it is a default rule; parties can specify otherwise and what they specify will apply; it’s what we use when parties don’t say anything When parties specify, don’t need it With options, acceptance is effective upon receipt (Restatement 63(b)) Offerree takes risk of loss of delay/transmission of acceptance Also free to revoke acceptance

UCC 2-207 Old one is still on the books This statute is really complicated MIRROR IMAGE RULE 2-207 makes more sense w/in context acceptance has to mirror offer if not, it’s a rejection and counter-offer (p. 186) p. 189 Communications Non-offer Offer Counter-offer Rejection (R 38) Acceptance 189/A—Non offer  B/c it is just asking for a quote; invitation 189/B—Offer  B/c it invites acceptance; says ―if offer is accepted‖; there is a quantity and price and detail; these are the reasons this appears to be an offer 189/C—Rejection/Counter-offer  B/c amount is lower and different 189/D—Rejection  B/c they say they can’t do it 189/E—Offer  Too late to accept C is the most important b/c they rejected initial offer and made a counter-offer; so it is no longer open to accept the original offer; when they rejected it they terminated their power of acceptance Once they give a different quantity, it’s a rejection; different terms but it still relates to the original offer and they’re proposing another bargain If you say X at this price and Y at this point, it is a substituted bargain Note 1 p. 189 How many offers here? Three How many rejections here? Two Restatement 38—talks about how you might frame the message so it’s not a rejection; rejection terminates power of acceptance Note 2 p. 190 Drafting Offerree has to be careful to say offer isn’t rejected (R 38) i.e.) ―I want to consider your offer‖ or ―holding your offer under advisement‖, and at same time saying ―I am willing to buy…‖ 65

What’s problem w/saying ―you have 8 days to accept‖? When does term begin and end is not specified REJECTION OF A REVOCABLE OFFER p. 190 R 37—Rejection and counter-offer Option contracts—paying to keep offer open, you are giving consideration You can’t revoke, revocation doesn’t terminate power of acceptance Firm offer, you haven’t paid anything to keep it open; firm offers only apply to sale of goods so it is easy to see how you might have reliance; offeror might rely on rejection; no consideration as an option, it is treated differently, if you reject offer, even more reason to… PROBLEMS W/MIRROR IMAGE Two kinds of disputes w/mirror image rule 1. Offeror says acceptance didn’t mirror my offer so we don’t have a contract (Ardente v. Horan case, Int’l Filter) 2. Most of the time, the parties actually begin performing and there is a dispute over the terms of performance Good thing about Mirror Image Rule is that you know terms of contract; when you make a contract and parties use different terms, how do you know what terms govern? When you have a sale of goods and parties are contracting on standard forms, problems get worse Sale of goods might take place on more than one document Consumers do it that way, but businesses might not Both parties are sending documents back and forth There might be exchange of several communications on standardized forms where the blanks are filled in for transactions Clauses are written to favor party sending the form; seller would put in arbitration, etc.; buyer will have in as many warranties as they can make; seller wants different things than the buyer does Typical transaction—you have a request for a quotation followed by quotation form then Buyer (offerror) sends a purchase order (PO) which is the offer Seller sends an acknowledgement (which is a counter-offer under Common Law, it will not mirror the offer b/c on standardized forms) Seller will ship the goods Buyer will accept the goods Buyer is accepting the counter-offer by performing Seller will always get their terms b/c they send the terms in their form (Last Shot Rule) Mirror Image Rules frames this UCC 2-207 abandons Mirror Image Rule Actually how firms practice and do business 66

Do you think buyer intended to accept all of seller’s terms? Probably not UCC 2-207 Section 1 turns counter-offers under Common Law into acceptances All you need is a definite and seasonable method of acceptance; even if it contains different terms than offer, it is still an acceptance You have to be proactive to keep it from being an acceptance Unless What is definite and seasonable expression of acceptance—you have to respond to acknowledgement form in a way that makes it clear that you actually accept; trying to get at dicker terms (the stuff they write in that applies to you, i.e. quantity, quality, time of lease, amount of rent, etc.) 2-207 is trying to get to a boilerplate, we care if dicker terms are different We have acceptance under 2-207(a) What are the terms? We have two documents but they say different things—dicker terms match like quantity, etc. You only have to go to arbitration if contracts says you have to go to arbitration DORTON V. COLLINS This case is how courts frame the analysis If arbitration is a term of the contract, it’s arbitration; arbitration was on the back No Mirror Image Rule to help us, so we have to figure out terms of the contract Is arbitration a part of the contract?? How were the deals made? - Oral offers by buyer (typical b/c they do a lot of business together) - Seller used acknowledgement form (that had arbitration the back) - Carpets were shipped o Always received acknowledgment before carpet - Took delivery and paid p. 199 Road map * Always begin with Section 1  Do you have a definite/seasonable expression of acceptance or written confirmation… YES * Section 1, second question  Is it expressly conditional? If not, it is a 2-207 acceptance and you will have to go to Section 2 to figure out the terms If yes, parties have performed and it is, go to Section 3 and Itoh analysis Confirmation is when parties contract orally and someone confirms it Common law talks about offers, 2-207 goes to acceptance Under Common Law there was a counter-offer and taking delivery would be acceptance of counter-offer and last shot rule would prevail * Does it come w/in proviso language and if it doesn’t, do terms come in?

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DORTON V. COLLINS Under 2-207, there was an offer under common law ―oral phone offers‖ and oral acceptances or seller of carpets would send form Offeror—Carpet Mart Oral offers Offerre (C/A) Oral acceptances (on phone = confirmations) Acknowledgement

Under 2-207, acknowledgement form is an acceptance, even though it contains different things as long as dicker terms match, you have to take an affirmative step for it not to be an acceptance; you have to do something to make it not an acceptance What do you have to do? 2-207 language… End of first provision ―unless acceptance is expressly made conditional on assetn to the additional or different terms‖; proviso language We accept, but it’s conditional upon you going alone w/everything we’ve added; our acceptance is conditioned on you going along w/all this stuff we’ve added What kind of language makes it come w/in language Court says ―subject to‖ is not enough; (also argued in Stepsaver and court said not enough; Itoh, court says it was clearly express) Even you want to make it expressly conditional, language in Itoh will do it, but that’s not the only language will do it for you, but just means other language is open to litigation If it is expressly conditional, you are like Itoh If not, you go to 2-207(2) Unless arbitration is in the contract, it is off the table Issue: What are terms of contract? Additoinal terms in acknowledgemnt form are PROPOSALS Must be between merchants Section 2 will tell you if it becomes part of contract or not These are merchants, they regularly engage in business, have forms, know what they are doing If it wasn’t between merchants, terms would drop out, additional terms, would drop out unless we EXPRESSLY consent to it 2-207(2)(a) Wht if offer itself limits to terms of offer? It says when you accept, you accept to terms on our offer If that’s the case, it would fall out, what’s in offer would control, there would be no additional terms What about in this case? These are oral offers Dorton is a question of fact It’s possible when they are making offers on the phone they said ―btw, this offer is limited to terms of the offer‖, but that is highly unlikely Court says they never claimed oral offers, limited acceptance to terms of seller’s offer 68

2-207(2)(c) Offeror can object to terms before or after acceptance Carpet Mart (offerror) did not object to terms in acknowledgment before or after acceptance, they could have, but they did not If they had objected before or limited terms before, additional terms would just drop out, unless carpet mart says they expressly assent; we don’t assume assent in this situation, silence is not enough, taking the goods is not enough; we need an affirmative act of express assent We rule out 2-207(2)(a) and (c) 2-207(2)(b)—litigated the most Additional terms are treated as proposals to be added; to determine if they are to be added, we decide if they materially alters or does not materially alter the original bargain If it does not, like arbitration doesn’t materially alter, it becomes part of the bargain If it does materially alter, we don’t let it in In Dorton, court remands it to be decided if it materially altered or not How do we figure out if it materially alters or not? Note 4 of 2-207—it is materially altered if it unfair surprises or hardship is incurred if it is incorporated Arbitration causes hardship, would be Dorton’s argument If it is listed in the comments as it doesn’t materially alter, you will have a hard time proving it does Comment 4 seems to go towards what is customarily done in the trade If they always arbitrated around textiles, how would it go down? We should look as to what goes on in the trade; so if arbitration always go down, you could say it was not an unfair surprise If dickered terms don’t match, you’re done Comment 5 looks at what goes on in the trade, stuff that is expected, rationale is court’s belief everybody expects boilerplate and the kind of boilerplate we let stand and come into agreement, is what the parties expect to be in the agreement Boilerplate stuff is expected to become part of the agreement Some courts have found they do materially alter the offer (p. 203) Looking for surprise or unexpected Industry is relevant for what is surprise or hardship in a particular industry Arbitration clauses are favored by law Choice of law—is it NY? TN? Choice of forum Time for delivery Time for payment ITOH—what happens when you end up w/a conditional acceptance Buyer (Itoh)—P.O.—offer 69

Seller (Jordan)—acknowledgment (acceptance) Offer and Counter-offer (2-207 counter offer—we know we are in business realm) Something different happens w/2-207 What if it was a regular counter-offer? They did get the steel Under common law, it would not have been an acceptance, it would have been a counter offer and there would not have been a contract; accept a counter offer by performance and the terms of that counter offer would be the terms of the contract What happens here? Did exchange of forms result in a contract? NO—you have an offer and a 2-207 counter offer (you need offer and acceptance makes a contract) What makes the contract then b/c we do have a contract? Conduct by both parties establishes a contract; when they move forward and perform, that is what establishes a contract, not the contract documents themselves What if they exchanged documents, haven’t shipped any steel, could they have walked away? YES—there was no acceptance of the 2-207 counter offer; subsequent conduct that makes for the contract; no contract formed by exchange of forms here Proviso language looks like statute Step saver comes closer to this This works in this case Why not acceptance and payment of the steel as assent like under common law? It would go back to ―last shot rule‖ and terms of 2-207 counter offer would control How do we figure out the terms of the contract? - What they expressly agreed to o Arbitration is not one of them; not a UCC gap filler o Conditional acceptance—our acceptance is conditional on you going along w/this Court says they shouldn’t have performed; if they really wanted arbitration and were conditioning their consent on getting the arbitration clause, they would not have performed If you really want arbitration, they should get them to assent to arbitration UCC gap filler terms tend to favor buyers Broader warranties, etc. STEP-SAVER Buyer (Step-Saver) and - Oral? - Purchase order Seller - Oral? - Acknowledgment

Issue: Warranty printed on the package On the box, it said excluded all warranties, implied and express 70

Court says performance says there is a contract, we don’t need to decide exactly when contract was formed Purchase order can be acknowledgment Boilerplate Help w/2-207 Was there a conditional acceptance here? Court says NO This is better language than Dorton ―Opening this box menas you are accepting‖ is better than ―subject to‖ They are saying only accept if you go along w/this Court says they ddin’t express unwillingness to proceed Can proviso language apply to confirmation?

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