A Nice Contracts Legal Outline by JohnMValentine

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									CONTRACTS II 1-12-05 Statue of Frauds  Each state has adopted the statue of frauds to some extent  Different standards in different jurisdictions  Come originally from the kings court o Around the 12th century the kings court decided to expand their jurisdictions they did this through writs o Around 12th they began enforcing agreements between individuals o Convents first  They could be enforced if they were in writing and sealed and delivered o Debt was next  Did not have to be seals but it had to be written and preformed o Debtenue  Same as debt but chattel was owed and the enforcement was through money not specific performance o Assumpsit  In between tort and contract I.E. if someone operated a barge and they did it poorly and caused someone to suffer a loss. There was a concept of  misfeasance – you did something in such a way it caused someone a loss  nonfeasance – you say you are going to do something but don’t and the other person prepared for you action: the other person relied. There is also nonfeasance if the other person did not rely. You did not have to show that you actually relied because your freedom of action was effective because of you dealing with the other person   What the problem was we had lots of oral agreements, and we could not prove that any of the above could work. This caused a need for the contract to be in writing. In 1677 ENGLISH STATUE OF FRAUDS o Section 4 recognized 5 categories of contracts  Marriage  1 year provision: contracts must be preformed with in one year of the signing  land contracts: sale of land or transfer in the interest of land  The Executive or administrative provision: a promise to be obligated on the promise of another o Section 17  There was a provision for the sale of goods


 Sureityship MYLEGS o Must be in writing and signed by person the enforcement is against or someone they said could sign basically In 1954 the statue of frauds was abolished in England except for o Land contracts o Sureityships

A lot of the courts do not follow the statue of frauds and we have continually deroaded the meaning of it. a. Recent argument – if you have reliance they it should not have to be in writing Writing satisfies  Evidentiary function - it is evidence that a contract has been formed  Protective function When a category of contracts is in the statue you need writing  Complying to the statue of frauds does not make the contract ok but not complying to the statue of frauds might make a breach of contract Surityships- the contract to answer for the duty of another(must be in writing and signed  England kept this  The person making the promise gets nothing so there is no evidence this is why the statue of frauds is so important in this case  From an evidentiary point of view writing is important in this case also helps as a cautionary function, and also a protective function.  3 parties the principal, the creditor, and the sureity  A promises to B that A will pay B if C does not pay what C owes B.  A- surety  B- creditor  C- principal  A’s promise is to C not to B,  The suretyship does not have to arise at the same time as the underlying obligation DISTINGUISHING A Surityship from an Ovation ????


Power Entertainment Inc v. NFLP Proset was a football card company that owed the NFL 800,000 but the company went bankrupt. Power entertainment went in and offered to take up the debt if they could become the new official card of the NFL. This was an oral agreement. Power entertainment claims a breach of contract. The trial judge said not breach because of a

failure to comply with the statue of frauds. The trial court says this is a sureityship and because it is not in writing it is a breach of contract and the claim is dismissed. The appellate court reverses, suggesting that this might fall under the main purpose rule. For it to fall under this there must be a surityship, but it might fall under an exception the main purpose rule. With you are taking someone elses debt but getting something out of it. The appellate court says we may have a surityship or maybe not but if we have one the main purpose rule might work . the main purpose rule 3 things the promisor must intend to become primarily liable to the debt, need consideration, weather the consideration was the promisors main purpose in getting into the contract. There seems to be consideration( becoming the offical card of the NFL, and it was there main purpose. It may not be a surety ship because they were taking over for a benefit not take over the duties of another really, just starting a new thing. Maybe a surityship if so then probably the main purpose rule. M AIN PURPOSE RULE  We look for economic gain  Selfish motive is not enough  A benefit is not enough LANGMAN v ALUMNI- surityship/ and the main purpose exception Langman was making a gift. We have a deed grantee agrees to pay, Alumni does not sign the deed. Then the property begins to operate at a loss. Langman pays for a while, and then says he should not have to pay because the Alumni had assumed the obligation. The trial found not meeting of the minds with respect to the debt. The Alumni associations agreement is since it was not signed it was not good. They also said it comes within the statue of frauds because it is a surityship. The courts position was that it was not a collateral duty but instead it was an original duty. Ie a grantee that assumes a mortgage is no suretyship this is an original duty. If the Alumni Association promised to pay the bank in langman did not then a surety ship. THE PROMISE MUST BE MADE TO THE CREDITOR NOT THE DEPTOR

The one year provision
   There is no real logic for this If all obligations could not be preformed within the space of one year it came within the statue of frauds. – Not performable One sided preformance doctrines, a contract can be taken out of the statue of frauds if you have full performance on one side with in one year


The one year provision
Problem 2 on p 275


Would the statue of frauds prevent recovery by Coan. Can victor raise the defense failure to comply with the statue of frauds. o Yes the court found the statue of frauds a defense the court distinguished performance verses termination. o You can be excused from performing or you can perform o Court said that it was not performance and this was a contract that required writing o Quitting his studies would have been stopping performing not performing

Employment contracts
  Death of an employee ends a contract Life time employment o Death is the culmination of the contract, death is full performance o This is full performance If you have a 5 year contract and some one dies 3 years into it is not full performance but instead the person is excused from their obligation


Problem 1 p 277  Is this a contract not to be preformed with in the space of one year o Employee will argue that the agreement could end at any time with in one year. Satisfactory, he could have stopped performing satisfactory within one year o Employer will say there is a deference between being excused from performance and performing and the statue of frauds is applicable – this side won If contract is within the statue of frauds then it needs to be in writing  If a contract is longer than one year then it needs to be in writing, not to be preformed with in one year excuse from performance is not performing.  If performable with in one year then it does not have to be in writing

Contracts for the sale or transfer for an interest in land  England kept this  This does not deal with a contract for the use of the land(license) this is not
transferring an interest in land  How do we satisfy that statue of frauds o Contract must be in writing and it must be signed a letter head can in some jurisdictions be a signature and only the party against who the enforcement has sought must sign o Usually this will be a memo but it can take any form it does not have to be a formal document

o Can be multiple document can be made at any time, can be made before or
after, and it does not have to be in existence at the time of the law suit, can be made before or after the contract  2 approaches  doctrine of incorporation by reference,- if a corp is going to require multiple documents you must have an actual reference from one document to another  the other writing must be in existence  and it must be properly identified  other jurisdictions don’t require an actual reference to the other writing just both reference the same transaction  Standard is clear and convincing evidence Why do we worry about multiple instruments ???  For the SF you must identify the parties, state the promises that are to be preformed, show a contract has be made, state the essential terms

E-sign   Allows contracts that come within the statue of fraud provision be signed by electronic means now a record not in writing A new def of records- retrievable in perceivable form

Acadia v Irving p 279  In a written agreement that had and arbitration clause for any problems the contract ends and was extended orally. There is a NY statue the NY civil --- act called for this contract in writing all agreements to arbitrate. Irving was fired, the contract was terminated. The employer was saying since the contract was made orally it was not good. The lower court said that there was not the necessary writing because agreements to arbitrate must be in writing. The appeals court said reverse and by oral renewal of the written contract we are adopting the premise in the prior written agreement the only way that we have modified the agreement is time THE PASSING THROUGH THEORY!!!!. The documentation of the prior contract will make the oral agreement ok. Problem p 281 X-Y-Z o The court said the statue of frauds does not stand in the way of enforcement in terms of signatures however if X and Y’s signatures were contingent on Z signing then not contract 2-201  Statue of frauds provision for article 2 o Subsection 2 is a merchant provision, there are 17 or 18 place in artlcle 2 that mention merchants

o Subsection 1 says what is nessary to satisfy the statue of frauds must be over 5 G’s o Sub 2 says if you haven’t satifised it and we have 2 merchants then dif rules o Sub 3 is tatumaunt to the reliance interests  If you could not do it under 1 maybe you can satisfy it under 3  Sepecially manufactured good that can’t be sold to anyone else  An ommision in court  Payments have been made or goods received 1-19-04  Statue of frauds provision  2(201) o subsections o 1. if there is a contract for the sale of goods for over 500 you need a writing sufficient to show a contract has been made, and it has to be sign by the party against whom the enforcement is sought. The contract won’t be enforceable over the quantity that is stated( the necessary term in a contract is quantity). Words of the statue itself does not say there must be a quantity but says what is written above not enforceable beyond quantity stated o 2. You don’t need witting it is a merchant provision. If you have 2 merchants you can enforce a contract even if you don’t have a signed contract against whom the contract is sought. If we have writing to bind the other party the recipient knows and there was not written rejection with in ten days o 3. If you have not complied under subsection 1 more chances you can still satisfy the statue  specially manufactured goods  a admission in court  when goods have been paid for are received and accepted We have made changes 5000 dollars admission in court to under oath and so on.  If you have a contract that comes under more than one subsection of the statue of frauds you must satisfy each category. Maybe the surety ship and the one year clause come into play you must satisfy both.. in

2-201  we put in a new subsection 4 which says the for the sale of goods the one year clause is out the window.  Faliure to comply with the statue of frauds is a defense you still must prove a valid contract. The international sale of goods act has reject the statue of frauds Ameliorating the operations of the statue of frauds  Part performance

 

o Pay contract price o Take possession of property o Make improvements Restitution Estople

Johnson Farms Partial performance  Johnson paid in part  Took some possession  Pad other property planted The court will ask weather or not this part performance is only consistant with the enforcement of the contract. The Mcenose will say there was no oral agreement The court says that they should not have granted summary judgement on behalf of the maceroes. Because there could be partial performance and they will get a chance in court to develop there case Monarco v Lo Greco Grandparents -----Nateli= N Caremela=C Step kids ----------John=J Rosy=R Nick=Ni Christy=Ch Grandchild --------Maranacro=M 4000 dollar investment half C+N other half R+Ni Ch wants to move but C+N ask him to stay and work the farm in return the said they would leave him there intrest in the land. Ch gets married and wife moves in. N dies but without anyone knowing he gets rid of the joint tendancy and tried to leave his share to his grandson M. N dies and we have a valid will and the property goes to M. M then tries to bring an action to partition the land break up and sell it. C files a cross complaint saying that N broke his promise and M chould act as a constructive trustee for Ch. Although M rightfully owns they can only legally hold the property but for the benefit of someone else. Because N breached his contract with the Ch and C. the is judgement for christy and M appeals. The issue is there is not signed writing and weather or not M should be estoped from being able to raise the failure to meet the statue of frauds defense. The court say he should be estoped because ch relied on the promised and there would be unjust inrichment and unconscionable injury. If the statue of fraud stopped the contract to Christy we would premote a frauds with we can’t let it do. M’s position is that for there to be estopel of the statue of frauds as a defense you must make assertions that go to the application if the statue itself(a technicality). In order for estopel t be triggered you must make assertions that go to the applicability itself the court says NO. FASHIONING A REMEDY  Specific performance, is a remedy especially with land is a remedy that courts have been willing to recognize  Restatement 139 how reliance deals with the statue of frauds o The remedy granted for breach should be limited as justice requires

1-103 ufcc o Supumentary principals  Unless displaced by this act the are a bunch of other things that come and supplement these provisions act under the code  2-201- is saying that 1-103 is not applicable and the only acceptions are those that come in under 2-201 subsection 3. Accept as otherwise stated in this section – this was in 1 but not in 2 and makes a big difference???????? One more acceptation to the stature of frauds HALSTEAD v. MURRY The P and D owned neighboring properties they got into a disputed about a building they were supposed to build. The halstead was going to by the property from murry. The lawyer draws up the papers, halstead receive and executed the documents then murry denied. Murry uses the statue of Frauds as a defense. No action …… unless signed by the person or some one authorized to act for him his lawyer was not authorized to act for him and he never signed authorization because the did not authorize in writing. because we don’t have compliance with a statue Murry still can use the statue of frauds defence because of the special relationship between the lawyer and his client as long as the attorney is authorized to act on behalf of his client if the attorney is not authorized then the remedy would be the client might be able to sue the attorney. 1-21-04 principals that can get you out of the statue of frauds  part performance  Estopel o You are estoped from raising the defence when this is unconscionable injury someone is relying to their detriment.  Ussally when the contract is not enforceable by the statue of frauds there is normally a restitushanary remedy Policing the bargain o CAPACITY to make a bargain o Drunkenness  15 1 a Traditional view- must be so drunk to impair mental faculties to such an extent as to render the party non compos mentis for the time being  Current many juristicions enforce 15 1 b – not being able to act in a reasonable standard and the other person knows

Kiefer v Fred Howe Motors Keifer bought a wagon before his 21st B-day. He represented to the party that he was over 21. shortly after his 21st B-day he tried to recover the price he paid and he won. Court take a bright line approach and decides to protect kinds bacilli. The car dealer tries to use the emancipated minor argument, but the court says no still a minor. The only exception is that minors are responsible for necessities. The reason for this is it protect the people making the contracts and it makes it so the minor will have people that are willing to rent to them. o If steven would have made some payments after he had have reached the age of majority then he would have gratified the contract and it could not be void o Contracts by infants are void- unenforceable and violable- can be e voided by one side. o During minority and within a reasonable time after majority a minor may disaffirm a contract. IT used to be a common law one delt with a minor at their own peril. This seemed to harsh and unfavorable to the person whom the minor contracted with. So then the minor had to give back what they received and then got their payments back. However the minor would still get free use of the product for a period of time. And then some juristiction for the minor to have to pay for some depration a misrepresentation of age had to be shown. Other juristicons said just contracting was enough to show a misrepresentation of age. Mental Capacity – Ortelere v Teachers Grace is crazy and takes her max retirement benefit leaving her husband with nothing for retirement. Her husband sues. Medical professionals diagonosed her with depression. This court is following the stanard is the person is unable to act in a reasonable mannor in relation to the transaction and the other party has a reason to know. The court says the traditional standard was that weather the mind was so affected that they could not under stand what was going on around them(the cognitive test) the court does not uses this they say they came up with this test before they under stood mental health. Restatement 15 This court followed 15 1 b o 1 A deals with not being able to understand o 1 B talks about the ability to act in a reasonable mannor o nothing less serious then medically qualified phycosis  what is this a evidence a transient surge of lucidity, a will you only need a lucid interval at a time in subsection 2 of 15 there is a qualifing test o if the contract is fair and the other party does not know about the mental illness then you will loss the power of avoidance if the contract has been preformed or the result would be unjust

3 mental standards o Fit for trial o Must be able to understand the nature and purpose of the proceedings against him and assist in his own defence o Legally insane o When def can’t appreciate the criminality of his conduct or conform you conduct to the requirements at lae o Capacity to contract o Sufficient mental ability to appreiate the effect of what you are doing and beable to put forth your will. o Insane delusion o It is recognized in various juristions but different standards  In some their belief must be against all the evidence  This excuses them form obligations in that particular reguard  Most courts don’t require the delusion to be against all the evidence just most the question is could a rational person have drawn that conclusion. Cundick v broadbent The standard in this case was basically the restatement 15 1 a. the court basically said how could he lack capacity and no one know about it. The dissent says he was a businessman would not let him self be taken like this. If we compare this to grace, that the large diagonios is the reason for grace winning. Darewin had altimers.


shifting from policing the bargain to the inequity of the exchange as manifested in terms of the bargain.  At common law a peppercorn could be consideration, but then it changed to a bargain for exchange, however if the value of so off then it was a shame Value of exchange: There have been a merger of courts of law and equity, you go to equity when there is nor approiate remedy at law. McKinnon v Benedict We don’t address the formative part of the contract.  McKinnon promised to loan and generate clients, and resolve a tenant issue, Bendeict promised not to build or change the land for 25 years. Benedict breached the contract, McKinnon brought suit. McKinnon claims breach of contract, trial court found for McKinnon, he is asking for injunctive relief to prevent benidict from making and operating the camp ground.

o The court holds that the contract was oppressive to Benedict because of McKinnons, was in an unfair siduation. The court says they will not enforce oppressive contracts in equity. Bendict gave up a lot and only got a tiny amount. o The court looks to the parties, Bendict a small business man, McKinnon a knowledge business man. o The plaintiff argues if he never lent the 5 grand he could not have started the camp in the first place.  Court says to this that Bendict was not in a siduation to negotiated in a free market situation, and the fact that he could not have done it with out McKinnon shows that the contract was not made at arms length  The equity court says if you don’t like the equity courts decision look at a court at law.  They are not invalidating the contract but not enforcing it  His remedy at law would be money but that is not what he wants If he had the month after he signed the contract started bulldozing then the plaintiff would have been in a better possession, however bendict tried to make it work.

Gerald and Nancy are divorced they have a son Ron. Nancy had leins on Geralds property. Nancy entered into an agreement that she would forgive those leins if Gerald would leave property to Ron. Gerald went to the court to enforce the contract and make N release the mortgages, the court made her do that. Gerald must act in good faith he can’t just sell farm to not have to leave to Ron.

Tuckwiller v. Tuckwiller Equity courts again: The plaintiffs lived on the Hudson family farm and farmed it by renters. Mr. Morison owned half of the land. She went back to live on the land. Mrs. Morison had a stroke but dr’s said she was clear. She asked Mrs. T to quit her job and care for her. She has a signed and witnessed contract. Mr’s T on the way to changing her will has a stroke and ends up dying in a few days never coming home. The origonal will left the money to pay student loans. The trial court found for Tuckwiller and then appealed. While Mrs. M was in the hospital Mrs. T did what she could and then cared for her for 4 days at home. The court says the plaintiff gave up a lot in exchange for Mrs. Morision, she quit her job and so on. The court says we must view the contract prospectively not what actually happened. The court realized Mrs. T could have been taking on years and years of care. Mrs. M was clearly happey with the arrangement because she had the ambulence drivers witness the contract. Would the statue of frauds be implicated in this siduation  This contrat is the transfer of intrest in land, so it must be in writing. o Would it be a contract not to be preformed with in the space of a year

 NO- the and could dies at any time o If we need a writing is the letter enough  yes Defendants say that Mrs. Should be conpenstated for services rendered

Problem on 320  should we enforce the contract? o The court focused on the long-term patient doctor relationship. Therefore the doctor new of his problems. They refused to enforce the contract Black v Bush- the middle man and anvil case. Black is suing sky. Black was a middle man for bush and hover. They were going to make a profit of 39 to 84 percent. Bush refused to complete the order saYing that these product were supposed to be part of the war effort and that it should be void against public policy.  The court enforces this contract. o In order to declare the contract violable against pubic policy it would have to fall into one of 3 areas which it did not. o Court says the end user is the government and it would be impossible to govern these types of contract and it might get rid of the idea of a middle man o Even if the plaintiff contribution is less than the def contribution the contract is still enforceable

Section 3 OVERREACHING CONVENTIONAL CONTRACTS  DURESS o If you acted under duress they there was not assent o Historically 2 catogeories  Phyical compulsion  False imprisonment  Threat

2-1-05 Contracts Class #6 – 01/28 Don’t have class on 2/11!!! Indvidual’s emotional state – when we talk about capacity to K, generally one’s emotional state doesn’t effect capacity to k but it may effect other aspects  Look at equity of exchange for policing the bargain

o If exchange is SO off & don’t have equal bargaining power then wouldn’t be able to enforce o Tuckwiller v. tuckwiller – court viewing exchange prospectively v. retrospectively  Usually how we will evalutate consisideration  Here ct said that Black industry v. Bush – if parties enter into K freely & no fraud involved, if public policy involved…then have to look at  Vaule of consideration off  Businessmen dealing at arms length – fact that exchange is off won’t effect validity of k Duress – how the parties bargain as a way of policing the bargain  Physical compulsion  By threat – one we are most interested in k law o Traditional requirement – had to be a threat, threat must be improper, threat had to induce the manifestation of assent, & manifestation of assent had to be sufficiently justified  Thereat had to be such that it would justify the fact that one would assent under those particular circumstances!! o What is a threat? A threat is an inducement to get one to manifest their assent  Sounds like an offer…  A threat must also be improper – the manifiestation of intent to induce some loss or some harm  This improper threat didn’t have to be expressed in words  Could be inferred in words or conduct o Some categories of threats that are improper in certain circumstances  Threat to institute criminal prosecution  Threat to civil liability in bad faith  Threat of a party to a k not to perform o Over time we shifted from focusing on the THREAT to focusing on the EXCHANGE  RSMT 176(1) (p. 216) – traditional kinds of threats that historically held improper  Threat so improper to the court they wouldn’t even focus on the exchange – fundamental unfairness  RSMT 176(2) (p. 216) – illustrates the train of thought that maybe shouldn’t focus on the threat itself should look at it in combination w/ some kind of resulting unfairness  We talk about duress but are not saying that we are trying to discourage hard bargaining by experienced advisaries o If someone gets taken advantage of in this situation that’s too bad o If k shaped by prevailing forces – TOUGH

o When is a threat going to be sufficiently grave to justify assent??  Common Law - Need to overcome the will of a person of ordinary firmness  More lenient standard evolved – need only deprive one of free will  Finally – leaves no person a reasonable alternative  RSMT 175 (p.213) – person no reasonable alternative the k is voidable by the victim o Subjective evaluation when making this determination…did the threat actually induce the assent?  RSMT 175 (1) – threat comes from the other party to the K  RSMT 175(2) – comes to from party not part of the k; the k is still voidable by the victim in this case if…  The other party is not aware of threat o Would still be voidable if other party knew of threat  Element of reliance  Pre-Existing Duty Rule o Common law concept – Performance of a pre-existing duty is not consideration for a promise!!!  Only doing what you are bound to do under the existing k o What if they are unforeseen costs?  Pre-Existing Duty Rule has evolved – today we have more or less moved away from this o Alaska Packer’s – k w/ sailors for $50 for voyage & 2c a fish, ½ way through sailors demanded $100, guy up in Alaska had to promise (signs agreement), when get back to CA the co pays them originally agreed to $50  Breach of k claim  Court says – performance of a pre-existing duty is not consideration of a promise  All the fishermen did is what they were obligated to do under the k  GAVE NOTHING IN EXCHANGE FOR ADDITIONAL PROMISE!!! o This rule has been modified by legislatures – p. 330 NY legislature example  Said ok if in writing and signed by party who enforcement is sought  If this statute was applicable to Alaska Packers…would it have changed outcome? Well have necessary signed writing so issue would be that the person k on behalf of co. had the autho to do so  According to this legislation you don’t need consideration as long as you have the signed writing against party who enforcement is sought  What this means is lack of a consideration is not be able to be a defense against enforcement if you have a signed writing…but could

argue for other applicable grounds…depends on the case & the jurisdiction.  UCC 2-209 (1) – no consideration necessary for the modification of a k for the sale of goods  UCC 2-209 (3) – still have to comply w/ the statue of frauds if the contract as modified falls w/in the statute of fraud o Modifications made there under must meet the test of good faith…and the extortion of a modification w/out legitimate commercial reason is ineffective as a violation of the duty of good faith  We are governed by duty of good faith Problem # 1 – p. 331  Suppose ever-tite roofing had arrived at the greens and no other roofers doing work  Suppose ET chaged the same amt and then said no gutter work o Common law – greens would not be bound by amended k b/c no consideation (pre-existing duty rule) o What if NY statute was an issue? Would depend if there was a signed writing by the greens o If this was an article 2 case & 2-209(1) was controlling what would the result be? Rescission & Modification – imposition of a way to get around pre-existing duty rule  Bauman Bauch case – agreeded to work for $90/wk, got another offer for $115/wk – told employer that he got other offer & then original offeror offered $100/wk o He started working in nov o Was discharged in dec  Need to figure out if he recovers $90 or $100  Terminated 1st K when tore off signatures of 1st k, so employer is bound to new agreement of $100/wk  If a k is partially executory on both sides (tore off signatures – ended the k) act of rescission and the duties they mutually agreed to forgive in original k can be consideration for the new k o Three agreements here  Original agreement  Agreement to tear off signatures & enter into new agreement  New agreement o Used as illustration to RSMT 89 – Watkins & Son v. Carrig – excavator k to do work in cellar, rock encountered (2/3rds rock), wanted more $$$ to do work (9 times more) – resistance to paying that price  Initially the referee found for excavator – the agreement to pay nine times as much superceded original agreement o DEF appeals – did it supercede? Or was did it not have consideration?  Ct says that oral modification superceded the k and was bound


Generally speaking parties can mutually agree to change things, changes to changes in circumstance should be carried out in the interest of business & commerce  Recinding the k – do we have to terminate the k? do we have to tear off signatures? o Talking about the mutual understanding of the parties o Don’t have to have an actual rescission of the k  Really we mesh & meld this whole consept of recission into one act  Not going to destroy what we are doing here if can’t isolate actual rescission (don’t need a separate transaction that is a specific rescission)  Every modification in & of itself is rescinding some obligation or duty under the k o Ct says the def intentionally yielded to a new price o Meets the reasonable needs of standard practices of men & their dealings o Also focuses on an element of reliance  Guy said ok will pay you 9x amt  On reliance of ok excavator moved fwd to blast this place  Is reliance part of this whole consept on about being able to modify a k?  Does reliance as an entity figure into this? o It plays a role here but isn’t necessary a requirement o RSMT 89 (c) – element of reliance but it’s an or – don’t have to have reliance but can have it  (c) to the extent that justice requires enforcement in view of material change of position in reliance on the promise  No understanding that there would be no rock – no claim that the DEF misled the PL  Ct sill looking for fair exchange here o Making sure no one is being taken advantage of

Compare Watkins w/ Alaska? Why isnt’ this the same corercive situation here?  No gun to the head in Wakins  Alaska there were no other options o Not the same coercive factual scenario o Also in Watkins – changes to meet changes in circumstances – parties to the k can chose to modify their agreement  Alaska no changes in circumstances 2-2-05 2-209 (1) UCC  You don’t need consideration for a modification Ones emotional state when making a contract  Note 4 p 337 the girl giving up her baby due to parental pressure this was found to be duress  The pressue came from her mother not the agency and she new of other options  Why can the 17 year old girl use her minority to rescind the contract because her parents had co-signed with her which takes away her ability to use her minority Problem p 338  The metal subcontractor gave to low of a bid o Are they entitled to the extra 12,000  Maybe not because they did not inform Richard of the month  The court found Richards liable for the extra 12,00 richards could not induce the rule after enducing AC into relying on them into entering into the agreement P 339  FOLKS v BEER  Payment of a lesser sum on the day cannot be any satisfaction of the whole. o She is a creditor he said I can afford the interest she said ill forego the interests after he paid the entire principal she says I want my interests the court finds that he owes her the interests o This was in the face of settlements o People tried to get around this by having the other person do a little something else so you would have consideration for the new promise

P 340 PAYMENT IN FULL  In common law if you have a dispute I owe you 50 and you pay me 40 and write payment in full then the other party has accepted it.  We did not like this the ucc 1-207(1)

o What remedy does the UCC give us  You can say on the check ―under protest‖ or other language such as that and then you still preserve your rights for the rest of the money  Exception Accord in satisfaction Existing obligation  You can enter into an accord that we be at varance with the existing obligation and when we have preformed under the accord we have satisfied the existing obligation.  You are still liable under the existing aboligation and if you fail to satisfy the accord you were still liable under the existing obligation Schweizer  This is a cardoza opinion o They were engaged to be married and dad agrees to pay them 2500 dollars a year for a period of time and he stops. Dad says that the contract is not enforceable because to form a contract with someone not to break something they are already obligated to do(get married) is not enforceable cardoza says even though one of them could not breach together they could breach so there is consideration. The 2 of them agreed not to jointly recind the contract so there was consideration. Duress in business Austin v Loral  Loral was awarded a navy contract to make radar sets: o L then solicited a bids and Austin got the job o A got the first contract o A then only got part of the second contract but refused to finish the first contract unless L would higher them for the entire rest of the 2nd contact and payed they more there were no other real options for L. o The court says this is a good case for economic duress and find for L  Immeadiate possession of needed goods is threatened, or  Threating to breach the agreement by withholding goods that are needed and the threatened party must not be able to get the goods from another source  This is a classic case of economic duress

Concealment and misrepresentation  Privelage to be silent about some things in an agreement Swinton  Plaintiff bought an termite infested house from the def and the def knoew aboit it the plaintiff had to spend abunch of money and he want the bank to pay for the

fixing of the house. The bank say there was no lie there was no fudusary relationship between the two, they did not prevent them from inspecting o The court says that the business deal was at most at arms length and although this may be unappealing there is no liability for bare no disclosure, -- you have a privelage to remain silent

2-04-05  De chico o How we could get around the pre-existing duty rule Odorizzi  Undue influence o To the point it will overbore the will of the other party Swinton  Concealment o There is no liability for bare non-disclosure o Even if there is a moral duty Farudlent concealment  To be actionalable as fraud concealment the consealment must be made knowing to mislead the statement o 2 siduations  1st where there is a duty to disclose  failure to disclose that material fact  a party in reaction in the failure to disclose either does something or fails to do something  the party is injuried because of it In cases where there is no duty to disclose there can also be fraudlent consealment if one knowlingly takes action to conceal a material fact, with a n intent to deceive or mislead

Kannavos v Annino:  the def bought a 1 failmy home and converted it into a apt building againsgt building codes. She then sold it to the plaintiff. The township then said you can use it for this not he is trying to recind the sale  the trial court recinds and the def appeals  court said they can recind because the defendant to steps to mis lead in the advertising, even though he should have looked this stuff up

P 360

1(a) the buyer was not justified in buying blind, he had ample time to figure out if the car was a/c because he drove if for 2 hrs. 4-3 decision. They found for the dealer (b) this would go to the buyer. The buyer does not have a duty to tell the seller he is getting a good deal. The court found the contract good 2. the reformed the contrat to what DH thought they were signing the employer was not responsible for what they signed because it was designed to deveive and exception can be when you have been tricked

Misrepresentation  we recognize this in tort and in contract  tort- deceit i. in tort the damage recovery will be what you thought the bargain was 1. in tort we talk about knowing it is false or reckless disreguard  contract – recession i. this came from ression and originally in equity 1. what it did was voild the contract 2. recognizes innocent misrepresentation elements a. there has been an assertion that is not in accord with the facts b. can be in any form i. the assertion is fraudlent or material 1. fraudlent – intentionally false or intending to mislead 2. Material – the misrepresentation is something that would have been likely to motivate the party to do or not do something a. The reliance must be justified Misrepresentation in the inducement  Normally makes a contract violable  There becomes a point when you can not longer void or reaise misrepresentation—affirmance i. It can be expressed or conduct Misrepresentation in the execution  Makes a contract void normally  Goes to the very essence of the document itself i. The party must sign something radically different then what they thoiught they were signing and there must not be negligence

COURTS FIND COERSIVE BEHIVOIR WORSE THAN MISREPRESENTATION Normally contract remedy will be less than tort remedy And there is an avenue in tort to get money for misrepresentive behivor.

Vokes v Murry  Widow stats taking dance lessons and her instructor keeps leading her on and she ends up spending 31 grand  She asserts o She was lored into the contractual obligation be cause of fraud and misrepresentation o The def says a misrepresentation must be one of fact and this was just there opinion o The courts  Says there are exceptions to just opinion and that is where there is one party in a posision to have superior knowledge to the other  When the is a feduary relationship and so on….. Carter v author murry  Carter 31 year old batchlor paid 2--- some thousand $$$ he was injured and suied he raised impossibility and fraud. The fraud was dismissed

2-08-05 Fraudlent concealment  Ct in Alabama told us what was necessary when you have a duty to disclose  If you don’t have a duty to disclose but you take action to conceal then you can have fraudlent concealment Bare non-disclosure   No liability There can be relief for innocent misrepresentation

2 kinds of misrepresentatipm  Inducement  excution Author Murry  they claimed they were not asserting a fact but an opinion  but the court found where the def had superior knowledge and held them liable

Unconsionability and problems with Adhesion contracts  Mikinion v bendict o They said although a contract might be unconscionable the courts of law might enforce it o In the 20th century the courts of law not only the courts of equity have begun giving relief for unconscionable contracts (2-302UCC)  Contracts of adhesion o Though to be embioded in the standardized form o Basically you could fill in the blanks but not change anything else o The contracts are everywhere now o These contracts were drafted to the advantage of the draftee o Originally the courts would engage in strict construction this meant they would strictly construe the language against the drafting party o Standirization is a cost saver and a time saver o Traditional response  Is there consideration  Yes What will we do when there are harsh and oppressive terms? O’callaghan o Plaintiff fell walking across the parking lot o There was a clause in the lease that absolves the Landlord of liability o She alleges that the contract was invalid and if she wanted an apartment she had no chiose but to sign o The court says that the relationship between here and her LL is one of private concern she did not raise this issue when she got the place, o She was claiming it was against Public policy and the court said take it to the legislature o The court points out places where these exculpatory clauses were no good  Shippers , public employees, master/servant The dissent ask what is the diferance between employer employee and lessor/lease o maybe an employee has fewer choises then an employee You are responsible for your agreements o other than strict constructions the courts have tried to say on this is not something a person would understand to have legal meaning The Restatement o We tried to balance the equities between the parties who did not know and the parties who actually knew o Restatment 211(2)Standarized Agreements  A WRITING IS INTERPERATED WHERE EVERY REASONABLE AS TREATING ALIKE ALL THE SIMILARLY SIDUATED , WITHOUT REGUARD TO THEIR KNOWLEDGE OR UNDERSTANDUNG OF THE STANDARDS TERMS IN THE WRITINg  (3) if you know there is something in the agreement that you know the other party would no go along with it will be no good

Parcel Room Case p375 o parcel room lost his package they lost the package he sued and won 1000 dollars, the ticket tried to limit the P rooms liability for negligence o the court said if they want to do that they have to make it more apparent, basically this is subsection 3 of rst 211 o in this case we would as did he understand that for the 10 cents he was limiting what he could collect for liability o they did not put the guy on notice, the other party did not know it was only written very small on the back o you must make sure the other party know it is part of the deal. The approach we have taken is disclosure Doctrine of reasonable expectation o when insurance is sold in cir which is not conducive for injuried they buyer expectation should be followed o we recognize this outside the insurance industry now Gram v Scissor-tail-inc- 377 o gram was a experienced premotor o gram agreed to a multi city tour with an arbitration clause o there is an argument about weather losses from on conscert can offset gains from another o gram claim breach siccor tail say arbitration o gram then argued the contract was one of ashesion and unenforceable o this is a contract of adnhesion it is a standardized agreement and one party has better bargining power o they find this contract enforceable , just because it is a contract of adheasion it can still be enforceable  if we have a provision that does not fall within the reasonable expectation of the parties  or if it is unduly oppressive or unconscionable  then npt enforceable

Henningsen v Bloomfeild o H bought a new car from Bloomfeild o The stearing wheel feel off o They tried to sue Chrysler o Cryslyer said that the disclaimer made it so there was not liability o Over the sig line the was something that said I read everythiong on the back and the back was in fine print

Implied warranty 2-341 Ucc- read this o Section 2 tells us the standard of quality for the goods

We say there is an implied warinty for the sale of goods if you are a merchanct that the goods will work for the use they are sold for.

4-16-05 At common law if you actually knew at common law you were stuck Rst 211 o Section 2 says that we will approach it objectively ???? o 3rd2-313 o expressed warranty 2-314 o implied warranty of merchantability in the UCC o did not have to be in writing merchanability but had to be included 2-315 o implied warranty of fitness of particular purpose o if the seller has reason to know the particular purpose, and the buyer relies on the judgement o had to put merchanibility in writing and had to be conspicious revised arti ccle 2 has done a lot with expressed warantied and not a lot with implied warantiedv 2-313- similar to the old 313they are talking about it in terms of immediate buyers 313A- remote purchasers, shrink wrap purchases 313B- talks about those statements made to the public and the expressed warranties that go along with that o We address remedies I these section o Buyer is entitled to consequences and incidentals damages  Trying to keep within compensatory damages o Not lost profits Similar for impled warranties different for expressed warinties 2-316(2) o Limiting implied warranties o In order to limit or exclued the implied warranty of merchantability o you had to mention the word mercerantability and if it was in writing it had to be conspicuous o in the revised article we are talking about consumer contracts and other contracts Now when you are dealing with a consumer contract and you are excluding the implied warranty of merchanibilty it had to be in the recored and it has to say ―the sell take not responsibility of the goods…….. contract‖- not merchantability

This is all under 2-316 in book What constitutes conspicuous o what a reasonable person against whom it is to operate ought to have a notice

P385 o old common law premise you are responsible for what you sign o we use legislation to try and soften these ideas o legislators have said youu must use certain language and and other legislators have said you can’t o other legislators have said you must use plain language o this is procedural plocing not substanive policing p384 o you don’t have to have a written warranty but if you do you must label it full or limited and if you have a full you must replace repair or refund Lemon laws o you can return the car and get money back if they cant fix it with in so much time o obligation of disclosure on the seller

UNCONSINABILITY o mickinon v bendict o law courts did not really enforce it when it was it was just unconscionable o The courts of equity would Cambells soup ve lentz p 400-401 o Campells soup have a contract with NJ farmers for carrots o The price of carrots went up o The farmers started selling their carrots to other people and the soup company says breach o The court says that this contract is so 1 sided in favor of campells soup and signed they pushed so hard to get the contract the court would not enforce it o One provision was the farmers had to sell all there carrots to cambells and the cambells did nto have to buy them all but they could not sell to any one else o When we think of unconscionable we think on party has a lack of a reasonable choice We say common law courts would not police unconsionability o There was one case that is where there was a fidusiary relationship o The contract had to be on fair terms and the benificary had to concent to those terms with full knowledge of the facts

o 2-302 only applies to the sale of good but gets applied in other place and now we ave restatment 208 which is basically 302 beyond the sale of goods  we say question od law if we find it to be unconscionable we can refuse to enforce the contract, or just the unconscionable part or what ever you really want to do lots of discression  the basic test for unconsionability it  in the light of the comericial back round ……..contract  are they so one sided that they would be unconscionable at the making of the contract o normally we will talk about unreale terms and lack of meaning full choise. P 35 in the sup starts out but saying as a question of law, this showed it was for the court to decided not the jury, however we also say that evidence must be produced

Willians v Walker Thomas furniture o the furniture store had something written in their contract that was a cross collateral policy that meant you never paid off anything until you have paid off everything o the def defaulted on something new but she owned furniture that went back a bunch of year only having a 1 left on some stuff and the store reposed everything o the court points out the furniture company new her poor condition o she claims unconsionability o lower courts say no o the finally court says contract terms unreasonable favorable to one party and meaninglessness of choise can lead to unconsionability Price unconsionability o can prise alone render a contract unconscionable o an unreasonably high price  generally courts woun’t condem this type of agreement

Jones o jones bout a fezer unit by the time jones finished financing they charged her 1200 and she sued for unconsionability under 2-302 o the consumers can not speak English and the contract was never interperated for them Unifom consumer credit code o will be unconscionable if there is a disparity between what a buyer pays and the price of similar services readily obtainable by other purchasers, we do not look at profitability of the statue

o what is a like consumer with credit how can consumer be alike

2-23-04 o p 441 . we do not allow contracts that are like non-compete clauses fro lawyers. We have rules that make it so If a lawyer leaves the client can follow him o there was a problem with lawyers grabbing and leaving – a lawyer gets clients and leave. o Jacob v Norris- this is an aspect of profession authority o These kinds of things are not permitted for a lawyer o A client can fire a lawyer for any reason but they still have to pay the lawyer for Quantum merilit- for services rendered CAB v Ingram(1984) 1. The chanslor steped in ans made these changes 2. The analysis look at the 2 modificy restricting elements the blue pencil rule which they don’t like and then they look at – if you can physically elimate words and it still makes sence you can do that. 3. then there was the rule of reasonableness – this is what they adopt and they stick with what the chanslor did – as long as there is no bad faith they will adopt a if it is not too much on the employee 4. they also reject the all or nothing rule – its either good or bad o Cab made a non- compete clause for 2 yeas and the court found it unreasonable changed to 1 year. o To all collection agencies that they had had any contact with the court finds that too broad and they limit that to only customers that had been costomers since 1999 o The geographic scope was originally nation wide but the court limited that to a hand full of states

Chapter 5 Specific performance- it very much relief , compensatory relief is the normal, only when the standard form of relief will not compensate is specific performance going to be given o On of the things we have clung to is specif relief is not available for personal service contracts

Klein v. PepsiCo o Klien is looking to by a corperate jet o Janus was the broker Klien said to offer 4.4 pepsi asked for 4.7 then 4.6 was decided on this was excepted by telex, and there was a dowen payment. Janus was going to sell to klien for 4.75 o They went to get the plane check out and it need some repairs, the cost was going to be between 25 and 28 thousand dollars pepsi said they would pay the repairs. o Then pepsi says they don’t want to sell it they want to withdraw it from the market. 1. they are saying they are not bound 2. Klien is saying there was an agreement ion the 3rd of april and they shoud get specific performance The appellate court says there is a contrat. o The court found that according to the terms of the agreement the parties were bound and they could not find any error interms of the analysis of the trial court o The appellate court said that specific performance was not approiate  And virgina had adopted the UCC that said basically Specific performance is the last resort  The fact that there were 21 other plane and klien had bid on other plane show this was not the only G2 out there  They said that they would cover his loss incurred looking for another plane o When we say cover we mean similar products being available 2-712 UCC  Specific performance is available when there are not similar goods out there  Price increase – is not enough for specific preformanc just money damages is higher 3. what if Pepsi said they want out of the agreement because the crack could hurt someone- the quest is would that excuse them the sub of 2-716 o can parties agree to specific performance in the beginning o yes they can but even if the parties agree you can have specific performance if the only contractual obligation that is still due is money it won’t be applicable ok so what should damages be o a buyer can cover in good faith a reasonable purchase of goods the buy can get the difference between the cover price and the contract price o the trial court will not use 2-712 because they did not buy a new G2 right away o if they went out an d bout a g3 the pepsi might say this is not a substitute

o 2-713 – market price damages, in old 2-713 you can have the dif between the contrat price at the time of the breach and the market price plu incendental and consequental the minus any savings. o The revised version 2-713 o Differenting types of siduations , p 165 , we no longer talk about when the buyer leaned about the breach, what we are doing in the revised version is we put the market price at the time for tender when the goods were to be handed over o In b when we talk about repudiation of the sell, when the seller repundats it can be the time for tender or earlier o A reasonable time after twender is suposibly giving the buyer time for more options. 2-715 incendental damages- incident from the breach, consequential damage flow naturally and forseeably from the breach Notes on page 458 o Car no specific performance , pony we gave specific performance

3-2-05 o The old article 2 is the law o We get a supplement for the exam o With respect to lawyers we have different rule for non-compete clauses – all and all they are taboo interms of the practice of law Ingram o We arte looking at the fact that the chanslor modified the agreement

Pepsico: o Court determined that specific preformace was not approiprate in the siduation, and the case was ultimately remanded for determination, 2-712, 2-714,2-715, 2713 o 712- (cover o 713 (Market price damages Amoco o there was a contract between the parties and the district court fount that mutality was lacking, the 8th cir reverses o the contract was for propane gas distribution the plaintiff agreed to maintain distribution , Laclede had a provision where they could cancle but amaco could not cancel that is why the court found the arrangement to be lacking mutality. o Amaco increased their price and told Laclede did not respond and then amaco refused to give gas and claimed lack of mutality

o They had tied the price into a central price index and put there customers on allocation, and laplede say they wanted the whole amount. o The eight circuit says there is no requirement that both courts are required to mutality of a remedy, the 8th cir says that this is a requirement contract and specific performance can go to one and not the other o The eight circuit says about amacos claim that specific performance is not approiprate,--the court said it would be hard not not impossible, amaco says there is a remedy at law, the court ―‖ the restatment and says the remedy at law is inadequate and it is not likely that Lapede will not get another long term contract o In this country no specific performance unless you remedy at law does not make you whole

Why do we give specific performance here but not in klien v pepsico o It was clear in this case the the imeadiate purchaser was making a profit, o There is maybe no substitute here o This is a long term arrangement compared to pepsi on shot deal o 2-716, were goods are unique or other proper cir—ie inability to cover. Output and requirement contracts 2-306 o subsec 1 requirement and output o exclusive dealing

Notherern V. Bliss. o Bliss was going to moderize a site work did not progress as fast as they were supposed to be , Bliss wanted specific enforcement of the contract and wanted 300 more workers on the court said not. They should not order specific prefvormance unless there is special intrest or public intrest involved o If they have a problem if it not done in time they court says go to the courts of law

We don’t allow recovery for theses reasons AVOIDABILITY Forseeability Certianty We don’t allow punitive damages in contract recovery just in tort recovery then maybe in contract law the contract must be accompanied by the tort WHEN THERE IS A BREACH THERE ARE 4 WAYS IT CAN AFFECT A PERSON o Loss in value – the difference between what you should have received and whaty you received – often the K price o Other loss- incentadental damages and consequential damages

o Cost avoidance- if it is in some way benificital to you the breach o Loss avoided- perhaps you were able to salavage something Damage formula – loss in value plus other loss – cost avoidance – loss avioded Cost avoided- sometimes the cost of complet preormance – cost of reliance

3-16-05 vitexo Should overhead be part of the damages calculations only as a different loss not as a cost avoided Hides: o Hides- they used a 2-712 and gave damages the difference between cost to cover and contract price, 2-718- buyer gets restitution of a down payment when a buyer breaches Davis v Diasonics o The mri case o Davis put 300 grand down and never bought it then Dia sold the piece of equiptment for the same price that davis was going to sell to dia o Davis Buyer says that dia did not incur any real damages o Dia says they are a lost volume seller o 2-718— o subsection 3 says that you can subtract any damages o the district court gave summary judgement for davis- ie they gave davis 300 grand back o then Dia says they are a loss volume seller and they could have had 2 contracts made 2 sales and made a profit and such they had a loss o the district court used 2-706- this is where the court said you are entitled to the contracted price – the resale price or in this case nothing o Dia wants to come under 2-708 but the district court says we only go there if 2706 and 2-709 don’t work, ie you are unable to resell or you resell in a commercially unreasonable manner o One bad thing is 2-708 (2) if the measure of the damages in subsection 1 is not sufficient to put you in as good as a place as performance then you are entitled to the profit, with incendental damages, with due allowence for cost incurred and credit for resale –THE SOUNDS BAD FOR DIA

o The court explains away this sentence and says that this sentence only applies if you are reselling for scrap o The court says for someone to be a lost volume seller that not only do you have to show that you could have made a second piece of equiptment but that it would have been profitable Whats the danger in following the district courts approach: o This might cause a company to sell in a commercially unreasonable manner so they can get to 2-708 o The appellate court says you are not stuck in 2-706 you can resale but if it does not put you in as good as a position as if you made the origonal sale they you can go to 2-708 (2) o Dia was awarded 463-300grand they were able to show they could have produced a machine and it would have been profitable 2-706(7)- failure to resell does not barr the seller from any other remedy

problem on bottom of page 487 flour o Would we still let the buyer have the 500,000, yes we do give the buyer the refund on a restitution theory USA v Algernon o There was 37 grand doue to the Sub contractor but it would have cost them more then 37 gran to finish so there was no recovery on the contract o The court says not damages recovery under the contract because you are better off but the court lets them collect restitution quamtim merit (services render)- the amount that services could have been purchased from one in the plaintiffs position at the time and place the services were rendered o When we talk about quantim merit should the contract price be a ceiling – you contract for 10 but the service is worth 12 – court says no in this case the contract price is not a limit on what you can recover in quantam meriwit

Problem p 490 o The furnace case, they were supposed to ship the parts one part did not come as a result the whole purpose of the exhibit was gone o In this case the court found the security stowe was able to recover everything under, what they found to be their reliance damages

Limitation on Damages o You can recovey for loss on damages that you could have reasonably avoided

o If you fail to midigate damages you can’t recover for loss that you could have avoided Rockingham o Luten had a contract to build a bridge after they spent 1900 dollars they were told them they were repudiating the contract then luden finished and expended 19 grand, and the county refused to pay. o The court said they should have stoped and sued and they can not pile up damages( ie) finish the bridge they needed to stop when the contract was resinded o Under the UCC when we have this happen to a seller who is manufacting goods for the buyer and the buyer ends we look at 2-704 o 2-704(2) – if you are making goods and they are unfinished we give options  you can complete the manufacturing of the goods and idenfy them and try to resell them  you can stop manufacturing and try to sell for scrap  or you can proceed in any other mannor What if your reasonable commercial judgement is wrong. , even if they are wrong if it is reasonable then they will not be penilized  once the contract has been breached you must treat it as it has been breached (2)704(2)

Problem p ( 493 ) o broklin bridge hypo o one pt of view--if we have commencement of the performance and the other person withdraws you are excused to have to complete the performance and you have an action o others say that in this sid we will infer you bargined for a promice and by beginning to perform you made a prome to perform and you would get 90 dollars Problem on p 495 o klien v pepsi o cover 2-712 o mk price 2-713 o conseq and incendal – 2-715 1. if you go out an d by a G3 for 400,000 this is not cover, there fore we would look at mkt price. You get 200 as a mkt price remedy 2. this will go to cover and he should recover the 250,000 3. here he will just get the 150,000 as a cover, but he will argue it is not a cover but he is probably stuck with it

question 2 p 493 o in a fluctuating market you cant wait 6 months and still have cover o we would use the mkt price and that is calculated at the time of the breach so there would be a 10000 dollar recovery

3-18-05    Buyers remedies 2-712- cover 2-716 specific performance 2-713- you can only go there if you don’t cover‖‖‖‖

Toungish v Thomas:  sale of goods case deal between coop and toungish  the price of seeds went up the seller could have gotten an extra 5 grand for the seeds  the district court said that there was 455 dollars in damages- the handling fee , this represented coops profit or actual loss 455  the appellate court reversed and said that damages should have been based on mkt price 2-713  1-106- said that all they need to do was put coop in the position as if toungish would have fully preformed  the appellate court said that this encourages mpre efficient mkt and discourages breach  the court did not follow alied because in allied they court not deliver wihere as here they choes not to deliver there is a bad faith breach here it seems

498 question (1)  yes if they went out in a reasonable amount of time and acted in a reasonable manner they should get cover  Part 2- no seeds o If the seeds were available and they choes not to pursue they could get mkt price damages but no the difference of what they lost on the resale contract  Part 3 – bambino resind o Some say if you can recind you can’t recover for a loss you did not incur/ but iron products case ruled you can’t take account of such subsequent cases  Part 4- coop reserved the ability to cancel if toungish did not supply o Some jur say it should make a difference if they can get out of it with no losee o Farmsworth suggest it is a bad idea to create a siduation where the party in breach is taking advantage of the provision that was put in the contract

Does 2-708 2 apply if 2 708 1 over compensates  You go to 2-7081 if 2-708 2 is inadequate  What is inadequate for purposes of 2-708 1  Some feel inadequate is too little or too much  Most feel just too little Shirley Maclaine’s  Constructive service o Rejection of the concept of avoidability in employment contracts o This was rejected by the court in 1970 and is normally not followed. o Shirlry maclaine signed a contract for 750,000 for a song and dance movie, she had certain rights to approve the script and director o It was to be filmed in LA the western was to be filmed on Australia o 20th century fox says that the other move can midigate the damages because they offered shirly another role, they said it was a substitute o the contracts were a little different , she did not have the same rights t choose the director and she would have to go to austrilia o this court suggests that the difference between the movies was so great it would not be a substitute for the contract  a substitute must be compareable or substaintally similar o generally not recovery for loss of reputation  the problem would be calculating the vaule of it with an y certiancy Anticiptaory repudiation K-------------------------------------------------------P  You could not recover for breach of contract until performance and the other side had to remain ready will and able to perform until performance – no breach until performance is do  This has been soften if there is definitive evidence that one side breached the other side was free to go out an make other arrangements you did not have to reamin ready willing and able but you could not sue until performance  Soften even more in some juristicitions 2-610- Anticiptory repudiation UCC  We say when a party repudiated and it is a material breach  The party can wait till preformace hoping you can talk them into performance

2-611 retraction of anticipatory repudiation  Until you performance you can retract the repudiation

Questions on p 505:  (1) probably yes, p 506 problem 1 o it is unreasonable to think that he would go by parts from S and B for more than twice as much as he was going to originally pay problem 2  there is still a breach and if there is a loss on the mkt price then they can recover that but not a lost volume seller becaue they would not have sold to the affilate if davis did not back out it is dangerous forDia to ignore the affiliate stepping in

Avoidability and coast of remedy defect: o 2 distinct things that can have an effect on damages o if work is imcomplet finishing might be cheap o if work is defective then the cost might be great tearing something out and rebuilding Jacob v yyoung    the builder used the wrong pipes not reading but an equal value substitute cost of replacement / difference in value court says typical measure is cost of replacement, cardoza says that the mistake was trival and unintential and it should be the difference in value cost of replacement was grossly and unfairly out of proportion to the good to be obtained and instead we will give diffenence in value



Jacobs v young:  majority awarded difference in value  Substainal performance- when we have a relitevely insignificant involuntary breach we will allow collection on the contract but then recovery for the breach

Peevyhouse  When it would invole unreasonable economic loss instead of usesing cost to complete we will usediminuation Hadley v Baxendale  Forseability  Was it in the contemplation of the parties o Ie big building is going up and they encounter an electrical problem for each day they are not working it cost them 10,000. contractor is going to the little electral shop around the corner. The guy says ill get it fixed in an hour for 50 dollars, will the electrical shop be liable for 10,000 per day  No, it would not be foreseeable for the guy in the electrical shop o What if the contractor told him it would cost him 10,000 per day if it was not fixed and if it is not fixed you will be responsible , now is he responsible  Now he might be prob yes o Contemplation test  Was this though with in the contemplation of the parties when the contract was made. Have we set forth info and circumstance that this info would be relayed. Have facts been relayed that the contemplateion was with in the parties o Tacit agreement test  The parties must consciously assumed the liability. Does not have to be expressly, it can be implied. o Restatement 351 section 3 – we permit courts to limit the foreseeable loss. P 243- a court may limit damages for foressable loss by excluding recovery for loss profits, by allowing recovery for loss only incurred in reliance or otherwise if it concludes that in the circumstance justice so requires in order to avoid disproportionate compensation o 2-710, 2-715 the UCC look at this Forseeability  ussally judged as of the time that the contract is made, all that has to be foreseeable is that loss will occour if the breach is made. Forseeability of the party in breach is what is essential, we talk about the loss being probable- comes from Hadley.

Keford Co. v County of Erie  Kenford donated a large amount of land and bought land around where Erie was going to build a stadium. In exchange for the land they were going to get a management agreement  The cost came in a lot hight and erie gave up on the contract.  Kenford is suing for damages. The jury awards, 18 million on the origonal trial. The appellate devision reversed based on improper evidence, on retrial the gave 6.2. in the origonal trial they compensated for appreation loss, profits on contact, and something else.  The appleate divison reverses for lost profis , and does not award this.

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And interms of the DSI contract they order a new trial Appelate divison says lost profits are not recoverable because they were not foreseeable and they were not in the contemplation of the parties when they entered into the contract. The courts finds that they are entitled to losses that are natural and arising form the breach and within the contemplation of the parties at the time of or before the breach. After we go through the contemplation test we should also consider the liability that the defend should have assumed consciously – we are describing the tacit agreement test The Ny court is basically decribing the contemplation and tacit agreement test. Lost profits in this case does not meet either of these tests.

2 test for froseeability  Tacit agreement test and Contemplation test

Emotional distress  It is rare but there can be recovery for emotional distress.  Rst 353 it is possible to recover for emotional loss in some cir we target were the breach causes phyicial harm  Basiclly this is only approiate in special circumstances

CERTAINTY  Standard – reasonable cerinty o Court s generally treat this as a question of law not a question of fact o It is reconoized that there is value palced on chance o Restatment 348 – deals with chance  We do recognize that there are issues that relate to chance  Compensation may be do for loss of chance in proportion to the probability of it happening o Reputation – damage to your rep historically to spectulitive hard to prove.  Historically to uncertian to put a dollar value on o Loss of profits  Must look is it reasonable certiant that the money would have been made but for the breach  NH law,- with no past profit of calcaluation to define the profits leaves the jury to guess  Historically if you are a new business you could bnot get profits. However if you were a business that had already been around they then maybe P537 Fera v Village Plaza


We had a rent, it was a bottle and book shop. They gave up part of their space for less cost, but the went to their space and it was gone. The lessor tried to find them another space they shop said it would not do. The bottle shop sued for lost profits. They got 200 grand for anticipated lost profits. Court of appeals overturns they said it was era to lets the lost profits come in because they followed the new business rule and it is improper in that case to consider profits, and the supreme court overturns, saying this should be a issue of sufficiency of proof or certainty. 538, 539 new business verse old one. The parties in this case entered Mr. Fera said he was going to make 270 grand and he put up expert witnesses to show where and when her was successful. The defendant had one witness say this guy would lose money, and the guy from the LCB said he would never get a license for this. The supreme court of Michigan say we have conflicting evidence and we might not have founf the same way as the jury but this is not our standard of review. Just because they are a new business does not mean they can not get lost profits.

P 541 note 1 – a stricter view on this issue.

Liquadated damages and pentalty .  Freedom of and freedom from contract.  Limitation, when parties want to say in advance what the pentality will be if there is a breach’ o You can agree to a damage recovery so large that it would constitute a penalty. o Advantages to liquated damages, - helps determine risk, resuces the cost of proof and litigation, afford compensation for loss in a way that a part can be able to plan for it should there be a breach , they can evaluate what a breach would cost in certain siduations. o You don’t want something so large that it would be a pentaly or impede the decision making of the parties. o If we have a vailid liquated damage provision and there is a breach that is the provision that controls o If the damage provision is not going to be enforced then the damage part is stricken, but the rest of the contract stands and a standard damages is put in. Aproprate sid for liq damages  Uncertian in amopunt and diffucult to prove  Intent of the parties  Amount must be reasonable not generally disproportionate to the presumable loss or injury o Some say this reasonable ness is at the time we enter the contract, other say the time we enter into the contract or at the time of the breach

Multiple choise ? 1A

4-01-05 Stipulated damages= liquidated damages  They are not as concerned with reasonableness International sale of goods act  Recognizes the fact that you can stipulate damages, they don’t look at successive or grossly excessive Wasserman Inc  Wasserman enters into a 30 year lease for 450 a month with a liquated damage clause that if thee was a breach they township would have to pay certain construction clause and 25 Percent of the grosser receipt for the last 3 years(this is the one under dispute)  Wasserman leases the property for 1850 a month , and then the township then sells the property for 600,000. the township does not want to pay 25 percent of the gross receipts for a certain period of time – 290,000 thousand  Suprememe court finally says o Define liquidated damages, and penalty damages- P 546 o Supreme court of NJ does not like using gross receipts because it really does not show how the business is doing, but they like that it is easy to get a definite number o NJ says it is going to use a reasonableness test. They say they are going to target the reasonableness at 2 times first at the time of the breach and second when the parties created the contract totality of the cir is what they will look at. o They sent the judgement back for further consideration  Reasonable ness of the use of gross receipt no matter when cancellation occours and more things to concider on the bottom of 550  Within this opinion there is reference to the UCC as well as the restatement  2-718 –and rest 356 sec 1 – addresses liquated damages  Reasonableness in light of the anticipated harm Revised version of article 2 becoming more consumer oriented Notes after this case  Subterfuge (note 3)

o Often in construction contracts, something is a bonus like 1000 dollar bonus for every day that you are early  If it operates as a penalty then it will not be enforce but if it acts as a bonus then it will be enforced P 552 Problem 1  The courts in this siduation said it would give effect to the plane and ordinary language of the contract and the court took the money owed to 0 and said that the contractor owed them 6 grand o Dissent said they should not be entitled to the extra 6 grand Problem 2  They missed the cut off by a day o The travel company did win they court said that they used their chances of rebooking and as a practial matter the closer to the trip that cancellation was made the harder to rebook o Reasonableness of forcast of loss that would be diffucult to pinpoint or assertain Dave Gustafson  Contract between the highway dpt and GUSTAFSON  The contract provision was 210 per day in damages by the number of the days for contracts over 500 grand  They finish 67 days late  The court looks at this and is trying to determine if it is an approiate liquated damage or is it a pentaly  They said this is reasonable dealays are impossible to measue  People will push as hard as they can to get as much as they can in liquated damages because it the court finds it a pentaly they will just give you traditional contract damages so I have noting to lose to push for as mush as I can get under liqudated damages

Nost 2 p 533  Take or pay o You take it and pay for it or you don’t take it and you pay for it o This garantees an entity a continual flow of cash you are basically paying for having it made available to you o Some people would say this is a penalty, the argument to this is they are alternative provisions Problem 2 p 554  (A) should not use the word penalaty  (B) same thing just replaced the word penalty – seems much better may be a pentaly need to look at when the damages were targeted

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(C) the fact that we said either do this or that it makes us think maybe alternitive performance or maybe a pentaly. (D) this used to be a slam dunk in common law you keep the deposit, not so much anymore look at (rst 374 subsection 1 )- you have a shot at getting it back at common law you could not get it back

CHAPTER 6  interpretation of contracts o assent and definiteness Problems that are encountered and tequineques that are used PAROL EVIDENCE RULE  not a evedentary rule but one of substantive law  it targets prior negotiations  we don’t want to use prior negotiations to try and show that the agreement is other than as it is written o oral contracts is not as reliable as the written word o the rule gives legal effect to the intention of the parties when the writing is final  witting can be final and complete or final and not complete  if the parties have intended that the agreement be final then we say that it is INTREGRATED and the parol evidence rule is applicable  if a document is not ment to be final and then it is not intregrated and the parol evidence rule dose not apply the agreement can be fully or partially intregrated. If the agreement was final and complete- fully intregrated If the agreement was final and incomplete – partially intregrted Not final then not intregrated – no parol evidence rule How do we determine intergration 1. 3 ways a. we look to the writing- if it appears to contain the final agreement then we say it is intregrated, is it definite does it have all of the terms so on or is there something that indicates it is not final i. it has to be incomplete on the face of the document to determine it is not final b. we look at the writing plus circumstances but excluding prior negotiations c. we look at the writing and the surrounding cir plus evidence of prior negotiations d. once we know that it is an intregated doc we find out if it is complete or imcomplete  if final and complete then done  If final and imcomplete you can suppliment but not contradict

Some drafters will insert a merger clause  This contract is the final expression of everything that we agreed to there is noting else --- this is evidence of a completely integrated document

We can supliment the writtiing but never contradict 4-06-05 Parol evidence rule- going to bar prior or contemporary evicence for purpose to show the contract is other then the writtin gof the contract Applicable to imtregrated documents – final expression of the party  Hence extrince are not permitted to go against what partys said IT can either be final and complete- can neither suplimnet Or final and not complete- if it is this then we allow extrinsic evocence to supliment Merger claiuse- clauses that says this is a final and complete expression of the parties, this is evidence that we have an intregrated doc Parol is applicanble to prior neg and agreement s Parol evidence rule does not apply to negoations and agreements that occour after the contract The Parol evidence preseuposes that we are dealing with a valid agreement does not apply to evidence that suggests there is not an agreement, atack the creditability of the document itself the parol evidence rule us not applible to matters of interpratation  2-202 a – whats allowed to interprate the doc  in common law you could only admit evidence to interprate when there was a question of what was going on needed a Patent ambiguity in common law  Latent ambiguity – abigous when tried to apply  I leave my farm to my cusin susan but I have 2 cusina name susan  Patient ambiguity- ambiguous on face  I leave my farm to my 3 cusins bill and ted Over time the though was using matters of interpratation should not matter if there was a patient ambiguity or not – as time when by we realized that you should not need a patent ambiguity 2-202 new one we added subsection 2 this reflects the fact that we don’t need an ambiguity

Gianni- p556  Plain was selling fruit cany and soft drinks but no tabaco in the def building. He gave up sellingtabaco and pays a higher rent to be the exclusive soft drink seller. The def then lets in a drug store to sell soft drinks. This was not in the contract but spoken 2 days before and then plaintiff cailm upon signing of the contract. The plaintiff had a witness to the discussion made 2 days before.  The P is catorigizing the oral agreement as a separate deal, because he is worried about the parol evidence rule, the court says they want to see if the written agreement is the entire agreement. o The court looks at the written agreement to see if it appears to be complete and then look at the oral agreement and see if it comes ―within the feel that is embrased by the written agreement ― o Would the parties naturally and normally include what the pla claims as the oral argument in the written argument the court says yes if there were part of the deal it would have been in there therefore we will not consider the evidence of the oral contract because the court views the contract as complete  The evidece would not be conflicting but the contract is totally intragates- final and complete, if it were incomplete we could let evidence in to sup but not in this case where is in final and complete  Final and incomplete- it is final in terms of what it talks about but not complete interms of the deal – not here

Masterson v sine  P transferred the property to the def with deed that let the plaintiff purchases from the def they were permitted to buy the land back for the same amount plus and improvement that were put on the property. The relationships were they were family.  Def file for bankruptcy, and then they want to exercise the option and liquidate the property to pay the creditors o The def is caterizing the option as unassignable because it was within the family, and it was personally to the grantor, and it is not transferable o They are saying we should not enforce the option because it was indefinate, o The supreme court of California says it was proper to admit extrinisic evidence about the phrases they were interpretating o They also found it was not proper to exclude the evidence to about the oral agreement that it was only transferable to family family – court says they are going to bais it on intent of the parties and then the creditability of the evidence and if it will mislead the fact finder- the lower court was wrong to exclude the evidence

The contract is final but incomplete so they can suppliment the contract o Dissent says – the contract is assignable unless it is expressly said in the contract that it is not and this is not supplementing it. Because a option is legally assignable unless stated other wise we are not supplimeting we are conflicting it that is what the dissent say  Fundemetal legal question suplimetation v conflict – must it conflict with the express words fo the contract or if it conflicts with a defult rule does that amount to conflicting evidence because no matter what conflicting evidence is not allowed in  2 standards 1 first rst the other is the comintary from the UCC  the UCC standard if the terms had been agreed upon they weould be in the standard- certaintly been part  the rst standard is might naturally or normally flow normally been part  they did not know to protect themselves they had to put it in this doc 2-202 0n p 28 2. subsection b – if it is completely intragrated then you can do what it want to do in subsection a if it is final and complete you can’t supplement we don’t talk about the complete intragration of a doc until we get to subsection b


Bollingger v QUARY  the quarry company had an agreement to put waste on the Bollingers property . the B’s thought that central would remove the top soil and then place it over the construction waste. the the quarry company did this at first and then stoped. The B’s thought the provision was in there and some how it was leaft out and they wanted the contract to be reformed. According the the supreme court of pa the reform the contract because they say it was a mutial mistake. The rely on the fact that sentraal did thais at first and that is how they did it for B’s neighbor. By doing it in the beging we call this cpurse of performance – how they handled it In the beginning.  Why don’t we have an issue with the parol evidence rule o Because it was a mistake and mistakes re exampt form the parol evidence rule. Mutal mistake  In common law if the parties were under the same mistake beleife as the the facts the courts were willing to give relief  The mistake Went tot the basic assumption of the contract  It had a material effect on the agreed performances  One party does not bear the risk

The seminal mutal mistake case is Sherman v walker

How about Unilateral mistake  Courts were much less willing to give relief, unless the other party knew or had reason to know of the mistake  However we becam a little more lenient with these types of mistakes started with contract bidding case  In order to find unilater mistake there must be  The mistake Went tot the basic assumption of the contract  It had a material effect on the agreed performances  Performance would be unduly burdern some on one party  The other party has to rely  Concept of unconsionability

4-8-05 Q p 569  Would a merger clause preclused the use of extrinsic evidenc to use frauds o No if we are attacting the valididy of the contract itself then we use an exception o Merger clause – all neg about contract merget to single doc- evidence of a totatly intregrated doc final and completed Problem p 596 o Is there a remedy for kastor  Court found there was a mutual mistake and the contractor can have the contract reformed

NO ORAL MODIFICATION CLAUSE  Ie thios contract can only be modified by a signed writing  At common law it was not effective because you could later chose to modify the clause o Any prior agreement could be changed by a later agreement so it was not effective o If thee was a reliance you could get around the no oral modification clause  The person that makes an oral contract to do work watHched it be done the work has reliance  the UCC takes a contrary position to common law and do recognize the no oral modification clause o 2-209 (2)talks about this if you say must be a signed writing you need that o 2-299(4) if you fail to comply with 2 and 3 it may act as a waiver  to comply with 2 you need a signed written agreement  and for subsection 3 to satisfy the statue of frauds under 2-201 (1) writening sign agais who the enforment is sought (2) merchant exption (3) admissions beging manufacting of goods , payment – satifising the sof without a writing


just cause you satisfied the sof does not mean you have satisfied subsection 2

Zipper clause  combo of a merger clause and a no oral modification clause

Ambiguties and vaguenessAmbiguity – different meaning  ambiguity of syntax  ambiguity of term Vaggeness  when applicablety is marhinal in situations of uncertaintly P 573  vagueness exercise o vague term is any school

Frigaliment (Chicken case)  def contracted to sell a chicken the contract o 1.5- 2 lbs and 2.5 to 3 lbs  2 contracts executed the same day chicken in different weight cat’s the 1.3 is more expensive then the 2.5 lbs chickens  contract was written in german but the word chicken was in English o the question was asked do you mean hun  there was a first contract and then the one company said they did not want the stewing chickens they wanted the fryers and there was some question as to if they should make the second shipment o they make the second shipment in the end and before it reaches its destination the exporter stops the shipment o  the german company though they were getting fryers but the big chickens were stewarts  the courts sets out in interpreting the contract o 1st they look at the contract itself. In fact the P’s argument is because the smaller chickens had to be the young ones- broiler or friers , hence the bigh ones had to be broiler of friers also o P also said they used the word chicken because it meant a frier or a broiler. But the court rehjected that when it was ask if the P meant hun and the P said yes o Def says the word chicken is everything but a goose duck or turkey- they support this with the Department of agrictulure definition for grade A

chicken which was in the contract – court says we are using that standard with respect to X but not def to what is in the doc o Def says it was a new business and it did not know the trade usage, that does not matter they would have to show that P had actual knowledge or theat the useage was so common the new comer was aware of the usage o How are we going to try to establish this usage did he know or should he have know  P had 3 witnesses  D had 3 witnesses  The def also has 2 other argument about subsequent conduct in priece and considering the mkt price the def would have loss money on the chicken and you have to expect the def to make some money  And the partial performance arguremnt. They accepted the second shipment  Court says even during the the 2nd shipment those cables were going back and fourt so this argument may not work  Court says must look at objective test. Def subjectie intent would not matter unless it met an objective standard  Def wins P failed to meet its burden to show the the def had reason to know of the interpretation of a chicken’ Note 1 p 579  Would result be the same if both parties meant broiler even thoughn they said chickens a. Objectively it would not matter what they ment RST 201(1)  Where parties have attached the same meaning of a term there of that is its meaning Raffels v whiffilhouse  Def or buyer wins  Cotton contract the P would sell to the def and def would buy cotton guaranteed to arrive from the peerless from Bombay. There are more than 1 the 1st did not show up in nov and the 2nd showed up on the December peerless. The seller sues  The seller wants the buyer to take the cotton and the fact that they made reference to the cotton being on the peerless by it arriving on the peerless they preformed as they were supposed to, the intent of putting the ship in the contract vwas a certiant kind of trade practice and this related to the cotton being lost at see and it was immerterial for which ship it arrived on  The Def felt like that were impoing a different contract on them than what they originally got in to  Because there were 2 chips neamed peerless according to the def we have a latent ambiguity – an ambiguity not in the face of the language itself

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Def takes point of view that unbenosed to them there are 2 peerless and there was no consensue between the parties and there was not contract HOLDS FOR DEFmaybe an illistration of rst 20(1)(a)

Oswald v Allen  Oswald tries to by coins form allen  . she shows him her rarity and swis coin collection. He buys here swiss coinsthinking he is buying all of the swiss coins she thinks only the swiss coin collection not the swiss coin collection and the swiss coins in the rarity collection.  Her family does not want her to sell them  Court finds for here relying on raggeks v wiffilhouse If no preformace then the court likes to leave things as they are

GET LAST CLASS 4-15-05 The meaning of languages is a question of fact The interpretation of a contract is a question of law WWW v Gia p 586  They looked at the 4 coners of the doc to see if it was clear and complete if it is then they will not add extrinicic evidence – the plain meaning rule  They have also interperated the plain meaning rule as mopre then the 4 coners Pacific gas  They said not clear and complete but is it subseptable to more than one meaning Delta Dynamice  Followed pacific gas

Hurst p 601  Hurst was a Horse meat trader selling horse meat scraps 50 per ton if 50 percent proten. Lack deducted 5 dollars as was in the deal these scraps had 49.53-49.93 but trade usage was 49.5 and above is 50 percent protein  The trial court finds for lake and interoperates 50 percent as 50 percent  The appellate court overturns saying we are not going to limit our consideration to the plain meaning of the contract  They say trade usage is relevant and that would be 49.5 percent and we will have to reconsider the contract in terms of the trade usage – trade may make allowances not understood by outsiders

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We will allow trade usage ti help us interperate a clear number in the contract and the court will not ignore the fact that this word has a particular meaning in the trade but different in the real world Usage of trade v course of dealing WHAT IS THE DIFFERENCE o Usage of trade – standards in the industry o Course of dealing – how parties have delt with each other in the past o Course of performance – what has happened under this particular contract so far o You can explain or supliment a contract with all of these  2-202 the new one  sub 2 – you can use this language weather or not we have an ambiguity  we can uses these to explain langauage weather or not it is ambiguous or not  we try to treat these things as being consistant with each other if this is not possible  express terms come first  course of performance comes 2nd  how you have delt in the past  usage of trade

revised ucc  1-303 we have move course of performance out of article 2 and into article 1 Q p 602  yes P p 603  they were held to the interstate transaction because the transaction is an interstate transction, maybe they could also say lack of consent, past dealing , course of performance

GAP FILLING  there are some things that the contract does not cover  process by which the court determines what the parties meant by the languages used o construction  some jur use interpration and contruction as the same thing  some say interpotation is what they meant the process  construction the process the court determines the effect  we are implying terms in a contract that might not be difentively states o good faith o fair dealing o best effort


terall must give his best efforts

Eastern airlines v Gulf oil o eastern had a contract for fuel o gulf was claiming that eastern was lifting fuel ie. When they entered a city with cheaper fuel they would fill up there if it was more expensive they would fill up less . cinci 2 a gallon 1.9 at cincinaty. When they got to cinci they would only take as mush as they need to get to chacigo o is this a breach o UCC 1st good faith is honestly in fact of the transaction concenned1 o Good faith honesty in fact and the observance of reasonale comericial standards of fair dealing and trade 2 – o Court says in the airline industry this is normal o Course of dealing they have been doing this o Course of performance – same o Eastern did not violate it was not inconsistent with good faith and standard comertial practice

Mkt st asoiate v Frey o Jc pennies entered into a contract with General

Dickey v Philadelphia o Weather or not we should supply a term that says hey stay in the car washing business o P leased lkot to D and D was to use it as a car wash and rent was 12 percent of sales or atleast1800 per year o The D stoped washing but only polished and D P said they D had defult o Generally when there is a provision that says these premises are supposed to be used for a specific purpose – that there is no obligation to use the land , but is is a covent not to you . you don’t have to use it for that buit cant do anything else o Pl when getting paid on percent of profits we can make them uses the land as much as possible o The D says it there si an obligation it must be expressed and this as never o They also point out that there should not be this implication because there is a minimim rental requirement o Defult- damages, but a material breach to terminate and get damages o Court says it would be unreasonable and to impose this

Boor v Fallstaff o Fall enterend a contract were they bought labels, they basically bought out balintine extept for the brewery o Buyer promised that her woulf give beast efforts to get the highest sales

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Expressed term to use best efforts Buyer was to pay the rolities of 50 cents per barrel for 6 years But if the sustantiall lower distribution they would have to pay a certiant amount This sounds like a stipulated damages Part of the payment was based on sales for the next 6 years Fallstaff breached the best efforts because they were loosing money and they cut their volume to increase profit and indoing so they breached The trail court says that falstaff agreed to the best effort clause THERE WAS AN EXPRESSED BEST EFFORTS CLAUSE o If they substantially did continued the distribution of balintine Triggered the liquidated damages clause Fallstaff reduced volume and pick new distributors and some of the new distributors carried competing products of balintine The lower court found that there was a breach of the best efforts clause but the liquidated damage clause was not triggered The 2nd cir says fallstaff did fail to use best efforts, and balintine had to show that fallstaff did not care about balintine and then fallstaff had to show there was noting else they could have don’t that is short of being finnatially disasterous o What constitutes best efforts, - that you worked as hard for this consumer as other o What constitutes best efforts will vary There is a breach of best efforts clause but it did not trigger the liquidated damages clause o The lower court determined damages by using sales of similar competitors o Balintine is saying that was not a good barometer for judging the loss, they want them to included all but the top 15 beers in the market. o The 2nd cir said the approach was reasonable in their approach


4-20-05 o Kerst o Even though a word may not be ambiguous on its face trade usage can effect what a words means o Mk streets assoiateas o A question of fact as it related to an indivual state of mind o Car wash case o there was no implied obligation to do business to get the most sales possible because there was a substaintial figure as a min if it would not have been there then maybe they would have done the most to get the highhets profits

o An output contract for bread crumbs and the buyer said they would buy all the bread crumbs that the seller could produce

o The seller found that they were not making enough money so they just sorta stoped producing o Buyer sues seller and claims BEST EFFORTS o It it is an output contract it is implied you will use best efforts o Seller will sell we did not have a requirement to use best efforts but just good faith – and they had a ligitment commercial reason for discontinuing the bread crubmbs o Best efforts and good faith are 2 different standards o If you are going to be driven into the ground you can stop but if you are just making less money then no

Zilg v Printice hall inc. o Zig wrote a book and Hall published. Hall picked it up originally was going to print 15000 copies and put 15,000 dollars into it. The book of the month club did not go for it and instead the only made 10,000 and spend 5,500 on advertising o Zig sued saying breach of best efforts there was no best effort clause they just had to act in good faith o The trial court found that hall should have used best efforts and did not o The 2nd cir says not breach because the contract exclusively reserved the right to publish at the discression of the publishing company – they don’t need best efforts just good faith o To indicate that the acted in good faith the publisher did certain things sending out to crits, an add in the new your times o For there too be breach zig would have to show that their initial efforts were inadequate to give the book a reasonable chance to catch on , or that there was a reason other than good faith for not printing more

Bak A Lum v acolla o Should the courts supply a term into the contract o When we have this sorta of siduation or a franchise we want the seller to give notice o Bak A lum had an agreement to ditribute all of Acolas alumin in jersey. Bak started to expan and then Acola ended contract o Before they find out that they will not longer have an exclusive they build up ther facility and the bought a bunch of steal from acola and acola encouraged them. o Acola stood by and watched them do this o Def seeks for an injenction not injunction but gets 35 grand in damages o The trial court determines they should have had atleast 7 months notice o The court said that an exclusive agreement can be terminated as long as there is a reasonable period of time and reasonable notice o Give them the ability to make back their investment a o Reasonable period of time passed and notice would be 7 months

o Appellate court agrees with trial court but feels that the notice should be longer and in every contract there is an implied covenent of good faith and fair dealing should have been 20 months and 10 per month o If acola had not withheld the info then there would still need to be reasonable notice what if there was a 60 day notice provision in the contract but reasonable notice would be 20 months if it si an expressed provison then it will proably be upheld

Can you have an expressed term in the contract that says you don’t have to have good faith o If you have an expressed term you can maybe override good faith, but it is implied in evey contract 2 views o

Usage of tracde can not contradict the expressed terms of a contract you can suppliment or explain Nanakulich v shell o can you suppliment a price protection provision o these 2 have been doing business together for ten years then all of a sudent in 74 the price of asphult went way up o they would give no notice to raise the price but nanakula claims breach because they did not price protect them o shell is saying that they should look only at the narrow trade practice o that they were just waiving the right to hold then to the prive and here that weren’t and finally o that even if the price protection was course of performance – the usage must be consistant with the expressed language. Man icuage want a broad trade usage and shell whants it just to be asphalt just chevron and shell o Nanakula had reason to think that shell was aware of this usage

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