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					                                        Contracts Final Outline
I.   General Definitions and Promises:
     a. Kelly Outline:
               i. Identifying a promise:
                       1. Promise must be manifest: words and actions can constitute promises;
                            unexpressed intentions cannot.
                       2. No magic words available.
              ii. Jest: if indications would warn a reasonable observer that the promisor did not intent a
                  commitment, the words or actions do not constitute a promise.
                       1. Restitution is available for mistakes here.
                       2. Objective standard: This is a reasonable person standard – just because YOU
                            didn’t discern the jest doesn’t mean a reasonable person would not.
                       3. Subjective knowledge: if YOU know that it’s a joke, but a reasonable person
                            would not – then it doesn’t count either.
     b. Evidentiary obstacles: only the parties know what they REALLY meant.
     c. §1: Contract Defined: A contract is a promise or set of promises for the breach of which the law gives a
        remedy, or the performance of which the law in some way recognizes a duty.
     d. §2: Promise; Promisor; Promisee; Beneficiary
               i. (1) A promise is a manifestation of intention to act or refrain from action in a specified way, so
                  made as to justify a promisee in understanding that a commitment has been made.
              ii. (2) The person manifesting the intention is the promisor.
             iii. (3) The person to whom the manifestation is addressed is the promisee.
             iv. (4)Where performance will benefit a person other than the promisee, that person is a beneficiary
     e. §3: Agreement Defined; Bargain Defined
               i. An agreement is a manifestation of mutual assent on the part of two or more persons. A bargain
                  is an agreement to exchange promises or to exchange a promise for a performance or to
                  exchange performances.
     f. §4: How a promise may be made
               i. A promise may be stated in words either oral or written, or may be inferred wholly or partly
                  from conduct.
     g. §7: Void v. Voidable: Voidable: one where one or more parties have the power, by a manifestation of
        election to do so, to avoid the legal relations created by the K, or by ratification of the K to extinguish the
        power of avoidance.




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                                       Contracts Final Outline

II.   Illusory Promises: §34
      a. Illusoriness or conditional promises:
                 i. Effect of illusoriness:
                         1. Illusoriness prevents enforcement of duties under an agreement. The party whose
                              words were illusory made no promise, so there is no promise to enforce.
                         2. Also, the party who received an illusory promise – received no promise and
                              therefore no consideration.
                         3. Both parties can refuse to perform.
                         4. Inconsistent cases: No enforceable K can exist w/out a promise, but overzealous
                              application of illusoriness might prevent enforcement of agreements that seem to
                              deserve enforcement. Thus, courts often are reluctant to deny enforceability on
                              the ground of illusoriness—particularly on technical grounds.
                ii. Definition!: If the promisor remains completely free to change her mind about the deal,
                    any commitment is illusory and no promise exists. A promisor who can w/draw from the
                    transaction on a whim w/out paying damages for breach has made no commitment.
               iii. Conditional promises:
                         1. They generally bind: almost any limit on the promisor’s ability to change her
                              mind may satisfy the requirements of commitment. As long as the promisor
                              remains bound to perform under some circumstances, the fact that the other
                              circumstances would permit the promisor not to perform does not negate the
                              commitment.
                         2. Promisor’s control over condition: When the promisor cannot cause or prevent
                              the condition to occur then the promisor lacks the ability to change mind. The
                              more control the more scrutiny you need to use in deciding whether a commitment
                              existed.
                         3. Influence over condition: usually not enough to make illusory: Example:
                              lobbying the government and therefore triggering a condition to occur.
               iv. Partial illusoriness: If part of an agreement was not illusory, courts could enforce that
                    part.
                v. Good faith and fair dealing: UCC §1-203 and R2d §205: The obligation to act in good
                    faith may limit a party’s ability to w/draw from the transaction, despite a condition that
                    arguably would permit the party to w/draw.
               vi. Reasonableness v. good faith: for goods: Evidence that a reasonable merchant would have
                    found the goods satisfactory might suffice to hold that the rejection by the plaintiff
                    constituted breach, no the failure of the condition.
      b. §34: Certainty and Choice of Terms; Effect of Performance or Reliance.
                 i. (1) The terms of K may be reasonably certain even though it empowers one or both parties to
                    make a selection of terms in the course of performance.
                ii. (2) Part Performance under an agreement may remove uncertainty and establish a K enforceable
                    as a bargain has been formed.
               iii. (3) Action in reliance on an agreement may make a contractual remedy appropriate even though
                    uncertainty is not removed.




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                                        Contracts Final Outline

III.   Requirement and Output K’s
       a. Kelly:
                i. Output K’s Definition: A seller agrees to sell all of a particular good or service that she
                   produces to a one buyer.
                        1. Seller can decide not to produce anything
                                          i. Seller can’t produce and sell to someone else however.
               ii. Requirement K’s: Definition: A buyer agrees to buy all of a particular good or service that
                   she needs from one seller. (Implied promise not to buy from someone else)
                        1. Buyer arguably retains the right to buy none of the good.
                                 a. But the buyer will actually NEED none.
              iii. Excessive requirements: A request that exceeds the amount that the buyer really needs
                   breaches the promise to act in good faith.
              iv. UCC prohibits excessive demands: measured by estimates or prior performance.
               v. Not illusory: The ability to produce or to demand too much is not the ability to back out of
                   the deal. Thus, the absence of a specific quantity would not make the agreement illusory.
              vi. Best efforts: an exclusive dealing K implies best efforts by the UCC §2-306 and not just
                   good faith. Can be two-way best efforts or just one way.
       b. UCC §2-306 Output, Requirements and Exclusive Dealings
                i. (1) A term which measure the quantity by the output of the seller or the requirements of the
                   buyer means such actual output or requirements as may occur in good faith, except that no
                   quantity unreasonably disproportionate to any stated estimate or in the absence of a stated
                   estimate to any normal or otherwise comparable prior output or requirements may be tenders or
                   demanded.
               ii. (2) A lawful agreement by either the seller or the buyer for exclusive dealing in the kind of
                   goods concerned imposes unless otherwise agreed an obligation by the seller to use best efforts
                   to supply the goods and by the buyer to use best efforts to promote their sale.
       c. R2d: §205: Duty of Good Faith and Fair Dealing
                i. Every contract imposes upon each party a duty of good faith and fair dealing in its performance
                   and enforcement.




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                                         Contracts Final Outline

IV.   Definiteness or Certainty: §33:
      a. Kelly:
                i. In general: Definiteness is a requirement, technically equal to assent and consideration.
                   This exaggerates the practical importance of definiteness. Courts will not enforce an
                   indefinite K. But courts have developed many ways to find definiteness even when the
                   parties themselves have left matters open.
               ii. Rule: terms are definite if they provide a basis for determining whether a breach has
                   occurred and for giving an appropriate remedy. From R2nd 33(2)
                        1. No offer: indefinite terms make it seem unlikely that the parties had concluded
                            their negotiations. Other party expects to have a further opportunity to assent
                            before a deal is concluded.
                        2. No possible solution: Even if the parties clearly intended the vague terms to e a K,
                            the court cannot enforce it unless it can tell the difference between performance
                            and breach.
              iii. Identifying the performance:
              iv. When parties’ words or actions signify that they intended a K, modern courts will do all
                   they can to discover the terms of the K and to enforce those terms. (see supplying missing
                   terms)
      b. §33: Certainty
                i. (1) Even though a manifestation of intention is intended to be understood as an offer it cannot be
                   accepted so as to form a contract unless the terms of the contract are reasonably certain.
               ii. (2) The terms of a K are reasonably certain if they provide a basis for determining the existence
                   of a breach and for giving an appropriate remedy.
              iii. (3) The fact that one or more terms of a proposed bargain are left open or uncertain may show
                   that a manifestation of intention is not intended to be understood as an offer or as an acceptance.




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                                        Contracts Final Outline

V.   Assent: Formation of Contracts: Mutual Assent - §§ 17, 18, 19, 22, 27, UCC 2-204, 2-206.
     a. Kelly:
               i. In general: the law enforces K’s because society benefits from mutually agreed exchanges.
                  The requirement of assent limits the law’s attention to mutually agreed exchanges.
              ii. Problems w/ assent:
                       1. Did the party assent at all? Someone might say they did no assent at all – this is
                            rare. Absent fraud, such as forged signatures or lies about what was said during
                            negotiations, words or actions rarely produce such ambiguity that one party
                            believes assent exists where the other does not.
                       2. When did assent occur? If assent does not occur then no K. If, however, assent
                            occurred before the party effectively w/drew, a refusal to go forward would be
                            called breach.
                       3. To what terms did the parties assent?
             iii. Structure of assent:
                       1. UCC approach: The UCC explicitly recognizes that almost any method of
                            signifying agreement can create a K. 2-204. Even silence can communicate it.
     b. §17: Requirement of bargain
               i. Except as stated in subsection (2), the formation of a contract requires a bargain in which there is
                  a manifestation of mutual assent to the exchange and a consideration.
              ii. Where or not there is a bargain a K may be formed under special rules applicable to formal
                  contracts or under the rules state in §§82-94
             iii. Comment…(c) ―meeting of the minds,‖ The element of agreement is sometimes referred to as a
                  ―meeting of the minds.‖ The parties to most K’s give actual as well as apparent assent, but it is
                  clear that a mental reservation of a party to a bargain does not impair the obligation he purports
                  to undertake. The phrase used here, therefore, is ―manifestation of mutual assent,‖ as in the
                  definition of agreement under §3.
     c. §18: Manifestation of Mutual Assent
               i. Manifestation of mutual assent to an exchange requires that each party either make a promise or
                  begin to render a performance.
     d. §19: Conduct as Manifestation of Assent
               i. The manifestation of assent may be made wholly or partly by written or spoke words or by other
                  acts or by failure to act.
              ii. The conduct of a party is not effective as a manifestation of his assent unless he intends to
                  engage in the conduct and knows or has reason to know that the other party may infer from his
                  conduct that he assents.
             iii. The conduct of party may manifest assent even though he does not in fact assent. In such case a
                  resulting contract may be voidable because of fraud, duress, mistake, or other invalidating cause.
     e. §22: Mode of Assent: Offer and Acceptance
               i. The manifestation of mutual assent to an exchange ordinarily takes the form of an offer or
                  proposal by one party followed by an acceptance by the other party or parties.
              ii. A manifestation of mutual assent may be made even though neither offer nor acceptance can be
                  identified and even though the moment of formation cannot be determined
     f. §27: Existence of Contracts Where Written Memorial is Contemplated
               i. Manifestations of assent that are in themselves sufficient to conclude a contract will not be
                  prevented from so operating by the fact that the parties also manifest an intention to prepare and
                  adopt a written memorial thereof; but the circumstances may show that the agreements are
                  preliminary negotiations.
     g. UCC: 2-204: Formation in General
               i. (1) A K for sale of goods may be made in any manner sufficient to show agreement, including
                  conduct by both parties which recognizes the existence of such a K.
              ii. (2) An agreement sufficient to constitute a K for sale may be found even though the moment of
                  its making is undetermined.
             iii. (3) Even though one or more terms are left open a K for sale does not fail for indefiniteness if
                  the parties have intended to make a K and there is a reasonably certain basis for giving an
                  appropriate remedy.
     h. UCC: 2-206: Offer and Acceptance in Formation of K.
               i. (1) Unless otherwise unambiguously indicated by the language or circumstances.


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                         Contracts Final Outline
        1.   (a) An offer to make a K shall be construed as inviting acceptance in any manner and
             by any medium reasonable in the circumstances;
         2. (b) An order or other offer to buy goods for prompt or current shipment shall be
             construed as inviting acceptance either by a prompt promise to ship or by the prompt or
             current shipment of conforming or non-re conforming goods, but such a shipment of
             non-conforming goods does not constitute an acceptance if the seller seasonably
             notifies the buyer that the shipment is offered only as an accommodation to the buyer.
ii. (2) Where the beginning of a requested performance is a reasonable mode of acceptance an
    offeror who is not notified of acceptance w/in a reasonable time may treat the offer as having
    lapsed before acceptance.




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                                        Contracts Final Outline

VI.   Offer: §§24, 29
      a. Kelly
                i. Identifying an offer:
                        1. Manifestation:
                                  a. An offer must be manifest; an uncommunicated offer is an oxymoron. No
                                      offer exists unless expressed to another.
                        2. Promise:
                                  a. You must identify a promise w/in an offer to find a promise to enforce if
                                      the offer is accepted.
                                            i. Usually conditional: I will do X, if you do Y.
                        3. Invitation to accept:
                                  a. Some expressions may imply willingness to enter a bargain w/out inviting
                                      assent
                                            i. Example: Words to another person. (see §52 Who may accept)
                                  b. Some expressions may not invited anyones’ assent:
                                            i. Example: For 2 cents I’d sell my son.
                        4. Conclusiveness:
                                  a. An offer gives the other party the power to conclude a deal by accepting.
                                            i. Offeree holds all the cards.
                                           ii. If the other party has reason to know that the offeror expects not
                                               to be bound until she has made some further expression of assent,
                                               the words are not an offer but preliminary negotiations. (see
                                               §26).
                        5. Don’t worry about ―bargain.‖
               ii. Infelicitous Offers:
              iii. Carelessly communicates a willingness to enter a bargain. Although intending to invite
                   bids, the language may reasonably be understood to invite acceptances. Where a party
                   cannot perform if she gets too many acceptances, courts might rescue: Nebraska Seed Co.
                   v. Harsh.
      b. §24: Offer Defined
                i. An offer is the manifestation of willingness to enter into a bargain so made as to justify another
                   person in understanding that his assent to that bargain is invited and will conclude it.
                        1. Manifestation: an offer must be manifest. An un- communicated offer is an oxymoron.
                             No offer exists unless expressed to another.
                        2. Promise: Usually, an offer takes the form of a conditional promise. You must identify
                             a promise w/in an offer to find a promise to enforce if the offer is accepted.
                        3. Invitation to accept: the issue depends on what listeners reasonably believe the speaker
                             intends, not on what the speaker actually intended.
                        4. Concluclusiveness: An offer gives the other party the power to conclude the deal by
                             accepting.
      c. §29: To Whom an Offer is Addressed
                i. (1) The manifested intention of the offeror determines the person or persons in whom is created
                   a power of acceptance
               ii. (2) An offer may create a power of acceptance in a specified or in one or more of a specified
                   group or class or person acting separately or together or in anyone or everyone who makes a
                   specified promise or renders a specified performance.




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                                          Contracts Final Outline

VII.    Existence of Preliminary Negotiations: §26
        a. §26: Preliminary Negotiations
                  i. A manifestation of willingness to enter into a bargain in not an offer if the person to whom it is
                     addressed knows or has reason to know that the person making it does not intend to conclude a
                     bargain until he has made a further manifestation of assent.
VIII.   Written Memorial: § 27
        a. §27: Existence of K Where Written Memorial is Contemplated
                  i. Manifestations of assent that are in themselves sufficient to conclude a K will not be prevented
                     from so operating by the fact that the parties also manifest an intention to prepare and adopt a
                     written memorial thereof; but the circumstances may show that the agreements are preliminary
                     negotiations.
IX.     Ads: §46
        a. Kelly:
                  i. Typically, ads are NOT offers. An ad manifests a willingness to enter into a bargain w/
                     readers. But in many cases the seller may have a limited supply and be unable to satisfy all
                     customers. If customers are generally aware of this possibility, they cannot justifiably
                     believe that their assent will conclude the deal.
                          1. Courts call ads: ―invitations to treat‖; they invite customers to make an offer that
                               the seller can accept or reject.
                 ii. Ads CAN be offers: The more detail an ad contains, the more likely the court is to find an
                     offer.
                          1. See §26.
                iii. In general, courts try to look at ads through their traditional scope and will be forgiving to
                     the drafters. §26 comment b.
        b. §46: Revocation of General Offer:
                  i. Where an offer is made by advertisement in a newspaper or other general notification to the
                     public or to a number of persons whose identity is unknown to the offeror, the offeree’s power of
                     acceptance is terminated when a notice of termination is given publicity by ad or other general
                     notification equal to that given to the offer and no better means of notification is reasonably
                     available.




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                                        Contracts Final Outline

X.   Closing the Offer: §§40, 41, 48, 38, 39, 50.
               i. Methods of terminating an offer:
                       1. Lapse of time: §41
                                 a. Specified in the offer
                                 b. Reasonable time
                                            i. No formula for determining a reasonable time, as a guide, the
                                                more volatile the price, the shorter the time will remain open.
                                                (IE: stock – moments, house – coulple days)
                       2. New Offers:
                                            i. Often lapse will not prevent formation of a K. If both parties still
                                                want to deal, one will make a new offer and the other will accept.
              ii. Death or Incapacity:
                       1. Death or incapacity of either party: An offer cannot be accepted after either party
                            dies or suffers incapacity.
                       2. Voidable K’s: A person under incapacity may have the power to make voidable
                            K’s.
                       3. Intoxication: such condition doesn’t fit the rule, although it might prevent
                            acceptance.
                       4. Agents: some offers may allow acceptance by a personal representative of the
                            offeree if the offeree dies or loses capacity.
                       5. Option K’s: Such K’s reamin open for a period specified, regardless of capacity
                            or death.
             iii. Counter Offer:
                       1. Counter Offer: §39
                                 a. Are simply a special kind of rejection: a response that proposes new or
                                      different terms rejects the original offer and puts a different offer on the
                                      table.
                                 b. After making the counter offer, the offeree cannot later accept the
                                      original offer.
                                 c. Small differences: any offer relating to the same matter as the original
                                      offer is a counter offer, no matter how small the differences.
                                 d. Waiver: as w/ rejections, the offeror can allow the offer to remain open
                                      despite counteroffer.
             iv. Reserved judgment:
                       1. A counteroffer may indicate that the original offer remains under consideration.
                            If so, either party can create a K by accepting the others’ terms.
              v. Rejection:
                       1. Rejection terminates offer: once rejected – cannot accept.
                       2. Waiver: an offeror may waive the benefit of this rule either in the offer or after
                            rejection, the offeror may indicate that the offer remains open.
                       3. Implied rejection: rejection includes manifestation of intention not to accept
                                 a. Equivocal words: ―I don’t think I can‖ may work. The offeror
                                      reasonably would understand she is free to deal w/others.
     b. §40: Time When Rejection or Counter-offer Terminates the Power of Acceptance
               i. Rejection or counter-offer by mail or telegram does not terminate the power of acceptance until
                  received by the offeror, but limits the power so that a letter or telegram of acceptance started
                  after the sending of an otherwise effective rejection or counter-offer is only a counter-offer
                  unless the acceptance is received by the offeror before he receives the rejection or counter-offer.
     c. §41: Lapse of Time:
               i. (1) An offeree’s power of acceptance is terminated at the time specified in the offer, or if no time
                  is specified, at the end of a reasonable time.
              ii. (2) What is reasonable time is a question of fact, depending on all the circumstances existing
                  when the offer and attempted acceptance are made.
             iii. (3) Unless otherwise indicated by the language or the circumstances, and subject to the rule
                  stated in §49, an offer sent by mail is seasonably accepted if an acceptance is mailed at any time
                  before midnight on the day on which the offer is received.
     d. §48: Death or Incapacity of the Offeror or Offeree:


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                                   Contracts Final Outline
          i. An offeree’s power of acceptance is terminated when the offeree or offeror dies or is deprived of
             legal capacity to enter into the proposed K.
e.   §38: Rejection
          i. (1) An offeree’s power of acceptance is terminated by his rejection of the offer, unless the
             offeror has manifested a contrary intention.
         ii. (2) A manifestation of intention not to accept an offer is a rejection unless te offeree manifests
             an intention to take it under further advisement.
f.   §39: Counter Offers
          i. (1) A counter-offer is an offer made by an offeree to his offeror relating to the same matter as
             the original offer and proposing a substituted bargain differing from the proposed by the original
             offer.
         ii. (2) An offeree’s power of acceptance is terminated by his making of a counter-off unless the
             offeror has manifested a contrary intention or unless the counter-offer manifests a contrary
             intention of the offeree.
                  1. Note: mere inquiry regarding the possibility of different terms, a request for a better
                       offer, or a comment upon the terms of the offer, is ordinarily not a counter-offer.




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                                        Contracts Final Outline

XI.   Revocation of the Offer: §§35, 36, 42, 43. 46
      a. Communications necessary:
               i. A revocation, to be effective, must be communicated to the offeree. A revocation is
                  effective only when the offeree receives it.
      b. Indirect communication sufficient:
               i. An offeree may receive notice of a revocation from person other than the offeror. Indirect
                  notice is sufficient if the information is received by the offeree is reliable and indicates that
                  the offeror has taken ―definite action inconsistent w/ an intention to enter the proposed K.‖
              ii. Note: Cannot revoke offer under Option K; §25, 37, 87(2)
      c. Ads:
               i. Actual notice for these offers would be nearly impossible.
              ii. When other means of revocation are impossible, the law permits revocation by notice that
                  receives publicity equal to that of the offer.
                       1. Prior acceptances: acceptances received before the notice may be effective.
                       2. Timing: tough to figure out when publicity becomes equal.
                       3. Posting on door might speed notice.
      d. Timing of Revocation:
               i. An offeror usually remains free to w/draw the offer at any time prior to acceptance.
      e. Promises not precluding revocation:
               i. A promise to keep an offer open for a specified period of time does NOT prevent the
                  offeror from revoking the offer before the time expires. If the offeree does not provide any
                  consideration for the promise to keep the offer open, then the promise to keep the offer
                  open is unenforceable.
      f. §35: The Offeree’s Power of Acceptance
               i. (1) An offer gives to the offeree a continuing power to complete the manifestation of mutual
                  assent by acceptance of the offer.
              ii. (2) A K cannot be created by acceptance of an offer after thepower of acceptance has been
                  terminated in one of the ways listed in §36.
      g. §36: Methods of Termination of the Power of Acceptance
               i. (1) An offeree’s power of acceptance may be terminated by
                       1. Rejection or counter-offer by the offeree, or
                       2. Lapse of time, or
                       3. Revocation by the offeror, or
                       4. Death or incapacity of the offeror or offeree.
              ii. (2) In addition, an offeree’s power of acceptance is terminate by the non-occurrence of any
                  condition of acceptance under the terms of the offer.
      h. §42: Revocation by Communication from Offeror Received by Offeree
               i. An offeree’s power of acceptance is terminated when the offeree receives from the offeror a
                  manifestation of intention not to enter into the proposed K.
      i. § 43: Indirect Communication of Revocation
               i. An offeree’s power of acceptance is terminated when the offeror takes definite action
                  inconsistent w/ an intention to enter into the proposed K and the offeree acquires reliable
                  information to that effect.
      j. §46: Revocation of General Offer: (ads)
               i. Where an offer is made by advertisement in a newspaper or other general notification to the
                  public or to a number of persons whose identity is unknown to the offeror, the offeree’s power of
                  acceptance is terminated when a notice of termination is given publicity by ad or other general
                  notification equal to that given to the offer and no better means of notification is reasonably
                  available.




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                                         Contracts Final Outline

XII.   Firm Offers:
                 i. An offeror may relinquish the right to revoke an offer. When the power to revoke is
                    effectively waived, the offer is called a firm offer.
                         1. Merchants: The rule only applies to merchants-generally people engaged in the
                              business of selling goods and who, therefore, probably know about the rule. (see
                              UCC §2-104 defining ―merchant.‖)
                         2. Sales of goods: Applies only to the sale of goods.
                         3. Writing necessary: The rule requires a signed writing, minimizing the difficulty of
                              proving what was said.
                                   a. Forms: if a standardized form includes assurance than an offer will
                                       remain open, then term must be separately signed by the offeror.
                                   b. Signature: UCC takes a broad view of what is a signature.
                                   c. UCC §2-205 Comment 2: ―Circumstances surrounding the signing may
                                       justify something less than a formal signature…minimum of initialing.‖
                         4. Open time: the rule does not require the party to specify how long the offer will
                              be open – reasonable period.
                         5. 90 days maximum regardless of writing or ―reasonable time.‖
                ii. *Enforces promises to keep offers open even w/out consideration.
               iii. *Makes an offer by a merchant irrevocable if a signed writing gives assurances that the offer will
                    be held open.
               iv. *Signed writing required, minimizing difficulty of proving what was said.
                v. *Can use Estoppel or Reliance on the offer: §87(2), but Kelly doesn’t like this – Use §90
                    Instead.
       b. UCC §2-205: Sales K’s/Firm Offers
                 i. An offer by a merchant to buy or sell goods in a signed writing which by its terms gives
                    assurance that it will be held open is not revocable, for lack of consideration, during the time
                    stated or if no time is stated for a reasonable time, but in no event may such period of
                    irrevocability exceed three months; but any such term of assurance on a form supplied by the
                    offeree must be separately signed by the offeror.




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                                          Contracts Final Outline

XIII.   Option K’s: §§25, 37, 87(2)
        a. Kelly
                 i. An option is a K to keep an offer open. When consideration is given for a promise to keep
                    an offer open, the promise becomes enforceable. The option K is separate from the K
                    being negotiated: the promise to keep the offer open is accepted and paid for
                    independently. The offer then becomes irrevocable for a period of time. If the offer is
                    accepted w/in that period, a second K is formed. But the option K is complete – and must
                    be paid for – even if the offeree decides not to accept the offer that has been kept open.
                ii. Creating an option: An option is created in the same way as any other K: by assent to a
                    definite bargain.
        b. Exception for reliance:
        c. §25: Option K’s
                 i. An option K is a promise, which meets the requirements for the formation of a K and limits the
                    promisor’s power to revoke an offer.
        d. §37: Termination of Power of Acceptance Under Option
                 i. Not w/standing §§38-49, the power of acceptance under an option K is not terminated by
                    rejection or counter offer, by revocation, or by death or incapacity of the offeror, unless the
                    requirements are met for the discharge of a contractual duty.
        e. §87: Option K
                 i. (2) An offer which the offeror should reasonable expect to induce action or forbearance of a
                    substantial character on the part of the offeree before acceptance and which does induce such
                    action or forbearance is binding as option K to the extent necessary to prevent injustice.
                         1. Implies that the power to revoke the offer may not be completely lost.
                         2. A revocation may be effective, at least in part, if injustice is limited or non-existent.




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                                         Contracts Final Outline

XIV.   Acceptance: §§50, 52, 56, 35, 59, 60, 61, 23
       a. Elements of acceptance:
                i. Acceptance is a manifestation of assent made in a manner that the offeror invited or
                   required: implicit w/in this definition are four components.
                        1. Only the offeree may accept §52
                        2. Assent must be manifest
                                 a. Words or actions a 3rd party could understand.
                        3. Acceptance must conform to offeror’s requirements §60
                        4. Offeree must have knowledge of the offer. §23
       b. Offers to groups:
                i. Offer can be made to one person or a group.\
       c. Exceptions to manifestations of assent:
                i. Manifestations of assent generally are aimed at notifying the offeror of acceptance
               ii. Three exceptions:
                        1. Terms of the offer: The offer may indicate that notice is unnecessary in order to
                            accept. If so, the offeror cannot avoid the K on the basis that she never received
                            notice.
                        2. Acceptance by silence: Where silence (failure to refuse an offer) is a legitimate
                            form of acceptance, no additional notice is necessary.
                        3. Reasonable diligence: An acceptance is valid if the offeree exercises reasonable
                            diligence to notify the offeror, even if the offeror does not receive the notice.
                            (letter lost in the mail)
                        4. Actual notice of acceptance: Such notice is effective even if the offeree did no
                            make reasonable efforts to communicate acceptance.
              iii. Equivocal acceptance: Where an offeror is entitled to notice of acceptance by promise, the
                   law accepts any reasonable interpretation an offeror places on an equivocal acceptance.
              iv. Careless wording: can convert an offer for a limited group to others (objective acts over
                   subjective intent)
       d. Conforming acceptance to offeror’s requirement:
                i. Acceptance must conform to the offeror’s requirements:
                        1. The offeror is the master of an offer.
                        2. Acceptance must comply w/ any requirements of the offer.
                                 a. Timely acceptance: Acceptance after specified date is ineffective.
                                 b. Form of payment: An offer might require acceptance by payment in a
                                      specific currency. Wrong currency means no acceptance.
                                 c. Odd requirements: One is tempted to see the form of acceptance as part
                                      of the performance the promisor seeks.
               ii. Other ways to accept: unless the offer clearly states that the ONLY way to accept is
                   through a specific manner, then the courts will find that the offer gives this as one plausible
                   way to accept among others.
       e. Must have knowledge:
                i. Offeree must have knowledge of the offer. An offeree who does not know of an offer
                   cannot accept is, even if her conduct otherwise would constitute acceptance.
       f. §50: Acceptance of Offer Defined: Acceptance by Performance; Acceptance by Promise
                i. (1) Acceptance of an offer is a manifestation of assent to the terms thereof made by the offeree
                   in a manner invited or required by another.
               ii. (2) Acceptance by performance requires that at least part of what the other requests be
                   performed or tendered and includes acceptance by a performance, which operates as a return
                   promise.
              iii. (3) Acceptance by a promise requires that the offeree complete every act essential to making of
                   the promise.
       g. §52: Who may accept an offer
                i. An offer can be accepted only by a person whom it invites to furnish the consideration.
       h. §56: Acceptance by Promise; Necessity of Notification to Offeror
                i. Except as stated in § 69 or where the offer manifests a contrary intention, it is essential to an
                   acceptance by promise either that the offeree exercise reasonable diligence to notify the offeror
                   of acceptance or that the offeror receive the acceptance seasonably.


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                                   Contracts Final Outline
i. §35: The Offeree’s Power of Acceptance
        i. (1) An offer gives to the offeree a continuing power to complete the manifestation of mutual
           assent by acceptance of the offer.
       ii. (2) A K cannot be created by acceptance of an offer after the power of acceptance has been
           terminated in one of the ways listed in
j. §59: Purported Acceptance Which Adds Qualifications:
        i. A reply to an offer which purports to accept but is condition on the offeror’s assent to terms
           additional to or different fromt hose offered is not an acceptance but a counter-offer.
k. §60: Acceptance of Offer Which States Place, Time or Manner of Acceptance
        i. If an offer prescribes the place, time or manner of acceptance its terms in this respect must be
           complied w/ in order to create K. If an offer merely suggests a permitted place, time or manner
           of acceptance, another method of acceptance is not precluded.
                 1. *Note: If the offeror prescribes the only way in which his offer may be accepted, an
                     acceptance in any other way is a counter offer.
l. §61: Acceptance Which Requests Change of Terms:
        i. Unless the offer provides otherwise,
                 1. (a) An acceptance made in a manner and by a medium invited by an offer is operative
                     and completes the manifestation of mutual assent as soon as put out of the offeree’s
                     possession, w/out regard to whether it ever reaches the offeror; but
                 2. (b) An acceptance under an option K is not operative until received by the offeror.
m. §23: Necessity that manifestations have reference to each other
        i. It is essential to a bargain that each party manifest assent w/ reference to the manifestation of the
           other.




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                                       Contracts Final Outline

XV.   Different Terms: §59, 61; UCC §2-207, 2-316, and revised version of 2-207.
      a. Reliance:
                i. Parties may rely on the agreement, despite differences between the forms.
      b. Oral K’s:
                i. A phone call can create an agreement.
      c. Mirror Image Rule:
                i. If the acceptance differs from the offer, even in a minor way, the terms of the K are not
                   agreed. Rather, the response is taken as a counter offer. This rejects the original offer,
                   replacing it w/ a new offer on amended terms.
      d. Battle of the forms: Additional or different terms:
                i. Last shot rule before UCC: Before passage of the UCC, the party who sent the last writing
                   before performance had an advantage. Each writing was interpreted as a counteroffer,
                   rejection the previous writing. But once a party accepted the goods or accepted payment,
                   that conduct functionally accepted the terms of the writing.
      e. First Shot rule: Acceptance despite different or additional terms.
                i. The UCC treated writings as acceptances, not counteroffers, even if they differed from the
                   offer. §2-207(1). Consequences are:
                        1. The K was formed on the offeror’s terms: first shot advantage.
                        2. The different or additional terms were treated as an offer to modify the K. The
                             terms the offeree proposed are only good if the offeror agreed to modification.
      f. Avoiding unwanted terms:
                i. An offeree can avoid accepting the offeror’s terms by making its acceptance ―expressly
                   conditional on assent to the additional terms.‖ §2-207(1).
                        1. Limitation: This must be VERY clear.
                                  a. ― I reject your offer, but would agree to the following terms‖ or ―I accept,
                                      but only if you agree to the following terms‖ BOTH work.
      g. Additional terms may be accepted by silence:
                i. Once the acceptance has proposed a modification, the question becomes whether those
                   were accepted by the offeror.
                        1. Explicit acceptance would modify agreement – UCC doesn’t require consideration
                             for modification.
                        2. Between merchants, silence may constitute acceptance.
                        3. Even between merchants, silence may not work:
                                  a. Material change: new terms that materially alter the K are not accepted
                                      by silence.
                                  b. Objection: terms to which the offeror objects do not become part of the K
                                      by silence.
                                  c. Limitations in the offer: If the offer expressly limits acceptance to the
                                      terms of the offer.
                        4. These rules apply to confirmations as well as to acceptances: When assent
                             becomes binding during a phone conversation, written forms may simply confirm
                             the agreement, filling in details not discussed on the phone. In that case, each
                             party’s writing proposes a modification, which the other party might accept by
                             silence.
      h. K’s that arise by conduct:
                i. If there is SOME k but both parties made their assent clearly on their own terms then;
                        1. Conduct can create an agreement.
                        2. Agreed terms in writing will be the terms
                        3. Gap fillers will be used.
      i. When acceptance takes effect: The Mailbox rule
                i. When an offer permits acceptance by mail (or other medium that is not instant), an
                   acceptance is effective when it is sent by the offeree. Revocation is effective when received
                   by the offeree.
      j. §59: Purported Acceptance Which Adds Qualifications:
                i. A reply to an offer which purports to accept but is condition on the offeror’s assent to terms
                   additional to or different from those offered is not an acceptance but a counter-offer.
      k. §61: Acceptance Which Requests Change of Terms:


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                                  Contracts Final Outline
         i. Unless the offer provides otherwise,
                  1. (a) An acceptance made in a manner and by a medium invited by an offer is operative
                       and completes the manifestation of mutual assent as soon as put out of the offeree’s
                       possession, w/out regard to whether it ever reaches the offeror; but
                  2. (b) An acceptance under an option K is not operative until received by the offeror.
l. §2-207 Additional Terms in Acceptance or Confirmation
         i. A definite and seasonable expression of acceptance or a written confirmation, which is sent
            within a reasonable time operates as an acceptance even though it states terms additional to or
            different from those offered or agreed upon unless acceptance is expressly made conditional on
            assent to the additional or different terms.
        ii. The additional terms are to be construed as proposals for addition to the contract. Between
            merchants such terms become apart of the contract unless:
                  1. The offer expressly limits acceptance to the terms of the offer;
                  2. They materially alter it; or
                  3. Notification of objection to them has already been given or is given with a reasonable
                       time after notice of them is received.
       iii. Conduct by both parties, which recognizes the existence of a contract is sufficient to establish a
            contract for sale although the writings of the parties do not otherwise establish a contract. In
            such case the terms of the particular contract consist of those terms on which the writing of the
            parties agree together with any supplementary terms incorporated under any other provision of
            this act.
m. §2-316: Exclusion or Modification of Warranties:
         i. (1) Words or conduct relevant to the creation of an express warranty and words or conduct
            tending to negate or limit warranty shall be construed wherever reasonable as consistent w/
            eachother; but subject to the provisions of this Article on parol or extrinsic evidence negation or
            limitation is inoperative to the extent that such construction is unreasonable.
        ii. (2) Subject to subsection (3), to exclude or modify the implied warranty of merchantability or
            any part of it the language must mention merchantability and in case of a writing must be
            conspicuous, and to exclude or modify any implied warranty of fitness the exclusion must be by
            a writing and conspicuous. Language to exclude all implied warranties of fitness is sufficient if
            it states, for example that ―there are no warranties which extend beyond the description of the
            face hereof.‖
                  1. (a) Unless the circumstances indicate otherwise, all implied warranties are excluded by
                       expressions like ―as is‖, ―with all faults‖ or other language which in common
                       understanding calls the buyer’s attention to the exclusion of warranties and makes plain
                       that there is no implied warranty; and
                  2. (b) When the buyer before entering into the K has examined the goods or the sample or
                       model as fully as he desired or has refused to examine the goods there is no implied
                       warranty w/ regard to defects which an examination ought in the circumstances to have
                       revealed to him; and
                  3. (c) An implied warranty can also be excluded or modified by course of dealing or
                       course of performance or usage of trade.
       iii. (4) Remedies for breach of warranty can be limited in accordance w/ the provisions of this
            Article on liquidation or limitation of damages on contractual modification of remedy.




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                                         Contracts Final Outline

XVI.   Medians of Acceptance: §§64, 54, 66, 67, 70.
       a. §64: Acceptance by Telephone or Teletype
                i. Acceptance given by telephone or other medium of substantially instantaneous two-way
                   communication is governed by the principles of applicable to acceptances where the parties are
                   in the presence of each other.
       b. §54: Acceptance by Performance, Necessity of Notification to Offeror
                i. (1) Where an offer invites an offeree to accept by rendering a performance, no notification is
                   necessary to make such an acceptance effective unless the offer requests such notification.
               ii. (2) If an offeree who accepts by rendering a performance has reason to know that the offeror has
                   no adequate means of learning of the performance w/ reasonable promptness and certainty, the
                   contractual duty of the offeror is discharged unless
                        1. (a) The offeree exercises reasonable diligence to notify the offeror of acceptance, or
                        2. (b) The offeror learns of the performance w/in a reasonable time, or
                        3. (c) The offer indicates the notification of acceptance is not required.
       c. §66: Acceptance Must be Properly Dispatched
                i. An acceptance sent by mail or otherwise from a distance is not operative when dispatched,
                   unless it is properly addressed and such other precautions taken as are ordinarily observed to
                   insure safe transmission of similar messages.
       d. §67: Effect of Receipt of Acceptance Improperly Dispatched:
                i. Where an acceptance is seasonably dispatched, but the offeree uses means of transmission not
                   invited by the offer or fails to exercise reasonable diligence to insure safe transmission, it is
                   treated as operative upon dispatch if received w/in the time in which a properly dispatched
                   acceptance would normally have arrived.
       e. §70: Effect of Receipt by Offeror of a Late or Otherwise Defective Acceptance:
                i. A late or otherwise defective acceptance may be effective as an offer to the original offeror, but
                   his silence operates as an acceptance in such a case only as stated in §69.




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                                          Contracts Final Outline

XVII.   Forms of Acceptance: §30, 32, 54, 69
        a. §30: Form of Acceptance Invited
                 i. (1) An offer may invite or require acceptance to be made by an affirmative answer in words, or
                    by performing or refraining from performing a specified act, or may empower the offeree to
                    make a selection of terms of acceptance.
                ii. (2) Unless otherwise indicated by the language or the circumstances, an offer invites acceptance
                    in any manner and by any medium reasonable in the circumstances.
        b. §32: Invitation of Promise or Performance
                 i. In case of doubt an offer is interpreted as inviting the offeree to accept either by promising to
                    perform what the offer requests or by rendering performance, as the offeree chooses.
                         1. *An offer to sell property may be w/drawn before acceptance w/out any formal notice
                              to the person to whom the offer is made.
                         2. * It is sufficient if that person has actual knowledge that the person who made the offer
                              has done some act inconsistent w/ the continuance of the offer, such as selling the
                              property to a third person.
        c. §54: Acceptance by Performance, Necessity of Notification to Offeror
                 i. (1) Where an offer invites an offeree to accept by rendering a performance, no notification is
                    necessary to make such an acceptance effective unless the offer requests such notification.
                ii. (2) If an offeree who accepts by rendering a performance has reason to know that the offeror has
                    no adequate means of learning of the performance w/ reasonable promptness and certainty, the
                    contractual duty of the offeror is discharged unless
                         1. (a) The offeree exercises reasonable diligence to notify the offeror of acceptance, or
                         2. (b) The offeror learns of the performance w/in a reasonable time, or
                         3. (c) The offer indicates the notification of acceptance is not required.
        d. §69: Acceptance by Silence or Exercise of Dominion (diff from UCC)
                 i. (1) Where an offeree fails to reply to an offer, his silence and inaction operate as an acceptance
                    in the following cases only:
                         1. (a) Where an offeree takes the benefit offered serves w/ reasonable opportunity to reject
                              them and reason to know that they were offered w/ the expectation of compensation.
                         2. (b) Where the offeror has stated or given the offeree reason to understand that assent
                              may be manifested by silence or inaction, and the offeree in remaining silent and
                              inactive intends acceptance of the offer.
                         3. (c) Where because of previous dealings or otherwise, it is reasonable that the offeree
                              should notify the offeror if he does not intend to accept.
                ii. (2) An offeree who does any act inconsistent w/ the offeror’s ownership of offered property is
                    bound in accordance w/ the offered terms unless they are manifestly unreasonable. But if the act
                    is wrongful as against the offeror it is an acceptance only if ratified by him.




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                                           Contracts Final Outline

XVIII. Consideration: §§71, 72, 73, 74, 81, 17.
       a. Kelly (1) Did the promisor seek something in exchange for the promise? And (2) Did the promise,
          in exchange for the promise, give the thing sought by the promisor.
                 i. ―An act other than a promise.‖
                         1. This can be a custumary act (pay money, do work) or something random (stand on
                            your head and make fart noises)
                ii. ―A forbearance‖
                         1. like choosing not to press a legal claim.
              iii. ―The creation, m, or de of a legal relation‖
                         1. Anything that changes the rights between two people or entities may constitute a
                            performance. Example: Canceling a legal obligation, accepting a role as a lawyer.
               iv. Exceptions to the bargain requirement:
                v. Sham consideration:
                         1. Officially, sham consideration doesn’t work.
                         2. Nominal consideration is allowed §87 comment b.
                         3. Check the proportionality: did the person seek the consideration in exchange for a
                            promise?
               vi. Was this about exchanges?
                         1. Mirror-image rule: the promisee cannot create a bargain by giving something
                            other than what the promisor requested. (save this for an assent discussion)
              vii. Conditional gifts are not bargains:
                         1. Some specifications merely specify how the promisee may collect a gift. (Going
                            downtown to receive a gift is not consideration)
             viii. Ignorance of the promise:
                         1. If the promisee does not know that the promisor has made a promise or that she
                            has asked a return, the promisee’s performance may not have been given in
                            exchange for the promise.
               ix. Promisee acts as she would have acted w/out the promise:
                         1. If a promisee acts as she would have acted even if no offer had been made, it is
                            difficult to discern whether her conduct was given in exchange for the promise or
                            was mere coincidence.
                x. *Nominal consideration is not something that is bargained for.
               xi. *The law is concerned w/ the external manifestation rather than the undisclosed mental
                    state.
              xii. *It is enough that one party manifests an intention to induce the other’s response and to be
                    induced by it and that the other responds in accordance w/ that inducement
             xiii. *It is not enough that promise induces the conduct of the promisee or that the conduct of
                    the promisee induces the making of the promise.
             xiv. *Both elements must be present or else there is not bargain.

        b.   §71: Requirement of exchange; Types of Exchange
                   i. (1) To constitute consideration, a performance or a return promise must be bargained for.
                  ii. (2) A performance or return promise is bargained for if it is sought by the promisor in exchange
                      for his promise and is given by the promisee in exchange for that promise.
                iii. (3) The performance may consist of
                           1. (a) An act other than a promise, or
                           2. (b) A forbearance, or
                           3. (c) The creation, modification, or destruction of a legal relation.
                 iv. The performance or return promise may be given to the promisor or to some other person. It
                      may be given by the promisee or by some other person.
        c.   §72: Exchange for promise for performance
                   i. Except as state in §73 and §74, any performance which is bargained for is performance.
        d.   §73: Performance of legal duty
                   i. Performance of a legal duty owed to a promisor which is neither doubtful nor the subject of
                      honest dispute is not consideration; but a similar performance is consideration if it differs from
                      what was required by the duty in a way which reflects more than a pretense of bargain.



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                                    Contracts Final Outline
                   1.   *If defenses are winners, the preexisting duty rule does not apply because there is no
                        preexisting duty.
e.   §81: Consideration as motive or inducing cause
           i. (1) The fact that what is bargained for does not itself induce the making of a promise does not
              prevent it from being consideration for the promise.
          ii. (2) The fact that a promise does not of itself induce a performance or return promise does not
              prevent the performance or return promise from being consideration for the promise.
        iii. *Comment: ―Bargained for‖: the promisor must manifest an intention to induce the performance
              or return promise and to be induced by it, and that the promisee must manifest an intention to
              induce the making of the promise and to be induced by it.
         iv. *Comment: Immateriality of motive or cause: Unless both parties know that the purported
              consideration is mere pretense, it is immaterial that the promisor’s desire for the consideration is
              incidental to other objectives and even that the other party knows this to be so.
          v. *Example: A promises B $100 if B goes to college. If the circumstances give B reason to know
              that A is not undertaking to pay B to got to college, but is promising a gratuity, there is no offer.
f.   §17: Requirement of bargain
           i. Except as stated in subsection (2), the formation of a contract requires a bargain in which there is
              a manifestation of mutual assent to the exchange and a consideration.
          ii. Where or not there is a bargain a K may be formed under special rules applicable to formal
              contracts or under the rules state in §§82-94




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                                          Contracts Final Outline

XIX.   Exception to Considerations: Gratuitous Promises: §24
       a. Proposed gift is no K:
                i. A proposal of a gift is not an offer within the present definition—can’t be promising a
                    gratuity.
       b. The alternative to a bargained-for exchange is a gratuitous promise.
       c. Promises effective on delivery:
                i. Gratuitous or ―gift‖ promises are only effective upon actual delivery of the thing that was
                    promised.
       d. Contingent Gift:
                i. A proposal of a gift is not an offer w/in the present definition; there must be an element.
                    IE: If A promises B $100 if B goes to college. If the circumstances give B reason to know
                    that A is not undertaking to pay B to go to college but is promising a gratuity, there is no
                    offer.
       e. *Johnson v. Otterbein University: A promise to make a payment as a gift may be revoked at any
           time before payment because it does not provide consideration. (no consideration because the
           money went where it had to go anyway.)
       f. *Hamer v. Sidway: A waiver of a legal right at the request of another party may serve as sufficient
           consideration exchange

XX.    Past Consideration: §82.
       a. Waiver of defenses:
                  i. The new promise in effect waives a defect in the enforceability of the first promise – a defect the
                     party has every right not to waive, but which she can waive w/out consideration. By enforcing
                     the new promise, courts basically treat the waiver as final, denying the promisor the right to
                     w/draw the waiver.
       b. Many based on past consideration and deal w/ promises that were enforceable at the time but for one
            reason or another have stopped being enforceable.
       c. Examples:
                  i. SOL runs but the  promises to pay anyway.
                 ii. Declare bankruptcy and say will pay anyway—no new consideration, but will be enforced.
                iii. Making exception for non-occurrence of a condition.
                iv. Promises voidable for other reasons, such as infancy.
       d. There are new promises made in consideration of what was done in the original bargain but the original
            bargain is no longer enforceable. All involve mutually beneficial exchanges.
       e. Moore v. Elmer: Services rendered upon request support a later promise to pay for such servces only in
            cases where the original rquest implies an agreement to make payment for such services.
                  i. §Promise: Manifestation of intention to act in a particular way so made as to justify the other
                     party in believing that a commitment has been made.
                 ii. Conditional promises are enforceable, depending on consideration, and they are promises.
                          1. The condition affects whether the duty to perform e due if the condition arises and not
                               whether it is a promise.
                          2. Duty comes due when the condition occurs and the duty does not come due if the
                               condition does not occur.
       f. §82: Promise to pay indebtedness; effect of the SOL (this is for real debts that exist)
                  i. (1) A promise to pay all or part of an antecedent contractual or quasi-contractual indebtedness
                     owed by the promisor is binding if the indebtedness is still enforceable or would be except for
                     the SOL.
                 ii. (2) The following facts operate as such a promise unless other facts indicate a different intention:
                          1. (a) A voluntary acknowledgement to the obligee, admitting the present existence of the
                               antecedent indebtedness; or
                          2. (b) A voluntary transfer of money, a negotiable instrument, or other thing by the obligor
                               to the obligee, made as interest on or part payment of or collateral security for the
                               antecedent indebtedness; or
                          3. (c) A statement to the obligee that the statute of limitations will not be pleaded as a
                               defense.




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                                         Contracts Final Outline

XXI.   Moral Consideration: §§79, 86.
       a. §79: Adequacy of Consideration; Mutuality of Obligation (needs to be reasonable and if not contributes
          to a defense)
                 i. If the requirement of consideration is met, there is no additional requirement of
                         1. (a) A gain, advantage, or benefit to the promisor or a loss, disadvantage, or detriment to
                              the promisee; or
                         2. (b) Equivalence in the values exchanged; or
                         3. (c) Mutuality of obligation
                ii. *Kelly
                         1. The law allows parties to decide for themselves how much things are worth. As
                              long as the party gets what she sought, the law will not second guess her decision
                              to pay a great deal for it.
               iii. *a peppercorn will do.
       b. §86: Promise for Benefit Received (exception to consideration)
                 i. A promise made in recognition of a benefit previously received by the promisor from the
                    promisee is binding to the extent necessary to prevent injustice.
                ii. *Kelly
                         1. What is needed:
                                   a. Promise
                                   b. Promise linked benefit through recognition
                                   c. Benefit (past)
                                             i. To the promisor (only to promisor)(check case law)
                                            ii. From the promisee
                                   d. Injustice if not enforced.
                         2. Distinctions between Webb and McGowen:
                                   a. Main distinction between Webb and Wyman is that Webb PERSONALLY
                                       received benefit and it was Wyman’s SON who received it in that case.
                                   b. Also, Wyman’s benefit was indirect.
                         3. Also consider that these could just be constructive bargains: what the parties would
                              have done had there been time.
                         4. Had the parties the time to bargain and didn’t - then no constructive bargain.
               iii. A promise is not binding under (1)
                         1. (a) If the promisee conferred the benefit as a gift or for other reasons the promisor has
                              not been unjustly enriched
                         2. (b) To the extent that its value is disproportionate to the benefit
                                   a. *much greater than, significant difference, out of all proportion to the benefit
                                       received, not in the same league.
                                   b. *Not a requirement of equal exchange.
                                   c. *Only a requirement that the promise and the benefit be in the same ballpark.
                                   d. *Only need to enforce it to the extent that is proportionate.
               iv. *Kelly: consider constructive bargains – plausible to assert that the parties would have entered
                    about the same bargain if they had negotiated in advance.
                v. *Mills and Webb:
                         1. Direct or indirect benefit on the promisor?
                         2. What did the  lose? (money or life or abilities?)
                         3. Was the act necessary or unnecessary? (immediate harm/other people could help?)
                         4. What are they being paid for? (expenses already incurred or future shit?)
               vi. *Kelly says consideration constructive bargains: plausible to assert that the parties would have
                    entered about the same bargain if they had negotiated in advance.
              vii. *In each case, a promise is given in gratitude of service already completed.
             viii. *If after the promise is made, the service is continued, this can be consideration for the whole
                    promise.
               ix. *Counter cases:
                         1. Mills v. Wyman: (majority rule) no consideration for services given to son.
                         2. Webb v. McGowin: A moral obligation is a sufficient consideration to support a
                              subsequent promise to pay where the promisor has received a material benefit for which
                              he subsequently and expressly promised to pay.


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                             Contracts Final Outline
            3.    Breakdown:
                            Mills v. Wyman                            Webb. McGowin
                            No benefit to promisor                    Promisor saved
                            Potential for future services             Completed Services
                            No performance                            Partial Performance
                            Promisee suffered $ loss                  Promisee suffered injury
                            No implied request for services           Implied request (would have asked)
                            Bypass negotiation                        Didn’t bypass negotiation
                            Open-ended                                Semi-Open promise
  x.    *In each case, a promise is given in gratitude of service already completed. The service is not
        given in exchange for the promise because the promise has not been made yet and the promise
        cannot be seeking the service because the service was already rendered.
 xi.    *If after the promise is made, the service is continued, this can be consideration for the whole
        promise, having induced continued service. This is an exception to the above.
xii.    *From Kelly: The temptation to enforce the new promise is strongest when the characterization
        of mutual gifts is weakest. In many cases, the past performance cannot realistically be
        characterized as a gift or charitable act. When donative purpose doesn’t explain the motivations
        very well, courts find ways to enforce a return promise.
xiii.   *Difference between §79 and §86:
             1. Ex. A peppercorn would be consideration for a promise of significantly greater value as
                  long as I seek it in exchange for my promise, there is no requirement that the promise
                  match the value of a peppercorn.
             2. §86 had nothing to do w/ considerations it is one of the sections making an exception to
                  consideration. If we can find consideration in the case, then we don’t ever need to refer
                  to the exception.
             3. §79 would make §86 superfluous so long as there is a bargain.
             4. §86 might be helpful if there was no bargain, if we need to find some other justification
                  for enforcement.




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                                          Contracts Final Outline

XXII.   Contract Modification and the Preexisting Duty Rule: §§73, 89 and UCC §2-209, §74
        a. §73: Performance of a legal duty (pre-existing duty rule)
                  i. Performance of a legal duty owed to a promisor which is neither doubtful nor the subject of
                     honest dispute is not consideration; but a similar performance is consideration if it differs from
                     what was required by the duty in a way which reflects more than a pretense of bargain.
        b. *Kelly: The pre-existing duty rule has been eroded to the point of extinction. Focus on arguments
            that rebut it.
                  i. The promisee probably didn’t give those services in exchange for the second K since he was
                     already legally obligated under the 1st K. This would assume that the party would have
                     breached the 1st promise.
                 ii. The promisor probably did not seek those services in exchange for the promise. He
                     already has a right to those services in the 1st K.
                iii. The underlying concern: DURESS: was someone threatening not to perform and thus
                     inducing the promisor?
                iv. To get around PEDR: argue that there was no duty to do that particular something so that
                     the K gives more and therefore gave consideration for the difference in price paid; also can
                     draft new K and rescind the old one.
        c. §89: Modification of executory contract (exception to §73)
                  i. A promise modifying a duty under a contract not fully performed on either side is binding
                          1. (a) If the modification is fair and equitable in view of circumstances not anticipated by
                               the parties when the K was made; or
                          2. (b) To the extent provided by statute.
                          3. (c) To the extent that justice requires enforcement in view of material change of
                               position in reliance on the promise.
                 ii. *Elements:
                          1. Second promise modifying the first
                          2. Contract not fully performed
                          3. Unanticipated circumstances that make the modifications fair
                          4. Must be modification in good faith
                          5. Unanticipated by the parties, but hard to tell if both parties need to not know.
                iii. *WAYS TO GET AROUND PEDR:
                          1. Terminate the original contract, enter into a new one
                          2. Other side must give any consideration
                          3. Waive the duty, once delivered it’s a gift.
                          4. Under UCC § 2-209, no consideration is needed to be binding if waived
                          5. Under R.2d § 89, if the modification is fair, it's enforceable
                          6. Full performance of modification, complete transfer (including payments already
                               paid)
                iv. *The promisee probably did not give those services in exchange for the second contract since he
                     was already legally obligated under the first contract.
                 v. *The promisor probably did not seek those services in exchange for the promise. He already has
                     the right to the performance.
                vi. *The underlying concern is duress 0 was someone threatening not to perform and thus inducing
                     the promisor?
               vii. *Opposing cases:
                          1. Stilk v. Myrick: Modifications of employment K’s which are occasioned by emergency
                               or duress are unenforceable.
                                    a. Sailors should have worked one more hour.
                          2. Brian Construction and Development Co. v. Brighenti: Where unforeseen
                               circumstances make the performance of a K unduly burdensome, and the parties agree
                               in view of the changed conditions to adjustment in price, a new K supported by
                               consideration is formed.
              viii. *The parties entered into an agreement, such as services for money. One party discovers that its
                     duties under the agreement were harder than he thought, than he anticipated, and as a result, that
                     party asked for a change in K terms. The change might have been offered by the other party
                     w/out having been asked. The K terms were changed in light of the discovery that the duties
                     were harder than anticipated.


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                                   Contracts Final Outline
d.   Sales K’s: UCC §2-209: Modification, Rescission, and Waiver:
           i. (1) An agreement modifying a K w/in this Article needs no consideration to be binding.
                   1. *Comment: modifications must be made in good faith and be for good business
                       reasons.
                   2. *Kelly: even if supported by additional consideration, a modification obtained in bad
                       faith will not be enforced.
e.   §74: Settlement of claims
           i. (1) Forbearance to assert or the surrender of a claim or defense which proves to be invalid is not
              consideration unless
                   1. (a) The claim or defense is in fact doubtful because of uncertainty as to the facts or law,
                       or
                   2. (b) The forbearing or surrendering party believes that the claim or defense may be fairly
                       determined to be valid.
          ii. (2) The execution of a written instrument surrendering a claim or defense by one who is under
              no duty to execute it consideration if the execution of the written instrument is bargained for
              even though he is not asserting the claim or defense and believes that no valid claim or defense
              exists.
         iii. *Kelly
                   1. You have to have a real doubt – litigation is expensive.
                   2. You can’t hope injustice will occur.
                   3. Doubt existing at the time of the agreement is sufficient to support a finding of
                       consideration.
                   4. Party asserting the untenable claim or defense must have a good faith belief that it
                       might prevail on the merits. (unless a total stranger – like making a title clear).




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                                            Contracts Final Outline

XXIII. Estoppel or Reliance on the Offer: 87(2), but Kelly doesn’t like use §90.
       a. *Kelly
                 i. Elements
                         1. Promise
                         2. Reliance: action or forbearance in the way the promisor reasonably should have
                              expected the promise to rely on the promise.
                         3. Promisee did rely on the promise (in a way the promisor reasonably should have
                              expected)
                         4. Detrimental reliance: gives rise to the injustice – injustice can be avoided only be
                              enforcing the promise.
                ii. Example: Rickets v. Scothorn: Grandpa gives chick interest on a note so she doesn’t have to
                    work. She quits her job. Grandpa dies and estate claims no consideration. Court estopps estate
                    from claiming no consideration because granddaughter relied.
               iii. Traps as explained by Kelly:
                         1. A promise is important: you must identify a promise, reliance on a promise can make
                              promise enforceable, replacing consideration. Reliance, cannot replace the promise.
                         2. Unreasonable reliance might suffice: This issue is not whether the promisee acted
                              reasonably, but whether the promisor had reason to believe she would rely.
                         3. Actual reliance: A promise may not be enforceable when the promisor should have
                              foreseen some reliance but the promisee relied in some completely unforeseeable way.
                                   a. Insignificant reliance may mean injustice can be avoided w/out enforcing the
                                        promise.
                                   b. Weddings: you don’t have to prove that you would not have married that bitch
                                        if your in-laws hadn’t promised you a ―sweet pad.‖
                                   c. You can’t refuse to pay the red cross the amount you pledged just because it
                                        would have engaged in hippy, liberal do-gooder shit anyway.
                         4. Injustice usually boils down to detrimental reliance: generally a change for the worse
                              will satisfy the requirement that injustice can be avoided only be enforcement of a
                              promise.
                         5. Courts compensate for expectation, not merely reliance:
       b. Exam advice: If you conclude that reliance, rather than a bargain, justifies enforcement of a promise,
           address the possibility that a court would limit recovery to the reliance interest. Professors like that shit.
       c. §90: Promise Reasonably Inducing Action or Forbearance
                 i. (1) A promise which the promisor should reasonably expect to induce action or forbearance on
                    the part of the promisee or a third person and which does induce such action or forbearance is
                    binding if injustice can be avoided only by enforcement of the promise. The remedy granted for
                    breach may be limited as justice requires.
                ii. (2) A charitable subscription or marriage settlement is binding under (1) w/out proof that the
                    promise induced action or forbearance.




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                                          Contracts Final Outline

XXIV. Statute of Frauds: In General: §§110, 131, 133, 143; UCC 2-201
      a. *Electronic signature: E Sign §101: Uniform Electronic Transfer Act.
      b. *Kelly:
                 i. Some promises are unenforceable unless evinced by a signed writing:
                        1. Promises in consideration of marriage
                        2. Promises that cannot be performed w/in one year
                        3. Promises conveying an interest in land.
                        4. Promises by an executor to pay debts of an estate.
                        5. Promises for the sale of goods for more than $500
                        6. Promises to pay another person’s debts (securityship).
                ii. Useful approach:
                        1. Does the statute apply to this K?
                        2. Does the writing satisfy the statute?
                        3. Does an exception to the statute apply?
               iii. Employment and Construction K’s:
                        1. The previous categories do no expressly include employment and construction K’s.
                             These K’s require a writing if they cannot be performed w/in one year – often they
                             will be enforceable w/out writing.
               iv. Satisfying the writing:
                        1. One signature:
                                  a. The party resisting performance must have signed.
                        2. Informal signature:
                                  a. Under UCC any mark intended to authenticate the writing is a signature
                                      as long as it identifies the party to be charged.
                                            i. Typed name, company seal, logo, initials, thumbprint might
                                                work.
                        3. Failure to respond to a writing (merchants):
                                  a. For sale of goods, failure to respond to a writing signed by the other party
                                      may be equivalent of signing a writing. UCC §2-201(2).
                        4. Writing sufficient against the sender:
                                  a. If the writing would not satisfy the statute if the sender raised the statute
                                      as a defense, it will not satisfy the statute when the recipient raises it as a
                                      defense. It must be signed by the sender and contain at least a quantity
                                      term.
                        5. Sent w/in a reasonable time:
                                  a. A letter sent shortly after contract formation looks like communication.
                                      A lot later looks like a hunt for evidence.
                        6. Received:
                                  a. The failure to object to an inaccurate writing is understandable if the
                                      writing was never received.
                        7. Reason to know of its contents:
                                  a. The rule prevents senders from concealing assertions about a K in
                                      unusual places.
                        8. Absence of an objection:
                                  a. Objection w/in 10 days is always good.
                v. Partial writings:
                        1. Sales of goods: The UCC requires very little: as long as the writing contains
                             quantity, it will suffice, even if the writing misstates quantity.
                        2. Other K’s: requires more: from §131
                                  a. The subject matter of the K
                                  b. An indication that the signor has consented to the deal.
                                  c. The essential terms of the unperformed promise stated in reasonable
                                      detail.
               vi. Multiple writings:
                        1. Several writings together may satisfy the statute, though none individually would
                             do the trick.
              vii. Lost or destroyed writings may suffice:


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                                   Contracts Final Outline
                  1.   Copies, even if unsigned, or other testimony may satisfy the court that a writing
                       did exist.
       viii. Exceptions to the writing requirement/Evidence corroborating an agreement:
                  1. Admissions under oath: explicit under §2-201(3)(b). R2d comments imply the
                       same thing. §131 comment c.
                  2. Full performance by both parties. §145
                  3. Full performance by one party:
                           a. One party accepts the other’s performance: UCC allows enforcement
                                w/out a writing when goods have been ―received and accepted‖ or when
                                ―payment has been made and accepted.‖ §2-201(3)(c)
                           b. K not performable w/in a year: full performance by one party removes a
                                promise that could not be completed w/in a year from the provisions of
                                the statute. §130(2)
                           c. Partial performance: The UCC may allow partial enforcement based on
                                partial performance.
        ix. Restitution:
                  1. A person who relies on an unenforceable oral promise may seek restitution.
                  2. SOF prevents enforcement, but does not preclude unjust enrichment.
         x. Exception for action in reliance:
                  1. §139 is an exception to the SOF’s.
                           a. Elements:
                                       i. The promisor reasonable should have expected reliance
                                      ii. The promisee did rely in that way
                                     iii. Injustice can be avoided only by enforcement.
                           b. Reliance interest only: different from §90.
                           c. Identify injustice: umm (should I include this? Pages 177-178 of the road map)
        xi. Rescission and modification:
                  1. Can be rescinded orally
                  2. Might be able to modify orally if that takes it out of the SOF’s
                  3. An agreement that was not w/in the SOFS when originally made may require a writing
                       if modification brings the terms w/in the statute. UCC §2-209 and §149.
c.   §110 Classes of Contracts Covered
          i. (1) The following classes of contracts are subject to a statute, commonly called the Statute of
             Frauds, forbidding enforcement unless there is a written memorandum or an applicable
             exception:
                  1. (a) A contract of an executor or administrator to answer for a duty of his decedent (the
                       executor-administrator provision);
                  2. (b) A contract to answer for the duty of another (the suretyship provision);
                  3. (c) A contract made upon consideration of a marriage (the marriage provisions);
                  4. (d) A contract for the sale of an interest in land (the land contract provision);
                  5. (e) A contract that Is not to performed within one year for the making thereof (the one-
                       year provision);
         ii. (2) The following class of contracts which were traditionally subject to the Statute of Frauds, are
             now governed by the Statute of Frauds provisions of the UCC;
                  1. (a) A contract for the sale of goods for the price of $500 or more (§2-201)
                  2. (b) A contract for the sale of securities (§8-319)
                  3. (c) A contract for the sale or personal property not otherwise covered to the extent of
                       enforcement by way of action or defense beyond $5000 in amount or value of remedy
                       (§1-206)
        iii. (3) In addition the UCC requires a writing signed by the debtor for an agreement which creates
             or provides for a security interest in personal property or fixtures not in the possession of the
             secured party.
        iv. (4) Statues in most states provide that no acknowledgment or promise is sufficient evidence of a
             new or continuing contract to take a case out of the operation of a statute of limitations unless
             made in some writing signed by the party to be charge but that the statute does not alter the
             effect of any payment of principal or interest.
         v. (5) In many state other classes of contracts are subject to a requirement of a writing.
d.   §131: General Requisites of a Memorandum


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                                   Contracts Final Outline
          i. Unless additional requirements are prescribed by the particular statute, a contract within the
             Statute of Frauds is enforceable if it is evidence by any writing signed by or on behalf of the
             party to be charged, which
                  1. Reasonably identifies the subject matter of the contract
                  2. Is sufficient to indicate that a contract with respect thereto has been made between the
                       parties or offered by the signer to the other party, and
                  3. States with reasonable certainty the essential terms of the unperformed promises in
                       contracts
e.   §124: Contract Made Upon Consideration of Marriage
          i. A promise for which all or part of the consideration is either marriage or a promise to marry is
             w/in the SOFs, except in the case of an agreement which consists only of mutual promises of
             two person to marry each other.
         ii. *Kelly: look to make sure that the marriage is no a condition, as opposed to consideration.
                  1. Prenumptual agreements often fall under the SOFs.
f.   §125: Contracts to Transfer, Buy or Pay For An Interest in Land
          i. A promise to transfer to any person any interest in land is within the Statute of Frauds.
         ii. A promise to buy any interest in land is within the Statute of Frauds, irrespective of the person to
             whom the transfer is to be made.
        iii. When a transfer of an interest in land has been made, a promise to pay the price if originally
             within the Statute of Frauds, ceases to be within it unless the promised price is itself in whole or
             in part an interest in land.
        iv. Statutes in most states except from the land contract and one-year provisions of the statute of
             Frauds short-term leases and contracts to lease usually for a term not longer than one year.
         v. *Kelly
                  1. Easements are included.
g.   §129: Action in Reliance; Specific Performance
          i. A contract to transfer an interest in land may be specifically enforced notwithstanding failure to
             comply with the statute of Frauds if it is established that the party seeking enforcement in
             reasonable reliance on the contract and on the continuing assent of the party against whom
             enforcement is sought has so changed his position that injustice can be avoided only by specific
             enforcement.
h.   §130: Contract Not To be Performed Within a Year
          i. Where any promise in a contract cannot be fully performed within a year from the time the
             contract is made, all promises in the contract are within the Statute of Frauds until one party to
             the contract completes his performance.
         ii. When one party to a contract has completed his performance the one-year provision of the Statue
             does not prevent enforcement of the promises of other parties.
        iii. *Kelly:
                  1. A K that MIGHT be completed w/in a year, however, does not fall w/in the statute.
i.   §139: Enforcement by Virtue of Action in Reliance
          i. A promise which the promisor should reasonably expect to induce action or forbearance on the
             part of the promisee or a third person and which does induce the action or forbearance is
             enforceable notwithstanding the Statute of Frauds if injustice can be avoided only by
             enforcement of the promise. The remedy granted for breach is to be limited as justice requires.
         ii. In determining whether injustice can be avoided only be enforcement of the promise, the
             following circumstances are significant:
                  1. The availability and adequacy of the other remedies, particularly cancellation and
                       restitution
                  2. The definite and substantial character of the action or forbearance in relation to the
                       remedy sought;
                  3. The extent to which the action or forbearance corroborates evidence of the making and
                       terms of the promise, or the making and terms are otherwise established by clear and
                       convincing evidence;
                  4. The reasonableness of the action or forbearance;
                  5. The extent to which the action or forbearance by the promisor
j.   §133: Memorandum Not Made as Such
          i. Except in the case of a writing evidencing a contract upon consideration of marriage, the Statute
             may be satisfied by a signed writing not made as a memorandum of a contract.


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                                   Contracts Final Outline
k.   §143: Unenforceable Contract as Evidence
           i. The Statute of Frauds does not make an unenforceable contract inadmissible in evidence for any
              purpose other than its enforcement in violation of the Statute.
l.   §2-201: Formal Requirements; Statute of Frauds
           i. Except as otherwise provided in this Section a contract for the sale of good for the price of $500
              or more is not enforceable by way of action or defense unless these is some writing sufficient to
              indicate that a contract for sale has been made between parties and signed by the party against
              whom enforcement is sought or by his authorized agent or broker. A writing is not insufficient
              because it omits or incorrectly states a term agreed upon but the contract is not enforceable under
              this paragraph beyond the quantity of goods shown in such writing.
          ii. Between merchants if within a reasonable time a writing in confirmation of the contract and
              sufficient against the sender is received and the party receiving it has reason to know its contents
              it satisfies the requirements of subsection (1) against such a party unless written notice of
              objection to its contents is given within 10 days after it is received.
         iii. A contract which does not satisfy the requirements of subsection (1) but which is valid in other
              respects in enforceable
                    1. If the goods are to be specially manufactured for the buyer and are not suitable for sale
                         to others in the ordinary course of seller’s business and the seller, before notice of
                         repudiation is received and under circumstances which reasonably indicate that the
                         goods are for buyer, has made either a substantial beginning of their manufacture or
                         commitments for their procurement; or
                    2. If the party against whom enforcement is sought admits in his pleading, testimony, or
                         otherwise in court that a contract for sale was made, but the contract is not enforceable
                         under this provision beyond the quantity of goods admitted; or
                    3. With respect to goods for which payment has been made and accepted or which have
                         been received and accepted (§2-606).




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                                         Contracts Final Outline

XXV.   K Interpretation
       a. *Kelly
                 i. 1st Start by finding the words that the parties used. Focus on particular words.
                ii. 2nd Identify what meaning each party seeks to attach to those terms.
                         1. Before arguing for one interpretation or another, identify each plausible interpretation a
                               party might present.
                                    a. No contest:
                                               i. Sometimes all plausible interpretations favor one party – say so.
                                    b. Be creative:
                                               i. Carefully consider whether other interpretations are possible that
                                                  favor the other side. Explain why they don’t work.
               iii. 3nd If the parties expressed agreement upon what the words mean, apply that meaning
                         1. Definitions in the K may reveal their intended meaning. §202(3)
                                    a. Oral agreement works.
                         2. Plain meaning – look in dictionaries §202(3)
                         3. Special meanings can be given their technical (in that field) meaning.
                         4. Statements during negotiation may reveal their intended meaning.
                         5. Other clauses may reveal their intended meaning.
               iv. 4th Inferences: If express doesn’t work: Inferences about meaning may arise from usage at other
                     times or by other parties.
                         1. Course of performance: (the best alternative to express)
                                    a. If a party has not objected to performance that met one meaning of the terms
                                        in the past, that may indicate she thought the performance satisfied the
                                        meaning of the term.
                                               i. §202(4); UCC §3-308.
                                              ii. Inferring a party’s actual interpretation works only if she knew
                                                  enough to realize the performance might not comply and had an
                                                  opportunity to object to it.
                                             iii. Objection will stop this.
                                             iv. Party may have waived, but that waiver is revocable under UCC 2-
                                                  209(5).
                         2. Course of dealing (the second best alternative to express)
                                    a. Parties who used words in prior dealings w/ on another probably used the
                                        words the same way this time.
                         3. Usage of trade: (the third best alternative to express)
                                    a. Parties in a trade probably use words the same way others in the trade use
                                        them.
                                    b. If K made, but essential term is missing-you can insert a term that is
                                        reasonable under the circumstances in this case §204.
                                    c. Doesn’t work when trade practice isn’t universal.
                                    d. Newcomers: will be governed by trade usage if they have actual knowledge or
                                        if the community outside the trade is so familiar w/ the usage that the
                                        newcomer’s knowledge can be inferred.
                v. 5th Priorties of construction:
                         1. Specific language over general language §203(c).
                         2. Negotiated terms over standardized terms. §203(d)
                         3. Express terms over inferences. §203(b) and §2-208.
               vi. 6th: Canons of construction offer some rules of thumb in interpreting language
                         1. Make the K legal:
                                    a. An interpretation that would make a K legal is better than one that would not.
                                        (avoiding illegal conduct is key here) §203(a)
                         2. Consistency:
                                    a. An interpretation consistent w/ all terms is better than one that makes terms
                                        inconsistent.§202(5)
                         3. Give all terms effect:
                                    a. An interpretation that gives all terms effect is better than one that makes some
                                        superfluous. §203(a)


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                          Contracts Final Outline
          4.   When all else fails – interpret against the drafter: §206
                   a. Terms imposed by law wont be used against the drafter.
vii. 7th Filling gaps
          1. Terms implied from context
                   a. Terms the parties have agreed on will suggest other terms they intended to
                       govern the transaction, even though those terms were not expressed.
          2. All K’s include an obligation of good faith.
                   a. Good faith defined: ―honest in fact.‖ For a merchant, good faith also requires
                       ―observance of reasonable commercial standards of fair dealing in the trade.‖
                   b. Honesty may be vague, but at a minimum it includes sincerity and excludes
                       pretense.
                   c. Usually good faith starts only after K formation.
          3. Terms implied by statute:
                   a. Time for Delivery: unless otherwise agreed delivery must occur w/in a
                       reasonable time after formation of the K. §2-309(a).
                   b. Place for delivery: W/ some exceptions, delivery is to be made at the seller’s
                       place of business or residence if he is not a business unless agreed otherwise.
                       §2-308.
                   c. One shipment: Unless otherwise agreed, all goods must be delivered in a
                       single delivery. §2-307
                   d. Time and place for payment: Unless otherwise agreed, payment is due at the
                       time and place the buyer receives the goods.
                   e. Price: Unless otherwise agreed, the price is a reasonable price at the time for
                       delivery. §2-305.
          4. Implied warrantees:
                   a. Warranty of title: 2-312
                             i. Seller has good title.
                   b. Warranty of merchantability: 2-314
                             i. Means that the goods would pass w/out objection in the trade; are of
                                 average quality, ― are fit for the ordinary purposes for which such
                                 goods are used,‖ are of roughly even quality, are adequately
                                 packaged, and conform to the lable.‖
                   c. Warranty of fitness for a specific purpose: 2-315.
                             i. Unless disclaimed, a K includes a warranty that the goods are fit for
                                 the buyer’s purpose if 1) the seller has reason to know the particular
                                 purpose for which buyer wants the goods,and 2) the seller knows the
                                 buyer is relying on the seller’s skill to select suitable goods.




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                                           Contracts Final Outline

XXVI. Missing Terms or Gap-Fillers Under the UCC: §204, UCC 2-305, 2-308, 2-309, 2-310
      a. §204: Supplying an Omitted Essential Term
                i. When the parties to a bargain sufficiently defined to be a K have not agreed w/ respect to a term
                    which is essential to a determination of their rights and duties, a term which is reasonable in the
                    circumstances is supplied by the court.
      b. §2-305: Open Price Term
                i. (1) The parties if they so intend can conclude a KI for sale even though the price is not settled.
                    IN such a case the price is a reasonable price at the time of delivery if
                         1. (a) Nothing is said as to price; or
                         2. (b) The price if left to be agreed by the parties and they fail to agree; or
                         3. (c) The price is to be fixed in terms of some agreed market or other standard as set or
                              recorded by a third person or agency and it is not so set or recorded.
               ii. (2) A price to be fixed by the seller or by the buyer means a price for him to fix in good faith.
              iii. (3) When a price left to be fixed otherwise than by agreement of the parties fails to be fixed
                    though fault of one party the other may at his option threat the K as canceled or himself fix a
                    reasonable price.
              iv. (4) Where, however, the parties intend not to be bound unless the price be fixed or agreed and it
                    is not fixed or agreed there is no K. In such a case the buyer must return any goods already
                    received or if unable so to do must pay their reasonable value at the time of delivery and the
                    seller must return any portion of the price paid on the account.
      c. §2-308: Absence of Specified Pace for Delivery
                i. Unless otherwise agreed:
                         1. (a) The place for delivery of goods is the seller’s place of business or if he has none his
                              residence; but
                         2. (b) In a K for sale of identified goods which to the knowledge of the parties at the time
                              of contracting are in some other place, that place is the place for their delivery; and
                         3. (c) Documents of title may be delivered through customary banking channels.
      d. §2-309: Absence of Specific Time provisions; Notice of Termination
                i. (1) The time of shipment or delivery or any other action under a K if not provided in this Article
                    or agreed up shall be a reasonable time.
               ii. (2) Where the K provides for successive performances but is indefinite in duration it is valid for
                    a reasonable time but unless otherwise agreed may be terminated at any time by either party.
      e. (3) Termination of a K by one party except on the happening of an agreed event requires that reasonable
          notification be received by the other party and an agreement dispensing w/ notification is invalid if its
          operation would be unconscionable.




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XXVII. Ambiguous Terms: §§34, 200, 201, 20, 202, 155; UCC §1-205, 2-208
       a. *Kelly
               i. Misunderstanding:
                       1. If parties attach different meanings to a term at formation, a court may interpret the
                            agreement to conform w/ one party’s meaning if:
                                 a. That party had no knowledge of the other’s meaning but the other know of her
                                      meaning; or
                                 b. That party had no reason to know of the other’s meaning, but the other had
                                      reason to know of her meaning. §201(2)
                                             i. Reason to know prevents assertions of implausible interpretations.
              ii. Negating assent:
                       1. If parties attach different meanings to a term at formation, a court may decide that no
                            assent exists if:
                                 a. Elements:
                                             i. The parties attach materially different meanings to their
                                                manifestations; and
                                            ii. Neither party knew or had reason to know of the other’s meaning; or
                                           iii. Each party knew or had reason to know of the other’s meaning. §20
                                 b. Often includes names ―peerless‖ ―swiss coin collection‖
             iii. Mistake of integration and reformation:
                       1. Mistakes about the content of the writing can be corrected via reformation.
                       2. What is needed:
                                 a. Clear and convincing evidence.
                                 b. Fault no an impediment:
                                             i. A party may seek reformation even if the mistake was her fault,
                                                unless she failed to act in good faith. §157.
                                 c. Rights of third parties:
                                             i. When third parties have relied on the written agreement, unaware of
                                                the inaccuracy, the court may limit or deny reformation.
                       3. Mistake as grounds for reformation:
                                 a. A mutual mistake about the accuracy of a writing can be corrected by
                                      reformation. §155
                                             i. Original agreement is necessary:
                                                     1. courts enforce the agreement the parties ACTUALLY made.
                                            ii. Not modification.
                       4. Misrepresentation as grounds for reformation:
                                 a. Reformation is not available for unilateral mistake.
                                 b. Fraud required:
                                             i. Reformation is available only for fraudulent misrepresentations
                                                regarding content or effect of a writing. An innocent
                                                misrepresentation regarding the content of a writing will not justify
                                                reformation, even if material. Innocent misrepresentations may
                                                justify rescission.
                                 c. Justifiable reliance: As w/ any misrepresentation, the deceived party must be
                                      justified in relying on the misrepresentation in order to establish a claim for
                                      reformation §166.
       b. §34: Certainty and Choice of Terms; Effect of Performance or Reliance
               i. The terms of a contract may be reasonably certain even though it empowers one or both parties
                   to make a selection of terms in the course of performance.
                       1. Part Performance under an agreement may remove uncertainty and establish that a
                            contract enforceable as a bargain has been formed.
              ii. Action in reliance on an agreement may make a contractual remedy appropriate even though
                   uncertainty is not removed.
       c. §200: Interpretation of Promise or Agreement
               i. Interpretation of a promise or agreement or a term thereof is the ascertainment of its meaning.
       d. §201: Whose Meaning Prevails



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                                   Contracts Final Outline
           i. (1) Where the parties have attached the same meaning to a promise or an agreement or a term
              thereof, it is interpreted in accordance with that meaning.
          ii. (2) Where the parties have attached different meanings to a promise or agreement or a term
              thereof, it is interpreted in accordance with the meaning attached by one of them if at the time or
              agreement was made
                   1. (a) That party did not know of any different meaning attached by the other and the other
                        knew the meaning attached by the first party or
                   2. (b) That party had no reason to know of any different meaning attached by the other
                        and the other had reason to know of the meaning attached by the first party.
         iii. (3) Except as stated in this section neither party is bound by the meanings attached by the other,
              even though the result may be a failure of mutual assent.
         iv. *Runs the threat the court will throw out the K entirely and if so, stuck w/ the unknown –
              whatever the court decides is fair under the circumstances.
e.   §20: Effect of Misunderstanding:
           i. (1) There is no manifestation of mutual assent to an exchange if the parties attach materially
              different meanings to their manifestations and
                   1. (a) Neither party knows or has reason to know the meaning attached by the other; or
                   2. (b) Each party knows or each party has reason to know the meaning attached by the
                        other.
          ii. (2) The manifestations of the parties are operative in accordance w/ the meaning attached to
              them by one of the parties if
                   1. (a) That party does not know of any different meaning attached by the other, and the
                        other party knows the meaning attached by the first party; or
                   2. (b) That party has no reason to know of any different meaning attached by the other;
                        and the other has no reason to know the meaning attached by the first party.
f.   §202: Rules In Aid of Interpretation
           i. Words and other conduct are interpreted in light of all the circumstances and if the principal
              purpose of the parties is ascertainable it is given great weight.
          ii. A writing is interpreted as a whole and all writings that are part of the same transaction are
              interpreted together.
         iii. Unless a different intention is manifested,
                   1. Where language has a generally prevailing meaning it is interpreted in accordance with
                        that meaning
                   2. Technical terms and words or art are given their technical meaning when used in a
                        transaction within their technical field
         iv. Where an agreement involved repeated occasions for performance by either party with
              knowledge of the nature of the performance and opportunity for objection to it b the other any
              course of performance accepted or acquiesced in without objection is given grate weight in the
              interpretation of the agreement.
          v. Wherever reasonable the manifestation of intention of the parties to a promise or agreement are
              the interpreted as consistent with each other and with any relevant course of performance course
              of dealing or usage of trade.
g.   §1-205: Course of Dealing and Usage of Trade (where is this from????)
           i. A course of dealing is a sequence of previous conduct between the parties to a particular
              transaction which is fairly to be regards a establishing a common basis of understanding for
              interpreting their expressions and other conduct
          ii. A usage of trade is any practice or method of dealing having such regularity of observance in a
              place, vocation or trade as to justify an expectation that I will be observed with respect to the
              transaction in question. The existence and scope of such a usage are to be proved as facts. If it
              is established that such a usage is embodied in a written trade code or similar writing the
              interpretation of the writing is for the court.
         iii. A course of dealing between parties and any usage of trade in the vocation or trade in which they
              are engaged or of which they are or should be aware give particular meaning to and supplement
              or qualify terms of an agreement.
         iv. The express terms of an agreement and an applicable course of dealing or usage of trade shall be
              construed wherever reasonable as consistent with each other but when such construction is
              unreasonable express terms control both course of dealing and usage of trade and course of
              dealing controls usage of trade.


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                                  Contracts Final Outline
          v. An applicable usage of trade in the place where any part of performance is to occur shall used in
              interpreting as to that part of the performance.
         vi. Evidence of a relevant usage of trade offered by one party is not admissible unless and until he
              has given the other party such notice as court find sufficient to prevent unfair surprise to the
              latter.
h.   §2-208: Course of Performance or Practical Construction
           i. Where the contract for sale repeated occasion for performance by either party with knowledge of
              the nature of the performance and opportunity for objection to it but the other any course of
              performance accepted or acquiesced in without objection shall be relevant to determine the
              meaning of the agreement.
          ii. The express terms of the agreement and any such course of performance as well as any course of
              dealing and usage of trade shall be construed whenever possible as consistent with each other
              but when such construction is unreasonable express terms shall control course of performance
              and course of performance shall control both course of dealing and usage of trade.
         iii. Subject to the provision of the next section on modification and waiver, such course of
              performance shall be relevant to show a waiver or modification of any term inconsistent with
              such course of performance.
i.   §155: When Mistake of Both Parties as to Written Expression Justifies Reformation
           i. Where a writing that evidences or embodies an agreement in whole or in part fails to express the
              agreement because of a mistake of both parties as to the contents or effect of the writing, the
              court may at the request of a party reform the writing to express the agreement, except to the
              extent that the right of third parties such a good faith purchasers for value will be unfairly
              affected.




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                                            Contracts Final Outline

XXVIII. Form or Standardized K: §211
        a. §211 Standardized Agreements
                  i. Except as stated in Subsection (3), where a party to an agreement signs or otherwise manifest
                     assent to a writing and has reason to believe that like writings are regularly used to embody
                     terms of agreements of the same type, he adopts the writing as an integrated agreement with
                     respect to the terms included in the writing.
                 ii. Such a writing is interpreted wherever reasonable as treating alike all those similarly situated
                     without regard to their knowledge or understanding of the standard terms of the writing.
                iii. Where the other party has reason to believe that the party manifesting such assent would not do
                     so if he knew that the writing contained a particular terms, the term is not part of the agreement.




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                                          Contracts Final Outline

XXIX. Parol Evidence: §§214, 209, 210, 213, §216; UCC 2-202
      a. *Kelly
                i. The Rule:
                       1. If an agreement is reduced to an integrated writing, parties may not introduce extrinsic
                            evidence of prior or contemporaneous events to vary, contradict, or supplement the
                            terms of the writing §215
               ii. Integrated writing:
                       1. An integrated writing occurs when the parties intend their writing(s) to express the final
                            term(s) of their agreement. §209.
              iii. Identifying integrated writings:
                       1. Integration clauses: parties commonly specify that a writing is the complete and final
                            agreement between them.
                                a. Clause no conclusive: An integration clause is evidence, but is not conclusive.
                                b. Hidden provisions: When the drafter of a standard form has reason to believe
                                     that the other party would not assent if she knew the writing contained a
                                     particular term, the term is not party of the agreement §211(3)
                                c. Difficulty showing materiality: Most people don’t attach much importance to
                                     these clauses.
                       2. Completeness may imply integration:
                                a. Parties are less likely to intend brief notations to include all terms of their
                                     agreement. Completeness and specificity, on the other hand, make it more
                                     likely the parties included all terms in the writing. Faced w/ fairly thorough
                                     documents, courts will presume it is integrated until a party proves otherwise.
                                     §209(3)
                       3. Usage of trade:
                                a. Evidence relating to customs in the trade may reveal whether agreements of
                                     this type generally are intended as integrated agreements.
                       4. Extrinsic evidence:
                                a. Can be used to show whether or not an agreement is integrated. §214( a)
                       5. Multiple documents:
                                a. The integrated writing need not be a single documents, several documents
                                     taken together may work.
              iv. Partially integrated writings.
                       1. Parties may intend a writing to integrate only part of the agreement(s) between them –
                            especially if they have several dealings at once.
                       2. Contradictory evidence inadmissible:
                                a. If an agreement is partially integrated, a party may not introduce extrinsic
                                     evidence to vary or contradict the terms of the writing.
                       3. Supplemental evidence admissible:
                                a. If an agreement is partially integrated, a party may introduce extrinsic
                                     evidence to show the parties agreed to additional terms that are consistent w/
                                     the terms in the writing. §216.
                       4. Factors to consider:
                                a. Separate consideration:
                                            i. If a party gave separate consideration for the consistent additional
                                               term, courts may hold the writing partially integrated.
                                b. Natural omission:
                                            i. Even when the consideration is the same, other circumstances may
                                               make it seem natural that the parties would omit the term from the
                                               writing. If so the court may conclude that the agreement was only
                                               partially integrated. §216(2).
                                c. Credibility:
                                            i. These factors seem to relate to the credibility of the claim.
                                               Integration depends on whether the parties intended the writing to be
                                               integrated.
               v. Pacific Gas and Electric:



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                                   Contracts Final Outline
                  1.   Fairly susceptible test: When a K terms is ―fairly susceptible‖ to either of the
                       interpretations proposed, extrinsic eviden is admissible to support either interpretation.
                   2. Admit parol to determine ambiguity: Extrinsic evidence is admissible to show that a K
                       term is fairly susceptible to either of the interpretations proposed.
         vi. Exceptions:
                   1. Defenses §214(d)
                   2. Does not apply to modifications.
        vii. Extrinsic Evidence refers to written or oral evidence of prior or contemporaneous events.
              Evidence of subsequent promises is unaffected.
       viii. Extrinsic evidence of prior or contemporaneous events may be introduced for purposes
              other than to vary, contradict, or supplement a writing, such as:
                   1. To prove whether a writing is integrated;
                   2. To prove whether a writing is partially or completely integrated;
                   3. To show the meaning of a writing, at least if a term is ambiguous;
                   4. To establish a K defense, such as fraud or mistake;
                   5. To establish whether a particular remedy is appropriate;
                   6. To establish a condition of K formation; and
                   7. To establish a tort action.
         ix. When extrinsic evidence is offered to show the meaning of an intergrated writing:
                   1. Some courts refuse to admit the evidence if K meaning is plain; and
                   2. Some courts admit the evidence to show whether the term is ambiguous.
b.   §214: Evidence of Prior or Contemporaneous Agreements and Negotiations
           i. Agreements and negotiations prior to or contemporaneous with the adoption of a writing are
              admissible in evidence to establish
                   1. That the writing is or is not an integrated agreement
                   2. That the integrated agreement, if any, is completely or partially integrated;
                   3. The meaning of the writing, whether or not integrated
                   4. Illegality, fraud, duress, mistake, lack of consideration, or other invalidating cause
                   5. Ground for granting or denying rescission, reformation, specific performance or other
                       remedy
c.   §209: Integrated Agreements
           i. An integrated agreement is a writing or writings constituting a final expression of one or more
              terms of an agreement
d.   §210: Completely and Partially Integrated Agreements
           i. (1) A completely integrate agreement is an integrated agreement adopted by the parties as a
              complete and exclusive statement of the terms of the agreement.
          ii. (2) A partially integrated agreement is an integrated agreement other than a completely
              integrated agreement
         iii. (3) Whether an agreement is completely or partially integrated is to be determined by the court
              as a question preliminary to determination of a question of interpretation or to application or the
              parol evidence rule.
e.   §213: Effect of Integrated Agreement on Prior Agreements (Parol Evidence Rule)
           i. (1) A binding integrated agreement discharges prior agreements to the extent that it is
              inconsistent with them.
          ii. (2) A binding completely integrated agreement discharges prior agreements to the extent that
              they are within its scope
         iii. (3) An integrated agreement that is not binding or that is voidable and avoided does not
              discharge a prior agreement. But an integrated agreement even though not binding may be
              effective to render inoperative a term which would have been part of the agreement if it had not
              been integrated.
f.   §216: Consistent Additional Terms
           i. (1) Evidence of a consistent additional term is admissible to supplement an integrated agreement
              unless the court finds that the agreement was completely integrated.
          ii. (2) An agreement is not completely integrated if the writing omits a consistent additional agreed
              term which is
                   1. Agreed to for separate consideration or
                   2. Such a term as in the circumstances might naturally be omitted from the writing
g.   §2-202: Final Written Expression: Parol or Extrinsic Evidence


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                         Contracts Final Outline
 i. (1) Terms with respect to which the confirmatory memoranda of the parties agree or which are
    otherwise set forth in a writing intended by the parties as a final expression of their agreement
    with respect to such terms as are included therein may not be contradicted by evidence of any
    prior agreement or of a contemporaneous oral agreement but may be explained or supplemented
         1. (a) By course of dealing or usage of trade (§1-205) or by course of performance (§2-
             208) and
ii. (2) By evidence of consistent additional terms unless the courts finds the writing to have been
    intended also as a complete and exclusive statement of the terms of the agreement.




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                                       Contracts Final Outline

XXX.   Performance and Breach Performance
       a. Implied Duty of Good Faith Performance
                i. §205: Duty of Good Faith and Fair Dealing
                        1. Every contract imposes upon each party a duty of good faith and fair dealing in its
                            performance and enforcement.
               ii. §1-203: Obligation of Good Faith
                        1. Every contract or duty within this Act imposes an obligation of good faith in
                            performance or enforcement
              iii. §2-203: Definition and Index of Definitions
                        1. In this article unless the context otherwise requires
                                a. ―Good faith‖ in the case of a merchant means honesty in fact and the
                                     observance of reasonable standards of fair dealing in the trade.
              iv. §1-201(20): ―Good Faith,‖ Except as otherwise provided in Article 5, means honest in fact and
                   the observance of reasonable commercial standards of fair dealing.




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XXXI. Conditions v. Promises:
      a. *Kelly
                i. A condition is an event that must occur before another’s performance is due.
                       1. If a condition does not occur, failure to perform is not breach because the performance
                            was not due.
                       2. A party protected by a condition may waive the condition.
                       3. A condition either occurs or does not; almost doesn’t count.
               ii. Recognizing a condition:
                       1. Words
                                a. Words such as ―if‖ or ―unless‖
                                b. Words are just clues and are not dispositive.
                                c. Substance could have the same effect as ―if‖ or ―unless‖
                       2. Conditions are events
                                a. The condition is the event that must occur, not the K term that specifies the
                                     event.
                       3. Events after formation but before discharge
              iii. Effect of conditions:
                       1. If a contiion does no occur, performance does not become due §225
                       2. Conditions limit promises
                       3. Conditions can have hard effects:
                                a. Forfeiture
                       4. Promises are less harsh
                                a. Interpreting the event as a promise – means the party promised the event
                                     would occur.
                                b. Jargon
                                            i. Substantial performance is breach – performance that does not strictly
                                               fulfill all of one’s duties under the K is breach. Other party can get
                                               damages, but no
                                           ii. Conditions are not performed: Anything short of the condition no
                                               matter how close, means the condition did not occur.
                       5. Interpretation as a promise preferred:
                                a. If K language is uncertain, courts prefer to interpret the language as creating a
                                     promise rather than a condition. §227
              iv. Excusing Conditions:
                       1. Waiver:
                                a. The party for whose benefit the condition was specified may waive it. No
                                b. A promise to waive is enforceable w/out consideration §84
                                c. Waiver revocable: Waiver of a condition is revocable unless another has
                                     relied to her detriment on the waiver. §84 allos revocation if:
                                            i. The condition was in the control of the beneficiary;
                                           ii. The waiver was made before the time for the occurrence of the
                                               condition;
                                          iii. Notice of revocation ―is received while there is still a reasonable time
                                               to cause the condition to occur‖;
                                          iv. Reliance does not make revocation unjust; and
                                           v. The waiver was not enforceable for other reasons-such as
                                               consideration the promisee gave the waiving party in exchange for
                                               the waiver.
                       2. Modification:
                                a. Parties may modify a K to delete reference to the condition. (can’t have had
                                     consideration for the waiver however)
                       3. Estoppel:
                                a. A party may be estopped to insist on a condition – a waiver on which other
                                     parties have relied.
                       4. Disproportionate forfeiture:




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                                    Contracts Final Outline
                            a.    When a condition produces ―disproportionate forfeiture,‖ courts may excuse
                                  the condition ―unless its occurrence was a material part of the agreed
                                  exchange.‖ §229
                                        i. Forfeiture – loss is unrecoverable and disproportionate.
                                       ii. Condition can be material (like fire for fire insurance)
           v. If a condition does not occur, a party who has already performed may suffer forfeiture when the
               return performance is excused.
          vi. To reduce the risk or consequences of forfeiture, courts prefer to interpret terms as promises
               rather than conditions when the issue is close.
         vii. When a condition does not occur, performance may nonetheless be due if:
                    1. A party waived the condition by promising to perform despite the non-occurrence; or
                    2. A party is estopped to perform because another relied on her promise to perform despite
                         the nonoccurrence; or
                    3. The parties modified the K by deleting the condition; or
                    4. A court excuses the condition because it produces disproportionate forfeiture and was
                         not material to the agreed exchange.
b.   Condition Defined: § 224:
           i. §224: Condition Defined:
                    1. A condition is an event, not certain to occur, which must occur, unless its non-
                         occurrence is excused, before performance under K becomes due.
c.   Effects of Non-Occurrence Of a Condition: §225:
           i. §225: Effects of Non-Occurrence of a Condition:
                    1. (1) Performance of a duty subject to a condition cannot become due unless the
                         condition occurs or its non-occurrence is excused.
                    2. (2) Unless it has been excused, the non-occurrence of a condition discharges the duty
                         when the condition can no longer occur.
                    3. Non-Occurrence of a condition is not a breach by a party unless he is under a duty that
                         the condition occur.
d.   Is the event a condition, a promise or both?
           i. §227: Standard of Preference with Regard to Conditions
                    1. In resolving doubts as to whether an event is made a condition of an obligator’s duty,
                         and as to the nature of such an event, an interpretation is preferred that will reduce the
                         obligee’s risk of forfeiture, unless the event is within the obligee’s control or the
                         circumstances indicate that he has assumed the risk
                    2. Unless the contract is of a type under which only one party generally undertakes the
                         duties, whether it is doubtful whether
                              a. A duty is imposed on an obligee that an event occur, or
                              b. The event is made a condition of the obligor’s duty, or
                              c. The event is made a condition of the obligor’s duty and a duty is imposed on
                                  the obligee that event occur, the first interpretation is preferred if the event is
                                  within obligee’s control.
e.   Waiving of Conditions: §84; UCC 2-209
           i. §84: Promise to Perform a Duty in Spite of Non-occurrence of a Condition
                    1. Except as stated in Subsection (2), a promise to perform all or part of a conditional duty
                         under an antecedent contract in spite of the non-occurrence of the condition is binding,
                         whether the promise is made before or after the time for the condition to occur, unless
                              a. occurrence of the condition was a material part of the agreed exchange for the
                                  performance of the duty and the promise was under no duty that it occur; or
                              b. uncertainty of the occurrence of the condition was an element of the risk
                                  assumed by the promisor
                    2. If such a promise ios made before the time for the occurrence of the condition has
                         expired and the condition is within the control the promisee or a beneficiary, the
                         promisor can make his duty again subject to the condition by notifying the promisee or
                         beneficiary of his intention to do so if
                              a. The notification is received whole there is still a reasonable time to cause the
                                  condition to occur under the antecedent terms or an extension given the
                                  promisor; and



                                                                                                                  44
                                   Contracts Final Outline
                           b.  Reinstatement of the requirement of the condition is not unjust because of a
                               material change of position by the promisee of the beneficiary; and
                          c. The promise is not binding apart for the rule stated in Subsection (1).
         ii. §2-209 Modification, Rescission and Waiver
                  1. An agreement modifying a contract within this Article needs no consideration to be
                     binding.
                  2. A signed agreement, which excluded modification or rescission except by a signed
                     writing cannot be otherwise modified or rescinded but except as between merchants
                     such a requirement on a form supplied by the merchant must be separately signed by
                     the other party.
                  3. The requirements of the statute of frauds section of this Article must be satisfied if the
                     contract as modified is within its provisions.
                  4. Although an attempt at modification or rescission does not satisfy the requirements of
                     subsection (2) or (3) it can operate as a waiver.
                  5. A party who has made a waiver affecting an executory portion of the contract may
                     retract the waiver by reasonable notification received by the other party that strict
                     performance will be required of any term waived, unless the retraction would be unjust
                     in view material change of position in reliance on a waiver.
f.   Excuse of a Condition:
          i. §229: Excuse of a Condition to Avoid Forfeiture
                  1. To the extent that a non-occurrence of a condition would cause disproportionate
                     forfeiture, a court may excuse the non-occurrence of that condition unless its
                     occurrence was a material part of the agreed exchange.




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                                          Contracts Final Outline

XXXII. Anticipatory Repudiation
       a. *Kelly
                 i. Express repudiation:
                        1. Unequivocal: a statement repudiating a K must be unequivocal. Statements that a party
                            either will not or cannot perform are repudiations. Statements about doubt are not.
                                 a. New demands: statements that impose new requirements on a party’s
                                     willingness to perform are repudiations. Insisting that the other party live up
                                     to the obligations of the K is not a new demand, though parties cannot
                                     unilaterally rewrite the order in which they must perform.
                        2. To the other party: statements of repudiation must be made to an obligee.
                ii. Implied repudiation:
                        1. A voluntary affirmative act that leaves a party unable or apparently unable to perform.
               iii. Total breach:
                        1. Total breach basically means material breach.
                                 a. Total equals discharge:
                                            i. Total breach is a breach that discharges a party’s remaining
                                                obligations under the K. §243(1)
                                 b. Discharge equal incurable and material:
                                            i. A breach discharges obligations under a K if it is material AND if
                                                cure is no long possible.
                                 c. Repudiation always curable?
                                            i. Cure is always possible if the time for performance has not run out.
                                 d. Exception for payment:
                                            i. When the only remaining duties are the breaching party’s duty to pay
                                                in installments for performance already completed by the other,
                                                breach regarding one installment is not total breach. §242(3)
                        2. Role of the Rule:
                                 a. a repudiation will not give you the right to suspend or terminate performance
                                     when the breach itself would not have given you the right to suspend or
                                     terminate performance.
               iv. Insecurity:
                        1. When a party has reasonable grounds to believe that the other will commit a material
                            breach she may
                                 a. Demand adequate assurance of due performance.
                                 b. If reasonable, suspend performance (except to the extent that she already
                                     received compensation)
                                 c. Treat the failure to provide adequate assurance w/in a reasonable period of
                                     time as a repudiation. §251.
                        2. Written demand: The UCC requires that a demand of adequate assurance be made in
                            writing.
                        3. 30 day limit: The UCC allows no more than 30 days to respond – faster may be
                            necessary.
                        4. No insecurity: The UCC treats the failure to give assurances as repudiation only if the
                            demand is justified.
                        5. Adequate assurances of performance:
                                 a. Unjustified demands:
                                            i. A party who refuses to perform unless she receives assurance may in
                                                fact be repudiation or breaching if she has no right to the assurance
                                                demanded.
                                 b. Good faith:
                                            i. A demand for assurance is limited by the obligation of good faith and
                                                fair dealing. Reapted demands may break this rule.
                                 c. Equivocal assurances:
                                            i. Such assurances are insufficient – I’ll try doesn’t cut it buttfucker.
                                 d. Insolvency:
                                            i. When a party’s insolvency produces insecurity, assurances may take
                                                the for of performance, an offer to perform, or collateral. §252


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                                    Contracts Final Outline
          v. Responses by the nonrepudiating party:
                   1. Terminating the K: §254 lets you accept the repudiation
                            a. Suspend performance: the party should suspend performance immediately.
                                 Damages will not be recoverable if the party could have avoided them by
                                 acting reasonably. §2-610(3)
                            b. Notice: the party should notify the repudiating party of her intent to take the
                                 repudiation as final.
                   2. Urging performance
                            a. Suspend performance: even while urging retraction, a party should suspend
                                 performance.
                            b. Substitute arrangements: urging retraction does not affect one’s rights later to
                                 make substitute arrangements.
                   3. Do nothing: runs all the risks of above w/out the benefits.
         vi. Retraction by the repudiating party
                   1. Actual notice is required: retraction requires actual notice to the repudiating party.
                       ―come to the attention of the injured party‖ or that she have ―knowledge‖ that events no
                       longer make performance impossible. §256
                   2. Timeliness: Retraction must be timely.
                            a. Too late if the party has relied on the repudiation; or
                            b. The other party has indicated to the repudiating party that she considers the
                                 repudiation final.
b.   In General: §250, 251; UCC 2-610, revised 2-610(2)
           i. §250: When a Statement of an Act is a Repudiation
                   1. A repudiation is
                            a. (a) A statement by the obligor to the obligee indicating that the obligor will
                                 commit a breach that would itself give the obligee claim for damages for total
                                 breach under §243, or
                            b. (b) A voluntary affirmative act which renders the obligor unable or apparently
                                 unable to perform w/out such a breach
          ii. §251: When a Failure to Give Assurance May Be Treated as a Repudiation
                   1. (1) Where reasonable grounds arise to believe that the obligor will commit a breach by
                       non-performance that would itself give the obligee a claim for damages for total breach
                       under §243, the obligee may demand adequate assurances of due performance and may,
                       if reasonable, suspend any performance for which he has not already received the
                       agreed exchange until he receives such assurances.
                   2. (2) The obligee may treat as a repudiation the obligor’s failure to provide w/in a
                       reasonable time such assurance of due performance as is adequate in the circumstances
                       of a the particular case.
         iii. §2-610: Anticipatory Repudiation
                   1. When either party repudiates the contract with respect to a performance not yet due the
                       lose of which will substantially impair the value of the contract to the other, the
                       aggrieved party may
                            a. For a commercially reasonable time await performance by the repudiating
                                 party; or
                            b. Resort to any remedy for breach (Seciton 2-703 or Section 2-711), even
                                 though he has notified the repudiating party that he would wait the latter’s
                                 performance and has urged retraction; and
                            c. In either case suspend his own performance or proceed in accordance with the
                                 provisions of this Article or the seller’s right to identify goods to the contract
                                 notwithstanding breach or to salvage unfinished goods (Section 2-704).
c.   Retraction of the Repudiation: §2-611
           i. §2-611: Retraction of Anticipatory Repudiation
                   1. Until the repudiating party’s next performance is due he can retract his repudiation
                       unless the aggrieved party has since repudiation cancelled or materially changed his
                       position or otherwise indicated that he considers the repudiation final.
                   2. Retraction may be any method which clearly indicates to the aggrieved party that the
                       repudiating party intends to perform, but must include any assurance justifiably
                       demanded under the provisions of this Article (§2-609)


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                                  Contracts Final Outline
                  3. Retraction reinstates the repudiating party’s rights under the contract with due excuse
                     and allowance to the aggrieved party for any delay occasioned by repudiation.
d.   Adequate Assurances of Performance: §251; §2-609
         i. §251: When a Failure to Give Assurance May Be Treated as a Repudiation
                 1. (1) Where reasonable grounds arise to believe that the obligor will commit a breach by
                     non-performance that would itself give the obligee a claim for damages for total breach
                     under §243, the obligee may demand adequate assurances of due performance and may,
                     if reasonable, suspend any performance for which he has not already received the
                     agreed exchange until he receives such assurances.
                 2. (2) The obligee may treat as a repudiation the obligor’s failure to provide w/in a
                     reasonable time such assurance of due performance as is adequate in the circumstances
                     of a the particular case.
        ii. §2-609: Right to Adequate Assurance of Performance
                 1. A contract for sale imposes an obligation on each party that the other’s expectation of
                     receiving due performance will not be impaired. When reasonable grounds for
                     insecurity arise with respect to the performance of either party the other may in writing
                     demand adequate assurance or due performance and until he received such assurance
                     may if commercially reasonable suspend any performance for which he ahs not already
                     received the agreed return.
                 2. Between merchants the reasonableness of grounds for insecurity and the adequacy of
                     any assurance offered shall be determined according to commercial standards.
                 3. Acceptance of any improper delivery or payment does not prejudice the aggrieved
                     party’s right to demand adequate assurance of future performance.
                 4. After receipt of a justified demand failure to provide within a reasonable time not
                     exceeding thirty days such assurance of due performance as is adequate under the
                     circumstances of the particular case is a repudiation of the contract.




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XXXIII. Material Breach: §§241, §237
        a. *Kelly
                  i. Elements: A party need not perform if there is an earlier uncured material nonperformance by
                     the other party. §237
                          1. Nonperformance When Due
                                   a. Rules for order of performance:
                                             i. The order as specified in the K.
                                            ii. When the K is silent, Simultaneous, if possible. §234
                                                     1. For simultaneous each party must be able to tender
                                                          substantial performance §238 – tender is an offer to perform
                                                          immediately combined w/ a manifest ability to do so.
                                           iii. If only one party’s performance requires time, she must perform first.
                                           iv. Employment, construction.
                                   b. Note: remember conditions make performance not due.
                          2. Material Nonperformance (five factors in an indeterminate way)
                                   a. How much of the K’s benefit will the nonbreaching party lose because of the
                                       breach?
                                             i. Probably needs to be substantial.
                                   b. Will damages adequately compensate for the benefit lost?
                                             i. When damages will compensate for the losses caused by the breach,
                                                the breach is less likely to be material.
                                            ii. Damages may be difficult to prove
                                           iii. If preventing loss is significantly better than compensating for it later,
                                                the court is more likely to find the breach material.
                                   c. How much will the breaching party forfeit if the K is terminated?
                                             i. The more forfeited the less likely to be material.
                                            ii. This refers to wasted expense and not expectations
                                           iii. Resale or cover may prevent waste.
                                           iv. Net forfeiture: the amount of forfeiture is net of any payments
                                                received so far and restitution.
                                   d. Is the breaching party likely to cure?
                                             i. When cure is uncertain, the breach is more likely to be material.
                                            ii. When cure is likely or certain, the nonbreaching party will obtain
                                                much of what she expected, though late – no need to get substitute
                                                performance.
                                           iii. Cure may be insufficient: even if certain, breach may be material –
                                                particularly when timely performance is crucial.
                                   e. Is the breaching party acting in good faith?
                                             i. A party’s lack of good faith and fair dealing increases the likelihood
                                                of a finding of material breach. (substitution might be needed from a
                                                trustworthy source)
                          3. Uncured non-performance:
                                   a. Rule:
                                             i. A party has no further obligation to perform once a condition of her
                                                performance ―can no longer occur.‖ §225
                                   b. Time for cure: the factors to allow for cure are the same as for materiality.
                                             i. Loss of benefit weighs in favor of quicker discharge
                                            ii. Compensation, forfeiture, cure, and good faith way against quicker
                                                discharge.
                                           iii. Amount of harm from delaying substitute arrangements: When delay
                                                will prevent or hinder efforts to make substitute arrangements, such
                                                as cover, discharge will occur sooner.
                                   c. Time is of the essence:
                                             i. An agreement that timely performance is important makes immediate
                                                discharge more likely
                                            ii. Merely specifying a time for performance does not make timing
                                                essential. Cure is possible even though the time for performance has


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                                   Contracts Final Outline
                                           passed and subsequent performance cannot be timely. §242(c).
                                           (paying rent a day late is not material)
                                      iii. Substance, not form: the ―time is of the essence‖ is not dispositive.
                                      iv. Parties can make timely performance a condition.
          ii. Failure to pay Money:
                   1. Often found to be material
         iii. Divisibility:
                   1. In general: if a breaching party has performed all duties of a divisble portion of a K,
                       the court will allow that party to recover the K price (or other return promise) for that
                       part of the K—even though the party breached other portions of the divisible K.
                   2. Identifying divisibility:
                            a. When the K can be divided into pairs of part performances that are agreed
                                 equivalents, the court may treat the K as if it was two or more K’s, each
                                 involving a pair of part performances. §240.
                            b. Usually requires a price per unit. Or a court will divide the whole by the
                                 parts. Or UCC§2-305 – a reasonable price.
                            c. Sometimes performance builds over time and is therefore not an agreed
                                 equivalent.
b.   §241: Circumstances Significant in Determining Whether a Failure is Material
           i. In determining whether a failure to render or to offer performance is material, the following
              circumstances are significant:
                   1. (a) The extent to which the injured party will be deprived of the benefit which he
                       reasonably expected;
                   2. (b) The extent to which the injured party can be adequately compensated for the part of
                       that benefit of which he will be deprived;
                   3. (c) The extent to which the party failing to perform or to offer to perform will suffer
                       forfeiture;
                   4. (d) The likelihood that the party failing to perform or to offer to perform will cure his
                       failure, taking account of all the circumstances including any reasonable assurances;
                   5. (e) The extent to which the behavior of the party failing to perform or to offer to
                       perform comports with standards of good faith and fair dealing.
c.   Discharge of Duties to Cancel: §237, 242, 240
           i. §237: Effect on Other Party’s Duties of a Failure to Render Performance
                   1. Except as stated in §240, it is a condition of each party’s remaining duties to render
                       performances to be exchanged under an exchange of promises that there be no uncured
                       material failure by the other party to render any such performance due at an earlier
                       time:
                            a. *Note: Effect of non-occurrence of condition: a material failure of
                                 performance prevest performance of the other party’s remaining duties if it has
                                 not been cured during the time in which performance can occur. Such
                                 conditions are sometimes referred to as ―constructive conditions of exchange.‖
          ii. §242: Circumstance Signifcant in Determining When Remaining Duties are Discharged (Time
              for Cure)
                   1. In determining the time after which a party’s uncured material failure to render or to
                       offer performance discharges the other party’s remaining duties to render performance
                       under the rules states in §237 and 238 the following circumstances are significant:
                            a. (a) Those stated in §241
                            b. (b) The extent to which it reasonably appears to the injured party that delay
                                 may prevent or hinder him in making reasonable substitute arrangements.
                            c. (c) The extent to which the agreement provides for performance w/out delay,
                                 but a material failure to perform or to offer to perform on a stated day does not
                                 itself discharge the other party’s remaining duties unless the circumstances,
                                 including the language of the agreement, indicate that performance or an offer
                                 to perform by that day is important.
                                        i. *Note: Cure, when it is too late for the performance or the offer to
                                           perform to occur, the failure has the effect of discharging the other
                                           party’s duties.



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                                     ii. *Effect of agreement: phrases such as time is of the essence does not
                                         necessarily have the effect of resulting in discharge upon delay
                                         beyond the date in the agreement, they are to be considered along
                                         with other circumstances in determining the effect of the delay.
d.   §240: Part Performance as Agreed Equivalents:
          i. If the part performances to be exchanged under an exchange of promises can be apportioned into
             corresponding pairs of part performances that the parts of each pair are properly regarded s
             agreed equivalents, a party’s performance of his part of such a pair has the same effect on the
             other’s duties to render performance of the agreed equivalent as it would have if only that pair of
             performances had been promised.
e.   §237: Effect on Other Party’s Duties of a Failure to Render Performance
          i. Except as stated in §240, it is a condition of each party’s remaning duties to render performances
             to be exchanged under an exchange of promises that there be no uncured material failure by the
             other party to render any such performance due at an earlier time.




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XXXIV. Perfect Tender Rule: §2-106, 2-508, 2-601, 2-602, 2-606, 2-607,2-608, 2-609, 2-709, 2-710, 2-711
       a. *Kelly
                 i. Why the rule is good:
                          1. Forfeiture is rare:
                                    a. If the buyer refuses to take the goods they can be sold to someone else. NO
                                         hardship.
                          2. Compensation could be difficult:
                                    a. Although the value of the goods may be easy to determine, the consequential
                                         losses may be uncertain – or unrecoverable because unforeseeable. Damages
                                         might not compensate the buyer fully.
                          3. Prompt cover may be important:
                                    a. Fluctuating prices in goods and circumstances make this rule make sense.
                ii. UCC
                          1. Perfect tender:
                                    a. Any defect in the tender, no matter how slight justifies refection.
                          2. Timely cure:
                                    a. If the time for performance has not yet expired, seller may cure by tendering
                                         conforming goods.
                          3. Untimely cure:
                                    a. Even if the time for performance has expired, the seller is allowed a chance to
                                         cure w/in a reasonable time if she had reason to believe the goods tendered
                                         would be acceptable to the buyer.
                          4. Acceptable goods:
                                    a. If buyer accepts nonconforming goods, wh may later revoke the acceptance
                                         only if ―the non-conformity substantially impairs‖ the value of the goods.
                          5. Multiple Lots:
                                    a. If performance involves a series of installments, the buyer cannot reject future
                                         installment unless the nonconformity in the current installment ― impairs the
                                         value of the whole k.‖
       b. §2-106: Definitions: ―Cancellation‖
                 i. ―Cancellation‖ occurs when either party puts an end to the contract for breach by the other and
                    its effect is the same as that of ―termination: except that the canceling party also retains any
                    remedy for breach of the whole contract or any unperformed balance.
       c. §2-508: Cure by Seller of Improper Tender or Delivery; Replacement
                 i. Where any tender or delivery by the seller is rejected because non-conforming and the time for
                    performance has not yet expired the seller may reasonably notify the buyer of his intention to
                    cure and may then within the contract time make a conforming delivery.
                ii. Where the buyer rejects a non-conforming tender which the seller had reasonable grounds to
                    believe would be acceptable with or without money allowance the seller may if he seasonably
                    notifies the buyer have a further reasonable time to substitute a conforming tender.
       d. §2-601: Buyer’s Rights on Improper Delivery
                 i. Subject to the provisions of this Article on breach in installment contracts (§2-612) and unless
                    otherwise agreed under the sections on the contractual limitations of remedy (§2-718 and §2-
                    719), if the goods or the tender of delivery fail in any respect to conform to the contract, the
                    buyer may
                          1. Reject the whole; or
                          2. Accept the whole; or
                          3. Accept any commercial unit or units and reject the rest.
       e. §2-602 Manner and Effect of Rightful Rejection
                 i. Rejection of goods must be within a reasonable time after their delivery or tender. It is
                    ineffective unless the buyer seasonably notifies the seller.
                ii. Subject to the provision of the two following sections on rejected goods (§2-603 and §2-604)
                          1. After rejection any exercise of ownership by the buyer with respect to any commercial
                               unit is wrongful as against the seller; and
                          2. If the buyer has before rejection taken physical possession of goods in which he does
                               not have security interest under a duty after rejection to hold them reasonable care at
                               the seller’s disposition for a time sufficient to permit the seller to remove them; but


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                   3. The buyer has no further obligations with regard to goods right-fully rejected
         iii. The seller’s rights with respect to goods wrongfully rejected are governed by the provisions of
              this Article on Seller’s remedies in general (§2-703)
f.   §2-606: What Constitutes Acceptance of Goods
           i. Acceptance of goods occurs when the buyer
                   1. After a reasonable opportunity to inspect the goods signifies to the seller that the goods
                        are conforming or that he will take or retain them in spite of their non-conforming; or
                   2. Fails to make an effective rejection (Subsection (1) of §2-602), but such acceptance
                        does not occur until the buyer has had a reasonable opportunity to inspect them; or
                   3. Does any act inconsistent with the seller’s ownership; but if such act is wrongful as
                        against the seller it is an acceptance only if ratified by him.
          ii. Acceptance of a party of any commercial unit acceptable of that entire unit
g.   §2-607: Effect of Acceptance; Notice of Breach; Burden of Establishing Breach After Acceptance; Notice
     of Claim or Litigation to Person Answerable Over
           i. The buyer must pay at the contract rate for any goods accepted
          ii. Acceptance of goods by the buyer precludes rejection of the goods accepted and if made with
              knowledge of a non-conformity cannot be revoked because of it unless the acceptance was on
              the reasonable assumption that the non-conformity would be seasonably cured but acceptance
              does not of itself impair any other remedy provided by this Article for non-conformity.
         iii. Where a tender has been accepted
                   1. The buyer must within a reasonable time after he discovers or should have discover any
                        breach notify the seller of breach or be barred from any remedy; and
                   2. Of the claim is one for infringement or the like (subsection (3) or §2-312) and the buyer
                        is sued as a result of such a breach he must so notify the seller within a reasonable time
                        after he receives notice of the litigation or be barred from a remedy over for liability
                        established by the litigation.
         iv. The burden is on the buyer to establish any breach with respect to the good accepted
          v. Where the buyer is sued for breach of warranty or other obligation for which his seller is
              answerable over
                   1. He may give his seller written notice of litigation. If the notice states that the seller may
                        come in and defend and that if the seller does not do so he will be bound in any action
                        against him by his buyer by any determination of fact common to the two litigations,
                        then unless the seller after seasonable receipt of the notice does come in and defend he
                        is so bound.
                   2. If the claim is one for infringement or the like (subsection (3) of §2-312) the original
                        seller may demand in writing that his buyer turn over to him control of the litigation
                        including settlement or else be barred from any remedy over and if he also agrees to
                        bear all expense and to satisfy any adverse judgment, then unless the buyer after
                        seasonable receipt of the demand does turn over control the buyer is so barred.
         vi. The provisions of subsections (3),(4) and (5) apply to any obligation of a buyer to hold the seller
              harmless against infringement or the like (subsection (3) of §2-312)
h.   §2-608: Revocation of Acceptance in Whole or in Part
           i. The buyer may revoke his acceptance of a lot or commercial unit whose non-conformity
              substantially impairs its value to him if he has accepted it.
                   1. On the reasonable assumption that its non-conformity would be cured and it has not
                        been seasonably cured; or
                   2. Without discovery of such non-conformity if his acceptance was reasonably induced
                        either by the difficulty of discovery before acceptance or by the seller’s assurances.
          ii. Revocation of acceptance must occur within a reasonable time after the buyer discovers or
              should have discovered the ground for it and before any substantial change in condition of the
              goods, which is not caused by their own defects. It is not effective until the buyer notifies the
              seller of it.
         iii. A buyer who so revokes has the same rights and duties with regard so the goods as if he had
              rejected them.
i.   §2-709: Action for the Price
           i. When the buyer fails to pay the price as it becomes due the seller may recover, together with any
              incidental damages under the next section, the price,



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                                    Contracts Final Outline
                   1.   Of goods accepted or of conforming goods lost or damaged within a commercially
                        reasonable time after risk of their loss has passed to the buyer; and
                   2. Of goods identified to the contract if the seller is unable after reasonable effort to resell
                        them at a reasonable price or the circumstances reasonably indicate the such effort will
                        be unavailing
          ii. Where the seller sues for the price he must hold for the buyer any goods, which have been
              identified to the contract and are still in his control except that if resale becomes possible he may
              resell them at any time prior to the collection of the judgment. The net proceeds of any such
              resale must be credited to the buyer and payment of the judgment entitles him to any goods not
              resold.
         iii. After the buyer has wrongfully rejected or revoked acceptance of the goods or has failed to make
              a payment due or has failed to make a payment due or has repudiated (§2-610), a seller who held
              not entitled to the price under this section shall nevertheless be awarded damages for non-
              acceptance under the preceding section.
j.   §2-710: Seller’s Incidental Damages.
k.   §2-711 Buyer’s Remedies in General; Buyer’s Security Interest in Rejected Goods
           i. Where the seller fails to make delivery or repudiates or the buyer rightfully rejects or justifiably
              revokes acceptance then with respect to any goods involved, and with respect to whole if the
              breach goes tot eh whole contract (§2-612), the buyer may cancel and whether or not he has
              done so may in addition to recovering so much of the price as has been paid
                   1. ―cover‖ and have damages under the next section as to all the goods affected whether or
                        not they have been identified to the contract; or
                   2. recover damages for non-delivery as provided in this Article (§2-713)
          ii. Where the seller fails to deliver or repudiates the buyer may also
                   1. If the good have been identified recover them as provided in this Article §2-502); or
                   2. In a proper case obtain specific performance or replevy goods as provided in this
                        Article (§2-716)
         iii. On rightful rejection or justifiable revocation of acceptance a buyer has a security interest in
              goods in his possession or control for any payments made on their price and any expenses
              reasonably incurred in their inspection, receipt, transportation, care and custody and may hold
              such goods and resell them in like manner as an aggrieved seller (§2-706).




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XXXV. Impracticability and Frustration: §261, 262, 263; UCC 2-613, 2-615
      a. *Kelly - Impracticability
                i. 1st identify the event or contingency:
               ii. Elements for Impracticability: §261 or §2-615
                         1. The parties entered the K on the basic assumption than event would not occur;
                                  a. Death: if a particular person is critical to performance, parties usually assume
                                       that she will not die or suffer incapacity. §262
                                  b. Destruction of property: If the existence of a particular thing is critical to
                                       performance, parties usually assume that it will not be destroyed, severely
                                       damaged, or prevented from coming into existence. §263
                                  c. Destruction of identified goods: The UCC makes special provision for the
                                       destruction of goods identified in the K at the time of formation. When the
                                       specific thing sold is destroyed, the duty to deliver is discharged. Don’t do §2-
                                       615 analysis.
                                  d. Changes in the law: parties usually assume that performance is legal and will
                                       remain legal. §264.
                         2. The event occurred;
                         3. The event made performance impracticable (not merely more expensive)
                                  a. Restatement requires: ―extreme and unreasonable difficulty, expense, injury
                                       or loss‖ §261 comment d.
                                  b. UCC requires: An increase in cost that ―alters the essential nature of the
                                       performance.‖ UCC §2-615 comment 4.
                                  c. Case Examples:
                                              i. Taylor v. Caldwell: destruction of the concert hall made performance
                                                 impracticable.
                                             ii. CNA & American Casualty v. Arlyn Phoenix: death made
                                                 impracticable.
                                            iii. Eastern Airlines v. Gulf Oil Corp.: Price increase in oil did not equal
                                                 impracticability.
                         4. The party is not at fault for the impracticability
                                  a. Sales of goods v. other K’s: UCC requires good faith and doesn’t mention
                                       fault the way the restatement does.
                                  b. Fault caused event: A party at fault for causing the event to occur is not
                                       excused.
                                  c. Fault caused impracticability: A party at fault for causing the performance to
                                       be impracticable as a result of the event is not excused.
                         5. The party did not agree to perform despite the occurrence of the event.
                                  a. An unqualified duty does not automatically include the burden to perform
                                       despite events that make performance impracticable.
                                  b. Recognized risks: An unqualified duty in the face of a recognized risk may
                                       indicate that the parties intended performance even if the risk materialized.
                                  c. Explicit assumption preferable.
              iii. Remedies:
                         1. Impracticability may excuse performance when uneven partial performance makes it
                             necessary to award a remedy to one party or the other. §272
                                  a. Divisibility: you can do this.
                                  b. Restitution: can be done, but may be offset by reliance expenditures.
              iv. Temporary Impracticability
                         1. Duty suspended: A party’s duty to perform is suspended whil the impracticability lasts
                             but is not automatically discharged.
                         2. Duty discharged: Either party may seek a discharge even though the impracticability is
                             temporary:
                                  a. Party facing impracticability: if performance after the impracticability ends
                                       would be ―materially more burdensome‖ than it was if the impracticability had
                                       not occurred, the duty is discharged. §269




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                           b.    Other party: When impracticability delays performance, rules on material
                                 nonperformance govern the other party’s ability to terminate the K and make
                                 substitute arrangements.
          v. Partial impracticability:
                  1. Under UCC: when events make full performance of all K’s impracticable, a seller must
                       allocate its deliveries (in any fair reasonable manner) among customers. §2-615(b)
                       The UCC also requires notice to customers of the reduction or elimination of deliveries.
                  2. Under R2d: Under some circumstances, a party who can provide part performance
                       must do so. The failure to do that part might be breach. §270.
                            a. Substantial part performance: part performance is not excused for
                                 impracticability if a party can still provide substantial performance under the
                                 K.
                            b. Waiving full performance: part performance is not excused for
                                 impracticability if the other party agrees to render full performance in
                                 exchange for the part performance the party can deliver practicably.
b.    Frustration
                  1. Identify the event!
                  2. Elements: §265
                            a. Nonoccurrence of an event is a basic assumption upon which a K was made
                            b. The event occurred
                            c. The occurrence of the event substantially frustrates the party’s principal
                                 purpose.
                            d. The party was w/out fault in causing the event.
                            e. The K or circumstances didn’t indicate the party agreed to perform anyway.
                  3. When the nonoccurrence of an event is a basic assumption on which the K was made
                  4. the occurrence of the event excuses a party’s nonperformance if, w/out that party’s
                       fault, the event substantially frustrates the party’s principal purpose—unless the K or
                       other circumstances indicate that the party agreed to perform despite the event.
                            a. Sales of goods: The UCC doesn’t mention frustration.
                            b. Same elements as impracticability
                  5. Principal purpose of the K:
                            a. The frustration must effect the essence of the K: an object ―so completely the
                                 basis of the K that, as both parties understand, w/out it the transaction would
                                 make little sense.‖ §265 comment a. (Coronation parade example)
                  6. Substantial frustrated:
                            a. Events that make the K less valuable do not substantially frustrate the K. The
                                 effect must be extreme, must the way effect of impracticability must be
                                 extreme.
c.   *Kelly Mistake v. Impracticability:
           i. Existing circumstances v. subsequent events.
                  1. Frustration and imp. Include both subsequent events and circumstances that existed at
                       the time the K was made. Mistakes concern circumstances only as they existed at the
                       time the K was made.
          ii. Degree of hardship:
                  1. Mistake requires ―material effect on the agreed exchange of performances‖
                       Impracticability requires something much more.
         iii. Allocation of risk:
                  1. Imp and frust require a more explicit allocation.
                  2. Implicit is ok for mistake such as ―as is‖ clauses.
         iv. Voidable v. excuse:
                  1. Mistakes make a K voidable
                  2. Imp and frust. are more moderate.
          v. Mistakes regarding future contingencies:
                  1. Courts occasionally treat mistakes about future contingencies under the mistake
                       doctrine rather than imp or frust.
d.   §261: Discharge by Supervening Impracticability
           i. Where, after a K is made, a party’s performance is made impracticable w/out his fault by the
              occurrence of an event the non-occurrence of which was a basic assumption, on which the K was


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             made, his duty to render that performance is discharged, unless the language or the
             circumstances indicate the contrary.
e.   §262: Death or Incapacity of Person Necessary for Performance
          i. If the existence of a person is necessary for the performance of a duty, his death or such
             incapacity as makes performance impracticable is an event the non-occurrence of which was a
             basic assumption on which the K was made.
f.   §263: Destruction, Deterioration, or Failure to Come Into Existence the Thing Necessary for
     Performance:
          i. If the existence of a specific thing is necessary for the performance of a duty, its failure to come
             into existence, destruction, or such deterioration as makes performance impracticable is an event
             the non-occurrence of which was a basic assumption on which the K was made.
g.   §2-613: Casualty to Identified Goods:
          i. Where the K requires for its performance goods identified when the K was made, and the goods
             suffer casualty w/out the fault of either party before the risk of loss passes to the buyer, or in
             proper case under a ―no arrival, no sale‖ term then
                  1. (a) If the loss is total the K is avoided; and
                  2. (b) If the loss is partial or the goods have so deteriorated as no longer to conform to the
                       K the buyer may nevertheless demand inspection and at his option either treat the K as
                       avoided or accept the goods w/ allowance for the K price for the deterioration or the
                       deficiency in quantity but w/out further fight against the seller.
h.   §2-615: Excuse by Failure of Presupposed Conditions
          i. Except so far as a seller may have assumed a greated obligation and subject to the preceding
             section on substituted performance:
                  1. (a) Delay in deliver or non delivery in whole or in part by a seller who comlies w/
                       paragraphs b and C is not in breach of his duty under K for sale if performance as
                       agreed has been made impracticable by the occurrence of a contingency the non-
                       occurrence of which was a basic assumption on which the K was made or by a
                       compliance in good faith with any applicable foreign or domestic governmental
                       regulation or order whether or not it later proves to be invalid.
                  2. (b) Where the causes mentioned in paragraph A affect only a party of the seller’s
                       capacity to perform, he must allocate production and deliveries among his customers
                       but may at his option include regular customers not then under K as well as his own
                       requirements for further manufacture. He may so allocate in any manner, which is fair
                       and reasonable.
                  3. (c) The seller must notify buyer seasonably that there will be delay or nondelivery and,
                       when allocation is required under B, of the estimated quota thus made available to
                       buyer.
i.   §265: Discharge by Supervening Frustration
          i. Where after a K is made a party’s principle purpose is substantially frustrated w/out his fault by
             the occurrence of an event the non-occurrence of which was a basic assumption on which the K
             was made, his remaining duties to render performance are discharged, unless the language or
             circumstances indicate the contrary.




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XXXVI. Promissory Estoppel
       a. Elements:
                 i. §90: Promise reasonably inducing action or forbearance
                        1. (1) A promise which the promisor should reasonably expect to induce action or
                            forbearance on the part of the promissee or a third person and which does induce such
                            action or forbearance is binding if injustice can be avoided only by enforcement of the
                            promise. The remedy granted for breach may be limited as justice requires.
                        2. (2) A charitable subscription or marriage settlement is biding under subsection (1)
                            without proof that the promise induced action or forebearance.
                        3. *Elements
                                 a. Promise
                                 b. Reliance: action or forbearance (in the way the promisor reasonably
                                      should have expected)
                                 c. Detriment: Injustice can be avoided only by enforcement.
                                 d. Promisor reasonably should have expected the reliance.
                ii. *Family promises:
                        1. Rickets v. Scothorn: when the payee changes her position to her disadvantage, in
                            reliance on a promise, a right of action of the promise arises.
                                 a. Don’t look for bargain – there is none – but the reliance estopps the assertion
                                      of that fact.
              iii. *Promises of a pension:
                        1. Feinberg v. Pfeiffer Co.:
                                 a. Rule: a promise which the promisor should reasonably expect to induce action
                                      or forbearance of a definite and substantial character on the part of the
                                      promisee and which does induce such action or forbearance is biding if
                                      injustice can be avoided only by enforcement of the promise.
                                 b. Rule: in a business context we usually assume that the parties know about
                                      consideration.
                                 c. Rule: circular reasoning problem: if you rely on a K because you think it is
                                      enforceable and the courts look to whether or not your relied to decide if it is
                                      enforceable.
               iv. The development of promissory estoppel as a substitute or consideration:
                        1. Promissory estoppel: a promise that is enforceable if the promisor should reasonably
                            except that it will induce action or forebearance on the part of the promisee, and does in
                            fact cause such action or forbearance, and it is the only means of avoiding injustice.
                        2. Reliance: dependence on a fact that causes a party to act or refrain from acting.
                        3. Equitable estoppel: A doctrine that precludes a person from asserting a right to which
                            he or she was entitled due to his or her action, conduct, or failing to act, causing another
                            party to justifiably rely on such conduct to his or her detriment.
                        4. Action in reliance: reason to enforce a K even if there is no consideration.
                v. *Kelly – Reliance implicitly sought: Some promisors hope for a return but do not expressly




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XXXVII.    Incompetence
      a.   Infants
                 i. An infants power to avoid a K:
                         1. Age, not appearance defines infancy.
                         2. In some states, marriage negates infancy
                         3. Ratification after reaching the age of majority waives the defense
                         4. K’s for necessaries are not avoidable:
                ii. Protections for parties unaware of another’s infancy:
                         1. Exempt transactions: some transactions are exempt like bank w/drawls or insurance
                             K’s – depends on statutes.
                         2. Fraudulent representation of age: equitable estoppel may prevent the infant from
                             asserting this defense.
                         3. Limitations on restitution: you get less in regards to restitution for K’s with infants, but
                         4. Specific restitution is available.
                                  a. Adjustment for use: in some states a minor’s recovery of amounts paid is
                                      reduced to account for the value of her use of the property.
                         5. Restitution in money is generally unavailable:
                                  a. You can get what the kid sold the thing for.
                                  b. You can’t probably get fair market value of a nonreturnable item.
      b.   Mental Illness or defect §15 :
                 i. Poor education or lack of forethough is no defense.
                ii. Cognitive incapacity:
                         1. This type of incapacity is what most people think of mental illness. The person does
                             not understand what the transaction entails and therefore her assent is not evidence that
                             she valued what she received more than what she gave up.
               iii. Volitional incapacity:
                         1. may apply to someone who understands exactly what the transaction entails and who
                             evinces that understanding by asking cogent and perceptive questions about the
                             transaction. Nonetheless, if the disorder prevents her from excercising FREE CHOICE,
                             she may later avoid the K..
                         2. Ortelere v. Teachers’ Retirement Board of NY:
               iv. Protections for parties unaware of another’s mental illness:
                         1. Necessaries: Some states enforce K’s that provide necessaries for the mentally ill.
                         2. Reason to know: works for volition incapacity.
                         3. Exception for good faith: When a party has dealt in good faith w/ a mentally ill person,
                             courts may enforce K’s w/ the mentally ill to protect reliance.
                                  a. Unaware of the mental illness or defect: ―reason to know in the comments‖
                                  b. Detrimental reliance: After partial performance or other changes in
                                      circumstances, prejudice to the other party may be so great that avoidance
                                      would be unjust. (particularly if restitution would be limited)
                                  c. Fair terms:
                         4. Effect of the exception:
                                  a. K becomes enforceable.
                                  b. Limited relief: ―may grant relief as justice requires‖ sounds like reliance
                                      interest in §90.
      c.   Intoxication:
                 i. An intoxicated person’s power to avoid a K
                         1. Cognitive and volitional incapacity:
                         2. Reason to know of intoxication:
                                  a. Awareness is probably not enough. The other party must have reason to know
                                      that intoxication has left the person unable to understand the transaction or
                                      unable to act reasonably. §16 comment b.
                                  b. Exception for inducement: A person who induces another’s intoxication may
                                      be unable to obtain enforcement even if the intoxicated person cannot prove
                                      that person had reason to know that intoxication was sufficiently sever to
                                      produce an incapacity.
                ii. Drugs and other nonalcoholic substances count: §16 comment a.


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        iii. Protections for parties unaware of another’s intoxication:
                   1. Reason to know:
                   2. Timely disaffirmance: an intoxicated person must disaffirm a K promptly after
                       becoming sober.
                   3. Tender returns benefits: The intoxicated person (like others seeking restitution) must
                       offer to return any consideration she received under the K at the time she disaffirms the
                       K.
d.   §12: Capacity to contract
          i. (1) No one can be bound by contract who has not legal capacity to incur at least voidable
              contractual duties. Capacity to contract may be partial and its existence in respect of a particular
              transaction may depend upon the nature of the transaction or upon other circumstances.
         ii. (2) A natural person who manifests assent to a transaction has full legal capacity to incur
              contractual duties thereby unless he is
                   1. (a) Under guardianship, or
                   2. (b) An infant, or
                   3. (c) Mentally ill or defective, or
                   4. (d) Intoxicated.
e.   §13: Persons affected by guardianship
          i. A person has no capacity to incur contractual duties if his property is under guardianship by
              reason of an adjudication of mental illness or defect.
f.   §14: Infants
          i. Unless statute provides otherwise, a natural person has the capacity to incur only voidable
              contractual duties until the beginning of the day before the person’s 18th birthday.

g.   §15: Mental Illness or defect
          i. (1) A person incurs only voidable contractual duties by entering into a transaction if by reason of
              mental illness or defect
                   1. (a) He is unable to understand in reasonable manner the nature and consequences of the
                       transaction, or (Cognitive)
                   2. (b) He is unable to act in a reasonable manner in relation to the transaction and the
                       other party has reason to know of his condition (volitional)
         ii. (2) (exception) Where the K is made on fair terms and the other party is w/out knowledge of the
              mental illness or defect, the power of avoidance under (1) terminates to the extent that the K has
              been so performed in whole or in part or the circumstances have so changed that avoidance
              would be unjust. In such a case a court may grant relief as justice requires.
h.   §16: Intoxicated persons
          i. A person incurs only voidable contractual duty by entering into a transaction if the other party
              has reason to know that by reason of intoxication
                   1. (a) He is unable to understand in a reasonable manner the nature and consequences of
                       the transaction, or (cognitive)
                   2. (b) He is unable to act in a reasonable manner in relation to the transaction. (Volitional)




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XXXVIII.   Misrepresentation: §§159, 160, 161, 162, 163, 164, 167, 168, 169, 172
      a.   Elements
                i. A misrepresentation was made
               ii. The misrepresentation was either fraudulent or material.
              iii. The misrepresentation induced her manifestation of assent; and
              iv. She was justified in relying on the misrepresentation.
      b.   A Misrepresentation:
                i. Misrepresentation: is ―an assertion not in accord w/ the facts.‖ §159
               ii. Implied assertions: Assertions need not be express. Sometimes, actions or silence can be
                   assertions.
              iii. Non-factual assertions: Assertions are not limited to statements of fact, statements of
                   opinion, promises, and statements about the law all are assertions.
                        1. Promises: A promise implies that the party intends to perform – this is either true
                            or false.
                        2. Opinions: A statement of opinion implies that the person ACTUALLY holds that
                            opinion.
                        3. Law: the law is particular kind of fact, and assertions about it can be true or false.
      c.   Fraudulent if;
                i. The party ―intends the assertion to induce another party to manifest assent to the
                   agreement‖ AND
               ii. One of the three following conditions applies:
                        1. The speaker knows or believes the assertion is false; or
                        2. The speaker does not have the confidence she states or implies in the truth of the
                            assertion‖; or
                        3. The speaker ―knows she does not have the basis that she states or implies for the
                            assertion.‖
      d.   Material if;
                i. ―it would be likely to induce a reasonable person to manifest assent to the agreement; or
               ii. ―The maker knows that it would be likely to induce‖ the other party manifest assent to the
                   agreement.
                        1. Objective and Subjective test.
      e.   Concealment:
                i. An active attempt to prevent the other party from discovering the true state of affairs.
                   §160
      f.   Nondisclosure as a representation:
                i. Correct known mistake re content of writing: When a party knows that disclosure of a fact
                   would correct the other party’s mistake as to the contents of a writing embodying an
                   agreement, she must disclose the additional facts. §161(c)
               ii. Relation of trust: ―Where the other person is entitled to know the fact because of a
                   relation of trust and confidence between them‖ she must disclose the additional facts.
                   §161(d)
      g.   *Good faith and known mistakes of basic assumption:
                i. Basic assumption: Must be a mistake about a fundamental aspect of the transaction.
               ii. Known mistake: The deceiver must know about the mistake. Reason to know plays no
                   role here.
              iii. Goodfaith: The law does not require disclosure fore every known mistake by the other
                   party. Unless good faith or reasonably standards of air dealing require disclosure, silence
                   is not an assertion.
      h.   Voidable:
                i. Misrepresentation by third parties will make the K voidable UNLESS the other party to
                   the K relies materially on the agreement in good faith and w/out reason to know of the
                   misrepresentation. §164(2)
      i.   When justified:
                i. Justified reliance: usually you can rely on the assertions of the other party.
                        1. Opinions: To the extent that opinions assert facts a party may justifiably rely on
                            them. §168



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         ii. *An honest opinion as to the monetary value of property, state as an opinion, is not
             fraudulent misrepresentation.
        iii. *Where one party has superior knowledge, statements made w/in the area of such
             knowledge may be treated as statements of fact.
j.
k. §159: Misrepresentation defined
        i. A misrepresentation is an assertion that is not in accord with the facts
l. §160: When action is equivalent to an assertion (concealment)
        i. An action intended or known to be likely to prevent another from learning a fact is equivalent to
           an assertion that the fact does not exist. (Concealment: actively preventing the other party from
           finding the truth)
m. §161: When non-disclosure is equivalent to an assertion
        i. A person’s non-disclosure of a fact known to him is equivalent to an assertion that the fact does
           not exist in the following cases only:
                1. (a) Where he knows that disclosure of the fact is necessary to prevent some previous
                     assertion from being a misrepresentation or from being fraudulent or material.
                          a. *halftruths: if something you have said would be misleading unless you share
                               the rest of it—reveal something else—then that failure to reveal might
                               nondisclosure
                2. (b) Where he knows that disclosure of the fact would correct a mistake of the other
                     party as to a basic assumption on which that party is making the K and if non-disclosure
                     of the fact amounts to a failure to act in good faith and in accordance w/ reasonable
                     standards of fair dealing.
                          a. *If you know the other party is making a mistake about a basic assumption,
                               and failure to speak up would breach good faith and fair dealing - need not
                               actually know that the other is mistaken, something else gives you some
                               requirement to speak up, such as good faith.
                3. (c) Where he knows that disclosure of the fact would correct a mistake of the other
                     party as to the contents or effect of a writing, evidencing or embodying an agreement in
                     whole or in part.
                4. (d) Where the other person is entitled to know the fact because of a relation of trust and
                     confidence between them.
n. §162: When a misrepresentation is fraudulent or material
        i. (1) A misrepresentation is fraudulent if the maker intends his assertion to induce a party to
           manifest his assent and the maker
                1. (a) Knows or believes that the assertion is not in accord with the facts, or
                2. (b) Does not have the confidence that he states or implies in the truth of the assertion, or
                3. (c) Knows that he does not have the basis that he states or implies in the assertion.
       ii. (2) A misrepresentation is material if it would be likely to induce a reasonable person to manifest
           his assent, or if the makes knows that it would be likely to induce the recipient to do so.
o. §163: When a misrepresentation prevents the formation of a contract (void)
        i. `If a misrepresentation as to the character or essential terms of a proposed K induces conduct
           that appears to be a manifestation of assent by one who neither knows nor has the opportunity to
           know of the character or essential terms of the proposed K, his conduct is not effect as a
           manifestation of consent.
p. §164: When a misrepresentation makes a K voidable
        i. (1) If a party’s manifestation of assent is induced by either a fraudulent or material
           misrepresentation by the other party upon which the recipient is justified in relying, the K is
           voidable by the recipient.
       ii. (2) If a party’s manifestation of assent is induced by either fraudulent or a material
           misrepresentation by one who is not a party to the transaction upon which the recipient is
           justified in relying, the K is voidable by the recipient, unless the other party to the transaction in
           good faith and w/out reason to know of the misrepresentation either gives value or relies
           materially on the transaction.
q. §167: When a misrepresentation is an inducing cause
        i. A misrepresentation induces a party’s manifestation of assent if it substantially contributes to his
           decision to manifest his assent. (subjective)
r. §168: Reliance on assertions of opinion


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          i. (1) An assertion is one of opinion if it expresses only a belief, w/out certainty, as to the existence
             of a fact or expresses only a judgment as to quality, value, authenticity, or similar matters.
         ii. (2) If it is reasonable to do so, the recipient of an assertion of a person’s opinion as to facts not
             disclosed and not otherwise known to the recipient may properly interpret it as an assertion
                  1. (a) That the facts are known to that person are not incompatible w/ his opinion, or
                  2. (b) That he knows facts sufficient to justify him in forming it.
s.   §169: When reliance on an assertion of opinion is not justified.
          i. To the extent that an assertion is one of opinion only , the recipient is not justified in relying on
             it unless the recipient
                  1. (a) Stands in such a relation of trust and confidence to the person whose opinion is
                        asserted that the recipient is reasonable in relying on it, or
                  2. (b) Reasonably believes that, as compared with himself, the person whose opinion is
                        asserted has special skill, judgment or objectivity w/ respect to the subject matter, or
                  3. (c) Is for some other special reason particularly susceptible to a misrepresentation of the
                        type involved.
         ii. *Kelly
                  1. Pure non-assertive opinions: An opinion does not assert facts when a party does
                        not imply that she knows any facts that support the opinion. Reliance on pure
                        opinion is not usually justified. §169.
                             a. Exception: relationship of trust and confidence.
                             b. Exception: special expertise.
                  2. Exception: Special susceptibility.
t.   §172: When fault makes reliance unjustified
          i. A recipient’s fault in not knowing or discovering the facts before making the K does not make
             his reliance unjustified unless it amounts to a failure to act in good faith and in accordance w/
             reasonable standards of fair dealing.
         ii. *Kelly
                  1. Usually a deceived party is not blamed for having believed and relied on another’s
                        misrepresentation. If the deceived party’s ignorance results from a ―failure to act
                        in good faith and in accordance with reasonable standards of fair dealing‖ reliance
                        on the misrepresentation is unjustified. §172
                             a. Known to be false: A party cannot justifiably rely on an assertion she
                                 knows is false.
                             b. Obviously false: where a cursory examination will reveal the falsity of an
                                 assertion, a party cannot justifiably rely on the assertion.
                             c. Significant investigation: when discovery of the truth would require
                                 significant effort, the party generally is entitled to rely on the
                                 misrepresentation.
                  2. Actual investigation: may suggest that she did not rely on the misrepresentation,
                        but does not change the requirements for justifiable reliance.




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XXXIX. Duress
       a. Kelly
               i. Elements
                       1. Threat
                                 a. Virtually any offer of an exchange can be characterized as a threat.
                                 b. A threat need not be stated expressly: ―that’s a nice family you have there, it
                                     would be a shame if anything were to happen to them‖ counts
                       2. Improper
                                 a. If the threatened act is a crime or a tort. (violence, or not taking reasonable
                                     precaution to prevent an accident)
                                 b. The threatened act would be a crime or a tort if the threatening party obtained
                                     property as a result of the threat. (blackmail)
                                 c. The threatened act is a criminal prosecution:
                                           i. A good faith explanation of possible criminal consequences may not
                                               constitute a threat.
                                 d. The threatened act is the use of civil process in bad faith.
                                 e. Would breach an obligation of good faith and fair dealing.
                                 f. When a threat results in a K not on fair terms, the threat is improper if
                                           i. The threatened act would harm the threatened party w/out
                                               significantly benefiting the threatening party.
                                          ii. The threat has been made significantly more effective by prior unfair
                                               dealing. (weakness increases the susceptibility to a threat). Example:
                                               unfair dealing drives opponent to bankruptcy – you can’t threaten not
                                               to pay him.
                                         iii. The threatened act is a use of power for illegitimate ends. (open for
                                               the court)
                                 g. No standard exists for what = fair terms.
                       3. Induced assent
                                 a. Significantly contribute to the decision (not can the  absolutely prove that he
                                     would not have made the decision w/out the threat – just that it was a
                                     significant factor. If  can prove  would have, its induced assent)
                                 b. Subjective test: did it induce THIS person’s assent, not what the reasonable
                                     person would have done. §167
                       4. Lack of reasonable alternatives
                                 a. Need to find a way that the person could have
                                           i. Said no and
                                          ii. Avoided the threatened consequences
                                 b. Ask should you have protected yourself by saying no instead of coming to law
                                     after saying yes?
                       5. Not and element: Threats by third parties:
                                 a. Good faith reliance: threats by a third party will make the K voidable unless
                                     the other party to the K relies materially on the agreement in good faith and
                                     w/out reason to know of the duress. §175(2)
                                 b. Indirect threats: A person who makes a threat at the behest of a party to the K
                                     may be an agent of that party.
                                 c. Reason to know: when a party to know about the threat, reliance is
                                     unreasonable, and there for does not require judicial protection.
       b. *You can modify a sale for goods and services. UCC
       c. §174: When duress by physical compulsion prevents formation of a K.
               i. If conduct that appears to be the manifestation of assent by a party who does not intend to
                  engage in that conduct is physically compelled by duress, the conduct is not effective as a
                  manifestation of assent.
       d. §175: When duress by threat makes a K voidable
               i. (1) If a party’s manifestation of assent is induced by an improper threat by the other party that
                  leaves the victim no reasonable alternative, the K is voidable by the victim. .




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                                   Contracts Final Outline
         ii. (2) If a party’s manifestation of assent is induced by one who is not party to the transaction, the
             K is voidable by the victim unless the other party to the transaction in good faith and w/out
             reason to know of the duress either gives value or relies materially on the transaction.
e.   §176: When a threat is improper
          i. (1) A threat is improper if
                  1. (a) What is threatened is a crime or a tort, or the threat itself would be a crime or a tort
                       if it resulted in obtaining property.
                  2. (b) What is threatened is a criminal prosecution
                  3. (c) What is threatened is the use of civil process and the threat is made in bad faith, or
                  4. (d) The threat is a breach of a duty of good faith and fair dealing under the K w/ the
                       recipient
         ii. (2) A threat is improper if the resulting exchange is not on fair terms, and
                  1. (a) The threatened act would harm the recipient and would not significantly benefit the
                       party making the threat,
                  2. (b) The effectiveness of the threat in inducing the manifestation of assent is
                       significantly increased by prior unfair dealing by the party making the threat, or
                  3. (c) What is threatened is otherwise a use of power for illegitimate ends. (catchall)




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XL.   Undue Influence
      a. *Elements (undue influence and inducement)
               i. (1) Undue Influence
                       1. (a) Elements: Unfair persuasion and
                       2. (b) Either domination or special relationship
                                 a. Domination: dependency, overbearing presence (physical size), relationship –
                                      authority (employee)
                                 b. Special relationship: You believe that the other person is looking out for your
                                      best interest. Trustees to fiduciary beneficiaries, clergy, close friendship,
                                      family members, lawyers to their clients, arguable husband and wife.
                       3. Conditions typically giving rise to a finding of undue influence:
                                            i. Time and place of assent
                                           ii. Rushed assent
                                 b. Breaching of the subject at an improper moment
                                 c. Completion of the agreement in a peculiar location
                                 d. Excessive stress on the need for consummation of the transaction
                                 e. Several dominant parties and a single victim
                                 f. Lack of independent advisors to the victim
                                 g. An absence of time in order to consult such advisors.
                       4. 3rd parties: Undue influence by a third party will make the K voidable unless the other
                            party to the K relies materially on the agreement in good faith and w/out reason to
                            know of the influence. §177(3)
              ii. (2) Inducement (did it induce assent?)(see duress)
      b. *Odorizzi v. Bloomfield School District: undue influence is exerted where the injured party’s
         independent will is overpowered by that of a superior party, or his agents, at a time at which the victim
         was particularly vulnerable.
      c. §177: When undue influence makes a K voidable
               i. (1) Undue influence is unfair persuasion of a party who is under domination of the person
                  exercising the persuasion or who by virtue of the relation between them is justified in assuming
                  that that person will not act in a manner inconsistent with his welfare.
              ii. (2) If a party’s manifestation of assent is induced by undue influence by the other party, the K is
                  voidable by the victim.
             iii. (3) If a party’s manifestation of assent is induced by one who is not a party to the transaction, the
                  K is voidable by the victim unless the other party to the transaction in good faith and w/out
                  reason to know of the undue influence either gives values or relies materially on the transaction.




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XLI.   Unconscionability:
                i. *Comments:
                        1. Scope:
                                 a. The determination that a K or term is or is not unconscionable is made in light
                                       of its setting, purpose, and effect.
                                 b. Relevant factors include weaknesses in the contracting process
                        2. Historic standards:
                                 a. Such as no man in his senses and not under delusion would make on the one
                                       hand, and a s no honest and fair man would accept on the other.
                                 b. Damages were then limited to those which the aggrieved party was
                                       ―equitably‖ entitled.
                                              i. Where the sum total of its provision direves too hard a bargain for a
                                                  court of concience to assist.
                        3. Overall imbalance:
                                 a. Inadequacy of consideration does not of itself invalidate a bargain, but gross
                                       disparity in the values exchange may be an important factor in a determination
                                       that a K is unconscionable and may be sufficient ground, w/out more, for
                                       denying specific performance.
                        4. Weakness in the bargaining process
               ii. *Kelly
                        1. Effects of an unconscionable K court may,
                                 a. Refuse to enforce the K; or
                                 b. Enforce the K but refuse to enforce a term; or
                                 c. Limit the effect of the term to limit the unfair result.
                        2. Elements of Unconscionability: (at time of formation!)
                                 a. The term or its effect UNFAIRLY SURPRISES the adversely affected
                                       party; and
                                              i. When the term was not apparent to the party at the time the K was
                                                  mad, her assent may not indicate that she valued the performance w/
                                                  the term more than she valued what she gave in exchange UCC 2-302
                                             ii. Examples of no fair notice: hidden in the type, confusing language,
                                                  no opportunity to read.
                                 b. The effect of the term is UNREASONABLY FAVORABLE to the other
                                       party.
                                              i. When the surprising term unreasonably favors one party, courts
                                                  wonder whether the disfavored party really would have assented if
                                                  aware of the term. Williams v. Walker-Thomas Furn.
                                             ii. Specific analysis of each clause’s purpose is needed to explain why it
                                                  is unreasonably favorable. A decent business reason might be OK.
                        3. Some courts consider more:
                                 a. If a term has harsh or oppressive consequences.
                                 b. If a party has undue bargaining power.
                                 c. Lack of reasonable choice
              iii. Adhesion K’s
                        1. Effects of an unfair K of adhesion
                                 a. Court might interpret ambiguities against the drafter.
                                 b. Interpret unambiguous terms in a manner consistent w/ the reasonably
                                       expectations of the party who didn’t draft it.
                                 c. Declaring certain terms of the K void because they violate public policy.
                        2. Benefits of adhesion K’s:
                                 a. Drafting error is lower, legal costs lower, consistency, lower transaction costs.
                        3. Dangers of adhesion K’s:
                                 a. Inflexibility, uniformity, one-sided terms.
              iv. * Willie v. Southwestern Bell Telephone Co.: Where, in light of the general commercial
                   background of a particular case, it appears that gross inequality of bargaining power between the
                   parties has led to the formation of a K on terms which one party has had no meaningful choice, a
                   court should refuse to enforce such a K on the ground that it is unconscionable.


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         v. *In Re Realnetworks: a licensing agreement is not procedurally unconscionable, nor does it fail
             to provide fair notice of its contents, merely because it is contained as part of a licenses in a pop-
             up window on an internet site.
        vi. * Ten common factors involved in determining Unconscionability:
                  1. The use of printed form or boilerplate K’s drawn skillfully by the party in the strongest
                       economic position.
                  2. A significant cost-price disparity or excessive price
                  3. A denial of basic rights and remedies to a buyer of consumer goods.
                  4. The inclusion of penalty clauses.
                  5. The circumstances surrounding the execution of the K, including its commercial
                       setting, its purpose and actual effect.
                  6. The hiding of clauses which are disadvantageous to one party in a mass of fine print
                       trivia or in places whch are inconspicuous to the party signing the K.
                  7. Phrasing clauses in language that is incomprehensible to a layman or that diver his
                       attention from the problems raised by them or the rights given up through them
                  8. An overall imbalance in the obligations and rights imposed by the bargain
                  9. Exploitation of the underprivileged, unsophisticated, uneducated and the illiterate.
                  10. Inequality of bargaining or economic power.
b.   The UCC: §2-302: Unconscionable K or Clause
          i. (1) If the court as a matter of law finds the K or any clause of the K to have been unconscionable
             at the time it was made the court may refuse to enforce the K, or it may enforce the remainder of
             the K w/out the unconscionable clause, or it may so limit the application of any unconscionable
             result.
         ii. (2) When it is claimed or appears to the court that the K or any clause thereof may be
             unconscionable the parties shall be afforded a reasonable opportunity to present evidence as to
             its commercial setting, purpose and effect to aid the court in making the determination.
c.   §208: Unconscionable K or Term
          i. If a K or term thereof is unconscionable at the time the K is made a court may refuse to enforce
             the K, or may enforce the K, or may enforce the remainder of the K w/out the unconscionable
             term, or may so limit the application of any unconscionable term as to avoid any unconscionable
             result.




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XLII.   Failure of basic assumption:
        a. §151: Mistake defined
                   i. A mistake is a belief that is not in accord w/ the facts.
                  ii. *Comments: ―mistake‖ is used to refer to an erroneous belief.
                 iii. *Comments: The belief need not be an articulated one, and a party may have a belief as to a fact
                      when he merely makes an assumption w/ respect to it, w/out being aware of alternatives.
                 iv. *Comments: The erroneous belief must relate to the facts as they exist at the time of the making
                      of the K.
        b. §152: When mistake of both parties makes a K voidable
                   i. (1) Where a mistake of both parties at the time a K was made as to a basic assumption on which
                      the K was made has a material effect on the agreed exchange of performances, the K is voidable
                      by the adversely affected party unless he bears the risk of the mistake under §154.
                  ii. (2) In determining whether the mistake has a material effect on the agreed exchange of
                      performances, account is taken of any relief by way of reformation, restitution, or otherwise.
                 iii. *Kelly
                           1. Elements of Mutual Mistake
                                     a. The mistake involved facts at the time the K was formed;
                                     b. The mistake concerned a basic assumption upon which the agreement was
                                         made;
                                     c. The mistake materially affected the agreed exchange; AND
                                     d. The adversely affected party did not bear the risk of mistake.
        c. §154: When a party bears the rise of a mistake
                   i. A party bears the risk of a mistake when
                           1. (a) The risk is allocated to him by agreement of the parties, or
                           2. (b) He is aware, at the time the K is made, that he has only limited knowledge w/
                                respect to the facts to which the mistake relates, but treats his limited knowledge as
                                sufficient, or (conscious ignorance)
                           3. (c) The risk is allocated to him by the court on the ground that it is reasonable in the
                                circumstances to do so.
                  ii. *Kelly
                           1. Bear risk when:
                                     a. Allocated by K
                                     b. Conscious ignorance
                                                i. Negligence is insufficient
                                     c. Judicial allocation
                                                i. Who is in the best position to insure against loss?
                                               ii. Availability of other relief. – who can go after REAL wrongdoer?
                                              iii. Who had ability to prevent mistake?
        d. §157: Effect of fault of party seeking relief
                   i. A mistaken party’s fault rules in failing to know or discover the facts before making the K does
                      not bar him from avoidance or reformation under the rules state in this chapter, unless his fault
                      amounts to a failure to act in good faith and in accordance w/ reasonable standards of fair
                      dealing.
                  ii. *Kelly:
                           1. Negligence is not enough – must be a breach of good faith and fair dealing.
        e. §158: Relief including restitution
                   i. (1) In any case governed by the rules state in this chapter, either party may have a claim for
                      relief including restitution under the rules state in §240 and §376.
        f. *Mutual Mistake
                   i. Sherwood v. Walker: Where the parties to a K for the sale or personal property are mutually
                      mistaken as to a material fact which affects the substance of the whole consideration, the K is
                      unenforceable. (pregnant cow)
                  ii. Nester v. Michigan Land & Iron Co.: A party may not seek to modify an agreement based on
                      mutual mistake as to the quantity or quality of goods being exchanged, absent a guaranty in the
                      K’s provisions assuring their acceptability. (timber)




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iii. Wood v. Boynton: In the absence of evidence of fraud on the part of the vendee, a mutual
     mistake as to the nature and value of a thing sold will not afford a basis for rescission of the K of
     sale. (diamond)
iv. Lenawee County Board of Health v. Messerly: (house probs) Where both parties to a K are
     mutually mistaken as to a basic supposition upon which the agreement was predicated, thereby
     affecting the parties’ obligations pursuant to the K, the court may grant the equitable remedy of
     rescission where the particular circumstances warrant.




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XLIII.   Unilateral Mistake:
         a. *Kelly
                   i. A party bears the risk of mistake if:
                            1. The K allocates the risk to her; or
                            2. She entered the K even though aware that she lacked information concerning the
                                 mistaken assumption; and
                            3. The court finds it reasonable to allocate the risk to the party.
                  ii. Elements of Unilateral Mistake:
                            1. Enforcement of the agreement would be unconscionable; or
                            2. The party not mistaken caused the other party’s mistake; or
                            3. The party not mistaken had reason to know of the other party’s mistake.
         b. §153: When mistake of one party makes a K voidable
                   i. Where a mistake of one party at the time a K was made as to a basic assumption on which he
                      made the K has a material effect on the agreed exchange of performances that is adverse to him,
                      the K is voidable by him if he does not bear the risk of the mistake under the rule state in §154,
                      an
                            1. (a) The effect of the mistake is such that enforcement of the K would be
                                 unconscionable, or
                            2. (b) The other party had reason to know of the mistake or his fault caused the mistake.
                  ii. *Kelly
                            1. Elements of Unilateral mistake:
                                      a. Enforcement would be unconscionable; OR
                                                i. Significantly disadvantageous, but would have been
                                                    advantageous but for the mistake.
                                      b. The other party caused the mistake; OR
                                                i. This misrepresentation has advantages because it can override an
                                                    ―as is‖ clause or other allocation of risk.
                                      c. The other party had reason to know of the mistake.
                 iii. *Tyra v. Cheney: Where one party to a K is unilaterally mistaken as to an essential K term, and
                      the other party is aware of his error, the agreement fails to constitute a binding K.
                 iv. *Drennan v. Star Paving Co.: ’s mistake should not defeat recovery under the rule of §90 as
                      between the subcontractor who made the bid and the general contractor who reasonably relied on
                      it, the loss resulting from the mistake should fall on the party who caused it.
                  v. *Laidlaw v. Oregon: A party to an agreement who has exclusive knowledge of extrinsic
                      circumstances that might influence the price of the commodity is not under a duty to disclose
                      such knowledge to the other party where the information is equally available to both.




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                        1.
XLIV. Public Policy: §§178, 179
      a. Elements:
                i. In assessing the interests in favor of enforcing K’s, courts consider:
                        1. The parties’ justified expectations
                                  a. If know it is illegal then reliance is unjustified. If think its legal then
                                      frustrating expectations should not be done lightly.
                        2. Any forfeiture if enforcement were denied; and
                                  a. Look for unjust enrichment (labor)
                        3. Any special public interest in enforcement.
                                  a. When the promise benefits the public, courts weigh the benefit
               ii. In assessing the public policy against enforcement of K’s, courts consider
                        1. The strength or importance of the policy involved;
                                  a. Felonies = strong: Misdemeanors = weak: antiquated regulation = very weak.
                        2. The likelihood that non-enforcement would advance the policy goal;
                                  a. When refusal to enforce the agreement will not further the public policy at
                                      issue, the interests in enforcement of the K may outweigh the policy against
                                      enforcement.
                        3. The seriousness of any misconduct;
                                  a. When the K involves serious misconduct, the policy against enforcement
                                      increases.
                        4. The deliberateness of any misconduct; and
                                  a. When misconduct was inadvertent, enforcement of the agreement may be
                                      appropriate.
                        5. The directness of the connection between the K term and the misconduct.
                                  a. When the connection is remote, refusal to enforce seems less appropriate
                                             i. Agreements induced by illegal acts: not enforceable.
                                            ii. Agreements performed by illegal acts: enforceability depends on
                                                 knowledge at time of formation as to what is necessary to complete
                                                 the deal.
                                           iii. K’s that tend to induce violations of public policy: even though not
                                                 requiring an illegal act, a K may create an incentive to violate public
                                                 policy.
              iii. Contracts in restraint of trade are unenforceable, w/ some exceptions:
                        1. A limited restraint of trade ancillary to a valid agreement is enforceable
                        2. To be reasonable, a restraint of trade must:
                                  a. Apply for a reasonably limited amount of time
                                  b. Apply within a reasonably limited geographic area, and
                                  c. Apply to a reasonably limited range of trade activities
      b. §178: When a term is unenforceable on grounds of public policy.
                i. (1) A promise or other term of an agreement is unenforceable on grounds of public policy if
                   legislation provides that it is unenforceable or the interest in its enforcement is clearly
                   outweighed in the circumstances by a public policy against the enforcement of such terms.
               ii. (2) In weighing the interest in the enforcement of a term, account is taken of
                        1. (a) The parties’ justified expectations
                        2. (b) Any forfeiture that would result if enforcement were denied, and
                        3. (c) Any special public interest in the enforcement of a particular term.
              iii. (3) In weighing a public policy against enforcement of a term, account is taken of
                        1. (a) The strength of that policy as manifested by legislation or judicial decisions,
                        2. (b) The likelihood that a refusal to enforce the term will further that policy,
                        3. (c) The seriousness of any misconduct involved and the extent to which it was
                             deliberate, and
                        4. (d) The directness of the connection between that misconduct and the term.
              iv. *Kelly
                        1. The presumption lies w/ enforcement.
                        2. Restitution is not available in most public policy cases – court leaves folks as it finds
                             them.
                                  a. Exception: excusable ignorance and laudable regret.


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                                   Contracts Final Outline
c.   §179: Bases of Public Policies Against Enforcement:
           i. A public policy against the enforcement of promises or other terms may be derived by the court
              from
                   1. (a) Legislation relevant to such a policy, or
                   2. (b) The need to protect some aspect of the public welfare, as is the case for the judicial
                        policies against
          ii. *Kelly
                   1.
        iii. * If statute declares that a contract is unenforceable, courts will not enforce contract
         iv. *If public policy against enforcement clearly outweighs interest of enforcement – no go
          v. * Express contracts among family members are enforceable if clear and convincing evidence.
                   1. Courts less inclined to enforce implied contracts
         vi. *Contracts altering family status may violate public policy – though there is willingness to allow
              parties to shape their rights within family agreements have eroded policy
        vii. *Contracts creating informal families are increasingly enforceable, though with limits similar to
              those within the family




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XLV. Equitable Relief: Specific Performance UCC §2-716.
      a.   *Kelly
                i. Definition: specific performance is an injunction ordering a party to perform as promised under a
                   K.
                       1. Like the expectation interest, specific performance seeks to place the  in the position
                            she would have occupied if the K had been performed, but by actually compelling
                            defendant to perform, instead of trying to calculate the equivalent in money damages.
               ii. The irreparable injury rule:
                       1. A court will deny an injunction if the remedy at law (damages) is adequate.
                       2. A remedy at law is inadequate if it is not as complete, practical, and efficient as
                            injunctive relief. That is, UNLESS DAMAGES ARE JUST AS GOOD AS AN
                            INJUCTION, the court will grant the injunction.
                                 a. Uniqueness: most courts will grant specific performance if the promised
                                      performance is unique.
                                            i. Land is unique.
                                           ii. Art is often unique.
                                          iii. People are unique
                                                    1. Even those w/out special skills are an assortment of
                                                         attributes at least as different as parcels of land.
                                          iv. Money is NOT unique.
                                           v. Goods are usually NOT unique:
                                 b. Shortage:
                                            i. The ability to use money damages to buy the same performance
                                               elsewhere may be limited by scarcity. ―other proper circumstances‖
                                               under the UCC §2-716.
                                 c. Difficult damage remedies:
                                            i. Damages may be difficult to prove: preventing the loss may provide
                                               plaintiff better, more accurate relief than allowing the jury to guess.
                                 d. Other reasons:
                                            i. Specific performance might avoid emotional distress.
                                 e. Insolvency:
                                            i. A damage judgment against the bankrupt is worse than inadequate, its
                                               worthless.
                       3. Other limitations on injunctions:
                                 a. Even when the remedy at law is inadequate, courts may deny injunctions for
                                      other reasons.
                                            i. Undue hardship: when the harm to the  greatly exceeds the benefit
                                               to the  then a court might do damages instead.
                                 b. Excessive judicial supervision: injunctions can be a big pain in the black robe
                                      cooter.
                                 c. Compelling individuals to perform personal services
                                            i. A peculiar institution: looks like slavery. Courts usually strike down
                                               injunctions for personal services.
                                           ii. Supervision: ordering an employee to perform well is tough.
                                          iii. Strained relationships: bad blood is bad
                                          iv. Modern exception: specific performance against employers: Under
                                               some antidiscrimination statutes employers might have to reinstate
                                               and/or promote those who they previously fired.
                       4. Personal services v. services:
                                 a. A promise from a company is not a personal service.
                                 b. Anything that can be delegated is usually not a personal service.
              iii. Negative covenants:
                       1. Enjoying alternatives to performance:
                                 a. Not working for other’s can be part of the promise and can be enforced.
                                 b. Unique doesn’t mean one of a kind, means that it would be difficult to locate
                                      someone as good.


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                                           Contracts Final Outline
                          2.   Enforcement beyond K term:
                                   a. Some promises not to work for others continue after the employment
                                       relationship ends. Trade secretes/show-you-the-ropes. Good only for a
                                       limited time.
                          3.   Public Policy regarding negative covenants.
                                   a. No involuntariness:
                                              i. No person is compelled to work for another, the strained relationship
                                                 is not perpetuated.
                                   b. Supervision uncomplicated: its clear if they go work for someone else.
                                   c. Restraint of competition: injunctions of this sort can limit competition.
                                   d. Earning a living: A broad injunction may prevent a person from earning a
                                       living.

§ 2-716. Buyer's Right to Specific Performance or Replevin.

(1) Specific performance may be decreed where the goods are unique or in other proper
circumstances.

(2) The decree for specific performance may include such terms and conditions as to payment of
the price, damages, or other relief as the court may deem just.

(3) The buyer has a right of replevin for goods identified to the contract if after reasonable effort
he is unable to effect cover for such goods or the circumstances reasonably indicate that such
effort will be unavailing or if the goods have been shipped under reservation and satisfaction of
the security interest in them has been made or tendered.




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XLVI.  Expectation Interest § 347: awards the nonbreaching party (plaintiff) an amount of
    money equivalent to what she would have received if the breaching party had performed.
    a.   *Kelly
              i. Expectation interest = how much  should have got – what he has despite the breach.
             ii. Value of promised performance: (market value or actual substitute transaction)
                     1. Market value:
                              a. When performance is available in the market, the price set by the market is the
                                   value of that performance.
                                          i. Where: At the place performance was to occur.
                                         ii. When: At the time the  learns of breach.
                                                  1. If breach occurred by repudiation then at the time
                                                       performance was to occur.
                                                  2. If, following repudiation, the case is tried before the time
                                                       performance arrives, then measured at the time the buyer
                                                       learned of the repudiation.
                                       iii. Lack of market: Expert testimony or maybe specific performance.
                     2. Cover price or resale price:
                              a. The law may look to the actual transaction instead of trying to identify a
                                   hypothetical market price among the many different prices charged in the
                                   market.
                              b. ’s option: UCC allows the  to recover based on actual transaction at her
                                   option. UCC 2-706
                              c. Cover more accurate:
                                          i. Subjective value: It may indicate the subjective value to the plaintiff.
                                         ii. Better evidence: An actual market transaction is good evidence of
                                             market price.
                              d. Commercially reasonable transactions:
                                          i. Only commercially reasonable transactions (arms length) can
                                             substitute for market price. Paying more or accepting less that a
                                             reasonable person would have deprives the cover transaction of its
                                             validity as proxy.
            iii. Avoiding undercompensation: (mention these even if the facts don’t)
                     1. Incidental loss:
                              a. These involve additional costs incurred because the deal fell through. §2-715
                                          i. Example: The cost to advertise goods when seeking a new buyer.
                                         ii. Example: The cost to insure, store, or protect the property pending
                                             resale.
                                       iii. Example: Commissions paid to find a new buyer.
                                        iv. Example: Costs buyers incurs to obtain substitute goods like phone
                                             expenses, transportation costs.
                     2. Consequential loss:
                              a. There are at least one step removed from the lost performance. Usually, they
                                   involved the way the  intended to use the performance.
                                          i. Example: Lost profits from reselling the property
                                         ii. Example: ―if you had performed, then I could have…‖
                     3. Prejudgment interest:
                              a. When a breach delays the date on which  receives money, the plaintiff loses
                                   the use of that money for that period. She could have invested and earned
                                   interest (consequential loss).
                                          i. Interest rates are paid by statute.
                                         ii. Imprecise: almost always limited to interest.
                     4. Differentiating incidental and consequential losses:
                              a. Incidental damages usually involved DIRECT EXPEDNITURES and are
                                   CLOSELY LINKED to the lost performance.
                              b. Consequential losses: often take the form of LOST GAINS rather than direct
                                   expenditures. And are more REMOTE.
            iv. Avoiding overcompensation:

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                         Contracts Final Outline
        1.  Substitute goods of superior quality:
                a. When goods of equal quality are available, the buyer cannot substitute higher
                     quality goods and expect seller to make up the difference. §2-712
                b. Reasonable cover: If goods of equivalent quality are not available; it may be
                     reasonable to cover w/ better goods. When cover is reasonable, the difference
                     between cover price and K price is recoverable.
       2. Costs avoided:
                a. After material breach you can stop performance, you save money that would
                     have been incurred – those savings will be offset against recovery.
                           i. Losing K’s: Cost avoided can exceed the value of performance.
       3. Losses avoided:
                a. Some losses can be avoided by shifting resources that would have been used in
                     one K to another profitable use.
                           i. Example: selling machine components for scrap.
       4. Losses not really avoided: The lost-volume seller
                a. Before treating losses on one K for another, consider whether plaintiff could
                     have entered both K’s.
                b. Issue is only an issue if the plaintiff resold the K performance to another.
v. Limitations on expectation recoveries:
       1. Avoidable consequences:
                a. Preventing losses: Plaintiff cannot recover for any loss that she could have
                     avoided w/out undue risk, burden, or humiliation. §350. ―reasonable efforts‖
                           i. Inaction: reasonable efforts often require inaction – stop working
                          ii. Action: reasonable efforts may require positive steps. You have to
                              seek other work.
                b. Defendants burden: D must prove what could have been avoided.
                           i. Identify reasonable efforts:
                                    1.  must state how plaintiff could have minimized the loss.
                                        Courts can’t evaluate until they are brought up.
                          ii. Establish plaintiff’s unreasonableness:
                                    1. Doesn’t have to be the efforts the defendant would have
                                        preferred. §350(2)
                         iii. Establish the amount of loss avoidable:
                                    1. This may be difficult, if the plaintiff didn’t’ take reasonable
                                        efforts.
                c. Plaintiff’s reasonableness precludes reduction:
                           i. A defendant that breaches must accept the results of any reasonable
                              efforts the plaintiff decides to make.
                d. Unreasonable efforts are not required:
                           i. If steps involve undue burden, risk, or humiliation, plaintiff need
                              not take them no matter how effective.
                                    1. Change of career – you don’t have to.
                                    2. Relocation – you don’t have to.
                                    3. Same employer – don’t have to take job from same guy for
                                        worse terms.
                e. Unavoidable losses:
                           i. Amounts that could not be avoided are recoverable. Substitute
                              measures may reduce but not eliminate the loss. The portion of the
                              loss that cannot be avoided is recoverable.
                f. Avoided and avoidable – should be treated alike.
                g. No need to make futile efforts.
                h. Cost of minimization is recoverable:
                           i. Some efforts to minimize loss are costly, and costs incurred to pursue
                              reasonable efforts to minimize the loss are recoverable from the
                              defendant.
       2. Cost to repair v. diminution in value:
                a. Two ways to compensate: take the lower



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                 Contracts Final Outline
                     i. Award plaintiff enough money to allow her to repair the inadequate
                        performance to comply w/ the K; OR
                    ii. Award her the difference in value between what she was promised
                        and what she received.
         b. Relation to avoidable consequences:
                     i. Most cases of this sort can be resolved by asking whether plaintiff
                        acted reasonably to minimize the loss.
                    ii. If repairs saves the deal – do repair
                  iii. If repair will cost more than the benefit – do difference.
                  iv. Subjective value: most cases involve costs to repair that exceed the
                        benefit. They reaise the possibility that the plaintiff attaches a
                        subjective value to the thing promised that exceeds the value attached
                        by the market – repair might be reasonable here.
                    v. Objective value preferred: done on a case by case basis because
                        subjective value is hard to verify.
         c. Risk of under and over compensation:
                     i. Overcompenstation: cost of repair might be too high and the plaintiff
                        might not repair and pocket the excess.
                    ii. Undercompensation: subjective value might lead tot his.
         d. Relation to specific performance:
                     i. Cost of repair is like an injunction. Undue hardship defenses might
                        be applied. If the injunction will harm the defendant much more than
                        it will help plaintiff then a court might reject.
3.   Forseeability:
         a. Rule: A plaintiff can recover damages if
                     i. The loss flows naturally from the breach; OR
                    ii. If the defendant, at the time of the K was made, had reason to know
                        that losses of this type probably would form a breach.
                  iii. When consequences are unusual, the only way defendant will have
                        reason to know about them is if the plaintiff tells her about the likely
                        consequences of breach.
                  iv. Consequential losses:
                             1. Tough to foresee
         b. Common errors:
                     i. Reason to know versus knew:
                             1. Foreseeability requires reason to know, not actual
                                  knowledge
                    ii. Amount v. type of loss:
                             1. only type of loss is required – don’t have to foresee the
                                  amount.
                  iii. Almost inevitable – higher requirement than for tort.
         c. Certainty:
                     i. Plaintiff cannot recover damages unless she can prove them w/
                        reasonable certainty §352. (today ―reasonable‖ is key)
                    ii. Consequential damages: this can be tough.
                  iii. Existence of loss: plaintiff must prove that she suffered a loss from
                        the breach.
                  iv. Amount of loss:
                             1. If the existence of loss is certain, the jury makes a
                                  reasonable estimate of the amount of loss.
                                       a. History: past quarters or years.
                                       b. Comparable businesses.
                                       c. New businesses – can be tough to prove, but
                                            established McDonald’s like businesses are fairly
                                            standard.
                    v. Reliance interest: lack of certainty can lead us to the realiance
                        interest.



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                                   Contracts Final Outline
                                              1.   Plaintiff’s burden: prove w/ reasonable certainty that
                                                   revenues would have exceeded total expenses.
                                              2.   Defendants burden: defendant must prove that it would not
                                                   have broken even.
                                                3. Default: presumption is that profits will be zero.
                  4.  Emotional distress:
                           a. Usually not recoverable – just part of doing business.
                           b. Physical harm – then its recoverable
                           c. Emotional K’s – burials, lack of insurance payout or lost vacation –
                                recoverable.
                           d. The rule: §353: ―the K or the breach is of such a kind that serious emotional
                                disturbance was a particularly likely result.‖
                                      i. Requires forseeability.
                                     ii. Measured at breach, not formation.
                                    iii. Severe emotional distress required.
                  5. Attorney’s fees
                           a. Usually not recoverable.
                           b. Exception 1: When the K’s provides for recovery
                           c. Exception 2: Collateral litigation: when defendants breach of a K forces the
                                plaintiff to incur attorney’s fees in litigation against third parties.
                           d. Exception 3: statutes might permit it.
                  6. Punitive Damages:
                           a. Usually not recoverable.
                           b. Exception 1: breach of promise to marry
                           c. Exception 2: Insurance K’s: when a large insurere denies a valid claim.
                           d. Exception 3: Employement K’s: Wrongful discharge:
                                      i. Retaliatory discharge: This is a tort for getting fired for legitimate
                                           action.
                                     ii. Breach of obligation of good faith and fair dealing:
b.   §347: Measure of damages in general
          i. (a) The loss in the value to him of the other party’s performance caused by its failure or
             deficiency, plus
         ii. (b) Any other loss, including incidental and consequential loss, caused by the breach, less
        iii. (c) Any cost or other loss that he has avoided by not having to perform.




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                                            Contracts Final Outline

XLVII. Reliance Interest
       a. *Kelly
                 i. The appropriate case for the reliance interest:
                         1. When expectation damages are uncertain.
                         2. When a K is unenforeceable, but restitution provides an inadequate remedy
                                  a. Undermines K defenses:
                                  b. Statute of Frauds:
                                             i. When SoF’s precludes recovery because no writing supports the K,
                                                courts sometimes award reliance.
                                  c. Mistake:
                                             i. A mutual or unilateral mistake allows recission and sometimes
                                                reliance is awarded. §158
                                  d. Consideration:
                                             i. When lack of consideration precludes enforcement, but action in
                                                reliance makes it unjust to allow refusal of performance – reliance
                                                sometimes used.
                                  e. Incapacity:
                                             i. If plaintiff is unaware of the infancy, may justify reliance interest.
                         3. Disproportionate recovery:
                                  a. Full expectation interest is just too great:
                                             i. Related to foreseeability: §351(3)
                                            ii. Indications: should be invoked when the informality of the
                                                transaction or the very small price charged imply the defendant did
                                                not intend to assume the duty to pay very large damages in the event
                                                of breach.
                                           iii. Defect in title:
                                                     1. This whole thing usually only happens regarding the sale of
                                                          land and defect in title.
                ii. Calculating reliance recovery:
                         1. Expenditures incurred:
                                  a. Reliance primarily involves reimbursing the plaintiff for any expenditures
                                       made in reliance on defendants promise.
                                  b. Partial performance:
                                             i. Expenditures include down payments or other partial performance
                                                conveyed by the defendant.
                                  c. Preparations:
                                             i. Expenditures include collateral costs in preperation for performance.
                                  d. Entire venture:
                                             i. When defendant’s performance is part of a larger venture,
                                                expenditures include other expenses incurred to purse the venture.
                         2. Lost opportunities:
                                  a. Application is problematic:
                                             i. Because courts have difficulty identifying and evaluating lost
                                                opportunities, this element frequently is omitted from reliance interest
                                                calculations.
                                  b. Next best offer:
                                             i. Even if the next best offer is easy to identify (bidding) the courts still
                                                don’t award it.
                                  c. Employees:
                                             i. The earnings someone SHOULD have made on the job that already
                                                existed are ascertainable, but a potential job’s pay is not.
               iii. Reliance interest cannot exceed the expectation interest:
                         1. In losing K’s, reliance will exceed expectation.
                         2. Expectation is a cap on recovery:
                                  a. If reliance damages exceed expectation damages, recovery will be limited to
                                       the expectation interest. §349.
                                  b. Losing K’s: RESTITUTION can EXCEED expectation.


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                  3.    Allocation of the burden of proof:
                            a. Default position is that plaintiff would have broken even.
                            b. Rule of certainty applies to reliance interest.
                   4. Risk of uncertainty shared:
                            a. The reliance interest allocates the burden to prove profitability of the venture
                                 between the parties.
                                       i. Proof of expenses: plaintiff must prove.
                                      ii. Proof of losses: Defendant must prove
                                     iii. Proof of profit: plaintiff must prove w/ reasonable certainty
                                     iv. Zero profit presumed:
b.   Reliance: Value before – value after
c.   §349: injured party has the right to reliance interest, including expenditures made in preparation for
     performance or in performance, less any loss that the party in breach can prove with reasonable certainty
     the injured party would have suffered had the contract been performed.
           i. *Meant to put the  in the position he was before the promise was made.
          ii. *Courts will never award this if it is more than Expectation.




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                                             Contracts Final Outline

XLVIII. Restitution: Put the  back in the position he was before the promise.
        a. *Kelly
                   i. Elements:
                            1. Benefit received:
                                     a. Restitution seeks to deprive the defendant of benefits she cannot in fairness
                                          retain.
                            2. Injustice:
                                     a. Gifts and volunteering don’t count – must be unjust to allow the defendant to
                                          keep the benefit w/out compensating the plaintiff.
                  ii. Situations requiring restitution:
                            1. In general:
                                     a. Any reason a K might become unenforceable may require a COA for unjust
                                          enrichment.
                            2. Statute of Frauds:
                                     a. When no writing exists to support an agreement, courts cannot enforce.
                            3. Duress, undue influence, and misrepresentation:
                                     a. Even the party who commited the fraud or duress is entitled to recover
                                          anything she performed under the K.
                            4. Mistake:
                                     a. Usuall no fault – so both give back.
                            5. Lack of consideration:
                                     a. Delivered gifts: once delivered, a gift is final.
                                     b. Unintended gifts: no donative intent = restitution.
                                     c. Reliance: action in reliance may make promises enforceable in most situations
                                          making restitution unnecessary.
                            6. Incapacity:
        b. §371: Measure of restitution interest
                   i. If a sum of money is awarded to protect a party’s restitution interest it may as just requires be
                      measured by either
                            1. (a) The reasonable value to the other party of what he receive in terms of what it would
                                have cost him to obtain it from a person in the claimant’s position, or
                            2. (b) The extent to which the other party’s property has been increased in value or his
                                other interests advanced.
        c. §373: Restitution when other party is in breach
                   i. (1) Subject to the rule state in subsection (2), on a breach by nonperformance that gives rise to a
                      claim for damages for total breach or on repudiation, the injured party is entitles to restitution for
                      any benefit that he has conferred on the other party by way or part or reliance.
                  ii. (2) The injured party has no right to restitution if he has performed all of his duties under the
                      contract and no performance by the other party remains due other than payment of a definite sum
                      of money for the performance.
        d. §374: Restitution in favor of party in breach
                   i. (1) Subject to the rule state in subsection 2, if a party justifiably refuses to perform on the ground
                      that his remaining duties of performance have been discharged by the other party’s breach, the
                      party in breach is entitle to restitution for any benefit that he has caused by hiw own breach.
                  ii. (2) To the extent that, under the manifested assent of the parties, a party’s performance is to be
                      retained in the case of breach, that party is not entitled to restitution if the value of the
                      performance as liquidated damages is reasonable in light of the anticipated or actual loss caused
                      by the breach and the difficulties of proof of loss.
        e. *The legal concept of restitution generally pertains to situations where one person has—w/out intending
            to make a gift—conferred a benefit on another.
        f. *Restitution can also provide an independent COA where there is no K at all: there is an unenforceable
            promise.
                   i. Occasionally there is a quasi-contract:
                            1.  received a benefit
                            2. It is unfair to allow  to keep the benefit
                  ii. Defenses:
                            1. Volunteer: Negotiation was possible and not done

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                                   Contracts Final Outline
                   2. Gift
g.   Martin Little Brown:
          i. Rule: One who volunteers information to another to the other’s benefit has not formed a K.
             Definition of volunteer is: bargaining and negotiation were possible, but the  failed to do so, if
             bargaining was impossible or impractical then we give you the benefit.
         ii. Rule: This case offers a break down as to how a K can be implied.
                   1.  asked for services (like going to the dentist) – there is a background assumption that
                      you will be paying. Needs to be a service whereby people usually expect to be paid.
                   2. Express K: if there were no words of bargain – then no express K.
                   3. Defense: gift – donative intent is needed.
                   4. Quasi-K/Unjust Enrichment: this is a K implied by law
                           a. 1st element:  receives a benefit
                           b. 2nd element: unfair to allow  to retain benefit
                   5. *There is a difficulty in assessing damages for unjust enrichment because a bargain
                      might not have been struck or might have been different.




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                                          Contracts Final Outline

XLIX. Agreed remedies:
      a. §356: Liquidated Damages and Penalties:
                 i. (1) Damages for breach by either party may be liquidated in the agreement, but only at an
                    amount that is reasonable in light of the anticipated actual loss caused by the breach and the
                    difficulties of proof of loss. A term fixing unreasonable large liquidated damages is
                    unenforceable on grounds of public policy as a penalty.
                ii. (2) A term in a bond providing for an amount of money as a penalty for non-occurrence of the
                    condition of the bond is unenforceable on grounds of public policy to the extent tha the amount
                    exceeds the loss caused by such non-occurrence.
L.    Punitive damages:
      a. *Kelly
                 i. The parties may agree on liquidated damages clause: a term specifying the amount recoverable
                    in case of breach.
                         1. Liquidated damages clauses are enforceable if they provide a REASONABLE
                              ESTIMATE in light of the ACTUAL OR ANTICIPATED LOSS and DIFFICULTY
                              OF PROVING the amount of loss.
                         2. The parties may not agree to impose damages as penalty for breach.
                         3. Unless otherwise specified, remedial provisions will be optional rather than exclusive.
                         4. Rule: courts enforce liquidated damage clauses but refuse to enforce penalties.
      b. §355 Punitive Damages
                 i. Punitive damages are not recoverable for a breach of K unless the conduct constituting the
                    breach is also a tort for which punitive damages are recoverable.
LI.   Definition of Merchant Under the UCC:
      a. §2-104: Definitions: ―merchant‖
                 i. (1) Merchant means a person who deals in goods of the kind or otherwise by his occupation
                    holds himself out as having knowledge or skill peculiar to the practices or goods involved in the
                    transaction or to whom such knowledge or skill may be attributed by his employment of an
                    agent or broker or other intermediary who by his occupation holds himself out as having such
                    knowledge or skill.
                ii. (3) between merchants means in any transaction w/ respect to which both parties are chargeable
                    w/ the knowledge of skill of merchants.
LII.  Things to check back on:
      a. Phone conversations – when do they become a binding K?
      b. Get a better break down of the differences between Webb and McGowan
      c. Did we cover the differences between settlement, K modification, and Accord and Satisfaction.
      d. Need to add explanation and elements of unjust enrichment.
      e. Question: in regards to the good faith requirment: nondisclosure is misrepresentation if good faith and
          fair dealing would require disclose – do you need a K first?
      f. Status ?’s
      g. Where does substantial performance fit in with material breach? And impracticability/frustration?
      h. The UCC expressly mentions the common law rules of capacity, estoppel, fraud, misrepresentation,
          duress, mistake, and other invalidationg or validating cause.




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