Contracts II

§ 2-204. Formation in General.

(1) A contract 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 contract. (2) An agreement sufficient to constitute a contract for sale may be found even though the moment of its making is undetermined. (3) Even though one or more terms are left open a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy.

§ 2-313. Express Warranties by Affirmation, Promise, Description, Sample.

(1) Express warranties by the seller are created as follows: (a) Any affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise. (b) Any description of the goods which is made part of the basis of the bargain creates an express warranty that the goods shall conform to the description. (c) Any sample or model which is made part of the basis of the bargain creates an express warranty that the whole of the goods shall conform to the sample or model. (2) It is not necessary to the creation of an express warranty that the seller use formal words such as "warrant" or "guarantee" or that he have a specific intention to make a warranty, but an affirmation merely of the value of the goods or a statement purporting to be merely the seller's opinion or commendation of the goods does not create a warranty. - 2-313(b) is goods' description - these are easier. Cts more likely to assume goods' description - (c ) is about sample or model when it shows up it's different. - (a) affirmation of fact/promise - problem w/promise is promise could just be to let you unwind k if racehorse doesn't work like it should in 1st year. But that's not a fact. (this is a wrinkle.)

§ 2-314. Implied Warranty: Merchantability; Usage of Trade.

(1) Unless excluded or modified (Section 2-316), a warranty that goods shall be merchantable is implied in k for their sale if the seller is merchant re goods of that kind. Under this section serving for value of food or drink to be consumed either on premises or elsewhere is a sale. (2) Goods to be merchantable must be at least such as (a) pass w/o objection in trade under k description; and (b) in case of fungible goods, are of fair average quality w/in description; and (c) are fit for ordinary purposes for which such goods are used; and (d) run, w/in variations permitted by k, of even kind, quality & quantity w/in each unit & among all units involved; and (e) are adequately contained, packaged, & labeled as agreement may require; and (f) conform to promises or affirmations of fact made on container or label if any. (3) Unless excluded or modified (Section 2-316) other implied warranties may arise from course of dealing or usage of trade. - 2-314 only applies to merchants. - 2-314 imposes on merchant sellers risk that goods won't conform to ordinary purposes for which goods are used.

§ 152 When Mistake of Both Parties Makes a Contract Voidable

(1) Where a mistake of both parties at the time a contract was made as to a basic assumption on which the contract was made has a material effect on the agreed exchange of performances, the contract is voidable by the adversely affected party unless he bears the risk of the mistake under the rule stated in § 154. (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.

§ 1-205(4). Course of Dealing and Usage of Trade.

(4) 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.

§ 1-303(a). Course of Performance

(a) A "course of performance" is a sequence of conduct between the parties to a particular transaction that exists if: (1) the agreement of the parties with respect to the transaction involves repeated occasions for performance by a party; AND (2) the other party, with knowledge of the nature of the performance and opportunity for objection to it, accepts the performance or acquiesces in it without objection.

§ 1-303(b) - Course of Dealing

(b) A "course of dealing" is a sequence of conduct concerning previous transactions between the parties to a particular transaction that is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct.

§ 1-303(c) Usage of Trade

(c) 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 it will be observed with respect to the transaction in question. The existence and scope of such a usage must be proved as facts. If it is established that such a usage is embodied in a trade code or similar record, the interpretation of the record is a question of law.

Gray v. Gardner Supreme Judicial Court of Massachusetts • 1821 • Parker, C.J.

(condition precedent vs. condition subsequent) - π sold oil to ∆, subject to condition that if more oil arrived between April 1 & October 1 1819, than year b.f., k would be voided & ∆s would not have to pay. - Judge ruled that proving arrival w/in time was on ∆s & although vessel might have gotten w/in space, it was necessary that she should have come to anchor b.f. 12 a.m. - When party makes promise subject to condition, that party bears burden of proving that condition occurred. if can't, promise is enforceable. - Has to pay premium unless a lot of oil on market. B's reading - condition subsequent - buyer has the burden to show Lady Adams arrives on time b/c party that wants condition to be true has to prove it. Buyer wants to excuse their duty to pay premium. have to prove getting close to shore counts as arriving. = Default rule (w/o other evidence) - party who wants condition to have occurred has to prove it

Hochster v. De La Tour Queen's Bench • 1853 • Lord Campbell, C.J.

(considers conceptual room for anticipatory repudiation) - Π wrote in May to inform that changed mind & no longer need π's services. - π sued end of May to recover damages in anticipation of future breach & obtained employment w/other party for July - As soon as ∆ informed π of intent to breach, π entitled to seek damages for breach. - Shouldn't have to wait til date. If π has to wait then will miss out on opportunity to mitigate damages by seeking other employment. - Cannot engage in mitigating activities in absence of legal permission w/o risking being accused of breach himself. - Π should be permitted to seek damages or addt'l employment in anticipation breach.

Howard v. Federal Crop Ins. Corp. United States Court of Appeals • 1976 • Widener, Circuit Judge

(different btwn condition subsequent & promise) · Tobacco insured by ∆ and extensively damaged (excess of $35k) by heavy rains. · Plowed fields to sow rye. · FCIC denied claim b/c field obscured/obliterated by plowing. · 5(b) - it shall be condition precedent that insur makes sure was crop b.f. pay for loss. Insur. period for year loss is claimed, & furnish any other info re manner/extent of loss · 5(f) - tobacco stalks - don't destroy until ∆ makes an inspection. · When it's doubtful it's a condition precedent - construed as creating promise.

§ 1-303(e) - Express terms and COP, COD, TU

(e) Except as otherwise provided in subsection (f), the express terms of an agreement and any applicable course of performance, course of dealing, or usage of trade must be construed whenever reasonable as consistent with each other. If such a construction is unreasonable: (1) express terms prevail over course of performance, course of dealing, and usage of trade; (2) course of performance prevails over course of dealing and usage of trade; AND (3) course of dealing prevails over usage of trade.

Lake River Corp. v. Carborundum Co. United States Courts of Appeals, 7th Circuit • 1985 • Posner, J.

(penalty v. liquidated damages clause) - It's penalty b/c designed to make sure π got more than actual damages. Breach at 90% completion still entitles π to 30% more than expected profit. And cost is same regardless of importance of breach. Clause doesn't force π to mitigate. - Cts will care about intent of parties at k and effect of l-damages clause. - Π says encouraging performance - if encourage past expectation damages/decrease chance of efficient breach, then have penalty - Ill. Law, if it's close it's penalty. Cl - if not sure penalty & it's close - penalty. - Cts try to figure out what to do w/proportionality of l-d w/actual OR estimated damages - Ill. Treats it different - care about intent at time of k'ing, but also about purpose in k & difficulty in determining damages. - Some cts look at actual. intent not important, if l-d proportionality off then no - UCC asks OR in way that suggests if you can answer either you get it. - odd

Truman L. Flatt & Sons Co. v. Schupf (Truman v. Sara Lee) Appellate Court of Illinois • 1995 • Knecht, J.

(what conduct constitutes an anticipatory repudiation) - ∆ agreed to sell π parcel of land. Enter into real estate k that contingent upon π's successful rezoning of property. - Π sent owners a letter dated May 21, indicating strong opposition to rezoning request. - Π stated that still interested in property, though worth less - π requested price term modification, which owners rejected in ltr June 9 - ∆s ltr July 8 stating considered k voided due to π's requested price term modification - Anticipatory repudiation doctrine requires clear, manifest intent not to perform k when performance due. - Intention must be stated in definite, unequivocal manner, not doubtful & indefinite statements. - AR may be rescinded if retracted & notice of retraction given ○ (1) before other party materially relies on repudiation or ○ (2) indicates that he deems repudiation to be final. - Even ltr AR, π clearly rescinded repudiation before owners materially relied/provided notification that final.

Monetti, S.P.A. v. Anchor Hocking Corp. United States Court of Appeals, 7th Circuit • 1991 • Posner Circuit Judge

- 2 writings: (1) Memo w/terms of proposed draft agreement, dictated by ∆'s agent. (2) Agreement draft that included in internal memo - contained all terms of earlier draft. - Memo b.f contract is formed can satisfy SOF. π's suit not barred by SOF. promissory estoppel not necessary. - Ill. law req writing "express k's substance w/reasonable certainty" - UCC SOF does not req writing contain k terms. just need written corroboration of oral k - Partial performance pretty good evidence that is k. - Oral k can't be enforce in quantity greater than received/accepted by buyer. - We propose that UCC doesn't abolish partial performance exception, just limits use for insisting full delivery. - Applying both b/c can separated enough to apply the different standards - If 2 SOF apply, must satisfy both - satisfy 1 doesn't remove barrier. higher burden.

Sessa v. Riegle United States District Court, Eastern District Pennsylvania • 1977 • Hannum, J.

- All parties were knowledgeable about horses - Π sent agent to purchase, at farm agent examined horse called π said liked horse. - ∆ talked to π & said π "would like horse, that [horse] was good one & was sound." - Horse injured didn't win enough, cost too much - For seller's statement to be express warranty under UCC, statement must be affirmation of fact/promise/goods description AND must be part of basis of bargain. - Seller's opinion not sufficient to be express warranty unless parties come to understanding that buyer relies on seller not to make bad faith deal b/c knows nothing about horses. - Even if ct determined ∆'s statements were express warranties, they were not basis of bargain.

California & Hawaiian Sugar Co. v. Sun Ship, Inc. United States Court of Appeals for the 9th Circuit • 1986 • Noonan, J.

- Both subs delayed and had l-d clasue. - Not a penalty b/c both rep by lawyers and anticipated damages are what might be expected if π could not transport crop, - §356 - cmt b - amount reasonable to extent that it approximates loss anticipated at k formation even though not approximate actual loss. - Pa okay l-d clause but takes into account actual harm & difficulty of proving damages - Pa. b.f UCC, looked at intent, if seemed or was penal, not enforceable. Ct says UCC didn't override this. - Under UCC only have to satisfy one or the other (actual or estimate) - Subtle move court engages in - ct says have additional $3.7 in consequential damages (lost charter damages) that make it no longer disproportionate. - here asking actual loss even if consequential & unforeseen - It's not a penalty if it approximates their actual damage.

Drews Co. v. Ledwith-Wolfe Associates, Inc. Supreme Court of South Carolina • 1988 • Harwell, J.

- Can't recover lost profits if not established w/reasonable certainty. Can recover if: § they are a natural consequence of BOC, § reasonably foreseeable, and § established with reasonable certainty. - New business doesn't preclude lost profits recovery, but creates evidentiary sufficiency issue. Naturally engender more speculation than established business. - ∆ didn't provide enough evidence to estb. w/reasonable certainty.

UAW-GM Human Resource Ctr. v. KSL Rec. Corp. Michigan Court of Appeals • 1998 • Markman

- Country club - oral agreement for unionized employees. - Merger clause -sold hotel - didn't know of clause - complete contract - Dissent - doc can't prove its own completeness.

R.E. Davis Chemical Corp. v. Diasonics, Inc. United States Court of Appeals, 7th Circuit • 1987 • Cudahy, J.

- Drs breached k w/π so π breached w/∆ & refused to accept delivery of med equip. - ∆ sold k equip to another purchaser for same k price. - Π wanted down payment less $500 per 2-718(2)(b) - Only under subsection 2-708(2) can ∆ recover profit lost when π breached. To recover under (2) must show LVS - capacity to produce both, - would be profitable to produce & likely would have sold both. whether probably would have sold them. - If apply 708(1) ∆ has to hand over $300k, if apply 2-706 - get no damages - Have to show damages inadequate under (1) b.f moving to (2). - Ask self - does breach make 2d k possible? sale dependent on 1st not taking place?

Masterson v. Sine Supreme Court of California • 1968 • Traynor

- Family ranch - option - options are assignable - Traynor changes the law just to natural omission. Ignores 4 corners. Allows PE - something a family might naturally omit - Dissent: messes up reliance on written docs, undermines how PER been understood for years, easier for frauds, makes complete-on-face docs suspect.

Mitchill v. Lath Court of Appeals of New York • 1928 • Andrews

- Farm & icehouse agreed to removal as term for purchase - Three conditions must exists (1) Must be collateral agreement (2) Cannot contradict express or implied provisions of the written contract (3) One that the parties would not ordinarily expect to be embodied in writing.

Frigaliment Importing Co. v. B.N.S. International Sales Corp. United States District Court, Southern District of New York • 1960 • Friendly

- Got stewing grade birds not broiling or frying that they expected. - But there's correspondence "any kind of chickens" - Chicken standing alone is ambiguous. - Size meaning young is not persuasive nor is USDA regulation's definition of chicken - Commercial lingo has to be well established, notorious, universal etc. - ∆'s witnesses said chicken is everything chicken as long as not not a chicken. - USDA has different classes under chicken but they have those under chicken. - Need outside evidence for this such as: § Trade usage § Market price § Size § USDA categories of chicken § Negotiation evidence § Used dictionary - Frigaliment has the burden of proof b/c it's claiming it has a significantly narrower definition. If you're trying to prove smaller you have to bear the burden

Condition Precedent

- If instead, you have an (immature) duty to be triggered by condition

Southern Concrete Services, Inc. v. Mableton Contractors, Inc. United States District Court, Northern District of Georgia • 1975 • Edenfield, C.J.

- K stated, among other things, that "No conditions which are not incorporated in this contract will be recognized." - too much concrete - ∆ wanted to bring in TU that quantities are guidelines & subject to renegotiation - § 2-202 does not allow for intro of TU evidence that negates express terms contract. - Case different from Columbia Nitro b/c no prior dealing, k doesn't intimate that buyer liable only for concrete actually delivered & doesn't grant one party repricing rights. - contract certainty. - 2-202 was not meant to invite a frontal assault on essential terms of clear & explicit k - Ct can't allow industry custom to negate a clearly contracted-for term. - Not interpretation someone just using it b/c it's a lower standard. - Court is basically importing the express terms control rule - requiring consistency btwn express written terms and course of dealing etc

Krell v. Henry Court of Appeal (K.B.) • 1903 • Appeal from a decision of Darling J.

- King became very ill and coronation ceremonies canceled. - Coronation ceremony happening is k subject matter, & ceremony not happening excuses nonperformance of k. - such a remote occurrence that king get sick parties couldn't contemplate it in forming k. - Canceled ceremony = frustrated purpose - 3 part test § The foundation of k was implicitly the coronation § Performance was prevented § They did/didn't contemplate the event that prevented performance - Can't make the argument that one party is frustrated b/c the other's purpose is just to make $. The purpose frustrated has to be somewhat joint.

Britton v. Turner Supreme Court of New Hampshire • 1834 • Parker, J.

- Left at 9 1/2 months of year k ($120) for no apparent reason & w/o consent - No evidence of damage from breach - π can't collect on k, but can get compensation for service actually performed - Plus someone who attempts performance may be placed in much worse situation than one who wholly disregards k - This turning point in cl - Even if k says for pay perform entirely, in theory can claim restitution b/c off k. - Concern that could make conditions so bad leave k early & get nothing.

Condition Subsequent

- Mature duty, subject to being excused by condition

Jacob & Youngs v. Kent Court of Appeals of New York • 1921 • Cardozo, J.

- One k specification was all pipes be manufactured in Reading, Pennsylvania. - ∆ demanded pipe be replaced, requiring substantial addt'l work & expense by π. - Existing pipe was of same quality as Reading pipe. Supplied based on innocent mistake by π from inattention of sub. - π substantially performed its k w/∆ & only trivial defects should rec rest of k. - Party that substantially performs obligations under k may recover expectation damages for remaining payment owed under k minus offset for defects in performance. - Even though not full performance of k, principles of fairness & equity justify not penalizing π significantly by w/h payment when effect of defect insignificant. - Dissent: McLaughlin, J., - ∆ should have received Reading pipe - most of pipe not Reading, meaning that π's mistake was either willful or grossly negligent. π failed to install agreed-upon pipes, & so k was breached regardless of pipe quality - Cardozo is saying we're going to have standard so don't have ppl being really picky - worried about ppl being opportunistic for small mistakes b/c don't want to pay.

Sullivan v. O'Connor Supreme Judicial Court of Massachusetts • 1973 • Kaplan, J.

- Promised prof. entertainer's nose surgery would improve beauty & appearance. - Π can recover for worsening condition, pain & suffering & out-of-pocket-expenses. - burnt & hairy hand - Hawkins v. McGee - promised working hand - ct has to find value of hairy hand vs. working hand & original - Π to recover any expenditures made by π & for other detriment following proximately and foreseeably upon ∆'s failure to carry out promise.

Sherwood v. Walker Supreme Court of Michigan • 1887 • Morse

- Rose the Barren Cow - When k based on the mutual mistake of material fact which materially affects the agreement, the parties may rescind the k once they learn of mistake. - Price discrepancy demonstrates the different value of a beef cow versus a breeder cow. Dissent: Sherwood, J. - record show π believed she could eventually be made to breed. Π's correct speculation should not let ∆ rescind.

Van Wagner Adver. Corp. v. S&M Enters. Court of Appeals of New York • 1986 • Kaye, J.

- S&M urge $ damages adequate but award amount improper and VWA wants SP - SP normally for interest in real property - not lease. Just b/c space unique doesn't mean have to award SP - When say unique & no established market value, ct really means can't obtain info at reasonable costs & can't calculate damages w/o high risk of under-compensation. - Hardly novel to award future damages. If damages can't calculated as S&M suggests, then SP should be awarded. SP would disproportionately harm S&M

Peevyhouse v. Garland Coal & Mining Co. Okla. S.C. • 1962 • Jackson, J.

- Strip-mining promise remedial work including cost ~ $29k. - We hold that in coal mining lease - if lessee agrees to remedial work & that's only part of k fails to do - ordinarily will be cost of performance - However, when provision breached is merely incidental to main purpose & result of full performance is grossly disproportionate to COP, DIV should be used. - Dissent: Irwin, J. - Nothing in record indicated ∆ couldn't perform obligations. BOC was willful & not in good faith. Several negotiations where π insisted on remedial portion & wouldn't agree o/w. ∆ knew cost of performance could be disproportionate. ∆ made no attempt to substantially perform - Under economic waste, have to have innocent/(maybe) slightly negligent breach & has to be trivial. Breach not innocent. Remediation not trivial, it was but-for

Kizas v. Webster Dst. Ct. D.C. • 1982 • Oberdorfer, J.

- Told π they could be hired for clerk-agent program at FBI and would get preference. FBI cancelled the program - Π argue preferential path to special agent status too difficult to value so should get reliance damages. - Lesser cost to ∆ b/c don't have enough info about clerks to special agents etc. - Get travel for moving for employment to FBI but not elsewhere now. - Edu too speculative. Spouses unemployment is unforeseeable & can't know what spouses would have been unemployed elsewhere

Hunt Foods & Industries, Inc. v. Doliner Supreme Court of New York, Appellate Division • 1966 • Steuer

- Took a break from negotiations but made sign an option - ∆s say that option was unconditional but understood option only used if solicited outside offer. - terms are considered final expression in writing or agreement (parties both agree) and can't be contradicted but can be explained or supplement. - (b) evidence of consistent addt'l terms fine unless think intended complete - Looked at comment 3 - certainly - took certainly to mean impossible inclusion - Evidence inadmissible only where writing contradicts the existence of the claimed additional term - To get SJ must be impossible ​not implausible - Allows evidence

Spang Industries, Inc., Ft. Pitt Birdge Div. v. Aetna Casualty & Surety Co. United States Court of Appeals, 2nd Circuit • 1975 • Mulligan, J.

- Work to be completed by Dec '71. Hired sub for steel supply & construct bridge. - In Nov '69, parties agreed π would deliver steel & erect bridge in June '70. - bridge ready for concrete in late Oct. K said concrete couldn't be poured below 40ºF, & T had to get special permission to pour concrete. Worked late hours b/c knew freeze happening. Incurred significant extra expense. - Breaching party must provide recovery when potential damages from BOC may be foreseen by parties at the time of k formation &a breach actually does occur - T's rushing to complete concrete pouring was mitigation of damages. would have had to wait til spring which would have cost them more. - Π knew industry and location and should have expected T's acts. - These are consequential b/c they're special.

Rodriguez v. Learjet, Inc. Court of Appeals of Kansas • 1997 • Marquardt, J.

- kept deposit as l-damages - A LVS is entitled to lost profits for breach of k even if item sold to another. - § 350 makes clear that seller who could fulfill multiple ks has LV if one breached. - Uses Davis criteria. - L-damages clause must be reasonable considering likely/actual injury, difficulty proving damages, & getting fair remedy impracticable, or it unenforceable penalty. - ∆ presented evidence had capacity to make additional sale & would have profited.

W.W.W. Assocs. v. Giancontieri Court of Appeals of New York • 1990 • Kaye

- put that both parties could cancel the contract. - had agreed orally that it was unilateral. - court wouldn't allow the extrinsic evidence b/c the contract was complete and there was a merger clause. - even though it seems pretty apparent that the parties agreed unilateral.

Aluminum Co. of America v. Essex Group, Inc. United States District Court, W.D. Pennsylvania • 1980 • Teitelbaum, J.

- Π agreed to provide ∆ with its long-term aluminum needs. WPI price escalation w/max price in event of excessive escalation. Π costs increased a lot. - Performance may be impracticable b/c extreme & unreasonable difficulty, expense, injury or loss to one of the parties will be involved. - Entitled to relief under impracticability. - Court has found that the risk of a wide variation btwn these values was unforeseeable in a commercial sense and not allocated to ALCOA - ALCOA is an outlier - ALCOA has probably one of the best claims we have for hardship under impracticability- they're losing a huge amount of money - Don't take away from Alcoa - the courts interpretation of the excuse doctrines.

Hadley v. Baxendale Court of Exchequer • 1854 • Alderson, J.

- Π miller didn't have extra crank shaft, delivery negligently delayed (breach) but didn't communicate that mill would be closed for entire time shaft away so ∆ can't be expect to bear unforeseeable costs of extended closure. - ∆ not liable for consequences of "special circumstances" - non-breacher may recover damages stemming from any special circumstances, provided circumstances were communicated to & known by all parties at k formation.

Flippo v. Mode O'Day Frock Shops Supreme Court of Arkansas • 1970 • Harris, J.

- Π tried on pants at clothing store & was bit by brown recluse, hospitalized for 30 days. - Still bought pants, were o/w normal - Under IWM, goods must be fit for their ordinary purpose so this warranty can't be used for claim if goods aren't defective. - The pants are not defective. She wore them so clearly fit for their ordinary purpose - Apparent that spider was not part of product. - Problems arise when buyer knows specific needs - gymnast/contortionist stretchy pants - Ask 2 questions for IWM - Was warranty breached AND Did breach proximately cause damage to buyer.

Columbia Nitrogen Corp. ∆ v. Royster Co. π United States Court of Appeals, 4th Circuit • 1971 • Butzner

- π agreed to minimum amount of phosphate. Set price & MC. - Prices dropped, ∆ didn't purchase the agreed amount - ∆ brought evidence to show COD deviated & TU. - UCC 2-202 admits evidence of COD & TU where it is consistent with the terms of the written contract. (even when not ambiguous) but doesn't allow additional terms evidence for complete & unambiguous contract. - K does not address modification of product's price or quantity & thus evidence of trade usage does not contradict the written agreement nor does it set forth consequences for failure to purchase the minimum quantity have to look at COD & TU to see if ∆ defaulted

Parker v. Twentieth Century-Fox Film Corp. Supreme Court of California • 1970 • Burke, J.

- π entered into k ∆ to play female lead in musical film Bloomer Girl, guaranteeing her compensation of $750k. Decided not to produce film & offered π lead in Western film Big Country, Big Men. - π did not accept offer - Big Country lead is different and inferior - dramatic actress in Western ≠ of or substantially similar musical lead. - π offered different terms in Bloomer - director & screenplay approval - D: Sullivan, C.J. - shouldn't solve on SJ - difference in genre not constitute difference in kind of employment, & record not conclusively establish extra terms that important in industry that w/o them k = inferior

United States Use of Susi Contracting Co. v. Zara Contract Co. Circuit Court of Appeals • 1944 • Clark, J.

- π entered into sub w/∆ who had gov k for airport w/crap clay soil - π agreed to do everything except 1-$100 item. Machine break down - extra work not in k. - ∆ breached k & received substantial benefit. - 2 don't work, 3rd doe b/c π can waive k entirely & sue in quantum meruit b/c of breach and doesn't violated k terms b/c restitution off k remedy.

John v. United Advertising, Inc. Supreme Court of Colorado • 1968 • McWilliams, J.

- π hired ∆ to erect 7 outdoor signs advertising π's motels. different signs different prices - K included term that termination of 1 part of k would not affect other part of k. - ∆ failed to properly erect two signs. - A significant factor is whether consideration provided can be apportioned. - Important to consider whether party would not have entered agreement comprised of several promises if any one promise were not included. - John argues would not have entered k unless all 7 signs properly erected. - ∆ argues that $ paid by π was apportioned under k, & that termination clause suggests k was intended to be severable. - Reasonable people could differ

National Farmers Organization v. Bartlett & Co., Grain United States Court of Appeals, 8th Circuit • 1977 • Van Oosterhout, J.

- π informed ∆ that it was ceasing delivery on outstanding ks until Bartlett made substantial payment for deliveries - ∆ treated this communication as AR of remaining 8 ks. - Sellers anticipatorily repudiated. - Seller could have availed self of 2-609(1) - 2-612(3) - whenever nonconformity OR default substantially impairs value of whole k there is breach of whole. - Cmt 6 - depends on if non-conformity substantially impairs whole k's value. - Buyer made substantial payment. - However, (2) No indication buyer ability impaired, (3) Steps short of suspending delivery could have preserved π's k'ual right to payment, (4) Didn't use 2-609 remedy (5) Was 1st breaching party on any of ks. (6) no grain w/substantial payment. - Unless pay substantial amount ltr from π to ∆ is repudiation b/c goes past terms of k. Demanding condition outside k. Delivering rest of grain not conditioned in any k. See comment 2 2-610

Lloyd v. Murphy Supreme Court of California • 1944 • Traynor

- ∆ couldn't cont. operating his business b/c gov restrictions. - ∆ vacated the property - A party seeking excuse performance under a lease due to frustration of purpose must show § (1) a frustrating event not reasonably foreseeable by parties at time entered into lease AND § (2) value of lease totally destroyed. - Possibility of war & consequences on auto industry's were reasonably foreseeable when the parties entered into the contract.

Norcon Power Partners, L.P. v. Niagara Mohawk Power Corp. Court of Appeals of New York • 1998 • Bellacosa, J.

- ∆ demanded adequate assurance b/c thinks π won't satisfy daily escalating credits in 3d period - Adequate assurances should apply to type of long-term commercial k btwn corporate entities b/c its complex & b/c helps keep parties at arms length. - Reasonable grounds to believe obligor will commit breach by non-performance that would give obligee damages claim for total breach under §243. - Obligee may treat as repudiation obligor's failure to provide w/in reasonable time assurance of performance as is adequate in circumstances of case. §251. - Position would be risk of this odd thing happening is assigned to ∆ and I π have not breached any of part of k for you to reasonably seek assurances. - ∆ wants renegotiation of k - they seek assurances not b/c they want to renegotiate so $610 million doesn't sit there. B would advise seek renegotiation

O.W. Grun Roofing & Construction Co. (∆) v. Cope (π) Court of Civil Appeals of Texas • 1975 • Cadena, J.

- ∆ entered a contract with π to install new roof on Cope's house. "russet glow" shingles. - Did roof stuff just fine. But only way to get uniformity would be to replace entire roof - Several factors to consider when determining if substantially performed. ▪ Extent of non-performance. Not enforced if deficiency in performance so pervasive that frustrates k's purpose in any real or substantial sense. ▪ K's purpose served ▪ gratified under k, ▪ excuse for deviating from exact k terms ▪ cruelty of enforcing strict adherence or compelling promisee to receive something less than what bargained for, and ▪ ratio of $ value of part-performance compared to promised performance. ▪ Finally, party seeking to enforce k on part-performance must have made good faith effort to perform k as written. - ∆ can't recover under quantum meruit b/c no evidence π received any benefit at all from performance. - π cannot be held to have "accepted" benefit conferred by continuing to live in her home. Unjust to require π to move out of her home to avoid implied acceptance of deficient roof.

Miller Brewing Co. (∆) v. Best Beers of Bloomington, Inc. (π) Supreme Court of Indiana • 1993 • Krahulik, J.

- ∆ entered into distrib. k w/another co., π may have partially fabricated complaints about π to get out of k. - Vernon Fire & Casualty v. Sharp 1976 - left door open for BOC punitive damages: § BOC got comp damages, alleged tortious conduct got punitive. § Damages not legally appropriate b/c (1) well-defined parameters of compensatory & consequential damages assessed against promisor give stability & predictability, (2) Promisee will be compensated for all damages proximately resulting from promisor's breach § Majority indi tort not very compelling when serious wrong (tortious in nature) not fit in tort box & where used to served public interest as deterrent. - ∆ did something wrong - employees made false statements to superiors about sales efforts, employees, accusations not supported by reports. ∆ tolerated overage beer in market even though terminated π for it. ∆ employee wouldn't give π's satis performance no matter what did. Sought unfavorable comments - Dissent: Dickson, J. - Vernon has two exceptions. - Indie tort & tortious in nature. Been well received.

Danann Realty Corp. v. Harris (pg. 428) Court of Appeals of New York • 1959 • Burke

- ∆ made false oral reps re the building's operating expense & profit. Contract contained specific merger clause. Premises as is. - π cannot say not rely and then rely. - General disclaimer or merger clause does not exclude PE showing that fraud has occurred. - If you can show fraud to the merger clause you can proceed - Dissent: Fuld, J. - parties that commit fraud should not get immunity b/c had mc/disclaimer. This is not a specific disclaimer, it's so broad it covers every thin​g

Freund v. Washington Square Press, Inc. COA N.Y. • 1974 • Rabin, J.

- ∆ merged w/another company - refuse to publish - didn't give notice. - π tried to prove - (1) delayed academic promotion (2) loss of royalties & (3) cost of publication if π had made own arrangements. - But was promoted & ct didn't find delay. - Measuring damages according to publication cost confers greater advantage than actual k performance for π & place in far better position than he would have been. - We compensate BOC when injury foreseeable (reasonably w/in parties' contemplation at time k was entered into) - Π alleged no reliance losses & royalties as expectancy interest speculative.

Anderson Bros. Corp. ∆ v. O'Meara π 5th Circuit • 1962 • Jones, J.

- ∆ selling a barge dredge for shallow trenches but π needed wide, deep canals dredge - Π sent employee to inspect dredge - knew a lot about engines not so much about dredges, but approved it for purchase - they were mistaken about different things. ∆ about what π wanted dredge for and π about dredge's capabilities. - π unilateral mistake not grounds for recovery because no due diligence leading up to the purchase. - To get unilateral mistake party must make effort to ascertain facts that reasonably ascertainable.

Pelc v. Simmons Appellate Court of Illinois • 1993 • Welch, J.

- ∆ sold garbage used car, saying was good little car. to π that required 4 qts of oil/day. Spark plugs bad. Wasn't holding enough pressure b/c air leaking from tray case. - Unless circumstances o/w indicate, all implied warranties are excluded by expressions like "as is," "with faults," etc. if calls buyer's attention warranty exclusion & makes plain no implied warranty. - "sold as is" sign excluded all implied warranties. - Rebuilding engine statement not express warranty as to functionality of engine.

Haymore v. Levinson Supreme Court of Utah • 1958 • Crockett, J.

- ∆s could move in b.f house totally completed, & $3k of k $ kept in escrow until "satisfactory completion of the work." - ∆s stated that not "satisfied" with work & refused to release $ - "Satisfactory completion" is judged by objective standard when work involves things as operative fitness, mechanical utility, or structural completion where personal preferences not reasonably deemed important to completion. - Need reasonable justification to refuse to accept work. - Building ks generally fall into objective standard category.

§ 2-313 comment 3

3. The present section deals with affirmations of fact by the seller, descriptions of the goods or exhibitions of samples, exactly as any other part of a negotiation which ends in a contract is dealt with. No specific intention to make a warranty is necessary if any of these factors is made part of the basis of the bargain. In actual practice affirmations of fact made by the seller about the goods during a bargain are regarded as part of the description of those goods; hence no particular reliance on such statements need be shown in order to weave them into the fabric of the agreement. Rather, any fact which is to take such affirmations, once made, out of the agreement requires clear affirmative proof. The issue normally is one of fact. - B.c. basis of bargain usually turns into reliance though technically UCC cmt 3 says not require proof of reliance. Some courts ask for reliance. Others have to argue close to reliance but don't say reliance. Cmt 3 says presume statements were part of why enter into bargain.

§ 151 Mistake Defined

A mistake is a belief that is not in accord with the facts.

§ 154 When a Party Bears the Risk of a Mistake

A party bears the risk of a mistake when (a) the risk is allocated to him by agreement of the parties, or (b) he is aware, at the time the contract is made, that he has only limited knowledge with respect to the facts to which the mistake relates but treats his limited knowledge as sufficient, or (c) the risk is allocated to him by the court on the ground that it is reasonable in the circumstances to do so.

§ 237 Effect on Other Party's Duties of a Failure to Render Performance

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.

§ 2-615. Excuse by Failure of Presupposed Conditions. (*Commercial Impracticability*)

Except so far as a seller may have assumed a greater obligation and subject to the preceding section on substituted performance: (a) Delay in delivery or non-delivery in whole or in part by a seller who complies with paragraphs (b) and (c) is not a breach of his duty under a contract 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 contract was made or by compliance in good faith with any applicable foreign or domestic governmental regulation or order whether or not it later proves to be invalid. (*Might want the excuse b/c you can't deliver the grain on time. Word foreseeability doesn't show up here. Notes 4 & 8 talk about foreseeability. Contingency something on the spectrum of unexpected*) (b) Where the causes mentioned in paragraph (a) affect only a part 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 contract as well as his own requirements for further manufacture. He may so allocate in any manner which is fair and reasonable. (*Solves part of the problem in Howell when you suppose to provide to two customers but you can't. About allocation*) (c) The seller must notify the buyer seasonably that there will be delay or non-delivery and, when allocation is required under paragraph (b), of the estimated quota thus made available for the buyer. (*Explains the notice procedure. About Notice*)

UCC § 2-202

Final Written Expression: Parol or Extrinsic Evidence Terms in confirmatory memo agree or which in a writing intended by the parties as a final expression of their agreement...may not be contradicted by evid of prior agreement or contemporaneous oral agreement but may be explained or supplemented (a) by course of performance, dealing, or usage of trade; AND (b) by evidence of consistent additional terms unless the court finds intended as a complete and exclusive statement of the terms

Steps to Analyzing Contract

Identify terms first & then you interpret those terms

§ 240 Part Performances as Agreed Equivalents

If the performances to be exchanged under an exchange of promises can be apportioned into corresponding pairs of part performances so that the parts of each pair are properly regarded as 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.

UCC 2-202 - comment 3

More liberal. Evidence is only inadmissible if the additional terms "would certainly have been included" If the additional terms are such that, if agreed upon, they would certainly have been included in the document in the view of the court, then evidence of their alleged making must be kept from the trier of fact.

Raffles v. Wichelhaus

Peerless had two ships and their purchasing cotton. Different prices. Judge said there no intent, no meeting of the minds, no k. Under mistake law we can figure out who bears the burden. Peerless isn't classically ambiguous but factually it's ambiguous. Could have prior negotiation evidence that would help us out. Not to add a new term but to tell us what Peerless. You have to permit contextual evidence for it to make sense.

UCC 2-202 comment 2

Similarly, the course of actual performance by the parties is considered the best indication of what they intended the writing to mean.

In Re Soper - Minn 1935

Soper marries one lady for 10 years then ghosts and marries another. New job, new life insurance policy goes to "deceased's wife." A lot of people don't know the law though. it's not that textualists ignore context - text is written evidence of intent. Everyone's looking for intention.

PER Steps

Start with integration - Two Tests the 4-corners rule Natural omission is used to prove partial integration but that's it.

§ 153 When Mistake of One Party Makes a Contract Voidable

Where a mistake of one party at the time a contract was made as to a basic assumption on which he made the contract has a material effect on the agreed exchange of performances that is adverse to him, the contract is voidable by him if he does not bear the risk of the mistake under the rule stated in § 154, and (a) the effect of the mistake is such that enforcement of the contract would be unconscionable, or (b) the other party had reason to know of the mistake or his fault caused the mistake.

§ 2-315. Implied Warranty: Fitness for Particular Purpose.

Where the seller at the time of contracting has reason to know any particular purpose for which the goods are required and that the buyer is relying on the seller's skill or judgment to select or furnish suitable goods, there is unless excluded or modified under the next section an implied warranty that the goods shall be fit for such purpose. - 2-315 is about fitness for a particular purpose. ▪ Where seller at time of k has reason to know particular purpose goods are required and that buyer relies on seller's skill/judgment to select/furnish suitable goods, unless excluded/modified under next § there is implied warranty that goods fit for such purpose. - 2-315 provides that seller may also bear risk goods not suit particular purpose of buyer if seller has reason to know purpose & buyer's reliance on skill in selecting conforming goods.

Vague

Words are imprecise

When words are CLEAR and UNAMBIGUOUS,

extrinsic evidence w/a possible contrary meaning is inadmissible.

Ambiguous

words have more than one meaning.

Test for Mistake

§ Mistake of present fact - present fact can be unclear b/c a present prediction might sound like a present fact. § Mistake must be mutual - doesn't have to be identical but mostly one mistake. § Has to be about foundational assumption (basic) - B means core assumption § Material effect on the value of the exchange btwn the parties. § Neither party can have borne the risk of the mistake.

Sedmak v. Charlie's Chevrolet, Inc. Missouri Court of Appeals • 1981 • Satz, J.

· Corvettes, made promise, got other offers, told have to bid even though made requested changes. Not rare but limited edt. Price demos small supply big demand · Have no adequate remedy at law b/c can't get same car · UCC says where goods are unique or in other proper circumstances. · π is still going to have to prove inability to cover. Don't require π to call bidders to make deals but do have to show it's pointless to try to cover. · Nothing ∆ doing makes sense - only thing would is k not binding.

Transatlantic Financing Corp. v. United States United States Court of Appeals, District of Columbia Circuit • 1966 • Wright

· Israel invaded Egypt & Suez Canal closed, so π sailed around Cape of Good Hope to get to Iran. · Three conditions must occur for the doctrine of impossibility to apply. (1) Something unexpected must have occurred. (contingency) Foreseeable & unexpected are different things. (2) Risk of unexpected occurrence must not have been allocated by agreement or custom. Risk bearing (3) Contingency's occurrence must render performance commercially impracticable. · Canal closure was unexpected, but risk of occurrence not allocated to U.S. b/c Suez was only acceptable passage according to either charter or trade custom. · Not commercially impracticable to change course to Cape. Cargo not harmed during the transit · Understood at time that you go through Canal. · Could have flat out impossibility if k said Canal · Court is conflating impracticability and impossibility

Stees v. Leonard Supreme Court of Minnesota • 1874 • Young, J.

· K'd to build, erect & complete building on π's lot.Gave up after tried twice & both collapsed at 3 stories b/c quicksand · Unless prevented by an act of God you must perform your contract. · The contractor knows what he's taking on. · Leave losses where k placed them. · π wants $ back - didn't pay ∆ for act of building. · Π & ∆ should have been worried about possibility that foundation not stable. · What we expect builder to do & industry standard in that district are useful to decide. · Default rule is builder bears increase/ unforeseen costs. They appraise soil.

Bell v. Elder Court of Appeals of Utah • 1989 • Bullock, J.

· Neither party may claim breach until party claiming breach tendered own performance of concurrent obligation. · K does not specify order in which parties' promises—obtaining building permit and supplying water to land—were to be completed. · So promises were to be performed concurrently. • Just b/c not furnishing is breach doesn't mean it excuses other party's performance. • One reason they're furnishing utilities is b/c payment is going to take a long time, so Elders have legal ownership still • Ct's real claim should be Bell's trying to get out on pretext - land value has decreased

Eastern Air Lines, Inc. v. Gulf Oil Corp. United States District Court, Southern District of Florida • 1975 • King, J.

· OG had pretty standard k then expanded it. ∆ drafted k - payment calculated by price escalation provision tied indicator. Any fuel purchased by π had to be from ∆ (require) · Pricing formula didn't yield profit for ∆ - threatened to cut off unless agree to $ increase. · Ct held it was enforceable and π hadn't breached. · For UCC §2-615 to apply there must be: § Failure of pre-supposed condition that § Was an underlying assumption of the contract which § Failure was unforeseeable AND § Risk wasn't allocated to complaining party. · Unprofitability not sufficient. Didn't satisfy hardship req. · Energy crisis was foreseeable. Knew about instability in Middle East. W/o that ct knows that oil has been used as poli weapon

Aluminum Co. of America v. Essex Group, Inc. W.D. Penn • 1980 • Teitelbaum, J.

· Price formula and k provided a max $ that π would pay if WPI caused excessive $ escalation. · π will suffer extreme expense if required to comply with the WPI · Π wanting reformation or adjustment of the contract under frustration and impracticability. · Excused by impracticability when exhibits "...extreme & unreasonable difficulty, expense, injury, or loss to one of the parties...." · Change in degree of difficulty/ expense NOT sufficient to excuse performance under this doctrine. · Excuse performance if cost due to unforeseen contingency that alters performance's nature. · Don't take away the discussion for any of the tests in alcoa because the court just gets it completely wrong. · If mistake in contract formulation party can argue recission. If mistake in expression can argue reformation.

Taylor v. Caldwell King's Bench • 1863 • Blackburn, J.

· Through neither party's fault, hall was completely destroyed by fire b.f. the first concert. · Music Hall's existence in state fit for a concert was essential to fulfillment k. · K subject to implied condition - should be excused if b.f. breach performance b.cs impossible from thing perishing w/o default of contractor. · Court says 2 things - you do need some kind of factual impossibility and factual impossibility is necessary but not sufficient. · Excuse means you didn't breach & you don't have to perform or pay.

Seitz v. Mark-O-Lite Sign Contractors, Inc. Superior Court of New Jersey • 1986 • Milberg, A.J.S.C.

· rec'd other quotes from Garden State for $20,228. Contract w/∆ for $12,800. Deposit of $3,200. · Co not liable for failure in performance of obligation b/c of act of God, strikes, labor union, fires, floods, earthquakes. "conditions or contingencies beyond its control" · ∆'s only sheet metal worker was hospitalized and returned uncashed deposit · ∆ cannot prevail on its claim of impossibility of performance b/c supposed to narrowly interpret force majeure clause. Worker disability not same class as force majeure. · Not sudden, reasonably foreseeable that he would have to get his foot partially amputated. · Force majeure doesn't get ∆ out of this b/c need whole co. to be affected not one guy.

Howell v. Coupland Court of Appeal (Q.B.) • 1876 • Lord Coleridge, J.

· Π, potato merchant contracted w/∆ farmer to purchase 200 tons of potatoes grown on land belonging to ∆. Disease attacked ∆'s crop and it failed. · Implied condition that b.f. performance time that potatoes would be in existence. · Seems weird to specify this - potatoes from his land. · π seems to have competitive advantage - he wants ∆ to be on hook to get him potatoes. · Price would be different if we thought the person was a middle man or if ∆ bore the risk of getting the potatoes

Rockingham County (∆) v. Luten Bridge Co. (π) Circuit Court of Appeals, 4th Circuit • 1929 • Parker, J.

· ∆ told π to stop, π said would, had performed ~ $1,900 worth of work on bridge. But finished bridge instead · After π rec'd ntc of ∆ of refusing k, didn't have right to cont. performance & pile up addt'l damages & then sue to recover for full performance. · Π had duty to cease performance and seek damages when received ntc of breach · natural thing to do would be seek expectation damages. · Can't seek restitution b/c if cty never builds road out there, conferred no benefit. · Passive duty pretty clear but not sure how strong active mitigation signal need to be. · As long as conclude reasonable active mitigation cts likely to award it.

4- Corners Test

□ "Four corners" presumption - if appears on its face to be complete and exclusive then presumed fully integrated. - Courts determine intent by looking at the writing. □ If passes four corners - proving stuff not written down is heavy burden □ Not a subjective test.

Natural Omission Test

□ Used to prove partial integration □ Asks if it is natural for the average person not to include it in the contract. Not what parties did. □ If it's partial then look to whether PE makes terms inconsistent. □ Not about intent □ If not natural to omit it then done