Contract Law

basic approach to offer and acceptance

(1) check if there is an offer (2) check if there is a subsequent acceptance (3) check to see if offer was accepted prior to termination of the power to accept *methods of termination of power of acceptance (a) rejection (b) revocation (c) lapse of time (d) death of offeror ~(e) offeree's power of acceptance terminated by non-occurrence of any condition of acceptance under terms of offer

test for materiality

(1) victim harm -extent to which deprived a benefit reasonably expected (2) victim compensation -extent to which victim can be adequately compensated (3) likelihood of cure -likelihood that breach will be cured (4) breaching party harm -extent to which breaching party will suffer "forfeiture" if breach is considered material - and other party can stop performance) (5) extent of bad faith (by breaching party)

construction - the implied duty of good faith and fair dealing

1) UCC 1-304: every contract [governed by this act] imposes a duty of good faith and fair dealing 2) what is the duty of good faith and fair dealing (i) UCC: honesty in fact + observance of reasonable commercial standards of fair dealing (ii) Robert Summers: Broad "Excluder Concept" (excludes heterogenous which we call bad faith) (iii) Professor Kar: "Ha Ha" test

The UCC

1) a set of model rules; enacted in 49/50 states; we'll focus on Art. 2 2) when Art. 2 applies (i) UCC 2-102 - applies to transactions in "goods" (sale of goods) -"goods" def: anything moveable at time of identification of contract (1) includes goods, crops, unborn young of animals, other identified things attached to realty (2) doesn't include IP, money in which price to be paid, lease, real estate, services, securities, things in action (a right to recover money or other personal property by judicial proceeding)

(2) check if there is a subsequent acceptance

1) acceptance def: (a) a manifestation of an assent to the bargain on the terms of the offer (b) made by the offeree (c) in manner invited or required by offer 2) objective test applied 3) court looks at same factors 4) counter offer - other party offers alternate set of terms = rejection + new offer 5) qualified acceptance - conditional acceptance - treated like counter offer 6) mirror image rule (common law) -gives varying acceptance the effect of only a counter-offer; requires any acceptance to be an unconditional assent to the terms of of the offer 7) last shot rule (common law) -a party implicitly assenting to and thereby accepted a counter-offer by conduct indicating lack of objection to it (whoever sends last form before performance starts - those T&CS govern) -tends to favor sellers in practice who usually send last form

interpretation/construction - exceptions to PER (PE isn't used to contradict/supplement)

1) admissible to interpret terms in contract 2) admissible to establish subsequent agreement 3) admissible if offered to show effectiveness of agreement was subject to an oral condition precedent 4) admissible to establish the invalidity of a contract 5) admissible to establish certain equitable remedies such as an "equitable" remedy, such as "reformation" of the contract (fixing mistake) 6) admissible to establish a collateral agreement (separate agreement)

grounds for irrevocability - true option contract

1) an offer for a contract 2) a valid subsidiary promise to keep that offer open, which is also 3) supported by consideration

defenses - unconscionability - policy

1) applies sparingly in practice (a) don't want courts to check fairness in every instance - disempowering; want deference for people's choices (b) though subjective choice isn't always empowering; framing can manipulate subjective choice to harm of individual 2) contractual liberty v. restrictions on contractual liberty -can understand both sides from empowerment rationale 3) contractual liberty i. freedom of contract - great deference to parties' subjective choices ii. freedom from contract = don't have to assume duties w/o choice 4) restrictions on contractual liberty i. unconscionability ii. minimum wage laws iii. illegality/public policy defense iv. duty of good faith/fair dealing v. tests for material breach vi. objective test for intent vii. can't waive consideration requirement viii. can't choose punitive damages

defenses - contract enforcement can be empowering - the perfect case

1) assumptions (a) both parties have perfect knowledge (no asymmetry) (b) both parties are free from coercion (c) both parties have certain capacities -identify what is in best interests (cognitive) -conform actions to judgments (volitional)

defenses - undue influence

1) basic test = overpowers the will w/o convincing the judgment -doesn't require bad faith; if not bad faith probably not overreaching -so sometimes undue influence is overreaching, sometimes it is not 2) elements/factors (a) discussion at unusual place or inappropriate time (b) consummation of transaction in an unusual place (c) insistent demand that business be finished at once (d) extreme emphasis on untoward consequences of delay (e) use of multiple persuaders by dominant v. single servant party (f) absence of 3rd party advisors for servant party (g) statements that there is no time to consult attorney

general approach to interpretation

1) begin w/ the language (L) 2) employ modified objective test 3) read language in context of the contract as a whole 4) remember to check any external sources of evidence (a) course of performance (CP) (b) course of dealings (CD) (c) trade usage (TU) *w/ common sense prioritization: L>CP>CD>TU)

modern test for consideration - notes

1) bilateral promises supported - I'll give you $100 to paint my house -exchanging promises of future performance is sufficient consideration 2) gratuitous promises not supported - I'll give you $100 b/c I feel like it 3) past consideration is no consideration - ex: promising your son $100 b/c he's been good 4) courts do not test adequacy of consideration - can be nominal

three beasts

1) breach of contract 2) promissory estoppel 3) restitution

remedies - standard remedies

1) breach of contract - expectation damages 2) promissory estoppel - reliance damages 3) restitution - restitution

reasonable grounds for insecurity

1) can not be something you knew when contract formed 2) must be new things that occur such that a reasonable person would be concerned

defenses - statute of frauds - general

1) certain kinds of contracts need to put into writing 2) formality provision (additional reason why consideration doesn't serve formality function; statute of frauds serves this function) 3) how does it relate to other defenses -if all evidence is oral >> he said/she said -evidentiary; cautionary rationales

common instances of promissory estoppel

1) charitable subscriptions -enforceable if there is *either* consideration or reliance (courts - will reach to find either of these - so not so different from restatement *in practice*) -enforceable even w/o consideration or reliance (restatement) -an oral or written promise to do certain acts of giving real or personal property to a charity for a charitable purpose 2) family contexts -focuses on interests of children 3) company pension plans NOTE: all are contexts in which gratuitous promises are frequently made -courts may give expectation damages in special circumstances

non-occurrence of an express condition

1) condition = an event that is not certain to occur, but that must occur in order for a duty to become due 2) a conditional duty does not arise if the condition does not occur

5 observations about gift exchange

1) pervasive in informal settings 2) like market exchange, gift exchange can be mutually beneficial 3) but gift exchange doesn't involve prior negotiations or promises to reveal preferences 4) hence, gift exchange requires that parties have intimate knowledge of one another's interests 5) in these informal settings, informal sanctions typically make law unnecessary (gossip, shaming, ridicule, ending relationships)

battle of the forms - historical changes toward form contracting

1) printing press (China - 80,000 characters - 1040 a.d.) 2) gutenberg press (germany 1450 a.d.) 3) modern proliferation of form contracts (i) boilerplate - pre-printed terms not subject to negotiation (ii) dicker terms - blanks you fill out (iii) pre-printed forms; leaves some items blank that parties discuss; conditions on back 4) form contract production by computer; examples -purchase order, order of confirmation, invoice, sales receipt

Electronic and "Layered" Contracts

1) shrinkwrap terms (i) open box, get product + T&Cs 2) clickwrap terms (i) software product, must click through agreement before you can install 3) browse wrap terms (i) by using website, you are agreeing to T&Cs

interpretation/construction - licensing agreements (lady duff)

1) some courts interpret them to contain duties to use "reasonable" or "best" efforts 2) others interpret them as too vague to be binding - only illusory consideration 3) still others find an implied duty of good faith which requires using "reasonable" or "best" efforts (construction)

remedies - definitions

1) specific performance -a court order to do what was promised 2) expectation damages -a court order to pay $ in the amount needed to put the victim in the same place he/she would have been if both parities fully performed (standard remedy for breach of contract) 3) reliance damages -a court order to pay $ in the amount needed to compensate for any harms caused by reasonable reliance on a promise (standard remedy for promissory estoppel) 4) restitution -a court order either to return material benefit that was conferred or pay its fair market value (standard remedy for restitution) 5) punitive damages -a court order top pay $ in an amount larger than would be needed to cover reliance, expectation, or restitution interests (and meant either to deter, express condemnation, rehabilitate, and/or provide retribution for a wrongful act)

form of tests for mutual assent

1) subjective - what the parties subjectively thought they were assenting to; "meeting of the minds" 2) objective - what a reasonable person in the position of the party hearing the words (or seeing the actions) take the words or actions to mean?

interpretation/construction - subtle uses of parol evidence

1) to show that a seemingly unambiguous term is ambiguous (i) restrictive view (formalist) (trying to determine parties' intent) (ii) Corbin view (contextualist) (trying to determine parties' intent) 2) to determine whether a document is partly or completely integrated same (i) and (ii) 3) restrictive view - just look at 4 corners of the contract 4) contextualist (i) allow PE to establish ambiguity even if facially clear (ii) allow PE to establish whether agreement is final or final & complete -could show integration clause is boilerplate and contradicts reasonable expectations

grounds for irrevocability

1) true option contract 2) rule for unilateral offers 3) UCC's firm offer provision (2-205: a formality provision) 4) restatement's formality provision (courts almost never follow this) 5) offer of a bilateral contract + reliance

establishing mutual assent

1) two people sign a contract (easy case) 2) behavior/conduct showing mutual assent 3) rules of offer and acceptance

defenses - unconscionability/illegality

1) unconsionability and illegality relate to substance of contract (at least in part) and not just process by which K is formed (like previous defenses)

advanced topics in formation I

1) unilateral contracts 2) option contracts/grounds for irrevocability 3) intro to UCC; covers sale of goods w/ special rules 4) form contracts/battle of the forms 5) electronic contracting

grounds for irrevocability - restatement's formality provision (courts almost never follow this)

An offer is binding as an option contract if it is 1) in writing and signed by offeror 2) recites a purported consideration for the making of the offer (no real consideration required, which makes this a formality provision) 3) proposes an exchange on fair terms w/i a reasonable time

grounds for irrevocability - UCC's firm offer provision

An offer will be treated as an option contract (or "firm offer") if: 1) an offer is governed by UCC (i.e. it is for a sale of goods) 2) the offer is made by a merchant 3) the terms give assurance that it will be held open 4) for up to 3 months or for any lesser time stated *even w/o consideration (b/c consideration not required, this is a formality provision)

grounds for irrevocability - offer of a bilateral contract + reliance

An offer will be treated as an option contract if: 1) it induces action or forbearance of a substantial character by offer 2) that the offeror should have reasonably expected 3) and it must be binding as an option contract to avoid injustice (this is rarely the case b/c the offer can typically avoid injustice by simply accepting a bilateral offer), but sometimes applies in construction contracts, where bids are relied upon)

modern test for consideration

Bargain theory: A promise is supported by consideration if: (1) there is a return promise or performance (2) that is "bargained for" = (a) sought by promisor in exchange for original promise; and (b) given by promisee in exchange for original promise

old test for consideration

Benefit/detriment test: A promise is supported by consideration if: (1) there is a return promise or performance (2) that is either (a) a benefit to the relevant promisor, or (b) a detriment to the relevant promisee

defenses - misrepresentation or fraud (tort)

Elements 1) affirmative statement of fact 2) statement is false 3) party making statement has knowledge of falsity 4) intent to deceive 5) induced reasonable reliance 6) damages *compensatory damages; possibly punitive damages

central narrative

FORMATION -process by which a contract comes into existence INTERPRETATION/CONSTRUCTION -methods used to determine rights/obligations arising out of contract PERFORMANCE/BREACH -standards used to determine whether a breach has occurred, and what reactions a victim can take DEFENSES -circumstances in which a D in breach of contract can avoid liability REMEDIES - standards courts use to determine what money damages or other redress should be awarded

interpretations preferred (in general)

all other things being equal, prefer interpretations that are VERy-LoPP-sided V = Valid E = Effective R = Reasonable L = Legal PP1 = consistent w/ Parties' Purposes PP2 = consistent w/ Public Policy

unilateral contract

def. a promise for a performance, rather than for a promise; only one person bound 1) no contract until offeree performs 2) promisee never bound; promisor bound to pay upon performance 3) incentive to perform w/o binding a party to perform (look at offeror's intent, reasonably construed) 4) can only accept through complete performance Problem w/ Brooklyn bridge ex: promisor can revoke offer while promisee in middle of performance Can change to bilateral - I will pay you $100 if you promise to cross" - "I accept"; if ambiguous, usually bilateral Examples of unilateral contracts: -reward posters -report cards rewards -employee bonuses when an offer for a unilateral contract becomes irrevocable: restatement 45 -an offer for a unilateral becomes irrevocable once an offeree begins performance in accordance w/ the terms of an offer -empowers promisor - offered will trust offer if they're protected from revocation

promise - definition

def: 1) a manifestation of an intention to act or refrain from acting in a specific way 2) so made so as to justify a promisee in understanding that a commitment has been made

mutual assent - definition

def: expressing an intention to take on reciprocal promises to one another which you assent to performing - creating obligations -MS essentially generates reciprocal promises

How does the UCC interact w/ the common law when the UCC applies?

does it displace or supplement the common law? 1) supplement it, sometimes minor displacements 2) common law rules form the foundation (consideration, definition of offer, basic approach to offer and acceptance, etc.) + UCC 2-204(1) - contract for sale of goods can be made in any manner sufficient to show agreement; including conduct by both parities which recognizes existence of a contract (implicit in common law) UCC 2-204(2) - an agreement sufficient to constitute a contract for sale may be found even though the moment of its making is undetermined (implicit) UCC 2-204(3) - a contract for sale does not fail for indefiniteness, even though one or more terms are left open, so long as parties intended to make a contract and there is reasonably certain basis for giving a remedy (augments/displaces common law) UCC 2-205 - firm offer provision - adds to common law

consideration

function: only promises supported by consideration can be legally enforced

construction - bad faith/good faith

numbers - form of bad faith conduct letters - meaning of good faith (1) seller concealing a defect in what he is selling A. allowing buyer access to all material facts + disclosing if required (2) willfully failing to perform in full though otherwise substantially performing B. substantially performing while trying to fully perform, even if there are some unintended deviations (3) contractor openly abusing bargaining power to coerce an increase in contract price C. not abusing bargaining power once in a contract (i.e. not forcing unilateral modifications, unless fair and reasonable) (4) hiring a broker then deliberately preventing him from consummating a deal D. cooperating in allowing hired broker to broker an envisaged deal (5) arbitrarily & capriciously exercising contractual power of termination E. exercising contractual power of termination only w/ some good reason (6) adopting overreaching interpretation of contract language F. interpreting contract fairly, even if in a way that differs from the other party

performance/breach - possible justifications for D's - non-occurrence of an express condition

P's problematic behavior -non-occurrence of an express condition: e.g. duty not due b/c (1) parties expressly stated that duty would only become due if a particular condition occurred + (2) condition did not occur **condition must protect D Justification for non-performance? -YES Warranted response by D: -Duty does not arise; so can't be a breach ...unless: non-occurrence of express condition is excused by: (1) D's waiver (2) D's estoppel (3) D's prevention (4) in order to avoid forfeiture to P

performance/breach - possible justifications for D's - anticipatory repudiation

P's problematic behavior: -anticipatory repudiation Justification for non-performance? -YES Warranted response by D: -Can: (1) treat as prior total breach ...unless P retracts before D either: (a) detrimentally relies on repudiation or (b) notifies P he's treating repudiation as final

performance/breach - possible justifications for D's - prior material breach

P's problematic behavior: -prior material breach Justification for non-performance? -YES Warranted response by D: -Can: (1) can sue for expectation damages at end + (2) stop performance unless and until breach is cured

performance/breach - possible justifications for D's - prior partial breach

P's problematic behavior: -prior partial breach Justification for non-performance? -NO Warranted response by D: -Can: (1) sue for expectation damages at end (or withhold amount to cover expectation damages) (but can't stop performance)

performance/breach - possible justifications for D's - prior total breach

P's problematic behavior: -prior total breach Justification for non-performance? -YES Warranted response by D: -Can: (1) sue for expectation damages at end + (2) stop performance unless/until cured; or (3) terminate contract altogether + (4) seek alternative/substitute K + (5) sue for ED immediately

performance/breach - possible justifications for D's - reasonable grounds for insecurity

P's problematic behavior: -reasonable grounds for insecurity Justification for non-performance? -YES Warranted response by D: -Can: (1) demand adequate assurance of performance + (2) stop performance (if commercially reasonable) until adequate assurance of performance is received + (3) treat as anticipatory repudiation if adequate assurance not received w/i reasonable time

third beast

Restitution ELEMENTS: (may not even require a promise) (1) conferral of a material benefit (2) non-gratuitously (3) in circumstances where retention would be unjust POLICY/PURPOSE: 1) prevent unjust gains 2) provide for rare instances of gift exchange REMEDY: 1) restitution - give the benefit back or fair market value

defenses - unconscionability - standard (under common law and UCC)

Two Prongs 1) procedural unconscionability (a) absence of meaningful choice (look at other defenses to satisfy this -doesn't necessarily have to satisfy other defenses) 2) substantive unconscionability (a) unfairness in resulting terms - shocks the conscience -have to look to see if there is a deviation from similar Ks in the market between parties of similar bargaining strength and sophistication Sliding scale (need both prongs) -but the more evidence of one means you need less evidence of the other

conditional gift v. return promise or performance

the return promise or performance is what is actually being sought by offering original promise (depends on the intent of the offering party reasonably construed)

express warranty

type/basis for warranty: IF: (1) any affirmation of fact, or promise relating to goods, or description, sample, or model of goods (2) is made part of basis of bargain (see UCC 2-313) content of warranty: Goods shall conform to (1) *(need not be a promise, but cannot just be a statement of opinion/puffery) rules for disclaimer of warranty: Invalid if inconsistent w/ terms of express warranty

implied warranty of fitness for particular purpose

type/basis for warranty: IF: (1) seller has reason to know of buyer's particular purpose (at time of K) & (2) buyer is relying on seller's knowledge or skill to select suitable goods (see UCC 2-315) content of warranty: Goods shall be fit for particular purpose rules for disclaimer of warranty: Must be in writing and be conspicuous e.g. -"there are no warranties that extend beyond description on face thereof", or -"AS IS", "WITH ALL FAULTS" or other known trade usages

implied warranty of merchantability

type/basis for warranty: IF: (1) seller is a merchant of these goods (see UCC 2-314) content of warranty: Goods shall be of "merchantable" quality: (1) pass w/o objection in the trade & (2) fit for ordinary purposes rules for disclaimer of warranty: Must specifically mention merchantability (and be conspicuous in writing, i.e. non-boilerplate) -or can say: "AS IS", "WITH ALL FAULTS" or other known trade usages

implied warranty of of habitability/workmanlike construction

type/basis for warranty: IF: (1) seller is builder of new home (common law) content of warranty: new home shall be habitable + skillfully constructed rules for disclaimer: Must be very explicit and conspicuous

rule for browse wrap (old offer and acceptance projected in new context)

typically binding when 4 conditions are met: (1) adequate notice of existence of terms (2) meaningful opportunity to review (3) adequate notice that specified actions will manifest assent (4) user voluntarily takes specified actions *clickwrap often works when browse wrap doesn't

defenses - effect of existence of bargain upon right to restitution

(1) a person who has performed services or transferred property to the other or otherwise has conferred a benefit upon him (a) pursuant to a contract (b) is not entitled to compensation therefor other than in accordance w/ terms of such bargain (c) unless the transaction is rescinded for fraud, mistake, duress, undue influence or illegality (d) or unless the other has failed to perform his part of the bargain

battle of the forms - UCC 2-207 - solves problem

(1) a definite and seasonable expression of acceptance (or a written confirmation that is sent w/i a reasonable time) -operates as an acceptance -even though it states terms that are additional to or different from those offered (rejects mirror-image rule) -unless acceptance is expressly made conditional on assent to the additional or different terms (if both parties do this; recreates battle of forms problem; section (3) responds) (2) the additional terms are to be construed as proposals for addition to the contract -except between merchants in which case they become part of the contract unless: (a) offer expressly limits acceptance to terms of the offer (b) they materially alter it (c) notice of objection given (already or in reasonable time i.e. before or after) (3) 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 cases, the terms of the contract consist of those terms on which the writings agree plus gap-fillers from UCC (eliminates last shot rule - called knock-out rule)

restitution type 1 - quasi-contract, contract-implied-in-law, constructive contract

(may not even require a promise) (1) conferral of a material benefit (2) non-gratuitously (3) in circumstances where retention would be unjust -test 1 - w/ knowledge and consent (i.e. not officious intermeddling) -test 2 - pelo factors - w/o knowledge and consent so long as: A person who has supplied things or services to another, although acting w/o the other's knowledge or consent is entitled to restitution therefor from the other if: (1) he acted unofficiously and w/ intent to charge therefor, and (2) the things or services were necessary to prevent the other from suffering serious bodily harm or pain, and (3) the person supplying them had no reason to know that the other would not consent to receiving them, if mentally competent, and (4) it was impossible for the other to give consent or, b/c of extreme youth or mental impairment, the other's consent would have been immaterial

test for totality of breach

*test for materiality + two factors: (6) extent to which delays will prevent victim from making substitute arrangements (7) extent to which timing is of the essence

performance/breach - justifications for non-performance - setup

1) P sues D for breach of contract 2) breach def: any non-performance of a contractual duty that has become due 3) contractual duties arise from interpretation/construction of a contract 4) but a duty is not due if non-performance is justified 5) D can try to justify non-performance by pointing back to P's prior problematic behavior

past consideration

...is no consideration ex: promising your son $100 b/c he's been good

rule for layered contracts (shrink-wrap) under the UCC

1) 2-206(2): an order (or other offer to buy goods) shall be construed as inviting acceptance either by prompt promise to ship or shipment 2) 2-207(1) a written confirmation operates as an acceptance even if it has different/additional terms (two forms not required) *tries to protect consumers more than merchants - and certainly at least both equally *but not relevant b/c the only question is which terms govern *recreates last shot rule problem

anticipatory repudiation

1) I'm going to materially breach and not cure (total breach) 2) has to be definite and unequivocal

interpretation/construction - UCC PER

1) PE inadmissible to completely negate the terms of a written contract - which is final or final & complete

construction contracts

1) conferral of a material benefit (claim w/o promise, consideration, or reliance which is enforceable) 2) non-gratuitous 3) circumstances in which retention would be unjust -the claim is by a subcontractor against a client -subcontractor has exhausted all remedies against general contractor -owner has received benefit w/o paying consideration to anyone NOTE: construction contracts special 1) allows restitution actions by subcontractors against owners 2) ensures all of the important policies that typically favor market exchange over gift exchange remain intact (i.e. restitution is only legally enforceable here b/c there is no officious intermeddling and there are other indicia of mutual benefit)

restitution - aliases

1) contract implied-in-law (no real contract - courts pretend there is a contract) (v. implied-in-fact - valid contract (mutual assent + consideration) implied from conduct) 2) aliases -restitution -unjust enrichment -contract implied-in-law -quasi contract -constructive contract -quantum meruit (services) -quantum valebat (goods) -material-benefit rule

rule for layered contracts (shrink-wrap) under Pro-CD

1) delivery of product = offer 2) keeping product can be acceptance of T&Cs 3) but only if product makes clear that (a) by accepting product customer is accepting T&Cs + (b) consumer can reject T&Cs by returning item *purchase order is an invitation for offer; says UCC 2-207 doesn't apply where there isn't more than 1 form *protects corporations more than consumers from form terms *gives policy reasons: practical considerations dictate that terms count b/c no one would want to have them read

defenses - illegality/public policy

1) easy case (illegality): contracts that require illegal acts are void 2) harder case (public policy): sometimes an act is not illegal, but is contrary to policies that arise in other areas of the law 3) then must balance these policies against policies that favor contractual enforcement

duress/economic duress

1) elements (a) any wrongful threat of one person by words or conduct (300K to 97.5K settlement) (b) induces another into a transaction (c) under influence that precludes free will (i.e. lack of reasonable alternative) (d) threat was intended or should reasonably be expected to induce action *guarantees some overreaching* 2) what is a wrongful threat (a) easy case = act is tortious or criminal (b) Alyeska - Alyeska had caused dire economic distress, and threatened to breach in bad faith -not a good faith interpretation of the contract; bad faith; overreach (c) affirmation, necessity, fraud -all same as minor

defenses - mental incapacity

1) elements (a) cognitive test: does person involved have sufficient mental ability to know what he/she was doing & nature & consequences of transaction? (b) volitional test: unable to act in a reasonable manner in the transaction and the other party knows or has reason to know 2) mental incapacity default for right to rescind - can only void if able to give full consideration back (a) exception - don't have to be able to give full consideration back if overreaching or unfairness (contract terms are fair + reasonable) (b) seller can get setoff for use if they didn't overreach/unfair

defenses - minority defense

1) elements (a) under 18 at time of contracting 2) default rule for right to rescind - minor can rescind whether or not he can give back full consideration (a) absent overreaching, undue influence, unfair bargain - the merchant can get a setoff for losses due to minor's use 3) purpose (a) protect minors from their lack of judgment; and (b) from squandering their wealth through improvident contracts w/ crafty adults who would take advantage of them in the marketplace 4) why allow defense? (a) minors might have poor capacities (b) other parties might take advantage 5) exception for "necessaries" - minor held to K (PELO factors - see restitution) - seller get fair market value even if overreaching 6) affirmation (a) can't rescind the contract made when party was a minor if that party affirmed w/ capacity (when of legal age) (b) moral obligation doctrine - can promise to not raise minority defense (waive) w/o new consideration (c) have to disaffirm w/i a reasonable time from becoming adult or will be assumed to have affirmed 7) fraud (a) if minor intentionally misrepresents age - can sue for tort - but contract issues are the same

modern test for consideration - rationale

1) empowerment (best understood in terms of this one) - promisors may want to use promise to induce people to do things; need their promises to be legally enforceable; only promises supported by consideration satisfy this 2) formality 3) evidentiary 4) cautionary (deter inconsiderate action) 5) market rationale (empower modern economy) (serves this one too)

rationales of the objective test

1) empowerment: promise as a tool (a) promisor wants to be able to induce promisee to do something (by making a trustworthy promise) (b) so promisor wants promisee to rely on objective meanings 2) reliance: don't harm (a) promisee might rely on objective meaning to their detriment; should protect promisee 3) evidentiary: best evidence of subjective intent

interpretation/construction - the parole evidence rule - evidence in general

1) evidence in general (i) always ask whether it is admissible for particular purposes; applies to PER (ii) ex: hearsay rule - out of court statements asserted to prove the truth of the matter are inadmissible

remedies - expectation damages v. specific performance

1) expectation damages is the rule - specific performance is the exception 2) specific performance chosen for items that are unique, where expectation damages are hard to calculate, or "in other special circumstances" 3) both ED and SP protect: an expectation interest (not reliance or restitution) - will give you what you expected in terms of value or performance 4) why ED as default? (a) theory of "efficient breach" -contracts are usually mutually beneficial -but sometimes circumstances change and it would create more net benefit to allow breach -ED allows party out of contract so long as their breach is more beneficial than cost of paying other party what was expected (efficient) (b) empowerment rationale -empowering to promise to perform and compensate in value

warranties

1) express warranty 2) implied warranty of merchantability 3) implied warranty of fitness for a particular purpose 4) implied warranty of habitability 5) implied warranty of skillful construction

interpretation/construction - PER

1) parol evidence def: any evidence outside the four corners of the written agreement; includes CP, CD, TU 2) PER for final contract (fully formed, binding, might not contain entire agreement) (i) PE inadmissible to contradict express terms; can supplement them 3) PER for final & complete contract (fully formed, binding, purports to contain entire agreement) (i) PE inadmissible to contradict or supplement express terms

defenses - statute of frauds - test/elements

1) first question - does the contract fall w/i the statute of frauds? (a) land provision: contract for sale of interest in land (b) one-year provision: contact not to be performed w/i one year (c) UCC provision: contract for sale of goods > $500 (d) suretyship provision: contract to answer for debts of another -promise must be made to (1) creditor, not debtor, (2) not for own financial gain, and (3) w/o releasing original debtor (e) executor-administrator provision: contract by executor/administrator to answer for duty of decedent (f) marriage provision: contract made upon consideration of marriage (e.g. I'll give you cattle if you marry my daughter) (not promises between married persons) 2) second question - does it meet its formality requirements? (a) in writing: ID subject matter + essential terms to be enforced (b) signed by person against whom action is being brought 3) third question - are there any exceptions to the statute of frauds? (often based in reliance - promissory estoppel) (a) promise (b) induces action or forbearance (c) promisor should have reasonably foreseen (a)-(b) (d) injustice can only be avoided through enforcement *can be enforced despite SoF problems*

defenses - statute of frauds - UCC

1) first question: does this fall w/i the UCC and is it for over $500? 2) second question: writing w/ essential terms (only quantity and subject required) and signed by person against whom K is being enforced? 3) any exceptions based on reliance? - yes, but only need to know common law SoF exception

battle of the forms - problem - application of common law

1) form offer w/ T&Cs 2) form acceptance w/ its own T&Cs (different) -rejection and counteroffer (mirror image rule) -T&Cs of last form before performance govern (last shot rule) (favors sellers - especially in consumer contracts) 3) problem: creates arbitrary unfairness

electronic contracts - initial observations

1) formalist v. purposive (a) formalist approach - apply classical contract rules to new setting (b) purposive - let policy guide how rules are adapted 2) law in this area still new, likely to change 3) many T&Cs in consumer transactions are pre-printed by seller (i) rarely read by consumers (ii) even if consumers read these terms; would rarely understand them (iii) even if consumers read and understood them, they typically have no power to change them (given on a take-it-or-leave-it basis) 4) what about mutual assent?

interpretation/construction - modified objective test

1) if one party knew or should have known about the second's meaning (and not vice versa), then the second party's meaning will prevail 2) really just applying an objective standard (a) if a reasonable person would have known of the party's meaning - the other person had reason to know (b) thus just need to establish that your interpretation is the objective meaning (the reasonable person interpretation in relevant circumstances) (c) but if no dispute, then parties can attach any odd meaning they want (d) still possible that neither had the objective meaning, so neither had reason to know of other's meaning *review polices of objective test

market v. gift exchange

1) market exchange - promised used seeking return promise or performance 2) gift exchange - give gift, no prior promise, but creates shared sense of duty to reciprocate

5 observations about market exchange

1) market exchange is just the first beast 2) promises in market exchange can be either express or implied (by conduct) 3) market exchange requires prior negotiation to reveal preferences 4) market exchange is most needed when we lack info about routes to mutual benefit 5) promises in market exchanges must typically be legally enforceable if market exchange is to work among relative strangers (i.e. in large scale societies)

defenses - minor v. mental incapacity

1) mental incapacity is a bit harder to establish than minority (must typically be able to return full consideration) 2) but if there has been overreaching or unfairness, these are essentially treated the same 3) only real difference is when seller innocent and full consideration cannot be restored

defenses

1) minority (voidable), mental incapacity (voidable), duress/economic duress (voidable), undue influence (voidable), misrepresentation/fraud (voidable), nondisclosure (voidable), statute of frauds (b/c the problem is a problem w/ evidence, probably need more than oral affirmation - voidable), unconscionability (voidable), illegality (void), against public policy (void) 2) defenses can be used as either a shield (defense against breach) or a sword (affirmative defense) (a) in either case, a defense shows that the contract (or some part of it) is not valid (b) in practice this means that: -parties may have given something over (conferred a material benefit) -pursuant to an invalid contract -they are likely to want it back: restitution

role of self-interest in contracting

1) move from "caveat emptor" to implied warranties 2) warranty v. promises (i) warranty - guaranteeing some fact as opposed to promising to do or not do something (ii) promise - a manifestation of intention to act or refrain from acting in a specific way so made so as to justify a promise in understanding that a commitment has been made

interpretation - special rules

1) noscitur a sociis: known from its associates (NAS) e.g. "baseball glove, bat, and ball" - bat not the animal 2) ejusdem generis: general given meaning by specific (EG) e.g. "farm, w/ its cattle, pigs, and other animals" - other animals might not include pet dog 3) expressio unius exclusio alterius (EUEA) (i) if one or more specific items are listed, w/o any more general or inclusive terms, other items are excluded e.g. i will sell you my farm w/ my cattle and pigs (doesn't include chickens) 4) ut magis valeat quam pereat (UMVQP) (i) an interpretation that makes the contract valid is preferred to one that makes it invalid 5) omnia praesumuntur contra proferentem (OPCP) (i) if a written contract contains a word or phrase which is capable of two reasonable meanings, each favoring a different party, the interpretation will be preferred which is less favorable to the one by whom the contract was drafted 6) interpret contract as a whole (I) (i) a writing(s) that form part of the same transaction should be interpreted together as a whole 7) purpose of the parties (PP) (i) purpose of parties given great weight in determining the meaning to be given to manifestations of intention or to any part thereof 8) specific provision is exception to general one (SG) (i) if two provisions of a contract are inconsistent w/ each other and if one is general enough to include the specific situation to which the other is confined, the specific provision is an exception to that general 9) handwritten or typed provisions control printed provisions (HW) (i) if inconsistent, handwritten or typed override printed - more reliable expression of parties' intentions 10) public interest preferred (PI) (i) if public interest affected by contract, that interpretation/construction is preferred which favors the public interest 11) restatement (second) §203(a) (RLE) (i) courts prefer interpretation that makes agreement reasonable, lawful, and effective to one that doesn't

grounds for irrevocability - rule for unilateral offers

1) offer for unilateral contract 2) offered begins performance (minority of cases say "substantial" performance) - Where an offer invites an offer to accept by rendering a performance and does not invite a promissory acceptance, an option contract is created when the offeree tenders or begins the invited performance or tenders a beginning of it

excuse of non-occurrence of express condition

1) waiver (a) intentional relinquishment of a known right (b) right is non-material 2) estoppel (a) waiver of a material express condition (can't waiver unilaterally - need other person to rely on waiver) (b) prejudicial reliance 3) prevention (a) promisor wrongfully hinders or prevents condition from occurring (i) if under control, must use good faith / best efforts (ii) if not strictly under control, still must cooperate and not hinder 4) avoidance of forfeiture (a) need to engage in materiality analysis b/c avoidance of forfeiture requires: (i) non material non-occurrence (ii) forfeiture to party if non-occurrence of express condition is held to justify non-performance -def. forfeiture - the involuntary relinquishment of money or property w/o compensation as a consequence of a breach or nonperformance of some legal obligation

implications of gift v. market exchange

1) we need to enforce market exchange (contracts) w/ law if we are to reap the benefits of modern market activity in large-scale societies 2) thus, we might want to incentivize formal exchanges to go through market exchange to ensure exchanges are mutually beneficial and produce info about routes to mutual benefit 3) but in large-scale societies, we might not want to enforce gift exchange b/c of threat of officious intermeddlers 4) in more informal settings, law is typically not needed to generate exchanges 5) hence, as a general rule, the law should enforce contracts, but should not require people to compensate others for benefits conferred w/o prior negotiation 6) in rare cases, where law enforces gift exchange, there is no actual contract, but courts pretend there is one 7) this is what it means to say; that there is a (i) contract implied-inlaw (not fact) (ii) quasi-contract (v. actual contract) (iii) constructive contract (v. actual contract)

interpretation/construction - definitions

1) what new rights/obligations arise from the contract (a) interpretation - the process of determining rights/obligations that arise from parties' mutual assent (b) construction - the process of determining rights/obligations that arise from the contract as a matter of law (regardless of party assent)

The UCC - predominant purpose test

1) when contract is mixed - ask: what is the predominant purpose of the K? a) are goods primary, w/ other items incidental or vice versa? b) Coakley factors (i) language of contract (ii) nature of business (iii) intrinsic worth of goods v. services

interpretation - reasonable expectations doctrine

1) when reasonable expectations of the parties conflict w/ the painstaking language of an adhesion contract - reasonable expectations control (i) boilerplate can be trumped, probably not dicker terms 2) policy (i) as a matter of law, the reasonable expectations doctrine is largely in insurance context (for final only in insurance context - contracts of adhesion) (ii) insurance protects against risks - if you interpret contrary to reasonable expectations, no coverage of risk - less value to consumer

applications of the objective test

1) whether a person has manifested assent to a bargain through a voluntary action (formation) 2) content of the mutual assent (interpretation)

remedies - calculation of expectation damages

1) will get how much you expected to profit

restitution type 3 - material benefit conferred pursuant to invalid contract

1) you can sue for restitution to put you back to where you were before invalid contract 2) restatement A person of full capacity who, pursuant to a contract w/ another, has performed services or transferred property to the other or otherwise has conferred a material benefits upon him, is not entitled to compensation therefore other than in accordance w/ the terms of such a bargain *(here, there is no bargain)

first beast

Breach of Contract ELEMENTS: mutual assent (to an exchange) + consideration POLICY/PURPOSE: empowerment; empower promisor to use promises as tool to induce others to make return promise or action REMEDY: expectation damages - monetary amount needed to put victim of breach in position he would have been in if both parties had fully performed; exception - specific performance

defenses - misrepresentation or fraud (contract)

Elements 1) affirmative statement of fact 2) statement is false 5) induced reasonable reliance 6) in the form of entry into contract *rescind the contract - was there overreaching? Affirmative statement of fact 1) statement of opinion or fact -opinion def. - expression of belief w/o certainty, as to the existence of a fact (if false, generally not actionable) -statement of fact def. - something you're claiming is true (if false, actionable) Exception: opinion statements are actionable if: 1) misrepresentation of state of mind 2) in relationship of trust or confidence 3) expert on matters covered by opinion 4) opinion rendered to one who, b/c of age or other factors, is peculiarly susceptible to misrepresentation *still have to satisfy other elements of misrepresentation - this just relates to "1) affirmative statement of fact"

defenses - nondisclosure (tort)

Elements 1) failure to state a fact that is 2) true 3) knowledge of truth 4) intent to deceive 5) induced reasonable reliance 6) damages

defenses - nondisclosure (contract)

Elements 1) failure to state a fact that is 2) true 3) knowledge of truth 5) induced reasonable reliance 6) in the form of entry into contract Plus need duty to disclose 1) to prevent previous assertion from being misrep., fraud or material 2) to correct mistake as to basic assumption, if nondisclosure amounts to bad faith 3) to correct mistake as to contents or effect of writing 4) relationship of trust and confidence In termite case - there is a duty to disclose 1) this knowledge is casually acquired by homeowner 2) important to value of property 3) this info the buyer cannot acquire easily 4) w/o this duty, market wouldn't function efficiently - no trust

restitution type 2 - promissory restitution

Material benefit rule 1) past services (benefit conferred) 2) non-gratuitous 3) subsequent promise to repay (operates like knowledge and consent) Remedy - enforce promise unless disproportionate to benefit received (then fair market value) Moral obligation doctrine (not really restitution) 1) past contract w/ benefits conferred (promise supported by consideration) 2) becomes legally invalid (not legally enforceable - voidable - some defense) 3) subsequent promise to repay (w/ capacity) (essentially, promise to waive a defense w/o new consideration) Rule: new promise enforceable w/o new consideration if there was a prior legally binding contract (w/ consideration)

(3) check to see if offer was accepted prior to termination of the power to accept

Method of termination 1) rejection 2) revocation (a) can be expressed indirectly (i) action inconsistent w/ keeping offer open (ii) info about action from a reliable source (b) option contract - irrevocable for that time (c) offer freely revocable until acceptance, even if offer expressly says it cannot be revoked (d) offer can expire 3) lapse of time (a) mailbox rule - acceptance effective upon dispatch by mail; not upon receipt (b) exception - option contracts; take effect upon receipt of acceptance 4) death of offeror 5) offeree's power to accept terminated by non-occurrence of any condition of acceptance under terms of offer

second beast

Promissory Estoppel ELEMENTS: promise + reliance (1) a promise (2) that induces action or forbearance (3) promisor should have reasonably expected (1)-(2) (4) injustice can only be avoided through enforcement *remedy may be limited as justice requires (need detrimental reliance) POLICY/PURPOSE: 1) protect promisee from harm caused by broken promises (tort-like) 2) not empowerment (only giving reliance damages, applies to promises that aren't given to induce promise or performance) REMEDY: 1) reliance damages - monetary amount needed to compensate victim of breach for harms caused by reasonably relying on broken promise

(1) check if there is an offer

offer def: 1) a manifestation of a willingness to enter into a bargain, so made as to justify another person in understanding 2) that his assent to that bargain is invited 3) and will conclude it not offers: opinions about future results, statement of intention, invitation to submit a bid, ads objective test applied factors courts will look at: (1) language -would a reasonable person believe this to be an offer and not just a solicitation for an offer (2) specificity & certainty -offer can't be conditional -price quote not offer -terms of contract must be reasonably certain if they are to provide basis by which the existence of breach and corresponding appropriation of remedies will be allocated (3) history of communication (4) directedness & definiteness -who/how many is it directed at -how concrete are the terms (5) type of contract/transaction

restitution - remedy

restitution - return of material benefit or fair market value