Contracts Decision Trees - Galbraith

When is there manifestation of mutual assent?

"Manifestation" means we care about actions indicating assent and not what's in people's minds (RAY: razor sharp edits). "Mutual assent" is when in the offer and acceptance, either both parties agreed on the meaning core terms (PEERLESS) or one party constructively knew of the other's meaning. Even if one party claims their offer was a joke, if past dealings made it seem like this offer was legit, it's legit (LUCY). But if no one would take the offer seriously, it's not an offer (PEPSICO).

Acronym for Contract Interpretation and Enforcability

I Pretend I'm Good With Driving Fast Unicycles, But I Particularly Miss Racing Cars Interpretation Parol evidence Implied terms Good faith Warranties Duress Fraud Unconscionability Breach (material/total) Impracticability/frustration of purpose Public policy Modification Repudiation (anticipatory) Conditions (express/implied)

What is needed for promissory estoppel to replace the need for consideration?

1. A promise which would reasonably induce someone to rely on it. This promise can be in words or through actions (HARVEY: parents supporting Harvey's house building was an implicit promise to give her the land and reasonably induced her to build). Reasonably inducing reliance means that the reliance is foreseeable, even if unwise (ACEVES: she lifted her bankruptcy relying on US Banks' promise to work with her on modifying loan, but they just sold her home) 2. Reasonable, detrimental reliance on it (KATZ: Katz relied on Danny's offer of $13k to retire, even if would've been fired anyways. Query if fulfills #3; BYERS: reasonable to rely on promise to give her the land if she quits her job, even if as a lawyer she could've known better; VASTOLER: even if better off financially, can be worse of/detrimenting in other ways, like the increased anxiety from promotions; WRIGHT: relying on promise of child support is reasonable reliance even if ends up he wasn't the biological father) 3. It is the only way to provide justice. Would the promisee be worse off than originally because they relied on the promise (KING: BU would be worse off if they lost MLK's papers after investing in them)

When do we imply terms into a contract?

Terms can be implied from statutes, common law, or this court. Terms/consideration can also be implied by the deal itself (WOOD: even if not explicit, there was an implied promise to do work for her, which was consideration for the contract). We imply that contracts are done in good faith (WOOD: we imply he intended to do the work) In the UCC, imply in fair gap-filling terms which save parties from having to bargain them out. Common law implies at will termination, UCC implies reasonable notice of termination to allow other party to seek arrangement (LIEBEL: Raynor couldn't terminate exclusive garage door contract without reasonable notice).

What constitutes negligent misrepresentation for voiding a contract?

1. Defendant didn't use reasonable care in getting/giving false information 2. Plaintiff who relied on the info is the one for whose benefit the info was given 3. The damages are part of the transaction the defendant was trying to influence It's about misrepresentation at the time the contract is formed Policy: negligent misrepresentation is often used instead of fraud because it's hard to prove someone was intentionally lying (JENNINGS)

When does a breach allow the other party to not perform?

1. For "non-material" breach/substantial performance: Common law: Other party must still perform. Substantial performance for a house requires that it be habitable (KENT: the pipe's brand was non-material, plaintiff still had to pay for house). Even if they themselves must still perform they can still sue the breacher. UCC: "Perfect tender rule," buyer can reject contract for any breach no matter how trivial; buyer is entitled to get exactly what they agreed to buy. However, if buyer accepts and keeps it, can only then return it and refuse to pay for material breach. However, if seller thinks the goods were acceptable, they get reasonable time to substitute. Precise timing is usually considered non-material, although a long passage of time may be material 2. For a "material" breach, other party can suspend performance. "Material" breach is an objective totality test, including a. extent injured party will get anticipated benefit b. extent injured party can be compensated for lack of complete performance c. extent of failing party's performance d. extent of failing party's forfeiture e. likelihood failing party will perform/curing breach f. reason/good faith of failure 3. For "total" breach, other party need not perform. Goes from "material" to "total" when (factors to consider, it's a totality of circumstances test) a. time goes by b. there is harm to the waiting party c. the timing is important (i.e. says "time is of the essence") (SACKET: Sacket's non-payments harmed Spindler and as time went by it became clearer Sacket wouldn't pay, so material breach became total breach and Spindler could sell to another and recover from Sacket).

What constitutes fraud for voiding a contract?

1. Fraud in factum: lying about what's in the contract itself. OR 2. Fraud in the inducement: knowingly/recklessly making false statements of material fact to induce a contract. "Material" can be if it matters to the other party (like in good faith dealing). Can include puffery or misrepresenting an opinion if a. defendant is an expert on the subject and presents them as a sure fact b. to someone with trusting relationship who is susceptible to misrepresentation (SYESTER: his lying about his opinion that she was a great dancer to get her to settle was fraud in the inducement). Can include fraud by silence if a. defendant knew of material facts that plaintiff couldn't reasonably discover and b. defendant was under obligation to communicate them to plaintiff but c. plaintiff intentionally didn't communicate the facts (JENNINGS: fraud in the inducement by not revealing the water leaks) AND 3. Reliance on the fraud and harm: Need not necessarily be reasonable reliance on the fraud itself - the more vulnerable the plaintiff and the more the defendant is trying to take advantage of the plaintiff, the more leeway we give in the interest of justice (SYESTER: was probably relying more on the company than the fraudulent statements, but reliance anyways).

What constitutes the implied obligation of good faith?

1. Honest in fact (WARNER BROS: never intended to give her real opportunity for advancement when they hired her) 2. Observance of reasonable commercial standards of fair dealing (especially between merchants) 3. Not doing something absurd and unfair (MORIN: a contract to perform "to the satisfaction" of the other doesn't give them unlimited power to reject this factory wall for a tint. For fitness/utility/quality we use objective standard of reasonableness; for personal aesthetics we use subjective standard of honest dissatisfaction. However, when there would be forfeiture, we lean more towards the objective standard) Policy: if you want to get an unfair or obnoxious benefit, you must spell it out in advance, to force people to be reliable and act fairly

When does duress render a contract voidable?

1. Improper threat (set rules): a. crime or tort b. criminal prosecution c. civil suit in bad faith d. bad faith dealing (not honest in fact or not abiding by reasonable commercial standards), such as withholding payment (TOTEM: withholding payment to force desperate company to accept discounted repayment was economic duress). However, reasonable responses to the market (eg increasing prices when supply drops) is fine (CABOT CORP. AND 2. No reasonable alternative (standards, but low bar, not much required by plaintiff) (TOTEM: Totem not required to try and renegotiate loans to claim economic duress) a. not on fair terms b. etc. AND 3. Inducement of contract by this threat To plead duress, party must have objected when entering into the contract.

When is there a contract?

1. Set of promises or a unilateral promise 2. Consideration or an exception (restitution and promissory estoppel) 3. Objective manifestation of mutual assent to the exchange (not subjective meeting of the minds). Even without a clear exchange, a contract can be "implied in fact" if parties act as if there's a contract (WATTS: contract because she quit job and worked for him in reliance on his promise). Contracts can be oral, written, or a blend, and assent does not need signature (except in statute of frauds) (PENNZOIL).

What constitutes unconscionability for voiding a contract?

1. procedural unconscionability: lack of meaningful choice a. not knowing terms/"surprise" (WILLIAMS: didn't know rent-to-own term, procedural unconscionability) (HIGGINS: reasonably surprised because we didn't expect them to read or understand contract terms) b. no bargaining power/"oppression" (HIGGINS). These are standards, not hard and set rules. Something must feel off or unfair about it. AND 2. substantive unconscionability: terms are unreasonably favorable to defendant given the general commercial background and this specific case (WILLIAMS: others have similar insuring practices, so questionable if substantive unconscionability, but court rules yes). This includes preventing access to justice for plaintiffs (HIGGINS: Higgins was forced to arbitrate while Extreme Makeover wasn't, but even if they both were forced to arbitrate, Higgins couldn't afford the arbitration fees.) Standard, not rule Policy: Matter of law to prevent jury from overly sympathizing with plaintiff Policy: protection of the vulnerable vs paternalism and autonomy to contract Policy: consumer protection laws try to 1. getting commercial parties to disclose information to consumers in a meaningful way (disclosure legislation); 2. substantive regulation of which contracts are lawful; 3. improving enforcement

What is sufficient consideration for a contract?

A benefit to the promisor or detriment to the promisee (MARSHALL: company's benefit was consideration for the promise to pay Baker an extra 5 years). Consideration can be a return promise or performance (DOUGHTERY: no consideration for aunt's $3k promissory note). The "detriment" can be forbearance of a legal right (HAMER: forbearing drinking/smoking counted) (MARSHALL: Baker staying at company counted). The consideration must induce the making of the promise and vice versa (though that's vague and gives courts leeway in determining what's consideration) (PENNSY: American's benefit in getting rid of toxic AggRite induced their promise to give it away) Courts have leeway in a. determining what's consideration vs. a conditional gift b. if consideration is only nominal Because consideration is usually a matter of law, not fact, courts use it to enforce or not enforce contracts depending on what they see as fair. In practice, consideration issues really only come up in options contracts and contract modification

What is an express condition and when are they enforced?

A trigger/event, not certain to occur, which must occur before performance under a contract becomes due. Strictly enforced unless: a. fulfillment is prevented by the party benefiting from it. If conditioned on a party's action, they must try in good faith to make it happen. b. it is non-material condition and waived. If material, rules of modification, so need consideration (or reliance, see D). Lease renewal dates are material if the landlord made a new lease (CROSS BAY) c. if non-material condition and forfeiture (worse off because no contract; equity; justice) (ENXCO: didn't get zoning license on time, and date was non-material condition, but if still kept wind turbines, not worse off). Losing a lease, especially when renovated property, is forfeiture (CROSS BAY) d. there was reliance on or consideration for the waiver, even if the condition was material (because waiving a material condition works like modification). If no predetermined order of performance, the longer performance precedes the shorter one. If the contract is interpreted as a promise (ie a unilateral contract), substantial performance will do. If interpreted as a condition, the condition must be literally satisfied, no substantial performance. Preference is to interpret contracts as promises, not conditions.

Acronym for Contract Formation

All Ben Understands Post Chocolate Battle: Every Promise Results in Sorrow Assent Bilateral Unilateral Postponed bargaining Consideration Battle of the forms Electronic Promissory estoppel Restitution (w/w/o promise) Statute of frauds

What must the injured party attempt to mitigate?

Anything they could have reasonably mitigated without incurring undue risk, burden/cost, or humiliation. This includes ceasing to perform when a contract is repudiated/breached (LUTEN: bridge) This includes other work if wrongfully fired, so long as that other work isn't substantially different (MANESS: drug addict -> lost job). The burden is on the defendant to show there were reasonably similar other jobs available. If they take a job with lower pay, this is subtracted from their damages. It's not always clear what a "substantially different" job means (20th CENTURY FOX: different movie, different job). Lost volume rule: can mitigate damages if you can show that by your breach, the injured was able to use those resources elsewhere; but if they have enough resources to have done both anyways, no mitigation (JETZ: washing machines).

What are browsewraps and when are they binding?

Browsewrap are the terms of browsing a site that is available but not usually unread. Not binding (OVERSTOCK: browsewrap restocking fee and arbitration clauses were unenforceable because no constructive notice of terms; lack of manifestation of assent).

Which terms rule in a CISG battle of the forms?

CISG - material alterations: An acceptance with a material alteration of the terms (a purported acceptance with different terms) is a counteroffer ("Mirror Image Rule"). Thus, whoever gives the last offer before the contract is assented to (either expressly or impliedly) wins out ("Last Shot Rule"). CISG - non-material alterations: An acceptance with a non-material alteration has those altered terms accepted by default. However, the contract is void/not accepted if the offeror rejects the alterations either preemptively (via "magic words"/express condition) or when it sees the alterations. Note: CISG "Material" = price, quantity, delivery, extent of liability. This means that pretty much all alterations are "material" and we end up with the same outcomes as under the common law.

When can we use parol evidence?

Can't use parol (extrinsic) evidence with written contracts. If fully integrated, can't use parol evidence for contradictory or supplemental terms (LIBBY: by the traditional, restrictive view, oral log warranty isn't included in the fully integrated contract); but if only partially integrated, can use parol evidence for supplemental terms. Most courts will allow parol evidence to determine if a contract if fully or partially integrated, though some won't. Policy: we want to incentivize people to be clear, and so assume that what's left out is intentionally left out. Exceptions, where we allow parol evidence: 1. Interpreting ambiguity. "Ambiguity" has been expanded so courts will generally allow parol evidence so long as it doesn't directly contradict a term (TAYLOR: "ambiguous" whether this "contractual" claim can include tort claims arising from a contract). This includes relevant trade usage. Courts nowadays will look at the context in order to determine if a term is ambiguous and should be allowed to have parol evidence. 2. Subsequent agreements 3. Oral contingencies 4. Most defenses to formation (e.g. both kinds of fraud) 5. Reformation (typos) 6. Collateral agreement (additional contract or agreement, a separate but related side deal which could stand on its own) Oral express warranties won't come in under the parol evidence rule if the contract says "no oral express warranties" or something of the sort, which is generally binding when written.

What are clickwraps and when are they binding?

Clickwrap is the seller's terms upon purchasing; click "I Agree." Binding when conspicuous, with reasonable notice and manifestation of assent (GOOGLE: AdWords clickwrap releasing Google from click fraud was binding).

Which terms rule in a common law battle of the forms?

Common law (more favorable to last offeror) - material and non-material alteration: An acceptance with a material alteration of the terms (a purported acceptance with different terms) is a counteroffer ("Mirror Image Rule"). Thus, whoever gives the last offer before the contract is assented to (either expressly or impliedly) wins out ("Last Shot Rule") (PRINCESS: GE's final price quote with the liability cap was a counteroffer to Princess' purchase order, which was accepted when Princess allowed GE to proceed). Counteroffers are only in common law, not UCC.

When are agreements to agree (i.e. postponed bargaining) binding?

Common law: Only when essential terms, or method of determining essential terms, are certain enough to determine breach and remedy (WALKER: could Walk because renewed rent not set, but courts go both ways if rent is essential term), and there is manifestation of mutual assent (QUAKE: letter of intent was vague enough for jury to decide if intended to be binding, will use parol evidence). However, the restatements try to push the common law to be more lenient in its strict necessity for set terms (ARBITRON: allowing licensor to adjust monthly fee based on new radio stations was not too indefinite despite lacking set price) UCC: Even if price isn't set (they will be set in good faith later, or UCC will determine how to set) CISG: Needs description of the goods and a method for determining price and quantity (though even without price, assumed to be FMV)

How set must the deal be for it to be binding?

Common law: all key terms must be set, or a method for determining them must be set UCC: 1. Needs manifestation of mutual assent to have a deal (STYBERG: enough set terms, but not enough intent for iBrakes sale contract). Actions/conduct/performance can act as manifestation of mutual assent (JANNUSCH: manifestation through actions to sell Festival Foods). 2. Don't need set key terms (JANNUSCH: binding deal to sell Festival Foods even without set terms)

How to do an issue spotter

Contract? Terms? Enforceable? Breach? Damages? 1) do you have a contact - I.e. figure out where offer and acceptance took place. And what governs contract (ucc, Restatement CISG?) —-sub point is there may be a counter argument that there was only a promise —-so then maybe bring up promissory estoppel/restitution 2) second question is what are all the terms in your contract? Implied terms? Can you fill in price if it's missing? Ambiguity? Can you bring more terms in through parol evidence? Was it modified? Was modification sufficient? 3) once you know what your contract contains, you can address the question of enforceability. Like would SOF, illegality, or misrepresentation etc. make it void, voidable? unconsionability? Public policy? 4) if we get through that hurdle, next question is was it actually breached? Here we have differences between material and total. This is also where you'd get into an interpretation analysis because you may have to thoroughly interpret a term of your contract in order to figure out if a party actually violated it. You can also talk about proper suspension/repudiation 5) any defenses to the breach? Like impossibility of performance? 6) if it was beached and no defenses, what are the remedies/damages?

When can a bilateral contract acceptance be revoked?

Default is that it can't be revoked once it leaves acceptor's possession (Mailbox rule B). Exceptions: 1. requires receipt of notice 2. options contracts (only binding once reach offerer)

Acronym for Damages

Every Man Really Really Loves ...Salad! Expectation Mitigating Reliance Restitution Liquidated Specific performance

When are warranties expressed or implied in a contract?

Expressed: an affirmation of fact/promise about/description of/representation of the specific, objective, verifiable facts of the goods, excluding opinions or puffery (BAYLINER: brochures of puffery or manuals about other products aren't express warranties). Oral express warranties won't come in under the parol evidence rule if the contract says "no oral express warranties" or something of the sort, which is generally binding when written. Implied: 1. Implied warranty of merchantability - goods are of good quality (most buyers would not object) and fit for ordinary purpose. Can be disclaimed by selling "as is," but Moss Act makes this hard to do with commercial contracts in writing, prevents taking advantage of consumers. Policy: saves time and effort, encourages buying, promotes better production of goods 2. Implied warranty of fitness for a particular purpose - if a buyer is relying on a seller's skill or judgement when purchasing and the seller knows the buyer's purpose, the goods must be fit for the buyer's purpose (CROW: buyer relied on seller's expertise, seller knew buyer's purpose, so should be implied warranty of fitness for a particular purpose, but because it was clear that buyer had used the boat a ton and was just looking to return it, the court relied on the fact that buyer hadn't specified the exact speed he needed to withhold the implied warranty). 3. Implied warranty of habitability - defines landlord's obligations to maintain livable conditions. This warranty extends to subsequent buyers (SPEIGHT). Policy: not a contract/privity issue, but an issue of law. Only builder would know of latent flaws, so keeping warranty for subsequent buyers is necessary for justice.

How do we calculate expectation damages in work on land contracts?

How to get injured to where they would've been had the contract been performed. This is from the injured's perspective. Work not performed on land (common law): a. the loss in market value, or b. the cost of performance (so long as the cost of performance is not disproportionate to the loss in value to the injured party) (PEEVYHOUSE: court got it wrong by comparing cost of performance to loss in market value instead of comparing cost of performance to value to the injured party).

How do we calculate expectation damages in employment contracts?

How to get injured to where they would've been had the contract been performed. This is from the injured's perspective. Employment contracts (common law): new salary - contracted salary. loss in salary payment expectations, not loss in net value (LUKASZEWSKI: school could recover for difference in teachers' salaries even if they got a better teacher).

How do we calculate expectation damages in goods contracts?

How to get injured to where they would've been had the contract been performed. This is from the injured's perspective. Goods (UCC), injured party can choose: Buyer's remedy = 1. Fair market value at time of breach - contract price 2. What they paid ("cover") - contract price 3. Value of the good goods - value of the received damaged goods Seller's remedy = 1. Contract price - fair market value at time of breach 2. Contract price - what they sold for ("cover") 3. Lost profits 4. Price (for customized goods which can't be sold to another)

How do we calculate expectation damages in buying/selling land contracts?

How to get injured to where they would've been had the contract been performed. This is from the injured's perspective. Selling/buying land (common law): Buyer's remedy = Fair market value at time of breach - contract price Seller's remedy = Contract price - fair market value at time of breach. Often the way to estimate the fair market price at time of breach is to use what they bought/sold it for ("cover") (CRABBY'S: used $235k cover to estimate fair market value despite being 11 months later).

When does minority status render a contract voidable?

If a minor buys something sold (or enters into a contract) in good faith, they can only return (or rescind) it when they become major for its current value, minus opportunity cost (DODSON: couldn't get back full value of the car he smashed). However, basic necessities are never refundable.

When can public policy concerns void a contract?

If the contract puts a burden on the public, as tempered with with our disposition for autonomy to contract. By state, can include: a. non-competes (VALLEY MEDICAL: non-competes for doctorslawyers injure the public who should be able to choose their doctor/lawyer.) Tempered with our concern for employees always breaking away and taking clients with them. b. trade restraints c. surrogacy (IN RE BABY: possibly against public policy to allow people to give up unborn baby) d. crime (IN RE BABY: against TX law to give up unborn baby)

What are the sources of contract interpretation?

If the court wants to uphold a contract but the parties can't agree on a term's meaning, the court can decide on whose meaning to give it (but won't give it a meaning that neither party intended). Sources of interpretation: 1. The text itself 2. The purpose of the contract (e.g. from negotiating history). In super rare cases (but more likely with insurance contracts) the purpose can override a clear and fair term/text of the contract if drafter has total control and no reasonable expectation that signer knew of the term (C AND J FERTILIZER: still considered burglary even though contract said "burglary" needs visible entry marks to exclude inside jobs, but wasn't an inside job and had no visible entry marks.) 3. From subsequent practice/course of performance 4. Broader context (e.g. trade usage) (FRIGALIMENT) 5. Broader social principles 6. Rules of interpretation: a. Meaning of word in a series is affected by its surroundings/context b. General terms (animals) joined with specific ones (dogs) only include things similar to the specific ones (pets) c. If there are only specific terms (dogs and cats) and no general ones (pets), even similar ones (gerbils) are excluded d. Interpretations that make a contract valid are preferred to those that don't e. Ambiguous words should be interpreted to favor the non-drafting party f. Writings part of the same transaction are interpreted as a whole, with the same meaning given to a term throughout g. If the intention is clear, we interpret according to the intention. If not, we go with plain meaning h. If there are two contradictory terms, and one is more specific to the other, the more general one is the rule, and the more specific one is the exception i. Handwritten or typed provisions are preferred to printed forms, as they are more recent and reliable expressions of intentions j. Interpretations which favor the public interest are preferred k. Restatement: prefer interpretations that make an agreement reasonable, lawful, and effective l. if a key term is ambiguous and one party had constructive knowledge of the other party's intent, we go with the other party's intent m. all else equal, the burden is on the plaintiff to prove their interpretation (FRIGALIMENT: sued for boiling chickens instead of stewing chickens but couldn't prove "chicken" meant boiling chicken)

When is impracticability/impossibility a defense to performance?

Need to show: 1. An event made performance impossible or extremely and unreasonably difficult, objectively, not subjectively (MINERAL PARK: extracting underwater gravel exorbitantly expensive). Excludes mere increases in difficulty/cost. 2. They made a reasonable effort to perform and the impossibility/impracticability happened without their fault (WADDY: event happened because Riggleman waited too long to transfer land title) 3. The contract assumed that what happened, wouldn't happen. E.g. that something will continue to exist. Doesn't include that current market/financial conditions will continue. (CALDWELL: rented music hall burned down). In other words, it was objectively unforeseeable. 4. The contract didn't disclaim impracticability/impossibility (e.g. force majeure /act of god clauses) Policy: all about allocation of risk

What are different ways damages are calculated?

Injured party can decide which to collect: 1. Expectation (usually biggest). The gain/profit as if contract had been fulfilled. Includes direct, incidental (costs incurred to avoid more loss from the breach), and consequential damages, minus costs the injured party avoided by not having to perform. From the injured's perspective. 2. Reliance. The injured's loss. As if the contract had never been made. Cannot exceed the expectation damages, but the burden shifts from the plaintiff to the defendant to prove their case (ie default is we believe plaintiff's reliance damages). 3. Restitution. If defendant has been unjustly enriched. 4. Agreed upon damages (often limited by state law)

What falls under the common law vs. the UCC vs. the CISG?

It's about the main thrust of the contract, even if the contract involves multiple parts. Predominant purpose test (JANNUSCH), considering the language of contract and nature of the business of the supplier (PRINCESS CRUISE). UCC: movable goods, unborn animals, and growing crops/things which can be unattached from the ground CISG: commercial international goods Common law: all else

When do we allow contract modification?

Modification = new contract 1. Both agree, with clear terms AND 2. Under common law, but not UCC or CISG, need consideration (ALASKA PACKERS: past consideration/preexisting duties don't count). Giving up right to sue for breach would count (ALASKA PACKERS: plaintiffs argue providing bad nets was a breach). Promissory estoppel would count. Policy: would be too burdensome to require consideration for UCC contract modifications, which happen all the time. And 3. There is no defense to enforcement of the new contract (ALASKA PACKERS: even with agreement, terms, and consideration, there was economic duress) (GALTACO: modified price was made under economic duress) Policy: by voiding contract modifications made under economic duress, we're incentivizing failing companies to close rather than offer customers a deal to stay open. OR 4. Due to unforeseen circumstances or assumption of wrong terms, some courts will enforce modification if fair and equitable

When can a bilateral contract offer be revoked?

Offers can be revoked before acceptance if the deliberating party has constructive knowledge (eg even indirect communication) that it's being revoked (NORMILE: was Normal to revoke their counteroffer and inform him). Counteroffers are only in common law, not UCC.

What is an option contracts and what is needed for it to be binding?

Option contract is an offer with prolonged power of acceptance. It can be revoked by offeror unless... Common law: It needs 1. Consideration, which can be substantial performance, benefit to offeror, detriment/forbearance of offeree (BERRYMAN: Kmoch was free to sell the land to another because Berryman didn't pay the $10 consideration to keep the option contract). 1a. However, some courts allow purported consideration to keep options contracts open (as per R2d); 1b. What to allow as consideration has tons of leeway. 1c. Reliance can replace consideration 2. To be in writing...kind of (courts don't enforce this) 3. To be within a reasonable time With 1, 2, and 3, offeror can't revoke, but need not perform in return until offeree completes performance. UCC: It needs 1. Consideration/reliance if the offeror is not a merchant. If it is a merchant, don't need consideration. 2. To be in writing 3. To be within a reasonable time (maximum three months, but determined by context) CISG: It needs nothing, can't revoke it!

When is a post-consideration/performance promise (promissory restitution) binding?

Post-benefit promises are binding to prevent injustice, if: 1. conferred direct benefit (WYMAN: promise to pay for past healing of estranged son was unenforceable because was for son) 2. benefits were not officious or gifts (promises help show less officious/gift) 3. there was unjust enrichment, and the promise to pay acknowledges and quantifies this unjust enrichment 4. benefits and promises aren't disproportionate (promises help quantify liability) (WEBB: promise to pay for having fallen on brick rather than let him get hit was enforceable because fulfills criteria and needed to prevent injustice; unclear why case comes out differently than ax case). Policy: this promise presumes that a deal would have been made pre-incident.

What fees are not recoverable?

Punitive damages Lawyer fees (though in CISG, courts are split on this (ZAPATA: international cookie tins)) Emotional distress (rarely; same as standalone from torts or accompanied by physical harm) (ERLICH: flooded dream home, not emotional distress damages)

What are shrinkwraps and when are they binding?

Shrinkwrap is the warning on the outside of the ordered box/item with the terms on it; says that by using the item, you're agreeing to the terms. Offer is delivering the product and acceptance is keeping the product with reasonable notice of the terms (DELL: arbitration clause in shrinkwrap wasn't binding because even though customer kept the product there wasn't reasonable notice of how to reject the terms by returning the product)

When do we allow specific performance?

The default is to go with damages, only go to specific performance if damages would be inadequate (eg that which is unique, like land or opportunity) (CITY STORES) or damages are too difficult to measure (CITY STORES). Other countries disagree with default, and CISG says can get specific performance for goods sale if host court would allow it. Needs to have sufficiently certain and definite obligations. Specific performance can't cause unreasonable hardship or loss on parties (so long as party has clean hands and didn't sleep on their rights) or on third parties. Can't be too hard to enforce. Specific performance can't force personal services. States differ on whether it can prohibit personal services (REIER BROADCASTING). Some say it can't prohibit personal services if that'll force them into the service they don't want to do or leave them broke (Restatements).

How clear must anticipatory repudiation be to allow the other party not to perform?

The other party need not perform (and can recover for breach) when a party's language or actions clearly indicate they won't or can't perform (TRUMAN: asking for a lower price because couldn't rezone land was not clear enough repudiation) If there's reasonable grounds for insecurity (not just rumors), can demand adequate assurance of performance (proportional to size of contract) and suspend performance while clarifying. Accepting previous improper delivery or payment doesn't bar them from demanding assurance. Party has reasonable time (UCC, max 30 days) to give assurance. Reasonable grounds for insecurity must derive from this contract itself and not look to previous dealings (HORNELL: Spry's previous shady dealings with selling Hornell's Arizona in Canada weren't reasonable grounds for insecurity, but in the new contract, asking for over the credit limit was reasonable grounds for insecurity to ask for assurance). Can retract a repudiation if the other hasn't materially changed position based on it or notified them that repudiation is final (TRUMAN).

What limits are there on consequential damage recovery?

Usually can recover all direct expectation damages. For incidental damages (eg cleanup out-of-pocket costs), must be reasonable. For consequential (ie flow from direct,eg needed money from sale to do something else) they need to be foreseeable/measurable. Only responsible for reasonably foreseeable damages from the breach (reasonably foreseeable from the standpoint of a reasonable person in the breacher's position; objective standard). Damages are foreseeable if they a. arise naturally or b. are communicated (HADLEY: the damage from not getting the new mill shaft asap wasn't directly communicated to shippers, but maybe shippers could've/should've known...unclear what standard of "foreseeable" is. The higher the standard, the less liable they are and less incentivized to be perfect [though nowadays shippers have adhesion contracts to release liability]) Both type and extent of harm must be reasonably foreseeable, no eggshell plaintiff (FLORAFLAX: difficult to determine the reasonably foreseeable loss in profits from breach and subsequent loss in contracts/business). Not responsible for loss which would cause disproportionate compensation

Which terms rule in a UCC battle of the forms?

UCC (more favorable to first offeror) - material alteration - merchants: An acceptance with a material alteration of the terms cancels out those terms, and the UCC then fills them in (though technically a court can choose to keep in the offeror's terms if the change was an alteration and not an addition). However, the contract is void/not accepted if the offeror rejects the alterations either preemptively (via "magic words"/express condition) or when it sees the alterations (BROWN: Brown's proposed addition of an indemnification clause was both preemptively rejected and material). different terms: maybe treat them the same as additional terms? between merchants would become part of it, unless material or rejected, non merchants need to accept. but for different term, might be offerer's terms UCC (more favorable to first offeror) - non-material alteration: An acceptance with a non-material alteration has those altered terms accepted by default (except for non-merchants, where both parties must expressly agree, new terms are just proposals). However, the contract is void/not accepted if the offeror rejects the alterations either preemptively (via "magic words"/express condition) or when it sees the alterations. Note: UCC default terms include: implied warranties of merchantability and fitness for purpose; seller liability for consequential damages; terms implied in by course of performance/dealing/trade usage Note: UCC "Material" = surprise or hardship (ALPS v GOTTLIEB: Gottlieb's proposed addition of a liability limit clause was not a surprise because should've read it and not a hardship because Alps, not Gottleib, knew what the material was being used for and what the damage would be).

When do we use reliance damages and how are they calculated?

Used when can't prove with certainty the expectation damages; can't exceed possible expectation damages, but the burden shifts onto the breaching party to prove where this limit is. Expenditures made in preparation for or in performing the contract, minus any losses the breaching party can prove the injured party saved through the breach. Back where would've been pre-venture (HIGHTOWER). Responsibility to mitigate reliance damages is reduced if opponents had opportunities to mitigate as well, and/or it would've incurred undue cost/embarrassment (HIGHTOWER). Contracts based in promissory estoppel might be limited to reliance damages (TOYOTA), but depends on the judge.

When is the statute of frauds a defense to enforcing a UCC contract?

When (need all three)... 1. The contract is in the statute of frauds. This includes contracts worth over $500. And 2. The contract doesn't satisfy the statute of frauds: 2a. is not in writing with a "signature" by the person seeking to void it (except for between merchants, in which either side can sign it so long as they give the other side notice and there's no objection within 10 days) 2b. doesn't have the quantity of the good (even if not the price) 2c. although not explicit in the UCC, Galbraith believes multiple documents of the same subject matter/same contract need only one signature between them And 3. There isn't an exception which removes this case from the statute of frauds. 3a. specifically manufactured/customized good which can't be sold to another (COMFORT KEYBOARD: was customized design which couldn't be sold to another, so not under SoF; BP EXPLORATION: was customized design which could be sold to another, so yes SoF) 3b. if parties admit there was a contract 3c. part performance or exchange (BUFFALOE: was over $500; has a quantity; not signed by Hart, but between merchants, but there's a written objection within 10 days; but an exception to statute of frauds because part performance through the transfer of goods and payment).

When is the statute of frauds a defense to enforcing a common law contract?

When (need all three)... 1. The contract is in the statute of frauds. This includes contracts which with interests in land and contracts which cannot be performed within one year. This used to exclude "for life" contracts because people can die within the year. And 2. The contract is not in writing with a signature by the party seeking to void the contract (ie doesn't "satisfy" the statute of frauds; "I never signed this or agreed to it"). 2a. Anything which demonstrates who the contractor is (letterhead, initials, email, etc.) all count as a signature. 2b. Multiple documents of the same subject matter/same contract need only one signature between them (CRABTREE: one document was signed and another had the 2-year term on it). Policy: If we know it's not fraud, we don't want to bar it based on a technicality. Policy: By not signing anything you can claim statute of fraud bars enforcement and you can breach at will And 3. There isn't an exception which removes this case from the statute of frauds. 3a. Reliance removes from statute of frauds (ALASKA: she "reasonably," foreseeably, and significantly relied on the oral promise for a job when she quit her old job and moved, and would be injustice if not enforced because no other remedy) (BEAVER: had already possessed and improved the house, so partial performance, along with preventing inequity/injustice)

When does mental capacity render a contract voidable?

When a party's mental condition interfered with their ability to act reasonably in relation to this contract. Not just about cognitive understanding, affective issues too. Some courts require the voiding party to demonstrate with expert testimony (SPARROW: had breakdown during contract negotiation, but no expert could testify that she couldn't act reasonably).

When has an offer been accepted in unilateral contracts?

When a substantial part of what the offer requests is performed (not just prepared for) (COOK: Cooking up many sales was substantial performance). This performance counts as consideration (SATERIALE: Sat a While smoking camels, actions were consideration for binding contract; reward programs are unilateral contracts, though they can be terminated at any time unless they announce an end date). The restatements tries to judge this towards not being able to revoke once there's been any performance, but this is rarely followed. If someone had the choice to accept by return promise/words, then offer can be revoked until complete performance. Policy: The acceptor took on the risk by doing the action based on reasonable reliance on the reward, so we protect that vulnerability.

When has a bilateral contract offer been accepted?

When the acceptor manifests assent to the offer's terms in a way allowed/suggest/required by offeror. If the acceptor tries to assent in another way, counts as a counteroffer. Counteroffers are only in common law, not UCC. This manifestation of assent can be (any) 1. in words, 2. by the start of performance, 3. by accepting the offered services and not rejecting them with constructive knowledge the offerer expects compensation, 4. through silence/inaction if this was allowed by offerer and acceptor intends to accept 5. if due to previous dealings it was assumed the acceptor would accept and the acceptor didn't notify the offerer he doesn't intend to accept anymore 6. by acting in a way inconsistent with the offerer still owning the offered property/product

When do we use restitution damages and how are they calculated?

When expectation damages are unclear (eg a new venture), and can't use reliance (pre-venture) either because reliance is capped at expectation. Non-breacher can choose: either what the other party has been unjustly enriched, or for services/goods provided/performed (or their FMV) (even if the completed deal would have been bad for them, ERECTORS: provided the cranes). Value of services vs. increase in value. If awarding to breacher, we go with lower value. Can get ONLY restitution (not expectation or reliance) when the contract was deemed unenforceable or void (VENTURA: fraudulently prevented from getting royalties). Can get restitution even if the contract was formed via promissory estoppel. Can't get restitution damages once there's been full performance by one party and all that's left to do is pay. This would allow payers/buyers to pay for the value of the services even if they had contracted for something higher/lower. At this point only expectation damages. Some states allow breachers to get restitution even if the breach was willful and deliberate (LANCELLOTTI: hot dogs). Policy: allowing restitution for breachers helps even out the power imbalance of those entering into contracts without any bargaining power (TURNER).

When has an offer been made in unilateral contracts?

When one party offers to perform only if and when the other party performs.

When is frustration of purpose a defense to contract enforcement?

When plaintiff will no longer get any benefit whatsoever from this contract (KRELL: rented room lost purpose when couldn't view king's procession) (DI CHEM: could still use storage to hold other things, so city banning him from storing chemicals was not frustration of purpose). If reasonably foreseeable, can't invoke frustration of purpose. Can't have frustration of purpose for things you yourself do Policy: all about allocation of risk

When has an offer been made in a bilateral contract?

When there a manifestation to enter into a bargain, made as to justify another person in understanding that his assent to that bargain is invited and will conclude it. Offer has been made only when it reaches offeree (Mailbox rule A). Ads and giving information to an interested buyer aren't offers because further bargaining/assent is needed (LONERGAN: a Loner tried to Gain land he saw in an ad and got info about) Policy: ads aren't offers because we don't want people to sell limited items to multiple people and get into ownership disputes (but not relevant in SATERIALE where can be limitless acceptances) Offers are as they appear to a reasonable person, not about offerer's intent (MACHADO: a Macho car dealer misrepresented) A new offer has been made (and the old offer rejected) if there is a conditional acceptance, i.e. a counteroffer (NORMILE: wasn't Normal to sit on the counteroffer). Counteroffers are only in common law, not UCC.

When can a party get restitution without a promise to pay (just restitution)?

With "unjust enrichment" 1. Conferred benefit (property/services) 2. Knowledge of and consent to the benefit (i.e. not officious). Officious is only when the two people could have bargained for it but didn't. However, don't need consent if 2a. the services were needed to prevent the other from "serious harm/pain," and 2b. supplier intended to charge for them, and 2c1. supplier had no reason to believe they'd be refused, or 2c2. it would be impossible to get consent (CBE: Pelo had to pay hospital bills for forced psychiatric hospitalization). 3. Inequitable acceptance/retention of the benefit. 4. There was intent to charge for the services or they were not a gift. This is not always clear (WATTS: unclear if Watt's family work was a gift/was officious/was expecting something in return). Policy: In other words, had the transaction costs not been prohibitive, what would the terms have been?

When do we allow liquidated (agreed-to) damages?

Won't allow if it appears as a penalty, but otherwise most courts will allow, even if they impose caps. Courts differ on whether they are capped at 1. a reasonable forecast of damage from breach (anticipated damage: not preferred in modern courts) (BARRIE SCHOOL: this was the upper limit of anticipated damages) or 2. a post-facto determination of harm from breach) (actual damage: preferred in modern courts) Courts differ on whether the injured has a duty to mitigate (clarity of contract vs. allowing for windfalls)