Contracts Final
What is the definition of acceptance?
A manifestation of assent, objectively determined, to be bound by the terms of the offer. It is the exercise of the power of acceptance (created by the offer) that simultaneously brings the agreement into existence and terminated the offeror's ability to revoke.
What is the rule regarding offers with the use of hyperbole?
A reasonable person does not believe there was a real offer when, based on "all the reasonable circumstances", someone makes a rhetorical statement using solely hyperbole, and there are no other facts that infer an actual offer.
What is an illusory promise? What are the rules?
An illusory promise lacks mutuality of obligation. It's not a real promise because the person making it reserved unbridled discretion over his obligation to perform. Rule: When a real promise is exchanged for an illusory promise neither promise is enforceable. Rule (2): Promises based on a condition that cannot occur also usually deemed illusory for obvious reasons. If it is impossible for the condition to occur, then the promise can and will never be executed. Rule (3): Promises that are on their face illusory because performance appears to be left solely to the option of the promisor might be rendered real, and thus good consideration, by judicial imposition of a limitation on the promisor's unfettered discretion.
How long does an offer stay open for?
An offer lasts for as long as the offeror says it will last for - assuming it is not earlier accepter or terminated by rejection or revocation.
What is Mutuality of Obligation, and what is the rule?
Mutuality of Obligation: When each party is bound to the other by a promise. Rule: Exchange of promises typically creates a binding contract with each party's promise constituting consideration for the other party's promise.
Does death terminate the offer when the offer is supported by consideration?
NO! Under R2D §37 Shows how ridiculous the rule is. ****
Can industry standards prevent formation of a contract if one already exists?
No
Is the defense of public policy limited to agreements that directly or indirectly violate a legislative enactment?
No R2D § 178.
If the original offer is not made by mail, does the mailbox rule apply?
No.
Under UCC 2-201, what is the only term which must appear in the writing?
The quantity term. § 2-201 does NOT require that the price be set out in writing.
How long does an offer stay open before it lapses If the offer does not state how long it is good for?
The rule is that the offer will remain open for a "Reasonable Time" - "Reasonable Time" Depends on: "All of the facts and circumstances, including market conditions and any prior course of dealing between the parties."
What statutory options are available to make an irrevocable offer?
"Firm Offer" U.C.C. § 2-205: an offer: (a) made by a person in the business of selling goods of that kind (Merchant), (b) in writing, (c) that provides that it will be held open, may not be revoked, even without consideration, for the period stated, or if no period is stated, for a period not to exceed three months. or § 87(1)(b) - Binding as option contract if it "Is made irrevocable by statute."
What is the definition of a contract?
"Promise or set of promises that the law recognizes by way of enforcement" You need: 1. Promise - That is voluntary. 2. The non performance of which leads to liability.
What does UCC 2-207(1) say?
(1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.
What are the relevant factors to determine if a price quote is an offer?
(1) The terms of any previous Inquiry; (2) The completeness of the terms of the suggested Bargain; and (3) The number of persons to whom a communication is addresses. (Also) - Industry customs and course of dealing is relevant to the issue of reasonableness, however, the UCC say they not alone determinative of the issue of contract formation.
In the few cases that recognize a defense based on economic duress, what do the cases emphasize the need for finding?
(1) the person trying to enforce the contract applied wrongful pressure, and (2) the person trying to avoid enforcement of the contract had no reasonable alternative.
What are the rules of anticipatory repudiation?
(1): Anticipatory repudiation requires an unequivocal indication of intention not to perform. (2): An Anticipatory breach, if material, excuses further contract performance by the other guy just like in the case of an actual failure to perform at the agreed-upon time of performance (3): Anticipatory repudiation is a form of breach of contract. (4): Important Rule (EXAM): If the non-breaching party honestly but wrongly interprets an equivocal statement of non-performance as an unequivocal indication of non-performance, and in response stops her performance, the non-breaching party becomes the breacher.
What are the rules regarding the limitation on damages fro Emotional Distress or Punitive Damages?
(1): Contract damages do not include damages for emotional distress (unless such distress was serious, and clearly foreseeable at formation). (2): Contract law also does not award punitive damages—damages designed to deter future similar conduct or to punish conduct.
What are the UCC Rules regarding Damage or Destruction of the Subject Matter of the Contract (Impossibility or Impracticability)
(1): In sale of goods cases, the question of whether destruction of the subject matter of the contract excuses performance only arises when goods "identified when the contract is made" have been damaged or destroyed. Hypo: If E contracts to sell M "my 1973 Cadillac" for $700 and before the car is tendered to M it is destroyed in a flood, Epstein's nonperformance is excused. The subject matter of the contract is E's Cadillac and that has been destroyed. M cannot recover damages for breach of contract even if he can show that the market value of E's Cadillac was $1,000. If E contracts to sell P 1,000 pounds of grits for $700 and all of E's grits are destroyed in a flood, E's nonperformance is not excused. No specific grits were "identified", and there are still a lot of grits in the world. E can perform by buying more grits and reselling them to P for $700. It may be that E has to pay more than $700 for 1,000 pounds of grits, but again the performance becoming more expensive does not make performance impracticable.
What is the Doctrine of Frustration of Purpose? What are the rules?
(1): The doctrine of frustration of purpose is triggered by post-contract events not anticipated by the contract that do not affect the ability to perform, but instead affect the mutually understood purpose for the contract performance. (Krell v. Henry) (2) And, it is important that you understand that in Krell v. Henry * both parties understood * that viewing the coronation parades was the * purpose of the contract. * Krell had advertised that that his apartment had a view of the parades. Had that not been the case, the outcome would have been very different. (3): R2D § 265, entitled "Discharge By Supervening Frustration," adopts the Krell v. Henry result. (4): Instead of the phrase "mutually understood purpose," § 265 uses the phrase "basic assumption." (5) Note also that § 265, like Krell v. Henry, only provides for the discharge of "remaining duties to render performance." In Krell v. Henry, Henry withdrew his counterclaim for the £25 that he had already paid, and that has become part of the modern doctrine.
What are the common law rules regarding Damage or Destruction of the Subject Matter of the Contract (Impossibility or impracticability)
(1): Today, courts and R2D § 361 use the phrase "basic assumption," instead of "implied condition," and "Impracticable," instead of "impossible." But, it's all pretty much means the same thing. (2): Focus on the effect of the post-contract occurrence on the ability to perform. Damage or destruction of the subject matter of the contract does not always excuse performance. Hypo: Obviously, if M contracts to paint E's house and the house burns down before M is finished, M is excused from performing. No ability to perform—nothing for the paint to stick to. By contrast, if M contracts to build a house for E and the house burns down before M is finished, M is not excused from performing. M the house builder still has the ability to build the house. Undoubtedly, it will now cost Markell more to build the house, but the performance becoming more expensive is generally different from the performance becoming impracticable.
What are Force Majeure and "Hell or High Water" Clauses?
(1): Whether your professor wants you to use the term "impossibility" or the term "impracticability", use these terms only when the facts involve a post-contract occurrence not provided for in the contract. (2): Sometimes the contract provides for post-contract occurrences in either a (a) "force majeure" ("superior or major force") clause that excuses performance in the event of a specified occurrence, or (b) a "hell or high water" clause that requires performance regardless of what occurs. (3): If you see a force majeure clause on your contracts exam, apply its language, not the law of impossibility or impracticability, to the post-contract occurrence in the fact pattern.
What does UCC 2-207(2) say?
(2) The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless: (a) the offer expressly limits acceptance to the terms of the offer; (b) they materially alter it; or (c) notification of objection to them has already been given or is given within a reasonable time after notice of them is received.
What does UCC 2-207(3) say?
(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 case the terms of the particular contract consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of this Act.
When is an Agreement Within the Statute of Frauds Enforceable Without a Writing?
(a) Part Performance: Some statute of frauds expressly provide for a part performance exception to the statute of frauds. (Like § 2-201(3)(a) and 2-201(3)(c)) In some other instances, courts have recognized part performance exceptions to the statute of frauds. For example, in many states, and oral agreement to transfer an interest in land is enforceable if the buyer/(P) can prove any two of the following three facts: 1. Payment of all or part of the purchase price; 2. Possession of the land; and/or 3. Improvements to the land. (b) Reliance: R2D § 139 provides that an oral promise can be enforceable because of reliance, notwithstanding the statute of frauds. In a sense § 139 is an adaptation of promissory estoppel in relation to statutes of frauds. Unlike § 90, § 139 has not yet been widely adopted or applied.
What are the 2 different tests for determining when parole evidence will be allowed to explain ambiguity?
1. The "Plain Meaning" or "four-Corners" test (More Traditional) 2. The External Evidence Rule (More Modern)
What are the three primary rules of acceptance?
1. The offeree must have knowledge of the offer (Intend to Accept) 2. Only the offeree can accept an offer. 3. The acceptance must be in the form authorized by the offer.
1. What kind of a breach excuses further performance of a contract under common law? 2. What is that kind of breach? 3. How can that breach happen?
1. A Material Breach: 2. A Material Breach is, in essence, a major screw-up. Whether a breach is "material" is a fact question. 3. A breach can be material because of: (a) the quantity of performance (or lack thereof) or (b) because of the quality of performance (or lack thereof).
1. What is the pre-existing duty rule? 2. How does it effect modifications? 3. Why is the rule in place?
1. A common law rule that a promise to do something that that the person is already bound to do, or to refrain from doing something she has already agreed not to do, does not constitute consideration for a contract modification. 2. For any contract modification to be enforceable, the modified agreement had to be supported by a new consideration. 3. Might be a sign that the modified promise was not truly voluntary, but rather the product of some form of duress; I.e., ordinarily, a person doesn't agree to pay more (or take less) without receiving something in return from the other party.
What are reliance damages?
1. In many cases, a party will not be able to show that its damages are certain or were foreseeable. 2. Instead of awarding damages based on the expectation interest, the court will award damages based on the reliance interest. 3. The court will look to the value of amounts spent by the non-breaching party in reliance on receiving performance under the contract from the breaching party.
What is promissory estoppel?
1. A court-imposed halt on the imbalance of a situation created by a person's reliance on a promise that lacked consideration. 2. A type of consideration substitute created by law where one party to a contract reasonably acts or refrains from acting to their detriment based on the promises of the other party to the contract. [detrimental reliance]. 3. Necessary Elements of Promissory Estoppel: (Can be difficult to prove all): (a) A promise; (b) Justifiable and detrimental reliance on such promise by the promisee; (c) That the promisor should have expected (foreseeable) the promisee to change her position by taking some detrimental action or forbearing from action; and (d) That enforcement is necessary to prevent injustice.
What are liquidated damages? What are the rules and limitations?
1. A form of damages agreed to in advance of a breach 2. The basic limitation is that the amount of liquidated damages cannot do more than compensate. This is usually expressed as the fact that liquidated damages may not impose a penalty. 3. The first limitation is that the amount set must be difficult to determine - With Damages that are easy to calculate there is a presumption of a penalty. 4. R2D §256: Even when the damages are difficult to determine, the contemporary view is that the amount set must also be reasonable in light of the anticipated or actual loss. - This means that there are at least two points in time which you must consider: (a) The time of formation, and (b) the time of breach. - This also means that a clause which sets an unreasonable amount in light of what parties think at the time of formation may later prove to be reasonable if circumstances change drastically, and the damages set are reasonable in light of actual loss. 5. Traditional Common Law: The rule was that the reasonableness of the amount set as liquidated damages was determined at the time the contract was entered into. This meant that if the stipulated sum was not a reasonable forecast of actual damages, the provision could be struck even if it turned to be reasonable in light of the actual loss. 6. Under either the older or modern view of when "reasonableness" is measured, the rule that this factor is satisfied when the amount set is deemed to be reasonable in light of anticipated loss (as of the time the contract was entered) is put to the test when actual damages turn out to be zero. 7. Tougher questions arise when contracts set "fees" or other amount for breach: Note that there is a direct link between the requirement of difficulty in determining damages and the requirement of certainty in damages. When parties anticipate that damages from the other side's breach might result in damages that will be difficult to quantify, they may very well decide to insert a provision for liquidated damages so that they can avoid that factual dispute in the event of breach..
When is a manifestation of intention intended to be understood as an offer?
1. Agreement must be capable of being given an exact meaning and that all the performances to be rendered must be certain. 2. However: Just because term(s) missing or yet to be agreed upon, does not mean that the parties did not conclusively intend for a binding an agreement to form 3. Determining whether a particular form of communication constitutes an offer rather than an inoperative step in the preliminary negotiations, depends on all surrounding circumstances. The pertinent inquiry is whether the individual to whom the communication was made had reason to believe that it was intended as an offer.
What are the rules on revocable offers?
1. All offers, standing alone, are revocable. 2. Even offers that are stated to be irrevocable are revocable unless: (a). Restatement § 87(1)(a): The promise not to revoke is supported by consideration; (b). U.C.C. § 2-205 and § 87(1)(b) "Firm Offer" - The promise is made revocable by statute; or (c). Restatement § 87(2) The promise (Whether or not said to be irrevocable) induces substantial reliance.
What are the 6 summarized rules of the mailbox rule?
1. Applies when there is a gap between dispatch and receipt of an acceptance. 2. Is only activated when the offeree uses the impliedly authorized means of communication (or a more reliable means.) 3. Applies Only to acceptances (Offers, Revocations, Counteroffers, and Rejections are effective on receipt.) 4. Does not apply when an acceptance follows a rejection or counteroffer. 5. Does not apply if an offer is irrevocable (option contract). Offeree is already protected against an unexpected revocation during the option period. 6. Does not apply when communication is near instantaneous (Phone, email, text)
What are the limitations on damages?
1. Certainty 2. Foreseeability (Applies primarily to Special/Consequential damages) 3. Avoidability (a) Mitigation (b) Costs you don't have to pay 4. Economic Waste (Only applies to Cost of repair or completion damages) 5. No Emotional Distress or Punitive Damages
What are the 4 kinds of Electronic Assent? Define them and say what courts have thought about them in general.
1. Clickwrap Agreements: User of a website clicks "I accept" - supposedly agreeing to the vendor's end-user license and other standard form terms. 2. Browsewrap Agreement: Website will contain a notice that - by merely using the services of, obtaining information from, or initiating applications within the website - the user is agreeing to and is bound by the site's terms of service. 3. Scrollwrap Agreement: Makes the user to scroll through the electronic agreement before being able to signify the user's assent. 4. Sign-in-wrap Agreement: Most controversial. Does not require the user to click on a box showing acceptance of the "terms of use" in order to continue. Instead, website is designed so that a user is "notified" of the existence and applicability of the site's terms of use when proceeding through the website's login process . Courts have generally enforced clickwrap and scrollwrap agreements, while the results have been mixed with respect to other kinds of online consumer contracts.
What are the rules regarding the Certainty limitation on damages?
1. Contract damages must be proved to a reasonable certainty. 2. The typical situation in which the certainty requirement restricts damages is when the non-breaching party wants lost profits resulting from the breacher's failure to provide an essential part or service of a larger project as part of his or her damages. 3. New ventures rarely can show profits with any certainty. If it is an established company with a good track record, however, (P) might be able to meet the standard. (P) can show that in the past, under similar circumstances, he has made a profit, and that (D)'s breach caused this trend to end.
What are the 4 most important points to remember about unconscionability?
1. Courts can use the unconscionability doctrine to find that the entire agreement is unenforceable or courts can use the unconscionability doctrine to find that a specific term in the agreement is unenforceable but the remainder of the agreement is enforceable. 2. Most courts use the term "Procedural Unconscionability" in referring to problems with the agreement process and the term "Substantive Unconscionability" in referring to problems with the terms of the contract. 3. In writing an exam answer about substantive unconscionability, you need to remember that both the R2D and the UCC expressly provide that unconscionability is to be tested as of the time of the agreement. Whether terms are oppressive thus turns on whether the terms were fair at the time of the agreement, not months or years later. 4. While the determination of whether a contract or a contract term is unconscionable depends on the relevant facts, the determination is made as a matter of law. The UCC expressly so provides, and cases applying the common law of unconscionability generally so hold.
When is Non-Occurrence of a Condition Excused? Explain the 1. Doctrine of Prevention and 2. Waiver.
1. Courts seek to avoid "forfeitures" by interpreting contract language as not imposing a condition, but also by excusing the non-occurrence of a condition when that non-occurrence of the condition would cause a disproportionate forfeiture. R2D § 229. 2. In other words, a court has discretion to excuse a condition to avoid a forfeiture. An exercise of that discretion involves a balancing of the policy of freedom of contract, on the one hand, and the policy of fairness, on the other. 3. So it is fair to say that conditions may excuse performance, but the conditions may also be excused, in which the performance is due. 4. Here is an example of excuse of the non-occurrence of an express condition under the doctrine of prevention: Hypo: M contracts to buy an emerald pupik ring from E for $10k on the condition that the ring is appraised at no less than $10k. M later refuses to perform (appraised value was only $8k). If E can establish that M bribed the appraiser to provide a lower than market appraisal, then the non-occurrence of the express condition will be excused because of prevention (which is to say satisfaction of the condition was prevented from happening). 5. More realistic, and more common, is excuse of the non-occurrence of an express condition because of waiver: Same pupik ring story except that (i) M does not bribe the appraiser, and (ii) M wants to buy the ring even though the condition was not satisfied because the appraiser valued the ring at $9k. (a) Obviously, M, the person protected by the condition, can "waive" the protection of the condition (b) Obviously, E cannot use the non-occurrence of the appraisal condition as an excuse to refuse to sell the ring to Markell, since the condition governed Markell's performance (i.e., ran in his favor, not Epstein's).
What is "Perfect Tender"? What are the rules?
1. Courts use the term "perfect tender," (term not used in the UCC), in determining whether the seller's improper performance excuses the buyer from performing under § 2-601. 2. UCC § 2-601: "[I]f the goods or tender of delivery fail in any respect to conform to the contract, the buyer may * * * reject. 3. And a buyer of goods who rightfully rejects the goods does not have to pay for the goods, i.e., she is excused from performing. 4. This perfect tender rule is subject to a number of exceptions, such as § 2-508, which creates a right to cure and § 2-612, which suspends strict application of the perfect tender rule in the case of installment sales.
How do you measure the benefit of the bargain with Cost of Repair or Completion Damages?
1. Courts will often take the cost of completion as a substitute measure for the difference in value approach. 2. The notion here is that the ultimate value of what is contracted for is reasonably related to the cost of building or completing it.
What are the exceptions to the parole evidence rule?
1. Defenses - Parol evidence will be allowed to show defenses like fraud, mistake, etc. 2. Complete or Partial - Parol evidence will be allowed to consider whether the agreement is partially or completely integrated. 3. The ability of a party to show that there is an oral condition precedent to the effectiveness of an agreement. (A condition that had to occur before contract performance was due.) 4. To explain ambiguity (Not contradict). - Here, parole evidence can be used to explain or provide meaning of the written document, even if completely integrated. (3 and 4 take up most of the discussion and 4 is the most important.)
What are the 3 kinds of damages?
1. Direct 2. Consequential (Or special) 3. Incidental
What is the difference between a Direct and Indirect Revocation?When can an Offeror indirectly revoke?
1. Direct Revocation - "The offeror withdraws her offer by notifying the offeree of her revocation" 2. Indirect Revocation - "Occurs when the offeree learns from someone (RELIABLE SOURCE) other than the offeror that the offeror is no longer interested in the deal." Can Indirectly Invoke if: 1. There was no meeting of the minds; 2. Offeree is aware of conduct by the offeror demonstrating intent to revoke the offer. - Meeting of the Minds: occurs when both parties have the same understanding of and mutually assent to the terms at the same time. - Offeree Aware: Once the offeree is aware that the buyer intending on selling to someone else, the buyer was no longer reasonable in believing that the offer was open for him to accept still.
What defenses does a (D) have based on Flaws in the agreement process?
1. Duress 2. Misrepresentation of Existing Facts 3. Non-Disclosure/Concealment 4. Mistake of Existing Facts - (a) Mutual Mistake - (b) Unilateral Mistake
What is the limitation on Cost of Repair or completion? What are the rules?
1. Economic Waste 2. Courts have sometimes limited the cost of completion remedy by not awarding it if it would result in damages disproportionate to the likely loss. 3. That is, if the cost of completion is more than the value of the object when built or as promised, courts fall back to the Hawkins type remedy and require the non-breaching party to prove the difference between what was contracted for and what was delivered. 4. In this calculation, courts analyze what it would cost to give full performance, and what the value of the property involved would be after that performance. 5. Restatement and majority view: The cost of completing performance is limited if that cost is clearly disproportionate to the probable loss in value.
What are the 4 ways to measure damages?
1. Expectation Interest 2. Difference in Value of Performance 3. Cost of Repair or Completion 4. Economic Waste
What is the difference between an express and implied rejection?
1. Express - Firm rejection; once declined, the offer is terminated. 2. Implied - Creation of a new offer (counteroffer) which the original offeror can choose to accept or reject.
What is the External Evidence Test/Rule?
1. If a word is capable of more than one meaning when viewed from the perspective of a reasonable person who understands the context of the contract and the relationship of the parties. 2. Under the external evidence rule, parties may bring in evidence that is external or "extrinsic" to the contract in order to show ambiguity in more cases than under the plain meaning rule.
How is an express condition satisfied? What are the rules?
1. If the express condition has been "satisfied," then there is no excuse of a later non-performance based on nonoccurrence of the express condition. 2. Generally, an express condition is "satisfied" only if it is complied with strictly. (Strict Compliance) 3. R2D § 227 (cmt. b) uses the term "forfeiture" in describing the denial of payment because of the non-occurrence of a condition to someone who "relied substantially on the expectation of that exchange."
What defenses does a (D) have based on what the agreement says?
1. Illegality 2. Public Policy: (Covenants Not to Compete Example)
What are the distinctions between promissory estoppel and equitable estoppel?
1. In contrast to an equitable estoppel, promissory estoppel is based not on a false statement of past or present fact but rather on a promise, which relates to future behavior. 2. Also, promissory estoppel is not raised as a defense to a claim by another, as is the case with equitable estoppel. Instead, it forms an affirmative basis for imposing liability on the promisor - it is its own claim for relief.
What does the holding in a particular covenant not to compete case depend on?
1. It depends in the main on facts relating to: (a) the reasonableness of the business need for the protective agreement; and (b) the reasonableness of the duration; and (c) geographic scope of the protective agreement. 2. More generally, the covenant not to compete decisions typically discuss and balance the public policies of: (a) Freedom of contract; (b) Restraint of Trade; (c) Freedom to Compete; and (d) The right of an employee to earn a livelihood.
What is the Material Benefit Rule?
1. It is an exception to the general rule of past consideration. It Involves situations where a promise made in recognition of past benefits may be enforceable. - An Implied in Law ("Quasi-contract") is not really a contract at all. It is an undertaking created under the law of restitution to prevent an unjust enrichment. - There is no real promise or voluntary consent; but rather a duty imposed by law to make restitution for the value of a benefit conferred so as to avoid an inequity. 2. Recovery and restitution is not available for mere "volunteers"; that is, where the benefit is conferred gratuitously without any reasonable expectation of compensation. 3. Except under emergency circumstances that render it inexpedient to do so, a party seeking recovery in quasi-contract must show that the other party was given the opportunity to decline the benefit. 4. First Restatement §86: Provides that a promise made in recognition of a prior benefit may be enforced to "the extent necessary to prevent injustice." 5. However, the promise must not have been conferred as a gift and must not be disproportionate in value to the benefit conferred.
What are the 3 most important things to remember about the SOF?
1. Not all agreements must be in writing: some agreements are not within the statute of frauds; in some situations, an agreement within the statute of frauds is enforceable without a writing; 2. Not all writings satisfy the statute of frauds; and 3. A (D) who loses on its statute of frauds defense does not mean that the (D) has lost the case, because the (P) still has the burden of proving that there was a contract, and the (D) may still have other defenses such as duress, misrepresentation, concealment, mistake, or unconscionability.
What are the seven excuses to performance?
1. Other Party's Total Nonperformance 2. Other Party Says they are not going to perform (Anticipatory Breach) 3. Reasonable grounds for insecurity (Adequate Assurance) 4. Other Party's Improper Performance (a) Common Law Material Breach Concept (b) UCC "Perfect Tender" Concept 5. Non-Occurrence of an Express Condition 6. Impossibility or Impracticability (a) Damage or Destruction of the Subject Matter of the Contract (b) Death of a Contract Party (c) Supervening Law or Regulation (d) Force Majeure and "Hell or High Water" Clauses 7. Frustration of Purpose
What is the Remedy in Promissory Estoppel Cases?
1. R2D simply says "damages may be limited as justice requires. 2. Damages would be calculated by an amount necessary to compensate the (P) for the loss caused by the detrimental change in position occasioned by reliance on the promise. - These would be reliance damages. 3. Typically, When promissory estoppel is being asserted to enforce a promise made either during the course of preliminary negotiations or as part of an agreement that is not enforceable other than because of an absence of consideration, it is usually appropriate to restrict damages to losses resulting from, or expenses incurred by the plaintiff in, reliance on the promise.
What are the rules regarding Mutual Mistake?
1. R2D § 152 says - The court will not grant relief for mistake if the party seeking that relief bears the risk of their mistake. 2. Under § 154's rules for risk of mistake, most people bear the risk of their mistakes. 3. In sum, even if both contracting parties have the same misunderstanding of the facts, courts will deny relief if: (a) The court concludes that there was simply a bad judgment or ignorance instead of "legal mistake," or (b) There is a mutual mistake but it is not "material," or (c) There is a mutual mistake but "under the circumstances" the person seeking relief because of the mistake should bear the risk of his or her mistake.
1. What is the definition of "Offer,"? 2. How is it determined that someone made an offer? and 3. What must an offer include (directly or indirectly)?
1. R2D § 24: "An offer is the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it." by the offeror that essentially says to the offeree, 'I commit to a deal on these terms. You now have the power to seal the deal with your assent to these terms" 2. Objective theory is applied to determine whether a particular form of communication - words, conduct, or some combination of each - constitutes an offer. 3. The offer must: (a) Be communicated (b) Indicate a desire to enter into a contract (c) Be directed at some person(s) (d) Invite Acceptances (e) Create a reasonable understanding that upon acceptance a contract will arise
What are the 4 ways to terminate an offer?
1. Rejection (a. Express or b. Implied), 2. Revocation (a. Direct or b. Indirect), 3. Lapse, 4. Death or incapacity of the Offeror or Offeree
What are the alternative to the usual types of damages?
1. Reliance Damages 2. Restitution Damages
What are the ways courts used "Implied Terms"?
1. Terms implied by a court to achieve the parties' intent, and (a) Obviously Omitted Terms (b) Trade Usage 2. Terms implied to further some public policy. (a) Implied Covenant of Good Faith (b) UCC Supplied Terms
1. What happens to the offeree's power of acceptance if the offer dies or is adjudicated incompetent? 2. Does the rule apply after acceptance?
1. The offeree's corresponding power of acceptance, terminate automatically and without regard to whether the offeree was notified or otherwise aware of the death (or incapacity). 2. No, automatic termination does not apply after acceptance.
What are the 4 factors that guide the analysis when determining the validity of any form of electronic assent?
1. The website draws the user's attention to the terms of the deal or at least to their existence; 2. The website's design makes it easy for the user so inclined to examine the standard terms; 3. The user's assent is captured in some fashion; 4. The proximity of the hyperlink to the vendor's terms to the part of the website where the user signifies her assent or signs-in.
What are restitution interest damages?
1. This interest is not keyed to what the non-breaching party spent, but rather to the value of the performance up until breach. 2. It often arises when a party disaffirms or avoids a contract, or when, after some performance, the parties' remaining duties are discharged by impracticability or impossibility. It also arises when one party pre-pays for a service or product. 3. We want to put the defendant in the same economic position as if the contract had never happened.
What is the traditional rule of manner of acceptance, and what does the UCC and R2D say?
1. Traditional Rule: for an acceptance to be effective, the acceptance must conform to any and all requirement specified in the offer. That means, if an offer stipulates, the time, place, and or manner of acceptance, to be effective, acceptance must comply without variation. 2. Contemporary Rule: R2D §§ 30(2) & 32. U.C.C. § 2-206. Under contemporary standards, - specified manner of acceptance is regarded as a mere convenience, that does not preclude acceptance in any other reasonable manner, Unless the offer Clearly and Unambiguously indicates that the designated manner of assent is exclusive.
What is the "Plain Meaning"/Four-Corners test/rule?
1. Traditionally, courts have adopted a Plain Meaning Rule. 2. Under this rule, unless ambiguity can be shown from within the document itself and without resort to external sources then the parties cannot introduce evidence tending to show ambiguity. 3. That is, unless the ambiguity arises and can be shown within the "four corners" of the document, then a party could not introduce evidence of a meaning different than the excepted meaning of the term at issue. 4. As a result, parties in jurisdictions in which this rule prevails may usually introduced extrinsic evidence only when the contract is contradictory (i.e., different parts of the contract call for different delivery dates.)
For purposes of specific performance, what is the effect of the sale of a unique (Or presumed unique item?) What kind of items are these? What is the impact on personal service contracts?
1. Where the contract involves the sale of a unique, or presumed unique item, inadequacy is presumed. 2. In this category are contracts for the sale of land, but can also include rare and irreplaceable items of personal property. (3): In the case of personal service contracts, enforcement might run afoul of the constitutional ban on involuntary servitude. - However, the court may order a "negative injunction."
Which agreements are within the Statute of Frauds?
1. With the exception of UCC § 2-201, statutes of frauds vary from state to state in terms of what types of agreements are covered. 2. Although R2D § 110 sets out what kinds of agreements are generally covered in state's Statute of Frauds: (M.Y.L.E.G.S.: Marriage, year, land, executor, goods, suretyship). (a) A contract of an executor or administrator to answer for a duty of his descendant (The Executor-administrator provision) (b)A contract to answer for the duty of another (The Suretyship provision) (c) A contract made upon consideration of marriage (The marriage provision) (d) A contract for the sale of an interest in land (The Land contract provision) (e) A contract that is not to be performed within one year from the making thereof (The one year provision) The following is governed by the statute of frauds provision in the UCC § 2-201: (a) A contract for the sale of goods for the price of $500 or more.
What are the two prongs of objective theory?
1. Would a reasonable person in the position of each party believe that, based on the on the other party's words and conduct used in all of the surrounding circumstances, the other party intended to be bound. 2. Did the party actually believed that, based on the other party's words and conduct used in all of the surrounding circumstances, the other party intended to be bound.
Under UCC 2-207(2) what happens to additional terms for non-merchants?
Additional terms are treated as Proposals that only become part of the contract upon the assent of the offeror.
What is the difference between express conditions and constructive conditions?
Constructive conditions: (1): Are not express conditions. They are not language in a contract that modifies obligations created by language of promise in the contract. (2): They are not subject to the strict compliance standard. (3): Constructive conditions are implied from the language of promise in the contract and are subject to the material breach rule. (4): "Constructive" means made up by the court and not the parties. Express Condition: (1): While a constructive condition is in essence also a promise, and so can be breached, an express condition is not a promise and so cannot be breached. (2): An express condition is either satisfied or not satisfied, and if it is not satisfied, there is an excuse of performance, but no breach. In sum: (1): Constructive conditions of exchange is the doctrine developed to explain why the performance by each party to a contract is almost always dependent on the performance by the other contract party. (2): Constructive conditions help to ensure that each party will receive the promised performance of the other party by making the respective promises mutually dependent on one another.
What is contract law based on? What is the tension?
Contract law is consent based even though there's a tension between consent and objective manifestation.
How do you measure benefit of the bargain with the Expectation Interest?
Contract law protects the parties' expectation interests; - what the parties reasonably expected to obtain by full performance of the contract. Put the non-breaching party in as good a position as he or she would have been in had the contract been performed.
What is the interpretive maxim regarding how the court construes ambiguous terms?
Contract should be construed against its drafter - representing the notion that if someone drafted a less than perfect contract, then that person should bear the cost of ambiguity.
How does UCC 2-207 treat conflicting different terms?
Courts have taken three approaches to conflicting or different terms. (1): Treat different terms just like additional terms and run them through §2-207(2). (2): "Fall Out": holds that the conflicting term in the offeree's acceptance simply drops out. (3): (Majority view) "Knock Out": Neither becomes part of the contract. This leaves the parties with the remaining terms and the default provisions supplied by Article 2.
What is a "merger clause" (Also called an "integration clause"), and what is the effect?
Courts look for integration or merger clauses such as, "This agreement is a complete expression of the parties understanding of the terms of this deal" or "This writing contains all of the terms related to the subject matter of this deal." Under the modern approach of R2D and the UCC, merger clauses are a factor that the court looks at, but they are not dispositive. The test, as stated above, is a functional one: would the deal have been signed without the term being offered?
When have courts found that rolling contracts validly capture assent?
Courts look to: was the consumer put on notice that there were going to be additional terms. If so, the existence of the return period, during which the consumer has the opportunity to review the terms and withdraw from the transaction, may be sufficient to find assent. Likewise, if the consumer is offered the opportunity to review the terms in advance of placing the order, this should help the case for enforcement. Thus, The Key Comes Down to: Adequate Notice Opportunity to Review And consent before coming bound
What is the effect of the Death of a Contract party on Impossibility or impracticability?
Death of either party to a contract after the contract was entered into, but before it is performed, does not generally terminate the contract. Unperformed contract obligations are generally not excused by death.
If offer made over phone, then offeror sends revocation, and offeree sends acceptance by mail. Is it contract?
Depends on when the acceptance is received and when the revocation is received since both are operative on receipt.
What is the difference between express conditions precedent and express conditions subsequent?
Express Conditions Precedent: A condition is "Conditions Precedent" when it is a prerequisite to the parties' performance obligations. The adjective "precedent" refers to the time relationship between the occurrence of the express condition and the obligation to perform pursuant to the contract. Express Conditions Subsequent A condition is a "Condition Subsequent" when it imposes a post-contractual limitation on the duty to perform. (1): The primary practical difference between conditions precedent and conditions subsequent then is that the non-occurrence of a condition precedent excuses any contract performance, while the occurrence of a condition subsequent excuses continuing performance. (2): Both the occurrence of express conditions precedent and the occurrence of express conditions subsequent are governed by the strict compliance rule.
What is an "Express Condition"
First, 1. An express condition is language or words in a contract. - If P says "I accept, conditioned on the house's being appraised at $200,000 or more," that response, is a conditional acceptance (or counteroffer). - There is no contract and so no contract condition. 2. In contrast, if P says that the sale is "conditioned on the house's being appraised at $200,000 or more," then we have a contract and an express condition. Again, we are looking for language in the contract itself. Second, 1. The language you are looking for in a contract is language that excuses the contract's other promises rather than creates new promises. The phrase "conditioned on the house's being appraised at $200,000 or more" is not a promise. Neither party has promised that the house will be appraised at $200,000 or more. Neither can recover from the other for breach of contract if the house is appraised at less than $200,000.
What is the general rule and the exception for signatures regarding the statute of frauds?
General Rule: A writing that satisfies the statute of frauds must be signed by the (D). UCC § 2-201(2) statute of frauds says, "the party against whom enforcement is sought." Exception to the Rule: UCC § 2-201(2) describes a very specific fact situation in which a writing signed by the (P) satisfies the statute of frauds.
What are the rules regarding acceptance by silence or inaction?
General Rule: Silence cannot constitute an acceptance. Exception Rule: However, there are exceptions where acceptance may be implied when silence is coupled with conduct that makes the inference of assent reasonable. I.e. Silence in the face of receipt and enjoyment of a benefit with knowledge of an expectation of payment presents the most compelling case. - (implied in conduct) contract. Silence (Or acquiescence) when construed against a prior course of dealing might also constitute acceptance.
What is the Doctrine of Nominal Consideration, and how does it deviate from the general rule?
General Rule: courts do not look into the adequacy of consideration, just to its existence. Doctrine of Nominal Consideration: Although courts typically do not look into the adequacy of consideration, where the alleged consideration is a sham, and both parties know it - have deliberately disguised what in substance is a gratuitous promise to look like a bargain - enforcement should be denied. Nominal consideration is not significant in an intrinsic sense, but because it is a red flag that the true nature of the transaction needs to be scrutinized far more closely. Multiple Motives: Sometimes the promisor may have multiple motives for making the promise, only one of which is to induce the legal detriment to the promisee that forms the alleged consideration. In cases such as this where the promise is the product of an admixture of motives, only one of which is exchange-based, consideration may be said to exist. It is only when there is no element of exchange - the promises truly a gift - that enforcement will fail for lack of consideration.
Is a contract to provide landscaping services for two years "within" the statute of frauds even though the contract provides that either party can terminate the agreement on five days' notice?
Generally yes. Most statutes of frauds focus only on whether the agreement can be performed within a year and treat termination is different from performance. A two year agreement, by definition, cannot be performed in the space of one year.
Can parties become obligated to one another before mutual assent?
Generally, no. But modern contract law has recognized certain Exceptions to the general rule about pre-contractual liability in the circumstances where Necessary to Prevent Injustice. 1. For example R2D Will impose a duty on an offeror to hold open as an option an offer that the offeror should reasonably have expected to induce substantial reliance, even though the offer doesn't state that it will be irrevocable and there is no consideration for the promise to hold the offer open. 2. "Letters of Intent." : This is a device frequently used in more sophisticated transactions where the deal involves many discrete points of agreement, all of which must be resolved before the deal is final. - Because negotiations to reach complete and final agreement will take time, at some point during the process, the parties will reduce the points of agreement so far, as well as the items still being negotiated, to a writing in order to prevent misunderstanding and, hopefully, pave the way for future agreement. - Usually, these letters of intent will contain a provision to the effect that, "this letter is not intended to create liability, or obligation on the part of either party." - While courts will typically respect such a statement of intention not to be legally bound, some cases have found that the letter of intent may give rise to a mutual obligation at least to continue negotiations in good faith. - This means, while the parties are not specifically bound by the terms so far agreed, neither can simply walk away from further negotiations without making a serious effort to come to agreements as to the remaining terms.
What are the rules regarding the Foreseeability limitation on damages?
Hadley v. Baxendale 1. This limitation applies primarily to special or consequential damages. 2. Foreseeability Limitation: damages are recoverable only to the extent that the breaching party, at the time of contract formation, could reasonably have foreseen the loss its breach ultimately caused. 3. This knowledge comes generally from two sources: (a) Either it is made known during the formation process, and therefore written into the contract, or (b) the general circumstances of the object of the contract or the parties must be reasonably known to all.
What are the rules regarding a Misrepresentation of Existing Facts?
Halpert v. Rosenthal: Holding: Yes, Halpert can be liable for an innocent misrepresentation of a material fact if it was a positive unconditional claim that Rosenthal relied on to his detriment. (1): An agreement will not be enforceable if (D) can establish that false statement as to existing facts induced him to enter into the contract. (2): If the misrepresentation is also material, then (D) will not have to prove that (P)'s misrepresentation was fraudulent or even negligent. (3): Even innocent misrepresentations as to existing facts can make a contract voidable.
How do you measure the benefit of the bargain with the Difference in Value of Performance Damages?
Hawkins v. McGee: Main Rule: Hawkins would be entitled to damages equal to the difference between the value of the hand as promised and the value of the hand as delivered. (2): This is often used without any change when the object of the contract has a value that can be determined without reference to the contract. Put another way - when there is a market for what was to be bought and sold under the contract, or if there is some way to independently determine the value of the object "as promised." (3): If there is a market for the object in the contract, proof of market price would also prove the value of the promise. (4): In cases of delayed performance, the value of performance due can be measured by awarding interest on the value of the property or the rental value of the delay.
What is the relationship between Substantial Performance and a Material Breach?
If performance is substantial, then the breach is not material and vice versa. There cannot be both substantial performance and material breach.
What are advertisements and Price quotes generally construed to be?
Invitations to offer
What is the rule to determine whether an advertisement or price quote is an exception to the general rule?
It comes down to the specific facts and circumstances of the situation and whether it was reasonable for the recipient of the price quote or advertisement to infer that the person who posted/sent an advertisement or price quote intended to be bound. (2 prongs of objective theory.)
Does UCC § 2-207 apply to delayed terms ("Rolling Contracts")?
It depends on when the court determines the contract was formed - If contract formed when order was placed, or the computer delivered - Yes. If contract not formed until the buyer retains the system beyond the right of return period - No. Note: that there are other cases that, while finding that the delayed terms are part of the contract without regard to § 2-207, have nevertheless refused to enforce some of these provisions as "Unconscionable."
What was the R2D's response to the strictness of the mirror image rule?
It distinguished between an acceptance with a "Suggestion or inquiry," and a truly conditional acceptance. Only the conditional acceptance is an implied rejection and counteroffer.
What is equitable estoppal?
It is a defense that exists throughout the law; it is not related just to contract cases. It is invoked to bar a person, who misstates certain facts, from later asserting the truth of the matter earlier misrepresented against a party that relied to her detriment on the first statement.
What is the effect of non-disclosure without concealment?
It is generally irrelevant. A person making a contract is not required by contract law to tell the other person all that they know, even if they know that the other person lacks knowledge of certain facts.
What does it take, under UCC 2-207(1) for an acceptance to be "Expressly conditional"?
It is not enough to say the acceptance is "subject to the terms and conditions of this acknowledgment." Rather, the offeree must make clear its unwillingness to go forward without the other party's affirmative agreement to the additional or different terms.
What are incidental damages?
Monetary damages incident to or connected to a breach typically involving reimbursement for expenses. Take for example a factory which was burnt down by the negligence of a contractor. The claimant would be entitled to the direct costs required to rebuild the factory and replace the damaged machinery.
What are consequential damages?
Monetary damages indirectly related to and flowing from the breach; damages based on special circumstances of the contract known and foreseeable to the breaching party at the time of formation.. Hadley v. Baxendale (1864). Examples include increases in finding and obtaining goods, services, etc. damages [that] compensate the claimant for the quantifiable monetary losses suffered by the plaintiff. For example: • lost earnings (both historically and in the future); • extra costs, repair or replacement of damaged property; • loss of irreplaceable items; • additional domestic costs, and so on. They are seen in both personal and commercial actions. [C]an include direct losses--such as amounts the claimant had to spend to try to mitigate problems--and consequential or economic losses resulting from lost profits in a business (wiki). .
Is a contract between the City of Chicago and M to move the Statue of Liberty to the Miracle Mile in Chicago within the statute of frauds?
No. Contracts for the performance of a specific task, as contrasted with contracts for a specific time period or a specific time are never within the statute of frauds. The amount of time that it will take M to perform is irrelevant. Most statute of frauds regarding service contracts use language similar to "to be performed within a year of the date of the contract." And most courts interpret the words "to be" in this context as meaning "theoretically possible with unlimited resources." With unlimited resources, any task, including moving the Statue of Liberty to Chicago is "capable" of being performed within a year of the date of the contract.
P offers E a contact for lifetime performance. Is it within the Statute of Frauds?
No. The agreement is capable of being fully performed without breach within the space of one year because E may die after 6 months.
Is UCC 2-207 limited to cases where two forms are involved?
No. § 2-207(1) for example, refers - in addition to a definite and seasonable expression of acceptance - to confirmatory memoranda sent within a reasonable time. Example: M & E reach an oral agreement over the phone for the purchase and sale of the armie, and E thereafter sends a written confirmation of the deal to M that contains additional or different terms, § 2-207 determines whether those different or additional terms become part of the deal.
What is the effect of non-disclosure with concealment?
Nondisclosure coupled with concealment is treated the same as a misrepresentation; that is to say, it is a defense to the enforcement of the agreement.
Are the restatements binding law?
Not necessarily, but they can be: Restatement is a distillation of common law principles. They're not binding unless state supreme court says they will follow a specific provision in restatements.
Hypo Question: P offers to sell his car to E for $20,000, but P actually miss spoke. He meant to say $22,000. Before P could correct the error, E promptly accepted. Who bears the risk of P's error? Would it make a difference if P first erroneously said $2,000 instead of $20,000?
One of the consequences of objective theory is the risk of mistake on the promisor. Falls on Ponoroff. Regardless of what a reasonable person infers, if Epstein doesn't believe what Ponoroff says is true, then its not objective theory. Thus, for the $2,000 offer, the other thing you would want to know is what the price of the car is. Would E be reasonable in believing it was a true offer?
Who can accept an offer?
Only the person with the Power of Acceptance - the offeree.
What is the traditional contract theory rule regarding past consideration?
Past consideration is not good consideration. It is not "good" precisely because there is no contemporaneous exchange, so there is not really any consideration at all. Essentially, this is a gift promise. It does not induce the promise.
What do contract remedies seek to do?
Place the non-breaching party in the place he or she would have been in had there been performance - the non-breaching party receives as a remedy the benefit of its bargain. Usually, (not always) the amount of damages are determined without reference to the intent of the breaching party. Intentional breaches are generally treated the same as non-intentional ones.
What are contracts of adhesion? What are the special rules for contracts of adhesion when dealing with ambiguous terms?
Pre-printed forms with take it or leave it basis. There is no bargaining and no choice but to except. Rule (1): Just because the contract is an adhesion contract does not mean it is unenforceable. - Most contracts in use are contracts of adhesion. Rule (2): Ambiguous words construed against the drafting party (Could have controlled the ambiguity). - In some sense, this is done in an effort to promote public policy. Rule 3: R2D §211 says: If a party attempting to enforce a particular provision of an adhesion contract knew, at formation, that the other party did not know of that particular provision's existence, and also had reason to believe that the other party would not have assented to the provision if they had known about it, then the court will delete the provision from the contract.
What happens if an express condition is not satisfied?
Put simply, the failure to satisfy a condition is not a breach.
When does R2D apply the Doctrine of Mutual Misunderstanding?
R2D § 20: Applies only in cases where a different meaning is attached to a material term and (1) neither party knows or has reason to know the meaning attached by the other, or (2) each party does know or has reason to know the meaning attached by the other.
What is R2D's definition of consideration?
R2D § 74(1): Something given in "Exchange" for the promise that is "Bargained-For". - That "something" could be an act, a promise to do something in the future, or a promise not to do something in the future (i.e. a "Forbearance"). Rule: The promise must Induce the consideration.
How does the R2D and the UCC deal with modifications and the pre-existing duty rule?
R2D § 89: if the modification was made in light of unforeseen circumstances and was fair and equitable, it would be enforced despite the absence of consideration. UCC § 2-209 goes further - agreement modifying a contract for the sale of goods needs no consideration to be enforceable. However, the modification must meet the test of good faith or it is barred.
What is the basic rule of the Parol Evidence Rule?
R2D §213: (1): A binding integrated agreement discharges prior agreements to the extent that it is inconsistent with them. (2): A binding completely integrated agreement discharges prior agreements to the extent that they are within its scope.
Under R2D, how is an offer binding as an option contract?
R2D §87: Option Contracts: (1) An offer is binding as an option contract if it (a) is in writing and signed by the offeror, recites a purported consideration for the making of the offer, and proposes an exchange on fair terms within a reasonable time; or (b) is made irrevocable by statute. (Firm Offer)
How does the R2D apply Promissory Estoppal as a substitute for consideration?
R2D §90(2) takes the position that charitable subscriptions may be enforced without proof of reliance; based simply on the existence of the promise. As noted, a few courts still take the view that promissory estoppel is limited to cases where all other elements of a contract exist save for consideration. The majority of courts, however, follow the view the promissory estoppel is more than just a proxy for consideration and, in fact, represents an alternative theory on which liability for non-performance of promises may be based.
Under R2D What is a completely integrated agreement? What is it under the UCC?
R2D: A completely integrated agreement is an integrated agreement adopted by the parties as a complete and exclusive statement of the terms of the agreement. UCC: asks if the terms being offered, if agreed-upon, would certainly have been included in the parties final agreement.
What is the restatement's position on preliminary negotiations?
Restatement (2) § 26: "Preliminary Negotiations": "A manifestation of willingness to enter into a bargain is not an offer if the person to whom it is addressed knows or has reason to know that the person making it does not intend to conclude a bargain until he has made a further manifestation of assent."
What is R2D's position on reliance as a basis to create an option contract?
Restatement (Second) § 87(2): An offer that foreseeably induces detrimental reliance of a substantial character by the offeree may be enforced as a binding option contract, to the extent necessary to prevent injustice, despite the absence of both (1) a promise of irrevocability, and (2) consideration in support of the promise.
What is the restatement's position on "Certainty" of an offer?
Restatement §33: "Certainty": (1): Even though manifestation of intention is intended to be understood as an offer, it cannot be accepted so as to form a contract unless the terms of the contract are reasonably certain. (2): The terms are Reasonably Certain if - Provides a basis for deterring the existence of a breach and for giving an appropriate remedy. (3): The fact that one or more terms of a proposed bargain are left open or uncertain may show that a manifestation of intention is not intended to be understood as an offer or as an acceptance.
What are the rules for UCC Supplied terms?
Rule (1): If it is determined that the parties intended to form a contract, the UCC will supply certain "default" terms as part of the deal. That is, the UCC will insert into a contract various terms that the language of the contract itself does not speak to, but that are necessary in order to prevent the contract from failing on grounds of indefiniteness. For example, article 2 provides: The place of delivery: (UCC § 2-308; seller's residence or place of business); Time for Performance: (UCC § 2-309; a reasonable time); and Price: (UCC § 2-305; a reasonable price, assuming the parties otherwise agreed to conclude their deal without agreeing to a price, which would occur if the object of the sale had a well established market price). Warranties form another important area of UCC-Supplied terms: The implied warranty of title ( a promise that the seller owns the goods sold) UCC § 2-312. Another is the Implied Warranty of Merchantability: UCC § 2-314: This is a promise inserted into the contract by the UCC that goods sold by a merchant will, among other things, be recognized in the trade as: 1. Matching the contract description; 2. Be at least of fair average quality; and 3. Will be fit for the ordinary purposes for which such goods are used. Another Implied Warranty in the UCC is the Warranty of Fitness for a Particular Purpose: UCC § 2-315: This warranty applies when, at the time of sale, the seller had a reason to know of any particular purpose the buyer had in mind in acquiring the goods, and reason to know that the buyer was relying on the seller's professional skill or judgment to furnish suitable goods for that purpose.
What are the rules for Implied Covenants of Good Faith and Fair Dealing?
Rule (1): The main implied term is the implied covenant of good faith and fair dealing. - It Attempts to impose on parties the obligation to refrain from taking or not taking actions that would deprive the other party of the benefit of its bargain. Rule (2): Most courts interpret this as requiring honest satisfaction, measured most often by whether the satisfaction was reasonably exercised. Rule (3): Additionally, If a party's performance is subject to a condition that is in that parties control, the control must be exercised in good faith. Rule (4): When there's a conflict between the express language of the contract and the implied covenant of good faith, the expressed language will usually prevail.
What does UCC Article 2 apply to?
Sale of goods - Physically moveable items. (Distinguishable from real estate and some others)
When is something within the scope for the Parol Evidence Rule?
Something is within the scope of an agreement if it would naturally have been included in the final expression of that deal if it had been part of the deal. (Price is almost always within the scope of the agreement under this test.)
What does any offer create in the offeree?
The "Power of Acceptance": The ability to create a binding agreement by their assent.
What are Direct damages?
The Type necessary to award the non-breaching party the benefit of his or her bargain.
Under UCC 2-207(2) what happens to additional terms for merchants?
The additional terms will become part of the contract, unless: 1. The offer expressly precludes additional terms; 2. The additional terms materially alter the offer; or 3. The offeror objects to them within a reasonable time.
Can someone claim the defense of illegality when the (P) violated a licensing act that does not expressly provide that contracts in violation of the statute are void?
The fact that the (P) acted illegally does not necessarily mean that the agreement is unenforceable. Courts look to the policy served by the licensing law. If, for example, a license could be obtained by anyone who paid the licensing fee so that the purpose of licensing was to raise revenue, rather than to protect the public by regulating conduct, the contract might be enforced, notwithstanding (P)'s illegal actions.
What is the effect of when something is posed as an "Invitation to offer" rather than an offer?
The inviter Reverses the Right of Final Assent before a deal arises; therefore, the Inviter has the Power of Acceptance.
When does an offer lapse when the offer is communicated to the offeree in a face-to-face conversation?
The offer lapses when the parties leave. However, since the offeror is king, the general rule can be overcome by an expression of contrary intention in the offer.
What is the effect on the mailbox rule if the offeree is careless in sending a reply?
The offeree will lose the benefit of the mailbox rule.
What is the Doctrine of Mutual Mistake?
The parties entered into an agreement based on the belief shared by both parties that ultimately proved not in accord with the facts. Under the doctrine of mutual mistake, parties may be excused from performing an agreement that was not in accord with the facts.
What happens when a contract is not formed under UCC 2-207(1) and (2) by the documents exchanged, but the parties conduct nevertheless demonstrates that some contract does exists?
The terms of that contract consist of the terms on which the two writings agree and such other terms as are supplied by default under Article 2.
What is the principal difference between the traditional and modern approaches regarding indefiniteness?
The willingness of courts today to imply missing or unclear terms. In sale of goods contracts, the UCC incorporates a number of "gap fillers" that apply Unless the parties provide otherwise.In essence, they operate as "default rules" that apply whenever the agreement is silent as to the subject of one of the gap-filling provisions.
What are the rules regarding the Avoidability limitation on damages?
There are two basic forms of avoidability: 1. "Mitigation," is usually represented by situations in which the non-breaching party could obtain substitute performance and minimize his or her loss. 2. When, because of the breach, the non-breaching party does not have to pay for his or her return performance. Mitigation: 1. The mitigation principle denies damages to the non-breaching party if the damages were avoidable if only the non-breaching party had obtained substitute performance, but they declined to exercise those options thereby compounding, rather than cutting, losses. 2. For the non-breaching party, there is no duty —primarily because failure to mitigate does not give rise to any cause of action—but rather a break in the chain of causation. 3. There are limits to mitigation: A non-breaching party does not have to mitigate if to do so would require undue risk, burden or humiliation. - It must be of the same general type, involving the same general duties. The second type of avoidability focuses on not awarding avoidable costs. Avoidable Costs 1. Avoidable cost issues arise most often in contracts which require the non-breaching party to make partial payments or to make deliveries of products to the other before completion of the project. 2. If there is a breach before completion, the doctrine of avoidable costs will not allow the non-breaching party to recover damages related to the buying or providing what the non-breaching party was to purchase or deliver under the contract. 3. The breach made such expenditures avoidable, and thus incurring them should not result in additional damages.
Is a poster that says, "$50 Reward for anyone who can find and return my dog." an offer or an invitation to offer? Why?
This is an offer rather than an invitation to offer. 1. Only 1 person can return the dog, so there is no risk of obligation in excess of supply, so it is more reasonable in this case to infer that the person who put up the poster intends to pay whoever returns the dog. 2. Also more reasonable to infer that the person who put up the poster was bargaining for the dog to be returned rather than seeking offers from people to go out looking for it.
What are the effect of a Supervening Law or Regulation on Impossibility or impracticability?
This one is easy. E contracts to sell Armie to M. After the contract but before E delivers or M pays, a law is enacted prohibiting the sale of armadillos. Rule (1): Obviously, performance is excused. And what should also be obvious from this hypothetical is that "legal" impossibility (or impracticability) is different from physical impossibility. Rule (2): It was still physically possible for both parties to perform under the contract but performance was excused because it was not possible to perform without violating a supervening law.
What is the purpose of the statute of frauds?
To prevent false claims by an unethical (P) that there was an oral agreement when, in reality, there was no such agreement.
Can the relinquishment of a legal claim serve as consideration?
Today, most courts hold that the relinquishment of a claim constitutes a detriment, and thus consideration, so long as Either the claim is objectively well-founded or, even if groundless the claimant honestly believes the claim is valid.
What are the traditional rules and the contemporary rules on Communication and Effectiveness of Acceptance?
Traditional Rule: Every offer was either unilateral or bilateral, and an attempt to accept was proper only if it complied accordingly: Unilateral: Seeking acceptance by an act. Executory only on one side because the other party has fully performed as part of her acceptance. Bilateral: Seeking acceptance by a return promise. Bilateral contract is wholly executory on both sides (I.e., unperformed on both sides.) Contemporary Rule: The contemporary view is that, regardless of how the offer is framed, it may be accepted by any reasonable manner of assent unless the offer leaves No Doubt that it can only be accepted in the manner stipulated in the offer. Rule (1): acceptance of an offer by return promise is not effective until Communicated to the offeror. Rule (2): The Rule is different when acceptance is by performance because, in that circumstance, the offer is construed as impliedly permitting or requiring acceptance in that fashion. - In these instances, notice is not necessary based on the fact that the offeror is bargaining for the act to be done, so the completion of the act alone is enough to bind the offeror without further notice. - R2D continues this rule, However, § 54(2) provides that the offeror's duty to perform is discharged if the offeree who has rendered performance fails to take reasonable steps to ensure that the offeror learns of performance.
What is the traditional rule and the contemporary rule regarding Indefiniteness?
Traditional Rule: If either: (A): The terms of the contract are so indefinite that it would be difficult or impossible for the court to detect a breach; or (B): Even if a breach could be detected, it would be difficult or impossible for the court to fashion a remedy: Then, the contract is "Too Indefinite" to enforce". R2D and UCC exhibit a much higher tolerance for indefiniteness and have a more flexible approach to to preserve contractual intent once it is found to exist. Generally speaking, the indefiniteness analysis occurs in two steps: 1. Whether the parties intended to enter into a legally binding deal, and, if so, 2. Whether there is a reasonable basis for the court to fashion an appropriate remedy.
What is the Mirror Image Rule?
Traditionally, in order to be effective, an acceptance had to be an unconditional expression of assent to the terms of the offer without addition or variation - anything less would regarded as an implied rejection and counteroffer - thereby placing the power of acceptance back in the hands of the original offeror.
How are consistent, additional terms and supplementary terms handled under the Parol Evidence Rule?
When there is a partially integrated agreement, consistent additional or supplementary terms can be introduced. But not under a completely integrated agreement.
What is mutual assent determined by?
Whether the parties' outward manifestation satisfied "Both Prongs of Objective Theory"
What is the traditional and modern rule on Deferred Agreements (Agreements to Agree)?
Traditionally: these arrangements were treated as completely unenforceable if the parties failed to later reach actual agreements as to a Material Term that had been deliberately left open. Modern Commercial Transactions: 1. If the parties fail to come to an agreement, however, the court will have to decide whether the agreement is too indefinite to enforce or whether the court can save the deal by supplying the missing terms. 2. Because of the growing prevalence and importance of long-term contracts, modern courts have exhibited a greater willingness to find agreements to agree enforceable and supply the open term if the parties are unable to do so themselves. 3. Today, where one party appears to be using the deferred agreement clause to escape enforcement, and the other party has arguably parted with value in return for the renewal right in the initial negotiations - the court is likely to enforce the renewal option at fair market rate. 4. While lease renewal clauses present particularly strong cases for enforcement because the renewal rate often represents a key aspect of the original negotiations, modern courts are also more likely to enforce a deferred agreement that the parties can't agree upon themselves whenever there is either sufficient evidence of present intent to be bound on reasonable terms or substantial reliance on the part of one of the parties.
M says to P, i'll pay you $20 if you wash and wax my car. He says, I accept. Has the contract been formed? If P fails to wash and wax M's car, is P in breach? How about if P says nothing in response, but begins washing the car? Is there a contract under traditional contract law? What about under the restatements?
Under classical contract law principles, every offer has to be unilateral or bilateral. Most likely because this offer says "If you wash and wax", he was seeking performance. So his acceptance does not constitute a contract. No, he is not in breach because no contract was formed. Only way for him to accept and create a binding contract would be to complete performance. Under restatement, it would probably accept any reasonable manner of assent, so when he accepts by performance, a binding contract is formed. In which case, Markell was liable to pay, and Ponoroff is liable to complete performance. What if he says nothing: Under traditional contract law principles, we're going to regard it as offer of unilateral contract. When he begins performance, it's just a start to request of performance and neither party is bound - Markell can revoke and Ponoroff can abandoned without liability. But under restatement, outcome would be different: Sometimes, partial performance creates an option to complete performance. But §45 isn't applicable here because in this case, it can be accepted by either acceptance or performance. Section 45 ONLY APPLIES WHEN EXCLUSIVE OFFER TO PERFORMANCE. BUT §62 - Where can chose between return promise or performance, beginning of performance is acceptance by performance and such a promise operates as an offer to complete performance. Commencement of performance creates a form of promissory acceptance where both parties are bound.
What is the mailbox rule?
Unless the mailed offer prescribes to the contrary, acceptance sent by any reasonable means is effective on dispatch (Not Receipt).
What is a rolling contract?
When a purchaser orders and pays for goods before seeing all of the terms of the sale. The deal comes together in stages over time rather than all at once.
How do courts use the parties' dealings to remove ambiguity?
When contract terms are confusing courts will look to how the parties actually acted with respect to similar or identical words in a contract, or in past dealings if they used similar contracts. Course of Performance: If the performance arises within one contract. Course of Dealing: If prior similar contracts are used.
What is the Doctrine of Mutual Misunderstanding?
When the parties agree to the use of the same terms in their contract, but each attaches a Materially different meaning to that term.
When do courts order specific performance? What are the two elements?
When the remedy at law (damages) is inadequate to compensate and when it is fair and reasonable to compel performance. The two basic elements here: 1. inadequate remedy; and 2. "equity."
What are the UCC Changes to damages?
While a buyer may still recover the difference between the market price of the goods the seller agreed to sell and the contract price, the UCC makes proof of damages somewhat easier: 1. Rather than having to prove market price, the buyer can purchase substitute goods and recover the difference between the substitution cost and the contract price. § 2-712 calls this "cover," and conditions its use on the repurchase being in good faith, without unreasonable delay, and at reasonable terms. 2. The concept of cover also factors in recovery of consequential damages. § 2-715 conditions the recovery of consequential damages (usually lost profits on a resale of the goods or something to be built with the goods) not only on foreseeability, but also on the fact that the loss by the non-breaching party "could not reasonably be prevented by cover or otherwise." Sellers' damages also change under the UCC: 3. If a buyer simply refuses to take delivery, a seller may resell the goods in good faith and in a commercially reasonable manner and use the resale price as a proxy or substitute for the market price of the goods under UCC § 2-706. - This ability, however, is conditioned upon giving the breaching buyer notice of the sale if the resale is anything but a public auction. - If the seller cannot resell the goods, the seller can recover the contract price and keep the goods (although if he sells them, the buyer gets a credit for the sale price) under UCC § 2-709. 4. UCC § 2-708(2) allows for special damages for the "volume seller." - The issue arises when a seller is in the business of selling multiple similar items. - The argument could be made that when a buyer breaches a contract to buy a car, for example, the dealer is not damaged because he can get someone else to buy the same car. The UCC rejects this position for volume sellers, finding that these sellers are damaged in such circumstances. - Thus, a seller can recover the lost profits on a lost sale. - This doesn't apply to situations in which the seller is limited to selling goods on hand, or otherwise has limits on his capacity.In these cases, the regular measure of damages adequately compensates the seller for each lost sale.
What are the rules for implied terms that use Trade Usage?
With repetitive and common contracts, certain terms become refined and predictable. When that happens, courts may imply them into contracts as "trade usage." That is, even though the parties may not have even thought about it, trade usage may insert terms into their contracts. UCC 1-303(c) speaks of Trade Usage as: "any practice or method of dealing having such regularity of observance in a place, vocation or trade as to justify an expectation that it will be observed with respect to the transaction in question." Rule (1): Trade usage applies regardless of whether both parties are UCC "merchants," or regardless of whether they even know about the trade usage. The requirement of "such regularity of observance as to justify an expectation" is sufficient to insert the usage into the contract. R2D § 222 is essentially the same for contracts not governed by the UCC - essentially land contracts and contracts for services.
Can parties be bound by a contract before it is signed if they discuss later reducing their agreement to writing?
Yes. 1. IF it is clear that they mutually assented to the deal AND 2. Intended the writing merely to serve as a formal memorial of their prior agreement.
Can you accept in the middle of performance?
Yes. Generally speaking, completion of the performance is sufficient to constitute acceptance
Can an offeror make the mailbox rule ineffective?
Yes. If in their mailed letter, they state "Offer not accepted by mail." (Offeror is king).
Can consideration come from a third party?
Yes. In terms of the validity of the consideration it does not matter from whom or to whom the benefit or detriment move; what matters is that they are bargained-for and given in exchange for a promise.
Can promissory estoppel be an independent basis of liability?
Yes. Recall - foreseeable reliance on a promise might be a basis to hold an offer open as an option contract for a reasonable time. That rule is another extension of the doctrine of promissory estoppel. In addition, on occasion, promissory estoppel has been employed to permit recovery based on promises or assurances made during the course of pre-contract negotiations. The most famous of these cases is Hoffman v. Red Owl Stores, Inc.
Is a January 2, 2017 Contract by Lady Gage to perform at E's birthday party on December 7, 2018 "Within the statute of frauds" even though the performance will only last an hour?
Yes. The focus is not on how long a person actually performs but whether her performance can be completed within a year of the date of the contract. Watch for the exam question that gives you both the date of the contract and the date that the contract specifies performance must occur.
When can an advertisement can constitute an offer? if its terms are - "Clear, definite, and explicit, and the offeree reasonably might have concluded that acceptance would form a contract.
if its terms are - "Clear, definite, and explicit, and the offeree reasonably might have concluded that acceptance would form a contract. R2D §26(b): Preliminary Negotiations - Advertising: There must ordinary be some language of commitment or some invitation to take action without further communication. Note: (The reason advertisements typically are not understood as offer to sell is because of the problem of over acceptance. Ads are typically seen as reserving the right for further assent.)
What is the signature exception to the SOF?
§ 2-201(2) has an exception where the SOF is satisfied with just the signature of the (P): 2-201(2) is limited to: (i) sale of goods in which (ii) both the buyer and seller are "merchants," and (iii) the receipt of a signed writing "in confirmation of the contract" fails to object in writing within 10 days. **Most important to understand is the limited importance of § 2-201(2). Saying that under § 2-201(2) the (D) loses the statute of frauds defense is very different from saying that (D) loses the lawsuit. (P) still has the burden of proof on all of the elements of his breach of contract claim - including the burden of proving there was indeed a contract and (D) still has the possibility of raising other defenses.
What does the UCC say about equivocal words or conduct by a buyer or a seller after a contract for a sale of goods that give reasonable grounds for insecurity
§ 2-609 of the UCC provides a basis for excuse of further contract performance by the other party to the contract. The other party can: (1) demand in writing adequate assurance of performance; (2) suspend her own performance until she receives adequate assurance, if commercially reasonable; and (3) stop performance altogether if adequate assurance is not timely provided, without worrying that the stopping of performance might later be construed as a breach. In reading section § 2-609, you should notice the additional requirement of a written demand of adequate assurance and three possible litigable issues: (1) were there "reasonable grounds for insecurity", (2) was the assurance offered "adequate" and (3) was it "commercially reasonable" to suspend performance until receiving "adequate assurance."
What does R2D say about partial performance?
§ 62 treats partial performance as a form of promissory acceptance, so long as the possibility is not precluded expressly by the terms of the offer. § 45: if the offer does clearly and unambiguously preclude acceptance by any means other than full performance, then the commencement of that performance creates an Option in the person performing's favor to give him a reasonable amount of time to finish the job. (§ 45 is intended to protect from a revocation after he putting in a lot of work on the job.)
What is an integrated agreement?
§209(1): An integrated agreement is a writing or writings constituting a final expression of one or more terms of an agreement.
How does the R2D differ from UCC 2-609 regarding Adequate assurance?
§R2D § 251 is similar, although the Restatement: 1. Does not have a writing requirement, and 2. Does not impose a set time limit on responses to requests for adequate assurance.
