Contracts Movsesian

Third Party Beneficiaries

Intended Beneficiaries: Recognition of a beneficiary's right to performance is appropriate to effectuate the intention of the parties and either performance will satisfy an obligation of p'ee to pay money to the beneficiary; or circs indicate that p'ee intends to give the beneficiary the benefit of the performance (Rest 2d § 302) KMART Corp. v. Balfour Beatty, Inc. Facts: TPL has K w BBI for construction of shopping center in which KMART is a tenant. KMART sues BBI for faulty construction Hold: KMART is an intended third party beneficiary → Can sue BBI

Excuse of Conditions: Waiver

Intentional relinquishment of a known right Clark v. West (1908) Facts: "If P doesn't drink & fulfills his other agreements, he will be pd an additional $2p/pg" (of law book he was K'd to write). P drank Hold: P relied on the fact that D repeatedly assured him he would receive the extra $, so can't be retracted → condition is excused

Illusory Promise

Looks like a commitment but really isn't; Can't serve as consideration, not enforceable UCC 2-306(1): A term which measures the quantity by the output of the S or the requirements of the B means such actual output or requirements as may occur in good faith Rehm-Zeiher v. Walker (1913) Facts: "If for any unforeseen reason Bs find they can't use full amt., S agrees to release them from the K for the amt. desired by Bs" Hold: A K lacking mutuality of obligation btwn the parties is unenforceable→ illusory

Objective Theory of Ks

Looks to the objective meaning of the parties language → what a reasonable person would understand Exceptions: -Parties share a subjective intent that differs from the objective meaning of the language -Parties' language bears more than one reasonable interpretation (and neither party is at fault for the ambiguity Raffles v. Wichelhaus (1864) Facts: K for P to deliver cotton on ship "Peerless" for D to retrieve. P meant the Peerless in Oct. and D meant the Peerless in Dec. Hold: K was unclear about which Peerless ship. A reasonable person would understand either → No K if mutual misunderstanding

Intent to K

Neither real nor apparent intention that a promise be legally binding is essential to the formation of a K, but a manifestation of intention that a promise shall not affect legal relations may prevent K formation (Rest 2d § 21) In re Edwin Farmhouse Green (1930) Facts: "She will pay $1 a year" Hold: Even though parties intended to have a K, they didn't so nominal consideration is insufficient Nominal/Sham Consideration: A mere pretense of a bargain does not suffice, as where there is a false recital of consideration on the purported consideration is merely nominal (Rest 2d § 71(b)

Formation Defense: Duty to Disclose

No duty to disclose as long as info is equally accessible to both parties Laidlaw v. Organ (1817) Facts: P and D negotiated to buy tobacco. D asked if P knew any reason why the market would change. P said he didn't but he knew the war of 1812 had just ended Hold: P not bound to communicate info ab war ending bc info was equally accessible to both parties Exceptions: -Fiduciary relationship -Previous statement or false impression -Mistake of other party as to a basic assumption -When other party asks a question Hill v. Jones (1986) Facts: K to buy D's home following termite inspection report. P's asked D's if there was termite damage. Report came back negative. Turns out there was history of termite damage and D sellers knew about it. Hold: Where a seller of real property knows of facts that materially affect the value of the property and are not readily observable and known to the buyer, the seller has a duty to disclose these facts to the buyer, even if equally accessible

Pre-existing Duty Rule

No legal detriment if promisee does (or promises to do) something he already has a duty to do Levine v. Blumenthal (1936) Facts: P leased store to D for 2yrs. 1st yr $175, 2nd yr $200. D couldn't afford to pay higher price, so P allowed them to continue paying og rent. D left w/o paying last month Hold: Oral agreement to pay og rent is not supported by consideration; Economic adversity is not a warrant for abrogation of consideration Alaska Packers v. Domenico (1902) Facts: D entered into K w P to do reg ship duties, & "any work whatsoever when req." Ds demanded more $ and refused to do work until P agreed, under duress Hold: No consideration → prior duty to perform

Revocation of Acceptance of Goods

Non-conformity substantially impairs value and B has accepted the goods on reasonable assumption nonconformity would be cured and it has not been cured, or without discovery of non-conforming if acceptance was reasonably induced by difficulty of discovery before acceptance or by S's assurances. B must revoke within a reasonable time (UCC § 2-208) B doesn't have to revoke acceptance of non-conforming goods→ can sue for damages

Remedies: Punitive Damages

Only allowed if breach is also a tort for which punitive dams are allowed (Rest 2d § 355) Traditionally, not allowed (Only compensatory) Boise Dodge v. Clark Facts: P sells D car he claimed to be new & odometer was set back. D stopped payment when he discovered car was used Hold: P entitled to punitive dams bc there was fraud/malice by D → "Calculated commercial fraud" affect more than just B, it affects the general public

Duress

Party was coerced into agreeing; Either do to improper threat that allowed no reasonable alternative or "economic duress" Austin Instrument v. Loral Corp. (1971) Facts: P said they would refuse to perform under existing K unless D gave them 2nd K & price increase. D said they had no real commercial alternative. Hold: Threat left D no reasonable alternative but to agree. K is voidable Machinery Hauling, Inc. v. Steel of WV (1989) Facts: P K'd w D for P to transport steel to 3rd party RULE: If P is forced into an economic transaction as a result of a D's unlawful threats, and this leaves the P no reasonable alternative but to acquiesce, the P may void the transaction and recover any economic loss. Hold: The expectancy of a future business relationship is not a legal right on which a P may base a claim of economic duress. P may not recover economic losses

Formation Defense: Undue Influence

Party was unfairly persuaded at a moment of weakness, either due to pressure, emotional/physical distress or a fiduciary relationship Rubenstein v. Rubenstein (1956) Facts: P transfers property rights to D if she promises to take care of kids. P argues consent not legitimate (he was threatened w poison & she had fam history of poison) Hold: P was in a position of weakness when he consented so he can get out of K bc consent invalid

Perfect Tender Rule

Perfect Tender Rule: Unless otherwise agreed... if the goods fail in any respect to conform to the K, B may reject the goods; or accept the goods; or accept some of the goods and reject the rest (UCC § 2-601) Strict compliance B's responsibilities -B must reject good within a reasonable time -B must seasonably notify S -B must hold goods w reasonable care for a time sufficient for S to remove them

Remedies: Divisible K

Performances to be exchanged under a K can be apportioned into corresponding parts of part performances. The pairs of part performances must have independent economic value (Rest 2d § 240) -Can recover for parts of performance that were substantially performed but will have to pay damages on the other parts that weren't completed Lowy v. United Pacific Ins. Facts: Completed 98% of excavating and grading work but did not complete street work Hold: D can recover for excav. & grading work bc 98% is substantial performance of that part of the K → Ind. economic value of the other part of the K New Era Homes v. Foster Facts: P agrees to make alterations to D's home, D refuses to pay after rough work completed Hold: NOT a divisible K → Each thing does not have independent economic value & rough work is not substantial performance

Remedies: Damages

Presumption: Compensatory damages only -Expectation, reliance, restitution -Specific Performance -Consequential Dams Mitigation Damages: Damages not recoverable for loss the injured party could've avoided w/o undue risk, burden or humiliation; Duty may encompass making a new K w the breaching party (Rest 2d § 350) Duty to make reasonable efforts to avoid loss Clark v. Marsiglia Facts: K for P to restore D's paintings. D changes mind after P begins work (breach). P completes job anyways & bills D for work Hold: P only can recover damages sustained up until breach, not after. Bad faith by P Reasonable Certainty of Damages: No damages beyond the amount of evidence establishes w reasonable certainty (Rest 2d § 352) Hydraform Products Corp. v. American Steel Hold: Can't recover for lost profits of value of division bc K only mentioned 400 stoves → No evidence they will sell more, so can't recover more

Damages

Presumption: Only compensatory damages in K law Expectation Measure: Put the injured party in as good a position as if the K had been performed Reliance Measure: Put the injured party in as good a position as if the K had not been made Restitution Measure: Restore P to the value of any benefit P has conferred on D (Implied-in-law Quasi K) Sullivan v. O'Connor (1973) Facts: P contracted w D for 2 operations on her nose to make it more attractive. P ended up with 3 surgeries, a worsened appearance, and further surgeries could not be done to repair. P seeking reliance measure Hold: "Too much strain" to det. value of what new nose would've been (don't have to choose what measure in this case Consequential Damages: Damages not recoverable for loss that breaching party didn't have reason to foresee as probable result of breach when K was made (Rest 2d §351) Hadley v. Baxendale (1854) Facts: P owned a corn mill. Crank shaft broke and halted operation. D informed P a new would would be delivered the following day if P shipped back broken one. P did and wasn't delivered until days later Hold: P cannot recover damages bc carrier did not have reason to foresee

B's Breach/ S's (Performer's Remedies): Real Property Ks

Real Property Ks S's standard remedy: (K price) - (Fair Market Value) --Expectation damages → puts S in position if K was performed as expected Alternate remedy: (K price) - (foreclosure sale price) American Mechanical Corp. v. Union Machine Co. of Lynn Facts: B knows S in financial difficulty & bank pressuring S. B breaches K & S suffers $45k loss Hold: Where standard remedy would not fully compensate S, use alternate remedy S has duty to mitigate damages

Warranty

Representation that certain facts relating to goods under K are true (as they exist now) False representation = Breach of warranty

Conditions

Rest 2d § 224: An event, not certain to occur, which must occur, unless its non-occurrence is excused, before performance under a K becomes due Express Conditions: Signals words used: "On condition"; "Provided that" (don't always have) Dove v. Rose Acre Farms (1982) Facts: Voluntary bonus program. If P worked for 10wks and didn't miss a day, he would receive a bonus. P got sick and missed the last 2 days RULE: If condition is expressed in K, substantial compliance is not enough. Conditions must be fulfilled exactly. If not, K is forfeited

Offers

Rest 2d § 24: An offer is a manifestation of willingness to enter into a bargain, so made as to justify another person in understanding is assent to that bargain is invited and will conclude it Rest 2d § 26: A manifestation to enter into a bargain is not an offer if the person to whom it is addressed knows or has reason to know the person making it does not intend to conclude a bargain until he has made a further manifestation of assent Lefkowitz v. Great Minneapolis Surplus Store (1957) Facts: D published ad in the newspaper "first come first serve". D wouldn't sell to P bc of house rule that the ad was for women only Hold: Generally, ad's are not offers. However, "first come first serve" is limited → Ad was a valid and enforceable K Leonardo v. Pepsico (2000) Facts: P saw a commercial that showed a fighter jet for 700,000 pepsi points. D said it was a joke Hold: No reasonable person would expect a fighter jet for pepsi points → No K

Impracticability

Rest 2d § 261: Where, after a K is made, a party's performance is made impracticable w/o his fault by the occurrence of an event, the non-occurrence of which a basic assumption of the K was made, his duty to render that performance is discharged, unless the lang or circs indicate the contrary Force Majeure Clause: Can be included to protect against impracticability (Pacta sunt servanda→ No excuses) Taylor v. Caldwell Facts: K for music hall. Burns down wk before event Hold: No breach → Implied condition that MH would be in existence & if it doesn't exist D's performance excused bc impracticable **old rule, but aligns w Rest 2d § 261 Dills v. Town of Enfield Hold: not obtaining financing was foreseeable (clause in K) → no excuse/not impracticable Retroactive Illegality: If law changes and K becomes illegal (not illegal when made), excuse for impracticability

Frustration of Purpose

Rest 2d § 265: "Where, after a K is made, a party's principal purpose is substantially frustrated w/o his fault by the occurrence of an event the nonoccurrence of which was a basic assumption on which the K was made, his remaining duties to render performance are discharged, unless the language or the circs indicate the contrary" Krell v. Henry Facts: P rents apt to D for £75 to watch parade. King dies, parade postponed Hold: D excused from paying remaining £ → Parties assumed parade was going to take place when K was made & that if parade didn't happen D would be excused

Seller's Remedy: Resale

S can resell the goods to another B. Where resale is made is good faith and in a reasonably commercial manner, S may recover (K price) - (Resale price) plus incidental dams (2-710) less expenses saved bc of B's breach (UCC 2-706(1)) Assumption: (K price) > (Resale price) B generally would only breach if market is down/bad deal

Remedies: Liquidated Damages

Specifies agreed amt of what damages would be in the event of breach Liquidated dams can't be penalties Southwest Engineering Co. v. US (Majority Test) At the time K was made (1) Amt fixed must be a reasonable forecast of just compensation caused by the breach (2) Calculating the amt must be difficult Cellphone Termination Fee Cases Facts: Sprint had early termination fee clause (liquidated dams clause) of $200 in K Hold: ETF unenforceable → $200 is an arbitrary amt, no reasonable effort to forecast loss; $200 is a penalty for terminating K early RULE: Must be a reasonable effort to forecast loss, can't be an arbitrary amt/penalty UCC 2-718(1) (Minority Test):Damages may be liquidated at an amt which is reasonable in light of the anticipated or actual harm caused by the breach... A term fixing unreasonably large liquidated damages is void as penalty -Judged either at time K was made or after the breach

Seller's (Performer's) Breach/ Buyer's Remedies: Construction K (Breach by Contractor)

Standard Measure: Cost to complete or repair the faulty construction American Standard v. Schectman Facts: P sells property to D w equip for 275k. D promises to remove equip & grade property but fails to do so Hols: Not removing equip was a breach in bad faith. Also, K wasn't substantially performed → Standard measure Alternative Measure: Diminution in mkt value of property -Where contractor has substantially performed & completion/repair damages would be grossly disproportionate -In the event of bad faith, only standard measure will be given Rivers v. Deane Facts: K for D to construct an addition to P's home. D breached Hold: P entitled to mkt value of the cost of correcting deficiencies → Alt measure Peevyhouse v. Garland Coal & Mining Co. Facts: K for D to remove coal deposits & restore P's property. Coal was deeper than Ds thought and too expensive to restore (breach), so there was a large hole Hold: Cost of completion would've been $29k, but dim in mkt val was only $300, so giving 29k would be grossly disproportionate → Alt measure

Buyer's Remedy: Damages for Breach of Warranty

Standard measure = (Value as warranted) - (Value as accepted), unless special circs show proximate dams of a diff amt. B may also recover consequential dams (UCC 2-714) -B can keep non-conforming goods & still recover damages for breach -Value as warranted depends on the mkt value of goods (not necessarily the same as K price)

Remedies: Construction K (Breach by Homeowner)

Standard remedy = (K price) - (cost of completion) - (payments received)

Anticipatory Repudiation

Statement by o'gor that o'gee will commit a major breach; Voluntary conduct that renders o'got unable or apparently unable to perform w/o a major breach -O'gor's duties under K are discharged & O'gee can immediately bring suit for breach Hochster v. De La Tour Facts: K for P to accompany D on a foreign tour. D decides he's not going on tour before start date of tour Hold: Injured party (o'gee) can sue now even though technically the breach hasn't yet occurred -Retraction of repudiation nullifies the repudiation if notification comes to the attention of the o'gee before --O'gee materially changes his position in reliance on the repudiation; or --O'gee indicates to o'gor that he consider the repudiation to be final -Mere expression of doubt by obligor ≠ repudiation -If o'gee has reasonable grounds to believe the o'gor will commit a serious breach, o'gee can demand adequate assurance of performance --Failure to provide such assurance = repudiation

Implied Promise to Use Best Efforts

UCC 2-306(2): A lawful agreement for exclusive dealing in the kind of goods concerned imposes unless otherwise agreed an obligation by the S to use best efforts to supply the goods and by the B to use best efforts to promote their sale Wood v. Lady Duff-Gordon (1917) Facts: P K'd w D for the exclusive right of placing D's endorsement on others' clothing designs for 50% profit. D later entered into another contract with another company to do place her endorsement on their designs P's promise illusory→ He might not make any sales Hold: Consideration→ Implied promise to use best effort to make sales Rest 2d § 228: When it is a condition of an obligor's duty that he be satisfied w respect to obligee's performance or wrt something else, and it is practicable to det whether a reasonable person in the position of the obligor would be satisfied, an interpretation is preferred under which the condition occurs if such a reasonable person in the position of the obligor would be satisfied Omni Group v. Seattle Bank (1982) Facts: "If report is satisfactory, we will go through w the deal" Satisfaction Clause: Implied promise to exercise good faith in determining whether performance is satisfactory Implied promise that makes what looks like an illusory promise real

Good Faith: Output & Requirements Ks

UCC 2-306: Such output or reqs as occur in good faith but-- no quantity unreasonably disproportionate to any states estimate or if no stated estimate, not unreasonably disproportionate to normal or otherwise comparable prior output or reqs Feld v. Levy (1975) Facts: K for all breadcrumbs produced by D. D makes output K, then realizes it's not economical & wants to raise price by 16%. P says no, so D dismantles oven Hold: Bad faith → Since breadcrumbs were a part of D's enterprise & since there was a K right of cancellation, good faith req'd continued production until cancellation, even if no profit

Seller's Remedies in General

UCC 2-703: Where B rejects or revokes acceptance or fails to pay or repudiates, S may: -Withhold delivery -Resell and recover damages (2-706) -Recover damages for non-acceptance (2-708) or in proper case the price (2-709) -Cancel

Seller's Remedy: Price

UCC 2-709(1)(b): When B fails to pay the price as it becomes due, S may recover the price of goods identified to the K if (a) S is unable after reasonable effort to resell them at a reasonable price or (b) The circs reasonably indicate that such effort will be unavailing (c) S may also recover incidental dams (2-710)

Liquidated Damages

UCC 2-718(1): Damages may be liquidated at an amt which is reasonable in light of the anticipated or actual harm caused by the breach... A term fixing unreasonably large liquidated damages is void as penalty Judged either at time K was made or after the breach (Minority Test) Southwest Engineering Co. v. US Majority Test: At the time K was made, Amt fixed must be a reasonable forecast of just compensation caused by the breach Calculating the amt must be difficult Cellphone Termination Fee Cases Facts: Sprint had early termination fee clause (liquidated dams clause) of $200 in K Hold: ETF unenforceable → $200 is an arbitrary amt, no reasonable effort to forecast loss; $200 is a penalty for terminating K early Majority Test: At the time K was made, Amt fixed must be a reasonable forecast of just compensation caused by the breach Calculating the amt must be difficult Cellphone Termination Fee Cases Facts: Sprint had early termination fee clause (liquidated dams clause) of $200 in K Hold: ETF unenforceable → $200 is an arbitrary amt, no reasonable effort to forecast loss; $200 is a penalty for terminating K early

Damages Limitations (Exclusive Remedies)

UCC 2-719(1): Agreement may limit the measure of damages recoverable. Agreed remedy is optional unless expressly agreed to be exclusive UCC 2-719(2): Where circs cause an exclusive or limited remedy to fail of its essential purpose, remedy may be had as provided in the UCC UCC 2-719(3): Consequential damages may be limited or excluded unless the limitation is unconscionable. Limitation of consequential damages for personal injury in the case of consumer goods is prima facie (presumptively) unconscionable but limitation of dams where the loss is commercial is not presumptively unconscionable Lewis Refrigeration Co. v. Sawyer Fruit, Vegetable & Cold Storage Co. Facts: K for S to sell freezer to B. Exclusive remedy that in the event the machine failed to perform, S would replace/repair malfunctioning part or K will be canceled and B would return goods & S would repay B. Handwritten portion of K excluded consequential dams Hold: Remedy failed → S couldn't repair/replace, K couldn't be canceled bc B getting $ back doesn't make him whole (lost profits bc 3rd party destruction as result of breach), B's standard remedies instead. K not unconscionable → Equal bargaining power, No unfair surprise so consequential damages may

Damages Limitations: Exclusive Remedies

UCC 2-719(1): Agreement may limit the measure of damages recoverable. Agreed remedy is optional unless expressly agreed to be exclusive UCC 2-719(2): Where circs cause an exclusive or limited remedy to fail of its essential purpose, remedy may be had as provided in the UCC UCC 2-719(3): Consequential damages may be limited or excluded unless the limitation is unconscionable. Limitation of consequential damages for personal injury in the case of consumer goods is prima facie (presumptively) unconscionable but limitation of dams where the loss is commercial is not presumptively unconscionable Lewis Refrigeration Co. v. Sawyer Fruit, Vegetable & Cold Storage Co. Facts: K for S to sell freezer to B. Exclusive remedy that in the event the machine failed to perform, S would replace/repair malfunctioning part or K will be canceled and B would return goods & S would repay B. Handwritten portion of K excluded consequential dams Hold: Remedy failed → S couldn't repair/replace, K couldn't be canceled bc B getting $ back doesn't make him whole (lost profits bc 3rd party destruction as result of breach), B's standard remedies instead. K not unconscionable → Equal bargaining power, No unfair surprise so consequential damages may be rewarded

Implied Warranty of Fitness for a Particular Purpose

Unless excluded or modified [under 2-316] S at the time of K'ing has reason to know any particular purpose for which the goods are req'd and that B is relying on S's skill or judgment to select or furnish suitable goods (UCC 2-315)

Implied Warranty of Merchantability

Unless excluded or modified [under 2-316] a warranty that goods shall be merchantable is implied in the K for sale if the S is a merchant w respect to goods of that kind (UCC 2-314)

Limitation on Implied Warranties

Unless the circs indicate otherwise, all IW's are excluded by expressions like "as is", "with all faults", or "other such lang" (UCC 2-316)

Mailbox Rule

Unless the offer provides otherwise (default rule), Acceptance made in a manner and by a medium invited by an offer is operative...as soon as put out of o'ee's possession, without regard to whether it ever reaches o'or (Rest 2d § 63(a)) Adams v. Lindsell (1818) Facts: D sent a letter to offering to sell a certain amt of wool. D expected to receive a response from P by Sept 7. D sent letter to wrong address and P did not receive letter until Sept 5. P wrote acceptance and mailed it back to D but he did not receive until 9th which at that point he already sold to someone else.

Remedies: Damages for Mental Anguish

Unusual in K actions, as such damages are typical unforeseeable (Hadley v. Baxendale) but some courts allow But still compensatory damages Kaplan v. Mayo Clinic Facts: K for D to remove cancerous pancreas. Turns out no cancer. P lost on negligence claim. Wants emotional distress dams for breach of K Hold: In K law, damages can't be speculative & must be shown to a reasonable certainty → Emotional distress damages are too speculative so they can't be recovered for breach of K (Opposite approach than Sullivan)

Remedies: Employment K Breach by Employer

When there is a term K (not employment at will) and employer breaches, employee may recover: -Salary agreed for period of service, minus -Amt that employer affirmatively proves employee has earned or w reasonable effort might have earned from other employment

S's Right to Cure (Time Expired)

Where B rejects non-conforming tender, S may have a further reasonable time to substitute a conforming tender if S had reasonable grounds to believe tender would be acceptable and S seasonably notifies B of S's intent to cure (UCC § 2-508(2))

Buyer's Remedies in General (UCC)

Where S fails to deliver or repudiates, or B rightfully rejects the goods or justifiably revokes acceptance, B may cancel and "cover" and get damages under 2-712, or get dams for non-delivery under 2-713 (UCC 2-711(1))

S's Right to Cure (Time Not Expired)

Where tender of goods is rejected bc non-conforming and time for performance has not yet expired, S may seasonably notify B of his intention to cure and then within the K time make a conforming delivery (UCC § 2-508(1))

Seller's Remedy: Non-acceptance or Repudiation

[Subject to 2-708] Damages for B's non-acceptance or repudiation is (K price) - (Market price at time & place for tender) plus incidental damages (2-710) less expenses saved bc of B's breach (UCC 2-708) Assumption: (K price) > (Mkt price) Implicit mitigation req

Exercise of Dominion

"An o'ee who does any act inconsistent w the o'or's ownership of offered property is bound in accordance with the offered terms unless they are manifestly unreasonable. But if the act is wrongful as against the o'or it is an acceptance only if ratified by him" (Rest 2d. § 69 (2)) Russell v. Texas Co. (1956) Facts: P offered D a revocable license to use his land for $150/day. Offer contained provision that stated continued use of roadway would constitute acceptance. D continued to use the land for a month then sent P a rejection of offer. P sued for recovery. Implied-in-fact acceptance of K: O'ee did not say "I accept", but their conduct was such that a reasonable person in that position would consider it to be acceptance Rest 2d. § 69 (1): Past dealings btween the parties creates circs. where it's reasonable to assume silence is acceptance (Exception) Ammons v. Wilson & Co. (1936) Facts: P, wholesale grocery, sued D for damages caused by D's breach of K to ship P shortening he ordered from D's traveling salesman. They had done business tg in the past, so P thought it strange he didn't get items within a week. when P inquired, D declined order

Moral Obligation

(1) A promise made in recognition of a benefit previously received by the promisor from promisee is binding to the extent necessary to prevent injustice (2) A promise is not binding under (1) if, (a) p'ee conferred the benefit as a gift or for other reasons p'or has not been unjustly enriched or; (b) to the extent that its value is disproportionate to the benefit (Rest 2d § 86) Moral Obligations ≠ Legal Obligations Webb v. McGowin (1935) Facts: D promised to pay P's medical expenses in consideration for P saving his life. P sued estate for benefits to continue after D's death Hold: When promisor receives a material benefit from the promisee, the p'or is morally bound to compensate the promisee for services rendered

Buyer's Remedy: Cover

(1) B may cover by making in good faith and w/o unreasonable delay any reasonable purchase of goods in substitution for those due from S (2) B may recover (cover price) - (K price) plus incidental and consequential damages (3) Failure to cover does not bar B from other remedy (but will affect ability of ultimate recovery of consequential dams) (UCC 2-712)

Motive

(1) The fact that what is bargained for does not of itself induce the making of a promise does not prevent it from being consideration for the promise (2) The fact that a promise does not of itself induce a performance or return promise does not prevent the performance or return promise from being consideration for the promise (Rest 2d § 81) Thomas v. Thomas (1842) Facts: "If you pay me $1/yr and keep property in good repair, we will allow you to keep the property $1 yearly is condition of the "gift" Hold: Motive doesn't enforce a K, a quid pro quo formal transaction w consideration does

Statute of Frauds

A K for the sale of goods for the price of $500 or more is not enforceable unless there is some writing sufficient to indicate a K for sale has been made btwn the parties and signed by the party against whom enforcement is sought (UCC 2-201(1)) Quantity must be stated

Formation Defenses: Mistake

A belief not in accord w the facts (as they exist at the time of K'ing) Basic assumption on which K was made Material adverse effect on agreed exchange Rest 2d § 153: One party makes a mistake (Unilateral Mistake) Boise Jr. College v. Mattefs (1969) Facts: D subcontractor wants out of K bc mistake in bid, seeks rescission on grounds it omitted element worth 14% Hold: Material adverse effect bc 14% is significant amt. Bid was in same price range as other bids, so non-mistaken party had reason to know of mistake. D entitled to rescission Rest 2d § 152(1): Both parties make the same mistake (Mutual Mistake) Beachcomber Coins v. Boskett (1979) Facts: Parties both think coin is rare, but turns out to be counterfeit. B wants out of K Hold: Yes basic assumption, yes material effect, buyer doesn't bear risk. P may rescind K due to mutual mistake of fact TC Sherwood v. Walker (1887) Facts: Both S & B assumed cow was barren. Cow wasn't barren Hold: Grounds for rescission bc qualitative difference → Barren animal diff than fertile animal Lenawee County Board of Health v. Messerly (1982) Facts: Parties did not know of illegal septic tank when making K for property sale. P signed clause assuming risk. Hold: Not entitled to rescission bc P's purchased property "as is" and assumed the risk of any mistake

Promise

A manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made (Rest 2d § 2) Express: Intention manifested by words Implied-in-Fact: Intent manifested by conduct, not words Implied-in-Law (Quasi): No manifestation of intent; Law infers a promise in the interest of justice Bailey v. West (1969) Facts: D purchased lame racehorse. Attempted to return but seller wouldn't accept. Van driver brought to P's farm w/o D's knowledge. P billed D for caring of the horse Hold: No promise bc no mutual agreement between the parties

Consideration

A performance or a return promise must be bargained for. Bargained for if sought by promisor in exchange for the promise and given to the promisee in exchange for that promise (Rest 2d § 71) Bargain + Legal Detriment = Consideration Must have a benefit to the promisor for a bargain to exist Legal Detriment: Promisee does/promises something he has no legal obligation to do or refrains/promises something he has a legal right to do Unilateral K: A promise exchanged for a performance; K exists when requested act is performed, not before Bilateral K: Exchange of a promise for a promise; K exists the moment promises are exchanged Quid Pro Quo: A commitment to X is supported by consideration if it is part of an exchange; "this for that" Kirksey v. Kirksey (1845) Facts: "if you leave where you live, I will let you live on my land" RULE: Gifts/merely gratuitous promises don't satisfy bargain requirement→ No consideration Hamer v. Sidway (1891) Facts: "If you refrain from drinking, I will give you $$ when 21" (unilateral K) Bargain= Performance of not drinking → benefit to uncle of feeling good ab healthy nephew Legal Detriment = Gave up legal right to drink Hold: Consideration Langer v. Superior Steel Corp. (1842) Facts: "If you refrain from working for competitor, you will receive monthly $$ for as long as you live Bargain= Performance of not working → benefit to company Legal Detriment= Gave up right to work Hold: Consideration

Third Party Beneficiaries

A person other than the p'ee that benefits from performance of the the p'or's promise; K set up for benefit of a 3rd person Intended Beneficiaries: Recognition of a beneficiary's right to performance is appropriate to effectuate the intention of the parties and either performance will satisfy an obligation of p'ee to pay money to the beneficiary; or circs indicate that p'ee intends to give the beneficiary the benefit of the performance (Rest 2d § 302) KMART Corp. v. Balfour Beatty, Inc. Facts: TPL has K w BBI for construction of shopping center in which KMART is a tenant. KMART sues BBI for faulty construction Hold: KMART is an intended third party beneficiary → Can sue BBI

Modification

A promise modifying a K not fully performed on either side is binding if the modification id fair & equitable in view of circs not anticipated by the parties when the K was made (Rest 2d § 89(a)) Must be voluntary Exception to the Pre-existing Duty Rule UCC 2-209(1): An agreement modifying a K within [Art. 2] needs no consideration to be binding UCC 1-304: Every K or duty within the UCC imposes an obligation of good faith in its performance UCC 1-201(b)(20): Good faith means honesty in fact and the observance of reasonable commercial standards of fair dealing Angel v. Murray (1974) Facts: P alleged D overpaid the city's garbage man who requested an additional $10k due to an unexpected increase in units Hold: Increase in unit was an unexpected circumstance → K can be modified

Contract

A promise or set of promises for the breach of which the law gives a remedy, or the performance of which the law in someway recognizes as a duty (Rest 2d § 1)

Promissory Estoppel

A promise which the p'or should reasonably expect to induce action or forbearance on the part of the p'ee, and which does, is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires (Rest 2d § 90(1)) Exception to consideration requirement -Was there a Promise? -Should the p'or reasonably have expected to induce reliance by p'ee? -Did p'ee rely? -Can injustice be avoided only be enforcement of the promise? Ricketts v. Scothorn (1898) Facts: "None of my grandkids work so you don't have to." P quits her job in response (not in exchange) Hold: No consideration, but enforceable bc D caused P to rely on his $. Losing it is a legal detriment Rest 2d § 90(2): A charitable subscription is binding under (1) w/o proof that the promise induced action or forbearance Allegheny College v. Bank of Jamestown (1927) Facts: D promised to give P $ for scholarship. Later changed her mind but P had already accepted part of the $ (implied-in-fact K that P will do what D asked) Hold: If you make a promise to a charity, even if you get nothing in return, that promise is binding and enforceable under promissory estoppel

Formation Defense: Unconscionability

Absence of meaningful choice (procedural) + Terms unreasonably favorable to other party (substantive) Ferguson v. Countrywide Credit Industries (2002) Facts: P claims she was harassed & discriminated against in vio of fed & state law. Arbitration clause in her employment K Hold: K was unconscionable Procedural: Had to agree to arb clause to work there; No power to negotiate (adhesion K) Substantive: Arb agreement advantages employer bc terms specifically for claims employees would bring Zapatha v. Dairy Mart (1980) Facts: Termination clause in franchise agreement. After 1yr, either party can terminate w/o cause w 90 days notice. D presented P w new agreement. P wouldn't agree. D terminated Hold: Not unconscionable Procedural: Not unfair surprise bc he knew ab clause; Experienced business man Substantive: Not unreasonably favorable to bc either party can terminate

Unconscionability

Absence of meaningful choice; "Shocks the conscience"; Terms unreasonably favor one party (impossible to consent) Limit on Freedom of K Williams v. Walker-Thomas Furniture Co. (1995) Facts: D, furniture store, sold household items to P to be paid in installments. K where title of items would remain in D's name until paid off. P faulted on payments and D attempted to repossess the items RULE: Where the element of unconscionability is present at the time of K, it should not be enforced

Acceptance

Acceptance is a manifestation of assent to the terms thereof made by the o'ee in a manner invited or required by the o'or (Rest 2d § 50(1)) Hendricks v. Beehee (1990) Facts: D offered to purchase real estate and submitted an offer. The agent mailed the offer and the P's signed and accepted. Before P's communicated their acceptance to D, he withdrew the offer Rest 2d § 56: In a bilateral K, notification of acceptance is essential. No K until acceptance of offer is communicated to the offeror Carlill v. Carbolic Smoke Ball (1893) Facts: "If you purchase and use our product as directed and get influenza, we will pay you £100" D's put £1000 in bank to show their sincerity. Hold: Generally, ad's are not offers. However, this ad was specific, detailed and it would lead a reasonable person to assume the company was serious about making a deal w the reader. Rest 2d. § 53: In a unilateral K, notification of acceptance is not necessary. Performance of conditions = acceptance

Acceptance of Goods (UCC)

Acceptance of goods occurs when B: after a reasonable opportunity to inspect the goods B signifies to S that goods are conforming or that he will take them in spite of their non-conformity; Fails to make an effective rejection; Does an act inconsistent w S's ownership (UCC § 2-206)

Adequacy

Adequacy of consideration is not relevant; A bargained for exchange is (Peppercorn Theory) Browning v. Johnson (1967) Facts: P K'd w D to buy P's practice. P changed mind & promises to give D $ if he "gives up" og K Hold: If formal bargain, quid pro quo, adequacy is irrelevant

Formation Defense: Exculpatory Clauses

Agreements to waive claims for negligence are generally enforceable; For gross negligence not enforceable bc public policy Broadley v. Mashpee Neck Marina (2006) Facts: P injured at D's marina but signed exculpatory clause that he couldn't sue for negligence. Hold: Exculpatory clause enforceable

Formation Defense: Misrepresentation

An assertion not in accord w the facts (Rest 2d § 159) Misrepresentation = K voidable by adverse party Vokes v. Murray (1968) Facts: D's dance studio sold lessons to P, continually telling her she's improving, knowing she's really not. P wants $ back because they defrauded her. D claims they were giving opinion (interpretation of facts, not assertion, thus not fraud - "sales puffing") RULE: Where a party has superior knowledge of the truth or falsity of the statement, a statement of opinion will be treated as a statement of fact

Buyer's Consequential Damages

B's consequential damages include: Any loss resulting from general or particular reqs and needs of which S at the time of K'ing had reason to know and which could not be reasonably prevented by cover or otherwise; and injury to person or property proximately resulting from any breach of warranty (UCC 2-715) Consequential damages are the "lost profits" from S's breach → Can't be guesswork, must be proven Applies to 2-712, 2-713, 2-714

Buyer's Remedy: Non-Delivery or Repudiation

B's damages = (mkt price at time B learns of breach) - (K price) plus incidental damages and consequential damages, less expenses saved bc of S's breach. Implicit mitigation requirement (UCC 2-713)

Bindingness of Contractual Obligations

Bolin Farms v. American Cotton Shippers Assoc. (1974) Facts: D agreed to purchase cotton on a price agreed upon prior to harvest. Price skyrocketed by harvest time RULE: Pacta sunt servanda: No excuses!! → K still enforceable

Remedies: Material Breach & Quasi K

Britton v. Turner Facts: P worked 9 ½ months then quit RULE: Party who commits a material breach may recover in quasi K → For the value of any benefit that the breaching party conferred on the other party Employee conferred a benefit on employer (even tho not substantial performance) Presumed intention of the parties Potential unfairness Measure of Restitution: As justice requires, either reasonable value of what D received in terms of what it would cost to obtain it from a person in P's position, or extent to which D's property has been increased or his other interests advanced. Not more ratable portion of total K price (Rest 2d § 371)

Good Faith: Duty to Cooperate

Each party will cooperate and do nothing to hinder the performance of the other party Patterson v. Meyerhofer (1912) Facts: P K'd to sell 4 properties to D, but didn't own them yet. D showed up at auction & outbid P for properties Hold: D hindered P from performing his obligation to the K→ Didn't perform in good faith/vio of duty to cooperate Market Street Associates v. Frey (1991) Facts: JC Penney transferred their rights to P, now P became tenant/lessee of shopping center. ¶ of lease contains agreement to negotiate for financing improvements - if not, P has option to purchase property at original price + 6% yearly increase. P exercises ¶ option after D did not negotiate. D claims breach of good faith by P for not mentioning ¶ Hold: P didn't act in bad faith bc D ignored P's req to negotiate & had equal access to the K w ¶

Remedies: Specific Performance

1) Specific Performance may be decreed where the goods are unique or in other proper circs. (2) The decree may include such terms & conditions as to payment of the price, dams, and other relief as the court may deem just (UCC 2-716) Easier than it used to be, but still limited Presumption: When S breaches a land sale K → Only 1 plot of land like this, so $ doesn't compensate for loss bc you lost something specific & unique ($ dams not adequate to compensate B for loss) Curtis Bros v. Catts Facts: Output K for P to purchase all tomatoes harvested from D's farm. P prepared & D refused to furnish tomatoes Hold: Goods unique where cover market is thin → Specific performance bc there is nowhere else P could get tomatoes in time Specific performance won't be granted for an unconscionable K or if P has done something bad himself In personal service Ks, specific performance is non-delegable → Can't be delegated to someone else bc unique to the person K is with Lumley v. Wagner Facts: K for D to sing at P's theatre. D breaches by anticipatory repudiation Hold: Injunction as specific performance → D is a famous "unique" singer & dams wouldn't be adequate. Can't force her to sing but can stop her from singing elsewhere (Negative injunction) Curb Records v. McGraw Facts: K for Tim Mcgraw to record 6 albums for record company. Satisfaction clause. P seeks injunction for him not to record for anyone else until 5th & 6th albums are completed (essentially ending his career if he doesn't comply) Hold: No negative inunction → Stopping Mcgraw from singing would deprive the public of his unique talent If there was a durational limit, that would be diff. No duration is unreasonable

Counteroffers

1) an offer made by o'ee to o'or relating to the same matter as the og offer and proposing a substituted bargain differing from that proposed by the og offer (2) CO terminates o'ee's power of acceptance, unless o'or manifests a contrary intention or unless the CO manifests a contrary intention of o'ee (Rest 2d § 39) Mirror Image Rule: When an offer is made, acceptance is not valid unless the terms of the acceptance exactly mirror the terms contained in the offer UCC 2-207 (1): A definite and seasonable expression of acceptance operates as an acceptance even tho it states terms additional to or diff from those offered...unless acceptance is expressly made conditional on assent to the additional or diff terms (Battle of the Forms) UCC 2-207 (2): The additional terms are to be construed as proposals for addition to the K. Between merchants such terms become part of the K 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 within a reasonable time after notice of them is received DTE vs. Briggs Facts: P & D negotiate sale of generator. P sent order acknowledgement to D w terms including a forum selection clause, wasn't part of the original offer. Hold: FSC "materially altered" the terms, not enforceable UCC 2-207 (3): Conduct by both parties which recognizes the existence of a K is sufficient to est a K...although the writings of the Ps do not otherwise establish a K. In such case the terms of the...K consist of those terms on which the writings of the Ps agree, together w any supplementary terms incorporated under any other provisions of this Act. Textile Unlimited v. BMH Facts: D responded w order acknowledgement including arb clause Hold: No arbitration clause bc no UCC gap filler

Option K

An independent promise, supported by consideration, that limits o'or's power to revoke the offer. O'ee has power to accept within stated time. Even if the o'ee rejects offer. Unless o'or materially relies on the o'ee's rejection Humble Oil v. Westside Facts: "Until July 4th, D cannot revoke the offer" RULE: When option K exists, the o'or must keep the option open for the time period specified in the K, and a counter-offer or other negotiations made by the o'ee within this time frame will not terminate the o'ee's power to accept the option UCC 2-205: Offer by a merchant to buy or sell goods in a signed writing which...gives assurance that it will be held open is not revocable, for lack of consideration, during the time stated or if no time is stated for a reasonable time. Not > 3 months. Form supplied by o'ee must be separately signed by o'or. (Merchant's firm offer) Rest 2d. § 45: In a unilateral K, an option K is created when o'ee begins the invited performance Marchiondo v. Scheck Facts: K between S and RE broker. "If you sell it, we will then have a K." / "I will pay you a % if you get me a buyer within 6 days." S revoked offer on AM of 6th day, broker found a buyer anyway. RULE: When an offer for a unilateral K is made, and part performance of the offer is completed by the o'ee, the o'or may not revoke. Rest 2d § 87(2): An offer which o'or should reasonably expect to induce action or forbearance of a substantial character by o'ee before acceptance and which does...is binding as an option K to the extent necessary to avoid injustice Drennan v. Star Paving Co. Facts: D's bid lowest, P makes bid to do school job and wins, but still had not formally accepted D's bid. D tells P they made a mistake and can't do job at that price, P says he expects them to foll

Express Warranty

Any affirmation of fact made by the S which relates to the goods and becomes part of the basis of the bargain. Goods must conform to the affirmation of fact-- otherwise it's a breach of warranty (UCC 2-313)

Remedies: Breach

Any failure to discharge a K duty Any injured party can recover damages but can only be excused from performance if material breach Major Breach: Party fails to perform substantially → failure of constructive condition Minor Breach: Substantial but not perfect performance Non-breaching party still has to perform, but can sue for damages

Interpretation

Ascertaining the meaning of language; The process by which we ascertain the ideas that the parties are trying to represent The Plain Meaning Rule: If K language is objectively "plain", interpretation is unnecessary and parol/extrinsic evidence is inadmissible The Context Approach: Language is never "plain"-- Even apparently clear language so interpretation is always necessary and parol/extrinsic evidence admissible, as long as the evidence proves a meaning to which the language of the writing is "reasonably susceptible" Pacific Gas v. Thomas Drayage & Rigging Co. (1968) Facts: K to work on turbine had indemnity clause. Ambiguity of the word "property" Hold: Parole evidence is admissible to interpret indemnity provision

Third Party Interests: Assignment

Assignment: Transfer of the right to performance under a K Assignor: Party who transfers the right Assignee: Party who receives the transfer of the right Obligor: Party who owes the contractual duty UCC 2-210(2): Unless otherwise agreed, all rights of either S or B can be assigned except where assignment would have a material adverse impact on the obligor Allhusen v. Caristo Construction Corp. Facts: W/o written consent of contractor, subcontractor assigns right. Anti-assignment clause in K RULE: Right to transfer rights (freely assignable) unless material adverse impact on obligor or anti-assignment clause → freedom of K theory UCC 9-318: A term in any K between an account debtor (obligor) & an assignor is ineffective if it prohibits assignment -Tension w UCC 2-210 Owen v. CNA Insurance/Continental Casualty Co. Hold: Anti-assignment clause not effective bc breach of K Continental Purchasing Co. v. Van Raalte Co. RULE: Once obligor receives notice, he owes the duty to the assignee, not the assignor -If obligor makes payment to the assignor after receiving notice, he still owes a duty to the assignee (and would have to make double payment)

Parol Evidence Rule

Complete Integration: A writing that the parties intend to be a final & complete version of their agreement can't be contradicted or supplemented by extrinsic evidence of prior or contemporaneous agreements or negotiations -Doesn't apply to separate agreements -Doesn't apply to subsequent agreements Mitchell v. Lath (STRICT approach) Facts: P wants to purchase farm owned by D. Oral promise by D to remove ice house in consideration for P's purchase of farm. D never removes ice house Hold: Oral agreements ab ice house inadmissible bc supplemental; A reasonable observer would expect any "agreement" ab the ice house to be in the document Merger (Integration Clause): Clause providing that the writing is a complete and final integration Partial Integration: A writing that the parties intend to be a final version of part of their agreement can't be contradicted, but can be supplemented, by extrinsic evidence of prior or contemporaneous agreements or negotiations Masterson v. Sine (FLEX approach) Facts: Property conveyed by deed. S put an option to repurchase when conveying deed. S goes bankrupt. Trustee exercises option to buy back property & pay creditors. B objects, saying option to repurchase was unassignable-- can't go to 3rd party; Oral agreement to keep within family at time of writing Hold: Not complete integration bc family members not commercially experienced; No attorneys→ didn't know of PER UCC 2-202: Integration can't be contradicted by evidence of any prior agreement or of a contemporaneous agreement, but may be supplemented (partial); by evidence of consistent additional terms, unless the court finds the writing to be intended as a complete integration Alaska Northern Development, Inc. v. Alyeska Pipeline RULE: PER always admissible for interpreting writing

Mutual Mistake in Expression: Reformation

Court has discretion to reform (change) a writing to make it express the parties actual agreement -The writing does not correctly state the parties agreement -Fixes a mistake in writing not a mistake in agreement -Equitable remedy OneBeacon v. Travelers (2006) Facts: Lang of clause looks like it extended policies to all leeses, but parties both meant only those who apply for the policy Hold:Yes reformation bc both parties meant the same thing

Freedom of K

Courts should enforce parties' Ks, whatever the terms. Substance of the exchange is irrelevant (up to the parties, society not responsible) Substantive Fairness: Courts should enforce substantively fair K terms

Good Faith in Performance

Every K imposes upon each party a duty of good faith and fair dealing in its performance (UCC 1-304) Failure to perform in good faith = breach

Good Faith: K Termination (Not for Breach)

Franchise Ks Zapatha v. Dairy Mart (1980) Hold: D acted in good faith bc term clause was in agreement & D was upfront & honest At-will employment Ks Hillesland v. Federal Land Bank Assoc Facts: P's clients in financial trouble. Suggests P's kids to buy property. P went to board of directors and they approved. P fired RULE: No good faith duty in employment at-will Ks → would no longer be enforcing what parties agree to, would be rewriting K, no longer voluntary

Seller's Remedy: Lost Profit (Volume Seller)

If dams under 2-708(1) are inadequate to put S in as good a pos as performance would've done, measure of dams is the profit (incl. reasonable overhead) which S would've made from full performance by B plus any incidental dams (2-710) less payment received (UCC 2-708(2)) Profit = (K price) - (cost to S) Volume seller has unlimited supply; S has capacity to sell to both B1 and B2 (anybody else who wants to buy). If B1 hadn't breached, S could've sold to both

Formation Defense: Illegality

Illegal K's are void--can't be enforced Exceptions: -Parties not equally at fault -Disproportionate forfeiture -P was excusably ignorant of illegality Sinnar v. Leroy (1954) Facts: P applied for beer license but was denied. D said he knew someone who worked for the city and could get him one. P gave D $450 to give to friend who worked for city. Couldn't get license and P never got $ back Hold: K not enforceable bc illegal to bribe public officials

Interpretation: Contra Proferetem

In choosing among the reasonable meanings of a promise or agreement or a term thereof, that meaning is generally preferred which operates against the party who supplies the words or from whom a writing otherwise proceeds (Rest 2d § 206) Contra Proferentem= "Against the Drafter" In re Katrina Canal Breaches Litigation (2007) Facts: Insurance policy has flood exclusion. P's claim "flood" is ambiguous Hold: Flood isn't ambiguous bc it just means inundation of water

Constructive Conditions

In every bilateral K, presumption that promises in K are dependent, so that each promise is a constructive condition of the other Only substantial compliance is necessary Order of Performance: Where performances can be rendered simultaneously, they're due simultaneously--unless lang or circs are to the contrary. Where performance of one or more parties reqs time, his performance is due first--unless land or circs are to the contrary (Rest 2d § 234) Palmer v. Fox (1936) Facts: K for land sale. D claimed P failed to perform covenants in K to make improvements to the land so he won't pay him Hold: Promise to cinderize could be performed simultaneously w payment → Since he didn't pay, duty to cinderize doesn't arise bc dependant covenant Jacob & Youngs v. Kent (1921) Facts: Reading pipes Hold: This is a promise, not an express condition. A reasonable person would understand the brand of pipes is not so vital that the whole deal is off if wrong pipe is used

Uncommunicated (Subjective) Intent is Not Acceptance

Industrial America v. Fulton (1971) Facts: P saw D's ad in the paper seeking a company for a merger. P connected D w a company with which they later merged after cutting P out of the deal Hold: An o'ee's motive for accepting an offer is not relevant. Subjective intent does not matter Glover v. Jewish War Veterans (1949) Facts: D advertised reward for info that led to apprehension of a murderer. Police visited P, who gave info leading to suspect's arrest. P was unaware of reward until later. RULE: In unilateral K's, there can be no acceptance of an offer unless the offeree knows of the existence of the offer; Exception: In unilateral K's from public authorities, o'ee doesn't have to have prior knowledge of the reward Ever-Tite Roofing Co. v. Green (1955) Facts: D signed offer to secure roofing services of P. Terms required a credit check before they could begin. After credit check came back, P loaded materials and headed to Ds home. When they arrived, D notified P that they hired other parties to perform the job. Hold: A K may be created by acceptance within a time frame specified by the offeror or, if no time is specified, within a reasonable time; In a bilateral K, beginning performance implies finishing job

Third Party Interests: Delegation of Duties

The act by which a party who owes a duty under a K confers on a 3rd person the power to perform that duty Delegating Party: Party w the duty Obligee: Party to whom the duty is owed Delegate: Party to whom the duty is transferred to -Performance by delegate, not delegation itself, discharges delegating party's duty -If delegate doesn't perform, DP still liable to obligee -Obligee must accept Delegate's performance UCC 2-210(1): A party may perform his duties through a delegate unless otherwise agreed or unless the other party has a substantial interest in having his original promisor perform or control the acts required by the K Sally Beauty v. Nexxus Prods. Co. Facts: Best was distributor of Nexxus. Sally, Nexxus' competitor, purchased Best. Best = DP; Sally = D; Nexxus= Obligee Hold: Not delegable → Obligee has a substantial interest in having performance from the DP

Manifestation of Mutual Assent

The formation of a K requires a bargain in which there is a manifestation of mutual assent to the exchange (Rest 2d § 17(1)) Embry v. Hargadine (1917) Facts: P employed D under a K for 1yr. P said he would quit unless his K was renewed. D said "don't worry ab it." P assumed he was rehired, terminated a few months later Hold: The only relevant intention is what the words or acts of the parties indicate; K law cares ab what's said, not what's meant Lucy v. Zehmer (1954) Facts: D wrote on a napkin and signed that he agreed to sell his farm to P. D thought it was a joke. P was serious Hold: D's subjective intent does not matter, a reasonable person in P's position would understand there was a K

Indefinite Agreements

The terms of a K are reasonably certain if they provide a basis for determining the existence of a breach and for giving an appropriate remedy (Rest 2d § 33(2)) Oglebay v. Armco Facts: Open price term in long term K Hold: This was a relational K. Parties manifested intent that they would remain bound for years (more lenient approach than Varney) UCC 2-204(3): Even tho one or more terms are left open to a K for sale does not fail for indefiniteness if the parties have intended to make a K and there is a reasonably certain basis for giving an appropriate remedy -UCC will provide gap fillers (not quantity) UCC 2-305(1) Open Price Term: The parties if they so intend can conclude a K for sale even though the price is not settled. In such a case, the price is a reasonable price at the time of delivery if nothing is said as to price, price is left to be agreed by the parties and they fail to, external price mechanism fails UCC 2-302(2): A price to be fixed by the S or B means a price for him to fix in good faith Blinn v. Beatrice Comm. Hosp. Facts: D assured P to stay at job. P terminated. No material terms of his employment defined during assurances RULE: No req for definiteness based on promissory estoppel → reliance (Also, Hoffman v. Red Owl) MGM v. Scheider Facts: D K'd w P to star in 1 film and tv series. Start date of filming term left open. D completed film, filmed pilot, but refused to do tv series RULE: Enforceable K exists provided objective method of determining missing terms is available (industry standard) Joseph Martin Deli v. Schumacher Facts: D leased store to P for 5 yrs. Rent $500 to $650 after 5yrs. Renewal clause based on price agreed by parties in the future. D would not renew for less than $900. FMV at $575 RULE: Agreements to agree where a material term is left open is unenforceable

Good Faith: Request for Modification

UCC 1-201(b)(20): Honesty in fact & the observance of reasonable commercial standards of fair dealing Roth Steel Products v. Sharon Steel Corp. Facts: D says they don't have enough steel--need modification. D faced w losses on K (not bad faith to ask for a mod). Instead, D was selling steel elsewhere at a premium Hold: D lied → subjective dishonesty = bad faith

B's Breach/ S's (Performer's) Remedies: UCC

UCC 1-305(1): Remedies shall be liberally administered to the end that the aggrieved party may be put in as good a position as if the other party had fully performed, but neither consequential or special nor penal damages may be had as except specifically provided in this Act or by other rule law Presumption: Remedies are expectation measure

Uniform Commercial Code (Sale of Goods)

UCC 2-105(1): Goods means all things which are moveable at the time of identification to the K for sale, other than $, in which the price is to be paid UCC 1-103: Unless displaced by the particular provisions of this Act, the principles of law and equity shall supplement its provisions

Exceptions to the Statute of Frauds

UCC 2-201(2): Btwn merchants, if within a reasonable time a writing in confirmation of the K and sufficient against the sender is received, and the party receiving it has reason to know its contents, it satisfies the requirement of (1), unless written notice of objection to its contents is given within 10 days after its received (Merchant's Written Confirmation) UCC 2-201(3): Goods are to be specially manufactured for B and are not suitable for sale to others in the ordinary course of S's biz and S, before notice of repudiation is received & under circs which reasonably indicate that the goods are for B, has made either a substantial beginning of their manufacture or commitments for their procurement (Specially Manufactured Goods) UCC 2-201(3)(b): K which does not satisfy 2-201(1) is nonetheless enforceable if the party against whom enforcement is sought admits in court/testimony/pleading that a K for sale is made but the K is not enforceable under this provision beyond the quantity of goods admitted (Judicial Admissions) DF Activities Corp. v. Brown (1988) Facts: P sought to purchase chair from D. P alleges they made an oral agreement. D denies this and sold the chair to someone else. P wants to depose. Hold: Court says no bc already affidavit, but if they said yes then the deposition would be an exception to the writing requirement Rest 2d § 139: A promise which the p'or should reasonably expect to induce action or forbearance on the part of the p'ee, and which does, is enforceable if injustice can be avoided only be enforcement of the promise (SOF exception not provided by 2-201, based on promissory estoppel)

Acceptance (UCC)

UCC 2-206(1)(a): Unless otherwise unambiguously indicated by language or circs, an offer to make a K shall be construed as inviting acceptance in any manner and by any medium reasonable in the circs Corinthian v. Lederle (1989) Facts: After hearing about a price increase, D purchased 1,000. P shipped 50 vials at the current price with a letter stating the rest of the order would be shipped at the new price. UCC 2-206(1)(b): Unless otherwise..., an offer to by goods for prompt or current shipment invites acceptance either by prompt promise or prompt or current shipment of conforming or non-conforming goods. But shipment of non-conforming goods ≠ acceptance if S seasonably notifies B that it's only an accommodation

Delegation of Duties

UCC 2-210(1): A party may perform his duties through a delegate unless otherwise agreed or unless the other party has a substantial interest in having his original promisor perform or control the acts required by the K Sally Beauty v. Nexxus Prods. Co. Facts: Best was distributor of Nexxus. Sally, Nexxus' competitor, purchased Best. Best = DP; Sally = D; Nexxus= Obligee Hold: Not delegable → Obligee has a substantial interest in having performance from the DP

Assignments of Rights

UCC 2-210(2): Unless otherwise agreed, all rights of either S or B can be assigned except where assignment would have a material adverse impact on the obligor Allhusen v. Caristo Construction Corp. Facts: W/o written consent of contractor, subcontractor assigns right. Anti-assignment clause in K RULE: Right to transfer rights (freely assignable) unless material adverse impact on obligor or anti-assignment clause → freedom of K theory UCC 9-318: A term in any K between an account debtor (obligor) & an assignor is ineffective if it prohibits assignment Tension w UCC 2-210 Owen v. CNA Insurance/Continental Casualty Co. Hold: Anti-assignment clause not effective bc breach of K Continental Purchasing Co. v. Van Raalte Co. RULE: Once obligor receives notice, he owes the duty to the assignee, not the assignor If obligor makes payment to the assignor after receiving notice, he still owes a duty to the assignee (and would have to make double payment)