Contracts

Part performance doctrine

The party to be charged "has so changed his position that injustice can be avoided only by specific performance"

Courteen seed

I am asking did not lead to contract

Why do people fail to contract?

I. Illegal contracts II. Transaction costs A. Information processing problems B. Too many parties C. Emergencies D. Agent misbehavior E. Rule of Law Problems 1. Imperfect enforcement in corrupt countries a) Less corruption leads to more wealth 2. Inefficient enforcement mechanisms

Contract terms unreasonably favorable to the other party (part 2 of unconscionability)

IN light of the general commercial background and needs of a particular case

Economic analysis of non-enforcement in pre-lim negotiations

Liability for relied-upon statements is on the goal of facilitating parties' efforts to invest in valuable projects that if work out the parties can share.

Trimmer v. Van Bomel

"To pay within a reasonable time an amount sufficient to pay for all his costs and expenses for a sumptuous living for the rest of his life"

Varney v. Ditmars

"Fair share of profits" was not an intent to contract as a matter of law--

Moses v. Macferlan

"This kind of equitable action, to recover back money, which ought not in justice to be kept, is very beneficial, and therefore much encouraged. It lies for money which, ex aequo et bono, the defendant ought to refund; it lies for money paid by mistake; or upon a consideration which happens to fail; or for money got through imposition, (express or implied) or extortion; or oppression; or an undue advantage taken of the plaintiff's situation, contrary to laws made for the protection of persons under those circumstances. In one word, the gist of this kind of action is, that the defendant, upon the circumstances of the case, is obliged by the ties of natural justice and equity, to refund the money."

Privity of contract

(1) No: Doctrine of Privity of Contract: The doctrine of privity in the common law of contract provides that a contract cannot confer rights or impose obligations arising under it on any person or agent except the parties to it. The premise is that only parties to contracts should be able to sue to enforce their rights or claim damages as such.

Quantum Meruit

Equitable remedy to provide restitution to a person who has rendered services in a quad-contractual relationship

Why do parties leave gaps in their agreement?

1) Probability of event is too remote to dicker over the consequences 2) Fail to force the event at all 3) The event is not certain to occur but dickering over it may block the agreement entirely 4) The parties may deliberately leave the terms vague in order to avoid legal enforcement altogether and rely instead on norms of trust and bonds of affection

2 things that are unenforceable indefinite agreements at common law

1) Varney v. Ditmars--indefinite bonus contract, "Fair share of profits," Essential terms left explicitly to further negotiation--Petze v. Morse Dry Dock & Repair--

Quasi contract

1) a benefit conferred by plaintiff 2) benefit appreciated and accepted by defendant 3) retention of the benefit would unjustly enrich the defendant

three things consideration does

1) evidentiary--provides courts with evidence that agreement or promise exists when it's in dispute 2) cautionary---deterrent function 3) channeling function

§71 Requirement of Exchange

1) to constitute consideration, a performance or a return promise must be bargained for 2) a performance or return promise is bargained for if it is sought by the promisor in exchange for his promise and given by the promisee in exchange for that promise. The PERFORMANCE MAY CONSIST OF a) an act other than a promise b) a forbearance or c) the creation, modification or destruction of a legal relation 4) The performance or return promise may be given to the promisor or to some other person. It may be given by the promisee or by some other person.

Wagner Excello Foods

2-305(1)--If parties so intend they can conclude a contract for sale even if the price is not settled -- intent left for jury-- can't just dismiss the case

2-204 Formation in General

A contract for the sale of goods may be made in any manner sufficient to show agreement including conduct by both parties which recognizes the existence of such ha contract..Even though one or more terms are left open a contract for sale does not fail for indefinitenss if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy

Hume on natural duties v. obligations

A father knows it to be his duty to take care of his children: But he has also a natural inclination to it. ... But as there is naturally no inclination to observe promises, distinct from a sense of their obligation; it follows, that fidelity is no natural virtue, and that promises have no force, antecedent to human conventions.

Promise

A promise is 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

Hume on beneficial reliance

A. Duty needs an antecedent 1. Moral obligation is that antecedent (human conventions) B. Society and conventions predate the promise C. Sentiments and obligations come from promises, they don't cause them Man naturally selfish and will screw over. Fidelity is not a natural

Unconscionability

Absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party. Meaningfulness of choice can be ruined by a inequality of bargaining power.

How would aristotle allocate goods? Distributive justice

According to merit. Democrats identify merit with the status of freeman, supporters of oligarchy with wealth (or with noble birth), and supporters of aristocracy with excellence.

Activity level effect

Activity affected by enhancing the penalities for promise-breaking si the activity of promise-making. Optimal enforcement regime enfoorces promises only when the increase in beneficial reliance that enforcement makes possible offsets th edecrease in promising occasioned by legally enforcing such promises.

Schwedes v. Romain

Acts of part performance relied on by the plaintiffs--securing financing and offering to pay the full purchase price were merely actions undertaken in contemplation of performance

Option Contract

An option contract is a promise which meets the requirements for the formation of a contract and limits the promisor's power to revoke an offer

Monetti, S.P.A. v. Anchor Hocking Corp.

Anchor Hocking Corp. (Anchor) (defendant) agreed in principle to become the sole U.S. distributor for Monetti S.P.A. (Monetti) (plaintiff) food service products for ten years. Monetti sent Anchor a draft agreement. Anchor did not sign the draft agreement, but an Anchor employee drafted a memo that incorporated all of the terms in Monetti's draft agreement and added additional terms that Anchor wanted. The employee initialed the memo. Monetti, as was required in its draft agreement, gave Anchor all of the assets of Melform, a Monetti subsidiary, which had previously distributed Monetti's food service products. In addition, there was a second Anchor memo, an internal memo on Anchor letterhead that included in "Exhibit A" all terms of the draft agreement except one. Davis, the drafter of this memo referred to it as the "summary agreement" with Monetti. Not long after Anchor wrote this second memo, Monetti brought suit for breach of contract. Anchor argued that the statute of frauds precluded the lawsuit because the agreement was not to be performed within one year and was not in writing. The trial court held that the suit was barred by the Uniform Commercial Code (UCC) statute of frauds. Monetti appealed. Big point here: both 139, which is Enforcement by Virtue of reliance, and the UCC 2-201 were applied.

quasi-contract

Benefit conferred on defendant by plaintiff Appreciation by defendant of the benefit Acceptance and retention of benefit by defendant where it would be inequitable to retain the benefit without payment

Step-Saver v. WYSE

Box top disclaimer that disclaimed all express and implied warranties. This is where WYSE tried to argue that it was governed by 2-207(1) and that the terms were supposed to be construed as additions to the contract.

Whats a signature?

Cf. Restatement § 134: "any symbol made or adopted with an intention, actual or apparent, to authenticate the writing as that of the signer"

Coley v. Lang

Coley

Why emission rule?

Compared to a reception rule? Celerity: under which rule does one party first know he has a contract? Evidentiary: what is easier to prove: emission or reception?

2-207 (3)

Conduct by both parties which recognizes the existence of a contract is sufficient to establish one for sale although the writings of the parties do not otherwise establish a contract. In this case the terms of the contract consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provision of this act

Allegheny College v. National Chautauqua County Bank

Consideration--Mary yates promised 5,000 for memorial fund, two years after johnson paid 1,000...then a year she notified she took back the pledge. Found for Allegheny college, forcing them to pay back. Consideration was putting her name on it.

St. Peter v. Pioneer Theatre Corp.

Consideration--adequacy of consideration is not something the court cares about.

Enforcing promises (Instrumental)

Contexts in which promisors are likely to have intended them to be legally enforceable enhances relianbility--Decreases incentives for individuals in the future to make promises in these contexts, forces individuals who do make promises to disclaim legal liability and does little to amen such promises more reliable than they already are

Contract law today

Contract Law as a solution to the threat of defection in PD Games Coasian bargains and trust Modeling Bargaining gains: a. Detrimental and Beneficial Reliance b. Edgeworth Box Function Defining Efficiency Criteria

Utilitiarian perspective on why we should enforce contracts?

Contract enforceability promotes societal wealth which promotes happiness, which is the ultimate desideratum for utilitarians

Realists scholars

Contract is dead and effort to reconcile promissory estoppel and consideration is a hopeless task. Willingness of courts to move beyond consideration has left field of contracts in confusion. Contract--> turn into torts because of notions of reliance. Individualism turned into collectivism--which is how it "should" be

Gift

Contract without valid consideration and to be valid must be executed.

How does the PD game relate to the tragedy of the commons?

Cooperation in the commons is collectively rational, but individually irrational.

Hobbes, Levithian: Covenants of Mutuall Trust, When Invalid

Covenants Of Mutuall Trust, When Invalid

Evertite Roofing v. Green

Defendants breached a contract for re-roofing of defendant's residence. They signed and executed a contract--They signed it, it was signed by the plaintiff;s representative--who ended up not being able to sign bc no authority--regardless the agreement was binding upon written acceptance, OR upon commencing performance of the work--commenced performance, within a reasonable time, which they did

Desny v. Wilder

Desny, aspiring playwright, came up with idea for movie based on life of a man who died after being trapped in cave-

Desny v. Wilder

Disney came up with movie idea, disclosed it to Wilder's secretary==

2-204

Even though one or more terms are left open for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving the appropriate remedy

Mc'Intosh reasons behind statute of frauds

Evidentiary- Antifraud Cautionary-Reflects seriousness of contracting Channeling- Distinguishing enforceable contracts

Expanded Bargain theory in Ctracts

Explains enforcement of promises made as a result of an actual bargain. Hypothetically every promise kind causes some reasonable reliance, so why does §90 not govern all. Enforcement of promises made as a result of an actual bargain. Think of all bargains in a bargain context. If a person COULD HAVE bargained for a result, it's probably a contract. If could not reasonably bargain, because soliciting a promise would have been inappropriate given social context, NO enforcement. Generally the promisee has the leverage necessary to induct the promisor to make a legally enforceable promise (sometimes but not always a promise in return)

Pluralist argument--Systematic cognitive error

Fairness goal--is to protect and do justice for those that are susceptible to systematic cognitive error. Would everyone in Hoffman's shoes do the same?

Lefkowitz v. Great Minneapolis Surplus Store

First come, first serve, dollar jackets--

Procedural unsconsionability-- element of unconscionability

Focuses on oppression and surprise. Oppression-inequality of bargaining power which results in no real negotiation and an absence of meaningful choice. Surprise--extent to which agreed upon terms are hidden, characteristically written by him who has a superior position

Graddon v. Knight

Gardens were having a home built for them and d bank was providing financing. Court found promissory estoppel liability

2-302

If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may limit the application of any unconscionable clause as to avoid some unconscionable result

Printing & Numerical v. Sampson

If there is one thing which more than another public policy requires it is that men of full age and competent understanding shall have the utmost liberty of contracting, and that their contracts when entered into freely and voluntarily shall be held sacred and shall be enforced by Courts of justice.

Why no quasi in Trimmer?

Implied obligation to compensate arises from those situations which we expect to pay for. Friendship is its own reward

How can courts tell that the manifestation is a commitment

Language used by parties, context in which language is used

Basic test for unconscionability

In light of general commercial background and needs the clauses involved are so one-sided as to be unconscionable under the circumstances existing at the time of making the contract

Good faith (2-103 (b)

In the case of a merchant means honesty in fact and observance of reasonable commercial standards of fair dealing in trade

Pluralist scholar on unconscionability

Inclined to support the use of it when the probability of consumers suffering from systematic cognitive error seems high

Ionics v. Elmwood

Ionics, Inc. (Ionics) (plaintiff) manufactures water dispensers. On several occasions, Ionics purchased thermostats from Elmwood Sensors, Inc. (Elmwood) (defendant) to place in the water dispensers. After each purchase, Ionics sent Elmwood a purchase order describing the remedies available to Ionics in the event of breach, as well as a statement that unless Elmwood objected to these terms in writing, the terms would become part of the contract. After receiving each purchase order, Elmwood sent Ionics an "acknowledgement" saying that it rejected any additional terms proposed by Ionics. Additionally, Elmwood limited its liability for damages resulting from use of its thermostats. Elmwood stated that this language constituted a "counteroffer" that would be deemed to have been accepted by Ionics unless rejected in writing within 10 days. Several of Elmwood's thermostats placed in Ionics' water dispensers malfunctioned and caught fire, causing damage to Ionics' customers. Ionics brought suit in federal district court against Elmwood. Elmwood argued that Ionics accepted its "counteroffer" limiting Elmwood's liability for damages. Elmwood moved for partial summary judgment. The trial court denied Elmwood's motion for partial summary judgment, and Elmwood appealed. Essentially this is a battle of the forms case

Statute of Frauds

M: consideration of marriage; Y: not to be performed within one year; L: sale of an interest in land; E: a contract of an executor; G: sale of goods for $500 or more; S: a contract to answer for the duty of another (the suretyship provision)

Common law view on acceptance

Mirror image rule--if acceptance varied in any way from terms of the offer, the acceptance was a counteroffer.... looping into last shot doctrine--Someone's silence would signal acceptanc

Meaningfulness of choice (part 1 of unconscionability)

Negated by gross inequality of bargaining power.

Feinberg

No consideration, but promissory estoppel

Marriage?

No fault divorce laws, means person can defect and get's nothing. Back then there was fault for person who strayed.

Non-bargain context

Non-reciprocal--there is no expectation of return--promisor has less reason to make promise legally enforceable. Haas, Hayes, here there was no way they wanted to be legally bound.

Kirksey v. Kirksey

Not enforceable because it was a gift. A gift is a contract without consideration.

Part performance

Not to be performed within a year will not take it out of the statute unless in some jurisdictions the part performance is reliable evidence of the agreement.

Data serv

Offered to sell computer components to Technology with proviso that, InDepth, a designated third party, would install computer components. Dataserv purported to accept technology's offer, but since they had rejected the offer and it was terminated and cannot be accepted without ratification by the other party.

1 function of contract law--sorting problem

Our legal system does not enforce all problems, not even those seriously intended. Objective theory.

Pledges to give money

Outside context where parties can bargain for promises by increasing the value of what they agree to give in return.

"Material" term

Required or there would be no contract

Feinberg

Pfeiffer Co.--would anticipate the need to make a legally enforceable promise rather than waiting for the promisee to press the issue

Baird Co. v. Gimbel Bros

Plaintiff bidding to build construction building, took a bid from Gimbel Bros, Gimbel refused to perform, court found that gimbal's bid was not an offer of a unilateral contract that Baird could accept by performing, i.e. submitting the general bid.

Fairmount glass

Price quoting led to contract--

Cortel v. Summit Thread Co

Promised "reasonable recognition"--yes because reasonable compensation for inventions was do-able

Contracts must have consideration

Promissory estoppel, material benefit rule

Note or memorandum in writing

Restatement § 131. Unless additional requirements are prescribed by the particular statute, a contract within the Statute of Frauds is enforceable if it is evidenced by any writing, signed by or on behalf of the party to be charged, which (a) reasonably identifies the subject matter of the contract, (b) is sufficient to indicate that a contract with respect thereto has been made between the parties or offered by the signer to the other party, and (c) states with reasonable certainty the essential terms of the unperformed promises in the contract.

Relevant for Monetti

Restatement § 139(2)(b): a factor re estoppel is the "definite and substantial character of the action" UCC § 2-201(3)(c): contract enforceable re goods "received and accepted"

Offer

Restatement § 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.

Autonomy Theory (non-instrumental)

Right of individuals to self-determination--to exercise their capacity to form, revise and pursue their own conception of the good. Facilitates future planning. Does not require legal enforcement of all promises--requires legal enforcement only if those promises intended by fully autonomous individuals to be legally enforceable. Otherwise it would fail to respect the promisor's exercise of free will. Individuals are free to bind themselves by undertaking promissory obligation. If an individual makes a promise he intends not to be legally enforceable, bound only by morality. When individuals bind themselves by making a promise they DO intend to be legally binding, the autonomy requires promises to be enforced by law.

Drennan v. Star Paving

Subcontractors bid was held to be irrevocable under 90

Substantive Unconscionability

Terms of the agreement itself--unreasonable price, which deprives people of the essence of bargain.

Getting at

So...make an offer, mirror image rule. the person "Accepts" the offer, but adds terms, which since it's not the mirror image is a counter-offer, which if

2-207 (2) Between merchants the terms become part of the contract unless

The additional terms are to be construed as proposals for addition to the contract..unless a) the offer expressly limits acceptance to the terms of the offer, b) they materially alter it, or c) the notification of objection to them has already been given or is given within a reasonable time after notice of them is received.

Hume

The conventions of men ... create a new motive, when experience has taught us, that human affairs wou'd be conducted much more for mutual advantage, were there certain symbols or signs instituted, by which we might give each, other security of our conduct in any particular incident, After these signs are instituted, whoever uses them is immediately bound by his interest to execute his engagements, and must never expect to be trusted any more, if he refuse to perform what he promis'd.

Jeremy Betham--Principle of utility

The principle of utility is the foundation of the present work: it will be proper therefore at the outset to give an explicit and determinate account of what is meant by it. By the principle of utility is meant that principle which approves or disapproves of every action whatsoever, according to the tendency which it appears to have to augment or diminish the happiness of the party whose interest is in question: or, what is the same thing in other words, to promote or to oppose that happiness. I say of every action whatsoever and therefore not only of every action of a private individual, but of every measure of government.

2-207 (1)

There is an acceptance if it is sent within a reasonable time and 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

How would aristotle do corrective justice?

These names, both loss and gain, have come from voluntary exchange; for to have more than one's own is called gaining, and to have less than one's original share is called losing, e.g. in buying and selling and in all other matters in which the law has left people free to make their own terms; but when they get neither more nor less but just what belongs to themselves, they say that they have their own and that they neither lose nor gain.

McIntosh v. Murphy

Think SoF, the court claimed the d had employed the M for a year, which would then not fall in the SoF, but then enacted

Some examples of transaction costs

Too many parties, (leading to pollution), Emergencies (or no time to bargain), Information processing problems, agent misbehavior,

Agreements to agree

Unenforceable at common law absent an external reference point

Material benefit rule contemporary

Usually when A has an idea that is valuable to B, but once A has disclosed it to B it would be difficult to prevent b from benefitting. Subsequent promises are not bargained for, not for the consideration--made after seller has voluntarily transferred its idea or information

False positive

We think we have a contract, only we don't ---Leonard v. Pepsico

Indefiniteness doctrine at common law

Where the parties did not make their intentions clear, common law presumed failure to reach an agreement on material terms, where no terms could be objectively supplied, implied an intention not to be legally bound

Paradox of PD Game

While cooperation is collectively rational, defection is individually rational. The undersupply of cooperation is "the tragedy of the commons." Garrett Hardin, The Tragedy of the Commons (1968).

For indefinite agreements, why leave a term open?

Why leave a term open Didn't occur to one The informational problem and the impossibility of a Complete Contingent Contract Don't want to block progress on negotiations Uncertain outcomes

False negative

You deny something. Only it's true. You think there is no wolf. Only there is. The test says you don't have the disease, only you do --Lucy v. Zehmer

Hume on beneficial reliance

Your corn is ripe to-day; mine will be so tomorrow. `Tis profitable for us both, that I shou'd labour with you to-day, and that you shou'd aid me to-morrow. I have no kindness for you, and know you have as little for me. I will not, therefore, take any pains upon your account; and shou'd I labour with you upon my own account, in expectation of a return, I know I shou'd be disappointed, and that I shou'd in vain depend upon your gratitude. Here then I leave you to labour alone: You treat me in the same manner. The seasons change; and both of us lose our harvests for want of mutual confidence and security.

duty

a moral requirement "naturally" imposed when not voluntarily undertaken. E.g., tort law duties

Hume (From his essay)

a person cannot bind himself through a statement of intention, even if accompanied by the most ferocious private act of will (whatever that might mean). Private resolutions and intentions are brute facts; but promising is an institution and the act of promising is an institutional fact which cannot be self-created. Promissory obligations arise through a convention and not from the mental act of willing a moral duty. Without the institution, one might grit one's teeth and silently will as much as one wants, without producing a promissory obligation or a binding contract.

Who is a merchant?

a person who deals in goods of the kind or otherwise who holds himself out as knowledgable in a skill that can be attributed by his employment

Cautionary--deterrent function

act as a check against rash, impulsive actions that will not be enforced at the disadvantage of the promisor

Obligation

an "artificial" moral requirement voluntarily undertaken

Step Saver v/ Wyse Technology

box top license was under 2-207 (1) the box top license did not constitute a conditional acceptance. Therefore 2-207 (3)

Battle of the forms?

commercial parties buy and sell goods using standardized purchase order and acknowledgement forms whose payment and delivery terms agree but whose boilerplate terms--warranties, risk of loss, other contingincies--do not

Cole v. Sandel Med. Industries, LLC

court ruled no contract existed when a nurse sued a medical supplier for submitting her idea--via online for--submitted time out towel, company had very similar invention--Cole made counter offer, company rejected--online submission form new offer

2nd function--gap filling

default rules

East Providence Credit Union v. Geremia

defendants borrowed money, secured it with the car, and the plaintiff agreed to pay for insurance premium on car if defendants were to default, there was valid consideration because the plaintiff was definitely going to get interest on the loan

Channeling function--

framework by which a party may fit his actions, or to change the figure, offers channels for legally effective expression of intention

Intra-familial promisors

motivated by loyalty, love, morality, or charity. Promises tend to be highly reliable w/o legal enforcement.

The Material Benefit Rule

promises made in recognition of a benefit received conferred--86.

Neo-Classical response

recognized shortcomings of consideration but said it was premature to toll the bell on contract law. Consideration didn't need to be abolished, just the idea that the ends it served didn't matter. Consideration--argued t o serve the evidentiary, cautionary, channeling functions..but also 1) there is the desire to protect private autonomy, or freedom of contract. 2) There is the desire of a capitalist system as a whole to promote the exchange of goods and services. 3) Reliance should be protected that a party is compensated for any hardship which results when he changes his position

Consideration

sorts out those promises legally enforceable and those not

Economic Analyst

the assumptions supporting the case for intervention

§63 Time when Acceptance Takes Effect

§63. TIME WHEN ACCEPTANCE TAKES EFFECT. Unless the offer provides otherwise, (a) an acceptance made in a manner and by a medium invited by an offer is operative and completes the manifestation of mutual assent as soon as put out of the offeree's possession, without regard to whether it ever reaches the offeror

When should contracts be enforced?

● The benefit afforded by promissory institutions is a greater assurance of performance ● Contract enforcement promotes freedom which = happiness ● Contract enforcement makes people wealthy = happiness