Contracts

UCC §2-105

"Goods" means all things (including specially manufactured goods) which are moveable at the time of identification and to the contract for sale other than the money in which the price is to be paid, investment securities, and things in action

RS § 32

"in case of doubt, the offeree may accept either by promising to perform or by rendering the performance, as the offeree chooses."

UCC § 2-207(1) & (3)

1. A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms. (No contract under 1 b/c of unless provision, jump to 3) 3. Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. In such cases the terms of the particular contract consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of this act.

RS 41: Lapse of Time

1. An offeree's power of acceptance is terminated at the time specified in the offer, or, if no time is specified, at the end of a reasonable time. 2. What is a reasonable time is a question of fact, depending on all the circumstances existing when the offer and attempted acceptance are made.

Elements of a contract

1. Mutual Assent 2. Offer 3. Acceptance 4. Consideration

Outputs Contracts

A contract between a supplier or manufacturer and a buyer where a buyer agrees to purchase a seller's entire output and a seller agrees to sell its entire production to the buyer.

Requirements Contracts

A contract between a supplier or manufacturer and a buyer where the seller agrees to sell all the particular products that the buyer needs, and the buyer agrees to purchase the goods exclusively from the supplier. Exception: where quantity is unreasonably disproportionate to the state estimate or prior output or requirements. In such a case, the agreement is not enforceable in amounts that exceed a reasonable quantity.

Rego v. Decker "Gas Station Purchase Option Enforceable"

A lessee was given an option (without security) to purchase a leased property. He accepted the option at a point and the lessor refused to honor it because he had sold the property to someone else. Court says they had a contract and it does not matter if there was no security. Rule: Even though one or more terms are left open, a contract for sale does not fail for indefiniteness if the parties have intended to make the contract and there is a reasonably certain basis for giving an appropriate remedy.

RS § 26 Preliminary Negotiations

A manifestation of willingness to enter into a bargain is not an offer if the person to whom it is addressed knows or has reason to know that the person making it does not intend to conclude a bargain until he has made a further manifestation of assent.

RS §86(2)

A past consideration promise is not binding if the benefit was a gift or the promisor was not unjustly enriched.

Consideration

A promise is generally supported by consideration if the promisee gives up something of value and there is a bargained-for exchange (the promisor gets something of value in return). Catch phrases: reeks of gift, a promise to make a present, does the promise induce any stream of action?

Restatement (Second) of Contracts §90 Alternative to Consideration: Promissory Estoppel

A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires.

Void Contract

A void contract is one that is totally without any legal effect from the beginning. It cannot be enforced by either party.

Voidable Contract

A voidable contract is one that one or both parties may elect to avoid

RS § 69(1)(a)

Acceptance by silence where the offeree takes benefit with opportunity to reject and knows the offeror expects compensation.

RS 86(1)

Allows a small exception if the past consideration is for a benefit received, binding to the extent necessary to prevent injustice

RS 63 Mailbox Rule

An acceptance is enforceable when it is out of the hands of the offeree. But for an option contract, acceptance must be received within the option period to be considered effective.

RS § 66

An acceptance is not operative upon dispatch unless it is properly addressed.

RS § 24

An offer is a manifestation of willingness to enter into a bargain so made as to justify another person in understanding that her assent is invited and will conclude it.

RS 29(2)

An offer may create power of acceptance in a specified person or in one or more of a specified group or class of persons, acting separately or together, or in anyone or everyone who makes a specified promise or renders a specified performance

RS § 30

An offer may invite or require acceptance to be made by an affirmative answer in words, or by performing or refraining from performing a specified act, or may empower the offeree to make a selection of terms in his acceptance. Unless otherwise indicated by the language or the circumstances, an offer invites acceptance in any manner and by any medium reasonable in the circumstances.

Unenforceable Contract

An unenforceable contract is an agreement that is otherwise valid but which may not be enforceable due to various defenses extraneous to contract formation, such as the statute of limitations or Statute of Frauds.

Lingenfelder v. Wainwright Brewery Co. "Architects... Always Wanting More"

Architect was working for D; D gave a contract to another building to someone else and P threatened to not complete his work; D said he would pay P more if P would not quit. Rule: When a contact is modified for the sole benefit of one party, the modification is unenforceable for lack of consideration

Kołodziej v. Mason "Million $ Challenge"

Attorney representing his client for murder goes on TV and says "I challenge anyone to show me, and guess what? Did they bring in the evidence to say that somebody made the route, did so? State's burden of proof. If they can do it, I'll challenge them. I'll pay them a million dollars if they can do it." Edited to say: "I challenge anyone to show me- I'll pay them a million dollars if they can do it." Kolodziej accepts challenge Rule: Objective test- how a reasonable objective person would have understood the potential offeror's communication

Norcia v. Samsung "Arbitration in the Box"

Buyer bought new phone from Verizon store; Inside the phone box there was a 101 page brochure that included an arbitration clause that allowed the buyer to opt out within 30 days; Store clerk took the phone out of the box and the buyer did not take the brochure with him when he left the store; The buyer never opted out of arbitration and sued Samsung for making misrepresentations about Galaxy S4 Rule: Silence doesn't constitute acceptance when the offeree does not reasonably know an offer has been made.

Morrison v. Thoelke "Accepts By Mail, Rejects by Phone"

Buyers in Florida send a contract to sellers in Texas to buy land in Florida. After the acceptance had been mailed and before sellers received it, the buyer calls the seller and says he doesn't accept. Rule: An acceptance is effective when it is mailed even when a subsequent rejection is actually received before the acceptance. Rule: An acceptance is enforceable when it is out of the hands of the offeree.

RS §82

Courts will enforce a promise based on moral obligation when a party promises to pay antecedent debt if the debt is still enforceable or if the only reason the debt is not enforceable because of the statute of limitations

Dickinson v. Dodds "I Already Sold the Property!"

D made an offer to P to sell real estate property; offer open until Friday at 9 pm to accept (nudum pactum); P hears that D as made a deal with someone else before deadline and tries to accept, D won't let him saying he already has a contract; Was the contract properly revoked? Court says D could revoke. Rule: offer is freely revocable by offeror unless offeree has given both acceptance and consideration Rule: An offeree's power of acceptance is terminated when the offeror takes definite action not consistent with intent to contract with original offeree AND the offeree has knowledge of this. Rule: Offer can be revoked indirectly

Branco Enterprises Inc. v. Delta Roofing, Inc. "Subcontractor Backs out of Roof Promise"

D promised to do roof for a certain amount of money. Later, they said they could not. P had to pay more to get another company to do the job. Court said there was a breach of K under promissory estoppel. Rule: This case shows the evolution of the scope of promissory estoppel beyond gift promises and into business offers. Rule: Reasonable reliance by a general contractor on a bid made by a prospective subcontractor makes the subcontractor's bid an irrevocable offer, which the general contractor may accept if the general contractor wins the overall contract. The subcontractor can no longer revoke. RS 90(1)

James Baird Co. v. Gimbel Bros. "Linoleum Miscalculation"

D was a subcontractor who submitted a bid to P, the general contractor, to supply linoleum for the contract. D estimated linoleum incorrectly in the bid. Revoked the bid after P sent off their bid but before P's bid was accepted. Rule: Court said promissory estoppel is only applicable to situations involving gift promises as a substitute for consideration; this changed as promissory estoppel evolved. Rule: Today, the firm offer rule would not let a revocation occur if the offer to sell the good had been in writing. Likely a different result today, given the Branco case.

Mills v. Wyman "Sick Son Dies and Dad Offers to Compensate"

D's 25 year old son comes back from sea and is sick. P takes care of him until he dies. The dad tells P he will pay him for taking care of the son but D never pays. There is no consideration because D's obligation was moral only. Rule: A moral obligation is not sufficient to constitute consideration. Exception: If the son had been a minor, D would have been obligated to pay because he is responsible for him.

Dyer v. National By-Products, Inc. "Lifetime Employment that Never Was"

Dyer lost his foot and alleges he was offered lifetime employment to not sue on his claim. The lower court granted summary judgement for the employer. The Supreme Court of Iowa reversed, following RS 74, and had the lower court find facts on whether or not Dyer had a good faith belief. Rule: Forbearance of filing a claim is valid consideration as long as the forebearer has a good faith belief in the validity of that claim, even if the claim turns out to be invalid. As a policy, it encourages parties to settle.

Continental Laboratories v. Scott Paper Co. "Contract to Follow"

Entered into negotiations concerning a potential supply and distribution agreement where Continental would supply hotel amenity products; had 5 drafts, each with new changes. Rule: Look at parties words and actions viewed within the context of the situation and surrounding circumstances. Rule: A party will not be bound to an oral agreement where they clearly intend the execution of a written document to be a condition precedent to the formation of a binding contract.

UCC § 2-204(3)

Even though one or more terms are left open a contract 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 an appropriate remedy.

Consideration: Failure v. Want

Failure of consideration is when someone did not pay what was agreed to; this is a breach Want of Consideration: no contract existed in the first place because there was no consideration. A bad deal is still a deal. Courts are not going to police the bargaining process for bad deals (unless there is some other defense like fraud, duress, etc.)

Hoffman v. Red Owl Stores "Red Owl Alliance"

Guy wanted to franchise a grocery store and D kept raising the price and telling him to sell the store and other things to P's detriment. Reasonable minds couldn't have differed. No K Rule: Promissory estoppel may be a cause of action even when no contract exists (no offer and no acceptance); Can still get damages even if they never reached a deal if the party materially changed their position. Court granted damages because of detrimental reliance RS 90

UCC § 2-205- Firm Offer Rule

Holding an offer open for certain time for goods. A signed writing by a merchant to hold open an offer for less than three months is not revocable for lack of consideration. The offer is irrevocable for the duration of the offer if the time stated is less than three months; if the stated time is more than three months, the offer is open for the stated period but may be revoked after three months

RS §87 Option Contract

I. An offer is binding as an option contract if it: A. is in writing and is signed by the offeror, recites a purported consideration for the making of the offer, and proposes an exchange on fair terms within a reasonable time or B. is made irrevocable by a statute.

Contracts involving goods and non goods Predominant Thrust Test

If a sale involves both goods and services, a court will determine which aspect is dominant and apply the law governing that aspect to the whole contract. However, if the contract divides payment between goods and services, Article 2 will apply to the sale portion and common law will apply to the services portion.

UCC §2-205

If an offer by a merchant to buy or sell goods is signed and gives assurance that it will be held open, it is not revocable for the stated or reasonable time.

RS § 45(1)

If an offer invites an offeree to accept by performance (unilateral), an option contract is formed at partial performance Note: Option contract is created when offeree begins performance in a unilateral contract

1464-Eight LTD v. Joppich (Texas)

Joppich entered into a contract with P and Millis to purchase a lot in a subdivision that was being developed by Millis. Joppich and Millis included an option contract that was signed by both parties. The option provided that Millis could buy the lot back after 18 months if Joppich did not develop the property within that time. The option required payment of $10 to Joppich to keep the opinion open, but it was never paid. Rule: an option contract that recites consideration, even if the consideration is never given, is valid so long as the contract proposes an exchange on fair terms. Rule: you can have nominal consideration for an option contract, but not for the underlying transaction that the option is keeping open.

Beard Implement v. Krusa "Combine Case"

Krusa wanted to buy a combine from Beard Implement; Sellers believed they had struck an oral deal; Krusa had signed the document and provided a counter check that was not dated; the K had a home office approval clause that was never signed by Beard Implement. Rule: An offer shall be construed to invite acceptance in any manner and by any medium reasonable in the circumstances unless unambiguously indicated.

Schnell v. Nell "Love and Affection as Consideration"

Lady died and left in her will $200 to each of three parties but she had no money to her name. Her husband agreed to pay the parties for 1 cent, love and affection, and her inoperative will as consideration. Court said not adequate consideration. Rule: a contract will be voided for want of consideration where the consideration given by one party is only nominal and is intended to be so. Rule: Love and affection is not consideration (past consideration)

Lefkowitz v. Greater Minneapolis Surplus Store "Lapins and Lairs"

Lefkowitz saw an ad in the paper to buy fur for $1 "first come, first served"; He was first one there but owner would not sell him the fur because he was not a woman Rule: An advertisement is generally not an offer; instead it is a mere invitation to enter into a bargain. Ads are only offers when the ad is clear, definite, and "I accept" would close the deal. Rule: Whether an offer has been made depends on the objective reasonableness of the alleged offeree's belief that the advertisement was intended to be an offer. The more specific the ad, the stronger the argument for an ad as offer

Walker v. Keith "10 Year Lease, No Enforceable Reward"

Lessee was given an option to renew his lease for another 10 years before the lease was up. Lessors said they would determine the rates on a comparative basis, but no more details. Lessee wanted national rates and the lessor wanted local rates. Court said there was no contract because of indefiniteness. Rule: A contract does not exist when the contract does not contain an essential term, like price, and no standards are included for the court to determine the term.

Lucy v. Zehmer "High As A Georgia Pine"

Lucy wanted to purchase land from Zehmer and offered $50,000 for the farm; Zehmer wrote up K on the back of a check stub and agreed to sell Lucy the farm; Zehmer later said he was intoxicated and joking- no K. No Subjective Meeting of the Minds Rule: Outward manifestations outweigh inner intent when a reasonable person would believe a contract was formed. Rule: Intention of both parties to contract is not necessary if a reasonable person could believe that one party had a right to, and did, conclude there was a contract. Rule: Mental is not required. Objective assent is required.

Commerce & Industry v. Bayer Corp. "Fire in the Fabric Factory"

Malden Mills had a fire caused by goods sold by Bayer. MM sent PO to Bayer with arbitration provision. Bayer sent back a response form with no arbitration clause, but form had an unless proviso. Bayer went ahead and shipped the goods and MM accepted. Now, Bayer wants to make MM arbitrate over the fire matter. Court rules K was formed under 2-207(3) and arbitration would not be used because it was never established in the contract. Rule: Where a contract is formed by the parties' conduct, only terms which are common to both parties' forms become terms of the resulting contracts.

RS § 27

Manifestations of assent that are in themselves sufficient to conclude a contract will not be prevented from so operating by the fact that the parties also manifest an intention to prepare and adopt a written memorial thereof; but the circumstances may show that the agreements are preliminary negotiations.

Loring v. City of Boston "Reward of Catching Arsonist"

Mayor puts ads in the paper offering a reward for the apprehension of arsonists responsible for recent fires. Almost 4 years later, P catches arsonists and wants to be compensated. Court held it wasn't a reasonable time. Rule: An offer is good for "a reasonable amount of time." What is reasonable is a question of fact.

Meyer v. Uber Tech. "Uber Arbitration Case"

Meyer downloaded and used Uber app; then sued Uber for price-fixing; Registering for Uber required agreement to binding arbitration and Meyer says he did not know he agreed to arbitration; claims the terms were hidden. Rule: If a reasonably prudent person (smartphone user) would know they are agreeing to terms, they are bound by the terms. Rule: Notice of a web agreement must be clearly and explicitly displayed. Rule: In order for an agreement to be valid, there must be actual notice or constructive notice that you are entering into an agreement.

Common law mirror image rule & Notes on modern common law application.

No contract is formed when parties exchange documents unless the material terms match exactly. This applies to contracts for services (not goods, which are governed by the UCC). If an acceptance contains different terms, it is a counter-offer instead.

Batsakis exception

Nominal consideration (in name only; pretense or sham) is not good enough. Courts do not inquire into the adequacy of consideration, BUT nominal consideration is not good enough where it "reeks of gift"

Northrop v. Litronic "Whose Warranty is it Anyway?"

Northrop solicited offers from manufacturers, including Litronic, to sell to Northrop a customized printed wire board. Litronic sent an offer to Northrop. The offer (by Litronic/seller) had a limited 90-day warranty. The acceptance (by Northrop/buyer) had a warranty of unlimited duration. Northrop rejected Litronic's goods after six months as defective and instituted suit. Three different approaches by courts across the country: One minority view: A different term can never become part of the contract. This is a strict reading of the statute. Another minority view: Different terms are treated the same as additional terms. The different term would be part of the contract unless it's a material alteration. Majority view (adopted in Northrop): The "knock out rule". Different terms are knocked out of the contract. Some courts knock them out completely, some knock terms out to the extent they're different.

Can we reconcile Webb and Mills?

Not actual consideration, the court felt it was the right thing to do. Mills is the rule: past consideration does not equal consideration Webbs is the exception

RS § 43

Offeree cannot accept when the offeror takes action inconsistent with intent to contract and the offeree has knowledge of this.

Allegheny College v. National Chautauqua County Bank "Donation To College"

Old lady promised to pay the college money when she died if they would use it as she wished. Before she died, she took back the promise. The court said that her estate had to pay up because the college detrimentally relied upon that promise. Found consideration based on the naming Note: With charitable donations, no consideration is necessary if there is a subscription (signing your name) because the charities rely on the donations and no action induced by the reliance is necessary. "A charitable subscription is a signed, written promise to make a gift to a charity."

Klocek v. Gateway "Terms in the Computer Box" (Contrast w/ ProCD case)

P bought a computer from D. Got the computer delivered with terms and conditions inside. The terms inside the box -- one clause says P has to arbitrate and if he disagrees with terms he has 5 days to return the product. P claims under 2-207 he doesn't have to arbitrate. Court agrees. Rule: If one party is a non-merchant, then the new term doesn't become part of the contract unless the non-merchant explicitly agrees to it. Rule: A purchaser does not necessarily have to accept the standard terms and conditions agreement, which may include an arbitration clause, located in the package containing a mail order product. (Contrast from ProCD case where terms popped up on screen before user could use product) Rule: 2-207 can apply to "one form contracts" because there's no specific language in the statute that says there have to be forms from both sides.

Day v. Caton "Wall Between Houses"

P builds a wall between his and D's home. D never objects to the act or says he won't help pay for it. P sues D to pay for the other half of the wall. Court says since D knew of performance and didn't say anything, silence as acceptance to K Rule: A promise to pay may be inferred if a party voluntarily accepts and takes advantage of a valuable service rendered for his benefit but remains silent about it, even if he didn't request or authorize the benefit.

Sylvan Crest Sand & Gravel Co. v. United States "Trap Rock"

P had 4 contracts with the US gov't to provide different sizes of trap rock for an airport. D refused to request or accept delivery. D just ignored P and never requested the rock. P alleges breach of contract, and D alleged that the agreement was illusory because of language that said the gov't could cancel anytime. Rule: Because the gov't had to give reasonable notice before cancellation, they were not entirely free to cancel at any time; therefore they were bound.

Webb v. McGowin "Riding the Wooden Block"

P saved his boss's life by falling off a platform guiding a large block away from his boss. He sustained injuries and his boss promised to help him financially until P died. D died and payments stopped for P. Court said saving D's life was a "material benefit" so there was consideration. This actually is not consideration but the court felt like it was the right thing to do. Rule: Moral obligation + material benefit= consideration Rule: A promise made in recognition of a benefit received by the promisor is binding to the extent necessary to prevent injustice.

Universal Computer Systems v. Medical Services Association of Pennsylvania "Guy Promises to pick up Bid"

P wanted to submit a bid to D. worker for D with apparent authority tells P he will pick up the bid and get it there in time. Neither the D nor the worker pick it up. Promissory Estoppel- P relied on D or D's worker to pick up the bid and acted to his detriment. Rule: A promisee who reasonably relies upon the apparent authority of another to his detriment may recover for breach of contract based on promissory estoppel. RS §90

Stilk v. Myrick "110 Percent (Sailor Case 2)

P was a worker on the ship where 3 other workers deserted. Captain told him he would pay extra if he would pick up the slack. Court held that the Captain did not have to pay because the workers had a contract to do the work required. Rule: Modifications of employment contracts where there is no additional work or duties are not supported by consideration. The employees were already committed to exert themselves fully.

Davis v. Jacoby "Niece who was like a Daughter"

P was raised by aunt and uncle; aunt is dying and uncle asks P and her husband to move in and take care of them; Says, if you come you will inherit everything; P said they would come, made arrangements to come, find out uncle committed suicide; P comes to take care of aunt; aunt dies and P finds out everything was left to other people. Issue: Was the contract unilateral or bilateral? Court says bilateral and P promised and performed by sending letter and coming and taking care of aunt.

Hayes v. Plantation Steel "Retired Worker Loses Pension"

P worked for D for 51 years; in January, P announces he will retire in July. D gives him pension as a gift but it wasn't consideration for his retirement; he would have retired regardless. Rule: past actions cannot constitute consideration. There must be some present exchange/bargaining. There was also no promissory estoppel because there was no material reliance or change of position based on the promise to "take care of him." his mind was already made up that he would retire.

Clark v. Elza "Car Accident Settlement Disagreement"

Parties in a car accident make a settlement outside of court. P went to go see a doctor and determined that her damages were higher so she wanted to get more money. Court said no, they had a bilateral contract. Rule: An executory accord to settle a pending lawsuit may be raised as a defense to prevent prosecution of that suit. Rule: If two parties agree to do something in the future, they cannot breach unless it is mutually agreed. Rule: One can settle a claim; the promise to take less than what you might get is consideration Exception: The settlement has to be in good faith. Example: you owe $1000 but in good faith believe you owe $750. The other party agrees to the $750, the promise is binding

RS §73

Performance of a duty owed to a promisor which is not disputed is not consideration, but it is if it differs from what was required in a way which reflects more than a pretense of a bargain.

RS 71

Performance or a return promise must be bargained for to constitute consideration. Forbearance constitutes consideration if a party had a legal right to do those things

Batsakis v. Demotsis "Desperation in WW2"

Person agrees to trade 500,000 drachmas (allegedly $25 in value) for a later payment of $2,000 plus 8% interest. Court found that consideration was adequate. Rule: Mere inadequacy of consideration will not void a K. Rule: Courts do not inquire as to how valuable the consideration is as long as it has some value and is therefore not a sham.

Petterson v. Pattberg "I have come to pay off the mortgage"

Petterson goes to Pattberg's house to pay the mortgage because Pattberg offered to cut some of Petterson's mortgage. Petterson goes to the closed door with cash and Pattberg responds from behind the closed door "you're too late, I've already sold the mortgage" Rule: Where offer requires performance to accept, the offer can be revoked prior to such performance. Modern Rule: If an offer invites offeree to accept by performance, an option contract is established by partial performance (more like dissent in Pattberg). Partial performance will turn the seller's offer to enter into unilateral contract irrevocable.

RS § 87(2)

Preparation to perform: if an offeror expects to induce performance and performance begins, option contract is established to the extent necessary to avoid injustice. Reliance

Princess Cruise Lines v. GE "The UCC doesn't Apply"

Princess Cruise Lines ship was scheduled for an inspection and repairs by GE. Princess sent GE a purchase order that included a contract price, terms and conditions, and warranties. GE sent a final quote. Though some goods were to be provided, most of what GE needed was on the ship (primarily services). Princess gave GE permission to begin and paid in full. GE did not clean the rotor properly which caused some damage. Rule: When a contract deals with services, the common law applies. Not the UCC.

How an Offer Dies

RS §36: Methods of Termination of Power of Acceptance RS §38: Rejection RS §39: Counteroffer RS §41: Lapse of Time

PFT Roberson v. Volvo "Freightliner Trucks"

Roberson and Volvo were emailing back and forth about renting trucks from Volvo; They had come to agreement on some terms but not all; Roberson says there was a K and Volvo says none; Roberson forced to go back to Freightliner to rent to trucks. Rule: When negotiators say that an agreement is subject to a more definitive document, this demonstrates intent not to be bound until that document is prepared and signed. A contract cannot be a mere agreement to agree. Rule: Should agreement on essential elements fail, it is a failure of negotiation, not performance. A contract is unenforceable if the essential terms are missing or are so uncertain that there is no basis to determine how the parties' futures are bound.

Stepp v. Freeman "Implied in Fact Lottery Contract"

Rule: For a contract to be implied in fact, assent must be expressed through interpretation of the surrounding circumstance (formal statements and actions of parties)

McMichael v. Price "Sand Dealer"

Seller owns land with sand and agrees to sell the sand to Sooner Sand who agrees to sell it to others. Sooner says all the sand they will buy will be from the seller. Sooner says that the seller has stopped supplying the sand and has breached. Seller is arguing they were not paid. Breach of requirement contract Rule: Where a requirement contract is established, the requirement by the buyer must be in good faith. Rule: A requirement contract is not an illusory promise because the party bound his future in some small way.

RS 74(b)(1)

Settlement of claims

Harris v. Watson "Don't Listen to the Master and Commander (Sailor Case 1)

Ship commander promised to pay a worker on ship more if he were to do more work during a time of danger and later the commander would not pay. Court held that the K was to do all the necessary work so he should not be compensated extra for doing work he was contracted to do. Rule: Where there is a preexisting duty to perform work for the wages agreed upon, one cannot demand more wages for the same amount of work.

Is there a pre-existing duty in the contract?

Sometimes, unanticipated circumstances can be sufficient to support modification. Is it really the same work? Ooze case example CB p. 237

2949 Inc. v. McCorkle "Flower Power to Revoke"

The McCorkles wanted to buy a sign to advertise their flower business. On February 21, they signed a form (lease agreement) that was provided by the company, Sign-O-Lite. The form said that the agreement was an irrevocable offer by the McCorkles for 60 days from the day of signing. Company also signs but does not give copy to McCorkles. 7 days later, McCorkles canceled. March 19, McCorkles got notice of acceptance from the company. Rule: For an option contract to be created, there must be consideration; calling something irrevocable does not make it so.

UCC 2-207(2)

The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract UNLESS: A. the offer expressly limits acceptance to the terms of the offer; B. They materially alter it; or C. Notification of objection to them has already been given or is given within a reasonable time after notice of them is received.

UCC § 2-305- open price term

The parties if they so intend can conclude a contract for sale-even though the price is not settled. In such a case the price is a reasonable price at the time for delivery if (a) nothing is said as to price; or (b) the price is left to be agreed by the parties and they fail to agree; or (c) the price is to be fixed in terms of some agreed market or other standard as set or recorded by a third person or agency and it is not so set or recorded. (2) A price to be fixed by the seller or by the buyer means a price for him to fix in good faith. (3) When a price left to be fixed otherwise than by agreement of the parties fails to be fixed through fault of one party the other may at his option treat the contract as cancelled or himself fix a reasonable price. (4) Where, however, the parties intend not to be bound unless the price be fixed or agreed and it is not fixed or agreed there is no contract. In such a case the buyer must return any goods already received or if unable so to do must pay their reasonable value at the time of delivery and the seller must return any portion of the price paid on account.

Consideration: Sufficiency v. Adequacy

Traditionally, the common law rule was that courts would inquire into the sufficiency of consideration, not the adequacy. Sufficiency: the offered consideration must be something that has value in the eyes of the law Adequacy: the quantity of the amounts exchanged

Fujimoto v. Rio Grande Pickle Co. "Employees in a Pickle Case"

Two men work for the pickle company and wanted pay increase; Pickle company said they would give them a profit sharing bonus of 10%; Workers sign a K because they wanted it in writing but never gave it back to the company. The company never paid them the bonus because workers never returned the K to the company; workers quit and sue Rule: Need to provide notice that you have accepted. Conduct can provide notice.

Hamer v. Sidway "I'll pay you to not drink or gamble"

Uncle told his nephew that he would give him $5000 if the nephew did not drink or gamble Rule: Forbearance can suffice as consideration. Rule: To constitute consideration, a performance or a return promise must be bargained for. The performance may consist of forbearance.

Unilateral Contracts Limited to 2 Circumstances

Under Article 2 and Restatement (Second) of Contracts, a traditional unilateral K occurs only in two situations: 1. Where the offeror clearly (unambiguously) indicates that the completion of performance is the only manner of acceptance; the offeror is the master of the offer and may create the offer in this way 2. Where there is an offer to the public such as a reward offer, which so clearly contemplates acceptance by performance rather than a promise that only the performance requested in the offer will manifest acceptance.

Battle of the Forms: Unless Proviso

Unless acceptance is expressly made conditional on assent to the additional or different terms. If there is an unless proviso, you must skip (2) and move on to (3).

Creation of a Contract

When a suit is brought in which one party seeks to enforce a K or to obtain damages for breach of K, a court must first decide whether there was in fact a contract. In making this determination, a court will ask the following three basic questions: 1. Was there mutual assent? 2. Was there consideration or some substitute for consideration? 3. Are there any defenses to creation of the contract?

Wood v. Lucy, Lady-Duff Gordon "Exclusive Marketing for Titanic Survivor"

Wood was supposed to put Lady Duff-Gordon's name into fashions and then market them. Wood says Lady Duff Gordon breached by contracting with Sears on her own, but Lady Duff Gordon argues that Wood was not bound to the deal because he can "market if he so chooses." Rule: Where a buyer has exclusive rights to distribute a seller's products, the buyer has an implied duty to use his or her reasonable (good faith/best) efforts to sell the product. Rule: An illusory promise is where one party can perform if they want to; it is not binding.

Distinguish Zehmer and Kolodziej (precedent)

Zehmer provided an outward appearance of the seller being serious, whereas in Kolodziej, the alleged offeror and offeree hadn't engaged in preliminary discussion.

ProCD, Inc. v. Zeidenberg "Modern Day Pirate"

Zeidenberg bought shrink-wrapped software; On the outside of the box, there was notice that there was a licensing agreement inside the box; Zeidenberg then pirated the info on the CD in violation of the licensing agreement that was on the inside of the box. Rule: A buyer accepts a good when, after an opportunity to inspect, he fails to make an effective rejection. Rule: Although the purchaser may not know all the details at the time of purchase (When the product is on the shelf), by accepting the offer (taking the product off the shelf), he is subject to the contract inside the product (details inside the box). Note: Courts limit contracts inside boxes to those that 1. Do not violate positive law and 2. Are not unconscionable. There also must be allowance for reflection and an opportunity to return

UCC §2-104

a merchant as one who regularly deals in goods of the kind sold or who otherwise by his occupation holds himself as having knowledge or skill particular to the practices or goods involved For many of the Article 2 provisions dealing with general business practices, almost anyone in a business can be deemed a merchant because they have knowledge and business practices To be subject to any of the merchant rules, the merchant must be acting in his mercantile capacity (must be acting in his business rather than personal capacity)

unilateral contract

acceptance by performance; the traditional unilateral contract is one in which the offeror requests performance rather than a promise. Here, the offeror-promisor promises to pay upon the completion of the requested act by the promisee. Once the act is completed, a contract is formed. In such contracts, there is one promisor and one promisee.

RS § 79

adequacy of consideration; mutuality of obligation

UCC §1-201

definition of "good faith" is honesty in fact and the observance of reasonable commercial standards.

bilateral contract

exchange of mutual promises; each party is a promisor and promisee

UCC §2-309

generally requires reasonable notice before cancellation

Nudum Pactum

naked promise; A promise to hold an offer open is a nudum pactum, a bare agreement with no consideration. Can be revoked because there is no consideration to hold the offer open.

UCC §2-306

output and requirements contracts

The Illusory Promise

promise that in fact does not impose any obligation on the promisor; the parties have not bound their future in any way ex: "if you choose to" "I promise if I so choose..."