Contracts Cases

Impossibility, Impracticability, and Frustration of Purpose

- Impossibility: Meaning: person/thing necessary for performance dies, incapacitated, destroyed, etc; prohibition of performance by governmental action a. only argument that really succeeds in practice - Frustration of Purpose Meaning: exchange called for has lost all value to the defendant, because of a supervening change in extrinsic circumstances - Impracticability Meaning: when the performance, albeit not literally impossible, was sufficiently different from what the parties had both contemplated at the time of contracting

Formation Under UCC Article 2 EC Styberg Eng. v. Eaton Corp

7th circuit Facts: plaintiffs manufactured a custom brake assembly part for D's vehicles. D was set to produce large quantities. Agent of D committed to insufficient number of parts. Exchange of letters occurred but no purchase order was ever sent Rules: - Conduct can indicate mutual assent - Under UCC, need to specify essential terms (item being traded, quantity), but price term is not necessary - continuing negotation may not lead to contract (not an offer/acceptance)

RULES: LAYERED & E-CONTRACTING

Case-Law & General Rules: · Shrinkwrap terms: After removing wrapping, purchaser can inspect, review terms, and decide to keep or return within a certain # of days. If no return, then purchaser agrees to terms · Clickwrap terms: Clicking "I agree" or "submit" or equivalent before completing the purchase of a product online. If digital purchase of physical object, the object might come in a box with a shrinkwrap agreement, too. · Browsewrap terms: Information made available by Internet providers on their websites, which are (often) free to use/access, and which are placed in such a manner that user is not typically required (or even encouraged) to scroll through them. · Requirement of Reasonable Notice: Lack of reasonable notice for method of rejection precludes enforceability of shrinkwrap agreement.

Rules: Principles of Contract interpretation

Common Law Definitions and terms: Ambiguity and "Plain Meaning": Courts often say plain meaning should prevail and evidence should be admitted only to resolve an ambiguity in the language. → Intrinsic ambiguity: apparent from words alone (think chicken case) → Latent ambiguity: not apparent from words alone but ambiguous due to the surrounding circumstances Canons of interpretation not included in restatement (don't need to remember latin words?): → a general term joined with a specific one includes only things that are like the specific one → if one or more specific terms listed without any general terms, other items even similar in kind will not be included → preference to interpretations that make a contract valid → all things assumed against the drafter, courts give less pref to the drafter when a word has two reasonable meanings

Promissory Estoppel in commercial settings Acevez v. US Bank

Common Law Facts: P took out a mortgage but defaulted after 2 years. US Bank offered to modify loan. P as a result relied on promise. US Bank broke promise & P lose her house. Rules: - To plead promissory estoppel, need to have (1) a clear and unambiguous promise; (2) reliance on the promise; (3) that the promisor could reasonably know that P would rely on the promise; and (4) injury to P. - Power imbalance and if the promisor expected the promisee to rely on it are important to consider in relation to reliance

Promissory Estoppel Harvey v. Dow

Common Law Facts: P's parents promised her land and she wants the deed. D assisted P with getting the house built. Issues happened where he wouldn't give her the land Rules: - Promissory Estoppel does not need express promise -> conduct implies promise + reasonable reliance can make binding promise - lack of consideration/express promise not a bar to enforcement - Promisor's conduct can create an implied promise that induces the promisee to undertake an action/forbearance. Enforceable by virtue of Promisee's reliance only if promisee's conduct is foreseeable and reasonable

Restitution in the absence of a promise Credit Buraeu enterprises v. Pelo

Common Law Facts: Pelo was bipolar and was sent to hospital after suicide threat. Refused to but eventally signed hospital bill for medical services. Would not pay the bill because he said he did not consent to treatment Rules: - Unjust enrichment leads to a binding contract implied-in-law - A party is unjustly enriched when it retains the benefits from another's unofficious behavior (benefit conferred from behavior that was requested/needed) - Implied in law contract: obligation imposed by the law without regards to party's expression of assent - Officious intermeddler doctrine: cannot recover if one is forced to accept a benefit against their will or without requesting/accepting it

Restitution in the absence of a promise Watts v. Watts

Common Law Facts: couple cohabitating but not married. P quits job as nurse, helped D with business. When they separated, D took everything and claimed it was because they weren't married she gets nothing. Rule: - Marriage can be considered unjust enrichment - Unjust enrichment found and restitution granted if: - D knew and conferred benefit from P when it was unequitable - unmarried cohabitants can bring unjust enrichment claims if one party attempts to retain an unreasonable amount of wealth acquired from joint efforts

ISSUE: HAS A VALID CONTRACT BEEN FORMED?

Common Law Mutual Assent (Peerless) Offer and Acceptance (Longeran, Normile) Consideration (Marshall Durbin, Dougherty, Hamer) Unilateral Contracts (Cook) Option Contracts (Berryman v. Kmoch) Agreement to Agree (Quake Construction) Battle of the Forms (Princess Cruises) Electronic Contracting (Uber) UCC Mutual Assent (no cases, same as CL) Offer & Acceptance (no cases but diff from CL re terms at formation) Consideration (no cases, same as CL) Unilateral Contracts (no cases, same as CL) Option Contracts (no cases, same as CL) Agreement to agree (Jannusch) Battle of the Forms (Styberg, Brown v. Hercules) Electronic Layering (Defontes v Dell) CISG Mutual Assent (subjective approach - cares about interpretation of the parties Offer & Acceptance (Same as UCC/CL (no mailbox rule)) Consideration (no consideration needed) Unilateral Contracts Option Contracts (irrevocable if a fixed time is stated) Agreement to agree (Contract can be missing price, assume implied reasonability) Battle of the Forms (varying acceptance is a counteroffer unless term does not materially alter the contract) Electronic Layering

ISSUE: Are there other ways to enforce a legal obligation outside of valid contract? Has there been reliance?

Common Law Proissory Estoppel (Kirksey, MLK, Acevez) Restitution (Pelo, Watts) Promissory restitution (Mills, Webb) UCC Proissory Estoppel (HarveyDow) Restitution (no cases, rely on CL) Promissory restitution (no cases, rely on CL)

RULES: Promissory Estoppel

Common Law R2d §90(1): Promissory Estoppel: A promise is binding if: (i) the promisor should reasonably expect to induce action or forbearance on the part of the promisee; (ii) it does induce (detrimental reliance); AND (iii) injustice can be avoided only enforcement of promise. → Cmt f: A promisor's conduct can create an implied promise that induces the promisee to action/forbearance. Such promises are enforceable by virtue of promisee's reliance only if promisee's conduct is foreseeable + reasonable. → Promissory Estoppel Within the Family: Bargain theory excludes dealings between family members from K sphere b/c promises tend to be "gratuitous" / driven by affection and altruism and b/c obligations are based not on ordinary contractual relationships (e.g., parent-child) → Promissory Estoppel in Charitable Subscriptions: A charitable subscription or a marriage settlement is binding under Subsection (1) without proof that the promise induced action or forbearance. → Courts often find consideration for subscriber's promise vs. legal commentators' consensus = not analytically convincing. PE thus provides an alternative route.(????) → Promissory Estoppel in Commercial Contexts: unbargained-for reliance on commercial promises = promissory estoppel → "Detrimental" reliance = change of position: doesn't necessarily mean expenditure; change of pos can even be to promisee's benefit

RULES: Promissory Restitution

Common Law → Classical Theory: Promise for benefits previously received is NOT binding because the benefits constitute past consideration → Modern Theory: Promise to pay for benefits previously received is binding to prevent injustice as long as there was unjust enrichment and the promise wasn't a gift or disproportionate to benefit (§86) → R2d §82: Promise to Pay: Promise to pay antecedent contractual indebtedness owed by the promisor is binding if the indebtedness is still enforceable or would be except for the effect of a statute of limitations. (Types of promise: acknowledgement of existence of obligation; part payment of the debt; statement to oblige that SOL will not be used as a defense). → R2d §83: Promise to Pay Indebtedness Discharged in Bankruptcy: An express promise to pay debt of promisee is binding, including if promise is made after bankruptcy proceedings began. → R2d §85: Promise to Perform a Voidable Duty: Promise to perform an antecedent contract of the promisor, previously voidable by him, but not void prior to the making of the promise, is binding. → R2d §86: Promise for Benefit Received: A promise made in recognition of a benefit previously received by the promisor from the promisee is binding to the extent necessary to prevent injustice. (Exception: gifts or for other reasons the promisor has not been unjustly enriched, if value is disproportionate to the benefit.)

RULES: Restitution in the Absence of a Promise

Common Law → Unjust Enrichment: leads to a contract implied-in-law → (NOT ASSIGNED?) Restatement 3rd Restitution §20: in emergency situations, person who provides/secures service required to protect another's life/health entitle to restitution → Person is entitled to restitution if: a. Acted unofficiously and with intent to charge, and b. Things/services necessary to prevent other from suffering serious bodily harm/pain, and c. Person had no reason to know that the other would not consent to services, if able to consent; and d. It was impossible for the other to give consent, or because of capacity (minority/mental capacity), the other's consent would have been immaterial → Restatement 3rd Restitution §107: Effect of Existence of Bargain upon Right to Restitution: (1) person of full capacity entitled to compensation only in line with the terms of bargain; (2) inference that person who requests another to render services/property thereby bargains to pay for it

Unconscionability Higgins v. Superior Court

Common Law Facts: 5 orphaned children (P) get fostered by a couple with alot of kids. Then get chosen for a Extreme home Makeover. P sign agreement with release including an arbitration clause. After that is done, they get kicked out of the house. Rules: - Arbitration may be unconscionable if it is 1) contract of adhesion; 2) procedurally unconscionable with imbalanced bargaining power; and 3) substantively unconscionable when considering results of clause - Procedural and substantive unconscionability can be a sliding scale (more of one, less of the other)

Option Contracts: Berryman v. Kmoch

Common Law Facts: P owns land and wants to sell to D. D enters into option agreement (D has the option to purchase the land w $10 as consideration), consideration was never paid. Rule: - Under Common Law (unlike UCC), an option contract to purchase land must generally be supported by consideration but not necessarily in writing (see UCC: Firm Offer Rule). - Without consideration, the option contract is no more than an offer to sell, which may be withdrawn at any time before it is accepted. - Promissory Estoppel best mode to argue if no consideration established - option contract is binding and irrevocable when there's action in reliance upon it only if it is reasonably induced by the option offer - Nominal consideration can make option contract enforceable (depends on JX)

Unconscionability Williams v. Walker-Thomas Furniture

Common Law (NOT UCC) Facts: P purchased furniture from D on an installment plan. Purchase policy was that if you default, they can take every piece of furniture you bought previously. Rules: - To determine unconscionability, Courts look at: - whether each party to the contract had a reasonable opportunity to understand the terms. - whether terms are hidden and minimized by deceptive practices - Is there party with little bargaining power and little real choice in the matter? - Corbin test: are the terms of the contract so unfair and go againt the mores and business practices of the time and place? If yes, enforcement should be withheld

RULES: Rationale for Implied Terms

Common Law/General Principles Implied-in-fact: if a court finds there to be terms implicit in parties' words or conduct, though not literally expressed Implied-in-law: a term made a part of that agreement by operation of the rules of law rather by the agreement of the parties themselves. (Can be due to statute, common law precedents, or because court concludes that it is appropriate in the specific situation of the case.) Rationale for implied rules: (1) efficiency - i.e., lower transaction costs of bargaining when parties can assume certain terms. (2) Legal fiction of a hypothetical bargain that would have occurred had the parties actually bargained over the issue prior to the agreement being finalized. (3) Relational aspects of contract law. (4) Penalty default rules to punish parties that take advantage of information asymmetry UCC UCC 2-306: Output, Requirements, and Exclusive Dealings: Reasonable quantity term implied. Best efforts implied in exclusive dealing. → Court split on what "best efforts" clauses mean: Minority: refuse to enforce such clauses on the ground of vagueness. Some: treat clauses as equivalent of "Good faith." Others: they impose fiduciary obligations on performing party. UCC 2-309: Absence of Specific Time/Termination Provisions: Required: reasonable delivery time, reasonable notice of termination. When K provides for successive performances but is indefinite, it is valid for reasonable time.

RULES: incapacity

Common Law:

RULES: Option Contracts

Common Law: R2d §87(1): Option Contracts: Offer = binding option contract if: (a) offeror's signed writing + recites a purported consideration for the making of the offer + proposes exchange on fair terms within a reasonable time; OR (b) is made irrevocable by statute. → R2d §87(2): An offer which the offeror should reasonably expect to induce action or forbearance of a substantial character on the part of the offeree before acceptance and which does induce such action or forbearance is binding as an option contract to the extent necessary to avoid injustice. → Nominal consideration: often thought not to count since it doesn't really induce the granting of the option. (Some courts take a minimalist approach inconsistent with Restatement: implied promise on part of option holder to pay the nominal consideration later suffices as consideration.) UCC § 2-205. Firm Offers. When merchant puts in writing that they'll buy or sell soemthing and promises to keep that offer open for a set time/reasonable period -> Can't change their mind during that duration even without consideration. Commitment lasts up to three months. *if by the offeree, must be separately signed by the offeror* § 2-104. Definitions: "Merchant"; "Between Merchants" Merchant: A "merchant" is someone who sells or works with specific types of goods as their job & has skills/knowldege. It can also be someone who employs an agent or broker with expertise in those goods.

RULES: Parol Evidence Rule

Common Law: General Rule: When the parties to a contract have mutually agreed to incorporate (or "integrate") a final version of their entire agreement in a writing, neither party will be permitted to contract or supplement that written agmt with "extrinsic" evidence (written/oral) of prior agreements or negotiations between them. When the writing is intended to be final only with respect to part of the agreement (incomplete/partial integration), the writing may not be contradicted, but it may be supplemented by such extrinsic evidence. Classic four corners approach: if an agreement is fully integrated (i.e., final written expression of parties' intent), no supplemental terms can be added (unless evidence of parties behaving fraudulently) - Policy: Lord Coke - don't want agreement subject to the "uncertain testimony of slippery memory" Corbin + Restatement: R2d §209: Integrated Agreement: (1) Integrated agreement = writing(s) constituting final expression of one ore more terms of an agreement. (2) Whether there is an IA should be first question court answers before interp. questions. (3) Where parties reduce an agreement to a writing which appears to be a complete agreement, it is taken as an IA unless evidence otherwise. R2d §210: Completely and Partially Integrated Agreement: Completely integrated agreement = adopted by parties as complete/exclusive statement of the terms of the agreement. Partially = other than a completely integrated agreement. This is a prelim. Question of Law for courts. (final/exclusive expression of agmt)

RULES: Statute of Frauds - Restatement

Common Law: R2d §110(1): Classes of Ks Covered by Statute of Frauds: MYLEG : Marriage, Year + long K, Land K, Executor-admin, Guarantee/surety R2d §129: Part Performance Exception: In land contract, part performance can remove contract from SoF if: "buyer" seeking enforcement reasonably relied on K and has changed her position on continuing assent of party against "seller" (i.e., made improvements to the land, etc.) R2d §131-134: Memoranda → 131: K meets SOF if evidenced by any writing that reasonably identifies the subject matter of the K, is sufficient to indicate that K has been made between the parties, and states reasonable certainty the essential terms → 132: memo can consist of several writings as long as one is signed and they clearly indicate that they refer to the same transaction (note: more generous std: even msgs repudiating K = signed writing) → 133: can satisfy SOF with a signed writing NOT made as a memorandum of the contract → 134: signature may be any symbol made or adopted with intent actual/apparent to authenticate R2d §139: Statute of Frauds and Promissory Estoppel: You can get around SOF using PE, but 5 factors to determine whether enforcement of promise is only way to avoid injustice: (a) availability of other remedies, (b) definite/substantial character of A/F in relation to remedy sought, (c) extent to which A/F evidences the promise, (d) reasonableness of A/F, (e) foreseeability of A/F by promisor.

ISSUE: Interpretation - What are the terms of the contract?

Common Law: Statute of Frauds (Arden, AlaskaRice) Canons of Interpretation (Frigaliment, C&J Fertilizer) Parole Evidence Rule (Libby, TaylorStateFarm) Implied Terms (WoodLucy) Good Faith (Morin, Locke) Warranties (Speight) UCC: Statute of Frauds: (Buffaloe) Canons of Interpretation: (no UCC case) Parole Evidence Rule: (no UCC case) Implied terms: (Liebal) Good Faith: (no UCC case) Warranties: (Bayliner)

RULES: Warranties

Common Law: adopts a lot of the warranties rules of the UCC UCC: UCC 2-313: Express warranties → Formal words "warrant"/ "guarantee" not required, but "mere opinion/commendation" or "mere affirmation of value of the goods" -> express warranty → 2-313(1) & 2-313(3): Express Warranty created by fact/promise or sample/model by seller which becomes part of the bargain → 2-313(2): any description of the good is an express warranty and the good needs to live up to that description - mere puffery doesn't count (i.e., "this is the best ___") UCC 2-314: Implied warranty of merchantability: (a) pass without objection in the trade, (b) (re: fungible goods) fair average quality w/in the description, (c) fit for ordinary purposes for which such goods are used, (d) even kind/quality/quant within/ among all units (e) adequately contained/packaged/labels, (f) conform to labels UCC 2-315: Implied warranty of fitness for a particular purpose: → Differs from merchantability warranty in several respects: (1) NOT limited to merchants, (2) created only when buyer relies on skill/judgment of seller, (3) breach does NOT require showing that goods are defective in anyway, just "mere unfitness" for buyer's particular purpose

RULES: implied obligation of good faith

Common Law: → R2d §205: Duty of Good Faith and Fair Dealing: Every contract imposes a duty of good faith and fair dealing in performance and enforcement. → Modern trend: textualist approach w/ greater emphasis on express terms, less emphasis on implied obligations. Most courts agree to impose when one party tries to undermine the "spirit" of the contract. UCC: → UCC 1-201(b)(20): Definition of Good Faith: Means honesty in fact and the observance of reasonable commercial standards of fair dealing. → Applies to all parties (both merchant and nonmerchant) the complementary concepts of "subjective honesty" and "objective reasonableness" some states have still retained to previous minimal standard of "honesty in fact" → UCC 1-302: Variation by Agreement: Can vary the effect of UCC provision by agreement. Cannot disclaim obligations of good faith, diligence, reasonableness, and care. Parties by agreement, however, may determine standards for measuring these obligations. Reasonable time of performance is assumed. → UCC 1-304: Obligation of Good Faith: Always imposed. → Courts treat not as independent cause of action but just as a direction for judicial interpretation + as not separate from duty of fairness/reasonableness. CISG: Art. 7(1): Observance of good faith in internation trade

Mitigation of damages Maness v. Collins

Facts Collins and Maness entered into a purchase agreement for Collins to purchase Maness's company. Agreed to leave Maness on as the manager. Josh Smith, who was responsible for the day to day operations, had a drug problem and was looking for ways to get Maness out (undermining his authority, etc). Maness eventually stopped performing and was fired. Rules: → If employee didn't undertake reasonable diligence to find comparable employment, reduce damages "only to the extent that the plaintiff fails to mitigate the damages." → "failure to mitigate" means": (1) No effort to find a job (2) Comparable job available

Foreseeability, Certainty, & Causation Florafax v. GTE

Facts Flower by wire company Florafax enters into a contract with Bellarose and then subcontracts a portion of that to GTE. GTE performance begins declining. Bellarose eventually terminated agreement with GTE. Common Law Rules → Loss of net expected monetary gain recoverable if (a) foreseeable (within contemplation of parties at time of K formation); (b) causation (losses flow directly from breach); (c) reasonably capable of accurate measurement. → consequential damages: lost profits due to Bellarose terminating K; incidental damages: had to set up new call center

Mitigation of damages Rockingham v. Luten Bridge Co

Facts Luten Bridge had a contract to build a bridge for the county. The members of the commission eventually voted to stop construction of the bridge, but Luten built it to completion anyway in hopes that they would change their mind. Luten sues for breach when they don't pay him Common Law Rules → Luten Bridge: Under common law, a party who is entitled to damages has a duty to try to mitigate those damages reasonably. Policy: JG: win-win for both. Promote social utility, injured party saves resources, efficiency. → Court: the measure of damages is the amount sufficient to compensate for labor, materials, and expenses incurred before the repudiation, plus the profit that would have been realized if the contract had been carried out.

Foreseeability, Certainty, & Causation Hadley v. Boxendale

Facts Plaintiffs ran a milling business, broken shaft stopped production in the mill. Told manufacturer they needed a replacement soon but didn't explain that the entire mill was down (lost profits) and that delay in receiving the shaft would lead to further lost profits UCC Rules → If damages aren't arising naturally from the breach nor in contemplation of both parties at time of formation, no damages. Need to tell people of unforeseeable potential damages → Foreseeability of the loss is either (1) when the loss stems naturally from the breach or (2) special circumstances that breaching party knew or had reason to know. → Hadley: namesake. (1) = "general" damages; (2) = "consequential" damages.

Mitigation of Damages Salina Properties v. Jetz Service

Facts Salina rents part of property to Jetz (company that owns lots of laundry machines) to install 5 of their machines. Salina then takes out Jetz machines and installs their own. Rules → Lost Volume Sellers: When injured party could have had benefit of both contracts in absence of breach, give gross profits to the lost volume seller. Key distinction is a mitigation contract vs. additional contract. Only additional Ks confer Lost Volume Seller status. → (1) Under common law, if a seller could enter into two contracts but for a breach in one, he has lost volume as a result of that breach even if used goods/services elsewhere. (2) Lost volume sellers get damages equivalent to net profit lost as a result of the broken contract. The additional contracts are not factored in.

Expectation Damages Crabby's v. Hamilton

Facts: D contract to purchase restaurant; contract contingent upon D obtaining loan (which never occurred). D started making repairs but later backed out of deal. Common Law Rules: → Expectation damages are measured by the difference between the expected benefit if the contract was fully performed and the fair market value (measured by resale price if within a reasonable time) → Express conduct can be interpreted as a waiver of contract provision → To waive provision: need written/verbal/conduct that constitutes clear, unequivocal, decisive act to waive

Damages Peevyhouse

Facts: P owned farm containing coal deposits, then leased premises to D for 5 years for coal mining. D agreed to perform restorative and remedial work at end of lease period, but did not. The restoration was estimated to cost ~29k. Common Law Rules: → When provision breached was incidental to the main purpose, and where economic benefit by full performance is grossly disproportionate to the cost of performance, damages are limited to diminution in value

Expectation Damages Handicapped Children's Ed. Board v. Lukaszewski

Facts: Teacher was hired at a school but gets a better job, then she tries to quit before the school year. School board says she cannot quit which leads her to suffer health problems. School board hires new "better" teacher, who is more expensive Common Law Rules: → Damages for breach of employment include cost of obtaining replacement services and any foreseeable consequential damages. Note - parties are entitled to what they bargained for, even if what they get is a "more valuable" service that they didn't necessarily want. → Damages is the out-of-pocket cost difference → When having to hire new employee: damages is difference in salary

Principles of Contract Interpretation Frigaliment Importing Co. v. BNS

Facts: "what is chicken?" P wanted chicken: fowl v. broilers. Disagreement as to which type of chicken stipulated in contract. Two shipments where P accepted first but then rejected second Rule: - express terms are more important than course of performance which is more important than course dealings which is more important than trade usage - Evidence that makes one interpretation impossible (i.e price evidence) will generally dictate court's judgment

Incapaciy & duress Dodson v. Shrader

Facts: 16 year old P paid D for truck which had mechanical issues later that year. P did not have money for inspection and later truck becomes inoperable. P asks for refund and D refuses Rules: - A minor cannot recover full purchase price without giving seller reasonable compensation for use/depreciation/negligent damage to good - but If any fraud or imposition from seller, minor engages in tortious activity or if contract takes advantage of minor: then this rule does not apply

Express Conditions JNA Realty v. Cross Bay Chelsea (1977)

Facts: : D in a 10-year lease and must notify landlord P w/in 6 months of expiration in order to renew. D didn't remind P to renew even with other reminders. P tells them they can't renew 1 mo. before lease expires. D made improvements to restaurant and invested $ and argues forfeiture. Rules: - Jurisdictional split on whether a tenant's negligent failure to give timely notice to renew should be excusable on some basis - Leading case for principle of equitable relief against forfeiture for tenants seeking to renew: Because, unlike stock options, lease options carry the risk of forfeiture of valuable improvements made by the tenant, the tenant has an equitable interest (though not a legal interest) to be recognized and protected against forfeiture, in cases where the tenant has... (a) made valuable improvements (b) of a substantial character, (c) intending to renew the lease, (d) if the landlord is not harmed by the delay in giving the notice, and (e) the tenant would sustain substantial loss if the lease were not renewed. - A commercial tenant who negligently failed to exercise* a lease-renewal option within the required time may be awarded equitable relief if the tenant's default would result in forfeiture and relieving the default would not prejudice the landlord.

Warranties Bayliner Marine Corp v. Crow

Facts: Boat was supposed to go 30mph per pamphlet for offshore fishing. "Going where you need to go!" P bought boat but was different then the one in brochure and after adding heavy repairs to boat it went only 13mph. - For express warranty, statements must be directly or substantially related to the product and may not be merely opinion or commendation (§2-313(2)) - For an implied warranty to exist, seller must have reason to know about the particular purpose and the reliance via the buyer (§2-315) - "Breach of merchantability": must "pass without objection in the trade" and "are fit for the ordinary purposes for which such goods are used" (JG thinks 30 mph could be breach here)

Contract Formation - Offer & Acceptance Raffles v. Wichelhaus (peerless)

Facts: D & P referring to two different peerless ships that were supposed to ship on different dates. D thought it was coming earlier -> refused to accept shipment Rules: Manifestation of mutual assent needed for contract formation without meeting of the minds -> no contract If there wasn't agreement on material terms -> invalid contract

Implied Obligation of Good Faith Morin Building Products v. Baystone Construction

Facts: D contracts P to build for wall exterior. Uneven finish when viewed in light. Contract: "Acceptability shall rest strictly w/ owner. What is customary shall not enter as consideration." Wall rejected and D doesn't pay. Rules: - In a contract with a standard owner's satisfaction clauses, involving commercial quality / operative fitness / mechanical utility, objective reasonable-person standard should apply but when involving personal aesthetics, subjective honest-dissatisfaction good faith standard - Standard of Good Faith: this is what courts use when contract involves aesthetics or something pertaining to taste. Basically means that unless giving party performs in bad faith, it is up to the satisfaction of the receiving party - Under the UCC, good faith means honest-in-fact and reasonable commercial standards. - Imply form contract language to protect the vulnerable

Material Breach Sackett v. Spindler

Facts: D enters contract to receive stock of Santa Clara journal from P via spaced out payments. Late payments continue even after notices and with losing profit in the business itself, P terminates and D sues for breach. Rules: - Total Breach: If an initial breach by one party is a total breach of the contract, then the nonbreaching party is discharged from its performance obligation (i.e., its refusal to perform doesn't amount to breach). - Partial Breach: If the initial failure is a partial breach, then the other party risks breach if fails to perform. - Assessing the materiality of a breach: 1) extent that injured party was deprived of expected benefit 2) extent that injured party can be adequately compensated 3) extent that failing party will suffer forfeiture 4) likelihood failure will be cured 5) extent party comported with good faith 6) how much a party is on notice of a particular item's value.

Offer & Acceptance: Bilateral contracts Lonergan v. Scolnick

Facts: D placed an ad to sell land -> P inquired. D wrote letter to P, sent "form letter" saying he expects to have a buyer in the next week Rules Ad does not constitute an offer a form letter is not an offer because it is intended for multiple parties Form letter is a preliminary negotitation counter-offer kills power of acceptance offer only effective once it has been received

Offer & Acceptance: Unilateral Contracts Cook v. Caldwell Bonuses Case

Facts: D promised P bonus, D delayed payment but P had already performed substantially (not yet complete though) Rules: Using First Restatement "implied promise" language: An offer for a unilateral K can't be revoked once offeree has accepted by substantial performance; (2) Partial performance / tender can furnish consideration for a subsidiary promise ("necessarily implied") of performance by offeror.

Impossibility, Impracticability, and Frustration of Purpose Mel Frank Tool & Supply v. Di-Chem

Facts: Di-chem negotiated a lease for storage of chemicals. City ordinance changes so Dichem needed to remove the chemicals so they try terminating the lease. P sues Dichem for breach Rules: - A party isn't excused from performing its lease obligations if a change in the law renders the premises partially unusable. - Restatement on Impracticability/Frustration: a contract expressly or implicitly assumes a given event won't occur, yet it occurs anyway substantial frustration - 3 conditions: 1- The object ("principal purpose") of the contract must be frustrated and must be of sufficient importance that without it, the contract makes little sense 2- Frustration must be substantial, but severe enough that it's not considered within the risks assumed under the contract. 3- The event must be such that its nonoccurrence is a basic assumption underlying the contract

Public Policy Valley Medical Specialists v. Farber

Facts: Farber worked & was a shareholder at valley medical specialists. Entered into an employment agreement with a noncompete clause prohibiting him from practicing within 235 sq mile radius of hospital. Rules: - Courts look at how reasonable a restrictive covenant is. - It goes against public policy if: 1- is greater than necessary to protect the employer's legitimate interest or 2- causes greater hardship to the employee and the public than the interest it protects. - Medical facility's interest is limited by a patient's right to choose their doctor

Promissory Restitution Mills v. Wyman

Facts: Levi Wyman is an adult who gets sick on a ship and P takes care of him. P writes to D that his son died, D offers to pay him back but doesn't Rules: Classical Theory: - in order to have a Promissory restitution claim, Promissor has to be the one enriched - Gratitude or moral obligation does not count - Promise for benefits previously received is NOT binding because this constitutes past consideration - Case refuses to found its decision on §82 - §83 (made after the case was made) says it is only when the party making the promise gains something, that the law gives the promise validity

Promissory Estoppel based on charitable subscriptions King v. Trustees of BU

Facts: MLK deposited materials to BU. Had a letter stating his intention to give BU his materials as a gift until everything was given to BU. After he died, his wife asked for them back. Rules: - To enforce a charitable subscription, a party must establish that there was a promise to give some property + that promise was supported by consideration - A statement is a promise when it creates a bailor-bailee relationship which the duty of care over a bailment is attached - Court here rejects 90(2).

Electronic & Layered Contracting Meyer v. Uber Technologies

Facts: Meyer registered for Uber, clicked I agree (clickwrap). Text was below payment screen with hyperlink to the services. hyperlink had an arbitration clause. Rules: if instructions clear and reasonably conspicuous -> assent is unambiguous Reasonably conspicuous notice if a reasonably prudent use would've known about the terms and conduct reqauired to assent

Formation under UCC Jannusch v. Naffziger

Facts: P & D enter into oral agreement for food truck. D tried to return later b/c it wasn't as profitable as he thought but he already had worked a full season Rules: predominant purpose test: is contract predominantly for the sale of good? yes -> UCC K can be formed under UCC even if time of formation is undetermined need intent to make a contract and reasonable basis for remedy Contract purchase is not a lease with option to purchase when buyer takes possession and uses it (accepts by conduct)

Implied obligation of Good Faith Locke v. Wood

Facts: P (through ex husband) gets deal with D for "non exclusive first look." D denied every proposal P offered but did pay as stated within contract. Rules: - When one party has discretionary power in a contract that affects the rights of the other party, there is good faith duty in exercising that right. - even if it's based on subjective satisfaction - Subjective standard of honest satisfaction can be triable in court

Parole Evidene Rule Thompson v. Libby

Facts: P agrees to sell D logs. Logs were not good quality so P refused to pay. D plead warranty of logs which was made at time of sale. Warranty not explicitly mentioned in K Rules: - "four corners" Model: if an agreement is fully integrated (i.e., final written expression of parties' intent), no supplemental terms can be added (unless evidence of parties behaving fraudulently) - Warranties are not collateral contracts - What is a "complete" writing -> Facially complete expression of whole agreement -> imports a complete legal obligation -> when this exists, must be assumed that parties have introduced into it every material item/term

Statute of Frauds Crabtree v. Elizabeth Arden Sales Corp.

Facts: P and D begin preliminary negotiations for position as sales manager. Employment contract created outlining offer & duration of employment. P doesn't receive 1/3 pay increase according to K but receives the other 2. Rules: - Statute of Frauds does not require that written memo be in one document - signed and unsigned writing can be read together to form a contract if: 1- refer to the same subject matter 2- one signed writing establishes a contractual relationship - Parole evidence is permitted to show the connection between the signed and unsigned papers & to show D assented to the unsigned papers. Threshold Test: Is at least one writing establishing a contractual relationship between the parties signed? Does the unsigned document on it's face refer to the same transaction as set forth in the signed writing? -> if and only if the answer to both is YES -> SOF satisified -> ENFORCE THE CONTRACT

Incapacity and Duress: Totem Marine Tug v. Alyeska

Facts: P and D enter into a contract to transport pipeline construction materials. P faced challenges (misrepresentation of cargo, delays, etc). D ordered offloading and subsequently terminated contract. P asked for money bc was facing bankruptcy, D said it would take 6-8 months. P signed a release for less money due to financial pressure Rules: - A party alleging duress must show (R2d §175): (1) one party involuntarily accepted the terms of another, (2) circumstances permitted no other alternative, and (3) such circumstances were the result of coercive acts of the other party.

The rationale for implied terms Leibel v. Raynor manufacturing co

Facts: P and D enter into an exclusive dealer-distrubtorship contact. D terminates contact because of dip in sales but does not give reasonable notice. Rules: - Under the UCC, reasonable notice should be the minimum amount of protection afford to either party upon termination of an ongoing sales agreement when substantial investments made in reliance (§2-309) - UCC can write in implied terms in interest of fairness if term not already included (i.e "Absence of Specific Time Provision") · Exclusive Distributorship Agreements: Common law problem of lack of consideration + lack of mutuality of obligation = at will termination. UCC deals with this problem via 2-306 and 2-309; indefinite time triggers reasonable notice of termination to allow other parties to seek arrangement

Battle of the Forms Princess Cruises, Inc. v. General Electric

Facts: P and D entered into a service contract for repairs that failed. P sends purchase order that D responds to with a price quote (not the same price). D corrects and sends final price quote (counter-offer). P accepts the offer and pays D the full amount. The repairs were not good and P had to cancel cruises Rules: Predominant purpose is service -> common law applies Consider contract language, nature of business and worth - last shot rule: the person who sends the last contract gets to set the terms

Misrepresentation & non-disclosure Hill v. Jones

Facts: P bought a house that had a termite problem that was known to the seller, D. D said there weren't any termites. There was evidence of historical infestation of termites Rules: - R2d §161: Sellers must disclose material facts if: - Disclosure would prevent an assertion misrepresenting facts - Disclosure would correct a mistaken assumption - Disclosure would correct a mistake about the contents or effect of a writing - Parties have a relationship of trust - Nondisclosure of a material element makes the K voidable - ParEv always allowed to show fraud - Policy: promoting honesty and fair dealing in business relationships > finality of contracts

Material Breach Jacob and Youngs v. Kent

Facts: P built house for D but didn't use "Reading Pipe" for whole house as expressed in contract but no material difference between them. Rules: - If strict compliance is not specified in the contract, the doctrine of substantial performance may apply, when the interests of justice are better served by it. - if other party has performed materially -> obligated to perform - if breach is material -> entitled to suspend performance (R2d/common law)

Promissory Restitution Webb v. McGowin

Facts: P dropping blocks as part of his job when he sees D walk below. Fell with the block to take the brunt of the fall to save D's life. As a result, P got seriously injured and could no longer work. D promised to pay him. Once D died, his estate stopped paying. Rules: - Material benefit rule: a moral obligation can be sufficient consideration where promisor received a material benefit, even without a previous legal obligation - A promise made in recognition of a benefit previously received is binding to prevent injustice as long as: - there was unjust enrichment - promise wasn't a gift - promise wasn't disproportionate to the benefit

Impossibility, Impracticability, and Frustration of Purpose Hemlock v. Solarworld

Facts: P enters into a series of agreements with D in Germany for polysilicon. Contract includes take-or-pay provision (pays min. even if no polysilicon). Chinese government drives down market prices making P bad deal. P doesn't pay min.anymore after failed negotiations. Rules: - Market changes caused by a third party's illegal acts generally don't render contract performance impracticable. - Party alleged to have breached contract may raise impracticability as an affirmative defense. - This requires extreme and unreasonable difficult/expense/loss/injury. - Party must show: (1) unforeseen event occurred + (2) both parties entered the contract with the fundamental assumption that such an event wouldn't occur. - Frustration of purpose defense overlaps with impracticability. - Requires proof of an unforeseen event that alters a fundamental assumption underlying the contract.

Breach - Express conditions EnXco Development v. Northern States Power

Facts: P executed two contracts in October 2008 with D to construct a wind-energy project with express termination clause. P waits too long and is unable to get the permit before timeline (due to unlucky circumstances). D terminates and P left with valueless assets. Rules: - Conditions vs. promises If you're the post-condition performing party, you want a condition because it will give you maximum ability to not perform b/c the other party has to technically perform the condition (unless you waive it/it's excused). If you're the party who has to make the conditional event happen before the other party will perform, you want a promise b/c if you substantial perform that promise (e.g. give the other party $999 instead of $1,000), they have to perform. - party to a contract may not use the defense of temporary impracticability to excuse the performance of an express condition if the party's own inaction caused the non-performance.

Incapacity & Duress Sparrow v. Demonico

Facts: P given half ownership of family home but D contests that D was mentally unfit to contract even with lawyers and mediators present Rules: - Mental incapacity as a defense to contract depends on: (1) Party's understanding the nature, extent, character, and effect of the particular transaction (2) Party's competency in transacting business generally → Cognitive Test (traditional): "Unsound mind" or "incapable of understanding and deciding upon the terms of the contract" → Modern Approach: Although some understanding of transaction, comes down to whether the transaction in its result is one which a reasonably competent person might have made → Important if the other party has reason to know of his condition voids agreement - Medical Expert Testimony is required in order to use mental capacity as a defense to enforcement

The rationale for implied terms Wood v. Lucy

Facts: P has exclusive right to place D's endorsement on other designs based off employment agreement. D allegedly placed her own endorsement without consent but D contends never agreed to contract since no consideration. Rules - An implied obligation to use reasonable efforts will prevent a somewhat indefinite promise from being illusory. - Promise to assume duty could be implied by terms so it's not illusory

Statute of Frauds under the UCC Buffaloe v. Hart

Facts: P is tobacco farmer, oral agreement to rent tobacco barns. P gave check to D, they accepted the check then tore it up a few days later. D reneged and sold the barn to someone else. Rules: - to satisfy the statute of frauds, writing must be signed by the party against whom enforcement is sought - if there was payment made and accepted by the other party. -> partial performance -> exception to SoF - If parties are merchants, rejects good within 10 days after acceptance -> signature will not satisfy statute of frauds

Warranties Speight v. Walters

Facts: P live in 2nd-hand house built by D but has defective roof and gutters. P believes D went against workmanlike construction duty. Rules: - home buyers are ill-equipped to discover defects and must rely on the skill and judgment of the builder. But Jurisdiction split on whether homeowners can claim defects when buy/sell a house - implied warranty of workmanlike construction can sometimes be bestowed upon subsequent buyers - Policy: Buyers inferior and lack expertise, should hold builders accountable for work (ensuring habitability is a standard separate from the status of the buyer), and buyers/owners don't always live in house long enough to see - Common law hasn't built out the concept of warranty in the same way as the UCC. Common law only recognizes warranty of habitability but not generally

Breach (modification) Kelsey Hayes v. GalTaco Redlaw Castings

Facts: P makes brake assemblies that it sells to manufacturers, D makes parts of assemblies for P. Contract D to be sole supplier of parts. D says needs money and P agrees to modification of price increase when they can't find another alternative to D. P doesn't pay price increase because of duress and says modification invalid bc of duress Rule: - modifications made under duress not enforceable - to raise economic duress defense->need to protest to show "good faith" on part of party seeking to reject modification - unprofitability is not accepted as a defense - UCC: contract modification does NOT require additional consideration. However, modifications made under duress not enforceable

Offer & Acceptance Bilateral Contracts Normile v. Miller

Facts: P offered to buy P's house, offer expired at 5pm. D signed offer with changes (counteroffer). P did not know he had until 5pm then D sold the land. P tried to accept the counteroffer but D said "you snooze you lose" Rules Changes in an acceptance -> counter offer -> 1st offer does not stand if offerree is made aware of intent to revoke, offeree can no longer accept this can be done through "adverse action"

Public Policy P.M v. T.B

Facts: P placed an ad requesting a woman to act as a surrogate mother. D needed money for IVF so agreed to carry the child. D formed an attachment with the babies and refused to give them to their biological parents. Rules: - Surrogacy contract is enforceable because of freedom of contract + interests/stability for children - To conclude that a contract is unenforceable due to public policy issues, the preservation of the general public must outweigh the societal interest in freedom of contract

Parole Evidence Rule Taylor v. State Farm

Facts: P sues insurance D for bad faith claim (didn't adequately defend him). D argues P gave up all claims in ambiguous release term in contract Rules: - Parol evidence permissible even without ambiguity when there are multiple reasonable interpretations of a contract's language → Plain Meaning (Restrictive) View: If a contract is clear and unambiguous, should interpret it based only on what is written in the contract itself → Corbin View: No need to declare ambiguity before looking at extrinsic evidence

Misrepresentation & non-disclosure Syester v. Banta

Facts: P was sold too many dancing lessons bc D promised she would be a professional dancer. She tried to leave but D convinced her to come back. P ultimately signed an agreement to get a small refund. Rules: - To win a misrepresentation claim, a party must establish there was 1) fraudulent misrepresentation, 2) reliance on that misrepresentation that was 3) reasonable and would not have led them to enter into a contract without it. Test: 1. D made 1+ reps claimed by P 2. 1+ of them were false 3. Said false reps were material 4. D knew said reps were false 5. Said reps were made with intent to deceive and defraud the P 6. P believed and relied upon false reps -> and this was a "but for" cause of P entering into K -This reliance has to be reasonable 7. P was damaged by relying on said reps

Promissory Estoppel in Family and charitable contexts Kirksey v. Kirksey

Facts: P's husband died, brother in law promised she could live with him. P moved with her kids. Brother in law kicked her out Rules: - Before promissory estoppel principle, promise would not have been enforceable - gifts out of "mere gratuity" are not enforceable

Principles of Contract Interpretation C & J Fertilizer, Inc. v. Allied Mutual Insurance Co.

Facts: P, insured by D. Insurance term abnormally excludes burglaries that do not have "marks left on exterior of premises" but D rep does not mention this to P. P robbed yet no visible marks on exterior of premises yet clear evidence of 3rd party outside and inside. Insurance denies coverage here Rules: - The doctrine of objectively reasonable expectations: courts use "objectively reasonable expectations" regarding terms that will be honored over terms that are clear and unambiguous. - Adhesion Contract: a standardized contract which, imposed and drafted by the party of superior bargaining strength, relegates to the subscribing party only the opportunity to adhere to the contract or reject it. - if contract language is ambiguous -> reasonable expectations

Electronic & Layered Contracting Defontes v. Dell

Facts: Ps purchased computers from Dell + service contracts. They were taxed on the contracts. Ps claim Dell wrong to collect service taxes. Dell had an arbitration clause in their shrinkwrap (the wrap that the computer came with) Rules: Shrinkwrap -> offer is when items are shipped. Acceptance is when buyer does not return items need to notify customers that they can return items as a way of rejecting the terms need to make right of rejection clear

Statute of Frauds Alaska Democratic Party v. Rice

Facts: Rice, initially approached by Greg Wakefield during his candidacy for the Maryland Democratic Party chair, accepted an offer to become his executive director after his election. Despite an assurance from Wakefield, she later discovered the position was no longer available. At that point she had quit her job. Rules: - SoF and promissory estoppel (Rst139): PE can invoke an exception if there is a promise that reasonably induced an action

Breach (modification) Alaska Packers v. Domenico

Facts: Sailors contract with P and agree to get paid 50/season. They demanded 100 and the boat superintendent signed. Rules: - Under CL, new consideration needed for modification - When you're doing what you're already obligated to do -> no consideration

Battle of the Forms (Qualified acceptance) Brown v. Hercules

Facts: Sales negotiations for a trim press. D put in an indeminity clause for injuries, P requested specific provision changes but didn't comment on indemnity clause. P got injured and sued. D countersued for indemnity Rules: When an offer expressly limits acceptance to the terms of the offer, any additional terms will not become part of contract between merchants

Anticipatory Repudiation Truman & Sons Co. v. Schupf

Facts: Summary: P enters contract for land with D contigent on P able to rezone land by the "closing date." Zoning chances are "zero to none" so P asks for reduction in price where D says no. D then says Rules: - Doctrine of AR strict on that the intention must be clear and unequivocal that he will not render performance → BOTH UCC and Common Law

Consideration Hamer v. Sidway

Facts: Uncle tells nephew he'll give him $5,000 if he doesn't smoke/drink/gamble/etc until 21 (unilalteral contract) Rule: when giving up something otherwise legally able to do -> detriment -> good enough consideration benefit/detriment test: a valuable consideration may consist of a right/interest/profit/benefit to one party or responsibility/detriment/forbearance/loss by the other party

Consideration Dougherty v. Salt

Facts: aunt promises nephew $$$ for being a good boy; promise was in writing for "value received" Rules: when no real value received -> nominal consideration -> not enforceable lack of bargain for exchange -> gift -> not enforceable

Anticipatory Repudiation Hornell Brewing v. Spry

Facts: oral contract for D to have distribution rights for Arizona Tea. D missed payments and operation looks like a sham with warehouse empty. Has done this before to others and considered liar by court Rules: One's failure to respond given grounds for insecurity can constitute a justified repudiation of the agreement → One party upon reasonable insecurity is authorized to demand adequate assurance of due performance and until then, can suspend any performance (if commercially reasonable) → JG: Just because one reasonable ground for insecurity is lifted doesn't mean others no longer exist and warrant further pursuit by aggrieved

RULES: Consideration

General CL Theories: Bargained-for Exchange Theory (modern): Reciprocal conventional inducement: if there is a reciprocal inducement between the one taking the detriment and the promisor, then there is consideration. The promisor's promise induces the promisee to take on a detriment, and crucially, it is the promisee's taking on the detriment that induces the promisor's promise. Restatement: R2d §71: Requirement/Types of Exchange: To constitute consideration, performance or return promise must be bargained for. This occurs if performance/promise is sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise. Performance can include an act other than a promise, forbearance, or creation/modification/destruction of a legal relation. Performance/ promise can be given to/by a third party. 71(2) vs. cmt b: Does motive matter? Bargain without bargaining: 71(2) indicates parties don't need to know exactly what bargain is for, as long as promisor is induced by detriment and promisee is induced by promise, the "bargained for" req is met. Cmt b: Holmesian "reciprocal relation" test indicates at least one party must manifest intention to induce other's response and to be induced by it. "A mere pretense of bargain does not suffice."

RULES: Battle of The Forms

General Theories: Mirror-Image rule: "Varying" acceptance is only a counteroffer. That is, acceptance that varies material terms of the offer not acceptance, it is a counteroffer and the terms of the offer are no longer applicable. Last-Shot Rule: a party impliedly assents to and thereby accepts a counteroffer by conduct indicating lack of objection to it. Thus, last form used the terms of the contract. UCC: § 2-206. Offer and Acceptance in Formation of Contract: (a) Offer to enter into contract invites acceptance in any manner & by any medium reasonable (b) If you want to buy something now, the seller can accept by promising to ship or by actually shipping the goods right away. If the shipped goods are not what you ordered (nonconforming), it's not considered accepted unless the seller says it's just to help you out CISG: Art. 19(2): Material Alterations Rule: if alterations not material, then offeree's acceptance = offer which original offeror can accept by conduct. Material: price, payment, quality, quantity, place, time, liability.

Rules: Warranties continued

Implied Warranty of Workmanlike construction: → 2 components: (1) Workmanlike or Skillful Construction: requires quality of work and materials meet average or reasonable standards for the trade. (2) Habitability: requires home be suitable for occupation and provide inhabitants with reasonably safe place to live w/o fear of injury to person/health/property → JX split on whether home-owners can disclaim defects when they sell house. Progressive courts: Subsequent purchasers may recover for breach of implied warranty of workmanlike construction against a builder-vendor. Other JXs: w/o being the OG builder of the house, there could be no warranty.

Consideration Marshall Durbin v. Baker

Mississippi Facts: P signed an agreement that if a triggering event occurs -> compensation for 5 years. Triggering event occurred and they refused to compensate him Rules: when acton forbearance create benefit to the promisor -> adequate consideration

RULES: Warranties continued

More on implied warranties of workmanlike construction → Other applications of implied warranty: (1) To developers: IW of quality -> IA Supreme Ct. did not extend b/c ability of developer to guard against problems is strong. (2) To banks: IW of quality -> Iowa Supreme Ct. did not extend -> bank can protect itself better than a consumer buying a single family resident → Disclaimers of implied warranty of habitability: (A) Prevailing view: the warranty can be modified or disclaimed. (B) Other courts: view disclaimers with great suspicion and require: (1) conspicuousness, (2) must clearly state its effect, and (3) reflect both parties' expectations

RULES: Warranties continued

Policy Implied Warranty. of Workmanlike Construction → Justifications for progressive perspective (adopted by Iowa Supreme Ct.): (1) buyers in inferior position + lack expertise; (2) should hold builders accountable for their work ensuring habitability is a standard separate from the status of the buyer; (3) sometimes the first buyers/owners don't live in house long enough ("turnover") for defects to be revealed (we live in a mobile society) = "latent defects"; (4) privity requirement has been eliminated already in products liability cases because caveat emptor doctrine too harsh; (5) Doctrine of assignment: allows for transfer of original purchaser's rights to subsequent purchaser -> this should include IWWC; (6) Implied warranties are judicial creations anyway and thus do not depend on express agreement between parties, thus privity isn't necessary. → Justifications for non-progressive perspective: (1) IWWC is contractual in nature and privity is traditionally required in order to maintain a contract action; (2) When no privity -> no reliance by subsequent purchaser on any representation made by builder-vendor regarding quality of construction; (3) Products liability is different - e.g., no "mass marketing" in real estate context; (4) increased costs and liability on homeowners

RULES: offer and acceptance in Bilateral Contracts Cont'd

R2d §43. Indirect Communication of Revocation: Offeror's taking definite action inconsistent with intention to enter into proposed contract terminates power of acceptance, IF offeree has received reliable information to that effect. Normile: offer may be revoked through indirect but reliable communication of adverse action. Policy: preserves offeror's status as "master of the offer" R2d §50(1). Acceptance of Offer Defined: a manifestation of assent to the terms, made by the offeree; in a manner invited or required by offer R2d §50(2). Acceptance by Performance: requires that least part of what the requests be performed/tendered and includes acceptance by a performance which operates as a return promise R2d §50(3). Acceptance by Promise: requires offeree satisfy all the acts essential to the making of a promise R2d §58. Necessity of Acceptance Complying with Terms of Offer: An acceptance must comply with requirements of offer as to the promise to be made / performance to be rendered. R2d §59. Purported Acceptance Which Adds Qualifications: A reply to an offer which purports to accept it but is conditional on the offeror's assent to additional/different terms is NOT an acceptance but a counter offer. R2d §60. Acceptance of Offer Which States Place, Time, or Manner of Acceptance: if specified, acceptance must comply; if "merely suggests," another method of acceptance is not precluded.

RULES: offer and acceptance in Bilateral Contracts Cont'd

R2d §63. Time When Acceptance Takes Effect: The Mailbox Rule - acceptance is operative and completes MoMA as soon as put out of offeree's possession (exception: option contract acceptance not valid until receipt by offeror) R2d §69(1). Acceptance by Silence or Inaction = acceptance only if: (a) offeree takes benefit of offered services with reasonable opportunity to reject them and reason to know they were offered with expectation of compensation; (b) offeror has stated or given offeree reason to understand that silence/inaction = acceptance AND offeree intends to accept in this manner; (c) because of previous dealings, it is a reasonable expectation that offeree should notify offeror if she does not want to accept R2d §69(2). Acceptance by Exercise of Dominion: An offeree who does any act inconsistent with offeror's ownership of offered property -> bound with acceptance on offered terms unless manifestly unreasonable + unless act is wrongful against offeror.

RULES: Objective & Subjective Theories of Assent

Restatement § 20: Effect of Misunderstanding (1) No manifestation of mutual assent if the parties attach materially different meanings to their manifestations & neither party knows what the other means OR each party knows what the other means. (2) The manifestations of the parties are operative in accordance with the meaning of the party that did not know of any different meaning only if the other party knows. § 21: Intention to Be Legally Bound Real or apparent intention isn't essential, but an intentional act manifesting mutual assent is required

Rules: Principles of Contract interpretation continued

Restatement → R2d §202: Rules in Aid of Interpretation: (1) Principal Purpose of parties, (2) K is interpreted as a whole, (3) "generally prevailing meaning" + use technical meaning of words in Ks in technical fields, (4) Course Performance given great weight, (5) manifestation of parties' intent interpreted as consistent w/ each other → R2d §203: Standards of Preference in Interpretation: (1) Reasonable/lawful interp. preferred to not. (2) Express terms > Course performance > Course Dealings > Trade usage. (3) Separately negotiated terms > standard terms not separately negotiated → R2d §204: Supplying an Omitted Essential Term: When parties have not agreed on an essential term, supply reasonable term. → R2d §206: Against the drafter All things assumed against the drafter, courts give less pref to the drafter when a word has two reasonable meanings → R2d §207: Public interest preferred: Proper scope of this application is questionable, but more applicable to government contracts → R2d §211: Standardized Agreements: When one signs an agreement / manifests assent to a writing and there are like writings regularly used to embody terms of agreements of the same type, he adopts writing as an integrated agreement, and it is interpreted where reasonable as treating alike all those similarly situated. If other party adds term that 1st party wouldn't assent to that term is not part of agreement. → R2d §222: Trade Usage: TU = having such regulatory of observance in a trade as to justify an expectation of its observation. Existence/scope of a TU = QOF → R2d §223: Course of Dealing: C/D is sequence of previous conduct between parties establishing common basis of understanding. UCC: → §1-303 Express terms > Course Performce > Course Dealings > Trade Usage

RULES: Parol Evidence Rule

Restatement Continued: →R2d §213: Parol Evidence Rule: (1) Binding integrated agreement discharges prior agreements to the extent that it is inconsistent with them. (2) Binding completely integrated agreement discharges prior agreements to the extent they are within its scope. (3) An integrated agreement that is not binding or that is voidable and avoided does not discharge a prior agreement. But an integrated agreement, even though not binding, may render inoperative a term which would have been part of the agreement if it had not been integrated. → 2-part inquiry: (1) Is writing intended to be a final expression of parties' agreement? (2) If Yes, is it a complete or partial statement? → R2d §213(3) + cmt b: even though words seem on their face to have only a single possible meaning, other meanings appear when circumstances disclosed →R2d §214: Evidence of Prior/Contemp. Agreements: Can admit evidence of prior agmt to establish: (a) writing isn't integrated, (b) that integrated agmt if any is completely/partially integrated, (c) meaning of writing, (d) invalidating causes, (e) ground for rescission/reformation/etc. →R2d §214(d) = invalidating causes = fraud, duress, mistake, lack of consid rationale: such invalidating factors would show that the purported K is not a K at all and thus not entitled to the benefit of the ParEv Rule; also fraudulent terms likely not to be written anyway (cmt c) UCC: §2-202 - Final Written Expression: Parol or Extrinsic Evidence Final agreement may not be contradicted by evidence of any prior agreement/oral agreement, but may be explained or supplemented by: →Course of dealing or usage of trade or course of performance → Evidence of consistent additional terms, unless fully integrated agreement

RULES: offer and acceptance in Bilateral Contracts

Restatement: R2d §17: Requirement of a Bargain: Formation of a contract requires a bargain in which there is a manifestation of mutual assent + consideration (generally) R2d §22. Office and Acceptance: Manifestation of mutual assent takes form of offer of one party followed by other's acceptance. R2d §24. Offer Defined: An offer = willingness to enter into a bargain, leading other person to think their acceptance concludes it. R2d §26. Preliminary Negotiations: Manifestation of willingness to enter into bargain does not constitute an offer, if person to whom it is addressed knows that person making it doesn't intend to conclude the bargain until he has made a further manifestation of assent. R2d §36. Terminating Power of Acceptance: Methods: rejection or counteroffer by offeree; lapse of time; revocation by offeror; death/incapacity of either party; or failure to fulfill condition of acceptance under terms of offer. R2d §38. Rejection: Rejection terminates offeree's power of acceptance; manifestation of intent not to accept = rejection, unless offeree also manifests intent to take it under further advisement R2d §39. Counter-offers: offeree's proposal for a substituted bargain terminates offeree's power of acceptance. NS Note: this is a default principle, but flexible. Policy: Eisenberg: this rule doesn't represent most bargainers' expectations. Normile and Lonergan: an offeree's counteroffer is rejection of initial offer + kills power of acceptance R2d §43. Indirect Communication of Revocation: Offeror's taking definite action inconsistent with intention to enter into proposed contract terminates power of acceptance, IF offeree has received reliable information.

RULES - Intro to Contracts

Restatement: §1: Contract Defined: A contract is a promise (1) if breached, the law gives a remedy for, and (2) whose performance the law recognizes as a duty §17: Requirement of a Bargain: Formation of a contract requires a bargain in which there is a manifestation of mutual assent + consideration (with exceptions) UCC: § 1-103: Goals of UCC: (1) to simplify, clarify, and modernize the law governing commercial transactions; (2) to permit the continued expansion of commercial practices through custom, usage, and agreement of the parties; and (3) to make uniform the law among the various jurisdictions. § 1-201 b(3): Agreement: as distinguished from "contract", means the bargain of the parties in fact, as found in their language or inferred from other circumstances, including course of performance, course of dealing, or usage of trade as provided in Section 1-303. § 1-201 b(12) "Contract", as distinguished from "agreement", means the total legal obligation that results from the parties' agreement as determined by the Uniform Commercial Code as supplemented by any other applicable laws. § 2-105: "Goods" means all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale other than the money in which the price is to be paid, investment securities (Article 8) and things in action. "Goods" also includes the unborn young of animals and growing crops and other identified things attached to realty as described in the section on goods to be severed from realty (Section 2-107).

RULES: Postponed Bargaining: the "Agreement to Agree"

Restatement: §27: Existence of Contract Where Written Memorial Is Contemplated: MoMAs sufficient to conclude a contract are not prevented from doing so merely because parties also manifest intention to prepare a written memorial of it. (Unless preliminary negotiations.) §33: Certainty: Terms of contract have to be reasonably certain in order to be accepted so as to form a contract. "Reasonably certain" = provides a basis for determining existence of a breach + giving appropriate remedy.

RULES: Offer and Acceptance in Unilateral Contracts

Restatement: §32: Invitation of Promise or Performance: When in doubt over mode of acceptance, offeree can choose either acceptance by perf or by return promise. R2d §45: Option Contract Created by Part Performance or Tender: If offer invites acceptance by performance only, beginning of performance creates an option contract. The offeror does not have to perform, however, until completion/tender of invited performance in accordance with the terms of the offer.

RULES: Implied obligation of Good Faith - Satisfaction Clauses

Satisfaction Clauses: clauses by which the performance of one party is by the satisfaction of the other party → Minority approach: subjective good-faith standard -> Party A's performance must be to Party B's satisfaction unless Party B rejected Party A's performance in bad faith -> applies if a contract involves personal aesthetics → Majority approach: objective reasonable-person standard = Restatement approach -> applied to determine if a reasonable person in Party B's position would've been satisfied by Party A's performance -> applies to contracts involving commercial qualify / mechanical utility / operative fitness

RULES: Warranties continued

UCC UCC 2-316 Exclusion or Modification of Warranties → UCC 2-316(1): Disclaimers of express warranties disclaimer of an Express warranty inoperative if the disclaimer can't be construed as "consistent" with terms in the contract that would create the express warranty · Can be created orally or in writings, but ParEv Rule applies (UCC 2-316(2) is subject to UCC 2-202) some courts get around Rule to permit ParEv of EWs → UCC 2-316(2)-(3): Disclaimer of implied warranties · For Merchantability - UCC 2-316(2) → oral or written → if written, must have conspicuous mention of "merchantability" (more specific). Note: some states have adopted non-uniform versions of UCC 2-316, disallowing all disclaimers of implied warranty of merchantability · For Particular Purpose - UCC 2-316(3) → written only → no conspicuous-ness req but must mention limitation of warranty* (more general). *e.g., "No warranties which extend beyond the description on the face hereof." CISG: CISG Art. 35: Conformity of Goods: (1) Seller must deliver goods of quant/quality/ description/packaging required by K. (2) Conformity requires fitness for ordinary use / special use if specified / mimics sample/model shown buyer / stored properly.

Rules: Statute of Frauds Continued - UCC & CISG

UCC: §2-201: (1) If >$500, must have signed writing sufficient to indicate contract for sale + quantity term (2) between merchants: Signed contract is received by seller within reasonable time is good if seller has reason to know it's contents; party has <10 days to object (3) Exceptions: SoF will not bar enforcement if: → Goods are specially manufactured for buyer and cannot be used for sale to others → Party against whom enforcement is sought admits that a contract was made → Payment was made and accepted CISG: No requirement of signed writing; can be any means to prove existence of contract (testimony, parole evidence, etc)

RULES: Contract Formation Under the UCC

UCC: §2-204: Formation in General (1) Formation: A contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by parties. (2) Moment of formation: Knowing moment of contract's making not required. (3) Essential & unspecified terms: Even though one or more terms are left open a contract for sale -> contract if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy. §2-305: Open Price Term If price isn't settled, the price is a reasonable price at time of delivery. If price-making is delegated to one party, that party must use good faith. If price isn't set due to failure of one party, other party may cancel or himself fix a reasonable price. If parties intend not to be bound until price is set, there is no contract without price term. CISG: Art. 14: Formation: A proposal for concluding contract addressed to 1+ persons = offer if it is (a) sufficiently definite and (b) indicates intention of offer to be bound in case of acceptance. · "sufficiently definite": (a) indicates the goods and (b) expressly or implicitly fixes or makes provision for fixing quantity & price. Art. 55: When contract validly concluded but does not fix price, use price generally charged at time of K's conclusion for such goods in trade · Otherwise, such a proposal = mere invitation to make offers.

Statute of Frauds Decision Tree

Which contracts fall within the SoF? M Y L E G 5: Marriage contracts Year+ or more Land trade Estate/Admin Guarantee(surety) $500+ Goods What does SoF need to have? Signature by both parties (esp the D) All the major terms of the deal - Merger Doctrine: Memo need not be one document (must all relate to the same deal) - Letterhead of individual can act as a signature (authentication works)

Postponed Bargaining: agreement to agree Quake Construction v. American Airlines

illinois Facts: P won bid from D to start working on airline terminal expansion. Sent letter of intent and announced that Quake was the contractor. Same day fired Quake Rules: Letter of intent "agreement to agree" is unclear if it has language suggesting intent to begin performance while noting that the contract is pending formation and has a cancellation clause Test: if no ambiguity exists, the parties' intent must be derived solely from the writing itself. If ambiguous -> parole evidence Facts considered: whether it's in writing, many or few details, amount of $$$, whether it requires a formal writing for the full expression, reliance

Parole evidence rule

involves the admissibility of evidence from preliminary negotiations - Involves what parties communicated leading up to formation of integrated agreement - List of scenarios in which parol evidence is per se allowed : (a) interpreting an ambiguous term (b) finding consideration (c) proving defense to enforcement (d) collateral agreement (i.e., 2 deals going on at once) (e) oral condition precedent When parties agree to incorporate ("integrated") a final version of their agreement in a writing, no party can supplement oral or written evidence in to add or contradict a term.

RULES: Parol Evidence Rule Continued

→R2d §215: Contradiction of Integrated Terms: When binding agmt, either completely or partially integrated, evidence of prior/contemp agmt or negotiations is not admissible to contradict a term of the writing. →R2d §216: Consistent Additional Terms: Evidence of a consistent additional term is admissible to supplement an integrated agreement that IS NOT complete, which is one that omits a consistent additional agreed term which is (a) agreed to for separate consideration or (b) such a term as in the circumstances might naturally be omitted from the writing. →R2d §217: Oral Conditions in IAs: Where parties to a written agmt agree orally that performance is subject to a stated condition, argument is NOT integrated with respect to the oral condition.