Contracts II - Ricks

Maple Farms, Inc v. City School District of Elmira, NY (1974) FACTS Contract to supply milk to school district. Prices go up, milk supplier faces loss, tries to get out of contract via "impracticability"

"RS § 454. Definition of impossibility. In the Restatement of this Subject impossibility means not only strict impossibility but impracticability because of extreme and unreasonable difficulty, expense, injury or loss involved Performance has been excused at common law where -performance has become illegal -where disaster wipes out the means of production -where governmental action prevents performance

Similarly, we do not speak of "breach of waiver" as we do breach of promise. We do, on the other hand, sometimes talk of waivers as being retracted, although that makes them sound more like a grant of property rather than an abandonment of it. So, can a waiver be retracted?

"[A]n executory waiver being in the nature of a promise or a contract must be supported by consideration to be enforceable. But a waiver . . . partaking of the principle of an election needs no consideration . . . and cannot be retracted

To prove unilateral mistake

"[t]he party asserting this doctrine must show that it was mistaken and that the other party knew of the mistake but remained silent."

A condition precedent is

"an act or event which, unless the condition is excused, must occur before a duty to perform a promise in the agreement arises Most conditions precedent describe acts or events which must occur before a party is obliged to perform a promise made pursuant to an existing contract, a situation to be distinguished conceptually from a condition precedent to the formation or existence of the contract itself. In the latter situation, no contract arises "unless and until the condition occurs"

The word parol is an older "Law French" term meaning words or speech. Its meaning has expanded to include something like ...

"anything that is not written in the document at issue." This might be spoken words but it also might be writing in other documents not formally connected to the contract or other actions of the parties. A letter written between the parties during negotiations, for instance, would be "parol" as the word is often used.

Parol evidence rule only applies when the parties intend a particular writing to serve as a

"final expression" or "integrated" contract.

A writing intended by the parties as not only final with respect to the terms it includes, but also as complete, is a ...

"fully integrated contract."

UCC 1-201 (b)(20) - For transactions involving merchants and the sale of goods, the Uniform Commercial Code has defined good faith as

"honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade

Conditions can be express or implied. Implied or constructive conditions are those...

"imposed by law to do justice".

An instrument is negotiable when it...

(1) is "an unconditional promise or order to pay a fixed amount of money," (2) "is payable to bearer or order" when issued or when it comes into possession of a subsequent holder, (3) "is payable on demand or at a definite time," and (4) does not contain any other promises or instruction that the person paying the money must do. UCC § 3-104. A common bank check is a negotiable instrument. Finance notes, such as for cars, or equipment, are often also negotiable.

The important question is whether an unanticipated circumstance, the risk of which should not fairly be thrown upon the promisor, has made performance of the promise vitally different from what was reasonably to be expected

(1) the occurrence of an event made performance under the contract impracticable, (2) the non-occurrence of the event was a basic assumption on which the contract was made, (3) the impracticability resulted without the fault of the party seeking to be excused from the contract, and (4) the party has not agreed to perform despite impracticability that would otherwise justify the nonperformance.

Under Restatement (Second) of Contracts § 261, to claim impossibility, a party must demonstrate that (elements test) -

(1) the occurrence of an event made performance under the contract impracticable, (2) the non-occurrence of the event was a basic assumption on which the contract was made, (3) the impracticability resulted without the fault of the party seeking to be excused from the contract, and (4) the party has not agreed to perform despite impracticability that would otherwise justify the nonperformance.

frustration of purpose excuses contract performance when: (alternate 3 point test)

(1) the party's principal purpose in making the contract is frustrated, (2) without that party's fault, (includes foreseeability) (3) by the occurrence of an event, the non-occurrence of which was a basic assumption (includes foreseeability) on which the contract was made. The principal purpose: `must be so completely the basis of the contract that, as both parties understand, without it the transaction would make little sense

Sales of goods seems to be the opposite

(EX: pay before amazon ships) Shipment times: 2-309 - the time for shipment, unless otherwise provided in contract, shall be a reasonable time Time for payment clause: 2-310 - unless otherwise agreed, you pay when you pick it up

To state a claim for fraud, a plaintiff must allege

(i) a misrepresentation, which can take the form of a statement, omission, or active concealment of the truth; (ii) the defendant's knowledge that the representation was false; (iii) intent to induce the plaintiff to act or refrain from acting; (iv) justified reliance on the misrepresentation; and (v) damage as a result of such reliance.

A claim for reformation based on a mutual mistake will survive a motion to dismiss only if it alleges:

(i) that the parties reached a definite agreement before executing the final contract; (ii) that the final contract failed to incorporate the terms of the agreement; (iii) that the parties' mutually mistaken belief reflected the true parties' true agreement; and (iv) the precise mistake the parties made.

Peters v. Opie, a worker promised to build a house for money. The worker sued the owner but did not allege that he had built the house (or allege that he had done anything at all). The owner argued that the worker had to allege that he had done the work before he could collect the money. What result, under Nicholas?

(worker CAN sue under Nicholas standard) One judge contested the Nicholas rule. He said he never let workers win unless they alleged that they had performed; otherwise the owner might be forced to pay, and then sue, a beggar! Imagine, forcing landowners to pay for work before it was done!

RICKS: What's the point of contract law - to enforce the intent of the parties. So why the parol evidence rule?

*Think of contract as a "letter to the court"* A reminder to the parties that the document they write and sign is written in part for courts. When you draft a contract you are often writing for the court because you want the court to understand what the parties decided. Court: if you write a document for us, don't come in later and say that it's wrong. You are bound by it. Thus, whatever the contents of parol evidence (phone call, letters between party), it doesn't mean as much as a formal document written to the court (contract).

Hochster v. De La Tour (1852) FACTS Hochster hired by De La Tour to go our Tour; De La Tour cancelled ***When trade is performance and payment, performance happens first because it takes longer

- FIRMLY ESTABLISHED DOCTRINE OF ANTICIPATORY REPUDIATION When one party to an agreement is informed by another party to the agreement that the second party intends to breach the agreement, the first party has an option to file suit for damages immediately in anticipation of the breach, or to wait until the act was supposed to be done.

What is a reasonable time to cure?

-Although the seller has a right to effect cure in the context of a buyer's revocation, that right is not boundless. -The seller does not have an unlimited time for the performance of the obligation to replace and repair parts. -The buyer is not bound to permit the seller to tinker with the article indefinitely in the hope that it may ultimately be made to comply with the warranty. -There comes a time when enough is enough when a purchaser is entitled to say, `That's all,' and revoke, notwithstanding the seller's repeated good faith efforts to repair. -whether seller has been given a reasonable opportunity to cure is fact question which is "properly left for the jury's determination under correct instructions" -The phrase "reasonable opportunity to cure" is necessarily a flexible one, and its meaning is dependent on the facts and circumstances of each case.

Parol Evidence Rule Exceptions

-Fraud -Mistake -Illegality -Duress -Partial Integration -Conditions precedent

Plain meaning approach is criticized for the following reasons:

-May rewrite the intent of the parties if that intent was poorly articulated in the written record -May detract from the principle of freedom of contract by imposing the general meaning of a term in place of that intended by the parties -With the rise of standard form contracts, a well-crafted contract may have not been fully understood or even read by the other party -Plain-meaning rule is more appropriate for contracts that are carefully negotiated by two sophisticated parties

Several reasons are usually advanced for adhering to the plain meaning of a written contract:

-Minimizes the ability of the court to rewrite the contract to mean something other than what it says -Parties who have taken the time to reduce their agreement to writing should be presumed to have drafted it carefully, to have selected their words with care, and courts should not assume otherwise -Enhances the parties' ability to rely on the text of their written contract, which promotes stability and thus commerce.

You decide which one of the three above it is by:

-evident sense and meaning of the parties -the order of the performance requires

Performance has been excused at common law where

-performance has become illegal -where disaster wipes out the means of production -where governmental action prevents performance

Unamortized Cost

1 The historical cost of a fixed asset less the total depreciation shown against that asset up to a specified date. 2 The value given to a fixed asset in the accounts of an organization after revaluation of assets less the total depreciation shown against that asset since it was revalued. That is, the unamortized cost of an asset is the value of the asset that has not yet been subtracted for depreciation. This affects the owner's net asset value, but the unamortized cost often has only a rough relationship with the asset's actual fair market value.

There are three types of constructive conditions.

1) "mutual and independent conditions" 2) "conditional and dependent conditions" 3) "mutual concurrent conditions"

REDEMPTION TEST: factors should be considered to determine if redemption is equitable under the circumstances. [remember in factors test, one big factor can win over several small factors]

1) Amount of purchasers equity 2) Degree of fault of the defaulting party 3) Whether the condition that did not occur was a condition precedent or condition subsequent 4) Relief is much more likely with a condition subsequent 5) amount and length of default, amount lost in forfeiture 6) the amount of the purchaser's equity, 7) the length of the default period and the number of defaults, 8) the amount of monthly payments in relation to property value, 9) the value of improvements to the property, 10) the adequacy of the property's maintenance 11) reason for delay in payment, 12) speed in which equity is sought

Exceptions to the (No) Parol Evidence Rule

1) Does not prevent parties from introducing evidence to show that the formation of the contract was subject to some condition that was not expressed in the writing 2) Does not prohibit evidence that the parties made a separate or "collateral" contract 3) Does not restrict evidence showing that the contract was invalid due to illegality, fraud, mistake, duress, or absence of consideration 4) Parol evidence may sometimes be introduced to "reform" an integrated contract due to a "scrivener's error" AKA "mistake in integration"

When the issue of impracticability is raised, the court is asked to construct a condition of performance based on the changed circumstances, a process which involves at least three reasonably definable steps.

1) First, a contingency — something unexpected — must have occurred. 2) Second, the risk of the unexpected occurrence must not have been allocated either by agreement or by custom. 3) Finally, occurrence of the contingency must have rendered performance commercially impracticable.

*Parol evidence is admissible to resolve ambiguities in an integrated written contract.* Here, two views dominate

1) One holds that although words may lack a "fixed meaning," they do have a "plain meaning" that can ordinarily be discerned, and this plain meaning prevents any ambiguity. 2) Other view holds that in interpreting contracts, the meaning intended by the parties should prevail regardless of any fixed, plain, or standard meaning familiar to the court, and that the court should consider this evidence in the process of identifying whether the contract is ambiguous. [View in Pacific Gas case]

Subsection (b) of 2-202 on *course of dealing* allows evidence of additional terms subject to *two prerequisites* to admission.

1) The first is that the writing or contract must *not* be found by the court to have been intended as a complete and exclusive statement of the contract terms. 2) Second, the "additional terms" must *not* be inconsistent with the contract and its terms

exceptions to the general rule that a vendee in default cannot recover:

1) fraud on the part of the vendor, 2) vendee's failure to fulfill the contract was due to any misfortune beyond his control that gave the vendor a benefit, 3) the retention of which was shocking to the conscience of the court. 4) mutual rescission of the contract.

When a promisor repudiates a contract, the injured party faces an election of remedies:

1) he can treat the repudiation as an anticipatory breach and immediately seek damages for breach of contract, thereby terminating the contractual relation between the parties, or 2) he can treat the repudiation as an empty threat, wait until the time for performance arrives and exercise his remedies for actual breach if a breach does in fact occur at such time. However, if the injured party disregards the repudiation and treats the contract as still in force, and the repudiation is retracted prior to the time of performance, then the repudiation is nullified and the injured party is left with his remedies, if any, invokable at the time of performance

A contract is divisible where by its terms,

1) performance of each party is divided into two or more parts, and 2) the number of parts due from each party is the same, and 3) the performance of each part by one party is the agreed exchange for a corresponding part by the other party

Policy Reasons for Parol Evidence Rule

1) promotes commercial certainty 2) permits parties to finalize their agreements 3) facilitates parties in performing contractual obligations confidently

What are the 5 mitigating doctrines of Constructive Conditions?

1) substantial performance 2) equitable relief from forfeiture 3) unjust enrichment 4) anticipatory repudiation 5) perfect tender The following doctrines mitigate the harshness that would otherwise flow from application of the doctrine of constructive conditions.

To excuse nonperformance of a contract on the ground of commercial frustration, [3 element test]

1) the basic purpose of the contract, which has been destroyed by the supervening event, must be recognized by both parties to the contract, 2) the event must be of a nature not reasonably to have been foreseen; and the frustration must be so severe that it is not fairly to be regarded as within the risks that were assumed under the contract; and 3) the value of counterperformance to the promisor seeking to be excused must be substantially or totally destroyed

Considerations in whether to apply substantial performance exception, or stick to letter of contract:

1) the purpose to be served, 2) the desire to be gratified, 3) the excuse for deviation from the letter, 4) the cruelty of enforced adherence. Then only can we tell whether literal fulfilment is to be implied by law as a condition.

Condition precedent -

A condition in a contract that must be met before a party's promise becomes absolute. an act or event, other than a lapse of time, that must exist or occur before a duty to perform something promised arises

Definition of divisible contract -

A contract under which the whole performance is divided into two sets of partial performance, each part of each set being the agreed exchange for a corresponding part of the set of performances to be rendered by the other promisor, is called a divisible contract.

Parol Evidence Rule

A substantive rule of contracts under which a court will not receive into evidence the parties' prior negotiations, prior agreements, or contemporaneous oral agreements if that evidence contradicts or varies the terms of the parties' written contract.

Grammar and punctuation rules normally apply

Absent other evidence, courts resolve ambiguity by interpreting the contract using accepted rules of grammar and punctuation

Omnia praesumuntur contra proferentem

Ambiguous terms must be construed against the drafter of the contract

Anticipatory Repudiation

An assertion or action by a party indicating that he or she will not perform an obligation that the party is contractually obligated to perform at a future time. requires a "definite and unequivocal manifestation" that a person "will not render the promised performance when the time fixed for it in the contract arrives."

Parol Evidence Rule

Applies when the parties have chosen to put their contract in writing. If the parties have agreed that a written document will be the final expression of their agreement, then the document cannot be contradicted by evidence of (or from) any prior or contemporaneous promise or agreement. If the parties have agreed that the document is complete, then it cannot be supplemented by any prior or contemporaneous promise or agreement.

Frustration of Purpose, NEVER impracticability because always can pay money BUYER or SELLER?

BUYER - FOP Think BF (Best Friends)

WHY the words over numerals rule?

Because negotiable instruments are essentially treated as cash and must have quick, simple method of determining value.

Tompkins v. Dudley - (1862) "The cruelty of enforced adherence" - contractor did 99% of the work building a school house, but burned down before turning over key/possession to school district. However, he should have planned for this by buying insurance.

Between the two, the contractor should have to pay for not preparing for contingency No property vests till the thing is finished and delivered When one of two innocent persons must sustain a loss, the law casts it upon him who has agreed to sustain it, or, rather, the law leaves it where the agreement of the parties has put it

Implied Obligations

Contract law recognizes that the words used in a contract could not possibly include everything the parties mean to say. . Our inability to specify obligations with perfect completeness sometimes tempts people to read their contracts in a wooden or technical way in favor of their own positions. Non-lawyers call such a reading "finding a loophole." But the *duties of cooperation and good faith* ensure that the bargain's substance is enforced notwithstanding the incompleteness of our contracts.

New Era Homes Corp. v. Forster (1949) -

DIVISIBILITY CASE, [EXAMPLE OF WHAT IS NOT DIVISIBILITY] Rule of Law A contract requiring scheduled installment payments throughout performance is not necessarily divisible based on separate acts of performance.

TU, CoD, CoP may NOT contradict the

EXPRESS terms of a contract

§ 2-615. Excuse by Failure of Presupposed Conditions.

Except so far as a seller may have assumed a greater obligation and subject to the preceding section on substituted performance: (a) Delay in delivery or non-delivery in whole or in part by a seller who complies with paragraphs (b) and (c) is not a breach of his duty under a contract for sale if performance as agreed has been made impracticable by the occurrence of a contingency the non-occurrence of which was a basic assumption on which the contract was made or by compliance in good faith with any applicable foreign or domestic governmental regulation or order whether or not it later proves to be invalid.

Destination contract (risk of loss)

FOB. Buyer address - Select carrier - Arrange for shipping - ROL transfer upon tender seller is responsible for the goods until they arrive at the specified destination (buyer's biz, etc) If they are destroyed en route, seller bears loss.

Assumption of Risk Analysis Factors in Frustration of Purpose

Foreseeability Fault Reasonableness Expectations related to bargain Knowledge of past instances Who is better risk bearer? Incentive to cover risk

Jones v. Fuller-Garvey Corporation (1963) FACTS Lessee has rental agreement, but nightclub burns down

Frustration of Purpose: Can't have a nightclub in a building that burns down NOT impossibility, since can still pay rent on lease for land, even if there's no nightclub. ***Remember: buyer CANNOT use impossibility*** Also, a constructive condition: landlord providing building is a constructive condition to paying rent Failure of Consideration - Can be due to both frustration of purpose AND/OR due to material breach EX: building burning down is both a frustration of purpose and failure of consideration

Larese v. Creamland Dairies, Inc (1985) ISSUE: Whether a franchisor has an absolute right to refuse to consent to the sale of a franchisee's interest to another prospective franchisee FACTS: P entered 10 year franchise agreement with D (Creamland). Agreement said franchisee "shall not assign or transfer or sublet this franchise... without prior written consent of Creamland, otherwise void." P tried to sell without agreement, Creamland refused. P brings suit against Creamland claiming that D had a duty to act in good faith and in a commercially reasonable manner"

HOLDING: Franchisor must bargain for a provision expressly granting the right to withhold consent unreasonably, to insure that the franchisee is put on notice. Since the contract stated only that consent must be obtained, Creamland did not have the right to withhold consent unreasonably Compares to requirement that landlord cannot unreasonably refuse to consent to assignment or subleasing by a tenant Franchisee/franchisor relationship mutually depend on each other. Court says relationship is broader than the clause Subsequent courts have sometimes said no one would ever agree to allow other party to act "unreasonably" Courts have split on this after Larese

Steven J. Burton discusses the implied covenant of good faith and fair dealing in respect of contracts authorizing one party to have the discretion to make decisions as to quantity, price, time, and other conditional aspects of a contract.

He explains that "[a] party with discretion may withhold all benefits for good reasons. . . . The fact that a discretion-exercising party causes the dependent party to lose some or all of its anticipated benefit from the contract thus is insufficient to establish a breach of contract by failing to perform in good faith A good faith performance doctrine may be said to permit the exercise of discretion for any purpose—including ordinary business purposes—reasonably within the contemplation of the parties *It follows, then, that "[a] contract thus would be breached by a failure to perform in good faith if a party uses its discretion for a reason outside the contemplated range— a reason beyond the risks assumed by the party claiming the breach.*

Oppenheimer & Co, Inc v. Oppenheim, Appel, Dixon, & Co (1995) Issue - Is substantial performance of an express condition enough?

Holding - No, never enough. Express performance must be performed to the letter. Implied/Constructive performance can be satisfied with substantial performance. Rule of Law Absent some forfeiture or unjust enrichment, substantial performance is not applicable to excuse the nonoccurrence of an express condition precedent.

Patterson v. Meyerhofer Issue May a party who intentionally causes the other party to breach a contract be held liable under the contract?

Holding and Reasoning (Bartlett, J.) Yes. The parties to any contract impliedly promise that they will not purposely prevent one another from carrying out the agreement. This is the logical next step from the general rule barring a party who causes another to breach from recovering damages for nonperformance. Likewise, the party who causes the breach may not raise the breach as a defense for her own nonperformance Rule of Law The parties to any contract impliedly promise that they will not intentionally or purposefully prevent one another from carrying out the agreement

Waddy v. Riggleman (2004) Issue May the doctrine of impossibility be used by a party to avoid a contract if he failed to take virtually every action within his power to perform the duties required by the agreement?

Holding and Reasoning (Davis, J.) No. The doctrine of impossibility may not be used to avoid a contract unless the party took virtually every action within his power to perform the duties required by the agreement. Rule of Law The doctrine of impossibility may not be used by a party to avoid a contract unless he took virtually every action within his power to perform the duties required by the agreement.

Frigaliment Importing Co. v. B.N.S. International Sales Corp. Issue May a contract be formed when the parties subjectively construe an ambiguous term differently?

Holding and Reasoning (Friendly, J.) Yes. When parties to a contract subjectively construe an ambiguous term differently, courts must look to external signs to determine the proper construction. To aid in the interpretation, courts may consider the plain meaning of the term, the negotiations between the parties, trade usage, other contract provisions, market factors, and the course of dealing between the parties. With respect to trade usage, when one party is not a member of the trade, the other party must show either (1) actual knowledge or (2) that the usage is so pervasive that the party's acceptance of it may be presumed. Rule of Law When the parties to a contract subjectively, but in good faith, construe an ambiguous term differently, courts may look to external factors to determine the proper interpretation of the term.

Outputs Contracts The same rationale supports different treatment of cases such as the present one, in which the seller in an output contract tenders less than a stated estimate, from cases in which the seller tenders more

If a seller saw an opportunity to increase his profits by buying additional goods to resell as output to the buyer, this exploitation might not conclusively establish bad faith. The proviso would forbid such conduct. On the other hand, an obligation to sell approximately the stated estimate may force the seller to make inefficient business decisions that the seller did not likely intend when he bargained to keep the contract's quantity provision open. Like the risk allocation in the requirements contract, the output contract allocates to the buyer the risk of a change in the seller's business that makes continuation costly, while the seller assumes the risk of a less urgent change in circumstances

Nicholas v. Raynbred - old standard, no longer good law

In a contract exchanging a promise for a promise, a party does not have to perform before he can recover. Can sue for the money even though didn't deliver cow overruled by Kingston

Lewis v. Premium Investment Corp FACTS P brought action for breach of contract and specific performance Trial court found for D Appeals reversed, holding purchase had an equitable interest in the property Thus, D's right to seek forfeiture or foreclosure was subject to P's right of redemption which could NOT be waived by contract Issues Whether an equitable right of redemption exists in spite of a strict forfeiture? Whether equitable principles may alter the clear and unambiguous terms of the parties' contract

In those circumstances, as in other contractual instances where a stipulated sum amounts to a penalty, we conclude it would be inequitable to enforce the forfeiture provision without first allowing the purchaser an opportunity to redeem the installment contract by paying the entire purchase price

Noscitur a sociis

It is known from its associates The meaning of a word or phrase may be ascertained by reference to the meaning of other words and phrases with which it is associated Context determines word meaning

Pollack v. Pollack (1932) - stream of payments case

Keep in mind reason one party must perform before the other is due to doctrine of constructive conditions If we say promises are conditions of each other, and Henry's is last Then if Charles doesn't perform, Henry's performance never comes due Why can't we say then the opposite, that if Henry doesn't perform, Charles isn't bound Shouldn't doctrine of constructive conditions go both ways? If other party is released, he can seek damages But if bargain is destroyed, how to calculate DAS? What do you do? HOLDING we are of the opinion that the rule of anticipatory breach should be applied without distinction to contracts still to be performed on both sides and those fully executed by one side, and we are further of the opinion that no distinction should be made between contracts to pay money, pure and simple, and other such contracts.

More modern approach is to allow Parol Evidence to Show Lack of Integration

Many modern courts are willing to examine any extrinsic evidence, including testimony about the disputed term itself, to determine whether the writing was intended as an exhaustive expression of the parties' agreement. The modern trend has been to reject this view on the ground that a "writing cannot prove its own completeness and accuracy." Corbin, the Second Restatement, and the UCC have all taken the position that the court should take into consideration all relevant circumstances before determining that the contract is integrated. Corbin approach Judge is screening evidence to determine if contract is integrated/complete; makes determination of whether to allow evidence

Ejusdem generis

Meaning is given to a general term is restricted to include only things of the same kind, class, character, or nature as those specifically enumerated because the listed items have a commonality, the general term is taken as sharing it When a text lists a series of items, a general term included in the list should be understood to be limited to items of the same sort EX: if someone speaks of using "tacks, staples, screws, nails, rivets, and other things" the general term "other things" surely refers to other fasteners EX: a glove compartment is fundamentally different from a case, firearm carrying box, or shipping box because those receptacles are portable, whereas a glove compartment is fixed into a vehicle Subcategory of noscitur a sociis

Diamond v. USC (1970) FACTS P, attorney, represents himself and 600 others in class action against USC At first denied economy ticket holders right to cheaper get tickets to Rose Bowl; later allowed when enough tix were available after first round of sales Was first note was anticipatory repudiation of Ds obligations to furnish ticket applications? -

NO, since unilateral K RULES the general rule: the doctrine of breach by anticipatory repudiation does not apply to contracts which are unilateral in their inception or have become so by complete performance by one party. EX: if you mow my lawn today, I will pay you $50 a week later; you can't sue to get payment $50 now, because that is a benefit greater than contract expectation damages The theory underlying this rule is that since the plaintiff has no future obligations to perform, he is not prejudiced by having a wait for the arrival of the defendant's time for performance in order to sue for breach Parties should not get more than they bargained for. If they get anticipatory repudiation, that is equivalent to accelerated lump sum

Peoplesoft USA v. Softeck, Inc (2002) FACTS Peoplesoft sold Softek software that softek sold to Puerto Rico police. Police decided not to use software. Softek tries to get out of contract based on impossibility/impracticability/frustration of purpose

NOT impossibility when all you have to do is pay money. Paying money is always possible Risk is central issue in FOP. Here they assumed risk, so no recovery on FOP.

Is FOP in the UCC?

No, not technically. Can infer through 1-103

UCC § 2-306. Output Contracts

OUTPUTS - A term which measures the quantity by the output of the seller means such actual output or requirements as may occur in good faith, except that no quantity unreasonably disproportionate to any stated estimate or in the absence of a stated estimate to any normal or otherwise comparable prior output may be tendered

Determining whether a term contradicts or merely supplements a written contract has proven difficult. Two tests have emerged:

One permits the introduction of parol evidence that *does not specifically contradict or negate an express provision* of the contract EX: contract doesn't expressly negate existence of a condition to a apparently unconditional stock option, jury was permitted to consider evidence of whether the condition had been agreed upon The other (majority approach) is more restrictive, preventing admissibility if there is an *"absence of reasonable harmony"* between the written contract and the supposed parol agreement EX: Parol condition excusing seller from delivering a specific quantity of scrap metal was not "in reasonable harmony" with the unconditional language of the seller's obligations in the written contract

Simcala Inc. v. American Coal Trade (2001) FACTS - Requirements contract; Simcala issued a purchase order to American stating it would purchase during 1998 approximately 17,500 tons of coal at $78.50 per ton. Actually only purchased 7,200 tons, only 41% of estimate. ACT sues for breach Trial court found no faith but said Simcala was in breach of contract since failed to buy estimated amount. On appeal, Simcala argued that the estimate clause in the statute should not apply to decreases in quantities ordered in a requirements contract. ISSUE Whether Alabama Code permits a buyer purchasing pursuant to a requirements contract to reduce its requirements to a level unreasonably disproportionate to an agreed-upon estimate so long as it was acting in good faith. Question of law, reviewed de novo

REASONING Words in a statute must be given their plain ordinary meaning Court believes UCC 2-306 means it was intended to prohibit both unreasonably disproportionate increases and decreases from estimates Most federal courts have held that unreasonably disproportionate decreases are permissible so long as the buyer has acted in good faith HOLDING Court sticks to plain meaning, Simcala is in breach Definition of the word "unreasonably" Simcala court takes it to mean "very" What if they read it as "without reason"? Perhaps that would harmonize the good faith and estimate clauses? Simcala has a good reason - govt cancelled contract. Simcala court gets hung up on comments and departs from statute.

UCC § 2-306. Requirements Contracts

REQUIREMENTS - A term which measures the quantity by the requirements of the buyer means such actual requirements as may occur in good faith, except that no quantity unreasonably disproportionate to any stated estimate or in the absence of a stated estimate to any normal or otherwise comparable prior requirements may be demanded.

Pollack v. Pollack (1932) - stream of payments case FACTS Charles conveys to Henry property, Henry pays Charles $5000/year in monthly installments until Charles dies If Henry dies first, he will give Charles $100K Henry stopped monthly payments without just excuse, BREACH But if you give Charles the whole value, that is giving more than he bargained for Henry wants DIAMOND rule to apply, but court does NOT

RULES AR allows aggrieved party to bring action immediately The damages are to be ascertained as of date of the breach, but such damages are to be full compensation for the loss occasioned by depriving plaintiff of the benefit of the contract. The doctrine of anticipatory breach is not founded on the theory that it moves the performance ahead of the time provided in the contract, but on the theory that, when a party bound to perform under the contract repudiates it and denies his liability thereunder, he thereby wrongfully destroys the contract so far as he is able to do so, and is liable for damages for such wrongful act. Also, since the injury is to the contract as a whole, the measure of damages is the value of the thing injured or destroyed regarded as an article of property.

McKnight v. Bellamy (1970) FACTS Bellamy (P) against McKnight (D) for the return of the money paid for a mare sold by McKnight to Bellamy at auction Bought thinking mare was "in foal" (pregnant), but actually wasn't. Returned to get impregnated. Mare died. Bellamy sues, gets money back. McKnight appeals, stating that "risk of loss shifted to the buyer at the time of the sale."

RULES Court: hell nah "Where a tender or delivery of goods so fails to conform to the contract as to give a right of rejection the risk of their loss remains on the seller until cure or acceptance." Risk of loss is easier than FOP. When there's a loss, it quickly/easily resolves who should win.

Satchell v. Van Brode (1971) FACTS P sued D for return of $500 earnest money deposit for home ($28K) D counterclaimed for damages for breach Contract not drafted by lawyer, no breach clause ISSUE Where a contract for purchase of real property fails to contain a liquidated DAS provision, may defaulting purchaser recover earnest money deposit?

RULES It is well settled that, even in the absence of such a forfeiture provision, a vendee in default is not entitled to recover from the vendor money paid in part performance of an executory contract

Tucker v. Aqua Yacht Harbor Corp (1990) FACTS P bought a boat, had problems in one engine. Brought back to dealer for repairs multiple times. Eventually brought to manufacturer, but brought suit against manufacturer of engine, boat, and retailer before engine manufacturer finished repairs. ISSUE Whether Chrysler (engine manufacturer) has established as a matter of law that it was not given a reasonable opportunity to cure before Ps revoked acceptance.

RULES before a buyer may revoke acceptance under 2-608, the seller must be afforded a reasonable opportunity to cure, even though there may have been a breach of an implied warranty. The law's policy of minimization of economic waste strongly supports recognition of a reasonable opportunity for cure. "Substantially impairs" is squishy, so "right to cure" allows parties to work out between themselves. More economically efficient; better to fix, leave with party if they can be satisfied thru cure. If seller had to take back every time, would have to discount substantially, hurting profits

Failure of Consideration

Relates to defenses of impracticability and frustration and breach *Failure of consideration is DIFFERENT than lack of consideration* *Failure of consideration* occurs when due to a supervening cause AFTER an agreement is reached, the promised performance fails *LACK of consideration* - exists immediately after the execution of the contract while failure of consideration arises because of subsequent events

Chugach Elec. Ass'n v. Northern Corp. (1977) FACTS Contracted to haul rock across ice once ice had sufficiently frozen. Ran into a ton of problems, including two trucks breaking thru ice killing drivers. Impossible/Impracticable?

Restatement of Contracts has departed from the harsh early common law rule by recognizing the principle of 'commerical impracticability'. Under this doctrine, a party is discharged from his contract obligations, even if it is technically possible to perform them, if the costs of performance would be so disproportionate to that reasonably contemplated by the parties as to make the contract totally impractical in a commercial sense. Sec. 465 of the Restatement also provides that a serious risk to life or health will excuse nonperformance.

Neumiller Farms, Inc. v. Cornett (1979) FACTS Potato farmer has contract for $4..25, then market price drops to $2. Buyer refuses to accept, says he will only accept at $2. Also says that potatoes are inferior. Clearly just trying to renegotiate contract price

Rule of Law A merchant buyer seeking to reject delivery of goods must act in good faith, which includes honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade.

D.P. Technology Corp v. Sherwood Tool, Inc (1990) - *NOT RELIABLE PRECEDENT* since CT doesn't follow majority rule FACTS Sherwood contracted to buy computer system specially designed for them Software delivered before due date, DP slightly late with hardware Sherwood rejects since late ISSUE: Does perfect tender rule apply?

Rule of Law Under the Uniform Commercial Code, a short delivery delay does not allow a buyer of specially-made goods to reject the goods as nonconforming.

Hubbard v. Utz Quality Foods, Inc (1995) Issue Is an installment contract breached by a non-conforming installment if the non-conformity substantially impairs the value of the contract?

Rule of Law An installment contract is breached by a non-conforming installment if the non-conformity substantially impairs the value of the contract.

Seitz v. Mark-O-Lite Sign Contractors, Inc (1986) FACTS Company contracted to make sign, but sheet metal guy got sick and can't do it. Breach?

Rule of Law If an act to be performed is delegable, the illness of the promisor or third party who is expected to perform the act does not excuse performance. ejusdem generis. Under this principle, the catch-all language of the force majeure clause relied upon by defendant is not to be construed to its widest extent; rather, such language is to be narrowly interpreted as contemplating only events or things of the same general nature or class as those specifically enumerated

Britton v. Turner (1834) FACTS Employment was not at will at the time. Back then it was presumption of one year employment since farm labor was the norm, a season of work Britton hired for one year contract. Only works for 10 months. Doesn't get paid, sues for unjust enrichment of employer

Rule of Law Where an employee voluntarily breaches a contract for labor by failing to continue the agreed employment, the employee is entitled under quantum meruit (unjust enrichment) to the reasonable value of the services provided, unless the contract specifically provides otherwise.

Taylor v. Johnston (1975) - HORSE CASE Issue - Does anticipatory breach occur when a promisor repudiates a contract before the specified time for performance has arrived?

Rule of Law - Anticipatory breach occurs when a promisor repudiates a contract before the specified time for performance has arrived. Holding and Reasoning (Sullivan, J.) Yes. There can be no actual breach of a contract until the time specified therein for performance has arrived. CANNOT have anticipatory breach in unilateral contract; or can we? Anticipatory breach occurs when a promisor repudiates a contract before the specified time for performance has arrived.

Lowy v. United Pacific Insurance Co. (1967) - DIVISIBILITY CASE

Rule of Law - When a specified sum of money is to be paid on full performance, the actor is not entitled to any part of the sum until completion, unless full performance has been excused, prevented, or delayed by the act of the other party. Very clear that they divided contract into two parts: excavation, and then street work. Clear case of divisibility.

Montgomery County Hospital v. Brown (1998)

Rule: vague assurances of employment by an employer are too indefinite to be enforced because of the default rule of at-will employment. Policy: At-will employment is economically efficient because it allows labor resources to be more flexible for employers Is a substantive presumption in American courts

Impracticability, NEVER frustration of purpose, since purpose is to get paid money, will never say it has no use for money BUYER or SELLER?

SELLER - Impracticability Think SI (So Impractical)

§ 2-202. Final Written Expression: Parol or Extrinsic Evidence.

Terms with respect to which the confirmatory memoranda of the parties agree or which are otherwise set forth in a writing intended by the parties as a final expression of their agreement with respect to such terms as are included therein *may not be contradicted by evidence* of any prior agreement or of a contemporaneous oral agreement *but may be explained or supplemented* (a) by course of dealing or usage of trade (Section 1-205) or by course of performance (Section 2-208); and (b) by evidence of consistent additional terms *unless* the court finds the writing to have been intended also as a complete and exclusive statement of the terms of the agreement .

A bargain comprising mutual promises is different. There, a binding contract forms when the promises are traded, as Nicholas v. Raynbred affirmed. But who is to say whether the promises are conditions of each other, and which should be performed first?

That is why we have the doctrine of constructive conditions with its attached order of performance doctrines. We presume the two promises are dependent—are conditioned on the performance of the other. If one promise is for work and the other for payment, then the Moore rule applies to show the order of performance.

Mineral Park Land Co. v. Howard (172 Cal. 289) The court relieved the defendants from the obligation to pay for the balance under water because it was not within the contemplation of the parties that the gravel under the water level would be taken and secondly because the cost of doing so would be 10 to 12 times as expensive.

The court stated the common-law rule (p. 293): "`A thing is impossible in legal contemplation when it is not practicable; and a thing is impracticable when it can only be done at an excessive and unreasonable cost.' We do not mean to intimate that the defendants could excuse themselves by showing the existence of conditions which would make the performance of their obligation more expensive than they had anticipated, or which would entail a loss upon them. But, where the difference in cost is so great as here, and has the effect, as found, of making performance impracticable, the situation is not different from that of a total absence of earth and gravel."

Expressio unius exclusio alterius est

The expression of one is the exclusion of the other. Ulmer v. Harsco Corp (1989) - The court found that while the language of the severance plan was general, it was not ambiguous on its face. Therefore, because the employee benefit plan gave several exemptions to a rule the court assumed under the principle of expressio unius exclusio alterius that other exemptions were NOT intended.

What is the difference between the "plain meaning rule" and the "parol evidence rule"?

The parol evidence rule is *NOT* about the meaning/ambiguity of words in a contract; that is determined by the plain meaning rule and the other rules you learn in this section. *The parol evidence rule is about what provision/terms/words are included in the contract at all, and the parol evidence rule applies any time the parties have put their agreement in writing*

RISK OF LOSS

The risk of one party's having to bear the loss due to damage, destruction, or loss of goods bargained for under a sales contract.

Premises underlying Parol Evidence Rule

The rule is based on several premises: -That written evidence is more reliable than oral testimony; -That a more recent written document is more reliable than testimony about earlier discussions; -And that whatever the parties have put down in writing is a more accurate reflection of the terms of their agreement than their memories -Limits their opportunity to commit perjury (people tend to remember things how they wish they had been) -Limits juries from rescuing sympathetic parties from bad deals -Reduces costs imposed on courts and the parties in searching for evidence about the terms of the contract

What is the primary goal of contracts doctrine?

To enforce fair exchange

AMF, Inc. v. McDonald's Corp. (1976)

Under UCC, a party that has reasonable grounds for insecurity regarding the other party's ability to successfully perform the contract may demand adequate assurance of performance by the other party and, if adequate assurance is not provided, may anticipatorily repudiate the contract. McDonald's was justified in repudiating its contract with AMF because AMF was unable to provide adequate assurance of its ability to perform the contract. This UCC provision should be construed broadly. Thus, a party is not required to provide notice of repudiation in writing. Whether in a specific case a buyer has reasonable grounds for insecurity is a question of fact.

Restatement Second of Contracts § 251 When a Failure to Give Assurance May Be Treated as a Repudiation

Where reasonable grounds arise to believe that the obligor will commit a breach by non-performance that would of itself give the obligee a claim for damages for total breach under [R2C § 243], the obligee may demand adequate assurance of due performance and may, if reasonable, suspend any performance for which he has not already received the agreed exchange until he receives such assurance. The obligee may treat as a repudiation the obligor's failure to provide within a reasonable time such assurance of due performance as is adequate in the circumstances of the particular case.

if the writing was intended not just as final but also as complete and exclusive, is TU, CoD, CoP allowed to supplement?

YES!

Charles R. *Tips* Family Tr. v. PB Commer. LLC, 459 S.W.3d 147, 150 (Tex. App. 2015) HOLDINGS:

[1]-The words "one million seven thousand" controlled over the numerals $1,700,000 to set the amount of the promissory note and guaranty obligations because *the rule that the written words controlled over numerals applied to all of the documents at issue, both negotiable and non-negotiable instruments*; [2]-Consideration of extrinsic evidence, such as the amount of money that actually changed hands amongst the parties, for purposes of interpreting the documents as a matter of law was improper because the amount of principal set forth in the note and guaranty agreement was not ambiguous; [3]-Plaintiff was not entitled to summary judgment because plaintiff did not establish each of the elements of any of its causes of action.

The repudiation may be either express or implied. An express repudiation is

a clear and unequivocal refusal to perform the contract as written.

Quantum Meruit/Unjust Enrichment

a reasonable sum of money to be paid for services rendered or work done when the amount due is not stipulated in a legally enforceable contract. "As much as he deserves" - the damages awarded in a quasi-contract case

Whether an installment contract is designed to consist of a schedule of payments toward performance as a whole, as opposed to

a series of divisible acts to which separate payments are tied depends on the intent of the parties. The intent of the parties must be gathered from the facts and circumstances of each individual case. In general, a house owner who contracts for improvements usually commits himself to one plan and one final result, not a series of unrelated projects. While the parties are free to make a contract divisible and stipulate the value of each individual part, the intent to do so must be clear from the facts of each case.

"Substantial performance" is a question of degree and is appropriate for determination by

a trier of fact.

a party can breach the implied covenant of good faith and fair dealing both by exercising express discretion in a way inconsistent with a party's reasonable expectations and by ...

acting in ways not expressly excluded by the contract's terms but which nevertheless bear adversely on the party's reasonably expected benefits of the bargain

Parol evidence is _______________ to resolve ambiguities in an integrated written contract.

admissible

"Integrated" means that

all of the parties' negotiations and preliminary agreements regarding a term have been included (or integrated) into a final written version of the agreement with the intent that the writing supersedes any contrary or even consistent prior discussions or agreements

Liquidated damages -

an amount contractually stipulated as a reasonable estimation of actual damages to be recovered by one party if the other party breaches

The rule that a contract for labor is entire and performance must be completed before payment is required prevents ...

an employee who breaches from recovering under the contract.

Conditional Formation Exception Does not exclude evidence that the contract simply does not exist. Evidence of a parol condition (precedent or subsequent), upon which formation of the contract depends, proves that the writing was not ...

an integrated contract Thus, the parol evidence rule does NOT prohibit one of the parties from introducing testimony or other evidence to show that there was no agreement in the first place EX: if the parties to a written contract for the purchase of a business agree that the entire deal is subject to approval of other members of the buyer's family, evidence of the condition is admissible However, MUST prove condition was IN in the contract, not just one of the duties undertaken by a party

A waiver is

an intentional relinquishment of a known right. Intentional relinquishment of a known right can be inferred from intentional conduct which is inconsistent with claiming the contractual right. Any contractual right can be waived (including condition precedent). If condition is narrow, then more likely to be waived. EX: condition that buyer get loan at 4%, but no loans available that low, gets loan at 5%, technically waived, but clearly intends to continue with contract to buy

impracticality

an interpretation of the doctrine of impossibility in contracts that allows a party to a contract to be relieved of the duty to perform, when the basis of the contract no longer exists due to un-forseen events.

Promissory note -

an unconditional written promise, signed by the maker, to pay absolutely and in any event a certain sum of money either to, or to the order of, the bearer or a designated person

However, if one of the parties announces its intent to not perform, or takes action that would make performance impossible, before the deadline for performance, there hasn't been a real breach, but instead an ...

anticipatory repudiation In most situations, the aggrieved party is entitled to treat repudiation the same as breach

Reid v. Key Bank of Southern Maine, Inc (1987) -

bank has a duty to have a reason to have reason to cut off loan. *Can be bad faith to not have a good reason*

Pittman - where a contract creates concurrent conditions and neither party tenders timely performance, ...

both parties are discharged

Installment contracts (3) Whenever non-conformity or default with respect to one or more installments substantially impairs the value of the whole contract there is a ...

breach of the whole. But the aggrieved party reinstates the contract if he accepts a non-conforming installment without seasonably notifying of cancellation or if he brings an action with respect only to past installments or demands performance as to future installments.

Conversely, because a party may be injured when the other party to a contract manipulates bargaining power to its own advantage, a party may nevertheless breach its duty of good faith without actually

breaching an express covenant in the contract

A party may breach an express covenant of the contract without ...

breaching the implied covenant of good faith and fair dealing

The essence of the parol evidence rule is, therefore, that evidence outside a completely integrated contract ...

cannot be used to change the agreement.

Requirements Contracts - Most courts and commentators, treat cases in which the buyer demands more than the stated estimate differently than

cases in which the buyer demands less The courts that employ separate analyses hold that while § 2-306 precludes buyers from demanding a quantity of goods that is unreasonably disproportionate to a stated estimate, it permits "good faith reductions that are highly disproportionate." Essentially, the argument is the following. The "unreasonably disproportionate" clause is somewhat redundant in light of the good faith requirement in that section. The clause therefore was likely provided to explain the good faith term. The good faith requirement with respect to disproportionately increased demands needed explanation as certain forms of exploitation in that situation do not clearly constitute bad faith. For example, if the market price of the subject goods rises above the contract price, a buyer in a requirements contract might be tempted to demand more goods than it truly needs in order to resell them for the better market price. The clause eliminates that opportunity. On the other hand, exploitation, beyond bad faith, is not a concern if a buyer demands less than a stated estimate. The seller has the opportunity to sell any excess of the subject goods on the market

Good Faith Requirement for Perfect Tender Rule

claim of dissatisfaction with delivery of goods so as to warrant their rejection must be made in good faith, rather than in an effort to escape a bad bargain A rejection of goods that have been specially manufactured for an insubstantial delay where no damage is caused is arguably not in good faith.

Evidence of consistent additional terms is expressly prohibited if the writing was intended not just as final but also as ...

complete and exclusive.

2) "conditional and dependent conditions"

condition the performance of one party on the prior performance of the other. Thus, a party's performance will be excused if the other party fails to perform the prior condition. Generally, if one party's performance takes longer, it must be done first. EX: service before payment

Concurrent conditions are

conditions precedent which are mutually dependent, and the only important difference between a concurrent condition and a condition precedent is that the condition precedent must be performed before another duty arises, whereas a tender of performance is sufficient in the case of a concurrent condition. The failure of both parties to perform concurrent conditions does not leave the contract open, but instead results in a discharge of both parties' duty to perform.

Specific terms control over

conflicting general terms EX: specific typewritten description of the collateral which the parties inserted into the printed form controls over the general description contained in the the standard form

Kingston v. Preston When one party's performance under a contract is dependent on the prior performance of the other party, the other party's performance is a

constructive condition precedent and performance will be excused unless the condition is satisfied.

A waiver is like a ...

contractual modification. It can be characterized as a promise to accept something that was not acceptable before. Another way to think of contractual rights is as a kind of property after the contract forms. In this line of thinking, waiver acts as an abandonment of property.

A fully integrated contract supersedes all prior negotiations and agreements, even if they are consistent with the terms appearing in the writing. Thus a fully integrated writing may not be ...

contradicted or supplemented by evidence of prior or contemporaneous terms.

An unambiguous contract will be enforced as written, and parol evidence will not be received for the purpose of ... *[Tips Case]*

creating an ambiguity or to give the contract a meaning different from that which its language imports *[Tips Case]*

Pacific Gas & Electric Co. v. G.W. Thomas Drayage & Rigging Co. Supreme Court of California 442 P.2d 641 (1968)

critical of plain meaning rule. Rule of Law If a preliminary consideration of all credible evidence offered to prove the intent of the parties still leaves contractual terms fairly susceptible to at least two rational interpretations, extrinsic evidence relevant to prove either of these meanings is admissible. The meaning of words used in a contract varies immensely based on the verbal context and surrounding circumstances associated with contract formation, as well as the linguistic education and experience of their users and readers. This includes the linguistic education and experience of judges. However, judges act improperly when they refuse to consider extrinsic evidence relevant to show the intent of the parties in drafting contract language, as no contractual rights or obligations are formed minus the intent of the parties. Thus, instead of relying on its own interpretation of the "plain meaning" of Thomas' indemnity clause, the trial court should have examined the contract language itself and any credible extrinsic evidence relevant to ascertaining the intent of the parties surrounding that language.

The parol evidence rule is ''premised upon the idea that when the parties have deliberately put their engagements into writing, in such terms as import a legal obligation, without any uncertainty as to the object or extent of such engagement, it is conclusively presumed, that the whole engagement of the parties, and the extent and manner of their understanding, was reduced to writing. After this, to permit oral testimony, or prior or contemporaneous conversations, or usages [etc.], in order to learn what was intended, or to contradict what is written, would be

dangerous and unjust in the extreme. . . .

forfeiture is

deprivation or destruction of a right in consequence of the non-performance of some obligation or condition.[1] It can be accidental, and therefore is distinguished from waiver The Restatement defines the term "forfeiture" as "the denial of compensation that results when the obligee (person bound by contract) loses [its] right to the agreed exchange after [it] has relied substantially, as by preparation or performance on the expectation of that exchange However, courts cannot go against the express language of a contract, even if it means forfeiture. Interpretation as a means of reducing the risk of forfeiture cannot be employed if "the occurrence of the event as a condition is expressed in unmistakable language" "[t]he policy favoring freedom of contract requires that, within broad limits, the agreement of the parties should be honored even though forfeiture results"]).

The parol evidence rule does not, however, prohibit the presentation of parol evidence to ...

determine if the contract is integrated

In determining the "plain" or standard meaning of terms or resolving an ambiguity, evidence of usage of trade, course of dealing, or course of performance will also be useful. However, the court need not ...

determine that the written contract is ambiguous to resort to these sources (as they do with parol evidence)

Usually, carrier has insurance, but if they don't or insurance provider insolvent, above matters. Even if fully insured, risk of loss matters to ...

determine who should bring the claim

1) "mutual and independent conditions" require

each party to perform his or her obligation, irrespective of whether the other party has performed. The other party's breach will not excuse performance.

Policy Argument: [t]he good faith performance doctrine may be said to ...

enhance economic efficiency by reducing the costs of contracting. The costs of exchange include the costs of gathering information with which to choose one's contracting partners, negotiating and drafting contracts, and risk taking with respect to the future. The good faith performance doctrine reduces all three kinds of costs by allowing parties to rely on the law in place of incurring some of these costs.

UCC 2-202 provides that a final written contract may be "explained or supplemented" with a TU, CoD, CoP or with ...

evidence of consistent additional terms.

Traditionally approach to determining if a contract is fully integrated (final and complete) is known as the "four corners test." Calls on court to

examine the writing to determine if it appears complete. If it appears complete, parol evidence rule applies and all prior written/oral evidence excluded Most often applied when the contract contains an "integration clause" expressing the parties' intent that the writing should be regarded as the final and complete expression of their parties' agreement Just look at contract itself: Williston's position is that "the contract must appear on its face to be incomplete in order to permit parol evidence of additional terms." Williston approach - he wrote most of 1st RS

The Restatement posits that "[t]o the extent that the non-occurrence of a condition would cause disproportionate forfeiture, a court may ...

excuse the non-occurrence of that condition unless its occurrence was a material part of the agreed exchange Substantial performance is a matter of law (not for the jury) In determining whether a particular agreement makes an event a condition, courts will interpret doubtful language as embodying a promise or constructive condition rather than an express condition. This interpretive preference is especially strong when a finding of express condition would increase the risk of forfeiture by the obligee (see Restatement [Second] of Contracts § 227[1]).

§ 229. Excuse of a Condition to Avoid Forfeiture To the extent that the non-occurrence of a condition would cause disproportionate forfeiture, a court may

excuse the non-occurrence of that condition unless its occurrence was a material part of the agreed exchange.

This rule divides waivers into two types:

executory (parts that are incomplete) and "partaking of the principle of an election"

Extrinsic evidence vs. Parol Evidence

extrinsic evidence includes before and after contract; parol doesn't include after, just all evidence prior to and including contract formation. EX: parties' behavior after contract is extrinsic evidence, but NOT parol evidence

RESTATEMENT (SECOND) OF CONTRACTS § 205 cmt. a (1981), which states, "Good faith performance or enforcement of a contract emphasizes...

faithfulness to an agreed common purpose and consistency with the justified expectations of the other party."

The first and most critical question in any analysis of the parol evidence rule is whether a writing is ...

fully integrated, partially integrated, or completely unintegrated.

Since an express condition depends for its validity on the manifested intention of the parties, it has the same sanctity as the promise itself. Though the court may regret the harshness of such a condition, as it may regret the harshness of a promise, it must, nevertheless, ...

generally enforce the will of the parties unless to do so will violate public policy.

Perfect Tender rule DOESN'T mean

goods are perfect, but rather that they conform perfectly TO CONTRACT Standard of quality if warranty of merchantability; pass without objection in the trade

3) "mutual concurrent conditions"

have to be performed concurrently. If both parties are obligated to perform at the same time, a party who is ready, willing, and able to perform may be able to sue if the other party refuses. It is unclear whether the willing party must first perform. The intent of the parties controls the type of covenant at issue.

Grounds for Rescission

i. mistake a. mutual mistake on material fact b. unilateral where non-mistaken party knew or should have known of the mistake ii. misrepresentation actually relied on by P iii. coercion iv. undue influence v. lack of capacity vi. failure of consideration vii. illegality All argue that there was no valid contract

The covenant of good faith and fair dealing is ...

implied in every contract

The law requires such a claim of dissatisfaction to be made in good faith, rather than

in an effort to escape a bad bargain.

Executory waivers are treated like promises. Executory means that a thing is ...

incomplete and that some part of it has yet to be done. A contractual performance is executory before it has been completed.

When the writing is a final expression of the parties' agreement, it is said to be

integrated.

Plain Meaning Rule -

interprets words according to their common meaning, or sometimes based on the meaning attributed to them in a dictionary. RS: unless a different intention is manifested, where language has a generally prevailing meaning, it is interpreted in accordance with that meaning. Courts are not authorized to construe a contract in such a way as to modify the plain meaning of its words, under the guise of interpretation. Courts are generally unwilling to consider testimony or other evidence about the parties' intended meaning if the words of the contract are clear.

Course of Performance Evidence -

is admissible to establish the meaning the parties attached to contractual terms, as evidenced by their actions in carrying out this particular contract

Usage of Trade Evidence -

is admissible to furnish background and give meaning to the contractual terms used by the parties as evidenced by past use of the language in the trade generally

Integration Rule -

it has always been presumed that a written contract is the final repository of the agreement of the parties.

Ut magis valeat quam pereat

it is a fundamental rule that a contract must, if possible, be so construed as to effectuate the intention of the parties and to sustain the contract An interpretation of a contract which results in termination of the contract is disfavored over one which affirms the existence of the contract An interpretation which gives a reasonable meaning to all parts will be preferred to one which leaves a portion of it useless, inexplicable, void, etc An interpretation that makes the contract valid is preferred to one that makes it invalid.

A contract is unconscionable only if

it is characterized by both "an absence of meaningful choice and contract terms unreasonably favorable to one of the parties."

Where, however, the law itself has imposed the condition, in absence of or irrespective of the manifested intention of the parties, it can deal with its creation as

it pleases, shaping the boundaries of the constructive condition in such a way as to do justice and avoid hardship. If there is doubt whether a condition is express or implied, courts will generally go with implied. Especially if it risks forfeiting the contract.

Waivers partaking of the principle of an election are treated

like abandonments of property. Too late, can't go back [so if you waive before something is finished (say the 60 day window to get financing, then it's treated like a promise and needs consideration (and would be considered a "modification" not a waiver; but if it happens AFTER that window closes it's an "election" and does not need consideration because it's an abandonment of that right?]

Requirements contracts - when might exploitation happen?

market price higher than contract price - buyer would have incentive to demand (require) more at low contract price (relative to high market price) and then resell goods at a profit on market This would be bad faith

Outputs Contracts - when might exploitation happen?

market price lower than contract price, seller takes advantage by outputting more than usual which buyer is forced to purchase at contract price higher than market price. Seller could even buy from other producers and resell to buyer, forced to pay higher price. This would be proof of bad faith

Parole evidence may still be admissible if relevant to show

mistake or fraud. . . . [ This ] recognized [exception is], of course, only [an example] of [a situation] where the evidence . . . tends to show that the contract should be defeated or altered on the equitable ground that relief can be had against any deed or contract in writing founded in mistake or fraud.'

Words over numerals applies to negotiable instruments like promissory notes, also applies to ... *[Tips Case]*

non-negotiable instruments. *[Tips Case]*

Although both the doctrine of impossibility and the doctrine of frustration of purpose developed from the commercial necessity of excusing performance in cases of extreme hardship, and although the two doctrines are somewhat similar to each other, frustration is

not a form of impossibility.

A claim of dissatisfaction by a merchant-buyer of fungible goods must be evaluated using an _________- to determine whether the claim is made in good faith

objective standard

If, however, the writing omits a consistent additional term that is either agreed to for separate consideration or might naturally have been omitted in the circumstances, the agreement is considered ...

only partially integrated and collateral facts and circumstances may be introduced to prove consistent additional terms

Jacob & Youngs v. Kent (1921) - FACTS - didn't use Reading pipe brand in house, but just as good

paradigm case for substantial performance Jacob substantially performed its contract with Kent with only trivial defects and is thus entitled to receive the remainder of the amount owed under the contract. A party that substantially performs its obligations under a contract may recover expectation damages for any remaining payment owed under the contract, minus an offset for defects in the party's performance.

If they are ruling on whether some term not in the written agreement belongs in it or otherwise modifies the writing, that is

parol evidence rule territory. [THINK OF AS THE "NO Parol Evidence Rule" since it refers to when parol evidence must be excluded]

If the parties intended the writing to serve as a final expression of some, but not all, of the terms agreed upon, it is a "______________________-" writing. It is final, but only with respect to the terms actually included in the writing.

partially integrated

If the writing is final but not complete, it is

partially integrated and consistent terms only can be supplied by extrinsic evidence.

There is no impossibility of performance when one party has performed as agreed and all that remains for the other party to do is

pay the agreed compensation.

While performance of work under a contract is a constructive condition to payment, it is subject to the general rule that

payment is due when the promisee has substantially performed his obligations under the agreement

Reasonable Opportunity to Cure - 2-508 (below) This was the concern of Karl Llewellyn (drafted section 2, didn't like perfect tender), which led the Code's drafters to carve out exceptions to the perfect tender rule.

perfect tender rule of UCC is modified and limited by Code language that seller has reasonable opportunity to cure improper tender seller's right to cure defective tender, Section 2-508, was intended to act as a meaningful limitation on the absolutism of the perfect tender rule under which no leeway was allowed for any imperfections.

If the contract in Moore v. Kopel was a unilateral contract, then the constructive conditions doctrine was irrelevant. If it was a trade of mutual promises, then the doctrine applied. In either case, ...

performance had to occur before pay was warranted, so the legal result was the same in that case. That it was and is the same in so many other cases is probably why so many lawyers confuse the doctrines.

In the case of Kingston v. Preston, changed the rule, and decided that

performance of one condition might be dependent on prior performance of another, although the contract contained no express condition to that effect.

In the early days (Nicholas v. Raynbred), it was settled law that covenants and mutual promises in a contract were

prima facie independent, and that they were to be so construed in the absence of language in the contract clearly showing that they were intended to be dependent.

In a unilateral contract, a

promise is exchanged for a performance. Because the performance is consideration for the promise, the promise is not binding until the performance is finished.

In testing the good faith of a merchant, § 7-2-103, Code of Alabama 1975, requires ". . . honesty in fact and the observance of

reasonable commercial standards of fair dealing in the trade."

Scholars disagree, however, on the method by which courts should determine if the contract is integrated. Williston's position is that "the contract must appear on its face to be incomplete in order to permit parol evidence of additional terms." The modern trend has been to ...

reject this view on the ground that a "writing cannot prove its own completeness and accuracy." Corbin, the Second Restatement, and the UCC have all taken the position that the court should take into consideration all relevant circumstances before determining that the contract is integrated.

A simple lack of clarity or disagreement between parties does NOT ... *[Tips Case]*

render a term ambiguous. EX: words and numerals different amounts, words control, so NOT ambiguous. *[Tips Case]*

§ 2-612. "Installment contract"; Breach. (1) An "installment contract" is one which

requires or authorizes the delivery of goods in separate lots to be separately accepted, even though the contract contains a clause "each delivery is a separate contract" or its equivalent.

Equitable Rescission

rescission by act of the court How it works: Sue for rescission first, then comply with whatever court says is a requirement Usually court makes them give mutual restitution if finds grounds for rescission So difference is that in legal rescission, you take all the steps first then sue, in equitable, you sue first. A bill in equity is an action brought to rescind, and is not based on any idea, or on any theory, that the contract has already been rescinded, as in an action at law.

Legal Rescission

rescission by act of the parties How it works: P cause for rescission, give notice, gives back any benefit, sues for unjust enrichment against other party that refuses to give back money they have been paid. in order that the plaintiff may have a legal remedy based upon rescission by the act of the party himself, he must restore or attempt to restore the consideration. The rescission reinvested him with the legal title to the thing for which he subsequently sues, and therefore must be conditioned upon a surrender of the thing received by him in pursuance of the transaction he thus avoids. This may be appropriately termed a legal rescission, and is the act of the party thereto.

Shipment contract - EX: FOB: Seller's Loading Dock

seller is obligated to tender goods to the carrier, then risk of loss is on the buyer while in transit; buyer pays shipping

Course of Dealing evidence

sequence of *previous* conduct between the parties to a particular transaction which is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct evidence of course of dealing . . . to explain or supplement the terms of any writing stating the agreement of the parties in order that the true understanding of the parties as to the agreement may be reached . . . . Unless carefully negated they have become an element of the meaning of the words used."

Constructive conditions, which ordinarily arise from language of promise, are subject to the precept that

substantial compliance is sufficient.

If one promise is for work and the other for payment, then the Moore rule applies to show the order of performance:

substantial performance first, then payment.

Partial breach - anticipatory repudiation

substantial performance is a type of partial breach, but good enough to make payment due because constructive condition satisfied by the substantial performance - (like in Reading pipe case)

Where industry or private customary practice is consistent with the express terms of a fully integrated written contract, these customs may be used to

supplement its terms

A partially integrated writing may not be contradicted by evidence of any prior or contemporaneous agreements not included in the writing. But it may be

supplemented by evidence of additional terms as long as the supplemental terms do not contradict the writing.

If it is partially integrated [final but not complete], the writing may be

supplemented, but not contradicted, by evidence of their prior understandings

AR is not technically the same as a breach, but has the same effect as a material breach: Permits the aggrieved party to

suspend performance, and, if the repudiation is not retracted within a reasonable time, to terminate the contract, cease performance of its own duties, and bring an immediate action to recover DAS

An ambiguity arises only after ...*[Tips Case]*

the application of established rules of construction leaves an agreement susceptible to more than one meaning. For an ambiguity to exist, both potential meanings must be reasonable. *[Tips Case]*

Whether the instrument is a final and complete expression of the agreement is to be determined from

the conduct and language of the parties, the surrounding circumstances, and the instrument itself.

Supplementing a Partially Integrated Contract If the court has determined that a written contract is final but not necessarily complete, that is, that it is partially but not fully integrated, a second preliminary determination must be made before permitting the jury to consider the evidence:

the court must also determine whether the term is consistent with the language of the written contract

However, quantum meruit (unjust enrichment) provides a basis outside the contract for ...

the employee to recover the value of the services provided, unless the parties' agreement stipulates otherwise. Comparison of harms: if employee leaving harms employer to such a great extent that it overcomes the value of service performed, no recover owed But usually, value conferred on employer by employee thru work is much higher than any harm from quitting.

If the term is consistent,

the evidence will be admitted as an additional or supplemental term, and the jury will be allowed to consider the veracity of the proponent of the supposed provision.

If the parties by their conduct (course of performance) show that they are not following the express terms of the contract, then

the express terms do not control and instead look to course of performance, course of dealing, usage of trade evidence.

Where the integrated writing contradicts such customs,

the final writing will control.

In applying the frustration excuse, courts look first to see whether

the fundamental reason of both parties for entering into the contract has been frustrated by an unanticipated supervening circumstance, which substantially destroys the value of the performance by the party standing on the contract.

A buyer may reject delivery of goods if either

the goods or the tender of delivery fails to conform to the contract. .

Parol evidence rule is not about

the meaning of words, whether in the contract or out of it. It is about which words are included in the contract. If a court is ruling on ambiguity in the words, that is about meaning, so it is NOT about the (no) parol evidence rule (in other words, parol evidence is allowed) [THINK OF AS THE "NO Parol Evidence Rule" since it refers to when parol evidence must be excluded]

Installment contracts (2) The buyer may reject any installment which is non-conforming if...

the non-conformity substantially impairs the value of that installment and cannot be cured or if the non-conformity is a defect in the required documents; but if the non-conformity does not fall within subsection (3) and the seller gives adequate assurance of its cure the buyer must accept that installment.

Restatement, Contracts § 241 (1932) which provides as follows: "Where parties to a writing which purports to be an integration of a contract between them orally agree, before or contemporaneously with the making of the writing, that it shall not become binding until a future day or until the happening of a future event, ...

the oral agreement is operative if there is nothing in the writing inconsistent therewith."

If it was completely unintegrated, and not even final with respect to the terms it contained, then ...

the parol evidence rule presents no bar to the jury's consideration of other evidence of the terms of the agreement

In making such a determination of whether the contract is final and complete, "the chief and most satisfactory index for the judge is found in the circumstance whether or not

the particular element of the alleged extrinsic negotiation is dealt with at all in the writing. If it is mentioned, covered, or dealt with in the writing, then presumably the writing was meant to represent all of the transaction on that element; if it is not, then probably the writing was not intended to embody that element of the negotiation

Trade usage will supplement the terms of a contract only when

the parties know or should know of that usage As this conclusion constitutes a factual finding, we review it only for clear error Have to prove other party knows or should have known of the trade usage

The parol evidence rule, therefore, does not apply to every contract of which there exists written evidence, but applies only when

the parties to an agreement reduce it to writing, And agree or intend that the writing shall be their complete agreement. [Citations omitted.] . . . . . Where there exists doubt that the written agreement was ever intended to reflect the full agreement of the parties, the courts of this State have not hesitated to admit contradictory parol evidence

Unilateral Contracts and Constructive Conditions No doctrine of constructive conditions is necessary because

the promise is not binding at all, even contingently, until the performance occurs. So the "condition" in a unilateral contract is by definition express and prior because there won't be a contract unless performance happens. So it's assumed in the structure of a unilateral contract and therefore redundant.

Unilateral Contracts and Constructive Conditions Section 45 of the Restatement, if adopted, binds the promisor to an option to give the promisee a reasonable time to finish, but the promisor is bound to the promise only if

the promisee finishes.)

An implied repudiation occurs if

the promisor's conduct makes substantial performance of the promise impossible.

However, if the term contradicts the language of the writing,

the proposed evidence of it will be excluded

In contracts affecting the public interest, an interpretation favoring

the public interest is preferred EX: Telecommunications Act of 1996 was intended to promote consumer choice, so TV subscribers don't have to have their wiring removed when they switch to a new provider.

''The parol evidence rule does not of itself, therefore, forbid the presentation of parol evidence, that is, evidence outside the four corners of the contract concerning matters covered by an integrated contract, but forbids only

the use of such evidence to vary or contradict the terms of such a contract. Parol evidence offered solely to vary or contradict the written terms of an integrated contract is, therefore, legally irrelevant. When offered for that purpose, it is inadmissible not because it is parol evidence, but because it is irrelevant. [THINK OF AS THE "NO Parol Evidence Rule" since it refers to when parol evidence must be excluded]

If it is fully integrated [final and complete], then...

the writing will be the sole evidence of the terms of the contract

The modern rule, which seems to be of almost universal application, is that

there is a presumption that mutual promises in a contract are dependent and are to be so regarded, whenever possible.

Express conditions precedent, which are

those agreed to and imposed by the parties themselves, "must be literally performed"

Handwriting prevails over ...

typewriting, and typewriting over printing

Performance is not excused simply because a responsibility required by the contract is more difficult than expected. A party should

use reasonable efforts to overcome obstacles to perform as required by the terms of the agreement.

A comment to the Restatement states that "[g]ood faith performance or enforcement of a contract emphasizes faithfulness to an agreed common purpose and consistency with the justified expectations of the other party; it excludes a variety of types of conduct characterized as involving `bad faith' because they

violate community standards of decency, fairness or reasonableness."

UCC 2-202 operates on the presumption that existing trade practices ...

were taken for granted when the document was executed

Terms of Contract Basic Analysis ***If it's in a contract, it's either a promise or an express condition. If it's a promise, it's a constructive condition*** NEXT, ask

what kind of constructive condition: one of three: from Kingston 1) mutual and independent 2) mutual and dependent 3) concurrent mutual

The way the result is reached is very different, however, and the difference is not just a technicality. The doctrines we are about to study—substantial performance, divisible contract, and so on—apply only ...

when the constructive conditions doctrine applies. They do not apply at all to the performance that is consideration in a unilateral contract.

The parol evidence rule provides that

when the parties reduce a contract to writing, no extrinsic evidence of prior or contemporaneous agreements will be admissible to change, alter, or contradict such writing. [THINK OF AS THE "NO Parol Evidence Rule" since it refers to when parol evidence must be excluded]

Duty of Cooperation (part of duty of good faith) -

where there is a contract to do an act on a future day, there is a relation constituted between the parties in the meantime by the contract, and that they impliedly promise that in the meantime neither will do any thing to the prejudice of the other inconsistent with that relation

Issue that the parol evidence rule addresses:

whether any words should be added to or taken from the parties' written contract, when they have a written contract. [THINK OF AS THE "NO Parol Evidence Rule" since it refers to when parol evidence must be excluded]

Where work and payment are traded,

work must be done first. Work is a constructive (implied) condition of payment. The assumption is the thing that takes time (work), will be a condition precedent to payment

Perfect Tender Rule (UCC)

§ 2-601. Buyer's Rights on Improper Delivery. if the goods or the tender of delivery fail in any respect to conform to the contract, the buyer may (a) reject the whole; or (b) accept the whole; or (c) accept any commercial unit or units and reject the rest.