Contracts

I. WHAT IS A CONTRACT
-an agreement that the law will enforce -written contracts v oral- although the word contract often refers to a written document, a writing is not always necessary to create a contract. An agreement may be binding on both parties even though it is oral. Some contracts must be in writing under statute of frauds A. SOURCES OF CONTRACT LAW - UCC- contract law is essentially common law. Sale of goods usually governed by statute Article 2 of UCC B. TYPES OF CONTRACTS 1.Bilateral: both sides make promises. A proposes to exchange his promise for Bs promise. For example: I promise to pay you 100$ april 15 if you promise now that you will walk across the bridge on April 1. 2.Unilateral: involves exchange of the offerors promise for the offerees act. The offeree doesnt make a promise, just simply acts. For example, If you walk across the bridge I will pay you 100$ when you finish.

II. OFFER AND ACCEPTANCE

A. MUTUAL ASSENT -necessary for an enforceable contract -depends on whether there has been an offer and an acceptance of that offer 1.Defined: If the offeror has clearly manifested a willingness to enter into a contract in such a way that the other party, the offeree, knows that assent is all that is necessary to cement the deal, and the offeree accepts, the mutual assent exists 2. Objective Theory of Contracts: partys intent is deemed to be what a reasonable person in the position of the other party would think that the first partys objective manifestation of intent meant. Was As conduct reasonably indicated to one in Bs position that A was making an offer. 3. Presumptions: where the evidence is ambiguous about whether the parties intended to be bound, the court will follow these rules: 1. In a business context, the court will presume the parties intended contract to be legally enforceable 2. But in social and domestic situations presumption will be that legal relations were not intended 4. Intent to put in Writing: if two parties agree either orally or in a brief writing on all points, but decide they will subsequently put their entire agreement into a more formal written document later, the preliminary agreement may or may not be enforceable. The parties intention controls. Where evidence of intent is ambiguous, the court will generally treat a contract as existing as soon as the mutual assent is reached, even if no formal document is ever drawn up later. CONTINENTAL LABORATORIES V SCOTT PAPER -Rule: if either party intends not to be bound in the absence of a fully executed document, no binding contract will be formed -To determine whether intent to be bound prior to execution of written document:

1. whether contract is of class usually found in writing 2. whether it is a type needing formal writing for its full expression 3. whether it has few or many details 4. whether amount is large or small 5. whether contract is common or unusual 6. whether all details have been agreed upon or some remain unresolved 7. whether the negotiations show a writing was discussed or contemplated - Existence of a familial relationship may affect ability to create an enforceable contract. Courts do not get involved with domestic agreements in marriages or living arrangements within a home. Recently courts have become more involved in disputes arising between unmarried cohabitants and friends. STEPP V FREEMAN Rule: in an implied-in-fact contract, assent is demonstrated by the surrounding circumstances, including the conduct and declarations of the parties -lottery ticket pool between coworkers. There were unwritten rules about how to be in the pool that were known for over 5 years. These included reminders of payment before tickets were bought and expressly telling person in charge he did not wish to be in the pool anymore. Plaintiff was never reminded and never told D that he didnt want to be in pool, D was just mad at P and neglected to remind him. B. THE OFFER -the manifestation of willingness to enter into a bargain, which justifies another person in understanding that his assent can conclude the bargain. -an offer is something that creates a power of acceptance 1. Offers made in jest are not enforceable 2. Preliminary negotiations: if a party solicits bids, this solicitation is not an offer and cannot be accepted. Its a basis of preliminary negotiations. For example, I would like to sell my house for at least 100,000$. LEEDS V FIRST AMERICAN ALLIED CONNECTICUT CORP -Rule: a court, when determining if intention has been manifested to bind the parties contractually, inquires whether a reasonable person would conclude, based upon the objectives manifestation of assent and all of the surrounding circumstances, that the parties intended to be bound by the contract -Leeds contended that an agreement signed by the parties was not a contract because there was not yet an agreement as to all the terms of the proposed contract and negotiations were still in progress 3. Advertisements: most are not offers to sell because they do not contain sufficient words of commitment to sell. For example, Mens jackets, $26 each, is too vague regarding quantity, duration etc. If promise to sell a particular number of units then it can be an offer. For example, 100 mens jackets $26 a piece, first come first served.

LEFKOWITZ V GREATER MINNEAPOLIS SURPLUS STORE INC -Rule: a newspaper advertisement for the sale of an article which is clear, definite and explicit, and leaves nothing to the negotiation is an offer, acceptance of which will create a binding contract -surplus store advertised one fur stole on a first come first serve basis but would not sell the stole to Lefkowitz who accepted alleged offer 4. Auctions: usually not an offer unless its stated the bids are without reserve C. ACCEPTANCE -a manifestation of assent to the terms thereof made by the offeree in a manner invited or required by the offer -offer can only be accepted by the person in whom the offeror intended to create power of acceptance 1. offeree must know of an offer: acceptance is usually only valid if the offeree knows of the offer at the time of his alleged acceptance PRO CD V. ZEIDENBERG -Rule: a buyer accepts goods when, after an opportunity to inspect, he fails to make an effective rejection -when Zeidenberg bought shrink wrapped software, he was given opportunity to read the license at leisure. It splashed across his screen upon installation and made him click Accept before it would go further. He kept software thus accepting the contract 2. Method of acceptance: offeror is master of his offer and may prescribe the method by which the offer may be accepted FUJIMOTO V RIO GRANDE PICKLE CO -Rule: return of an executed contract to offeror is not necessary to make the contract binding upon the offeror -after signing contracts of employment, Ps did not return executed documents to employer D. employer never said that offer would only be accepted if returned contract, nor did he give other methods. Therefore it can be inferred that acceptance manifested by fact that employees kept working for over a year and employer had to have taken notice of this. 3. offer invites either promise or performance: if offer doesnt make clear whether acceptance is to occur through promise or performance, the offer may be accepted by either. a. shipment of goods: If buyer places a purchase order and doesnt specify how to accept, the seller may either promise to ship the goods or just ship them 4. Notice of acceptance of unilateral contract: where an offer looks to a unilateral contract, most courts now hold that the offer must give notice of his acceptance after he has done the requested act

5. Acceptance by silence: Generally cannot accept an offer with silence except when: a. reason to understand: offeror has given offeree reason to understand that silence will constitute acceptance, and offer subjectively intends to be bound b. benefit of service: offeree who receives benefit of services (not goods) will be held to have accepted a contract 1. if he had a reasonable opportunity to reject them and knew or 2. should have known that the provider of the services expected to be constituted c. prior conduct: prior course of dealing makes it reasonable for offerees silence to be construed as assent. For example, seller responds to buyer either by shipping goods or saying we dont have the item usually. If seller now remains silent in face of an order buyer put in, sellers silence will constitute an acceptance of the order. d. accepted by dominion: where offeree receives goods and keeps them, this is exercise of dominion is likely to be held an acceptance DAVIS V JACOBY -Rule: in case of doubt it is presumed that an offer invited the formation of a bilateral rather than a unilateral contract -Whitehead invited the Daviss to help him with his business affairs and to look after his wife; the Daviss accepted by letter, but before they could move down Whitehead killed himself D. TERMINATION OF POWER OF ACCEPTANCE -An offerees power of acceptance may be terminated by: 1. rejection or counter offer by offeree: a. rejection: if offeree rejects offer, then decides he wants it, he has no power to accept anymore. Exceptions are if offeror says the offer still stands or if offeree says I dont accept now but I will consider the offer further later b. counteroffer: if offeree makes a counter offer his power to accept original is terminated just as if he had flatly rejected the offer 2. lapse of time: offerors set time limit or a reasonable time 3. revocation by offeror: offeror is free to revoke offer at any time before acceptance is received 4. death or incapacity of offeror or offeree
1. Revocation by offeror:

DICKINSON V DODDS -Rule: an offeree may not bind an offeror by accepting a revoked offer, even if the revocation had not been communicated to him prior to acceptance -Dodds attempted to revoke an offer to sell land to Dickinson, but Dickinson agreed to purchase prior to communication of the revocation to him

MARCHIONDO V. SCHECK -Rule: where an offer invites an offeree to accept by rendering a performance, an option contract so created is conditional on the offerees completion of the performance in accordance with the terms of the offer. -Scheck offered to sell realty to a specified prospective buyer and agreed to pay Marchiondo a brokers commission. Later Scheck revoked the offer. Shortly after the revocation and within the time limit set by the offer, Marchiondo obtained the offerees acceptance.
2. Rejection/Mailbox rule:

-acceptance effective upon proper distpatch in mail, unless offeror says otherwise -if rejection sent first then the acceptance will be effective if and only if it is received before rejection -if acceptance sent first, acceptance is effective upon dispatch. The subsequent rejection (revocation of acceptance at this point) does not undo the acceptance even if it is received before acceptance. MORRISON V THOELKE -Rule: an acceptance is effective when it is posted even though a subsequent rejection is actually received before the acceptance -after mailing an acceptance, Morrison informed Thoelke that the offer was being rejected, the rejection being received before the acceptance.
3. Termination by Counter Offer

LIVINGSTONE V EVANS -Rule: a counter offer is a rejection of the original offer and terminates it -Livingstone submitted a counter offer which Evans rejected. Livingstone then unsuccessfully attempted to accept original offer. Here, since evans said cannot lower price, it meant that he reaffirmed original offer so Livingstone did get power to accept. 4. Battle of the Forms -Common law mirror image rule: offerees response operates as an acceptance only if it is precise mirror image of the offer. If the response conflicts at all with the terms of the offer or adds new terms, the purported acceptance is in fact a rejection. 2-207. Additional Terms in Acceptance or Confirmation. (1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms. (2) The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless: (a) the offer expressly limits acceptance to the terms of the offer; (b) they materially alter it; or

(c) notification of objection to them has already been given or is given within a reasonable time after notice of them is received. (3) Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. In such case the terms of the particular contract consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of this Act. -UCC rejects mirror image rule and will often lead to a contract being formed even though the acceptance diverges form the offer. Wherever possible the UCC tries to find a contract so as to keep the parties from weasling out 1.General: #1 any expression of acceptance or written confirmation will act as an acceptance even though it states terms that are additional or different from those contained in the offer 2.Acceptance expressly conditional on assent to changes: expression of acceptance does not form a contract if it is expressly made conditional on assent to additional or different terms. i.e. I accept provided that you ship tomorrow 3. Additional term in acceptance: where offerees response contains an additional term consequences depend on whether both parties are merchants a.at least one party not a merchant: additional term does not prevent offerees response from making a contract, but additional term only becomes part of contract only if the offeror expressly agrees to it b. both merchants: additional term automatically becomes part of contract as a general rule. Unless: i.materiality: if term materially alters the contract i.e. disclaimer of warranty ii. objection: if offeror objects to having additional term become part of contract 4.Acceptance silent: if an issue is handled in the first document (offer) but not in the second, the acceptance will be treated as covering all terms of the offer, not just those on which the writings agree 5.Conflicting Terms in Document: knock out rule 6.Response diverges too much to be acceptance: if a purported acceptance diverges greatly from the terms of the offer, it ill not serve as an acceptance at all so no contract 7.contract by parties conduct: if 6. Occurs and no contract is created by divergence of terms, the conduct of parties later on can still cause a contract to occur according to 2207-3 8.confirmation of oral contract: if parties reach an oral agreement, a document sent later by one of them is a confirmation a. additional terms in confirmation: same as with acceptance..materially alters or objection needed b. different terms added probably not a part of original agreement

COMMERCE & INDUSTRY INS. CO V BAYER CORP -Rule: where a contract is formed by the parties conduct, only terms which are common to both parties forms become terms of resulting contract

-explosion and fire destroyed several of Malden Mills buildings at its manufacturing facility. Subsequently, MM and its property insurers commenced suit against numerous defendants, including Bayer. Bayer brought a motion to compel arbitration in accordance with an arbitration provision in Malden Mills purchase orders. Superior Ct denied Bayers Motion. 9.Terms to Follow Contracts/Rolling Contracts: buyer, usually consumer, orders and pays for goods without seeing most of contract terms. Detailed terms are contained on or in the box and buyer told that if she does not agree with terms then she has a certain time to return goods. a. not formed until receipt approach: 2-207 doesnt apply and that no contract is formed until buyer received goods and keeps them beyond specified time period of return. Keeping the goods is acceptance of terms. (Procd) b. contract formed under 2-207: contract formed at time of order. Buyer is usually considered to be offeror and sell is offeree proposing additional or different terms, and at least where buyer is a consumer those terms never become part of the contract unless buyer expressly agrees to them KLOCEK V GATEWAY -Rule: a purchaser does not necessarily accept the standard terms and conditions agreement, which may include an arbitration clause, located in the package containing a mail order product -P sued Gateway D and HP D alleging that D induced him to purchase a computer by making promises of technical support and that HP breached its duty to warn customer that its product was incompatible with certain computers. There was a 5 day limit to read materials and accept license and return, but since P was not told by salesperson on phone this rule the license cannot be seen as accepted E. INDEFINITENESS -Generally no contract will be found if the terms of the parties agreement are unduly indefinite. For example if A and B agree that B will buy product from A from time to time. There is no decision about quantity, price, delivery etc. so even if A and B meant to have a binding agreement, absence of terms makes their agreement void for indefiniteness. 1. Court supplies missing term: if court concludes parties intended to contract, and court believes that it can supply a reasonable value for missing term it will generally do so a. UCC expressly allows court to fill in missing value b. nonUCC courts follow fill in missing term on reasonable basis WALKER V KEITH -Rule: where essential terms such as price are not combined in an option contract and no standards are included whereby it may be judicially determined that no contract exists

-P rented property from D for 10 years with an additional ten year option, rent to be fixed mutually by the parties, said rental values to reflect the comparative business conditions between the periods.

III.CONSIDERATION
A. BASIC CONCEPTS -as a general rule, a contract will not be enforceable unless it is supported by consideration. Consideration is supported when 1. Detriment: promisee gives up something of value, that is, the promisor makes his promise in exchange for the promisees giving of value or circumscription of liberty. Promisee has to do something he doesnt not have to do or refrain from doing something that she has a right to do. 2. Exchange: promise is given as part of a bargain, that is, the promisor makes his promise in exchange for promisees giving of value or liberty 3. Unenforceable: -Promises to make gifts do not satisfy bargain requirement -Business situations in which one party has not really promised to do something or given anything up, even though he may appear to have done so HAMER V. SIDWAY Rule: forbearance is valuable consideration -D promised to pay 5000 to William Story P if he would forbear in the use of liquor, tobacco, swearing, or playing cards or billiards for money until he became 21 years old B. SUFFICIENCY -court inquires into sufficiency of consideration but not the adequacy of it. -sufficiency means that the offered consideration must be something that has value in the eyes of the law -adequacy refers to the quantity of amounts exchanged -the question is that the thing claimed to be sufficient satisfies requirement of consideration under any circumstances C. ILLUSORY PROMISE -not supported by consideration, and is therefore not enforceable. An illusory promise is a statement which appears to be promising something, but which in fact does not commit the promisor to do anything at all -the basic test that determines whether the promise states a limitation upon promisors future liberty of action is useful in determining whether any promise is illusory -a promise to buy of another person or company all of some commodity or service that the promisor may thereafter need or require in his business is not an illusory promise; and such promise is sufficient consideration for a return promise 1. Implied promises:

WOOD V. LUCY, LADY DUFF GORDON -Rule: while an express promise may be lacking, the whole writing may be instinct with an obligation-an implied promise- imperfectly expressed so as to form a valid contract -P in a complicated agreement, received exclusive right for one year, renewable on a year to year basis if not terminated by 90 days notice, to endorse designs with Ds name and to market all her fashion designs which would received the profits derived. D broke contract by placing her endorsement on designs without Ps knowledge. 2.Right to Terminate -if contract allows one or both parties to terminate the agreement at his option, this right of termination might make promise illusory and contract therefore unenforceable. a. Unfettered right: if agreement allows one party to terminate by giving notice at any time, traditional common law view is that the one party has not furnished consideration. Modern trend is to hold that as long as the terminating party has the obligation to give notice (even if obligation is implied), this duty of notice furnishes consideration SYLVAN CREST SAND & GRAVEL V U.S. -Rule: in agreements which seem to reserve the right to cancel at any time, it is reasonable through interpretation to take the position that notice of cancellation is required, and even though notice may be given at any time, it constitutes a detriment, hence, valid consideration -P successfully bid on 4 contracts to supply trap rock for an airport. The contract had printed on it that cancellation by D could be made at any time. When D refused to accept any more rock, P filed suit claiming breach MCMICHAEL V PRICE -Rule: a requirements contract will be valid if the buyer realistically anticipates such requirements -experienced seller of sand sues supplier of sand for refusing to give him more sand when he promised to buy all the sand he needed from that supplier. He cannot get it anywhere else as part of the contract. Supplier should have realistically believed seller would need sand bc he was an experienced seller D. PAST CONSIDERATION -No good. If promise is made in return for detriment previously suffered by promise, there is no bargain, and thus no consideration. Thus promise to pay back pre-existing debt, and promises to pay for services already received, usually lack the bargain element (but may be binding even without consideration). HAYES V PLANTATIONS STEEL CO -Rule: promise made to employee upon the announcement of his retirement is not enforceable

-Hayes announced his retirement and management promised him $5,000 annual pension. Management changed, and the payments stopped. A promise made to an employee upon the announcement of his retirement is not enforceable. (Under past consideration/performance rule) MILLS V WYMAN -Rule: a moral obligation is insufficient consideration for a promise -Wymans son became ill and Mills cared for him. When Wyman found out about this he promised to pay Mills all of the expenses he incurred. Not enforceable. A moral obligation is insufficient as consideration for a promise. (same as above) E. PREEXISTING DUTY RULE -If a party does or promises to do what he is already legally obligated to do, or if he forebears or promises to forbear from doing something which he is not legally entitled to do, he has not incurred a detriment for purposes of consideration. 1.Modification: if parties to an existing contract agree to modify the contract for the sole benefit of one of them, the modification will usually be unenforceable at common law, for lack of consideration. Usually in construction cases. 2. Extra duties: if the party who promises to do what he is already bound to do assumes the slightest additional duties, or different duties, his undertaking of them does constitute the required detriment. 3. UCC does not follow this rule and says an agreement modifying a contract needs no consideration to be binding. HARRIS V WATSON -Rule: where there is pre existing duty to perform work for the wages agreed upon, one cannot demand more wages for the same work -Midway through ships voyage, a seaman claims he will no longer work unless his wages are increased. Captain, having no other choice, agrees. Not enforceable. Where there is a pre-existing duty to perform work for the wages agreed upon, one cannot demand more wages in the same work. LINGENFELDER V WAINWRIGHT BREWERY -Rule: a promise made to induce compliance with a valid contract is not enforceable -P didnt want to build the brewery he had legally contracted to build so D promised 5000$ more to finish it. Then D didnt pay P the extra bc there was no contract. Either way P had to finish building, no extra duties were placed on him. F. PROMISSORY ESTOPPEL -promises which foreseeably induce reliance on the part of the promise will often be enforceable without consideration -must have actual reliance on promise -promisees reliance must have been reasonably forseeable to promisor be enforceable without consideration, under this doctrine.

1. A promise which the promisor should reasonably expect to induce

action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. 2. Charitable subscriptions: written promise to make a charitable donation will generally be binding without consideration under promissory estoppels. Usually charity doesnt need to show detrimental reliance. Oral promises to donate will not be enforceable unless there is detrimental reliance. ALLEGHENY COLLEGE V. NATIONAL CHATAUQUA COUNTY BANK -Rule: acceptance of charitable subscription by the trustee of the charity implies a promise on their part to execute the work contemplated and to carry out the purposes for which the subscription was made BRANCO ENTERPRISES V DELTA ROOFING -Rule: a contract may be effected between a general contractor and a subcontractor based on the general contractors reliance on subcontractors bid for component of the project being bid upon

IV.

STATUTE OF FRAUDS
-most contracts valid in spite of the fact they are only oral. These are unenforceable unless in writing: A. Executor/Administrator Contracts -contracts made by an executor or administrator to answer for the debts of a decedent and payable out of executors own personal assets generally must be in writing. B. Suretyship Contracts- An accessory agreement by which a person binds himself for another already bound, either in whole or in part, as for his debt, default or miscarriage. C. Made in Consideration of Marriage -almost never litigated -ex. Oral promises to support other spouses child from previous marriage upon new marriage. Property promise once married. etc D. Land Transactions -agreements to buy and sell are within the types of transfers contemplated -generally assumptions, extensions, or modifications of real estate mortgages also covered -doesnt usually include leases bc they are short term E. One Year Provision -if a contract doesnt specifically state a time that is more than one year is not within the statute even if the time for contemplation of the contract is very likely to be more than a year. -ex. Contract to build a commercial building does not state a time for complete greater than a year is not within the statute even if it is likely that it contract to build will take longer than a year

-other courts look at circumstances of contract and its contents, and if its likely to take more than a year it must be in writing SATTERFIELD V. MISSOURI DENTAL ASSOCIATION -Rule: an oral agreement not to terminate an employee until the employees date of retirement is unenforceable -P alleged that D had breached an oral agreement not to terminate her until intended retirement date, over a year from when she was actually terminated. EASTERN DENTAL CORP V. ISAAC MASEL -Rule: an oral requirements contract is not enforceable -P entered into oral requirements contract with D. No long term agreement ever signed, only purchase orders and confirmations exchanged. Since transactions were always over 500$, this contract was not enforceable bc not in writing THOMSON PRINTING MACHINERY V. BF GOODRICH -Rule: a failure by a party selling an item in the regular course of business to object to a memo confirming that sale may result in a waiver of the statute of frauds defense -D failed ot object to a memo from surplus equipment buyer P confirming the sale of surplus printer

V. PAROL EVIDENCE
-our law presumes that those who have written a contract have integrated into that writing all matter, written or oral, that occurred prior to signing the writing and will not allow in evidence to the contrary -generally assumed to include evidence of oral or written agreements or negotiations that are prior to or contemporaneous with a writing intended to be the complete or partial integration of the parties final agreement. -parol is French word meaning informal -bars introduction of all negotiations or agreements occurring prior to the signing of the writing, whether written or oral -Process of interpretation- Determine meeting of agreement is next step, and starting point is to look at the written contract Partial integration: document that is intended to be final but not intended to include all details. No evidence of prior or contemporaneous agreements or negotiations may be admitted if they would contradict a term of the writing. Total integration: document that is a final expression of agreement including all details. No evidence allowed that would contradict or add to the writing. Only allowed for interpretation. A. EXCEPTIONS TO THE RULE 1. Fraud, Mistake or other Voidability 2. Existence of Condition: if parties orally agree on a condition to the enforcement of the contract, or to the duty of one of them, but this condition is

then not included in the writing, courts generally allow proof of this condition despite the parol evidence rule. 3. Collateral Agreements: an oral agreement that is supported by a separate consideration may be demonstrated even though it occurred prior to what seems to be a total integration 4. Subsequent transactions: PER never bars evidence that after the signing of the writing, the parties orally or in writing agreed to modify or rescind the writing MITCHELL V LATH -Rule: an oral agreement is permitted to vary from a written contract only if it is collateral in form, does not contradict express or implied conditions of the written contract, and consists of terms which the parties could not reasonably have been expected to include in the written contract -P bought land from D pursuant to a full and complete written sales contract. She sought to compel D to perform on his parol agreement to remove an icehouse on neighboring property -Had it been that important, it would have been in the written contract. BETACO INC V CESSNA AIRCRAFT -Rule: absent an ambiguity, the intent of the parties is to be determined from the face of the contract, without resort to extrinsic evidence -P contracted to buy a new jet airplane advertised to have a greater range than its predecessor, but later became convinced that it would not have a greater range and canceled the purchase, alleging breach of express warranty B. INTERPRETATION 1. Modern View: most courts today allow parties to introduce extrinsic evidence to aid in the interpretation of a contract, even if the writing is an integration. However, courts vary on the details of how and when extrinsic evidence is allowed in connection with a question of interpretation a. Extrinsic Evidence in case of Ambiguous terms: all courts agree that is a term is found by trial court to be ambiguous extrinsic evidence must be allowed. Jury decides. Evidence allowed is extremely broad b. Unambiguous Terms: judge decide what term means and instructs jury. Jury does not here any extrinsic evidence. c. How Judge determines existence of ambiguity: i. Four Corners: no extrinsic evidence what so ever. Solely look at the written agreement. Court will not consider any evidence about surrounding negotiations, context around making the agreement. Very few courts use this. ii. Plain meaning: court will not hear evidence about the preliminary negotiations, but will hear about the circumstances or context surrounding the making of agreement iii. liberal rule: evidence of pretrial negotiations is admissible EICHENGREEN V ROLLINS

-Rule: parol evidence rule excludes extrinsic evidence where a letter operating as a complete integration of the parties agreements exists -P brought suit alleging breach of contract and negligence against D resulting from a fire on his property. PACIFIC GAS & ELECTRIC V. GW THOMAS DRYAGE & RIGGING CO -Rule: test of admissibility of extrinsic evidence to explain the meaning of a written instrument is not whether it appears to the court to be plain and unambiguous on its face but whether the offered evidence is relevant to prove a meaning to which the language of the instrument is reasonable susceptible -D contracted to repair P steam turbine and to perform work at its own risk and expense and to indemnify P against all loss and damage. D also agreed not to procure less than 50,000 insurance to cover liability for injury to property. But when the turbine rotor was damaged, P claimed it was covered under that policy, while D said it was only to cover injury to third persons NANKULI PAVING & ROCK V. SHELL OIL -Rule: under UCC, an agreement goes beyond the written words to mean the bargain of the parties in fact, as found in their language or by implication from other circumstances, including courses of dealing, usage of trade, and course of performance -P entered into long term supply contracts with D to buy asphalt and objected when D raised price from $44 to $76 3. To interpret the ambiguous terms judge will use: (espec in sales contracts UCC) a. COURSE OF PERFORMANCE: refers to the way parties have conducted themselves in performing the particular contract at hand. b. COURSE OF DEALING: refers to how parties have acted with respect to past contracts c. TRADE USAGE: any practice or method of dealing having such regularity of observance in a place, vocation, or trade as to justify an expectation that it will be observed with respect to a particular term in a certain region, or in certain industry, would be admissible OPTION CONTRACT: - An option contract is also known as a firm offer or an irrevocable offer. An option contract is defined as an offer which cannot be revoked prior to a certain stated time. Option contracts can be made if: 1) the option is coupled with consideration, 2) the option is in writing, or 3) a person accepts a unilateral contract by beginning performance, R.2d 45. R.2d 87. - For non-merchants the option must be in writing and signed by the offeror and state valid purported consideration, however the consideration could be nominal. R.2d 87.

-For merchants the option must be in writing and signed by the offeror, however no consideration is even necessary. UCC 2-205. -Option contracts are not revoked by a counter-offer or rejection, however the offeror may have an estoppel defense if he reasonably relied upon a rejection. R.2d 37. -Partial performance of a unilateral contract creates an option contract that must stay open for time deemed reasonably necessary to completely perform. R.2d 45. Partial performance of a bilateral contract creates an actual contract. -The majority rule is that Promissory Estoppel is only valid for actual contracts or option contracts. Baird. However there is a minority that in certain situations (specifically construction) a revocable offer may invoke Promissory Estoppel if the offeree reasonably relied upon it. Drennan; R.2d 87(2). REQUIREMENTS CONTRACT: Agreement pursuant to which one party agrees to purchase all his required goods or services from the other party exclusively for a specified period of time PARTIAL PERFORMANCE: Offerors duty of performance under an option contract so created is conditional on offerees completion of performance in accordance with terms of that offer. In such a case the offerees part performance furnishes the acceptance and consideration for a binding contract upon offerees full performance. Right to revoke depends on whether offeree had partially performed before received revocation notice

RESTATEMENTS ACCEPTANCE OF OFFER DEFINED; ACCEPTANCE OF PERFORMACE; ACCEPTANCE BY PROMISE 1. Acceptance of an offer is a manifestation of assent to the terms thereof made by the offeree in a manner invited or required by the offer 2. Acceptance by performance requires that at least part of what the offer requests be performed or tendered and includes acceptance by a performance which operates as a return promise (unilateral K) 3. Acceptance by a promise requires that the offeree complete every act essential to the making of a promise. (bilateral K) ACCEPTANCE BY SILENCE OR EXERCISE OF DOMINION 1. Where an offeree fails to reply to an offer, his silence and inaction operate as an acceptance in the following cases only a. Where an offeree takes the benefit of services with reasonable opportunity to reject them and reason to know that they were offered with the expectation of compensation b. Where the offeror has stated or given the offeree reason to understand that assent may be manifested by silence or inaction and the offeree in remaining silent and inactive intends to accept the offer

c. Where because of previous dealings or otherwise, it is reasonable that the offeree should notify the offeror only if he does not intend to accept 2. An offeree who does any act inconsistent with the offerors ownership of offered property is bound in accordance with the offered terms unless they are manifestly unreasonable. But if the act is wrongful as against the offeror it is an acceptance only if ratified by him METHODS OF TERMINATION OF THE POWER OF ACCEPTANCE 1. An offerees power of acceptance may be terminated by a. Rejection or counter offer by offeree or b. Lapse of time or c. Revocation by offeror or d. Death or incapacity by the offeror or offeree 2. In addition, an offerees power of acceptance is terminated by the non occurrence of any condition of acceptance under the terms of the offer REJECTION 1. An offerees power of acceptance is terminated by his rejection of the offer, unless the offeror has manifested a contrary intention 2. A manifestation of intention not to accept an offer is a rejection unless the offeree manifests an intention to take it under further advisement REQUIREMENT OF EXCHANCE; TYPES OF EXCHANGE 1. To constitute consideration, a performance or a return promise must be bargained for 2. A performance or return promise is bargained for if it is sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise 3. The performance may consist of a. An act other than a promise b. A forbearance c. The creation, modification or destruction of a legal relation 4. The performance or return promise may be given to the promisor or to some other person. It may be given by the promisee or some other person. ILLUSORY AND ALTERNATIVE PROMISES 1. A promise or apparent promise is not consideration if by its terms the promisor or purported promisor reserves a choice of alternative performance unless a. Each of the alternative performances would have been consideration if it alone had been bargained for; or b. One of the alternative performances would have been consideration and there is or appears to the parties to be a substantial possibility that

before the promisor exercises his choice events may eliminate the alternative which would not have been consideration PROMISE FOR BENEFIT RECEIVED 1. A promise made in recognition of a benefit previously received by the promisor from the promisee is binding to the extent necessary to prevent injustice 2. A promise is not binding under subsection 1 a. If the promisee conferred the benefit as a gift or for other reasons the promisor has not been unjustly enriched; or b. To the extent that its value is disproportionate to the benefit PROMISE REASONABLY INDUCING DEFINITE AND SUBSTANTIAL RELIANCE A promise which the promisor should reasonably expect to induce action or forbearance of a definite or substantial character on the part of the promisee and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise PROMISE REASONABLY INDUCING ACTION OR FORBEARANCE 1. A promise which the promisor should reasonably expect to induce action or forbearance on the part of promisee or a third person and which does induce such action or forbearance is binding if injustice can only be avoided by the enforcement of the promise. The remedy granted for breach may be limited as justice requires. 2. A charitable subscription or marriage settlement is biding under subsection 1 without proof that promise induced action or forbearance EFFECT OF INTEGRATED AGREEMENT ON PRIOR AGREEMENTS (PAROL EVIDENCE RULE) 1. A binding integrated agreement discharges prior agreements to the extent that it is inconsistent with them 2. A binding completely integrated agreement discharges prior agreements to the extent that they are within its scope INTERPRETATION OF INTEGRATED AGREEMENT 1. The interpretation of an integrated agreement is directed to the meaning of the terms of the writing or writings in the light of the circumstances, in accordance with the rules stated in this chapter 2. A question of interpretation of an integrated agreement is to be determined by the trier of face if it depends on the credibility of extrinsic evidence or on a choice among reasonable inferences to be drawn from extrinsic evidence. Otherwise a question of interpretation of an integrated agreement is to be determined as a question of law RULES OF AID IN INTERPRETATION

1. Words and other conduct are interpreted in the light of all the circumstances, and if the principal purpose of the parties is ascertainable it is given great weight 2. A writing is interpreted as a whole, and all writings that are part of same transaction are interpreted together 3. Unless a different intention is manifested a. Here language has a generally prevailing meaning, it is interpreted in accordance with that meaning b. Technical terms and words of art are given their technical meaning when used in a transaction within their technical field 4. Where an agreement involves repeated occasions of performance by either party with knowledge of the nature of the performance and opportunity for objection to it by the other, any course of performance accepted or acquiesced in without objection is given great weight in the interpretation of the agreement 5. Wherever reasonable, the manifestations of intention of the parties to a promise or agreement are interpreted as consistent with each other and with any relevant course of performance, course of dealing, or usage of trade. STANDARD OF PREFERENCE IN INTERPRETATION In the interpretation of a promise or agreement or term thereof, the following standards of preference are generally applicable: a. In interpretation which gives a reasonable, lawful, and effetice meaning to all the terms is preferred to an interpretation which leaves a part unreasonable, unlawful or of no effect b. Express terms are given greater weight than course of performance, course of dealing, or usage of trade, and course of dealing is given greater weight than usage of trade; c. Specific terms and exact terms are given greater weight than general language; d. Separately negotiated or added terms are given greater weight than standardized terms or other terms not separately negotiated INTERPRETATION AGAINST THE DRAFTSMAN In choosing among the reasonable meanings of promise or agreement or a term thereof, that meaning is generally preferred which operates against the part who supplies the words or from whom a writing otherwise proceeds FAVORING THE PUBLIC In choosing among the reasonable meanings of a promise or agreement or a term, a meaning that serves the public interest is generally preferred Common law:

Mirror image rule Counteroffer is rejection UCC: requires courts look to usage of trade, course of dealing and course of performance to evaluate construction of a contract

UCC STATUTES Is this a K for the Sale of Goods? 2-105(1) Defining Goods o All things moveable. o Includes unborn livestock and growing crops. Is the K between Merchants? 2-104(1) Defining a Merchant One who has knowledge and skill about the goods being transacted One who regularly participates in these types of transactions. Is there offer and acceptance? o 2-204 Formation in General (1) Contract can be made in any way that will show agreement. Conduct by both parties will show recognition of the existence of the K. (2) Even if the parties cannot establish the moment at which the K was formed- an agreement sufficient to constitute a K may still be found. o 2-206 Offer and Acceptance in a Formation of a Contract (1)(a) Its an offer if it invites acceptance. (1)(b) Acceptance can be by promise or shipment. If they are non-conforming goods shipment will not constitute an acceptance if the seller seasonably notifies the buyer that the shipment is offered only as an accommodation to the buyer. Corinthian (2) If the beginning of performance is a reasonable mode of acceptance and the offeror is notified within a reasonable time. Is this a K to keep the offer open? 2-205 Firm Offers Merchant making offer. Signed writing saying offer will be held open. Reasonable time. Enforceable without consideration. Are there additional/different terms? 2-207 Additional Terms in Acceptance If there is definite(clear on the main terms) or seasonable expression of acceptance or written confirmation it will operate as acceptance-even if it states terms additional or different from those offered- UNLESS it is expressly conditioned on accepting the additional or different terms. [If there is acceptance, go to 2. If there is not acceptance then go to 3.] (2) Once acceptance is established-what are the terms? o Additional terms are to be construed as proposals. If K is between merchants the terms become part of the contract UNLESS: Offer expressly limits acceptance to the terms. Terms materially alter K There is notification and objection within a reasonable time after notice of them is received.

(3) If there is conduct by both parties there is a K. The terms that conflict will be dropped and if there are gap fillers for those terms provided in the UCC they will be put into the K. Leonard Pevar Co. v. Evans Products Co: (Breach of warranty. Warranty disclaimer on back of acknowledgment form.) No acceptance bc it is conditional on accepting new terms. But there is a contract by conduct. Go to UCC for warranty gap filler. Textile Unlimited v. BMH: (Offer on order form. accepts by sending invoice. Arbitration clause.) No acceptance bc it is conditional on accepting new terms. Contract by conduct- no gap filler in UCC for arbitration so the terms are simply dropped and case goes to court. Are there any missing terms? 2-305 Open Price Term Can have a K for sale without price. Reasonable price at time of delivery if: o Nothing is said as to price o Price is left to be agreed and they fail to agree o Agreed to be market price and is not set or recorded. Must have good faith. If the price is not fixed bc of the fault of one party, the other party may treat the K as cancelled or himself set a reasonable price. If the parties do not intend to be bound without fixed price the buyer must return goods or pay their reasonable value at the time of delivery. Is there Consideration? Is this a Input/Output or Exclusive dealing contract? o 2-306 Output, Requirements and Exclusive Dealings (Mutual Obligation) Output and Requirement Ks are enforceable if: o ACTUAL output or requirements. o Duty of good faith. o Cannot be unreasonably disproportionate. (compare to any estimates or prior use) Exclusive Dealings is lawful when seller uses best efforts to supply the goods and buyer uses best efforts to promote their sale. Does it fall within the Statute of Frauds? o 2-201 Statute of Frauds Except otherwise provided in the K. $500 or more Writing sufficient to indicate K. Signed by the party against whom K would be enforced. Writing wont fail just because its not complete or has mistake. o BUT, must have quantity. (2) Exception: o Btwn merchants- one sends a confirmation. Other party receives confirmation and doesnt object within 10 days. S/F satisfied. (3) Exception:

o (a)Specially manufactured goods. Not suitable for sale to others. No repudiation. o (b) Testimony or admissions in court. o (c) Payment has been made or goods have been received or accepted. D.F. Activities v. Brown Is this a modification to an existing K? 2-209 Modification (Pre-Existing Duty) Doesnt need consideration as long as there is good faith.