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Generic Framework

1 Offer & Acceptance 2 Consideration


Formation

a) Identify and describe the negotiations. a) Was there a benefit & a detriment (Hamer v. Sidway)?
b) Identify and describe the essential terms (price, materials, b) Was this a bargained for exchange?
1) Is there a K? payment). c) Note both parties exchanged material, non-sham
c) Is there an offer? (does it inivte assent) promises.
d) Is there an acceptance? (is assent given)

Possible Problems to hunt Possible Problems to Hunt


- Are there counter-offers or conditional acceptances? - Is the consideration "sham" consideration?
See Battle of the Forms See Promissory Estoppel
- Are there specifics from negotiation that didn't make it - Is the consideration for a past deed?
verbatim to K? See Parol Evidence Rule See Promise for Benefit Received
- Should the K have been written, but was oral?
See Statute of Frauds

2) Do we need an We have a framework for Promissory Estoppel; We have flow charts for all
alternate means of else.
recovery?

3) Did something break?

See framework and flowchart for warranties.

4) Did somebody back


out?

4a) Can we back out?

We have us a chart

5) Did somebody mess


up an otherwise
complete performance?

5) How much can we get


for it?
Formation Basics

(things which could be


What is a Promise? What is NOT a Promise?
inbetwen?)
These are NOT:
If a joke? Depends on if one of
A manifestation of intention to act or refrain from -> Mere statement of present intent
the parties could be justified in
acting in a pseciied way, so made as to justify a -> Predictions
it being serious based on past
promisee in understanding that a commitment has -> Opinions
dealings.
been made -> Agreements to agree
But remember PepsiCo

Bilateral K
There is a preference to read contracts as
bilateral.
- Both sides make promises for future action
- Cannot be revoked after acceptance w/o
breach

Unliateral K
- Offeror makes offer to exchange a promise of
future performance w/ the ACTUAL performance of n3. p71; courts are now using
the offeree being the only valid means of unilateral contract as a basis to
acceptance. enforce liability on offeror when no
- Offeror cannot revoke after substantial promissory acceptance was invited
performance (modern rule) or required.

Basic Common Law


1 Offer & Acceptance
a) Identify and describe the negotiations. 2 Consideration
b) Identify and describe the essential terms (price, materials, a) Was there a benefit & a detriment (Hamer v. Sidway)?
Formation

payment). b) Was this a bargained for exchange?


1) Is there a K? c) Is there an offer? (does it inivte assent) c) Note both parties exchanged material, non-sham
d) Is there an acceptance? (is assent given) promises.
Must be communicated to be accepted unless there is a
mailbox involved (& must be "unequivocal and unqualified"

UCC Contract Formation


Is there an offer?
Predominate Purpose Test a) UCC does not define offer, common law definition applies.
a) Under Princess Cruises via Coakley, three 1-103(b) "An offer is made when the offer leads the offeree to
steps reasonably believe than an offer has been made."
1) Look at language of the K b) Only 'true' essential term is quantity. Identify the relevant
2) The nature of the business of the supplier terms.
1) Prelim reqs. c) Essential terms missing does not invalidate K, only a
3) The intrinsic worth of the materials
b) Under Jannusch, just look at the "thrust" of the "reasonably certain basis" for determining them is necessary.
agreement to see if it is more than 50% for goods 2-204(3)
or for services d) Under Brown Machine & E.C. Styberg - "A purchase order
is an offer, NOT the quotation from the seller which set the
price."

Acceptance
a) Can be in any manner sufficient to show agreement. 2-204(1)
Can be silent if such was a practice of the parties in the past
Common law rules
2) Std. b) The any manner any medium provision can be contracted out 3) Consideration
govern.
Acceptance of per 2-206(1) but must be "unambiguously indicated in terms"
c) Need not determine a precise time
d)

Battle of the Forms UCC 2-207 Give some theory bout it


a) Are both parties merchants? If no, terms excluded. - This is a rejection of the mirror image/ last shot
b)There are three rules prevent inclusion of extra terms.(2) rule
2a) Qualified (a) the offer expressly limits acceptance to the terms of - This is intended to allow for Ks even when there
acceptance/ the offer; is different BOILERPLATE language.
Battle of the (b) they materially alter it (means will cause other party - Not all post-agreement communications are
Forms surprise or undue hardship per cmt 4) included terms under this; only the ones which
(c) other party has already notified of objection or is would reasonably appear to be new terms.
given w/n a reasonable time - Merchants are assumed to be sophisticated
parties and so play by different rules

(Remember you have a parallel framework for this sucker.)


Stat of Frauds - Affm. Def. Preventing an ORAL K from getting to trial.
Parol Evidence - Prevent extrinsic evidence from being considered
as party of an integrated agreement.
SoF R2K 110 ? may
Contracts, non proceed to trial UCC 2-201
goods. to prove K Common Law - Both still used; 211-217 more prevalent.
1) W/n SoF? 2-201(1)
1) is the K w/n the SoF? Four Corners (Old Rule) Corbin Rule R2K 212
No. Sale of goods of over $500?
110(1)(d) For land?
OR 1) See if K is complete Step 1. Court considers
110(1)(e) Not to be Yes. w/n "four corners. parol to determine extent of
"Complete integration"
Integration
performed w/n one year? integration and intent of
No. 2) Is SoF satisfied Merger clauses Phase
(Feedman: If K could be parties.
completed in one year, dnq) (nonmerch)? determinate. Purpose is to eliminate
2-201(1) evidence w/ no "probative
1.Shw K 4 goods value"
Yes. Yes. 2.Only essntl term is 2) Use of Parol
quantity; no rcvry b/y If complete:
2) Is the statute satisfied? Cannot be used to
quantity written.
One doc? all terms in writing + change a written term Step 2. Court "finalizes"
3.Signed by ? .
? 's signature Yes or add unwritten term understanding of K; PER
Multi-docs? -> 4 reqs. CAN be used to applies and precludes
a) all terms in writing No. give context to subject admission of extrinsic
somewhere? b) is one of the matter evidence that would vary or
2a) If both are contradict meaning of written
docs w/ writing signed by ? ? c) Yes. merch? 2-201(2) words. (Ie, where K is silent,
unsigned docs refer to same
(1) cnsidered met IF new terms are fair game)
trnsctn as signed on their face?
(2) - Cnfmtn sent by ? ,
d) combined docs show assent
& ? has reason to know
by ? ?
contents, but does not Speak here of modified
AUTH SPLIT.
objct w/n 10 days, K is interpretation rule and how
Maj: All docs must "generally
cnsidered signed & we would consider the terms.
refer" to same doc; parol ev can
accpt. by ? Keep in mind we have an
be used to connect dots, not
extra framework for this
supply terms.
Min: All docs must "explicitly" Yes. No.
refer to main doc. UCC Parol Evidence Rule: 2-202.
3) (3) - Std Exceptions Trade usage supplementation is
No. permitted
(3)(a) Special Goods
3) Is there an exception to SoF? - If goods are spcl for ? & Note 3: Things which would have
Met. not sellable to othrs, and ? been included in K "with certianty"
began mnfctr or procurment, will not be added by parol evidence
Part performance: Part perf. of oral before repudiation & w/ rsnbl
contract can remove K from SoF. indication goods are for ? ->
Perfomrance must "unequivocally refer" to satisfied.
alleged agreement
*Some crts will set missing price; others rjct PAROL EVIDENCE RULE CAN BE AVOIDED
Test: Would outsider, knowing all circmsncs OR BY GOOD FAITH OBLIGATIONS
of case EXCEPT claimed oral agrmnt, B/c good faith covenant gives implied terms by
(3)(b) Admission by ?
naturally and reasonably conclude that a K law, parol evidence will not prevent a greater
Yes. If ? admits in pleading,
of same gen. natr as claimed by ? ? understanding of the contract.
testimony, or otherwise in
PP for land: 1) take possession? 2) make
court that K was made, but
valuable, permanent imprvmnts? SPLIT.
not enforceable b/y quantity
Maj: Only specific perfm. permitted in land
admitted.
part perf. excptn. Burden to prove this is on the
OR plaintiff
Nope.
(3)(c) Part Perf. by ? R2K S 201 Modified
SoF R2K 139 - PE " End Run" Prvsn. If ? accepts and paid for Objective Approach
Split: Some states do not enforce this. goods, SoF satisfied ONLY
(1) PE reg elements, a) prms rsnbly for those goods already
indcs actin by ? , b) injstc only avoided recieved & accepted.
via enfrcng prmse. Ex. Check held for 4 days = Step 1) See if the parties subjectively agreed on the
(2) To det. if injstc cn be avoided -> accptnc; even if not cashed. term.
(a) avaliablity of other remedies (UE)?;
(b) "definite and sbtntl chctr of action" v.
remedy sought; No.
(c) reliance gives "substantial" evidence Step 2) If no agreement, see if one of the parties would
of prms OR evidence otherwise exists? have reasonably known the other's meaning.
(higher stnd of ev thn reg SoF. Uslly - If a party knew what they other meant, or should have
>50%; here substl prbllty, prob >70%) known, then they are held to that standard.
(d) reliance must be reasonable - Use trade usage for info "so generally known in the
? ? community that individual knowledge may be inferred"
(e) reliance must be foreseeable

Met. No.
Step 3) If neither party knew nor should have known
what the other meant, then look to what a reasonable
? recovers per person would have thought.
? wins; no K nor
promissory - Is an interpretation unreasonable, ie one of the parties
PE.
estoppel. would clearly be operating w/o a profit on this?
Parol Evidence Framework
Overall: Remember, the first time you address a topic, give a
Tip Off: When the fact pattern includes thorough evaluation. Afterwards, only briefly check them off unless
negotiations with a specific term which is ? ? question is begging deep analysis.
ambiguously put into the contract, which
then causes an issue:

1 Offer & Acceptance 2 Consideration


a) Identify and describe the negotiations. a) Was there a benefit & a detriment (Hamer v. Sidway)?
Formation

b) Identify and describe the essential terms (price, materials, b) Was this a bargained for exchange?
1) Is there a K? payment). c) Note both parties exchanged material, non-sham
c) Is there an offer? (does it inivte assent) promises.
d) Is there an acceptance? (is assent given)

2 4 Corners Integration
1 Invoke the PE rule 3 R2K 210 Rule
a) Invoke "4 corners" approach
a) Explain PE rule is to "bar of Wilison. Thompson v. Libby.
2) Will terms not in the production of extrinsic evidence to a) Merger clause?
b) Are all essential terms b) All essential terms?
final document be contradict or supplement a final, fully included? "fully integrated on its
included AS TERMS. integrated agreement" c) If so, then probably fully integrated.
face" d) PE can STILL be used to " clarify
Invoke Parol Evidence b) We must discover if the agreement
Parol Evidence Shit

c) But modern integration rule and interpret" ambiguous terms


here. is "fully integrated" says doc cannot prove own
completeness.

1 Modified Approach Invoked 2 What are "chickens"? 3 The controlling interpretation


a) Even if fully integrated, we can still a) Using interpretation under modified objective a) Under the modified
use the parol evidence to "clarify and approach allows judges to circumvent PE rule. objective rule...
3) Can we include use interpret" ambiguous terms Taylor v. b) B/c contracts are reasd strictly, we use PE to b) Did the parol evidence
the PE to " clariify and State Farm find out what they mean. offer a party notice of the
interpret" the initial b) We use the "modified objective c) Judge would look at this PE first to determine other's intent?
terms? approach to do this" Cite the relevance c) If so, would jury find these
Frigaliment chicken case d) Identify and describe the prior discussion of a "definite and credible basis"
meaning. for using the terms as such?
e) Say if a jury would allow it.

4) Should be finished, but Go to damages


DOUBLE CHECK: Other key exception beyond clarification and interpretation.
Remedy

might be asked about chart and figure ya


a) PE does not apply to modifications made post-agreement to K
damages. shit out.
The UCC provision for Parol Evidence is 2-202.

1 Offer & Acceptance 1.5 Consideration


Lack of Formation

Promissory Estoppel
Framework a) Identify and describe the a) Was there a benefit & a detriment (Hamer v. Sidway)?
negotiations. b) Was this a bargained for exchange?
Tip off: There will be a claim 1) Why isn't b) Identify and describe the c) Note both parties exchanged material, non-sham
or deal which is either there a K? essential terms (price, materials, promises.
between family, friends, or an payment).
employee being terminated c) Is there an offer? (does it inivte
and is not completed. assent)
d) Is there an acceptance? (is Note the reason why this is either sham consideration or
1 PE Basics assent given) otherwise would not be a K

a) Promissory estoppel
permitted when a contract is 2 Was there a promise 3 Reliance
2) Promissory not made or valid a) Did the promise induce the reliance?
Estoppel b) Guided by R2K S 90 a) Identify the promise
b) The reliance was reasonable
c) List elements (promise, b) Note that it was a
because_______.
reasonable, foreseealble, manifestation of intent to
c) Reliance was foreseeable because _______.
detrimental, injustice act in a certain way"
d) Reliance was detrimental because _____.

3) Will injustice a) Because of the reliance, it is clear that injustice


can only be avoided by enforcing the promise. 4) Why would a) Say why unjust enrichment
occur unless the
NOW analyze the possible remedies other equitable would be improper
promise is
b) Would specific performance be appropriate? theories be b) Say why a promise for benefit
enforced?
c) Would reliance damages be appropriate? inadequate? recieved would be improper.
d) Would expectation damages be appropriate?
e) Would restitution be appropritate?
Categorizing a Breach

1. Did party not perform a contractual obligation exactly


as specified?
Violates "presently due obligation" BUT a party can have an No.
No breach.
obligation to perform despite an express condition not being No.
met. See below.
2b. Was the condition not met due a
Breach.
party's inaction (bad faith)?
2a. Was the express condition met Oppenheimer - Substantial performance has
2. Was the non-performed duty expressly conditioned? prior to breach? no application if an express condition is not
If a general contract provision, go below. If an express - If an express condition is met, the No. completely met.
condition, go to right. party MUST perform
Yes. -Bad faith ALWAYS built into contracts via
REMEMBER: Courts have a preference to read express - Language of "if" or "unless and until" implied terms. Super relevant here.
conditions as std. promises if an EC would increase risk of is signification of express condition.
forfeiture by the obligee (person to whom perf. is owed).
Yes.

Std Breach Analy. Line of Culpable Breach

Yes.
3. Was the performance " substantial" ? 2c. If the breach was failure to perform the
Jacob & Youngs v. Kent express condition, can substantial
- Was the performance only trivially different from full NOTE: Express conditions performance apply?
performance? are excellent ways to protect Probably not. Courts have a strong preference
- Was the omission done in good faith (ie innocent)? a party in a K. It is more than to not permit substantial performance. If it
likely she'll ask us to improve says by cable, better be by cable. If it says by
a K. Use express conditions telephone, better fucking be by telephone.
Yes. Trivial & Innocent Breach No. Non-trivial and/or bad faith breach
to accomplish this.

No compelling reason to differ?

(Substantial Perf) Immaterial Breach

When a Breach is NOT " Material" Material Breach


- Non-performance/ non-payment by the
wronged party is not excused - other party
must still perform. HOWEVER When a Breach is " Material"
- Damages are still permitted. - Non-performance/ non-payment by the
wronged party is excused. (no need to pay a
remaining balance on work)
- Damages are permitted
Since practical effect is trivial, the damages
permitted will usually only be the difference
in value, rather than the replacement cost,
which would likely be used for a material
breach.
Warranties/ Product Performance Iss. Framework

Tip off: When the fact pattern includes the


purchase of goods and there are
advertisements involved, statements from
a seller, or ANY mention of specifications
and technical details. ? ?
&
Something does not go correctly
1 Offer & Acceptance 2 Consideration
Formation

a) Identify and describe the negotiations. a) Was there a benefit & a detriment (Hamer v. Sidway)?
b) Identify and describe the essential terms (price, materials, b) Was this a bargained for exchange?
1) Is there a K? payment). c) Note both parties exchanged material, non-sham
c) Is there an offer? (does it inivte assent) promises.
d) Is there an acceptance? (is assent given)

3 UCC 315 Fit 4 Part. Purp.


1 UCC 313 Express Warranty 2 UCC 314 Merchantibility
a) Does merchant usually sell these a) Does the seller have reason to
a) Did seller say it somehow?
kinds of goods? know of special purpose?
b) It was not an opinion?
2) Was the product b) Would a normal person object to b) Does seller have reason to know
c) Was mad part of "the basis of the
covered by an implied its quality? the buyer will be relying on seller's
transaction" (though this is NOT
warranty? c) Is it good (fit) for ordinary purpose? skill & knowledge for such?
reliance)
d) Did the seller exclude or modify c) Did seller modify or disclaim the
d) Not specifically recanted?
the warranty? warranty?

1 316(1) for Express 2 316(2) for Merchantibility 3 316(2) for F4PP


a) Disclaimer must mention a) MUST be written AND
a) Disclaimer MUST be consistent merchantibility conspicuous
with the statements otherwise b) If written (spoken permitted) b) "as is" and "with all faults"
3) Did the seller modify made MUST be conspicuous decisively determines disclaimer
or disclaim? b) Parol evidence rule applies for c) "as is" & "with all faults" decisively c) If buyer given chance to inspect &
proving these if unwritten determines doesnt, then voided.
d) If buyer given chance to inspect
but refuses, voided.
1 2-317 Rock, Paper, Scissors Provision

3a) (Unlikely) Are the


Written in the main chart.
warranties consistent?

If an advertisement has
something to do with it,
4) Is another theory Check check the bait and switch
relevant? Misrepresentation provision of offer and
acceptance.

Tip off: Are there extra terms


in one of the party's offer to
UCC 2-207 Battle of the Forms
the other and acceptance was
silent?

a) LIst the three provisions


a) Are there counter-offers or - Materially alter What does "materially alter"
mismatching terms? - Offer expressly limited to mean?
1) Preliminary b) Do these come from 2) Is the new
terms a) Would cause surprise or
reqs. boilerplate Ks? term included?
- Offeror has notified objection hardship to other party?
c) Are we both merchants?

Policy reasons
behind 207.
3) Is it included? Rejection of "last
shot" rule.
Implied Terms & Warranties

Warranties are mostly for goods in this class. Fucks with the UCC. (exception - common law house case)

Express Warranties UCC 2-313 All warranties Bayliner Warranty warning. If you're going to claim an object
- Does not need to be stated as a warranty is unfit for use STOP USING IT. Bayliner.
(1) Express warranties are created by the seller when:
(a) Any affirmation of fact or promise made by the seller to the buyer which
relates to the goods and becomes part of the basis of the bargain becomes an
express warranty that the goods will conform to the affirmation or promises. Quick rundown 2-313 Quick Rundown 2-315
(b) Any description of the goods which is made part of the basis of the bargain Express Fit 4 Particular Purpose
creates an express warranty that the goods shall conform to the description. 1. Did seller say it? 1. Does seller have reason to know
(c) Any sample or model which is made part of the basis of the bargain creates 2. It wasn't an opinion? of special purpose?
an express warranty that the whole of the goods shall conform to the sample or 3. Made part of basis of 2. Does sllr have reason to know
model. transaction? buyer will be relying on sllr's skill and
(2) It is not necessary to the creation of the warranty that the seller use formal 4. Not specifically recanted? knowledge for such?
words such as "warrant" or "guarantee" or that he even intends to make a 3. Did seller modify or disclaim?
warranty; BUT a mere affirmation of the value of the goods or a statement
"purporting to be the seller's opinion" does not create a warranty. Quick rundown 2-314
Notes: Implied Merchantibility Disclaimers Quickie 2-316
3. No particular reliance on the fact need be shown here. TO REMOVE a fact 1. Does merchant usually sell Exprss: Mst be consistent
from the agreement, the seller must clearly affirm that it is to be taken out of these kinds of goods? Mrchntbly: Spoken or written;
consideration. 2. Would a normal prsn objct? conspicuous if written
4. "No warranty" clauses are generally ineffective; unless they are otherwise 3. Is good fit for ordinary Part. Purp: MUST both writing & conspic.
consistent per UCC 2-316(1). But will be subject to parol evidence rule. purpose? M&PP: "as is" "with all faults" decisively
5. Technical specifications, blueprints, and the like can, if made part of basis of 4. Did seller modify? cancels implied warranties
deal AND CHECK TIEBREAKERS BELOW

Implied Warranty: Fitness for Particular Purpose 2-315


Implied Warranty: Merchantibility, Usage of Trade 2-314 - When a seller has reason to know any particular purpose for which the
(1) Unless excluded or modified per 2-316, then all goods SOLD BY A goods are required and that the buyer is relying on the seller's skill or
MERCHANT FOR GOODS OF THAT KIND, will have this warranty. judgment to select or furnish suitable goods, there is UNLESS EXCLUDED,
(2) To be "merchantable" goods must: (all conjunctive, good must meet all) an implied warranty that the goods shall be fit for such purpose.
(a) pass without objection in the trade (ie normal people would happily buy)
(b) if fungible, are of average quality per description
Disclaimer of Warranties 2-316
(c) **are fit for the ordinary purposes for which such goods are used
Express - 316(1): Disclaimers MUST be consistent w/ facts & promises.
(d),(e),(f) we didn't cover these don't worry.
Proving these, however, subject to parol evidence rules.
(3) Unless excluded or modified per 2-316,
Implied - 316(2): To exclude or modify MUST mention merchantibility and if
in writing, be conspicuous, For fitness for particular purpose MUST BOTH be
by writing AND conspicuous.
(3) (a)language like "as is" or "with all faults" or similar kills any implied
Common Law Implied Warranty " Housing Merchant" Caceci v. Di Canio
warranties beyond product description; (b) if buyer refuses to examine
- All houses bought new contain an implied term b/w builder-vendor and
goods then no warranty if he could have found the defects
purchasers that the house is built "in a skillful manner free from material
defects"
- Merger clause has NO EFFECT here Conflict of Warranties 2-317 Tiebreakers for expres v. implied
(a) Exact/ tech. specs beat inconsistent sample, model, or gen descript.
(b) Sample from bulk displaces inconsistent gen language
(c) Express displace inconsistent implied warranties other than Fit4ParPurp

Other Important Implied Terms

Reasonable/ Best Efforts in Exclusive Dealings UCC Gap Fillers


Common Law Wood v. Lucy UCC 2-306(2) Implied Termination Notice UCC 2-309
- Because contracts would - Any agreement for an - Unless otherwise noted in K, all K for goods requires:
otherwise be meaningless, exclusive dealing has an (3) Reasonable notification MUST be given AND (if contracted out) such notice is
unless stated otherwise, implied obligation for best invalid if the operation would be "unconscionable" Expln through "good faith"
common law contracts have efforts UNLESS the parties
an implied "reasonable" otherwise contract this out. W/n reading but not thgly discussed
efforts provision for purpose Seller: Best effort to supply 2-308 - Place of delivery 2-310 - Time of payment
of contractual efficacy w/n Ks goods 2-509 - Risk of Loss 2-513 - Buyer's right of inspection
for exclusive dealings Buyer: BE to promote them
Good Faith Obligations
Common Law R2k 205 UCC 1-201(b)
- Contracts have implied ob of good faith. - All UCC Ks have both "objective"
Three uses of common law gfo Meaning can differ: (commercially reasonable) and "subjective"
1) To include unwritten terms w/o p ev rul - Can be inadequate bargainning power (not outright dishonest) requirements for
2) Redress bad faith even w/o a breach - Can revolve around expectations & exprs good faith and fair dealing
3) To inquire into the true exercise of discretion a - Can be outright dishonesty 2 reqs:
party uses 1) Must not act in bad faith; OR
2) Did not act in a commercially reasonable
manner
If K is made, can we argue it is either voidable or unenforcable on grounds of incpacity, duress, mispep, unconsc,
AVOIDING ENFORCEMENT or public policy?

Incapacity: Can be brought either as aff. cause of action OR aff defense. Voidable not Void
Minority/Infancy: A minor's Ks are voidable; not automatically Mental Incapacity/" Incompetency" (Burden is on ? to prove incompetence)
void. Term is "rescission"
Step 1) Test, whether the person involved had sufficient mental ability to know what
Old Rule: Benefit Rule Mod. Benefit he or she was doing and the nature & consequences of the transaction?
1)Contracts are (Min 1) Rule (Cur Maj)
voidable, not void - Upon - Rcvry of prchs
2) Can be rescission, price minus "use" Step 2) Did the other party know, or have reason to know of, incompetency OR
disaffirmed either recovery of AND minus took unfair advantage of the incompetent (ie std fraud whch incomp coulndt knw)?
before OR after purchase price "depreciation" -From common law duty of good faith in formation & perf.
majority reached, if minus the while in
w/n rsnbl time minor's "use" possession Yes, bad faith. No, good faith, no reason to know.
FULL PRCHS PRC
Money lost without If other party had no reason to know and
Exceptions: benefit to the incompetent made K fully in good faith, then K ceases to
-Necessaries: Not voidable, to prevent merch frm not selling party need not be be voidable when the prt perf. makes it such
(recvry based on restitution, not K, theory) restored. (But benefits do) that parties cannot simply be restored to
-Tortious misrepresentation of age: If merch attmpts to find age R2K 15(2). previous position.
and minor lies (rcvry based on tort, not K, theory)

Duress - Physical Duress = VOID. (Simple.) Economic Misrepresentation R2K 164 - Unconscionability UCC 2-302; R2K 208
Duress = VOIDABLE (only rarely passes muster). K VOIDABLE ,if; Ks are UNENFORCEABLE
1) Fraduelent or material Notes
Old " Wiliston" Rule misrepresentation; AND - Uncscblty is an absence of meaningful choice on the
1) Party alleging economic duress must show that he has - Does not need to be part of one of the parties together with terms whcih
been victim of a wrongful or unlawful act or threat; AND intentinoal misrep, so long as are unrsnbly favrbl to other party. -Req consideration
2) Such act or threat must be one which deprives the civtim misrep is "material" of all the terms in a K, not just failure to read.
of his unfettered free will. - An opinion is not a - ALWAYS a matter of law for judge.
misrepresentation. - RK2 literally adopts and cites UCC, just use UCC
- Wrecklessly false and note this if for non-goods.
R2K 175-176 & Totem Elaboration asseritions; made as true Elements
Marine Tug & Barge 1) Wrongful ? unlawful (though without knowledge of veracity (1) Procedural unconscionability; AND
1) one party involuntarily unlwfl is sffcnt). Inclds immoral (not tech. fraud, but considered Absence of meaningful choice by wronged party.
accepted the terms of & bad faith, ie delib. withld of so for this) ie little or no bargaining power.
another via wrongful acts; payment (2) Substantive unconscionability.
2) circumstances 2) A lawsuit to recover is NOT 2) Justifiable reliance Terms unreasonably favorable to other parties
permitted no other considered a reasonable - Ex if dance studio could Corbin's Test: Are the terms "so extreme as to appear
alternative; AND alternative due to dire financial prove that Mrs. Syester never unconscionable according to the mores and business
3) the wrongful acts straits- No alt also means thought she could actually be a practices of the time and place."
induced the transaction financial hardship would occur. professional dancer it would not ie. Walker-Thomas Furniture: Even if party had paid off entire
have been jstfbl reliance. amount of old consigned item, it was automatic collteral if a
single payment was missed on a new consigned item.

Public Policy - Illegality and Gen. Pol (Non-competes)


UNENFORCEABLE/VOID

1) Illegal? - If subject matter is or becomes illegal prior to


performance, the K is unenforceable ??

2) Non-Compete Agreement for Professionals


Such a covenant will NOT be enforced IF,
(1) If the restraint greater than necessary to protect the
employer's legitimate interest (too broad); OR
- Unnecessary breadth in time, geographic limit, restricted
practices, and similar factors.
(2) If that interest is outweighed by the hardship to the
employee and the likely injury to the public (agst pub pol)
-For M.D. & J.D.s this is a balancing test weighing the
public's right to choose a professional and the potential
harm to business. Public considered more important than
profits.

Severability - If provision unenforceable, is just that line


or whole K unfrcbl?
Blue Pencil Rule: Erase unreasonable provisions.
- IF the K is still meaningful (remainder gramatically
consistent) w/o unreasonable provisions, rest of K can be
enforced.
- IF NOT, then the court may not "re-write" K; whole K
becomes unenforceable.
Justifying Non-Performance If the K is otherwise valid & enforceable, can we somehow justify not performing our contractual
duties on account of mutual mistake or changed circumstances? - These are Aff Defenses.
Note: Not typically. Major shared points of these doctrines are a) deal with a basic assumption of
the K and b) must also show that the party does not bear the risk under the K

Mutual Mistake of Fact R2K 151-152, 154


151 - "A mistake is a belief that is not in accord with the facts" (a fact in existence at Change of Circumstances?
time K is executed)
- May NOT be a mistake as to a future occurrence or non-occurrence.
- Analyze under both rules for the points, duh. True (Objective) Impossibility - Concert Hall Case. R2K 262,262
- If a person (262) or specific thing (263) which, as a basic assumption,
Rule 1) Essence v. Value - Barren Cow Case Old Rule, now minority is necessary to the performance of the agreement either dies or is
- When the ESSENCE of the consideration is completely different from that destroyed after the creation of the K, performance is excused.
contemplated by the two parties, non-performance is justified - 264, can also be invoked if government law makes it illegal or
ie K for a meat cow v. breeding cow impracticable
"The thing being bought and sold had in fact no existence" - More difficult to attain if the goods or services lost were fungible
- However, when only the VALUE of the consideration is different from what the - Objective impossibility "no one can do it"; not subj. ie "I cannot do it"
buyer thought, non-performance is NOT justified UCC 2-613
ie VanGough painting sold for $40 only to discover it is worth $40k is not justified - If goods are damaged or destroyed via no fault of either party before risk
of loss passes to the buyer then either:
(a) if total loss, contract is avoided
Rule 2) Material Value Rule - R2K 152 New rule. now maj. (b) if partial loss, buyer has right to inspect goods and either void K or
(1) When mistake of both parties at time contract was made in relation to a basic accept goods for lower price, but w/o further action against seller
assumption which has a MATERIAL EFFECT on the agreed performances, then the
K is voidable by the adversley affected party (unless he beas the risk of mistake per
154) Farnsworth's synthesis of Impract. & Frust of Purp: 4 elements
(2) In determining if mistake 'material' on agreed exchange, must consider if relief The disadvantaged party must show:
can otherwise be acquired via reformation, restitution, or otherwise (b/c rest. Par Ev (1) substantial reduction of the value of the K; ->
is permitted in alt. solut.) (2) b/c of occurrence of event, non-occurrence of which was basic assmpt
of both parties; ->
(3) w/o the party's fault; and
(4) the party seeking relief does not bear the risk of that occurrence of the
2a) Determine Who Bears Risk for Mat val. R2K 154 - Party bears risk when...
event either under the language of the contract or the surrounding
(a) the risk is allocated to him by agreement of the parties; OR
circumstances.
-Some courts infer "as-is" provisions allocate all risks to the buyer
USE THESE AS THE ORGANIZATIONAL PLAN; USE BELOW AS
(b) he is aware, at time K made, that he has only limited knowledge w/ respect to
ELABORATION
the facts to which the mistake relates but treats his knowledge as sufficient; OR
(c) the risk is so allocated to him by the court on the ground that it is reasonable
under circumstances to do so.
Impracticability - UCC 2-615 (ucc & com cnsstnt, use UCC)
(a) if both (b), (c), and not a breach, if performance has been made
impracticable by the occurrence of a contingency, the non-occurrence of
2b) Relief is equitable remedy; usually rescission + restitution if so applicable. which was a basic assumption on which the K was made (or in good faith
If mistake is an inaccurate writing of K, reformation of terms is prop remedy. compliance w/ gov't order regarless of constitutionality) -> excused
S.S. permit mutual mistake to apply to mistakenly drafted tort settlement Ks (b) If only part performance impacted by circmstncs (a), seller must
perform as possible & allocate avali goods to K buyers & reg. customers
in a "fair and reasonable manner" AND
(c) must notify buyer that delay, non-delivery, or limited quota of allocation.
Elaborations - UCC cmt. 4.
just like the tractor co, you're -Increased cost does not excuse unless rise in cost is unforeseen
gonna want to analyze both contingency. Market collapse or rise is never justification alone.
The primary differene b/w frustration of purpose and -If shortage of materials or increase in cost is due to war, embargo,
mistake and frustration is the impracticability even though local crop failure, unforeseen shutdown of major sources of supply which
timing. In mistake, the problem they are substantially similar; causes MARKED increase or altogether prevents seller from securing
already exists. for points and all that supplies necessary, then the market problem is valid under 2-615.
In frustration of purpose, the Common Law is R2K 261
problem occurs after the k has - After a K made, party's performance is made impracticable wihtout his
been made. fault by the occurrence of an event, the non-occurrence of which was a
?? basic assumption on which the K was made, his duty to render that
performance is dicharged, unless language or circumstances indicate
otherwise. Cmt b. -> financial inability of a party insufficient.
Cmt. d -> Mere lack of profit is insufficient to invoke; increased wages,
ALSO, notes are insufficeint difficulty, or price of raw mats likewise unless well beyond normal range.
to say whether or not (b) and Like ucc cmt 4, war et al invokes. SEE FARNSWORTH ABOVE
(c) of 2-615 are w/n the scope
of the course.
Frustration of Purpose - R2K 265 "Discg by Supvning Frstrtn"
-Where party's principal purpose is substantially frustrated without his fault
by the occurrence of an event, the non-occurrence of which was a basic
assumption on which the contract was made, his remaining duties to
render performance are discharged, unless the language or circ. indicate
otherwise.
Three factors. per cmt. a
1) "Principal Purpose" - Object must be so "completely the basis" of the K
that, as both parties understand, the trnsctin would be meaningless w/o it.
-> mutual profitability insufficient.
2) Frustration is "substantial" - Not enough that it is less profitable. Must
be severe as to not been considered w/n initial risks
3) "Basic assumption" See same as impracticability.
SEE FARNSWORTH ABOVE
Alternate Theories of Recovery

Promissory Estoppel R2K 90 Promise for Benefit Recieved R2K 86 Unjust Enrichment / Restitution / Quantum Meruit
Harvey v. Dow (Family) - PE has historitcally been aka Material Benefit Rule Webb v. McGowin Commerce Partnerships v. Equity
used to enforce familial agreements initially Very much a minority rule, but address anyway 4 Elements req.
backed by altruism rather than vlbl cnsdrtin. "Where the promisee cares for, improves, and (1) ? has conferred a benefit on ?
Katz v. Danny Dare (Cmrcl Emp Pnsn) - In preserves the property of the promisor, though (2) Consent prong; both
modern context, PE's principal application is done w/o his request, it is sufficient (a) Knowledge - ? has knwldg of benefit
protection of unbargained-for reliance on consideration for the promisor's subsequent (b) Acceptance - ? has acctp &/or retained benefit
commercial promises agreement to pay for the service, because of the (3) Unjust - Circumstances are such that it would be
Aceves v. U.S. Bank, N.A. - Dickheads on house material benefit received" inequitable for the ? to retain benefit without paying fair
loan. value.
Elements (1) Material benefit received by ?
(1) Promise - Need not be an express promise, (2) ? subsequently made ? a promise to
can be implied so long as it still meets the compensate for this previous benefit (essentially
'reliance' tests. reverse consideration) Determining Injustice - Sub-Contractors
(2) Reliance, three pronged; both (3) Injustice would result from the (1) Subcontractor had exhausted all remedies against
(a) Reasonable - ? 's reliance on ? 's promise non-enforcement of the promise. the general contractor and still remained unpaid; AND
was not unreasonable or based off an insincere (2) the owner had not given consideration to any person
statement CANNOT BE A MERE GIFT OR GRATUITY for the improvements furnished by the subcontractor
(b) Foreseeable - ? 's reliance on ? 's promise Note: Some statutes just consider this a valid
was foreseeable under the circumstances when contract but waive the retroactive consideration
they were made. prohibition. NY does this.
(Rsnbl & Frssbl = involves a definite &
substantial change of position which would not
have o/w occurred)
(c) Detrimental - ? 's reliance has led it to
either incurr loss or substantially improve the
property which they were promised. Would the
result be "unjust & inequitable?" If so, PE should
apply. In the context of employment, change of A contract theory is almost always preferred, as these alternate theories are only approved in roughly
position satisfies; even if higher salary, this does 10-20% of cases. Not a very good shot for a client.
not mean that the salary = proper compensation
for stress.

??
Damages
Which is best when?
Expectation Damages Best? Expectation damages are BEST in a breach where the contract would otherwise have been profitable for a party and they are unable
to suitably mitigate. Can only be claimed by the non-breaching party ---> If a contract would be un-profitable or mitigation is extensive then this may not be the
best option for a party. Instead, restitution damages would be a better option; reliance damages could be attempted b/c of burden shift.
Reliance Damages Best? If anticipated profits are too speculative, reliance damages are best. Still does not permit recovery of unprofitable venture but this at least
shifts the burden of proof on speculative profits to the breaching party. Seek to return to "ex-ante" position.
Restitutionary Damages Best? These are best when a loss on the transaction is guaranteed or the breaching party seeks to re-coup some of the value of its
expenses prior to breach.
Specific Damages Best? When the contract is either for a unique good or service, unavailable in any other way by any other non-party, and it would not be unjust to
apply the remedy as such.

1) Remedies within the Contract - Liquidated/ Agreed Damages


R2K S 356 - 3 Elements - No duty to mitigate BUT! For test be sure new trend:
1) Damages anticipated from breach are difficult to calculate - All forecasts are based@time Kmade - Trend of mitigation
2) The damages are NOT a penalty (too high or too low) - No actual harm needed - Trend of req. actual damages
3) The amount set is a reasonable forecast of just compensation - "Anticipated OR actual loss" req. - Now "anticipated & actual loss"

2) Remedies At Law Note: K's are entitled to equitable remedy; promissory Shared Factors of Damage Calculation
estoppels are too. Foreseeability, Certainty, Causation of Damages + Mitigation
- Frssblty: Either "arising naturally" from the breach as would have
Expectation Damages - Claimed by non-breaching party been in contemplation of both parties at time of breach. OR if the
Purpose: To give plainitff what he would have received if the K was completed. damages arise from special circumstances, these MUST have been
This is common law. SEE UCC 2-708 for goods. communicated by both parties when the K was formulated,shwn in K.
(1) in cntmplt @ time of K; (2) type of loss, not manner, frssbl; (3)
Calculation of Expectation Damages E = Vl + Ol - Ca - La frssblty focuses on brchng prty; (4) cn b objctv "reason to know;" & (5)
E : Expectation Damages mst be a "probable" result of breach
Vl: Value Loss - Difference between the value to the injured party of the Certainty: "Reasonably calculable;" merely "speculative" not counted.
performance and what was actually received. Ex expected profits. Lost profits require expert testimony. Only recover net, not gross profits.
For land: Vl is the difference b/w the fair market value and the K price. The Causation: Prox cause.
second sale can be used as evidence of the FMV. MITIGATION: Failure to mitigate is an affirmative defense, the
For employment: If eqv. services not avail. then breaching party is employer/ breaching party must prove both availability of comprable
responsible for the more expensive replacement. substitute AND lack of reasonable dilligence on non-breaching party
Ol: Other Loss = Incidental Damages + Consequential Damages
(Incidental Damages) - Costs incurred post breach in attempt to avoid loss.
Ex broker fees to find sub. buyer Losses on Collateral Contracts Figured Under OL Florafax rules
(Consequential Damages) - Damages caused directly by the breach. (1) Loss must be w/n contmplation of parties @ time of K
RULES: (a) damages must be reasonably foreseeable by breaching prty (2) Loss must flow directly or proximately from the breach
(b) harm need be measurable w/ reasonable certainty (3) Loss is capable of reasonably accurate measurement
(c) duty to mitigate has been accounted for
Jacob & Youngs (wrong pipes): When incidental damages far outweigh the Reliance Damages - Claimed by the non-breaching party
value loss, breach unintentional, & consequences trivial, courts will be reluctant Purpose: To prevent waste and return non-breacher to "ex-ante."
to enforce them. Instead, will enforce 'diminution in value'
Ca: Cost Avoided - Reduction by savings from unspent resources. Rd = Money spent - money paid - probable loss - mitigation (losses
La: Loss Avoided - Savings which result from mitigation of damages. must be proved by D)
DUTY TO MITIGATE: Loss Avoided should be calculated as losses which - Subject to the certainty, foreseeability, causation, and mitigation principles.
could be mitigated; since a party has the duty to mitigate those damages which - Only for "necessary" reliance damages, not incidental. Must be necessary
it can. EXCEPTION: The burden is on the breaching party to show that the for performance of the non-breaching party's obligations. Only applies to
damages could be mitigated in the frist place. "wastes," reliance damagess which are otherwsie still beneficial are not
For employment, a person need not accept inferior work if it is offered. recoverable. ---- These are basically just costs incurred without net profit.
The permissibility of pre-judgment interest: COSTS ACTUALLY INCURRED - not the market value.
Damages must be "luquidated sum" meaning that both (a) the amount due and - **Burden that the venture would not have been profitable falls on the
(b) the date on which originally due, are fixed/certain/ascertainable by calcultn. defendant as an affirmative reduction of this value. HOWEVER, at least this
is better for a potentially unprofitable venture to try this, since the D may fail
to meet the burden.**

3) Equitable Remedies Avaliable both for standard contracts and per se equitable claims

Restitutionary Damages - CLAIMED BY EITHER PARTY Specific Performance - Claimed by non-breaching party
Purpose: To restore value of a benefit that the D has unjustly retained. Purpose: Precisely compel performance when other remedies are inadqt.

ResD = Value of benefit retained Must meet requirements; considered an extreme remedy
- Must meet reqs. of Unjust Enrichment (ie expenditure justifiable, (1) Insufficiency of Monetary Damages (Inadequacy + Impracticality)/ AND
reasonable, and leaving D with unjust benefit) (a) Inadequacy - Sub matter of K is rare enough that money cannot remdy
- Where reliance would only pay for costs incurred, Restitutioary damages (land or a Picasso)
can acquire the market value of the service. Includes Cost of performance + (b) Impracticality - Would be impossible or very difficult to calculate
value of labor/reasonable profit. damages or a market value replacement.
-However, could also be lower than reliance damages if the expenditure does (2) Equity considerations - Would it be unjust to compel performance? ie if a
not result in a large benefit to the owner. houseowner breaches b/c of severe illness, it would be unjust to evict
- Often based on market value but can be based on the net value of (3) Practical Considerations - Would the court have to supervise the
recipient's net gain. K price is not an upper limit on this. performance? How will the court know it is done properly?
NOTE: rarely, if ever, compel performance of personal service Ks

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