Contracts

Important parts of a contract 1) Future looking 2) Contains a Promise 3) Exchange of Value a) Law will recognize that there is a remedy for failure to perform the promise. b) Without three elements, it is not an enforceable contract Courts do not enforce all promises, example: social engagements

Remedies
Shall be liberally administered to the end that the aggrieved party shall be put in as good of a position as if the other party had fully performed 1.) Damages a. Expectation Interest i. Putting the person back where they would be if the promise had been performed b. Reliance Interest i. Put the person in the position they would have been in had the contract not been made c. Restitution Interest i. Interest in having restored to him any benefit that he has conferred on the other party 1. Partial payment 2. Furnishing services 2.) Buyer s cover Remedy UCC a. After the seller s breach, a buyer may cover by making in good faith and without unreasonable delay a reasonable purchase of or contract to purchase goods in substitution for those due from the seller b. A buyer may recover from the seller as damages the difference between the cost of cover and the contract price along with any incidental or consequential damages i. Incidental Damages-expenses reasonably incurred in inspection, transportation and care of goods rightfully rejected ii. Consequential Damages-any loss resulting from general or particular requirements and needs which the seller at time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise c. Failure of a buyer to effect cover does not bar him from any other remedy y

Damages must be reasonably certain

1. There must be some basis on which damages are assessed. 2. If there is no way to determine amount of damages only nominal amount can be recovered a. Goal is not to punish the breacher, but to restore the breached to where they would have been had the contract been fulfilled. 3. Liquidated Damages Clause a. Clause in contract for specific amount to be paid upon breach

Damages must be foreseeable 1. Damages are not recoverable for loss that the party in the breach did not have reason to foresee as a probable result of the breach when the contract was made. Restatement Efficient Breach 1. Breach in which no party is injured 2. More efficient to breach than to perform the contract a. Devoid of moral obligation Specific performance 1. Situations were monetary damages are insufficient a. Priceless/hard to find objects 2. Order the defendant to perform the contract 3. UCC a. Specific performance may be decreed where the goods are unique or in other proper circumstances 4. Personal Service Contracts a. Courts do not usually require specific performance on breach of employment contracts b. People with unique talents may be subject to other remedies i. Injunction ii. Damages

Validation Process
1. Are there certain promises that should not be performed a. If there is no validation in connection with the promise, then courts won t uphold the promise i. Early law courts would not enforce laws without a seal b. Consideration for a promise i. To constitute consideration, a performance or a return promise must be bargained for 1. A benefit to the promisor and a detriment to the promise, and 2. A bargained for exchange ii. Does not require equal value c. Promissory Estoppel i. A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promise 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. Restatement d. Moral Obligation i. Not in system of jurisprudence sufficient to enforce a contract on its own. ii. Must be consideration or primary Estoppel, moral obligation is not on its own binding

Intention to be legally bound

Objective Theory 1. Cases where one party contests that they did not intend to be legally bound a. Court must not consider the defendant s subjective intent, nor plaintiff s subjective view of what is offered, but what a reasonable person would have understood to be conveyed 2. CISG- requires an inquiry into the subjective intent so long as the other party was aware of such intent Interpreting Statements to Determine Legal Consequences 1. There are some statements that appear to be serious that are not intended to have legal consequences a. Physicians i. Doctor s therapeutic reassurance that his patient will be all right, not to worry, must not be converted into a binding promise by the disappointed or the quarrelsome. ii. Doctor patient relationships should be treated differently 1. Exception if doctor does too many things that are questionable (soliciting patient, out of their field, specific promises) iii. Good public policy to give doctors a little room. 2. Contracts Made between husbands and wives a. Can t be held to the same standards as business partners a. Would overwhelm the courts b. Don t believe there are legal consequences c. Exception-if they enter into a business relationship Express Statements Concerning Legal Consequences 1. Letters of intent and Express Statements Not to be Legally Bound a. Letter of intent i. parties agree certain things in agreement will have legal consequences, and certain things will not b. Most just state they intend to continue in negotiations i. neither party is legally bound to the other c. Contract to negotiate in good faith b. Good faith is determined on a subjective basis. c. Restatement a. Neither real nor apparent intention that a promise be legally binding is essential to the formation of a contract, but a manifestation of intention that a promise shall not affect legal relations may prevent formation of a contract

Contemplation of Final Writing 1. Titles of Documents are not important; it s what s in the document. Some letters of intent may be binding; others may not be binding at all. 2. Signing memorandum of intent can create an agreement a. Even if there is still to be a final writing, the letter can still be binding. i. The circumstances surrounding the signing must be examined ii. If the parties agree there is to be a final writing and all of the terms have been worked out, then a contract has been formed b. Parties can manifest that they don t intend to be bound until final document c. Evaluation of circumstances surrounding the parties discussions i. Question of fact Agreements to Agree- Missing Terms 1. Parties don t always include all of the terms that they need in their contracts a. Older law, if there were missing pieces, there was no contract b. Modern view- even though all terms aren t spelled out in advance, contract is formed. i. Unless way too many terms are missing 2. UCC 2-204 (3) a. Even though one or more terms are left open a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving appropriate remedy. 3. UCC has gap fillers for when a term is not addressed in contract. a. Default rules 4. UCC open Price Term a. The parties if they so intend can conclude a contract for sale even though the price is not settled. In such a case the price is a reasonable price at the time for delivery if i. Nothing is said as to price ii. The price is left to be agreed on by the parties and they fail to agree iii. The price is to be fixed by some agreed market or by a third person and it is not set b. A price to be fixed by the buyer or seller means a price for him to fix in good faith The anatomy of agreements--offer and acceptance Revocation Rejection Offer Counter-offer Acceptance

Preliminary Negotiations versus offers 1. What a reasonable person would believe 2. An offer is the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude is. Restatement 3. Case by case basis- examination of facts and circumstances 4. Sellers listing real estate are inviting offers, not making one

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a. The definite or indefiniteness of the words used in opening the negotiation must be considered, as well as the usages of business, and indeed all accompanying circumstances. Restatement of contracts 24 Public add usually is not an offer a. Goes out to many people b. Many people are making offers/bidding Price quotes are invitations to bid, not offers a. Unless asking for acceptance a. $$$...for immediate acceptance Advertisements a. If goods are advertised for sale at a certain price, it is generally not an offer, and no contract is formed because of the statement of an intending purchaser that he will take a specified quantity of goods at that price. Restatement of Contracts, second b. Exception to rule: when advertisement is clear, definite, and explicit, and leaves nothing open for negotiation c. Have to consider all circumstances d. If there is nothing peculiar about the ad, it will be deemed to be an invitation to negotiate Owner, contractor, sub-contractor a. SubK submits bids to GenK submits bids to owner b. Contract not quote a. Each party performs their part b. Can manifest contract through conduct in absence of words 1. If parties act like there is a contract, there is 2. If they act like it was just an offer, it will be treated as such c. Guarantees price Purchase orders are usually offers a. Usually a request for purchase from the company first- invitation to negotiate b. Then purchase order, c. Acceptance is granted by fulfilling the order 1. Objective manifestations not subjective intents

Identifying the offeror and offeree 1. Offeror-the one who makes the offer a. Master of the offer 2. Offeree- the one who accepts the offer 3. Contract can be formed by action of the offeree to perform the contract a. Ordered truck but didn t sign contract

Duration of offers 1. How long offers remain in effect 2. Statute of limitations a. Amount of time a person has to bring suit 3. An offeror can put any conditions on an offer they want b. Don t have an obligation to make the offer in the first place 4. Reasonable time is a common law concept a. Default rule

b. Up to a jury to decide based on all of the facts c. Depends on the how much/quickly the price fluctuates-reasonable amount of time 1. Selling stock v. selling house c. Offeror can designate how they want offer accepted 4. Restatement a. An offeree s power of acceptance is terminated at the time specified in the offer, or if no time is specified, at the end of a reasonable time b. Reasonable time is a question of fact, depending on all of the circumstances when the offer and attempted acceptance are made

Termination of Power and Acceptance

Rejection 1. An offer is extinguished upon rejection Revocations 1. An offer can be revoked anytime before acceptance is received Mailbox rule 1. Default rule i) Offer is made when letter is received ii) Accepted when mailed (1) CISG-time for acceptance begins when letter is dated iii) Rejection is effected when received iv) Revocation is effected when received (1) Court may not always apply default rules, based on circumstances Indirect Revocation 1. It is sufficient to constitute a withdrawal that knowledge of acts by the offeror inconsistent with the continuance of the offer is brought home to the offeree. a. Don t have to be directly informed can be learned through a third party 2. Restatement a. An offeree s power of acceptance is terminated when the offeror takes a definite action inconsistent with an intention to enter the proposed contract and the offeree acquires reliable information to that effect. Counter offers 1. An acceptance of an offer with added stipulations that must be met, does not create a contract, it is a counter offer 2. Buyer can add suggestions, so long as they make it clear they will accept with or without fulfillment of their suggestions 3. Restatement a. The normal effect of the counter-offer is to reject the original offer. It terminates the original power of acceptance in the offeree who is now the counter-offeror. 4. Different from a rejection a. Seeks to carry on negotiations

Death or incapacity 1. The death of an offeror revokes his offer or causes his offer to lapse a. Unless there is money put down for consideration, making the offer irrevocable.

Making Offers Irrevocable

1. Option Contract-rights of first refusal a. Right of first refusal i. Once an offer is received from someone else, then offeree has the option to buy it b. Often on lease contracts where party wants to sell house 2. Classical option contract a. Restatement i. An option contract is a promise which meets the requirements for the formation of a contract and limits the promisor s power to revoke an offer b. Separate contract makes an offer irrevokable i. Offeree wants time to decide without chance of offeror revoking c. Pays amount of money for amount of time without possibility of revoking i. Does not always have to be cash, consideration can be in form of promises or tasks to be done d. Offeree must be given a reasonable amount of time to accept or refuse offer i. Once there is an option agreement for 90 days and on the 45th day reject, usually still have 45 days to change mind and accept a. So long as person has not relied on the rejection e. Typically acceptance of the offer is accepted upon receipt not upon mailing 3. Irrevocability through Reliance- Firm Offers a. Subcontractors and general contractors i. Relationship of offers between two b. When one party knows that the other party is relying on the irrevocability of the offeror s bid, the bid is said to be irrevocable for a period of time. i. Unless it is obvious a mistake had been made c. UCC 2-205 i. An offer by a merchant to buy or sell goods in a signed writing which by its terms gives assurance that it will be held open is not revocable, for lack of consideration, during the time stated or if no time stated for a reasonable time, but in no event may such a period of irrevocability exceed three months; but any such terms of assurance on a form supplied by the offeree must be separately signed by the offeror a. Merchant- a person who deals in goods and knowledge or skill peculiar to the profession a. Signed writing b. Irrevocable d. Restatement i. An offer which the offeree should reasonably expect to induce action or forbearance of a substantial character on the part of the offeree before

acceptance, and which does induce such action or forbearance is binding as an option contract to the extent necessary to avoid injustice e. CISG i. A contract is irrevocable if, a. There is a date stating how long the offer is open, or b. If a party relies on the offer as being irrevocable

Irrevocability through Part performance

1. Unilateral contracts a. An offer to enter into a contract upon the doing of a bargained for act by the offeree. The performance by the offeree constitutes an acceptance of the offer and the contract then becomes executed. b. one duty, one promise i. contract is formed when duty is complete ii. if performance of the promise becomes an illegal act through no fault of the parties, court may excuse the performance 1. give monetary reimbursement instead 2. Irrevocability upon part performance a. Section 45 of the Restatement i. Where an offer invites an offeree to accept by rendering a performance and does not invite a promissory acceptance, an option contract is created when the offeree tenders or begins the invited performance ii. An offeror s duty of performance is conditional upon completion of the performance. b. Depends on how the offeror frames the argument i. Whether it is unilateral or bilateral c. Bilateral Theory (bad) i. Once performance begins, it becomes a bilateral contract 1. Becomes a problem because it binds an offeree

The Nature of Acceptance

1. Knowledge and Motivation a. Knowledge i. Person must at least have knowledge of the offer before performing the acceptance 1. Knowledge can come at the very end, right before acceptance ii. Public service cases 1. Don t have to have knowledge to collect reward a. Want to encourage people to be good Samaritans iii. Completed performance of the acceptance is necessary b. Motivation i. Performance does not have to be motivated by the offer ii. Unless a contrary intent is manifested, person s motivation is assumed based on their promise to accept the offer is clear evidence of their intent to accept. 1. Judged by acts not motivation

2. The Requirement of Volition a. Unilateral contract ii. The acceptance comes at the time of the completion of voluntary action a. The offeree has to have control over doing the act b. There can still be conditions that have to be met

Manner of Acceptance
1. The modern Analysis a. UCC 2-206 i. Unless otherwise ambiguous indicated by the language or circumstances: 1. an offer to make a contract shall be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances. b. Restatement i. The usual offer which either amounts to performance or constitutes a promise the offeror is often indifferent to which form an acceptance takes c. Offeror is the master of the offer i. May insist on a particular manner for acceptance ii. Doesn t have to use mode of acceptance provided by offeree document d. When one party solicits another, clearly specifying there is to be no contract until ratification by the solicitor, this is not an offer, but an invitation for an offer e. Accommodation i. An order or other offer to buy goods for prompt or current shipment shall be construed as inviting acceptance either by a prompt promise to ship or by the prompt or current shipment of conforming or non conforming goods, but such shipment of nonconforming goods does not constitute an acceptance if the seller seasonably notifies the buyer that the shipment is offered only as an accommodation to the buyer. ii. Accommodation-an arrangement or engagement made as a favor to another 1. Constitutes a counter offer iii. Without Accommodation would be an acceptance and a breach 1. Accommodation must arrive at a seasonable amount of time a. Can come after in some occasions i. Not too long after, not high reliance f. Person may accept a contract by accepting the benefits of the contract i. External manifestation communicates acceptance 2. Silence as acceptance a. No way to know if the offeree has manifested assent. b. Where an offeree fails to reply to an offer, his silence and inaction act as an acceptance in the following cases only

i. Where an offeree takes the benefit of the offered services with reasonable opportunity to reject them and reason to know they were offered with the expectation of compensation ii. 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. iii. Where because of previous dealings or otherwise, it is reasonable that the offeree should notify the offeror if he does not intend to accept 3. The notice requirement a. Title of goods passes from the seller to the buyer in any manner and on any conditions explicitly agreed on by the part b. UCC 2-206 (2) i. Where the beginning of a requested performance is a reasonable mode of acceptance an offeror who is not notified of acceptance within a reasonable time may treat the offer as having lapsed before acceptance 1. What is a reasonable time for taking any action depends on the nature, purpose, and circumstances of such action 4. Warranty a. Express Warranty 2-313 i. Promise or affirmation of fact by the seller 1. Relating to quality or feature of the goods ii. Product must match its description iii. Expressly stated 1. Example-Unbreakable b. Implied Warranty of Merchantability i. Basic quality of goods buyer is entitled to receive 1. What a reasonable man in the position of the buyer expects to receive ii. Fit for the ordinary purposes of such goods iii. Fair average quality c. Implied warranty of fitness for a particular purpose i. Whether the seller had reason to know at the time of the contract that the buyer was relying on skill and expertise ii. Applied to products where seller knows buyer requires a higher or different standard than the usual standard iii. May be good enough for ordinary use, but defective for special use 1. Relying on skill and expertise of seller d. Seller can exclude express and implied warranties i. Selling as is ii. Buyer examines goods before purchasing 1. Examination should have made clear to him

5. Self Service Contracts a. Contract for sale-contract to sell goods at a future time i. Shopping in a supermarket, intent to purchase b. UCC 2-314 i. A warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind c. If the goods are found to have not been merchantable, then there is a breach of contract on the seller s side d. Statute of limitations on breach i. 4 years e. Create an option contract when product put into cart 6. Auction contract a. If an auction is done with reserve an auctioneer can withdraw the goods at any time b. Without reserve, once bid is received, must go forward with sale

The Deviant Acceptance

B sends p/o to S- without arbitration clause S sends acceptance to B- with arbitration clause Common law- no contract- didn t match

1. Acceptance and counteroffers a. Common law mirror image a. Acceptance had to exactly match the form of the offer 1. Otherwise it was a counter offer b. Dickered terms 1. Terms the parties consciously considered when making the contract 2. Change in dickered terms precluded formation of contract b. Standardized forms a. Boiler terms b. Dickered terms match, boiler terms don t 1. Generally ignored, contract formed so long as dickered terms match 2. Last shot principlevd a. Boiler plate terms relate to litigation and warranty a. In conflict, person who fired the last shot won 1. Counter offer, therefore boiler terms accepted b. Changed this 3. Modification of the matching acceptance role a. UCC Additional terms in Acceptance or confirmation a. A definite or seasonable expression of acceptance or a written confirmation which is sent with 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.

b. The additional terms are to be construed as proposals for addition to the contract. (between buyer and seller) Between merchants such terms become part of the contract unless 1. The offer expressly limits acceptance to the terms of the offer 2. They materially alter it 3. Notification of objection to them has already been given, or is given within a reasonable time after notice of them is received c. Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale even though the writings of the parties do not otherwise establish a contract 1. Expressly made conditional clause, go to C 2. No expressly made conditional clause, go to B b. Material Alteration a. Clauses that result in surprise or hardship b. Something that is important 1. Clauses that limit warranties of ordinary fitness 2. Arbitration clause c. Can limit acceptance to only the terms of the offer. Disregards any boiler plate terms in the acceptance 4. The knock out rule- conflicting terms- majority view a. When the parties have contrasting boiler plate terms a. Conflicting terms are knocked out and the gaps are filled by UCC rules b. Go to paragraph C b. Minority view a. Additional= different b. Go to paragraph B 5. Amendment to 2-207- not adopted, doesn t look like it will be a. When the terms don t match, but both parties recognize the existence of a contract, the terms of the contract are a. Terms that appear in the records of both parties b. Terms, whether in records or not, both parties agree on c. Terms supplied or Inc. under any provision of this act(UCC terms) 6. Rolling contract a. In deals between merchants and consumers where terms of the contract are sent along with the product, if after reading the terms the consumer does not return the product, they accept the contract and all terms included in it b. Acceptance spread over a long time and involves many steps a. Payment for the product b. Receiving the product c. Reading the terms d. Accepting the contract and all terms, or e. Not accepting and returning the product c. 2-207 does not apply because there are no additions to the contract a. Acceptance has not occurred until license agreement is accepted b. One view

Validation Notes
1. Introduction a. The function of validation devices i. To determine which promises will a court enforce b. One measure i. Whether there is a validation device c. What are the devices i. Formalistic Devices ii. Consideration iii. Promissory Estoppel iv. Moral Obligation 2. Seals and other formalistic devices a. Replaced the seal with the Restatement 87(1) i. An offer is binding as an option contract if it 1. is in writing and signed by the offeror, recites a purported consideration for making the offer, and proposes an exchange on fair terms within a reasonable time; or 2. is made irrevocable by statute a. Fair terms- applies to the underlying transaction b. Purported consideration- any exchange takes place ii. Just another formalistic device 1. Seal is no longer an acceptable validation device b. UCC 2-203 i. Seals Inoperative 1. The affixing of a seal to a writing evidencing a contract for sale or an offer to buy or sell goods does not constitute the writing a sealed instrument and the law with respect to sealed instruments does not apply to such a contract or offer c. Functions of devices i. Creates an enforceable document ii. Supposed to be cautionary/warning to parties iii. Some seals change statute of limitations d. Restatement 98 i. Unless extrinsic circumstances manifest a contrary intention a written promise by the promisor amounts to the adoption of any seal then on the document 3. Consideration a. Elements i. Has to be legal value 1. Impact of the transaction on the parties 2. Benefit to the promisor or detriment to the promisee ii. Bargained for exchange 1. Promise induces the detriment a. Promise to pay is induced by promise of delivery b. Must all be related b. Gifts are not considered to have consideration

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i. Detriment to the promisor, benefit to the promise 1. Not enforceable ii. Can be conditions on the gift that cause tiny detriment, not usually applied Adequacy of Consideration i. Don t generally inquire into the adequacy of the legal consideration 1. Court does not require equivalence 2. Don t value consideration, it is either there or not Exceptions to refusals to Inquire into Adequacy i. Inadequacy in Equity 1. Restatement 364 a. Specific performance or an injunction will be refused if such relief would be unfair because a. The contract was induced by mistake or unfair practices b. The relief would cause unreasonable hardship or loss to the party in breach or third persons c. The exchange is grossly inadequate or the terms of the contract are otherwise unfair 2. Can sue for damages, 364 will not be applicable ii. The money exception 1. If money is exchanged for money, courts will look at the value exchanged 2. There is no bargained for exchange a. No one would bargain to give more money than they were getting Nominal Consideration i. Person does not have to be motivated by consideration for contract to be formed ii. So long as there is a form of consideration, the motivation behind it is not important 1. Unless both parties know that the consideration is merely a pretense At will employment i. Permanent job means not temporary 1. Does not mean for life ii. Employee handbook 1. Usually guidelines not meant to be a contract 2. Look for a unilateral contract and consideration a. Only forms a contract if i. It is sufficiently definite ii. Communicated to and accepted by the employee iii. The employee provides consideration iii. At will employment 1. An employee can be terminated at any time by an employer for no reason 2. Over time courts have become more protective of employees Recitals i. Background of the agreement 1. Usually in the beginning of a contract ii. 87(1) Restatement of Contracts

1. An offer is binding as an option contract if it, a. Is in writing and is signed by the offeror, recites a purported consideration for the making of the offer, and purposes an exchange on fair terms within a reasonable time i. ****minority position iii. Failure to pay nominal consideration does not void a contract 1. Must be recited, doesn t have to be true h. Mutuality of Obligation i. Another way of saying there is consideration i. Illusory Promises i. A promise to perform unless a party changes their mind promises nothing ii. No binding aspect 1. If there is no promise, then there is no contract iii. Cases where neither promise is enforceable for lack of consideration 1. Plaintiff fulfilled their part 2. Defendant benefitted a. Estopped from refusing performance based on these grounds b. Cannot raise grounds of lack of consideration i. Performance is already completed j. The Illusion of Illusory Promises i. Promises based on the happening of another event 1. If I do this, then I ll do this ii. Contract is formed when party does original act, bound to do second act then iii. The offer had to be accepted and communicated to the offeror iv. Once act is performed, offeror is bound k. Requirement and Output Contracts i. 2-306 UCC 1. A term which measures the quantity by the output of the seller or the requirement of the buyer means such actual output or requirements as may occur in good faith, except that no quantity unreasonably disproportionate to any stated estimate or in the absence of a stated estimate to any normal or otherwise comparable prior output or requirements may be tendered or demanded. 2. A lawful agreement by either the seller or the buyer for exclusive dealing in the kind of goods concerned imposes unless otherwise agreed an obligation by the seller to use best efforts to supply the goods and by the buyer to use best efforts to promote their sale (Requires more than good faith, must make effort to sell) ii. 2-103(1)(B) Good faith 1. Means honest in fact and the observance of reasonable commercial standards of fair dealing in the trade iii. Requirement Contract 1. The sellers requirement is to sell goods to the buyer in the amount that the buyer requires a. Buyer dictates amount required iv. Output contract 1. Buyer has agreed to buy whatever the seller s output is a. Seller determines amount

v. Buyer cannot demand an increase in amount that is disproportionate to original estimate 1. Can purchase less than estimate so long as it is done in good faith vi. Duration of exclusive agreement 1. Reasonable time, or 2. Terminable at will vii. Must act to use their best efforts during contract 1. In exclusive dealings 2. Must try to make it work l. Capacity to Contract- voidable promises and consideration i. Contract with a minor is voidable 1. Minor is only party who can void a. Not other contract party ii. Can disaffirm at a reasonable time after they become of age 1. Must return all benefits received under the agreement iii. Claims can be made for 1. minors, 2. intoxication a. (did not understand what they were doing if the other party had reason to know), 3. Person with diminished mental capacity a. (doesn t matter if other person knows or not) m. The pre-Existing duty rule i. There is no consideration if a party is only offering something that they already had a duty to do ii. Change the obligation in some way 1. Adds consideration iii. Agreement to rescind the original contract and enter into a new one iv. hold-up rule 1. Courts will not enforce an agreement that has been procured by distress or coercion and will hold the parties to their original contracts n. Modification of the pre-existing duty rule i. 2-209(1) 1. An agreement modifying the a contract for the sale of goods needs no consideration to be binding a. Must meet the test of good faith i. Not distress or coercion ii. Restatement 89(a) 1. A promise modifying a duty under a contract not fully performed on either side is binding a. If the modification is fair and equitable in view of circumstances not anticipated by the parties when the contract was made o. Disputed claims, modifications, accord, and satisfaction i. Modification 1. Relating to good faith dispute and claim is consideration for modification of the underlying contract ii. UCC 2-209(1) 1. See above

p. Accord and satisfaction i. Two parties have an existing contract 1. A lends $10,000 to B 2. B doesn t have it at the time of payment 3. Enter into second agreement a. B will provide a vehicle to A in lieu of paying A $10,000 in cash ii. Whether when they intend to hold first contract in suspense or discharge it and enter into a substitute contract iii. If suspend- obligation in accord 1. When vehicle is provided, satisfied, both contracts are discharged a. If 2nd breach may proceed for either car or money 2. What did the parties intend q. The invalid claim i. If a party uses forbearance on a claim as consideration 1. Claim is later found to be invalid 2. Still held ass consideration so long as the party believed in good faith that it was valid ii. Restatement 74 1. Forbearance to assert or the surrender of a claim or defense which proves to be invalid is not consideration unless: a. The claim or defense is in fact doubtful because of uncertainty as to the facts or the law, or b. The forbearing or surrendering party believes that the claim or defense may be fairly determined to be valid iii. Promise to forebear a claim where the claim turns out to be invalid 1. Merely the good faith belief that you have a claim 4. Promissory Estoppel a. Absence of bargained for exchange Antecedents i. Restatement 90 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. ii. Reasonably expect to induce and does iii. Reliance on a promise 1. Substantial reliance is important iv. Only way avoid injustice b. Precontractual Reliance i. No final agreement reached ii. Relied on the promise that a contract would be formed 1. Other side could argue that reliance was not reasonable iii. Courts more often than not give expectation damages 1. Without a contract though, there is no way to know what the terms of the lease would have been- revenue, expenses and terms are all hard to determine 2. Reliance damages can also be argued a. Usually will be granted all vs. nothing iv. Restatement 90

1. The remedy granted for breach of a promise may be limited as justice requires 5. Moral Obligation a. Past Consideration i. No consideration ii. Already performed the services 1. Promise to give something for this afterwards iii. No bargained for exchange iv. Ethical problem 1. Can t negotiate a business deal with your client 2. Must advise them to bring in another lawyer b. The Material Benefit Doctrine i. Where a material benefit had been received and the recipient voluntarily promises to pay for the past benefit, the promise is enforceable ii. Promise made subsequent to the receipt of a material benefit 1. Most jurisdictions do not follow this rule iii. Restatement 86 1. A promise made in recognition of a benefit previously received by the promisor from the promise is binding to the extent necessary to prevent injustice 2. A promise is not binding under (1) a. If the promisee conferred the benefit as a gift or for other reasons the promisor had not been unjustly enriched b. To the extent that its value is disproportionate to the benefit c. Promises uniformly enforced through moral obligation i. Old debts barred by the statute of limitations 1. A promise from the debtor to the creditor promising to pay them even though the statute of limitation applies is enforceable ii. Bankruptcy 1. Upon bankruptcy debt is discharged 2. Promise to pay it anyways, there is a new enforceable promise a. Protection for consumers not tricked into paying them again

Operative Expressions of Assent Notes

Statute of Frauds
1. If a contract is of a certain type, then there must be a writing a. If it doesn t fall within these types then it need not be in writing 2. Types of catergories a. Restatement 110 i. The executor-administrator provision ii. Suretyship provision iii. The marriage provision iv. The land contract provision v. The one year provision vi. Sale of goods

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8.

9.

within the statute a. Falls under provisions of statute without the statute a. Does not fall under provisions of the statute Suretyship i. Debtor- obligor ii. Creditor- oblige iii. Surety a. Contract between the surety and the creditor iv. If the debtor doesn t pay you, I will v. Must be third party, not direct obligation 1. Otherwise not a surety b. Nature of the contract can be determined by parties actions c. Statute of frauds must be contract between surety and creditor Main Purpose (leading object) exception a. If a party enters into an agreement as a surety to serve their own interest, then it is without the statute and need not be in writing i. Problem is that this argument can be made in almost any situation 1. Wouldn t guaranty debt of another for no benefit to themselves b. Extent of ownership, direct investment, economic reward Marriage agreements a. Promises to marry are not within the statute b. Promises in consideration for marriage fall within the statute i. Wouldn t get into agreement but for getting married ii. Wouldn t get married but for the agreement c. Prenuptial agreements i. Fall within the statute ii. Must be in writing d. Exception Complete Performance i. One of the reasons for writing was to show that there was an actual agreement ii. When people act according to the oral agreement it removes the question of whether there was an agreement Contracts for the Sale of Land a. When deed is given after all the payments are made i. Over a period of time b. Must be in writing c. Exception Part performance i. In order to fall without the statute of frauds 1. There must be something more than money exchanged 2. Taking possession of the land 3. There must be improvements on the land ii. Want to be strict if there is no writing 1. Don t just give away people s land The one year provision a. Contracts that are not performable within one year i. If there is a way the court can find to ignore this class of contract and not require writing, they will do that

10.

11. 12. 13.

14.

ii. Does not apply if the contract conceivably can be done within one year iii. If there is no way it can be done in one year, then it must be in writing Contracts for the Sale of goods a. UCC 2-201 i. Contract for the sale of goods over $5000 must be in writing 1. Not enforceable beyond the quantity of goods listed in the record ii. If there is not written contract but within a reasonable time 1. Seller sends receiver a written documentation and receiver does not object within 10 days iii. Even if a contract does comply with 1, it can still be enforcible 1. If the goods are specially manufactured for the buyer and are not suitable for sale to others and seller has made a substantial beginning 2. If party against which enforcement is sought makes an admission that a contract was made 3. If goods have been accepted or payment has been made Electronic Writings and signatures a. Same as traditional writings Estoppel and the Statute of Frauds a. The statute of frauds will allow promissory estoppel Admission that the contract was made a. The party against whom enforcement is sought admits a contract was formed 1. During litigation or pleadings 2. Can be used as evidence ii. External manifestation of assent 1. Subjective thoughts not relevant b. Admissions made during pleadings and motions i. Must be clear and precise 1. When raising the statute of frauds as a defense c. how to assert the statute of frauds i. must raise it as an affirmative defense d. if it applies, is the assertion the there is no contract? i. consequences 1. generally does not mean that the contract is void 2. voidable a. if statute never gets raised, contract is good e. CISG i. No statute of frauds Restitution a. Contract is unenforceable i. One party has conferred a benefit upon the other through part performance ii. party can get the money they put in back out

Parol Evidence Rule

1. Start at negotiations---<alledged oral agreement>----move to written contract

2. 3.

4.

5.

a. Significant difference between what legal rules apply depending on the time line i. Oral agreement prior 1. Look at parol evidence rule ii. Oral agreement after written agreement 1. Not province of parol evidence rule a. Modifications Whether agreement is integrated a. Was the written contract intended to be complete levels of integration a. Partial i. There will be a determination made- fact finder will be allowed to hear the evidence, as long as it is not inconsistent with the written contract b. Total i. No evidence of any other agreement will be submitted to the fact finders c. No i. The evidence of the prior agreement will be admitted d. Five tests i. Appearance test 1. Face value of the contract 2. Judge looks at appearance of contract 3. Does it look like everything is there 4. Judge determines as a matter of law ii. The separate consideration test 1. Made for separate consideration iii. Natural Omission test 1. Something that would naturally be written in a separate agreement iv. Certain inclusion test 1. Shift the burden to the person invoking PER to keep the evidence out a. They would have to show that the subject of the oral agreement would most of the time be included in the written agreement v. Writing omission test 1. If the writing covers some aspect of the topic, then the writing is considered integrated e. Restatement uses test 2 and 3 i. Pg 260 and 261 restatement ii. Meets either one, oral testimony can be admitted f. UCC 2-202 i. Adopt certain inclusion test 1. More permissive about admitting prior oral testimony g. Modern view i. Should trust jurors 1. Should be excluded only when the fact finder is likely to be misled Merger clause a. States that the agreement is complete and final i. Nothing else is to be included The UCC Parol Evidence Rule Trade Usage, Prior Dealings a. 2-202

i. Agreements in writing may not be contradicted by evidence of any prior agreement but may be supplemented or explained 1. By course of performance, course of dealings, or usage of trade, and 2. By evidence of consistent additional terms unless the court finds the writing to have been intended also as a complete and exclusive statement of the terms of the agreement b. Even in complete documents some evidence may be included to explain and supplement the contract i. Course of performance 1. What the parties have done with the respect to the contract 2. Did the parties behavior suggest what agreement about certain things should be ii. Course of dealings 1. Refers to parties dealings of a particular time 2. How they address issues over several contractual relationships iii. Usage of trade 1. How parties within industry do things 6. CISG and the Parol Evidence Rule a. Subjective intent is permitted where the other party has reason to know of their intent b. CISG contains no express statement on parol evidence i. Allows for oral contract ii. Gives due consideration to all relevant circumstances 7. Cases where the parol evidence rule does not apply a. Reformation and the Parol Evidence Rule i. Scrivener s error 1. Doesn t bar introduction of evidence that there was a mistake made in the drafting of documents ii. Reformation 1. Reforming a document to reflect its true intent b. Condition Precedent, Fraud, and the Parol Evidence Rule i. Condition precedent 1. A condition that must occur before there is a contract ii. Fraud 1. False intentions or trickery used to create a contract iii. Parol evidence can be considered by the fact finders when there are allegations of fraud 1. Not a bar to consideration of evidence of fraud iv. Parol Evidence can also be heard when there are allegations of condition precedent

Modification
1. UCC 2-209 (DO NOT APPLY TO COMMON LAW) a. An agreement modifying a contract needs no consideration 2. Modification that is not in writing (oral) a. If the contract is within the statute of frauds (3) i. Must satisfy 2-201

1. Sale of goods 2. Quantity specified a. Not applied in requirements contract i. No distinct amount by nature 3. Signed by party invoking SOF defense ii. If the original contract was required to be in writing then the modification must be in writing 1. Majority of courts iii. If the term modified must have originally been in writing, then the modification must also be in writing 1. Minority view b. No-Oral-Modification Clause NOM (2) i. Clause where there can be no oral modification to the contract 1. Private statute of frauds a. Parties decide what has to be in writing and what doesn t c. 2-209(4) i. Allows enforcement of an oral modification to be enforceable where it is not enforceable under because of a NOM or the Statute of frauds is not satisfied 1. Buyer waived the requirement through oral modification a. Look at who initiated modification b. Extent of reliance on modification c. Whether party is taking advantage of the other d. 2-209(5) i. Party who has waived a part of the contract can retract it back to the original terms 1. So long as there is reasonable notification 2. And the other party has not changed their position in reliance on the waiver

Interpretation
1. Attempting to determine what the parties meant by various terms in the contract a. No limitation on the extrinsic evidence of what the judge may hear b. Generally involves the interpretation of the written contract c. Judge looks at the document and determines if there is any ambiguity as to what the terms mean i. No ambiguity, no extrinsic evidence heard d. Up to the lawyer to show that certain words can have more than one meaning 2. Goal is to determine what the parties intended a. Look at how that parties acted toward term b. Who wanted the term 3. Guides (only given limited weight) a. Contra preferentem

i. When all other things are the same, the courts will look at the meaning the person who wrote the contract intended it to have b. Expressio Unius i. If there are items listed and an item is not included, then it does not apply 4. Vague or equivocal meanings a. Where a word has a spectrum of applications or a double meaning i. Must look at all of the extrinsic evidence to determine the meaning of the term 5. Latent Ambiguity a. Can cause a contract to be voidable i. Parties attach different meaning to the same word, neither know 1. Was no manifestation of assent a. there was no contract ii. If both know the other person has attached a different meaning to the word 1. no manifestation of assent iii. seller thinks it s one thing, buyer thinks it is another, but knows the seller thinks it is the 1st thing 1. there is a contract based on the innocent party s belief 6. Mistake i. A belief that is not in accord with the facts b. Mutual Mistake i. Both parties are mistaken 1. Mistake on a basic assumption upon which the contract was made 2. Must have a material effect a. Would the contract been made had the mistake been known ii. If both conditions are met, then the contract is voidable by the adversely effected party 1. Unless they bear the risk of the mistake a. If contract says he bears the risk b. If buyer is aware that he has limited knowledge with respect to the facts, but treats the knowledge as sufficient i. Conscious ignorance c. The risk is allocated to the buyer by the court s discretion c. Unilateral Mistake i. One party is mistaken 1. Mistake on a basic assumption 2. Mistake has a material effect a. Does party bear the risk i. Agreement ii. Conscious ignorance iii. Court s discretion ii. Is voidable if 1. Unmistaken party had reason to know of the mistake or cause the mistake 2. Unconscionable a. Whether it is a bad deal i. Will look at other parties detrimental reliance