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NOTES

Monday, February 14, 2011 1:51 PM

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Week 4 NOTES
Wednesday, January 19, 2011 7:18 PM

Housekeeping: Offer and acceptance are the only topics covered on the midterm. The midterm will be the first hour of class in week six. Proctors will administer midterms. Practice questions are posted on the twen page, as well as hypos. Week 3- Termination of the power of acceptance: Restatement 50 deals with acceptance- must manifest acceptance based on an objective standard. 1. Communicated 2. Absolute 3. And responsive Offeror is the Master ( Beard v. Krusa, the farmer case, where they offeror turned themselves into the offeree, and made the buyer the offeror) of the offer. Only they can dictate how acceptance must occur. One party however can not change terms after acceptance has occurred. The UCC applies to everyone not just merchants. The common law still applies , the UCC works together with the common, but there are cases when it does trump common law. Offeror can revoke the offer anytime prior to acceptance except in an option contract. (option means someone bought time. ) Offeree must give something of value . Options contract 1. Offeree gives the offeror something of vale 2. when the offeror has dictated that the acceptance through a unilateral contract. Partial performance under the unilateral contract can operate as an option contract. 3. Firm merchant- under 2-205 (talking about later in notes. 2-206 states that the offeree can decide a manner that is reasonable to accept if the offeror does not dictate the specific way of acceptance. A reasonable method can be the same manner the offeror sent the offer or faster. Example: offer sent through mail- acceptance by phone is acceptable. Shipment of goods- promptly shipping them or promising to ship them. Acceptance can be made any 3 different ways 1. Acceptance by performing (unilateral) 2. Acceptance by promise (bilateral) 3. Acceptance by conduct (ex. Pickle company case, they employees performed, so the contract was silent as to how the contract was supposed to occur.) The court will fill in the reasonableness. Reasonableness is what we argue it to be. Practice the art of persuasion, "practice" of law. Everything depends on argument and where the judge and jury stat e of mind is at. Critically reading the facts is of the upmost performance. There is a three-day cooling off period that is limited to the door to door sales. Silence is not acceptance: we do not have to respond. Exceptions 1. Day v. Caton : If you take the benefit of the offered service and you have the opportunity to object and you dont. 2. Course of dealings: Parties prior relationship has created an expectation so it might be reasonable that you would respond. 3. Negative option plan 4. Inconsistent with the offerors ownership 5. Postal reorganization act- Unsolicited/ you didnt pay for it, it is considered a gift. (excluding charity) The offeree must know about the offer, except for rewards. Private the offeree must know about it before they can accept. If it is public then the offeree does not have to know about it for acceptance.
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before they can accept. If it is public then the offeree does not have to know about it for acceptance.
Motive- we do not care why the offeree excepts, it does not matter. However it has to be voluntaryex. Guy offers up info for his mother being murderer under threat of arrest. Not voluntary. Unilateral - Offeror is only looking for the completion of the act as acceptance. That is the key. Could the offeree walk away whenever they want too ? Yes, they can choose when to accept. The offeror cannot stop the offeree from performing once they have started performing because it becomes and options contract. The offeror must give you reasonable time to complete. Restatement 45 Bilateral contract- the offeror asks for a promise, or the facts look that a promise is sufficient. So once the offeree responds with a promise then both parties are bond. If the offer is ambiguous then 1. it will be seen as a bilateral contract, or 2. the offeree will choose. IF the offeror does not dictate and it becomes the offerees choice and the offeree starts partial performance under this situation they cannot walk away.. Restatement 62?? Subcontractors/contractors have different rules (do not worry about it) What if you only start to prepare to perform- Mere prep. Does not count. It can be tricky, be careful. 2-206 only kicks in when the offeror does not specify how the they want the acceptance to occur. Key is the offeror leaves it up to the offeree, and the offeree starts performance, they are acting under a unilateral contract, but in this case because it was the offeree choice the offeree must finish performance. The terminators___ Restatement 36 1. revocation 2. lapse of time 3. rejection or counteroffer 4. Death or incapacity (of either party) 5. Gr. Offeror is free ot revoke an offer at any time before it is accepted. 1. Direct - Manifest intention not to enter into the contract - Does not have to be definite (objective Std) 2. Indirect - Take action inconsistent with an intent to enter into the proposed contract - Information can be obtained from reliable third party Information must be reliable, if the offeree hears something but it is not true than it does not revoke. Option v. Option K Option= Empty promise, simply set the time for offer to lapse, revocable at any time. Option k's = created by the parties O'ee (look at week three notes) Option K's under 45 of restatement If an offer invites acceptance by performance, and not by giving a promise, an option conract is created when the o'ee begins the invited performance. Firm (Merchant) Offer Ucc 2-205 - A firm offer is a type of option K(making the offer irrevocable) 1. Offer to by or sell goods. 2. By a merchant (O'or has to be merchant)
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2. By a merchant (O'or has to be merchant) 3. in a signed writing 4. Which gives assurances (i.e. this offer will remain open for 7 days) 5. Is irrevocable for the time stated, or if no time stated a reasonable time, but in no case beyond 3 months ( Selections for contracts pg. 225, 226, 218, 219) - A reasonable not to exceed three months, Question does the offeree have to give something of value to hold open? No

Problem 21 Under common law this is probably a revoked offer. b. Yes it becomes a firm merchant offer, it is a offer to buy or sell goods, he is a merchant, it is an assigned writing, and it is irrevocable for the time stated. C. He would not be a merchant, in this case and common law would kick into place d. NO because not beyond the three months.. IN NO CASE BEYOND 3 months Test taking purposes- pay very close attention to what problems we go over and the notes that are hit. Must critically read the facts. Does not make something purposely vague.. Some of the mid term questions are departmental questions.
How much information do you have to have that would make you a merchant? - Reasonable knowledge, what the court imputes to make you a merchant. DO NOT CARE IF YOU KNOW THE NUMBERS BUT KNOW THE RULES Problem 22 - They can revoke because there is no writing. Lapse of timeRestatement 41- All offers expire whether time is stated or not (in which case it is a reasonable time) Substantially Equal Publicity Rule Loring V. City of Boston- Boston wanted apprehension and conviction of the persons setting the fire. This is a unilateral contract. Plaintiffs waited 3 yr. and 8 months to apprehend and convict a person who set the fire. The city denies the reward to the plaintiff. The court stopped running the advertisements, and that It was not fresh in the mind of the citizens. Court says it must be a reasonable time. Problem 24 a. Yes, because it is reasonable amount of time. b. Same manner, (substantially equal publicity rule) Must make a reasonable effort to reach the same amount of people, by whatever media is available. c. We do not know based on what is reasonable. d. Hold on to the money, you might have to pay it out.. You have to make some effort to revoke it. Problem 25 The court says unless it is clear at the end of the face to face encounter/ other conversation than the offer is not considered to be on the table. Death: Death of either party terminates an offer/power to accept the offer Death does NOT terminate an existing contract Death does NOT terminate an option contract or (firm merchant offer)

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Rejection: Restatement 38 - O'ee's power of acceptance is terminated by rejection of offer Unless O'or manifested a contrary intention - Manifestation of intent not to accept offer is a rejection UNLESS O'ee manifests intention to take under advisement. Problem 27 No, because he rejected the contract, and only the offeror can revive the offer. With the option, it is reasonable to rely on the rejection but if good/ service is still available then the offeror would have to follow through because the offeree have bought the time. Offeror does not have to give the money back. A counteroffer would also operate as a rejection. 4th- Not a counter offer, because he is still thinking about the original offer. MAILBOX RULE: Morrison V. Thoelke: buyer makes an offer and sends it to the property owner. The property owner receives the offer, signs it and sends it back through the mail. The called attorney to revoke acceptance. The court is trying to decide whether acceptance was effective upon mailing or upon receipt. If acceptance is effective at the point of mailing then the phone call was pointless, because a deal had been set. IF it was upon receipt then the phone call would have been a rejection. The Court says that the acceptance was at the point of dispatch. Once it was dropped in the mailbox assuming it was properly stamped and addressed. Mailbox Rule: 1. Must be properly stamped and addressed, if, so acceptance upon dispatch, if mail appropriate medium of acceptance 2. Does NOT apply to option contracts (or firm merchant offers) 3. Only applies to USPA (Standard Mail) Not UPS, FedEx, etc "A letter sent is a letter received" REJECTION IS AFFECTIVE UPON RECIEPT. HOW TO COUNT DAYS HANDOUT: 1.) Start w/date of receipt UNLESS otherwise specified 2.) Never count day of receipt (use next full 24 hour day) 3.) Weekends are included UNLESS O'or specifies "business days" 4.) Holidays count as days UNLESS otherwise specified. IT ALL DEPENDS ON WHAT IS IN THE LETTER: Read carefully PROBLEM 28 1. This is a contract because there was an acceptance. 2. It depends. 3. Yes there was a contract because an acceptance was sent before she received his revocation. 4. No, because he must reasonably relied on her rejection. 5. There is no contract because the offeror states that he must receive the acceptance, and there was no acceptance. Mirror Image RuleThe acceptance must look exactly like the offer and must not try to change it in any way. If the acceptance tries to add new terms not already implied in the offer, it is not acceptance but is a counteroffer.
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counteroffer. Counteroffer: Is an offer made by original O'ee relating to same subject matter as original offer, but proposes different bargain-acts as a rejection (Restatement 39) O'ees power of acceptance is terminated when rather than accepting, O'ee makes a counteroffer. Livingstone V. Evans -Evans offers to sell property to Livingstone for 1800 on terms. (financing) Evans comes back with counter offer. Since defendants reply manifested a revival of the original offer. Reasonable to believe that the offer was still on the table. If he didnt want to revive offer he could just say no. Offeree could have state still considering. Problem 29: 1. No because terms were added, and not technically accepted. 2. No, because his performance and silence would be deemed to be acceptance 3. No, because it is implied that he would be sober in his offer. A reasonable person would not hire a drunk magician. BATTLE OF THE FORMS 2-207 When to do a 2-207 analysis? 1. Contract for sale of goods (UCC) 2. When return document has new or different term Follow the FLOW CHART - Is there a k created if the form which purports to accept or acknowledge an offer contains additional or different terms? - IF a K is created, what are the terms of that K? - It depends: Does the additional term or different term make the return document a counteroffer or an acceptance? Why doe we have the 2-207? - It is not the assumption of business people that they would enter into agreements not expecting to enter into litigation. - Even though the documents do not mirror each other it does not mean there was not acceptance. Ex. Ford and Firestone case. Harvey Firestone and Ford had been friends from the beginning of their businesses, Fast forward Ford sends out a bid to numerous companies, firestone responds back. Ford requests warranty, firestone does not do warranty- costs them 24million dollars to figure it out. Problem comes when there are conflicting or different terms- and we do not know what was accepted. They operated and acted as if their was a contract in place, which ones govern.. 2-207 is considered a default provision. Only needed is the parties cant agree. (page 104 in case book) IF we do not see this exact statement : "Expressly conditional on assent to" than it is not proviso language for this class. There is no gap filler for quantity.

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WEEK FIVE NOTES


Monday, January 31, 2011 2:02 PM

-Housekeeping Study offer and acceptance for the midterm check out twen for the multiple choice.. And look at the review sheet on the twen.. And do the multiple choice questions. Remember that we are always looking for the best possible answer. BRING PENCIL JUST IN CASE.. SUGGEST TO GO OVER THE NOTES IN DETAIL. Critically reading the fact pattern is important. Pay attention to the scenarios in the cases and problems they are examples of how the rules are used. Could see something similar to those on the midterm or on the final exam. IF WE HAVENT TALKED ABOUT THEM DO NOT FOCUS ON THEM. Review Last week: The Terminators 1. Revocation 2. Lapse of time 3. Rejection or counteroffer 4. Death or incapacity 5. Non-occurrence of condition These are the ways that the offer could be terminated.. Revoked by the offeror, The non-occurrence of a condition will be dealt with more in contracts too. Revocation can come into being in two ways 1. Direct - Manifest intention not to enter into the contract - Does not have to be definite (Objective standard)
2. Indirect

Option v. Option K Option= empty promise, simply set the time for offer to elapse Option K- under section 45 of restatement. FIRM MERCHANT OFFER - Must be the offer to buy and sell goods.. - Goods are tangible moveable objects at the time of the offer. (includes animals) - Must be by a merchant..(generally in the business of doing that thing) - Irrevocable for the time stated or is no time stated a reasonable timer, but in no case beyond 3 months.. - In no event can it be open for longer than 3 months If he wants it open for more then 3 months than there must be something of value given. In GENERAL THE OFFEREE DOES NOT HAVE TO PAY TO KEEP THE OFFER OPEN.. Lapse of time - All offers expire whether time is stated or not, (in which case it is a reasonable time) Substantially Equal publicity Rule: There should be a revocation in a same general manner to reach the same population. Death- of either party terminates an offer/ power to accept the offer. Does not terminate an existing offer Does not kill an option contract.
The offeree does the rejecting Power of acceptance terminated by rejection of offer unless there is some revival. MAIL BOX RULE: applies to acceptance only. 1. must be properly stamped and addressed, if so acceptance unpon dispatch if mail appropriate medium of acceptance. 2. Only applies to USPS (standard mail) 3. Not UPS< FedEx, etc.
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3. Not UPS< FedEx, etc. 4. Does not apply to option contracts (or firm merchant offers)

If offeror says this is not acceptance until I receive it then the mailbox rule does not apply. Counting Days 1. Start with date of receipt unless otherwise specified. 2. Never count day of receipt (use next full 24 hour day) Weekends are included unless O'or specifies business days Etc. ___________________________________________________________________________________ Week 4 - Review MIRROR IMAGE RULE - The acceptance must look exactly like the offer and must not try to change it in any way if the acceptance tries to add new terms not already implied in the offer, it is not acceptance but is a counteroffer. This is common law, because in the ucc it does not necessarily apply. Counter offer (LOOK IN WeeK 4 notes) BATTLE OF THE FORMS 2-207 Does not have to be merchants. The UCC applies to everyone. Unless it is a section that applies only to merchants in the ucc FOCUS ON TWO QUESTIONS 1. is there a contract created when the form that that purports to except does not mirror the offer. 2. If there is acceptance what are the terms of that contract? That is when the question of whether or not there are merchants The first analysis is answering the question of is this an acceptance or not If the answer is no then it becomes a counter offer.. Terms of the contract depends.. If it is counteroffer then it falls under paragraph 3.. You cannot have both.. Either paragraph 2 or paragraph 3.. It is one or the other.. Either or
If it acts as a counter offer then they are not bound unless they act in a way that there is a contract. - IDEA BEHIND 2207 - Because of the amount of business that is completed when there is nothing in writing - Having all the terms worked out is not necessarily the norm you would not think this would be the case. Example: the Ford and Firestone case became battle of the forms out of a custom of doing business at shake of hand. IN many situation this could become a major issue 2207 is a default for the parties if they do not agree. Many companies use boilerplate documents, it because time consuming and negotiation What usually happens is as documents are going back in forth.. By the time the parties conduct comes around there is not a problem. Most of the time a problem does not arise unless there is a major problem. IF YOU ARE GOING TO SEE A QUESTION ABOUT 2207 for exam purposes it will start out with a purchase order --- you do not have to be the seller to be to the offeror Offer- return document comes back with different or additional terms -- does it make it a counter offer or an acceptance. 1. Is there a statement of acceptance-- Paragraph 1 of 2207 a definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon UNLESS acceptance is expressly made condition on assent to the additional or different terms.. Question 2.. Does it change a dickered term? - A dickered term could be anything technically but for our purposes it will only be price and quantity.
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price and quantity. Yes(counter offer) No: then question three Is there proviso Language? Expressly condition on assent too.. ? MUST THOSE WORDS>>> FOR OUR PURPOSES If no then it is acceptance (based on paragraph 1) What about the additional terms? If both merchants there is still a contract, but the additional terms becomes part of the contract, unless the additional terms materially alters the contract For ford v. Firestone would the disclaimer of warranty would alter the contract and cause materially alterred deal.. Would create a surprise or a hardship. IF ford believed they had to warranty their own tires they would Change the price they are willing to pay for the tires 2. Objection within a reasonable time 3. Offer is limited to its terms.. If one of these is satisfied.. They still have a contract but the additional or changed terms will not be part of the contract. Opposite side of handout covers paragraph 3 Conduct can form a contract simply through a contract. Because they operated as if there were a contract. Parties cannot walk away if they act in a way that there is a contract chart answer yes then a contract does exist. 2207 is a process that you go through . Contract terms -those that are agreed upon,, and a provision that the ucc will fill in the missing parts to a certain degree. Place , time payment, warranty or merchant ability(do not need to know for right now) And price.. (2-205) Cannot be both an acceptance and a counter offer you have to pick one or the other IN paragraph two if you are merchants go one way if you are not merchants go the other way.

CASE: Commerce and Industry Ins Co. v. Bayer Corp


- You have a fire that destroys some buildings, and what supposedly fire was ignited by the fabric from the

defendant.
- They always order the fabric from the defendant.. Either they call and then send a p.o. or they send a p.o. - The invoice is sent by Bayer and they says that it is not an expression of acceptance. .. If looking at the

chart.. Did it change price or quantity? No


- Did it include proviso language? Yes it did .. - Was there an agreement to that proviso language? NO - You go to paragraph 3 -- but they behaved as if there were a contract..

They are arguing about the arbitration clause.. They didnt agree to the proviso language Conduct created the specific contract.. Now what happens.. Terms by which the parties form the contract.. And there is a gap filler but not for arbitration Court agreed that the arbitration was not part of the contract .. Courts do not have to enforce because they did not agree but because this is the bayer corp.. Making it so arbitration was not part of the contract. They had the last word. The court does a good job of how to walk through 2-207. PAGE 112: - The note is important.. REFERR TO THIS AND COMPARE TO FLOW CHART. PROBLEM 31: -The two parties completely negotiated the terms of the contract ending with an agreement that they had reached a deal. ACKNOWLEDEGMENT: that added a disclaimer of warranty DO either party have a contract prior to a shipment of the boat? they have a contract because they had completely negotiated After the Fact can you change terms.. NO GOES BACK TO ONCE ACCEPTANCE OCCURS IT IS FINAL THIS IS NOT A 2-207 problem. LOOK AT THE DIFFERENCE IN WHAT IS MISSING IN PARAGRAPH TWO IN PROBLEM 32: -The last problem raises the issue of how 2-207 resolves an exchange of forms containing different terms
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-The last problem raises the issue of how 2-207 resolves an exchange of forms containing different terms Are we treating them the same or not.. There are two schools of thought to this.. Majority: Different terms get knocked out (additional is the same plus more, different is conflicting terms) - In paragraph 1 they do not care but in paragraph 2 it just says additional terms when are not dealing with merchants.. The different terms get knocked out in paragraph 2.. Knock out rule.. (MAJORITY) MINORITY- treat additional and different terms the same (WE USE THIS RULE)

Klocek v. Gateway Inc.


Plaintiff brought an individual and class action against gateway Breach of contract and a breach of warranty.. Gateway is the offeree..(the seller) Klocek is the offeror.. The offeree has the arbitration language is found in the box with the computer.. It says he only has five days to decide whether he wants to keep the computer there is an arbitration clause. HOW DID WE GET INTO THE 2-207 ? Why? This is because it is a sale of a good. ( the computer) Walk through the flow chart. 1. Is the arbitration language a dickered term? No 2. Does it have proviso language? No Sends us over to acceptance? 3. Is this between merchants.. One is a merchant but not the plaintiff. Contract exists.. But additional or changed term is merely a proposal for addition to the contract, not a part of the contract unless offeror expressly agrees. HE DID NOT EXPRESSLY AGREE TO IT. SILENCE IS NOT EXCEPTANCE HOLDING: It is not! This case follows the flow chart. ( This case is almost the opposite of PROCD in PROCD THEY SWITCHED WHO THE OFFEROR AND OFFEREE were ) -- Shrink wrap license.. This case rejects this idea of the shrink wrap license. Also computer is a good.. Not a problem. Software was the question in the Pro Cd. Why do we care about arbitration: 1. You would not necessarily hear about possibly 2. Saves time and money..(usually less formal) 3. Usually the process is much faster.. 4. You do not have the judge or jury 5. Usually it is binding and appealable. (must say that in the arbitration ) 2-207 is not necessary is difficult as people think. Look at it as a triangle With paragraph 2 or paragraph 3 INDEFINITENESS General Rule: no mutual assent exists (and thus no K) unless the agreement of the parties is sufficiently certain.. TWO MOST IMPORTANT TERMS>> PRICE AND QAUNTITY (pg. 123) People do business in a informal method.. A transaction is complete when the parties mean for it to be complete.

CASE WALKER V. KEITH


- Leased property .. Cannot figure out what they should do about the price. - Was the court willing to actually set it..? - the lower court found for a 125 dollars, this court is questioning if the parties can absolutely not agree. The higher court is not going to get into the business of setting it the ucc does not apply in this situation because it is not a good. Rent is not a good the ucc gap fillers do not fit.. This case is the classic indefiniteness.. How can you agree if you do not know what the price is. Courts can argue by analogy but this court decided not to do so. PAGE 130: SUI JURIS- OF A FULL AGE OR CAPACITY.
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SUI JURIS- OF A FULL AGE OR CAPACITY. _____________________________________________________________________________________ We care about who originally sued who.. The only reason the names will flip is if the defendant is the appealer then they become the appellee.. The court can then put their name first that does not mean they not become the plaintiff. That just means they are the appellant it is all about who the moving party is. Some UCC Provisions to cure INDEFINITENESS 2-204 Formation in General K will not fail for indefiniteness if 1) parties intended to make a K, and 2) there is a reasonably certain basis for giving an appropriate remedy. 2-305 Open Price Term - reasonable price 2-308 Place of Delivery - Sellers place of business 2-309 Time of Delivery - reasonable time REGO V. DECKER - Rego and wife lease a 3 bay station to the Decker with terms found in brief. - Rego's agreed to pave the grounds with asphalt before july 31st of that year - Decker could renew with the same terms but the rent would increase - Decker was also given the option to purchase with a 30 day written notice by certified mail - Purchase price was 81000 dollars, if the lessee exercised the option he would get 75 percent of the rent deducted from the purchase price - They were very specific . He would be furnished with a warranty deed and title insurance. - Decker first exercises his option to renew and also exercises his purchase option. - The problem is that rego was supposed to pave the lot but he never does - They are fighting over the terms that they do not believe are definite he is looking for a remedy sought in equity.. - WHAT TERM IS NOT DEFINITE IN THIS AGREEMENT? . Plaintiff is arguing over the diesel fuel, because the price was missing out of the situation and it was a product he had never sold. The court has to decide whether they can fill in the gap..? TURNS OUT FUNDAMENTALLY DIFFERENT FROM WALKER V. KEITH - they are going to attempt to fill in the gaps. THE COURTS ARE SPLIT ONTO WHEN GAPS WILL BE FILLED IN. We are not dealing with a good we are dealing with the sale of property.
PROBLEM 34 on pg. 135 Yes it is a contract. TWO SECONDS: THE SLIDE FOR TWEN FOR MIDTERM REVIEW Introduction to contract Informal v. formal Inplied in fact OFFER Factors to consider for an offer Definitie in its terms indefinite Objective manifestations Special offer situations 1. professional statements Solicitations and Ads Written Contract to follow Rewards ACCEPTANCE TERMINATION OF THE POWER OF ACCEPTANCE revocation
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revocation lapse of time Death Rejection INDEFINITNESS>>> LOOK AT TWEN>>> IT WILL BE POSTED> ____________________________________________________________________________________________

CONSIDERATION (NOT ON MIDTERM)


Consideration is a form of quid pro quo- stands for this for that.. A bargain for exchange. 1. True consideration 2. Promissory Estoppel 3. Contracts require the following to be enforceable Offer = acceptance = consideration = K (or a consideration substitute) Explicitly bargained for benefit to the promisor or Explicitly bargained for detriment to the promisee Bargained for exchange of something which in eyes of the law has legal value.. CONSIDERATION ANALYSIS 1. What is the promise to be enforced 2. What is the act or promise sought in return? 3. Was the act or promise bargained for? 4. Does the act or promise have value? VALUE is not the same is legal value they could be very different.. The courts are not always willing enforce all promises even if someone makes a promise if it does not have consideration it is not going to be enforced. A GIFT: No definite and not a bargained for exchange both sides are not being benefited.. There is no exchange. IF IT LOOKS LIKE A GIFT THE COURTS WILL PROBABLY NOT ENFORCE IT. PROBLEM 36: 1. No, there is no return.. It looks like a gift.. Not enforceable 2. YES, there is an act or promise to go to chicago.. 3. Yes, because forbearance can be considered consideration. CORBIN HAS GOOD LANGAUGE>>> Restatement 71 pg. 138 the promise can be given to some other person and it may be given by the promisee to some other person. HAMER V. Sidway - Uncle promised to give 5000 dollars to nephew is he refrained from tobacco, gambling etc. - The court says there is a detriment on the nephews part because he gave up the legal right to do something. Bargained for? Yes uncle would not have paid otherwise Legal Value? Yes, gave up legal right to these. Giving up something that you have a legal right to do .. Uncle has the same name as the nephew so his name was saved.. (reflect poorly on his uncles reputation) In 1891 that may have been a big deal to the uncle REFRAINING FROM SMOKING AND DRINKING CAN CONSTITUTE CONSIDERATION
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REFRAINING FROM SMOKING AND DRINKING CAN CONSTITUTE CONSIDERATION PROBLEM 37 -surety must pay.. Bargained for.. They wouldn't have given the money to Lewis w/o Clark. The money has value because it went to the third party. THEY NEVER WIN. Adequacy v. Sufficiency: The courts will generally will look into the sufficiency. (apple for apple) -Adequate consideration: refers to the quantity of the amounts exchanged. -Sufficient consideration: it must be something that has value in the eyes of the law. General Rule: Courts do not inquire into the adequacy of consideration(adequacy alone will not void a contract) Two exceptions1. Fungible for like fungible (capable of interchange) (Us money for us money, brick for brick) 2. Before decreeing specific performance. (remedy in equity) Problem 38.
a. Bargained for but does it have legal value in the eyes of the law? Why would court say there is no legal value: it is subjective and has to much value to be bartered. B. Magic or conjuring spirits have value in the eyes of the law? It does not in most jurisdictions.. Unless used for entertainment. Consideration then would be the entertainment

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Week Six Notes


Monday, February 07, 2011 3:09 PM

CONsideration Analysis, What is the promise to be enforced What is the act or promise sought in return Was the act or promise bargained for Does the act or promise have value-

Week 6 N...

Audio recording started: 3:15 PM Monday, February 07, 2011

Problem 38 C promises to pay H 5000 H to like c Bargained for Yes Legal Value- No, love and affection are not recognized .. Under the law as having sufficient value.
Problem 38 b.(WHERE WE LEFT OFF) Can someone conjure up spirits? What about god? It doesnt matter generally but - She could argue that he sought her out and thus he must have a belief (subjective) . Courts usually stay away from questions that are hard to answer in that way. Be very specific in the questions.. Most jurisdictions will fall into this rule.. This does not seem to be an objective test the stander is does it have value in the eyes of the law. There are several arguments that could be made MAKE SURE TO SPECIFY THE FACTS> be very fact specific when questions are asked. Problem 38 C The court said that there was no value in doing the obvious Problem 38 D -- questionable whether it was bargained for And does it have legal value? The course did find for the cigarette case but it was a stretch another court may disagree. Problem 38 EBargained for exchange of education.. Yes, teaching has value in the eyes of the law. Batsakis V. Demotsis - 500,000 Drachmae for 2,000 US dollars
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- 500,000 Drachmae for 2,000 US dollars - Promise to pay Us 2000 - In return for 500,000 Drachmae (worth $25 US) 1. 2.

Bargained for ? Yes Legal Value? Yes Not the same currency Not Fungible - therefore consideration

Demotsis agreed to give 2000 dollars of U.s. Dollars for return of 500,000 drachmas (worth 25 dollars. She was desperate and she needed the money to go back to the united states. Her want and desire to go back to the United States does that have value. What did the courts say? Why is the court not looking at the money value? For the underlying reasoning They specifically talk about the difference of currency. If this was American for American then it would have a very different effect. A person can put any value they wish when trading currency.. The court would look at adequacy if it was in the same currency.. It would sound more like a gift in this court. THE WANT AND FAILURE OF CONSIDERATION: Schnell V. Nell Wife dies leaving a bequestis to people Wife has no money in her estate Husband feels bad so he promises to pay out his own pocket. apparently Husband changes mind, doesn't want to pay the 600 after all Husband claims there was no consideration. Why was he agreeing to pay1. For wifes love and affection (honor) 2. One cent paid by the plaintiffs 3. Her past domestic industry (she helped him in her duty in helping him accumulating his assets. What does the court say - Bargained for ? No you cannot bargain for love and affection.. Shouldnt be bartered because it is priceless. - Past services? Bargained for no, she had already provided them and it bargained for would be at the time the agreement was made. - One cent is not adequacy.. It looks like a gift. .. One cent for 600 dollars is grossly inadequate.. - The court walked through seen no consideration Nominal consideration - it is usually fiction.. It is in name only. IT must be bargained for. Genearlly nominal consideration is inadequate consideration because it is not truly bargained for. Exception problem 39 b. and option contracts. Option contracts, if nominal consideration is recited in writing even if not actually paid , courts will consider it to be adequate for consideration. Problem 39. A. No Fungible for fungible (if they are exactly the same wheat) Capable for interchange) B. Yes. Historical value of the coin takes it out of the context of money for like money.. C. Yes the dollar bill is not fungible with the quarters because the dollar bill will not
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C. Yes the dollar bill is not fungible with the quarters because the dollar bill will not

work in the machines. 4 quarters for 2 quarters would be fungible for like fungible. D. No Probably nominal- grossly inadequate so courts will look at adequacy- probably a gifte. No- Still falls within the exception, probably nominal and a gift. f. Yes- Here , the nominal consideration has value because it is for an OPTION K, not for the actual sale of the land. Normally when you see a one dollar it is just to say there is consideration.. It will mostly be seen as grossly inadequate.

Fiege V. Boehm Promice: Feiges's promise to pay money to Bohem Return: Bohem's promise to forbear Not to sue
Bargained: Yes Value: Yes. At the time of the agreement, was there an honest and reasonable belief in the possible validity of the claim. Honest Belief" Subjective Standard (good Faith) Did the mother believe she had a possible legal Claim against the father Reasonable Belief : Objective Standard (reasonable Person_ would a reasonable person have believed she had a possible claim? IF you refrain from suing on an invalid claim is that forbearance?? No if you do not have a valid claim it is not valid. The court did allow her to sue him and enforced the agreement. Courts will presume good faith The parties has a differing version of the relationship.. But why would he pay if he didnt believe that this was a valid claim. PAGE 156 THE restatement of contracts.. MUST BE AT THE TIME OF THE AGREEMENT but the court agrees This is still the standard in todays law.. But the court can go either way The law is developed to meet the needs of society.. Problem 40: - There was no promise.. He could have sued at any time.. She did not know that he would or would not.. He never promised to do anything. Technically there was not even a return promise. This is an example of failure of consideration. Problem 41 - Promise- V's promise to pay money to J Return promise- J forbears on right to talk to R about insurance policy Bargained for? Yes. Value? Yes Enforceable because she agreed to forbear on something she had a legal right to do. Problem 42Promise- P's promise to pay 1000 to tribe Return Promise- . Forbearance on invalid claim (statute of limitations ran) 2. Sign quit claim deed Bargained for : Yes Value 1. No no honest and reasonable belief in the validity of the calim 2 Yes, they were not obligated to sign the quit claim deed.
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2 Yes, they were not obligated to sign the quit claim deed. promise enforceable because of the quit claim deed. ILLUSIONARY PROMISES: Nothing is actually promised, P'or has no obligation under the contract - A promise whos fulfillment is optional or entirely discretionary on the part of the P'or Courts will imply certain promises How to handle mulitple/ alternate promises or acts: If separated by Or both must have value IF separated by and only one must have value. Now most courts will imply some values and will find ways to bind it. Most courts assume at the time of the contract that there was good faith. (skipped to page 170 remember to look at corbins basic test. Always look and see if the party is bound to do something or did they structure it with an easy way to get out of it. Problem 43: her langauge makes it so she can change her mind and not be bound to do anything. Wood V. Lucy, Lady Duff Gorden (survivor of the titanic disaster) Promise: Let W have exclusive dealing contract Return promise? What, exactly is W's promise? Was the promise explicit?

Is the exchange illusory? Cardozo IMPLIES a promise to use best efforts to market her line
Exclusive dealing (2-306) He was going ot market and sell her name and her designs.. And in return half the profits Could she have sued him if he did not do this could she sue him if he didn't do this (PAY ATTENTION TO CARDOZO OPINIONS) IMPLY GOOD FAITH UCC 2-306 pg. 240 Supplement ___________________________________________________ Sylvan Crest Sand V. Us Promise: us Promises to buy all rock as required but may cancel at any time Return promise : sell all rock required Bargained for : Yes Value:?? Court says 1. Us will either order w/in reasonable time or will give reasonable notice of cancellation Do 1. and 2 have value? 1. Yes not required to order anything? 2. Yes it's not an unfettered right of cancellation; rather us must give reason notice which is a bit of a restriction.. 3. Court finds the promise is not illusory.. (Valid CONTRACT) 4. Think of whether the party has valued in some way or is it completely discretionary..
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discretionary..

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WEEK 7 Notes
Monday, February 14, 2011 1:50 PM

Week Seven Notes

Audio recording started: 2:00 PM Monday, February 14, 2011 Handout UCC 3-311, and make sure to sign both the seating chart and the sign in seat. Mid term grades came out average score was 13.. Do not be concerned or alarmed the mid-term is only 10 percent of your grade. (do not be concerned if you got more than half wrong.) (start practice essay around week 8, TA REVIEW STARTS AT 5pm. IF YOU KNOW THE MATERIAL YOU SHOULD BE ABLE TO TAKE ANY OF THE OLD CONTRACTS EXAMS!! WE WILL TALK ABOUT THE FINAL EXAM>> COMPREHENSIVE REVIEW IS WEEK 14.. ____________________________________________________________________________________ ___ CONSIDERATION -Subject that people struggle the most with is consideration and remedies.. With all rules there are 101 exceptions that go with them many of problems and cases are exceptions to the general rule. Consideration is a bargained for exchange.. (pg. 138) of text book. A performance / or return promise must be bargained for. If there is no consideration it looks like a gift gift promises are not enforceable. There had to be legal value- not necessarily monetary.. . - Love and affection does not have legal value (to valuable it should not be bargained) - Conjuring spirits. Our job as a lower is to argue the rules and why it should or should not be followed. - Today we are going to talk about past consideration.. Things that have already happened in the past. - Nominal consideration is not consideration..- it looks like a sham the farmer case. - Forbearance consideration- giving up something you have a legal right to do. Most common one is giving up the right to a law suit. (Boehm) (honest and reasonable belief at the time the claim is made) - Hamer V. Sydway. Adequacy v. Sufficiency: is it sufficient or does it measure up. The court will not usually look at the adequacy of the situation unless it is fungible goods.. Money for moneyOr when it is grossly disproportionate.. ILLUSIARY PROMISES - Nothing is actually promised, p'or has no obligation under the contract. A promise whose fulfillment is optional or entirely discretionary on the part of the P'or - Courts will imply certain promises - How to handle multiple/ alternative promises or acts: - If separated by "Or' both must have value - If separated by "and' only one must have value. Courts are getting away from recognizing illusiary promises, because they go back to the intent of parties at the time of the contract. They must look at did the parties intend to be bound. The court does not like illusory promises.. They look for ways to hold the contract together. They will imply promises. LADY LUCY DUFF GORDEN Promise0 let W have exclusive dealing contract Return Promise? What exactly is W's promise? Was the promise explicit? Is the exchange illusory? Cardozo IMPLIES a promise to use best efforts to market her line.

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She went ahead and made her own and did not share the profits.. The court disagreed with her because the court implied the promise that W made. Sylvan Crest Sand V. US - Promise : US promises to buy all rock as required but may cancel at any time. - Return Promise: Sell all rock required - Bargained for: Yes - Value: ?? - Mutuality of obligation Implied PROMISIE 1. US will either order within reasonable time or 2. US will give reasonable notice of cancellation DO 1 and 2 have value? 1. Yes not required to order anything. 2. Yes. IT's not an unfettered right of cancellation: rather US must give reasonable notice (which is a bit of a restriction_ Courts finds the promise is not illusory. PROBLEM 44 She is not restricted in anyway.. Corbin test is the future is restricted then it is not illusory. McMichael V. Price Promise: S promises to sell/ furnish al the sand buyer can use Return Promise: B agrees to buy all the sand that it can use Illusory? No b. doesn't have to buy any but if it does, B must buy from S. Issue in the case is he is claiming illusory promise.. If we do not know how much that is he cannot be restricted to do anything? IT TALKS ABOUT REQUIRMENTS IN SEVERAL SECTIONS: REQUIREMENTS AND OUTPUT K"S vs. Continuing Offers Agreeing to purchase all that you require ? Or agreeing to purchase all that you produce? The court says that these are valid. Requirement K: a contract for "all the product you need Output K : A contract for all the product we produce" Must have good faith and words of obligation Look for words of obligation: require, need, use, produce) I offer to buy from you all the widgets I need during 2011. There is K upon acceptance. These k's are enforceable and are not illusory. Continuing offer IF you don't have words of obligation and you instead have ambiguous words, it is a continuing offer Look for ambiguous words: want, wish, might want, might require, desire) I offer to buy from you all the widgets I want during 2011" No K unless shipment and acceptance of the shipment. Revocable at any time Each individual acceptance creates an individual contract. WENT OVER HANDOUT. MAKE SURE YOU LOOK FOR WORDS OF OBLIGATION It cannot be discretionary. ___ Even you do not know how much you need or require the court will typically hold it. If both terms if and need are together the court will typically find it ambiguous. IF words of obligation then they are not contracts.. It becomes a continuing offer. In a consumer world can you return goods? Possibly because they do not want to get into a lawsuit over something that is law value FOCUS ON THE DIFFERENCE BETWEEN THE ONGOING ON CONTRACT V. THE MINI INDIVIDUAL CONTRACTS.
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CONTRACTS. PROBLEM 2-306. Output, Requirements and Exclusive Dealings. (1) A term which measures the quantity by the output of the seller or the requirements 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. Pasted from <http://www.law.cornell.edu/ucc/2/2-306.html> PROBLEM 45 - Output contract B. Requirement contract C. Continuing Offer: Corbin on contracts- Restates what we are basically saying. Problem 46 - Yes he is obligated if he purchases the boat.
B. Gifts are not enforceable .. So no. THERE ARE VERY STRONG ARGUMENTS How is it handled if there is multiple or alternative promises? ALTERNATE PROMISES: a. If the two choices are connected to the word "Or" each choice must have value I'll pay you 5oo if you 1. wash my car or 2. Paint my car =k Ill pay you 500 if you 1. love me or 2. paint my house= no k

B. IF the two choices are separate by the word And only one or the other choice has to have value. Ill pay you 500 if you 1. wash my care and paint my house Ill pay you 500 if you 1. love me and paint my house = k Ill pay you 500 if you 1. love me and 2. conjure spirits for me does not equal contract. PAST CONSIDERATION Hayes v. Plantation Steel Co. (look at brief) WE have an offer and an acceptance.. (there is no consideration) The problem with consideration is we must have a bargained for exchange. What was exchanged for the bargain for exchange.. He retired on his own so it cannot be considered a bargain for exchange because it did not affect his decision to leave. Promise: Company to pay pension to Hayes Return Promise: 1. 25 Years service 2. Hayes agrees to retire 3. Hayes works an additional week. Bargained for 1. No 2. No, he laready announced he was retiring before promise.
General Rule is past consideration is not consideration -- an act or promise already made/performed cannot be consideration -- There is nothing being bargained for, as required by out definition of consideration because it is already done or promised Before the negotiations began. Where are we? O+A+C=K C= 1. consideration(bargained for exchange) 2. Promissory Estoppel (forceable reliance) 3. Moral Obligation (can be consideration in certain circumstance)
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3. Moral Obligation (can be consideration in certain circumstance) MILLS V. Wyman P: Dad will pay money A/P: Take care of Son Bargained for: No (already occurred by time dad promised) Value: Yes Court may feel he should pay based moral obligation.. But legally it could not be held that he is obligated.. The question even if you have moral obligation.. Does that mean you have a legal obligation. The court separates the two they are going to say away from this basis as much as possible. However even though the general rule does not equate a legal obligation the court does highlight four exceptions for that general rule: 1.Debts barred by the statute of limitations, 2. Debts incurred by infants 3. Debts incurred in bankruptcy 4. Express promises (material benefit) Is enforceable without consideration because of a moral obligation. STATUTE OF LIMITATIONS - The debt is barred.. If someone trys to bring it after the statute has run. If after the statute has run you come back and promise to pay.. It becomes consideration and can be held. If you make a contract when you are a child below the age of majority.. The contract is voidable because you are not of the age of majority once you hit the age of 18 and you say ill pay then it becomes enforceable. The court will hold you to a moral obligation - If you file bankruptcy and our debts are thrown out if you make a promise it becomes a moral obligation. Debt collectors have special rules. (do not blend in rules that you may know specifically this is common law principles) Problem 47 a. Not required to pay, because the statute of limitations have ran. He is no longer obligated. b. WE do not need consideration.. The court views giving up the bad feeling because he didn't pay. c. What does he owe? The 1000 because he is only obligated by the new promise. He might be able to claim that he did not have knowledge of the statue. It can be enforceable in some courts and not in others. Courts will uphold good faith.. D. Acknowledged the debt becomes the original amount. Because the indebtedness becomes enforceable again when the voluntary acknowledgement . ____________________________________________________________________________ IF you promise to only pay a certain amount that is all that is owed.. If you are silent and transfer money than that revives the original contract. DO not bleed over accord and satisfaction. WEBB V. Mcgowin Consideration? P'estoppel? Moral Obligation? 1. Statute of Limitations 2. Infancy 3. Bankruptcy 4. Material Benefit Received. Mcgowin promises to pay Webb for the rest of the life, after Webb saves his life. Where is the consideration? The court recognized the obligation: basically McGowin received a material benefit, it is sufficient because it spared his life and it was received under circumstances that created the benefit.. In this case WEBB was not required to stop the block, and did so without prior promise. This is a rare situation and the rule will only use it in an emergency situations. PAGE 184-185 Note 3. and Note 4.

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Basically- the courts presume that the promisor would have requested the services rendered. Would you want to have your life saved or would you want the block to hit you. VERY RARE Difference between this and the Mills Case is that IN the Mills case he reputiated the promise and that there was a material benefit.
Problem 49: NO, because kindness cannot be considered consideration.. Also it sounds like past consideration. There was also a social relationship. SeVERAL PROBLEMS.

RESTATEMENT 86 Reiterating a promise received PRE-Existing Duty Rule - There is no consideration if you are only promise to do something you are already obligated to do. - The law will not allow extortion or holdouts. (can vary on the court)
YOU CANNOT CONTRACT TO DO SOMETHING YOU ARE ALREADY OBLIGATION TO DO. - Harris V. Watson- Shiphands out to see the ship is in parrol and the master promises extra money. The master after they get home refuses to pay. The court states that they had already implied a promise.. And that the promise was not valid.

Stilk V. Myrick - Two deck mates leave the ship - The captain promised to split the wages among the original crew. - They court refuses stating no consideration. Because The crew members were already bound to the original contract, and they had a duty to complete the work. If the crew members had died they would have dome the work any way. First case discusses public policy and the second case talks about the failure of consideration.

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Week 8
Monday, February 21, 2011 1:47 PM

HOUSEKEEPING: - Finish up consideration.. No handouts today..

Last week Review - Past consideration.. Is past consideration sufficient consideration.. NO its not generally way? It has not been bargained for. IT did not induce the promises on either side.. Even if it has value.. The problem is it happened in the past. - Illusory promise.. It is not an actual promise. It binds you to nothing. ON closer review you are not bound to do anything at all. The courts will imply certain promises to bind certain agreements together.. They look at the premise behind and assume good faith on the parties. - Requirement and Output contracts.. The courts will find that those situations do not fall into the illusory promise. To have the contract valid there needs to be words of obligation. Good faith. The courts will interpret good faith to come to a determination of what each party is responsible for. - Words like want, might, desire etc do not show obligation.. IF you do not have the words of obligation you will have a continuing offer. Where each individual obligation will be seen as a contract within itself. The UCC TALKS about that. - Alternative or Multiple promises.. The connecting words .. If you have an or both promises have to have value.. If they are connected by the word and only one has to have value. - Moral Obligation.. Started talking about certain situations where a court may find that a moral obligation can be consideration. Just because you can be morally obligated it may not be a legal obligation. Generally a moral obligation does not rise .. But there are some circumstances. - Mills V. Wyman- there was a moral obligation but not a legal obligation. - What are the exceptions? 1. Statute of Limitations, 2. Infancy, 3. Bankruptcy and 4. Material Benefit - Is enforceable w/o consideration because of a moral obligation. - GETTING RID OF THE GUILT/ BAD Feeling is sufficient consideration. - What are the limits of that the problem about the shipwrecked man and the statute of limitations. 1. No obligation 2. Yes because he is giving up that bad feeling .. 3. Written promise to pay but only the 1000 the courts will only enforce the new promise. 4. Nothing in return no verbal but a check for 100 dollars you can be responsible for the whole amount of money. Simply silently acknowledging debt is not enough to limit it. Infancy will generally mean below the age of 18 but check the various jurisdiction to verify.. If you enter into a contract when you are an infant can that be enforced? No generally.. But if you make a subsequent promise to pay one you reach the age of majority you are responsible to pay.
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majority you are responsible to pay. Material BENEFIT ( RARE ) Web V. Mcgowin case the pine block.. He is crippled for life and the boss makes a promise and it seems like past consideration.. Because there was no bargained for exchange. The courts say in order to be a material benefit. .. Typically the emergency situation. Could you see a situation where a doctor renders medical services.. And you promise to pay him because you are thankful that he did that.. Probably responsible for the situation if it was energy.. It could be reasonable to assume. Something that is unique and rare the courts dislike it. There are some courts that will not enforce this.. Because it is a presumption.. That the service would have been requested. It can be a dangerous assumption to make. The courts are shaky on this standpoint.. _______________________________________________________________________ ___________________ WEEK 8 NOTES - WEEK SEVEN MATERIAL CONTINUED Preexisting duty rule - There is no consideration if you only promise to do something you are already obligated to do. - The law will not allow extortion or holdouts. - TALKED ABOUT THE SHIT CASES> the court says in both cased that in both cases the crew is not entitled to extra because they already had a duty to do all they could reasonably do to get the ship back to port. Basically you take on the idea that additional work may be required in situations that are forcible.. You are already required to do.

Liingenfelder v. Wainwright Brewery Co.


Pre-existing Duty Rule Facts: The Pl is the executor of the estate of Jungenfeld, who was an architect. While employed by D brewery to design new buildings for the D, he noticed a competitor was erecting one of the new buildings. Jungenfeld also owned a refrigeration company. He threatened to quit unless defendant agreed to pay a percentage, 5%, of the refrigeration plants cost. Upon completion Jungenfeld demanded payment and df refused to pay anything more than the original contract price.

Issue(s): Whether Jungenfeld and Wainwright entered into a new contract with additional consideration to perform the original plus a commission?
Procedure: Trial court found for the df. Circuit Ct determined recovery of $3449.75 to the pl, Referee recommended reversal to that extent, S. Ct. reversed C. Ct.

Courts Holding: No Law or Rule(s): A promise to pay a man for doing that which he is already under contract to do is without consideration. A change, or modification to an original contract, upon new or different considerations is binding. Court Rationale: When a party merely does what he has already obligated himself to do, he cannot demand an additional compensation therefor, and although by taking
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do, he cannot demand an additional compensation therefor, and although by taking advantage of the necessitates of his adversary he obtains a promise for more, the law will regard it as nudum pactum and will not lend its process to aid in the wrong.

Plaintiffs Argument: (respondents) When Jungenfeld declined to go further the df had the right to sue for damages, and did not but agreed to compensate in exchange for continuation. Defendants Argument: Under the new promise the defendant received the same service under the original contract, and the pl extorted the promise of 5%.
NUDUM PACTUM- NAKED PROMISE .. There was no bargained for exchange in the promise to pay him more. The brewery was not getting anything more there was not consideration. The claim on the actual payment was based on the facts that he would complete what he was already obligated to do. If he had agreed to do something not in the original contract then it may have been seen as a new contract. -- SIDE NOTE BOTTOM OF PAGE 189 a Michigan case is listed with the Justice Cooley. THE FOUNDING NAME PICKED BY THE FOUNDER OF COOLEY LAW SCHOOL> KNOWN FOR INSIGHT AND ELEQOUANCE OF HIS WRITING

PROBLEM 51. Not required because as a police officer has a pre existing duty because of his job to find the criminal. He was not on duty at he time what was the problem.. How did he have a pre-existing duty .. -policy problems.. If police officers would not do his job properly if he knew a financial gain would happen. There should not be an extra driving force.
Problem 52. Be careful what can be assumed.. The important wording is the Lets agree to forget the old contract. Problem 53 Writing in the UCC 2-209 section 1. that there needs to be good faith. IF we look at Restatement 89 - There were unforeseen circumstances and the court should enforce the promise.

Problem 54 (better example of 2-209) No, because there was a lack of good faith. They did not give any explanation and it appears that they were just attempting to extort more money. What can the US army do? 1-207 they need write under protest. IF the US Army pays under protest they could go back and sue to get the extra money back . Even though the UCC 2-209 says that you do not have to have consideration to modify the contract.. There still must be good faith.
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faith. (HIGHLIGHT SUBSECTION PARAGRAPH 2-207) The under protest theory we will see how that can play out in an accord and satisfaction theory.

PROBLEM 55 The contracts were separate. The company that made the boat had different consideration. Could the same performance be legitimate consideration for two contracts? Yes it can.. They had different interests and there was different bargained for exchange and he did not have a duty to win .. There was not pre-existing duty.
How do get around the PED 1. Rescind the old K and enter into a new K (in the same document if possible (in the same document if possible-specifically release parties from old obligation 2. Restructure or rewrite the K, and promise something new old: 20,000 for 3 years New: 60,000 for 5 years *you've added something new on both sides) Modification of contracts can be done but only if there is new consideration.

ACCORD AND SATISFACTION


Accord is an agreement whereby one party agrees to give and the other party agrees to accept in satisfaction of a claim something other than what is owed. Satisfaction: is the carrying out of the accord. YOU MUST START WITH A GOOD FAITH (BONA FIDE) DISPUTE.

IF you own a certain amount of money and you have a good faith that you only owe 300 dollars. Instead of suing you agree ot settle for 400 dollars that is good enough as long as there is good faith. IF someone breaches this agreement.. Say the debtor does not pay the accord than they can be sued for the entire amount of the original debt. The agreement must be satisfied.
Problem 56 - Technically this is a new agreement. Where is his consideration? Her reason was that she did not have enough funds it was already past due.. There was nothing new or different be very creative in collect he has the right to go after her because it was already past due.. If she would have said that she would pay earlier than when it was due there would be some consideration. She did not give anything in return for him agreeing to pay less. - (in toms situation.. Even if the offer is sent from the credit card company.. They could change their price) Problem 57 - If you have no duty to play a disputed debt until there is a legal resolution. In problem 56 it was non disputed.. Pay on a non disputed debt is just a payment.. Not consideration for the entire debt. - Payment on a disputed debt. If both parties agree it will discharge the original debt. - She truly believed.. Satifys good faith - b.. Because someone was rude does not equate to a disputed debt. Just because someone was rude to here that is not a good faith excuse that something was owed. Problem 58 She is giving up the right to file bankruptcy.. So this is accord and satisfaction.
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- She is giving up the right to file bankruptcy.. So this is accord and satisfaction. DISPUTED DEBT No duty to pay on disputed debt until legal resolution -payment on a non-disputed debt is payment on account (it does NOT discharge the original debt because of the preexisting duty rule) - Payment on a disputed debt will discharge the original debt because there is no duty to pay the disputed debt until legally resolved.

CLARK V. ELZA Pre-existing Duty Rule Facts: Pl Elza and his wife were injured in an automobile accident alleged to have resulted from the negligence of dfs Clark and Woodward. The parties verbally agreed upon $9500; the judge was notified of the settlement and the case was removed from the calendar. Df forwarded a release and order of satisfaction to pl atty and later sent a settlement draft. These papers were returned unexecuted with a refutation of the settlement as being no longer adequate. Df found the injuries were more extensive than previously known. Legal Issue(s): Whether the verbal settlement agreement functioned as an executory accord or a substitute contract? Courts Holding: Executory accord. Procedure: Trial ct refused to enforce a settlement agreement. Df appealed to Ct. of Special Appeals, dismissed as premature. Df petitioned Ct . of App for certiorari, granted. Reversed special ct. w/ instructions to reverse circuit ct. and remand for further proceedings. Law or Rule(s): An executory accord is an agreement for the future discharge of a preexisting claim for performance, and does not discharge the underlying claim until it is performed. Court Rationale: An executory accord is an agreement for future discharge of an existing claim by a substituted performance. It is presumed that the parties each intended to surrender their old rights and liabilities only upon performance of the new agreement. We agree with the trial court that this is an executory accord and not a substitute contract. This is supported by a release, that was to be executed upon performance of the settlement D will not perform, the P has no right to enforce the underlying cause of action. The Ps right to pursue the original cause of action is held in abeyance. If the D breaches or repudiated the settlement the original action may go forward. As such the original action should not have proceeded until the settlement accord was breached or repudiated by the D . Plaintiffs Argument: The agreement was an executory accord and not subject to judicial enforcement until after the original cause of action was final. Defendants Argument: The agreement was a substitute contract and if not then as an
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Defendants Argument: The agreement was a substitute contract and if not then as an executory accord it is subject to judicial enforcement. An agreement to compromise is binding. The agreement was to pay $9500 after, and in exchange for an executed release and satisfaction.
Court spends their time talking about an executory accord. Executory accord: an accord that hasn't been carried out yet ( the satisfaction has not happened yet) The underlying debt is not discharged until satisfaction occurs. Agreement: Oral settlement of 9500 on a disputed debt. An executory accord- that there is a substitution for an old contract. The person owed the money will go back to the original claim. A substituted contract- is a brand new contract.. Completely removes the first contract.. And replacing it. The old obligation is immediately gone.. The Court is saying that this is an executory accord. WHY? They case was still ongoing the defendant sent a release to the plaintiff to sign.. It has not occurred yet.. If the release had occurred at the time that the agreement was made that would have been a substituted contract. DID IT MATTER? The court suspended the court claim but what did they leave open for the satisfaction to occurr (bad example of the case) The outcome in this case ends up being the same.. Because the court basically says that the check needs to accept the check. What do courts immediately assume if they cannot tell what the parties originally intended? They will assume a executory accord because it protects the parties. The defendant is the one receiving a benefit in this case. BOTTOM OF PAGE 196 Until there is a breach of accord or justifiable change of position based upon prospective nonperformance, the original cause of action is suspended. (LOOK AT HANDOUT) 3-311 talks about accord and satisfaction by use of an instrument typically a check. Paragraph A if a person against whom a claim is asserted.. .what does that mean ? A debtor. Subsection A. and B are the general Rule . Paragraph C and subsections are the exceptions.. And Paragraph D is exceptions to paragraph c.

UCC 3-311 - When amount owned is in dispute And - A Party in good faith tenders a check as payment in full of amount owned, and - Check or correspondence makes it clear the check is tendered in satisfaction of entire amount owed if - Party receiving check cashes it then - Claim is discharged -- UNLESS
Debt is not discharged if 1. Organization instructs party sending the check where it must be sent and that party does not sent it to the correct person or pace (or 2. Party who received the payment sends it back (or pays it back within 90 days. ) Debt is not discharged if: 1. Organization instructs party sending the check where it must be sent, and that the party does not sent it to the correct pesron or place (special address for disputed payments or 2. Party who recieved payment sends it back (or pays it back) within 90 days. Problem 59 A. Debt discharged.. Good faith dispute. B. If they do not send it back within 90 days then it is discharged.. C. Bad faith..
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C. Bad faith.. What is the problem is determining good faith.. How do you prove it is a good faith dispute.. You must have something ot say as to why you think it is disputed. That is why you must always look at all situations. Article three so these do not only apply to goods. In the UCC article 1 and 2 deal with good. Article 3 deals with negotiable instruments. Article 9 deal with secured debt. Problem 60 A. Good faith dispute, they were notified the check was cashed. They cannot sue him for the 150 owed B. No because if you send it back with in 90 days C. Yes instruments must be sent to the specific place. If this is disputed you must sent to specific person or office. (PARAGRAPH ONE OF THE UCC) D. No, because it will not apply to the accord and satisfaction. ________________________________________________________________________________________ _____________________ WEEK 8 MATERIAL Where are we : promissory estoppel. C= 1. consideration (bargained for exchange) 2. Promissory estoppel 3. Moral obligation Consideration Substitutes Always a fallback position

Promissory Estoppel - A means of finding consideration where the promise was not bargained for - Defined by Restatement 90 - Requires detrimental reliance When do situations come up.. The five hurdles 1. Promise 2. P'or should reasonably expect the p'ee would rely on it (Detrimental Reliance -deos it induce action or forbearance?) 3. Promisee does rely on it 4. IS binding if injustice can be avoided by enforcement of the promise 5. Remedy granted as justice requires. Depends on the amount of the detrimental reliance. - Example - if you go out and by yourself a new car I will give you 10,000 dollars. If you go buy the car after relying on the detriment maybe but you need to know more facts and circumstances. You could try to prove promisory estoppel.

Allegheny College v. National Chautaugua County Bank


-Cardoza the judge in this opinion. Brief Fact Summary. The Defendant, National Chautauqua County Bank of Jamestown (Defendant), promised to pay Plaintiff, Allegheny College (Plaintiff), $5,000 for a scholarship fund in Defendants name. Plaintiff accepted part payment and held the money for the fund. Defendant refused to pay the remaining balance of the $5,000.
Synopsis of Rule of Law. An assumption of duty to promise whatever was necessary to carry out the conditions of her gift is valid consideration.

Facts. Plaintiff sent a letter of appeal as part of its fundraising drive to Johnston who at the time of the case
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Facts. Plaintiff sent a letter of appeal as part of its fundraising drive to Johnston who at the time of the case was deceased. In response, Johnson sent a letter promising $5,000 due 30 days after her death. The letter ordered her Executor to pay the sum out of the estate added to Plaintiffs endowment in accordance with instructions found on the reverse of the letter. The reverse said In loving memory this gift shall be known as the Mary Yates Johnston Memorial Fund, the proceeds from which shall be used to educate students preparing for the Ministry, either in the U.S. or in the Foreign Field. Made only on the condition that provisions of her will are first met. $1,000 was paid two years after the date of letter and while Johnston was still alive. Plaintiff put this money aside to be held as a scholarship in Johnsons name. Later Johnston sent notice of her revocation. Thirty days after Johnstons death Plaintiff brought the suit against the executors. Issue. Is the promise made with consideration and thus enforceable? Held. Yes. When the college accepted the $1,000 there was an assumption of duty to maintain the memorial and name. This duty (to perpetuate the name of the founder in the memorial) acts as the consideration resulting in a bilateral agreement, implied in fact by the conduct of the plaintiff.

The measure of the benefit to the promisor is not relevant in determining the validity of the contract. When a thing is to be done by the plaintiff, be it ever so small, this is a sufficient consideration to ground an action.
There are no grounds for promissory estoppel. Dissent. No offer existed because it was a gift. But, if we strain to view the transaction as an offer then it is an offer for a unilateral, not bilateral contract. However, the acts have not been performed because there was no acceptance in her lifetime. An offer that is revocable dies with the maker. Discussion. The court may be reluctant to find for the Defendant in order to serve the policy concern of supporting charitable organizations. It is difficult to determine whether words of condition in a promise indicate consideration or a gift. One way to make this determination is to ask whether the happening of the condition will be a benefit to the promisor. He implied a promise because the college is not able to due anything other than what the memorial scholarship. He found true consideration but.. On pg. 204 there was a large dissent. (Dissents are usable in court because you can say see these judges agree with my viewpoint) Always pay attention to the dissent. Restatement 90 on pg. 206 - First restatement adopted in 1932 and the second was adopted in 1979 - First restatement uses the terms "definite and substantial character) - Second restatement.. Adds the language of the third party, and THE remedy granted for breach my be limited as justice requires. The second restatement is telling us that we do not need to have consideration for charitable donation. Because there is a policy that they should be able to rely on the donations.. There might not be detrimental reliance. They should be able to count on those. Top of Pg. 207 - 3 major limitations on the scope of the second restatement. (previously noted) Problem 61: Was it reasonable reliance? It could be deemed a social contract. Problem 62 Social contract.. It could go either way.. If this was in some way a business arrangement.. The bigger
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- Social contract.. It could go either way.. If this was in some way a business arrangement.. The bigger issue is he relied on his promise and forebeared to get the insurance himself. Reasonable efforts in good faith. (do not worry about this problem) Problem 63 - Stong argument that this was a unilateral contract.. But if you couldn't get that to fly then you could argue promissory estoppel.

Universal Computer Systems v Medical Services Assoc. of Penn.


Promissory Estoppel

Relevant Facts: In 1975, Df Assoc. solicited bids for the lease of a computer. Pl Universal prepared a bid proposal. An employee of df was contacted by president of Universal and informed that the proposal would be arriving Monday by airline, but it needed to be picked up from the airport. The employee promised to pick it up before the noon deadline. After sending the proposal via air, Universal contacted the employee liason to relay the necessary information. The employee then stated that he could not pick up the proposal. Other arrangements were unsuccessful and the bid was rejected as untimely.
Legal Issue(s): Whether an agent/employee had authority to make a binding promise to pick up a bid from a potential bidder, and if so is the principal bound by that promise? Courts Holding: Yes employee had apparent authority, and principal is bound. Procedure: Pl filed in U.S. D. Ct. seeking breach damages. Jury trial verdict awarded $13,000 to pl. Df filed nov (liability and ?) and motion for new trial; nov was granted (liability) denied otherwise, pl appealed that and df appeal denial for new trial. Affirm U.S. D. Ct. denial of NOV and reversed liability portion of NOV, new trial for damages. Law or Rule(s): A promise which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee. The promise must actually induce such action or forbearance and the circumstances must be such that injustice can only be avoided by enforcement of the promise

Court Rationale: The employee had authority to make the promise, and the pl relied upon the same to his detriment, pl was reasonably unaware of the applicability of the federal regulations interdicting employees promise. Pl incurred a substantial detriment as a result of relying upon dfs promise. Pl has suffered an injustice in being deprived of the service promised by the employee. The df promised to pick up the bid and pl relied upon that promise to its detriment.
Plaintiffs Argument: df promised to pick up the bid proposal and when employee failed it was at the detriment of the Pl. Defendants Argument: The employee lack actual authority to make any promises conferring preferential treatment of a potential bidder. Damages were awarded on basis of conjecture and speculation. The final bid was subject to approval by HEW, and there was no way to determine the amount pl would, if granted the k, have been awarded. Court argues actual authority and apparent authority. The court says that yes he had apparent authority. It was reasonable for them to rely and they satisfied all elements under the first restatement. -- damages : they were awarded lost profits.. That is not the traditional amount of damage that should be recovered under the traditional rules of damages.

James Baird Co. v. Gimbel Bros. Inc., 64 F.2d 344 (2d Cir. 1933).
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James Baird Co. v. Gimbel Bros. Inc., 64 F.2d 344 (2d Cir. 1933).
Facts: Gimbel Brothers (D) sent subcontractor bids to approximately 20 to 30 contractors, offering to supply all of the linoleum for the construction of a building for the Pennsylvania Department of Highways. In preparing the bid Gimbel Brothers underestimated the size of the project by 50% and therefore mistakenly quoted a price that was only half the necessary amount. Contractor James Baird Co. (P) received the offer and used the quoted price to submit a bid on the main contract. Later the same day Gimbel realized the mistake and retracted the bid by telegraph and quoted a new price approximately twice that of the original. James Baird did not receive the retraction until after submitting the bid on the main contract and was awarded the main contract two days later. James Baird formally accepted Gimbel Brothers offer two days after receiving Gimbel Brothers withdrawal of the offer. Gimbel Brothers refused to recognize the existence of a contract and James Baird sued for damages. The trial court entered judgment for Gimbel Brothers and James Baird appealed.

Issue: 1) Can promissory estoppel be used to enforce an offer that is not meant to become binding until consideration has been received? 2) Does promissory estoppel render a subcontractors bid irrevocable? Holding and Rule (Learned Hand): 1) No. Promissory estoppel cannot be asserted to compel an offeror to perform where the offer is not meant to become a binding contract until consideration has been received. 2) No. Promissory estoppel does not render a subcontractors offer irrevocable even if the contractor has relied upon it in submitting a bid for a general contract. The court held that if an offer is withdrawn before it is accepted, the acceptance is too late. James Baird argued that Gimbel Brothers offer should have been irrevocable in the event James Baird used it to submit its bid for the general contract and that it would have been an unreasonable hardship to expect it to lose the contract and forfeit its deposit. Offers are ordinarily made in exchange for a consideration; either a counter-promise or some other act. In such cases they propose bargains and presuppose that each promise or performance induces the other. The doctrine of promissory estoppel is used to avoid the harsh results of allowing the promissor to repudiate when the promisee has acted in reliance upon the promise.
The court held that an offer for an exchange is not meant to become a promise until a consideration has been received; either a counter-promise or whatever else is stipulated. Gimbel Brothers offered to deliver the linoleum in exchange for James Bairds acceptance, not in exchange for James Bairds bid on the general contract. That offer could become a promise to deliver only when James Baird promised to take and pay for it. Promissory estoppel is not applicable in this case. Disposition: Affirmed; Judgment for Gimbel Brothers. Notes: The rule here is the minority rule; promissory estoppel does not make a subcontractors bid irrevocable even though the contractor may have relied upon it in submitting its bid to the owner. This case has since been overturned by Drennan v. Star
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submitting its bid to the owner. This case has since been overturned by Drennan v. Star Paving.

Branco Enterprises v Delta Roofing


Promissory Estoppel Relevant Facts: Pl Branco wanted to bid on a proposed renovation and requested bids from subcontractors to install the roof. There were specifications for the job that a bitumen roof of Derbigum, or an approved substitute of equal quality was to be used. Approval had to come from the architect, and the roofer had to be certified to use Derbigum. Delta submitted a bid which was significantly lower than that of the other bids, which prompted pl to call and confirm the bid. The estimator for df stated thats fine, and pl accepted the bid. The main contract was signed and then pl sent df three copies of a subcontract agreement, with request for certificates of insurance. Delta did not execute and return the contracts, but did return a certificate of insurance. df president stated they had intentions of doing the job. Shortly after work began df notified pl they were not certified and were not going to do the job. The cost to have another do the job was $18500 more. Legal Issue(s): Whether there was a contract between the parties based on the doctrine of promissory estoppel where Df made a bid to pl sufficient to expect performance which pl relied upon to its detriment? Courts Holding: Yes there was a K under promissory estoppel. Procedure: Pl brought suit to recover damages from breach by df, trial ct granted judgment to pl, Ct of Appeals Affirmed.

Law or Rule(s): A promise; with foreseeable reliance; with reliance; and injustice absent enforcement.
Court Rationale: The estimator testified he had seen the plans or specification for the job before he submitted Deltas bid. He submitted an initial bid and then a revised bid on the day pl compiled its bid. Df testified of awareness that pl was relying on dfs bid in formulating its bid. Pl testified that df would not obtain variance [contrast] to permit it to substitute another product for Derbigum or obtain certification for df to apply Derbigum with a complete warranty; that df would perform the roofing task for the amount of its bid. A promise by df to pl. The estimator acknowledged that the reliance was acceptable to df. It was foreseeable that pl would rely on dfs promise at the bid price. Df refused to perform and pl was required to expend a greater sum.

Plaintiffs Argument: Df promised to perform at a set price, understanding and agreeing to the terms involved, acknowledged the reliance of the promise and then refused to perform. Defendants Argument: Dfs bid did not make an unequivocal promise to pl sufficient to permit pl to unquestionably expect performance and to reasonably rely upon it.
Majority rule is the Branco rule- that the general contractor should rely on the subcontractor bid. Both opinions are good law.
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bid. Both opinions are good law.

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