TOPIC Intro

UCC
1-103(b) Unless displaced by the particular provisions of [the Uniform Commercial Code], the principles of law and equity, including the law merchant and the law relative to capacity to contract, principal and agent, estoppel, fraud, misrepresentation, duress, coercion, mistake, bankruptcy, and other validating or invalidating cause supplement its provisions.

RESTATEMENT
R2-1 A contract is a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty. R2-2(1) A promise is a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made. R2-71 When any of the terms used to express an agreement is ambivalent, and the parties understand it in different ways, there cannot be a contract unless one of them should have been aware of the others understanding. Nominal or sham consideration is usually evidence that a gift is masquerading as a bargained-for exchange (i.e. form of consideration, but not sufficient). R2-74 : A promise not to sue, made in exchange for some return benefit, is valid consideration if either: a)The claim was valid, or b)The claim was not valid, and (1)The parties reasonably believed the claim was valid (majority rule), or (2)The validity was uncertain or the promisor subjectively believed that it was valid R2-79 If the requirement of consideration is met, there is no additional requirement of (a) a gain, advantage, or benefit to the promisor or a loss, disadvantage, or detriment to the promisee; or (b) equivalence in the values exchanged; or (c) mutuality of obligation. R2-87(1)(a) An offer is binding as an option contract if it: (1) is in writing and signed by the offeror, recites a purported consideration for the making of the offer, and proposes an exchange on fair terms within a reasonable time; or (2) is made irrevocable by statute. (3) (Reliance) An offer which the offeror 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.

Consideration

2-306 Output, Requirements, and Exclusive Dealings: 1) A term that measures the quantity by output or requirements means actual output or requirements as may occur in good faith, cannot be disproportionate to a stated or implied estimate. 2) Refraining from a right is adequate consideration.

Reliance

R2-90 Promissory estoppel is an equitable doctrine that is used to avoid injustice by enforcing otherwise unenforceable promises. It estops the promisor from claiming that no consideration was given. (A promise, foreseeable reliance, actual reliance, avoidance of injustice). 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.

Contract Formation Offer Acceptance Counteroffers

2-205 Has 4 requirements and if they are satisfied offer = irrevocable. 1) Offer by merchant. 2) to buy or sell goods 3) in a signed writing offeror 4) which terms give assurance promise 5) If time is not stated, offer remains open for reasonable time. 6) Time not to exceed 3 months. 7) Requires signature of offeror. 8) 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 is stated for a reasonable time, but in no event may such a period of irrevocability exceed three months; but any such term of assurance on a form supplied by the offeree must be separately signed by the offeror. 2-104(1) "Merchant" means a person who deals in goodsof the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction or to whom such knowledge or skill may be attributed by his employment of an agent or broker or other intermediary who by his occupation holds himself out as having such knowledge or skill.

R2-20 a)There is no manifestation of mutual assent to an exchange if the parties attach materially different meanings to their manifestations and, (1)neither party knows or has reason to know the meaning attached by the other, or (2)each party knows or each party has reason to know the meaning attached by the other. b)The manifestations of parties are operative in accordance with the meaning attached to them by one of the parties if (1)that party does not know of any different meaning attached by the other, and the other knows the meaning attached by the first party; or (2)that party has no reason to know of any different meaning attached by the first party. (NOTE: This sections attempts to save the contract to which materially different meanings are attached by posing two questions: 1. How would a reasonable person interpret the language? And 2. Even if reasonable people could differ, which party was more justified in his understanding? R2-24 Offer Defined: An offer is the manifestation of a 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 it. [Offer effective when received by offeree.] R2-25 Option Contracts: An option contract is a promise which meets the requirements for the formation of a contract and limits the promisors power to revoke an offer. R2-36 Methods of Termination of the Power of Acceptance

(1) An offerees power of acceptance may be terminated by (a) rejection of counter-offer by the offeree, or (b) lapse of time, or (c) revocation by the offeror, or (d) death or incapacity of the offeror or the offeree. (2) In addition, an offerees power of acceptance is terminated by the non-occurrence of any condition of acceptance under the terms of the offer. R2-41(1) Offers terminate at the time specified in the contract or if a reasonable time elapses. R2-41(2) What a reasonable time "is" is a question of face, depending on all the circumstances existing when the offer and attempted acceptance are made R2-42 An offeree's power of acceptance is terminated when the offeree receives from the offeror a manifestation of an intention not to enter into the proposed contract. R2-43 An offeree's power of acceptance is terminated when the offeror takes definite action inconsistent with an intention to enter into the proposed contract and the offeree acquires reliable information to that effect. R2-45 (1) 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 or tenders a beginning of it. (2)The offeror's duty of performance under any option contract so created is conditional on completion or tender of the invited performance in accordance with the terms of the offer. Consequence: one party can revoke (stop performing), the other cant! R2-59 The mirror image rule, also referred to as an unequivocal and absolute acceptance requirement states that an offer must be accepted exactly with no modifications. The offeror is the master of his own offer. An attempt to accept the offer on different terms instead creates a counter-offer, and this constitutes a rejection of the original offer. R2-61 Acceptance which Requires Change of Terms:

Acceptance with change of terms not invalid unless terms are conditional. R2-62 Effect of Performance by Offeree where offer invites either performance or promise: (1) where an offer invites an offeree to choose between acceptance by promise and acceptance by performance, the tender or beginning of the invited performance or a tender of a beginning of it is an acceptance by performance (2) Such an acceptance operates as a promise to render complete performance R2-87(1)(a) Option Contract: (1) An offer is binding as an option contract if it (a) 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.

Negotiation and Closure

2-204 Formation in General (1) A contract for the sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognize the existence of such a contract. (2) An agreement sufficient to constitute a contract for sale may be found even though the moment of its making is undetermined. (3) 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 basis for an appropriate remedy. 2-305 Open Price Term: Price can be left open should be fixed reasonably.

R2-22(2) A manifestation of mutual assent may be made even though neither offer nor acceptance can be identified and even though the moment of formation cannot be determined. R2-27 Existence of Contract Where Written Memorial Is Contemplated: Manifestations of assent that are in themselves sufficient to conclude a contract will not be prevented from so operating by the fact that the parties also manifest an intention to prepare and adopt a written memorial thereof; but the circumstances may show that the agreements are preliminary negotiations. R2-33 Certainty: (1) Even though a manifestation of intention is intended to be understood as an offer, it cannot be accepted so as to form a contract unless the terms of the contract are reasonably certain. (2) The terms of a contract are reasonably certain if they provide a basis for determining the existence of a breach and for giving an appropriate remedy. (3) The fact that one or more terms of a proposed bargain are left open or uncertain MAY show that a manifestation of intention is not intended to be understood as an offer or as an

acceptance.

Standard Form Contracts

2-207 Additional Terms in Acceptance or Confirmation: 2 communications with non-identical content (usually an offer, and then a response to that offer OR first communication is the entire agreement, and then one person acknowledging the agreement and added new terms) a) Is there a contract? Usually YES, can add or change terms, but cant make them conditional. b) Is the new term part of the contract? Usually NO, but need more facts (1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms. (2) The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless: (a) the offer expressly limits acceptance to the terms of the offer; (b) they materially alter it; or (c) notification of objection to them has already been given or is given within a reasonable time after notice of them is received. 2-314 (1) Unless excluded or modified (Section 2-316), 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. Under this section the serving for value of food or drink to be consumed either on the premises or elsewhere is a sale. (2) Goods to be merchantable must be at least such as: (a) pass without objection in the trade under the contract description; (b) in the case of fungible goods, are of fair average quality within the description; (c) are fit for the ordinary purposes for which goods of

that description are used; (d) run, within the variations permitted by the agreement, of even kind, quality and quantity within each unit and among all units involved; (e) are adequately contained, packaged, and labeled as the agreement may require; and (f) conform to the promise or affirmations of fact made on the container or label if any. (3) Unless excluded or modified (Section 2-316) other implied warranties may arise from course of dealing or usage of trade. 2-316 The section seeks to protect a buyer from unexpected an un-bargained language of disclaimer by denying effect to such language when inconsistent with language of express warranty.

Statute of Frauds

2-103 Supplementary General Principles of Contract Law Applicable: Unless displaced by the particular provisions of this Act, the principles of law and equity, including the law merchant and the law relative to capacity to contract, principal and agent, estoppel, fraud, misrepresentation, duress, coercion, mistake, bankruptcy, or other validating or invalidating clause shall supplement its provisions. 2-104(1) [definition of a merchant. see above.] 2-201 A contract for the sale of goods for the price of $500 or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party whom enforcement is sought or by his authorized agent or broker.

R2-110(1) Classes of Contracts Covered (1) The following classes of contracts are subject to a statute, commonly called the Statute of Frauds, forbidding enforcement unless there is a written memorandum OR applicable exception: a) executor-administrator provision b) suretyship provision c) marriage provision d) land contract provision e) one-year provision [NOTE: if contract not in these classes, does NOT need to be written to be enforced] R2-131 General Requisites of a Memorandum Unless additional requirements are prescribed by the particular statute, a contract within the Statute of Frauds is enforceable if it is evidenced by any writing, signed by or behalf of the party to be charged, which (a) reasonably identifies the subject matter of the contract, (b) is sufficient to indicate that a contract with respect thereto has been made between the parties or offered by the signer to the other party, and (c) states with reasonable certainty the essential terms of the unperformed promises in the contract.

R2-132 Several Writings: The memorandum may consist of several writings if one of them is signed, and the writings in the circumstances clearly indicate that they all relate to the same transaction. R2-134 Signature: The signature to a memorandum may be any symbol made or adopted with an intention, actual or apparent, to authenticate the writing as that of the signer. R2-135 Who Must Sign: Where a memorandum of a contract within the Statute is signed by fewer than all parties to the contract and the Statute is not otherwise satisfied, the contract is enforceable against the signers but not against the others. R2-136 Time of Memorandum: A memorandum sufficient to satisfy the Statute may be made or signed at any time before or after the formation of the contract. R2-139 enforcement by virtue of an action in reliance (can exempt if there was detrimental reliance and injustice so requires.

Parole Evidence Rule

2-202 Final Written Expression: Parol or Extrinsic Evidence: Terms with respect to which the confirmatory memoranda of the parties agree or which otherwise set forth in a writing intendedas a final expressionmay NOT be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement but may be explained and supplemented (a) by course of dealing or usage of traded ( 1-205) orperformance ( 2-208) and (b) by evidence of consistent additional terms unless the court finds the writing [is complete and exclusive].

R2-204 Supplying an Omitted Essential Term: When the parties to a bargain sufficiently defined to be a contract have not agreed to a term which is essential to a determination of their rights and duties, a term which is reasonable in the circumstances is supplied by the court. R2-209 Integrated Agreements: Writings constituting final agreement subject to parol evidence rule. Whether or not there is an integrated agreement is step 1 to determine whether or not to admit parol evidence. R2-210 Complete and Partial Integrated Agreements: Complete complete and exclusive statement of terms; Partial all others Must give wide latitude to determine circumstances bearing on intent. R2-214 Evidence of Prior or Contemporaneous Agreements and Negotiations: Agreements and negotiations prior to or contemporaneous with the adoption of a writing are admissible in evidence to establish (a) that the writing is or is not an integrated agreement;

(b) that the integrated agreement, if any, is completely or partially integrated; (c) the meaning of the writing, whether or not integrated; (d) illegality, fraud, duress, mistake, lack of consideration, or other invalidating clause; (e) ground for granting or denying rescission, reformation, specific perf, or other remedy. R2-215 Contradiction of Integrated Terms: Except as stated in the preceding Section, where there is a binding agreement, either completely or partially integrated, evidence of prior or contemporaneous agreements or negotiations is not admissible in evidence to contradict a term of the writing. b. Interpretation and contradiction. An earlier agreement may help the interpretation of a later one, but it may not contradict a binding later integrated agreement. Whether there is contradiction depends, as is stated in 213, on whether the two are consistent or inconsistent. This is a question which often cannot be determined from the face of the writing; the writing must first be applied to its subject matter and placed in context. The question is then decided by the court as part of a question of interpretation. Where reasonable people could differ as to the credibility of the evidence offered and the evidence if believed could lead a reasonable person to interpret the writing as claimed by the proponent of the evidence, the question of credibility and the choice among reasonable inferences should be treated as questions of fact. R2-216 Consistent Additional Terms: (1) Evidence of a consistent additional term is admissible to supplement an integrated agreement unless the court finds that the agreement was completely integrated. (2) An agreement is not completely integrated if the writing omits a consistent additional agreed term which is a) agreed to for separate consideration, or b) such a term as in the circumstances might naturally be omitted from the writing.

Interpretation

2-202 Expression: Parol or Extrinsic Evidence: Terms with

R2-202 Rule in Aid of Interpretation: Use whole weight of

respect to which the confirmatory memoranda of the parties agree or which otherwise set forth in a writing intendedas a final expressionmay NOT be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement but may be explained and supplemented (a) by course of dealing or usage of traded ( 1-205) orperformance ( 2-208) and (b) by evidence of consistent additional terms unless the court finds the writing [is complete and exclusive]. 1-303 Interpretation of K: Rejects C/L plain meaning rule and focuses on the commercial context of agreement. Course of performance, Course of Dealings, and Usage of Trade ( 1-303) are to be used to fill in gaps and interpret the parties expression of the terms of their agreement. Ex: Chicken usage of trade would be relevant to demonstrate that the word chicken in the K did not mean stewing chicken.

words, including context and in light of all circumstances. Generally prevailing meaning used, but use technical definitions and trade usage where appropriate. Use course of performance and course of dealing. Any term accepted without objection should be given greater weight. R2-203 In the interpretation of a promise or agreement or a term thereof, the following standards of preference are generally applicable: (a) an interpretation which gives a reasonable, lawful, and effective meaning to all the terms is preferred to an interpretation which leaves a part unreasonable, unlawful, or of no effect; (b) express terms are given greater weight than course of performance, course of dealing, and usage of trade, course of performance is given greater weight than course of dealing or usage of trade, and course of dealing is given greater weight than usage of trade; (c) specific terms and exact terms are given greater weight than general language; (d) Separately negotiated or added terms are given greater weight than standardized terms or other terms not separately negotiated.

Good Faith

2-305(2) Open Price Term: Price can be left open should be fixed reasonably. 2-306(1) Output Requirements: Quantity measured by output can be in good faith, should reasonably to comport to estimates.

R2-205 Duty of Good Faith and Fair Dealing: Every contract imposes upon each party a duty of good faith and fair dealing in its performance and enforcement.

Warranties

1-201(2) Between merchants if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of subsection (1) against such party unless written notice of objection to its contents is given within 10 days after it is received. 1-304 In commercial transactions, good faith is required in the performance and enforcement of all agreements or duties. 2-313 Express warranty an explicit promise or guaranty by the seller that the goods will have certain qualities

a)A seller will be found to make an express warranty if she makes an explicit promise that the goods will have certain qualities; such a warranty can take the form of: (1) an affirmation of fact or promise; (2) a description of the goods; or (3) a sample or model upon which the buyer relies 2-314 Merchantability: If a seller is a merchant with respect to the kinds of goods contracted for, unless effectively disclaimed, there is an implied warranty that the goods be such as pass in the trade under the contract description and are fit for the ordinary purposes for which such goods are used. 2-315 Fitness for Particular Purpose: If the seller has reason to know that the buyer wants the goods for a particular purpose and knows that the buyer is relying on the sellers skill and judgment, unless effectively disclaimed, there is an implied warranty that the goods shall be fit for that purpose. 2-316 1) If the scope of the disclaimer is clear, and the scope of the alleged express warranty is not as clear, the court should construe the warranty narrowly, so that it will not conflict with the disclaimer; if there is no reasonable way to construe the two as consistent with each other, the disclaimer is ineffective (provided that proof of the warranty does not run afoul of the parol evidence rule) 2) If the seller wishes to make an explicit disclaimer of implied warranties he must: a) For implied warranty of merchantability mention the word merchantability; disclaimer does not have to be in writing, but if it is, it must be conspicuous b) For implied warranty of fitness for a particular purpose disclaimer must be in writing and must be conspicuous (doesnt have to use any particular words) 3a) Implied warranties may be excluded or disclaimed by the sellers use of expressions like as is 3b) Implied warranties will not be held to exist with regard to defects which should have been revealed upon examination by the buyer 2-719 (1) must make the disclaimer exclusive (buyers only remedy is repair or replacement)

(2) provides that where circumstances cause an exclusive or limited remedy to fail of its essential purpose the other Codeprovided remedies may be used (a)A remedy will be found to have failed of its essential purpose where the seller is either unwilling to repair or replace or incapable of doing so (b)Comment 1 applies where the modification or limitation of remedy operate in an unconscionable way (3) provides that consequential damages may be limited or excluded unless the limitation or exclusion is unconscionable; limitation of consequential damages for injury to the person in the case of consumer goods is a prima facie unconscionable but limitation of damages where the loss is commercial is not 2-601 if the goods or the tender of delivery fail in any respect to conform to the contract, the buyer may: (a) reject the whole; or (b) accept the whole; or (c) accept any commercial unit or units and reject the rest. 2-602(1) Rejection of goods must be within a reasonable time after their delivery or tender. It is ineffective unless the buyer seasonably notifies the seller. 2-711(1) Where the seller fails to make delivery or repudiates or the buyer rightfully rejects or justifiably revokes acceptance then with respect to any goods involved, and with respect to the whole if the breach goes to the whole contract (Section 2-612), the buyer may cancel and whether or not he has done so may in addition to recovering so much of the price as has been paid (a) "cover" and have damages under the next section as to all the goods affected whether or not they have been identified to the contract; or (b) recover damages for non-delivery as provided

Modification

2-209 1) an agreement modifying a contract for the sale of goods needs no consideration to be binding a modification under this section must meet the test of good faith imposed by the Code, and a modification obtained by extortion without a legitimate commercial reason is unenforceable 2) If parties impose this requirement on themselves, the parties

R2-73 Performance of a legal duty owed to a promisor which is neither doubtful nor the subject of honest dispute is not consideration; but a similar performance is consideration if it differs from what was required by the duty in a way which reflects more than a pretense of bargain. R2-89 Modification of Executory Contract

may incorporate an enforceable clause into an agreement. Note: if clause is contained in form provided by a merchant party to a non-merchant party, the form must be signed separately by the non-merchant party. Both parties are merchants = separate signing req does not apply. 3) Must be satisfied if the K as modified is within its provisions. Written Modification required if: (1) it brings the entire K within the terms of 2-201 (ex: price raised from $400 to $500); or (2) Falls within 2-201 on its own (ex: prices raised from $600 to $700); or (3) Alters the quantity term of K originally within 2-201 (ex: quantity raised from 100 to 200). 4) Although an attempt at modification or rescission does not satisfy the requirements of subsection (2) or (3) it can operate as a waiver. a) This modification can be result of an oral agreement when the parties contracted for no oral modifications or of the parties course of performance when it is inconsistent with the written terms of K. b) Any attempted modification which does not meet the writing requirement is still enforceable under a theory of waiver (intentional relinquishment of a known right). c) If any attempt at modification that does not comply with subsections (2) or (3) could be a waiver, those subsections would be effectively nullified.

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 the circumstances not anticipated by the parties when the contract was made; or (b) to the extent provided by statute; or (c) to the extent that justice requires enforcement in view of material change of position in reliance on the promise. [X works for Y making 125K; Z offers 140K; B offers A 5K raise to 130K; Enforceable]

Misrepresentat ion and Mistake

R2-151 Mistake defined: A mistake is a belief not in accord with the facts. R2-152(1) When Mistake of Both Parties Makes a Contract Voidable (1) Where a mistake of both parties at the time a contract was made as to a basic assumption on which the contract was made has a material effect on the agreed exchange of performances, the contract is voidable by the adversely affected party unless he bears the risk of mistake under the rule stated in 154.

R2-154 When a Party Bears the Risk of a Mistake A party bears the risk of mistake when (a) the risk is allocated to him by agreement of the parties, or (b) [conscious ignorance] he is aware, at the time the contract R2-161 When Non-Disclosure is Equivalent to an Assertion A persons non-disclosure of a fact known to him is equivalent to an assertion that the fact does not exist in the following cases only: (a) where he knows that the disclosure of the fact is necessary to prevent some previous assertion from being a misrepresentation or from being fraudulent or material. (b) where he knows that the disclosure of the fact would correct a mistake of the other party as to a basic assumption on which that party is making the contract and if non-disclosure of the fact amounts to a failure to act in good faith and in accordance with reasonable standards of fair dealing. (c) where he knows that the disclosure of the fact would correct a mistake of the other party as to the contents or effect of a writing, evidencing or embodying an agreement in whole or in part. (d) where the other person is entitled to know the fact because of a relation of trust and confidence between them. R2-162 When a Misrepresentation is Fraudulent or Material (1) A misrepresentation is fraudulent if the maker intends his assertion to induce a party to manifest his assent and the maker (a) knows or believes that the assertion is not in accord with the facts, or (b) does not have the confidence that he states or implies in the truth of the assertion, or (c) knows that he does know the basis that he states or implies for the assertion. (2) A misrepresentation is material if it would be likely to induce a reasonable person to manifest his assent, or if the

maker knows that it would be likely to induce the recipient to do so. R2-164(1) When a Misrepresentation Makes a Contract Voidable: (1) If a partys manifestation of assent is induced by either a fraudulent or a material misrepresentation by the other party upon which the recipient is justified in relying, the contract is voidable by the recipient.

Public Policy, Illegality

2-302 Unconscionable Contract or Clause: (1) If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result. (2) [When unconscionability claimed, parties may introduce evidence as to its commercial setting, purpose, and effect].

R2-178 (1) A promise or other term of an agreement is unenforceable on grounds of public policy if legislation provides that it is unenforceable or the interest in its enforcement is clearly outweighed in the circumstances by a public policy against the enforcement of such terms. (2) In weighing the interest in the enforcement of a term, account is taken of (a) the parties' justified expectations, (b) any forfeiture that would result if enforcement were denied, and (c) any special public interest in the enforcement of the particular term. (3) In weighing a public policy against enforcement of a term, account is taken of (a) the strength of that policy as manifested by legislation or judicial decisions, (b) the likelihood that a refusal to enforce the term will further that policy, (c) the seriousness of any misconduct involved and the extent to which it was deliberate, and (d) the directness of the connection between that misconduct and the term. R2-187 (1) The law of the state chosen by the parties to govern their contractual rights and duties will be applied if the particular issue is one which the parties could have resolved by an explicit provision in their agreement directed to that issue. (2) The law of the state chosen by the parties to govern their contractual rights and duties will be applied, even if the particular issue is one which the parties could not have

resolved by an explicit provision in their agreement directed to that issue, unless either (a) the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties' choice, or (b) application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue and which, under the rule of s 188, would be the state of the applicable law in the absence of an effective choice of law by the parties. (3) In the absence of a contrary indication of intention, the reference is to the local law of the state of the chosen law. R2-188 (1) The rights and duties of the parties with respect to an issue in contract are determined by the local law of the state which, with respect to that issue, has the most significant relationship to the transaction and the parties under the principles stated in s 6. (2) In the absence of an effective choice of law by the parties (see s 187), the contacts to be taken into account in applying the principles of s 6 to determine the law applicable to an issue include: (a) the place of contracting, (b) the place of negotiation of the contract, (c) the place of performance, (d) the location of the subject matter of the contract, and (e) the domicil, residence, nationality, place of incorporation and place of business of the parties. These contacts are to be evaluated according to their relative importance with respect to the particular issue. (3) If the place of negotiating the contract and the place of performance are in the same state, the local law of this state will usually be applied R2-208 Unconscionable Contract or Term: If a contract or term thereof in unconscionable at the time the contract is

made a court may refuse to enforce the contract, or may enforce the remainder of the contract without the conscionable term as to avoid any unconscionable result.

Breach

R2-237 Effect on Other Partys Duties of a Failure to Render Performance: [No uncured material defect in performance X is condition for other partys remaining duties due after X; Cf. 234 default rule is for performances to be due simultaneously]. R2-241 In determining whether a failure to render or to offer performance is material, the following circumstances are significant: (a) the extent to which the injured party will be deprived of the benefit which he reasonably expected; (b) the extent to which the injured party can be adequately compensated for the part of that benefit of which he will be deprived; (c) the extent to which the party failing to perform or to offer to perform will suffer forfeiture; (d) the likelihood that the party failing to perform or to offer to perform will cure his failure, taking account of all the circumstances including any reasonable assurances; (e) the extent to which the behavior of the party failing to perform or to offer to perform comports with standards of good faith and fair dealing. R2-242 In determining the time after which a party's uncured material failure to render or to offer performance discharges the other party's remaining duties to render performance under the rules stated in 237 and 238, the following circumstances are significant: (a) those stated in 241; (b) the extent to which it reasonably appears to the injured party that delay may prevent or hinder him in making reasonable substitute arrangements; (c) the extent to which the agreement provides for performance without delay, but a material failure to perform or to offer to perform on a stated day does not of itself discharge the other party's remaining duties unless the circumstances,

including the language of the agreement, indicate that performance or an offer to perform by that day is important. R2-250 A repudiation is: (a) a statement by the obligor to the obligee indicating that the obligor will commit a breach that would of itself give the obligee a claim for damages for total breach under 243, or (b) a voluntary affirmative act which renders the obligor unable or apparently unable to perform without such a breach. R2-251 (1) Where reasonable grounds arise to believe that the obligor will commit a breach by non-performance that would of itself give the obligee a claim for damages for total breach under 243, the obligee may demand adequate assurance of due performance and may, if reasonable, suspend any performance for which he has not already received the agreed exchange until he receives such assurance. (2) The obligee may treat as a repudiation the obligor's failure to provide within a reasonable time such assurance of due performance as is adequate in the circumstances of the particular case. R2-253 (1) Where an obligor repudiates a duty before he has committed a breach by non-performance and before he has received all of the agreed exchange for it, his repudiation alone gives rise to a claim for damages for total breach. (2) Where performances are to be exchanged under an exchange of promises, one party's repudiation of a duty to render performance discharges the other party's remaining duties to render performance. R2-261 Discharge by Supervening Impracticability: Where, after a contract is made, a partys performance is made impracticable without his fault by the occurrence of an event, the non-occurrence of which was the basic assumption on which the contract was made, his duty to render that performance is discharged, UNLESS the language or the circumstances indicate to the contrary. R2-262 Death or Incapacity of Person Necessary for Performance: If the existence of a particular person is necessary for the performance of a duty, his death or such

incapacity as makes performance impracticable is an event, the non-occurrence of which was a basic assumption on which the contract was made. R2-263 Destruction, Deterioration or Failure to Come Into Existence of Thing Necessary for Performance: If the existence of a specific thing is necessary for the performance of a duty, its failure to come into existence, destruction, or such deterioration as makes performance impracticable is an event, the non-occurrence of which was a basic assumption on which the contract was made. R2-264 Prevention By Governmental Regulation Or Order: If the performance of a duty is made impracticable by having to comply with a domestic or foreign governmental regulation or order, that regulation or order is an event the non-occurrence of which was a basic assumption on which the contract was made. R2-265 Discharge by Supervening Frustration: Where, after a contract is made, a partys principal purpose is substantially frustrated without his fault or by the occurrence of an event, the non-occurrence of which was a basic assumption on which the contract was made [ 262-263], his remaining duties to render a performance are discharged, unless the language or the circumstances indicate to the contrary.

Remedies

2-704(2) Where the goods are unfinished an aggrieved seller may in the exercise of reasonable commercial judgment for the purposes of avoiding loss and of effective realization either complete the manufacture and wholly identify the goods to the contractor cease manufacture and resell for scrap or salvage value or proceed in any other reasonable manner. 2-706(1) Sellers Resale Including Contract for Resale: Seller may resell goods and recover difference between resell price and contract price plus any incidental damages. 2-708 Sellers Damages for Non-Acceptance or Repudiation (1) Subject to subsection (2) and to the provisions of this article with regard to the proof of market price ( 2-723), the measure of damages for non-acceptance or repudiation by the buyer is the difference between the market price at the time and place of

R2-237 [see above] R2-243 Effect of Breach by Non-performance: (1) With respect to performances to be exchanged under an exchange of promises, a breach by non-performance gives rise to a claim for damages for total breach only if it discharges the injured party's remaining duties to render such performance, other than a duty to render an agreed equivalent under 240. (2) Except as stated in Subsection (3), a breach by nonperformance accompanied or followed by a repudiation gives rise to a claim for damages for total breach. (3) Where at the time of the breach the only remaining duties of performance are those of the party in breach and are for the payment of money in installments not related to one another, his breach by non-performance as to less than the whole,

tender and the unpaid contract price together with any incidental damages provided in this Article ( 2-710), but less expenses saved in consequence of 2-709(1) Seller recovers the K price. 2-711 Buyers Remedies: buyer can recover price that has been paid can cover or not and get damages as per 2-712 and 2713. 2-712 Cover; Buyers Procurement of Substitute Goods (1) After a breach within the preceding section the buyer may cover by making in good faith and without unreasonable delay any reasonable purchase of or contract to purchase goods in substitution for those due from seller. (2) The buyer may recover from the seller as damages the difference between the cost of cover and the contract price together with and incidental or consequential damages as hereinafter defined ( 2-715), but less expenses saved in consequence of the sellers breach. (3) Failure of the buyer to effect cover within this Section does not bar him from any remedy. 2-713 Buyers Damages for Non-Delivery or Repudiation (1) Subject to the provisions of this Article with respect to proof of market price ( 2-723), the measure of damages for non-delivery or repudiation by the seller is the difference between the market price at the time when the buyer learned of the breach and the contract price together with any incidental and consequential damages provided in this Article ( 2-715), but less expenses saved in consequence of the sellers breach. (2) Market price is to be determined as the place of tender, or in cases of rejection after arrival or revocation of acceptance, as the place of arrival. 2-714 Direct Damages (damages for non-conforming goods): Damage = value as warranted value as delivered 2-715 Incidental and Consequential Damages (1) Incidental damages resulting from the sellers breach include expenses reasonably incurred in the inspection, receipt, transportation, and care of and custody of goods rightfully rejected, any commercially reasonable charges, expenses, or

whether or not accompanied or followed by a repudiation, does not give rise to a claim for damages for total breach. (4) In any case other than those stated in the preceding subsections, a breach by non-performance gives rise to a claim for total breach only if it so substantially impairs the value of the contract to the injured party at the time of the breach that it is just in the circumstances to allow him to recover damages based on all his remaining rights to performance. R2-344 Judicial remedies under the rules stated in this Restatement serve to protect one or more of the following interests of a promisee: (a) his expectation interest, which is his interest in having the benefit of his bargain by being put in as good a position as he would have been in had the contract been performed, (b) his reliance interest, which is his interest in being reimbursed for loss caused by reliance on the contract by being put in as good a position as he would have been in had the contract not been made, or (c) his restitution interest, which is his interest in having restored to him any benefit that he has conferred on the other party. R2-347 Measure of Damages in General [Expectation] Subject to the limitations stated in 350-353, the injured party has a right to damages based on his expectation interest as measured by (a) the loss in value to him of the other partys performance caused by its failure or deficiency, plus (b) any other loss, including incidental or consequential loss, caused by the breach, less (c) any cost or other loss that he has avoided by not having to perform. R2-348(2) Alternatives to Loss in Value of Performance: (2) If a breach results in defective or unfinished construction and the loss in value to the injured party is not proved with sufficient certainty, he may recover damages based on (a) the diminution in the market price of the property

commissions, in connection with effecting cover and any other reasonable expense incident to the delay or other breach. 2-715(2) Consequential damages resulting from the sellers breach include (a) any loss resulting from general or particular requirements and needs of which the seller at the time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise; and (b) injury to person or property proximately resulting from any breach of warranty. 2-716 (1) Specific performance may be decreed where the goods are unique or in other proper circumstances 7-718(1) damages for breach by either party may be liquidated in the agreement but only at an amount which is reasonable in the light of the anticipated or actual harm caused by the breach, the difficulties of proof of loss, and inconvenience or nonfeasibility of otherwise obtaining an adequate remedy, a term fixing an unreasonably large liquidated damages is void as a penalty a) Language gives the party seeking to enforce a liquidated damages clause 2 chances to prove that the stipulated sum is reasonable: the reasonableness of the sum may be measured as of the time the contract is made or after breach b) Clause may still be declared unconscionable under the general unconscionability provision of 2-302 2-719(3) provides that consequential damages may be limited or excluded unless the limitation or exclusion is unconscionable; limitation of consequential damages for injury to the person in the case of consumer goods is a prima facie unconscionable but limitation of damages where the loss is commercial is not.

caused by the breach, or (b) the reasonable cost of completing performance or of remedying the defects if that cost is not clearly disproportionate to the probable loss in value to him [Comment c: in construction cost of completion usually less than loss in value, which is hard to prove even if greater, better to give a small windfall than undercompensate, but if much greater, should use difference in market price and property value] R2-349 Damages Based on Reliance Interest: As an alternative to the measure of damages stated in 347, the injured party has a right to damages based on his reliance interest, including expenditures made in preparation for performance or in performance, less any loss that the party in breach can prove with reasonable certainty the injured person would have suffered had the contract been performed. R2-350 Avoidability as a Limitation on Damages (1) Except as stated in Subsection (2), damages are not recoverable for loss that the injured party could have avoided without undue risk, burden, or humiliation. (2) The injured party is not precluded from recovery by the rule stated in Subsection (1) to the extent that he has made reasonable but unsuccessful efforts to avoid loss. R2-351 Unforseeability and Related Limitations on Damages (1) Damages are not recoverable for loss that the party in breach did not have reason to foresee as a probable result of the breach when the contract was made. (2) Loss may be foreseeable as a probable result of a breach because it follows from the breach (a) in the ordinary course of events, or (b) as a result of special circumstances, beyond the ordinary course of events, that the party in breach had reason to know. R2-352 Uncertainty as a Limitation on Damages: Damages are not recoverable for loss beyond an amount that the evidence permits to be established with reasonable certainty. R2-355 Punitive Damages: Punitive damages are not recoverable for a breach of contract unless the conduct

constituting the breach is also a tort for which punitive damages are recoverable. R2-356 Liquidated Damages and Penalties (1) Damages for breach by either party may be liquidated in the agreement but only at anamount that is reasonable in the light of the anticipated or actual loss caused by the breach and the difficulties of proof of loss. A term fixing unreasonably large liquidated damages in unenforceable on grounds of public policy as a penalty. (2) A term in a bond providing for an amount of money as a penalty or non-occurrence of the condition of the bond is unenforceable on grounds of public policy to the extent that the amount exceeds the loss caused by such non-occurrence. R2-360 In determining whether the remedy in damages would be adequate, the following circumstances are significant: (a) the difficulty of proving damages with reasonable certainty, (b) the difficulty of procuring a suitable substitute performance by means of money awarded as damages, and (c) the likelihood that an award of damages could not be collected.