I.

Why Have Contract Law?1 A. Compensation for detrimental relianceunfair to let someone suffer B. revent un!ust enrichment C. oint of contract law to promote "ood of society 1. Most common view in law school sees benefit as economic efficiencythats what society should promote. 2. #$utual %enefit& theory' people benefit when they can exercise their rights. ontract law enables mutually beneficial exchanges! we wouldnt ma"e certain agreements if it werent for contract law. #$xample! someone stranded in the desert with no %& who agrees to pay a passing driver %1'' to ta"e him home out of the way(driver will be willing to accept the guys word& because its enforceable in court.) *. $utual %enefit theory as pushed %y !ud"es in 1(th Century a. +ight of individuals to be able to trade as they see fit and obligation of the state to ma"e it possible. ,ndividuals have a right to have their agreements enforced. b. ,ndividualistic ideal(people had a right to contracts as much as they had a right to be protected from attac" or to have their property rights enforced. -ave certain basic rights! --freedom of contract --property rights --bodily integrity c. +ichard $pstein at .niv of hicago still strongly believes this. d. ,ndividualistic ideal theory e/uivalent to libertarianism. #$xample! Lochner dealt with regulation of ba"ers--no contracts of employment where you agreed to wor" more than a certain number of hours. 0upreme ourt found the law interfered with the right of freedom of contract& which violated due process clause. 0ignaled start of Lochner era& where you could not interfere with any freedom of contract. 1ot feasible today& where limits on contract are regulated right and left.) 2. )ocial "ood theory' must design contract law to benefit society a. Mutual benefit is not good for society! some people might be willing to wor" for less than we are o" with& and we must stop them from doing so. b. ,nstrumental view of contract law! must be done in way that benefits society. c. 3enerally good to enforce agreements and advance economic efficiency& but not always. d. 4ots of variations within application of the theory. e. 5ey /uestion! is it better for all of us if this contract is enforced6 f. ,t would seem bargain theory comes from this theory. *. $oral +%li"ation' Contract is a promise, and we must -eep our promises .Charles /ried0 #$xample! 7romisee in -amer should get his money because promisor has moral obligation to do what he must do and promisee has a moral right to the money.) #Most people say that merely enforcing moral obligations is not sufficient for a legal code(should be based on economically efficient transactions.) 1. +nly C 2 * a%ove are in position to tell us what contracts are important.

II.

*+C34I51) +/ 15/+4C1ABILI36 #found in law) Which promises and a"reements are enforcea%le, and why?2 8. Bar"ain theory of consideration .4estatement 78109 1. 0omething done by promisee #return promise& performance& forbearance) a. 9ont need to establish that what was given in exchange for the promise was the only reason the bargain was made ,f there are two reasons for a promise& neither reason needs to be sufficient that if it were the only reason you would still ma"e the promise. #4estatement 7:1) b. 0ought after by promisor(one reason he made promise was that he sought something from promisee. c. 0omething given by promisee in exchange for promise #one reason he did it was because of promise) 2. ourt will not in/uire into fairness of an exchange when loo"ing for bargain or consideration& but will loo" for ade/uacy! no sham bargains. a. 1o theory of mutual obligation under bargained for contracts. :argaining re/uires only mutual see"ing. #4estatement 78(0 b. ;ou can have unilateral agreements(where one side has no obligations(and still have acceptable bargain. *. <wo types of contracts! a. .nilateral(only one party obliged to honor the contract #li"e Hamer) b. :ilateral(both parties obliged to follow the contract #had the nephew also promised in Hamer) 2. :enefit=9etriment rule of consideration! for a contract to be enforceable there must be a benefit to the promisor or detriment to the promisee. a. 9erived from theory of assumpsit. >or it to apply& there had to be consideration& ie. something to trigger the promises having legal effect. <heory depends on ma"ing a promise that limits your freedom of action. ?ithout consideration& your freedom of action is not limited& and you have not given anything up that would ma"e your promise enforceable. b. 7roblem with rule! if you ma"e a promise in response to another persons promise and that amounts to a detriment& then every promise is enforceable. ,mpossible to impose reasonable limits on enforceability. c. :enefit=9etriment <heory still applied in some states #1) Must find bargain @ benefit to promisor or detriment to promisee #2) ,n general& rule has been reAected by 4estatement 78( c. Hamer v. Sidway .5.6. 1:(10 F: 7s uncle promised him %B&''' if he refrained from drin"ing& smo"ing& and other vices until his 21st birthday. 7 honored his side of agreement& and decided with uncle that he would not receive the money until he turned 2C& when hed receive the money with interest. .ncle died and his estate argued that 7 was not entitled to the money. Q: ,s there consideration for the contract6 H: "ave up ri"hts to en!oy certain activities' that constituted a detriment that serves as consideration. R: 7 suffered a detriment in that he gave up his right to do something. 8nytime your freedom is limited& youve suffered a detriment. Thoughts from Class: -- ourt loo"s at detriment to 7D 9 clearly didnt benefit from contract. --9id 7 really suffer a detriment6 8fter all& he gave up harmful things. --9id 7 really give up a right6 ?ith no return promise& 7 was free to do things at any point. 1o obligation to perform #unilateral contract).

B.

3ratuitous promises #no longer enforced by courts) a. ,n older law& were enforced& because of application of benefit=detriment rule! gave up a right any time you made a promise. ,f you agree to pay your father a dollar for a piece of property& Aust so that there is some consideration& that was o". .nder the 0econd +estatement& not accepted. b. ,dea of bargaining introduced in to give teeth to idea of consideration. c. Kirksey v. Kirksey .Ala. 1:;<0 F: 7 was a widow with several children& living on leased public land& where she was comfortable. -er brother-in-law learned of his brothers death and offered! a place to raise your family& and , have more open land that , can tend& if she were to leave her property. 7 accepted and was given comfortable home for two years. 9 then moved to her bad home in the woods& before "ic"ing her out entirely. Q: ?as there consideration for 9s offer of property to 76 H: 3here was no consideration' did not "ive up anythin" to move, and defendant did not %enefitit was a "ratuitous promise. D: 7s loss an inconvenience was a detriment. 0ince she gave up something& there is consideration for the contract. Thoughts from Class: -- Kirksey added the re/uirement that there be a bargain. 1o bargain here b=c promisor didnt care whether 7 came or not& getting her to come was not what induced him to ma"e the promise. --#,n Hamer& uncles reason for promise was for nephew to do what he did--change of behavior.) -->or a bargain& completion of promise& must be at least one reason why promise was made. ,f 9 made the bargain b=c he wanted to see the sister in law& then there was a bargain. ourt said promise gratuitous! her coming was not reason he made the promise -- ourt said fact that she suffered detrimental reliance was not enough! needed bargain for an enforceable contract. Fischer v. Union Trust Co. .$ich. 1(=;0 >ather gives property to daughter& for transfer to occur at fathers death. ,n exchange& he gets a dollar. ,f he later changed his mind& he could then get the property bac" since there was no consideration. King County v. Taxpayers of King County .Wash. 1((80 F: >inancing scheme for new stadium for Mariners! taxpayer group argued deal invalid b=c government gave too much and received too little& contrary to state constitution prohibiting gifts to private corporations. 7 said deal was so one-sided that there was no consideration! that financing needed to be considered a gift. H: )tadium deal o-' #Courts do not in>uire into the ade>uacy of consideration.& R: ity got more than peppercorn! even if bargain was une/ual& it was still enforceable. Mariners to play home games& share profits& and maintain stadium! wasnt e/ual to what they got& but sufficed. 1ominal rent would not have! but state got more than that. D: 0tate onstit intended to prevent plunder of wealth from state coffers! imposing normal standard of contract review doesnt do that.

d.

e.

E.

80$0 899+$00,13 :8+38,1 <-$F+; F> F10,9$+8<,F1! Fein erg v. !feiffer Co. .$issouri 1(<(0 F: 7 began wor"ing for 9s company at age 1G and was promoted through various positions. 8fter *G years& :oard of 9irectors passed a resolution promising to pay her %2'' a month for the rest of her life upon retirement. ?anting a brea" after *C years of wor"& 7 retired two years later. -owever& she only did so based on the financial security provided by the pension. 7resident who passed resolution died& and his wife was bothered by the payments. ?hen she retired& new 7resident& after consulting with attorney and accountant& cut 7s pension in half(she refused the change and filed suit. Q: ?as there consideration for the promise to pay 7s pension6 H: 5o %ar"ain' past performance can?t %e !ustification for a %ar"ain. R: Ma"es no logical sense to bargain for past performance. 1othing can be done about whats happened& so it cant be basis for future concession. --7s continuing employment after offer is not consideration& since she was specifically told she could leave whenever she wanted! her future employment was a not a condition in the offer. -ad getting her to stay been intended purpose of offer& and that caused her to stay& it could have been consideration. Centra" #d$ustment %ureau v. &ngram .3enn. 1(:;0 F: 9s were in employment-at-will situations with 7& a debt collection agency. --91 hired on March 1& 1CG' and as"ed to sign a non-compete agreement next wee". >irst he refused then told that he would be fired if he didnt sign. -e was promoted several times over the years& eventually to a top manager in company. :efore he left& he too" private company documents and assembled info. to start a competing company. -e also too" steps to set up the company. --92 hired on March E& 1CG2! signed non-compete agreement following day. 7romoted often before he left in 1CGC& as head of the 1ashville office. --9* hired on May B& 1CGG. -e signed agreement three wee"s later. -e received one raise in his time at company& but no promotions. --agreement applied for two years after leaving! no competing anywhere in ..0. 1o sharing company information or contacting comp. clients during that time. Q: ?as there consideration for defendants signing non-compete agreements6 H: A non@compete a"reement si"ned after employment has %e"un has consideration if employee in employment@at@will position continues in position for a sufficient period of time after si"nin". R: >or 91 salary and Aob itself are consideration for signing the non-compete pledge& li"e for all other initial terms of employment. -->or 92 and 9*& their continued employment brings force to the contract& even if it was not valid at time it was signed. Must stay on for reasonable time! here& wor"ed a significant period of time and were promoted on several occasions. --0hows 7 performedD no performance if they were fired right after signing. --,ts a valid unilateral contract& not bilateral! 9 made promise& 7 performed. --4estatement 8(.c0! dont need mutuality of obligation. D: $mployment-at-will cannot serve as consideration for a non-compete agreement signed after employment& because employer could fire employee the next day. >or consideration& must be bargained for in the initial exchange. Thought from Class: --.nli"e in Pfeiffer& there was connection between the action and consideration! employees didnt want to get fired& so they signed the non-compete pledge. ,n Pfeiffer offer specifically noted that it re/uired no additional employment.

G.

H.

Strong v. Sheffie"d .5.6. 1:(<0 F: .ncle sold his business on credit to nieces husband. ?hen loan came due& husband didnt have money to pay it off. .ncle agreed to accept a promissory note endorsed by his niece& who owned a separate business& as security for the debt. <he uncle agreed he would not collect the money until he needed it. 8fter ma"ing this promise& he did in fact forbear collection for two years. Q: ,s uncles offer to forbear loan until he needed money consideration6 H: A re>uest followed %y performance, in which promisee ma-es no eAplicit promise in response to the re>uest, >ualifies as performancethat did not happen here, since promised somethin" specifically different than what * re>uested. 3here is no consideration. R: 8t the time 9 handed over promissory note& 7 specifically stated that he would collect when he needed money. :ased on his statement& he could have collected the next day and not bro"en his promise. :ecause he left himself freedom to collect at any point& his promise& and role in the agreement& had no value and cant serve as consideration. --?hile 7 did delay collecting for two years& that was made moot by him specifically stating that he would not commit to forbearance. -ad the re/uest been made& and he complied without explicitly agreeing& that could have been consideration& since there was a re/uest followed by performance. ,n this case& there was a re/uest followed by a different promise. :ecause the promises were not aligned #no mutual promises) there is no consideration. 7romise is illusory. Thoughts from Class: <he argument against the court is that even if 9 was explicitly see"ing the illusory promise& she was implicitly see"ing forbearance and she got it through performance& so contract should be valid. %roadnax v. 'ed etter .3eA. 1(=80 F: 9 offered a reward of %B'' for capture of an escaped prisoner. 7 recaptured and returned the prisoner. 9 refused payment on the grounds that 7 was unaware of the reward offer at the time he captured and returned the prisoner. Q: ?as there consideration for 9s offer6 H: ?s service was not consideration for *?s offer, since did not -now a%out offer at time it was made. (attei v. Hopper .CA 1(<:0 F: 7 and 9 entered into contract for sale of property& to be used to build a shopping mall. 7 put down %1&''' deposit. >inal closing depended on 7 obtaining satisfactory leases for the retail space. ?hile 7 was finding retail tenants& 9 said she would not proceed with the sale. 7 found satisfactory leases& but 9 refused to sell. Q: 9id satisfaction clause ma"e the contract illusory6 H: A #satisfaction clause& does not ma-e a contract illusory' courts will loo- for #"ood faith& effort as o%!ective test of performance. Thoughts from Class: -->or satisfaction clause to be enforceable& need test to ma"e it obAective good faith test serves this purpose. --:ad faith performance in this case could have been if 7 did not see" tenants. --8n illusory condition might be! ,ll sell you my car next if , feel li"e it.

C.

1'.

11.

)ood v. 'ucy* 'ady +uff,-ordon .5.6. 1(180 F: 9 was a fashion figure whose name enhanced value of clothing. 0he entered an exclusive arrangement with 7 to mar"et and endorsed products using her name #always subAect to her approval). 7 entitled to B'I of profits and monthly financial reports from 7 on deals pursuant to the contract. 9 breached by endorsing other products without sharing profits with 7. Q: ,s 7 bound to anything in contract that would count as consideration6 H: 5ot everythin" in the a"reement needs to %e eAplicitly written in the contract. 3ryer of fact can find that promise had value, and somethin" unsaid was implicit. R: ,mplicit promise that 7 will ma"e reasonable effort to mar"et 9s products. <hat is the term of the agreement that counts toward the bargain. --?hile 9 might ma"e no money if 7 did not see" business for her& and technically 7 is not re/uired to do those things& implied that a company in that line of wor" signing such a contract will see" opportunities to earn money. Thought from Class: -- ould possibly see this as unilateral contract(even if 7 made no explicit promise& could have enforceable contract if 7 fulfilled its part of the contract and breathed life into it. $xchange of exclusivity for performance. +ementas v. .state of Ta""as .Btah Ct.App. 1(::0 F: <allas was retired businessman and close friend of 7& for whom 7 did many favors. :efore he died& <allas promised 7 %B'&''' in than"s for his help& and wrote up formal document ma"ing the offer. <allas died before he paid and his estate refused to honor the commitment. Q: ?as their consideration in the formal written entitling 7 to %B'&'''6 H: An offer %ased on past service lac-s consideration.

12.

:.

romissory 1stoppel .4estatement 7(=0; 1. JG1 of the +estatement tells us you need a bargainD JC' tells us you dont. 2. <reated li"e statute even though it comes from +estatement. 9. 1lements of a promissory estoppel case' a. romise %. romisor reasona%ly eApects reliance on promise c. Actual reliance of the promise d. In!ustice can only %e avoid %y enforcement of the promise e.C 4emedy may %e limited as !ustice re>uires 2. $nforcement can be limited #to avoid inAustice)! a. $xpectation is default reward b. ?ill award reliance damages if expectation damages excessive B. $videntiary presumption that promisee has relied in two areas! a. marriage settlements b. charitable donation E. 7romissory estoppel relies on detriment to promisee in old benefit=detriment rule G. ourts never as" if it was reasonable for promisor to rely on the promise(Aust need to demonstrate that they did rely on the promise. H. $/uitable $stoppel! about reliance on someones expression of the state of things in the world. a. -ad previously applied only to acts and statements of fact b. ,f someone says something false to you& and you rely on it& they cant later see" rights against you buy pointing out the truth. c. $xample! your house burns down and you call insurance company to find out when you must file your claim. ompany says file by the end of the month and you do. ompany refuses to pay& and you sue. <hey point out that you need to file within three days& and you didnt. <hey can be estopped(prevented(from avoiding payment on grounds that they lied and changed your perception of things& they therefore cant go bac" and allege you should have acted on the truth. C. /icketts v. Scothorn .5e%. 1:(:0 F: ,n a promissory note& 9 promised 7 a sum of %2&''' payable on demand at a sum of EI interest per year. ?hen he delivered the note& he explained that none of his grandchildren wor"ed and he didnt want her to have to do so. .pon receiving the note& 7 /uit her Aob. 8 year later& with her grandfathers help and permission& she too" another Aob. -e did not repudiate the offer& and expressed a desire to complete the payment. -e died& 7 tried to recover from his estate. Q: ?as the promise of the grandfather an enforceable contract6 H: 5o consideration, %ut there is an e>uita%le estoppel in the case, which prevents *?s estate from rene"in" on the promise he made to the . R: :ased simply on the gift to 7& there was no consideration and no contract. 7 promised nothing& and 9 as"ed nothing. ,t was a gratuity. --<here is an e/uitable estoppel in this case! grandfather& in ma"ing his offer& contemplated 7 giving up her employment. -aving achieved his wish when she /uit her Aob& it would be grossly ine/uitable to void the promise on the grounds that there was not consideration. Thoughts from Class: --Kastly expanded scope of e/uitable estoppel a new term introduced in that case. 7reviously limited to specific instances& ie. charitable gifts. --+estatement C' based in part on the holding in Ricketts.

1'.

Fein erg v. !feiffer #see facts above) H: An estoppel prevents * from ceasin" payments' fact that relin>uished her lucrative !o% to receive the annuity she was promised. :ased on +estatement JC'. Cohen v. Cow"es (edia Company .$inn. 1((D0 F: 7 wor"ed for candidate for governor& and lea"ed information about his candidates opponent with understanding that paper would "eep his identity confidential. 7aper wound up publishing his name& which led him to be fired from his advertising firm. Q: ,s 7 entitled to recover for newspaper printing his name6 H: suffered %ecause of his reliance on a tradition in the newspaper industry and *?s un!ust actions. 3he in!ustice must %e remedied. R: Many papers ac"nowledged long-standing ethical commitment to "eep confidentially promises. 7 relied on this when he made his comments after a promise of anonymity. --Must approach case from point of view of avoiding inAustice. Thoughts from Class: --<est difficult for court since it re/uires sociological analysis of views in the industry. ase is outlier! not applying typical theories of promissory estoppel. +.-. Stout* &nc. v. %acardi &mports* &nc. .8th Cir. 1((10 F: 7 was li/uor distributor in ,ndiana during time of industry consolidation. ?hen 7 lost two of its biggest clients& entered negotiations with another distributor on possible terms of sale. 9 was one of 7s largest clients! they promised to continue selling through 7. :ased on this promise& 7 turned down the offer for sale& believing it could still survive with 9. 8 wee" after reAecting the deal& 9 dropped 7 as its distributor. 7 was then forced to go out of business& while selling the company for %BB'&''' less. 7 sued for damages. Q: an 7 recover price difference from sale on promissory estoppel theory6 H: /or . romissory estoppel can hold in at@will situations where there are clear reliance dama"es. R: 7romise was not entirely illusory! promise was to not withdraw for long enough time for 7 to not regret decision to stay in business. --7 not suing for lost income due to 9s departure. +ather& 9 made a specific promise to 7& during sensitive negotiations. 7 reAected offer in reliance on this specific& false promise& and wound up in a desperate situation. -- 8nalogy to future wages for at-will employment would apply if 7s original sales price resulted from expectation that purchasing company would have income from 9. ,n fact& they did not expect to "eep 9s account! 7 Aust lost the leverage when 9 forced them to sell. Thoughts from Class: -- <here is a tort cause of action for deceit or misrepresentation that could apply. .ntil you have a promise& you have no contract(mere statements of intention are not promises. ourts do not re/uire a specific use of the word promise& but rather& promise-li"e statements -- 1o expectancy b=c cant "now how long :acardi would have stayed(so& no expectation damages could be rewarded. Luestion! is promise illusory if there was no expectation6 -ard to see reliance if promisee doesnt expect anything.

11.

12.

Implied@in@law .restitution0 contracts as a cause of action< 1. +estitution intended to claw-bac" unAust enrichment. +emedy! restit damages. D. 1lements of a Claim for 4estitution *ama"es. must show that' a. He conveyed a %enefit %. In doin" so, he was not an officious intermeddler #:enefit cannot be imposed on someone who doesnt want it! ie. mowing their lawn when they didnt as" you to.) c. He did not do so "ratuitously #?ould normally expect payment for act) d. 3here was no contract in place that he avoided e. He could provide a reasona%le measurement for siEe of %enefit #8ctual benefit or cost avoided by defendant) 4estatement 7981 *. +estitution is cause of action in its own right--an implied-in-law or /uasi-contract is not an actual contract. <hough& conditions b&c&e are more li"ely to be met in places where youd expect to see a contract. 2. ,n places where plaintiff performed a service& such as medical service& with no guarantee to benefit defendant& best way to calculate award is cost avoided by 9. #,n doctor example below& a doctors usual fee for the service provided.) B. :ad 0amaritan laws! 9r. wal"ing down street& and person calling for help. 9r. wal"s by the person. ,s 9r. in breach of legal duty6 3ood 0amaritan law re/uires coming to aid of someone in distress. 4aw of Kermont and $urope! no tradition in common law of $nglish states #criminal action). <ort liability for failure to rescue6 1o tort liability for failure to act #nonfeasance)& only for misfeasance. <here is no duty for the 9r. to help the person& even if he is offered a fee. ontracts are voluntary. 8nglo-0axon anomaly that there is no duty to rescue. E. Cotnam v. )isdom .Ar-ansas 1(=80 F: 7 was surgeon& who performed a difficult operation at the scene of an accident. Man died and surgeon sought restitution damages from his estate. --<he Audge offered two instructions to the Aury! 1) if you find 7 to be a surgeon who performed professional wor" for the deceased& you should award reasonable amount to compensate him for his wor"D 2) when deciding amount& consider importance of operation& s"ill and training of surgeon& responsibility on his shoulders& ability of deceaseds estate to pay. Q: ,s 7 entitled to restitution damages from 9s estate6 H: earned restitution dama"es in amount of fair compensation for his wor-not %ased on estate?s a%ility to pay. R: Man would have paid if he was conscious. 0ince contracting behavior was impossible& but there would have been a contract if it would have been possible& its appropriate to apply a remedy. --4ong history of precedent to support this idea. Thought from Class: --4aw provides a contract in order to apply a remedy --9octor is not officious intermeddler(person would have wanted help. --9r. is not entitled to value of persons life but to value of his service.

G.

Ca""ano v. 0akwood !ark Homes Corp. .5.F.)uper. 1(GG0 F: 9 agreed to build a house for someone. 7 made a separate agreement with him to provide shrubbery for the home. 7 planted the shrubbery& but the man did not pay for it. 0hortly after the shrubbery was planted& the man died. 8fter his death& 9 and mans family voided the contract for sale of home. .naware that 7 hadnt been paid& 9 sold the home& with the shrubbery& to another family. Q: ,s 9 liable to 7 for restitution damages& despite the lac" of a contract between the two of them6 H: A plaintiff may not try apply the le"al fiction of a 1uasi@contract to su%stitute a de%t from one payer to another. R: +estitution claims& or quasi-contracts are legal fictions& not rooted in the law! they must be applied with caution. <hey ta"e effect by virtue of notions of natural e/uity and the law. --<o prove quasi-contract claim& 7 must prove that 9 was enriched unAustly. -ere& 9 enriched(he was able to sell the house with shrubbery. :ut didnt benefit unAustly! 7 never had a right to expect payment from 9& who cant be expected to ma"e good on debts owed by the decedent. ant Aust transfer debt to innocent third party on the theory of restitution. Thoughts from Class: --7 probably didnt sue mans estate because it was ban"rupt. --8ccording to Paschall #later case) if 7 went after mans estate first& he could have sued 9 if estate was ban"rupt. --Paschall held you must exhaust contract remedy before you go after the beneficiary for restitution. <his is the law usually held by states. !yeatte v. !yeatte .AriE. 1(:D0 F: 7 and 9 were married& when they agreed that 7 would support 9 while he was in law school& after which he would support her in grad school. ?hen he graduated& 9 passed the bar and accepted a Aob at a law firm. 4ess than a year later& he as"ed for a divorce. 7 had not yet started school. PP: <rial ourt said contract validD appeals court said contract was too indefinite& but awarded restitution damages. Q: ,s 9 liable for restitution damages6 H: Where spouses ma-e a"reement and one underta-es an effort far %eyond the norms of a %asic relationship, which is not matched %y an e>ual effort %y the other spouse, and the relationship dissolves, the remedy of restitution is appropriate. R: ;ou are not entitled for restitution for your efforts doing laundry or other basic duties in a relationship(you are for providing significant financial support for your spouse to attend school if he=she agreed to reciprocate. Thoughts from Class: -- ontract mattered here& as sign that she didnt pay for his education out of gratuity. .sually court doesnt get into /uasi-contract matters in marriage& because services are gratuitous. --,ndefiniteness of his promise also a problem under promissory estoppel. +estitution helps& because we "now what benefit was that 7 conveyed and were trying to get bac" benefit that 7 gave 9.

H.

III.

3heories of interpretin" %ar"ain theory and promissory estoppelG #1o uniform agreement on this! when people disagree at theoretical level& li"ely to emerge in a specific case& when court needs to apply the rules.) 8. <hree types of rules! substantiveD strict formD evidentiary rules of thumb. :. Bar"ain and consideration are su%stantive, not formal, doctrines need to ma-e su%stantive in>uiry into intention of the parties to use theory. 4estatement 781 implies there is somethin" special a%out %ar"ains. 1. ;ou cant say something or do some formal thing and have contract count. a. $xample! you cannot offer %1 to buy a car and have it count as considerationMclearly& the %1 is not real factor in sale of the car. b. ant say , sell this estate for %1 in consideration. 2. 1eeds to be a real bargain 4estatement 78(, comment d *. ?hat is Austification for this6 a. .sed to be that people thought these were mutually beneficial and promoted economic growth& and other promises didnt. <his theory no longer accepted. 1o good theory right now. c. ould we ta"e formal reading of bargain re/uirement6 -ard given nature of JG1. ?ed need to say that is wrong& and go to Pielans an Rose theory. 2. -ow to ma"e bargain formal! all promises #serious ones should be enforced)D all commercial promises should be enforced& etc. . 0eals are a formal rule 1. 0eal is wax with distinctive mar" impressed on a document. 2. -ad effect of ma"ing any promise contained in the document legally enforceable without any other re/uirement. *. 1ow considered archaic 9. /ormal rules serve three functions' 1. Cautionary function(if you ta"e the time to put wax on it& and write it down formally& presumably youve given the contract sufficient thought. 2. 1videntiary function(it would be harder for courts to understand context of a gratuitous promise! this provides evidence that something was done intentionally. *. Channelin" function(lets you channel your affairs through the law with confidence and certainty. ;ou "now where you stand. 2. 0trict form is a rule which provides cautionary& evidentiary& and channeling functions. $. 8 formal rule doesnt say why its a good rule& doesnt explain the ruleD a substantive rule wears its rationale on its face. >. >ormal aspects of promissory estoppelM. 1. $videntiary function! ,f reliance happened& claim a promise was made seems more plausible. ?hy would , have moved 2'' miles if he didnt promise to put me up6 2. autionary function! re/uirement that promisor expects promisee to act should prevent promisor from ma"ing dumb promises. 3. Mbut promissory $stoppel also appears to be a substantive rule! 1. ?hen people do something in reliance on promise it would be unAust not compensate them! substantive view. 7roblem is& this would lead to reliance damages being awarded. 2. >ormal rule says elements of JC' are for evidentiary purposes only& no reason not to enforce relied upon promise.

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$xceptions to rule!G 1. ,n some states& seals ma"e a gratuitous unrelied upon promise enforceable( varies widely from state to state. 2. 0ometimes a gratuitous promise will lift a legal bar that would otherwise impede enforcement of a contract that would otherwise be invalid. a. ?here statute of limitations period has run(too late to get enforcement. ,f you ma"e a gratuitous promise to pay after that point& court will enforce it& but only up to amount to specified in latest promise& not original contract. *. 0ometimes past benefits /ualify as sufficient consideration for a promise. 3enerally& past performance no consideration& since you cant bargain for something thats already happened. a. 4estatement 7:G addresses this exception. 0ection has hints of restitution! mention of unAust enrichment. 7romise cant be gratuitousD and must be able to /uantify the benefit to ma"e sure its not excessive. b. >or 7:G& loo" for! benefit to promisorD harm to promiseeD siNe of the promise. c. 7:G wea"ens gratuitousness re/uirement by placing the burden on the defendant to prove gratuitousness. d. )e v. (c-owin .Ala%ama Ct. of Appeals, 1(9<0 F: 7& wor"ing on clearing bloc"s from a mill floor saves a mans life by falling to the floor with a bloc"& instead of dropping it on the man. 7 suffered substantial inAuries. ,n than"s& the man agreed to pay him %1B every two wee"s for the rest of his life& in light of his permanent disability. -e did until death! his estate refused to continue payments. Q: ?as 9s offer legally enforceable6 H: 3here is a le"ally enforcea%le moral o%li"ation when %ased on a past material %enefit to a person .as opposed to !ust monetary0. R: 9ifferent than cases determined with a mere moral duty& since 9 received a real material benefit from the exchange. --:enefit was so clear& that the promise to pay affirms the fact there was a presumption that the previous re/uest for the service was made. Thoughts from Class: --<here was no bargain! promise based on past performance. --+ule seems to be that any promise made in recognition of a past material benefit is worthy of enforcement! +estatement doesnt li"e this. --<hree possible ways to understand this case! 1) 1o rationale(Aust a gratuitous effort to ma"e someone feel better. 2) >ormal way(evidentiary function. 7osner explains that benefit to the promisor gives him a reason to ma"e a promise #serves as consideration)D evidentiary function to show that promisor was in fact a promisor. >act that man paid benefits his whole life is evidence of promise. *) +estitution argument(court using promise to ma"e a restitution award& not enforce a promise. #Man was unAustly enriched& there is Austice in ma"ing 7 whole. 7romise helps put monetary figure on the restitution and calculate an award.)

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$videntiary rules of thumb 1. :argains give evidence of a promise(nothing special about bargains !er se 2. !i""ans and /ose v. 2an (ierop and Hopkins .H.B. 18G<0 F: 8 merchant in ,reland& came to 7 see"ing assistance in repaying a loan. 7 agreed to repay the loan under the condition that repayment by the merchant was guaranteed by a ban" in 4ondon. <he merchant identified 9 as such a ban"& and the merchant and 7 wrote see"ing 9s agreement to underwrite the loan. 9 agreed in writing to secure the debt. <he merchant went ban"rupt before 7 wrote the chec"& and the 9 sought to renege on its offer. 7 still went ahead and made good on its offer to the merchant. 9 refused to uphold its obligation to 7. Q: ?as agreement between the 7 and 9 enforceable6 'ord (ansfie"d3s Ho"ding: Bnsealed writin" still "ives evidence that the promise was made intentionally. In a commercial conteAt promises are %indin" without consideration. Thoughts from Class: --,n a commercial context& you expect promises to be legally binding. #formal) -->or commerce to succeed& commercial promises must be enforced(not necessary in familial promises. #<his is substantive argument& not formal! saying rational need with a rational basis(something more important about commercial promises.) --9ont need to worry about caution function& because people are more cautious in business contexts& especially when they write something down. --<o say bargain theory is formal rule& must be consistent and say peppercorns count. ant meddle with a strict form& or youll mess up the channeling function. ,f you loo" behind a formal rule to its substance& you destroy the formal rule. -ere& Mansfield says the point of seals is to provide evidence of a deal& if thats the point of it& then it should be Aust as good to write it down and not seal it. <his screws up the formal aspect of the rule. <his is more an evidentiary rule of thumb. Moral obligation as basis for enforcement 1. (i""s v. )yman .$ass. 1:D<0 F: 9s son fell ill on voyage at sea& and came home in bad shape. 7 cared for him for two wee"s. ,n gratitude& 9 offered to pay expenses that 7 incurred while caring for son. 9 later changed his mind and decided not to pay. Q: ,s a promise based on a moral obligation legally enforceable6 H: * can have a moral o%li"ation to repay the de%t, %ut still no le"al o%li"ationthey are not e>uivalent le"ally e>uivalent.

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7riority among theories of enforceabilityH 1. +nly class of contract not enforcea%le under either 4estatement 781 or 7(= is the purely "ratuitous eAecutory contract that has not %een relied upon. 2. :argain theory is preferred doctrine under enforceability of contracts when theres overlap. GBI-H'I of contract cases depend on bargain theory *. 7romissory estoppel still not totally embraced& though more so than before a.. 7romissory estoppel ma"es court as" what Austice re/uires(leaves room for error. :argain theory a more fail-safe rule. :etter claim for plaintiff. b. 0ometimes might want to argue promissory estoppel precisely because you are loo"ing for reliance damages. #see "acar i case#

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,ntention to enter legal relationsC 8. ,n business dealings& presumption of intent to enter legal relations. #<his assumption saves time and money.) :. <hree possible states of intention in personal dealings! 1. <he parties intend to enter legal relations. 2. <he parties neither intend to& nor not to& enter legal relations *. <he parties intend not to enter legal relations. C. /or an a"reement to %e enforcea%le' 1. 3he parties must have intended to enter le"al relationspresumption that personal arran"ements are not intended to %e enforcea%le. #Fnly 1 wor"s) $134819 D. 3he parties must not have intended not to enter le"al relationsno need for showin" of an intent to enter le"al relations. 5eed showin" of intent not to enter le"al relations to avoid enforcea%ility. 4estatement 7D1 #1 or 2 wor"s) ..0. 9. %a"four v. %a"four .H.B. 1(1(0 F: -usband promised his wife *' pounds a month for her care and expenses while he was overseas. -e then decided that they better remain apart& and she began divorce proceedings. 0he sued for his failure to continue ma"ing monthly payments. Q: ,s a financial agreement between husband and wife an enforceable contract6 H: $ost a"reements %etween spouses are not le"ally enforcea%le contractsthere is no intent to enter le"al relations. R: 8greements in marriage are predicated on love& not consideration. $nforcing marital agreements would allow wives to sue husbands for promised allowances and husbands to sue wives for improper use of the allowance #ie. not properly using it to care for their "ids). <oo many cases of spouses using law to settle domestic disputes. Thoughts from Class: --,n family contexts& Fption 2 above is li"ely to apply. 1ot o" in $ngland(need positive step to prove the parties specifically intended to enter legal relations. ---arder to avoid contracts in .0! they follow you everywhereD in .5& not into home. --Fption 8 only one that would not support courts holding! 1 or 2 would wor". /ose and Frank Co. v. 4./. Crompton* 'td. .H.B. 1(D<0 F: 7 had been sole supplier for 9& a firm ma"ing carbon paper. 9 had used product made by :rittains for many years! 1C1* they set up a deal for 9 and :rittians to contract through 7. omplex agreement outlined the terms of their relations and prices. ,t contained an -onourable 7ledge lause stating the parties would carry out agreement in good faith& but the contract not binding in ..0. or ..5. courts. 8fter a dispute among the parties& companies terminated the agreement right after 7 placed a large order that companies had accepted& but not filled. Q: ?as the contract enforceable despite provision specifically stating it was not a legally enforceable document6 H: )ince the parties to the contract did not intend it to %e enforcea%le, and specifically wrote a provision to that effect, it is not enforcea%le. It is essential that the parties shall have intended that their a"reement have le"al conse>uences. R: <he final deal for the shipment was enforceable& since 7 had placed the order and 9 had accepted(it is a separate contract outside of the main relationship.

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/+4$A3I+5 0ome fundamental /uestions in formation doctrine!1' 8. -ow do we understand the connection between the mainly obAective approach that we ta"e and the times we depart from that6 <heoretically we care about subAective intent& but from a practical point of view& we typically we rely on the manifestations of that intent and dont re/uire proof. :. .. . .s more open view to contracts good---is that something we support6

K,,. 3he +ffer11 )11 A))153 I5 3H1 C+$$+5 LAW, . 18, /+4 H16 I5/+4$A3I+5 +5 +//14) 8. :. . 7romise is more than statement of intention(it is a commitment. 9ont need to say words , promise but do need sign of a commitment. 8n offer is a conditional promise! conditional on promisee doing or promising to do something prior to revocation of offer by offerer. Luestion court as"! is promise& offer or agreement there6 ,f so& on what terms6 1. 0ettle this by loo"ing to ordinary meaning of words& together with circumstances in which those words were uttered. a. ?ords can have special meanings in particular commercial contexts. b. 8lso loo" to conduct when determining terms. 2. 8s" whats most plausible interpretation of partys behavior6 4inguistic and otherwise& from the perspective of the other party. 0ometimes appropriate to find a promise& offer& or commitment& even if there is little express language to go by. 0ay that the promise or term is implied in fact. 1. ,mplied in fact means person made the offer even though he didnt do it expressly. ourt believes people have agreed to even though they havent explicitly said it. onstruction contracts #ie. subcontractors)(we say there has been a firm offer& even when its not explicit. 2. ,ts about what actually happened& as opposed to whats implied in law. 7erson ma"es offer as opposed to an invitation to ma"e an offer when he can be interpreted as having said that there is nothing left to negotiate about(all we need for an agreement is your assent. Fairmont -"ass )orks v. Crunden,(artin )oodenware Co. .H6 1:((0 F: 7 wrote to 9 see"ing price /uote for various /uantities of Mason green Aars. 9 sent the information& and stated for immediate acceptance& and shipment not later than May 1B& 1HCBDM 7 responded to the /uote by placing an order. 9 responded that they had no more product available& so the offer is invalid. 7 sued for breach of contract. Q: ?as 9s price /uote a binding offer6 H: A price >uote is usually not an offer' here it was, %ecause of phrase #for immediate acceptance.& Court may find a >uote to %e an offer in special cases. Court also reads in default term' where >uantity not specified in offer, assume %uyer may set >uantity. Thoughts from Class: --<hree ways to read the price /uote! 1) /uoteD 2) offerD *) conditional offer. -- onditional offer would be binding if they had sufficient supplies to meet the offer. -- ourt reads into the offer something from the transactional bac"ground #/uantity of goods)& which was alluded to in the exchange. -ad it not been mentioned& might have been invalid contract because no /uantity specified in the offer. 0ee BCC 71@9=9.d0,.e0 --9efault terms tric"y! when may court read something into contract thats not there& and when does the absence invalidate the contract6

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0wen v. Tunison .$aine 1(9D0 F: 7 wants to buy a store& ma"es an offer of %E&'''. 9 says , could not sell for less than %1E&'''. 7 says& , accept offer to sell for %E&'''& send me the deed. 9 says hes not interested in selling. 7 sued for breach. Q: ?as 9s comment a legally enforceable offer6 H: *?s citin" I1G,=== price mi"ht have %een the openin" for ne"otiations, %ut not a formal offer to sell. R: >irst letter from 7 might have been an offer& but second was not an acceptance since it outlined different terms. Harvey v. Facey . rivy Council 1:(90 F: 7 wrote to 9 as"ing if he would sell him his land and the lowest price at which he would sell. 9 responded 4owest price for :umper -all 7enn C'' 7ounds. 7 agreed to buy the property for that price. 9 bac"ed out and 7 sued. H: *?s response was not an offer to sell the property. R: 9s reply not an offer because he only answered second half of /uestion& re. lowest price. 1ot part where was as"ed will you sell. Thoughts from Class: --,f he wanted to sell he could have said , will sell for PC'' -- oncern that offerer is in some position of vulnerability& because if other party accepts& your bound. Ffferee can either accept or not accept. 7rice /uotes are usually invitations to ma"e offers rather than offers. :ut& some advertisements and price /uotes are offers #e.g. Lefko$ti%). 'efkowit5 v. -reater (inneapo"is Surp"us Store .$inn. 1(<80 F: 9 placed an ad in newspaper stating that on C 8M 0aturday& 2 new %HC.B' scarves and 1 new %1*C.B' lapin stole would be sold for %1 to first to arrive. 7 was the first at the store& in order to purchase the stole. ?as told that the offer limited to women. Q: ?as the advertisement offer or invitation to ma"e an offer6 #,f ad is invitation& buyer must ma"e offer to purchase& which store must accept. ,f ad is offer& buyer can accept and store cant say no.) H: Advertisements are typically considered invitations to ma-e an offer, not %indin" offers. In this case, very specific, definite offer ma-es it %indin"ie. we have one thin" availa%le, at ( A$ to the first person that wal-s in here. R: 0omething intended to an offer if intended that someone could come in and accept. Thoughts from Class: @@Because of possi%ility that store will not have "oods in stoc-, advertisements can?t %e considered offers. --8n item on the shelf with a price tag on it is considered an offer& because no other step is implied. -- ontract law is a very private legal regime! to enforce moral responsibilities or good business practices must loo" to consumer protection or civil rights laws. --0ee! B.C.C. 7D@D=;J 7D@911 on enforcing indefinite contract.

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Assent in the common law1D 8. 9efiniteness(criterion for enforcement of agreement in courtD criterion for finding agreement in first place. 4estatement 799 1. >irst view! must be sufficient definiteness to enable court to determine when a breach has occurred. 2. 0econd view! terms must be sufficient definite on their own to allow enforcement. :. ourt can find an agreement exists even if there are not definite enough terms for court to enforce it(they find that parties agree to something that can be enforced. B.C.C 7D@D=;.%0 and 0econd +estatement. <hey would not do this past. 1. Luestion of whether incomplete agreement is enforceable depends on whether court can supply reasonable terms. 4estatement 7D=; . 9. BCC will fill "aps in price' BCC 7D@D=< and assortment of "oods' BCC 7D@911 ourts will now accept agreements to agree& where some terms are left for negotiation& if rest of agreement provides sufficient context for reasonably focused negotiation. 1. ourts will enforce contractual duty to negotiate& so long as rest of agreement provides reasonable context for negotiation. 2. *efault term in all contracts that contract will %e performed in "ood faith hence, any contract to ne"otiate is a contract to ne"otiate in "ood faith. 3his ma-es %reach detecta%le %y court, which is how we can have enforcea%le a"reements to a"reecourt can see where a party %reached. .see BCC 71@9=;J (attei v. Hopper0 0ge" ay 6orton Co. v. #rmco* &nc. .+hio 1((=0 F: 7 and 9 entered long-term contract for provision of barges to transport iron ore. ontract stated that rates would be set each year based on prevailing rates in the industry. ontract was modified and extended 2 times over a 2* year period. >rom 1CBG-1CH*& parties agreed to rates published in 0"illings Mining +eview. 8fter and iron-industry downturn in 1CH*& the parties began having trouble agreeing to rates& which led to legal proceedings. Q: 9id parties intend to be bound despite the failure in the pricing mechanism6 H: arties a"reed to su%mit to a reasona%le price term, and court may set that price. Cites 4estatement 799. Thoughts from Class: --3ood example of court finishing contract where one loo"s complete. --7 wants specific performance on negotiation of the priceD 9 wants declaratory relief throwing out the contract on grounds there is no price. --?hen awarding specific performance& often need officer of the court to supervise parties and ma"e sure they follow court order. -- ourt loo"s at what parties were thin"ing when they revived and extended their relationship to 2'1'& 1F< at point pricing negotiation brea"s down. What matters is the intent at the time of the a"reement, not what parties want later on.

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'ucy v. 7ehmer .Kir"inia 1(<;0 F: 9 went for drin"s with 7 and discussed the possibility of selling him their farm. 8ccording to 9& he believed the conversation was a Ao"e& including when he wrote a contract to sell the farm for %B'&'''& which he had 7 and his wife sign. -e realiNed it was serious when 7 as"ed to formaliNe the deal by exchanging %B. 8fter the conversation& 7 raised %2B&''' from his brother& by selling him a sta"e in half the farm. -e then called 9 to close the dealD 9 reneged. Q: ,s a contract that might have been negotiated in Aest by one party enforceable6 H: 3he test for the presence of an enforcea%le contract is the manifestation of intent not %y the parties, not their su%!ective mental states. R: 7 clearly believed that the conversation about sale of the farm was serious& and his belief was not unreasonableD 9 actually tried to reinforce it. -- lear outward expressions of assent! rewrote contract after an obAectionD clause providing for inspection of titleD Qehmer let 4ucy wal" away with contract. Thoughts from Class: --<he obAective theory of assent provides security of transactions! want people to "now that the contract will be enforced. :ased on pragmatic considerations& doesnt necessarily flow naturally from contract law. --?hat we really are most concerned about is the subAective thin"ing of the parties& but& subAective states are hard to prove(you could change your mind after the fact or say you intended something different. Much higher transaction costs& as courts would need to underta"e more difficult test. --0ince its difficult to enforce meeting of the minds test& we apply an obAective approach because its more efficient and consistent to implement. --0addled offerer with burden of what they said& since they are in best position to "now what they mean. Ma"es sense to put burden on them to ma"e themselves clear. --,f spea"er can prove that hearer "new full well that he didnt mean what he said& than its possible to enforce what he really meant& instead of what he said. ,t is sometimes necessary to loo" behind the obAective theory. <hough& generally go with obAective test. --;ou cant snap up an offer thats too good to be true and then have it enforced& since you "now that the offerer didnt mean it& ie. you mean to sell something for %1&'''& you write up an offer& and leave off a '(the person cant Aust buy the thing for %1''. &!!lying contract theories to 'o()ecti*e theory of assent+: 1. Moral obligation of promise! obAective theory is problem for >ried& because its hard to enforce contracts on moral grounds if parties had different ideas about what they did. 2. 0ocial good! it would be better to do a subAective test& but perhaps not practical. Toys* &nc. v. F.(. %ur"ington Company .Kt. 1((=0 F: 9 operated mall& in 7 leased space for five years. ontract had option for 7 to renew for five years& with one years notice& at rate to be renegotiated based on then prevailing rate within the mall. 7 sought to renew& but was given higher price than expected. 8fter ten unsuccessful months of negotiating& mall declared the contract void and announced it would lease to another store. Q: ?as renewal option a binding offer6 H: +ption need not contain all terms of contract, so lon" as it has practical and o%!ective method for determinin" -ey terms. When a provision is unclear, you should construe it a"ainst the party that drafted it. Thoughts from Class: --1ot a . case since in involves real estate. :ut& court can accept open price term! see BCC 7D@9=<.

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'eonard v. !epsico .).*.5.6. 1(((0 F: 7 saw commercial advertising 7epsi points! showed teenager wearing various 7epsi products and listing point value. 8 -arrier Oet pic"s the dude up from school& and -arrier Oet G&'''&''' million 7epsi 7oints appears on the screen. 7 sent in 1B 7epsi 7oints and %G''&''' #could buy points for 1' cents each) and re/uested Aet. 7epsi wrote bac" the offer was a Ao"e. 7 sued. Q: an a commercial intended to be humorous /ualify as enforceable contract6 H: An offer is not %indin" when it is so o%viously a%surd and that no reasona%le person could have eApected it to %e serious. R: 7lanes function #a war plane designed to attac" surface and air targets) and price #%2* million) made it impossible to believe that the plane was pic"ing the child up from school or being offered by 7epsi. --Fffer not sufficiently definite! it advised viewers to see the catalogue for details. Corinthian !harmaceutica" Systems* &nc. v. 'eder"e 'a s .).*. Indiana 1(:(0 F: 7 placed an order from 9 for 1&''' vials of vaccine& after learning that a maAor price increase was imminent. 9 sent 7 B' vials of vaccine right away at the old price& but the remainder later at the new price. ,t said with its first shipment that the lower price was a favor& and not an acceptance. Q: ?as 7s offer accepted at the time it placed its order or 9 sent its first shipment( or when the later shipment went out6 H: 3he initial shipment of "oods was not acceptance of the entire order' the <= vials was a shipment of non@conformin" "oods, accompanied %y notification, pursuant to BCC 7D@D=G.%0. R: .nder BCC 7D@D=G.%0& a shipment of nonconforming goods& accompanied by a letter informing the recipient& is not acceptance of an offer. --,t would been acceptance had 9 shipped non-conforming with no explanation.

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4evocation19 8. Frdinary offers can revo"ed by offerer any time prior to acceptance! after acceptance& offerer can no longer revo"e. 1. +evocation can be indirect #4estatement 7;9) 2. +ickinson v. +odd .Chancery *ivision 1:8G0 F: 9 offered to sell his property to 7 on 1'th of Oune& and left offer open until morning of 12th. 9 then began negotiating with someone else& prompting 7 to go to his mother-in-laws house where he was staying& and drop off a formal acceptance. 9 never got the acceptance& and went ahead and sold the property to someone else. 7 found him the next wee"& handed him a formal acceptance& and demanded the property. 9 refused& and 7 sued. Q: ,s there an enforceable firm offer or Aust an offer6 H: 1o consideration for promise to hold offer open for two days& so offer wasnt binding. 9 was free to sell to anyone else at any point& until he received formal acceptance. R: 8bsurd to allow someone to claim property from a new owner once sold in a legitimate exchange& on grounds that an offer had previously been made to 7. --1o meeting of the minds! one party thought offer binding& other no. Thoughts from Class: -- ourt found it was a firm offer& but not an option that can be legally enforced. --7romissory estoppel now important in grounding firm offers(but& this is an old case and promissory estoppel not commonly used at this point.

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+evocation of offer to public at large #4estatement 7;G) Car"i"" v. Car o"ic Smoke %a"" Co. .L.B. 1:(D0 F: 9 advertised any person who caught the flu or cold after using its product as prescribed entitled to P1''. 9 used the product as instructed& caught flu& and demanded her money. ?hen the 9 refused to pay& she sued. Q: ?as 7s acceptance valid despite failing to inform 9 in advance of her intention to ta"e them up on the offer6 H: If an offerer eApressly or implicitly ma-es clear that performance is sufficient acceptance without notice, then additional notice is unnecessary. Thoughts from Class: --9 would have to put out additional ad in newspaper& or otherwise inform public of intent to revo"e offer.

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,f an offeree reAects an offer& offer lapses without need for revocation by offerer. ,f offeree of an enforceable firm offer reAects the offer& the offer does not lapse automatically(doesnt lapse until offer expires. #4estatement 798) 1. >irm offers are irrevocable offers to "eep offer open until it expires& so long as the offer is an enforceable one. ."sinore Union ."ementary Schoo" v. Kastorff .CA 1(G=0 F: 9 submitted a contract to ma"e improvements to a school. 9 waited for estimates from subcontractors and wor"ed on his proposal until the last minute. -e made a clerical error& forgetting to bring the cost of plumbing from one column to the total cost. ?hen the school district opened bids& defendant was %11&*'E less than the next bid. 9 was as"ed if his bid was correct! he said it was. 9 was awarded the contract then realiNed his error the next day. -e immediately called to withdraw his bid& and appealed to the school board for the same. <hey refused to cancel the award and sent him notice in writing that he won. ?hen refused to perform& school awarded the contract to the next lowest bidder& and sued 9 for price difference. Q: ,s 9s bid a binding offer6 H: )chool district -new of the error %efore sendin" written notice of the award actin" under an assumption you -now to %e false must %e treated as a mutual mista-e for purposes of rescission. Thoughts from Class: --8 contract bid is considered an irrevocable option! leaves the ability to buy or sell something at a fixed price for a certain period of time. ,n alifornia& bids made to government agencies are irrevocable by statute. --,f bid was revocable& why does it matter when bid was accepted6 :ecause you cant accept an offer if you "now there was an error. ,f other side "nows you made an error& you are not bound to what you said. --0upreme ourt seems to ta"e for granted that communication of acceptance must be part of contract formation. ?hen parties are accepting contract by return promise& you must let other party "now what you are going. .ntil theres notification& theres no promissory acceptance. <echnical issue decides this case! do you need to be notified of promissory acceptance for the promise to ta"e6 ,f you dont& then 5artstorff loses. --5ey is different interpretations of when acceptance too" place! 0upreme ourt seems to believe it occurred on 8ugust 2H when letter was sentD trial court seems to thin" 8ugust 12& when school board voted to accept bid.

9.

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$odes of Acceptance1; 8. Ffferer is master of offer(may set conditions on time& place and type of acceptance. &nternationa" Fi"ter Co. v. Conroe -in* &ce 8 'ight Co. .3M 1(D<0 F: 7 offered to sell a purifier to 9. <he written proposal was to become binding when! Maccepted by the purchaser and approved by an executive officer of the ,ntern. >ilter o. at its office in hicago. 9 received proposal and accepted in writing. 8cceptance sent to company K.7. who wrote& F5 and signed form. 7s salesman sent letter to 9& confirming agreement and the terms of sale. 9 rescinded order& claimed contract was invalid since it received no formal acceptance from executive of company. Q: 9id 7 need to notify 9 of its acceptance of their offer6 H: Conroe dispensed with need to "ive notice, since contract specifically made acceptance contin"ent on K. .?s acceptance. Contract is %indin" once some%ody in Chica"o wrote o-. R: 4etter from salesman isnt relevant! but& if letter was necessary& contract would be binding because letter reasonably implied that terms of acceptance had been met. Thoughts from Class: --?hy do we need notice of acceptance in the first place6 4estatement 7<G says must ma"e reasonable effort to provide notice of acceptance& except when offer manifests different intention. --0eries of events in this case! 7 ,nitial proposal #invitation to ma"e offer) 9 ?rites accepted& deliver by *=1' #this is the actual offer) 7 K.7. write o" #this is acceptance of offer) :. . <o be effective& acceptance need not restate terms of offer or contain words , accept 0ome offers may be accepted by return promise or performance. #4estatement 79=.10) 1. Bnless otherwise specified, may %e accepted %y either medium. #4estatement 79=.D0) 2. When there is dou%t a%out which was meant, either o-. .4estatement 79D0 *. .ver,Tite /oofing Corp. v. -reen .La.App.1(<<0 F: 9 hired 7 to repair roof. Made arrangements for the wor" through a salesman. ontract stated 9s offer to hire 7 would be considered accepted by appropriate official signing off or 7 commencing wor". ?or" to be done on credit& delay between deal and 9s credit approved. 7 sent wor"ers to 9s house& found other wor"ers doing Aob. 9 announced that contract was void. Q: 9id 9 actually notify 7 before commencing performance of wor"6 H: 3he wor- commenced when the company loaded and transported the materials and wor-ers. 3hen * too late for * to %ac- out of deal, since provided reasona%le notice of acceptance. Thoughts from Class: ---ow can this be distinguished from ?hite6 :ecause contractor showed up to implicitly accept the promise& and language in the offers was different(in ,hite& binding upon agreementD in -*ertite& either upon acceptance or performance. --)ee 4estatement 7<; and 7GD on acceptance by performance. --?hen offer calls for acceptance by way of return promise or performance& acceptance by performance is implicit promissory acceptance of entire Aob.

2.

--7roper mode of acceptance is determined by the offer! where offer doesnt state otherwise& either promise or performance will do. #""ied Stee" Conveyors* &nc. v. Ford (otor Co. .Gth Cir. 1(G=0 F: 9 sent 7 order for wor" in 1CBB& in which it voided a provision in its standard contract holding 7 liable for any harm to 9s employees caused in the course of 7 wor"ing on 9s premises. ,n Ouly& 1CBE& 9 sent a new wor"er to 7& without voiding the provision. <he order stated that the contract would be binding once accepted. ,t further stated that 8cceptance should be executed on ac"nowledgment copy which should be returned to the buyer. 7rior to sending executed copy of the form in 1ovember& 1CBE& 7 began wor"D ee inAured. Q: 9id 7 accept the new contract(which would have held it liable for the inAury(prior to formally returning an executed agreement in 1ovember6 H: If one party ma-es an offer and re>uests a return promise, and other party instead does the act to %e promised in lieu of actually ma-in" the return promise, it >ualifies as acceptance. R: Fffer 9 made to 7 did not propose an exclusive means of acceptance. ?hile it suggested an ac"nowledgment copy& other forms of acceptance valid. --:y performing the wor"& 7 implied to 9 that it had accepted 9s offer( forfeited the right to ignore or challenge the terms of the contract.

9.

romissory acceptance re>uires notice .4estatement 7<G0. 1. 5o notification is needed when acceptance is %y performance, unless it is called for in the offer. 2. However, it must %e possi%le for offerer to find out reasona%ly promptly that the offer has %een accepted. 4estatement 7<; *. )hite v. Cor"ies 8 Tift .5.6. 1:810 F: 7 was a builder who sought to renovate 9s office building. 8fter discussion& 9 sent letter stating! .pon agreement to finish the fitting up of offices BG :roadway in two wee"s from date& you can begin at onceM.. 7 did not respond& but immediately began purchasing lumber and other supplies for the Aob. .naware of 7s actions& 9 sent follow-up letter rescinding the offer. Q: 9id 7 ordering lumber count as acceptance& or did 7 have duty to notify6 H: When offer depends on promissory acceptance only, offeree must provide notice in speech or in a way that informs * of acceptance R: 4etter accepts promissory acceptance only because it says upon agreement. --9 does not need to "now of acceptance to be bound #had 7 mailed letter& and 9 not yet received it when they rescinded& thats o"). --7 could have started wor"ing in a way that showed he was specifically wor"ing on that Aob(fact that he bought the wood doesnt mean he accepted because contractors buy wood all the time. -ad he showed up and started wor"& it would have been an implicit promissory acceptance.

$. >. 3. -.

Lapse of time and offer eApiration 4estatement 7;1 Can have indirect revocation when offerer ta-es definite action to imply no intention to enter contract, and offeree finds out. 4estatement 7;9 When offer calls for acceptance %y performance or promise, %e"innin" of performance counts as acceptance and implied promise to complete. .4est. 7GD0 ?here acceptance only called for by performance& result is unilateral contract.

,.

In "eneral, silence is not acceptance .eAceptions in 4estatement 7G(0. Would %e oppressive. Can construe conduct as implied promissory acceptance, even if nothin" has %een said. Ho s v. (assasoit )hip Co. .$ass. 1:(90 F: 7 sued for payment of eels"ins he had sent to 9& a ma"er of whips. 7 had sent eels"ins unsolicited to 9 before& and they had been accepted and paid for. Q: an silence count as acceptance in case of existing business relationship6 H: When you have a normal course of %usiness dealin", a contract can %e inferred even if one party doesn?t formally accept, if that?s the way you normally do thin"s. arty must let other -now if it plans on chan"in" the arran"ement. )ee 4estatement 7G(.c0 R: 9 said nothing& yet held onto eels"ins for an unreasonable period of time. 7 was warranted in assuming they were accepted. Thoughts from class: --?here you ta"e advantage of an offer& which you "now was intended to be accompanied by compensation& you must compensate. 4estatement 7G(.a0 --,f 9avids sends you unsolicited coo"ies with card saying if you eat these& youll need to pay for them you will need to pay if you eat them. :ut& if you throw them out& you wont need to pay(no affirmative obligation to do something if the offer wasnt solicited and you have no ongoing relationship.

R,.

#$irror Ima"e& and #Last )hot& rules1< 8. Mirror image rule(acceptance must state terms identical to those in offer. #from common law(changed by BCC 7D@D=8) :. ,f a purported acceptance does contain varying terms& then that purported acceptance becomes a counteroffer. 1. <hat counteroffer is a reAection of the original offer& which no longer stands. 2. Must distinguish different terms in the reply from mere re/uests for proposals or modifications. *. (innp"is and St. 'ouis /ai"way Co. v. Co"um us /o""ing,(i"" Co. .B.). 1::G0 F: 7 and 9 exchanged letters bac" and forth pertaining to contract. 7 as"ed price for 2&'''-B&''' tons of steel. 9 sent response& then 7 as"ed for 1&2''' tons. 9 said that they could not supply that /uantity at that price. 7 replied and as"ed for 2&''' tons instead. 9 declined and denied existence of a contract. Q: an a company turn down an offer and then later accept it6 H: +nce you decline an offer or proffer a modified acceptance, the contract is void and must %e rene"otiated. Contract only valid if ori"inal offerer accepts new terms or declines terms %ut renews its ori"inal offer. . 9. 4ast shot rule(when the last terms in the offer are not explicitly agreed to& but conduct implies acceptance& the terms of the last counteroffer will be considered accepted. 1. 4ast shot rule favored offererD . favors offeree. +evocation of offers that invite acceptance by performance only where offeree has started to perform #:roo"lyn :ridge problem) presents difficulty! 1. 4estatement 7;<! applies only where offer did not invite promissory acceptance. >ind implied option contract. ,mplicit promise not to revo"e offer once performance begun! hold promise enforceable under promissory estoppel. 2. Ffferee is not bound at any time to anything& because it is a unilateral offer( offeree will only get paid if he performs& so he can decline at any time. *. 3enerally get unilateral contracts in offers to the public li"e Carlisle or as"ing someone to find your cat. 1ot common in bilateral business dealings.

2. R,,.

B. /irm offers1G 8. 8 firm offer is an offer plus promise& express or implied& to "eep offer open for a certain period of time. 1. Must as" if it is enforceable 2. /agosta v. )i"der .Kt. 1((10 F: 7 attempted unsuccessfully to purchase a shop in 1CHB. ,n 1CHG& the property was for sale and 7 tried again. 7 sent offer to buy along with %2&'''& then began wor"ing to secure financing. 9 returned the %2&'''& but agreed to sell the house for %HH&''' any time before 1ovember 1st if 7 met him with the money at a specified ban". Fn Fctober E& 9 informed 7 that he was no longer selling. 7 showed up as planned& with financing& Fct. H. 9 didnt show! 7 sued. Q: 9id 9 have right to rescind his offer6 H: *?s offer to sell could only %e fulfilled %y an actual eAchan"e of moneyno consideration until that happened. R: 7s loan was not consideration& since it was not specifically bargained for by the 9. 7 sought financing before the formal offer was made& so its not exchange for promise. --$/uitable estoppel inapplicable because no facts "nown to the 9 and un"nown to 7. 7 had no definite reason to believe the property was his& so 9 not accountable for 7s reliance on his offer. +eliance was not reasonable. Thoughts from Class: --?as a firm offer& but not enforceable! 7 performed& but before the firm offer was made& so it could not have been made to generate the promise. 8lso& offerer didnt want the performance. 4ames %aird Co. v. -im e" %ros. .Dnd Cir. 1((90 F: 9& a subcontractor bidding for a public construction proAect in 78. 9 sent estimate to 7. Fffer concluded with! ,f successful in being awarded this contract...we are offering these prices for reasonableMprompt acceptance after the general contract has been awarded. 0ame day that 9 sent bids& he realiNed his estimate was half of what it should be. -e sent new numbers to the same contractors rescinding his offer and stating hed send a new estimate& but too late for 7 to change estimate before submitting his bid to state. 7 was awarded the contract! he had already received notice from 9 in writing rescinding his offer. 7 still formally accepted& and sued when 9 refused to perform. Q: ?as 9 permitted to rescind his offer6 H: 3he wordin" of the contract ma-es clear that the offer cannot %e accepted until after the %id has %een awarded%y then * had rescinded. R: .sually& an offer cannot be accepted once it has been withdrawn. ould have crafted a contract where 9 was bound once 7 put in his bid. <his would have made sense& since 7 would be committed to his bid once it was formally accepted& and would suffer as a result of 9 bac"ing out. :ut they didnt. --<he didnt intend to be bound at the point the bid was submitted! either one could have bac"ed out then. Thoughts from Class: --1o firm offer at all. ant read for prompt acceptance as offer to leave contract open for specific period of time.

an handle situation! subdivide contract(find it has different stages( hold the performance thus far as full acceptance as part of the contract. an interpret offer as calling for acceptance by performance or promise.

*.

--1o promissory estoppel(no 7$ argument when no promise to base it on. :. 7romissory estoppel not commonly used as grounds to enforce firm offers. >ollowing Drennan& courts willing to find an implied in fact firm offer and enforce that using 4estatement 7:8.D0. 1. ?hats the different between 4estatement 7:8.D0 and 4estatement 7(=6 4estatement 7(= refers to a promise& 4estatement 7:8.D0 says offer. 2. -ow can you reconcile these6 ,n 4estatement 7:8.D0& an offer where an offerer should expect reliance is an offer where its safe to infer a promise which binds the promisor. *. +rennan v. Star !aving Co. .CA 1(<:0 F: 9& a subcontractor& offered to provide paving services for a school proAect on which 7 was bidding. 8s customary in industry& call came on day bids were due. 8fter winning the bid for the overall contract& 7 visited 9 to inform him of his winning bid. 9 immediately informed 7 that he had submitted his bid in error and would need to rescind the offer. 8fter 9 nearly doubled his bid& 7 spent several months see"ing e/uivalent offers. ?hen he could not& he accepted the lowest bid available and sued 9 for the difference. Q: ?as 9 permitted to rescind his offer6 H: acted in reliance on *?s promise in way that should have %enefited %oth parties' * may not rescind after has relied. artial performance, if "rounded in reasona%le eApectation, precludes offerer from %ac-in" out of promise. Thoughts from Class: --.sual view that general contractor is in more vulnerable position because its bound to owner putting out original bid. --0ubcontractor can avoid being bound by only ma"e bids in a way that he isnt bound when general puts in his bid #.im(el "ros/#. +arely wor"s that way. -- ontractor couldnt accept subcontractors offer if he "nows he made a mista"e(but here he accepted first.

9.

4estatement 7:8.10 offers another route& which seems to imply a formal rule. 1. >or firm offers& a bargain with a real or sham consideration will be legally enforced. ,t seems if you offer a peppercorn& you can ma"e your offer binding. 2. .nusual formal rule within +estatement& which normally has substantive rules. 8 true formal route is in BCC 7D@D=< 1. 8n offer from a merchant to buy or sell goods& put down in writing& gives assurance it will stay open. 2. <his formal device only exists for merchants.

R,,,.

B.C.C. 1G

#.. . . written by onference of ommissioners on .niform 0tate 4aws. 8merican 4aw ,nstitute helped out. 8dopted by every state except 4ouisiana. . has seven chaptersD were concerned with two! 1) 3eneral provisionsD 2) 0ales.) 01nly res!onsi(le for sections of 2CC iscusse in class or referre to in rea ings3$hen no section is a!!lica(le transaction of merchants or goo s4 assume common la$ go*erns/#

0,here 2CC oes co*er a to!ic an it5s not in common la$4 on5t nee to o*erturn common la$3this $on5t come u! on e6am/# 8. BCC %uilds on common law' trumps it when they conflict, since BCC is le"islation. 71@1=9 :. . lets parties bargain or contract its provisions(can agree to ignore them. 71@9=D . . 8rticle 2 only applies to exchange goods. BCC 7D@1=D a. #Noods& defined in BCC 7D@1=<. b. +eal estate and land not goods! theyre not movable. c. ,ntellectually property not movable if its Aust ideas. d. 9oes not apply to services contracts. --;ou buy a washing machine& price includes delivery and installation! then what6 Must determine if primary transaction is for the good or the service. 9. 0ome . sections apply only to merchants. a. #$erchants& defined in BCC 7D@1=;, $. BCC' relaAed approached to formation with respect to definiteness. BCC 7D@D=; >. .sual course of practice in an industry important for filling gaps in contract. 0ee! BCC 71@9=9.d0,.e0 >. 7art * of article 2 contains numerous gap fillers(court will use them to complete an otherwise incomplete agreement. 0ections on! 1. +pen price terms! BCC 7D@9=< 2. Where specifications on assortment of "oods at %uyer?s option. BCC 7D@911 *. Implied warranties and ways they can %e disclaimed! 7D@91;, 7D@91<, 7D@91G 3. Battle of /orms in BCC 7D@D=8 1. 0ection BCC 7D@D=8.10& with BCC 7D@D=;(do the writings form a contract6 <urns on two things! a. 9id variation in offerees reply concern such fundamental matters that its not be plausible for offerer to construe reply as an attempt to accept6 ourt must determine if its legitimate attempt to accept the offer. 4oo" at terms at the heart of the deal #price& what youre loo"ing to buy.) b. ?ords after comma BCC 7D@D=1.10(did reply ma"e offer explicitly conditional on offerers assent to the additional terms6 #9ont find this often--reply usually says we accept on our terms(does not mean that acceptance is explicitly conditional on offerers acceptance of those terms. <his is seller trying to eat its ca"e and have it too. 0eller usually doesnt want to actually void the contract.) 2. $ven if there are varying terms& can still be acceptance if not wiped out in one of ways mentioned above. an establish that writings are contract. *. ?here there is a contract& BCC 7D@D=8.D0 governs the terms of the contract. a. 9oing nothing about the additional terms does not /ualify as assenting to them since silence is not acceptance. ?hen trying see if theres been express consent to the additional terms& performance wont count as assent! must expressly assent to conditional terms&not contract in general. b. 1ew proposals are also automatically accepted& unless they fall into one the categories in BCC 7D@D=8 .a0, .%0 or .c0. c. 6orthrop Corp. v. 'itronic &ndustries .8th Cir. 1((;0 F: 9 offered to sell 7 printed wire boards. Fffer contained a C'-day warranty for the goods. 7s return invoice contained a warranty of unlimited duration. 8fter C' days had elapsed 7 tried returning some defective boards. 9 refused to accept on grounds contract was expired.

Q: ?hat happens if offerees response contains different but not additional terms under 0ection BCC 7D@D=8.D06 H: When parties convey different material terms to an a"reement, and neither is eAplicitly accepted, neither should prevailthe court should turn to neutral lan"ua"e in BCC to fill #"ap& in the contract. R: 1o consensus on how to interpret the word different& which is not explained in the . as clearly as additional. <hree competing views! 1) the two terms negate each other and neutral terms from the . fill the gapD 2) the offerer term drops out& and offerees term controlsD *) e/uate different with additional& ma"ing terms both proposals& and meaning offerees terms control if the difference is material and he does not expressly agree to the new terms #the terms merely becomes part of the contract if they are immaterial). -- ourt prefers view *& since different terms are inherently additional terms and *ice *ersa. $vidence that omission of different in J2-2'G#2) was drafting error. -owever& this has been accepted by very few courts. #-ad court applied this view& 7s counteroffer was materially different and not explicitly accepted by 9D 9s offer& therefore& would control.) --MaAority of courts prefer view 1& which drops both clauses. Kiew holds that offeree didnt accede to offerers terms& but both parties would still rather go ahead with the contract. >airest thing to do is assert a neutral provision. ourt adopts this view to promote uniformity. d. +orton v. Co""ins .Gth Cir. 1(8D0 F: 9 supplied carpets to 7 over three-year pear period. 7 discovered carpets not made of material advertised& and sued for misrepresentation. 7 would place orders by calling them in. ,t would receive the order along with a contract in the mail& which specified numerous means of acceptance& including when the buyer accepted and held the goods for ten days without obAection. 9 argued that terms on the bac" of its contract re/uired the dispute be settled in arbitration. <he front of the contract said its acceptance was contingent on agreement to all terms on the reverse side. H: 4emanded. .see reasonin"0 R: ?ere 9s forms acceptances or ac"nowledgments6 -inges on whether binding oral agreements were reached on phone before forms and goods mailed. --9id oral offer on phone embody arbitration agreement6 ,f it did& and 7 accepted& he is bound. --7 cannot be found to have expressly consented to offer sent to him& since some modes of acceptance #ie. silence) were illegal. --,f terms not explicitly assented to& /uestion of being binding depends on materiality of arbitration clause. Luestion remanded. Thoughts from Class: --9oes the arbitration clause /ualify as material6 0eems li"ely if you loo" at definition for arbitration @@8ccepting the goods is a valid form of acceptance BCC 7D@D=8.10. >act that offeree replies with non-identical terms from original offer does not mean that its not acceptance.

e.

Union Car ide Corp. v. 0scar (eyer Foods Corp. .8th Cir.1((10 F: 7 sold casings for sausage to 9 from an address outside of hicago to avoid city taxes. 8fter several years& tax authorities assessed 7 with %HH&''' in bac" taxes. 7 paid and sought to recover the money from 9 on grounds that indemnity provision on its contract made 9 liable. Q: ?as indemnity provision a material change to contract not assented to by 9 under BCC 7D@D=8.D06 H: A contract provision that is a surprise to one party and causes them hardship is not enforcea%le. R: 8n alteration is material if consent cannot be presumed. ,f a provision is a total surprise to a party& and the surprise causes hardship& provision cannot be considered enforceable. --,f the party has agreed to the provision& they cannot later challenge enforcement on the grounds that it would be a hardship. ---ardship not distinct criteria in this case! it is conse/uence of surprise.

2.

?here writings do not establish a contract& but it is accepted in conduct& 7D@D=8.90 tells you what those terms are. a. 0plits the difference(adopts only terms that both parties agree to and fills in holes with gap fillers. b. C. &toh 8 Co. 9#merica: &nc. v. 4ordan &nt3" Co. .8th Cir. 1(880 F: 7 sent 9 purchase order for steel coils. 9 returned the form with provision saying sellers acceptance is expressly conditional on :uyers assent to the additional or different terms and conditions set forth belowM Fne of those terms was an arbitration clause. 7 sued 9 on grounds that steel was defective and had been delivered late. Q: ?hat are conditions of a contract created by conduct #BCC 7D@ D=8.90) rather than exchange of forms #BCC 7D@D=8.90) under the . 6 H: 3erms eAcluded from the contract %ecause of disa"reement %y the parties cannot later %e %rou"ht %ac- in as #supplementary terms.& 5ew terms permitted under BCC 7D@D=8.90 are limited to those covered %y BCC #"ap@filler& provisions. R: <his ruling still provides sellers substantial benefit if they use acceptance is strictly conditional clauses. 0eller has option of proceeding with the contract despite the buyers failure to agree& but he must then forfeit the clause that is not agreed to. ,t would be unfair to give seller advantage of the right to cancel the contract if he chooses not to proceed& and right to impose the terms on the buyer if he does. 1ew . terms(proposed revisions to BCC 7D@D=G and 7D@D=8. 1ew approach embraces method of BCC 7D@D=8.90 to deal with /uestion of what the terms of the contract are& unclear if these changes will be widely accepted.

B.

-.

!roC+* &nc. v. 7eiden erg .8th Cir. 1((G0 F: 7 manufactured a telephone S database& based on numbers from *&''' phone boo"s and sold product to companies loo"ing for customers& and consumers. 0old to consumers for different price than companies! contract prohibited use of consumer versions in commercial applications. omplete restrictions printed inside box& and encoded in software to appear when product first installed. Futside of the box stated

that purchase comes with restrictions stated inside the software. 9 bought a consumer version& and started a businesses where he sold the information to others. Q: ?as 9 bound by the terms of the contract contained inside the pac"age6 H: Bnder BCC D@D=;.10 a vendor may invite acceptance %y conduct, and propose limitations on the conduct that constitutes acceptance. If %uyer purchases, he accepts those terms. He can return product if he feels cheated or li-e his purchase wasn?t worth it "iven what he learned' %ut he can?t violate the terms. R: <his happens all the time(people should "now whats in the box. <he law should follow common practice. --,mpractical to put all terms on the box. Thoughts from Class: --Oudge trying to brea" down traditional need to determine offerer and offeree(says it doesnt matter& since there is obviously an offer and an acceptance. -- Most criticiNed part of decision is his reference to airline tic"ets and concert tic"ets& since you really dont "now the terms on those& and as such& they are not binding. --J2-2'G not relevant to this! J2-2'G is about case where the offer and acceptance are different. -ere& no different terms expressed in the acceptance. --?ays to loo" at this case! 1) 0eller gave notice of hidden terms& buyer "new they were there& he could have seen them& he chose not to& he waived his right to obAect to them later. 2) ?e have these transactions& we need to ma"e them wor"& we should say that item is conditionally accepted simply by being purchased. 0ale conditional on buyer not disli"ing terms inside box. --5otice plays very important role(purchasers must "now there is stuff in the box. 8nalysis wont wor" if that is a total surprise. ?or"s in .ate$ay because people expect a warranty with the product(wor"s in ProCD because notice of terms on the pac"age. Fnce "now this& your purchase is conditional on acceptance of the goods. -->ormation of the contract happened over time(didnt matter who was offerer and who was offeree. :oth parties understood that the contract wasnt accepted until all terms within the box were read. --?hen does acceptance ta"e place(when buyer purchases. :ut& its a conditional acceptance(if he doesnt li"e the terms& he can return the goods. ,. Hi"" v. -ateway ;<<< .8th Cir. 1((80 F: 7 purchased 3ateway computer& which was delivered in a plain box. 7 was dissatisfied with performance and tried to return the computer. 9 said customers were bound by arbitration clause contained in the warranty and could not sue. 7 sued on grounds that contract came in unmar"ed box& and no way of "nowing it was there. Q: ?as 7 bound by 9s warranty6 H: >or 9. R: 9s ads stated its computers came with limited warranties& and 7 did not see" to discover these terms in advance. 7 had three ways of finding out what was in the warranty! 1) calling the company and as"ing for a copyD 2) chec"ing trade publications or other sourcesD *) waiting to get the product& opening the box& and then chec"ing. :y choosing the third option& and "eeping the computer past the warranty date without complaining& 7 accepted 9 offer.

R,K.

recontractual Lia%ility1: 8. 4iability that emerges during the negotiation stage. 7arties are negotiating towards an agreement and say and do things that create liability.

:. .

ourts generally reluctant to enforce agreements to agree(but it will sometimes. Mutual promises to negotiate become mutual agreements to negotiate in good faith. Hoffman v. /ed 0w" .Wisc. 1(:<0 F: 7 owned and operated a ba"ery in ?isconsin& and wanted to open a +ed Fwl store. 7 began negotiations with a representative from the franchise& who made numerous suggestions about how he could prepare to open a store& including selling his store& putting a down payment on property in another city& and moving there with his family. 8fter extensive negotiations& the deal fell through& when 9 raised the price beyond what 7 would pay& and far beyond the %1H&''' he has promised would suffice. Q: ould 7 be awarded damages in this case6 H: romissory estoppel not limited to situations where contract is present' it wor-s whenever you have a promise li-ely to cause for%earance, for%earance and in!ustice that could only %e avoided %y enforcement. R: ,nAustice could only be avoided if 7 gets some relief from losses suffered as a result of his reliance on 9s promise. 9 encouraged 7 to rely on this promise. Thoughts from Class: -- ourt is not saying they dont care about definiteness in enforcing the franchising agreement. ,ts enforcing a promise that %1H&''' would be enough to start a franchise. -- omplex remedy issue here! court implies that trial court had tried given expectation damages& whereas they should have given reliance damages. $xpectation damages too speculative. :ut one could even argue this is a form of expectation damages! that youd at least ma"e enough money in the franchise to at least ma"e up your losses. Cy erchron Corp v. Ca""data Systems +eve"opment* &nc. .Dnd Cir. 1((<0 F: 7 developed computer wor" stations to be installed in air command centers being built by the 9 for 9F9. ,n 9s purchase order& specified the maximum acceptable weight for the stations. 7 never signed or agreed to the terms on the wor" order& but after repeated re/uests by 9& continued developing its product& with understanding they would resolve weight issue down the line. ?hen 7s product was ready& 9 refused to pay& on grounds that it was too heavy and did not meet the wor" order specs. 7 sued. Q: ,s 7 liable to 9 for breach on promissory estoppel grounds6 H: *?s repeated assurances that it wanted ?s product, followed %y decision to %ac- out of the deal, caused #unconsciona%le harm& and an in!ustice that must %e remedied. Thoughts from class: --5ey here! implied promise to negotiate in good faith& even though no guarantee that youll end up with a contract. --?hat are the partys responsibilities here6 7 needed to wor" in good faith to "eep the weight down. 9 needed to ma"e a good faith effort to negotiate a resolution on the weight. ---ow would you figure out reliance damages6 ?or" 7 did from point that 9 promised to "eep negotiating& to point that 9 bac"ed out of deal without negotiating. ---ow would you figure out expectation damages6 Might be nothing(promise was only to negotiate in good faith. $ven had they "ept that promise& and come to the table& would not necessarily have reached any agreement. ,n that case& expectation damages would be same as reliance damages. +eliance damages sometimes best way to figure out expectation damages.

9.

$.

Channe" Home Centers* +iv of -race /etai" Corp. v. -rossman .9rd Cir. 1(:G0 F: 9 attempted to buy a mall. <o help secure financing& he sought out 7& a large retail operation& in effort to show his operation would be successful. 9uring tal"s& 9 as"ed for letter of intent to show ban"s. 7 agreed& and produced letter promising to negotiate in good faith to conclude a lease& if 9 would "eep the property off the mar"et during the negotiations. 8fter much wor" on 7s part& 9 leased space to 7s competitor. Q: ,s promise to possible tenant to "eep property off the mar"et while negotiating lease terms in good faith binding6 H: An a"reement to ne"otiate in "ood faith is enforcea%le if' 10 %oth parties manifested an intention to %e %ound %y the a"reementJ D0 the terms are sufficiently definite to %e enforcedJ there was consideration. R: <he letter of intent was re/uested by 9 in effort to help secure financing& attract other stores& and complete his purchase of mall. 0ince he bargained for and enAoyed these benefits& they serve as consideration for "eeping the property off mar"et. Thoughts from Class: --<here was no contract& but a binding letter of intent. --9 breached its promise to negotiate in good faith! a promise to perform in good faith is inherent in every contractual arrangement.

RK.

)tatute of /rauds1( 8. Friginal statute of frauds from 1EGG. 4anguage in many states still similar. 8ll states have adopted one except for 4ouisiana. $ach state has different provisions. :. 9etermines when absence of writing renders oral contracts unenforceable& ie. when you need some "ind of writing for the agreement to be enforceable. ?e as" three /uestions! 1. *oes a"reement fall within statute? ,s "ind of agreement the type statute is concerned with6 an use M; 4$30 pneumonic to remember topics covered. 2. 8ll categories in 4estatement 711=& except for sale of goods. *. 0ale of goods in BCC 7D@D=1. 4oo" out for exceptions in BCC 7D@D=1.90. a. $arriage! must be contract in consideration of marriage& not merely in contemplation of it. b. 6ear provision! if interval between ma"ing of agreement and earliest possible date of performance is one year or more. --.sually interpreted strictly! a loan expected to be paid over 1' years wont /ualify& since it could be paid immediately. --8n agreement to wor" for five years wor"s& since cant be done in year. 4ifetime employment contract doesnt writing& since can die at any time. --0ome states say all contracts li"ely to last more than a year. --0erves a cautionary function(you might not thin" very carefully about events far in the future. <his ma"es you consider plans more carefully. --0ome evidentiary function& since it puts things in writing. :ut& statute of limitations for suing on most contracts is six years& so the time period in the statute doesnt seem to parallel this rule. c. Land provision! applies to any deal in land& including leases& though many states exempt leases of one year or less. --Fften have idiosyncratic valuation of land& so its good to have parties valuations in writing.

d. e. f.

1xecutor! contract where one party ta"es over liability for debts of an estate. ?here person administering an estate personally ta"es on liability for debts(not usually the case. Noods! where the sale of goods exceeds a certain amount #%B''). 7roposed to go up to %B&'''. )uretyship! where one person agrees to become a surety or guarantor& ie. contract ma"ing one person liable for the debts of another. --$videntiary function! not li"ely to have evidence of other "inds. -- autionary function! might not ta"e it very seriously& or thin" carefully enough& since you are not directly assuming the debt. --1o channeling function! courts are willing to loo" to alternative sources& ie. partial performance to satisfy re/uirement. 'angman v. #"umni #ssociation of University of 2irginia .KA 1((;0 F: 9 agreed to a gift of a commercial property& in which donor attached clause holding 9 liable for related debts. ?hen 7 bought the property& he had ta"en a loan and placed lien to cover it. 4oan charges and expenses of running business began to outrun its income& so 7 turned to 9 under debt-assumption clause in the deed. Q: ould 9 be forced to pay despite lac" of a signed surety agreement6 H: Assumin" eAistin" mort"a"e in eAchan"e for receipt of property is not actin" as a third party insurer. * too- over the de%ts outri"ht' did not merely "uaranteed them. /or a collateral underta-in" to %e a surety arran"ement, promisor must receive no direct %enefit from transaction, and only %e lia%le if de%tor defaults.

*.

If a"reement does fall within statute, has statute %een satisfied' what are the formal re>uirements? a. ?riting need not be signed by both parties(only one to be charged. #7arty to be charged is the party against whom the action is being brought& ie. person being sued.) 4estatement 7191 b. Fral modifications to written contracts generally o"& but& may fall within statute of frauds if contract as modified falls under statute. c. $ust identify su%!ect matter and essential terms of contract. A si"ned offer is o-. 4estatement 7191.a0,.c0 d. $ust identify parties to contract, and ma-e clear %oth have a"reed. 4estatement 7191.%0 e. Fral agreement can be an enforceable contract& so long as there is a subse/uent memorandum signed by the party to be charged. f. 0ignature is interpreted loosely(can be any sign or scratch& sometimes letterhead or a stamp. Must be a mar" accompanied by the intention to authenticate the document being signed. . ! symbol executed or adopted by a party with present intention to authenticate a writing. f. . rules in BCC 7D@D=1 #1) .nder BCC 7D@D=1 must have been agreed to(an offer cant be enforced. . doesnt want to rely too strictly on statute of frauds. 8s usual& it tries to wea"en formal re/uirements. #2) .nder BCC 7D@D=1.10 must have /uantity term. 9ont need other specific terms.

#*) #2) #B)

BCC 7D@D=1.10 special terms in case one party has signed& and not other. an sometimes be enforced even if the person who is suing has signed& but the person to be charged has not. BCC 7D@D=D.a0 partial performance counts as exception. 9ifficulty with straight interpretation of . (seems that signed offer not sufficient as memorandum of the agreement. . generally relaxes standards(this seems to tighten them up.

2.

What if the statute has not %een satisfied? a. 3enerally contract not enforceable b. 7artial performance sometimes grounds for waiving formal re/uirement #7ohnson Farms). ommon law varies on this& see . terms. 4ohnson Farms v. (c.nroe .5.*. 1((80 F: 7 intended to purchase land from 9. <o avoid taxes& 9 wanted payment in form of different land. 7 found property to swap for half of 9s land& but not enough to complete the deal. 7 received assurance from 9s son that 9 was committed to the deal& though 9 still didnt want cash in escrow that could be taxed. 7 began to advertise the property he planned to develop and ma"ing improvements to it& thin"ing the deal was nearly done. 8fter some time& 9 rescinded his offer to sell. Q: ,s contract invalid since there was no writing signed by the party to be charged6 H: artial performance of a real estate purchase can %e an eAception to )tatute if' purchaser pays the contract priceJ ma-es improvement to the landJ or ta-es possession of the property. R: ourt reluctant to enforce the doctrine as tool to support fraud #ie. 9 lying about escrow %). --7 started wor"ing on part of land that they hadnt yet ac/uired& its pretty good evidence that there was an agreement to transfer that part of land eventually. Thoughts from Class: -- 7artial performance serves evidentiary function of showing there is a contract. 9oesnt serve cautionary& but court places premium on evidentiary function of statute. --7artial land swap doesnt count& because it could be seen as full performance on a separate deal. <hey referred to it as partial performance later& but that cant be relevant to courts analysis. $ither the sale was partial performance or not(that must be determined by agreement before the initial swap. --,s there a reliance argument6 ;ou can only prove that you overpaid in the swap if you can prove existence of contract saying what you should have paid for the land. 0tatute of frauds seems to be barring ac"nowledgment of the very contract that would be needed to prove restitution damages are due. c. ?here promisors promise has been relied on& promisor can be estopped from turning to statute. 4estatement 719( #1) 0ome say this "ills statute of frauds #2) +epresents maAority view& but not accepted everywhere.

#*)

(onarco v. 'o -reco .CA 1(<=0 F: 8 couple promised a son that if he stayed on the farm& theyd turn the property over to him when they died. <hey reaffirmed that promise several years later when he got married. 8s promised& the couple wrote the child into their will. 0hortly before he died& stepfather changed the will and left him out. Q: an 7 inherit the property despite lac" of written document6 H: A contract can %e enforced despite violatin" statute if' 10 fraud would result in unconsciona%le in!ury to the a""rieved party, who acted in reliance on promise in a way that vastly chan"ed his positionJ D0 the other party would %e un!ustly enriched at the eApense the party who performed the service in reliance on a promise. R: $nforcement of 0tatute has been specifically interpreted to avoid it being used to perpetrate a fraud or inAustice. --;ou can only apply promissory estoppel even if oral agreement did not indicate that a writing would later ta"e place. Thoughts from Class: --<raynor says promissory estoppel serves same function as 0tatute. <he 0tatute is intended to provide evidence of a bargained for agreement(dont need it for promissory estoppel. --+eliance in this case does not serve a strong evidentiary function. 4ots of reasons why son wor" for his family farm. --4estatement 719( does not re/uire unAust enrichment li"e in this case! only detrimental reliance.

RK,.

arole 1vidence 4uleD= 8. +ule "ic"s in when existence of later& usually written agreement renders prior agreements or promises unenforceable. $verything said and written before the writing can be ignored. >act that it doesnt appear in the new writing is ta"en as evidence that the parties did not agree to it anymore. :. ).).). #ssociates* &nc. v. -iancontieri .5.6. 1((=0 F: 9 and 7 were in negotiations over a two-acre parcel of property in 0uffol" ounty. %2B&'' was to be paid at time of contract execution& %22B&''' at closing& and %B''&''' payable two years later. <wo "ey provision in contract! --7arties ac"nowledge that seller has been served with process and that legal proceedings concerning the property will soon beginM in the event that litigation is not concluded before E-1-HG either party shall have the right to cancel this contract. --Merger clause! the contract represents the complete agreement of the parties. <he contract did not close on scheduleD in May of 1CHG& 7 wrote to 9 that he was prepared to close and would appear for closing on May 2H. -e also initiated suit for specific performance. Fn Oune 2& with litigation still pending& 9 cancelled the contract. Q: 9id both parties have right to cancel contract& or only buyer6 H: Where a contract is not am%i"uous, courts should stic- to the eApress lan"ua"e, and only loo- to eAtrinsic evidence when necessary.

R: :usinessman carefully drafted a contract with clear language(even left some options to the purchaser alone for some provisions(but not right to cancel. ourt cannot read it into the deal. Thoughts from Class: --Merger clause strongest in bloc"ing claims that there is a collateral agreement. ?ill not always "ill efforts to get around the rule on allegations of a mista"e. --.p to Audge to determine if language is ambiguous. ,f the language is unambiguous& than Audge can dismiss the case without it going to Aury. --Oustice <raynor in 8asterson too" opposite view! said we should loo" at all surrounding facts and documents and then ma"e a decision. --More strict at turn of last centuryD less strict in 1CE'sD getting a little more strict now. :. . 1ot actually an evidence rule& but rather a matter of substantive law. onsidered substantive in federal court& and obAection does not need to be made at point its raised. ,f there is evidence of a prior agreement in the first agreement are we supposed to see parties from having discharged that duty6 1. Cor%in' CWhere parties have eApressed an a"reement in writin"J C3o which they have %oth assented as a complete and accurate inte"ration of that a"reementJ C1vidence, whether parol or otherwise of antecedent understandin"s and ne"otiations will not %e admitted to overturn the writin". 2. Fnce we "now that : in orbins test is met& there couldnt be any warrant for adding material from before. ,n concluding that parties intended agreement as complete and accurate agreement& we have concluded that they intended to discharge anything they left out. 0eeing if : is met is courts main tas". *. -ianni v. /. /usse"" 8 Co. . A 1(D;0 F: 7 operated a candy=soda=cigarette=fruit stand in office building. ?hen building was bought by 9& 7 signed new three year raising the rent and prohibiting him from selling tobacco. 7 alleged that in consideration& 9 promised to give him exclusive rights to sell soft drin"s. <he written contract 7 signed said nothing about soft drin"s. 7 sued to enforce oral contract. Q: ,s the exclusive right to sell soft drin"s part of the lease6 H: In a"reement of this type, an oral understandin" re"ardin" a su%!ect that is clearly addressed in the writin" cannot %e enforced. 3he written lease contains all relevant elements of the oral contract. R: 0ince lease contains similar terms about what might or might not be sold #ie. tobacco) this is precisely the type of the term youd expect to see in the lease. >act that its not there implies it was dropped on purpose. --0ince plaintiff specifically reAects any fraud& accident& or mista"e& he has no other grounds by which to claim the clause was omitted.

rior material can %e used to construe unclear writin", or to determine if it was intended to %e complete inte"ration of the writin". .4estatement 7D=(, 7D1=, 7D1;) 1. Oudge re/uired to decide as prior matter that the language is ambiguous before he will allow additional material(not Aust limited to parole evidence situations. 2. When contract admits some areas, called #partial inte"ration.& 7D1=.D0

9.

?hat do we do with parole evidence rule6 1. ?e assume& absent evidence to the contrary& that a writing that appears integrated and complete was intended as a complete integration of the agreement. 2. -ow do we Austify departing from this6 a. <he greater the claimed disagreement between earlier subAect matter and the agreement& the more it seems that exclusion of initial agreement was not intention to discharge. b. 7arties might have intentionally misstated their intentions. c. 0ubAect matter of separate term not something youd expect to see in the contract(its a collateral contract. (asterson v. Sine .CA 1(G:0 F: Masterson owned a ranch& which he gave to his sister and brother-inlaw. <he grant had an option for Masterson to repurchase the land before a certain date& for the amount he received for it minus any improvement that the grantors paid for. Masterson went ban"rupt& and the trustee in ban"ruptcy sued to enforce the option and claim the land. Q: 9id 9 have right to enter parol evidence showing the option re/uired the land to stay within the family6 H: It?s impossi%le to definitively declare a writin" completely self@ determinative. *eeds are not a "reat place to codify collateral a"reements, so isn?t surprisin" that deed is silent on whether the option clause is transfera%le outside of the family R: Ma"es sense in this case to say that a collateral agreement on transferability might naturally be made as a separate agreement. --7arol evidence rule has always been interpreted loosely. Dissent: MaAority completely does away with longstanding parol evidence rule& which held that a written option in an absolute form was unassailable. 1o suggestion at all in the written document that the contract was nontransferable. <o permit that is to violate parol evidence rule. d. an also have evidence that mista"e was made when agreement drawn. %o""inger v. Centra" !# =uarry Stripping8Construction Co.. a 1(G80 F: 7 agreed to let 9 deposit construction waste on his property. 7 alleges that 9 promised to remove topsoil from the land& put the waste under it& and then cover it again with a layer of soil. 7 assumed everything it was in contract and did not read before signing. 8t first& 9 did as agreed. 4ater& 9 stoppedD 7 sued. Q: 9id contract include clause to bury waste under soil6 H: +nce there is a written contract, it "enerally can?t %e chan"ed %y outside claims. However, may allow for eAceptions in cases with clear evidence of a mista-e in the writin". R: ?hy would 9 have buried topsoil for some time& and done the same for 7s neighbor& if there was no agreement6 0eems clear there was a mista"e. Thoughts from Class: --7 does not allege that there was a collateral agreement and only partial integration contract! this would not li"ely have succeeded. ?hy would a

contract relating to dumping waste on someones property not stipulate the full terms of that dumping6 8ny oral agreements or things said subse/uent to the writing can be valid parts of the contract. 7arol evidence rule only relates to agreements made before the writing. RK,,. $isunderstandin"D1 8. ases where parties had materially different understanding of their interaction are resolved by loo"ing at what they "new or had reason to "now about each others understandings. 4estatement 7D=, 7D=1 1. ?here both parties had reason to "now what other meant& but one was in the best position to "now what the other party meant& that person will be bound to what the other person meant. 4estatement 7D=.D0.%0 a. 3ives person with the best opportunity to "now what was meant the burden of being bound to that meaning. b. :urden on person best able to clear up the misunderstanding. 2. 1eed to present evidence that other person "new what you meant. 4i"e parol evidence& go with obAective unless you establish good reason to do otherwise. a. Friga"iment &mport Co. v. %.6.S. &nternt". Sa"es Corp. .).*.5.6. 1(G=0 F: 7 ordered chic"ens from 9 of two different siNes. <he contract did not specify what "ind of chic"ens. 8t that time& two "inds were on the mar"et( young chic"ens intended for broiling and frying& and those intended for stewing. 9 sent stewing chic"ens for the heavier siNe& since they were much cheaper Q: ?hich type of chic"en was intended for sale in the contract6 H: When you?ve "ot an o%!ective meanin" .of chic-en0 and you want to depart from it, %urden of proof must fall on party tryin" to impose a su%!ective meanin" on the term. R: 0eems both parties were sincere in their belief about what contract meantD on the whole& 9s position slightly stronger& since he went by the ..0.9.8. definition& and since the price was too low for the more expensive chic"ens. b. Hurst v. ).4. 'ake 8 Co. .+r. 1(9D0 F: 9 ordered horse meat from 7. ,f it contained less than B'I protein& 9 was entitled to pay %B less per ton. 0ome of the meat contained 2C.B*I protein& some 2C.CEI protein. 9 refused to pay full price for that meat. 7 sued to recover the difference in price& on grounds that 9 "new common industry practice was for B'I to mean anything above 2C.BI. Q: ?hich meaning governs! plain language& or industry practice6 H: Where words have commonly held meanin"s in an industry, one party may not unilaterally decide to interpret them differently. R: 8llowing for custom in the interpretation of a contract does not distort the unambiguous meaning of a contract. *. 2. ?here both parties had e/ual reason to "now the meanings of the other& there is no contract. 4estatement 7D=.10.%0 ?here neither party "nows or has reason to "now intentions of the other party& there is no contract. 4estatement 7D=.10.a0J 4estatement 7D=1.90 a. /aff"es v. )iche"haus .Court of 1Ache>uer, 1:G;0 F: 9 placed an order for cotton and other goods from 7& to be delivered via the ship 7eerless from :ombay to $ngland. ?hen the ship 7eerless arrived in $.

9ecember with the goods& 9 refused to pay& on the grounds that he had expected them on a ship named 7eerless that arrived in Fctober. Q: ?as contract binding& despite different understandings of 7eerless6 H: /or defendant. 3here was no mutual understandin, so no contract. Thoughts from Class: --4estatement 7D1 gives us the 7eerless rule. --7roblem here is that there is no obAective meaning in 7eerless. ,ts two separate ships. <hough people who say words are normally held to their obAective meaning(which would bind one party or the other(this case is ambiguous since 7eerless in and of itself can mean any ship by that name. --7s attorney said maybe there was a miscommunication& but that doesnt matter(the deal named a ship named the 7eerless& any ship by that name would do. 9s not buying the ship& Aust buying cotton. --Fne way to view this case! they had contract& and 7 breached by failure to deliver in Fctober. 9 bac" in status /uo. 5ey /uestion! does the misunderstanding matter6 #+estatement J2' says material misunderstandings ie. those that effect the interest of the parties.) b. 0swa"d v. #""en .Dnd Cir. 1(G(0 F: 7 was a 0wiss coin collector who went to see 9s coin collections. 9 had two collections! +arity oin ollection and 0wiss oin ollection. 7 saw both& and offered to buy them for %B'&''' #he spo"e little $nglish). 9 thought he Aust intended to buy the 0wiss collection. 7 wrote to confirm that agreement to purchase all of her coins for %B'&'''. 9 bac"ed out. Q: ?as there an agreement to sell both collection6 H: When terms of a contract are am%ivalent, and understood %y the parties in different ways, there cannot %e a contract unless one party was aware of the other?s understandin". R: +are case& but no basis for choosing between conflicting understandings. Thoughts from Class: ---ere& one party has a maAor reliance loss. ant transfer loss to seller because then its unfair to her. 1o provision in contract law for splitting difference. Fne party may wind up absorbing a maAor loss. ?ay court deals with this is to saddle party in best position to prevent problem w= other partys terms. 1ot helpful to thin" of this terms of reliance damages or losses. :. $xample from >irst +estatement! 8 says to : , will sell you Mary& a valuable race horse& for %1'' 8 meant to say , will see you 9aisy the cow 1. : could have prevented the misunderstanding. 8 had a slip of the tongue& and didnt really pay enough attentionM: should have commented. 2. :.<& if : did not "now what 8 meant& then 8 is bound to sell the horse. -e should have been more careful in saying what he meant. a. FbAective meaning test(8 has reason to "now that : will ta"e his words at their obAective meaning.

41$1*I1) RK,,,. 4emedies Bac-"roundDD 8. 1Apectation dama"es(puts promisee in position he would have been in if contract would have been performed. 0tandard remedy for bargain& most common remedy for promissory estoppel. :. 4eliance dama"es(puts promisee in position as if contract had never been made. 1ever available for standard bargain& sometime for promissory estoppel. . 4estitution(puts promisor bac" in position as if contract had never been made #claw bac" unAust enrichment)D benefits from 8 to : are restored to 8 by :. 1. ?here restitution is better for the plaintiff than compensatory damages& the plaintiff is entitled to restitution. 7 can choose to sue for restitution& but no reliance! that is only when court decides it is the appropriate remedy. 2. ;ou are never entitled to both restitution and expectancy damages. 9. )pecific performance(inAunction to perform! court forces performance of original deal. #+are in ..0.D default remedy in $urope) $. 9octrinally& have rules of enforceability and rules of remedy which should match up. 1. :ut& hard to say point is to protect detrimental reliance! reliance damages should be given& yet& expectation damages are almost always awarded. 2. <o undue unAust enrichment remedy should be restitution. :ut again& remedy usually expectation damages. *. $conomists believe that the best remedy for the social good is unclear. :est remedy is the one that will do the most good. 2. +emedy for enforcement of moral obligations would seem to be specific performance. <his view also will not allow for consideration doctrine. >. U.S. 6ava" &nstitute vs. Charter Communications* &nc .Dnd Cir., 1((10 F! 7& a small boo" seller published hardcover of <he -unt for +ed Fctober. ontracted with 9 for soft cover. 8greed 9 would not release boo" before Fctober 1CHB. 9 violated contract and began distributing and selling in mid-0eptember. :y the end of month& it was on the bestseller list. 7rior to the release of soft cover& 7s hardcover sales already beginning to slow. Q! ?hat type of damages is 7 entitled to6 H: *ama"es must not %e speculative or punitive. If must choose %etween measures of dama"es, chose one that favors non@%reachin" party. *efer to trial court when determinin" loss, assumin" its calculation was reasona%le. R! 1o restitution damages because those are a function of copyright law! in this instance& there was no breach of copyright& so no penalty for brea"ing those laws. +emedy for breach is expectation damages! compensate loss of aggrieved party. --9s gains not appropriate gauge of award where the plaintiffs loss can be calculated. Su""ivan vs. 03Connor .$ass. 1(890 F! 7& an entertainer& hired 9 to fix her nose. 9 performed the surgery& but left her nose in a worse condition that it was to begin with. 9octor tried third operation to fix it& but couldnt. 1ose left messed up. 7! paid for * operationsD ended up with worse conditionD suffered through * operations. Q! ?hat is appropriate remedy for doctors breach6 H: Awarded some eApectation dama"es, ie. difference %etween situation post@ operation and prior to the operation. .compleA discussion of possi%le remedies.0

3.

R! +estitution damages would not be enough(simply reclaiming the fees paid by the plaintiff to the doctor would not right her wrong. --7roblem with computing expectation damages! speculative in noncommercial context. <ough to determine what a better nose would be worth to 7. --7ublic policy concerns with doctor-patient relationship. 7atients sometimes thin" they are promised things that they arentD doctors sometimes ma"e promises they cant "eep it. $xpectation damages encourages this sort of contractual relationship with doctors. -- oncerns with 7s motives and claim. +eliance loss(restoring the plaintiff to where she would have been(seems li"e sensible award. ourt awards some reliance damages& but they also could be considered expectation damages. Thoughts from Class: ?hy did 7 pursue breach of contract6 -- ase was unusual& because doctor promised a specific result! didnt Aust outline procedure that would ta"e place and explain hoped for result. --,f you can establish a promised result and a different result& than you have easier case than negligence& where you need more. #Might have preferred tort win! more money.) 9ifference between expectation and reliance damages! --.nder expectancy theory she got money for third operationD reliance would have gotten all three. .nder expectancy& got money for pain and suffering for third operationD reliance would have gotten all three.

R,R. )pecific erformanceD9 8. +nly availa%le when money dama"es inade>uateif court can fi"ure out eApectation dama"es, that is the award. 1. <ough to determine this is the caseD a challenge with specific performance. 2. ?hen damages are an ade/uate remedy depends on possibility of proving loss with reasonable certainty. 7roblematic situations! a. Bni>ueness! there is no mar"et for it& so cant give someone money to buy something Aust as goodD and& no way to facilitate computing the loss from a breach. b. )ale of land! often valued by more than Aust its monetary worth. 7eople value land for different reasons. *. $ven when money damages inade/uate& other grounds for refusing specific performance! a. <he contract is for personal services #though an inAunction stopping person from wor"ing for another party might be issued.) b. ?here court cant frame inAunctive order with definiteness. c. ?here inAunctive order would re/uire too much court supervision. d. b and c not big factors anymore! courts dont worry about them. 'um"ey v. )agner .Ch. 1:<D0 F: 0inger has an exclusive contract to sing for an opera house. 0he decides to sing for another company. Fpera house sues. Q: ?hat "ind of remedy in a breach for a personal service contract6 H: Fud"e may issue in!unction preventin" party from performin" for someone else. $ay not force to perform ori"inal contract. R: :y preventing performance for anyone else& hoping to get her to perform on original contract& without direct coercion. Thoughts from Class: ?hy will court not ma"e her perform6 --0oured relationship! dont want two people who dont get along to be forced into a close wor"ing relationship. 8lso forcing her into involuntary servitude ---ard for court to enforce and see if she is properly singing. --)ame lo"ic holds for employment contracts. ?hy is policy different with a contractor6 --;oure not forced into a personal relationship. ,ts not a personal service(contractor and owner dont have a close relationship. :. )pecific performance and BCC 7D@81G. 0eller would get the contract priceD buyer would get the goods. 1. 7roper when goods uni/ue or other proper circumstances. # ourt wont award specific performance& if you could have done something to ma"e it easier to award expectation damages.) 2. May determine terms of price& damages& and other things court finds Aust. *. :uyer has right to re!le*in #seller handing over goods) when is unable to cover and get goods elsewhere. #different for purchases for family) BCC 7D@8=( determines when seller is entitled to contract price.

9. >.

onse/uence of not carrying through with specific performance! contempt of court. an wind up in Aail. Money damages! sheriff can do is ta"e your assets. K"ein v. !epsico .;th Cir. 1(::0 F: 7 and 9(through intermediary(negotiated sale of 9s corporate Aet to 7. ,ntermediary sent fax to 9 offering %2.2 million for plane& to be final after inspection satisfactory to purchaser and written contract. 8fter negotiating price& 9 sent offer to sell the Aet& which 7 accepted. 7 and 9 had Aet inspected& and 9 offered to pay for needed repairs. Oust when 9 was planned to ma"e the repairs& the chairman of 9s board nixed the sale. Q: ?as there a binding contract for the sale of the Aet6 ,f so& should the remedy for breach be specific performance or money damages6 H: An increase in price is not a sufficient reason for awardin" specific performance instead of money dama"es, when the item is not uni>ue and dama"es can %e calculated. R: 1umerous factors indicated that a contract was formed& including! 1) 7s confirming <elexD 2) 9s failure to communicate dissatisfaction with telexD *) 9s directive for 7 to wire down paymentD 2) 9 sending plane for inspectionD B) 9 admitting its offer was accepted. -- lear that additional planes were available! intermediary purchased additional planes for 7. ,f it costs 7 more to buy another plane and initiate another transaction& these expenses should be factored into the expectation damages. Thoughts from Class: --9 says a condition of the agreement was neither party would be bound unless the contract was written down. #?ith a condition& the contract is called off if the contract was not met.) ourt said it was not truly a condition of the agreement! its Aust something they agreed to do to. --7lane not uni/ue. 6orthern +e"aware &ndustria" +eve"opment Corp. v. ..). %"iss Co .*el.Ch. 1(G:0 F: 7 had contract with 9& who was ma"ing repairs to its facility. +epairs were behind schedule! 7 sued to ma"e 9 hire more wor"ers to wor" an extra shift. Q: ould 9 be compelled to hire more wor"ers6 H: A court of e>uity should not order specific performance in a %uildin" contract where it would %e impractical to carry out the order, unless there are special circumstances or the pu%lic interest is involved. R: ontract not sufficiently definite for court to order clear remedy! would be impossible for it to enforce one if it did. 1o number of people court should hire. --,f 7 has suffers loss as result of the delays& can see" monetary damages down the road. Com!any comes (ack an says all $e $ant is for court to say hire more !eo!le: -- ourt again says no. <his would re/uire enforcing a performance contract for personal services(court doesnt do this. 'ac"ede -as Co. v. #moco 0i" Co. .:th Cir. 1(8<0 F: 9 and 7 had an arrangement! 7 wor"ed with new developments to establish propane gas systems& 9 would build the systems and provide gas until point when system would be converted to natural gas. 7 maintained right to cancel contract if it provided *' days notice before the end of each year. 9 had no right to cancel. ?ith gas shortages& 9 cut supplies to all clients by 2'I. 7 complained& 9 cancelled the contract. Q: ,f 9 breached& what was remedy6

9.

$.

H: does not have other lon" term contracts for lar"e >uantities of "as' unclear if could "et more "as, or use it for this purpose if it did. could li-ely not li-ely find another lon"@term supplier, "iven uncertainty in the mar-etspecific performance is the only solution that would wor-. R: 7s unilateral power to terminate not ma"e contract illusory! contract was binding. -- ourt reAects 9s four arguments! 1) 1o mutuality of remedy in the contract! old argument in past that if specific performance only available to one party& shouldnt be used. ourt reAects this outright. 2) 0upervision too difficult! ourt says not the case here. *) ontract is too indefinite #unclear for how long& what price& or how much propane)! ,ndefinite time period goes& that would actually ma"e it harder to figure out damages. :esides& it will ta"e 1'-1B years& which is a fairly definite period. <here is a price. 2) +emedy at law would be ade/uate! 1o. ourt would need to figure out how many more contracts hed need to enter in to& what rates would be& how long into the future hed need them& cost to enter the contract& etc. <oo much speculation. >. 1fficient Breach! some say want to pic" the rule or remedy that will lead people to act in efficient ways. +emedy will give incentive to perform or not.22 1. $xpectation damages right remedy for this idea! people will breach when they have an economic incentive to do so& they wont breach when they no incentive. 2. :reach is efficient when breaching party would gain enough to pay off other party and ma"e some additional money. *. $xample! 0eller values house at %C'&'''D buyer values the house at %11'&''' 8gree to a contract price of %1''&'''D seller gets an offer of %12'&''' #0eller could sell to new buyer& pay buyer his %1'&''' and ma"e %1'&''' extra) 2. +elated theories! 1. 1ormative! we assess legal rules by whats best to promote economic efficiency. 0ocial good will be captured by economic efficiency. #<his is a social good theory) 2. :ehavioral! legal rules give people incentives. Ma"e assumption that people decide to follow law based on narrow economic self interest. *. 9escriptive! we can explain the way that common law came to be demonstrating that it promotes economic efficiency. #7osner made this bold claim! few people believe it) 2. 3eneric! follows from common law adAudication that youd expect efficient rules to result. #Most law and economics people reAect this( dont believe common law is efficient.) B. ?hat is economic efficiency6 a. <ry to figure out whats best for society. b b. 7areto ,mprovement! nobody better off without someone worse off. c. 5aldor--ic"s=potential compensation test! though some people may be worse off from the change& the extent to which they are worse off must be outweighed by benefit to other party. ost-benefit analysis test. 1o interest in distribution of welfare among people(only total amount.

E.

)a"green v. Sara Creek !roperty Co. .8th Cir. 1((D0 F: 7 leased space in 9s mall. 4ease contained provision promising no other pharmacy would be allowed in mall. 9 planned on leasing to another pharmacy. Q: ?hat is the appropriate remedy! specific performance or money damages6

H: Costs and %enefits of each remedy must %e wei"hed %y trial !ud"e to determine if %reach would %e efficient and effect of remedy. .*on?t need detailed analysis, %ut need to consider these >uestions.0 R: :reach might be sensible breach is 9s benefit from breaching might exceed 7s loss from competition. :enefits of an inAunction! 1) shifts burden of determining costs from court to the parties& by having them bargain out of the contractD 2) prices and costs are more accurately attained by private sector than government. 9own side of inAunction! distorts mar"et functions(imposes monopoly and possible inefficiency.

RR.

$oney *ama"es for %reachD< 8. ompensatory not punitive! compensates promisees expectation loss. :. <hree :asic types of loss occur during breach under BCC! 1. ontract=cover& resale& mar"et 2. ,ncidental *. onse/uential #only for buyer) :. )eller?s dama"es under BCC 1. ContractOresale rule' 0eller my sell to someone else and recover difference between contract price and resale price& together with incidental damages& less expenses saved as result of breach. BCC 7D@8=G.10 2. ContractOmar-et rule' 0eller may do nothing and recover difference between contract price and mar"et price at time and place for tender& together with incidental damages& less expenses saved as result of breach. BCC 7D@8=:.10 *. May only appeal to contract=mar"et rule if seller has not yet resold. 2. )eller?s incidental dama"es' listed in BCC 7D@81= B. Lost volume seller! if seller can convince court that new sale is not a replacement& but a sale that would have happened anyway& so that result of breach is that over course of year seller has one less sale& seller entitled to recover lost profit from the lost sale. BCC 7D@8=:.D0 E. Where seller has %een paid somethin"' see BCC 7D@D1:.D0.%0 /... +avis Chemica" Corp. v. +iasonics* inc. .8th Cir. 1(:80 F! 7 contracted with 9 for medical e/uipment then with researchers to set up lab. ?hen researchers breached& 7 breached with 9 and refused to buy the e/uipment. 7 had already put down a deposit of %*''&''' towards the price of the e/uipment& which it sought to recover. PP: 9istrict court found for 7 and awarded %*22&EBE #deposit @ interest T 9s incidental damages). BCC 7D1:.D0.%0 sets the default amount for incidental damages at %B''. Q! ,s 9 a lost-volume seller under rule BCC 7D@8=:.D06 H: If * can prove it had capacity to ma-e an additional sale, that it would have made a profit from that additional sale, and that it would have made that sale even a%sent the %reach, then it is permitted to recover lost profits under rule 7D@8=:.D0. R! 3enerally may only recover difference between contract price and resale price! may recover lost profits if you can prove that you are a lost volume seller. --BCC 7D@81:.90.a0 says that if a buyer breaches& and wants its deposit bac"& it wont get it all if the other party has suffered damage. #9 see"s these damages) --4anguage from 7D@D=:.D0 holding value of resale against profits only applies to instances of resale of goods for scrap. Thoughts from Class: --1ormally thin" of resale as replacement for sale to the breaching buyer. 7 says nothing has replaced that sale to the breaching buyer. <hat is lost profits. -- ant claim to be lost-volume seller if you sell as /uic"ly as you produce. --:urden of proof on seller to prove could have gained additional income from the sale. --$conomists say you will rarely be a lost-volume seller& since you will produce exactly the amount that brings you to a point where one additional unit would result in no profit.

Buyer?s dama"es under BCC 1. ContractOcover rule! buyer may purchase goods in substitution for those due from seller and claim difference between contract price and cover price& together with incidental or conse/uential damages& less expenses saved as result of breach. BCC 7D@81D.10,.D0 2. ContractOmar-et rule! buyer may do nothing and recover difference between contract price and mar"et price at time buyer learned about the breach& together with incidental and conse/uential damages& less expenses saved as result of breach. BCC 7D@819.10 *. Buyer?s incidental dama"es listed in BCC 7D@81<.10. 2. Buyer?s conse>uential dama"es listed in BCC 7D@81<.D0. B. ,f a buyer whos been breached against chooses not to cover& may effect availability of conse/uential damages. ?hy6 --:ecause conse/uences were not caused by breach& but rather& by buyers actions which ran up the damages. E. May only appeal to contract=mar"et rule if buyer has not yet covered. G. onse/uential damages example! 8 sells widgets to :. : gets discount for volume(more widgets he buys& cheaper they are. buys widgets from :. breaches. 8s a result of s breach& : buys fewer widgets from 8& and pays more because he buys fewer. : sued and sought conse/uential damages. ourt said . only provides conse/uential damages for buyer& not for seller& and thats the end of the story. 'aredo Hides Co.* &nc. v. H8H (eat !roducts Co.* &nc. #<R 8pp. 1CG2) F: 9 contracted with 7 for the sale of hides. Fne of 7s payments got delayed in the mailD 9 insisted on receiving payment within hours or brea"ing contract. ?hen 9 did not receive the money as instructed& it voided the contract. 7 already had deal with tannery in Mexico that expected the hides(had to buy from other suppliers at a far greater price. Q: ,f 7 was victim of breach& what damages should be awarded6 H: A %reachin" seller has %urden of provin" the cover price paid %y %uyer unreasona%le%uyer does not need to !ustify the price. R: ,n <R& a buyer who is victim of breach may purchase recover in damages the difference between the price he would have paid under the contract and the cover price he was forced to pay because of breach. -- over price in this case was %122&2B2.2H. <ransportation costs of %1&2*B.GG and handling charges of %2&'1*.1H! recoverable as incidental expenses. --1o evidence that 7 tried to increase its losses to ratchet up damages in any way& which could have reduced its award.

H.

>.

alculating expectation damages for cases not covered by . ! 1. :ased on four factors if a contract is stopped! a. 4oss in value! different between what performance would have been worth and what was actually received. b. Fther loss! physical harm& expenses incurred trying to salvage transaction& etc. c. ost avoided! saves party expenses that would be incurred during cost of performance. d. 4oss avoided! money saved by salvaging goods or materials that would have been expended. 2. ,f there hasnt been full performance& awarding damages for all anticipated income would overcompensate! loo" at anticipated income under the contract then subtract from that anticipated costs. *. +r' /ormula for calculatin" loss! *ama"es P loss in value Q other loss R cost avoided R loss avoided *ama"es P cost of reliance Q profit R loss avoided Q other loss

3.

2itex (anufacturing Corp. v. Cari tex Corp. .9rd Cir. 1(G80 F! ..0. tariffs on wool imports& could be avoided by shipping through Kirgin ,slands and improving goods there. 7 improved fabrics! contracted with 9& a fabric supplier and shipper. 7 had closed its factory temporarily& but reopened it when 9 placed its order. 9 never supplied fabric& out of concern the transaction would not meet customs re/uirements. Q: 0hould overhead costs be deducted from 7s damage award6 H: In a claim for lost profits, overhead should %e considered part of "ross profits and recovered as dama"esnot considered part of seller?s cost avoided. R! Fverhead expenses are fixed! not attributable to performance on a specific contract. --9 cant argue overhead is part of a companys calculation when setting prices to ensure a profit& since taxes and advertising are too. ant reduce damages by those. --Fverhead is a loss incurred by 7& since it spreads overhead costs across all sales& it necessarily eats in to profits from other sales when a customer breaches and eliminates that contribution toward overhead. --. J2-G'H allows for a remedy for reasonable overhead in some cases(sign overhead shouldnt be deducted from damages. Thoughts from Class: --1o concern about speculation on anticipated income side because it was included in contract. 1ot always case(can be controversial.

RR,. 4ecovery of 4eliance on Losin" ContractsDG 8. ?here contract and mar"et and cost of completion rules not available court will loo" into actual value of 7s expectancy. Must still as" what value of performance would have been. :. 4oo" at what you would have made and what youve spent. an view expectation damages as! costs already eApended QO@ eApected profit or loss. . <his theory is helpful where you cant prove with certainty what income from full performance would have been.

$B)3 B1 ABL1 3+ )H+W L+))1)O 4+/I3 WI3H C143AI536 3+ /AC3+4 I3 I5. 9. ,f 7 has partially performed& but cant prove profit upon full performance& can recover for expenses thus far unless other side proves there would have been a loss& in which case loss is deducted from costs thus far. 4estatement 79;( 1. <his isnt reliance damages! this is expectation damages where we cant prove profit or loss! assumption of approach is that he would have at least recovered his expenses. 2. Moneys already paid under contract always factor into damage award. a. >or contract of sale if seller is in breach and buyer has paid purchase price& buyer gets not Aust difference between cover price and contract price& but also his money bac". b. 4i"ewise where seller is service provider& and part has already been paid& seller must refund money. '. #" ert 8 Son v. #rmstrong /u er Co. .Dd Cir. 1(;(0 F! 9 delayed in delivering machines to 7 needed to reclaim old rubber. :uyer didnt see" lost profits when delay caused venture to fall through(sought reliance damages& to compensate for foundations it had purchased& since its venture would have lost money. Q! ?hat damages should 7 when his venture falls through because of 9s breach& but his venture would have lost money6 H' should "et reliance dama"es, less any loss that would have resulted from performance. Burden is on * to prove what the loss would have %een. Thoughts from Class: <his case is the basis of the formula=+estatement section addressed above.

$.

,K.

4estitutionD8 8. 8 party that has partially performed& on what the defendant can prove would have been a losing contract will do better suing for restitution than expectation. 1. ,f contract was a loser& wont get much for expectation. 2. +ecovery is not offset by loss under contract& since were setting contract aside. :ut& it is offset by extent that 9 has benefited 7& ie. money already paid under the contract. :. +estitution not available in case where 7 has fully performed and all that remains is for 9 to pay. 4estatement 7989.D0 #1o logical explanation for this dichotomy. ourt stri"es middle ground between differing policies. 7erhaps unwilling to blatantly ignore completed contract.) . 4estatement 7981 has instructions for determinin" award. 1. Cost of hirin" someone else to do the !o%. D. 1Atent to which other party?s property value has increased, or his other interests have %een advanced. 9. Chose method more "enerous to innocent party. 2. +elative difficulty of proof under various methods also important. a. 9irect measure of benefit hard in construction contract. b. ,nstead figure out what it would cost someone else to do the Aob. 9. (o i"e 0i" .xp"oration 8 !roducing Southeast v. United States .B.). D===0 F! <wo oil companies sued government over breach of contract& where gov bac"ed out of deal. 0ued for restitution damages since would do worse had they drilled. H' If the contract would have %een worse for you, %ut the %reachin" party has %enefited, you can sue for restitution. Thoughts from Class: --$xample of plaintiff opting to see" restitution damages ,10<$89 of expectation damages. # ant have both) --1ot actually suing on the contract& but on restitution& a different cause of action. $.

United States v. #"gernon %"air* &nc. .;th Cir. 1(890 F! 7 supplied construction e/uipment and services for 9s contract for the 1avy. 9 refused to pay for crane rental& arguing not part of contract. 7 sued for restitution damages its cranes and labor. 2BI of subcontract performed at that point. PP: <rial court said 7 cant recover! would have lost under contract. 0ince they saved money& no expectation damages. Q: May 7 still recover restitution damages even if it would have lost money had contract been fully performed6 H: has ri"ht to recover for services rendered, even if it would have lost money on the contract. $easure of recovery is the reasona%le value of performance to the other party .4estatement 79810, ie. cost of hirin" someone in ?s position at time services were rendered. R! 7 is entitled to compensation out of fairness& having provided labor and e/uipment at its own expense to a party that breached its contract& whether or not 7 would have lost money. --<he contract price is evidence of reasonable value of the services& but doesnt limit recovery. Thoughts from Class! --?hen you award restitution damages allow 7 to clawbac" benefit gained by 9(but also account for money paid to 7. --,n &l(ert& no restitution& because nothing conveyed to other side. RR,,. Limitations on Award of *ama"esD:

8.

Avoida%ilityD( 1. $ay not recover for loss that could have %een avoided #without undue ris-, %urden, or humiliation.& 4estatement 79<=.10 2. arty not precluded from recovery to the eAtent he ma-es a reasona%le, al%eit unsuccessful effort to avoid loss. 4estatement 79<=.D0 *. Must act in a way that you dont Aust pile up loss and expect other guy to pay for it. ;oure actual losses will be recoverable& so long as they are unavoidable. b. >airness! not fair to let party pile up losses Aust because of breach. c. 0ocial good! wasteful to let losses pile up. 2. /ockingham County v. 'udin %ridge Co. .;th Cir. 1(D(0 F: 4udin contracted with ounty to build bridge. 7 decided to cancel proAect & and called 9 to void contract. 8t that time& 4udin had expended %1&C'' in performance. 9espite breach& 4udin continued to perform. 0ued for total cost of bridge! %1H&*'1.'G. Q: May 4udin recover for full cost of bridge despite breach6 H: +nce the county provided notice it no lon"er wanted %rid"e, while contract was still eAecutory, Ludin?s duty was to do nothin" to increase its dama"es as a result of the %reach. R! <hough county breached(which it had no right to do& proper remedy would have been profits 4udin would have earned from performance and any other losses that resulted from the breach at time ount cancelled. --8 defendant must try mitigating any damages that result from the breach. !arker v. Twentieth Century,Fox Fi"m Corp. .1(8=0 F! 7 offered a part in a movie that studio cancelled. ontract specified she would be entitled to full pay in the event a breach(but& implied she would try to mitigate damages. 0tudio offered 7 a different role. 1ew film was western& and not musical& and filmed in 8ustralia& not 4.8. 8lso& no veto power over choice of director in new contract. Q: ?as 7 compelled to accept the second role or forego compensation6 H' Neneral rule is that compensation on employment contracts is I promised, less money earned in su%se>uent employment or money that reasona%ly could have %een earned in other employment. But other employment was compara%le and su%stantially similar' not case here. D! MaAority creates a new standard of not of a different or inferior "ind and then applies it in a distorted way. .nder maAoritys logic& only o" Aob would be same position with same employer. Thoughts from Class: --7roblem! if you are fired and offered to come bac" at half pay& dont want to give employer incentive to "eep worsening your conditions& so you can not come bac" and recover your full damages. 9ifferent if you are offered an inferior Aob somewhere else(that could count against your damages. --9issent correct in arguing with courts holding that Aob cant be different& or at all inferior. -ard to come up with firm rule(non-breaching parties cant be allowed to do nothingD at same time& cant be forced to do Aust anything.

B.

B.

Tongish v. Thomas .H) 1((D0

F! <ongish had a contract to sell seeds to oop& which oop had a contract to sell to :ambino. oop would sell to :ambino for BB cents more per unit. ?hen the price of seeds shot up& <ongish breached its contract and sold to <homas at a much higher price than it would have received from oop. #Made %B&B1* more than contract with oop). Q! 0hould oop get damages based on mar"et price or expectation damages for what it would have received had 9 performed6 H: If * %reaches, must apply contractOmar-et, cover rule, even if non@ %reachin" party recovers more than would have under ori"inal contract. R! <ongish "new that oop had a contract to resell the seeds& and decided to breach& despite its ability to meet the terms of its contract with oop. --,f the lost-profit rule was followed& one party would always have an incentive to breach if it could get a better price from somewhere else sufficient to pay off profits to the aggrieved party and still ma"e a profit #efficient breach). Thoughts from Class: -- oop didnt cover& so any cant recover conse/uential losses it incurs due to inability to perform on contract with :ambino. 4imited to contract and mar"et damages! puts them in situation as if had ta"en reasonable steps to avoid loss. --Fne reason for cover=mar"et rule is that oop had third contract! Aust giving expectation damages would lead oop to breach with :ambino. ?hat if there had been no third party contract& and theyd li"ely poc"et the money if given the cover and mar"et price6 @@3here is a windfall to Coop %ecause the mar-et price went up. But court says must loo- at this eA ante. Had mar-et price went down, Coop would have %een forced to purchase seeds at a hi"her price than it could have "otten them from someone else. 3reat mar-et price as a ris- that parties ta-e upon themselves when they enter contracts, win or lose. :. 5on@pecuniary loss and cost of completion9= 1. ases where losses of nonpecuniary nature are too speculative& avoid problem by awarding cost of completing performance that defendant did not complete. #ie.& in a construction contract! cant figure out subAective value of loss to plaintiff& award cost of completion. 2. 0ometimes cost of completion disproportionate to 7s loss! in that context& court may award damages based on difference performance would have made to value of 7s property. #7aco(s& Pee*yhouse) a. ?hile contract and mar"et rule always applies even if it overcompensates plaintiff& pecuniary loss does not. b. <his alternative may under compensate 7s loss! may thin" specific performance is a way out. *. -roves v. 4ohn )under Co. .$inn. 1(9(0 F! 7 made a contract allowing 9 to use 7s land to extract gravel. ,n exchange& 9 was to pay %1'B&''' and leave the land at a smooth& even grade. ?hen 9 did give up the land& it was bro"en and useless unless 7 paid to fix it up. >ixing land would cost more than %E'&'''. -ad 9 performed and left land as agreed& would be worth %12&1E'. Q! 0hould 7 be awarded the value of the land had 9 performed& or the cost of fixing the land as is6

H' +wner?s ri"ht to improve his property is not lessened %y its small value. Contractor who promised land in a certain condition must return land to that condition. R! 9s breach was willful and in bad faith. ?here contractor intentionally breaches& he does not deserve e/uitable doctrine of substantial performance. --4aw aims to give aggrieved party what he was promised. 1o windfall for 7 simply because of value of land(what contract promised cant be a windfall. D! 9iminished value can be applied in absence of evidence to show completed product was designed to meet taste of promisee. Thoughts from Class: --;ou can do something to your land that will decrease its value& but you can are still entitled to performance on the contract. #ie. you can pay someone %1''&''' to build a statute of your mother on your lawnD even if it would decrease the value of your property& you are still entitled to performance.) --4i"ewise in this case! not about the value of the of the service& about the contract(you are entitled to performance. 2. 4aco 8 >oungs v. Kent .5.6. 1(D10 F: 7 contracted to build a house for 9. <he contract specified all pipe used must be particular brand. 7 finished building the house& but did not pay the full cost. 7 sued for money owed. 8t same time& 9 found 7 had used wrong pipe. 9emanded 7 rebuild entire sections of house to install right pipe. 7 refused. Q! ?hat damages does 7 owe 9 for its failure to install the appropriate pipe6 H' 3here was su%stantial performance' this was not a material %reach. @@Cost of completion is typically remedy %ecause of avoida%ilityJ in situation where cost of completion is "rossly disproportionate to actual loss to the plaintiff, "o to alternative rule of thum%. 4estatement 79;:.D0 D! 9 had right to contract for exactly what he wanted! if 7 screwed up& thats his problem. 9 shouldnt be forced into contract he didnt as" for. Thoughts from Class: ardoNo as"s two /uestions! 1) ?as this a breach of condition! a condition of 9s obligation to pay that 7 not breach in that way6 -- can have conditions that are expressD in this case& its implicit(if breach is sufficiently material to undermine whole point of contract from point of view of non-breaching party& than non-breaching party does not have to perform. ,f breach not material& non-breaching party must perform& but& he may sue for damages for breach. -- ardoNo cant interpret contract in way that ma"es this a material breach. 2) ?hat are 5ents damages6 #?ant him in position as if 7 had performed.) --.sual remedy! award owner cost to complete the Aob or repair the defect. --?ays to compute damages! cost of completion or difference in mar"et value. --Kery hard to put value on how much 5ent li"es the pipes(so its easier to as" how much it would cost him to get them somewhere else. <his is li"e mar"et and cover rule(how much would it cost to get service somewhere else6 --3ross disproportion between cost of completion and value of the pipes. ,mplausible that 9 values pipes as much as it would cost to replace them. -- ost of completion is usually the right idea because of avoidability reasons! encourages non-breaching to finish the Aob. :etter for everyone if they do that. 1on-breaching party gets what he wants& breaching party only pays for costs not avoidable.

B.

!eevyhouse v. -ar"and Coa" and (ining Co. .+-la. 1(GD0 F: 7 leased farm to 9 for purposes of strip mining. 9 agreed to do perform restorative and remedial wor" at the end of the lease. 9 failed to do the restoration wor"& which would have cost %2C&'''. ?ould increase value of the farm by %*''. PP: Oury awarded %B&''' in damages. Q: ?hat are damages! cost of restoring or the difference in value of land6 H: When contract is %reached, normal remedy is cost of reasona%le performanceJ however, where cost is "rossly disproportionate to value of performance, the remedy is the difference in the value of the property. R! 3roves case only one on record which compels lesee to pay to restore with vast disparity between cost and difference in value of land. -- lause of contract related to remedial wor" was tangential to the agreement. -- ites Oacob U ;oungs! owner to money if cost of completion greatly our of whac" with benefit. D: 7 insisted that the clause be included in the contract(7 entitled to performance Thoughts from Class: --%2C&''' would be out of proportion with how 7eevyhouses valued the land. --Ourys award was artificial! cant award speculative damages. --7erhaps another approach(award specific performance& and let party figure out among themselves what the cost of performance or settlement should be. --3enerally& with two rules& chose one that benefits non-breaching party! hard to swallow if difference is that great.

/oreseea%ility91 4estatement 79<1 1. ourts will not award damages that party in breach did not have reason to foresee as a probable result of breach when contract was made. 2. 4oss may be foreseeable if it follows! a. ,n normal course of things. #:ac"ground ,nformation) b. 8s a result of special circumstances that breaching party had reason to "now. #0pecial ,nformation) *. .sually comes up in context of conse/uential damages. 2. Oustification for theory! a. >airness=Austice for the parties in the particular case #surprises ma"e if difficult to plan& cause unforeseen hardship). b. 0ocial welfare for such transactions in society generally #ie. avoid piling up losses& encourage parties to share information and plan). B. 7arties often sue for emotional damage in breach of employment contracts& but courts are reluctant to award them. E. Had"ey v. %axenda"e .1A. 1:<;0 F! 7s mill shut down because of bro"en cran" on steam engine. 7 made arrangements to send cran" to a shop& which would send it bac" next day. 8rranged with carrier to ship goods. arrier delayed delivery of cran" by several days. 7 forced to shut mill during that time& incurring P*'' in expenses. Q! ?as 7 entitled to the entire cost of shutting his mill6 H' Where a contract has %een %reached, a""rieved party may only %e compensated for what #fairly and reasona%ly& mi"ht %e considered as arisin" from the contract, either in normal course of events or in eApectation of the parties in the particular case.

R! ,f special circumstances that might lead to increased damages& party must inform the other. ,f he does& damages would be what would normally result from a breach in that particular circumstance. --,f the special circumstance un"nown to 9& only liable for what would occur in normal contract under similar circumstances. -ad they been "nown& 9 could have made preparations or perhaps acted differently in light of that "nowledge. --1o way 9 could "now that the entire mill was shutdown because of the bro"en part(not normal when part repaired. Thoughts from Class: --9ont need to "now for certain that it would result from breach(need to "now that it would be probable. --,n tort rule& recovery is based on possible damage resulting from a tort(in contracts& can only recover where breaching party "new it was a probable result of a breach. -->or probable dont need to prove its more li"ely than not(not a torts I test(more vague. ?hy this difference6 --,n contracts& parties can communicate and plan in advance for breach& and can loo" at contract and see what parties stipulated or decided together. --,n tort& element of punishment for wrongdoing or negligence(not in contracts. --4estatement 79<1 adopts holdin" from Had"ey v. %axenda"e G. +e"chi Carrier Sp# v. /otorex Corp. .Dd Cir. 1((<0 F! 7 had contract to receive air conditioner compressors from 9. 7arts didnt meet 7s specs! 9 refused to send replacements. 7 sought new supplier& sued 9. Q! 0hould damages be limited to what was foreseeable in the breach6 ,f so& what is the proper award6 H' /oreseea%le as possi%le is standard in B.5. law that "overns this case. R: ,t was foreseeable that 7 would have ta"en orders for air conditioners and would be dependent on the compressors. <he number of sales could be inferred based on the number of compressors it ordered. -- 7 should be able to recover for customs fees and storage of unusable parts. 8lso for labor expenses incurred as a result of shutting down its production line. Kenford Co. v. County of .rie .5.6. 1(:(0 F! 7 negotiated with 9 for construction of a stadium on his property. 7 donated& for 9 building the stadium& and providing 90, long term lease on its operation. ounty to receive tax revenue& rent& and increased property taxes from nearby properties. Fn basis of this agreement& 7 exercised option on nearby lands! he expected to ma"e a profit from proximity to stadium. ounty realiNed stadium would cost more than its bond resolution allowedD breached. Q! ,s 7 entitled to recover for lost appreciation value on land6 Ho"ding: is not entitled to recover, since it was not foreseea%le to either party at time contract was formed that he mi"ht invest in that property. R! 1o hint of language in contract ounty would ma"e itself liable for 7s lost opportunity to benefit from that boom if it failed to build the stadium. 7 voluntarily assumed ris" that he would not enAoy those benefits if the stadium was not built.

H.

Thoughts from Class: --+evenues accounted for increased property tax values! 9 "new theyd li"ely go up. .nder Ha ley rule& should be liable for 9s lost value. ---olmes decision! -"o e test says only lia%ility when there is tacit a"reement. Implied@in@fact a"reement to %e %ound. .nclear if you can state this in negative. #0eems 7 would not have agreed to not hold ounty liable.) --?ould have had to explicitly state in contract that ounty would pay bac" 5enford for lost property values or somehow explicitly implied that at time of contract. <his is very different than foreseeable rule! this rule depends on the intention of the parties at time of contract with respect to liability. BCC 7D@81<, comment 9! what would had to have happened at time of negotiation for this. 7arties have ability to limit each others liability through agreement(courts will honor it if the parties do that. --;ou could also read this case as ounty believing that they did not ta"e on the ris" of the lost property values. ounty had agreed not to assume liability #but this would be different test(this would wor" directly with .lo(e test& and not necessarily conflict with Ha ley/ --1ew ;or" flirts with tacit agreement test& but doesnt expressly reAect Ha ley which is still the controlling test. --?ont saddle promisor with all damages& even if foreseeable& b=c of Austice. G. Sundance Cruises Corp. v. #merican %ureau of Shipping .Dd Cir. 1((90 7 cant rely on classification certificate as proof that ship was soundly constructed& when certificate cost %HB&'''& and 7sued for %2E2 million. 3hree rules emer"e' 10 foreseea%le as possi%leJ D0 foreseea%le as pro%a%leJ 90 tacit a"reement.

H. 9.

Certainty9D 1. 9amages may not be awarded beyond what the evidence permits to be established with reasonable certainty. 4estatement 79<D 2. ourts dont li"e to speculate& but a bit more willing to then before. *. BCC 71@1=G also lays out certainty standard. 2. ?elfare benefits to letting people plan their business affairs. B. +e/uirement for reasonable certainty has been a problem for artists see"ing claims based on lost royalties(generally too difficult to predict. E. Kery difficult to recover for lost good will or business reputation in ..0. G. Fera v. 2i""age !"a5a &nc. .$ich. 1(8G0 F! 7 signed lease for space in shopping center that would be opening for a li/uor and boo"s store. enters owner went ban"rupt. 1ew owner lost 7s lease and rented 7s space to someone else. 7 sued for future wages. Q: ?as the award of future wages too speculative6 H' /uture profits for unopened %usiness only too speculative when difficult to prove. 5o "eneral %ar on new %usiness receivin" recoverin" lost profits for %reach with stron" show of evidence. R! 1ew business=interrupted business dichotomy developed because usually easier to predict future profits from an existing business. ---ere& future profits most litigated and developed issue at trial! days of evidence. Ourys decision reasonably fell within reasonable range. --<rial Audge did not abuse his discretion by finding that Aury was Austified in its decision given the range of evidence presented.

$.

Li>uidated *ama"es ** 1. 4i/uidated damages are enforceable unless they can be construed as a penalty! something that would overcompensate 7 a. ?as the amount set out in the clause reasonable as a measure of the loss anticipated at time contract was made or in terms of actual loss6 4estatement 79<G.10& BCC 7D@81:.10 b. ourts wont refuse to enforce li/uidated damages clause because amount too low. 2. +eluctance to enforce penalty clauses is product of history(were viewed as oppressive in courts of e/uity& favored une/ual bargain power. *. 0ubAective intent of parties irrelevant! must loo" at circumstances of the case. 4oo" at reasonable at time of contract formation or breach. 2. )asserman3s &nc. v. Township of (idd"etown .5.F. 1((;0 F! 7 leased property from 9 for term of twenty years. 9 cancelled after 1G years. ,n cancellation clause& 9 agreed to pay a pro-rate reimbursement for improvement costs& based on value of improvements& time on lease& and total years in lease. 9 agreed to pay 2BI of one year of 7s earnings& based on gross receipts for the three years proceeding the lease. 7 made substantial improvements to the property& and then subleased to other parties. <hey were not using the property at the time the town cancelled. Q: ,s cancellation clause an unenforceable penalty clause6 H: )tipulated dama"es clause must constitute a reasona%le forecast of the prova%le in!ury from the %reach. Nross receipts "enerally don?t reflect costs incurred %ecause of the cancellation. R: 4i/uidated damages is good faith calculation of cost of the breach! not intended to compel promisor to perform. ---arder it is to calculate damages& more li"ely clause will appear reasonable. -- lauses deemed presumptively reasonable! party challenging the stipulated damages clause bears burden of proving why its unreasonable. --3ross receipts do not account for ordinary expenses& or for expenses specifically attributable to the breach. -- ourt should consider& eg.! reasonableness of gross receipts as measure of damagesD reasoning of the parties that supported stipulated damageD lesees duty to mitigate damagesD fair mar"et rent available for replacement space. +ave -ustafson 8 Co. v. State .).*. 1(G:0 F! 7 surfaced new state highway& but finished EG days late. ontract provided graduated scale for li/uidated damages& resulting in a penalty of %21' a day on a contract of this siNe. <otal penalty was %12&'G'. 7 challenged it. Q! ?as penalty a legally enforceable li/uidated damages penalty6 H' Li>uited dama"es clauses especially helpful in fiAin" compensation for %reach when dama"es will %e uncertain or unmeasura%le. enalty must %ear #a reasona%le relation to pro%a%le dama"es.& R: Modern tendency not to loo" with disfavor on li/uidated damages clauses. --9elays in construction cant be measured to fix an exact cost on delay& loss& and inconvenience. 7enalty is not disproportionate to damages from unexcused delay in performance.

B.

1MCB)1) RR,,,. 1Acuses Bac-"round9; 8. >ive types of excuses we covered! 1) duressD 2) coercionD *) fraud=misrepresentationD 2) mista"eD B) impracticability. :. $xcuses "ic" in when we "now there is an enforceable contract& we have no formation problem and we "now what the remedy would be! but there is something about the contract that poses a problem. 1ot the bargain itself& but something about way it was reached. . ?hats the outcome where there is an excuse6 1. ?e do not pretend that the contract is void! 2. ,nstead of saying contract is void& we say contract is avoidable or voidable. *. 3ive adversely effected party option of going ahead with contract or not. 9. <o the extent that contracts have been partially or fully performed restitution will be available. $. reeAistin" le"al duty rule 1. romise made in consideration of performance of preeAistin" le"al duty of promisee is typically not enforcea%le #4estatement 789). a. <his limitation on enforceability not an issue of consideration! has to be Austified on ground of public policy. b. :etter to see rule turning on good faith& fair dealing& duress. 2. 0ometimes enforce JG* on grounds of no considerationD sometimes public policy #ie. cop cant say he wont investigate robbery unless you pay him.) *. #"aska !ackers3 #ss3n v. +omenico .C.A. (th, 1(=D0 F! ?or"ers agreed to sail from 0an >ran to 8las"a and wor" on a fishing boat and canning factory. ?hen wor"ers arrived in 8las"a& refused to wor" unless paid more. 7 signed& since he had no chance to get other wor"ers. <hen paid originally promised amount. Q! ?as there consideration for the promise to increase the wor"ers pay6 H: 5o consideration since the a"reement was for wor-ers to render precisely the same services they had already a"reed to under the previous contractthe company would receive no additional %enefit for increasin" pay. R! ?hile the wor"ers willfully and arbitrarily bro"e their agreement& no showing that company intended to change the terms of its offer. --<o permit the increased pay would be to put a premium on bad faith& and invite men to violate sacred contracts if they see the potential for profit. Thoughts from Class: -- an say there was consideration! wor"ers promised not to /uit in exchange for more %. Luestion is 1F< whether there is consideration( its whether there was coercion. ?hile pre-existing duty rule shows up in +estatement under consideration& its actually more about coercion. )atkins 8 Son v. Carrig .5.H 1(;10 F! 7 was contractor who agreed to excavate 9s basement. 8fter beginning wor"& he hit solid roc". ,nsisted on re-negotiating deal where hed ma"e Cx as much for the excavation of solid roc". PP: 4ower court found first deal negated and replaced by new one. Q! ?as the price increase in the contract enforceable6

2.

H: 1ven if was unwise to ta-e the chance of there %ein" solid roc-, he would have %e held to that decision under the ori"inal contract. $odification is enforcea%le, %ecause didn?t show any resistance to chan"e. Contract may %e modified %y mutual a"reement of parties. R! ourt says there were two deals! 1) +escinded original deal #this is o"! both parties got out of their obligations& so there was consideration)D 2) <hey made new deal. ---ard to "now whether they had two separate agreements or one agreement that modified first one. 8greement to separate rescission and modification doesnt mean anything. 8nd doesnt matter in this case. --9 either thought the original deal did not include solid roc"& was anxious to get things done& or felt bad for 7 he agreed to change the contract. 9 received fair value for his increased price in the new contract. B. Ki "er v. Frank '. -arrett 8 Sons* &nc. * ;9( .Dd ;1G .Wash. 1(G:0 F: 7 sent 9 a bill for %H2E for harvesting wheat. 9 sent a chec" for %222 with a notice attached in fine print that :y endorsement this chec" is when paid is full payment on the following account. 7 deposited the chec" and sued for the remaining %*H2. H: 5o showin" that * ade>uately manifested to his intention to pay no more than the amount remitted. Can?t tric- other party. 4ule preventin" promises made in eAchan"e for what you have a"reed to do %y contract .a type of preeAistin" le"al duty0 has %een wea-ened %y' 4estatement 7:( #modifications) a. 1ot Aust any change of circumstances(must be change of circumstances that nobody could have anticipated for the change to be bindingD b. Fr can be re/uired by statuteD c. Fr on promissory estoppel grounds. d. 7:(.c0 can pose a problem! could always say you relied on promise #1) #ie. the meat pac"ers didnt /uit to get more moneyD had they not gotten more& they would have /uit.) #2) 4ean on Austice re/uires part(can say Austice does not re/uire enforcement. B.C.C. 7D@D=(.10! abolishes pre-existing duty rule with regard to contract modifications. hanges to a contract needs no consideration in order to be binding. a. ant be coercion(4estatement 718G would apply. b. 7rovision says issue is not consideration& its coercion.

E. G.

H.

RR,K. *uress9< 8. 9uress undercuts all theories of contract law! 1. .nder harles >rieds theory& dont feel that people who have promises under duress have really made promises. 2. 0ocial good theory! depends on people ma"ing mutually beneficial agreements! if not free& cant assume agreement was beneficial. *. >reedom of contract! good for people to be able to decide who to ma"e deals withMbut& only wor"s if there is no coercion or fraud. :. . 9. 0ee 4estatement Chapter 8,3opic D 9uress can be so extreme& because of physical force& that we should say you never assented. ,n this case& there was never a contract. 4estatement 718; #$xamples! being hypnotiNed& a gun to your head) 8 contract may voided when an improper threat left one party with no reasonable alternative but to assent. 4estatement 718< #ustin &nstruments* &nc. v. 'ora" Corporation .5.6. 1(810 F: 4oral awarded 1avy contract. 8warded 22 of 2' parts subcontracts to 8ustin. ?hile performing& 4oral was awarded a new contract& and needed more subcontractors. 8ustin said if 4oral did not award it all wor" on second proAect& and pay it more on first contract& it would bac" out deal. 4oral couldnt find other suppliers on preferred list in time to get product to 1avy. 8fter completing both contracts& 4oral sued for damages. Q: 9id 8ustins demands constitute duress6 H: *uress found where one party threatens to withhold "oods and' 10 other party can?t o%tain those "oods from another sourceJ D0 the ordinary remedy for %reach of contract would %e inade>uate. R! 8 contract is made under duress when one party forced to agree because of a wrongful threat precluding its exercise of free will. --4oral was in situation of duress& since its contract with the government was critical& and serious conse/uences of failing to perform. --1ormal legal remedy for breach would not have wor"ed! 4oral could not have let 8ustin breach& and then immediately sued for damages. ,t had to perform on its contract with 1avy. D: <here was a reasonable alternative supplier! lower court found that as an issue of fact. 1ot for appeals court to overrule that. Thoughts from Class: -- an thin" of suing for breach as an option& li"e finding new supplierD can only sue for duress if that option isnt reasonable alternative. What remedy is see-in"? --+estitution! void contract& and recover benefits unAustly conferred on 7. 1ot see"ing usual expectation damages! not the remedy for duress.

$.

+estatement ties coercion to improper threat& and tells us which threats are improper& and therefore coercive. 4estatement 718G 1. lear cases! what is proposed is a crime or tort. 4estatement 718G.10 2. atch all! a threat is improper if resulting exchange is not on fair terms. 4estatement 718G.D0 a. 0eems inconsistent with idea that thing to loo" at is the way the exchange happens and not the terms. <his is used only if threat isnt in a specific category. b. 8lso need a use of power for illegitimate ends. c. 1o easy answer to whether something proposed fits this. ourt will need to decide what it feels to be Aust. d. ,f there was a :ad 0amaritan law& this case would be easy! loo" to 4estatement 718G.10.a0. Bndo influence! unfair persuasion of party under domination of person exercising persuasion& or who& because of their relationship& assumes person is not acting for their welfare. 4estatement 7188.10 0dori55i v. %"oomfie"d Schoo" +istrict .CA App. 1(GG0 F: 7 induced to resign teaching Aob when accused of being homosexual& which was illegal. ?hen charges dropped& sued for his Aob bac" on grounds of duress and undo influence. PP: <rial court dismissed complaint. H: 5o duress %ecause school had duty under law to dismiss. Court identified several normal si"ns of undue influence' 10 discussion of transaction at unusual time or timeJ D0 insistent demand that deal %e finished at once, with emphasis on conse>uences of delayJ 90 use of multiple persuaders a"ainst sin"le party, who lac-s advisersJ ;0 statements that there is no time to consult financial advisor or attorney. R: .ndue influence involves excessive pressure applied by a dominant party to persuade one vulnerable to such pressure. --,nvolves a real mismatch! cant be pretext to avoid bad bargains. --0igns of influence! showing up and ma"ing him resign on spot. ?ill re/uire close reading of fact on which Aury should decide.

>.

RRK. $isrepresentation9G 8. 0ee 4estatement chapter 8, 3opic 1 :. 9ifficult /uestion is that of non-disclosure. 4estatement 71G1.%0 1. 4estatement 71G1.%0 is catchall. 2. -angs on language of failure to act in good faith and in accord with standard of reasonable fair dealing. Fverlaps with part of doctrine of unilateral mista"e. *. 'aid"aw v. 0rgan .B.). 1:180 F! :loc"ade on tobacco at port of 1ew Frleans during ?ar of 1H12. Q: ,f a party to a sale has access to extrinsic information un"nown to other party& is he under a duty to disclose it to the other party6 H' 3here is no re>uirement to disclose information. 4e>uirement to say nothin" false, %ut not to affirmatively divul"e information. R! <oo difficult to impose a general rule of a duty to disclose! impossible to limit rule. -ave responsibility not say or do something to mislead someone. Thoughts from Class: --,dea that something unsaid can be a misstatement is an idea that has been growing with time. -->irst half of 4estatement 71G1.%0 would seem to apply! the disclosure would correct a mista"e of the other party as to a basic assumption on which party is ma"ing the contract. :ut second half only sets to re/uirement to act in good faith and in accordance with reasonable standards of fair dealing. 1eed to "now what standards of fair dealing are. Swinton v. )hitinsvi""e Sav. %ank .$ass. 1(;D0 F! 7 bought a house from 9 that 9 "new was infested with termites. -e did not provide 7 with that information& nor did he expressly lie. Q! 9id 9 have an obligation to tell 7 about the termites6 H: An a%surd conclusion would follow if everyone had to disclose everythin". $ust rely on principle on caveat emptor. Thoughts from Class: ?hats happened in sales law since then6 --. plugs in a warranty! implied warranty of merchantability. 7arty who doesnt want warranty must ta"e affirmative steps to discharge it. --,n many states& its fraud not to disclose latent defects that could not be found by reasonable inspection. 0ome states still li"e 9$intonD others support buyers. --,n every state& when selling land to a oil company& no re/uirement for company to disclose that there might be oil on your land. ---1ew ;or" a caveat emptor state! few rights of buyers purchasing homes. :ut& legislation forces seller into filling out forms and saying something positive. Kannavos v. #nnino .5.6. 1(:(0 F: 7 bought building from 9& which she advertised as having several rental units. ?hen 7 later learned it was not Noned for rentals. H: 1ven if a party has no o%li"ation to spea- or represent somethin", when they do, they assume an o%li"ation to spea- honestly and divul"e all information. And even where can "et info himself, it does not %ar recovery in an instance of fraudulent misrepresentation. R! 1o misrepresentation had 9 said nothing about uses of the house.

2.

B.

Thoughts from Class: --9istinguishes 9$inton on two grounds! 1) 1ot Aust nondisclosure. 8d implied that it could be used as multi-family dwelling& ie. half truthD 2) could have easily learned truth! not li"e difficulty of finding termites. 4estatement 71G1.a0 and 71G1.%0 could apply to this case. . 4estatement 71GD, 71G; explain when to find misrepresentation is grounds for avoiding a contract.. 1. FbAective test! if promise is li"ely to induce reasonable person to assent. 2. ,n a case of fraudulent or material misstatement& reliance on part of promisor must be reasonable. 4estatement 71G9 explains when misrepresentation prevents formation of a contract. #?hen contract is void as opposed to avoidable& similar concept from duress.) 1. -ow does this wor"6 ?hen he did not assent to the terms written downM& he assented to the terms he thought he was assenting to. 2. $xample! 0am has a >errari worth %B''&'''D <im says he wants to buy 0ams "ids tricycle for %1''. <hen <im has 0am sign contract selling his >errari for %1''. ?hat happens6 --$nforce contract 0am though he was ma"ing! ie. enforce contract selling tricycle for %1''& since 0am didnt "now what the terms of the contract are& but <im did have reason to "now. -old person ma"ing promise to what they say. *. $isrepresentation a%out what the terms of the contract are is treated very differently than misrepresentations a%out those terms. a. 0ome courts might totally void contract! what >irst +estatement did. b. 0econd +estatement says enforce contract 0am thought he was ma"ing. c. $xample! 0am has a >errari worth %B''&'''D <im is a car expert& convinces 0am his car is worth %1&'''. -e has 0am sell him the car %1&'''. ?hat happens6 --0am can avoid the contract! its not void or enforced based on assent doctrine& since 0am was selling what he thought he was selling. ,mpose normal misrepresentation remedy! avoidability. d. Modified example! ?hat if <im runs and sells car to 0ally6 --9epends if 0am has avoided the contract yet. ,f not& she owns the car. -ow do you repudiate contract6 --0am must to say to <im& , repudiate this contract. 8t that point its repudiated! dont need to go to court. --BCC 7D@;=9 sets out difference between avoidable and void. ,n case of misrepresentation& adversely effected party may void contract and future duties and see" restitution. 4estatement 798G 2okes v. #rthur (urray* &nc. ./L Appeals Ct., 1(G:0 F: 7 too" lessons from 9s. ?as repeatedly told she was a wonderful dancer and induced to pay for more and more lessons& despite having hundreds of hours of unused lessons. ?ound up paying %*1&'C'.2B. 7 was a terrible dancer ma"ing little progress. =: ould be 9 be liable for misrepresenting about 7s s"ills6 H: If you have information other person doesn?t, and you use it to eAploit party in a fiduciary relationship, it can count as misrepresentation, even if !ust an opinion. R! ,n a situation li"e this of gross inAustice& the opinion of 9 clearly led 7 to do ta"e actions that she would not have ta"en had 9 told her the truth.

9.

$. >.

RRK,. /ailure of a Basic Assumption' $ista-e, Impractica%ility, /rustration98 8. <he concepts all fit together! mista"e about incorrect information at time contract madeD other two doctrines address when things turn out differently than expected. 9ifferent temporal focus& but all revolve around issues of where to assign ris" among the parties& and a case of things turning out otherwise than was expected or believed. :. Basic assumption from BCC 7D@G1<, ta-en up %y 4estatement! expression seems to have different meanings in mista"e and impracticability=frustration sections of +estatement and ,mpracticability section of . . ,n those& finding a failure of a basic assumption re/uires finding that person see"ing to be excused did not bear the ris". ,n mista"e section& these are divided up separately. ,n . and +estatement impracticability and frustration sections& no mention of who bears ris"! probably must assume that its implied. . 9ifferent standard for mista"e and other two theories! $ista-e v. impractica%ility or frustration P $aterial difference vs. Kery %i" difference $. $utual mista-e 4estatement 71<D, 71<;9: 1. 1lements of mutual mista-e' a. $ista-e as to %asic assumption #1) Much looser than older standards. #2) 0omething both parties too" for granted. b. arty see-in" to %e eAcused did not %ear ris- of mista-e #1) <his is where it gets tric"y. #2) >amiliar pattern in +estatement! at some point there is a substantive engagement& with little guidance on how to proceed. ,e. allocate ris" based on what is reasonable in circumstances. #*) -ow would an economist allocate ris"6 +is" should go to person who could avoid mista"e most cheaply. 8void social costs and deadweight loss. #2) -ow would a social welfare theorist allocate ris"6 <o person who will be most harmed if there is a mista"e. >airness argument. c. 1ffect of mista-e on a"reed performance was material #9ont want people to get out of deal claiming mista"es about things that would have had no impact on their decision.) 2. How do we fi"ure out if someone has assumed ris- of mista-e? a. 4ead contract' if it says somethin", parties own assumption "overns. 4estatement 71<;.a0 b. Where party aware at time of contract that he has limited -nowled"e of the facts related to the mista-e, %ut treats as sufficient. 4estatement 71<;.%0 Where parties haven?t throu"h their a"reement assi"ned ris-, aswhere it?s reasona%le to it. 4estatement 71<;.c0 #1). +easonable leaves everything open. 9ifferent courts will favor different approaches. #2). 0ome courts prefer e6 ante& whats fair for societyD some e6 !ost fairness between parties.

c.

*.

BCC doesn?t mention mista-e' for mista-e, even in "oods, use 4estatement.

2.

4emedies for mista-e, impractica%ility, or frustration' 1 Adverse party may void contract, dischar"e further duties, and seerestitution. 4estatement 71<:.10, 7D8D.10 2. $ay consider reliance dama"es when !ustice re>uires. 4estatement 71<:.D0, 7D8D.D0 .state of (artha 6e"son .5.6. 1(:(0 F! 7 sold a painting to 9 from 1elson estate. :oth 7 and 9 thought it was a reproduction. ?hen 9 had it chec"ed& turned out to be original worth %1 million. $state sought to rescind or recover some paintings value. Q! ould the sale be rescinded or profits recovered from 96 H' Bnder 4estatement 1<;.%0 a party is responsi%le for mista-e when it forms contract -nowin" at time that it has limited information a%out the facts related to the mista-e. R! 4estatement 1<;.c0 says court may allocate the mista"e to one party when its reasonable to do so. -ere& seller had opportunity to discover what it was selling& but didnt. $state victim of its own folly. /enner v. Keh" .AriE. 1(:G0 F! 7 agreed to buy land from 9 on shared belief that land was good for growing AoAoba& which needs much water. 7 bought land and did tests! turned out land no good. 7 sued to rescind& recover expenses and down payment. Q! ,s the contract voidable6 ,f so& what damages is 7 entitled to6 H' $utual mista-e is accepta%le %asis for rescission' %ut a%sent fraud or misrepresentation, rescindin" party may not recover conse>uential dama"es. roper award is restitution for ?s down payment and any value %y which the land was enhanced less the fair rental value for time land was in ?s possession. R! 0ole purpose of the contract& which both parties understood& was for 7 to grow crop. :oth parties made contract on belief water supplies were available. 4estatement 71<D, comment %. --7arty may recover any benefit conferred on other in form of restitution. 4estatement 798G. .nAust benefit must be returned& even if attained honestly. --Measure of enrichment is extent to which other partys property has increased in value or his other interests advanced. 4estatement 7981.%0 Thoughts from Class: -- ourt doesnt loo" 4estatement 71<:.D0& which allows reliance damages! where both parties e/ually responsible& no fairness in providing reliance. --,t sometimes seems unfair if one party spends much more than other! but& not necessarily fair to impose that cost on other party. 5nown problem in contract remedies! cant split damages& or ma"e case-specific award. --1o discussion of who assumed ris"! 7erhaps buyer realiNed there might not be enough water(he tested for it after allD perhaps seller& since it was their land. Maybe court thought it was a wash.

B.

E.

G.

Stees v. 'eonard .$inn. 1:8;0 F! 9 agreed to construct building for 7& based on detailed specs. <ried building& but turned out foundation was /uic"sand. 9 argued it could not perform& because circumstances un"nown at the time it agreed to build. 7 sued for damages for money it had paid 7 and other expenses. Q! ould 9 be bound to its promise& given circumstances preventing performance un"nown at the time it was made6 H' If a person commits %y contract to do somethin", it must literally %e impossi%le to eAcuse performanceJ no hardship or hindrance, however eAtraordinary, can eAcuse performance that?s in any way possi%le. R! ?hile the doctrine may seem unfair to contractors& it only holds them to what they themselves have agreed to do in the contract. --1o defense that 9 did what the specifications called for before collapse! 9 contracted to erect the building. Thoughts from Class: -- 1ot clear what a successful mista"e argument would get 9 in this case! if he won& 7 would still get restitution damages& essentially what it as"ed for. )ood v. %oynton .Wis. 1::<0 F! 7 sold a Aewel to 9. 8t a time& neither "new what is was& 9 paid a dollar. <urned out to be diamond worth %G''. 7 wanted to buy it bac"& with interest. Q! 9id 7 have right to revo"e& given the mista"e made by both parties6 H' /or *. +nly recovery when %oth parties mista-en as to the very identity of the thin" sold and delivered. Thoughts from Class: --<his is extremely rare. --$xample! 7 and 9 go to farm& 7 says& ,ll sell you this horse named 0ecretariat for breeding. <urns out to be another other horse. 7arties not mista"en as to the terms! it was the sale of that horse& but they thought horse was a different horse. Sherwood v. )a"ker .$ich. 1::80 F! 9 agreed to sell 7 cow of distinguished ancestry for %H'& that both believed was barren. <urned out& cow was pregnant& and worth %GB'-%1&'''. 9 refused to deliver it. Q! 9id 9 have a right to rescind the contract& given parties mutual mista"e6 H' /or . A deal may %e rescinded, if the item sold turns out to %e su%stantially different than what either party %elieved, ie. a mista-e a%out the very nature of the thin". R! 8 barren cow is substantially different than a breeding one(it is not the type of cow the 7 intended to sell or 7 to buy. Thoughts from Class: --0eller not excused if a mista"e about a mere /uality of the thing. --8larming that law of mista"e gets into apparently metaphysical tests& and things too difficult to determine or distinguish. ?ould diamond pass this test6 --;es! clearly diamond is very different in nature than a topaN. <est seems less exclusive than ,oo . --9F1< 9?$44 <FF M. - F1 <-$0$ <$0<0! rules of mista"e much wea"ened since this these cases.

H.

C.

3.

Bnilateral mista-e 4estatement 71<9, 71<;9( 1. <raditionally hard to be excused where mista"e is unilateral. 2. In addition to re>uirements for mutual mista-e must show' a. Bnconsciona%ility 4estatement 71<9.a0, or #1) <his is a very& very tough standard. ?hy6 #2) :ecause there is a presumption with a unilateral mista"e that you could have found out& and didnt for some reasonD in mutual mista"e& assumes neither party could figure out the truth. b. 3hat non@mista-en party -new or had reason to -now that mista-en party was mista-en. 4estatement 71<9.%0 #1) +emember fact that nonmista"en party "new other party was mista"en does not mean other party can void contract! must still as" if mista"en party bore ris" of mista"e. #2). ?hen thin"ing if mista"en party bore ris" of mista"e& not enough to as" who meant for mista"e(thats obvious(party who "new about it. #ie. sale of oil bearing land). #*) ?hy does it matter than nonmista"en person could have "nown other side was mista"en6 :ecause they could have told them and avoided the whole problemV #2) Identical to ri"ht of nondisclosure in misrepresentation. W 8s"ing if other party has right to trade on private "nowledge when as"ing if suffering party bears if information was expensive to attain& and other 0ome say base decision on social good of letting parties withhold information. 0tructural similarity between doctrines. #1) Mista"e! where one party bears the ris" of the mista"e #: will suffer because of 8s failure to tell him). #2) Misrepresentation #where 8s failure to tell : is not in "eeping with re/uirement to act in good faith and fair dealing.) W

ris". 8s" stuff.

c.

-.

Impractica%ility O /rustration2' 1. -istory of it! increasing liberality of discharge in face of unforeseen circumstances. 2. BCC D@G1< synthesiNes both terms. *. +estatement follows . doctrine in 7DG1, 7DG< but "eeps separate terms. 2. :oth terms come down to same thing! things turned out differently than expected& and the contract is no good for me anymore. B. 1lements you must show' 1. $ista-en assumption 2. *. 2. E. arty see-in" dama"es didn?t %ear ris- .see mutual mista-e0 erformance is impractica%le& or arty?s purpose of enterin" contract is fundamentally eliminated.

-igher bar for recovery than mista"e. $ven big increase in cost not enough for impracticability.

G.

Impractica%ility developed from impossibility. 1. ?as! its impossible for me to do what , promised to do it(, literally cant do it. 2. 1ow! things much harder or more expensive for me than expected. *. Transat"antic Financing Corporation v. United States .*.C. 1(GG0 F: 7 contracted with ..0. to deliver wheat to ,ran. 8t the time of contract& 7 expected to travel via 0ueN anal. $gypt closed the anal& which became the focus of big dispute. 7 sued for cost of new route. Q: ould 7 recover for the added expense caused by the anal closure6 H: 5eed three elements for claim of impossi%ility' 10 uneApected contin"encyJ D0 ris- of uneApected occurrence not allocated to you %y a"reement or customJ 90 occurrence must render performance commercially impractica%le. Conditions D and 9 not met in this case. R: <est for impossibility based on balance of having contracts performed and avoiding senselessness when its not practical. -->irst condition met! it can be assumed parties meant for delivery to ta"e place via the usual and customary routes at time of contract. --0econd condition is "ey! Aust because they expect delivery via normal route& does not mean ris" of delay allocated to ..0. ,f anything& allocated to 7 who was more aware of commercial conditions and in better position to predict and insure against delay. --<hird provision! contract does not specifically insist on usual route being used(its only implied. ..0. had right to insist on goods being sent to another country(clearly time was not pressing& and contract could be performed with a delay. 3oods were not perishable. Impractica%ility must include more than an uneApected added eApense& which is all that happened here. --+emedy for impossibility is nullification of contract! but 7 is see"ing costs for a new contract. <hey want to say its impossible& but then perform it and ma"e a profit(not consistent with the doctrine. Thoughts from Class: ?hat difference does it ma"e if they did or didnt call government6 --,f they didnt tell them& it would be officious intermeddling. had to find out what the government wanted before Aust doing it and see"ing restitution. --.sing restitution& should as" for benefit conveyed& less contract price. --1ot a . case& extensive reference to BCC 7D@G1< by analogy! $xcuse by >ailure of 7resupposed onditions. --<heory generally that restitution not available when 7 has performed& and only needs to be paid! so& why wouldnt that apply here6 :ecause they are see"ing to avoid contract. Fnce contract is out of picture restitution gets going. ,n &lgernon "lair& contract has not been avoided! loo"ing for restitution& though there is contract still in force.

H.

/rustration! decreased benefit from performance of contract. 1ot more expensive& but no longer of benefit.21 a. The .ugenia F: ompany had a time charter! rented ship for a month. :rought into canal& where it got stuc" because of war. 0tuc" there for three months& 7 tried to recover. 7eople who hired ship said their purpose in rented was frustrated since ship was stuc" in canal because of war. H' 5o frustration. %ore ris-, made decision to send ship into canal, ship was stuc- there, %ut they could have predicted that. Kre"" v. Henry .D H.B. 8;= .1(=90 F: 9 leased apt from 7 for two days& to see 5ings coronation. >ound apt through ad placed by 7& advertising space as a good viewing location. 5ing got sic"& and parade was postponed. 9 had paid a down payment& but refused to pay the balance. Q: ?as the change in parade route grounds for avoidig contract6 H: If the very thin" assumed %y %oth parties to %e the foundation of the contract %ecomes impossi%le, contract may %e avoided. R: 7 advertising the space for the parade& and 9 renting only for the daytime& made the purpose of the exchange clear. Thoughts from Class: --7 could still sit in apt and pay for it! this is frustration& not impract. --Kery thing assumed by both parties to be the foundation of the contract similar to basic assumption of the contract. --?hat if 9 made significant alterations in preparation of the event6 .nder restitution& get nothing& because it doesnt enrich 7. ---ow about reliance damages6 4estatement 7D8:@D! if a party has relied on the promise and Austice re/uires& can award reliance damages. :ut cans split between parties.

b.

RRK,,.Bnconsciona%ility;D 8. .nconscionability is a catch all where other excuses fail! bargain power seem to be related to duress& information to misrepresentation. :. 0ubstantive unconscionability! about the process that you led to the terms. # ourt will rarely find Aust on this ground& since it does not loo" into fairness of bargains reached by parties on e/ual standing.) . 7rocedural unconscionability! about the terms of the contract itself. 9. ourts traditionally found nitpic"y pays to construe language strictly and void contracts! this doctrine was intended to replace those machinations. $. ontract of adhesion! lots of boilerplate offered on ta"e it or leave it basis. 1. 1ot inherently suspect or presumptively unenforceable. :ut& sometimes a party may find that everyone if offering boilerplate on ta"e it or leave it basis! they might have unconscionability issue. 2. 8n alternative supplier=landlord& etc. viewed as alternative to negotiating. 03Ca""aghan v. )a""er 8 %eckwith /ea"ty Co. .Ill. 1(<:0 F: 7 was inAured wal"ing across her building courtyard. :lamed crac"s in sidewal". <ried to sue building& but bloc"ed by exculpatory clause barring personal inAury suits against landlord. =! ,s contract clause invalid for reason of public policy6 H' An eAculpatory clause does not ma-e an apartment leases unconsciona%le' the landlord tenant relationship should not %e su%!ect to !udicial interference. A housin" shorta"e should not %e "rounds for invalidatin" a contract, when that principle mi"ht applied later. /: 7 did not demonstrate that she couldnt find other housing& or that she tried to negotiate. --<here are thousands of landlords competing with each other! not a monopolistic relationship of concern. Thoughts from Class: -- ourts problem would have been in there was no alternative to this contract! didnt believe 7 faced that situation. *. 2. 8dhesion! concern is with doctrine of assent& when you have standard forms& and parties dont always read them. <raditional assent! bound to whatever you signed so long as you had notice of terms in the document. 4estatement 7D11(followed in 8riNona #similar 8) thin" of this in different way! a. ,f you sign form& youre bound to everything in it& whether or not you read it or had reasonable notice of term. 4estatement 7D11.10 b. ;ou not bound if other side had reason to "now that it was a deal brea"er for you #ie. you wouldnt have signed had you "nown about it). 4estatement 7D11.90 c. ?ont be worse off if you are especially good at reading contracts! still interpreted as if you were a normal person. 4estatement 7D11.D0 d. Modifies traditional doctrine of assent for standard form contracts. 1otice re/uirement less important(says traditional assent doctrine not up to the tas" of standard form contracts.

>.

-raham v. Scissor,Tai" .CA. 1((=0 F! 7& a concert promoter& and 9& corporation representing performer agreed to deal using boiler plate language. ontract provided for disputes to be settled by arbitration. 7arties had disagreement& and 7 claimed contract was of adhesion& and arbitration clause unconscionable. H: Adhesion contracts not enforcea%le if' 10 terms do not fall within reasona%le eApectations of wea-er or adherin" partyJ D0 terms fall within eApectations of the parties, %ut unduly oppressive or unconsciona%le. Here, had notice of term, %ut it was unconsciona%le %y appointin" an ar%itrator %iased to stron"er party. /: 1o party to music industry able to negotiate change in unions contract. 7(however& prominent(had no choice but to go along. ?hat does notice mean6 1. 9ecision in 5lar! you didnt thin" there would be terms. K"ar v. H8( !arce" /oom* &nc .5.6. 1(;80 F: 7 left parcel in coat room! came to get it& someone else had ta"en it. hec" tag limited recovery to max of %2B! 7 said value of item was %1&'''. Q: 9id 7 assent to the terms on the coat tag6 H: assumed the ta" was for the purposes of identifyin" his parcel' * did not provide ade>uate notice of presence of a contract. cannot %e found to have assented. 2. ,ts as if someone gives you document& with terms on front that you sign& and it turns out there are terms on bac"& you arent bound to them if you didnt "now they were there. #.nder J211& might need to be bound! 8riNona hasnt addressed direct conflict.)

e.

3.

BCC 7D@9=D J 4estatement 7D=: 1. +emedy for unconscionability! releases you from further duties under the contract. 1o further remedial conse/uences(cant get restitution. 2. ant have contract undone! if youve performed youre screwed. ?hy6 omes from e/uitable tradition of no 07 for unconscionable contracts. *. ourts will find unconscionability in business deals& but not if both parties are big corporations with e/ual power. #0ometimes ine/uality in franchise deals.) 2. 4ones v. Star Credit .5.6.)up.Ct. 1(G(0 F: 7& a welfare recipient& purchased a freeNer from 9 for over %1&2*2.H'& that was worth only %*''. 8fter 7 paid %E1C.HH& 9 sued for the remainder. =! ?as the contract unconscionable6 H! A price term may %e a si"nificant factor in findin" unconsciona%ility. $ust also consider the resources of the %uyer, as -nown to the seller. /! 8 price term is a "ey part of a contract& and a sign of its fairness. --1ot Aust a mathematical formula to determine fairness(must loo" at buyer and circumstances #ie. resources& "nowledge of math). Thoughts from Class: --1othing wrong with process here& but paid too much.

B.

)i""iams v. )a"ker,Thomas Furniture Co. .*.C. Cir. 1(G<0

F: 7 bought furniture from store on credit. ontract said payments for any items would apply to all(you could never own anything outright if you "ept buying more. 7 couldnt pay for one item& and store tried to repossess all. =: ?as clause unconscionable and contract invalid6 H! Bnconsciona%ility is the a%sence of meanin"ful choice on the part of one of the parties, to"ether with contract terms which are unreasona%ly favora%le to other party. $eanin"ful choice can %e ne"ated %y a "ross ine>uality of %ar"ainin" power and a lac- of -nowled"e a%out the terms of a contract. /! ,mportant how contract entered into! did each party have opportunity to understand the terms6 ?ere terms hidden6 --?here a party with little bargaining power signs an unreasonable contract where he has little "nowledge of its content& did not give consent to all terms. --Must loo" in light of the circumstances in which contract was made. 1o easy test. orbin said! so extreme as to appear unconscionable according to the more and business practices of the time and place. D: ourt should be more cautious(many poor clients need things on credit.

?hy -ave ontract 4aw6 #theories) $nforceability! 2 ?hich promises and agreements are enforceable& and why6 * :argain theory of consideration 2 7romissory $stoppel B +estitution E <heories of interpreting bargain theory and promissory estoppel G $xceptions to rule #webb v. Mc3owin& $videntiary +ules) H 7riority among theories of enforceability C ,ntention to enter legal relations
1

7. 7. 7. 7. 7. 7. 7. 7. 7. 7. 7. . 7. 7. 7. 7. 7. 7. 7. 7. 7. 7. 7. 7. 7. 7. 7. 7. 7. 7. 7. 7. 7. 7. 7. 7. 7. 7. 7. 7. 7. 7.

1 2-C 2-E G-H C-1' 11-1* 12-1* 1* 12 1B 1B-1E 18@1( 1C-2' 21-2* 2* 22-2B 2B-2C 2C-*1 *1-*2 *2-*E *G-*H *C-2' 21-22 2*-22 2B-2G 2H 2C B'-BB B'-B1 B1-B* B*-BB BB BE BG-BH BC-E' E1-E2 E*-EH E*-EB EE-EG EE-EG EH EC-G1

>ormation! 1' 0ome fundamental /uestions in formation doctrine 11 <he Fffer 12 Assent in the Common Law 1* +evocation 12 Modes of 8cceptance 1B Mirror ,mage and 4ast 0hot rules 1E >irm offers 1G .. . .& :attle of the >orms #J2-2'G) 1H 7recontractual 4iability 1C 0tatute of >rauds 2' 7arole $vidence +ule 21 Misunderstanding +emedies! 22 +emedies :ac"ground 2* 0pecific 7erformance 22 $fficient :reach 2B Money 9amages for breach 2E +ecovery of +eliance on 4osing ontracts 2G +estitution 2H 4imitations on 8ward of 9amages 2C 8voidability *' 1on-pecuniary loss and cost of completion *1 >oreseeability *2 ertainty ** 4i/uidated 9amages $xcuses! *2 $xcuses :ac"ground= 7re-$xisting 9uty +ule *B 9uress *E Misrepresentation *G >ailure of a :asic 8ssumption! Mista"e& ,mpracticability& >rustration *H Mutual Mista"e *C .nilateral Mista"e 2' ,mpracticability 21 >rustration 22 .nconscionability