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&,+)(/$&0 GOOD FAITH Sales of Goods (merchants): Honest-in-fact AND the observance of reasonable commercial standards of fair dealing in the trade. (UCC2-103; ammended 1-203(20))
Note: Every K or duty for sales of goods imposes an obligation of good faith in its performance and enforcement (ammended UCC1-304). failure to act in good faith is breach MERCHANT (UCC2-104) A person is considered a merchant if he is either: Dealer: a person who deals with goods of the kind, OR Expert: A person who either: Holds himself out as having knowledge or skill peculiar to the type of goods involved in the transaction, OR Employs an agent, broker, or other intermediary who holds himself out as having such knowledge or skill. GOODS (UCC 2-105) All things which are movable at the time of identification to the K for sale other than the money in which the price is to be paid. INcludes the unborn young of animals and growing crops and other identified things atached to realty if they are to be severed from the realty. AGENT An agent has authority to vind the principal contractually when the principal confers actual authority (express or implied) or holds the agent out as having the authority (apparent). EXPRESS WARRANTIES (SALES OF GOODS): General Rule: A sellers affirmations of fact (representations) to the buyer about the nature or quality of the goods which become part of the basis of the bargain constitute express warranties even though they are innocent. They are terms of the K. (UCC2-313). Remedy: If the goods dont conform to the express warranties, the buyer may reject the goods upon tender, recover whatever has been paid, and sue the seller for breach of K damages (UCC2-711).

FORMAL REQUIREMENTS CL and UCC reject the use of a seal as a substitute for consideration, but R295 allows for a promise to be binding wthout consideration if it is in writing and sealed, the document containing the promise is delivered, and the promisor and promisee are named in the document. Renunciation of claim or right after breach: Any claim or right arising out of an alleged breach can be discharged in whole or in part w/o consideration by a written waiver signed and delivered by the aggrieved party. (UCC 1-107). Firm Offers: An offer by a merchant to buy or sell goods in a signed writing that by its terms gives assurance that it will be held open is not revocable for lack of consideration during the time stated, or for a reasonable time not to exceed 3 months. (UCC 2-205). Modification, Rescission, and waiver: An agreement modifying a K for sales of goods needs no consideration to be binding. (UCC2-209). DUTY TO READ Williams v. Walker Thomas Furnature gives us a duty to read K, but we dont necessarily assent to terms which are unreasonable or unconscionable.

1'%($!",+&$'% BARGAIN RELATIONSHIP FORBEARANCE TO SUE AS CONSIDERATION: General Rule: The formulation of a K requires a bargain in which Common Law: We are willing to treat forbearance of a claim as there is a manifestation of mutual assent to the exchange AND a consideration only as long as the promisor has an honest AND consideration. (R217. But see exception in R288-94) reasonable belief that the claim or defense may be fairly determined to be valid or uncertainty to the facts or the law. (Fiege v. Boehm) REQUIREMENT OF CONSIDERATION: General Rule: To constitute consideration, a performance or a return Exception: An honest OR reasonable belief is sufficient consideration. promise must be bargained-for. The consideration must induce the making of the promise, and the promise induces the furnishing of the (R274) consideration. R271. Note: Settlement of a lawsuit is ok even though it is factually impossible or the forbearing party wouldve won anyways. We deem A performance may consist of: the settlement sufficient so long as at the time of the agreement the An act (R271) parties honestly and reasonably believed in the validity of the suit or A forbearance (R271) are uncertain about the facts. We can think of the agreement as The creation, modification, or destruction of a legal relation. insurance against a claim being brought against the promisor (Fiege). (R271) What about nondisclosure? (c.f. Jordan v. Knafel (extortionate blackmail) w/ Fiege (no duty to disclose) and material The performance or return promise may be given to the promisor or to misrepresentation (triggering bad faith and breach of warranty?). some other person. (R271)
Policy: External Manifestation: The law is concerned with the external manifestation of the bargain relationship. (R271cmt.b). This creates a Fiege v. Boehm is better approach. On public policy grounds, it doesnt make sense to allow people who know that there isnt a valid two-part test: lawsuit to force a settlement. This rewards those who throw around We look for an action (See Hamar v. Sidway) unjustified threats of lawsuits. This is exactly the kind of conduct The action is a manifestation of the motive of the parties, such that that we want to discourage. the action is induced by the other party. Settlement of a suit is efficient. Examples: PRE-EXISTING DUTY AND MODIFICATION OF KS: The god feeling of giving a donative promise is not sufficient General Rule: Performance of a legal duty owed to a promisor which is consideration. For consideration, the promisee needs to perform neither doubtful nor the subject of honest duspute is not consideration; some action that he is not legally required to do, or refrain from but a similar performance is consideration if it differs from what was doing something that he is legally entitled to do. required by the duty in a way which reflects more than a pretense of a Refraining from drinking may be consideration, if you are of bargain. May also apply to modification of an existing K. (R273; legal age. (Hamar v. Sidway) Levine v. Blumenthal). If the action by the promisee is a mere condition of accepting a promise, then it is not bargained-for and cannot be consideration. Jur Split: Whether performance of a pre-existing contractual duty can Moving onto land that someone gifts to you is an action, but it is be consideration if the duty is not owed to the promisor. (R273cmt.d) not consideration, because the promisors gift wasnt induced by Preferred on policy grounds to find consideration, since there is less it. (Kirskey v. Kirskey) likelihood of economic coercion or other unfair pressure than in A promise to receive a pension as long as you are not employed in cases where the duty is owed to the promisee. any competitive position is enforceable. (Langar v. Superior Steele) Exception (modification of K): A promise modifying a duty under a K Policy: not fully performed on either side is binding if the modification is fair Consideration puts the parties on notice. We want them to know andequitable in view of circumstances not anticipated by the parties when they will be held to a promise. when the K was made; or to the extent that justice requires enforcement We dont treat formalities as consideration b/c they are too easy in view of material change of position in reliance on the to use and lose their meaning. promise. (R289); this is an exception to the consideration rule! We dont enforce donative promises b/c we dont want to frustrate Test: A modification of an existing K is enforceable if all these people from making them. requirements are met (Angel v. Murray): Voluntary (i.e., good faith requirement); this distinguishes ADEQUACY OF CONSIDERATION coercion. General Rule: Once the requirement of consideration is met, there is no Fair and equitable (renegotiation not necessarily mkt price, but additional requirement of: merely fair and equitable). A gain, advantage, or benefit to the promisor, or a loss, disadvantage, The circumstances are not anticipated (what is not anticipated?). or detriment to the promisee. (R279) Neither party has completed performance at the time of the Equivalence in the values exchanged (R279) modification Mutuality of obligation (R279) Policy: Adjustments in ongoing Ks have some utility. Crts can find mutual rescission of original K to bypass this this rule. Exceptions: Signing, sealing, and stating a nominal consideration is insufficient Sales of Goods: An agreement modifying a K within this article needs (In Re Green; R271cmt.b) no consideration to be binding. (UCC2-209). Modifications must still A huge disparity in the values exchanged (such that it shocks the conscience) may suggest that the consideration was not bargained-for meet test of good faith. (UCC2-209cmt.2; See 2-103 good faith test). (R279cmt.d) Policy: Although this doctrine limits freedom of contract (Levine v. Blumenthal), it protects the promisee from unfair bargaining, because Policy: On economic grounds, the private parties are best able to evaluate the of the likelihood that the modification was obtained by an express or implied threat to withold performance of a legal duty (Alaska Packers circumstances of the transaction. (R279cmt.c) v. Domenico; R273cmt.a).

-2&2+3$&45)-',+3)'63$7+&$'%5)895):,'-$((',4)"(&'::"3 MUTUALITY OUTPUTS/REQUIREMENTS K General Rule: A K needs mutuality to be enforceable. If one party isnt General Rule: Where one party promises to sell to another all that the bound, or has reserved an alternative by which he may cancel the K at latter can use, or where one party promises to buy all that the other can his own discretion, then the K lacks mutuality. (Rehm-Zeiher v. produce, the mutuality requirement is satisfied without a commitment Walker). for the buyer to take a fixed quantity of goods (McMichael v. Price).
Adding terms to create mutuality: Courts may create an implied promise to use either good faith or best efforts, etc. Exclusive dealings: An implication to use reasonable efforts may be implied from the circumstances when one party is granted an exclusive privilege. This is implied in fact, and is codified in UCC2-306 (Wood v. Lucy, Lady Duff). Satisfaction clause: Courts interpret satisfaction clauses to require good faith on the part of the party who must be satisfied. (Omni Group v. First National Bank). Good faith means reasonable OR honest. R2228 prefers an objective test. UCC requires honesty in fact and observance of reas commercial stds of fair dealing (Neumiller Farms v. Cornett). If the satisfaction clause deals with commercial value or quality, or mechanical utility, courts should apply the reasonableness test, since the satisfaction can be compared w/ other market alternatives If the satisfaction involves fancy, taste, or judgment, courts should apply the honesty test. Does the K fail for indefiniteness, or can the crt impose a requirement of good faith? See Metropolitan Ventures v. GEA Associates (an appraisal which is satisfactory to Buyer in Buyers sole discretion.). Outputs/requirements and Sales of Goods: A term which measures the quantity by the output of the seller or the requirements of the buyer means such actual output or requirements as may occur in good faith, excapt that no quantity unreasonably disproportionate to any stated estimate (or in the absense of an estimate to any normal or otherwise comparable prior output or requirements), may be tendered or demanded. (UCC2-306). MORAL OBLIGATION: General Rule: A promise made from a sense of moral obligation to pay for a benefit received in the past is not enforceable. (Mills v. Wyman; Harrington v. Taylor) CL Exception: When there was a prior bargain that created a past consideration, the consideration may be renewed, so that the K is enforceable. One promises to value the K after the SOL has passed What constitutes a promise: voluntary acknowledgement of to the obligee, a voluntary transfer of money, etc., made as interest on por part payment of for the antecedent indebtedness, or a statement to the obligee that the SOL will not be pleaded as a defense. Writing required? A bankrupt has promised to pay (R283; U.S.C.524 (CB119)). A party who was a minor when entering into the K says after he reaches the age of majority that he will value the K.

Exclusive dealings and sales of goods: An agreement by either the seller or the buyer for exclusive dealing in the kind of goods concerned imposes (unless otherwise agreed) an obligation by the seller to use Minority Approach (Ca, NY, Ala, R286): A promise may be binding to best efforts to supply the goods and by the buyer to use best efforts to the extent necessary to prevent injustice when made in recognition of a promote their sale. (UCC2-306). benefit previously received. The promise is not binding if the promisee conferred the benefit as a gift or for other reasons the promisor has not Examples: Distinguish a K to buy all I want from one to buy all I been unjustly enriched; or to the extent that its value is disproportionate need or to sell all I produce. The first is unenforceable for lack of to the benefit. (R286; Webb v. McGowan) (CA easier, see CB124). mutuality, but the latter two are enforceable. Policy: Social norms should enforce moral-obligation-induced QK (IMPLIED-IN-LAW) AND RESTITUTION promises, but not the legal system. Harrington v. Taylor (where General Rule: B is liable to A in damages if (a) A confered a promisee deflects axe-blow from promisor) shows that the majority rule measurable benefit on B with the (b) expectation of compensation. (c) is imperfect, and strict adherence can lead to unjust results. If B retained the benefit after knowing A expected compensation, (d) PROMISSORY ESTOPPEL (RELIANCE) did A fail to give B an opportunity to decline the benefit? (e) A must General Rule (R290): A promise which the proisor should reasonably have had a reasonable excuse for the failure. expect to induce action or forbearance on the part of the promisee or a Was the benefit a mere gift? third person and which does induce such action or forbearance is What constitutes a benefit? If you request a service, but choose not binding if injustice can be avoided only by enforcement of the promise. to accept the benefit or the services prove fruitless, you have (Rickets v. Scothorn) (first-time assertion of promissory estoppel to benefitted to the extent of the fair market value of the services mere promises). The remedy granded for breach my be limited as rendered. justice requires (usually reliance damages). Some crts: the remedy of restitution in money is not available to one How clear and definite must the promise be? Distinguished from a who has fully performed his part of a K and the only thing left is for mere present intention. the defendant to pay a certain sum of money. The rule focuses on what a promisor should reasonably expect; some crts inquire about the reasonableness of the promisees reliance. Policy: We dont want good samaritans to get paid for their deeds. We The promise must induce the action or forbearance. only want to enforce unbargained-for exchanges when we think that the person who conferred the benefit expected compensation, and that the Exception: Charities or promises that are part of a marriage settlement parties would have contracted if given the opportunity. do not need reliance for the enforcement of the promise. Breaching party recovery: K price is a ceiling on the breaching partys Meanins of injustice:cmt b notes that the injustice inquiry should recovery. Also, breaching party is liable for any damages caused by include relevant policies. breaching the K. (Britton v. Turner) (employee quit job before K up) Does an employer receive a benefit in each days work from a long- [cont] Should the K price be a ceiling on recovery? term Kemployment K? Or is there a better understanding that an Yes: freedom of K and the parties own contractual employee should be paid for efforts even if cannot complete term? measurements of value No: The law shouldnt allow the party who repudiated the K use Damages: Quantum meruit (equitable restitution); generally allows for the K as a shield to insulate her from liability for the actual the recovery of fair market value of the services. benefit she received.

&/")+7,""-"%&):,'1"((;)-+%$#"(&+&$'%)'#)-2&2+3)+(("%&5)'##",5)+11":&+%1" OBJECTIVE TEST OF ASSENT OFFER General Rule: K law evaluates a promisors intent to contract General Rule: A manifestation of willingness to enter into a bargain, so objectively Agreements are enforceable when a reasonable person that the other party is given the legal power to bring about a binding K would believe the promisor intended to be bound AND the promisee by accepting. A r/p in the same or similar circumstances must believe honestly believes the promisor intended to be bound. (Lucy v. that the author of the communication intended to be bound upon assent Zemher) (drunken sale of land at bar signed on dinner check). by the other party. (Test: intent, definiteness, quantity!, price) K law doesnt care about promisors actual beliefs Preliminary Negotiations: A manifestation of willingness to enter into a K law cares about promisees intentions, which must be both reasonable AND honest. pbargain is not an offer if the person to whom it is addressed knows or has reason to know that the person making it doesnt intend to conclude Exp: TC was wrong by instructing jury that both parties must have a bargain until he has made a further manifestation of assent. (R226) subjectively intended to enter a binding agreement to form a K. A quote is generally understood as inviting an offer rather than (Embry v. Hargadine) (Employer made oral communications to remaking one. (R226cmt.c). hire employee even though he was going to fire employee anyways). Exp: A letter stating, you have to act fast, b/c I expect a buyer in the Note: Objective theory focuses on the impression on the hearer next week is not an offer. (Lonergn v. Scolnick) rather than the intent of the speaker. Circumstances/factors: Using Lefkowitz, PepsiCo., etc. as exps How objective is the test? The following generally affects the There must be a certain degree of definiteness to satisfy a r/p that the interpretation: we look at specific words tht are uttered and the offeror intended to be bound. Does the communication leave context in which they appear (course of negotiations, prior dealings, anything to negotiation? Do they provide a basis for determining the trade practices, etc). (Cohen v. Johnson; c.f. Lucy v. Zemher). existence of a breach and for giving an appropriate remedy? (R233). Whether the supposed offer is too good to believe. (PepsiCo; c.f. Not legally binding clause: Manifestation of an intent NOT to be Lucy v. Zemher) bound may be controlling (Rose and Frank Co v. JR Crompton) Advertisements: the fact that an advertisement appears in a (clause, this agreement is not entered into as a formal or legal newspaper is strong evidence that the advertiser did not intend to be agreement renders the K unenforceable). bound (R226cmtb; but see Lefkowitz v. Great Minn. Surplus Store) (valid offer b/c the advertisement was clear, definite, and explicit, Social agreements: the context may suggest that a social setting implicitly conveys the same intention as the explicit not legally and left nothing open for negotiation AND it required a performance binding clause in a commercial agreement. on the part of the buyer).
Policy: We assume that individual bargainers will define their wants in a rational way. But when this brakes down, we are concerned about both freedom of contract AND freedom from contract. Learned Hand: A K is an obligation attached by mere force of law to certain acts of the parties, usually words, which ordinarily attach to a known intent. (this is the test used by Lucy) Expectations argument: the purely objective test protects !s reasonable understanding based on what was said and done. IRREVOCABLE OFFER General Rule: An offer is binding as an option K if (R287): (a) it is in wroting ans sidgned by the offeror, recites a purported consideration (jur splt) for making the offer, AND proposes an exchange on fair terms within a reasonable time; OR (b) it is made irrevocable by statute (See UCC2-205) UCC2-205: A firm offer (option K) is created if it is made by a merchant, in writing, signed, AND specifically states that an option will be held open. No consideration is needed to create an option K. Will remain open for specified time (or in the lack of a specified time, for a reasonable amount of time) NOT to exceed 3 months! Modification of offer: An offeror has the right to modify the offer at any time before acceptance, but can not impose new conditions not contained in the first offer. (Lefkowitz). To whom an offer is addressed:An offer may create the power of acceptance in a specified person or in one or more of a specified group or class of persons (acting separately or together). (R229; Lefkowitz (Offer was to the first person to arrive in the morning). NATURE OF COUNTER-OFFER General Rule: A counteroffer is a rejection that terminates the offer UNLESS (a) the offeror expressly invites a counteroffer OR (b) the offeree in making the counteroffer states the still has the original offer under consideration. (R238). Mirror Image Rule Purported acceptance which adds qualifications: A reply to an offer which purports to accept it but is conditional on the offerors assent to terms additional to or different from those offered is NOT an acceptance but is a counteroffer. (R259; Minn. RR v. Columbus Rolling Mill). May be an acceptance if it merely adds a term that was implicit in the original offer. (US v. Natl Optical Stores).

Reasonable Reliance: An offer which the offeror should reasonably Acceptance which requests a change of terms: Not invalidated unless expect to induce action/forebearance of a substantial character on the the acceptance is made to depend on an assent to the changed or added part of the offeree before acceptance and which does induce such terms. (R261). action/forebearance is binding as an option K to the extent necessary to avoid injustice. (R287(2); Drennan v. Star Paving (note that now Cal. statute requires general contractors to designate subs before the final BATTLE OF THE FORMS AND UCC 2-207 bid is submitted to the homeowner) (See R290). See R287cmt.e for Non-sales of goods: follows the mirror image rule and the last form wins. factors influencing remedies. See attached page for interpretation of UCC2-207 and sales of goods. Termination: An option K may NOT be terminated by rejection or counter-offer, by revocation, or by death/incapacity of the offeror, unless the requirements are met for the discharge of a contractual duty. Note: A forum selection clause materially alters a K under 2-207(2) analysis. (DTE Energy Technologies v. Briggs Electric). (R237; Humble Oil v. Westside Investment).

+11":&+%1"
INTENT TO FORM A K Non-sales of goods: CL formal offer and acceptance Sales of Goods: Relaxed test A K may be made in any manner sufficient to show agreement, including conduct by both parties that recognizes the existence of such a K. (UCC2-204(1)). Exact time of offer/acceptance need not be known. (UCC2-204(2)). WHAT KIND OF ACCEPTANCE IS VALID? General Rule: Acceptance of an offer is a manifestation of assent to the terms thereof made by the offeree in a maner invited or required by the offer. (R250). The offeror is the master of his offer. MAILBOX RULE Acceptance: An acceptance of an offer is effective upon dispatch, regardless of whether it reaches the offeror. (Adams v. Lindsell; R263). Revocation: An offerees power of acceptance is terminated when the offeree receives from the offeror a manifestation of an intention not to enter into the proposed K. (R242). Exception: An acceptance under an option K is not operative until received by the offeror. (R263(2)).

Counteroffers and revocations: These communications are effective Absense of expressed manner of acceptance in the offer: An offer invites acceptance in any manner and by any medium reasonable in the when received instead of when sent. (R240, 42). circumstances. (R230). Policy: What about electronic communications, where the parties are communicating practically instantaneously, and there is a means of When Acceptance must be given: When a K does not specify a time within which it may be accepted, a reasonable time will be implied in confirming that the acceptance was received? Should we fall back to accordance with the facts/circumstances. (Ever-Tite Roofing v. Green). normal rule that acceptance is effective when received? Or is electronic communication still non-instantaneous? ACCEPTANCE BY PROMISE TERMINATING THE POWER OF ACCEPTANCE: General Rule: The offeree must complete every act essential to the General Rule: (a) rejection or counter-offer by the offeree, (b) lapse of making of the promise. (R250(3)). time, (c) revocation by the offeror, (d) death or incapacity of one of the parties, or (e) the non-occurrence of any condition of acceptance under Notice: Except as in 69, the offeree must exercise reasonable the terms of the offer. (R236). diligence to notify the offeror of acceptance OR the offeror must receive the acceptance seasonably. (R256). Indirect Communication of termination: An offerees power of acceptance is terminated when the offeror takes definite action inconsistent w/ an intention to enter into the proposed K and the offeree acquires reliable information to that effect. (R243). ACCEPTANCE BY PERFORMANCE ONLY General Rule: Where an offer invites an offeree to accept by rendering Note: The tender or beginning of the invited performance or a tender of a performance and does not invite a promissory acceptance, an option a beginning of it is an acceptance by performance. (R262). Such an K is created when the offeree tenders or begins the invited acceptance operates as a promise to render complete performance. performance. The offeree is not bound to complete performance where an option K is created. The offeror alone is bound, but his duty of Option K created? Unless an ption K is contemplated, the offeree is performace is conditional on completion of the offerees performance. expected to be bound as well as the offer once he has begun (R245) performance (R262cmt.b). But where acceptance by performance is Mere preparation to perform is NOT acceptance, although in some invited and no promise is invited, the beginning of performance or the cases preparation may make the offerors promise binding under tender of part performance creates an option K under 45 and renders 87(2). (R250cmt.b). the offer irrevocable. (R262cmt.b). What is begun or tendered must be part of the actual performance, rather than mere preparations. Preparation vs. Performance: What is begun or tendered must be part of the actual performance invited in order to preclude revocation. Notification: follow rules of accept by promise(56)/ Beginning preparations is not enough. But they may constitute performance(54). justifiable reliance sufficient to make the offerors promise binding under 87(2). (R245cmt.f). factors: Exp: Performance begun when a roofing co. loaded its truck w/ offerees conduct clearly referable to the offer? supplies and drove to the customers house (Ever-Tite Roofing). definite and substantial character of that conduct? extent to which it is of actual or prospective benefit to the offeror An order to buy goods for prompt shipment: see UCC2-206(SM34). rather than the offeree ACCEPTANCE BY CONDUCT OR SILENCE (R269): terms of the communications btw. the parties General Rule: Where an offeree fails to reply to an offer, his silence prior communications btw. parties, and trade customs. and inaction operate as acceptance only in the following cases: Manifestation of intent not to accept: performance doesnt constitute Where an offeree takes the benefit of offered services with reasonable opportunity to reject them and reason to know that they an acceptance if w/in a reasonable time the offeree exercises reasonable diligence to notify the offeror of non-acceptance. (R253). were offered with the expectation of compensation (unjust enrichment). Notification: No notification is necessary to make the acceptance Where the offeror has stated or given the offeree reason to understand that assent may be manifested by silence or inaction, and effective unless the offer requests such a notification. If the offeree has reason to know that the offeror has no adequate means of learning of the offeree in remaining silent and inactive intends to accept the the performance w/ reasonable promptness and certainty, then one of offer. Where b/c of previous dealings or otherwise, it is reasonable that the the following conditions must be met or else the offeror isnt bound: offeree should notify the offeror if he doesnt intend to accept. (See the offeree exercises reasonable diligence to notify the offeror of acceptance Ammons v. Wilson) (Seller usually ships w/in a few days of receiving order, this time was silent for twelve days; the silence the offeror learns of the performance w/in a reasonable time counted as an acceptance). the offer indicates that notification of acceptance is not required. ACCEPTANCE BY PROMISE OR PERFORMANCE General Rule: An offeree may choose to accept by promise or performance when when not explicitly restricted to a certain type of acceptance. (R232; UCC2-206).

))))))))))))))))))))))),"+('%()%'&)&')"%#',1")<):,'63"-()=>)#',-+&$'% INDEFINITE AGREEMENTS; CERTAINTY; DEFERRED TERMS MISUNDERSTANDING/AMGIGUITY PEERLESS RULE General Rule: Regardless of the parties intentions, the terms of the K General Rule: A K is unenforceable because of a misunderstanding must be reasonably certain to form a K. The terms are reasonably when (1) the parties contract is ambiguous, meaning that it is certain if they provide a basis for determining the existence of breach reasonably susceptible to more than one meaning; (2) the parties and an appropriate remedy. (R233). actually had in mind different interpretations of the language, and (3) That a term is left open may show that a manifestation of intention is the misunderstanding is material. (Raffles v. Wichelhaus; Konic not intended to be understood as an offer/acceptance (R233(c)), but International v. Spokane Computer (sale for fifty-six twenty.)). the actions of the parties may show otherwise (R233cmt.a). Distinguish misunderstanding from mistake. The terms may be reasonably certain even though they allow the If one party does not know or have reason to know of any different parties to make a selection of terms in the cours of performance. meaning attached by the other, but the other knows or has reason to (R234(1)). know the meaning attached by the first party, then the law attaches the meaning understood by the innocent party (i.e., former). (R220). When the parties have not agreed w/ respect to a term which is essential to a determination of their rights and duties, a term The doctrine does NOT is less reasonable than the other partys which is reasonable in the circumstances is supplied by the understanding (Konic International v. Spokane; Frigaliment v. BNS). court, usind community standards of fairness. (R2204 & cmt.d) Parole evidence is admissible to establish the facts necessary to apply the rule. (Konic International v. Spokane Computer) See CB415 for examples of indefinite Ks. Part performance may remove uncertainty (R234(2)) Action in reliance on an agreement may make a contractual remedy Policy: Crts prefer to avoid the peerless rule b/c if no K is formed, then appropriate even though uncertainty isnt removed. (R234(3). any reliance by any party on the arrangement will be protected only if the other party has received and retained a measurable benefit! Non-sales of goods - the K must be pretty certain (R233). How to avoid the peerless rule: Find a reasonable means to give effect Examples: to the K at issue; determine which partys interpretation is more reas. a promise to pay a fair share of my profits is not specific enough to support a K (Carney v. Ditmars). An agreement to renew the lease at a rental to be agreed upon Last resort for crts to avoid the peerless rule: In choosing among the is not specific enough. (Joseph Martin v. Schumacher). But reasonable meanings ofa promise or agreement, that meaning is under R233cmt.a, the case would come out differently, since generally preferred which operates against the party who supplies the the actions of the parties showed an intent to agree. words. (R2206). Rationale: the party that chooses the words is most Where the parties complete their negotiations on what they regard as likely to provide more carefully for the protection of his own interests the essential elements of a K and begin performance on the goodthan for those of the other party, and is more likely than the other party faith understanding that agreement on the unsettled matters will to have reason to know of uncertainties of meaning. (R2206cmt.a). follow, then the courts will find an objective method of determining the unsettled elements (from custom, commercial practice, prior Last-Last resort for crts to avoid the peerless rule: btw. two reasonable dealings, etc. (Metro-Goldwin-Mayer v. Scheider) meanings of a promise, a meaning that serves the public interest is generally prefered. (R2207). Sales of goods: Open terms doesnt make K fail for indefiniteness IF (a) the parties intended to make a K AND (b) there is a reasonably ILLEGALITY AND PUBLIC POLICY certain basis for giving an appropriate remedy. (UCC2-204). General Rule: A promise is unenforceable if legislation provides that it Intent to make a K: See UCC2-204(1) (conduct by both parties which is unenforceable. Also, a party seking to avoid a K or term based on recognizes the existence of a K). public policy is to convince the crt that the public policy is more Reasonably certain basis for giving an appropriate remedy: important than freedom of contract (the interest in enforcement is Commercial stds are intended to be applied, including terms for outweighed by a public policy against enforcement.). (R2178(1)). performance, price, remedies, and the like. Remedies inclued: specific performance, expectation, reliance, Enforcement of term: (a) partys expectations, (b) forfeiture tht would and/or value of benefits conferred on D. result if enforcement were denied, and (c) special public interest in the Quantity of goods MUST be stated in K enforcement of the particular term. Compare Homami v. Iranzadi w/ St. John Shipping See UCC2-305 regarding when price is absent from K: Corp. v. Joseph Rank. (CB616) If the parties intent to be bound only if the price is fixed, Public Policy concerns: (a) the strength of that policy as manifested by and the price is not yet agreed, then there is no K. (2-305(4)) legislation/judicial decisions, (b) the likelihood tht a refusal to enforce If intent is present, then the price is a reasonable price at will further that policy, (c) seriousness of misconduct involved and the time for delivery. (UCC2-305(b)(1)). But the K will extent to which it is deliberate, and (d) directness of the connection still fail f/ indefiniteness when there is no reas basis f/ between that misconduct and the term. determining a price. (North Central Airlines v. Continental de minimus illegal K wont necessarily prevent enforcement. CB616 Oil). For other gap fillers when the K is silent, see CB436. traditional cont from left... Intent to reduce an oral agreement to writing, but not yet signed: rule to give the parties what they wouldve contracted for had court should consider (a) whether there has been an express the expressly contracted (hypothetical contracting). reservation of the legal right not to be bound in the absence of a writing, (b) whether there has been partial performance, (c) whether Actionable Preliminary Agreements (i.e., letter of intent, etc.): For an all the terms are agreed-upon, and (d) whether the agreement at issue agreement to agree, what must be present to render the K sufficiently is the type of a K that is usually committed to writing definite to be enforced? Schwartz L.Rev. article says (a) the parties must agree on the type of project, (b) on an imprecise but workable Policy: The idea is that by not enforcing indefinite Ks, it forces the division of authority for investment behavior, and (c) on the rough parties to come to an agreement. But see Lefkowitz v. Great Minn. order in which their actions are to be taken. BUT, compare w/ 168th Surplus Store, where the crt didnt enforce the first offer for lack of and Dodge, which held that the letter of intent was not enforceable. Agreement to use best efforts may be a K in some jurisdictions, b/c it definiteness of price, encouraging bad behavior. Best Way Realty v. Perlegis says that b/c of the reasonable is a closed proposition, discrete, and actionable. expectations of parties, striking down a K as indefinite is a last resort.

,"+('%()%'&)&')"%#',1") MISREPRESENTATION MUTUAL LEGAL MISTAKE Definition: An assertion that is NOT in accord w/ the facts (R2159). General Rule: The K is unenforceable when, at the time the K was made, the parties are (1) mutually (2) mistaken about a (3) material fact General Rule: If a partys manifestation of assent is induced by either a that affects the substance of the consideration and/or relates to a basic fraudulent OR a material misrepresentation by the other party upon assumption of the parties upon which the K was made. (Sherwood v. which the recipient is justified in relying, the K is voidable by the Walker) recipient (R2164(1)). Distinguish from frustration of purpose justified in relying: the reliance must be reasonable (depends upon the circumstances; was fact w/in recipients reasonably diligent Mutual: both parties are mistaken as to the same basic assumption. attention?) Material fact: Substance vs. quality. (Sherwood v. Walker). Did the Fraudulent misrepresentation: If the maker intends his assertion to mistake relate to a basic assumption of the parties upon which the K induce a party to manifest assent and the maker (a) knows or believes was made? Did the parties itend it as a condition precedent? the assertion is not in accord w/ the facts OR (b) does not have the confidence that he asserts/implies in the truth of the assertion (R2162).Legal Mistake: Did the parties contract on the basis of a set of facts that they took as true (excusable mistake) or did they contract on the basis Material misrepresentation: If it would be likely to induce a r/p to of some conjecture as to the facts (not excusable)? The question is manifest his assent OR if the maker knows that it would be likely to whether the parties contracted on the basis of the perceived truth of induce the recipient to do so (R2162) (note: asserter may be innocent). certain facts or whether the parties were gambing over them.
Concealment: An action intended to prevent another from learning a fact is equivalent to an assertion that the fact doesnt exist (R2160). Hill v. Jones: concealment of termites is material misrepresentation (but whether the recipient is justified in relying on misrepresentation is jury question) (note: this is a minority rule for requiring disclosure at a deal that happens over an arms length). Exception: A party bears the risk(a) the risk is allocated in the agreement of the parties (i.e., Lenawee County v. Messerly (as is clause)); (b) he is aware at the time the K is made that he has limited knowledge w/ respect to the facts to which the mistake relates but he treats such knowledge as sufficient; OR (c) it is reasonable to allocate the risk to him by the court (i.e., economic, fairness, etc.).

Duty to disclose: Non-disclosure is equivalent to an assertion that the Fairness consideration: Compare the parties positions if the court fact does not exist ONLY when: (a) where he knows that disclosure of enforces the K w/ their positions if the court doesnt. In Sherwood v. the fact is necessary to prevent some previous assertion from being a Walker, () if the crt rescinds the K, then the parties retain roughly fraudulent or material misrepresentation; (b) Where he knows (actual equivalent assets that they started with; but if the crt enforces the K, knowledge) that disclosure of the fact would correct a mistake of the then one party gets a windfall (assuming the parties never thought other party as to a basic assumption on which that party is making the about the cows attributes) while the other gets a loss. (We generally contract AND if non-disclosure of the fact amounts to a failure to act in want one party to get more than an item is worth only when it is due to good faith and in accordance with reasonable standards of fair dealing; bargaining prowess or skill, etc). (c) where he knows that disclosure would correct a mistake as to the execution of the K; OR (d) the other party is entitled to know the facts Remedy: crt may award reformation, rescission, restitution and/or b/c of a relation of trust and confidence between them. (R2161). reliance or other relief on such terms as justice requires. (R2158). Distinguish from R2153: this rule is broader than mistake b/c it does NOT require a showing of material effect on the agreed Effect of fault on party seeking relief: As long as (1) his fault is in good exchange and is NOT affected by the fact that the party seeking relief faith AND (2) is in accord ance w/ reasonable standards of fair dealing, bears the risk of mistake. (R2161cmt.d). then he is not barred from performance or reformation. Reasonable commercial standards: Vendee need not communicate extraneous information that influences the price of the commodity Mistake in expression of the written K: (and when to use reformation when the other party can obtain the same information by being as an equitable remedy) - (a) P must show that the parties had actually equally diligent/fortunate. (Laidlaw v. Organ (faild to disclose the reached agreement over the term at issue, (b) that both intended the ending of war of 1812 in tobacco sail)). term to be included, and (c) because of mutual mistake in expression, the term was not included. The appropriate remedy is reformation as Reliance on assertions of opinion (expression of a belief w/o certainty per R2153-55). or a judgment of the quality, value, authenticity, etc): The recipient of NONMUTUAL LEGAL MISTAKE an assertion, if reasonable to do so, may treat as an assertion (1) that theGeneral Rule: Where a mistake of one party has a materiall effect on facts known to the asserter arent incompatible w/ his opinion, OR (2) the agreed exchange of performances that is adverse to him AND (a) that the asserter knows facts sufficient to justify him in forming it. the effect of the mistake is such that enforcement of the K would be unconscionable OR (b) the other party had reason to know of the When Reliance on an assertion is justified: The recipient reasonably mistake or his fault caused the mistake, then the K is voidable by him believes that, as compared w/ himself, the person whose opinion is as long as he doesnt bear the risk (above). (R2153). asserted has special skill, judgment or objectivity with respect to the subject matter. (R2169; Vokes v. Arthur Murray (dance teacher who incorrectly says that student is next rising star has duty to act honestly and to disclose the entire truth) Reasoning: extension of reasonable reliance on doctors, lawyers, etc [cont] the misrepresentation gives value OR relies materially on the to others who are experts in a field which P is unfamiliar. transaction. (R2164(2)).

Fraudulent misrepresentation by a third party: If he is justified, the K is voidable by the recipient of the misrepresentation UNLESS the other Remedy: voidability of the K includes rescission damages necessary party to the transaction in good faith AND without reason to know of to restore the parties to their position prior to the K. P may also go for daharsher damages measures, but usually crts require him to show actual intent to deceive by the defendant. (Dobbs).

,"+('%()%'&)&')"%#',1" STATUTE OF FRAUDS DURESS General Rule: Certain Ks must be recorded in writing and signed by the General Rule: Generally, K law declines to enforce a promise when the party against whom enforcement is sought, including: promisor did not make the promise of his own free will. Marriage Ks Distinguish from those kinds of restraints on free will that the law should ignore. Real estate Ks Ks appointing guarantors or sureties Economic duress: Deliberate exploitation by one party of another partys lack of choices to exact returns that exceed those normally Ks which are impossible to be completed within 1 year realizable in a more competitive environment is suspect. Involves Ks for the sale of goods over $500 (Revised article 2 raises it to $5000, but most states have rejected this). determining the motive of the exploiting party. May be used to determine whether an agreement modifying a K is in Fulfilling SOF (non-merchants): If one of the parties is not a merchant, good faith and not the result of extortion. (See Alaska Packers). a written memorandum from a party will qualify as a writing if (1) it UNCONSCIONABILITY indicates that a K was created, (2) it specifies the quantity, AND (3) it General Rule: If the crt as a matter of law finds that the K or any clause is signed by the adverse party. of the K was unconsciounable at the time it was made the crt may refuse to enforce the K, it may remove the unconscionable clause, or it Fulfilling SOF (merchants): If the transaction is between two may limit the application of any unconscionable clause. (UCC2-302; merchants, a written letter of confirmation of the K (even if sent after R2208) the oral agreement) is sufficient to fulfill the SOF if (1) the party has Procedural Unconscionability (defects in bargaining process cast reason to know its contents, (2) it is sufficient to hold the sender shadow on the quality of a partys assent to a K) responsible, and (3) it is sent within a reasonable time. The Obtuse or hidden terms such that a r/p wouldnt understand the confirmation will bind the parties unless one receiving the confirmation meaning of the K. objects to it in writing within 10 days after receiving it. Substantive unconscionability (oppressive substantive terms) When a term subverts a partys purpose for contracting and the Modifications: Modifications of a K must be in writing if the K would other cant justify use of the term to protect its own needs have had to be in writing. Ask, Do the terms perform a reasonable function in the context of the transaction? Policy: to combat fraud by people who might falsely claim they had an oral contract. Keeps one party from trying to alter the terms of a K that Test: gross inequality of bargaining power, together w/ terms will last a long time. But, does this allow people to get out of an oral K unreasonably favorable to the stronger party, may confirm indications merely b/c it isnt in writing? that the transaction involved elements of deception or compulsion, or Satisfies cautionary and evidence function (you understand the may show that the weaker party had no meaningful choice, no real seriousness of what you are doing when you put your K in writing). alteernative, or did not in fact assent to the unfair terms. R2208cmt.d) Factors: Exception - Accepted goods or accepted payment: A K not in writing belief by the stronger party that the weaker pty will probably not may still be enforceable if the seller delivers the goods and the buyer perform the K accepts them (UCC2-201(3)(c)). But, the K is only enforceable to the knowledge by stronger pty that weaker pty will be unable to receive extent the goods were accepted. substantial benefits from the K Knowledge of the stronger pty tht the weaker pty is unable Exception - Special goods: An oral K to make specially manufactured reasonably to protect his interests by reason of physical or mental goods over $500 will only be enforceable if the seller (1) substantially infirmities, ignorance, illiteracy, or inability to understand the began manufacturing the goods, OR (2) made substantial commitments language of the agreement. to manufacture the goods BEFORE any notice of repudiation was Gross inadequacy of the values exchanged (R2208cmt.c) received. The goods are specially manufactured when: (1) they are specially Example: Williams v. Walker-Thomas Furniture cross collateral manufactured for the buyer, (2) they are not suitable for sale to others clause is is sent back to trial crt to determine whether it was in the ordinary course of the sellers business, and (3) the unconscionable (procedural). Majority and Dissent argue about circumstances reasonably indicate that they are for the buyer. whether the circumstances of the cross collateral clause make it unconscionable (credit risk, sellers net profit, similarly situated sellers, Exception - admittance: If a party against whom enforcement is sought etc.). admits in his pleading, testimony, etc that a K was made, then it is enforceable up to the quantity of goods admitted. Contracts of Adhesion (std form): CL duty to read all the terms of a K (Walker-Thomas Furniture), and presumptively enforceable; but Exception - Reliance (R2139): A promise which the promisor should unconscionability might dispell with unreasonable terms. Also, R2211 reasonably expect to induce action or forbearance on the part of the says that where the other party has reason to believe that the party primisee or a third person and which does induce the action or manifesting assent would not do so if he knew that the writing forbearance is enforceable notwithstanding SOF if injustice can be contained a particular tern, the term is not part ofthe areement. Policy: avoided only by enforcement of the promise. The remedy is to be When people dont read all the terms, they give a blanket assent to the limited as justice requires. terms of the transaction and any non unreasonable terms tht the seller Circumstances to consider: may have on his form which do not alter or eviscerate the meaning of availability/adequacy of other remedies (cancelation/restitution) the terms essential to the transaction. definite and substantial character of the action or forbearance in Note: Arbitration provision is legally enforceable in an adhesion K in relation to the remedy sought Cal. the extent to swhich the action or forbearance corroborates [cont] evidence of the making and terms of the promise Exception K for sale of land may be enforced if in reasonable reliance the reasonableness of action/forbearance whether the action/forbearance was foreseeable by the promisor on the K AND on the continuing assent of the party against whom enforcement is sought, changed position so tht injustice can be avoided Exception Unjust enrichment only by specific enforcement (R2129).

,"+('%()%'&)&')"%#',1" IMPRACTICABILITY FRUSTRATION OF PURPOSE General Rule: Where a partys performance is made impracticable w/o Frustration defined: when the cost of performance does not change, but his fault by the occurrence of an event the non-occurrence of which the value of what a party is going to receive drastically decreases. was a basic assumption on which the K was made, his duty to render Exp: Krell v. Henry Henry rented a room iat the hotel for the sole that performance is discharged, UNLESS the language or purpose of viewing a procession w/ the king. But, the King fell ill circumstances indicate the contrary. (R2261). and the procession was canceled. The K was avoidable b/c f frustration. Examples of events the non-occurrence of which is a basic asumption on which the K was made: General Rule: Where, after a K is made, a partys principal purpose is death or incapacity of particular person necessary for performance. substantially frustrated w/o his fault by the occurrence of an event the If the existence of a specific thing is necessary for the performance ofnonoccurrence of which was a basic assumption on which the K was a duty, its failure to come into existence, destruction, or deterioration made, his remaining duties to render performance are discharged, as makes performance impracticable. (R2263) unless the language or the circumstances indicate the contrary. A duty is made impracticable by having to comply w/ a governmental regulation or order. (R2264) Risk analysis equivalent to impracticability.
UCC Casualty to goods: Where the goods suffer casualty w/o fault of either party before the risk of loss passes to the buyer, then (a) if the loss is total the K is avoided, (b) if the loss is partial the buyer may either treat the K as avoided or accept the goods w/ due allowance from the K price f/ the deterioration or the deficiency in quantity. (2-613) When circumstances beyond the promisors control (objective impossibility): First ask whether the parties allocated the risk of the event either expressly or impliedly in the K. See Taylor v. Caldwell (the RELIEF AFTER MISTAKE, IMPRACTICABILITY, OR FRUSTRATION parties did not consider the possibility of the hall burning down when 1. The parties may agree upon an appropriate modification or they wrote the agreement). Next, fill the gap by asking how the parties adjustment and complete the K without knowing whether the would have allocated the risk of hte fire had they thought about the promisor was entitled to some relief as a matter of law. issue (Traylor). If we follow economic reasoning, should the risk of unanticipated events be placed on the superior risk bearer or avoider? 2. If the promisor has completed performance at additional costs even after the impracticability, courts may deny recovery for any costs Risk-bearer analysis: increased cost, rise, or collapse in market is NOT incurred after the promisor knew or had reason to know that in itself a justification for impracticability UNLESS it is due to some performance was impracticable. But National Presto Indus. v. unforeseen contingency which alters the essential nature of the United States allowed for equitable relief of one half of the performance. Otherwise, it is the type of the risk that the K was contractors claim for extra costs incurred in overcoming difficulties intended to cover. due to the impracticability (Judge found tht that is what the parties wouldve intended). When merely impracticable, but not impossible (UCC2-615): the parties basic assumption must be that the major disruption in the 3. If the promisor refuses to continue performance upon encountering market would not occur. Did the parties allocate the risk expressly or the impracticability, traditionally, the promisor is discharged from impliedly? Foreseeability plays a large role. the unexecuted portion of the K, but either can recover at the K rate for a divisible or severable part of the performance if part Impossibility that will NOT excuse a promior (subjective): If the performance has been received AND either party can recover in impossibility claim is because of the fault of one of the parties, then the restitution for any benefit conferred on the other. BUT, reliance is impossibility is subjective, and the defense will fail. Think of it as an NOT recoverable unless it meets the benefit test. implied condition. See Canadian Insustrial Alcohol v. Dunbar (D could not claim impossibility b/c he was at fault for not contracting with the 4. R2272: the court may grant relief on such terms as justice requires sugar manufacturer). including protection of the parties reliance interests. UCC Notification: Seller must notify the buyer seasonably. 5. Judicial reformation: ALCOA crt cound that the shared objectives of the aprties w/ respect to the use of the WPI have been completely Remedy: Either party may have a claim for relief including restitution and totally frustrated, and reformed the pricing provision to allow (and possibly reliance). (R2272) ALCOA to receive its costs of processing plus a profit of one cent per pound! Flowchart: Policy: Does the parties failure to allocate the risk themselves 1. What is the nature of the risk event? What is its impact on the constitute implicit consent to allow the crt to intervene to adjust contractual relationship? Was the event a condition which existed the agreement for them? at the time of contracting or a circumstance which arose thereafter? UCC2-615cmt.6 expressly authorizes judicial reformation (it 2. Was the party seeking relief at fault in that is caused the event or situations in which neither sense nor justice is served by either failed to take reasonable steps to avoid it or minimize its impact? answer when the issue is posed in flat terms of excuse or no 3. Did the agreement allocate the risk of the event to either or both of excuse, adjustment under the various provisions of this Article is the parties? The allocation, if existent, may be express or implied. necessary.). 4. How should the court fill in the gap in risk allocation? Should it allocate risk? 5. WHat is the nature and scope of relief?

:",#',-+%1" PAROL EVIDENCE RULE OBJECTIVE TEST OF INTERPRETATION General Rule: Bars evidence of prior or contemporaneous oral General Rule: Words interpreted in light of all the circumstancess. agreements or promises that contradict or vary a term in a writing tht language is intepreted in accordange w/ general prevailing meaning the parties intend to be complete w/ respect to that term. Also precludes technical terms are given their technical meaning when used in a evidence of prior written agreements that contradict the aprties final transaction w/in their technical field. written agreement. (R2213) Evidence of a contemporaneous/prior oral agreement is admittable Trade, course of dealing, and course of performance: admittance ONLY IF (a) it doesnt contradict the written K OR (b) if the parties allowed by UCC2-202 in sales of goods (i.e., circumstances did not intend the writing to be complete on that issue. surrounding the agreement) and Traynor in PGE v. Thomas Drayage (indemnification clause for repair work). Also applies to implied terms of the written K. Completeness: when only part of the agreement is complete, Express terms, course of performance, course of dealing, or usage of parol evidence might be shown to prove elements as to the trade should be consrtued as consistent with each other remainder not reduced to writing, as long as the parties did not intend the written agreement to be the complete embodiment of Definition usage of trade: practice having such regularity of the terms (Masterson v. Sine). observance in trade as to justify an expectation that it will be observed w/ respect to the transaction in question. Applies to usage of trade of Must the K appear on its face to be incomplete in order to permit parol evidence of additional terms, or can the crt use parol evidence which they are or should be aware is relevan. to help to show that the written K is incomplete? J. Traynor, R2209, A pty may be bound to a usage of trade even if she is not a member and R2214 supports view tht parol evidence may be used to help to of the trade. show that the written K is incomplete or integrated. Hierarchy if meanings are inconsistent: Express terms > course of Generally applies to promissory estoppel claims. performance > Course of dealing > usage of trade. Purported policy: assures tht K law carries out the intentions of the parties. Note: The party who seeks to interpret the terms of a K in a sense narrowe than their everyday use bears the burden of persuasion. Exception Collateral K: When the oral agreement at issue is one that Interpretation may include extrinsic evidence of reasonableness, etc. reasonable parties would ordinarily NOT include in the written K OR is (Frigaliment v. BNS Sales). agreed to for separate consideration, then the oral agreement is a collateral K (separate K), and the evidence of the oral K is admissible, Course of performance: (1) may help prove a K modification or waiver b/c it doesnt contradict the written K. (R2216). of express terms; (2) may help determine what a reasonable person Did the oral agreement induce one of the parties to enter the written would believe an ambiguous agreement means. K? If so, then it probably isnt collateral. But if it is a task unrelated requirements: there must have been repeated occasions for to the actual sale of the property, then it might be collateral. performace, the other party must have actual knowledge of the nature Exp: Would an agreement to remove ice house be part of a written K of those performances AND an opportunity to reject. for sale of land, thus barring parol evidence? (Mitchill v. Lath (Majority = yes; Dissent = no)). Other rules of interpretation: Interpret ambiguous language against the drafter Exception Ambiguity: The crt must admit parol evidence if a writing parties intend to incorporate the common meaning of language, not is unclear, even if the parties intended the writing to be complete. an unusual definition (Frigaliment v. BNS Sales) Must the K be ambiguous on its face, or can you use parol evidence Specific language trumps general language. to prove that a term is ambiguous? PG&E v. Thomas Drayage and crts favor an interpretation tht upholds a K rather than defeats it Rigging held tht we need to look at intrinsic evidence to determine terms should be interpreted w/ the meaning of the whole K in mind whether a word is ambiguous (parol evidence admitted to prove that An interpretation tht furthers the public interest trumps others. the parties intended an indemnification provision to cover only property owned by third parties, and not Ps property). Exception to objective interpretation: If both parties intend a particular Traynor: Parol evidence must be relevant to prove a meaning to meaning, K law enforces that meaning even if it contradicts the which the language of the instrument is reasonably susceptible. objective interpretation of the langugage (R2201). This approach supports policy of carrying out parties intentions! Fairness: gains/losses analysis; avoid huge losses/windfalls; takes into Exception Fraud, Duress, or Mistake, illegality, lack of consideration: account reasonableness of parties actions (Dunbar Molases (suppliers Parol evidence allowed. failure to ensure adequate production is breach b/c it is unreasonable, since similarly situated suppliers wouldve contracted w/ sugar co.) Exception remedies: parol evidence allowed to determine grounds for DUTY OF GOOD FAITH (FRONT PAGE) AND RESERVED DISCRETION granting/denyin rescission, reformation, specific performance, etc. General Rule: doctrine of good faith directs a crt towards interpreting Ks within the commercial context in which they are created Sales of goods: Generally adopts the CL rule, with exception that (UCC1-304; R2205 (adds fair dealing)). written memoranda can be explained or supplemented by evidence of a Distinguish btw. superior knowledge and exploitation of another course of dealing, trade usage, or course of performance (i.e., allows partys ignorance of a crucial fact (Mkt Street Associates v. Frey). evidence of the commercial context even w/o a finding tht hte K prevention, hindrance, or failure to cooperate language is ambiguous). (UCC2-202). exercise of discretion granted by K (exclusive dealings, satisfaction) UCC test for whether the parties intend the written memoranda to be complete w/ respect to the term: If the additional terms are such Policy: Parties intend the meaning the society would find fair and just. that, if agreed upon, they would have been included in the written document, then the parole evidence rule applies. (UCC2-202cmt.3). Subject to financing clauses: a clause which makes the buyers Amendmened 2-202: Terms may be explained by course of obtaining financing a condition precedent to his duty to perform performance, course of dealing, or usage of trade WITHOUT a imposes on the buyer an implied duty to make reasonable good faith preliminary determination tht the language used is ambiguous. efforts to satisfy the condition (Billman v. Hensel)

:",#',-+%1" EXPRESS CONDITIONS CONSTRUCTIVE CONDITIONS OF EXCHANGE Definition: An event, not certain to occur, which must occur before Order of performance: the party whose performance will take longer performance under a K becomes due UNLESS its non-occurrence is should go first (Policy: reflects general practice of paying people after excused. (R2224). The condition may be w/in the control of either they perform services). When the performances take the same amount party or neither. of time, performace should be simultaneous (Policy: neither party bears the risk tht the other wont perform). UCC in accord. Policy: freedom from contract
Defenses: the event wasnt a condition, but a matter of convenience Substantial performance: In the absence of an express promissory that didnt affect the righs/duties of the parties. (2) SConstructive condition precedent requiring perfrct performance, K law does not condition is satisfied by substantial, rather than literal compliance. The require a perfect performance before the other party must perform. condition was excused. Substantial performance is sufficient. (Jacob & Youngs v. Kent (substitute piping of the same quality is substantial performance)). Condition precedent: Must be satisfied before the contractual duty Test: Inquire whether the defect in performance is significant in its comes into existence. A party is bound to perform all conditions relation to the project. In other terms, does the tendered precedent knowingly accepted under a K as prerequisite to recovery. performance satisfy the other partys purpose in requiring the (Dove v. Rose Acre Farms). condition precedent? Weigh the purpose to be served by the condition, the desire to be gratified, the excuse for deviation from the Condition Subsequent: a condition subsequent extinguishes of letter, and the cruelty of enforced adherence. discharges a contractual duty. Exp: Installation of roofing tiles that arent the same color is not substantial performance when the other partys general plan and Waiver: A waiver defeats an express condition. It does NOT need (1) purpose in entering into the K was to have a roof of uniform color to be in writing, (2) to be supported by condsideration, or (3) reliance. (OW Grun Roofing v. Cope). But, parties CANNOT waive material terms (those that are part of the bargained-for agreement) without consideration or reliance. Also, mere Material Breach: Factors to consider: (R2241) acceptance of performance does NOT constitute a waiver. (Clark v. the extent to which the injured party will be deprived of the benefit West) which he reasonably expected Test to distinguish from a bargained-for promise: The condition is the extent to which the injured party can be adequately compensated outside of and modifies the promised performance called for under for the part of that benefit of which he will be deprived the K. the extent to which the party failing to perform will suffer forfeiture (but may be mitigated if the breaching party has a claim in UCC2-209: attempt at modification may operate as a waiver even if it does not satisfy the writing requirements. restitution) Retraction of waiver of executory portion of the K: allowable when the likelihood that the party failing to perform will cure his failure reasonable notification is received by the other party UNLESS the the extent to which the behavior of the party failing to perform retraction would be unjust in view of a material change of position in comports with standards of good faith and fair dealing. (See OW reliance on the waiver. Grun Roofing and Construction v. Cope (breaching party must establish that odeviations from the K were unintentional and Forfeiture: When a term does not appear to be unconscionable at the comparatively insignificant). timet he K is made but that would, b/c of ensuing events, cause disproportionate forceiture, the crt may excuse the non-occurrence of When material breach discharges the other partys duty to perform: the condition UNLESS the conditions occurrence was a material part The extent to which it reasonably appears to the injured party that of the agreed exchange. Factors include: (a) investment, (b) delay may prevent or hinder him in making reasonable substitute reasonableness of parties, (c) good/bad faith of parties, (d) lack of arrangements. (R2242) reliance. The extent to which to which the agreement provides for performance without delay AND the language of the agreement ANTICIPATORY REPUDIATION General Rule: An aggrieved party may treat an anticipatory repudiation indicates that performance by a certain time is important. (R2242) as a breach of K, and the aggrieved party can either sue imediately or Effect: First, suspends the injured partys duties; Then, when it is too late for performance, the failure discharges those duties. wait until performance. (Hochster v. De La Tour). UCC2-610 is generally in accord, but only allows the aggrieved party to wait for a Entire vs. Divisible contracts: In a divisible K, the aprties promises can commercially reasonable time for performance. be apportioned into corresponding pairs of part performances so that Objective test for determining repudiation: A statement must indicate the parts of each pair are properly regarded as agreed equivalents. In an entire K, the parties agree to a single shole, so that there would have tht the party will not perform. An act must be voluntary and it must been no bargain whatever if any promise was struck out. make the party unable or apparently unable to perform (R2250) If one party has reasonable grounds for insecurity tht the other wont Test: Look at the parties inentions in entering into the K perform, then he can ask for adequate assurance of due performance, UCC Perfect tender rule: Allows the buyer to reject goods or tender of delivery that fail in any respect to conform to the K (UCC2-601). and if he doesnt recieve it w/in 30 days, then he can treat it as repudiation (2-609). He may also suspend his own performance until Also, whenever nonconformity with respect to one installment substantially impairs the value of the whole K, there is a breach of the situation has been clarified. the whole (UCC2-612). Finally, UCC2-307 assumes single delivery. reas. of grounds f/ insecurity determined according to comrcl stds. Exception: Under UCC2-508, a seller can cure a deficiency in performance if the time for performance has not passed or the Retractability: ok before the other party has relied on it or indicates seller reasonably believed the tender would be acceptable. acceptance of the repudiation as final. (R2256; Taylor v. Johnston Exception: Under UCC2-512, the buyer can only reject an (once the repudiation is retracted, the K reinstated)). installment which is nonconforming if the nonconformity substantially impairs the value of the installment and the seller Damages mitigated if repudiated duty wouldve been discharged by does NOT give adequate assurance of its cure. impracticability/frustration or there wouldve been a total failure by the Employment Ks treated as divisible? See Britton v. Turner (yes). injured party to perform his return promise.

,"-"!$"()=/"%)&/",")$()6,"+1/)?)".:"1&+&$'% BREACH OF K EXPECTANCY DAMAGES PURPOSE OF REMEDIES Measured by: (a) loss in value to him of the other partys performance Expectation: Put the injured party in the position she would have caused by its failure or deficienty PLUS (b) consequential and been in if there had been no breach at the least cost to the defendant. incidental loss caused by the breach LESS (c) any cost or other loss that Reliance: reimbursed for loss caused by reliance by being put in as he has avoided by not having to perform. (R2347). good a position as he would have been in had the K not been made. Viewpoint: objectively (based on mkt value of the promised restitution: having any conferred benefit restored to him performance) or subjectively (based on the value of performance to UCC EXPECTANCY DAMAGES FOR SALES OF GOODS the injured party himself)? R2344cmt.b prefers subjective. Genral Rule: Remedies liberally administered to achieve expectation When the diff btw. K price and mkt price is inadequate, the injured damages (UCC1-106) (mathematical precision not required). party can be compensated for the actual losses he occurred (American Mechanical v. Union Machine of Lynn) Incidental damages: consists of charges incurred in stopping delivery, transporting and caring for the goods after the breach, effecting cover, Theory of efficient breach: K law want to encourage breach when it etc. (UCC2-710; 2-715) makes some parties better off w/o making any parties worse off. Problems: Assumes equal bargaining power, equal wealth, info., etc. INJURED BUYERS: Specific Performance (2-716): Where the goods are unique. Lost volume: Whether a subsequent transaction is a substitute for the broken K. Test: Could the injured party have entered into the Cover (2-712): The buyer may recover the difference betewen the cost subsequent K even if the contract had not been broken and could have of cover and the contract price WITH any incidental or consequential had the benefit of both? If yes, then the injured partys damages are damages LESS expenses saved PROVIDED THAT the buyer make the based on the net profit that he has lost as a result of the broken K. purchase in good faith and w/o unreasonable delay.
Expectancy damages in employment Ks: employers: difference between the cost of a reasonable replacement employee and the breaching employees salary. Employees and wrongful termination: The employee is entitled to any unpaid salary up to the time of the breach and her salary for the remaining term LESS amt earned and with reasonable effort might have earned from other employment (Parker v. 20th Cent. Fox). Substantially similar employment? Could the employee have handled both jobs? Damages f/ nondelivery or repudiation (2-713): Difference btw. the market price at the time when the buyer learned of the breach and the K price WITH incidental AND consequential damages LESS expenses saved. Damages f/ breach of warranty (2-714): Difference at the time of acceptance between the value of the goods accepted and the value they would have had if they had been as warranced UNLESS special circumstances show proximate damages of a different amount. Incidental and consequential damages may also be recovered.

Unfinished/defective construction: When a breach results in defective/ unfinished construction (and the loss in value to the injured party is not Consequential damages: (1) any loss resulting from needs of which the proved w/ sufficient certainty), owner may recover damages based on: seller at the time of contracting had reason to know and whichcould not (a) the dimunition in the market price of the property caused by the reasonably be prevented by cover or otherwise. (2) injury to person/ breach, OR (b) the reasonable cost of completing performance or of poroperty resulting from breach of warranty. remedying the defects if that cost is not clearly disproportionate to the probable loss in value to him. INJURED SELLERS RIGHTS: Delay: When a breach delays the use of property, the injured party Identify goods to the K and salvage (2-704): Aggrieved seller may may recover damages based on the rental value of the property. identify to the K conforming goods not already identified if at the time he learned of the breach they are in his possession (thus allowing him LIMITS ON RECOVERY Foreseeability: The breaching party must have had reason to foresee the to resell). WHere the goods are unfinished, an aggrieved seller may use reasonable judgment to as to completing them (either complete damages as a probable result of the breach when the K was made. manufacture OR resell for scrap in a commercially reasonable manner) Example: delays in construction cause loss of profits for a new business. B/c it is a new business, it isnt provable to a sufficient Resale (2-706): Where the resale is made in good faith and in a degree of certainty, and you cant collect. BUT, you can still get commercially reasonable manner, the seller may recover the idfference damages measured by the lost rental value of your property. btw. the resale price and the K price PLUS incidental damages under Lost profit: The court will not award lost profits that do not arise naturally from the breach nor are reasonably in the contemplation of 2-710 LESS expenses saved in consequence of the breach. both parties at the time they made the K, as the probable result of the Must give the buyer notification of his intention to resell breach of it. (Hadley v. Baxendale; UCC2-715). Measure of damages for nonacceptance by the buyer (2-708): diff. Uncertainty: no recovery beyond amt establshd w/ reas certainty (352) between the market price at the time and place for tender and the unpaid K price WITH any incidental damages LESS expenses saved. Mitigation principle: The injured party must act reasonably after a Max if seller unreasonably fails to resell goods. breach to minimize its loss. This also requires a builder who honors a If inadequate, then measure of damages is the profit which the seller repudiation to look for other work in order to minimize the loss (but not would have made from full performance by the buyer WITH any incidental damages. if the builder lost volume) Related Avoidability Principle: Damages not recoverable for loss Action for the price PLUS incidental damages (2-709): limited to those tht the injured party could have avoided w/o undue risk, burden, humiliation UNLESS he made reasonable efforts to do so. (R2350).cases where resale of the goods is impracticable. Seller must hold the goods for the buyer except if resale becomes possible. Disproportionality: (1) When the loss caused by breach is disproportionate to the price charged by the party whose liability for [cont] injured party, then the damages based on this number is a that loss is in question OR (2) when the cost to remedy what has been windfall to the injured party, and crts will not award this. improperly done is disproportionate to the probable loss in value to the (R2351cmt.f)

,"-"!$"()?)(:"1$#$1):",#',-+%1"@):,'-$((',4)"(&'::"3@)+%!)2%A2(&)"%,$1/-"%&
RELIANCE DAMAGES FOR BREACH IN LIEU OF EXPECTANCY DAMAGES

General Rule: The injured party has a right to damages based on his reliance interest, including expenditures made in preparation for performance or in performance LESS any loss that the party in breach can prove with reasonable certainty the injured party would have suffered had the K been performed (R2349). Note: second clause tells us that P cannot recover on reliance if it wouldve been a losing K. In other words, reliance damages cannot exceed the expectation damages. But he might have a claim in restitution.

RESTITUTION AND UNJUST ENRICHMENT When applicable: Recovery allowed when a party confers a benefit on another in the way of part performance or reliance.

Measure (R2371): (a) the reasonable value to the other party of what he received in terms of what it would have cost him to obtain it from a person in the claimants position (based on market value of such substitute), OR (b) the extent to which the other partys property has been increased in value or his other interests advanced (mkt value of increase). choice (a) is usually less than the cost to the party seeking restitution, since his expenditures are excluded to the extent that they conferred Limits to recovery: foreseeability, mitigation, and proof w/ a reasonable no benefit. degree of certainty. When the K price can be used for unjust enrichment claim: K price as Fixed overhead costs can be collected only if the injured party proves evidence of the true value of the benefit to the person who was unjustly that it could have recouped its overhead expenses on other projects. enriched. Limits to recovery indivisible K: the injured party from a breach will REMEDIES FOR PROMISSORY ESTOPPEL not be required to pay for a part of the performance that he has received General Rule: The remedy granted for breach may be limited as justice (as unjust enrichment) if he cannot make full use of that part w/o the requires. (R290). Debate btw. expectancy damages and detrimental remainder of the performance. reliance damages. Limits to recovery K price and losing Ks: some courts will limit Policy: Promissory estoppel is meant to address reliance harm. unjustment enrichment recovery to the K price on the theory that K law shouldnt ignore the agreement (even if it was breached). Note: Can we award reliance damages for opportunities forgone R2373cmt.d allows recovery for unjust enrichment even if the K (which would extend it to include lost profits, etc)? price is stated in terms of a rate per unit of work and the recovery exceeds that rate (i.e., P can recover ful amount of benefit conferred even though it wouldve been a losing K). But, the court should ask DIVISIBLE VS. INDIVISIBLE K whether the P provoked a breach in a losing K inorder to avoid Majority Rule: a provision for partial pyments to be made as the work having to perform. (R2373cmt.d). progresses does not render the K divisible unless the terms make it Policy: A breaching party should not be able to use the K that clear otherwise. (New Era Homes v. Forster) (but note jur. split) she breached as a shield against the additional liability (is this If K is indivisible, then breached-against party can collect punative?). expectation damages or quantum meruit (New Era Homes) If K is divisible, then breached-against party can collect payment for When other party is in breach (R2373):Injured party is entitled to completed performance (New Era Homes, dissent) restitution for any benefit that he has conferred on the other party by RESCISSION: way of part performance or reliance. But, the injured party has no right Rule/purpose: attempts to return the parties to the status quo: fraud, to restitution if he has performed all his duties under the K and the only misrepresentation, and mistake thing left is for the other party to pay a definite sum of money. SPECIFIC PERFORMANCE AND INJUNCTIONS: General rule: Made on such terms as justice requires. BUT should be granted only when the legal remedy of money damages is inadequate to When party claiming restitution is in breach (R2374): the party in breach is entitled to restitution for any benefit that he cas conferred by protect the injured partys expectation interest (R2359). Factors: way of part performance or reliance in excess of the loss that he has difficulty of proving damages w/ reasonable certainty difficulty of procuring a suitable substitute performance (Curtis Bros caused by his own breach. Crt. will probably choose smaller of the two choices of measure (see v. Catts). R2371illus.1). likelihood that an award of damages could not be collected. Restitution when K is voidable (R2376): A party who has avoided a K for the following reasons is entitled to restitution for any benefit that he has oconferred on the other by way of part performance or reliance: lack of capacity mistake misrepresentation duress Mistake in expression of K (and when to use reformation as an equitable remedy) - P must show by clear and convincing evidence that undue influence the parties had actually reached agreement over the term at issue, that both intended the term to be included, and because of mutual mistake Other circumstances (R2377): When a partys performance is in expression, the term was not included. If the P can show that both discharged for one of the following reasons, he is entitled to retitution for any benefit that he has conferred on the other party by way of part parties believed the writing expressed their true agreement, then the performance or reliance: fault of the P in not reading the writing will not bar reformation. impracticability frustration non-occurrence of a condition UCC: Specific performance may be decreed where the goods are unique or in other proper circumstances.(UCC2-716). Generally, UCC seeks to further a more liberal attitude in connection with the specific performance of Ks for sale . (UCC2-715cmt.2). Land: presumed to be unique, and specific performance often granted.