Contents 1 INTRODUCTION TO CONTRACT LAW ......................................................... 3 1.1 1.2 1.3 2 2.1 2.1.1 2.1.2 2.1.3 2.1.4 2.1.5 2.

2 3 3.1 3.1.1 3.1.2 3.2 3.2.1 3.2.1.1 3.2.2 3.2.2.1 3.2.3 3.2.3.1 3.2.3.2 3.2.3.3 3.3 3.3.1 3.3.2 3.3.2.1 Cause of Action .............................................................................................. 3 Contract Formation: essential aspects of a contract................................... 3 Terms .............................................................................................................. 3 SELECTING THE GOVERNING LAW ............................................................ 5 Rules for Determining the Governing Law ................................................... 5 Geography ................................................................................................... 5 Type of Contract ......................................................................................... 5 Contracts involving services AND the sale of goods............................... 6 Supplementing the UCC with rules from the general law of contract .... 6 The UCC supplementing the rules of the general law of contract ......... 6 Terms .............................................................................................................. 6 FORMATION ...................................................................................................... 7 The Key to Assent: Intent to be Bound ........................................................ 7 Objective Standard: .................................................................................... 7 Disclaiming an intent to be bound ............................................................. 8 The Basic Mechanics of Assent: The General Law of Contract ................ 9 What is an Offer .......................................................................................... 9 Elements (RS 24) ................................................................................. 9 Parties agree to agree or agree to Negotiate......................................... 10 What is not an Offer .............................................................................. 10 What is an acceptance? ........................................................................... 11 Elements (RS 50) ................................................................................ 11 What terminates an offer? .................................................................... 13 Assent by Correspondence: the mailbox rule..................................... 13 The drafting history of Article 2's formation rules................................... 14 Judicial interpretation of Article 2's formation rules ............................... 14 U.C.C. 2-204 - offer............................................................................ 15

The Basic Mechanics of Assent: Uniform Commercial Code Article 2 ... 14

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3.3.2.2 3.3.2.3 3.3.2.4 3.3.2.5 3.4 3.4.1 3.4.2 3.5 3.5.1 3.5.2 3.6 3.6.1 3.6.2 3.6.3 4 4.1 4.1.1 4.1.2 4.2 4.2.1 4.2.2 4.2.3 4.2.4 4.2.5

U.C.C. 2-206 - Acceptance ............................................................... 15 UCC Bilateral/Unilateral Offer Distinction ........................................... 16 Barker v Allied Supermarket ................................................................ 16 Bethlehem Steel v Litton....................................................................... 17 Specht v Netscape Communications Co ................................................ 20 Bobble Head Hypo.................................................................................... 20

Electronic Assent .......................................................................................... 20

Binding deals without Assent: Promissory Estoppel (PE) ........................ 21 Promissory Estoppel Elements: RS 90................................................. 21 Promissory estoppel and sales of goods................................................ 22 Some Offer and Acceptance Complications .............................................. 23 Controlling the method of acceptance .................................................... 23 Accepting the offer in the wrong way ...................................................... 24 Silence (inaction) as acceptance ............................................................ 24 Consideration: Elements ............................................................................. 27 General Law of Contracts: ....................................................................... 27 UCC A2 Consideration ............................................................................. 28 Defenses: what causes a court to invalidate an Agreement? .................. 30 Duress:....................................................................................................... 31 Duress Elements....................................................................................... 31 Statute of Frauds ...................................................................................... 34 Unconscionability ...................................................................................... 37 Illusionary Promises ................................................................................. 39

CONSIDERATION ........................................................................................... 27

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1 1.1 y

INTRODUCTION TO CONTRACT LAW Cause of Action Breach of Contract must show that the parties assented to (or formed) a deal, that this deal was validated (or made legally binding) by consideration), and that the defendant failed to perform one or more duties under the contract. Reliance / promissory estoppels must show that the defendant made a promise and that the relied to her detriment on that promise. o PE: Does not need to prove assent nor consideration supported the deal. Restitution - must prove she transferred something of value to the , and that it would be unjust for the to keep that something. Contract Formation: essential aspects of a contract Mutual Assent - Offer and Acceptance  Offer: person must consensually express the offer in a manner capable of acceptance without anything further required of the person receiving the offer other than to indicate acceptance.  Acceptance: the person receiving the offer must consensually express that the offer is accepted without conditions attached. Consideration - Validation  A bargained-for-exchange of something which, in the eyes of the law, is of some value to the parties - i.e. you must give up something in exchange. Parties have capacity  For a contract to be valid, each side must have the capacity to enter into it. No legal prohibition preclude the contract  In general, as long as the basic elements of an agreement (offer/acceptance) with consideration are present, the parties have a valid and binding contract. Terms Contract: a set of legal obligations (promises) Binding on all parties involved, and if the breaches, the has a legal right either to full performance OR the financial equivalent of full performance Promises: a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made. A promise has value (RS 2(1)) Transaction and deal any dealing or action that involves crossing a boundary from one status or participant to another. They are both neutral terms that make no legal judgment about the enforceability of the parties negotiations and promises.

y 1.2 (i)

(ii)

(iii)

(iv)

1.3 y

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Agreement is a legal conclusion that means all of the parties to a deal or transaction sufficiently have expressed their assent. I.e. their intent to be bound, to a sufficient number of terms.

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2 2.1 y

SELECTING THE GOVERNING LAW Rules for Determining the Governing Law Two factors determine what law will govern a deal: geography and the type of contract.

2.1.1 Geography y The jurisdiction with the most significant portion of the making or performance of the contract is to occur or does occur. (UCC 1-105) y CISG - United Nations Convention for the International Sale of Goods applies to any contract for the sale of goods made between businesses (not personal) which are based in different countries that have adopted CSIG 2.1.2 Type of Contract y Relatively few contracts are governed entirely by federal law. More types of contracts are governed in part by fed & state law (i) Statutes Sale of Goods (UCC A 2-101) a. What is the item at the time of identification is it moveable (UCC 2-102 & 2-105(1)) b. Only applies to the sale of goods in the US. c. UCC does not impair or repeal any statute regulating sales to consumers, farmers, or other specified classes of buyers rather it supplements the existing laws in place (UCC A 2 2-102) (ii) Statutes for the sale for very specific types of transactions (iii) Statutes for leasing goods (UCC A 2A) (iv) Statutes for transactions in intellectual property (v) Cases and statutes for all other types of transactions: the general law of contracts - sale of land, buildings, and general service contracts consists of statutes and case law a. Restatements: summarizes American general law of contracts, not binding unless adopted

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2.1.3 Contracts involving services AND the sale of goods y In "mixed hybrid transaction transactions involving both goods and services you must determine whether the UCC governs or the general law of contracts o Pittsley rule: court will apply the predominant factor test  Looks at the transaction as a whole (all circumstances) to determine whether its predominant factor, its main thrust or purpose is the rendition of services, with goods incidentally involved (vice versa). To determine if the transaction look at, 1. The most important part of the deal/ why the buyer made this contract (did buyer select the supplier because of the quality of its services, or are the suppliers service fungible?) <Also, the language used by the parties in the agreement and their reasonable expectations on the nature of the business of the supplier of goods > 2. Which part of the deal (the goods or the services) will cost the most? o Minority rule severing the contract into different parts, applying the UCC to the goods but not to the non goods involved when it is easily severable - Problems inconsistent results o Minority rule asks if the dispute involves the goods part of the transaction or the services part. 2.1.4 Supplementing the UCC with rules from the general law of contract y When the UCC is silent regarding a particular area of law it may borrow rules from the other areas of the general contract law power granted from UCC 1103 2.1.5 The UCC supplementing the rules of the general law of contract y When the law is outdated, or plainly unfair the general law may establish an analogy with the U.C.C and apply its reasoning and rules to create new laws and rules. 2.2 y Terms Goods: moveable items at the time of identification (2-105) also include the unborn young of animals and growing crops."

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FORMATION

3.1 The Key to Assent: Intent to be Bound y Mutual assent: A mutual manifestation of assent to the same terms (offer and acceptance). 3.1.1 Objective Standard: y Objective intent (outward manifestations of intent to be bound) the intent observed, either by words or actions o Lucy v. Zehmer (Lucy buying land off Zehmer for 50K at a restaurant (Z acting in jest secretly) Offer terms: restaurant check language- we agree to sell to Lucy/signatures/price)  We must look to the outward expression of a person as manifesting his intention rather than to his secret and unexpressed intention.  If his words and acts, judged by a reasonable standard, manifest an intent to be bound  Does not matter what the state of mind is, only the expressed actions. y If one partys actions, judged by the standard of a reasonable person, manifested to the other party an intention to be bound, the real but unexpressed state of mind was irrelevant  Expression of assent must be communicated to the other side o Leonard v. PepsiCO, Inc Based on how reasonable person would have taken commercial  a basic rule of contracts holds that whether an offer has been made depends on the objective reasonableness of the alleged offerees belief that the advertisement or solicitation was intended as an offer. y Reasonable person: someone that exercises qualities of attention, knowledge; intelligence, and judgment that society requires of its members for the protection of their own interest and the interests of others.  If a statement that looks like an offer is made in jest, its not an offer, and the response yes will not create a contract.  Reasonable person conveying points 1. If for example the product suggests to transform an ordinary experience into an extraordinary experience and it is not plausible 2. When A proposes to sell B a product that is currently been used for military destruction, the proposal is not intent to be bound 3. When I propose to sell you something that is illegal, then you are not bound to that contract 4. When the ratio of the market price and the sale then it is no deal is someone being tricked?

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o Embry v. McKittrick - the Employers statement, Go ahead and get your men out; youre alright, combined with the circumstances, (Employees expired contract, the upcoming hiring season, and Employees need to know immediately if he still was employed) show McKittrick intended to show that he intended to be bound.  Though McKittrick may not have intended to employ Embry (no meeting of the minds) by what transpired between them would have been taken by a reasonable person (Embry) to be an employment offer and Embry so understood it, it constituted a valid contract of employment for the ensuring year. 3.1.2 Disclaiming an intent to be bound y To have intent to be bound, each party must say or do something that shows that party is COMMITTED or BOUND to do something. Words of commitment, such as shall be entitled to, I promise, I agree, I will, I shall, are all words of commitment, as is the shall be entitled to language in Russell. o Russell v. Board of County Commissioners (want of overtime for at-will employments/) Commissioner intent to be bound: was shown by mandatory words of commitment in the handbook (must be paid/will be paid) (Disclaimer placed in front of handbook (in caps) - enough facts to go to trial)  While an employer may deny (or disclaim) any intent to make the provisions of a personnel manual part of the employment relationship, the disclaimer must be clear.  An employer's conduct -- i.e., representations and practices -- which is inconsistent with its disclaimer may negate the disclaimer's effect. o McDonald to be conspicuous, a disclaimer should be: (1) set off in print; (2) capitalized; (3) not contained within another section of the manual A good rule would be that a disclaimer must be clear and conspicuous (incorporating the rule from Russell and McDonald)

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3.2

The Basic Mechanics of Assent: The General Law of Contract

3.2.1 What is an Offer y Manifestation of assent that empowers another to enter into a contract by manifesting assent in return. Shows intent to be bound

3.2.1.1 Elements (RS 24) o An offer is the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it. y Manifestation of willingness  Objective standard of intent to be bound i. Statement or act that other people can see, hear, feel or touch ii. Words of commitment iii. Conduct iv. Circumstances (relationship) To enter into a bargain  Consideration: we need to know what the definite terms of the deal are (major terms) : 1. subject matter 2. price 3. quantity y minority of jurisdictions require all the terms so made as to justify another person in understanding that his assent to that bargain is invited and  offer directed to a specific person for their acceptance i. fewer people invited the more willing that their assent is invited will conclude it.  Completeness of agreement i. Enough terms to simply say YES no negotiation needed link with terms (to enter into bargain) 1. Traditional approach parties must agree on all terms if they do not then there is no contract 2. Modern approach - court may fill subordinate details (if there is sufficient intent AND a customary (common) standard - the court can infer what the parties would have done)  By leaving terms out it demonstrates intent not to be bound to a contract

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Traditional approach - is that if the agreement is not reasonably certain as to its material terms there is a fatal indefiniteness and the agreement is void. Material terms include: (1)subject matter, (2)price (3)payment terms, (4) quantity, (5) duration, and (6)quality. Contemporary approach - Parties are silent as to a material term or discuss the term but do not purport to agree on it, there is a strong possibility that a term may be either implied from surrounding circumstances (community or trade standards) or supplied by a court using a gap filler If the court thinks that the party would have agreed on the term had it came to their attention parties had sufficient intent Genest v John Glenn A court can cannot make a contract, it can only enforce it.

o Southworth Letter + initial conversation + telephone conversation = Offer  The question is whether a reasonable person in the position of the other party would understand that an offer was made and that acceptance would create a legal contract.  terms on Southworth offer price for land, address description, interest terms, payment plan, sale date, sell of permits)(Missing security provision)  Price quotation with the other circumstances constitutes an offer 3.2.2 Parties agree to agree or agree to Negotiate y y Traditional approach prevents formation of contract lack of intent and leaves a material term too vague Majority view Duty to negotiate in good faith What is not an Offer

3.2.2.1 y y

Statements of policy, wishes, hopes, desires, opinion, inquiry or invitation to make an offer, advertisements and circular letters are not offers. Bottle on the shelf o Traditional Law no offer no language of a promise and no quantity specified o Modern Law offer because quantity offered is the quantity on the shelf and the unit price amounts to an implied promise  Acceptance when customer places the bottle in the cart (customer can terminate the offer)

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A HYPOTHETICAL o Prof. sends e-mail to class: Dear Contracts students: Im looking for a research assistant for next summer, to work May 10th to Aug. 10th, 20 hours/week, $10/hour, no benefits. Contact me. Signed, Prof. Gibson  No Promise no offer sent to a large number of people o Student A immediately sends e-mail to Professor: I accept your offer of yesterday. Signed, Student A.  Words of commitment manifestation of commitment the terms are missing (however could imply from previous email) will conclude o Student B sends e-mail to Professor: Id love to work with you this summer on the terms you stated. Here are my resume and transcript. Signed, Student B.  Expressed reference to the terms making the offer using Prof. terms, o Professor sends e-mail to Student B: Excellent! Your comments in class show youll make a great assistant. Please stop by my office next week, and well fill out the necessary paper-work. By the way, could you do 25 hours a week? Signed, Prof. Gibson  Key words, by the way states that this not necessary for the deal to close ALTERNATIVE o Professorial e-mail Excellent! Your comments in class show youll make a great assistant. However, I just learned this morning that my research grant has been cut in half. Would you work for $9 an hour? Signed, Prof. Gibson  Counter-offer rejection of previous offer - changes the terms not an acceptance ALTERNATIVE o Professorial E-mail Excellent! Your comments in class show youll make a great assistant. Stop by my office tomorrow to fill out the paperwork. Signed, Prof. Gibson Professor hits Send button. Five minutes later, Student C stops by and offers to work for free. Is Professor still bound to Student B?  Acceptance is effective when you dispatch it even if the acceptance never gets to another side does not matter if you rely on anything

3.2.3 What is an acceptance? 3.2.3.1 Elements (RS 50) (1) Acceptance of an offer Is a manifestation of assent a. Objective assent undisclosed intentions are irrelevant i. Words of commitment or action communicated to the offeror that is definite and unequivocal ii. An offer can only be accepted by the person it invites to furnish the consideration (RS 52) (2) to the terms thereof i. Mirror Image Rule - terms proposed by the offeror without variation - Ardente - <different for the UCC>

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ii. Minority Cts will borrow from 2-204 (3) made by the offeree in a manner invited or required by the offer.  Unless otherwise indicated by the language or the circumstances, an offer invites acceptance in any manner and by any medium reasonable in the circumstances. 1st RS in the case of doubt it was presumed that the offer invited the formation of a bilateral contract by a promissory acceptance (Davis v. Jacoby). Therefore, the beginning of a performance by the offeree had no legal significance, and the offeror would be free to revoke even after performance had began

a. Unilateral Contract - Offeror makes a promise & the offeree accepts by performing (e.g. Travelers Advantage Check in mail to activate credit card or commission played to pitch fast balls) - At formation only one promise is outstanding y The offeree must inform the offeror within a reasonable amount of time that the offer has been accepted if the offeree has reason to believe that the offeror does not know he has accepted. However, it is not required when: offeror waives notice or the offeror will know when performance has been rendered e.g. International Filter y Performance without knowledge of the offer will not form a contract with the offeror Bobble head hypo y A contract may be formed even though the offeror does not immediately know that performance has began or being completed. (RS 54). Part performance an option contract is created - promisor impliedly promises not to revoke the offer and the promisee impliedly promises to furnish complete performance RS45 b. Bilateral Contract -Offeror makes a promise in the offer & Offeree makes a promises as an acceptance i. Generally promise needs to be accepted by a promise. a. The offeree must communicate his acceptance to the offeror before any contractual obligation can come into being. ii. Offeror can waive communication requirement in their offer eg International Filter iii. At formation two promises are outstanding (4) Received within a reasonable amount of time  Time when contract takes effect - (RS 63a)- acceptance completes the manifestation of mutual assent as soon as put out of the offeree's possession, without regard to whether it ever reaches the offeror  Reasonable time is a question of fact depending on the circumstances existing when the offer and attempted acceptance are made; such

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circumstances include the nature of the proposed contract, the purposes of the parties, the course of dealing, and the relevant usages of the trade. 3.2.3.2 What terminates an offer? (1) Rejection or Counter offer  Silence may be a sign of rejection Akers employees offered to resign, went to boss, boss was silent on the issue; then a week later the boss attempted to accept  Proposes a substitute bargain differing from the proposed offer Ardente - expresses acceptance with a condition by requesting additional material to be included in the sale - Acceptance must be definite and unequivocal assent to the offer, and must not include additional conditions or limitations. y If an offeree, while making a positive acceptance of an offer inquires or makes a request regarding the possibility of different terms a contract will normally be formed (2) Not accepting in a reasonable amount of time  Failure to specify a time will result in the court imputing a reasonable time. What is reasonable depends on: i. Circumstances ii. balancing the interests of each party iii. subject matter (fluctuation of price) iv. mode of offer (face to face offer dies at the end of the conversation - Akers (3) Revocation  The revocation of the offer must reach the offeree before acceptance reaches the offeror  The rejection is not effective until it reaches the offeree (4) Death or incapacity of the offeror  Offeree does not need to be made aware of the death of a offeror CEOs offer will survive if he dies because it was effectively made by the corporation, rather than the CEO. 3.2.3.3 y Assent by Correspondence: the mailbox rule

General Law (RS 41) o Acceptance is effective on dispatched, i.e. as soon as the Offeree puts the acceptance beyond her control, such as putting the letter in the mailbox. As a result, an Offeree who dispatches his acceptance knows there is a deal; he cant be ambushed by an Offeror who mails a revocation. CSIG o CISG is different, it states that acceptance takes affect when the offerees acceptance reaches the offeror. But an offer may ONLY be revoked if it reaches the offeree before he dispatches his acceptance.

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3.3

The Basic Mechanics of Assent: Uniform Commercial Code Article 2

3.3.1 The drafting history of Article 2's formation rules y Problems existed with the traditional contract formation rules (1) Courts hesitated to find an offer existed when one or more terms were missing. (2) Courts insisted that the offer and the acceptance come together at the same time in a single magic moment (the offeror had to list the terms of the offer and the Offeree had to say I accept.) (3) A distinction between bilateral and unilateral offers created problems when the Offeror made a bilateral offer, but the offeree responded by simply performing. The traditional law of contracts offer and acceptance rules often told courts that as a matter of law, no contract had been formed, even though the parties in fact had reached an agreement. y Overcome Problems - Prof. Llewellyn, developed the UCC formulating anew formation rule which initially said that a contract for goods may be made in any manner sufficient to show an agreement UCC2-204  look for an overt expression of agreement dont worry about technical rules/laws.  Llewellyn said that we can have a contract if the parties overtly express their agreement, even though they havent expressly discussed and agreed to all of the terms.  You do not need to have an offer to have a contract. For example, parties can go back and forth until they eventually reach an agreement but you never have one statement with all the proposed terms. What is required is some manner sufficient to show agreement. Does it sound like the parties made a deal? o formulation rules were drafted to get rid of technicalities more flexible aimed towards how business work y The Danger of Article 2's Approach: there is a problem with A2 in that it is difficult to determine when you are bound to the contract o Overt manifestation, may be very vague o Fewer terms, the more flexible the less you are sure that the party is bound 3.3.2 Judicial interpretation of Article 2's formation rules y Agreement (UCC 1-201(3)) demonstrates the bargaining process o Bargain in fact look to the perspective of the parties without imputing the law, i.e. does it look like the parties reached an agreement (language or inferred from the circumstances (past relationship) o Agreement in of itself is not legally binding y Contract (UCC 1-201(12)) total legal obligation that results from the parties agreement - the agreement is filtered through the law to make a legally binding contract

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3.3.2.1 U.C.C. 2-204 - offer (1) A contract for sale of goods may be made in any manner sufficient to show agreement <bargain between the parties, i.e. agreement>, o recognizing any manner of expression of agreement with terms through oral, written or other conduct may be sufficient o if they act as though they are bound, then they have given a reasonable indication that they believe that they bound no offer or acceptance language y some cts have brought in rules from RS 24 and 50 (2) An agreement sufficient to constitute a contract for sale may be found even though the moment of its making is undetermined. o it is not important to identify the exact point at which the deal was closed, but that the actions <conduct> of the parties MUST indicate that a binding obligation has been undertaken <actions more important> (3) Even though one or more terms are left open a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy. o Agreement is valid despite missing terms as long the parties: (1) intended to make the contract (2) a reasonably certain basis for giving an appropriate remedy o When one of these elements is missing, there is no contractual intent and any purported agreement is not enforceable. y There is an assumption that there are external standards to fill in those terms i.e. market price (assumption) other situations the standards are not availability y UCC Article 2's gap-fillers (2-305 to 2-315) give rules how to fill in terms e.g. price y HOWEVER, must have the quantity of purchase court cannot fill this in o The more terms the parties leave open, the less likely it is that they have intended to conclude a binding agreement, but their actions may be frequently conclusive on the matter despite the omissions. 3.3.2.2 U.C.C. 2-206 - Acceptance (1) Unless otherwise unambiguously indicated by the language or circumstances a. an offer to make a contract shall be construed as inviting acceptance <manifestation & enter & invitation> in any manner and by any medium reasonable in the circumstances<conclude>; b. an order or other offer to buy goods for prompt or current shipment shall be construed as inviting acceptance either by a prompt promise to ship or by the prompt or current shipment of conforming or non-conforming goods, but such a shipment of non-conforming goods does not constitute an acceptance if the seller seasonably notifies the buyer that the shipment is offered only as an accommodation to the buyer.
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The sellers shipment of goods will be deemed an acceptance even if the goods shipped are non-conforming (they do not meet the specifications set forth in the buyers offer). In such a case, the shipment simultaneously accepts of the buyers offer and breachs the resulting contract. y However, if the shipper seasonably notifies the buyer that the shipment is offered only as an accommodation to the buyer then there is no breach if the goods and the goods are non-conforming. In such cases, the shipment of nonconforming goods is not construed as an acceptance, but as a counter-offer (2) Where the beginning of a requested performance is a reasonable mode of acceptance an offeror who is not notified of acceptance within a reasonable time may treat the offer as having lapsed before acceptance. y o The beginning of performance by an offeree can be effective as acceptance so as to bind the offeror only if followed within a reasonable time by notice to the offeror. Such a beginning of performance must unambiguously express the offerees intention to engage himself. y UCC 2-207 was intended to alter the "Mirror Image Rule" of the common law. Under subdivision (1) of that section, a contract is recognized notwithstanding the fact that an acceptance or confirmation contains additional or different terms from those of the offer or prior agreement, provided that the offeree's intent to accept the offer is definitely expressed and provided that the offeree's acceptance is not expressly conditioned on the offeror's assent to the additional or different terms. Hence, 2-207 rejects the common law mirror image rule and converts many common law counteroffers into acceptances.

3.3.2.3 UCC Bilateral/Unilateral Offer Distinction y 204 dont worry about bi and unilateral any manner sufficient y 206 (1)(a) any manner dont worry about bi and unilateral y 206(1)(b) either by a prompt promise to ship or by the . 3.3.2.4 Barker v Allied Supermarket y Shopper picked up a Dr. Pepper it exploded causing serious injuries breach of contract (implied warranty)  Offer: the merchants act of stocking up the self-service displays with goods thereby makes an offer to the shopper to enter a contract for their sale (price & quantity)  Acceptance: Court held that acceptance is accomplished picking up the bottle and promising to take goods to check out counter and pay for them o picking up the item the other party is not aware of his acceptance acceptance not communicated to other party (like Zehmer outward manifestation not enforced)
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o Gibson believes the court was wrong no communication of acceptance o Big difference between acceptance - picking up the item and taking the carton of soda on the cashiers Privity Plaintiff can bring breach of contract cause of action only against the entity with which plaintiff had a contract

3.3.2.5 Bethlehem Steel v Litton y Parties exchange several letters with various terms of a possible agreement to sell large ore vessels. When Bethlehem attempted to exercise its option to purchase more ships, Litton refused, and Bethlehem brought an action. Court had trouble b/c the subindexes made it difficult to fill in the escalation price and there was conflicting conduct. Although there was overt agreement on a number of terms the sub index / escalation clause was left open. Fluctuation of price here was a big difference (5 Mil) and there was no industry to use. o A contract does not exist if the parties conduct documents, or communications support not finding an intent to be bound o Contract fails for indefiniteness when the terms missing are inter-related (substantial) terms

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A HYPOTHETICALS (1) Gibson has a relationship with shoe store, walks into store says I need new shoes, manager says Black or Brown, I say black, he says fine three weeks. o The problem have not set terms (price or payment) o Llewellyns probable reaction  Expression of agreement more important than the formation rules y All you need is an overt expression of agreement (outward manifestation of intent to be bound) y If parties act if they are bound, then there is an overt expression of agreement y An agreement can be reached before all the details are worked out  Difference between terms and details details may or may not be important to the parties while terms legally are always important (2) Alternative: Gibson Leaves Message on Owners Voice Mail This is Michael Gibson. I need one pair of black, 15D Allen Edmond Imperial wingtips, as advertised in your catalogue for $219.95. Im at 208-5131, 2501 N. Blackwelder. Thank you! o Problem - What method of acceptance does Gibson expect?  In David v. Jacoby the court held that the offeree needs to accept the offer on the basis of the offeror o Llewellyns probable reaction  Consumer are happy with either a promise or performance all they need is an overt expression of acceptance y All you need is agreement, i.e. deal  An overt need of agreement, YOU THEN HAVE THE SUBSTANCE OF THE CONTRACT (3) Manufacturer (based in Racine, Wisconsin) makes cordless, electric lawn mowers in two sizes. The large size has a 20" blade, and its wholesale price (the price the manufacturer charges retail stores) is $250. The small size has a 17" blade, and its wholesale price is $220. Both sizes are comparable in size, quality and price to those of other manufacturers. Green Thumb Lawn and Garden, Inc., operates twenty stores in small Iowa cities. Last summer, many of its customers asked about electric lawnmowers. Consequently, on Febr. 1 , Green Thumb ordered 100 20" electric lawnmowers from Manufactures catalogue, at $250, for Febr. 15th delivery, and included a check for the $250,000 (plus sales tax!) On Febr. 15th, Manufacturer delivered 100 electric lawnmowers to Green Thumbs distribution center. After Manufacturers truck left, Green Thumb noticed that all the 6 mowers were the smaller, 17" type. Green Thumb immediately calls Manufacturer, who says Sorry about that! But with everyone getting worried about the environment, we havent been able to keep up with all the orders for our large mower. All weve got are the 17 inchers. We figured youd rather have something than nothing. Even though Manufacturer did not do what Green

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y y

Thumb asked, what legal rule says that Manufacturer still accepted Green Thumbs offer? The manufacturer accepted the offer of Green Thumb by performing the contract and delivering the lawn mowers. When Manufacturer sent the wrong mowers, Manufacturer accepted and breached the contract at the same time. Buyer can respond to this breach in several ways, and one of those ways is to reject the goods. If Buyer still can use the goods, Buyer can take the goods and then sue Manufacturer for breach. o Buyers damages would be the difference between the value of the promised goods (20 mowers are worth $250) and the value of the delivered goods (17 mowers are worth $220). That leaves $30 in damages per mower. Under the general law of contract this was a counter offer. But 2-206(1)(b) overrides the mirror image rule. What protects the offer is the fact that 2-206(1)(b) treats Manufacturers shipment of the non-conforming goods as an acceptance of Buyers offer. Since Buyers offer was for 20 mowers, and Manufacturer (by sending the wrong mowers) accepted that offer, Manufacturer is bound to deliver 20 mowers or to pay Buyer damages When an offer is accepted, the acceptance immediately and permanently creates a contract. So theres nothing left for the offeror to accept or reject. o (4) Suppose your mother decides to order something from a mail-order catalogue (Ill distribute a copy of L.L. Beans form). She fills in the blank spots (item number, item description, color, size, price, quantity, etc.), writes her credit card number, signs the document, makes a photocopy for her records, and sticks the original in the mail. Mother is the offeror because the catalogue was not a legal offer (distributed to indefinite number of people), instead he it was an invitation to invite an offer.

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3.4

Electronic Assent

3.4.1 Specht v Netscape Communications Co y downloaded s product; another software they were not aware of, lack of accessible terms; Ct found for )(did not want to agree on arbitration clause) o What factors will cause a court to interpret a click on a computer screen as an acceptance? 1. An offeree, regardless of apparent manifestation of his consent, is not bound by inconspicuous contractual provision of which he is unaware, contained in a document whose contractual nature is not obvious o No contract is formed when the terms of the contract are NOT called to the attention of the receiver o When products are "free" and users are invited to download them in the absence of reasonably conspicuous notice that they are about to bind themselves to contract terms 2. The Specht court also says that the offeree (in this case, the plaintiffs who downloaded the programs) must also be aware that he/she, by taking a certain action, is making a contract. o The Specht court said that the plaintiffs thought they simply were downloading a free program; they had no idea that Netscape considered their downloading a way to make a contract. o When the offeree does not know that a proposal has been made to him, his assent cannot be regarded as binding. y RULE: reasonable conspicuous notice of the existence of contract terms and ambiguous manifestation to those terms are essential. o HOWEVER, generally when the offeror provides the offeree with a reasonable inquiry or constructive notice of the terms of the agreement, their acceptance would be considered binding, even if they do not read the terms. 3.4.2 Bobble Head Hypo y Nebraskan selling anti OU bobblehead dolls for $1000. y Nebraskan announces acceptance = singing Boomer Soonerat Cotton Bowl during OU-Texas game this weekend o When OU fans sing, are they accepting?  You cannot manifest intent to bound to a contract if you have not been given notice to the terms and therefore have no idea that you are entering into a contract and will be bound to certain terms.

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3.5 y

Binding deals without Assent: Promissory Estoppel (PE) When a promisor makes a clear and definite promise on which the promisee justifiably relies, the promisor is bound by the promise, even if it was insufficient to form the basis of a valid, legally binding contract. o The doctrine of PE does not require either an offer or an acceptance, nor consideration, in fact, promissory estoppels is not a contract o Even though there is no enforceable contract, the law may enforce the promise to promote fairness PE is the thing the lawyer claims when the client does not have a contract very difficult to win PE option of last resort -

3.5.1 Promissory Estoppel Elements: RS 90 A promise which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise

1. A promise by the promisor o Words of commitment from the defendant (clear and definite)  Kirksey v. Kirksey the received a letter from defendant; letter said to come live with him; abandoned her possessions; lived with for 2 yrs; then asked her to leave. The court ruled in favor of the . There was no PE. y Court found there to be no acceptance - too many open terms: which house to live in, how long, or which land to live on y Also, the action or forbearance must be solely motivated by the promise. 2. which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee o objective standard - reasonable and foreseeable: which the should have anticipated would cause to do something  Kirksey - it was a condolence letter did not expect her to move 3. which does induce Action or forbearance by the promisee o causation: promisees action or forbearance must relate to the promise made - cause and effect - (does not need to be the full cause)  Kirksey, planning of moving anyway  Cleveland v. American General Life Insurance Co - promise by American General Life Insurance Co. to Mrs. Cleveland to pay 1% commission of Ms. Quarters sales did not give rise to PE because there was no substantial relationship between the promise and her decision to close her office

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4. and injustice can be avoided only by enforcement of promise as justice requires o Must harm Plaintiff in some way -- The bigger the harm (and the more substantial the harm), the bigger the injustice, and, presumably, the bigger the damages. o Damages may be limited to the extent of the reliance o Jones v. East Center for Community Mental Health was at will employee and got fired; wrote termination procedures in employee handbook; did not follow them and did not read them  Personnel manual with suspension memo constituted a set of promises - employee handbook does not mention employment is at will or any language that reserves the right to terminate for any reason/purported fair reason to its employees o Injustice can be avoided only by enforcing the promissory representations contained in the manual, to the extent that such promises reasonably intimated that appellant would be terminated only for the reasons stated in the manual  does not have to be proven that plaintiff relied - employer should have known that expectation of benefits would induce action  if employer allowed to make high-sounding promises to obtain loyal and long-standing employees, then disaffirm such promises and rely on at will status, injustice will frequently result  Jones court bends rule so that it does not have to be proven that plaintiff relied on and acted upon promise, only that it is probable that some persons relied and acted on the promise. Promises in employer handbook are likely to create expectations of benefits  However, most American courts still do require proof of reliance. 3.5.2 Promissory estoppel and sales of goods o Few sale of goods cases use promissory estoppel. o UCC indirectly states PE as an exception to SoF (3(a)(c))

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3.6

Some Offer and Acceptance Complications

3.6.1 Controlling the method of acceptance y Crucial is which parties assent will conclude [the deal] RS 24 o It is irrelevant which side a. begins negotiations b. prepares/drafts the terms i. The party who specifies the method of acceptance y RS 56 Acceptance by Promise; Necessity of Notification to Offeror Except as stated in 69 or where the offer manifests a contrary intention, it is essential to an acceptance by promise either that the offeree exercise reasonable diligence to notify the offeror of acceptance or that the offeror receive the acceptance seasonably. y RS 63 Time When Acceptance Takes Effect Unless the offer provides otherwise, (a) an acceptance made in a manner and by a medium invited by an offer is operative and completes the manifestation of mutual assent as soon as put out of the offeree's possession, without regard to whether it ever reaches the offeror; but (b) an acceptance under an option contract is not operative until received by the offeror. y International Filter Co. v. Conroe Gin, Ice & Light Co. - expressly stated in the proposal that the would accept offer after the approval of the executive officer (no communication to the offeror), the then accepted this proposal and effectively made the offer to the , who then had the ability to conclude the deal by having the exec sign the contract o Offeror in this case waived his right to a return notice of acceptance Conroe got no notice, when vp signs contract (accepted) followed the prescribed method as indicated by the offer  Where a person in an offer made by him to another person, expressly or impliedly intimates a particular mode of acceptance as sufficient to make the bargain binding, it is only necessary for the other person to whom such offer is made to follow the indicated method of acceptance. If the person making the offer, expressly or impliedly intimates in his offer that it will be sufficient to act on the proposal without communicating acceptance of it to himself, performance of the condition is a sufficient acceptance without notification.  General rule: need to communicate acceptance  Whether the offer invites acceptance by a promise or by performance, the prevailing view is that if notice is required, it is enough if the offeree exercises reasonable care to let the offeror know of the acceptance, even if the offeror never actually learns of it (RS 54(2)(a))

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3.6.2 Accepting the offer in the wrong way y Polaroid Corp. v Rollins Environmental Services, Inc disposed of plaintiffs waste; some of the waste spilled and EPA said plaintiff had to pay; sought indemnification from defendant parties process was i. Polaroid would send waste material data requesting whether Rollins could perform the job ii. Rollins would analyze the waste and return a written proposal with the treatment price and shipping cost (OFFER) iii. Polaroid would then execute a purchase order - all of Polaroids purchase orders referenced the supplemental general conditions in a list of documents which constitute this contract (COUNTEROFFER) iv. Rollins would pick up the waste (ACCEPTANCE) Fill in acknowledgment copy and return immediately: was held that not to create an exclusive method of acceptance long history of ignoring clause o Held  failure to expressly object to terms or to make a counteroffer followed by performance that implies acceptance is acceptance. y when an offeree accepts the offeror's services without expressing any objection to the offer's essential terms, the offeree has manifested assent to those terms.  it does not matter how the offeree accepts if there is not stated method of acceptance 3.6.3 Silence (inaction) as acceptance y Silence will not in and of itself constitute acceptance Fiduciary relationship lax rules to offer and acceptance o McGlone v Lacey; sends authorization form to (attorney). s partner notified that out of town but would notify on return, received put fine on it; later noticed that the SOL had run on case / not liable)  Acceptance must be unequivocal in order to create a contract. Where a client and attorney never discuss or agree on fees, and where an attorney promises to respond by a certain date, there is no attorney client relationship, there is no breach of duty, and therefore no liability. Missing terms contingent fee o Togstad; paralyzed in hospital case and (attorney) stated to they did not have good case -- client relied on advice/said he would get back to her/ did not mention SOL problem./ liable)  When an attorney gives legal advice to a person, and does not expressly state why he does not want to take case, he is in fact accepting the offer of that person to enter into a contractual relationship of the attorney-client kind. o McGlone & Togstad courts disagree y Exceptions to the silence rule:

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1. When the offeree has in the past accepted, in silences goods that Offeror has delivered 2. an insurance company has solicited and received from a consumer an application for an insurance policy (International) o The offer, as drafted by the offeree, is so worded that a reasonable person in the offerors position would believe that the offer was deemed to be accepted unless the offeree notifies the offeror that the offer is rejected; 3. When the offer has many opportunities to easily and conveniently tell offeror that it is rejecting the offer, but remains silent

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y y

Hypo #1 Oklahoma City University opens job search for vice-president for academic affairs o -advertises job in Chronicle of Higher Education o -describes courses to be taught o -starting date and three-year duration Salary commensurate with experience Pres. McDaniels interviews o -Dean of large state university o -President of small private college o -Associate vice president at OCU McDaniel sends letter to big school dean, offering to hire her as VPAA, starting Jan.2, 2008, for $120,000/year, -three years, -w/ standard benefits under university plan o Big school dean already makes $150,000 a year; so insulted that she does not reply y General Rule: Silence by itself not acceptance

Hypo #2 Pres. McDaniels runs into OCU Associate VP while walking to cafteria and makes him the same $120,000 offer y Associate VP asks for some time to think about it y Three days later, Associate VPs mother has stroke and is partially paralyzed y Associate VP realizes he cant handle VPAA duties and care for mother y McDaniel sees Associate VP several times at various meetings, inquires after mother y Associate VP says nothing about job y WHAT IS THE ANSWER B. Hypothetical A y The facts o Lawyer attends sisters wedding. At reception, Best Man makes small talk with Lawyer about OSU-Nebraska football discovers Lawyers job Best man says Ive been wondering about a friend of mine.... Car accident involving friend and teenager o -Officer was so angry at teenager that she didnt notice my friend had been drinking o Passengers in both cars badly hurt o -Does the insurance policy still protect my friend? o Lawyer says A lot depends on what the policy actually says and what Oklahomas insurance statutes and regulations permit. o Conversation is interrupted..... y No contract McGlone y Face to face communication reliance Togstad y y

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4 4.1

CONSIDERATION Consideration: Elements

4.1.1 General Law of Contracts: y The promisees detriment was suffered in exchange for the promise: the parties must have bargained for (agreed to) an exchange of the promise for the detriment, so that each induces the other (bargain theory of consideration).

1. Value (I want something (promise or performance) from the other party) a. Hamer v. Sidway (Hamer / Uncle promised money for a promise to refrain from doing a number of activities until turning 21 - has to pay) (1) the promisees forbearance of his lawful freedom to use tobacco, during, etc., is sufficient consideration, regardless of whether or not the promisor benefits because the promisor sought the promisee to cease the activities b. Dahl v Hem Pharmaceuticals Corp-- HEM giving drug to people, promise to receive drug when study was completed after one year / Binding contract (1) The participants consideration was their performance to submit to the double-bind study of the drug for a year, in exchange for the Drug companys promise to provide a free supply of Ampligen without having to pay for it. a. Dahl acceptance by performance - No consideration until the parties have participated in the study for a year. o A waiver of any legal right at the request of another party is a sufficient consideration for a promise If I ask you to waive a legal right, and offer to pay you $ in return, and you agree, we have provided consideration to each other. o A legal detriment is any relinquishment of a legal right o Benefit is seen as meaning that the person received what they bargained for (motive not important) 2. Bargained for - the promise/act sought by the promisor and given by the promisee must be given for in exchange for the promise (RS 71(1)) o Courts ask whether your promise to me induced (or caused) you to make a return promise to me. a. Bargain = agreement (manifestation of mutual assent) to exchange promise or performances (consideration) (17(1)) b. Exchange / Inducement - the consideration (legal detriment) induces the making of the promise and the promise induces (legal detriment) the furnishing of the consideration c. Each partys detriment must induce and be induced by the others (cause effect) (determined by an objective standard external manifestations) RS 71(2) - recognizes that contracts are voluntary exchange relationships

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i. As long as legal detriment has been suffered in exchange for the promise, the court does not inquire into its value in relation to the promise. - (Equivalence in the values exchanged) -- (RS 79(b)). d. Hancock Bank & Trust Co. v. Shell Oil Co. - occupied estate under a written lease. Provision that may terminate lease by giving 90 day notice at any time. Bank( ) acquired estate on foreclosure/ misperformed contract/ wins for breach of contract -consideration on both sides(1) If there is evidence of consideration, and no contrary statute, courts have declined to relieve parties from an allegedly unfair (or maybe even actually unfair) bargain. a. Do not need mutuality of terms (no requirement that parties have parallel duties, terms, rights) as long as both parties were willing to make an exchange promise for a contract to be binding. b. Freedom of contract doctrine- You made deal, know you live up to it. (2) There does not need to be adequacy in the number of promises or performances provided by each party. When the consideration given for a promise has so small value in relation to the promise that it is obviously nominal, it may fail to satisfy the requirement of exchange, and the transaction may be viewed as a gift.

The key to consideration is BARGAIN o Bargain which you ask and I ask for something - we exchange those things because we want what the other has Things that are NOT required o No need to negotiate o no need to show detriment o no need to show that it benefits y The Real Action Is In the Defenses o No need to discuss the elements of consideration o The real issue is in the defenses sue breach of contract motion to dismiss will be based on the fact that there was no contract made under duress unconscionable statute of frauds consideration will come into play with defenses

4.1.2 UCC A2 Consideration y 2-106 (1) exchange of promise and performance o Agreement - manifestation of assent to the terms o A sale consists in the passing of title from seller to the buyer for a price Exchange for a Value (Price) y A sale inherently involves consideration o Consideration and Normal Commercial transactions make sure your CL is promising something to other side and other side is promising

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something back, and both are motivated/asking for it Hypo y y y y y y

Letterman wants a particular person However, the public is sick of the person Director says We have better guests that the audience would prefer to see Letterman doesnt care and contacts the person and says Ill pay you $100 person says yes we have consideration we have an exchange of promises

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4.2 y

Defenses: what causes a court to invalidate an Agreement? These are defenses that the may bring up to excuse the contract 1) Duress 2) The Statute(s) of fraud 3) Unconsciousability a may use to invalidate a terms as well as the contract 4) Lack of mutual consideration and illusionary promises, and

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4.2.1 Duress: y Contracts are voluntary, so, you cannot be forced into the contract. y Modifications of a contract do not require consideration, as long as they are entered in good faith. The issue is not so much whether a party threatens not to perform, but whether that party acted in good faith. Also, rather than accept the modification, the threatened party may well have the reasonable alternative of suing for breach of contract. y Coercive behavior may take the form of physical compulsion or of threat - Trane v. Bond - If a victim is physically forced to assent by signing writing then the victims actions will not manifest assent and the contract is VOID y If the duress is caused by a third party other than that in the contract, the victim can still disaffirm the contract UNLESS the other party to the contract acted in good faith and without reason to know of the duress either gives values or relies materially on the contract RS 175(2) 4.2.2 Duress Elements . When Duress By Threat Makes A Contract Voidable RS 175 1. If a party's manifestation of assent is induced by an improper threat by the other party that leaves the victim no reasonable alternative, the contract is voidable by the victim. 2. If a party's manifestation of assent is induced by one who is not a party to the transaction, the contract is voidable by the victim unless the other party to the transaction in good faith and without reason to know of the duress either gives value or relies materially on the transaction. 176. When A Threat Is Improper 1. A threat is improper if what is threatened is a crime or a tort, or the threat itself would be a crime or a tort if it resulted in obtaining property, (b) what is threatened is a criminal prosecution, (c) what is threatened is the use of civil process and the threat is made in bad faith, or (d) the threat is a breach of the duty of good faith and fair dealing under a contract with the recipient. 2. A threat is improper if the resulting exchange is not on fair terms, and (a) the threatened act would harm the recipient and would not significantly benefit the party making the threat, (b) the effectiveness of the threat in inducing the manifestation of assent is significantly increased by prior unfair dealing by the party making the threat, or (a)

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i. Manifestation of intent a. the good guy objectively agrees to the deal ii. Inducement a. Subjective - you look to the individual (age, background, relationship of the parties, circumstances of the deal) i.e. is the threat the primary reason the good guy agrees to the proposed deal? i. E.g. Chouinard Case could not borrow loan until ownership issues were dealt with. asked for interests owed and had to give him the interest to get the loan- No duress involved -no inducement because good guy signed the contract for another reason (business pressure) iii. Improper threat 1. Modern noneconomic a. needs to be a crime or at least a tort i. Bond forces wife to sign contract b. It breaches the duty of good faith and fair dealing in a contract - good faith means that the bad guy had a decent reason for asking to change the contract (increased production costs, etc.) i. Austin - An ordinary threat to breach a contract is not necessarily a breach of good faith. A threat to breach of contract, when you know that means the other side has no other way to get the goods it bought from you, and when you make the threat in order to get a better deal in another transaction, is a breach of good faith. 2. The resulting exchange is not on fair terms, and a. The threat is use of power for illegitimate ends 1. E.g. Reiver Threat of termination at will contract to obtain release of already accrued benefits 2. Price Gauging paying above the Statutory limit b. Threatened act would harm the victim, but would not significantly benefit the recipient 1. A municipal water company refuses to
supply water to a developer unless he signs a contract that has a price in excess to that charged in similar situations no reasonable alternative

iv. Leaving victim with no reasonable alternative a. What is considered a reasonable alternative depends on the victims:

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i. E.g. Machinery Hauling - Threats of future loss of business when the parties do not have a continuing contract does not constitute duress b. Impending financial loss and bankruptcy is a reasonable alternative (Chouinard) but not when a contract already existed - (Austin (loral) received contract from Navy(govt), then 2nd contract for radar, only allowed those of bid, refused 1st contract unless, complied to finish in time/ wins there was economic duress/ did not have to request extension from Govt- no reasonable alternative based on Lorals list of other companies) y Threats that are OK i. Hard bargains I will not sell this picture for less than $5mil ii. Market or other conditions permit the sale at the price down turn in housing market allows me to purchase house at a reduced rate iii. It is not a threat if financial circumstances may have caused one party to make concessions Mere hard bargaining positions, if lawful, and the press of financial circumstances, not caused by the party against whom the contract is sought to be voided, but person created his own situation, will not be deemed duress (sell property now that he faces bankruptcy similar to Chouinard Case)

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4.2.3 Statute of Frauds y The primary purpose of the Statute of Frauds is to require certain contracts to be in writing, so that a cannot falsely testify that a contract existed. Also, it helps to preserve evidence. o Protects / against false allegations of a contract. o Only / s that can support their claim with a written contract, supplied by the / , could sue, and such a written contract provided solid evidence that the deal had really been made. y When you satisfy the SoF you have only eliminated one defense General Law of Contract 1) Is the contract of the type that must be in writing (within scope of SOF) a. Sale of Land. b. Contract that cant be performed within one year i. Unless it appears from the agreement itself (its terms are so drawn) that it is not to be performed within a year, the statute does not apply - Contracts of uncertain duration are simply excluded, the provision only covers those contracts whose performance cannot be completed within a year as stated by the agreement itself - C.R. Klewin, Inc. v Flagship Properties Klewin made an oral agreement with Flagship, reps shook hands, Flagship held a publicized press conference, and the parties signed a form of agreement; parties had a written agreement on one part of the project, performed part of the contract 2) Is the contract evidenced by a writing which meets the requirements of the relevant SOF - Party to be charged the party denying the contract must have signed it (usually )  Clark: A partial land description and a substantial amount of corroborative evidence to help you fill in the gaps that the deal was made, the writing requirement will be satisfied only need essential terms - check given in connection with the sale of a land, bearing notations such as down payment amount, comments about when the remaining payments would be made, how much interest would be charged on remaining amount due, and names of parties Ct deciding also on policy reasons primary reason of SoF prevent fraud  Crabtree: same transaction allows for multiple documents by showing that at least one writing bear the signature of party to be charged and the unsigned document on its face refer to the same transaction as that in the signed document.

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3) If there is not a sufficient writing, is the transaction within an exception to the SOF (is the contract taken out of the statute)? a. Partial performance - Complete performance by one party will provide evidence of K- Mason loaned money - Other jurisdictions: only full performance by both sides will take contract out of one-year provision. [Chomicky rejects part performance of action before the deal] b. Judicial admission - most courts dealing with service and land contracts borrow 2-201 rule admits in a pleading, testimony or court that the contract really existed. c. Promissory Estoppel 178, Comment f told that the document satisfies the SoF, but later it is found that the person deceived you and the document does not satisfy SoF or a promise to make a memorandum, if similarly relied on may give rise to promissory estoppel d. Present clear and convincing evidence that a K exists complete partial performance matter of justice purpose of SoF Thompson v Stuckey  Promissory Estoppel 139 is not an exception but it would defeat a SoF case y McIntosh case acts of reliance (moving to Hawaii in preparation of performance (but not part of K) reasonable anticipated y Stearns an employee may not avoid the statute of frauds based solely on his detrimental reliance under the promissory estoppel theory in an employment contract for than one year BUT he may recover if the employees promise was made in bad faith

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The Statute of Frauds for the sale of goods - U.C.C. 2-201 y Scope of UCC 2-201 - $500 or more; Sale of Goods y You need only quantity term because most other terms can be figured easy by looking outside the document (Price list, catalog) also quantity gives basis for giving an appropriate remedy (2-204) K only enforceable as the quantity written y If Merchant, written confirmatory memorandum will satisfy the statue of frauds if the memo is tendered w/in a reasonable time after an oral agreement is made unless the recipient (party to be charged) objects with 10 days after receipt. Note: party to be charged must know the contents of the written confirmatory memorandum y A writing is not required if : (i) specially made goods, (not suitable for sale to others in the ordinary course of the seller's business) and the seller has started making them or committed for their procurement; (ii) If the party admits in his pleading or court testimony that a contract was made; or (iii) If the contract is performed (the goods are either received and accepted or paid for). SWAP: Specially made goods, Written confirmation by a merchant, Admission in court, or Performance. These things take the contract out of the Statute of Frauds. y Promissory Estoppel (i) and (iii)

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4.2.4 Unconscionability y Holding that where a commercial transaction or contract is so one-sided and beneficial to one party in the transaction that the contract will be voided because its terms when applied are onerous, burdensome, and oppressive to the other party. y The court may void the entire contract or that portion which it finds offensive. y Helps the middle class- claims usually fail y When the contract terms are grossly oppressive. Procedural unfairness may be found simply in the opportunistic use of a position of dominance. Elements: 1. Procedural unconscionability (unconscionable bargaining process) the process in which the K was made 2. Substantive Unconscionability (resulting unfair or oppressive terms)

Sale of Goods UCC 2-302: o Procedural U - UCC 2-302 prevent oppression and unfair surprise, but attempts not to disturb the allocation of risk because of superior bargaining power.  When a party of little bargaining power, and hence little real choice(meaningless choice), signs a commercially unreasonable contract with little or no knowledge of its terms, it is hardly unlikely that his consent was ever given to all the terms  Williams: bought items w/repossession clause. Ladys education| Ct found transaction was U- have a reasonable opportunity to understand the terms of the contract, or were the important terms hidden in a maze of fine print and minimized by deceptive trade practices o The substantive element alone may be sufficient to render the terms of the provision at issue unenforceable.  Brower v Gateway - terms and conditions included arbitration clause. 4000 nonrefundable filing fee (double the price of the PC) could lose a substantial amt of money arbitrating.| Ct found for borrower| it was U to make them arbitrate)  Toker: buying a refrigerator for a substantial amt more than market price/ wins did not have to pay anymore/Door-to-door salesman- could have been intimidated) - injure the public in some way gross inequality y Services: (rest (2nd) 208 & 364) o A compelling showing of substantive U may overcome a weaker showing of procedural U.

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o Carboni: P loans D 3000 at 200 percent interest/ accumulates into a substantial amount of money/D did not pay/Trial Ct found interest rate was U, and awarded (D)Carboni the principal plus interest at 24% o The procedural aspect is manifested by oppression, which refers to an inequality of bargaining power resulting in no meaningful choice for the weaker party, or surprise, which occurs when the supposedly agreed-upon terms are hidden in a prolix document. o Substantive unconscionability refers to an overly harsh allocation of risks or costs which is not justified by the circumstances under which the contract was made. o Conflicting rules: Toker and Carboni said we decide if a price or an interest rate is substantively unconscionable by comparing that price/rate with the prevailing market price/rate. If that ratio is too high, the price/rate term is substantively unconscionable. Unfortunately, one cant numerically compare a pro rata security clause or a mandatory arbitration clause to the prevailing market rate, because there is no such market rate for such clauses (Williams and Brower). o One of the debates in the cases is the extent to which the alleged victim must prove both substantive and procedural unconscionability. Toker only discusses substantive unconscionability. Williams and Brower talk about the alleged victims education and the extent to which the allegedly unconscionable clause was hidden procedural

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4.2.5 Illusionary Promises

y An illusionary promise is a statement that has the form of a promise, but is not a real promise in substance. An illusionary promise does not limit ones future options. Rather, illusionary promise is an apparent commitment that actually leaves a free way out such a promise is illusionary and cannot serve as consideration Illusionary promises arise in four circumstances (1) promises whose effectiveness depends on the occurrence or nonoccurrence of a certain event (buy house after bank approves the loan)  One sides duty to perform depends on whether an event happens or doesnt happen.  The event that triggers the duty to perform is called a condition parties are bound to the contract as soon as they agree, but one side does need to perform its part of the contract until something happens  Three types of conditions 1. Conditions beyond the control of any person (hail, weather, fire, etc) 2. Conditions within the control of persons unconnected with the contract (buy oil when the market price falls below $4) 3. Conditions within the control of the person that has the condition placed on them (buy ship once purchased ship bound to contract) a. A valid contract may be conditioned upon the happening of an event though the event may depend upon the will of the party who afterwards seeks to avoid its obligation Scott and the ship (2) promises which one side may terminate or cancel (terminate before fully performing) Cancelation clause must be rest y Laclede Gas Co. v. Amoco Oil Co. - A bilateral contract is not rendered invalid and unenforceable merely because one party has the right to cancellation while the other does not. A cancellation clause will invalidate a contract only when it is unrestricted y Miami Coca-Cola Coke was permitted to cancel the deal at any time the court held that the contract was void for lack of mutuality because it could be terminated by coke at any time. y UCC requires reasonable notification be received by the other party (3) promises with an indefinite or vague quantity term (does not know how many oranges to buy yet) y Requirement contracts expressed its quantity in terms like all the coal Buyer shall require or need between Jan. 2, 1995 and march 30, 1995. y Traditional rule parties were not committed to each other i.e. there is no commitment to buy anything e.g. Wickham held that there is a lack of mutuality when the a seller expresses the quantity in terms of Buyers needs no commit at all could actually purchase none (hence promise was illusionary). y Modern approach the parties have limited their options and given a commitment. y Laclede Gas Co. v. Amoco Oil Co. looking for a parties intent a practical reading of contract demonstrates that it intended to purchase gas from Amoco i.e. set up its equipment from them

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(4)

UCC 2-306(1) allows this indefinite requirement as a term and considers the buyers good faith in making the output or requirements of the particular party Promises omit key terms, such as what one side is suppose to do.

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