Last Updated: 10 December 2008

Not Required (Use as Evidence of Contract)

Mutual
Assent
Offer Acceptance
Rule for
most cases
Special
offer rules
Communication of
Present Commitment
Context in which
language used
Reasonable person test,
looking at:
Language
Used
Advertisements,
Circulars, etc.
&
Requests for
Bids
Letters of Intent
GR: Not offer
unless party makes
it clear they are to
be bound
GR: Not offers
and considered
invitations to
offers
GR: Not offers
except with
specific offeree
or a limited qty
Termination of
power to accept
(see other chart)
How to accept
(requirements)
Manifestation
of Present
Commitment
Proper
Manner
By the
offeree to
the offeror
To the
terms
Unilateral Bilateral
Performance
to Accept
Promise to
Accept
Rule if doubtful
whether
unilateral or
bilateral?

Bilateral
Silence as
acceptance
Rules to
determine
manner
ONLY in
the
following
situations
Reason to
believe silence
is accepted
Offeree takes
benefit
Previous dealings
have allowed
silence
Acts inconsistent
w/ offerror's
ownership
If Offer is
silent re
manner
If Offer
suggests
manner
If Offer is
prescribes
manner
Any
reasonable
manner

Any
reasonable
manner

Must comply
Interpret language to
determine which
Certainty of Terms
Required

Parties
Subject
Matter

Quantity
Price
(Common
Law)

Time

Place
Last Updated: 11 December 2008
OR
&

Termination of the
Power to Accept
Revocation Lapse Rejection Death or
Incapacity
Counter-
Offer
Direct
Revocation
Indirect
Revocation
Irrevocable
Offers
GR: Time stated
in offer or
reasonable time
Rule for face-to-
face GR: offer
lapses at the end
of the
conversation

Manifestation
not to Accept
Defined: Offeror
takes definite actions
inconsistent with an
intention to enter into
the contract
Inconsistent
Act
Reliable
Information
Effect:
Terminates power
to accept

Elements
Contrary
intention is
expressed by
either party
UNLESS
Proposing
Different
Bargain
Relating to
the same
subject
From the
offeree to the
offeror

Offer
Unilateral

Offeree starts
performance
(Creates an
option contract)
Bilateral

Option Contract
(Trade $ for time)
Offeree manifests
intent to take it
under further
advisement

Elements
Firm Offers (U.C.C.)
Offers between merchants to buy or sell
goods in a signed writing which gives
assurance that it will be held open is not
revocable for lack of consideration
during time stated or reasonable time (not
to exceed 3 months).
Last Updated: 03 December 2008
&
OR
OR


Consideration

GR: Bargained-for
exchange

Recurring
Problems
Forbearance
(Withhold some
legal action)

Adequacy
Pre-Existing
Duty
Rule
Moral &
Past
Considerations

Illusory
Problems
GR:
Forbearance
is good
consideration
Invalid claims
are good
consideration,
if:
Plaintiff
asserts claim
in good Faith
Claim has a
reasonable
Basis
GR: Courts will
not usually inquire
into the adequacy
of consideration,
except:

Like-Kind
Exchange

Nominal
Insufficiency
(items not
capable of
being owned)
GR: A party who agrees to do
what he has already legally
obligated himself to do has given
no consideration
Addition of
Genuine New
Duties
Settlement of
a Genuine
Dispute
Minority Rule: Unforeseen
change in circumstances
and the extra compensation
must be fair
Rip & Tear
Contracts
GR: Agreeing to
do what one has
already done in the
past is not good
consideration
UNLESS
U.C.C.: No Pre-Existing
Duty Rule
(see U.C.C. 1-103 Duress)
GR: Promises cloaked in
consideration and are
actually one-sided is not
good consideration


Promise
Free to
perform at
promisor's
own
discretion
Promise
cannot restrict
promisor's
discretion by
either:
Good
Faith
Reasonable
Efforts

Reasonableness
Elements

Last Updated: 20 January 2009
& & &


Promissory Estoppel
Elements
See Restatements (Second)
Contracts 90

Uses
EXCEPTION
A charitable subscription
and marriage settlement is
binding without proof that
the promise induced action
or forbearance
Promisor should
reasonably expect
to induce action or
forbearance

Promise
Injustice can only
be avoided by
enforcing the
promise
Promise does
induce such action
or forbearance
#1 As a substitute for consideration
Measure of Damage
The court has the discretion to granting partial or full enforcement.

The remedy granted for breach may be limited as justice requires. In other
words, sometimes a party may be limited only to reliance damages.
#2 As a substitute for a writing
required by a statute of frauds

#3 As a way of making bids (offers)
irrevocable

#4 As a way of policing unfair
negotiation behavior
Last Updated: 10 December 2008


















&
OR
Argument: could have said "no"
OR

Wrongful
Act
Precludes
Exercise of
Free Will

Defenses

Unconscionability

Duress

Mistake

Undue
Influence

Illegality

Deception

Traditional
Duress

Causation: The
threat or use
subjugated victim's
will

Wrongful
Act
Precludes
Exercise of
Free Will

Economic
Duress

Threat of
breach in bad
faith

No feasible
alternatives
exist

No practical
legal remedy
exists
Legitimate
reasons to
threaten breach

Change in
Circumstances

Other party
breached

Threat or use of
violence, captivity,
or other wrongful
act or threat
Substantive
(Terms)
Procedural
(Process)
OR

Absence of
meaningful
choice
"Shocks the
conscience
of the court"
Extremely
Unfair K Terms
Mistake of
fact by both
parties
(substance,
unconscious
ignorance)
Mistake as to
the basic
assumption
(quality,
function,
purpose)
Mistake has
a material
effect on K
exchange

Contract allocates risk to a party
Party contracts knowing that she
has limited knowledge of the
facts (conscious ignorance)
Court allocates the risk to the
party because it is just to do
Assumption of Risk
Examples
Gross
inequality of
bargaining
power

Considerations:
1. Take-it-or-Leave it
2. Opportunity for
legal advice
3. Legalese
4. Deceptive Sales
Think Categorical:
1. Wealth
2. Education
3. Experience
4. Access to legal advice
Considerations:
1. Marketplace
2. Parties Respective Risks
3. Competition

Deception

Statutes of
Fraud
Party has a
good contract
defense

Last Updated: 10 May 2009


-
+
OR &

Remedies

Damages

Restitution
(see separate chart)
Liquidation (Agreed)
Damages

(see separate chart)

Measure
Rest (2d) 347

Limitations

Avoidability

Foreseeability

GR: Damages
based on harms that
a party could have
evaded without
reasonable burden,
risk, or humiliation
are not recoverable.


General Damages
(Benefit of the
Bargain)

Special Damages


Costs & Losses
Avoided
(Expenses Saved)

Consequential

Reliance
Incidental:
Money spent in
anticipation of a
contract and
dealing with
breach fall-out
Special
Circumstances

must have a
reasonable
reason to know


Arise in the
ordinary course
of events
(naturally flow)

EXISTENCE

Prove damage
actually occurred
because of the
breach
AMOUNT

Prove the amount
of damages by
submitting enough
evidence to allow a
reasonable estimate

Certainty
New Business Rule: A new
business can never claim lost
profits damage due to a
breach. (Only applies to some
jurisdictions.)

Argue what constitutes a new
business.
Essential:
Money spent
preparing or
performing a
contract
1. Property damage
2. Personal injury
3. Lost resale profits
4. Lost use profits
Additional Rules
1. Construction: After notification of a breach, the
must reasonably stop performance. See Luten Bridge.
2. Employee: Employee need not take an inferior job to
address a wrongful termination. See Hussy and Parker.
Additional Rules
1. Emotional Distress: Only recoverable for breach
when a high level of foreseeability is present.
2. Apply & Distinguish Cases
- Ford (Tractor Light): Expect some damages, but actual
damages are disproportionate to what was foreseeable.
- Boiler: Only recover damages that are foreseeable.
- Driveshaft: only responsible for damages knows or
should have known.
Situations where you
can receive reliance
only damages
1. Benefit of the bargain too uncertain.
2. Contract is a losing contract.
3. "Break-even" contract.
4. Public Policy.
5. Promissory Estoppel.
Coercive Equitable
Remedies
(Specific Performance)
(see separate chart)

OR

Last Updated: 10 May 2009
Three Steps in Damages Analysis - See Restatements (Second) 347

Step 1: What kind of breach did the defendant commit?

1. Breach by Non-Performance?

2. Breach by Defective Performance (Partial Performance)?

Step 2: What damages might the plaintiff be entitled? 4P's: Put the Plaintiff in the Performance
Position

1. Benefit-of-Bargain Damages (General Damages)

A. Breach by Non-Performance
(General Damages = Get - Give)

B. Breach by Defective Performance
(General Damages = FMV Promised - FMV Received)

2. Plus (+) Essential and/or Incidental Reliance Damages

a. Essential Reliance: Money spent preparing or performing a contract

$ spent in performing or in preparing to perform

b. Incidental Reliance: Money spent in anticipation of a contract and dealing
with breach fall-out

$ spent anticipating other party's performance
$ spent dealing with breach fallout

3. Plus (+) Consequential Damages

Property damage
Personal injury
Lost resale profits
Lost use profits (It must be reasonable to the seller/buyer that the item will be
resold)

4. Minus (-) Expenses Saved (Cost and Losses Avoided)

Unauthorized damages: (1) punitive damages, (2) emotional distress, and (3) attorney
fees (unless specified in contract).

Step 3: Do any limitations justify reducing (-) P's damages recovery?

Avoidability
Foreseeability
Certainty


Last Updated: 10 May 2009

COMMON LAW
General Damages for Commonly Made Contracts

Nature of Contract Type of Breach
Breaching
Party
Measure of Damages
Land
Purchase & Sale
Non-Performance Buyer = K Price - FMV of Land
Land
Purchase & Sale
Non-Performance Seller = FMV of Land - K Price

Construction Non-Performance Owner = K Price - contractor's cost of performing
Construction Non-Performance Contractor = FMV of contractor's services - K Price
Construction
Defective
Performance
Contractor
= COR
1
(unless COR
1
is grossly disproportionate to DIV
2
); OR
= COR causes economic waste

Employment for
Specific Term
Non-Performance Employer = K Price
Employment for
Specific Term
Non-Performance Employee = FMV of employee's services - K Price
1
Cost of Repairs (COR): captures what you lost; gets you where you were promised to be; more accurate,
except in economic waster cases
2
Diminution of Value (DIV): determined by expert witnesses (not as accurate)





UNIFORM COMMERCIAL CODE (U.C.C.)
General Damages for Commonly Made Contracts

Nature of Damages Type of Breach
Breaching
Party
U.C.C. Measure of Damages

BUYER'S BREACH BY NON-PERFORMANCE. All possible measures of seller's BOB damages for buyer's
non-performance: K - FMV, K - Resale $, Profit, K Price (only under extraordinary circumstances).

Benefit of the Bargain Non-Performance Buyer 2-708(1) = K Price - FMV (OR:= Get - Give)
Profit Non-Performance Buyer 2-708(2) = Price Paid - Cost to Make
Profit Loss (Actual) Non-Performance Buyer 2-706(1) = K Price - Resale Price
Reasonable & Good
Faith Resell w/o Resell
Non-Performance Buyer 2-709(b) = K Price

SELLER'S BREACH BY NON-PERFORMANCE.

Benefit of the Bargain Non-Performance Seller
= FMV Price - K Price
OR
= Cost of Cover - K Price



Last Updated: 10 May 2009


Ground for Claim Measure of Restitution
Alternative to damages for K



Value of defendant's gain
Alternate to tort
Performance under a non-contract
Losing K
Doctors to unconscious patients
Restoration to party in breach (Value of defendant's gain) minus (Damages caused by breach, general damages)

Remedies
GR: Value of
the 's gain at
's expense.
EXCEPTION: Applies only to
a party in breach -
Value of the 's gain minus the
damages caused by the breach.
Substantive
Claim
(Unjust Enrichment)
The gained
benefit at the
expense
(enrichment)

Elements
Without
compensating
would be
unfair (unjust)
&
Situations where a
party can recover
restitution damages
only
1. As an alternative to damages.

2. A losing contract.

3. Unjust enrichment not tied to a valid contract.
a. Alternative to a tort claim.
b. $ paid for performance under void or voidable contract.
c. Good Samaritan (services rendered by a medical doctor by an unconscious person)

4. To a party in breach.
Elements
(Two-Part Test
of Validity)
The amount stated is
reasonable in light of
either estimated damages
or the actual damages.

Damages were difficult
to estimate at the time
that the contract was
made.


Damages
(see separate chart)


Restitution

Liquidation (Agreed)
Damages
Coercive Equitable
Remedies
(Specific Performance)
(see separate chart)


Last Updated: 10 May 2009




Remedies

Damages
(see separate chart)

Restitution
(see separate chart)
Liquidation (Agreed)
Damages

(see separate chart)
Coercive Equitable
Remedies
(Specific Performance)

Adequacy
Requirement

Uncertain

Irreplaceable
contract subject

Uncollectable

Undue burden on the
.

Public policy.

Discretionary
Considerations

Fairness of bargain.

Higher degree of
certainty.

Laches and unclean
hands.

Undue Burden on
the Court.
Injunctions Against Breach
1. Analyze adequacy requirement (see chart above).
2. Analyze discretionary considerations (see chart above).

Covenants Not to Compete (see p. 416)
1. Must be part of a legit agreement;
2. Must be necessary to protect legit employer interests (good will, trades secrets,
or other proprietary information); and
3. Cannot be unduly burdensome regarding geography, duration, amd restricted
activity.

Limitation
13th Amendment: It is against the 13th Amendment for a court to order an
individual to work for an employer for whom the individual does not wish to work.

1. Williston Two-Part Test (Narrow). NOTE: A merger clause creates an irrebuttable presumption of
complete integration. If no merger clause, then apply two-part test:
a. Look at the writing and analyze whether it was adopted as a complete, exclusive statement.
b. Look at the term at issue and analyze whether it was natural for the parties to have omitted it.
(Analyze the six Hatley naturalness factors on page 2 of the note-taking guide.)
2. Corbin All-Evidence Test (Broad). Look at the agreement, the term and all surrounding circumstances
and determine if the parties intended a complete integration.
* Merger clause is evidence of complete integration.

PAROL EVIDENCE RULE

STEP 1: Determine if the PER applies to the evidence.
The PER ONLY applies to prior or contemporaneous oral evidence or prior written evidence for which there is no separate
consideration.

Is it oral or written?


Was it made prior to, during or
after the making of the writing?
Was it for separate
consideration?
If the PER does NOT apply, STOP. The evidence is admissible.


STEP 2: Determine if the writing is integrated at all.
An agreement is integrated if it is in writing and final as to at least one term.

If the agreement is NOT integrated at all, STOP. The evidence is admissible. An agreement that is NOT
integrated at all does not bar ANY evidence.


STEP 3: Determine if the agreement is completely integrated.
There are three approaches. Apply each separately.










3. U.C.C. 2-202. (Broad, like Corbin) Intent of the parties unless it is certain that parties similarly
situated would have included the term.

If the agreement is completely integrated, SKIP to STEP 5.
If the agreement is NOT completely integrated, the evidence is admissible depending on whether it is consistent or
contradictory. GO to STEP 4.


STEP 4: Determine if term is consistent with or contradictory to the writing.
There are two approaches. Apply each separately.

Reasonable Harmony Test: Courts look at what the
parties have already agreed to and use as evidence to see
if any contradictions. (Narrow - bars more evidence)
Complete Negation Test: Evidence is consistent
as long as it does not completely negate any term
in the agreement. (Broad - bars less evidence)

If the term is consistent or NOT contradictory, STOP. The evidence is admissible.
If the term is inconsistent or contradictory, GO to STEP 5.


STEP 5: Determine if the evidence is of a type that is always admissible.
Evidence of contract defenses, of an oral condition precedent, or to help resolve an ambiguity is always admissible.
There are two approaches to identifying ambiguities. Apply each separately.


If the evidence falls into any of the above categories, the evidence is admissible.
Four Corners Rule: An agreement is ambiguous only if it
appears so on its face. (Narrow - bars more evidence)
P, G & E Rule: An agreement that is unambiguous
on its face can be shown to be ambiguous by
extrinsic evidence, so long as the agreement is
reasonably susceptible of the alleged meaning.
(Broad - bars less evidence)
2009, Carolina Academic Press - Used with Permission









































CONTRACT INTERPRETATION ISSUES

General Ambiguity
Problems

Recurring Ambiguity
Problems
Grammatical
Problems
(Sloppiness)
(e.g. commas,
modifiers)

Conflicts
Among
Terms

Same as General Problems
BUT
Arise in Special Contexts
USE
SPECIAL
RULES
NAME OF
CONTEXT

AND
Course of
Performance

(Performance of
the K at issue and
neither party has
objected)
USE GENERAL CONTRACT
INTERPRETATION RULES
(IN ORDER OF PRECEDENCE)
Course of
Dealing

(Performance of
past Ks between
the same parties)
Trade Usage

(Parties must be in the
trade and usage is so
prevalent that anyone
in the trade would
know it.)

Interpreting
Ks to make
them
reasonable

Interpret the K
to reconcile
any
inconsistencies

Public Policy
Contra
Proferentem

(Interpret against
the drafting party)


Categories of K
Ambiguities
1. Patent

(Appearing on the
face of document)
2. Latent

(Ambiguity revealed
only after learning
additional info)
3. Gap in K

(Contract is silent or
incomplete regarding
an issue)

Creation of
an
Express
Condition

Creation of
an
Constructive
Condition

Time of the
Essence Clauses

Divisibility

TEST
1. K divided into pairs;
and

2. Parties agree that each
item in each part is an
agreed equivalent of the
other item in that part.

Negotiations
between
parties
1 2 3 4 5 6 7 8

Words or
Phrases with
Multiple
Meanings

Preference for a
promise
&
Against unclear
and ambiguous
language
* Preference to find CC *

1. Following stated or
relative dates.
2. If the parties can
perform at the same time,
they must.
3. "Work before Pay."
4. Nature of Transaction.
Express Condition?
Pro: It is so central that,
without it, nothing important
is left so it must be an EC.
Con: Boilerplate - time is
important but not so
important to mean if
performance is late, the K is
over.
EFFECT
1. If divisible, breach of
one party generally not
excuse further
performance.

2. If not divisible, breach
of one party may excuse
performance of
dependent obligation.

Force
Majeure
Clauses

Construe
narrowly and
"other such
causes" must be
within the same
category
2009, Carolina Academic Press - Used with Permission


Checklist for Identifying Patent Ambiguity

1. Try the easy way first. Look at the parties contract and their dispute and try to figure
out what each party would say the contract means.

2. Focus on what you know about the dispute between the parties. Look for a basis in the
contract itself for either party claiming the other party breached the contract.

3. Look for ambiguous words or phrases. Use your dictionary to help you develop
alternative and competing meanings for what you believe to be the key words in the
contract provision at issue.

4. Look for grammatical ambiguity. Make sure you understand what word in the contract
each modifying phrase is modifying. If you discover that a phrase may modify more
than one word, you may have found the ambiguity.

5. Look for conflicts between terms.

6. Try to translate the contract term(s) into your own words. If you cannot find the
ambiguity, the act of translating may reveal it. At least, translating contract into your
own words will demonstrate your ability to articulate at least one partys contract
meaning contentions.
Last Updated: 10 May 2009

OR

Conditions

Express
Conditions

Was the express
condition
accomplished?
GR: Courts prefer
promises when the
language is
ambiguous.

Clauses

Constructive
Conditions
Magic
Words
(See Page 2)
CREATION

K
Interpretation
Rules

Perfect Performance: Express
conditions must perfectly occur, for
example:
1. Happen when suppose to happen;
2. Done in the correct manner
1. Pay when Paid: Ambiguous
must use the surrounding
circumstances.

2. Time is of the Essence
* FOR EC: If something is of the
essence, it is so central that without it
nothing important is left.
* AGAINST EC: Boilerplate clause
used by the parties to mean that time
is important BUT do not mean that if
performance is a day late, the contract
is over.

3. Satisfaction: Creates an express
condition. Standards to evaluate:
* Fancy, Taste, or Judgment: made
in "good faith."
* Commercial Value: reasonable
person in determining satisfaction.
(operative fitness or mechanical
utility).
RULES
(In order of precedence)
1. Follow stated or relative
dates.

2. If parties can perform at
the same time, they must.

3. "Work before pay."

4. Courts consider the
nature of the transaction.
Rest. (2d) Contracts 241
1. Extent non-breaching
party did not get her essential
K benefit.

2. Extent non-breaching
party can get damages to
substitute for loss of the K
benefit.

3. Extent breaching party
will have wasted time and
money.

4. Likelihood breaching
party will cure deficiencies.

5. Extent breaching party
acted in good faith.
SUBSTANTIAL
PERFORMANCE

EFFECT
1. If an insubstantial
performance, then a
material breach and CC
has not occurred.

2. If a substantial
performance, then NO
material breach and CC
has occurred.

Did the non-breaching
party get most of what
he was supposed to get?
(Core Assessment)

GR: Preference for
finding constructive
conditions.
CC help courts determine
order of performance.

1. CC Precedent: second
party has no duty to perform,
unless other party performs.

2. CC Concurrent: parties'
performances are due
simultaneouslyeach must
render/tender performance in
order to claim a breach by
the other party.

3. Independent: Terms are
unconditional and parties
must perform.

Types & Purpose
Last Updated: 10 May 2009
Express Condition Language Chart

(1) Language which all courts would
agree create express conditions:
(2) Language which all courts
would agree do not create express
conditions:
(3) Language about which
reasonable lawyers could argue
either way:
1. Conditional (-ed) on
2. Contingent upon
Dependent upon*
3. Expressly conditioned on
4. If
5. If and only if
6. On the condition that
7. Only if
8. Provided that
With the understanding that*
9. Satisfy or Satisfied or Satisfaction
Adequate*
Please (-ing)*
Suffices (-ive)*
10. Shall be a condition precedent to
11. Subject to
Subjugate to*
Predispose*
12. Unless
13. Unless and until

* - Weaker variation found in the
dictionary. A practitioner runs a risk that a
court may find these terms ambiguous (see
e.g. column 3).
1. Covenant
2. For
3. Pledge
4. Promise or Promising
Assure or Assurance
Expect
Warrant
5. Shall (or Shall Not)
Expect you to
Must
Ought to
Will (have to / be able to)
5. Swear
6. Time is of the essence
7. Vow
1. After
Afterwards
Behind
Later
Subsequently
2. As
3. As soon as
4. Pay when paid
5. So that
6. Time is of the essence
7. Until
8. Upon
9. Upon receipt of payment
10. Warranty
11. When
Although
At which time
Considering that
12. While


Last Updated: 10 May 2009







































Excuses

Nonoccurrence of
a prior condition

Impracticability /
Impossibility

Waiver
Force Majeure
Clause

(Act of God)
GR: Condition
due before the
condition at
issue did not
occur
For
Express
Conditions
Only

Estoppel

Prevention
(Bad Faith)
EFFECT

Discharge or
Breach
GR: Beneficiary of a
condition
intentionally gives up
the right to enforce
the condition.
EFFECT

Performance
Excused
GR: Beneficiary of a
condition takes action
indicating an intent
not to enforce the
condition and that
action causes the
other party to rely.
EFFECT

Performance Excused
GR: Beneficiary of a
condition causes the
condition NOT to
occur, or otherwise
has breach her duty of
good faith.
EFFECT

Discharged
Excused (depending
on significance)
GR: Impracticability
clause. Lists
circumstances in
which a party can
avoid having to
perform the K without
penalty.
EFFECT #1
Narrowly construe
and "other such
causes" must be
within the same
category to be
effective.
EFFECT #2

If something in the
list happens, then you
do NOT need to prove
impracticability or
impossibility.
For
Express & Constructive
Conditions

Party had no fault in
the occurrence.


Party has not assumed
the risk, unless:
Event makes
performance
impracticable (must
radically change the
obligation).

Nonoccurrence of
event is basic
assumption.
ELEMENTS
EFFECT
1. If material part, then performance
excused, remainder of K discharged.

2. If NOT material part, then that
performance is excused, remainder of K
is NOT discharged

Occurrence is
unforeseen event.

Event was
within the
party's control

Event was
foreseeable

K assigned the
risk
Shell: x increase (33% increase) (finding
increased cost is NOT excessive or
unreasonable).

Howard: 10 to 12x increase (1000% to 1200%
increase) (finding increased costs is excessive
and unreasonable).