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, but everything really IS on a curve, and if the essay has everything exactly right AND have the case names, memorize at least 10 or 15 cases out of the class If you can’t remember then do something like “hairy hand” case What they mean and how they apply Restatement or UCC numbers, don’t worry about knowing 2-207 will definitely know (and hate) will need to know 2-204, 2-206, 2-207: § 2-204 and § 2-206 deal with formation issues. If a contract is formed, § 2-207 is used to determine what the terms of the contract are. Learning and knowing the stuff is only 20% In 2:45 you must apply it to a complex fact pattern you’ve never seen in your life Almost none of the questions have a definite answer Probably an offer, probably not an offer. Call of the question determines whether you need to talk about both side. Is this an offer = both sides You represent Ann, is this an offer = 1 side Pick up points on exam by abbreviating Also outline, Frank takes 5 minutes doing “conflict pairing” Practice and do the same way ever single time Do same way every time….laziness if you don’t. Contracts go in chron order, do a timeline Always put UCC and Merchant at the top of the essay Define what a contract is: O+A+C CoQ is there an offer? Supra – already talked about (offer as defined supra, contract as defined supra) Ask prof if you can do it. Infra – haven’t talked about yet. Answer most essays with probably not a definite. Conclusion not where you get points, it’s how you get to it. Def 2 pts Rule 2 Conc. 10 pts Analysis Even if you blow the rest, analysis is 2/3 of the points If you have an exam question on the firm merchant offer – 4 months? NO 3 is all allowed. ON EXAM, CAN’T SAY WIDGETS ARE GOODS, GOT TO SAY WHY. LEARN THIS DEFINITION. EXAM – definitions, fact circumstances 4 choices this is a merchant b/c, this is not a merchant b/c Know in context of essay common law v. UCC. analyze all elements of offer and acceptance first ONLY NEED TO KNOW A FEW GAP FILLERS FOR EXAM IGNORE REVISION TO PROPOSED UCC 2-207 probably WON’T BE ON MIDTERM? EXAM? 2-305
20 department multiple choice. More student friendly on final. At Professor’s judgment can add more multiple choice Scott will have short answer AND essay Use highlighter or underline words
Title everything New law, new paragraph (from LEWS) Label your essay Use outline as a crutch and start working on essays from practice exams Good for editing the outline Give yourself more time (55minutes instead of 45) Para or two on consideration in exam essay Don’t waste time restating the facts UNLESS they follow the word “because” Discipline yourself to do one area of law at a time in each paragraph. Don’t outline dump definitions up front and then apply facts to them afterward. Define offer, then deal with it. Define acceptance and then deal with it. Common law accord and satisfaction UCC accord and satisfaction (by check) Has to be a good faith dispute Difference between accord and satisfaction and substitute-K ON EXAM: when you have a question dealing with C, if you cannot make case for tradition C, look for substitute (PE or MO) before moving on. Write down whether or not you analyzed and rejected C substitutes otherwise he doesn’t know if you even thought about them. ===================== Rick Frank’s Practice Essay scoring sheet. UCC applies: goods fountain drinks are movable goods Define Merchant. In this case both are merchants. Signed , writing, goods, from Merchant 2-205 Reasonable time (3 months max) Offeror is maste of O UCC apply Firm offer 2-205 Merchant Signed writing Assurance for time, reasonable time not to exceed 3 months 29th telegram revoke offer Offer irrevocable until Oct 1 Sept 29t letter was additional terms per 2-207 Change in dickered term: No Triggered Proviso language No Acceptance per 2-207(2) # of exceptions October and Nov. deliveries do not violate either exception therefore become part of the contract. 2-207 analysis for 2-207(3) MARTIN-SCOTT ONLY in the alternatives (DON’T DO FOR KEVIN SCOTT) Read comments for 2-207 about material alteration ========================= EXAM TIP: If you’re asked how to analyze fact situation. Know difference between Restatement 90 1st and 2nd restatement and the differences. See the slide from week 9 for
more details. IN BOTH CASES the response must be reasonable. LAST TERM he asked what elements must be proved to show PE. GET ALL 5. EXAM TIP: On an exam when you are analyzing a case, you look first for traditional consideration, then you look for promissory estoppel, if not then maybe moral obligation under the right fact circumstances. EXAM TIP: Cite UCC 2-205, 2-207, and 3-311 when they specifically apply EXAM: good faith, dispute, 2 parts nothing extinguished until satisfaction occurs. If no good faith dispute, payment on account and you can still go after remainder. Accord & Satisfaction R2nd 281 versus substitute K (BIG TIME ESSAY QUESTION. KEY IS THE INTENT OF THE PARTIES. Was their intent to get rid of old K and form a new one). If you just have accord & satisfaction and you renege on that too, b/c accord and satisfaction you can sue for either original amount $1000 or $700 accord amount Substitute K. now I renege, now I can only sue for $700. Have to look at the intent of parties. Subclause of an essay question.
DEFINITIONS Stare decisis: one decision is precedent for subsequent ones, building up a body of common law Technically the only decisions that bind a given court are those from the highest court in that particular jurisdiction. Dica/dictum: differ from holding. Dicta are opinions without legal authority. Holding has the authority of law. Equitable estoppel: what you did in the past (statements or actions) you are barred from changing in the future if another person relied on the original position. Breach: binding agreement not honored by one or more of the parties by non-performance OR interference with other parties performance. Amicus/ae Curiae: A person not party to the lawsuit who petitions the court or is requested by the court to file a brief in the action because that person has a strong interest in the subject matter. Shrinkwarp license: becomes effective as soon as the customer tears the wrapping from the package. Injunction: A court order commanding or preventing an action. Arbitrage: Attempting to profit by exploiting price differences of identical or similar assets, on different markets or in different forms. Mortgage: a lien against property that is granted to secure an obligation such as a debt. Lein: a legal right or interest that a creditor has in another’s property. Bond: long term interest bearing debt instrument…usually secured by a lien on the issuers property.
The buyer pays freight.also commonly but incorrectly referred to as "Freight on Board". nonsuit pg. It means that the seller pays for transportation of the goods to the port of shipment. A motion in limine is usually made by a party when simply the mention of the evidence would prejudice the jury against that party. even if the judge later instructed the jury to disregard the evidence. assumere) is an action for the recovery of damages by reason of the breach or non-performance of an informal contract. assumpsit (form of action to recover damages for failure to perform a simple K) Default pg. 128 An act or event. and whether made orally or in writing. Characterized by or accomplished with care and perseverance. court’s dismissal of a case b/c P has failed to make a legal case or bring forward sufficient evidence." from Latin. adjective: 1. Per Curiam – decision handed down by the court as a whole motion in limine . his lawyer would file a motion in limine to keep evidence of the confession out of the trial. either express or implied. For example. FOB = Free On Board (FOB) is a term -.A request submitted to the court before trial in an attempt to exclude evidence from the proceedings. Assumpsit ("he has undertaken. if a defendant in a criminal trial were questioned and confessed to the crime without having been read his Miranda rights. plus loading costs. steadily industrious. sedulous \SEJ-uh-luhs\. The passing of risks occurs when the goods pass the ship's rail at the port of shipment.P’s voluntary dismissal of a case. 188 – judgment entered against a D who has failed to plead or otherwise defend against P’s claim. 2. 490 -. Diligent in application or pursuit. that must exist or occur before a duty to perform something promised arises. 23 A voluntary declaration of facts written down and sworn to by the declarant before an officer authorized to administer oaths such as a notary public Condition precedent: pg.Affidavit: pg. other than a lapse of time. unloading costs and transportation from the port of destination to his factory. insurance. Sources of Legal Authority Primary Authority (the “law”) constitutions statutes case law (precedent) court rules administrative rules Secondary Authority (not the “law”) restatements treatises periodicals encyclopedias ALR annotations .
Not on the same level as the UCC which is a statute and MUST be followed if relevant to the dispute. regardless of who severs them from the land provided that they can be removed without causing material harm to the land • currency exchanged as a commodity (as opposed to the medium of payment for a good) • minerals or the like or a structure or its materials to be removed from realty that are to be severed by the seller The term "goods" does not encompass: • Real estate • “things in action” = intangible property such as insurance policies. Every jurisdiction makes its own modifications. Good faith undergirds all of the UCC provisions Under the UCC. but persuasive Restatement I and Restatement II of Contract Law Not a statute. Adopted by Penn in 1953 and followed by all others (LA has only enacted a bit). [UCC § 2-105(1)] In addition to manufactured products. Article 6 allows parties this choice. Merely advice to courts on what the common law should be. Precedent – Case Law (courts) Statutes – Primarily the UCC (state legislatures) • The Uniform Commercial Code – not necessarily uniform! • New version of UCC (NOT ON EXAM.Sources of Contract Law Contract law protects economic interests and generally the law favors the seller. The UCC Various “model” or “uniform” laws were created. Uniform Sales Act and Uniform Negotiable Instruments Law eventually led to creation of the Uniform Commercial Code. Scott: learn what the law is now. • intangible rights such as intellectual property • investment securities • money which is the medium of payment for goods . not what it is going to be) • CISG: applies if parties do not agree that the laws of some particular jurisdiction apply. Restatements – Not the law. "goods" include: • growing crops or timber. but persuasive Murray on Contracts Calamari & Perillo on Contracts Farnsworth on Contracts White & Summers on Contracts Williston 1920 and Corbin 1950. unborn young of animals and other identified things attached to land (other than minerals or the like or structures). Treatises – Not the law. a "good" is any tangible thing that is moveable.
probably a service.MA is shown by the surrounding circumstances. Stepp v. Implied in Fact . 2.• minerals or the like or a structure or its materials to be removed from realty that are to be severed by the buyer When they sign the contract. If the primary function of the contract is to provide a service. Contracts that involve both goods and services must be evaluated to see which constitutes the primary purpose of the contract. Are they right? No. Stepp v. Implied in Law – a “legal fiction” used to effect an equitable result. with the secondary purpose being treated as incidental. A promise is a commitment or undertaking that a given event will OR will not occur in the future A promise is legally enforceable where it: • was made as part of a bargain for valid consideration. or • is deemed enforceable by a statute despite the lack of consideration. The rights and duties of the parties within an enforceable contract DO NOT vary by whether a contract is an express or implied in fact contract. 15) Hypo: Ann orally promises to sell and Bob orally promises to buy a book for $10. Applying UCC by analogy. checks. etc. the existence of an implied-in-law contract DOES NOT depend on whether the elements of a contract are proven. Should probably use common law in your analysis where goods are not involved. One OR both parties make a legally enforceable promise. • reasonably induced the promisee to rely on the promise to his detriment. Ann and Bob both think that this promise is unenforceable as a contract unless it is in writing. Another way to look at it: 1) Formal Contracts under seal (obsolete) The recognizance (D promises to report for a court date) Negotiable instrument (CD's. 3. What is a Contract? Contract: a promise or a set of promises the law will enforce. even if an incidental sale of goods occurs.Freeman. the UCC does not apply. including the conduct and declarations of the parties that makes it inferable that the contract exists. Because a contract implied in law is a tool of equity. Freeman. "Sale" Defined UCC § 2-106(1) defines "sale" as the transfer of title for a price. Express – in express contracts MA is actually expressed in the form of an O and A.) . courts do it. Wedding Cake hypo. Types of Contracts There are 3 categories of contracts: 1. (pg. no movable good at time of contract’s signing.
Zehmer: In the field of contracts we must look to the outward expression of a person as manifesting his intention rather than to his secret and unexpressed intention. no O Hypo: You wouldn’t consider paying $1. ‘The law imputes to a person an intention corresponding to the reasonable meaning of his words and acts. Soliciting opinion.based on actions and behaviors of the parties Uni-k = promise for an act Bi-k = promise for a promise Presumption of bilateral contract Davis v. Contracts Require: • Offer • Acceptance • Consideration (or a consideration substitute) • Legal Capacity to Contract (Contract II subject) and a • “Legal” purpose. The Principle of Mutual Assent Without MA there is no K. the interpretation is favored that a bilateral contract is proposed. 84 S. title satisfactory to buyer.” Zehmer and wife signed. the parties were held to not intend to enter into a buy-sell contract. Lucy v. not barred by law or policy (Contracts II subject) INTENT TO CONTRACT: OFFER AND ACCEPTANCE I.2) Informal . it is expressly provided that there is a presumption that the offer is to enter into a bilateral contract. Hypo: I’m considering selling my car to you for $1. Exchange Bank of Roanoke v. Would a reasonable person in Lucy’s position believe that the parties had mutually assented to the sale? Hypo: seller (Greenbaum) refused to accept the tendered check and the buyer wanted to meet the following day to complete the transaction with the cashier’s check. 1954). Zehmer. No intent to K = no O = no MA Hypo: Would it be a good deal if I sold you my car for $1. may be a cryptic type of O. On a bar tab Zehmer wrote: “We hereby agree to sell to W.200. Lucy the Ferguson Farm complete for $50.200. the Oee. In the case cited. Jacoby: By provisions of the Restatement of the Law of Contracts. the requisite MA exists. .2d 516 (Va. Roanoke Oil Co.O.200 for my car would you? Not clear. If the Oor has clearly manifested a willingness to enter into a K in such a way that the other party.’ First Nat. Section 31 of the restatement says that the reason for the presumption is that “It is not always easy to determine whether an offeror request an act or a promise to do the act.000. As a bilateral contract immediately and fully protects both parties. courts asked whether there has been an O and an A of the O. knows that A is all that is necessary to “cement the deal” and the Oee accepts. Both had already signed the other’s copies of the contract but had not exchanged copies. In determining whether there is mutual assent. Is there a meeting of the minds? Lucy v.E.
A was not an intent to K. custody of children. Formation in General. Inc. Leonard v. Hypo: document says “This contract shall not be enforceable in a court of law” problem 4 pg. Social Contracts A husband and wife are not precluded from enforcing such agreements as they may make in a commercial transaction. Not an enforceable agreement. Justice Wargrave cancels. If the words or other acts of one of the parties have but one reasonable meaning.2d 792 (Ohio App. Breaches serious enough to result in litigation usually terminate the marriage. Is there an enforceable agreement? No K. Courts limit enforcement to: dissolution. No reasonable person would conclude that Falstaff Oor had intention to K. 694 N. § 2-204. Scott asked: Did the parties intend for this to be a “social” agreement or a contract with legal consequences? Stepp v. also Smith v. no reasonable person would conclude commercial was an O. (2) An agreement sufficient to constitute a contract for sale may be found even though the moment of its making is undetermined. Hypo: bridge game. (1) A contract for sale of goods may be made in any manner sufficient to show agreement. his undisclosed intention is immaterial EXCEPT when an unreasonable meaning which he attaches to his manifestations is known to the other party. it’s yours for $1500. including conduct by both parties which recognizes the existence of such a contract. courts will not usually concern themselves with enforcing domestic agreements controlling relationships within the marriage. social contract Hypo: Ann and Bob are married. He doesn’t need to pay. lottery group) Court held that Stepp proved all elements of an implied in fact contract. (1999): Commercial didn’t amount to an O.” Recall Little Red Corvette. 15. apportionment of property. 1997). MacDonald. This phraseology turns document from a legal obligation to a “moral obligation” The Offer "Offer" Defined . OTOH. and she agrees that she will send Bob a check every week while she is gone to cover household expenses. 1918. Freeman. Hypo: John Falstaff and Francis Feeble.E. commercial transactions. Freeman (Chrysler plant in Ohio. Hypo: Ann invites Bob to her house of dinner and Bob accepts. (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. alleged contract did not satisfy NY statute of frauds. Stepp v. “The mental assent of the parties is NOT requisite for the formation of a contract. Pepsico.Restatement section 71. Ann is about to leave on a long business trip. UCC is similar in its requirements to prove a contract has been formed.
there is a note on her door stating the following: "Ann. demonstrate a commitment to contract. maybe I would apply UCC course of dealing by analogy here to demonstrate nothing in the past to indicate Bob was expected to water flowers while she was away. Bob. I didn't want your flowers to die. An offer is a “yes-able” proposition Whether an offer has been made is measured by objective standards. estoppel may be invoked if the offeree relied to his detriment on the estimate. Duration of offer If the offer has a stated time within which the acceptance must be made. prior dealings and other circumstances of which the offeree knows or should know. and she has never asked Bob to do this for her in the past. Must Ann pay Bob? Why or why not? Ok. Generally. Your neighbor. courts hold that in telephonic or face-to-face communications in which an . You can just leave your check for me in my mailbox to compensate me for my time (2 hours). 2. trade usage. be communicated to the offeree (a manifestation)." Ann did had ask Bob to water her lawn before she left. have been watering your lawn for you for the past two weeks. where the estimate is deemed to be a factual misrepresentation because it was made by an expert. it is assumed that the offeror intended to keep the offer open for a reasonable period of time.An offer is a manifestation of an intent to be contractually bound upon acceptance by another party. When she returns. be definite in its terms (assent to the bargain will conclude it). any attempted acceptance after the expiration of that time will fail and will merely constitute a counteroffer by the offeree. Would a reasonable person think this is an offer? Offeror is the master of the offer & language can include anything legal Hypo: Ann leaves the country for a two-week vacation. Definitely no O. Elements of an Offer (CCD) An offer must: 1. including professional opinions 2) statements of intention (including letters of intent which merely memorialize negotiations) 3) invitations to submit a bid 4) price estimates – However. [Restatement § 24] (page 183) Scott paraphrases: An offer is the manifestation of willingness to enter into a bargain that justifies another person to believe that assent to the bargain is invited and will conclude it. to be determined based on the nature of the proposed contract. Examples of things that ARE NOT offers: 1) opinions about future results. An offer creates in the offeree the power to form a contract by an appropriate acceptance. Not communicated. (willingness to enter into a bargain that justifies another to believe assent to the bargain is invited) AND 3. If no specific time is stated within which the offeree must accept.
even without notice to the offeree of such occurrence • death or insanity of the offeree. However. the offeree began performance of the promised act to any extent [Restatement § 45] – Upon commencement of performance.  Communication of revocation An offer may be revoked by any words that communicate to the offeree that the offeror no longer intends to be bound. in the absence of a specified time. not to exceed three months. the offeree's mere preparation to perform does not preclude the offeror from revoking.  Offers that may not be revoked An offer is irrevocable where: 1) there is an option contract in which the offeree gave consideration for an irrevocable offer for some period of time. Revocation With limited exceptions (see  below). 5) in goods contracts. if no consideration if given [UCC § 2-205]  Effective time of revocation A revocation is effective upon receipt by the offeree. the offeror must give the offeree the amount of time specified in the offer (or. 3) the offeree relied to his detriment upon the offer itself if the such detrimental reliance was reasonably foreseeable by the offeror [Restatement § 87(2)] 4) in the case of a unilateral contract. An offer is also revoked by action that is inconsistent with the intent to be bound once the offeree learns of such inconsistent action. an offer is generally revocable at any time prior to acceptance. such as in the case of an option contract • death or destruction of a person or thing essential to performance • the offeree's rejection of the offer. unless an offer is irrevocable. Termination of the Offer An offeree's power to accept an offer is terminated by: • the death or insanity of the offeror. a merchant indicates in a signed writing that an offer to buy or sell goods will be held open for the stated time or a reasonable time if no time is specified. the offer lapses when the conversation terminates in the absence of a clear indication that the offer remains open beyond the conversation. ***POPULAR TESTABLE ITEM .offer is made. which cannot be reinstated by the offeree's subsequent attempted acceptance. which impliedly manifests a rejection of the offer • revocation of the offer • expiration of the offer Preliminary Negotiations – party A sometimes assumes too early that party B has expressed intent to K. a reasonable time) in which to complete the bargained-for promise. • the offeree's counter-offer. 2) the offeree relied to his detriment upon an implied or express promise by the offeror not to revoke if such detrimental reliance was foreseeable by the offeror.
1. If either party intends not to be bound in the absence of a fully executed document.000 for it. "I can quote you a price of $40 each for men's overcoats. Existence of Contract Where Written Memorial Is Contemplated Manifestations of assent that are in themselves sufficient to conclude a contract will not be prevented from so operating by the fact that the parties also manifest an intention to prepare and adopt a written memorial thereof. Continental Laboratories v. Scott Paper Co. 7. 4. I would consider $100. D’s motion for summary judgment is granted.Is not an offer if the person that the bargain is addressed knows or has reason to know that the person making it does not intend to conclude a bargain until he has made a further manifestation of assent. • • . signed by both parties. 6." Is this an offer? Why or why not? § 27. BUT the circumstances may show that the agreements are preliminary negotiations. 3.(1990) Holding: Scott (D) communicated its intent to e bound only by a written contract. Usually in writing? Need formal writing for full expression? Few or many details? Large or small amount? Common or unusual? All details agree on? Writing discussed or contemplated? • • Parties can make the execution of a written document a condition precedent to the birth of a binding contract. The court must determine the intent of the parties objectively from their words and actions viewed within the context of the situation and surrounding circumstances. no amount of negotiation or oral agreement as to the specific terms will result in formation of a binding contract. • how did they conduct themselves • what words were exchanged • have the parties had prior dealings • what are the customs and practices of the trade Hypo: Bob sent Ann a letter stating." Is this an offer? Why or why not? Hypo: Ann sent Bob the following: "I am eager to sell my house. 5. No such contract ever existed. 2. It is the parties’ intent which will determine the time of the contract formation.
Explicit 1. Acceptance by Promise . places an advertisement in the Lansing State Journal. Hypo: the Doctor that crosses the line or Attorney that both promise outcomes.Statement of Opinion or Intention General rule: statements that are meant to comfort are NOT legally binding. As an attorney.The manifestation of assent by offeree to the terms made by offeror made in the manner invited or required by the offer. 10 only. The ad stated. he does not have the right after acceptance to impose new or arbitrary conditions not contained in the published offer. Inc. definite. • Acceptance (RCA) . definite. etc. material. (1957) Issue: was the advertisement an offer. Solicitations (only offers if CDE) General Rule: Advertisements are NOT offers because they are not definite enough – they lack specifics and there is a potentially unlimited number of offerees. Lefkowitz v. acceptance of which will complete the contract. Greater Minneapolis Surplus Store. Scott: Clear. and explicit” and left nothing open for negotiation. • • Where the offer is clear. Would a reasonable person in the position of the offeror believe that the offer was accepted? Once offeree accepts in the manner requested.Ann. Whether in any individual instance a newspaper is an offer rather than an invitation to make an offer depends on the legal intention of the parties and the surrounding circumstances. color. "Men's overcoats.Is it an offer if it stated.” • Communicated to offeror • Absolute and unequivocal: Rick Frank says you’ll spend time arguing on the test about this § 50 Acceptance of Offer Defined. Acceptance by Performance. Hypo: “I’ll sell you my car for $1000." Is this an offer? Why or why not? No. Definite. Reasoning: The offer by the D for the sale of the Lapin fur was “clear."? Why or why not? No b/c size. "Men's overcoats. a clothing merchant. ok I’ll buy your boat. and explicit and leaves nothing open for negotiation. and did the P’s conduct constitute an acceptance. NEVER GUARANTEE the outcome of the case. $50. Per Scott “terms are cemented” and can only be changed by both parties Acceptance must be: • Responsive to offer: you have to accept whatever they want to sell you. it constitutes an offer. While an advertiser has the right at any time before acceptance to modify his offer. is still missing. 2. $50.
Acceptance by Performance. She immediately sent Bob the following note: "Bob. Hypo: Ann says to Bob. He posted the following information on a community bulletin board: "Reward. Acceptance by Return Promise. and failure to fulfill such promise results in breach. in lieu of making the required promise. BOTH Oor and Oee are bound once partial performance begins per section 62(1) 62(2). I will pay you $10. the offer empowers the offeree to only accept by complete performance of the promise. I will pay $50 for the return of my watch lost yesterday on Main Street. but mows her lawn is there a contract? Why or why not? Yes if Bob mowed it “next week” Hypo: Ann says to Bob. § 32. and 2) the offeror learns of the commencement of performance and acquiesces to such manner of acceptance. The offeree's failure to perform does not constitute a breach since no contract is formed until the offeree renders full performance. Either R(II) Section 32 says in the case of a Doubtful Offer." If Bob says nothing. [UCC § 2206. (Situation II on handout from Scott) Hypo: Bob lost his watch. A contract may be formed even if an offer clearly indicates that acceptance is to be by promise if: 1) the offeree begins to perform. Invitation of Promise or Performance . Oee may EITHER act OR promise. I'm sorry that you lost your watch." If Bob says nothing.(1) Acceptance of an offer is a manifestation of assent [objective standard] to the terms thereof made by the offeree in a manner invited or required by the offer. This is the normal situation. Bilateral contracts are formed upon the giving of the promise to perform an obligation in the future. Restatement § 30(2)] This approach reflects the fact that many offers do not specify whether acceptance is to be by full performance or promise. "If you will mow my lawn next week. the offers empower the offeree to only accept by return promise." Ann saw Bob's notice. wanted the act. is Bob in breach of contract? Why or why not? Offeree’s failure to fully perform does not constitute a breach. Unilateral Contracts In a unilateral contract. If Oee partially completes performance of the act then there is a K subject to the condition that the act is completed. (3) Acceptance by promise [bi-K] requires that the offeree complete every act essential to the making of the promise. (2) Acceptance by performance [uni-k] requires that at least part of what the offer requests be performed or tendered and includes acceptance by performance which operates as a return promise. I will pay you $10. An offer invites acceptance by any means reasonable under the circumstances. Bilateral Contracts In a bilateral contract. unless otherwise indicated by language or circumstances. but does not complete it. begins mowing her lawn. I promise that I'll find it for you. "If you will mow my lawn next week." Was a contract created here? Why or why not? No.
Hypo: Ann says to Bob. Medium of Acceptance Unless the offeror indicates otherwise. the offeree may use any medium that is reasonable under the circumstances [UCC § 2-206(1)(a)] or. [UCC § 2206(2)] • Notice of Acceptance by Return Promise Where the offeree accepts by promise.” • Notice of Acceptance by Performance Under common law. could go either way. or • the offer indicates that notification of the acceptance is not necessary. Restatement 32? No UCC because this is a service. there is an effective acceptance." [Restatement § 65] Notice of Acceptance The offeror is entitled to notice of the acceptance Pg. applied in common law transactions." is there a contract? Why or why not? Way written right now. No contract is formed if the acceptance contains terms that are different from or additional to those set forth in the offer. This is because the offeror has actual knowledge. 51. I will pay you $10. or • the offeror learns of the performance within a reasonable time. the offeree must exercise reasonable diligence to notify the offeror of the acceptance or ensure that the offeror seasonably receives the acceptance." If Bob says. However. no notice is required to make the acceptance effective. Such . in non-goods contracts. “If the overt act is one that clearly expresses an intention to accept the specific offer AND is in fact known by the offeror. the offeror's contractual duty will be discharged unless: • the offeree exercises reasonable diligence to notify the offeror of acceptance. he may treat the offer as having lapsed prior to acceptance. if the offeror is not notified of acceptance within a reasonable time. "If you will mow my lawn next week.In case of doubt an offer is interpreted as inviting the offeree to accept either by promising to perform what the offer requests or by rendering the performance. if the offeree has reason to know that the offeror has no adequate means of learning of the performance with reasonable promptness and certainty. where an offer invites acceptance by performance. the same medium as was used to communicate the offer or any other medium "customary in similar transactions at the time and place the offer is received. not moveable goods. "I accept. where commencement of performance is a reasonable mode of acceptance. an acceptance must conform to the terms set forth in the offer. unless the offeror so specifies. as the offeree chooses. [Restatement § 56] Terms of Acceptance Under the "mirror image" rule. [Restatement § 54] Under UCC.
(2) The offeror's duty of performance under any option contract so created is conditional on completion or tender of the invited performance in accordance with the terms of the offer. if the rejection is received later than when the acceptance was dispatched.communication merely constitutes a counter-offer. If an offeree dispatches more than one response to an offer. Marchiondo v. Option Contracts An option contract is created when the offeree has given the offeror something in exchange for the offeror’s promise to keep the offer open for the period of time agreed upon. Option Contracts An option contract is a promise which meets the requirements for the formation of a contract and limits the promisor's power to revoke an offer. a broker. § 25. The UCC rejects the mirror image rule. The condition is full performance by the offeree. a contract is formed since an acceptance is effective upon dispatch but a rejection is effective upon receipt. Revocation received by P on morning of 6th day. Scheck (1967)Significance: option contract is born Issue: Whether the offeror had a right to revoke his offer to enter a unilateral contract. estoppel may operate to bar enforcement of such a contract where the offeror receives the rejection before the acceptance. regardless of whether the rejection is sent before or after the acceptance. It give effect to a definite and seasonable expression of acceptance even though it contains additional or different terms from those offered. A contract is formed if the offeree unequivocally accepts the offeror's terms. Facts: D in writing offered to sell real estate to a prospective buyer and pay % of sales price as commission to the P. Option Contract Created By Part Performance Or Tender (1) Where an offer invites an offeree to accept by rendering a performance and does not invite a promissory acceptance. Offer had a 6 day time limit for acceptance. [UCC § 2-207] Rejection of Offer (THE KEY!) A rejection of an offer by the offeree is effective when received by the offeror. Nevertheless. unless the offeree expressly makes the acceptance conditional on the offeror's assent to the different or additional terms. § 45. . D. § 45 of the restatement If an offer invites acceptance by performance (unilateral K offer) and not by giving a promise (bilateral K offer). and acts in reliance on such rejection. an option contract (one that is irrevocable by the offeror) is created when the offeree tenders or begins the invited performance. revoked the offer. Holding: We hold that part performance by the offeree of an offer of a unilateral contract results in a contract with a condition. in writing. an option contract is created when the offeree tenders or begins the invited performance or tenders a beginning of it.
unless the requirements are met for the discharge of a contractual duty. by revocation. or if no time is stated. 1 A communicates to B “I’ll sell you my car for $400. 17) “Writing” § 2-205. the power of acceptance under an option contract is not terminated by rejection or counter-offer. Option K Option Options simply set the time for lapse. 17) “Signed” • 1-201 (p. O terminates in 7 days. 23) “Goods” • 2-104 (p. but never longer than three months. The O terminates in 7 days. Hypo: Oct. and if you pay me $5.” O is received on Oct. or by death or incapacity of the offeror. this offer will remain open for 7 days) 5) Is irrevocable for the time stated. but they are revocable at any time. You have 7 days to accept. for lack of consideration. it is irrevocable for the stated period of time. Termination Of Power Of Acceptance Under Option Contract Notwithstanding §§ 38-49.e. it is IRREVOCABLE before expiration. This hypo is an example of a ‘Nudum Pactum’ – bare promise not enforceable by law Option Contract Option K’s set the time for lapse. written assurance to hold an offer for the sale of goods open.Option v. 23) “Merchant” • 1-201(p. An offer by a merchant to buy or sell goods in a signed writing which by its terms give assurance that it will be held open is not revocable. but in no case beyond 3 months. Elements of a Firm Offer (see Comment 2 of UCC § 2-104) • 2-105 (p. UCC—Firm offer rule § 2-205 If a merchant gives a signed. during the . it can be revoked at any time. but they are irrevocable until the time stated UNLESS rejection of offer inside option window coupled with Oor’s reliance on rejection then period terminates. you have 7 days to accept. for a reasonable time. Firm Offers. or a reasonable time. 3. Hypo: Oct. Firm (Merchant) Offer 2-205 A firm offer is a type of option K (making the offer irrevocable) No need for consideration 1) Offer to buy or sell goods 2) By a merchant (not necessarily “between” merchants) 3) In a signed writing 4) Which gives assurances (i.” O is received on October 3. § 37. and Oee agrees to pay the $5. 1 A communicates to B “I’ll sell you my car for $400.
is logger he might have the knowledge and skill of logging equipment necessary to be considered a merchant. man lived with the perpetrator of the crime. Eley. The offeror can specify a mode of making an acceptance of his offer. the court held that it was there was sufficient proof to support the decision that the information was imparted through fear of arrest. Similar circumstances as our Norman Bates problem. specialized knowledge as to business practices. or without any expectation of receiving the reward. The Offeree's Power Of Acceptance (1) An offer gives to the offeree a continuing power to complete the manifestation of mutual assent by acceptance of the offer. Knowledge Offeree must know of the offer before she can accept (reward) Motive Person’s motive for acceptance is irrelevant as long as it’s done voluntarily. the court must consider probable convenience and results… General rule: Mode of acceptance must be as fast or faster than mode of offer . but any such term of assurance on a form supplied by the offeree must be separately signed by the offeror. (2) A contract cannot be created by acceptance of an offer after the power of acceptance has been terminated in one of the ways listed in § 36. Corbin: The offeror can require notice of acceptance in any form that he pleases. Manifesting Assent – how do you show you’ve accepted? Common Law § 35. Definitions: "Merchant" (1) "Merchant" means a person who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction or to whom such knowledge or skill may be attributed by his employment of an agent or broker or other intermediary who by his occupation holds himself out as having such knowledge or skill. If proof of such usage and custom is wanting or is uncertain. but in no event may such period of irrevocability exceed three months. Comment 2 of UCC § 2-104 The term "merchant" as defined…may be based upon specialized knowledge as to the goods.time stated or if no time is stated for a reasonable time. Paul B. without making that method exclusive of all others. Hypo: our lumber equipment example. If the offeror specified no mode of acceptance the law requires no more than that the mode adopted shall be in accord with the usage and custom of men in similar cases. Vity v. § 2-104. or specialized knowledge as to both and which kind of specialized knowledge may be sufficient to establish the merchant status is indicated by the nature of the provisions.
O.” Court reasoned that if D’s offer contained on the P. because the printed terms on the agreement said so. Krusa (1991) Who was the offeror? Who was the offeree? How could the offeree accept? Did the required acceptance occur? UCC 2-206 An offer to make a contract shall be construed as inviting acceptance in any manner and b any medium reasonable in the circumstances. Rio Grande Pickle Co.O. Offer and Acceptance in Formation of Contract. "I accept your offer!" Is there a contract? Why or why not? Restatement 30. Both were given important jobs and demanded more compensation. was almost identical and found that the offer was not accepted unless dealer rep signed the P. this was not a valid acceptance of the contract. is unambiguous in inviting acceptance only by the signature of the P’s dealer. president of Rio said he would prepare one. § 2-206. (1) Unless otherwise unambiguously indicated by the language or circumstances (a) an offer to make a contract shall be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances. is signed accordingly. signed them. (1969) Facts: Rio Grande (D) raises and sells cucumbers. but such a shipment of nonconforming 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. Reasoning: There was a key term in UCC 2-206: 1) unless otherwise unambiguously indicated by the language or circumstances an offer to make a contract shall be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances. no contract exists until the P. • The mode of expressing assent is inconsequential so long as it effectively makes known to the offeror that his offer has been accepted. Of the cases presented by D. (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. (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.O. Ann writes the following: "You can accept this offer only by signing on the dotted line below. They hired Fujimoto and Bravo. Inc. Both P’s got their written contacts. . At the end of the letter. P’s believed that they had accepted the company’s offers and were working under the proffered bonus contracts. Bravo wanted the agreement in writing. UCC Beard Implement Co. Stevens Dodge.Fujimoto v." The next day. v. Antonucci v. Ann receives a telegram from Bob stating. offeror master of terms b/c Bob sent a telegram instead of signing on dotted line. and did not return them to D. Hypo: Ann sends a letter to Bob stating the terms of a proposed contract. D orally agreed to pay them a salary plus a bonus of 10% of the company’s annual profits.
but not limited to. or • "where the offeror has stated or given the offeree reason to understand that assent may be manifested by silence or inaction. The main issue: whether the contract was a unilateral or bilateral contract. he knew from his past relationship that if they gave their promise to performance. Davis to perform services until the death of BOTH Mr. and the offeree in remaining silent and . An offeror may prescribe as many conditions or terms of the method of acceptance as he may wish. Mode (Promise or an Act) sometimes critical Davis v.s are not enforceable contracts until accepted by the offeree. Essentially they ruled it was a unilateral contract. Holding: The offer of April 12 was an offer to enter into a bilateral contract. Whitehead. Whitehead died first. and Mrs. Jacoby Lower court found for D because they said that the letter of April 14th was not a legal acceptance. The missing air mail reply of April 14th was a valid acceptance.• An ancient and cardinal rule of the law of contracts: the offeror is the master of his offer. the time place and manner. including. Whitehead expressly indicated the nature of acceptance desired by him. • ProCD: Placing the package of software on the shelf is an “offer” which the customer “accepts” by paying the asking price and leaving the store with the goods. • It is elementary that when an offer has indicated the mode and means of acceptance an acceptance in accordance with that mode or means is binding on the offeror. he could rely upon them. The contract required Mr. It is obvious that if Mr. Where an order form. containing the buyer’s offer. it is reasonable that the offeree should notify the offeror if he does not intend to accept. Silence as Acceptance The general rule is that silence is NOT acceptance Common Law RII § 69 (p. • • Contracts are generally construed against the party who drafted the document. appellants’ promise. By specifically requesting an immediate reply. Weight of authority suggests that P. some of those services were to be performed after his death so that he would have to rely on the promise of the appellants to perform these services. most of the time you offer to purchase the products when you present them at the counter and the store accepts your offer by ringing them up and taking your cash. Reasoning: Whitehead wanted the promise of the appellants (Davises) that he could look to them for assistance. We talked in class about grocery store. and Mrs. Depending on jurisdiction. 53) Acceptance by Silence or Exercise of Dominion Silence may not constitute an acceptance except where: • based on prior dealings between the parties. requires the acceptance of the seller. no contract will exist until the seller has manifested acceptance of the offer. namely.O.
and thus to amount to an acceptance. The D denied this and testified that he never had any conversation with the P about the wall.inactive intends to accept the offer. qui tacet consentire videtur: He who keeps silent is assumed to consent. ½ on his land. is liable for the reasonable value or stated value of such services. accompanied with the knowledge on his part that the party rendering the services expects payment therefore. If the act wrongs the offeror. sending them imposed on the company a duty to act about them. Masasoit Whip Co. may fairly be treated as evidence of an acceptance of it. the retention of the skins. [Restatement § 69(2)] Hobbs v. and with the expectation of payment. The P testified that there was an express agreement on the D’s part to pay him ½ vlue of the wall. When there is knowledge or profit from 2) takes advantage of services with reasonable opportunity to reject 3) where acceptance is invited by silence 4) previous dealings indicate they only need to respond to reject Acts Inconsistent with Offeror's Ownership or Receipt of Benefits The common law holds that one who receives goods with knowledge or reason to know that they are being offered for a price is bound by the terms of the offer if he exercises dominion or control over such goods or engages in any other act inconsistent with the offeror's ownership. it is deemed a valid acceptance only if ratified by the offeror. Similarly." [Restatement § 69] 1. ½ on the D’s. Silence on the company's part. with a knowledge that another was doing valuable work for his benefit. indicated consent that would give rise to the inference of a contract. such silence. The court held that conduct importing acceptance. When one stands by in silence and sees valuable services rendered. and where he has a reasonable opportunity to reject them. The circumstances of each case would determine whether silence. was acceptance in the view of the law and the jury instruction was warranted. could be found by the jury to warrant plaintiff in assuming that they were accepted. • • UCC Hypo: Bob sends Ann the following letter: "Ann.: even if the offer was not such that the contract was made as soon as skins corresponding to its terms were sent. Canton Facts: P built a wall. one who receives benefits from services that he knows or has reason to know are being offered with the expectation of compensation. Day v. Please send me 200 widgets as soon as possible." On the . silence gives consent. • • The fact that the plaintiff expected to be paid was not sufficient of itself to establish the existence of a contract. coupled with a retention of the skins for an unreasonable time. My check for $200 is enclosed. I have been looking at your webpage.
(2) A manifestation of intention not to accept an offer is a rejection unless the offeree manifests an intention to take it under further advisement.” The general rule: Rejection terminates the power of A o If an offeree rejects an offer. (2) A contract cannot be created by acceptance of an offer after the power of acceptance has been terminated in one of the ways listed in § 36. The Offeree's Power Of Acceptance (1) An offer gives to the offeree a continuing power to complete the manifestation of mutual assent by acceptance of the offer. the court found “that EXPRESS NOTICE of withdrawal before acceptance of an offer for which no consideration was paid was NOT NECESSARY. Terminating the Power of Acceptance § 35. the offer is terminated. or (c) revocation by the offeror. In the case cited for problem 19. o If an offeree says or does something that suggests that the offeree does not intend to accept. Exception to the BIG Exception: If Offeror RELIES on the rejection then offer is terminated. Rejection (1) An offeree's power of acceptance is terminated by his rejection of the offer. the offer is terminated. UNLESS the offeror says or does something that suggests otherwise (aka manifested a contrary intention). or (d) death or incapacity of the offeror or offeree. unless the offeror has manifested a contrary intention.• The UCC consistently permits the parties to structure their relations so that the buyer has a chance to make a final decision after a detailed review. or (e) counter-offer (2) In addition. UNLESS the offeree says or does something that suggests otherwise (aka has manifested an intention to take it under advisement) BIG Exception: When O kept open by an option K (or firm merchant offer under the UCC). an offeree's power of acceptance is terminated by the non-occurrence of any condition of acceptance under the terms of the offer. § 36. or (b) lapse of time. • Lapse of Time . Methods Of Termination Of The Power Of Acceptance (1) An offeree's power of acceptance may be terminated by (a) rejection by the offeree. • Rejection by the offeree § 38.
§ 41. Lapse Of Time (1) An offeree's power of acceptance is terminated at the time specified in the offer, or, if no time is specified, at the end of a reasonable time. (2) What is a reasonable time is a question of fact, depending on all the circumstances existing when the offer and attempted acceptance are made. (3) Unless otherwise indicated by the language or the circumstances, and subject to the rule stated in §§ 49, an offer sent by mail is seasonably accepted if an acceptance is mailed at any time before midnight on the day on which the offer is received. Loring v. City of Boston (1844) What were the terms of the offer? Who could accept the offer? Was the offer still open? What, if anything, revoked the offer? Holding: 3 years 8 months not reasonable time within which offer can be considered continuing. Reasoning: City officials bound by annual term of office. Had they made an ordinance, case might have come out different. Ad was given some weight b/c it had two purposes: notify citizens, notify wrongdoers. Terms of ad gave no time. Implication there was some limit to time, general rule of law it must be limited to a reasonable time. NOTE: When Governments make the offer, the offeree doesn’t need to know about it in advance to be able to claim the reward. Restatement 2nd § 46 Revocation of General Offer Supplement p. 188 dealing with the wanted posters situation and advertisements QUESTION: In cited case, court held: But the case at bar is of a totally different character. Here, a reward was offered to any one who should make discovery and give information, &c., as to a crime committed on a previous day, specifically pointed out. The offer, it is true, is not limited in its terms as to time, but the statute of limitations, which is applicable to the crime in question, necessarily restricts the offer to the period within which the delinquent must be informed against and prosecuted, three years next after the offence was committed. So long as the statute of limitations continued to run against the offender, so long would this offer of a reward continue good. As soon as the statute becomes a bar to the prosecution, all liability to pay the reward of course ceases” Problem 24 yes, bank is still responsible because there must be a reasonable amount of time for information about revocation to be disseminated. See pg. 188 Sec 46 of the Restatement. court found that the reward offer was revoked prior to the time that the informant provided his information. The court held that because the revocation was published in the same manner as the reward offer and it was published prior to the informant's actions, the revocation was effective. Reasonable time for revocation……greater amount of time, greater reasonability associated with its revocation. The court held that the bank did not effectively revoke the offer in the manner in which it was made. From the nature of the offer, the public could reasonable assume that continuity was an intended element of the offer
Just include a time frame on the reward poster. Then no question of when the offer ends. Practical consideration: just forget about it, if someone claims the reward just pay it if it would be more costly to go through the revocation process. Problem 25: If Gaston sues? Alphonse will win. By saying, “I’m not sure I wan to sell it.” Acceptance must be RCA, this is not absolute and unequivocal. G did not give an acceptance, the offer was opened, G says not sure, and conversation moved on. A reasonable time would have been during the same conversation, not the next day. Lapsed due to time elapsed. End of conversation on phone or face to face is generally held as the end of the offer. Until tomorrow noon? 5PM no. 1PM no. THE ONLY exception is if the Oor decides to take the acceptance after the time has lapsed. If Alphonse were hard to fine, doesn’t matter, though his actions, the offeror made it impossible to perform acceptance (since no consideration given and this is not a firm offer under 2-205 yes goods, no merchant, no writing, no signature) which is basically the same as saying the deal is off. Problem 26 (Huck) Looking at the case, estate not responsible. Offer of guarantee on each shipment revoked at time of Scrooge’s death. Same if he is incompetent. Sec 48 of Restatement pg. 188 and case Swift & Co. v. Smigel (1972) because a continuing guaranty involves a renewal of the offer on each occasion of an acceptance thereof by the offeree it was arguable that the guaranty became invalid once decedent was adjudged incompetent. Guarantor = offeror Continuous offer and acceptance, offer and acceptance • Revocation by Offeror An offeror is free to revoke an offer at any time before it is accepted. Exceptions: Firm offers under the UCC and Option contracts. § 42. Revocation By Communication From Offeror Received By Offeree An offeree's power of acceptance is terminated when the offeree receives from the offeror a manifestation of an intention not to enter into the proposed contract. Petterson v. Pattberg (1928) Was this an offer for a bilateral or unilateral contract? How could the offer be accepted? Did Petterson do the required act to accept? Could the offer be revoked? When could Patterberg revoke the offer? Significance of the case: dissent shows that the law is changing evolving into the option contract. On a day in the latter part of May, Petterson went to D’s home “It is Mr. Petterson, I have come to pay off the mortgage.” D replied he had sold the mortgage. Holding: 4 judges in majority opinion stating that the judgment should be affirmed for D Mr. Pattberg. 2 dissented believing the judgment should be reversed.
Unilateral contract: the gift of a promise in exchange for the performance of an act. If an act is requested, that very act and no other must be given. Any offer to
enter into a unilateral contract may be withdrawn before the act requested to be done has been performed. • Cites Dikinson v. Dodds, “An offer to sell property may be withdrawn before acceptance WITHOUT any formal notice to the person to whom the offer is made. It is sufficient if that person has actual knowledge that the person who made the offer has done some act inconsistent with the continuance of the offer, such as selling the property to a third person.” Williston further says: The offeror may see the approach of the offeree and know than an acceptance is contemplated. If the offeror can say “I revoke” before the offeee accepts, however brief the interval of time between the two acts, there is no escape from the conclusion that the offer is terminated. Dissenting opinion: A condition precedent to performance by the D of his promise to accept payment at a discount. If the condition precedent has not been performed, it is because the D made performance impossible by refusing to accept payment when the p came with an offer of immediate performance. Quoting Williston on Contracts 677 “It is a principle of fundamental justice that if a promisor is himself the cause of the failure of performance either of an obligation due him or of a condition upon which his own liability depends, he cannot take advantage of the failure. § 43. Indirect Communication Of Revocation An offeree's power of acceptance is terminated when the offeror takes definite action inconsistent with an intention to enter into the proposed contract and the offeree acquires reliable information to that effect. Dickinson v. Dodds (1876) nudum pactum Was the offer revoked before it was accepted? If the offer was revoked, when and how was it revoked? Facts: P having heard or knowing that Dodds was no loger going to selling to him and was probably selling to Allan, wanted to fix Dodds to his offer and tried to bind him.
The promise to keep the offer open was itself a nudum pactum, an agreement unclothed by consideration, and was therefore not binding. There is neither principle nor authority for the proposition that there must be an express and actual withdrawal of the offer or what is called a retraction. It is admitted law that, if a man who makes an offer dies the offer cannot be accepted after he is dead. The law may be “right or wrong” in saying that a person who has given another a certain time within which to accept an offer is not bound by his promise to give that time but it is the law. The offer must continue up to the time of the acceptance. If there was not such a continuing offer, then the acceptance comes to nothing.
Court interpreted this to be a renewal of the original offer and gave the P the right to bind the D to it by his subsequent acceptance. Mere accommodation is the same as a counteroffer. Acceptance Which Requests Change Of Terms An acceptance which requests a change or addition to the terms of the offer is not thereby invalidated unless the acceptance is made to depend on an assent to the changed or added .800 on “terms” (with financing—doesn’t have to be a cash sale) C-O Send lowest cash price. Non-conforming Goods Seller wants to ship non-conforming goods as an accommodation to the buyer. Mirror Image Rule § 59.offer. Exception: Option Contract remains in effect • Counter-Offer General rule: counteroffer is a rejection § 39.” Issue: counteroffer a rejection? Fact: Oor’s telegram “cannot reduce price” should have made rejection clear. Death Or Incapacity Of Offeror Or Offeree An offeree's power of acceptance is terminated when the offeree or offeror dies or is deprived of legal capacity to enter into the proposed contract. Evans (1925) demonstrates 39(2) O I shall sell the land for $1. unless the offeror has manifested a contrary intention or unless the counter-offer manifests a contrary intention of the offeree. § 61.600 cash. Purported Acceptance Which Adds Qualifications A reply to an offer which purports to accept it but is conditional on the offeror's assent to terms additional to or different from those offered is not an acceptance but is a counteroffer. Will give $1. Or “Cannot reduce price” (indicating original offer still in place) Oee I accept “Clear that when O has been rejected it is thereby ended and CANNOT be accepted afterwards without the consent of the Oor. (2) An offeree's power of acceptance is terminated by his making of a counter.• Termination by Death OR Incapacity of the Offeror OR Offeree § 48. Counter-Offers (1) A counter-offer is an offer made by an offeree to his offeror relating to the same matter as the original offer and proposing a substituted bargain differing from that proposed by the original offer. Shipment of non-conforming goods does not constitute an acceptance if the seller seasonably (within a reasonable time) notifies the buyer that the shipment is offered only as an accommodation to the buyer. Livingstone v. When buyer (Marshall) receives the goods he can accept or reject them.
white. Additional Terms in Acceptance or Confirmation. based on the conduct of the parties. . (2) The additional terms are to be construed as proposals for addition to the contract. (b) they materially alter it. Is there a contract between the parties? A. Between merchants such terms become part of the contract unless: (a) the offer expressly limits acceptance to the terms of the offer.: “Ship 1. and it was accepted by Barbara. what are the terms of that K? Why? (2-207(2) or 2-207(3))? Dickered terms = REFERS TO PRICE AND QUANTITY ONLY “Materially alters” official comment #4 if fact pattern has an item that creates HARDSHIP AND SURPRISE.c.000.terms. Yes. This document also contained a provision requiring all disputes to be settled by arbitration. There was no further correspondence between the parties. together with any supplementary terms incorporated under any other provisions of this Act. alters warranty credit terms = not materially altering Hypo #2 Early one Monday morning. This offer will be held open for 30 days only—so hurry!" B promptly returned its standard acceptance form to order one ton of flour for $2. In such case the terms of the particular contract consist of those terms on which the writings of the parties agree. Samuel sent the following acknowledgment: “Will send cloth standard credit terms apply. Hypo #1: Barbara sent Samuel the following P. Hypo: Sobriety assumed when you ask someone to perform. B received the following fax from S. DOES NOT make it a counter-offer “Battle of the Forms” § 2-207. B. cotton cloth at the current market price. or (c) notification of objection to them has already been given or is given within a reasonable time after notice of them is received.er is not thereby invalidated unless the acceptance is made to depend on an assent to the changed or added terms. based on the documents exchanged. S shipped and B accepted the flour. (1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon. "We are offering one ton shipments of flour for $2. Yes.O.000 bolts of 200 t. Do the parties have a K? Why? (2-207(1) or 2-207(3))? If they have a K. (3) Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract.. This term mentioned subsequently.” Samuel shipped the cloth. unless acceptance is expressly made conditional on assent to the additional or different terms.” In response.000.
The terms of the contract will be all those that do not "materially alter" the agreement. Did the D add additional terms? Were the additional terms agreed to? Does 2-207(2) or 2-207(3) (original) apply here? If the parties contracted. Hypo #3 On 12/12/04. It also included an arbitration provision. D. Which of the following best describes the terms of the parties' contract: A. Fun Toys faxed an acknowledgement. Inc. if the arbitration materially altered the terms. Which of the following best describes whether the parties have a contract: A. V. The terms of the contract will depend on whether this jurisdiction finds that an arbitration provision is a "material alteration. Gateway. B." The parties did not exchange any additional documents or calls.00 per set.C. P. C. There is a contract here because ‘Toys R We’ acquiesced to the arbitration provision when it failed to object to it in a timely manner. No. a purchasing agent for ‘Toys R We’ faxed a purchase order to Fun Toys for 1. The terms of the contract will be those that were agreed to by the parties. unless B specifically assented to the arbitration provision. contained an arbitration term Invoice contained proviso language Parties performed Does 2-207(2) or 2-207(3) (original) apply here to determine the terms of the agreement? Klocek v. D. and it stated: "Seller's acceptance is expressly conditioned on the Buyer's assent to the additional or different terms set forth in Seller's acknowledgment. D. On 12/20/04.O. C. There is a contact here because there are no gap fillers regarding arbitration." Commerce & Industry Ins. On 12/16/04. Co. building block sets at $10. or . what are the terms of the contract? When is Acceptance Effective? Common Law (Restatement view) 1) Received (comes in the possession of the Offeror) 2) Received by a person authorized to receive the A 3) Deposited in a place where the Offeror has authorized for communications (does not have to be read) UCC 1-201 (26) A person “receives” a notice or notification when (a) it comes to his attention. to be delivered to its warehouse in Lanzing. No. There is a contract here based on the parties' conduct. #100 count. plus any UCC gap fillers. The terms of the contract will NOT include the arbitration provision because the acknowledgement form was not the mirror image of the purchase order. B. There is a contract here.000. the block sets were shipped and accepted. unless the arbitration provision "materially alters" the parties' agreement. agreeing to ship the block sets for the price stated. Bayer Corp.
P (Seller) sues D to “clear title” saying the A is valid only when received (not mailed) The issue: whether contract is complete and binding when letter of acceptance is mailed or when received. • Adams v. Contracts “the contract is regarded as made at the time and place that the letter of acceptance is put into the possession of the post office…. This means that the terms must be reasonably certain.(b) it is duly delivered at the place of business through which the contract was made or at any other place held out by him as the place for receipt of such communications. A validly formed contract must provide a basis for determining the existence of a breach and for giving an appropriate remedy [Restatement § 33. Lindsell” After a contract is formed: What’s next? Indefinite Terms and Modification Indefiniteness • General Rule: No mutual assent exists (and thus no K) unless the agreement of the parties is sufficiently certain. the usual mail box rule DOES NOT apply. UCC § 2-204]. Non-goods contracts: must include terms that are sufficiently definite and certain. the court may supply a term which is reasonable under the circumstances. “deposited acceptance rule” and also known as “rule in Adams v. Thoelke (1963) Is it acceptance when mailed or when received? Does it matter if it’s never received? Why would we put the offeror in the position of being the last to know? 11/26 D (buyer) mails ? P (seller) an O 11-27 P (seller) mails ? D A by mail 11/27 P retracts A by phone (after mailed) Later. “early decided that contract was completed upon the mailing of the acceptance…. [Restatement § 204] . • Acceptance MUST be RECEIVED prior to end of option period (either common law or UCC Firm rule option) Morrison v. Corbin. The “Mail Box” Rule BIG Exception: • If there is a valid OPTION-K. D receives P’s letter and records K in Florida Now. Lindsell (1818) “rule that a contract is complete upon deposit of the acceptance in the mails. Where a contract is sufficiently defined but omits an essential term.acceptance operative on mailing” Get letter back? You still accepted the offer and have a contract. • Williston. terms are deemed reasonably certain if they 1) provide a basis for determining the occurrence of a breach and 2) an appropriate remedy.it is immaterial that the acceptance never reaches its destination” No power to withdraw the acceptance even if you can get the letter back.
Course of Dealing. [UCC § 1-205(2)] § 2-208. (3) Subject to the provisions of the next section on modification and waiver. (2) The express terms of the agreement and any such course of performance. and the other party knows of the nature of the performance and has an opportunity to object to such performance. shall be construed whenever reasonable as consistent with each other. course of dealing and trade usage may supply both additional terms and aid in construction of existing terms. Course of Performance. In order of their significance and the weight to be given each are: • express terms • course of performance • course of dealing • usage of trade "Course of performance" represents a pattern in the performance of the contract. QUANTITY MUST be on contract. Course of Performance or Practical Construction." Unspecified terms can be supplied by course of performance. and "gap fillers. any course of performance accepted or acquiesced to without objection is relevant to the meaning of the agreement. (1) Where the contract for sale involves repeated occasions for performance by either party with knowledge of the nature of the performance and opportunity for objection to it by the other. course of performance. [UCC § 2-208(1)] "Course of dealing" represents a sequence of previous conduct between the parties to a particular transaction which establishes a common basis of understanding for interpreting their expressions and conduct. and Trade Usage In BOTH common law and goods contracts. the manifestations of intention of the parties to a promise or agreement are interpreted .205). Problem 48) section 202 RII of contracts (5) Wherever reasonable. as well as any course of dealing and usage of trade.UCC contracts: do not fail for indefiniteness even if one or more terms are left open if the parties intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy. [Restatement § 223. vocation or trade. justifying an expectation that the practice will be observed with respect to the agreement in question. UCC § 1-205(1)] "Usage of trade" represents a practice that is employed with regularity in a place. but when such construction is unreasonable. There is NO gap filler. course of dealing. If a contract involves repeated occasions for performance by either party. such course of performance shall be relevant to show a waiver or modification of any term inconsistent with such course of performance. express terms shall control course of performance and course of performance shall control both course of dealing and usage of trade (Section 1. any course of performance accepted or acquiesced in without objection shall be relevant to determine the meaning of the agreement." provided in UCC § 2-305 through § 2-311. trade usage.
could the court set the rent for a new term? Rego v. by mutual assent. Promissory Estoppel (elmer’s glue) Moral Obligation (paste) Consideration is negotiated within same context of the original offer and acceptance of the transaction. 136 Restatement 71(4) performance OR return promise may be given to the promisor or to some other person. course of dealing. claiming that the terms were too uncertain to enforce. . it is usually not something separately negotiated. Exceptions: signing a surety under the UCC.as consistent with each other and with any relevant course of performance. the landlord refused to perform. but you never pay) Gratuitous promise: a promise made in exchange for nothing. pg. When the tenant attempted to exercise that option. No C. but not enough Failure of consideration = C is recited but never carried out / never became valid (I’ll sell you my car for $500. modify the contract. Keith (Indefinite) A lease executed in 1951 contained an option to extend the term for 10 years. or usage of trade. the parties may. The term in the original lease stated that the rent amount for the new lease would “be fixed in such amount as shall actually be agreed upon. Problem 38. It may be given by the promise OR BY SOME OTHER PERSON. Were the terms of the option too uncertain for the provision to be enforceable? Good Faith Modification Subsequent to the formation of a contract.” When the parties failed to agree. Decker (Definite enough for the court to craft a remedy) The parties lease agreement contained a purchase option. INSTRUMENTS SIGNED FOR ACCOMMODATION. § 3-419. CONSIDERATION Terms: Want of consideration = no consideration Adequacy of consideration = There is consideration. Overview: Offer + Acceptance + Consideration (or a consideration substitute) = K Consideration is like super-glue while the 2 substitutes are weaker. Walker v.
3. Types of Exchange (1)To constitute consideration. modification. not go) Did the promise induce the detriment Did the detriment induce the promise? A legal detriment exists where the party: • engages in an act that the party was not previously obligated – whether statutorily or contractually – to perform. or (c)The creation. It may be given by the promise or by some other person. (3)The performance may consist of (a)An act other than a promise. What is the promise to be enforced? What is the act or pomise sought in return? Was the act or pomise bargained for? Does the act or promise have legal value? Bargained For Exchange Quid pro quo (something for something) Must be explicitly bargained for the benefit to the promisor OR Explicitly bargained for detriment to the promisee Rick Frank test for B/4 Is there a legal detriment (can be negative i. (4)The performance or return promise may be given to the promisor or to some other person. subject to subsection (d). or (b)A forbearance. 2. (2)A performance or return promise is bargained for if it is sought by the promisor in exchange for his promise and is given by the promise in exchange for that promise. 4.e. or destruction of a legal relation. is obliged to pay the instrument in the capacity in which the accommodation party signs. Another exception is modification of the contract under UCC. drawer. Restatement § 71.(b) An accommodation party may sign the instrument as maker. Definition: Consideration is a bargained for exchange of something which in the eyes of the law has “legal” value. acceptor. Consideration Aid 1. Requirement of Exchange. or . The obligation of an accommodation party may be enforced notwithstanding any statute of frauds and whether or not the accommodation party receives consideration for the accommodation. a performance or a return promise must be bargained for. or indorser and.
Sufficiency v.• refrains from exercising a legal right Under the pre-existing duty rule. Legal Value Negative examples: • Love and affection are not recognized under the law as having legal value. • Ideas that aren’t sufficiently proprietary to have legal value. a month. which relates to whether there is a legal detriment incurred as part of a bargained exchange of promises or performances. a promise regarding a preexisting obligation to the other party does not constitute a legal detriment. Definitely C. I promise to give you $500. Generally. honoring the concept of freedom of contract. Adequacy Overview Adequacy of consideration relates to whether the bargain involves an exchange of equal value.not doing something that you have a legal right to do. however. the court held that the contract was unenforceable due to lack of consideration. $500 if you do not go to Chicago next Friday? Forbearance. On the other hand. courts do not concern themselves with whether consideration is adequate. In case cited. who proposes to cure a lingering disease by conjury or incantations. for the services of a conjurer. with interest at two per cent. courts do require consideration to be "sufficient". then it is a gift. • Magic is not recognized under the law as having value (including psychic readers) Cooper v. 3. No C. The suggestion that the manufacturer increase profits by raising prices was a concept common and general to the whole world which the business consultant was not permitted to monopolize by contract Simple Hypos from problem 37: 1. No value for doing the obvious. Maybe C. $500 if you go to Chicago? Enforceable uni-k unless guy is going to Chicago to pick up the $500. Livingston (1883) Our conclusion is that "conjuring" over a sick man "to make him well" is not [**16] a valid consideration for a promissory note. Problem 39 (C) Business promise to pay ½ increased profits in return for idea to increase profits B/4? Yes Value? No. 2. This is a gift not a promise. . and that no man with a healthy mind would voluntarily give a note for $ 250. Negative example: Promises to make gifts are generally not enforceable b/c there is no bargain.
If a bargain gives a party a choice of alternative obligations. and playing cards or billiards from money” until he is 21. uncle would not have paid otherwise. regardless of whether the promisor benefits or not GR: The court will inquire regarding sufficiency. All three needed? Scott says stay tuned for later class. Sufficient consideration: Refers to value the law will enforce. Sidway (1891) Pg.). courts do not inquire into the adequacy of consideration Two exceptions: 1) fungible for like fungible (US$ for US$. obvious ideas. using tobacco. Promise to pay $5000 2. each alternative on its own must constitute sufficient consideration for the return promise. If the court finds the exchange to have no legal value (sufficiency). Memory Hook: Uncle promises nephew $5000 if he refrains from “drinking. Fungible goods (same stuff) (gas. 134 at bottom 1. Test: throw it in a big pot. return promise/act: do not do x. then you are talking about fungible goods. will look to adequacy. there is no consideration (ie. value? Yes nephew gave up legal right to do these acts Hypo: minor has no legal right is forbearance consideration? No. Adequate consideration: Refers to the quantity of the amounts exchanged.y. love and affection. grain. Hypo: legal right to smoke and drink but not to gamble. when a nominal amount is “exchanged” for larger sum or for an item with a fair market value far in excess of amount given (disguised gift). etc. bargained for? Yes. Sufficient – Scott says think “value” Adequacy – Scott says think “quantity” Example of sufficient consideration: Hamer v. but it will not generally inquire regarding adequacy of consideration. The court will inquire into adequacy if it’s merely an exchange of money or fungible goods. capable of being Interchanged. and likely say it’s a gift) . swearing.e. Rule: If a person gives up a right that is valuable to them (forbearance) in a bargain for exchange then there is consideration. (Compare this to that) Normally. the court will also inquire into adequacy if the plaintiff is seeking equitable relief. If you don’t care that you get a specific one back. brick for brick) Example: Fungible for like fungible.z until after 21 yrs 3. i. Corn for like corn IS fungible (ct.
Batsakis v. Demotsis (1949) 500.75 in coins so I can use vending machine. Rule: Gratuitous promises and moral obligations are not enforceable. P Claims loving and dutiful wife. so he promises to pay out of his own pocket in return for one cent.000 In return for P giving 500. W has no money in her estate. Non-examples: Low-grade corn (for animals) exchanged for highgrade corn (Michigan Sweet corn) NOT fungible (Ct. will not look into adequacy) 1 dollar for $0.000 Drachmae (worth $25 US) to D during wartime B/4? Yes Value? Yes. no consideration. Husband’s love for his wife and desire to do her will are not legally enforceable.Schnell v Nell (1861) Wife died. Apparently H/D changes mind. Consideration – cannot have a bargained for exchange if actions were in the past W dies ? leaves bequests to people. Exchange of one cent for $200 is unconscionable & “sham” consideration since it is both inadequate & insufficient – shows that there was no bargain for exchange. husband agreed to pay in consideration for 1 cent and the love he had for his wife. husband promised to pay bequests for $0. H/D claims there was no consideration. doesn’t want to pay the $600 after all.01 out of his own estate. 1) NOT the same currency 2) NOT fungible .000 US dollars D Promise to pay P US $2. Promise to pay $600 Return promise: 1) love/ affection/ respect of W 2) past services 3) pay 1 cent B/4? 1) No b/4 exchange 2) no (already done in the past) 3) gift? Value? 1) No value 2) yes 3) No – fungible (cent) for fungible ($600) Therefore.000 Drachmae for $2. she helped H acquire assets. H/D feels bad. had no money in her estate. Past “C” no good Memory Hook: Wife left $200 she did not have to plaintiffs in her will.
Consideration was sufficient (valuable to her)." However. nominal consideration is inadequate consideration because it is not truly bargained for. RII § 87). There is some conflict as to whether a sham recital of consideration in option contracts is sufficient to enforce the promise.Therefore= consideration Memory Hook: During WWII. provided the option time is relatively short (e. courts will consider it to be adequate for the option K. (see p. comment c. some courts continue to deny enforcement where there is a false recital of consideration in option contracts. 10 days) and the price to be paid if the option is exercised is a fair price. Generally. Consideration must in fact be rendered. the agreement will not be enforced for lack of sufficient consideration. 143. This is exception #2 to the general rule Nominal Consideration Nominal” consideration is C in name only b/c consideration must be bargained for. a payment or promise to pay nominal consideration is sufficient consideration to make enforceable a promise not to revoke.5] In option contracts. comment b] Exceptions: Problems 39(b)(c) where it actually is bargained for.g. defendant got exactly what she bargained for. states "the option agreement is not invalidated by proof that the recited consideration was not in fact given. the consideration is insufficient. Option contracts. illus.. [See Restatement § 87. Rule: Mere inadequacy of consideration will not void a contract. 2) before decreeing specific performance (in equity) Example: Problem 40 (d) (e) (f) d) No. defendant received $25 from plaintiff but signed a contract saying she would return $2000 to him. Lexis/Nexus says: False Recitals of Consideration Where there is a false recitation of consideration. If nominal consideration is recited (even if not actually paid). Lexus/Nexus says: If nominal consideration is given as a mere formality in order to create a binding contract rather than as a bargained exchange. Restatement § 87. [Restatement § 71. .
V: Yes. Orr (1913). V promises to pay $ to J J forbears on right to talk to R about insurance policy B/4? Yes Value? Yes Enforceable b/c she agreed to forbear on something she had a legal right to do (detriment to J) change word “will” to insurance policy in the problem. USE THIS FOR YOUR EXAM. The court affirmed because the court found that the wife had a right to request that the decedent change the beneficiary of the certificate and that her promise to refrain from so doing constituted sufficient consideration for the father's promise. (1956) P: Feige’s promise to pay $ to Bohem A/P: Bohem’s promise to forbear (not to sue) B/4: Yes. At the time he made the agreement. it had value. Memory Hook: Defendant agreed to pay various expenses and child support for plaintiff as long as she did not institute bastardy proceedings against him. she informed the father that she was going to ask the decedent to remove him as beneficiary of the certificate and to name her as the beneficiary. Boehm. From 1st Restatement. that the father did not want her to approach the decedent with such a matter at that time because he was ill. Settlement of Claims Majority Rule: Forebearance to assert an invalid claim is consideration only if there is an honest AND reasonable belief that the claim is valid AND it is brought in good faith.Forbearance Don’t forget that forbearance is more than just settlement of claims! Not doing an act is forbearance and that can be consideration.148) Honest belief: Subjective standard (good faith) Reasonable belief: Objective standard (reasonable person) Fiege v. Must have an honest and reasonable belief in the possible validity of the claim (p. The jury found in favor of the widow. Original case that inspired problem 42 was Orr v. The widow claimed that during the decedent's lifetime. and that the father agreed to pay the proceeds over to her in exchange for her promise to refrain from approaching the decedent with the matter. He breached contract. Good example is problem 42. but blood tests showed he was not .
They were not obligated to sign the quit claim deed.149). There is consideration if claim or defense is doubtful because of the facts or law OR if the forbearing party believes that it is valid. Examples of § 74(2) is problem 43 P’s promise to pay $1000 to tribe Return Promise: 1) forbear on invalid claim (statute of limitations ran) 2) sign quit claim deed B/4? Yes V? 1) No. believe she had a possible legal claim against the father? Reasonable belief: Objective standard (RP) would a RP have believed she had a possible claim? Minority Rule: § 74 Restatement 2nd (p. Was her promise not to institute bastardy proceeding sufficient consideration. Promise enforceable because of quit claim deed. 148) Honest belief: subjective standard (good faith) did the mother. in fact.father. or b. (2) The execution of a written instrument surrendering a claim or defense by one who is under no duty to execute it is consideration if the execution of the written instrument is bargained for even though he is not asserting the claim or defense and believes that no valid claim or defense exists. and passes that claim to . The claim or defense is in fact doubtful because of uncertainty as to the facts or the law. Quit claim deed: A quitclaim deed is a term used in property law to describe a document by which a person (the "grantor") disclaims any interest the grantor might have in a piece of real property. Must have an HONEST and REASONABLE belief in the possible validity of the claim (pg. even if there turned out to be no basis for it? Rule: The consideration is sufficient and the promise is enforceable because it was valuable (though wrongly) and the result of a bargain made in good faith. No honest and reasonable belief in the validity of the claim 2) Yes. Settlement of Claims (1) Forbearance to assert or the surrender of a claim or defense which proves to be invalid is not consideration unless a. The forbearing or surrendering party believes that the claim or defense may be fairly determined to be valid. Restatement § 74.
Illusory and Alternative Promises A promise or apparent promise is not consideration if by its terms the promisor or purported promisor reserves a choice of alternative performances unless (a) each of the alternative performances would have been consideration if it alone had been bargained for (Sylvan and McMillan v. A quitclaim deed neither warrants nor professes that the grantor's claim was actually valid. might require. Easy example: $100 if you go to Chicago? Response: I might Have not promised to do anything. Restatement: § 77. A promise IS illusory if it reserves a choice of alternate performances. The promisor has not committed him or herself in any way. or when the promisor. desire. at the time of the promise is made. UNLESS 1) the two choices are separated by the word “or” each choice must have legal value . knows that such condition cannot occur. or (b) one of the alternative performances would have been consideration and there is or appears to the parties to be a substantial possibility that before the promisor exercises his choice events may eliminate the alternatives which would not have been consideration. The Illusory Promise Definition An illusory promise may exist where a promise is subject to a condition which is within the control of the promisor. Harder example: Continuing-O K’s where there is no commitment in promise (might want. Has the promisor limited their rights in the future toward a certain thing? If promisor is not fettered…promisor has not committed him or herself in any way. That is not consideration. especially where such condition is related to the contract performance.another person (the grantee). General Rule If a promise is illusory. there is no consideration because the “promise” given does not fetter the “promisor’s” future. Price). etc) but would be a K after shipment accepted.
I’ll pay you $500 if you 1) was my car OR 2) paint my house = K I’ll pay you $500 if you 1) love me OR 2) paint my house = NO K b/c they both don’t have legal value 2) the two choices are separated by the word “and” only one or the other choice has to have legal value. but in these types of contracts. Lady Duff-Gordon.Y. (1) A term which measures the quantity by the output of the seller or the requirements of the buyer means such actual output or requirements as may occur in good faith. except that no quantity unreasonably disproportionate to any stated estimate or in the absence of a stated estimate to any normal or otherwise comparable prior output or requirements may be tendered or demanded. Requirements-K or Output-K Look for words of obligation: require. produce Words of Obligation + Good Faith = Requirements K that is NOT Illusory A of an O for a Requirements-K or Output-K Requirements-K or Output-K: If the K is to run for 1 year. [See Wood v. need. I’ll pay you $500 if you 1) wash my care AND 2 ) paint my house = K I’ll pay you $500 if you 1) love me AND 2) paint my house = K I’ll pay you $500 if you 1) love me AND 2) conjure spirits for me = NO K neither has legal value Requirements-K. . Requirements and Exclusive Dealings. There is no gap filler for this. UCC § 2-306(2)] § 2-306. common law and the UCC have recognized an implied promise to use best efforts in an agreement for exclusive dealings. 222 N. Nevertheless. the words of the agreement provide enough information about the quantity for the court to enforce the K. Output. Output-K. (2) A lawful agreement by either the seller or the buyer for exclusive dealing in the kind of goods concerned imposes unless otherwise agreed an obligation by the seller to use best efforts to supply the goods and by the buyer to use best efforts to promote their sale. and Continuing-O-K These contracts are NOT illusory even though they might appear to be at first glance. Lucy. 88 (1917) (involving an agreement by the defendant to give the plaintiff the exclusive right to market its name and designs). As mentioned before. Acceptance of this Offer would form a binding obligation of 1 year’s duration. the UCC requires a quantity. Implied Promises of Best Efforts and Good Faith Dealing (Lexis/Nexus) Agreements for exclusive dealings may appear to be based on an illusory promise since the promisor's performance is subject to conditions within its control. use. which furnishes the necessary consideration.
the marketer had the power to license the fashion designer's products to other marketers. holding that an implied contract existed between the parties. you would have a series of A’s forming a series of K’s. Output K is the “flip side” of a Requirements K (all the product you can produce v. might require. v. Courts try to find consideration.Example: “I offer to buy from you all the widgets I need during 2006. Lady Duff-Gordon (1917. A of a continuing Offer Continuing O: If the Continuing O were to run for a year. UCC 2-306 and Official Comment a) “all…produced” Output-K b) “all…need” Requirements-K c) “all…wished” Continuing O if she places the order there is a K Wood v. The fashion designer subsequently marketed her own products but did not share in the obtained revenue. Lucy Lady Duff-Gordon (1917) An agreement existed between the fashion designer and the marketer. Lucy markets some designs on her own. Offer: “I offer to buy from you all the widgets I want during 2006. United States (1945) Plaintiff contracted with defendant for the delivery of trap rock to an airport construction site. Sylvan Crest Sand and Gravel Co. which gave the marketer authority to make sales and advertising decisions. by imputing an unconditional obligation (reasonable to assume that both parties implicitly understood that Wood would expend reasonable efforts). rather. pg 151) Memory Hook: Wood receives exclusive right to market Lucy’s designs. however. Unless the Continuing O were irrevocable for some reason. or desire. On final appeal. Plaintiff brought a breach of contract action after defendant .” There’s a K immediately upon A of this O. the marketer's implied promise to faithfully market the designer's products amounted to fair consideration creating performance obligations by both parties. might want. all the product you will need) Continuing Offer K Look for ambiguous words like want. Was there sufficient consideration on Wood’s part (who did not obligate himself to do anything) to enforce contract? Rule: Promises are not necessarily illusory even if one party’s obligation is merely conditional. Lucy. no one acceptance would form a binding obligation for a year. Is the exchange illusory? Scott says to see 2-306(2) Wood v. wish. it could be revoked before the 1 year had run.” Here there is no contract unless there’s shipment and acceptance of the shipment. Specifically. the court affirmed the ruling of the trial court. Essentially.
I. if each alternative would be sufficient consideration if it alone were bargained for. that were alone sufficient consideration. and Exclusive Dealings .L.refused to request or accept delivery of the rock within a reasonable time. Summary judgment was granted in favor of defendant on the grounds that the contracts were illusory by virtue of defendant's unrestricted power of cancellation. but it was a sufficient consideration to support the contract. because defendant had alternatives. Plaintiff appealed. The alternative of giving notice [**10] was not difficult of performance. • Scott said to not be illusory = • Act in good faith • Not free to do what you want • Bound in good faith • Future limitation Scott: Exclusive dealings. this is a Requirements-K. UCC § 2-306: Output. Promise: US promises to buy all Rock as required. and the court reversed. unless otherwise stated. to either give delivery instructions or notice of cancellation within a reasonable time. The court held that when contracts lacked specific details for the time of delivery and delivery instructions. Contracts. This can be accomplished by interpolating the word 'reasonable'. If the other side can cancel at any time. Other snippets of law from this case: • The words should be so construed as to support the contract and not render illusory the promises of both parties. as is often done with respect to indefinite time clauses. but may cancel at any time Return promise: Sell all rock required B/4: Y V: Y Rule of Mutuality of obligation: Both parties are bound or neither are bound. Sec. The fact that the contracts allowed for cancellation at any time did not render them illusory. • A promise is not made illusory by the fact that the promissor has an option between two alternatives. See UCC 2-306 AND UCC 2-309(3) and think about how they pertain to Sylvan. As we have construed the agreement the United States promised by implication to take and pay for the trap rock OR give notice of cancellation within a reasonable time. are they bound? Is the promise illusory? No. 79. delivery within a reasonable time and a promise to give instructions were implied. imposes duty to use best efforts. A. Requirements.
or. to render the contract binding on either party. Price (1936) Plaintiff contracts to buy all the sand he can sell from the defendant. Plaintiff alleged that defendant failed to furnish sand which plaintiff had sold for shipment and that defendant renounced the contract. Absence of Specific Time Provisions. rather than that which renders it inoperative. (2) Where the contract provides for successive performances but is indefinite in duration it is valid for a reasonable time but unless otherwise agreed may be terminated at any time by either party. Where the terms of a contract are susceptible of two significations. who promises to supply all the sand plaintiff needs. Defendant breaches. McMichael v. that will be adopted which gives some operation to the contract. (3) Termination of a contract by one party except on the happening of an agreed event requires that reasonable notification be received by the other party and an agreement dispensing with notification is invalid if its operation would be unconscionable. Return Promise: B agrees to buy all the sand that it can use . Notice of Termination. • In construing a contract where the consideration on the one side is an offer or an agreement to sell. Defendant alleged that plaintiff breached the terms of the contract by failing and refusing to pay for sand shipped each month as required by the contract and advised plaintiff he would cease making further shipments unless he paid as provided in the agreement. (1) The time for shipment or delivery or any other action under a contract if not provided in this Article or agreed upon shall be a reasonable time. • • Promise: S promises to sell/furnish all the sand buyer can use. and on the other side an offer or agreement to buy. unless such construction is wholly negatived by the language used. not unreasonably disproportionate to what is estimated or as compared to prior output/requirements § 2-309. if one of the parties. as it is sometimes stated. can escape future liability under the contract.A term which measures quantity by the output of the seller or the requirements of the buyer means such actual output or requirements as may occur in good faith. A contract should be construed in such a way as to make the obligation imposed by its terms mutually binding upon the parties. not having suffered any previous detriment. the obligation of the parties to sell and buy must be mutual. that party may be said to have a "free way out" and the contract lacks mutuality.
Hayes works an additional week B/4: 1. e. it doesn’t matter how great or small that limitation is – mutuality of obligation exists. “all” + Good faith = NOT ILLUSORY Corbin on Contracts § 156: A basic test in determining whether or not a promise to buy all you need of a particular product from someone is illusory is whether the promise states a limitation upon the promisor’s future liberty of action. Illusory: No Restatement (2nd) § 86: Promise for Benefit Received (1)A promise made in recognition of a benefit previously received by the promisor from the promisee is binding to the extent necessary to prevent injustice. the employee received $5k annually from the employer. The court held that the employee's long years of dedicated service was legally insufficient consideration because his service was rendered without being induced by the employer's promise. No 2. Starting one year after he retired and continuing for three years. The court held that the employee announced his intent to retire well in advance of any promise by the employer to pay him. No. As long as the promisor does not have an unlimited option. Past Consideration GR past consideration is NO consideration b/c it is not B/4. B doesn’t have to buy any. (2)A promise is not binding under Subsection 1 (a)If the promisee conferred the benefit as a gift or for other reasons the promisor has not been unjustly enriched. but if it does. Plantation Steel (1982) The employee worked for the employer for 25 years. 25 years service 2. and therefore the intention to retire was arrived at without regard to any promise by the employer. Nell Hayes v. or (b)To the extent that its value is disproportionate to the benefit . Hayes agrees to retire 3. Words of obligation.B/4: Yes V: Yes Illusory? No. he already announced he was retiring BEFORE promise 3. Promise: company promises to pay pension to Hayes Return promise: 1.g. The court held that the employee did not supply the required consideration to make the employer's promise binding. No evidence it was bargained for V: Yes. B must buy from S. Recall Schnell v.
Watson (1791) Ship Alexander bound on a voyage to Lisbon. . D performed extra work like navigating the ship. or • to the extent that justice requires enforcement of the modification due to a material change of position in reliance on the modified promise. or (b) to the extent provided by statute. D (master) induced the seaman to exert themselves by promising 5 guineas over and above his common wages. Lexis/Nexus: In non-sale-of-goods executory contracts. Law: For policy reasons. You’ve got to ask the question preexisting duty relevant to whom? Hornblower had PED to boats owner. Harris v. you are not allowed to hold out for more in an emergency (other is under duress) when you have a pre-existing duty to deliver services/goods. Scott says same consideration could support both K’s even though case cited came to different conclusion. there is no C Exception may be when a modification is ‘fair and equitable’ in view of circumstances not anticipated when K was made. a modification must be supported by new consideration except: • if the modification is fair and equitable in light of circumstances not anticipated by the parties at the time contract was made (the "unforeseen difficulties exception"). The law will not allow extortion or holdouts. P (seaman) proved ship was in danger. He did NOT have a PED to Forester Marine Works. [Restatement § 89] § 89. Modification Of Executory Contract A promise modifying a duty under a contract not fully performed on either side is binding (a) if the modification is fair and equitable in view of circumstances not anticipated by the parties when the contract was made. SCOTT: Ask question in these cases whether this is the holdup game. or (c) to the extent that justice requires enforcement in view of material change of position in reliance on the promise. Common Law: If a party does or promises what he is already legally obligated to do.The Preexisting Duty Rule – Modification without Consideration There’s no consideration if you only promise to do something you are already obligated to do. Tricky Example: Problem 55.
Angry he threated to quit unless D promised him an extra payment of 5% of refrig plan cost. Court said: If the cpt had capriciously discharged the two men…one story. But otherwise you’ve got a preexisting duty. two seaman deserted. • • • A promise to pay a man for doing that which he is already under contract to do is without consideration. Preexisting duty is not consideration for a better contract. but that doesn’t mean that D is estopped from showing that revised K was without consideration. P was to be paid at the rate of 5 pounds of a month. Found D had awarded separate K for plant to one of his rivals. P can only recover at the rate of 5 pounds a month. After brewery was complete D refused to pay the extra $.Stilk v. They couldn’t get replacement men. can negotiate a new K Lingenfelder v. P argued that when Jungenfeld declined to continue his K the D had the right to sue for damages. Course of voyage. he cannot demand an additional compensation therefore and although by taking advantage of the necessities of his adversary he obtains a promise for more. We hold when a party merely does what he has already obligated himself to do. Wainwright Brewery Co. (1891) Facts: Jugenfeld architect designing new brewery building. Myrick (1809) Voyage from London to the Baltic and back. but didn’t. D argued that this new K was without consideration. Promise: to pay L extra $ to finish B1 Return Promise: L promises to complete B1 B/4: Yes V: No L is under a PED to finish B1 . Hypo: what if they only contracted to go to Cronstadt instead of London to London and then the desertions occurred? No preexisting duty. Cpt couldn’t replace them at Cronstadt. the law will regard it as a nudum pactum and will not lend its process to aid in the wrong. Watson rightly decided. Instead they agreed to demand for additional compensation. Holding: Haris v. Ships articles. The desertion of a part of the crew is to be considered an emergency of the voyage as much as their death and those who remain are bound by the terms of their original contract to exert themselves to the utmost to bring the ship in safely to her destined port. entered into agreement with rest of crew to add deserted crewman’s wages to theirs if they couldn’t get 2 men at Gottenburgh. In this case the agreement is void for want of consideration. Holding: It is true Jungenfeld became liable in damages for obvious breach of original contract. Nothing we have said is intended as denying parties the right to modify their K’s or make new Ks upon new or different considerations.
(5) A party who has made a waiver affecting an executory portion of the contract may retract the waiver by reasonable notification received by the other party that strict performance will be required of any term waived. (3) The requirements of the statute of frauds section of this Article (Section 2201) must be satisfied if the contract as modified is within its provisions. promising to pay any additional cost. SCOTT: Look at 89 of Restatment pg. 200. and that the owner would pay actual cost.E. This agreement was held to be enforceable. Also from Corbin on Contracts via Lexis/Nexus: In Martiniello v. 838 (1926) . unless the . 89 restatement comment b in particular p. When excavation began. the original contract could have been set aside in equity on the principle of mutual mistake need not be inquired. 150 N. Bamel. (1) An agreement modifying a contract within this Article needs no consideration to be binding. (a) if the modification is fair and equitable in view of circumstances not anticipated by the parties when the contract was made.g 201 of supplement illustration #1 almost exactly the same. It is up to the courts to determine if. No new consideration needed but good faith IS needed.. it was found that the land was ''filled land'' and that the foundation must go much deeper than expected. Both parties were surprised at this.EXAMPLE THAT IS NOT THE HOLDUP GAME Problem 53 (Ravi Mehre) Abby insisted on cellar. for example. Rescission and Waiver. Modification. (2) A signed agreement which excludes modification or rescission except by a signed writing cannot be otherwise modified or rescinded. The court said: ''Whether . or UCC: Abolishes the PED rule.. but except as between merchants such a requirement on a form supplied by the merchant must be separately signed by the other party. They thereupon agreed that the building should go on. (4) Although an attempt at modification or rescission does not satisfy the requirements of subsection (2) or (3) it can operate as a waiver. 25. 255 Mass. that the foundation should be made as deep as the law required. a party was coerced into the modification. because both parties acted upon the theory that there had been such mistake and that hence as matter of fair dealing the original contract ought to be modified and a new agreement made to govern their relations. a building contract was made without investigation of the soil. § 2-209.
1-203 Obligation of Good Faith. Policy consideations affect because police would wait for their day off work to make the collar so they could personally profit. Barry Sanders How can you exceed performance and during the first year of a 5 year contract demand a new contract? How to get around the PED 1. Getting around the PED with Substitute Contracts Unlike an accord and satisfaction which merely suspends the original contractual duty. The officer has a pre-existing duty to catch criminals on/off duty. Example was a problem about a NY police officer who collared a criminal in his spare time and wanted to claim the reward. Dangerous for police. going after criminals with largest rewards. (2) The substituted contract discharges the original duty and breach of the substituted contract by the obligor does not give the obligee a right to enforce the original duty. Police would become mercenary. and promise something new old: $1 M for 3 years new: $10 M for 5 years (You’ve added something new on both sides) . damaging to public confidence in them. Treads did not act in good faith. 1-207 Reservation of rights (Army gave in “under protest”) preserving rights to sue later Statute: Federal statute and NY Penal Law make it a crime to offer or accept a gratuity for the performance of a public servant’s official duties. § 279. Problem 54: Army v. Substituted Contract (1) A substituted contract is a contract that is itself accepted by the obligee in satisfaction of the obligor's existing duty. Restructure or rewrite the K. Rescind old K and enter into a new K (in the same document) 2.retraction would be unjust in view of a material change of position in reliance on the waiver. Inc. Tank Treads. 2-209 (see above) This was not a good faith modification or recision. If the obligor breaches the substitute contract. Examples: Michael Jordon. a substitute contract immediately discharges all duties under the original contract. an action may be brought on the substitute contract alone. Tyrell Owens. taking advantage of Army’s plight.
Accord and Satisfaction An accord is an agreement between parties of a pre-existing contract that the obligee will accept the performance stated in the accord in satisfaction of the obligor's contractual duty. [Foakes v. Pg. would be sufficient consideration. Beer. such as paying or performing before the obligation is due. Performance Of Legal Duty Performance of a legal duty owed to a promisor which is neither doubtful nor the subject of honest dispute is not consideration. H. if the promisor undertakes a greater obligation than is promised. the obligee may bring action on the original contract OR the accord. and it is not consideration for a promise.Lexis/Nexus: Discharge of Obligation by Lesser or Greater Performance Generally. he incurs a legal detriment sufficient to form consideration for the discharge of the obligation. the debtor does not have to pay anything until the debt is legally resolved. [Restatement § 281] Useful Terms: Accord: An agreement whereby one party agrees to give and the other party agrees to accept something other than that originally agreed to. 1884] However. 183 of casebook: Modern context an additional promise to do something additional or in substitution such as paying a debt earlier than due. Performance of the accord suspends the contractual duty but if the obligor breaches the accord. a promise to pay a lesser amount than is owed or to partially perform a preexisting obligation does not constitute a legal detriment since the promisor is merely doing that which he is already obligated to do. Accord And Satisfaction . Corbin on Contracts: § 7.L. Payment on a non-disputed debt is payment on account Payment on a disputed debt will discharge the original debt because there is no duty to pay the disputed debt until legally resolved.18 Compositions With Creditors Part payment by a debtor of an already overdue debt is generally held not operative as a full satisfaction. but a similar performance is consideration if it differs from what was required by the duty in a way which reflects more than a pretense of bargain. § 73. even though the creditor so agrees. Common Law: § 281. Satisfaction: The carrying out of the accord Obligee – one to whom an obligation is owed Obligor – one who owes an obligation General rule: Where you have a disputed debt.
• Court had to reason whether it was an executory accord or a substituted contract. As long as the basic requirements to form a contract are present. Elza (1979) Proc: P (the Elza’s) suffered injuries in auto accident. • . Problem 58b: If Pecunious violates and files bankruptcy anyway claim for $1000 or $750? See Restatement of Contracts section 417c on pg. Facts: trial court refused to enforce settlement on ground it was an executory accord and not a substitute contract. Unless there is clear evidence to the contrary. Elza (1979) Problem 58a: By agreeing to forbear from legal right (Restatement section 71(3)(b) a forbearance is consideration) and pay the $750 as full satisfaction (both promises of which have legal value and were bargained 4. Holding: The circuit court should NOT have permitted the P’s to proceed with tort action in violation of their settlement agreement. (SEE problem 58b below) (3) Breach of the accord by the obligee does not discharge the original duty. D’s petitioned for writ of certiorari and it was granted. the obligee may enforce either the original duty or any duty under the accord. This is a valid accord and her payment will be the satisfaction.(1) An accord is a contract under which an obligee promises to accept a stated performance in satisfaction of the obligor's existing duty. After case was scheduled for trial. The next day. Elza found his injuries were more $$ so they advised court that they didn’t want to do through with settlement. P alleged D’s (Clark and Woodward) were responsible. He can enforce either the original duty or the subsequent contract” Clark v. (2) Until performance of the accord. Mr. there is no reason to treat such a settlement agreement differently than other contracts which are binding. Court agreed and said D’s could procede with their original tort action for the auto injury. If there is such a breach. 186 of casebook “If the debtor breaks such a contract the creditor has alternative rights. D’s filed a separate motion within the tort action to enforce the settlement. Hearing on this motion the P’s argued that settlement was not binding because it was an executory accord and could only be enforced on satisfaction. Performance of the accord discharges the original duty. SEE Clark v. the original duty is suspended unless there is such a breach of the accord by the obligor as discharges the new duty of the obligee to accept the performance in satisfaction. but the obligor may maintain a suit for specific performance of the accord. in addition to any claim for damages for partial breach. they negotiated a settlement verbally for $9500. Trial judge was notitified and case removed from calendar. an agreement to discharge a preexisting claim will be regarded as an executory accord (middle pg 185). An executory accord is simply a type of bilateral contract.
Bottom of 186 As long as the debtor (D in this case) neither breaches the accord nor provides a reasonable basis for concluding he will not perform. (d) A claim is discharged if the person against whom the claim is asserted proves that within a reasonable time before collection of the instrument was initiated. (ii) the amount of the claim was unliquidated or subject to a bona fide dispute. Performance or Acceptance Under Reservation of Rights. whether or not an organization. proves that within 90 days after payment of the instrument. (1) A party who. are to be sent to a designated person. with explicit reservation of rights. proves that (i) within a reasonable time before the tender. 186 THIS IS 281(3) of Restatement § 3-311. the claim is discharged if the person against whom the claim is asserted proves that the instrument or an accompanying written communication contained a conspicuous statement to the effect that the instrument was tendered as full satisfaction of the claim. (b) Unless subsection (c) applies. a claim is not discharged under subsection (b) if either of the following applies: (1) The claimant. See section 417 of the Restatement on pg. the creditor (P) has no right to enforce the underlying cause of action.• If a substitute K were intended. (FLOWCHART THIS!) (a) If a person against whom a claim is asserted proves that (i) that person in good faith tendered an instrument to the claimant as full satisfaction of the claim. including an instrument tendered as full satisfaction of a debt. office. Such words as "without prejudice". office. the following subsections apply. • • UCC: . the claimant sent a conspicuous statement to the person against whom the claim is asserted that communications concerning disputed debts. Accord and Satisfaction by Use of Instrument. performs or promises performance or assents to performance in a manner demanded or offered by the other party does not thereby prejudice the rights reserved. (c) Subject to subsection (d). "under protest" or the like are sufficient. or place. if an organization. knew that the instrument was tendered in full satisfaction of the claim. and (iii) the claimant obtained payment of the instrument. the claimant. the claimant tendered repayment of the amount of the instrument to the person against whom the claim is asserted. This paragraph does not apply if the claimant is an organization that sent a statement complying with paragraph (1)(i). (2) The claimant. § 1-207. or place. underlying tort action would go away when K was formed notwithstanding that performance had not been rendered…on the principle that the substitute K replaces the initial claim. or an agent of the claimant having direct responsibility with respect to the disputed obligation. and (ii) the instrument or accompanying communication was not received by that designated person.
) Merchadise should not have cashed the check and returned it immediately. 3-311(d) if within a reasonable time before collection of the instrument was initiated. If they did cash it. less than total amount. etc. Ralston Purina Co. Silence can be interpreted as acceptance as in case cited below. Part b) within 90 days they can repay the $5350 and reassert their claim for the full amount of $5500 under UCC 3-311c2 . debtor will still pay if debt is really owed. Cannot write under protest to reserve their rights UCC 1-207 b/c it does not apply to accord and satisfaction. 2d 445 The court held that appellant's retention of respondents' check and credit memorandum for an unreasonable length of time with the knowledge that both instruments were offered in full settlement of the disputed claim constituted an acceptance of the settlement offer. so this is consideration (forbearance of a legal right) 59a You have to put “payment in full” if you want to have a chance of getting out of it.. Depending on circumstances. cover letter. 169 Pa. Super. (EXAM QUESTION FROM LAST TERM!) Hypo: Let’s say you have good faith disputed debt with Sears. She sent and they acknowledged payment in full. Thus. $150 cleaning charge and they cashed it. 174 Even though the subcontractor had cashed the check. Coddington. Hoffman v. You don’t have a legal obligation to pay until dispute is legally resolved. agent of claimant (credit card dept) having direct responsibility knew instrument was tendered in full satisfaction (cover letter. Problem 60 3-311 revised (see above) He immediately complained (good faith) Check tendered as payment in full. the court rejected the contractor's defense of accord and satisfaction because in light of the bill's acceptance without objection. 59c SCOTT: THERE MUST BE A Good faith dispute for an Accord & Satisfaction. the contractor's tender of the check had not been offered in settlement of a claim honestly disputed. 86 Wis.(2) Subsection (1) does NOT apply to an accord and satisfaction. Hayden v. If you agree to pay $400 in satisfaction for whole disputed debt and pay it now (not in future when it will be legally resolved) then you have done something you aren’t legally obligated to do. Accord and satisfaction when check was cashed. send back repayment within 90 days. the court held the contractor's denial of the subcontractor's claim had not been in good faith. SCOTT: Good faith dispute. 59b SCOTT: He has a duty to say something. They say $500 and you say it’s only $300. Then you have a disputed debt.
First. Part d) by writing cashed under protest all rights reserved the company cannot protect themselves b/c 1-207 does NOT apply to accord and satisfaction AND if they cash it under UCC3-311(d) Alice knew (scratching it out proves it) and so it WILL discharge the debt if she scratches it out. Some courts have refused to apply promissory estoppel to cases involving goods contracts because UCC § 2-201(3). The remedy in such cases is based on the extent of the promisee's reliance.Action or forbearance must be of a definite and substantial character * RII -.Part c) Under UCC 3-311c1 all invoices should conspicuously communicate that disputed claims are to be addressed so that Alice Mayberry gets them so they are outside normal processing of Accounts Receivable department. Promissory Estoppel (RI and II p. Which the promisor should reasonably expect to induce action or forbearance* (Detrimental Reliance) on part of promisee* * RI -. Possibly separate mail code or PO box." [Restatement § 90(1)] Promissory estoppel is classically used in cases involving GRATUITOUS PROMISES Allows certain contracts to be enforced even without consideration There needs to be REASONABLE RELIANCE on the promise Available remedy is different than under a contract: Generally RELIANCE damages Cannot be more that the difference of the value of having the promise enforced versus not enforced. [Restatement § 139] Mere reliance on the oral contract itself is generally not enough to justify estoppel. even in the absence of an enforceable contract. eliminated the requirement from the Restatement. 196) 1. Which does induce reasonable action or forbearance (Detrimental Reliance) 4. that the detriment be "substantial. Definition per Lexis/Nexus: When a promisee foreseeably relies to his detriment on the promisor's promise. which applies to all commercial transactions. However. The Restatement. including estoppel. writes under protect. and cashes it.or Third Party 3. Promissory Estoppel A non-goods contract that fails to satisfy the statute of frauds may nevertheless be enforceable if the promisor's promise foreseeably induces action or forbearance on the part of the promisee or a third person and enforcement is the only means of avoiding an injustice. Second. not his expectation. however. Is binding if injustice can be avoided only by enforcement of the promise * . are to supplement the specific provisions. the doctrine of promissory estoppel may be invoked to make such promise binding in order to prevent injustice. be less than this difference. which enumerates the circumstances under which the writing requirement may be avoided. section 1-103. Promise 2. Can. indicates that principles of law and equity. most cases require some additional statement or promise. does not include estoppel.
She paid $1000 on account before she died. then you are not required to give the pledged amount. The remedy granted for breach may be limited as justice requires. • It is certain that we have adopted the doctrine of PE as the equivalent of C in connection with charitable subscriptions. If you cannot find other donor.The remedy granted for such a breach may be limited as justice requires. Restatement (2nd) § 90 – Promise Reasonably Inducing Action or Forbearance: (1)A promise that the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third party and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise.does not have ¶ 2 RII -. Aid (though not conclusive test) is whether happening of the condition will be a benefit to the promisor. • . If so. National Chautauqua County Bank (1927) The concept of promissory estoppel is introduced as the equivalent of consideration in connection with laws of charitable subscription. it is a fair inference that the happening was requested as consideration. • A bilateral agreement may exist though one of the mutual promises be a promise “implied in fact” an inference for conduct as opposed to an inference from words. * RI -. In July 1924 she gave notice to the college that she repudiated the promise. Often difficult to determine whether words of condition in a promise indicate a request for consideration or state a mere condition in a gratuitous promise.5. (2)A charitable subscription or a marriage settlement is binding under Subsection (1) without proof that the promise induced action or forbearance. She died and P tried to collect the remaining $4k. Interlocutory promise – pledge of donation of certain amount of money in exchange and dependant upon another donor being identified that will give a like amount. Facts: Mary Yates Johnston signed and delivered an Estate Pledge. Non example Allegheny College v. which is decided using normal consideration doctrine. though it is not used to support this case. PE not necessary in this case • Duty to perpetuate name of founder was implied by request of promisor and result was creation of a bilateral agreement.
Dec 24th D’s make offer Dec 28th P receives original O D sends revocation by telegraph and new O P puts bid in for building P receives revocation and new O Dec 30th P found out their bid for the building is accepted Dec 31s D’s withdrawal communicated by letter received by P Jan 2nd P formally accepts original O Law: An offer for an exchange is not meant to become a promise until a consideration has been received. • PE isn’t as limited in scope as D argues.Another Non-example: Some jurisdictions don’t allow sub-contractors to be bound based on doctrine of PE As in this case: James Baird Co. The written K was just a confirmation. There is no room in such situation for doctrine of PE. Restatement does not impose the requirement that the promise giving rise to the cause of action must be so comprehensive in scope as to meet the requirements of an offer that would ripen into a K if accepted by the promise. (1994) Banco (P) was a general contractor tried to recover damages from subcontractor Delta for Delta’s refusal to install roof (couldn’t get certification from Owens-Corning). small grocery store. yet court comes to a different conclusion. and that it would be included in [the contractor’s] bid. and sells his bakery. v. Condition 3 for the court (injustice) to craft a remedy. Inc. • . Hoffman v. and home without having a formal contract (“agreement was never reached on factors essential to the contract”). Gimbel (1933) Facts: D was a subcontractor. Red Owl Stores (1965) Memory Hook: Man really wants this grocery store franchise. Missouri’s doctrine of PE applies. yet subcontractor “was bound to realize the substantial possibility that its bid would be the lowest. Conditions 1&2 of PE go to jury (reasonably foresee + did induce). Their employee put together a bid that underestimated yardage of linoleum needed by ½. finding room for PE: No contract. either a counter-promise or whatever else is stipulated. [The Sub] had reason not only to expect [the Contractor] to rely on its bid but want him to” Banco Enterprises Inc. v. Example: Drennan v. Judgment for P affirmed. Star Facts essentially the same as in Baird. Delta Roofing.
Levi returning from voyage at sea got sick. the court must remember all of its powers. Moreover the amount allowed as Damages may be determined by the plaintiff's expenditures or change of position in reliance as well as by the value to him of the [*702] promised performance. unless there is a MO where there is an express promise. In determining what justice requires. it may be quite unjust to refuse to perform the promise. 200. 1A Corbin. Holding: nonsuit of P was correct. Restitution is also an 'enforcing' remedy. Blue Shield didn’t go. Moral Obligation GR MO is NOT sufficient C. p. which would never be more in amount. although it is often said to be based upon some kind of a rescission. if the promisor actually foresees. derived from equity. that the promisee voluntarily revives. D felt grateful. damages awarded were equivalent to the contract not awarded. law merchant. Contracts. In class analysis: P: Dad will pay $ A/P: Take care of son (in past and past C is NO C) . and other sources. and Universal lost bid. Its decree should be molded accordingly. action by a third person in reliance on the promise. Holding: Universal reasonably relied (and acted on its reliance) on Blue Shield’s promise to its detriment and can be compensated under promissory estoppel. In this case. 220." Universal Computer Systems v. Medical Services Association of Pennsylvania (1980. sec. promised in writing 4 days later to pay P for expenses. Example: Mills v.• PE extends to 3rd parties as well: Ordinarily only the promisee and not third persons are entitled to enforce the remedy of promissory estoppel against the promisor. than the promised reward. which was more than the reliance interest." "The wrong is not primarily in depriving the plaintiff of the promised reward but in causing the plaintiff to change position to his detriment. It would follow that the damages should not exceed the loss caused by the change of position. Wyman (1825) Rule: “mere verbal promise without any consideration cannot be enforced by action” Facts: D is the father of 25 yo Levi Wyman. P acted as good Samaritan and gave him shelter and comfort for 15 days until Levi died. as well as the common law. PE Damages: "Enforcement of a promise does not necessarily mean Specific Performance. pg 198) Facts: Universal relied on Blue Shield’s promise to pck up it’s bid a the airport in order to make it in time under the deadline. [**277] It does not necessarily mean Damages for breach. some preexisting obligation that has become inoperative by law. However. or has reason to foresee. but might be less.
admitting the present existence of the antecedent indebtedness.B/4? No already occurred by time dad promised Legal Value: yes Illusory: no PE? Promise could not induce action b/c action had already occurred. • A promise to pay an indebtedness discharged in bankruptcy (controlled now by Federal law). 169 Revives the past valuable consideration 47c) yes. (2) The following facts operate as such a promise unless other facts indicate a different intention: (a) A voluntary acknowledgment to the obligee. Effect on the Statute of Limitations (1) A promise to pay all or part of an antecedent contractual or quasicontractual indebtedness owed by the promisor is binding if the indebtedness is still enforceable or would be except for the effect of a statute of limitations. Wyman “the mere acknowledgement of the debt OR the part payment of principal OR interest may be found to be an enforceable implied promise to pay the obligation” 82(2)(a) 82(2)(b) 47d) 82(2)(a) and 82(2)(b) § 82 Promise to Pay Indebtedness. 1. promise to pay infant incurred as an infant Hypo: Columbia records. made as interest on or part payment of or collateral security for the antecedent indebtedness. minor. Is not obligated to pay 47b) rests upon past consideration “In all these cases there is a moral obligation founded upon an antecedent valuable consideration” pg. or (b) A voluntary transfer of money. • A promise to pay an indebtedness incurred as an infant after the infant reaches majority. $5000 Mills v. or other thing by the obligor to the obligee. statute of limitations Policy reasons for statute of limitations: peace of mind. 2. walks away upon majority . etc. MO? Debts incurred by infants? No son was 25 yo 4 Exceptions to the GR: • A promise to pay an indebtedness that is now barred by a statute of limitation. • A promise made in recognition of a benefit previously received by the promisor to the extent necessary to prevent injustice (material benefit to promisor). or (c) A statement to the obligee that the statute of limitations will not be pleaded as a defense. a negotiable instrument. memories fade.
promise to pay indebtedness by bankruptcy 4. His estate has to pay it. promise made in recognition of a benefit previously received by the promisor to extent necessary to prevent injustice (rare) Restatement 86 . PC is !C B/4: No . it was easier for two employees who knew each other to accept that there was an obligation here. Webb v. Problem 49 Promise: $50 a week for rest of your life Return: past consideration. McGowin (1935) Scott: Most courts won’t extend MO quite this far Riding the block. AND The nature of the circumstances make it reasonable for the promisee to expect compensation. A promise is not binding under Subsection (1) o if the promisee conferred the benefit as a gift or for other reasons the promisor has not been unjustly enriched.Stevie Wonder. (Guy was paying while alive. Consideration? No P’estoppel? No Moral Obligation? 1. or o to the extent that its value is disproportionate to the benefit. The material benefit was received under circumstances that raised a moral obligation. There must have been a subsequent promise to compensate. Infancy 3. Material Benefit received 4 things are needed for the promise for benefit exception to work: The promisor must have received a material benefit from the promisee.Promise for Benefit Received 1. 3. now his estate should continue the payments) Theory that in this case. took care of him while he a minor. 2. SoL 2. A promise made in recognition of a benefit previously received by the promisor from the promisee is binding to the extent necessary to prevent injustice. Bankruptcy 4. Sympathetic P in this case. as approached majority record label nervous because he might try to avoid K.
REMEDIES Damages Reliance + Restitution IS possible Reliance + Expectation IS NOT possible Look to Expectation damages FIRST Theories of Monetary Damages (most common damages awarded) Expectation (uncertainty can limit/eliminate damages) ALWAYS START WITH EXPECTATION DAMAGES FIRST TAYLOR: IF YOU DO NOT HAVE LOST PROFITS YOU CANNOT SEEK EXPECTATION DAMAGES give the pomisee the value of the expectancy which the promise created Most common form of damage award. Ann can recover only $200 from Bob. 347. 350-53. less (c) the cost or other loss that he has avoided by not having to perform. Measure of Damages in General Subject to the limitations stated in Secs. 347: Loss in value (*****GET FROM SLIDE WEEK 9) If there has been NO PERFORMANCE the loss in value Other losses: All loses actually suffered (except… Costs avoided: If the P avoids cost or losses by the breach. EXAM TIP: if you are told there is a K. caused by the breach.V? GR services from one family member to another family member is looked at as a gift. If she can resell those building materials to Chris for $300. Hypo: Ann spent $500 for building materials for K with Bob. those must be subtracted from the P’s damage award.” The purpose is to compensate the P the amount that gives him or her the value of what was B/4. the injured party has a right to damages based on his expectation interest as measured by: (a) the loss of in value to him of the other party's performance caused by its failure or deficiency. FORMULA: Lost value (usually profits & gains) + incidental loss + consequential loss – costs avoided – loss avoided = $$$ Put the non-breacher into the position he or she would have been in if the K was fully performed. Bob breaches. plus (b) any other loss. including incidental or consequential loss. “Benefit of the bargain. . Typically lost profits Sec. believe that there is a K.
Recover the value f a benefit conferred upon the other party. Loss of value (lost profits) + any other loss . put the defendant back into the position he or she was in before the contract was created). Put P in as good a position as he was in before the promise was made. The purpose is to compensate the plaintiff the amount that the defendant has received as a benefit from the plaintiff. Undo the harm that reliance on D’s proimise has caused him. Allow one party to recover the value of a benefit conferred upon the other party Prevent unjust enrichment Wrap up with Liquidated damages .” Out of pocket expenses put the non-breacher back into the position he or she would have been in before the contract was created). Answer: $5000. Put the non-breacher back into the position he have been in before the K was created.costs avoided What was expected Reality Look at Hypo 2 calculation on slide. eliminate any unjust enrichment promisor breaches and pormisee has already paid money or benefit. $2k + $10k = $12k $12K expectation $5k other loss NOT reliance Reliance (foreseeable can limit/eliminate damages) pomisee has changed position. The purpose is to compensate the plaintiff the amount that gives him or her the expenses that have been paid out of pocket in reliance on the bargain Put the plaintiff in as good a position as he was in before the promise was made. the prevention of unjust enrichment Put the D back into the position before the K was created. but which the defendant has not yet paid for. What does buyer get as expectation damages. Purpose is to compensate the P the amount that the D has received as a benefit from the P but for which the D has not paid for. Seller breaches.Hypo: seller to sell land for $20k that was worth $25k. “Restore the status quo. Restitution (unjust enrichment) (Avoidability can limit/eliminate damages) pevention of gain by the defaulting promisor at the expense of the promise.
including incidental or consequential loss. but that result indirectly from the act. Consequential damages – expenses or losses beyond general damages that the P would never have incurred but for the breach. the injured party has a right to damages based on his expectation interest as measured by: (a) the loss of in value to him of the other party's performance caused by its failure or deficiency. less (c) the cost or other loss that he has avoided by not having to perform. the loss in value is equal to the value of the performance expected and the value of the performance received.then you get $x Equitable Remedies Injunctions Specific performance Writ of Mandamus SCOTT PUTS IT THIS WAY: Expectation Damages: Always look at what the plaintiff would recover in expectation damages first. a type of consequential damages incurred in ascertaining and trying to prevent the breach. . including incidental and consequential losses. Incidental losses are those incurred in a reasonable effort to avoid loss.. 347. Sec. Losses that do not flow directly from an injurious act. Loss in Value If there has been no performance. Other losses All loses actually suffered (except those necessary to receive the loss of value). caused by the breach. Measure of Damages in General Subject to the limitations stated in Secs. (Often it is the lost profit amount). If there has been defective performance or partial performance. plus (b) any other loss. Consequential losses are those such as injury to a person or property resulting from the breach. Incidental Damages – generally. 350-53. those must be subtracted from the plaintiff’s damage award. the loss in value is equal to the value that the promised performance would have had to the plaintiff.If there is a damage clause in K that says if you breach. Costs avoided If the plaintiff avoids cost or losses by the breach.
Hypo: commercial setting often these are lost profits for the nonbreaching buyer Hypo: motel is not ready b/c contractor breached and a convention group cancels. THE BOOK STATES IT THIS WAY: General Damages: Expectancy damages representing a “loss in value” to P because of breach. if she can resell those building materials to Chris for $300. (1) Incidental damages resulting from the seller's breach include expenses reasonably incurred in inspection. Consequential damages include the lost profit from the convention group. Buyer's Incidental and Consequential Damages. who breaches the contract. § 2-715. transportation and care and custody of goods rightfully rejected. any commercially reasonable charges. Ann cannot recover that $300 from Bob. Hypo: storage costs incurred by a nonbreaching seller who hols goods for a buyer for a reasonable time after the buyer fails to pick up the goods as promised.For example. Hypo: builder of motel fails to build structure as promised. (2) Consequential damages resulting from the seller's breach include * (a) any loss resulting from general or particular requirements and needs of which the seller at the time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise. It is generally presumed that the general damage is measured by the cost of substitute performance. receipt. consequential damages are P&S and medical expenses. expenses or commissions in connection with effecting cover and any other reasonable expense incident to the delay or other breach. Hypo: faulty furnace blows up. Special Damages – damages that arise out of a peculiar set of facts “special” to this K. loss in value damages are cost of substitute performance or diminution in value occasioned by the defective performance. Consequential – expenses and other losses beyond general damages that the P would never have incurred “but for” the breach. Incidental – Damages incurred in ascertaining and trying to prevent the breach. if Ann has spent $500 for building materials to perform a contract with Bob. and .
. Certainty applies to primary and secondary damages Must prove the damage occurred AND amount of injury P has burden of proof If P does not present sufficient evidence of some portion of the damages. LIMITATIONS for BOTH general and special damages are subject to doctrines of 1. Certainty (“Chrysler”) P is denied relief that is too speculative b/c P cannot prove: Fact that the breach caused the type of injury that the P alleges AND/OR Extent to which the P suffered from the breach A party cannot recover for damages for loss beyond the amount proven with reasonable certainty. Foreseeability (“Ford”) P must show that the damages were within the reasonable contemplation of the breach. The breaching party must have been able to foresee the probable loss that would result from a breach The way the loss occurred does not have to be foreseeable 3. the P will not recover May require expert testimony. Avoidability aka Mitigation (“AMC”) Injured party must use reasonable efforts to mitigate (avoid) damages. econominc and financial data 2. market analyses. There’s no recovery if the loss is too speculative. This is an affirmative duty even if you are the nonbreaching party. May be too speculative because they are too uncertain as to Whether the breach cause the type of injury that P alleged Extent of the injury that P alleged OR Both the cause and the extent of the injury alleged Absolute certainty is not required but reasonable certainty is.* (b) injury to person or property proximately resulting from any breach of warranty. Is determined by looking at what the breaching party knew or should have known (objective test) at the time that the contract was made.
000. This amount puts the buyer back into the position that the Buyer would have been in if the K was fully performed.000 (the cost that the plaintiff still expected to pay to the defendant to realize that profit)) PLUS Any other loss (does not include those costs necessary to receive the lost value of the K). The land has a fair market value of $52. Hypo: Buyer and seller enter into a K for the sale of land for $50.$5k you paid = $12k Taylor: Lost profits: Reliance expenses: Restitution interest: Salvage $4k $24k .000. Hypo: Buyer and seller enter into a K for the sale of land for $50. The Buyer incurs costs of .$20k $15k (out-of-pocket) -$5k (keep non-breacher from being unjustly enriched) -$2k ===== $12k RICK FRANK FORMULA: Lost value (usually profits & gains) + incidental loss + consequential loss – costs avoided – loss avoided = $$$ Hypo: Buyer and seller entered into a K for the sale of land for $20.000.000 down on the land as a down payment.000. The amount that puts the Buyer into the position the Buyer would have been in if the K was fully performed.000—the lost profit plaintiff expected by performing the contract ($25. Buyer’s expectation measure of damages would be $5. Seller repudiates. Buyer’s expectation measure of damages would be $12.$20.000. including incidental or consequential loss caused by the breach MINUS Any cost or loss avoided by not having to perform. The land has a fair market value of $25.000 (the value of the land that the plaintiff expected to receive by performing the contract (value of land) PLUS Any other loss (does not include those costs necessary to receive the lost value of the K). including incidental or consequential loss caused by the breach MINUS Any cost or loss avoided by not having to perform=$40. Buyer puts $10. $5k The loss of value=$5. What amount puts the buyer into the position the Buyer would have been in if the contract was fully performed? The loss of value=$52.Problem 66 I’m out $15k + lost profits $4k . Seller repudiates. The land has a fair market value of $52.000 (value of land) .$2k I can avoid by salvage .000.000 (plaintiff’s remaining costs under the K).000.000.
000.$300 to obtain a mortgage and title insurance necessary to buy this property. The land has a fair market value of $52. Seller repudiates. D said “I will guarantee to make the hand a hundred percent perfect hand or a hundred percent good hand. What amount puts the buyer into the position the Buyer would have been in if the contract was fully performed? The loss of value=$52. Buyer puts $10.000 down on the land as a down payment. also pays a nonrefundable $5. This amount puts the buyer back into the position that the Buyer would have been in if the K was fully performed. with Seller’s knowledge. (The Buyer does NOT get the $300 b/c the Buyer expected to pay that money to receive the benefit of the bargain. Seller repudiates. and the value of his hand in its present condition. This amount puts the buyer back into the position that the Buyer would have been in if the K was fully performed. What amount puts the buyer into the position the Buyer would have been in if the contract was fully performed? The loss of value=$52.) Hypo: Buyer and seller enter into a K for the sale of land for $50.000 down on the land as a down payment.000 (plaintiff’s remaining costs under the K). including incidental or consequential loss caused by the breach MINUS Any cost or loss avoided by not having to perform=$40.000 (the value of the land that the plaintiff expected to receive by performing the contract PLUS Any other loss (does not include any other costs that the plaintiff must necessarily incur to receive the lost value of the K calculated above). Buyer’s expectation measure of damages total $17. The Buyer incurs costs of $300 to obtain a mortgage and title insurance necessary to buy this property.” Holding: Damages were in error.000 (plaintiff’s remaining costs under the K).000. Buyer. Pain and .) Hawkins v. (The Buyer does NOT get the $300 b/c the Buyer expected to pay that money to receive the benefit of the bargain.000 (paid as down payment for adjoining property—a consequential loss resulting from defective performance by the defendant)) MINUS Any cost or loss avoided by not having to perform =$40.000 (the value of the land that the plaintiff expected to receive by performing the contract PLUS Any other loss (does not include any other costs that the plaintiff must necessarily incur to receive the lost value of the K calculated above). True measure of P’s damage is difference between the value to him of a perfect hand or a good hand such as the jury found the D promised him.000.000. McGee (1929) Operation for removal of (9 year old burn) scar tissue from palm of P’s right hand and grafting of skin taken from P’s chest. Buyer’s expectation measure of damages total $12. include-ing incidental or consequential loss caused by the breach=5.000 down payment on adjoining property to use as a parking lot. Buyer puts $10.
including gains prevented and losses sustained. (1962) Facts: P had a farm with coal deposits. Would have cost them $29k. where the contract provision which was breached was merely incidental to the main purpose in view. As a general rule. and such other damages as could be reasonably anticipated by the parties as likely to be caused by the vendor's failure to keep his agreement. Prime consideration in Restatement was “economic waste” and “relative economic benefit” is proper basis for analysis. Prof Taylor: bring in expert witnesses to establish the value of a good hand and value of a bad hand. Taylor: there are cases that have followed that support the “economic waste” theory. and where the economic benefit which would result to lessor by full performance of the work is grossly disproportionate to the cost of performance. or such as they either knew or ought to have known would probably result from a failure to comply with its terms. Garland Coal & Mining Co. Looked to tort damages section 96 and 97. D argued “diminution in value” of farm. not what plaintiff has given defendant or otherwise expended. part of legal detriment P expected to suffer as part of the K. and the actual value at the time of the sale. Peevyhouse is still the law of the land. and could not by reasonable care on the part of the vendee have been avoided. • The measure of damages in an action by lessor against lessee for damages for breach of contract is ordinarily the reasonable cost of performance of the work. Court modified judgment to $300. • The measure of recovery on a contract is based upon what a defendant should have given a plaintiff. P argued “cost of performance” Holding: Special provisions of the lease K pertaining to remedial work were incidental to the main object involved. D specifically agreed to perform certain restorative and remedial work at end of the lease. however. They leased it to the D for 5 years and D strip mined it.suffering not included. the measure of the vendee's damages is the difference between the value of the goods as they would have been if the warranty as to quality had been true. • Peevyhouse v. the damages which lessor may recover are limited to the diminution in value resulting to the premises because of the nonperformance. • The only losses that can be said fairly to come within the terms of a contract are such as the parties must have had in mind when the contract was made. . The $29k of improvements will only lead to increase in value of the farm of $300. All parts of lease except remedial work were formed by both parties.
Items were compensable on either an expectancy or reliance view. P&S Sullivan v. pg. costs incurred by non-breaching party before and after K was formed • Presumption of breaking even Note on the presumption of breaking even: P is entitled to recover out of pocket expenses UNLESS the D can prove that the K was a losing one and that the P would not have made enough from the K to make up these expenditures. OR clause in K that explicitly says economic waste recognized and waived. Out of Pocket. the damages which P may recover are limited to diminution in value. Third operation did not correct it and no further improvement was expected from further surgery. Holding: P will get out-of-pocket expenses. Today the Peevyhouse rule: “Where the economic benefit which would result to P is grossly disproportionate to the cost of full performance. worsening of her condition. American Standard. . Schectman (1981) Couple ways to protect yourself: in the case of breach damages are $x. Or get $29k upfront. Andrulis v. First two operations actually worsened her appearance. Consequential damages. O’Conner (1973) Facts: P was a professional entertainer. wanted to shorten her nose.” Note 4. some courts opt for the cost of repair even where this arguably results in economic waste. (1993) Note 2: As in dissent in Peevyhouse. If D can carry the burden of showing the K was really a losing one the court will deduct the loss from the P’s outlay. Taylor above highlighted in purple has been stricken. where the D is guilty of a willful breach. Inc. v. RELIANCE INTEREST • Out of pocket • Consequential damages • Pain & Suffering • And in a minority of jurisdications. in effect imposing a form of punitive damages on the bad faith party. 239: The burden is on the breaching party to show that the cost of repairs is unreasonable when compared to the diminution of value due to the breach. P&S and mental distress in 3rd operation. Levin Construction Corp.Per Prof.
has been absolved of negligence. • Suffering or distress resulting from the breach going beyond that which was envisaged by the treatment as agreed is compensable on the same ground as the worsening of the patient's conditions because of the breach. P&S and ED damages for first as well as subsequent operations. Ask Scott about Bill Clinton hypo. Judge rejected this. They decide on applying a reliance measure. he can claim the expenditure which has been wasted by reason of the breach. If you’re willing to forego expectancy damages. Majority view is damages incurred AFTER the K was formed. Not the same as Hawkins v. Reed (1971) Facts: Robert Reed (Mike Brady) actor concluded a K with Anglia TV to star in a 90 minute TV drama. Ltd. especially where Dr. • P can claim either his lost profits or. Restatement §349: Damages Based on Reliance Interest As an alternative to the measure of damages stated in §347. Anglia Television. including expenditures made in preparation for performance or in performance. Finally address question of recovery on reliance basis. he backed out. the injured party has a right to damages based on his reliance interest. consequential damages for making condition worse.Taylor: Significance is reliance: out of pocket. but at the last minute due to double booking.65. if he cannot prove what his profits would have been. McGee (expectation damages limit P&S). D contends that P cannot recover for expenditures incurred before the contract was concluded. All of the wasted expenditure can be recovered when it is wasted by reason of the D’s breach of K. held that Anglia could get full amount and D appeals. • . restitution seems too meager while expectancy may be excessive. only those incurred after 854. V. Compensation for this waste may be required in order to complete the restoration of the status quo ante TAYLOR: Anglia decision AND Restatement 349 is the MINORITY VIEW. you can pick up additional P&S damages under reliance theory of damages. less any loss that the party in breach can prove with reasonable certainty the injured party would have suffered had the contract been performed. Breach of patient-physician agreements.
Got advance and no proof of royalties that would have been earned (failed for UNCERTAINTY). Holding: cost of publication not appropriate remedy and P may recover nominal damages only.. Strike 3 you’re out. and that the amount of damages claimed be measurable with a reasonable degree of certainty and.e. subject to the limitations that the injury -. Reliance losses. This may influence other parties’ behavior in dealing with the P.whether it be losses suffered or gains prevented -. Can also support other claims for punitive damages (“smart money” to teach the breacher a lesson) Even if P cannot prove loss court may still award nominal damages. Reduced award from $10k to 6 cents. D publisher agreed to pay a $2000 advance. publish the work hard bound and afterward paperback paying royalties at a specified percent. P alleged none. D refused to publish book in any form. Washington Square Press (1974) Facts: P author and college prof wrote a book on modern drama.LIMITATIONS CERTAINTY Freund v. reasonably within the contemplation of the parties. Reasoning: restitution interest = return of manuscript. at the time the contract was entered into. . • It is axiomatic that. Lower Court Holding: Cost of hardcover publication was the natural and probable consequence of the breach and P was awarded $10k to cover this cost. i. An award of the cost of publication would enrich P at D’s expense. You get nominal only. of course. the law awards damages for breach of contract to compensate for injury caused by the breach -.” Sometimes nominal damages entitle you to attny fees and court costs. • Note on nominal damages: six cents. Promised performance – publication – was a % of sales of the books published NOT the books themselves. But it is equally fundamental that the injured party should not recover more from the breach than he would have gained had the contract been fully performed. except where punitive damages are allowable. Expectation damages: 1) advance 2) royalties. P performed and got his $2k advance but D merged with another publisher and stopped issuing hardbound books. The law attempts to secure to the injured party the benefit of his bargain. “An award of nominal damages may be better than an outright dismissal of the P’s action.injury which was foreseeable. adequately proven. the court is necessarily finding that the P’s position concerning breach is correct.was foreseeable. In awarding nominal damages.
and that their amount cannot be shown with mathematical precision. LIMITATIONS A. Humetrix not exactly a new business. Profits were not so speculative that court abused its discretion by allowing jury to hear evidence regarding profits. H’s profits were in some part dependent on and derivative of G’s profits. The new business rule is not a hard and fast one. Reasoning: P made an estimate of lost profits supported by testimony of two expert witnesses. criticisms of an expert's method of calculation are a matter for the jury's consideration in weighing that evidence. • Both federal and California state courts recognize that lost profits are necessarily an estimate.A. attny fees or both to the winning P. Will guarantee 1/3 of the $25k purse.”Cases applying the ‘new business rule’ generally involve businesses which have been in operation only a very short period of time. Hypo on eliminating uncertainty: Problem 68: Taylor: easy solution to eliminate the uncertainty issue is for all 3 of the dog owners to sue as a class action suit. ten years. and the evidence not being inherently improbable provides a substantial basis for the trial court's award of lost profits. Holding: H was entitled to trademark and lost profit damages (expectation damages).C. The court upholds awards of lost profit damages so long as they are supported by substantial evidence. (2001) CERTAINTY Proc: Health careconsulting company Humetrix P contracted with Smart card technology company Gemplus SCA. Court called this “substantial” Gemplus was able to cross-examine and bring forth its own experts. Gemplus argued that profits were too speculative. As to the reasonableness of the assumptions underlying the experts' lost profit analysis. Trial court was correct that authority to resolve battle of expert witnesses is the jury. v. Humetrix. It is for the trier of fact to accept or reject the evidence. Inc.This technical win may permit the court to award costs. • • Taylor: significance: New business can sue for lost profits on the same basis as an old business. Gemplus argued ‘new business’ theory. Uncertainty . and loss of prospective profits may nevertheless be recovered if the evidence shows with reasonable certainty both their occurrence and the extent thereof… . Used to be a hard and fast rule. Humetrix sued Gemplus for breach of K and breach of fiduciary duty and wanted a declaration that Humetrix was entitled to use the Vaccicard trademark. Gemplus S.
Baxendale – 1) what a reasonable person should have foreseen or 2) what the reasonable person with particular knowledge should have foreseen. not the breach itself. etc. V. (1990) Facts: P’s bring a class action suit on behalf of 150 franchises of ARCO. Numerous purchasers experienced poor engine performance and damage to their fuel systems. ARCO created an oxinal blend of gas and required the franchises to sell it instead of regular blend of unleaded gas. Determined by what a reasonable party would know (obj test) Hadley v. (Like Palsgraf in Tort. May require expert testimony. AM/PM Franchise Assn. Damages are not recoverable for loss beyond amount that the evidence permits to be established with reasonable (Restatement 352) b. . P has burden of proof for certainty i. Under Hadley v. outside the foreseeability) Recovery for ED will be excluded unless K is of nature that breach would likely cause ED (mortician loses body) Would cause bodily harm Problem 69 a) Under Hadley v. Atlantic Richfield Co. Baxendale test. Baxendale mere knowledge is enough b) Plane crashes are foreseeable if rare. P’s suffered a precipitous drop in the volume of their business and attendant loss of profits. Foreseeability Cannot recover damages for loss that the party in breach had no reason to foresee at the time the K was created. financial data. The products agreements they operated under stipulated that the franchisees could sell ONLY ARCO’s petroleum products. only the consequences (damages) of the breach has to be foreseeable. Consequential Damages Not the ‘primary’ damages Lost profits – ONLY USE IF PROF SCOTT GIVES THEM TO YOU 4 tests yardstick – comparison with profit of businesses in similar size nature and location comparison with profit history of P’s successor where applicable comparison of similar businesses owned by P himself use of economic and financial data and expert testimony Technical Win Nominal damages only but may award costs Punitive Damages – GR: no Goal of K law is not to punish B.a.
First. must have been reasonably foreseeable at time of contract and able to be proved with appropriate certainty. P’s employee told D’s clerk that mill was stopped and that the shaft must be sent immediately. and (3) good will damages. Second: contemplation by both parties. Baxendale (1854) Facts: P were millers. Different way of getting to x – y calculation of expectation damages. Baxendale rule had 2 parts. Taylor: Hadley v. etc). The crankshaft broke and their employee took the shaft to the D’s Pickford & Co. defined as a loss of prospective profits or business reputation. to transport the shaft to Greenwich for repairs. there need not be any contemplation of damages to recover for those damages that arise “naturally” from the breach. HvB today: “An injured party may recover those damages which arise naturally from the breach or which should have been reasonably contemplated (foreseeable) by the breaching party at the time the K was made. (2) loss of secondary profits (slurpees. Today: only has to be the contemplation of the breaching party at the time of the breach (within breacher’s foreseeability) Taylor.” . New shaft wasn’t delivered for several days and during that time the P’s mill was shut down. They include: (1) loss of primary profits (gas). Hadley v.Rule: Consequential damages. or lost profits due to breach of a sales contract.