Contracts: Roy Contracts Outline: Roy Fall 2010 Knapp, Crystal, and Prince, Problems in Contract Law 6th

Edition Thompson Contract- a promise the law will enforce A promise or set of promises for the breach of which the law gives a remedy Contract Questions: 1) Is there a contract? (agreement in fact) 2) Is there an enforceable obligation? (agreement as written) 3)What are the terms? (rights and duties created by 1 and 2). Offer and Acceptance-can be called a concurrence of wills or ad idem (meeting of the minds)«the obvious objection is that a court cannot read minds. Mutual Assent-legal doctrine in every contract each party must agree to the same thing, must know what the other party or parties intended, and must mutually assent to be in agreement A bilateral contract - formed when the parties exchange promises of performance to take place in the future: Each party is both a promisor and a promise A unilateral contract-only one party (the offeror) would be a promisor, and the offeree¶s rendering of performance would also constitute her acceptance of the offer. *This affords maximum protection to the offeror Implied in fact - the circumstances imply that parties have reached an agreement, but it¶s not expressly said. For example, by going to a doctor for a checkup, a patient agrees that he will pay a fair price for the service Implied in law (quasi-contract) the courts remedy situations in which one party would be unjustly enriched were he or she not required to compensate the other. In 1677 The English Parliament enacted what is commonly referred to as the ³statute of frauds´-requires writing Sources of Contract Law: y Common Law y The Uniform Commercial Code has become the major statue with general importance to all phases of contract law. Applies in some variation in all states. o Revised in 1940 with the help of Professor Llewellyn- effort to make law applicable to commercial transactions...*all or part of the UCC has been adopted and is now in force in every American state. o Prevails in Ks for the sale of goods (all things movable-most tangible things). Does not apply to land, but goods associated with real estate may fall under Article 2. If a K involves both goods and services use ³predominance´ test o Most provisions apply to anyone, but some require a person to be a merchant y Restatement of Contracts 2nd-project began by the American Law Institute; ³black-letter´ statements of the general rule; a secondary authority, but with a high persuasion level Two approaches to Contract law: 1. Classical Approach- Objective Theory of Contract- thoughts and intentions don¶t matter±What would a reasonable person have thought? Ray v. Eurice Bros- Duty to read rule. 2. Modern Approach- tries to be fair, looks at intent of parties; progressive, but not in the sense that it replaces the classical The Restatement (2nd) §17 -a bargain in which there is a manifestation (expression) of mutual assent (agreement) to the exchange and a consideration; *K doesn¶t require bargaining i.e. internet agreements in which you check a box (adhesive). What promises ought to be enforced? (1) Formality (and the seal²in the old days it had to be written, signed, sealed, and delivered«over time the seal got watered down); (2) Consideration; (3) Foreseeable, justifiable reliance (in the absence of consideration); or (4) Charitable subscriptions What promises aren¶t enforced? Promises made (1) under duress; (2) by children or by people who are not mentally competent; (3) that are unjust or that shock the conscience; or (4) as gifts. 1

Contracts: Roy

2

§ 26. Ct found only an invitation for offer. Ct looks to language (definite and certain terms capable of being enforced). It must be communicated to offeree so that offeree has knowledge of the offer y The following are important: (1) identity of offeree. FORMING A CONTRACT a. surrounding circumstances. It must be properly addressed w correct postage. ii. and prior practice and relationship of parties y The broader the communicating media. 2nd purchaser then made an offer which was accepted.´ Duty to read-it doesn¶t even matter if the specifications were attached bc it¶s their duty to figure out what the specifications mentioned are. D then claimed he could not build the house. D sold the property four days later. ³absent fraud. **here the ct was more inclined to rule for D bc of P¶s lack of timely acceptance o R. duress. reasonable. not e-mail. INTENTION TO BE BOUND: Objective Theory of Contract 1. D told him to decide quickly because he expected to have a buyer within a week. 1st purchaser (already being told ³you snooze you lose. Ray v. the more likely it is that the cts will view the communication as merely a solicitation of an offer. AND REVOCATION ARE ALL EFFECTIVE UPON RECEIPT o The modern trend discards mailbox rule and focuses on need of offeree to have a firm basis for action in reliance on the effectiveness of her acceptance once it had been dispatched 2. § 25 . found a miscommunication: no K bc no meeting of the minds.Preliminary negotiations are not an offer until promisor has made a further manifestation of assent. Lonergan v. Trial ct. (2) the subject matter. there must be intent.e. The majority of jurisdictions and Art 2 hold that the ct can supply reasonable terms (presumption cannot be made if the parties have included a term that makes K too vague to be enforced) i.medium of acceptance must be reasonable and thus invited by the offer. (3) the price y The fact that one or more terms are left open does not prevent the formation of a K if intent is clear and there is a reasonably certain basis for giving a remedy.  If the mailbox rule is negated bc the method of acceptance used was not invited then the acceptance is effective on receipt  §65. ±P wants to build home.applies to post and probably faxes. *Holmes-the law must go by externals. Purchaser doesn¶t accept or reject. unless the offer provides otherwise.Contracts: Roy I. Ct has to determine intent objectively.must create a reasonable expectation in the offeree that the offeror is willing to enter into a K on the basis of the offered terms. Eurice Bros. It would have full force and single-mindedness on intent.it would be unfair to the offeree to have it effective before the offeree receives it. Series of communications ±you use the offer where it crystallized and you reference everything that has happened up to that point o R. COUNTER-OFFERS ERASE INITIAL OFFERS a. §40 ± rejections and counteroffers are also effective upon receipt **OFFER. Must be mutual assent. Acceptance is valid when dispatched/sent. TERMINATION OF OFFER.´) then accepts the counter-offer. After counter-offer the power of acceptance was then on 1st 3 .meeting of the minds. or mutual mistake. OFFER. P responded that he accepted. without knowing this. REJECTION. publication) or indirect communication if offeree receives correct information from a reliable source of acts that would indicate to an RPP that the offeror no longer wishes to make the offer 1. Normile v Miller: Seller rejects first offer with a counteroffer (mirror image rule-if acceptance doesn¶t mirror original then it¶s a counter offer). selected Eurices who signed contract with a clause stating specifications.claiming that in order for the letter to be a final offer there had to be no ambiguity. Scolnick: Mail correspondence about sale of land (ad placed in the paper).Methods of communication: direct communication (or comparable means that the offer was made i. Ct looks at words used-D¶s language indicated no definite offer just a ³first-come-firstserve´ statement (even K that uses ³offer´ may not be held out legally as an offer). IT MUST BE AN OFFER TO BE ACCEPTED a. o §63 The ³Mailbox Rule´ . o §42 -revocation (act of recall or annulment-eliminates the power of acceptance) is valid when received. a party who signs a written contract with or without reading it is bound by his signature.

B is not bound to continue to cross the bridge. Classical Doctrine. Changes pay date to March. o Objection to Unilateral Contract: It¶s hard upon B that he should walk half way across the bridge and not get compensation. but revoking right is gone. Making that quarterly payment was a preexisting legal duty). Drennan v Star Paving Co-P was awarded the contract for a job. It must be ³reasonably foreseeable´ that General will use subs bid in his offer. not in exchange for P¶s bid on the general contract. Offeror¶s duty only exists on the completion. If promisor is the cause of the failure of performance. next day went to D & said he couldn¶t do the price quoted ($7K changed to $15K). he cannot take advantage of the failure. ii. (2) Merchant¶s firm offer: merchant in writing w assurance to hold offer open for stated time or reasonable time. (4) Part performanceunilateral Ks aren¶t solidified until complete performance. Modern **applying PE to an offer is known as the Drennan rule. Objective. offeree is given reasonable time to complete performance i. o § 32 ± When in doubt. A contract is not an option unless there is a time attached to it. Judgment required D to pay the difference. Petterson v Pattberg: Offeror revokes offer when Offeree attempts to pay off mortgage. P looked for another K (lowest he could find was $11K). iv. but hard cases should not make bad law. ads are held to be not offers.Contracts: Roy purchaser. (Petterson might think that his quarterly payment was consideration for the promise to hold the offer open. but once performance has begun. Any offer to enter into a unilateral K may be w/drawn before the act requested has been performed. o § 43² If I get an indirect communication of a revocation. Promissory estoppel cannot be asserted to compel an offeror to perform where the offer is not meant to become a binding contract until consideration has been received. D later revoked realizing mistake. LIMITATIONS ON OFFEROR¶S POWER TO REVOKE: (1) Option K-distinct K in which offeree gives consideration for a promise by the offeror not to revoke. 3. Normally. which they didn¶t. PE is used to avoid harsh results allowing promissor to repudiate when promisee has acted in reliance. so if B is free-willed. offer is terminated (seen in §42). but merely solicitations/ invitations for offers«decision made on policy grounds. then I can¶t accept anymore. Ford .RPP¶s interpretation of ad. o Minority Modern View: D made performance impossible. Cook v Coldwell Banker-Er offers bonus program to be paid at the end of the year if ees sell certain amount. **This case has since been overturned by Drennan v. 4 . but bid was placed and the general bid was accepted shortly after. thinking they had an µoption¶. Subcontractor¶s bid to General used in reliance in preparing a big bid is enforced under PE. cts should conclude the offeror intended to allow the offeree to accept either by making a return promise or by rendering the performance requested by the offeror (Try to interpret every K as if bilateral if possible. § 45. That¶s wrong.can¶t revoke after part performance b/c option K is created. but after the end of the bonus year.Deceptive Ford ad attempted to ³bait and switch´ customers. why should A not be 4. If offeror can say ³I revoke´ before offeree accepts. Izadi v. D tries to revoke claiming P did not accept. and the information I get is reliable. restitution or reliance (extent to which D has been enriched). Remedies: Relief of expectation interest. Deceptive ads will be viewed as binding offers. James Baird v Gimbel Bros-D sent sub-contractor offer to P to supply linoleum for construction project. D offered in exchange for P¶s acceptance. If P would have known mistake it wouldn¶t be enforceable. P used offer in his general bid. o § 45± If there¶s consideration then it¶s an option K as soon as offeree begins or tenders performance. however brief. (3) Detrimental reliance-if offeror could reasonably expect offeree to rely K is open for reasonable time. P left before March. specific performance (simplest) iii.) Exception: when offeror clearly only sought an act in exchange for the promise. who waited. Star Paving. REVOCATION OF UNILATERAL KS a.

moveable property (applies to both consumer and commercial sales of goods). It is difficult to find the degree of injustice necessary for recovery. Under the UCC a contract for the sale of goods of $500 or more must comply with the writing requirement of the UCC statute of frauds. so it¶s replaced with first shot (not all that much better). TERMINATION BY OFFEREE y Express rejection y Counteroffer-same subject matter. but must provide notice within a reasonable time of performance completion y Acceptance of offer for bilateral K: generally acceptance must be communicated (unless acceptance is waived in offer) o Silence as acceptance §69 ±highly limited circumstances  Previous dealings can create a duty to speak thus if party doesn¶t comment. under non-option K if optionee gains reliable notice the land is sold. (3) common law would have buyer. Thus it was an offer to sale. D approached to buy P¶s land. repeated assurances and promises to Pop¶s. For Option K. consideration may be nominal (amount is irrelevant. Ct. Reasons UCC changes CL mirror image rule (1) makes sense for business. in regular K. 5 . you need more than nominal consideration. but in Option K it¶s okay to be nominal. (b) notice-not required to tell offeror he has begun. Relaxed the strict requirement for a ³clear and definite promise´ in order to establish PE (modern). iii. grants PE bc reliance was foreseeable. **Often. but different terms serves as a rejection of original offer as well as a new offer *distinguish mere inquiry y Lapse of time.000´ y Abandons mirror image rule-providing instead that a proposal of additional or different terms is effective as an acceptance unless the acceptance is expressly made conditional on assent to new terms. Option K drafted for 960 acres for $10 consideration (never paid tho). Then P sold to a third party. D decides to exercise option.must accept within specified or reasonable time iv. ACCEPTANCE GENERALLY y Only the offeree can accept. subject to withdrawal and no PE because no requirement to do anything. Whether P¶s reliance was reasonable is for the jury. A promise that foreseeably induces action or forbearance and does produce that action or forbearance is binding if injustice can be avoided only be enforcement of the promise. TERMINATION BY OPERATION OF LAW y By death or insanity of either party y By destruction of subject matter y By supervening legal prohibition of proposed contract b. inaction will be treated as acceptance bc it¶s reasonable under the circumstances  If you take benefit of services offered when you had a chance to reject them y Method of acceptance-unless provided an offer invites acceptance in any reasonable manner y Common Law rule-any different or additional terms turn acceptance into a counter-offer o Distinguish between statements that make implicit terms explicit o Grumbling acceptance o Request for clarification c. **Every business man faces risk that the substantial transaction costs necessary to bring about a mutually beneficial contract will be lost if the negotiations fail to yield a satisfactory agreement. but it must be paid. Revised Article 2 raises the amount to $5. formality is not). a leisurely approach to contracting is too expensive and time consuming Article 2 deals with transaction in ³goods´-goods are generally defined as any tangible. vi. Pop¶s Cones v Resorts Int¶l Hotel-during preliminary negotiations. OFFER AND ACCEPTANCE UNDER UCC **For most businesses.power of acceptance cannot be assigned y Acceptance of offer for unilateral K: (a) completion of performance (starting performance make create an option K so offer is irrevocable). Berryman v Knoch-P filed claim to make option contract bw him and D void. (2) need for fast K formation. then K is void (power of acceptance terminated when offeror takes definite action inconsistent with proposed contract §43). as counter-offeror dictate the terms-last shot rule was seen as arbitrary.Contracts: Roy v.

Advance Steel wants to buy steel. but expressly say okay to additional terms. So. b. (b) additional terms materially alter it.) Clause negating standard warranties. They are considered proposals. 2. (looks at ³usage of trade´²seller says shipment between by Sept-Oct but that means OctNov in trade terms).counteroffer/revocation of original offer.925.or given w/in reasonable time o Test for material terms are terms that would not result in surprise or hardship o Comment 4 typical clauses that normally materially alter: a. Bc K is for sale of goods and bw merchants. Acceptance contained additional terms. This is not necessarily a problem of mutual assent but a problem of agreement to terms. Final judgment against GE in the amount of $231. Ct finds K formed orally and subsequent events were fine-tuning. acts. . Harlow and Jones v Advance Steel . and quacks like an acceptance. Discrepancy on shipping dates. The Knock-Out Rule²we eliminate the dispute and focus on agreed provisions. (c) notification of objection to them has already been given. If bw merchants. iv. Princess Cruises v General Electric-Princess scheduled a inspection and repair stop with GE. *If looking at this under classical doctrine-buyer¶s purchase order that came back would be a counter-offer (a new offer) which would have been accepted by performance. Terms negotiated and finalized on GE¶s last proposal.not infer. Brown Machine v. therefore. BATTLE OF THE FORMS. Harlow sends sales form and places order with third party. clause limited acceptance to the terms of the form. **Under common law. the fact that there is no consideration will not make it revocable focus on time stated «. it wouldn¶t be valid as the thirty day window had long since run.2-207(2). Advance Steel mailed purchase order to Harlow w/ some minor revisions. offer was expressly limited.new terms are part of K unless offer expressly limits acceptance to terms of the offer. (neither party signed or returned either form). the last one in is accepted by performance.  2-207(2): What to do w/ additional terms. c. even if it contains additional or different terms (common law would have seen these as counteroffer). Hercules.00 based on GE¶s last form. a quote is not an offer. Only way to get around this is for offeror to expressly assent.reasonable time (three months) not to EXCEED three months. rather an invitation to enter into negotiations. **A signature on either form would have been manifestation of assent ii. Here.P attempting to gain damages from D after settling w injured employee. no additional terms possible. Last Shot rule (common law approach)every form that changes is considered a counter-offer. THE FIRM OFFER: 2-205: An offer by a merchant. Even if the quote was an offer. A quote can be an offer if it reasonably appears that assent will constitute acceptance.) Clause requiring a guaranty of 90% or 100% deliveries in a case such as a contract by cannery.2-207 (1) we view the seller¶s acknowledgment of buyer¶s purchase order as acceptance when it looks. 1. Exception. (2) additional term shall be a proposal for an addition. but full performance indicates they agreed to ³something´ thus it¶s reasonable to assume they had an agreement. part of K unless: (a) offer expressly limits acceptance to terms of offer.if offeree expressly conditions acceptance to additional or different terms. not automatically three months Has to be signed some manifestation of assent *If there¶s no authority there¶s no promise if pop¶s would have claimed that they guy making the promise wasn¶t authorized they could have won on that TO APPLY THE UCC OR NOT 1.Contracts: Roy Exceptions: expressly conditional or large price difference i. MODERN APPROACH UCC 2-207 -Assent. Ct finds no material delay.in 2-207. Delays. The Rule: moment of offer and acceptance is difficult to pinpoint. means ³explicit agreement´  2-207(1): Purported acceptance will be treated as acceptance. Common law applies here because UCC is inapplicable since this involved mostly services (predominance factor).) Clause reserving to the seller the power to cancel upon the buyer¶s 6 iii. even if it states an additional term.

What are the terms of the contract? Common law analysis would have the seller.´ don¶t need that anymore. This was criticized as being as arbitrary as can be. If there is a smidgeon of trade the promise will be enforced. It¶s still good consideration § 71 -Consideration is bargained for. II. swearing till 21 and here a promise without benefit to promisor is an enforceable contract. it goes against their ordinary understanding. the ³smidgeon´ of exchange is consideration. boy refrained from drinking.someone forbears from doing something that they are legally entitled to do.Contracts: Roy failure to meet any invoice when due.it doesn¶t matter if the consideration itself was the thing that induced the promise. Consideration for a promise may consist of the abandonment of a legal right. Bargained for exchange-requires the promise induce the detriment and the detriment induce the promise The modern test for consideration.knock out rule  Why did UCC want to change CL rule that a deviant acceptance is a counteroffer? 1. This used to be referred to as the ³last shot´ principle: whichever side sends the last form gets its preferred terms. When the law comes along and tells them something else. but didn¶t have. a K. ELEMENTS: bargained for exchange between the parties and that which is bargained for must be considered of legal value (traditionally stated-benefit to promisor or detriment to promisee. and gambling. Ask if the promisor¶s motive was to induce the detriment. adequacy is immaterial Consider the §§ 71 and 81 together: If a transaction is 99% gift and 1% bargain. In this case. The majority rule asks for detriment to promisee. y Benefit to promisor need not have economic value. a. as the counterofferor. The buyer would thus implicitly accept the seller¶s terms when the buyer accepts the goods. The business people think they¶ve got a deal when the acknowledgement is sent off as a response to the purchase order. smoking. §81 even if consideration itself was the thing that induced the promise.forbearance or performance of an act by the promisee which the promisor was not legally entitled to expect or demand. dictate the terms to the buyer. but which confers a benefit on the promisor. but second restatement §79 says this isn¶t required anymore. can be peace of mind or gratification y Legal Detriment to promisee-if promisee does something he is under no legal obligation to do or refrains from doing something that he has a legal right to do *need not involve any actual loss to the promisee or benefit to promisor (promisor must have primarily sought to induce the detrimental act by his promise y Legal Benefit to promisor. New rule: as long as there is consideration. Sidway. We need to find a rational way to figure out whose terms control rather than just picking the terms of the party that fires the last shot. Legal Detriment. d. just looks for something bargained for and given in exchange i.Uncle promises (in front of a big party) some cash if his nephew won¶t do ³bad stuff´ like smoking. Old rule: ³benefit to the promisor/detriment to promisee=enforceable. The common law defers contract formation for a couple of months and allows the parties to walk away from the contract scot-free long after it would commonly be understood to be binding. 7 .the terms are those in writings which agree.) Clause requiring that complaints be made in a time materially shorter than customary or reasonable o Knock out rule-if there¶s a conflict the conflicted terms are knocked out (majority) and terms are replaced with generic terms 2-207(3): If parties thought. § 81 . 3. first restatement and minority ask for either detriment or benefit to suffice. drinking.Benefit/Detriment Test= benefit to promisor or detriment to promise. Hamer v. swearing. BENEFIT/DETRIMENT TEST 1. Classical consideration. if so then it will be treated as consideration. 2. detriment must be the price of the exchange. CONSIDERATION-additional requirement for a promise to be enforceable (Classical Doctrine).

³Is the promisor making a promise based on something they want to attain or on something they want to do for someone else?´ The note was ruled an unenforceable gift. Took out and signed for a loan. which was the reason they were offering it free in the first place.she could make a will. ³bargain´ does not mean an exchange of things of equivalent.000 had no valid consideration. Neither past-Consideration nor Moral Consideration are valid. Fairness isn¶t always relevant. should the estate have insufficient assets. It cracked. only the sufficiency. o Gift in Trust-if your client presently has the funds to make the gift to her nephew. o Testamentary Note. It wasn't a gift because American Ash received a benefit from the arrangement. or any. value. they are either met or they are not Lawyer¶s role in counseling: o Executed Gift. If consideration is met. "Complaint alleges facts which. (Restatement §77a) o Mutuality of Obligation. If the terms are specific.Ps argue there was valid consideration in an offer for company¶s retirement plan." No requirement of bargain for exchange. This would be consideration. it must actually be bargained for as the exchange for a promise. Pennsy Supply v. It was used. Batsakis v Demotsis ± Greek woman needed $. Pennsy had to redo it and dispose of AggRite. If there was a promise in the note would that be enforceable? ³if you are a good boy´ There would be a bargain. or neither is bound. ii.e. she could create a trust on his behalf 2. Not really needed in K so long as bargained for exchange exists. American Ash Recycling ±Pennsy subcontracted to do paving. if proven. o General rule-promise to perform or the performance of an existing legal duty is not sufficient consideration However. Plowman v Indian Refining Co. that is enough (Restatement §79c) 3. not the court¶s place. You are a good boy no such thing as past consideration. Court doesn¶t value what she received only that she received it. Why? No consideration. §79(e) gross inadequacy may be taken into account. thus what he has always done is not a promise for the future. so a contract to follow the law is not enforceable. ³Consideration requires bargaining.not an enforceable promise. However. it means a negotiation resulting in the voluntary assumption of an obligation by one party under condition of an act or forbearance by the other. i.both parties must be bound. Dougherty compared with Hamer-both promises to a younger relative-the promise in Dougherty was made more formally than the one in Hamer.property law provides inter vivos/causa mortis. Consideration thus insures that the promise enforced as a contract is not accidental. a teacher teaching a course) y y 2. an enforceable promissory would take priority over a mere testamentary gift.promise that makes performance entirely optional w/ promisor no matter what promise does. thus there is still a promise The same policy consideration is valid when offering additional incentive to someone already obligated to do something (i. Cts will not inquire into the adequacy of consideration. Consideration is essential. Bequet is not payable until the debts of the estate have been satisfied.Contracts: Roy y The door is shut on dealing only with legal rights as a public policy. a ³last testament´ of her desires (freely revoked). even though it is illegal a lot of people still engage in it. would show the promise induced the detriment and the detriment induced the promise. ³Mere inadequacy of consideration will not void a contract´ Restatement §75: no requirement of equivalence in the values exchanged. o Illusory promise. obligation must be imposed on promisor. but does not wish to give him (or his guardian) present control. Sued original contractor for disposal costs. but the latter was enforced and the former was not. but the terms are difficult to prove. Condition of the 8 . Dougherty v Salt: aunt¶s promissory note to give boy $3. Doesn¶t have to be an equivalent exchange. the law expects you not to engage in these activities anyways. APPLYING CONSIDERATION 1. original contractor suggested free AggRite for project.

An injustice would result if D were allowed to walk away. except when founded upon a sufficient consideration. but the flipside of policy is do you penalize benevolence of helping out a child and then requiring continuance. Dissent: P¶s loss and inconvenience were sufficient consideration to render D¶s promise enforceable. doesn¶t require exhaustion of all other means. simply a requirement in order to receive benefit. she has made it 7 years without him. Dissent: The majority fails to state how she is prevented from instituting a child support action against the natural father. CHARITABLE SUBSCRIPTIONS--Modern Theory. Mother argues no consideration bc she received no benefit from his moving. This case shows traditional unwillingness to inject this new doctrine into the courts. Greiner made promise to son for land.Contracts: Roy promise. D left when P¶s son was 3. BU did this and organized them as well. nor does the record reveal. Kirksey v Kirksey ± D promised sister-in-law a home after her husband died. y It is easier to enforce a definite. King v Trustees of Boston University.cts used PE to legally enforce ³gifts´ to charitable institutions. ***Policy Comment b to §90 suggests that whether a promise should be enforced may depend in part on 9 . ABSENCE OF BARGAINED FOR EXCHANGE: Promissory Estoppel and Restitution a. Also easier to enforce a promise if trade (reciprocity) is involved (the facts in Kirksey described a conditional gift. He moved a long way and gave up his homestead in reliance of the promise. that there was a promise to give some property to a charitable institution and that promise was supported by consideration or reliance. that she does not know the identity of the natural father or that he is dead or unable to be found. the action has to be foreseeable and detrimental though) b/c King wanted papers to be kept w/ scrupulous care at BU. but no benefit at all. finds consideration in MLK¶s promise to transfer title of papers and to give BU property when he died.Ct. agrees. ii. P and her son relied upon D¶s promise to their detriment bc P refrained from identifying and seeking support from the child¶s natural father (Reliance doesn¶t have to be bargained for).promise reasonably inducing definite and substantial action. Wright v Newman ± P seeks child support. Ct. This would push strongly towards enforcement of this promise. PE considered only when consideration is not present. There was a bargain for exchange (not necessary. Policy if you assume parenthood of a child you better be pretty sure of your commitment because the child is relying on it. She¶s doing fine with or without her promised support. Say you add this sentence to the brother-in-law¶s letter: ³I am very lonely. but uses PE to enforce bc son reasonably relied to his detriment. P has not alleged. The letter itself was pretty vague. The facts as they are show that she got at least two years¶ worth of good livin¶. the law does not recognize their sanctity or supply any means to compel their performance. 3. 2. She later refused to give him land. To enforce a charitable subscription. enforces ³implied promise´ w/ PE. She lived there 2yrs and was kicked out. So there is a promise and there is consideration (charitable exchange). DOCTRINE OF PROMISSORY ESTOPPEL § 90 . (3) enforcing promise is the only way to avoid injustice i. Under PE reliance need only be reasonable. you needed to est. Greiner v Greiner-Mrs. Court found for BU. PROMISES WITHIN THE FAMILY: 1. That¶s something.is not consideration. ***§90(2) A charitable subscription or a marriage settlement is binding under subsection (1) without proof that the promise induced action or forbearance 1. III. established relationship) implied a promise to support child even though he was not the father. Then she would have incurred a detriment. (2) the promise actually did rely on the promise. **Kirksey might have come out differently if P had been booted out of the house immediately upon arriving. **Today. However. clear promise unlike the vague one in Kirksey. ³I¶ll give you a present if you¶ll come and get it. applies to Ks w out consideration when (1) promise was made that promisor should reasonably expect to induce reliance on part of the promisee. D¶s actions (name on birth cert. No benefit to employer when they went to pick up checks. Ct. attempt to put all her children on equal footing.. So. and that might be all that was really promised.´) It doesn¶t take much to add consideration to the picture.´ Now you have a bargain. last name. the doctrine of PE might allow enforcement of K bc Kirksey reasonably relied upon defendant¶s promise to her detriment. A purely gratuitous promise will not be enforced. strongly a man may be bound in conscience to fulfill his engagements.

lends money to B on the security of a mortgage on B¶s new home. Potential donors could become more reticent about making gifts.Pelo was hospitalized against his will for mental illness. Under duress signed approval.Contracts: Roy ³the extent to which the evidentiary. This should have been a red flag for Shoemakers. Insurance lapsed and bank said it would add it to premium (threat more so than a promise). deterrent. for how long. and work involves more than one¶s daily bread´ and the weekly paycheck. PROMISES IN COMMERCIAL CONTEXTS 1. Therefore. which is good for the borrower. cautionary. Credit Bureau Enterprises v. D was P¶s brother-in-law. Certain jobs have higher levels of stress and anxiety. Furthermore. y Consider the following: o ³At that point I was in no financial situation to do so on my own. the presence of detrimental reliance in this case is a sufficiently disputed issue for the trier of fact. Liability could be large in relation to the promise. the court noted that informality exposes donors to the risk of unforeseen tax problems. and 3) injustice can be avoided only by enforcement of the promise y In some cases a change of position might be viewed as financially beneficial can nonetheless support an action for promissory estoppel as detrimental reliance: ³All jobs are not the same. The court observed charities that are successful in obtaining court enforcement of casually made pledges my suffer harm. and channeling functions of form are met. Ct finds even w out an express/implied K he has to pay for involuntary services bc he was unjustly enriched. Court found there was enough material evidence to support a jury finding either way on RPP standard. 2)a detrimental reliance of such promise. youth or mental impairment). therefore PE is upheld.´ b. 10 . Policy-forces the banks to be more definite on their terms and explanations. The promise is binding. Pelo. did the Shoemaker¶s premium go up? It doesn¶t appear so. Promise to use reasonable efforts. D knew it had to fire him or make him retire. potential benefit to promisor (there is a benefit that¶s why they make it in the first place) o Illustration 13: ³A. 3 years later D rescinded. In connection with the court¶s admonition about the dangers of informal practices by charities. They have denied recovery when D failed to make a promise on which liability could be based or when P failed to establish detrimental reliance y §90 Comment E: This section is to be applied with caution for promises to procure insurance. restitution doesn¶t have to be paid when service is forced. P was injured. is destroyed by fire. RESTITUTION-no promise.e. Katz v Danny Dare.´-fishy? If she couldn¶t afford it on her own what made her think she could pay for it through the bank.Six months later the property still uninsured. y **PE has been applied to enforce a wide variety of promises in commercial situations o It should not be thought that the mere mention of PE will cause a court to roll over and play dead. Generally. and in reliance on the promise B fails to insure . iii. 2. o The bank¶s ³promise´ implied no duration:  Open price term²the restatement is somewhat willing to fill in terms based on what¶s reasonable (we talked about this in the context of offer and acceptance).´ *Reliance must be Reasonable* PE¶s 3 elements: 1) a promise producing reliance. a bank.ct likes ³fairness. if it does require the promise focus it cannot be found to have been breached because they did initially go out and get the insurance. The mortgage requires B to insure the property. but one party has been unjustly enriched/benefited.P worked for 25 years. house burns down.  The bank focuses on saying it¶s not a promise because it falls under a contractual obligation. Case deals w/ reasonableness of reliance. look for restitution. i. Ct ruled for P using PE §90 finding he reasonably relied on promise to his detriment and injustice only avoided by enforcement.´Urges charities to adhere to prudent business methods. exception: if services are deemed necessary and if it was impossible to gain assent (i. Rather reliance is justified or unjustified. Shoemaker v Commonwealth -P secured a loan with bank and was bound by contract to keep insurance on the home. D reached a reasonable pension decision. Vastoler increased his salary but was forced to absorb additional stress and emotional trauma. At the closing of the transaction A promises to arrange for the required insurance.

Restitution is an intent to charge. MBR is not same. (2) Promise is not binding: (a) if promisee conferred benefit as a gift or if promissory hasn¶t been unjustly enriched. hailing a cab). (4) It was possible for other to give consent **the classical approach held no bargain then no recovery ii.) Ct. Webb saves M¶s life by falling w/ block. To impose a quasi-contract action (restitution) against owner. Implied in Fact requires interaction between the parties. acceptance and consideration). § 86: (1) A promise made in recognition of a benefit previously rec¶d by the promisor from promisee is binding to extent necessary to prevent injustice. Owner is not liable under an implied in law claim even when subcontractor wasn¶t paid by a bankrupt general contractor bc they have to account for where all payments went to define an unjust enrichment for the implied in law contract. **Restitution rests on idea of promoting justice iii. Mills v Wyman. In such cases. (2) contract implied-in-fact (i. STATUTE OF FRAUDS (SOF)-defense to the enforcement of a K. ³Past´ or ³moral´ consideration is not valid. Implied in Law requires no interaction. but which public policy protects debtors from being compelled to pay. (3) Supplier of services had no reason to know receiver would not consent (if mentally competent). y MBR is close to restitution. took out life insurance policies.e. Once P saved D from death or harm (material benefit) and subsequently agreed to pay him for the service rendered (moral consideration) it became an enforceable contract (Material Benefit Rule-minority).´ (but in the words of Beyonce ³if you like it you should put a ring on it´. Under MBR: promisor must receive benefit and must not be a gift y Grounds to require payment: (1) express promise to pay. windfall benefit on the part of the receiver.Classical Approach. She files for restitution asserting her right to half property/wealth gained during relationship. M promised to pay him for saving his life. §110 and UCC y Contracts for the sale of goods $500 + (mentioned in restatement but really covered by the UCC-article 2) y Contracts not to be performed within 1 year of the making y Contracts for the sale of an interest in land y Contract of an executor to answer for a duty of his decedent 11 . but promisee expected to receive value. (2) D has knowledge of benefit. (b) To extent that value is disproportionate to the benefit. P basically claims she filled the role of ³domestic engineer. The court held that marriage was not necessary to provide relief for both parties and that if not. general contractor) hired subcontractor Commerce for stucco work. ii. World filed for bankruptcy. but borrows from K law. finds unjust enrichment b/c she did a lot of things during years that allowed him to work and build business. Equity then sued Commerce. y Moral obligation is sufficient consideration under the following circumstances: debts barred by the statute of limitations. Ct also finds K implied in fact b/c actions of parties imply agreement to share. (look for unjust enrichment) Quasi-K Elements: (1) P has conferred benefit on D. enforcing promises based on preexisting equitable obligations may be enforced because they merely remove an impediment created by the law to enforce debts that are due. IV. a. she got nothing. y c. Not enforceable promise b/c no consideration.Equity (sub-contractor for World. Commerce v Equity. (3) D has accepted or retained benefit conferred. Watts v Watts-unmarried cohabitants. they split. i.Webb throws 75 lbs blocks off 2nd floor. (4) Unfair to allow D to keep benefit w/out paying. receiver knows a benefit is being conferred.Contracts: Roy §116: Elements for restitution (modern doctrine): (1) Act unofficiously w/ intent to charge. Upon completion. filed tax together. subcontractor must (a) exhaust remedies against General (b) prove owner¶s receipt of benefit conferred w/out paying consideration to anyone. Material Benefit Rule: R. PROMISSORY RESTITUTION-Promise made after benefits have been rec¶d. Webb v Mcgowin-Modern Approach. debts incurred by infants. (look for offer. father later writes and promises to pay. (she took his name. and his wealth greatly increased). Under Classical Doctrine this would not be enforceable b/c no consideration. ones side would be unjustly enriched and the other impoverished.sick son taken care of by nurse. (3) if someone is unjustly enriched. must be a reasonable charge. and debts of bankrupts. (2) Services were necessary to prevent other from suffering serious bodily harm or pain. Equity stopped work and filed suit. refused partial payment. World gave Equity a list of remedial work.

testimony. (ii) specially manufactured goods.´ iv. Rice. Winternitz v. 134.symbol may be acceptable for signature R. P was forced to renegotiate his sales contract in light of new terms. (b) sufficiently indicate K.P asked to return to former position as exec director for 2 years. What is different about §139 (than §90): Easer to get ³benefit of bargain´ damages. memo can be anything. applied when not sufficient writing. is there sufficient memo/writing? If yes.made and accepted or rec¶d an accepted. P began payment of new rent agreed upon. 131. SOF writing requirement is satisfied by parol linking several documents. P claimed that D orally agreed to renew the lease and permitted him to assign it.´ y R (2nd) §767: Intentional interference evaluates is met by considering the following factors: (a) nature of conduct. (iv) part performance. iii. (3) Need quantity Exceptions: (i) merchants exception: writing sent in confirmation if not rejected w/in 10 days. 12 . (iii) if admitted in pleading. R. P later informed she would not get the job. Just b/c a K can be breached w/in 1 year doesn¶t take it out of SOF. isn¶t applicable in a suit for damages.Memo req¶ments: (a) id subject matter. P¶s second salary increase wasn¶t approved. written or oral. Elizabeth Arden. PE used as exception to SOF if existence of promise is clear and convincing. y Analysis: (1) Is K under SOF? Yes b/c it can¶t be performed w/in 1 year: for 2 yrs.gives cts more guidance. and forwarded to payroll department. 133.at least one signed and others clearly indicate relation to same transaction. (b) motivation. (e) social interests in protecting the freedom of action of the actor and the contractual interests of the other. and enforcement must be the only way to avoid injustice. P sued for breach of oral agreement. applied when K conflicts w/ SOF.Oral agreement to renew lease for 2 years. 136.Except for consideration of marriage. *SOF requires a signature to authenticate information. (c) interests of the other with which the actor¶s conduct interferes. a writing may be anything. §129. y R (2nd) §766(A): ³One who intentionally and improperly interferes with K performance bw another and 3rd party is subject to liability.Contracts: Roy y Contract make upon consideration of marriage y Contract to answer for the duty of another R. An oral K unenforceable under SOF may be enforced w respect to doctrine of part performance K for transfer of an interest in land will be enforced if party seeking enforcement reasonably relied. Affirmed for P bc the writings taken together combined all the essential terms of the K. UCC 2-201: Sale of Goods SOF: (1) sale of goods. also forbearance must be reasonable and foreseeable. more detailed. Cts are LENIENT and want to enforce agreements. 3. (2) $500 or more.signed´ includes any symbol«w/ intention to authenticate writing. **It¶s not the case that it has to be in writing«all you need is a sufficient memoranda. only for specific performance. R. but it doesn¶t require a single document. Summit Hills Joint Venture. (d) interests sought to be advanced by actor. *memo must be signed by party being enforced against. Party v. some sort of writing amounting to the evidentiary purpose.Several Writings. Is K w/in statute of frauds? If not then P is free to prove her K by any combination of relevant evidence. 132. initialed.memo can be made b/f or after agreement/K is formed UCC 2-201(39). direct or circumstantial 2. (c) contain essential terms R. (2) Sufficient Writing? 3 writings w 1 unsigned that contains essential terms. provided the assignee was financially sound. Ct found for P on malicious interference argument. Crabtree v. If not.Memo can consist of several writings if one is signed and others clearly indicate that they relate. there is still hope bc of exceptions such as performance or reliance by P i. ANALYZING SOF: 1. some signed and others unsigned together. then there is no bar to enforcement and the case may proceed in normal fashion. (f) direct cause of interference (g) relations between the parties.employment at Arden Co (D) K based on 2yrs and specific salary increases. R. *Perhaps easier to enforce b/c agreement already exists. and changed his position so that injustice can only be avoided by specific enforcement. or ct. Payroll change card prepared. (v) Promissory estoppel §139 o o o o o o o o b. any exceptions applicable? Yes. No problem was foreseen then D later refused to allow it. No signed writing exists thus it¶s under SOF. Alaska Dem. If yes. 132.

but the courts have generally permitted enforcement so long as the term ³Requirements´ or ³output´ or some functional equivalent appears in the writing. §2-201 (1) makes enforcement possible on the basis of very fragmentary notations of terms. it was felt that D shouldn¶t be deprived of his statutory right by anything but a voluntary admission. Buffalo made 1st $5. Rationale is that the practice of objecting to an improper confirmation ought to be familiar to any person in business.oral agreement for Buffalo to buy 5 tobacco barns by 4 installments. If confirmation meets requirements. (attempted repudiation). holds himself out as having knowledge or skill peculiar to the practices or goods involved«may be attributed by his employment For UCC 2-201 to apply. If asserted K is for one unit. §2-201(2) comment 4. only Buffalo. Merchant-a person who deals in goods. thereby implicitly allowing enforcement even in the absence of a writing stating the price term.000 check. Later it was mailed back. Buffalo v. Mrs. (SOF requires a signature of party against whom enforcement is sought). i. However a substantial minority of decisions have concluded that the exceptions specifically listed in §2-201 displace any common law exceptions including estoppel y y y 13 .if receiving merchant fails to object. it appears that D wasn¶t permitted to assert the statutory defense if in fact he admitted making the agreement. Confirmation must be received by the other party (person w reason to know about it). Hart accepted the $5.000. 2-201(3)c Exception: Enforceable if goods or payment is: 1) Made and accepted. **Revised Article 2 uses the term ³record´ rather than ³writing. Fundamentally. but there was already an agreement. Analysis: is K under SOF: Yes. y By reducing the required contents of the writing to a bare minimum.000 payment and check was given to D and accepted. Roy: keeping check for few hours is closer to outright rejection. In the early days of SOF.Ct seems like it would have accepted this. or. over $500. sometimes based on published price list or market price. Hart.he held them out as having possession.´ but otherwise only makes minor changes Cts have generally taken the view that where the asserted contract is for one unit of the goods in question. But she sent it back. so he will not get all 5 barns b/c they are divisible. the rule developed that even oral admissions in ct wouldn¶t preclude D¶s raising the statutory bar. o This is problematic where obviously the parties at the outset cannot set a fixed quantity (although they may set a maximum or minimum). Is there a sufficient writing: NO. torn up and called a ³revoked´ offer. Ct finds there¶s enough evidence to uphold SOF part performance exception. Fact intensive 2) Received and accepted. even a payment of only part of the price will be sufficient under §2-201 (3) (c) to validate the entire K (since the goods cannot be apportioned). THE SALE OF GOODS: new text of §2-201 added subsection (4) clarifying relationship bw article 2 SOF and traditional 1yr general SOF and increased threshold amount for coverage from $500 to $5. there is sufficient evidence to conclude that a real transaction may have occurred bw the parties.. one of the merchants must send a ³confirmation of K´ in writing w/in a reasonable period of time after K was formed. A question raised in §2-201(3)(b) is the issue of what constitutes admission: The majority view is that PE can operate as an exception to §2-201 by virtue of §1-103. it¶s treated as sufficient to comply with SOF against recipient merchant even though the recipient has not signed any writing showing the existence of K. authenticated perhaps by only initials or even a printed letterhead. part payment is sufficient to enforce entire K. ³A term agreed upon´ may be omitted from memorandum. check was not signed by Hart. **Buffalo only paid a portion of full payment.could argue that she didn¶t accept.Ct accepts this part b/c Buffalo´ received and accepted´ the barns.Contracts: Roy c.

This policy keeps one side from misleading the other. the contract would be void as there was no meeting of the minds.g. K may still be valid if that term wasn¶t essential  If one party has more information.  If there is failure of mutual assent to a term. if the final writing was intended to be a full and final agreement.  In a case where the court finds that neither party knew or had reason to know of the other parties intent. usage of trade. the court should focus on the intent of the parties. Parties must present evidence showing other party had reason to know of meaning. 201: Whose Meaning Prevails? R. Ct ruled against the party w more knowledge. 201(2): If parties attach different meanings. 201(1): If parties attach same meaning to a term.´ y Williston presented a systematic. INTERPRETATION AND PAROL EVIDENCE RULE -need to know terms to determine if a breach has occurred. Cts reasoned that the formation of a K required a ³meeting of the minds. When two sides have opposing intentions. (³ct should not strain to apply principles of interpretation to fill the gap. but should instead strive to achieve a just outcome´) b. Joyner v Adams. efficiency reasons y Under the subjectivist view. *The only situation where the ambiguity falls in favor of the non-drafter is in cases of unequal bargaining power or an adhesion contract. objective theory of contractual interpretation-words and conduct should be interpreted in accordance w the standard of a reasonable person familiar w the circumstances rather than in accordance w the subjective intention of either of the parties. y After all that it may be appropriate for a ct to conclude that the parties did not make an enforceable agreement.g. interpretation will be preferred which is less favorable to the one by whom the K was drafted (favors party w less bargaining power) o Handwritten or typed provisions control printed provisions o **This battery of maxims is never fired all together. A party is bound by the other party¶s meaning if the first party either knew or had reason to know of the second party¶s meaning while the second party did not know or have reason to know of the first party¶s interpretation. Justifications.Property owner Ks w/ builder ³to develop´ lots. Very fact intensive. E. compelling force. the term means what one party thinks if: a) that party did not know of any different meaning by the other. provides certainty w writing. Corbin-liberal. The parties here are of equal bargaining power. Williston. it is up to the finder of fact to determine which one had reason to know the other side¶s position. no contract was formed.conservative-reluctant to admit evidence outside of the four corners of the writing by applying the plain meaning rule.Contracts: Roy V. then that party is held to higher standard. and B has reason to know of A¶s meaning. just intended to help make prudent choices.the writing is not given a magic.  Interpretation to aid them in giving meaning to expressions of contractual agreement: o Meaning of a word in a series is affected by others in same series o General term joined w specific one will be deemed to include only things that are like the specific one o If one or more specific items are listed w out any more general or inclusive terms. and the other knew the meaning attached by the first party. the term means what the parties have given it. Both parties thought ³develop´ had different meaning. 14 . PRINCIPLES OF INTERPRETATION 1. E. Oral agreement can modify if it (1) is collateral or (2) doesn¶t contradict any express or implied provisions of written K. a. useful guides for reasoning and justification for his conclusion. unique. if the parties attributed materially different meanings to contractual language. Court eventually held for defendant. R. RESTATEMENT¶S VIEW OF INTERPRETATION R. A knows of B¶s meaning. evidence of prior oral or written agreements cannot be introduced.witness testimony is messy and expensive. other items although similar in kind are excluded o Interpretation that makes the K valid is preferred to one that makes it invalid o Written K contains a word or phrase which is capable of two reasonable meaning.

First look at language. (language disparity). 204: If parties have a K. (5) To determine manifest intention: course of performance. course of performance. 222: Usage of Trade: usage having such regularity of observance in a place. holds for D/seller by dismissing the complaint.doesn¶t mean they knew. course of dealing. look at evidence to interpret. interpret it accordingly. (c) Specific/Exact terms greater weight than general (d) Separately negotiated over standardized. 223: Course of Dealing: a sequence of previous conduct b/t parties to an agreement which is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct. May include system of rules regularly observed. Ct concludes that burden rest on P to prove that D¶s general interpretation was inaccurate. then no K exists b/c there is no mutual assent. usage of trade. Department of agriculture regulations governed the Trade usage -perfect chicken is obvious. and effective (b) Order of weight: Express terms. So.P didn¶t really object. obviously here testimony threw this argument out. **Dictionaries give both meanings P¶s argument-small. K so the dept¶s definition should apply ±(ct says Size -older birds do not come in that size so incorporated in K so clearly not external) bc he specified size that¶s clearly what he Conduct. but if technical term.N. vocation. while second party didn¶t know or didn¶t have reason to know of first party¶s intention.chicken is everything (Trade Usage). or trade. 202: Rules in Aid of Interpretation: (1) Look at purpose of parties to determine words and other conduct (2) Interpret writings as a whole (3) If general language. and the other had reason to know of the meaning attached by the first R. Int¶l Sales Corp. turkey Negotiations . but ³chicken´ is ambiguous. 2. it only became inconvenient later wanted ct says this isn¶t logical Price ± P paid a certain price that could only be considered good business if it was for the actual chx that was delivered **The language discrepancy ± huhn v chicken.RPP.S. 207: Meaning that serves public interest is generally preferred. but left out an essential term. unless they agreed otherwise. Usage of trade should be used to give meaning or supplement or qualifies a parties agreement. the court may supply a reasonable term 205: Parties have a duty of good faith and fair dealing 206: The meaning of a term is preferred that operates against the party who supplied the words. 208: If a K or term is unconscionable. UCC 1-203: Obligation of good faith UCC 1-205: Course of Dealing and Usage of Trade in understanding and interpreting a K. 15 . (4) Part performance. use technical meaning. 203: Standards of Preference in Interpretation: To interpret a term: (a) use interpretation that is reasonable. but how much weight does a ct give language in an international contract y A party is bound by other party¶s meaning if first party either knew or had reason to know of second party¶s meaning. 201(3): IF the parties attached different meanings to a material term of the K. duck.modified objective standard. the court may refuse to enforce it.any course of performance accepted or acquiesced in w/out objection is given great weight in the interpretation of the agreement. and usage of trade. only that a RPP would have known. young chicken D¶s argument = anything but goose. **Has reason to know. but 201(2) doesn¶t¶ apply. course of dealing. lawful.used chicken instead of huhn Expert. Frigaliment Importing Co v B.Contracts: Roy b) That party had reason to know of any different meaning attached by the other.

cross-referenced. had he known of the terms. as well as the trial court. and would not understand them if they did. Course of Performance. Course of performance (the way that the parties perform in this K). Construed against drafter. lawful.P purchased a burglary policy. Negotiated terms control over standard ³boilerplate´. An insurance company tenders the insurance upon a µtake it or leave it¶ basis. D denied coverage bc no visible marks or physical damage. no real alternative.take it or leave it) Unconscionability: Gross inequality of bargaining power. may confirm indications that the transaction involved elements of deception or compulsion. The Restatement prefers. negotiated terms are given greater weight than standardized terms. Interpret K as a whole. In interpreting. no bargain.a party is not bound to non-dickered boilerplate terms where party making terms had reason to believe that adhering party would not have agreed to terms. P could reasonably have expected the burglary policy to cover this burglary where the police. Terms that validate the offer preferred: an interpretation that makes the K valid is preferred. ct prefers(in this order of importance): Express terms. Usage of Trade (what¶s done in the industry normally if both parties are aware). and then may look at extrinsic evidence. (3) Boilerplate overrides dickered term. K depends. (3) Usage of trade. And parol evidence is admissible to show the meaning of an ambiguous term and its usage in a contract. Public interest preferred y y Contract scholars have consistently rejected the idea that words can have only one precise meaning Cts have often held that where a written K is facially clear a court should not look for its meaning beyond its ³four corners. Plain Meaning Rule. human nature (we would really like it if past dealings are directly related to current dealings i. Course of Dealing. same goods/ same process). Maxims of Interpretation. After P¶s premises were burglarized. nor with a legal interpretation. or did not 16 . and Usage of Trade. C&J Fertilizer v Allied Mutual. 3 things to look for to determine if term violates R. Also. (2) course of dealing ±these parties interacted before ±history is bound to be repeated.must stick to four corners of document in interpretation unless term is ambiguous. The court held that the definition of ³burglary´ stated in this policy comports neither with the concept a layman might have of that crime.Primary Purpose. and effective meanings. course of performance (what they actually do should be distinguished from what other people do). (2) eliminates dominant purpose of transaction. found that it was an outside job  This is a contradiction of duty to read rule. Reasonable Expectations Doctrine.D.e. but cts should not seek to impose on the writing a meaning beyond any reasonable understanding of its terms.more general y 3. or may show that the weaker party had no meaningful choice. mass-produced insurance forms.  Adhesion K: must have this to apply RED o Standard Form o Inequality of Bargaining Power o Consumer Must Accept or Reject (i.Contracts: Roy y Holding. The courts have therefore adopted the doctrine of reasonable expectations. Policy holders do not read the detailed. standardized. o How do we prioritize? What is most probative of the issue of meaning? (1) What they actually do is indicative of what the mean.E.´ Ct is permitted to receive extrinsic evidence to determine whether there may be in the agreement a latent ambiguity.A party who seeks to interpret a contract¶s ordinary terms in a narrower sense than is used in everyday trade has the burden of proof to establish that meaning. A K term in an adhesion K will not be enforced if strict enforcement of that term results in forfeiture.e.: (1) Bizarre/Oppressive. In this case. Course of dealing (what¶s been done in the past). reasonable. together with terms unreasonably favorable to the stronger party.

entered into agreement b/c misrepresentation of facts were made (not usually an exception) y To establish a ³collateral´ agreement. PAROL EVIDENCE RULE ±involves the admissibility of evidence of oral agreements. (4) form is presented to adhering party w representation that terms must be accepted. Notes: y The doctrine of reasonable expectations as applied to insurance policies has been adopted by more than half the states.classical cts first require ambiguity from 4 corners b/f interpreting. they don¶t know they¶re signing a K (always an exception) o Fraud in the inducement.agreement outside scope of integrated agreement o Classical: must be completely different subject matter o Modern: not as strict y Promissory Estoppel 17 . proponents of the other view argue that one cannot know the intent of the parties simply by looking at the document y Parole Evidence Exceptions: (parole evidence rule can only be fully understood in light of its exceptions)-exceptions are allowed bc the allegation is the contract itself is voidable regardless of writing y To explain/ interpret agreement. y The doctrine of reasonable expectations appears to apply to adhesion contracts generally. i. (3) Contradict y Adherents to the ³four corners´ approach argue that to permit consideration of extrinsic evidence on the threshold question of integration is to do exactly what the parol evidence rule is designed to avoid. and when overall circumstances or premium charged suggest reasonable expectations are negated. y §211 Restatement is narrower than a full-fledged version of doctrine of reasonable expectations: ³The black letter formulation reflects a conservative approach in its recognition of an exception to the rule that standardized agreements will be enforced as written. o Noted three variations on applying the doctrine: when there is ambiguity. when the ³fine print´ undermines more prominent expectations. undue influence. (3) drafted by one party. o Many jurisdictions have substantially limited the reasonable expectations doctrine by requiring a presence of ambiguity.Contracts: Roy in fact assent or appear to assent to the unfair terms. Involves the following: (1) printed form containing many terms (2) purported as a K. (6) adhering party enters into few transactions of the type. not part of the agreement. The court held that in this case the plaintiff¶s evidence demonstrated that definitional provision was unconscionable. incapacity. The Restatement formulation. they allow all evidence in. broadens the principle to cover all standardized contracts. although it narrows the doctrine by focusing on expectations of the drafter. y An ambiguous policy should be construed against the insurer and in favor of the insured. Modern cts don¶t. not just insurance agreements o Contract of adhesion is a combination of the use of standard form documents. mistake. (2) Supplement. (5) parties have dickered over whatever terms are open to bargaining and doc is signed. illegality o Fraud in the execution. parol evidence is not admissible to contradict or vary terms of written agreement (gives parties certainty)  3 ways evidence may come in: (1) Interpret. that party commonly enters into this type of transaction.lying to get a signature. y Oral or written agreements made after the execution of the writing y To evidence offered to show that the effectiveness of the agreement is subject to an oral condition preceding y To show agreement is invalid: fraud duress.e. (7) principle obligation of adhering party is the payment of money c. presentation of demands on a take-it-or-leave-it basis. It is narrowly drawn to assess the situation from the drafter¶s perspective where the other party has reason to believe that the party manifesting such assent would not do so if he knew that the writing contained a particular term.

Reason for modern approach is. bc those negotiations should be embodied into the writing. Then. or vague y if no ambiguity parol evidence excluded ³contractual´ applies to Modern (Corbin) 1) Reasonably susceptible (ct considers parol) 2) Evidence in/out Restatement §214(c) Interpretation-way to get extrinsic evidence in **Ct must stop short of contradiction 18 . **Classical court is less likely to distinguish bw full integration and partial integration. it is inadmissible to vary or contradict the terms of a valid written K. Ct applies the modern (corbin) view: ask first is it reasonably susceptible to opposing party¶s meaning«look to document to determine ambiguity. it is presumed that the parties have introduced into it every material item and term. Thompson v Libby. Policy. ii. After intent is established. ambiguous. and causes of action«´ all and bad faith is a tort claim Classical (Restrictive 1) Ambiguity (plain meaning/four corners) 2) Evidence in/out y if the language is unclear. whereas subsequent changes or oral conversations could alter the writing. but now wants to sue. **Prior negotiations aren¶t allowed to contradict a writing. Taylor v State Farm. If a writing contains on its face a complete expression of the whole agreement. all prior understandings are deemed to have been merged into or superseded by the final writing. Parol evidence is admissible if it relates to a subject distinct from that to which the writing relates. so four corners is not always acceptable. ***Whether the contract is integrated is a question of law and must be determined from the four corners of the instrument. they just ask if it is integrated at all. determined from the ³four corners´ approach (look at the document on its face). claims. Classical court uses Parol Evidence Rule to prevent testimony from coming in to supplement the agreement. but incomplete.P signed a release from ³all contractual claims´ in exchange for $15. parol evidence rule excludes any extrinsic evidence that contradicts or varies the written document.D claimed P breached an oral warranty regarding log quality. Partial Integration ± intended to be final. were subject to the uncertain testimony of slippery memory. Concurrence: The concurring opinion is concerned that the majority opinion does not provide enough guidance for subsequent cases dealing with this same issue.Parol Evidence Rule is founded on the inconvenience and injustice that would result if matters in writing. Here the ct says extrinsic evidence was properly admitted by necessity to aid interpretation.words have different meanings. We give deference to the writing bc we want to effectuate the intent of the parties (they wrote it for a reason) and give certainty to these types of transactions to allow reliance on writing Integration-completeness and finality.State Farm is getting security in terms of peace of mind and Taylor is getting $15. Bargain for Exchange. if term is reasonably susceptible. Ct used 4 corners approach and found K to be integrated. the extrinsic evidence is admissible to determine meaning introduced by parties and the extent of integration in the document. i. Claims he can for bad faith is a tort and not a ³contractual´ claim. made with consideration and deliberation and intended to embody the entire agreement of the parties. it includes terms sufficient to render it legally binding.000 Is language ambiguous? y Ambiguity ± ³all contractual rights.000.e. Every agreement will have to be presented to the court.Contracts: Roy i.

Extrinsic evidence offered in Taylor did not show a separate agreement. The two cases illustrated the ongoing tension between two opposing views of the parol evidence rule. is this everything. K specified no verbal agreement or changes would be effective unless reduced to writing and signed. considers if it is partially integrated (this is it for the writing but it¶s incomplete) The differences between the views only have a shade of difference: reasonably susceptible (possibility of second meaning) v ambiguous. Contracted to do earthmoving work-bid was made in reliance on miscalculation. Fraud exception doesn¶t work here (reasoning is a little circular). thus the tension is one that still exists today. Other writers defend the modern approach bc the intention of the parties can only be determined in context. Integration: Modern will consider parol. Thus. Words however.P is subcontractor. The important difference is under the modern view. P claims fraud in inducement related to subject matter of K. have to use the fraud exception. A number of scholars have even called for complete abolition of the rule iii.not allowed as exception. not from the words of a document. If evidence conflicts. it¶s efficient to allow parties to a K certainty. Integration and Interpretation are separate terms: integration is trying to figure out. Whereas interpretation is analyzing parties¶ intent. what¶s the interpretation of the agreement. Interpretation and Supplementation are sometimes used interchangeably: analyzing interpretation used integration framework/analyzing supplementation use ambiguity/susceptible framework Notes: y Thompson dealt w what is sometimes referred to as ³supplementation´ of the written agreement. P was paid according to the written contract. Written K-quantity ³LS´ for lump sum.´ This rule chips away at the foundation of our legal system by giving credence to the idea that words are inadequate to express concepts. The four corners approach and the Plain meaning approach ±all courts will allow extrinsic evidence to interpret a K w a patent or facial ambiguity. **Any reliance is contradicted by terms of written K. integration is a preliminary question. But. 19 .  Note: a majority of fraud is fraud in the inducement. Some authors conclude that evaluation of the benefits depends on the level of transaction. Integration: Classical likely to say ³it is what it is´«this is the entire agreement of the parties. Fairness: It¶s fair to allow fraud to be an exception.  This brings up debate over Efficiency v. Sherrodd v Morrison-Knudsen. o Some scholars want a return to the traditional approach bc it gives parties the incentive to negotiate written agreements carefully. but rather conduct and other background circumstances. Evidence to contradict is NEVER allowed. Ct does not provide exception for fraud in the inducement. So under the modern view whether parol evidence is entered you look at everything. If there was an oral agreement it obviously wasn¶t executed. it might be possible to discover contractual intention in the words themselves and in the manner in which they were arranged. do not have absolute and constant referents. Policy: certainty that a signed K is binding. y **Some jurisdictions still use the classical view. the point of the difference is that ³plain meaning´ adherents will not allow use of extrinsic evidence to uncover latent ambiguity o California Supreme Ct: ³If words had absolute and constant referents. P signed bc D allegedly told him if not he wouldn¶t be paid for work already done and told him a deal would be worked out. in the first step the court considers parol evidence. Taylor involves a case of interpretation..Contracts: Roy Problem: what appears plain and clear to one judge may not be so plain or clear to another *parallels SOF concern one party could subsequently alter contract by coming up with something later **(goal is to honor intent from K¶s creation) Problem: The reason parties reduce things to writing is to avoid problems and this view admitting the parol brings the question repeatedly. you can¶t use the fraud exception. D is gen contractor. If want to bring in an oral argument.

(no clear statement of how many acts are necessary. Concurring: This case shouldn¶t be extended to deal with unfair dealings.(1) establish that trade exists. y Professor Knapp: the stricter view of the parol evidence rule represented by Sherrodd embodies a flawed world: ³At the most basic level. as you well know¶. However. back toward the privileged beneficiaries of classical contract law. he did) 2) Course of Dealing. Note: If K is fully integrated.in this case.Paving Co (P) enters into long term asphalt purchasing K w Shell Oil (D).¶ and a world that says. Fraud in inducement -false statement of fact that induces the party to enter into the agreement. Trade usage and course of performance will be implied into contracts if there is evidence that it is not inconsistent with the terms of the contract. UCC Cts will look at 3 things: 1) Course of Performance. but may to supplement or interpret. only allowing uncontradicted custom and usage as a necessary predicate for interpreting the contract based on the course of performance or for a finding based on good faith that the seller was required to price protect. PER Exam Q Outline I. and a world that runs on face-to-face communication-between a world that says µI don¶t believe it unless I see it in writing. P wants to supplement a price protection term to the K. This is a K for sale of goods falls under UCC 2-202. may not offer 3 things to contradict. Nanakuli Paving v Shell Oil. every time D could have done so. (p. 392). and they are so prevalent that the parties would have intended to incorporate them (reinforced by routine practices and D¶s past performance). thinks they¶re signing a receipt and are really signing a contract. I will take you at your word and rely on that.Contracts: Roy  Economic Duress could have been a possible exception in Sherrodd. Fraud generally is an exception. Because the alleged fraud contradicts the terms of the written contract. a number of cts take the view that not even the combination of a merger clause and a specific disclaimer can shield a party from a claim of fraud y At a deeper level the opinions reflect a fundamental disagreement about values. Fraud should be applied bc it rewards the fraudulent party creating injustice Notes: y Consistent w the dissent in Sherrodd. UCC does not require ambiguity to allow parole evidence in. Dissent: Fairness is not met. Some courts make the distinction between fraud in the inducement and fraud in the execution. the new conceptualisms µmost troubling feature of all. it is inadmissible under the parol evidence rule. Fraud in the inducement is not an exception in this case. and I won¶t do it unless a writing tells me to. Ex-a party lies about the instrument itself.´ y Professor Mooney laments on the ³new conceptualism´ ±judicial tilt away from the underdogs. P sued claiming customary trade practices implied requirement for price protection. D later increased the price. but they¶re really not giving any sort of assent.how parties have behaved re: each other in past contracts 3) Usage of trade. Evidence that contradicts will NEVER be admitted @ common law or UCC. µif you assure me this is so. is. the Court determines that the exception does not apply under these facts because the fraud directly relates to the subject of the contract. then establish that party is member of that trade and (2) should know about it. **The Court recognizes that there is an exception to the parol evidence for fraud. twice. of course. does it seem to you that Sherrodd might have had more success if he had attempted to proceed on either a mistake or a duress theory? iv. y Based on your studies. it¶s the difference between a world that runs on paper.ways parties have conducted themselves in past w/ regard to particular K at issue. Make argument for/against each w/ conclusion to each 20 . Fraud in the execution-manifest assent to something.

a showing of intent can still be a K. ii. duress. Modern. If parties later fail to agree.wants ³reasonable certainty. Original K . but no definite way to determine new rent.4 corners ii. the fact that the buyer didn¶t read or understand the terms is irrelevant and doesn¶t invalidate the contract.´ Says a term left open may show agreement. y R. Arguments AGAINST: letter lacks lots of specific terms that would be needed for written K. amount of details the agreement contains. to aid P in securing subcontractors D sent P a letter of intent. No agreement yet. General Arguments FOR intent to be bound: parties intended to enter into written agreement and parties have begun to act upon those expectancies. This is a budge away from Classical towards UCC. Classical. option to extend for another 10 years under same terms except rental price. but that changes with electronic contracts 1.D expanding O¶Hare Airport. If one party has power to fix term. Brower v Gateway ±P is not happy with computer because customer support isn¶t 24/7 like promised. Shrinkwrap Terms-package informs the purchaser that the product contains the seller¶s contract terms and that use of the product constitutes the purchaser¶s agreement with those terms 2. P argues it was a ³take it or leave it arrangement. Ct finds agreement when P kept the comp past the 30 day warranty period. etc.´ but ct explains this is the benefit from online purchases and P had the option to send it back within the 30 days and buy it elsewhere. Ct uses Classical Approach. Complete integration ii.no K. amount of money involved«etc) A letter of intent can be binding. Also. Supplement i. Walker v Keith . P doesn¶t have to abide by shrink-wrap agreement when arbitration clause is obscure or expensive. orally informed P that a written K would be received shortly. ELECTRONIC CONTRACTING: classical contract formation is based equal bargaining power and a bargaining process. SUPPLEMENTING THE AGREEMENT a. doesn¶t mean they win---jury will decide. 1) Agreements made after execution of writing 2) Oral condition preceding 3) Invalid: fraud. the arbitration clause in the shrink-wrap is at dispute here. y UCC 2-305: (Modern Approach) ³Open Price Term´ will not prevent intention to be bound. Rent is material. VI.10 year $100 a month. 27: Even though a formal written K is contemplated. 4) Promissory Estoppel 5) Collateral Agreements. y R.Contracts: Roy a. ct may enforce reasonable price. 33. Clickwarp (clickthrough Terms) 3.ambiguous. Exceptions to PER. Ct found this letter to be ambiguous so it grants entrance of parol evidence. Conclusion: Note that just b/c evidence comes in.´ If parties intended not to be bound unless a price was fixed.parts of K w/ separate consideration 6) Reformation-mistake III. Quake Construction v American Airlines.parties have a lease. and it was not set w enough certainty. b.even if you determine evidence will come in. K not enforceable. say that it could still come in under an exception. Partial integration b. do analyze under both UCC and CL. POSTPONED BARGAINING: ³AGREEMENT TO AGREE´ ±determining a missing term in the future i. **Also: If hypo has mixed goods and services.must be done in ³good faith. Ct will not be paternalistic and insert a term.if a material term is missing. Contradict c. To determine if a letter is binding cts look at intent: (is agreement generally put in writing. Browsewrap Terms i. Later D told P he was terminating the arrangement. Interpret i.reasonably susceptible II. 21 . Duty to Read.

Merchantconsumer requires expressed assent (action or inaction) Policy: Cashiers/Phone operators cannot be expected to read legal documents to customers before ringing up sales«droning voice would anesthetize rather than enlighten many potential buyers and oral recitation would not avoid customers assertions (whether true or feigned) that the clerk did not read terms X to them. Unless D gave his efforts she wouldn¶t get anything. historically courts have issue w one-sided Ks). Modern Approach: If the parties acted like there was an agreement. Lady Duff 2.there ct implied term as a matter of fairness. The court implied.at some point there¶s a contract amidst negotiation doesn¶t result in offer or acceptance. (2) traditional way. vendor is master of offer. but in actual K it was one-sided. the court will find a way to make an implied agreement. Lady Duff Gordon. then delivery must occur within a ³reasonable time.e. It¶s not uncommon to have a contract that is one sided (i. it is implied he will use reasonable effort in executing the contract. (2) Terms provided for in parties¶ present and/or prior agreements. Two lines of reasoning: (1) these contracts take place on a rolling place.´ 3. Reasonable Time: (UCC § 2-309(1)) If parties don¶t agree upon a time for delivery. Wood v. courts would imply consideration). Reasonable Efforts: Where one party has an exclusivity agreement under a K. only one form thus no battle of the forms. Writing provides benefits from both sides of commercial transactions.Termination of a contract(other than a set event) without notice will be considered invalid. Reasonable notice: (1) Industry Norm. contract takes place when customer makes offer y y y c. ** Remember Wright v. the term reasonable efforts because of parties¶ intentions. A promise may be lacking and yet the whole writing may be instinct with an obligation imperfectly expresses so as to make a contract. y Implied-in-law: A term not found in the parties agreement. no stopping point until form is submitted. he asserts. Reasonable Notice: (UCC § 2-309(3)) . however subsection 2 applies only to merchants. Argument in line with Brower: there may be times when the consumer wants to be bound later. y Professor Eisenberg takes the position that agreements in which one party makes only a nonbinding illusory promise frequently reflect a rational bargain and ought to be enforceable according to their terms. there must be a bargain for exchange (thus. they would want the opportunity to send the computer back and be able to rescind on their end. ³rolling´ refers to what happens before and once form is sent that is the offer and what happens after is either acceptance or rejection Language of material alteration: if it does fall under 2-207. 1. without the court¶s implied terms this agreement would lack business efficacy.Lady made exclusive agreement w Wood to acquire half of Wood¶s profits from his endorsement of Lady. 1. as a matter of fact. not to consumer-merchant. Two Types: y Implied-in-fact: A term agreed to in some meaningful sense by the parties themselves. or that they did not remember or understand it.Contracts: Roy y Rolling Contract. Ct finds Lady liable for breach of K. IMPLIED TERMS: SUPPLEMENTING THE AGREEMENT Classical Approach: Before the court implies an agreement. Customers are better off and so our Vendors. See Wood v. Wood says Lady broke K by doing her own promotions and withholding profits. has in effect bargained for a chance to show that his performance is attractive (analogy of ³money back´ guarantee-seen in UCC §2-326 sale on approval) 22 . The party making the nonillusory promise.promise to pay child support. the court could apply subsection 2 then court would conclude the terms do materially alter. court focuses on the form. Three Bases: (1) Statute (2) Common law precedent (3) Court discretion y Gap Fillers: Terms implied-in-law by the UCC. even broadly viewed. Newman. not intention. but imposed on the parties by law. She wouldn¶t want half of nothing. Nanukuli ± presumably they could use someone else.

**Restatement (2nd) §205 echoes UCC by extending duty of good faith and fair dealing to every K--Cts are unanimous that once a K is concluded terms will be deemed to include an obligation of good faith that is binding on both parties (honesty in fact and observance of reasonable commercial standards of fair dealing in the trade). UCC 2-309 requires reasonable notice (based on the circumstances) to terminate if no termination privilege is in K.verbal agreement for exclusive dealer distributorship for garage doors: D was to provide product and P was to sell it. must determine on a case by case basis. Notes: y Gap-filling provisions of Article 2: §2-308 (place of delivery). you are showing the a party tried to deprive the other party of the fruit of the term. P borrowed money and began business. Not needed to show a specific term is violated on its face. y Code also justifies implied terms on grounds of economic efficiency-most parties would voluntarily choose them for themselves.Contracts: Roy y What if the situation were reversed? The implied obligation would go both ways (implied obligation of reasonable efforts)«trouble in trying to prove what ³Best Efforts´ look like«a little/a lot«it would be hard to make standard certain. This is an implied in law term. Appeals ct rejects the summary judgment finding and sends it to trial.all about fairness. Raynor Manufacturing. Ct would honor this explicit intense.people doing things purposefully. 2 years later D terminated relationship. Implied Obligation of Good Faith: One party to a K claims to be acting in ways either expressly permitted or at least not forbidden and the other party complains such conduct is improper and actionable.´ d. Implied obligation of Good Faith (§2-306).´ y Some of the implied by law obligations are imposed by the UCC are mandatory and may not be varied even if the parties expressly agree otherwise. ³Except on the happening of agreed event. §2-310 (time of payment). Leibel v. but for the most part rules are gap-fillerssubject to preemption by parties¶ express agreement. thus fewer terms to bargain out y In gauging reasonable notice comment 8 to UCC §2-309 refers to a related factor: whether there has been sufficient or reasonable time to find a substitute arrangement y Written K allowed termination immediately if sales decline (no notice required)«would such a provision give in effect. §2-509 (risk of loss). This case applies Implied in Fact y 2.no definition. implied the way it should be. §2-513 (buyer¶s right of inspection)²supported on the basis that terms are ³fair´ and ³just. **Common theme in bad faith is willfulness. FORM OF BAD FAITH CONDUCT MEANING OF GOOD FAITH 1) Seller concealing a defect in what he is selling Fully disclosing material facts 2) builder willfully failing to perform in full. Under UCC (predominance test) ct finds P was entitled to reasonable notice. Substantially performing w/out knowingly though otherwise substantially performing deviating from specifications 3) contractor openly abusing bargaining power to Refraining from abuse of bargaining power coerce an increase in the K price 4) hiring a broker and then deliberately Acting cooperatively preventing him from consummating the deal 5) conscious lack of diligence in mitigating the Acting diligently other party¶s damages 6) arbitrarily and capriciously exercising a power Acting w/ some reason to terminate a K 7) adopting an overreaching interpretation of K Interpreting K language fairly language 8) harassing the other party for repeated Accepting adequate assurances assurances of performance 23 .

K is ambiguous and qualifications are hedged around circumstances that seem to suggest the parties did not intend to subject Morin¶s rights to aesthetic whims. To determine good faith performance.Ps sold business to D including joint obligation to work together. (2) allow redress for the bad faith performance of an agreement even when the defendant has not breached any express term. P claimed D failed to honor its obligations (which P alleges gives rise to an inference of bad faith). Here K was for factory. or mechanical utility which other knowledgeable persons can judge. a court must allow for parol evidence. Therefore. Morin Building Products Co v Baystone Construction.performance of parties helps evaluate intent (four corners). third party. but it does turn on the parties¶ intent Allowing Parol Evidence. Good faith standard is employed when K involves personal aesthetics or fancy. but K specifically refers to ³artistic effect. Seidenberg v Summit Bank. the PER will ordinarily be irrelevant to the issue of its existence and application (I¶m confused on the application of this rule to the obligation of good faith) 2. (it seems to me they kind of side with D. it is necessary to imply terms.bc the obligation of good faith is an implied term rather than an express one.´ GM rejected P¶s work. (3) notion of good faith has often been applied to judge the appropriateness of a party¶s exercise of some type of discretion expressly granted to it by the terms of a K.good faith can¶t override an express K term) **Covenant has been applied: (1) covenant permits the inclusion of terms and conditions which haven¶t been set forth (i. operative fitness. Parol evidence is permissible to evaluate a breach of good faith. custom shall not be relevant.GM.Contracts: Roy 1. (General Rule. D hired Morin Building (P) to supply and erect the aluminum walls. P sued for the balance and won and D appealed. Ct says the presence of bad faith is found in the eye of the beholder (³I KNOW IT WHEN I SEE IT´)²not really an answer bc it was a half-answer in the first place and it should go to the jury. Good faith isn¶t limited to situations where on party exploits a weaker party. but it is a factor.Con. to make that determination without considering evidence outside the written contract. y PER cannot inhibit the application of the implied covenant of good faith and fair dealing because that covenant is contained in all contracts made by operation of law. in determining whether a breach of the covenant has occurred. if not impossible. but since 24 . Jury considered the RPP standard and it¶s unlikely P intended to bind himself to a higher and perhaps unattainable standard since it seems impossible to achieve a uniform finish with mill-finish aluminum. not usually a thing of beauty. It would be difficult. RPP standard applied in determination of satisfaction in commercial construction projects when K involves commercial quality. acceptability rests strictly with GM. y Seidenberg courts treatment of PER. terms the parties must have intended along the lines of business efficiency). K said: ³aluminum siding.´ Ct says there¶s more than a suspicion that the artistic-effect and quality-fitness clauses were not intended to cover the aesthetics. so D hired another subcontractor to replace it and refused to pay P. hires Baystone (D) to build an addition. ct must consider expectations of the parties. **Generally obligation of good faith is implied in law (implied in every K) mandates that neither party do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract. (2) contradictions to express terms.allowing something completely outside the specifically written K y Applied to prohibit (1) variations to integrated written instrument. (3) covenant has been held to permit inquiry into a party¶s exercise of discretion expressly granted by a contract¶s terms **important to note in what types of cases this obligation of good faith applies y Ways in which the doctrine of good faith may come into play: (1) court may be persuaded that in order for K bw parties to have business efficacy.e. D terminated Ps employment. **If a uniform finish was important GM could have gotten such a finish by specifying painted siding. P¶s bad faith allegations survive dismissal. (2) covenant of good faith may permit a finding of breach even where no express term has been violated. all work subject to approval of architect.

had problems because wasn¶t satisfied with performance (speed of the boat). Subjective: good faith (aesthetics) vs. painting a house) **there is a lot of Code and Restatement overlap (for testing purposes you must differentiate. y y y Express Warranty.Contracts: Roy facts and K are vague and inconclusive they defer to lower court¶s opinion). He was given documents ³prop matrixes´ (described capacity to travel 30 mph) and a brochure (advertised ³the kind of performance you need to get to the prime offshore fishing grounds´). The ct held mere opinions of a product aren¶t express warranties (docs here referred to a slightly different boat and the brochure was simply an opinion). Despite P¶s allegations he couldn¶t use the boat. there is«an implied warranty that the goods shall be fit for such purpose o As a threshold matter the buyer must prove as a threshold matter that he made known to the seller the particular purpose for which the goods were required Notes: y Examples: y Cell phone service restricted to Oxford MS²breaches warranty of fitness bc it¶s not the purpose of a phone 25 . o EX of need for subjective is painting a portrait (added support is if an extra fee is paid as consideration) « if they don¶t like it then they shouldn¶t be stuck with it bc it¶s up to their content with the performing party¶s job (presumably the performing party thinks they can please you).§2-314 all goods are sold containing an implied warranty that such goods are merchantable (trade standard fit for ordinary purposes) **must have a merchant involved selling the god Warranty of Fitness .. but recognize you can borrow from one or the other as seen by the judge in this case) Notes: y Ks frequently contain express terms that obligate one party to perform to the ³satisfaction of the other.If in fact they really wanted it to be uniform so that they were honestly dissatisfied then the good faith standard is met (pretty lenient standard when you think about how fickle people are which is why there¶s a preference for the objective standard). specialized fanciful use) One of the tricky situations: there are situations with functional purpose with an aesthetic aspect (i. Warranties i.§2-315 ± provides when a seller has reason to know any particular purpose for which the goods are required and that the buyer is relying on the seller¶s skill or judgment to select or furnish suitable goods.§2-313created when seller makes an affirmation of fact or a promise to the buyer that becomes part of the bargain basis Warranty of Merchantability . One of two approaches (described in Morin): either the obligor¶s declaration of dissatisfaction will be judged by a standard of reasonableness or at minimum held to standard of honest dissatisfaction o Comment a to §228 indicates that the subjective standard should be used only where the agreement leaves no doubt that it is only honest dissatisfaction that is meant and no more y §228 indicates a preference for the objective test may be justified in part by the desire to avoid forfeiture as the denial of compensation that results when the oblige loses his right to the agreed exchange after he as relied substantially as by preparation or performance on the expectation of that exchange y P¶s burden of establishing D was honestly dissatisfied may be difficult. defeating K as a whole. the ct found no evidence showing the trade standard of merchantability or that the boat was unfit for offshore fishing to conclude that the boat violated the warrant of merchantability. the party whose performance was conditioned might be held to have made only an illusory promise.P bought boat. Bayliner Marine Corp v Crow. but it¶s not impossible VII. Objective: restatement §228 (functional) Good Faith.´ Indeed if pure discretion were the test.e.Restatement §228 ± preference for objective standard when it¶s practical to do so (practical refers to when something is functional as contrasted with something is artistic. Objective.

without this added knowledge the seller¶s skills would only be applicable to the shoe¶s standard function Validity of disclaimers of warranties (§2-316) ±disclaimer is inperative if it cannot be construed as consistent with the terms in K that would create the express warranty.´ you take the person¶s advice and go to your interviews---assuming you don¶t get a job (resolve the ambiguity that surrounds ³why they didn¶t choose me´-someone gives you a tip. and the result of a mutual agreement o A disclaimer is considered void against public policy if it attempts to disclaim compliance with applicable building codes or if it permits the home to be unsafe Add to list of implied terms: common law warranty of home o A home would only be a good if it is movable (a modular home) y y y y Summary of Warranties Express Warranty UCC § 2-313  Any affirmation of fact or performance  Words ³warranty´ or ³guaranty´ not required. CL rule of Caveat Emptor may not be invoked.Contracts: Roy y Go shopping and employee gives you a particular shoe-white. Caceci v Di Canio Constr Co. NY courts recognize the Housing Merchant warranty. Ct held.. does the implied warranty of fitness ³reason to know´ ±you relied on the sales person¶s skill and judgment to get a job. specific. y A clear majority of jurisdictions have recognized an implied warranty of quality in the sale of a new home by a builder-vendor. Thus. o Most common is the ³as is´ disclaimer Bayliner distinguishes between a type of factual representation about the quality of goods that may give rise to an express warranty and ³mere puffery´ or sales talk that will not serve as a basis for a binding commitment To be considered a basis of the bargain §2-313(3) ±the agreement requires clear affirmative proof Implied warranty of fitness is different from implied warranty of merchantability bc it is not limited to merchants and it is created only when the buyer relies on the seller¶s skill or judgment to select suitable goods for the buyer¶s particular purpose and the seller has reason to know of this reliance. if an oral warranty the application may depend on the application of the parol evidence rule o To use boilerplate language to overcome a specific provision in the code. as having the expertise necessary to construct a livable dwelling. which imposes a contractual liability to build new homes with skillful performance and quality. but not in the context you were seeking them for (comment §2-315) o It¶s really unreasonable to rely on the seller¶s advice o Would be different if the seller claimed to have special knowledge (i.e. in regards to new houses. ³clearly every builder-vendor holds himself out.Ps brought suit against builder of their home five years after the home was constructed alleging Ds violated the implied warranty of merchantability by building on an unstable foundation. The shoes otherwise work. Caceci ct states that the builder-vendor must construct a house ³Free from material defect and in a skillful manner. construction must be done in a skillful manner free from any material defects (it¶s immaterial whether builders had actual knowledge of the defect bc the builders are in a much better position than buyers to ensure the proper quality of the home. bright neon tennis shoes ³everyone uses this shoe for job interviews. it needs to be specific and conspicuous (especially if we are talking about the warranty of merchantability).. expressly or impliedly. also the breach of warranty doesn¶t require a showing that the goods are defective in any way²merely that the goods aren¶t fit for the buyer¶s particular purpose y y y y ii. 26 . used to work in that field or has lots of those employees in the store) ±really talking about specialized skill and judgment. it was the shoes). An implied warranty of merchantability will be read into all construction contracts for new homes. implied warranty of skillful or workmanlike performance may include defects that do not render the house uninhabitable Some states have enacted legislation providing for implied warranties of quality in the sale of new homes Most courts view disclaimers with suspicion and will refuse to enforce a disclaimer unless it is conspicuous.´ may have two separable components-a warranty of habitability and a warranty of skillful or sound construction. different bw implied warranty of skillful construction and the implied warranty of habitability is that the former warranty focuses on the manner in which the work is performed while the latter reflects the ³end result´ expectation that the home will not have any major defects which render it unsuitable for habitation.

Contracts: Roy     Doesn¶t have to be intended Opinions and mere puffing are not a warranty Affirmations of fact that can be verified Timing: facts and circumstances determinative.UCC § 2-315 individual¶s expectations must be communicated  Seller must have knowledge of particular purpose  Buyer must have relied on seller¶s skill and judgment  Not required that merchant involved  Not that goods are defective. statements post-K aren¶t warranties. Classical courts will not allow because it¶s fraud in the inducement. Implied Warranty of Fitness for a Particular Purpose.  Implied warranties have no problem with the Parol Evidence Rule  Implied warranties can be disclaimed or modified if expressly contracted so.UCC § 2-314suitable for its ordinary purpose  Sale must be made by merchant who deals in goods of that kind  Goods must pass within trade  Goods must be fit for ordinary purpose  Consumer expectations. Determine if there is complete integration and warranty will vary terms. not personal preference.need dickering. Courts view this with suspicion. Normally. just not what buyer needed Applying the Parole Evidence Rule to warranties.may present a problem when trying to introduce express warranty. Implied Warranty of Merchantability. 27 . Then use fraud exception. so can¶t come in. so boilerplate won¶t cut it. If it was partial integration. much less problem getting express warranty in. But some modern courts will allow.  Implied warranties exist in contract to construct a house.

In such cases. it¶s enough to protect the reliance interest and not the expectation interest. Often in § 90 situations. the promisee¶s reliance is treated as an independent and sufficient basis for enforcing the promise. ³detrimental reliance´). (2) We may limit the remedy as justice requires: promises enforced under § 90 are without consideration and can lead to a partial enforcement as opposed to a promise with consideration which will lead to full enforcement. (2) the promisee actually did rely on the promise. Remedy The available remedy is usually limited to only that which is necessary to avoid injustice. When there is no reliance. and (3) injustice can only be avoided if the promise is enforced. and 3) injustice can be avoided only through enforcement of the promise. Promissory estoppel can be viewed as a legal device that prohibits the promissor from denying the existence of a contract for lack of consideration. the elements of promissory estoppel are: 1) a promise reasonably expected by the promissor to induce action or forbearance. Elements In general. The remedy granted for breach may be limited as justice requires. 28 .e. Limitations on the application of § 90: (1) We¶ll only make the promise binding when justice requires it. (2) A charitable subscription or a marriage settlement is binding under Subsection (1) without proof that the promise induced action or forbearance. Summary § 90 applies to contracts without consideration when: (1) A promise was made that the promisor should reasonably expect to induce reliance on the part of the promisee. Legal Principles Restatement (Second) of Contracts §90 ± Promise Reasonably Inducing Action or Forbearance (1) A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. 2) action or forbearance by the promisee in justifiable reliance on the promise (i. § 90 and promissory estoppel do not apply.Contracts: Roy Promissory estoppel serves as a ³consideration substitute´ in contract law that renders certain promises otherwise lacking in consideration binding and enforceable.