Ks outline.

oo3

Topic

I. General
A. What are Ks?
1. O + A + C = K 2. Private ordering of business 3. Made for: a) Assurance
(1) Get what you want (2) Have sense of legal recourse (3) Assess/plan risk

b) Organizing joint undertakings c) Enforcing agreements 4. Enforcement is compensatory, not punitive 5. When can K law solve the problem? When is it a bad tool for solving a problem?

II. Enforcing Promises
A. Remedies
1. Protected Interests – §344 a) Expectation: as good as would have been if K performed (default rule for damages) b) Reliance: reimbursed for loss by reliance on K by being put as good had K not been made – often used if expectancy too difficult to prove – promisee from - to 0 c) Restitution: restoring any benefit conferred on other party (promisor returning any econ value to promisee) promisor from + to 0 d) Check 352, 355 re: damages e) Economics of Remedies
(1) Efficient Breach
i. If nonbreaching compensated w/expectation interest, then no one worse off and at least someone better off (one reason expectation interest as default) ii. No one worse off, someone better off (Pareto-superior)

f) Other Remedies
(1) Specific Performance (type of injunctive relief) – Eastern Air Lines v. Gulf (2) Declaratory Judgment

B. Theories of Consideration, Basis for Enforcement
1. Bargain Theory – §71 APPLY ON EXAM UNLESS TOLD NOT
"Reciprocal conventional inducement" (i.e., bargained-for exchange) – Holmes

a) Performance or return promise must be bargained for b) Sought by promisor in exchange for promise, given by promisee in exchange for that promise c) Performance may consist of
(1) Act other than a promise

Topic

c) Performance may consist of
(1) Act other than a promise (2) Forbearance (3) Creation, modification, destruction of legal relation

d) Performance or return promise may be given to promisor or some other person. May be given by promisee or some other person. e) PEPPERCORN used to fool court to think gift is a K f) §79 - ADEQUACY of CONSIDERATION g) Doesn't have to be benefit or detriment to be a bargain 2. Benefit-Detriment Theory a) B to promisor or D to promisee [Hamer v. Sidway: no smoking etc. till 21 – forbearing legal right] b) Somewhat in use in NY still (was prevalent everywhere up to early part of 20th cent.) 3. Gratuitous Promises a) Not valid consideration because not given so as to effect return performance or promise thereof b) Fiege v. Boehm (1956): bargaining for woman's silence not a gratuitous promise; he bargained for silence, she forbore bringing bastardy claim
(1) Honest and (2) Reasonable belief her claim was valid = valid consideration

c) Kirksey: can't live on property unless you go there 4. Requirement of Exchange: Action in the Past a) Past actions as Consideration
(1) Classic - past actions not valid consideration [Feinberg v. Pfeiffer; Mills v. Wyman] (2) Liberalization - valid if past consideration gave material benefit to promisor [Webb v. McGowin] (3) NY Stat. (GOL §5-1105) - does not recognize "moral obligation," but a promise in writing valid if consideration proved to have been performed and would be valid but for time it was performed (assuming valid K) (4) Restatement §86: APPLY ON EXAM UNLESS TOLD NOT TO promise in recognition of benefit previously received is binding to the extent necessary to prevent injustice (assuming not K, but preventing injustice)

b) Moral Obligation (MO)
(1) Formalist - MO not consideration [Mills v. Wyman] (2) Liberal - MO exception; material benefit conferred [Webb v. McGowin]

5. Requirement of Bargain a) Kirksey v. Kirksey (1845) B-D case b) Employment Agreements
(1) Lake Land Employment v. Columber (2004)
i. Time turned bad bi-lateral K (initial employment agreement) into good unilateral K (continued employment, non-compete later) ii. Consideration good on both sides: employment, promise not to compete

c) Employee Handbooks – KNOW BY NAME
(1) Pine River State Bank v. Mettille (1983)

Topic

c) Employee Handbooks – KNOW BY NAME
(1) Pine River State Bank v. Mettille (1983)
i. Handbook given after employment, promises therein can be offer of UNILATERAL K, and emp'ee continued performance of duties is acceptance, and affords necessary consideration; bank gains advantage of more stable, productive workforce

(2) Worley v. Wy. Bottling Co. (2000)
i. Emp'er unilaterally change emp'ee handbook so as to reduce emp'ee rights. NOT VALID. Emp'er must provide consideration to make disclaimer effective

(3) Bankey v. Storer Broadcasting
i. Admin Law model: unilaterally changing policy w/o prior notification, and will be valid ii. YES in Bankey, if applied consistently to promote environment conducive to collective productivity—this gives rise to situation "instinct w/obligation" iii. NO in 9th Cir. – cannot change inconvenient, uneconomic, unpleasant term of K like an admin agency [Demasse v. ITT Corp.]

d) Rewards §51
(1) Must know of reward to "accept" the offer and then "perform" (2) Offer & Acceptance can be understood as mechanism by which consideration is exchanged

6. Promises as Consideration a) §75 – promise bargained for is consideration if, but only if, promised performance would be consideraiton b) Bilateral K: exchange promise for promise c) Unilateral K: one promise now for future promise later d) What constitutes?
(1) Strong v. Sheffield [promissory note] (1895) BILATERAL
i. Illusory promise §77 – does not meet requirements of §75 (too indefinite, would not be considered consideration); promisor reserves choice of alternative performance

e) Ks for Sale of Real Estate
(1) Satisfaction clauses
i. Commercial: reasonable person (objective) test ii. Fancy, taste, judgment: good faith (subjective) test

(2) Mattei v. Hopper
i. Fancy clause adequate consideration

(3) Negotiation -> Signing -> Closing
i. Between period of signing and closing, offer is accepted as long as threshold of satisfaction clause met

f) Ks for Sale of Goods
(1) Most governed by UCC, if int'l may be CISG (Convention International Sale of Goods) (2) Requirements K: seller agrees to supply as much good buyer needs in exchange for buyer not to buy elsewhere [UCC 2-306]
i. I promise to require to you your good faith requirement

(3) Output K: seller agrees to sell all output to buyer, buyer agrees to purchase all output [UCC 2-306]
i. I promise to purchase your good faith output

(4) Eastern Air Lines v. Gulf Oil (1975)
i. Requirements K binding as long as the quantities of output or requirements in good faith & according to commercial standards of fair dealing, and are not unreasonably disproportionate to comparable prior requirements

Topic

(4) Eastern Air Lines v. Gulf Oil (1975)
i. Requirements K binding as long as the quantities of output or requirements in good faith & according to commercial standards of fair dealing, and are not unreasonably disproportionate to comparable prior requirements

(5) Good faith – how to establish
i. ii. iii. iv. Performance History of prior dealings Examples from others in the industry UCC 2-103: honesty in fact and observance of reasonable commercial standards for fair dealing in trade

(6) Implied Promises
i. Common law and the UCC have recognized an implied promise to use best efforts in an agreement for exclusive dealings, which furnishes the necessary consideration. [Wood v. Lucy, Lady Duff-Gordon]

g) Substitutes for Consideration
(1) Reliance as example

C. Reliance as Basis of Enforcement (Alternative of Consideration)
1. Distinct from reliance as a damage interest 2. §90 – Promise which promisor should reasonably expect to induce action/ forbearance and which does induce such is binding if injustice avoided only by enforcement; remedy may be limited as justice requires -- MEMORIZE a) I.e., remedy limited, does not have to be expectation interest b) Criticism: reliance swallows up the bargain principle of §75 (Gilmore – Death of K) c) Common law counterpart – Equitable Estoppel: right arising from acts, admissions or conduct which have induced a change of position in accordance with the real or apparent intention of the party against whom they're alleged 3. Feinberg v. Pfeiffer (1959) – retiring from lucrative position in reliance on promise for pension; at her age could not get another job at that remuneration 4. Important to assessing reliance (very fact-sensitive): a) What communicated b) When communicated c) How communicated 5. Not always enforced w/Reliance interest for recovery

D. Restitution as Alternative for Recovery
1. §370 – Restitution available only to extent of unjust enrichment of the other party a) EXCEPTION: officious conferral of benefit: "intermeddler" or "volunteer" b) Can be described on "quasi contractual" grounds
(1) Court assume some type of mutual consent (at least that can be implied), even if no actual promise

c) CAN'T RECOVER EXPECTATION INTEREST (NO BARGAIN, NO K) 2. Restitution not available as compensation for gratuitous services. a) Presumption may be rebutted if services excessively expensive or burdensome b) Presumption may be overturned if services rendered in business or professional capacity [Cotnam]

Topic

2. Restitution not available as compensation for gratuitous services. a) Presumption may be rebutted if services excessively expensive or burdensome b) Presumption may be overturned if services rendered in business or professional capacity [Cotnam]
(1) Restitution usually reserved for individuals in professional capacity

3. Cotnam v. Wisdom (1907) a) Damages awarded based on reasonable compensation for services, not ability of party to pay 4. Callano v. Oakwood Park Homes Corp. (1966) a) Unjust to make someone pay for something they didn't know about, when a relevant party exists to go after for recovery (i.e., decedent's estate) b) π is not entitled to employ quasi-K to substitute one promisor or debtor for another

III. Creating K Obligations
A. Assent – Objective Standard
1. Look to the outward expression, rather than unexpressed intention; reasonable meaning of words & acts. Lucy v. Zehmer (drunk farm sale) 2. Factors to consider a) Expressed reservation of right b) Partial performance c) Have all terms been agreed to? d) Is the agreement of the type usually committed to writing?

B. Offer
1. Defined a) An act whereby one person confers upon another the power to create contractual relations between them. It must be an act that leads the offeree to reasonably believe that power to create a K is conferred upon him. –  Corbin b) §24 Offer – Manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent is invited and will conclude it c) A manifests assent to B to enter into a K if B manifests assent in return by a requested or expected action. – Borgen 2. When does an offer exist? Look at a) Specificity of language concerning terms b) Intent to be bound c) Sequence of statements/actions d) Overall circumstances of communication 3. Where an offer is clear, definite & explicit, and leaves nothing open for negotiation, it is an offer that can be accepted Lefkowitz (man came to buy stole, was told only women can purchase) ("first come, first served" implies definiteness) a) EXCEPTION to general rule that advertisements are not offers 4. Mistake a) §151 Mistake Defined – Mistake is belief not in accord with fact b) §152 When Mistake of Both Parties Makes a K Voidable

Topic

4. Mistake a) §151 Mistake Defined – Mistake is belief not in accord with fact b) §152 When Mistake of Both Parties Makes a K Voidable
(1) Where a mistake of both parties at the time the K was made has a material effect on the agreed exchange of performances, the K is voidable by the adversely affected party unless he bears the risk of the mistake under §154 (2) In determining whether mistake has material effect, account is taken of any relief by way of reformation, restitution, or otherwise

c) §153 When Mistake of One Party Makes a K Voidable
(1) Where mistake of one party at time of K was made as to basic assumption on which he made the K has a material effect on the agreed exchange of performances that is adverse to him, the K is voidable by him if he does not bear the risk of the mistake under §154, and
i. effect of the mistake is such that enforcement would be unconscionable, or ii. other party had reason to know of the mistake or his fault caused the mistake

d) §154 When a Party Bears the Risk of Mistake
(1) Risk is allocated to him by agreement of the parties, or (2) He is aware, at time of K, that he has only limited knowledge and treats that as sufficient, or (3) Risk is allocated to him by the court on the ground that it is reasonable in the circumstances

e) Mistaken bid (clerical error): Rescission may be had for mistake of fact if it is material to the K and was not a result of neglect of legal duty, if enforcement of the K as made would be unconscionable, and if the other party can be put back to status quo Elsinore Union Elem. v. Kastorff (much lower bid than intended; immediate rescind next day.)

C. Acceptance
1. Defined a) Voluntary act of the offeree whereby he exercises power conferred upon him by the offer, and thereby creates a set of legal relations called a K. – Corbin b) §50 Acceptance of Offer Defined; Acceptance by Performance; Acceptance by Promise
(1) Acceptance is manifestation of assent to terms of offer, made by offeree in a manner invited or required by the offer (2) Acceptance by performance requires at least part of what offer requests be performed or tendered and includes acceptance by a performance which operates as a return promise (3) Acceptance by promise requires the offeree complete every act essential to the making of the promise

c) §51 Part Performance w/o Knowledge – offeree may accept by completing requested performance (if not contrary to offeror's intention) d) §53 Acceptance by Performance; Manifestation of Intention Not to Accept
(1) Offer can be accepted by performance only if the offer invites it (2) Except as in §69, rendering performance does not constitute acceptance if w/in a reasonable time the offeree exercises reasonable diligence to notify of nonacceptance (3) Where offer of promise invites acceptance by performance and does not invite promissory acceptance, the rendering of invited performance does not constitute acceptance if before the offeror performs his promise the offeree manifests

Topic

(2) Except as in §69, rendering performance does not constitute acceptance if w/in a reasonable time the offeree exercises reasonable diligence to notify of nonacceptance (3) Where offer of promise invites acceptance by performance and does not invite promissory acceptance, the rendering of invited performance does not constitute acceptance if before the offeror performs his promise the offeree manifests intention not to accept

e) §54 Acceptance by Performance; Necessity of Notification to Offeror
(1) Where offer invites acceptance by rendering performance, no notification is necessary to make acceptance effective unless the offer requests such a notification (2) If an offeree who accepts by rendering performance has reason to know that offeror has no adequate means of learning of the performance w/reasonable promptness and certainty, the K duty of the offeror is discharged unless
i. Offeree exercises reasonable diligence to notify offeror of acceptance White (below), or ii. Offeror learns of performance within a reasonable time, or iii. Offer indicates that notification is not required

f) §56 Acceptance by Promise; Necessity of Notification to Offeror
(1) Except as stated in §69 or where the offer manifests contrary intention, it is essential to an acceptance by promise either that the offeree exercise reasonable diligence to notify the offeror of acceptance or that the offeror receive the acceptance seasonably

g) §60 Acceptance Which States Place, Time or Manner of Acceptance
(1) If an offer prescribes the place, time or manner of acceptance its terms in this respect must be complied with in order to create a contract. If an offer merely suggests a permitted place, time or manner of acceptance, another method of acceptance is not precluded. Allied Steel (below)

h) §63 Time When Acceptance Takes Effect (MAILBOX RULE)
(1) Unless offer provides otherwise
i. Acceptance made in manner and by medium invited by an offer is operative and completes the manifestation of mutual assent as soon as put out of offeree's possession, without regard to whether it ever reaches offeror; but ii. Acceptance under an option K is not operative until received by the offeror.

i) §69 Acceptance by Silence or Exercise of Dominion
(1) Offeree takes benefit of offered services, w/reasonable opportunity to reject & reason to know compensation was expected (2) Offeror has stated or given offeree reason to understand that assent by silence or inaction is okay (3) Prior dealings make it reasonable that offeree should notify offeror if he does not accept

j) Offeror is MASTER OF THE OFFER, can insist on acceptance by performance or promise 2. Bilateral Acceptance vs. Unilateral Acceptance a) In BILATERAL K, we're looking for a PROMISE from the other party b) In UNILATERAL, we're looking for COMPLETION OF PERFORMANCE 3. Mental determination to accept that is not outwardly manifested is not a binding acceptance White v. Corlies & Tift (not communicating acceptance and starting performance on project was no good) 4. An offer that merely suggests a permitted method of acceptance does not preclude others Allied Steel v. Ford

Topic

3. Mental determination to accept that is not outwardly manifested is not a binding acceptance White v. Corlies & Tift (not communicating acceptance and starting performance on project was no good) 4. An offer that merely suggests a permitted method of acceptance does not preclude others Allied Steel v. Ford 5. Acceptance by part performance is accordance w/terms is sufficient to complete the K Allied Steel v. Ford 6. UCC PROVISIONS a) 2-204 Formation in General
(1) K for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a K (2) Agreement sufficient to constitute a K for sale may be found even though the moment of its making is undetermined (3) Even though one or more terms are left open, a K for sale does not fail for indefiniteness if the parties have intended to make a K and there is a reasonably certain basis for giving an appropriate remedy

b) 2-206 – Offer and Acceptance in Formation of K
(1) Unless otherwise unambiguously indicated by language or circumstance
i. an offer to make a K is construed as inviting acceptance in any manner and by any medium reasonable ii. order "for prompt or current shipment" invites acceptance either by prompt promise to ship or by prompt or current shipment of conforming or nonconforming goods; buyer revocation is too late if seller has already shipped If seller ships nonconforming goods and seasonably notifies buyer that shipment is mere accommodation, the seller has not accepted Corinthian Pharma v. Lederle Lab (buyer tries to stock up on drug before prices go up)

(2) Where beginning of requested performance is reasonable mode of acceptance, an offeror who is not notified w/in a reasonable time may treat the offer as having lapsed before acceptance

c) 2-606 What Constitutes Acceptance of Goods
(1) Acceptance of goods occurs when buyer
i. (a) after a reasonable opportunity to inspect the goods signifies to seller that the goods are conforming or that he will take or retain them in spit of nonconformity; or ii. (b) fails to make an effective rejection, but such acceptance does not occur until the buyer has had reasonable opportunity to inspect; or iii. (c) does any act inconsistent w/the seller's ownership; but if such act is wrongful against the seller it is an acceptance only if ratified by him.

(2) Acceptance of a part of any commercial unit is acceptance of the entire unit

D. Termination of Power of Acceptance
1. Methods a) Lapse of offer b) Revocation by offeror c) Offeror death or incapacity d) Offeree rejection 2. Lapse (reasonable time determined by . . .) a) Window of need b) Market volatility c) Industry practice d) Past dealings e) Face-to-face offer only good for time of convo

Topic

d) Past dealings e) Face-to-face offer only good for time of convo f) Acceptance after lapse = counteroffer 3. Revocation a) Can revoke at anytime (as opposed to civil law); FREEDOM FROM K b) §42 Revocation by Communication from Offeror Received by Offeree
(1) An offeree's power of acceptance is terminated when he receives from the offeror a manifestation of an intention not to enter into the K – REVOCATION ONLY EFFECTIVE UPON OFFEREE'S RECEIPT

c) §43 Indirect Communication or Revocation
(1) Offeree power of acceptance terminated when offeror takes definite action inconsistent w/intention to enter into the K, and offeree acquires reliable info to that effect

4. Option Ks a) At common law (3 ways)
(1) Using consideration (2) Partial performance (3) Reliance (i.e. equitable estoppel) See §90
i. No reliance in Ragosta v. Wilder (I promise to sell to you if I haven't already sold it) ii. Reliance in Feinberg v. Peiffer (quitting job in reliance on pension) [this case came down before the Restatement]

b) §87 Option K
(1) An offer is binding as an option K if it
i. (a) is in writing and singed by offeror, recites a purported consideration for making the offer, and proposes an exchange on fair terms w/in a reasonable time; or ii. is made irrevocable by statute.

(2) An offer which the offeror should reasonably expect to induce action or forbearance of substantial character before acceptance, and which does induce such action or forbearance is binding as on option K to the extent necessary to avoid injustice [reliance as consideration substitute here]

c) §45 Option K Created by Part Performance or Tender
(1) Where offer invites offeree to accept by rendering a performance and does not invite a promissory acceptance, an option K is created when the offeree tenders or begins the invited performance or tenders a beginning of it (2) Offeror's duty of performance under any option K so created is conditional upon completion or tender of the invited performance in accordance w/the terms of the offer

d) 2-205 Firm Offers
(1) An offer by a merchant to buy or sell goods in a signed writing that assures it will be held open is not revocable, for lack of consideration, during the time stated (or, if no time stated, a reasonable time), but that period cannot exceed three months; any term of assurance on a form supplied by offeree must be signed by the offeror

e) NYGOL 5-1109 Firm Offer (beyond sale of goods 2-205)
(1) Except as otherwise provided in 2-205 any offer in writing and signed by offeror which states that offer shall not be revocable during a period, offer is not revocable for absence of consideration during that time; if writing states the offer is irrevocable but doesn't state a time, the time period is a "reasonable time"

e) NYGOL 5-1109 Firm Offer (beyond sale of goods 2-205)
Topic

(1) Except as otherwise provided in 2-205 any offer in writing and signed by offeror which states that offer shall not be revocable during a period, offer is not revocable for absence of consideration during that time; if writing states the offer is irrevocable but doesn't state a time, the time period is a "reasonable time"

5. Death or Incapacity a) §48 Death or Incapacity of Offeror or Offeree
(1) Offeree power of acceptance terminated when Offeree or Offeror dies or is deprived of legal capacity to enter into the K

6. Rejection and the Mirror Image Rule a) Softening the Mirror Image Rule (LIBERALIZATION)
(1) Use of implied terms (term might seem different in acceptance, but is implied in offer) (2) Some language in acceptance is precatory (a wish, not requirement) (3) There is a K, but the issue is with performance (e.g., timing when a book arrives is an issue of performance, not the K itself)

b) §37 Termination of Power of Acceptance Under Option K
(1) Power of acceptance not terminated by rejection or counteroffer, by revocation, or by death or incapacity of the offeror, unless the requirements are met for discharge of a K duty

E. Battle of the Forms and UCC
1. 2-207 – Additional Terms in Acceptance or Confirmation (Sale of Goods)
UCC 2-207 chart

a) (1) A definite and seasonable expression of acceptance or written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms add'l to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the add'l or different terms b) (2) Add'l terms are to be construed as proposals for addition to the K. Between merchants such terms become part of K UNLESS:
(1) (a) Offer expressly limits acceptance to terms of the offer; (2) (b) They materially alter it; or (3) (c) Notification of objection to them has already been given or is given within a reasonable time after notice of them is received

c) (3) Conduct by both parties which recognizes the existence of a K is sufficient to est. a K for sale although the writings of the parties do not otherwise est. a K. [i.e. NO actual K] In such case the terms of the K consist of those terms on which the writings do agree, together w/any supplementary terms incorporated under any other provisions of this Act. 2. Material Changes a) Examples
(1) Beyond what is expected (2) Usually will cause hardship

b) Under 2-207, an arbitration provision that materially alters a K will not be incorporated Dorton v. Collins & Aikman (attempt to hold π to arbitration provision on boilerplate) c) "Supplementary terms" contemplated by 2-207(3) are limited to those supplied by standardized "gap-filler" provisions of Art. 2 (an arbitration clause is not "gap-filler," unless agreed upon) Itoh v. Jordan (terms did not indicate K, but parties' actions did – going thru w/purchase of coils)

Topic

b) Under 2-207, an arbitration provision that materially alters a K will not be incorporated Dorton v. Collins & Aikman (attempt to hold π to arbitration provision on boilerplate) c) "Supplementary terms" contemplated by 2-207(3) are limited to those supplied by standardized "gap-filler" provisions of Art. 2 (an arbitration clause is not "gap-filler," unless agreed upon) Itoh v. Jordan (terms did not indicate K, but parties' actions did – going thru w/purchase of coils) 3. Different Terms a) Knockout – Both parties' discrepant terms out [MAJORITY RULE]; common law response to 2-207 gap
(1) Assumes there is a K, contra 2-207(3) in which there is NO K

b) Dropout – Offeree discrepant terms out [minority rule] c) 2-207(2) [CA rule] 4. FINAL ANALYSIS: USE 2-207 FOR ADD'L TERMS, KNOCKOUT RULE FOR DIFFERENT TERMS 5. Contract First, Terms Later: 2-207 or a New Method of K Formation? a) 2-207 governs Ks for sale of goods where parties have multiple agreements w/add'l or diff. terms. Step-Saver v. Wyse (seller's acceptance hard to be read as conditional to buyer's assent when seller performs and the add'l or diff. term was known upon receipt of goods; seller tried to get buyer to assent to disclaimer before, but buyer refused) b) License enclosed in a software package is binding if the package provides notice that the purchase is subject to license and the buyer can receive a refund if he does not agree. ProCD (not a 2-207 case)(purchaser of database resold the software in violation of included license; saw license every time he started program)
(1) Easterbrook uses 2-204 (formation) and 2-606 (acceptance) [CONTROVERSIAL]

c) Seller may provide that acceptance is by conduct, and buyer accepts by performing the acts that the seller treats as acceptance Hill v. Gateway (not a 2-207 case) (Easterbrook argues this is a question of formation) (Gateway's performance was not complete after shipping, because there was a services element present)

F. Precontractual Liability
1. Revocability and Reliance a) An offer may not be freely revocable if offeree has substantially relied upon it. Drennan v. Star Paving (refusal to do paving work according to bid submitted)
(1) Court uses Reliance for recovery; reads promise into agreement, though it wasn't expressly given; if it can't read a promise in, the bidding process would make no sense

2. Liability When Negotiations Fail (look to §90) a) An offer does not need to address every detail of an agreement to support promissory estoppel claim Hoffman v. Red Owl (rejected by franchise after making preparations at ∆'s request)
(1) §90 does not require a proper offer, merely a promise that one relies on

b) Reliance on a promise that a K is forthcoming may allow recovery under promissory estoppel. Cyberchron v. Calldata (creating hardware as negotiations drag on)

a) An offer does not need to address every detail of an agreement to support promissory estoppel claim Hoffman v. Red Owl (rejected by franchise after making preparations at ∆'s request)
Topic

(1) §90 does not require a proper offer, merely a promise that one relies on

b) Reliance on a promise that a K is forthcoming may allow recovery under promissory estoppel. Cyberchron v. Calldata (creating hardware as negotiations drag on)
(1) DATE OF PROMISE, OR WHEN PRECISE ENOUGH UNDER §90 IS THE KEY DATE FOR ASSESSING DAMAGES

3. Preliminary Binding Agreements/Commitments a) Agreement to negotiate in good faith toward a prospective K may be binding if it satisfies the conditions to a binding K. Channel Home v. Grossman (mall abruptly canceling lease negotiation)
(1) Mini-K to negotiate in good faith (2) US law does not require negotiation in good faith, so contracting to negotiate in good faith must be upheld.

4. §45 Option K Created by Part Performance or Tender a) Where offer invites offeree to accept by rendering a performance and does not invite a promissory acceptance, an option K is created when the offeree tenders or begins the invited performance or tenders a beginning of it b) Offeror's duty of performance under any option K so created is conditional upon completion or tender of the invited performance in accordance w/the terms of the offer

G. Requirement of Definiteness
1. §33 Certainty a) Even though manifestation of intention is intended to be understood as an offer, it cannot be accepted as a K unless the terms are reasonably certain b) Terms of K are reasonably certain if they provide a basis for determining the existence of a breach and for giving appropriate remedy c) The fact that one or more terms are left open or uncertain may show that manifestation of intention is not intended to be understood as offer or acceptance. (cf. 2-204(3): Even though one or more terms are left open, a K for sale does not fail for indefiniteness if the parties have intended to make a K and there is a reasonably certain basis for giving an appropriate remedy) 2. §34 Certainty and Choice of Terms; Effect of Performance or Reliance a) The terms of a K may be reasonably certain even though it empowers one or both parties to make a selection of terms in the course of performance b) Part performance may remove uncertainty and est. that a K enforceable as a bargain has been formed c) Action in reliance may make a K remedy appropriate even though uncertainty is not removed 3. Techniques to make something that looks indefinite precise a) Preliminary negotiations b) Prior dealings c) Course of performance after agreement d) Reference to external sources (oil cases) e) Trade usage/practice
(1) Toys Inc. (option to extend rental K) (pricing structure based on definite indicator [price of rent in mall] so K does not fail because of indefiniteness)

Topic

e) Trade usage/practice
(1) Toys Inc. (option to extend rental K) (pricing structure based on definite indicator [price of rent in mall] so K does not fail because of indefiniteness)

4. 2-305 Open Price Term a) Parties if they so intend can conclude a K for Sale even though price is not settled. Then, the price is a reasonable price at time of delivery if
(1) nothing is said as to price; or (2) the price is left to be agreed by the parties and they fail to agree; or (3) the price is to be fixed in terms of some agreed market or other standard as set or recorded by a third person or agency and it is not so set or recorded

b) A price to be fixed by the seller or buyer means a price for him to fix in good faith. c) When a price left to be fixed other than by agreement fails to be fixed through fault of one party, the other party may treat the K as canceled or fix a reasonable price d) Where parties intend not to be bound unless the price is fixed or agreed upon, there is no K. Buyer must return any goods or pay reasonable value at time of delivery, and seller must return any portion of the price paid on the account
(1) Oglebay v. Armco (pricing indicator fails, court intervenes to arbitrate fair price because conduct of parties show they agreed to be bound by K [long-lasting business relationship], regardless of price indicator) [COURT USES EQUITABLE REMEDIES]

IV. Statute of Frauds (agmts unenforceable bc they're oral)
A. Types
1. 2. 3. 4. 5. 6. 7. 8. 9. Duration of performance exceeds one year Real estate Ks for sale of goods exceeding $500 Leasing/renting property exceeding $1000 Suretyships Personal property as security for an obligation Performance not to be completed before the end of a lifetime Pay a commission for services of real estate broke Extending credit

B. Vocabulary
1. An oral K in one of the above categories is "within" the SoF and will not be enforced in most cases (some exceptions, e.g. 2-201(3)(a), (c)) 2. A K in writing (need not be full K, merely a memorandum) in one of the above "satisfies" the SoF and will be enforced, assuming a valid K a) This does NOT mean you have a K: still need O+A+C 3. §131 Memorandum – Unless add'l req. are prescribed by the particular stat., a K w/in SoF is enforceable if evidenced by any writing, signed by party to be charged, which a) Reasonably identifies subject matter of K b) Sufficient to indicate that a K has been made c) States w/reasonable certainty the essential terms of the unperformed promises in the K

K w/in SoF is enforceable if evidenced by any writing, signed by party to be charged, which
Topic

b) Sufficient to indicate that a K has been made c) States w/reasonable certainty the essential terms of the unperformed promises in the K

C. Exceptions in favor of Enforcement
1. Part Performance 2. Estoppel (reliance) 3. Restitution (sometimes)

D. LIBERALIZING Interpretation
1. Separate writings may be okay 2. Signature (whether intent to authenticate is present) a) Company logos/letterhead (if normally used for this type of thing) b) E-signatures c) Voicemails

E. Statutory Scope
1. Duration of Performance a) An oral K w/o an express indication of performance beyond one year is equivalent to a K of indefinite duration, and is enforceable as outside SoF C.R Klewin v. Flagship (construction project w/duration expected past 1yr) b) Lifetime Ks are necessarily outside SoF because they are of indefinite duration Tuckwiller 2. Real Property a) SoF does not bar enforcement of oral K to convey real estate if party seeking performance can demonstrate partial performance in reliance, including improvements, payment of substantial part of purchase price, etc. Richard v. Richard (sweat equity in home orally agreed to make payments on) 3. Suretyship a) C backs A's ability to pay B, directed to B (creditor) b) Does not constitution a novation (subst. one debtor for another) c) Main Purpose exception: A promise to pay a debt owed by another is not w/in the SoF if the leading object of the promise is to confer some benefit on the promisor Central Ceilings v. Nat'l Amusements (promise to pay debt so that other party will continue work on construction project) 4. NYGOL 5-701(a) NY SoF a) Need Writing b) Needs to be signed by party against whom enforcement sought

F. 2-201 UCC SoF
1. K for sale of goods >$500 not enforceable unless there is a writing sufficient to indicate a K for sale has been made and signed by a party against whom enforcement is sought; writing not insufficient if it omits or incorrectly states a term agreed upon, but K not enforceable beyond the qty. of goods shown in writing. 2. Between merchants if w/in a reasonable time a confirmation writing is received and the party receiving has reason to know of its contents, it satisfies (1), unless written notice of objection is given w/in ten days of receipt a) Under regular SoF, if A sends B signed confirmation, only A could be sued on it because the party against whom the doc is to be enforced must have signed it

Topic

2. Between merchants if w/in a reasonable time a confirmation writing is received and the party receiving has reason to know of its contents, it satisfies (1), unless written notice of objection is given w/in ten days of receipt a) Under regular SoF, if A sends B signed confirmation, only A could be sued on it because the party against whom the doc is to be enforced must have signed it 3. K that does not satisfy (1) but is valid in other respects is enforceable a) Either party can enforce an oral agreement for custom goods, once seller has passed certain point in production or procurement b) Party against whom enforcement is sought says in court that K was made, but that it is not enforceable under the SoF beyond quantity of goods admitted – admission of quantity lifts bar to enforcement c) Goods for which payment was made and accepted, or received and accepted 4. Loose Application of 2-201 [not part of 2-201 subsections] a) Reasonable time that written confirmation must be sent
(1) (2) (3) (4) Market volatility St. Ansgar Mills (price of goods drastically changed) Price/amt. of order Past business between parties Amicability of parties

5. Estoppel and 2-201

G. Reliance and Other Equities
1. Estoppel can be applied to keep a party from relying on SoF to block an oral K, when refusal to enforce will result in fraud (e.g. unconscionable injury after one party induced to seriously change position in reliance on K, or by one party receiving unjust enrichment in reliance on SoF) Monarco v. Lo Greco (oral agmt to work parents' farm in exchange for taking possession when father dies, but instead passes to grandson); Look to §90 Reliance doctrine 2. §139 Enforcement by Virtue of Action in Reliance (complements §90 Reliance) [adaptation of promissory estoppel in relation to SoF] a) Promise which promisor should reasonably expect to induce action or forbearance and which does is enforceable notwithstanding the SoF, if injustice can be avoided only by enforcement. Remedy is limited as justice requires b) Determining whether injustice can be avoided only by enforcement
(1) Availability/adequacy of other remedies, particularly cancellation and restitution; (2) Definite & substantial character of the action or forbearance in relation to remedy sought; (3) Extent to which the action or forbearance corroborates evidence of the making & terms of the promise, or the making & terms are otherwise est. by clear and convincing evidence (4) Reasonableness of action or forbearance (5) Extent to which the action or forbearance was foreseeable by the promisor

V. Policing the Bargaining Process
A. Policing Concerns
1. Status (capacity): of party seeking relief 2. Behavior: of parties during bargaining 3. Substance: of resulting bargain

V. Policing the Bargaining Process
A. Policing Concerns
Topic

2. Behavior: of parties during bargaining 3. Substance: of resulting bargain

B. Capacity
1. §14 Infants – unless stat. provides otherwise, person incurs only voidable K duties until day before 18th birthday a) K for necessaries may not be voidable Kiefer v. Fred Howe 2. §15 Mental Illness or Defect – person incurs voidable K duties by entering into transaction if bc of mental illness a) he is unable to understand reasonably the nature of the transaction; or b) he is unable to act reasonably in relation to the transaction and the other party has reason to know of his condition c) IF K MADE ON FAIR TERMS and other party unaware of mental illness, avoidance above terminates to extent K has been performed i whole or in part, or to avoid injustice. Court may grant equitable relief as justice requires
(1) cf. Ortelere (teacher on mental leave, known) and Cundick (man who bought sheep rancher property had no way of knowing other's crazy)

3. §16 Intoxicated Persons – person incurs voidable K duties by entering into a transaction if other party has reason to know that by means of intoxication a) he is unable to understand the nature or consequences of transaction; or b) he is unable to act reasonably in relation to the transaction

C. Overreaching
1. §73 Preexisting Duty – performance of legal duty owed is not consideration, though similar performance is if it differs in a way that reflects more than pretense of bargain (e.g. Alaska Packers Ass'n) a) R 89 Modification of Executory K – A NEW PROMISE that constitutes mutual rescission of an existing K and formation of a new one is GOOD. Watkins & Son v. Carrig (new agreement to dig through newly discovered rock) b) NYGOL 5-1103 – In NY, can change a K w/o consideration so long as it is in writing and signed by person against whom enforcement sought c) UCC 2-209 Modification, Rescission and Waiver
(1) Agmt modifying a K needs NO CONSIDERATION to be binding (2) Signed agmt that excludes modification or rescission except by signed writing cannot be modified, except as between merchants on a form supplied and separately signed (3) SoF 2-201 must be satisfied if K is within its provisions

2. Duress – looking for push back, bringing claim as soon as possible a) §175 When Duress Makes a K Voidable
(1) If manifestation of assent induced by improper threat that leaves no other alternative (2) If manifestation of assent induced by non-party, K is voidable unless the other party to transaction in good faith and w/o reason to know of the duress either gives value or relies materially on the transaction

b) Econ Duress
(1) Must appear that party could not have obtained needed goods from another source, and that BoK remedy would be inappropriate; no clear objective standard, but use 175 to work to that goal Austin Instrument

Topic

b) Econ Duress
(1) Must appear that party could not have obtained needed goods from another source, and that BoK remedy would be inappropriate; no clear objective standard, but use 175 to work to that goal Austin Instrument

3. Undue Influence a) §177 – When Undue Influence Makes K Voidable
(1) Unfair persuasion of party under domination of person exercising persuasion (2) Assent induced by undue influence, K is voidable by victim (3) Assent induced by third party, K is voidable unless other party to transaction in good faith and w/o reason to know of the duress either gives value or relies materially on the transaction

b) If persuasion is excessively coercive, K is voidable at victim's option –  Odorizzi v. Bloomfield (gay school teacher pressured to resign) c) Patterns for "overpersuasion"
(1) unusual/inappropriate time (2) unusual place (3) insistent demand that business by finished at once

4. Concealment and Misrepresentation a) §161 Non-Disclosure Equivalent to an Assertion in the following cases (EXAM)
(1) Know disclosure is necessary to prevent some previous assertion to be a misrepresentation or from being fraudulent or material (2) Know disclosure would correct mistake of other party as to basic assumption, and if nondisclosure amounts to lack of good faith (3) Know disclosure would correct mistake as to contents or effect of a writing (4) Other person entitled to know the fact because of relation of confidence and trust

b) No liability for failure to disclose if there is not evidence of special duty to disclose Swinton (sold house knowingly infested w/termites) c) Even with no duty to disclose, if party speaks about something, they must speak honestly and divulge all material facts Kannavos (sold building broken into apts, knowingly in violation of zoning) d) False statements of opinion by experts are misrepresentations Vokes (dance instructor bilks widow)

VI. Limits on the Bargain and its Performance
A. Limiting Principles
1. Unfairness 2. Unconscionability 3. Public Policy

B. Unfairness
1. Undue Influence a) §177 – When Undue Influence Makes K Voidable
(1) Unfair persuasion of party under domination of person exercising persuasion (2) Assent induced by undue influence, K is voidable by victim

1. Undue Influence a) §177 – When Undue Influence Makes K Voidable
Topic

(3) Assent induced by third party, K is voidable unless other party to transaction in good faith and w/o reason to know of the duress either gives value or relies materially on the transaction

b) If persuasion is excessively coercive, K is voidable at victim's option –  Odorizzi v. Bloomfield (gay school teacher pressured to resign) c) Harsh, oppressive or unconscionable may still be enforceable, but the court may decide not to enforce equitable remedies against the suffering party McKinnon (can't alter campground for 25 years, for loan of 5k) d) Court looks from the viewpoint of parties at the time of agreement to determine fairness, and sufficiency of consideration; if K for real property deemed fair, court of equity can decree specific performance Tuckwiller (woman took care of husband's aunt in exchange for farm) e) Patterns for "overpersuasion"
(1) unusual/inappropriate time (2) unusual place (3) insistent demand that business by finished at once

2. §79 Adequacy of Consideration; Mutuality of Obligation a) If the req. of consideration is met, no add'l req. of
(1) gain, advantage, or benefit to the promisor, or a loss, disadvantage, detriment to the promisee; or (2) equivalence in the values exchanged; or (3) "mutuality of obligation"

3. It is not the function of the court to interfere w/a K relationship of businessmen dealing at arm's length by trying to determine adequacy of consideration Black Industries 4. §205 Duty of Good Faith and Fair Dealing – every K imposes this duty in its performance and enforcement 5. UCC 1-304 Obligation of Good Faith – same as §205 for Ks under UCC

C. Standard Form and Adhesion Ks
1. Look to the following to see probability of enforcement a) Unconscionability b) Are terms unfair? c) Is this against public policy? 2. Ks by which one relieves self from liability for negligence are generally enforced, unless against public policy, or something in relationship of parties goes against upholding O'Callaghan (landlord exculpated self from negligence in lease) – LEGISLATION BY K 3. Adhesion Ks enforceable except those that contradict reasonable expectations or are unconscionable Scissor-Tail (arbitrators were reps from one party's union) 4. Boilerplate a) §211 Standardized Agreements
(1) If person has reason to believe like writings regularly used to enforce same type of agreement, it's reasonable (2) Treats alike all those similarly situation w/o respect to knowledge or understanding of standardized terms

4. Boilerplate a) §211 Standardized Agreements
Topic

(1) If person has reason to believe like writings regularly used to enforce same type of agreement, it's reasonable (2) Treats alike all those similarly situation w/o respect to knowledge or understanding of standardized terms (3) If one has reason to believe the other would not assent if he knew the writing contained a particular term, it is OUT

5. Duty to read & disclose a) Common law: Absent fraud, one who signs a written agmt is bound whether or not he understands it or has read it (unless unintelligible)
(1) Illiteracy does not render the K unenforceable

b) NYGOL 5-702 Plain Language Requirement
(1) Common language & Everyday meaning (2) Appropriately divided and captioned by its various sections

D. Unconscionability
1. Two Views (both must be present for court to refuse to enforce K or clause, though there is a sliding scale) a) Procedural: fault or unfairness in the bargaining process b) Substantive: fault or unfairness in the outcome 2. Employment K arbitration clauses enforceable unless arbitration procedure is unfair, unilateral, or the clause is unfair substantively or procedurally Armendariz v. Foundation Health (arbitration agreement only required employee to arbitrate her claims) 3. 2-302 authorizes the court (not jury) to refuse enforcement or limit application of a K or clause that is unconscionable or contrary to public policy or the dominant purpose of the K—to prevent oppression and unfair surprise – LIBERALIZATION a) Refuse to enforce whole K b) Refuse to enforce particular clause c) Rewrite clause so it's no longer unconscionable 4. §208 Unconscionable K or Term – same as 2-302

E. Public Policy
1. Illegal Ks a) Factors to consider:
(1) Means of enforcing public policy w/o voiding the K (e.g. statutes) (2) Voiding K would cause unjust enrichment of other party (3) Is voiding an effective means of implementing public policy at issue?

b) §178 – Term Unenforceable on Grounds of Public Policy
(1) If legislation provides it is unenforceable, or interest in its enforcement is clearly outweighed by a public policy against (2) In weighing the interest in the enforcement of the term, look at
i. parties' justified expectations ii. forfeiture that would result if enforcement denied, and iii. any special public interest in enforcement

(3) In weighing public policy against enforcement, look at
i. strength of policy as manifested by legislation or judicial decision, ii. likelihood refusal to enforce will further that policy, iii. seriousness of any misconduct involved and the extent to which it was deliberate, and

(3) In weighing public policy against enforcement, look at
Topic ii. likelihood refusal to enforce will further that policy, iii. seriousness of any misconduct involved and the extent to which it was deliberate, and iv. directness of the connection between that misconduct and the term

c) Courts cannot hear disputes about Ks that violate public policy by being illegal, or tending to promote illegality Bovard v. Am. Horse (guy sued to recover payment for selling a business that made bongs) d) A K which is legal on its face and does not call for unlawful conduct in performance is not voidable because it resulted from an antitrust conspiracy XLO Concrete v. Rivergate (Rivergate would not play XLO for work done because K was part of racket)
(1) Other ways to deal w/antitrust, i.e. having state bring claims directly; court is skeptical nonenforcement would protect public policy

2. Judicially Created a) §179 Bases of Public Policy Against Enforcement
(1) Legislation relevant to such a policy (2) Restraint of Trade (3) Impairment of Family relations

b) §186 Promise in Restraint of Trade
(1) Unenforceable if unreasonably in restraint of trade (2) Restraint of trade if performance would limit competition or restrict the promisor in the exercise of a gainful occupation

c) §187 Non-Ancillary Restraint on Competition – not ancillary to an otherwise valid transaction = unreasonable d) §188 Ancillary Restraint on Competition
(1) If ancillary to an otherwise valid transaction, unreasonable if
i. restraint greater than needed to protect legitimate interest ii. promisee's need is outweighed by hardship to the promisor and the likely injury to the public

(2) Promises imposing restraints ancillary to a valid transaction include
i. promise by seller of business not to compete in such a way as to injure value of business sold ii. promise by an employee or other agent not to compete w/his employer or other principal iii. promise by partner not to compete w/partnership

e) Covenant not to compete is valid only if it is (1) no greater than required for emp'er protection; (2) does not impose undue hardship; (3) not injurious to public Hopper v. All Pet (non-compete modified to only last 1 year—court reformed clause, rather than tossed it) f) BURDEN is on employer to show non-compete is fair and just (reasonable) g) At-Will Employees
(1) If fired in contravention of public policy, can sue in tort for wrongful termination Sheets v. Teddy's Frosted Food (quality control guy fired for doing his job); employer's K rights DO NOT override public policy concerns of retaliatory termination (2) If an attorney is fired for reporting client misconduct which the attorney is ethically obligated to report, attorney has no claim for retaliatory discharge (have to protect the privilege) Balla v. Gambro

Topic

(1) If fired in contravention of public policy, can sue in tort for wrongful termination Sheets v. Teddy's Frosted Food (quality control guy fired for doing his job); employer's K rights DO NOT override public policy concerns of retaliatory termination (2) If an attorney is fired for reporting client misconduct which the attorney is ethically obligated to report, attorney has no claim for retaliatory discharge (have to protect the privilege) Balla v. Gambro

h) Family Relations
(1) Prenups are enforceable as written if made w/o duress and after full and fair financial disclosure Simeone v. Simeone

Sign up to vote on this title
UsefulNot useful