You are on page 1of 35

I.

THE CONCEPT OF A CONTRACT Three interests to be protected under contract law: • Restitution - the plaintiff has, in reliance on the promise of the defendant, conferred some value on the defendant. o The object here may be termed the prevention of gain by the defaulting promisor at the expense of the promisee; more briefly, the prevention of unjust enrichment. • Reliance - the plaintiff has, in reliance on the promise of the defendant changed his position. o The object is to put the plaintiff in as good a position as he was in before the promise was made. • Expectation - reliance by the promisee or enrichment of the promisor o The object is to put the plaintiff in as good a position as he would have occupied had the defendant performed his promise. o This law of contracts of compensation from loss of expectation is only there because there is a contract in place. This makes it different from the law of torts. o This is the standard damages for breach of contract. The three interests distinguished do not present equal claims to judicial intervention. The restitution interest, involving a combination of unjust impoverishment with unjust gain, presents the strongest case for relief. On the other hand, the promisee who has actually relied on the promise, even though he may not thereby have enriched the promisor, certainly presents a more pressing case for relief than the promisee who merely demands satisfaction for his disappointment in not getting what was promised him. A. FREEDOM OF CONTRACT 1. Liberal Autonomy 2. Contract Distinguished from a Tort  The purpose of the contract duty is to secure the receipt of the thing bargained for.  The duty in tort is only occasionally to do or refrain from doing a particular thing, and even then the doing or non-doing of the thing is not the end or the purpose of the duty itself. 3. Evaluating Freedom of Contract B. EXPECTATION 1. The Aristotle Method

1

Hawkins v. McGee (1920), “perfect hand case” Facts: ∆ doctor (1) guarantees 100% perfect hand, and (2) predicts short hospital stay. Disability results from operation. Π - breach of contract for guaranteed perfect hand. ∆ no guarantee, only medical opinion. Holding:1) “Perfect hand” guarantee was to induce operation => reliance on promise. 2) “short hospital stay” promise was only medical opinion. Trial ct. erred in trying to restore status quo (ie torts). Contracts is about preserving the expectation: expectation damages (difference between value of perfect hand and hand delivered 2. Doctrinal Indeterminacy II. ENFORCEABILITY Three types of enforceable promises: 1. supported by consideration 2. supported by reliance 3. necessary to avoid unjust enrichment (restitution) Goals: economic efficiency, promote gains of trade, promote deliberation A. CONSIDERATION Performance or the promise of a bargained-for exchange. Use “if..then” test to make sure consideration exists. First promise induces second promise.   If no consideration exists = no remedy look to §2-306 Pre-existing duty is not consideration 1. Donative Promises Gifts promises are unenforceable, because no consideration (no detriment to promisee). Doctrine of substance, not formality. o Past consideration – cannot make exchange for something already received. o Nominal consideration – not really consideration, just a formality trick Dougherty v. Salt(1919), Π received promissory note from aunt,∆, payable at death or before. Holding: Note is unenforceable due to lack of consideration, this was a gift promise. Gift promises are not supported by consideration. What is it about a gift promise that should make them unenforceable:  You want to give the person the right to change their mind.  Society wants to insure there is gratitude for gifts.  Ability to respond to change circumstances. 2. Bargained-for Exchange TEST:  Identify the Promise 2

 

Identify the promisor/promisee Detriment Analysis: o Is there a detriment to the promissee? o Is the detriment bargained for? Is it the thing that induced the promise? o Is the promise bargained for? Is it the thing that induced the detriment? o (“Promisor wanted the detriment badly enough to exchange the promise for it.”) If answer to any is NO the contract is not supported by consideration!!

Hamer v. Sidway, uncle (decedent) syas he’ll pay nephew $5000 if he quits drinking,etc. Holding: Nephew’s sacrifice/detriment = consideration. Forbearance of legal right is sufficient consideration, even if it is beneficial. Uncle didn’t have detriment – cant say intangible increased happiness of having a clean-cut nephew is enough to support consideration, otherwise all gift promises would be enforceable! Spann thinks this case is wrong and this was donative intent on the uncle’s part. § 17. Requirement of a Bargain. (1) Except as stated in Subsection (2), the formation of a contract requires a bargain in which there is a manifestation of mutual assent to the exchange and a consideration. Requirement of Exchange; Types of Exchange. (1) To constitute consideration, a performance or a return promise must be bargained for. (2) A performance or return promise is bargained for if it is sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise. (3) The performance may consist of (a) an act other than a promise, or (b) a forbearance, or (c) the creation, modification, or destruction of a legal relation. Consideration as Motive or Inducing Cause (1) The fact that what is bargained for does not of itself induce the making of a promise does not prevent it from being consideration for the promise. (2) The fact that a promise does not of itself induce a performance or return promise does not prevent the performance or return promise from being consideration for the promise. 3. Adequacy of Consideration Cannot question the adequacy (value) of the consideration – must respect the subjective value of parties. Batsakis v. Demotsis, during war, ∆ agrees to give $25 for $2000 loan. Holding: Parties are allowed to assign their own values, freedom of contracts. Restatement §79(b) if there 3

§ 71.

§ 81.

contract that would give Π exclusive right to market her endorsements in exchange for fee form what he sells. requirements and output contracts. and modified contracts. 4. Good Faith There are several common types of contracts in which some variant of the implied obligation of good faith is often used to avoid consideration and mutuality problems. This looks like a real bargain. Holding: Implied duty of Π to sell reveals exchange by ∆ to pay. b. (2) Exclusive Ks impose an implied duty of good faith on seller to sell the goods and on buyer to promote the sale. the implication of a good-faith type requirement provides constraint that might otherwise be absent. Undercurrents (1) Fossilization (2) Legitimization Legitimation is the process of making something seem proper or appropriate to the members of a relevant culture. will not be enforced if the quantity is unreasonably disproportionate to estimate or to normal requirements in industry. Note that mutuality of obligation seems to be a superfluous doctrine. Mutuality Need to have agreement of both parties to be bound. It does not accomplish anything that is not already accomplished by the doctrine of consideration. Requirements and Exclusive Dealings (1) requirement Ks: ok to be indefinite if good faith: the quantity is simply the actual good faith output or requirements of the particular party. upholding illusory Ks ≠ freedom of Ks. a.is consideration. These include exclusive dealing contracts. no requirement of equal value in exchange. Cardozo espouses UCC view. no consideration. However. RESTITUTION 4 . contracts containing personal satisfaction or termination clauses. In each type of contract. not donative intent. Lucy. Wood v. Lady Duff-Gordon. The Future of Consideration B. Both consideration and mutuality of obligation exist. 5. Essentially just another way of saying no detriment to the promisee = illusory contract! UCC §2-306 Output. otherwise .

A person is not permitted to profit by his own wrong at the expense of another. Wisdom – Doctor who provides emergency treatment to an accident victim is assumed to be responding to the latte’s request and can therefore recover the fair value of her professional services. § 370. Section 5 of the Restatement of Restitution provides that the proper form of legal action for a restitution claim is an action in general assumpsit. Officious Conferring of a Benefit. Exception: Emergency : 1. A person who officiously confers a benefit upon another is not entitled to restitution therefore. Immediate action is required. 2. Restatement (2d) of Contracts describes some of the ways in which restitutionary concepts are incorporated into the law of contracts. Requirement That Benefit Be Conferred A party is entitled to restitution under the rules stated in this Restatement only to the extent that he has conferred a benefit on the other party by way of part performance or reliance. Tortious Acquisition of a Benefit. 3. 2. The claimant has no reason to believe that the recipent would not wish for the action to be taken. Elements of a Restitution Claim The first three sections of the Restatement of Restitution describe the essence of a cause of action for restitution: §1 Unjust Enrichment A person who has been unjustly enriched at the expense of another is required to make restitution to the other. or other appropriate form of action. Advance assent is impracticable. 5 . Section 4 of the Restatement of Restitution provides for remedies to effectuate restitution including self help and judicial decrees issued by courts of law and equity. Quasi Contracts Quasi contracts are fictitious contracts whose existence the law implies in order to prevent unjust enrichment Cotnam v.1. § 2. or an action in contract (as opposed to tort). § 3.

To avoid unjust enrichment. (2) The injured party has no right to restitution if he has performed all of his duties under the contract and no performance by the other party remains due other than payment of a definite sum of money for that performance. 3. material benefit Mills v. Π jumps with pine block to save ∆ life and ∆ promises life payments. Webb v. Π sues for promise to pay for caring for ∆ dying son.§ 371. McGown. Restitution When Other Party Is in Breach (1) Subject to the rule stated in Subsection (2). Measure of Restitution Interest If a sum of money is awarded to protect a party's restitution interest. on a breach by nonperformance that gives rise to a claim for damages for total breach or on a repudiation. Material benefit exception. no reliance. No inducement. if a party justifiably refuses to perform on the ground that his remaining duties of performance have been discharged by the other party's breach. restitution – quantum meruit. Wyman. it may as justice requires be measured by either (a) the reasonable value to the other party of what he received in terms of what it would have cost him to obtain it from a person in the claimant's position. (2) To the extent that. 6 . § 373. Restitution in Favor of Party in Breach (1) Subject to the rule stated in Subsection (2). the injured party is entitled to restitution for any benefit that he has conferred on the other party by way of part performance or reliance. moral obligation. Promissory Restitution  past consideration. that party is not entitled to restitution if the value of the performance as liquidated damages is reasonable in light of the anticipated or actual loss caused by the breach and the difficulties of proof of loss. or (b) the extent to which the other party's property has been increased in value or his other interests advanced. promise not relied on. Extra: If ∆ had chance to bargain for life he would have made this deal. a party's performance is to be retained in the case of breach. under the manifested assent of the parties. no bargain. the party in breach is entitled to restitution for any benefit that he has conferred by way of part performance or reliance in excess of the loss that he has caused by his own breach. Holding: Past consideration – promise given after detriment. Holding: Moral obligation is enforceable when promisor receives a material benefit. § 374.

Intended to modify rule that “firm offers” must have consideration in order to be binding.As a general rule. Modified Objective Theory 7 . Goal: protect reliance. 4.§ 86 Promise for Benefit Received (1) A promise made in recognition of a benefit previously received by the promisor from the promisee is binding to the extent necessary to prevent injustice. Subjective Theory  What parties were thinking 2. RELIANCE Promises without consideration can be enforced if they were relied upon. Brown & Co. TEST: 1. INTENT OF THE PARTIES 1. A. UCC §2-205 Firm Offers (UCC’s version of Promissory Estoppel) (1) An offer (2) by a merchant (3) to buy or sell goods (4) in a signed writing (5) which gives an assurance that is irrevocable cannot be revoked (for maximum 3 months). . 1. This means that each party must intend to enter a contract and must agree with the other to do so on mutually acceptable terms. Non-promissory Restitution Martin v. Was there reliance? 2. Consideration is not always necessary if the promise was reasonably relied upon. Was the reliance foreseeable? 3. It’s an on-K substitution for consideration. but can’t override other doctrines such as parol evidence rule. Bar on denying promise fulfillment. or (b) to the extent that its value is disproportionate to the benefit. (2) A promise is not binding under Subsection (1) (a) if the promisee conferred the benefit as a gift or for other reasons the promisor has not been unjustly enriched. Protects general contractors. volunteers have no right to restitution C. Is the enforcement of promise necessary to avoid injustice? III. MUTUAL ASSENT Mutual assent is the basis of contract. Promissory Estoppel Restatement §90: promises relied upon are enforceable. Little.

Context St. Objective Theory If it looks like a K. (d) the death or legal incapacity of either party. Zehmer. who can revoke the offer prior to acceptance. (Duty to Read Rule) B. it is a K. 8 .Averments: that the said goods did arrive by the said ship from Bombay in England. so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it.If no subjective mutual assent/meeting of the minds. and the plaintiff was then and there ready and willing and offered to deliver the said goods to the defendants. Specific Performance = sale of land. R§24 Offer Defined An offer is the manifestation of willingness to enter into a bargain.  Takes into account some subjective issues but encompasses materiality (objective theory – what actually happened) Raffles v. v. Π and ∆ are drinking ∆ jokingly sells farm to Π. unless one person is at fault (ie knows of a usage of trade and doesn’t clarify the ambiguity to promote meeting of the minds). by a rejection of the offer or a counter-offer proposing different terms. Uncle may not have subjectively understood the contract but objectively his is bound. (c) the lapse of time. a.. then no K. etc. and may be terminated by (a) the offeror. In determining whether to admit the contextual factors you decide whether it would frustrate someone else’s reliance. (b) the offeree. Wichelhaus . Avie – Promissory note with ∆ as maker and illiterate uncle as endorser. In this situation there is no frustration because the bank officer was there and knew uncle’s situation. 3. Breach: that the defendants refused to accept the said goods or pay the plaintiff for them. Landry Loan Co. OFFER Manifestation of intent to be bound without further action by the offeror  Creates power of acceptance in offereee  Offeror is the master of the offer The offeree's power to accept the offer and thus create an enforceable contract does not continue to exist indefinitely. or (e) the non-occurrence of any condition of acceptance that the offeror imposed in making the offer. signed by wife). Holding: ∆ actions manifested intent to sell (2 drafts. then there IS A K and at will be interpreted in favor of the innocent party. Goal – protect reliance (also 3rd party reliance)  What has actually been manifested  Look to reasonability: o of the situation o where it occurs Lucy v.

Both π sue to see who owns the land. Scolnick . intended to be bound. Holding: ∆ made a clear and definite offer.Π had power to accept. Letter was a solicitation for offers buyer to make an offer.. Normile v. but in no event may such period of irrevocability exceed three months. a counter offer. otherwise. (2) Where the beginning of a requested performance is a reasonable mode of acceptance an offeror who is not notified of acceptance within a reasonable time may treat the offer as having lapsed before acceptance. during the time stated or if no time is stated for a reasonable time. negates the offer 9 .The Δ is selling land.§ 2-205 Firm Offers An offer by a merchant to buy or sell goods in a signed writing which by its terms gives assurance that it will be held open is not revocable. Great Minneapolis Surplus Store. but such a shipment of nonconforming goods does not constitute an acceptance if the seller seasonably notifies the buyer that the shipment is offered only as an accommodation to the buyer. C. ACCEPTANCE  Manifestation of intent by offeree to bring contarct into existence  Offer must be accepted in timely manner to be valid  Acceptance must be the mirror image of offer. Miller . Inc. Miller makes an offer the Δ signs the offer but makes changes to the offer by the π (counter offer). Sold to 3rd party. Holding: ∆ seller did not intent to be bound. At 12am Segal (other π) offers to buy the land and the Δ agrees to it. Lefkowitz v. Learning that the intent has changed on the part of the offeror. (b) an order or other offer to buy goods for prompt or current shipment shall be construed as inviting acceptance either by a prompt promise to ship or by the prompt or current shipment of conforming or non-conforming goods. Holding: The counter offer stopped existing when the Δ sells the land to Segal and the agent tells the π. At 2pm the real estate agent informs the π that the land was sold. for lack of consideration.Π trying to sell land via form letter. but any such term of assurance on a form supplied by the offeree must be separately signed by the offeror. At 5pm the other π they sign the counter offer. The courts rule for the Segal. ∆ refuses to sell $1 fur from newspaper ad claiming reserved for women. Lonergan v. § 2-206 Offer and Acceptance in Formation of Contract (1) Unless otherwise unambiguously indicated by the language or circumstances (a) an offer to make a contract shall be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances.

or at least agree upon. Mailbox Rule The Receipt Rule: Legal documents have no effect until they are received Deposited Acceptance Rule (The Mailbox Rule). the mailbox rule does not apply unless the offeror says it does. begin performance. a court using a default rule is addressing a situation that the parties did not consider. • If the offer is an option. Π then calls the Δ attorney and say that they revoke their offer before it got to the attorney. thus enabling the offeree to begin performance earlier. which can prejudice the offeror in practical terms. Morrison v. which is ordinarily desirable from the offeror’s point of view. But the mailbox rule is counter-intuitive. who would be unable then to rely on the acceptance and. ____________________ Anti-rule:In using default rules to resolve disputes that the parties have not addressed specifically. ____________________ Anti-rule:Most offerors are unaware of the counterintuitive mailbox rule. so that the rule’s actual effect is to give an unfair advantage to the offeree. there is no need to protect the offeror who chooses not to impose such a condition.a contract is effective once the acceptance is placed in the mailbox • Must have postage • Must be properly addressed • Contract is effective on deposit. Π wants to quiet the title and does not want the Δ to claim the land. In situations such as that addressed by the 10 . there is no reason today to protect the offeree who chooses not to use one of them.π owns land. the offeror is contractually bound without knowing of that fact. The Δ still records the offer. Δ mails the offer to the π. ARGUMENTS ABOUT THE MAILBOX RULE Anti-rule:Under the mailbox rule.1. The Δ counter claim seeking the title to the land. courts should select those rules that the parties would have employed if they had thought of the issue. not receipt • Must be an authorized mode of communication (by the offeror) • The Offeror can override the Mailbox Rule. Pro-rule:A rule making the acceptance effective only upon receipt would prejudice the offeree. Makes a contract with the Δ to sell the land. Pro-rule:By definition. Pro-rule:The rule is efficient in that it makes the bargain effective at an earlier point. for example. if they say they want the contract to be effective on receipt. during the period between the offeree’s dispatch and the offeror’s receipt of the acceptance. Pro-rule:Given the offeror’s unquestioned power to insist on a receipt rule as a condition to the offer. Thoelke . ____________________ Anti-rule:Given the availability of substantially instantaneous means of communication.

3. The π had agreed to sell the land. it is reasonable that the offeree should notify the offeror if he does not intend to accept. it can not allow the Δ to sit back and do nothing. (b) Where the offeror has stated or given the offeree reason to understand that assent may be manifested by silence or inaction. Rules for the π. no breach. Pattberg . Massasoit Whip (1893) . (I’ll do this when you do this) • used in contexts where the offeror is interested only in performance • used when potential offerees might be willing to attempt performance but are not willing to promise performance. PRAGMATIC ALTERNATIVES 11 . Silence (1) Where an offeree fails to reply to an offer. Hobbes v. 2. The offer of the Δ was withdrawn before it ever became a binding contract. But if the act is wrongful as against the offeror it is an acceptance only if ratified by him. (c) Where because of previous dealings or otherwise. and the offeree in remaining silent and inactive intends to accept the offer. The Δ keeps them. and now he was out $780 per the agreement with the Δ.mailbox rule where the interests of the parties are antithetical. The lower court rules for the π. D. it is meaningless to search for what the parties would have done.π owns land. Unilateral Contracts Formed when a promise for future performance (the offer) is exchanged for actual performance itself (the acceptance) rather than for a promise of future performance. no contract was ever made. without the mortgage. D does not notify the π that he does not want the skins. Lower courts says that whether there was a contract or not. (2) An offeree who does any act inconsistent with the offeror's ownership of offered property is bound in accordance with the offered terms unless they are manifestly unreasonable. his silence and inaction operate as an acceptance in the following cases only: (a) Where an offeree takes the benefit of offered services with reasonable opportunity to reject them and reason to know that they were offered with the expectation of compensation. Δ owns a bond given to him by π which used the land as collateral. Keeping the skins and being silent was an acceptance. • common in offering rewards or commissions • mailbox rule does not apply Petterson v.π sends Δ eel skins.

QUALIFIED ACCEPTANCE 1. but any such term of assurance on a form supplied by the offeree must be separately signed by the offeror.. Exception: 12 . 3) there is assurance that the offer will be held open. for lack of consideration. If the acceptance deviates from the offer in any way it does not qualify as acceptance but is a rejection and possibly a counterofferor. Options a. but in no event may such period of irrevocability exceed three months.1. Gimbel Bros. b. To be valid. 2. the option must have its own separate consideration. Options Created by Reliance An option is created by law to protect the reliance of the offeree in beginning the combined act of acceptance and performance. § 2-205 Firm Offers An offer by a merchant to buy or sell goods in a signed writing which by its terms gives assurance that it will be held open is not revocable. and 4) if assurance is in form supplied by the offeree the offeror must sign the form separately. 2) offer is in writing. not merely reliance through submission of a bid Drennan v. E. Firm Offers In sale of goods §2-205 dispenses with the need for consideration to validate and option. if: 1) the offer made by a merchant. – Subcontractor’s offer looked for an acceptance from the offeree in form of return promise. during the time stated or if no time is stated for a reasonable time. – Star’s offer to do paving included a “subsidiary promise” not to revoke until plaintiff should have at least an opportunity to accept that after the general contract had been awarded to him. v. Traditional Options An option is a promise to keep an offer open for a stated period of time. -Mailbox rule does not apply James Baird Co. Inc. Star Paving Co. with no alteration or qualification. Limited to a maximum of 3 months. Mirror Image Rule Rule that requires an acceptance to match the offer exactly.

or (c) notification of objection to them has already been given or is given within a reasonable time after notice of them is received. Between merchants [§2-104] such terms become part of the contract unless: (a) the offer expressly limits acceptance to the terms of the offer. ** Gap fillers . together with any supplementary terms** incorporated under any other provisions of this Act. §2-308 payment.§2-315 min. and §2-314. Battle of the Forms §2-207 Additional Terms in Acceptance or Confirmation (1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon. Between merchants such terms become part of the contract unless: (a) the offer expressly limits acceptance to the terms of the offer. Additional Terms in Acceptance or Confirmation. or (c) notification of objection to them has already been given or is given within a reasonable time after notice of them is received.§2-207 Rejects this!!!! (and “last shot” rule) says that can be considered proposal and that conduct of acceptance is considered. unless acceptance is expressly made conditional on assent to the additional or different terms. [cannot have assent until the other person knows and agrees – sale of widget over internet] (2) The additional terms are to be construed as proposals for addition to the contract.§2-308 delivery. (1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon. § 2-207. (2) The additional terms are to be construed as proposals for addition to the contract. unless acceptance is expressly made conditional on assent to the additional or different terms. warranties 2. (3) Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. 13 . In such case the terms of the particular contract consist of those terms on which the writings of the parties agree. (b) they materially alter it. (b) they materially alter it.

they Δ wants to charge $900 and the π wants the market rate of $545. together with any supplementary terms incorporated under any other provisions of this Act. Schumacher (1981) .π rents space from the Δ. π sues for breach. §2-204 Formation in General (1) A contract for sale of goods may be made in any manner sufficient to show agreement. §2-204 Formation in General (1) A contract for sale of goods may be made in any manner sufficient to show agreement. INCOMPLETE AGREEMENTS 1. F. including conduct by both parties which recognizes the existence of such a contract. Agreements to Agree Parties have committed themselves to continue to make honest. they agree to rent again under agreed terms. When the time comes to renew. (3) Even though one or more terms are left open a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy. (2) An agreement sufficient to constitute a contract for sale may be found even though the moment of its making is undetermined. **Most issues of standardized contracts of adhesion are resolved by doctrine of unconscionably. In such case the terms of the particular contract consist of those terms on which the writings of the parties agree. (3) Even though one or more terms are left open a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy. “good faith” effort towards an agreement. Inc v. including conduct by both parties which recognizes the existence of such a contract. A standard contract becomes adhesive and unconscionable only if the doctrine’s two-part test is satisfied. They have a rental agreement that the rent increases over time. Joseph Martin. 14 . Jr Delicatessen.(3) Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. At the end of the time period. (2) An agreement sufficient to constitute a contract for sale may be found even though the moment of its making is undetermined.

Π sues for breach. Δ says in order to do so. DEFERENCE TO WRITINGS A. D then says that they can sell at a higher price. . Wilmington Trust CO. (2) An agreement sufficient to constitute a contract for sale may be found even though the moment of its making is undetermined. The court decided to apply the UCC 2-204 §2-204. (3) Even though one or more terms are left open a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy. He sells his bakery. Tells the π that he is going to sell the franchise for x$ and then after all this stuff happens he says that the price went up. buys a grocery store. Negotiations Hoffman v.π wants to buy shares of stock from the Δ. Δ Send letter back and says that the acceptance of the offer is subject to the approval of the board of directors. (most likely because there was not an actual contract) IV. Courts will not enforce vague promises. sells store. the PL would have to do some things.π contacts Δ about opening a grocery store.Agreements to agree are unenforceable when future terms are not discernable. the UCC will input GAP FILLER provisions to make your contract for 3. including conduct by both parties which recognizes the existence of such a contract. Δ says that there was not a contract. Send letter saying that they want to buy. Open Terms and Letters of Intent Pennsylvania Co. • Will enforce incomplete contracts with open terms • If you do not write your contract clearly. prevent enforcement through perjury or fraud or Ks never made (although sometimes makes it difficult for those w/ valid Ks to win) What does the writing have to contain:  parties 15 . buys property. v. it was an agreement to agree at a later date. Red Owl Stores . Formation in General (1) A contract for sale of goods may be made in any manner sufficient to show agreement. in which a material term is left for future negotiations. The PL sues under Promissory Estoppel. is unenforceable so as to not interrupt freedom of contract 2. STATUTE OF FRAUDS Goal: ensure deliberation.

there is no signature on the paper. But to some just having it on the letterhead is enough to equate to having a signature under the UCC. gives quantity (2) merchants – no signature necessary.  material terms signatures 1. Protects reliance. Enforceable unless party objects to the writing within 10 days (3) or. . Scope Five types of Ks (and any modification thereof) need a writing in order to be enforceable (Restatement §110)  Marriage  Suretyship (guaranteeing someone’s debt)  Ks not to be performed within a year of their making  Promises made by executors/administrators of estates  Sales and interest in land Exception: if there is partial performance on Π’s cannot invoke SoF.) Goal: prevent fraudulent assertion of oral promises not contained in the written K. fallible memories. UCC §2-201 Statute of Frauds (1) goods over $500 need a writing that has a signature (any marking) by the person who it is being enforced against.Is the note taken by Elizabeth Arden’s secretary an adequate writing? No. if doesn’t satisfy (1) then also enforceable are: a) goods specially manufactured for ∆ b) admission by ∆ that K existed c) partial performance (under UCC = full performance of severable part) ** Once found to be unenforceable the remedy is restitution to prevent unjust enrichment. Crabtree v. avoids jury equity. Promotes certainty. had she done so it could have been considered adequate. B. Also promissory estoppel may apply if the party relied on an oral agreement to their detriment. Elizabeth Arden Sales Corp. avoids fraud. (Does not affect evidence of agreement claimed to be made after the execution of the writing. However. PAROL EVIDENCE RULE Bars extrinsic evidence (either oral or written) to a written K when K is a total integration. refers to a K. Exceptions:  “naturally” would have been  partial agreements and/or collateral agreement  ambiguity 16 .

Holding: partial integration. Says you can only exclude evidence if it is certain that the parties would have put it in. does a contract exist. Sine. the meaning must be determined from the 4 corners w/o considering 17 . Cannot contradict but you can supplement the terms in a partial integration. agreement must not contradict the express or implied provisions in the written contract 3. Never removes the ice house.Δ owns a farm. Does not put this into the contract. Oral evidence will not be permitted unless the agreement is a collateral agreement (Collateral Agreement Exception) Test: In order to allow parol evidence. it is a complete K. trying to protect option to purchase w/ in the family. cannot be contradicted but can be supplemented. If it looks like a complete K. Ambiguity and Interpretation  Plain Meaning Rule .] 1. TEST: 4 corners rule: look only within the 4 corners of K. Integrated Writings Total integration – indicates that contarct is final and complete expression of agreement. Agreement must be collateral in form (separate agreement. Mitchill v. Lath .] [Statute of Frauds is about ENFORCEABILITY. TEST: “Naturally” test – if collateral agreement would have naturally been made by parties. the agreement must satisfy three requirements 1. Sells it to the π Says that he will remove the ice house on the land across the street so that π will buy the farm. Partially integrated writings can be supplemented. **UCC’s “certainty test” – even more permissive. Can use parol evidence to clarify terms in a contract but not to vary or modify it (Ambiguity exception) 2. interpretation (“reasonably susceptible” –Trident) -> possible changing circumstances [Parol Evidence is about TERMS.If a writing appears clear and unambiguous on its face. a contract does exist. but not contradicted. outside of the actual contract) 2. Π sues for performance. the promise can not be one expected to be embodied in the contract (Can’t relate to the contract) Masterson v. Partial Integration – writing parties intended to be final but not complete expression of agreement. Often includes a merger or integration clause. Merger Clause indicates total integration.

3. Heavy weight given to this: UCC §1-205 (4).π and Δ enter into a contract for a loan. Terms may be explained or supplemented by: 1. Says you can only exclude evidence if it is certain that the partied would have put it in. Π can not prepay the loan.extrinsic evidence. Usage of Trade §1-205 (general practice in industry) 2. BARGAINING AND INFORMATION A. Arthur Murray. Course of Dealing §1-205 (tradition b/t parties before this K) 3. the law is if he undertakes to do so he must disclose the whole truth. 4.General. MISCONDUCT 1. No “plain language”. to the other party’s injury or detriment. which does in fact deceive the other party. Co. no meaning absent context. Fraud Misrepresentation of fact = equitable estoppel. 18 .  UCC §2-202 Parol or Extrinsic Evidence Expressly throws out the plain meaning rule – bends over backwards to let evidence in! “Certainty test” – even more permissive than common’s law’s “Naturally” test. Course of Performance §2-208 (practice b/t parties since this K) 4. Interest rates go down and the π wants to prepay. Δ says no. A false representation of fact. UCC §2208 and R§203(b)  Latent ambiguity – ambiguous w/ in context. Careful – extrinsic evidence itself may reveal latent ambiguities that were not obvious before. 2. Facial ambiguity – unambiguous on its face. Conn. G. (1968) – The plaintiff was made to believe under false pretense that she had hope as a dancer and invested over 31. Inc. π says that he can prepay per a parol agreement. Even in contractual situations where a party to a transaction owes no duty to disclose facts within his knowledge or to answer inquiries respecting such facts. V. Gap Fillers throughout article 2 of UCC Pacific Gas and Elect. made with knowledge of its falsity and intent to induce the other party to enter the contract (scienter). obviate 4 corners rule. Lets in parol evidence. Trident Center v. Life Insurance .000 in lessons. W. Thomas Drayage & Rigging Co: Was Π indemnified against all damage. Vokes v. Could have been no mutual assent The elements are: 1. or just 3rd party damage? Holding: Rejects plain meaning rule.

(5) the use of multiple persuaders by the dominant side against a single servient party.” 3. Loral Corporation. as a matter of law. (7) statements that there is no time to consult financial advisers or attorneys. Loral Corp. Odorizzi v. Mutual Mistake – arises before.. (6) absence of third-party advisers to the servient party. because the action or threat in duress or menace must be unlawful. MISTAKE 1.UCC§2-721 Remedies for Frauds => all remedies 2.The defendant. Duress There has to be no alternative and a threat Austin Instrument. that it was forced to agree to an increase in price on the items in question under circumstances amounting to economic duress. or during contract A shared erroneous assumption about a material fact. . 4. Inc v. Inc. (4) extreme emphasis on untoward consequences of delay. Test: o Shared Mistake o Must be material 19 . We agree with respondent's contention that neither duress nor menace was involved in this case. (2) consummation of the transaction in an unusual place. Only mutual mistakes concerning substance of K are rescindable (ie: vendor makes mistake in delivering an article other than the one sold). Bloomfield School Dist. Nondisclosure Disclosure is only required if it would correct a known mistaken assumption of the other party and then only if disclosure is compelled by “reasonable standards of fair dealing.Appeal from a judgment dismissing plaintiff's amended complaint on demurrer. on the ground that the evidence establishes. and a threat to take legal action is not unlawful unless the party making the threat knows the falsity of his claim. seeks to recover payment for goods delivered under a contract which it had with the plaintiff Austin Instrument. persuasion which overcomes the will without convincing the judgment. (3) insistent demand that the business be finished at once. . B. not those having to do with value/quality (parties assumed that risk). Undue Influence Describes persuasion which tends to be coercive in nature. The pattern usually involves several of the following elements: (1) discussion of the transaction at an unusual or inappropriate time.

o Risk must not have been assumed by the party seeking rescission Restatement § 152 When Mistake of Both Parties Makes a Contract Voidable (1) Where a mistake of both parties at the time a contract was made as to a basic assumption on which the contract was made has a material effect on the agreed exchange of performances. the contract is voidable by him if he does not bear the risk of the mistake under the rule stated in § 154. Neither party knew of the problem with the sanitation at the time of the sale. the contract is voidable by the adversely affected party unless he bears the risk of the mistake under the rule stated in § 154. restitution. the land is condemned due to a sanitation problem. Messerly . of the other parties mistake and can tell that the other party does not know but does nothing to correct the mistake (fraud by non-disclosure)  will not enforce the contact o Mistake by Unilateral Mistake  No scienter  The other party does not know that the other party was mistaken Test: The person looking to uphold the contract has not reason to know of and doesn’t cause the mistake of fact. or 20 . (2) In determining whether the mistake has a material effect on the agreed exchange of performances. Π wants the contract for the sale of the land to be rescinded. and (a) the effect of the mistake is such that enforcement of the contract would be unconscionable. The parties allotted the risk to the PL by inserting the as is clause in the contract • • • 2.π buys land from the Δ. Soon after. account is taken of any relief by way of reformation. Unilateral Mistake An unshared erroneous assumption of fact Basis of rescission because there is no mutual assent 2 types o Palpable Unilateral Mistake  one parties knows. Lenawee County Board of Health v. the contract can be rescinded if: o The Δ made a mistake of fact regarding the basis for the contract o Material effect o Δ does not bear the risk of the mistake o The effect is such that enforcement would be unconscionable  Large amount of loss • Restatement § 153 When Mistake of One Party Makes a Contract Voidable Where a mistake of one party at the time a contract was made as to a basic assumption on which he made the contract has a material effect on the agreed exchange of performances that is adverse to him. or otherwise.

CHANGED CIRCUMSTANCES 1. Calwell (Doctrine of Impossibility) . The Δ wants the contract to be rescinded. but no longer want to • The purpose of the performance has been frustrated • The value of performance has been frustrated o Must be a big reduction in the value • Basis of rescission because of mutual assent • Test: o Is the event foreseeable? 21 . neither party is at fault for problem Use only when you think the parties didn’t allocate the risk – if they didn’t don’t rescind UCC §2-613 Casualty to Identified Goods .Δ advertises a Jag for $26.K may be avoided if.π contracts to use Δ’s music hall and garden. 2. Impossibility Can rescind when: 1. both parties must use and accept it. The intentions of the parties were contingent on the performance of the contract being possible. The π tries to buy the car at that price. C.(b) the other party had reason to know of the mistake or his fault caused the mistake.000 in the paper. goods suffer casualty. The π wants the contract enforced. 5 Conditions for non-palpable unilateral mistakes: 1. The Δ says that the price was a misprint. if enforcement would be unconscionable 4. must give prompt notice of desire to rescind Donovan v. Lower court rules for the π. through no fault of either party. problem arose subsequent to making K 3. UCC §2-614 Substituted Performance – If there is a commercially reasonable substitute (ie: different carrier. if mistake material to K 2. if other party can be placed in status quo 5. Frustration • Can perform. loading dock or delivery place). objective impossibility of performing (no one can perform) 2. Π wants out of the contract. RRL Corp . Taylor v. Buyer may cancel K or accept the damaged goods at lesser price. if mistake not result of neglect of legal duty 3. The building burns down.

frustrating event is not foreseeable. purpose of performance has been undermined b/c value of counter-performed has been destroyed/rendered valueless 2. Is the contract rescinded? yes 3.o If the event is foreseeable then you should have guarded against it in the contract (assumed the risk) o Is the event the basis of the contract o The reduction in value of the other party’s performance must be great Can rescind: 1. relieving him of the duty of performance and liability of damages. local crop failure UCC §2-616 Procedure on Notice Claiming Excuse – Only applies to sellers (buyers cannot invoke doctrine). The coronation does not happen and the Δ does not want to pay for the room. parties probably allocated the risk. When buyer is notified by seller of 2-615 condition. he has choice of canceling K or accepting goods in modified condition. Krell v.Δ rents room from π to see the coronation of the king. and the goods suffer casualty without fault of either party before the risk of loss passes to the buyer … then (a) if the loss is total the contract is avoided … . fails. Section 2-613 deals with the situation in which identified goods are destroyed before they are delivered to the buyer. Commercial Impracticability Easiest method of rescission – only few conditions. embargo. Ie: war. The π wants the room paid for. 22 . Henry . it is a complete defense to that party’s failure to perform. MODIFICATION 1. Impracticable = at excessive or unreasonable cost. UCC §2-615 Excuse by Failure of Presupposed Conditions – applies when a contingency.” D. The rule of 2-613 is that “Where the contract requires for its performance goods identified when the contract is made. If foreseeable. Relief: When impracticability fully defeats the feasibility of performance by a party. non-occurrence of which was a basic assumption of the K. Pre-existing Duty Rule A modification that lessens one party’s obligation must be supported by some new consideration or the new contract is void. Dilutes impossibility and frustration requirement.

Modifications for goods Ks do not need consideration. The trial court feels that it is enforceable the Supreme Court reverses. PUBLIC POLICY 1. Domenico . Rescission. Voluntary. the π sues to get the money back. UCC §2-209 Modification. Modifications need consideration. When they get to land. Underlying circumstances (difficulties) must be unanticipated 3. The court does this because the exception to the preexisting duty rule only comes into play when there has been an unexpected difficulty. Good Faith §1-201 (19)"General DefinitionsGood faith" means honesty in fact in the conduct or transaction concerned 23 .π hires Δ to work on a fishing boat under a contract. Mutual E. The π finally agrees. Contract revisions are enforceable if they are: 1. and Waiver No pre-existing duty rule. wants to enforce the first contract without the modifications. When the contract is not voluntarily rescinded or modified. Murray – city made a modification to a contract and the question is whether said modification is enforceable. Modification made perform contract fully performed 2. so legit increase. Modification must be fair and equitable Angel v.Common Law No consideration when one party promises something he is already obligated to do. and 2. While out on the boat the Δ says that they want their contract to reflect an increase in pay or they will not work. Good faith rule is guard against extortion (like common law’s voluntary mutual rescission) Alaska Packers Association v. no extortion (concern of pre-existing duty rule).prevent extortion. because no detriment to promisee! Goal. Exceptions Unexpected difficulty: Test 1. the contract can not be enforced despite the party’s reliance on it 2. Also. they just need to be made in good faith.

Remedy:  Avoidance and restitution  Eliminate the unconscionable aspects VI. the non-occurrence of which precludes duty to perform. TEST: 1. 3. A standard contract becomes adhesive and unconscionable only if the doctrine’s two-part test is satisfied. Unconscionablity – “shocks the conscience” Contracts entered into under these circumstances are known as contracts of adhesion as the weaker party has just adhered to the choice of terms of the stronger one. 2. Substantive prong – are the terms unreasonably favorable to one party(excess profits)? UCC §2-302 Unconscionable Contract or Clause (1) If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract. or it may enforce the remainder of the contract without the unconscionable clause. Form Contracts **Most issues of standardized contracts of adhesion are resolved by doctrine of unconscionably. (2) When it is claimed or appears to the court that the contract or any clause thereof may be unconscionable the parties shall be afforded a reasonable opportunity to present evidence as to its commercial setting. purpose and effect to aid the court in making the determination. or it may so limit the application of any unconscionable clause as to avoid any unconscionable result. you assume the risk – convenient way of allocating risk. If you don’t put the condition in. Procedural prong – is there unequal bargaining power/absence of meaningful choice? 2.§ 2-103 (b) Definitions and Index of Definitions "Good faith" in the case of a merchant means honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade. Condition subsequent – non-occurrence of which discharges existing obligation Condition precedent – condition must be met to create obligation of performance 24 . CONDITIONS Condition – an event.

1. b) Waiver & Estoppel Waiver 25 . he has a good faith obligation to ensure that the condition is satisfied. this chances allocation of risk. TEST: 1. a) Excuse  Strict performance is excused to prevent forfeiture (disproportionate losses) or extreme penalty (but make sure the losses are disproportionate to the other’s losses)  Watch out – excuse often upsets risk allocation! ≠ freedom of Ks. we will treat conditions as if it were satisfied. 3. “provided that” etc denote express conditions Exceptions:  Frustration  Impracticability  Impossibility 2. Personal Satisfaction If one party has control over the condition. Look at language – words like “as long as”.) 2. If not. Mitigating Doctrines Two Exceptions to the rule that strict conditions are strictly enforced. (subjective standard)  Standard for commercial property is objective standard. EXPRESS CONDITIONS Express condition – one that is expressed in the K Promissory condition – a term that is a promise and a condition Ways to get out of express conditions: (1) say it’s a promise and not a condition (2) waiver or excuse (3) say it’s constructive condition and has been satisfied by substantial performance.Concurrent precedent – both parties must meet conditions A. Avoid by putting in condition of satisfaction which specifies the condition is to be done prior to performance. it’s probably a condition. Strict Enforcement Rule: Express conditions are strictly enforced. Look at intent of the parties (ie: if one party wouldn’t have made the K had the statement been put in.

PL sues to get paid. not central to the exchange. B. ie: negligent) Goal – avoid forfeiture (≠ freedom of Ks!). The π fails to use the pipe. express condition). Not expressed in the K. Substantial Performance Constructive conditions can be satisfied by substantial performance (as long as breach was unwillful. Waiver is a better argument if no prejudicial reliance can be established. Teaches you to use express conditions if you want something strictly enforced! Constructive conditions are not strictly enforced. 2. so can still sue for expectation damages.PL builds a house for the Δ saying that he would use a certain type of pipe. but there is argument that the abandoned right is ancillary. Estoppel – Estoppel is more appropriate if detrimental reliance can be shown and there is some question about whether the right relinquished is material enough to require consideration. don’t need consideration if made in good faith can’t be retracted. Jacob and Young v. Party voluntarily relinquishes its right to terminate the K because of nonoccurrence of condition Waivers can be retracted (but watch out – this may frustrate reliance) Is it a waiver. But although condition is considered met. Kent (constructive conditions) . or a modification (new deal. and the Δ refuses to pay. The use of the pipe was a condition for payment. 1. CONSTRUCTIVE CONDITIONS One party’s promise is a condition of other’s performance (vs. Can be satisfied by substantial performance. who was entitled to rely on such conduct and has acted upon it • Can be undone Waiver v. can’t go back to old terms because they no longer exist!)   Equitable Estoppel A party may be precluded by his acts or conduct from asserting a right to the detriment of another party. ∆ must pay. Δ claims the PL breached the contract because the PL did not use the right pipe. Material Breach (total breach)  non occurrence of a constructive condition 26 . Π substantially performed the condition. Constructive conditions are NOT strictly enforced. there is still breach of promise.

27 . Buyer can repudiate the contract 2. Restitution Britton v. Failure to meet this condition is a material breach b. substantial performance is not a material breach dangerous. The Pl does not deliver all the goods in the time frame stated in the contract. a. **If more than one item and unhappy with results of PTR look to installment contracts** a. In contracts for the sale and delivery of marketable goods within a time limit. Failure is not a material breach a) Scope – Under UCC. Lower court finds for the Δ stating that nt delivering on time was a material breach of the contract. Colo. the performance of the contract within the time is a condition precedent to the enforcement of the contract. time is not of the essence. Co. Off-K or On-K. For sellers: UCC §2-703 Seller’s Remedies in General allows seller to cancel if no payment = PTR. In contracts for work or skill. and a short delay will not justify the repudiation of the contract. The Δ has to pay because this is a contract for the skill and labor. because if you think other party has materially breached and you walk away. When he delivers the goods. or continue to perform as though it were a partial breach and later sue for expectation damages. PL sues to enforce the contract for payment. every breach is a material breach. Turner – Rule: restitution can be claimed by the party in breach. the Δ refuses to accept the goods and refuses to sell. 2) Can be adequately compensated for the breach by money damages 3) The breach was willful 3. you might be guilty of material breach if other party’s breach wasn’t material! Requirements: 1) Close to complete deprivation of expected benefits. UCC Perfect Tender Rule (§2-601 – lots of ways to get around it!) Beck & Pauli Litho.   gives non-breaching party option to rescind contract and walk away from deal (he has no obligation to perform if other party commits a material breach). 1. (Employed for a certain period of time you should be paid for that period of time) 4. Milling & Elev (1892) (timely delivery in sale and service contracts) Facts: PL agrees to make stationary for the Δ with specific designs. Π appeals. v.

so can walk away from deal! Freedom of Ks. Limitations:  Revocation of Acceptance  Cure  Installment Contracts  Anticipatory Repudiation b) Mitigating Doctrines (1) Cure 28 . UCC §2-606 What Constitutes Acceptance of Goods – acceptance accomplished by notice to seller. (2) The measure of damages for breach of warranty is the difference at the time and place of acceptance between the value of the goods accepted and the value they would have had if they had been as warranted. Cannot exercise any dominion over goods – they still belong to seller. Watch out – some may exploit rule to get out of the deal. buyer may reject the whole. Notice can be (1) words or (2) action (ie: dominion after inspection). It’s a material breach.For buyers: UCC §2-601 Buyer’s Rights on Improper Delivery – if the goods fail in any respect to conform to K. Inspection alone is not acceptance. UCC §2-602 Manner and Effect of Rightful Rejection – rejection accomplished through giving notice to seller within reasonable time. unless special circumstances show proximate damages of a different amount.  Precludes rejection under UCC§2-601  Can still recover for damages for nonconforming tender under UCC§2714 UCC §2-607 Effect of Acceptance – acceptance of goods precludes rejection If already accepted (Remedy still exists): § 2-714 Buyer's Damages for Breach in Regard to Accepted Goods (1) Where the buyer has accepted goods and given notification (subsection (3) of Section 2-607) he may recover as damages for any non-conformity of tender the loss resulting in the ordinary course of events from the seller's breach as determined in any manner which is reasonable. (3) In a proper case any incidental and consequential damages under the next section may also be recovered.

VII.UCC §2-508 Cure by Seller of Improper Tender or Delivery: Replacement – seller gets a second chance to undo the breach by sending a replacement delivery within a reasonable time. Remedies 29 .§2-711 2. but it’s only allowed if the defect substantially impairs the K value (whereas under rejection. so back to common law idea of material breach. **If you want to preserve deal and use the substantial impairment test instead of the PTR. Adequate Assurance of Performance UCC §2-609 Right to Adequate Assurance of Performance – when reasonable grounds for insecurity arise as to one party’s performance. If you prefer PTR. which permits seller to cancel under 2-610b and 2-703f Can go to breach remedies:  Seller . buyer allowed to reject for any reason at all) Substantial impairment = material breach. if a buyer demands more than adequate assurance or performance prior to ascertaining whether seller intends to breach.** C. make an expansive reading of what an installment K is. (3) Installment Contracts UCC §2-612 “Installment Contract”.§2-703  Buyer . If not a reasonable demand. (2) Revocation of Acceptance UCC §2-608 Revocation of Acceptance in Whole or in Part – revocation of acceptance gives buyer all the same rights as if he had rejected the goods. so many ways to trump the PTR! Also. UNCERTAIN BREACHES 1. (3) says can breach whole K if defect of installment affects whole K. not PTR. Equity – way of tempering harshness of PTR. Substantial impairment test. Anticipatory Repudiation UCC 2-610 Anticipatory Repudiation – future breaches treated as present breaches so no wastes of human resources. prevent forfeiture. construe definition of ‘installment Ks’ narrowly. the demanding party may be guilty of anticipatory repudiation (see above) – this may substantially impair value of K to other party and allow him to completely cancel the K. this unauthorized demand constitutes anticipatory repudiation substantially impairing value of K to seller under 2-610. UCC incorporates substantial impairment test. Breach – (2) can only reject an installment if defect substantially impairs the value of that installment. the other party may get demand adequate assurance in writing and suspend performance until he gets it.

(Contact price – market price) Buyer’s §2-712 & §2-713 Specific performance by §2-716 (all below) a) Measurement per restatement. use cost of performance unless economic waste would result. Seller's Resale Including Contract for Resale – Permits an aggrieved seller to either substitute transaction by reselling the goods and. § 2-708. § 2-706. expenses party incurs on the other party’s performance 2. Court must balance the equities. provided that the resale is made in good faith and in a commercially reasonable manner. Limitations:  Foreseeability  Mitigation  Causation (only damages from the breach)  Certainty (breach must have resulted in a fiancial loss which can be shown) Seller’s § 2-709. Seller's Damages for Non-acceptance or Repudiation – recognizes that the damages may be based on based on hypothetical resale as an alternative to actual resale. to recover the shortfall between the contract price and the resale price. Sound discretion of the court. EXPECTATION INTEREST 1. Action for the Price . apply diminished value only. value of lost opportunities not taken in reliance on K. Legal Remedies are inadequate (When the injury is irreparable)  Example: Breach of contract for the sale of land. Includes profits. 2. Two methods: 1.Threshold for Equitable Remedy (Equitable remedies of are of last resort and are discretionable) 1. Expectation Damages Put Π in position he would have been in had K been performed. Permits efficient breaches. 30 . Land is considered unique and therefore the breach is irreparable.chooses economic efficiency over parties valuation. A. Economic waste = inefficient expenditure of $.Allows the seller to claim the price of the goods only when the goods have been accepted by the buyer or they are incapable of being resold because they have been lost or damaged or are just not resalable.

as of the place of arrival. (2) The buyer may recover from the seller as damages the difference between the cost of cover and the contract price together with any incidental or consequential damages as hereinafter defined (Section 2-715). in cases of rejection after arrival or revocation of acceptance. Limitations a) Consequential Damages Only recoverable if ∆ was given notice (“contemplated”) of them. the measure of damages for non-delivery or repudiation by the seller is the difference between the market price at the time when the buyer learned of the breach and the contract price together with any incidental and consequential damages provided in this Article (Section 2-715). § 2-713 Buyer's Damages for Non-delivery or Repudiation (1) Subject to the provisions of this Article with respect to proof of market price (Section 2-723). but less expenses saved in consequence of the seller's breach. but less expenses saved in consequence of the seller's breach.b) Efficient Breach § 2-712 "Cover". (3) Failure of the buyer to effect cover within this section does not bar him from any other remedy. (2) Market price is to be determined as of the place for tender or. Exceptions: Seller is not authorized to recover consequential damages under §2-710 § 2-710 Seller's Incidental Damages 31 . Buyer's Procurement of Substitute Goods (1) After a breach within the preceding section the buyer may "cover" by making in good faith and without unreasonable delay any reasonable purchase of or contract to purchase goods in substitution for those due from the seller. Hadley Rule – recovery only allowed for damages that: 1) naturally arise or 2) are contemplated by parties (foreseeable) at time of contract. (1) Forseeability An event or consequence is foreseeable when a reasonable person would have realized the likelihood of its occurrence. 2.

(1) Where the buyer has accepted goods and given notification (subsection (3) of Section 2-607) he may recover as damages for any non-conformity of tender the loss resulting in the ordinary course of events from the seller's breach as determined in any manner which is reasonable. (1) Incidental damages resulting from the seller's breach include expenses reasonably incurred in inspection. If yes . in the transportation. Buyer's Incidental and Consequential Damages. in connection with return or resale of the goods or otherwise resulting from the breach.Incidental damages to an aggrieved seller include any commercially reasonable charges. and (b) injury to person or property proximately resulting from any breach of warranty. expenses or commissions incurred in stopping delivery. unless special circumstances show proximate damages of a different amount. (3) In a proper case any incidental and consequential damages under the next section may also be recovered. (2) Certainty Rule: You only get the foreseeable subset of expectation damages that are certain b) Mitigation  has burden of proving that he abided by the duty to mitigate.Π’s damages reduced 32 . Buyer may not be able to make a substitute transaction § 2-714. any commercially reasonable charges. receipt. expenses or commissions in connection with effecting cover and any other reasonable expense incident to the delay or other breach. Buyer's Damages for Breach in Regard to Accepted Goods. (2) The measure of damages for breach of warranty is the difference at the time and place of acceptance between the value of the goods accepted and the value they would have had if they had been as warranted. transportation and care and custody of goods rightfully rejected. § 2-715. (2) Consequential damages resulting from the seller's breach include (a) any loss resulting from general or particular requirements and needs of which the seller at the time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise. care and custody of goods after the buyer's breach.

2. 2) prevents under compensation any incidental damages incurred in seeking other work are recoverable determining comparability: objective or subjective standard? Duty to Mitigate (UCC §2-704 (2)) 1. the seller is not a lost volume seller. if yes. because UCC says that specific performance is appropriate where goods are unique or in other proper circumstances b) Liquidated Damages Common Law: Pre-specified damages put into K by parties themselves. Affirmative aspect: take affirmative action to keep expenses from piling up. not mitigating. Otherwise $ damages are the general rule. Negative aspect: make sure you don’t do anything to make the damages pile up. sentimental. Main Question: what would have happened if contract wasn’t breached? => second contract (substitute work) mutually exclusive from breached contract? If no. 3. If you really want Reading pipe. put very high liquidated damage provision in to deter other party from breaching. If the sales are mutually exclusive. However. have to fulfill test.not risking jury equity giving you lower damage reward. cannot be a service contract (ie construction K) or personal service unless unique UCC §2-716 Buyer’s Right to Specific Performance or Replevin – somewhat more liberal than common law. or irreplaceable value 2. ie: incur unnecessary expenses. Only reimbursed for expenses up to breach. ie: take comparable work. sentimental or irreplaceable value (ie land). then mitigating.   goal: 10 reduces chances of an inefficient breach. Public Policy – Must be only means because courts have to expend energy to enforce and supervise TEST: 1. Deposits – allows a defaulting buyer to get his deposit back from seller by allowing seller to collect that amount as extra on his damages. Advantage. then not mitigating Lost Volume Seller – breach reduces total volume of the seller. 33 . Alternate Expectation Remedies a) Specific Performance Specific performance is only allowed when personal property has a unique. A non-refundable deposit (expressed in K) is a liquidated damage that seller can retain. Personal property must have unique. UCC §2-718 Liquidation or Limitations of Damages.

34 .because cts want to avoid unreasonably high liquidated damages (=penalty damages in disguise). Also called: Quantum meruit.when Π can’t get expectation damages because they’re too speculative. ** test is internally inconsistent: the better you do satisfying one prong. RELIANCE INTEREST (On-Contract)  Restore Π to position he was in before K was entered. because they are easily quantifiable  Compensation for expenditures on reliance of contract => restore status quo ante  Deduct provable losses (under both expectation and reliance damages) Pre – contract Reliance – doesn’t matter when reliance came into existence (before or after K) When contract comes into existence. [Off-Contract – Promissory Estoppel] C. They are reasonable either at the time of contracting or at the time of actual harm (so even if actual loss is less afterwards.liquidated damages enforceable when: 1. he gets reimbursed for expenditures. RESTITUTION INTEREST    must pay Π amount equal to benefit he received from Π’s performance. ∆ benefits so allow Π to recover expenses. not after loss has occurred. Reasonable at the time of contracting. because party has 2 chances (instead of 1) to show damages were reasonable. If provision is unreasonably high. TEST: . Reasonable forecast – if the forecast provides reasonable amount of penalty for the anticipated loss. party can still get higher amount that was thought to be reasonable at time of contracting). breaching party assumes foreseeable reliance on contract. Difficult calculation – if the harm caused is difficult to calculate accurately.  It’s the second alternative. courts will simply award ordinary expectation damages. the worse you do at satisfying the other. quasi-contractual damages Goal=prevent unjust enrichment. All that maters is whether or not reliance is paid off. ie: lots of intangibles 2. even if contract is made after reliance. can get deposit back (except for anything ∆ is supposed to keep) UCC §2-719 Contractual Modification of Limitation of Remedy – imposes a limitation on remedies B. UCC §2-718 Liquidation or Limitation of Damages: Deposits – makes it easier than in Common Law to enforce liquidated damages. If made a deposit. Includes out-of-pocket costs.

if profit would have been negative (and no reimbursement for losses) then the recovery would be zero! If he sues under restitution. In a bad deal under reliance. because he’s getting what he bargained for. If you sue for reliance you will only get the K price. he can get reasonable value of whatever services he rendered to ∆ Exception: you can’t get restitution damages if performance has already been fully performed.   Reliance is on-contract => have to deduct provable losses from damages Restitution is off-contract => DON’T deduct losses from damages 35 . He allocated the risk in the K so have to stick to on-K damages. it’s better to sue for restitution. If Π made a BAD DEAL. Not just unjust enrichment. Then. get only K price.