Contracts - Outline

I. Contracts – General
Definition of a contract
§ 1 Rest.2d: A promise or set of promises for the breach of which the law gives a remedy. agreement between two or more people to do or refrain from doing something Facilitates trade or exchange of goods or services or other types of property Allows parties to specify obligations and expectations Allows enforcement if violated, assures parties that promise will be kept Express contracts = words of agreement (oral or written) Implied contracts Implied-in-fact = promises are inferred from acts or conduct or from words that are not explicit words of agreement Implied-in-law = court fictionally implies a promise to avoid inequities and unjust enrichment (also quasi-contracts)

Contract theory
a. classical theory clear rules over general standards, indifferent towards policy b. modern theory more standards and policy, more flexible – several variations


Formation of a contract
Bargain in which there is a manifestation of mutual asset to the exchange and a consideration = bargained for exchange Achtung:     not always a bargain inequality of bargaining power not every bargain results in a contract misconduct on bargain (fraud, duress, undue influence)

Elements: Mutual Assent (objective manifestation) o Offer o Acceptance Consideration


Mutual assent
a. Subjective theory: o meeting of the minds, focus on intention of the parties rather than conduct o b. Objective theory: What a reasonable person would understand


Exception for fraud. “bait and switch”.e. manifestation of intent to be legally bound Rest. or. Scolnick (Seller) “Ad is not an offer” Izadi (Buyer) v. Eurice & Bros. William G. quantity and price Offer must be distinguished from preliminary negotiations (e. so made as to justify another person in understanding that his assent to that bargain is invited and will conclude the original offeror has the “power of acceptance” Promise binding. Offer must be viewed as a whole and objectively – how would reasonable reader interpret offer. the power to conclude a bargain and bind the offeror by giving assent) Rest. except where language shows commitment A particular ad may be construed as an offer if it is definite in terms and either (i) the circumstances clearly indicate an intention to make a bargain. (ii) the ad invites those to whom it is addressed to take specific action without further communication. recipient is aware that offer is sent to multiple parties and cannot be performed more than once) Subjective unexpressed intent irrelevant Advertisement is usually no offer but an invitation ad offerendum. - - 2 .o o o - “ … one having the capacity to understand a written document who reads and signs it. as long as acceptance is “mirror image” If offeree varies the terms. Offer creates power of acceptance in the offeree (i. 2d § 26 – “A manifestation of willingness to enter into a bargain is not an offer if the person to whom it is addressed knows or has reason to know that the person making it does not intend to conclude a bargain until he has made a further manifestation of assent. self-serving testimony about intent parties’ incentive to be careful about their conduct protects reasonable expectation Offer and acceptance in bilateral contracts Offeror makes offer that if valid creates “power of acceptance” in the offeree Offeree creates contract by accepting offer. without reading it or having it read to him.” = obj. if Bargained for exchange in mutual assent Reliance in promissory Estoppel Unjust enrichment/restitution Offer a.g. duress or mutual mistake Party’s subjective intent is irrelevant Rationale for objective theory protects other party’s reliance on manifestation to contract reduces courts attempt to read minds. 2d § 24 – “An offer is the manifestation of (present) willingness to enter into a bargain. or (iii) over-acceptance is unlikely Lonergan (Buyer) v. b. it is a rejection of the original offer and a “counteroffer” . - c. subjective intent of seller not relevant. signs it.” o Intent to enter into bargain (must be distinguished from invitations to begin negotiations) – based on language and circumstances o Offer to be valid must have definite essential terms which can be accepted to form a contract – no further negotiations required as to subject matter. Plaintiff must show that he believed in the offer – misled by genuine belief. Machado Ford “Ad was the offer. is bound by his signature in law” – per court in Ray v.

but a manifestation of intention that a promise shall not affect legal relations may prevent the formation of a contract. 3 . Offer expires or lapses before acceptance (1) Time for acceptance is fixed in the offer o Lapse of offer without further action o Time period usually starts upon receipt (2) Time for acceptance is not fixed o Lapse after reasonable period of time. e. depending on the circumstances o Telephone negotiations – usually only during conversation o Mail – usually if mailed on day of receipt of offer b. - Termination of power of acceptance a. unless offeror detrimentally relies on first received rejection o If rejected and then accepted = counteroffer o If rejection mailed before acceptance but received later = contract.) o Rest.” Joke offer has to seem serious to victim Putting contract out for bid Usually no offer Response to bid is offer f. § 59: Counteroffer rule not applicable.d. - Price quote may be offer if detailed enough and it must reasonably appear that it is all that’s needed Joke offers: Rest. if acceptance is made conditional on assent to additional or different terms – new terms are merely proposal to modify contract which may be accepted in silence Conditional or qualified acceptance o Acceptance with additional terms or changes to terms of the offer o Except for request. Miller (Seller) o Termination of power of acceptance of original offer o Creates power of acceptance in the offeror o Valid upon receipt by offeror o To be distinguished from Inquiries and requests o Except for options (see b. 2d § 21 – “neither real nor apparent intention that a promise be legally binding is essential to the formation of a contract. grumbling acceptance. but offeree is estopped from enforcement if offeror treats rejection as repudiation of contract o Except for options (during the time of option offeree has a contractual right to have the offer held open) o However exception does not apply if the offeror relies on rejection Offeree makes a counteroffer o Offer by the offeree concerning the subject matter but containing different terms or late acceptance o if the offeree modifies the terms of the offer he makes a counter-offer which must be accepted or rejected by the offeror and rejects the original offer Normile (Buyer) v. implied terms of offer c. Offer is rejected by the offeree o Valid upon receipt by offeror o If mailed together with acceptance – contract because of mailbox rule. d.

only proposal  If merchant: terms become part of contract. unless  Offer expressly limited acceptance to terms of offer (broadly)  Material alteration  Rejection by offeror within reasonable time o Effect of different terms  Knock out rule (majority view) (agreed terms plus implied by law-UCC)  Same as additional terms  Do not become part of contract ii. iii. then contract is established by conduct o Terms are the written ones that match plus supplemental terms of UCC 2-207(2) o If contract is formed in writing under 2-207(1) o Effect of additional terms  If not merchants: terms do not become part of contract. Note: Predominant purpose test Applies to “mixed” transactions involving sale of both goods and services Determination of predominant purpose is based on:  Language of the K  Nature of supplier’s business  Intrinsic worth of the materials (2) Except for UCC 2-207 sale of goods i.” o “Last shot” rule generally favors sellers because buyer usually sends the first form (purchase order) and seller usually sends the last form (price quote). 2-207(1) o Definite and seasonable expression of acceptance or a written confirmation o operates as an acceptance even though it has additional or different terms. e. i. Offer is revoked prior to acceptance o Offeror retracts the offer – termination of offer o Must be communicated to the offeree (direct or indirect. if delivery or performance. offeree obtains knowledge that offer was revoked through other means) (§ 43 Rest.e.2d §19(1) “Manifestation of assent may be made wholly or partly by written or spoken words or by other acts or by failure to act. GE o Rest.(1) Usually treated as counteroffer (see c. o unless acceptance is expressly made conditional on assent to these new terms  narrow. must use these terms and not “subject to” (policy is to have contracts go forward) 2-207(3) o In case acceptance was made conditional – NO CONTRACT o However.) o Valid upon receipt by offeror o offer can be revoked even if it says it is not (“firm offer”)  except for option contracts where offer is kept open for a specified period of time  An offer is binding as an option contract if it 4 .) o Common law mirror image rule (acceptance has to mirror the terms of the offer) o Last shot rule (applied in merchant’s transactions where the preprinted forms do not match but the parties perform anyway – last form was counteroffer and performance is acceptance) Princess Cruises v.

)  By a merchant (UCC 2-104)  To buy or sell goods (UCC 2-105)  In a signed writing (UCC 1-201(39) and (46))  Which by its terms gives assurance it will be held open  Is irrevocable during time stated or reasonable time but not to exceed 3 months Unilateral contracts  Old rule: any time prior to full performance  New rule: § 45 Rest. (Sub-contractor) – Promise to keep the offer open “absence of consideration is not fatal” and “reasonable reliance serves to hold the offeror in lieu of the consideration ordinarily required to make the offer binding. Resorts – Promise can be implied Limits: GC must not delay acceptance of sub’s offer after being awarded the general contract (no bid-shopping) GC must not reopen bargaining with the sub while still claiming right to accept original offer (no bid-chopping) GC can’t rely on offer if he has reason to believe it was a mistake GC can’t rely on mere estimate that is not an offer  o Berryman v. Star Paving Co. (a) is in writing and signed by the offeror. “merely acting in justifiable reliance on an offer may in some cases serve as sufficient reason for making a promise binding (see § 90)” – now in § 87(2). and proposes an exchange on fair terms within a reasonable time. Termination by law (1) Death or incapacity of offeror o Does not apply to options o Does not apply to unilateral contracts after performance has begun (2) Changed circumstances 5 .Foreseeable reliance by offeree prior to acceptance  Drennan (General contractor) v. recites a purported consideration for the making of the offer. or  (b) is made irrevocable by statute. Only until performance has begun  Look at intent of the parties  f.  Pop Cones v. Unless (§ 90 Rest. o Offer which offeror should reasonably expect to induce action or forbearance of a substantial character on the part of the offeree before acceptance o And which does induce such action or forbearance o Is binding as an option contract to the extent necessary to avoid injustice  Unless UCC 2-205  Offer (§ 24 Rest. Kmoch.” Comment to § 45 Rest. OR § 87(2)) Promissory Estoppel .2d.

and offeror does not reject it (3) Except for Unjust enrichment or quasi-contract (Restitution in absence of promise or with implied promise) o “Person unjustly enriched at expense of another is required to make restitution” 6 . but must not be principal motive Voluntary Offeree not bound. o Bilateral contracts = exchange of promises Promise not action. will or pleasure of one of the parties) o Rationale: used in situations where it is unclear if other party is able to perform (2) i. v. iv. the offeror becomes bound to an implied option contract and cannot revoke his offer so long as the offeree completes performance in accordance with the terms of the offer. o iii. Coldwell Banker Notice may be after completion With knowledge of offer. Is offer for unilateral or bilateral contract? (1) i. offeror would deem it accepted unless rejected.Acceptance a. sometimes silence Not mere use of subcontractors bid in own bid Communication Mailbox rule (Rest. because he never promised anything  Except where offeror knows of performance and relies on it ii. Silence as acceptance (1) Generally no acceptance (2) Except o Offeree’s conduct or behavior gives reason to interpret as acceptance o Offeror has said that silence is acceptance and offeree intents to be silent o Offeree exercises dominion over shipped products. offeror relies on acceptance o Late acceptance = counteroffer. Only Performance in accordance with terms of offer  Petterson (Homeowner) v. Pattberg (Lender) . or where mail was reasonable. o ii. iii. except where fully performed prior to expiration of offer Except where offer is ambiguous Rest. b.” Cook v. 2d § 45 “When an offeree tenders or begins the requested performance under a unilateral contract. does not apply where offer states that he must receive the acceptance) (risk of receipt is on offeror)  Does not apply to options  Dispatch must be timely and in proper manner  If dispatched before revocation is received . 2d § 63) = as soon as acceptance is dispatched the contract is formed unless otherwise specified in the offer (applies to all acceptances by way of mail. implied in fact by conduct.contract o Waiver of receipt by offeror Unilateral contracts o promise in exchange for performance (performance is based on wish.classical rule of full performance  Today Rest. unless statutory exception o Offeree solicited offer and drafted its terms. and UCC allow promise or performance Verbal promise.

Advance Steel Co. if the circumstances justify the decision to intervene without request.some terms may be open  . is entitled to restitution therefor from the other if:  he acted unofficiously and with intent to charge therefore.3d .  With the expectation that he would be paid its value  Def. or obtains professional services required for the protection of another's life or health is entitled to restitution from the other as necessary to prevent unjust enrichment. Modern § 21 Rest. benefit conferred but contract not formed Limits – no restitution for officious or gratuitous actions Actor must not intend a gift Promise to pay is implied Liability is imposed on person who receives a benefit without the promise to pay for it  § 116 Rest. whichever is less.  (2) Unjust enrichment under this section is measured by the loss avoided or by a reasonable charge for the services provided.Protection Of Another's Life Or Health  (1) A person who performs.2d Restitution:  Person who has supplied … services… although acting w/o the other’s knowledge of consent.” o Differences:  . supplies.  (2) K may be found even though the moment of its making is undetermined  (3) Open terms in a K does not make it fail for indefiniteness (2) Rest.3d Protection Of Another's Property  (1) A person who takes effective action to protect another's property from threatened harm is entitled to restitution from the other as necessary to prevent unjust enrichment.o o o o o o o o Examples – life or property protecting services when beneficiary unable to consent. less formal 7 . and …  consent would have been immaterial … because of … mental impairment. disagreement only over some terms Harlow & Jones.  (1) A K for sale of goods may be made in any manner sufficient to show agreement. Other methods of reaching mutual assent (1) Application of UCC 2-204 o Contract was made orally over phone. including conduct ….parties exchange forms  . (emergency situations)  (2) Unjust enrichment under this section is measured by a reasonable charge for the services in question. Inc. Pelo or Watts v. v. knew or had reason to know of plaintiff’s expectation  Def. Watts Modern § 20 Rest. Plaintiff must show  He has conferred a benefit on def.court goes by conduct  . 2d § 22 o “A manifestation of mutual assent may be made even though neither offer nor acceptance can be identified and even though the moment of formation cannot be determined. if the circumstances justify the decision to intervene without request. Inc. c.oral communication  . would be unjustly enriched if he were allowed to keep benefit w/o payment Credit Bureau Enterprises. Unrequested intervention is justified only when it is reasonable to assume the owner would wish the action performed. and  the things or services were necessary to prevent the other from suffering serious bodily harm or pain.UCC more practical. v.

I’ll give you an overcoat” o Am Jur – if occurrence of condition would benefit the promisor. no consideration but condition for gift o Holmes “The promise must induce the detriment and the detriment must induce the promise” and Promise and consideration must be in “relation of reciprocal conventiona l inducement.” o Bargain theory of consideration does not actually require that the parties bargain over the terms of the agreement Rest.” Pennsy Supply Inc. if it merely enables promisee to receive a gift. American Ash Recycling Corp. a performance or a return promise must be bargained for. Sidway (Uncle) “a waiver of any legal right at the request of another party is a sufficient consideration for a promise” o “Courts will not ask whether the thing which forms the consideration does in fact benefit the promisee or a third party. Demotsis - - b. each for the other. benevolent man to tramp – “if you walk to shop. 2d § 71 Bargain for Exchange theory “(1) To constitute consideration.g. or is of any substantial value to anyone. (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.Consideration a. o Condition of receiving gift is not a bargain. American Airlines. suffered or undertaken by the other party. e. Jones o Factors:  Usually in writing  Amount of details  Amount of money  Statute of frauds  Reasons for abandoned negotiations o § 27 Rest. interest.. Batsakis v. detriment.” o Rest. profit or benefit accruing to the one party or some forbearance. Glue that binds parties to a contract Makes promises enforceable Distinguishes contract promises from donator promises General theories: Bargained for exchange / benefit & detriment General rule .” o A valuable consideration may consist either in some right. 2d § 79 “if requirement for consideration is met no additional requirement for equivalence of values exchanged” Old way: detriment and benefit Hamer (Nephew) v. consideration.Rest. Postponed bargaining – Agreement to agree Parties negotiate but agreement is incomplete because parties leave matters for agreement in future OR Parties agree in principle but want to execute written formal contract (1) Common law rule o Intention of the parties matters o If they intent to be bound – contract. loss or responsibility given. but the circumstances may show that the agreements are preliminary negotiations. Quake v. May be overcome by Promissory Estoppel (substitute for consideration) “Mere inadequacy of consideration will not void a contract” o “Peppercorn” theory – even a peppercorn will be adequate consideration if bargained for o Rationale: Bargain may be unfair on free market. v.2d “Manifestations of assent that are in themselves sufficient to conclude a contract will not be prevented from so operating by the fact that the parties also manifest an intention to prepare and adopt a written memorial thereof. 2d § 33(3) –Fact that one or more terms of proposed bargain are left open or uncertain may show that manifestation of intention is not intended to be understood as offer or acceptance 8 .

” Other approach: Contract to negotiate in good faith  Applied by some courts  Reliance damages (2) UCC 2-204(3) o "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. General rule – Mutuality  Bilateral contract – promise for a promise and mutuality of obligations  But illusory promise (fake) lacks mutuality and neither party is bound o o o o o o Exceptions to Mutuality rule Unilateral contracts Limited promises Voidable promises (e. and yet the whole writing may be ‘instinct with an obligation. (3) Implied promises make illusory promise definite  Implied in fact = conduct of parties. he must do so "in good faith. Exceptions – Bargains that are not consideration (1) Nominal consideration o It lacks the substance of a bargain o Could be a donative promise o Except for options if in writing and proposes fair terms (2) Illusory promises – Statement that appears to be promise but lacks commitment i." (3) UCC 2-305 o court will enforce an agreement with an open price term if parties intended to be bound o a contract can be formed even if they leave the price for mutual determination or give one party the power to fix the price o if parties fail to agree the court may fix a "reasonable price.“ o if one party has the power to fix the price. minor) Conditional promises Alternative promises Agreement allowing one party to supply a material term (UCC 1-203) ii.o o But Comment (e) to Rest.”  “Without an implied promise. Lucy. the transaction cannot have such business efficacy as both parties must have intended”  UCC 2-306(2): codifies common law principle of best efforts (same as reasonable efforts)  Gap fillers – may be preempted by parties  UCC 2-309(3) “Termination of a contract by one party except on the happening of an agreed event requires that reasonable notification be received by the other party … agreement dispensing with notification is 9 .’ imperfectly expressed. 2d § 33 – summarizes UCC § 2-305 for sale of goods and says “similar principles apply to contracts for the rendition of service.g.“ o No K if parties intend not to be bound unless price is fixed or agreed and it is not so fixed or agreed c. Lady Duff-Gordon held that such promise was implied in exclusive dealings contracts  “A promise may be lacking. parties meant to say  Implied in law = legal duty implied by statute or precedent  Common type: promise to use reasonable efforts or best efforts  Common law: Wood v.

Locke v. Donative / gratuitous promises and offers o Unenforceable for lack of consideration Unless relied upon (promissory estoppel) (§ 90 Rest. operative fitness or mechanical utility. Baystone Construction. “if it is practicable to determine whether a reasonable person in the position of the obligor would be satisfied.g.” Standard for satisfaction clauses  Objective standard: whether a reasonable person would be satisfied o Applied to contracts involving commercial quality. an interpretation is preferred under which the condition [that the obligor be satisfied with the obligee’s performance] occurs if such a reasonable person in the position of the obligor would be satisfied. o Not reasonable to reject mill finish siding for factory based on nonuniform appearance  Subjective standard: whether person was honestly dissatisfied even if unreasonable (good faith) o Applied to contracts with aesthetic or artistic elements. v. Raynor Manufacturing Co.“the application of principles of good faith and sound commercial practice normally call for such notification of the termination of a going contract relationship as will give the other party reasonable time to seek a substitute arrangement. fraud) o express promise to pay debt discharged in bankruptcy (§ 83 Rest. Inc.o invalid if its operation would be unconscionable (sittenwidrig)” Leibel v. McGowin  unless. Comment 8 .2d)  higher burden because process initiated by debtor o material benefit received and necessary to prevent injustice (§ 86 Rest. honest dissatisfaction required Requirement or output contracts (4) Legal duty rule – promise of action that promisor is already obliged to perform d. (2) Except for Promissory Restitution o Where promise is made after service or benefit is received o promise (implied or express) to pay debt barred by Statute of limitations (§ 82 Rest. Inc. Warner Bros. Indian Refining Co.. Moral or past consideration (1) NOT sufficient o Dougherty v. Salt o Plowman v. Morin Building Products Co. promise not binding if  Benefit was conferred as a gift  Promisor not unjustly enriched  To extent value is disproportionate to benefit e. o Limited by good faith.2d OR § 87(2) Rest)  Offer/Promise  Express OR  Implied by conduct  which offeror /promisor should reasonably expect to induce action or forbearance of a substantial character on the part of the offeree before acceptance  And which does induce such action or forbearance (87(2) – substantial!) 10 . f.2d) Webb v.2d) o promise (implied or express) to pay debt incurred when one was minor (§ 85 Rest.”  § 228 Rest. minors.2d)  applies to voidable promises (e.

. but 87(2) is widely accepted. 2nd was adopted after the Drennan case and reflects the holding of that case. Newman charitable subscriptions. Shoemaker v. Greiner. Inc. 24) to protect reliance of offerees.) .2d 1003 (1997) Facts/Rule: Katz = . 87(1)? Part performance of unilateral contract under Rest. yes Feinberg case o Rec’d promise of pension o At-will employee o Voluntarily retired in reliance o Injustice – once retired. Sec. 45? Promissory estoppel under Rest.It depends on parties view – either necessary part for making a gift or price of promise Section 87(2) Rest. 90 or 87(2)? 11 . 87(2) says sometimes reliance on an offer can create an option contract (irrevocable offer). Note that in 87(2) the reliance has to be "of a substantial character" and the remedy is that the offer is binding as an option contract to the extent necessary to avoid injustice. 610 S. Katz v. Commonwealth Bank Even if it contains condition (if you come to my house. liable under promissory estoppel . Danny Dare. Trustees of Boston University  “Charitable subscription …binding … without proof that the promise induced action or forbearance” (§ 90(2) Rest. 87(1) is not a majority rule. Greiner v." So there are some differences between the two sections. Section 87(2) could be thought of as a special case of promissory estoppel. Section 90 is broader and applies to "promises" (defined Sec. It applies to "offers" (defined in Sec. 2) to protect reliance on the promise by the promisee or third person. King v.o    Usually   Is binding as an option contract to the extent necessary to avoid injustice Remedy may be limited as justice requires. 90 does not have a requirement that the reliance be "substantial.Could have been fired = = = promise to obtain property insurance on home enforceable Ways to find whether offer is irrevocable! Option Contract? Firm Offer under 2-205? Irrevocable offer under Rest.W. Wright v. Reliance = consideration o o in family situations. I will give you my coat) .Rejected in Massachusetts and several other courts  Only adopted in one case!  In General there has to be consideration to make charitable promise binding  also in commercial context.2d 121 (1980) Facts: Katz injured on the job and promised a pension Rule: § 90 Rest. 700 A.. couldn’t work full time o Co. 87(1) is an attempt by the framers of the REstatement to have something like the UCC "firm offer" 2-205 concept in common law.

Di Canio Construction Corp. direct connection between advertiser and buyer) for actions based on breach of express warranty if the mass media ad is intended to reach remote purchasers and if purchaser saw or heard of ad o Revised UCC 2-313B codifies this rule by clearly stating that remote sellers are liable for express warranties in nonprivity situations UCC 2-314 Implied warranty of merchantability o If seller is a merchant o then goods should be merchantable (fit for ordinary purpose or pass without objection in trade) o Disclaimer possible UCC 2-315 Implied warranty of fitness for a particular purpose o If buyer relies on seller to select goods fit for a particular purpose o Seller knows of buyer’s purpose and reliance o Must be more than an ordinary purpose. standards o Recognized only against builder/vendor. promise. o Warranty is termed warranty of habitability and/or skillful or sound construction  Involves habitability and skillful construction o Can be modified or disclaimed. not private sellers of used homes o Courts are divided whether warranty applies to subsequent buyers o Rationale:  Harmonization with warranties for sale of goods  Unequal bargaining power  If not yet built. either by court decision or legislation. b. Crow o Disclaimer possible Implied warranty of Quality in home sale by builder/vendor o Recognized in most jurisdictions. duty to inspect of buyer. recommendations) o No reliance necessary – buyer reliance can be assumed o Most courts have abolished the privity requirement (i.” o contradictory o But parol evidence of express warranty could be excluded if there is fully integrated written agreement (2) Implied Warranty of merchantability UCC 2-316(2) o merchant must follow proper wording and disclosure requirements. Bayliner Marine Corp. or if warranty meets certain min. o language must mention that word and 12 a. specific and mutually agreed. e. d. Caceci v. . but possibly only if conspicuous. c. description or model that becomes part of basis of bargain o But not puffery (statements of opinion. Warranties Caveat emptor: Buyer beware.e.III. no inspection possible Disclaimers UCC 2-316 (1) Express Warranties UCC 2-316(1) o difficult to disclaim – “negation or limitation is inoperative to the extent that [consistent] construction is unreasonable. v. no reliance of buyer unless seller expressly stated a warranty Common law now has warranty o Implied warranty of habitability o Implied warranty of workmanlike quality UCC 2-313 Express warranties o Express warranty by seller o Any affirmation of fact.

o or if it’s “as is” there must be disclosure that AS IS – NO WARRANTY means “You will pay all costs for any repairs. K interpreted according to that meaning (even if not the objectively reasonable meaning) (2) If parties attach different meanings to same term.” f.” “with all faults” or “other language which in common understanding calls the buyer’s attention to the exclusion of warranties and makes plain that there is no implied warranty. § 2301(1) and 2308. b. and one knew or had reason to know of meaning attached by other. the wording of a disclaimer of the implied warranty of merchantability has to be in the words used in the statute : “the seller undertakes no responsibility for the quality of the goods. except as otherwise provided in this contract.2d (1) where parties attach same meaning. family or household purposes]. to same duration as express written warranty. o But MMWA allows warrantor to limit duration of implied warranty.o if in writing be conspicuous – “magic word” approach (3) Implied Warranty of fitness for particular purpose UCC 2-316(2) o must be in conspicuous writing. o NO disclaimer of implied warranty of merchantability in transactions that offer express written warranty.” (4) Alternative ways to disclaim implied warranties UCC 2-316(3) o Expression like “as is. Interpretation of a contract General Rule for interpreting the intent of the parties a. and the other party doesn’t know or have reason to know the oth er 13 c. Old view: subjective approach (Peerless rule) Meeting of the minds No contract if the parties’ view differs on a term Contract should be based on individual exercise of free will Con: no proof Objective approach Attributed to Holmes & Williston Words & conduct of parties should be interpreted under standard of what reasonable person would have meant People should be held to reasonable meaning of their own words and conduct Con: Could result in Contract based on neither party’s intended meaning! Con: freedom of contract Modern Modified objective approach . The dealer assumes no responsibility for any repairs regardless of any oral statements about the vehicle. . and o can say something general like “there are no warranties which extend beyond the description on the face hereof.” Amended UCC 2-316 o for consumer contracts. § 2308(b) FTC rule requires disclosures of either the warranty if one is offered.” o alternative wording is also still allowed under 2-316(3) provided it is conspicuous if written o Some states have non-uniform version of 2-316 making all disclaimers of implied warranty of merchantability ineffective in consumer transactions - - IV. Excerpt: Consumer transactions Magnuson-Moss Warranty Act governs written warranties on consumer products o [products normally used for personal. 15 U.§ 201 Rest.C.S.

f. course of dealing. - party’s meaning.S. § 202(4) Rest. § 202(1) Rest. unenforceable or unreasonable. International Sales Corp. - Course of performance. § 222 Rest. enforceable and reasonable over an interpretation that makes the K invalid. Principles of Interpretation Most courts require ambiguity of a term If plain language is clear. Doctrine of reasonable expectation For adhesion contracts assent to boilerplate only if reasonably expected Only applied in ½ of the states. § 203(a) (2) Contra Proferentem § 206 Rest. Usage: habitual or customary practice Usage of trade: usage regularly observed in trade. trade usage and usage May be helpful for interpretation Frigaliment Importing Co.2d o look at context and how the different provisions fit together o Specific clauses will be subordinate to the K's general intent (4) Intent or purpose of the parties. Course of dealing: conduct prior to contract.N. (6) Ordinary meaning of words prevails unless clearly shown that they were meant to be used in a technical sense. C & J Fertilizer. § 202(2) Rest. 202(3) Rest. then no contract. § 211 Rest. § 203(c) Rest.2d o Determine the common purpose and use that as a guide in interpretation (5) Specific provision is construed as an exception to the general one. v.2d (7) Ejusdem generis o General term joined with specific one will include only things like the specific one (8) Expressio unius exclusio alterius o List of specific terms without a general or inclusive term meant only specific items are included e. weaker form 14 . Adams (3) If parties had different meanings and neither one knew or had reason to know of other’s meaning.d.  Terms giving reason to believe  Bizzare or oppressive  Eviscerates bargained-for terms  Eliminates the dominant purpose of the transaction (3) Contract as a whole. unobjected performance. particularly where there is unequal bargaining power and a contract of adhesion (contract with large amount of boilerplate terms and one party with more bargaining power – “take it or leave it” ) is imposed on the weaker party o § 211(3): where the other party has reason to believe that the party manifesting such assent would not do so if he knew that the writing contained a particular term. § 223 Rest. Course of performance: parties’ repeated. Allied Mutual Insurance Co.2d o construe ambiguous provisions against party who drafted the contract. Joyner v. B.2d o Specific provision controls if inconsistent with the general o Handwritten or typed provisions control over printed provisions. party having knowledge or reason to know is bound by meaning of the other . Inc. v. the term is not part of the agreement. most courts do not allow extrinsic evidence Modern approach is to allow extrinsic evidence to figure out intent Use all relevant circumstances (1) Prefer an interpretation that makes the K valid.

State Farm Mutual Automobile Insurance Co.) § 214(d)  only so-called fraud in the factum. Morrion-Knudsen Co. deals with some but not all aspects of transaction How to determine? o Traditional objective approach  Intent of parties determined from the face of the writing  4 corners  Merger clause decisive (i. amount of negotiation  § 209(3) Rest.Parol Evidence Rule. careful drafting o Subjective actual intent approach  Actual intend of parties  Any evidence to prove intent allowed  Corbin view  Good indicator: form contract. v. As opposed to fraud in the inducement. - Did the parties intend their written agreement to be the final and complete statement of their agreement? Integration: agreement is final Complete integration: complete and exclusive expression of the terms Partial integration: writing intended to be final but not complete. where someone misrepresents something about the deal to induce someone to enter the K (narrow view) Sherrod. Inc. illegality etc. Agreement was subject to Condition precedent § 217 To establish an equitable remedy. such as reformation of the contract § 214(e) ii.e. no evidence of a term or obligation that is allegedly part of the agreement (2) Exceptions i. 15 . certainty. v. but means any evidence outside the written agreement What is it the party is trying to prove? For what purpose is the evidence offered? (1) Generally.. § 210  Taylor v. entire agreement clause)  Williston method  Pro: distrust of parties. incapacity. Inadmissibility of extrinsic evidence for written agreements if it contradicts or supplements the contract Usually applies to oral statements. §§ 209-218 Rest. iv. b. mistake. vi. c. Meaning of a term – interpretation § 210  Plain meaning rule  Bars evidence if no ambiguity and no special meaning  Modern  No ambiguity necessary Separate enforceable agreement (collateral agreement) supported by separate consideration § 216(2) Modification after the formation of the contract Formation issue (fraud.. duress. finality. iii. UCC 2-202 a. memo or a different type of document is covered. fraud that tricks someone into signing a contract when they think it's just a receipt.

v. f. UCC 2-208 conduct of parties after the agreement and in the course of performing it more than once Course of dealing. vocation or trade and Must be binding on the party against whom it is offered.2d  Any written document – may be by way of linked documents  Signed by or on behalf of the party to be charged. o o Course of performance. are hostile to defense) Defense may only be raised by party to the contract Is this the type of oral contract that is within the S/F (i. terms and conditions) 16 b. UCC 1-205 practice or method of dealing in a place. vocation or trade. lifetime contract) o Suretyship contracts (guarantees) If so. o o ii. Shell Oil Co o unless totally negating express terms V. is there a sufficient memorandum to meet the statutory requirement? o § 131 Rest. the context of the agreement Must show regularity of observance of usage in a place. which  Reasonably identifies the subject matter of the K (parties. but (2) Explained or supplemented by. o iii. . Defenses Statute of Frauds – Defense to an oral contract (§ 110 Rest.d. unless unreasonable i. Failure to comply with SoF will make promise unenforceable but not void Purpose is to prevent fraud (courts narrow interpretation. Does the evidence contradict or supplement the agreement? (1) Completely integrated o No contradictory OR o No Supplemental terms (2) Partially integrated o No contradictory terms e. is a writing required)? o Contracts for the sale of an interest in land  Leases  Real estate o Contract for sale of goods of more than USD 500 (UCC 2-201) o Contracts in consideration of marriage o Contracts that cannot be performed within 1 year of making  Usually employment contracts  Courts ask whether it is possible to perform within 1 year from formation (e.) a.e. UCC 1-205 conduct of the parties prior to the contract Usage of trade. subject matter.2d ff.g. - Promissory estoppel? Rejected by most courts to overcome parol evidence rule UCC-approach 2-202 Courts more likely to look beyond the writing (1) Express terms of agreement govern. Nanakuli Paving & Rock Co..

if one side sends a written confirmation within a reasonable time after oral K and the other fails to respond within 10 days of receipt. clear & convincing evidence of terms o UCC-2-201  specially manufactured goods where seller has made a substantial beginning of manufacture.  if goods have already been shipped and payment made (part performance) K is enforceable with respect to those goods.2d) or promissory estoppel reliance (§ 139 Rest. 17 .  under 2-201(2). 2d 139 – promissory estoppel principle . at least for S/F purposes  promissory estoppel by UCC 1-103 Party may recover by way of promissory restitution (§ 82 Rest. between merchants. but there is not a sufficient memorandum.o  Is sufficient to indicate that a contract has been made. but other terms can be omitted or even misstated  “Signature” can be any authentication c.other remedies insufficient. definite & substantial. reasonable & foreseeable reliance. If a writing is required.2d) d. and  States w/ reasonable certainty the essential terms UCC 2-201  Requirement is less demanding than common law  Signed writing sufficient to indicate a contract has been made  Must state a quantity. is there an exception? o Rest. testimony or otherwise in court that K for sale was made (judicial admission).  if party to be charged admits in pleading. then that's sufficient writing to charge both parties. 2d 129 – land contract – may be specifically enforced if party seeking enforcement changed position in reasonable reliance o Rest.

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