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1. Background a. Sources of Contract Law i. Judicial opinions ii. Statutory Law: UCC (does not apply to real estate or personal service contracts) iii. Restatements: only a persuasive authority, not bindings iv. Legal commentary (Williston and corbin; Farnsworth v. International commercial law: CISG, Gen'l Agreement of Tariffs and Trade "GATT" b. Theory (Feinman): contracts looks to restore the state of affairs as if the K was performed as Promised, futurity, social ordering, freedom and autonomy (freedom of contract freedom to decide whether or not to enter into K, relational v. contextual, social justice v. formalism) 2. Contract Law a. Contract - an agreement between two or more persons - as to something that is to be done in the future by one or both of them. Is enforceable by law. Contracts can be written or oral. i. Written v Oral contracts - an oral K may be binding and enforceable in most circumstances unless it falls under the statute of frauds. ii. Elements of Contract - A contract may be defined as an exchange relationship created by oral or written agreement between two or more persons, containing at least one promise, and recognized in law as enforceable a. An oral or written agreement between two or more persons: Each party agrees to do something each way, some sort of exchange or bargain going on, for a legal purpose. i. Subjective - their minds are in accord ii. Objective - a party's intent is deemed to be what a reasonable person in the position of the other party would think that the first part's objective manifestation of intent meant. b. An exchange relationship - either for promise or performance c. At least one promise - a promise is a commitment to do or not do something in the future. d. Enforceability - to enforce a k by law, it must be determined that the K is legally enforceable iii. **Law sides with the objective theory. It looks at the conduct of the parties from a reasonable perspective. i. Contract - an agreement for an exchange for a legal purpose (K) a. Courts recognize three types of contracts i. Express contracts - one the terms of which are declared by the parties, either orally or in writing, at the time it is made ii. Implied in Fact Contracts - a real contract in which the agreement is reached by the parties actions rather than words. Sometimes referred to as express contracts. iii. Implied in Law or Quasi Contracts - not really a K at all, used by courts to denote a recovery imposed by law where justice requires,
even if the parties have not made an agreement. Ie emergency services provided to injured. b. What contracts will the law enforce - This is a contract doctrine known as the validation of promises, and the main doctrine is consideration. Two people set up an exchange - one thing for the other - considered a manifestation of assent and can be enforced. Bilateral Contracts: A contract in which both sides make promises. Since they involve an exchange of reciprocal commitments, bilateral contracts were seen by the classical theorists as typically being the product of a negotiating process usually known as "offer and acceptance" Offer and Acceptance: Bilateral Contracts a. Offers compared w/ invitations to deal i. General Rule: A statement is not an offer merely b/c it looks toward a bargain. Statements made in language or under circumstances indicating that the speaker only wants to begin negotiations are considered invitations to deal, or preliminary negotiations, rather than offers. For example, a price quotation is normally not an offer to sell but simply an invitation to the buyer to make an offer to purchase. When the circumstances indicate otherwise, however, a quotation may be elevated to the status of an offer. ii. Solicitation of offer is not an offer. i. See Izadi v Machado ford Unilateral Contracts: A contract where the offeror makes a promise for a future performance by the offeree.
a. Mutual Assent - Restatement 22 Manifestation of mutual assent ordinarily takes place: a. The manifestation of mutual assent to an exchange ordinarily takes the form of an offer or proposal by one party followed by an acceptance by the other party or b. A manifestation of mutual assent may be made even though neither offer nor acceptance can be identified and evven though the moment of formation cannot be determined. i. 26. Preliminary Negotiations: 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. ii. 27. Existence of Contract where written memorial is contemplated: Manifestations of assent that are in themselves sufficient to conclude a contract will not be prevented from so operating by the fact that the parties also manifest an intention to prepare and adopt a written memorial thereof; but the circumstances may show that the agreements are preliminary negotiations. iii. 33. Certainty: even though a manifestation of intention is intended to be understood as an offer, it cannot be accepted so as to form a contract unless the terms of the contract are reasonably certain.
a. The terms of a contract are reasonably certain if they provide a basis for determining the existence of a breach and for giving an appropriate remedy. b. The fact that one or more terms of a proposed bargain are left open or uncertain may show that a manifestation of intention is not intended to be understood as an offer or as an acceptance. a. Restatement 17 - formation of a contract requires "a bargain in which there is a manifestation of mutual assent to the exchange and a consideration. b. Meeting of minds v Mutual assent; i. Mutual assent - for a contract to be formed, both parties must reach "mutual assent" that is, they must both intend to contract, and they must agree on at least the main terms of their deal. ii. Objective Theory of Contracts: in determining whether the parties have reached mutual assent, what matters is not what each party subjectively intended. Instead, a party's intentions are measured by what a reasonable person in the position of the other party would have thought the first party intended, based on the first party's actions and statements. This principal is known as the objective theory of contracts. iii. Ray v Eurice Bros - A party who manifests acceptance of the terms of a writing which he should reasonably understand to be a contract is bound by the contract. There does not have to be a meeting of the minds. In this case the court chose to look at the words and actions in an objective sense to decide whether they assented to something. a. Rules of the case: i. In the absence of fraud, duress, or mutual mistake, on having capacity to understand a written document, and who reads and signs it, or who, without reading it or having it read to him, signs it, is bound by his signature in law. ii. A party who manifests acceptance of the terms of a writing which he should reasonably understand to be a contract is bound by the contract. It does not matter that the party claims he actually intended to be bound by. iv. Offer and Acceptance: Normally, for a contract to come into existence there must be an "offer, and an acceptance" a. Offer - an offer is a statement or act that creates a "power of acceptance". When a person makes an offer, she is indicating that she is willing to be immediately bound by the other person's acceptance without further negotiation. b. Acceptance: an "acceptance" is a statement or act that indicates the offeree's immediate intend to enter into the deal proposed by the offer. As long as the acceptance takes place while the offer is still outstanding, a contract is formed as soon as the acceptance occurs.
Social ordering d. Where performance will benefit a person other than the promisee. Freedom to join in a contract ii. Promises and agreements c. Restatements Section 1 a. The Mailbox rule: common law has traditionally held that although both an offer and a revocation (by the offeror) must be communicated to be effective. Lonergan v Scolnick page 34 . vii. The person to whom the manifestation is addressed is the promisee. Court used Restatement Section 25: If from a promise. The offer is rejected by the offeree ii. he has not made an offer c. c. is to figuring out whether the offer ended before the acceptance occurred. The offeree makes a counteroffer iii. d. Jay Feinman . an . Either the offeror or the offeree dies or becomes incapacitated. There can be no contract unless the minds of the parties have met and mutually agreed upon some specific thing. ii. so made as to justify a promisee in understanding that a commitment has been made. Contract: A contract is a promise or a set of promises for the breach of which the law in some way recognizes as a duty. Freedom and autonomy i. The offer lapses by passage of time v.v. Rules: a. Freedom to not join in a contract e. Relational context . The offeror revokes the offer iv. A promise is a manifestation of intention to act or refrain from acting in a specified way.Themes about contract law a. Try to set up rules that are flexible so that the law doesn¶t get screwed h. Future b. or manifestation of intention. (in which case there would be no contract) The main ways in which an offer can end are: i. b. Duration and Power of acceptance: The key to see whether a valid offer and acceptance occurred.Ad placed in paper for land for sale. the person to whom the promise or manifestation is addressed knows or has reason to know that the person making it does not intend it as an expression of his fixed purpose until he has given a further expression of assent. or from the circumstances existing at the time. Important to have a rule and the rule must be clear. Restatement Section 2 a. b.contract is always a contract f. that person is the beneficiary. Justice/Formalism i. i. Property was sold to another individual and plaintiff brought suit. vi. The person manifesting the intention is the promisor c.
i. Assent/Intent ." That is. It is enough that the offeree receives reliable information. there is no more power of acceptance. Communication of the offer: failure of the offeror to communicate the offer to the offeree may indicate that no offer exists in the circumstance. Rule 3: Generally. I. The power of acceptance created by an offer will be terminated by the offeree's rejection. (Restatement 23) iv.) by the offeree. 24. iii. (r2nd 57 and 58) iii. a. "that the offeror had taken definite action inconsistent with an intention to make the contract. iv. iii. so made as to justify another person in understanding that he assent to that bargain is invited and will conclude it. b. the offer will contain a conditional promise. Normile v Miller: i. 24: An offer is the manifestation of willingness to enter into a bargain. Promise contained in the offer: In most cases. Rule: 4 It is a fundamental tenet of the common law that an offer is generally freely revocable and can be countermanded by the offeror at any time before it has been accepted by the v. Definiteness: if the terms of their purported agreement are not reasonably certain. .acceptance will in some circumstances by treated as effective as soon as dispatched (mailed. Intent is determined by the reasonable person test. Classical Rules of Offer and Acceptance a. ii. even indirectly. etc. Requirement of offer and acceptance: The "mutual assent" necessary for the formation of a K almost invariably takes place through what are called an "offer" and an "acceptance. and will propose that the other party accept the proposal by making a promise in return.to enter into a bargain i. one party proposes a bargain (this proposal is the offer_ and the other party agrees to this proposed bargain (this agreement is the acceptance). Three essential elements to an offer: i. ii. would a reasonable person in the position of the offeror and considering all of the circumstances understand that the offeree intended to conclude the bargain. no contract will result. notice of the offeror's revocation must be communicated to the offeree to effectively terminate the offeree's power to accept the offer. telegraphed. An acceptance must be unequivocal and unqualified for an offer to be formed. When you have communication that an offer is rejected. Offer Defined: Restatement 2d. General Rule: A counter offer is a rejection of the buyers offer ii. Offer and acceptance Generally i. Rule 2: The revocation of the offer terminates it and the offeree has no power to revive the offer by any subsequent efforts to accept.e. Restatement 42 a.
the invitation may be held to constitute an offer. the bids are offers. c. radio or tv are not ordinarily intended or understood as offers to sell« To make an offer by an advertisement there must ordinarily be some language of commitment of some invitation to take action without further communication. b. then it is an offer. 2d 25) b. even though it is also an advertisement.This case is a version of a unilateral contract. General Rule: A statement is not an offer merely because it looks toward a bargain. and it is up to the inviter to decide which. Words of commitment: suggest an offer. vi. newspaper. the invitation is not an offer unless it contains language so indicating. ii. (rest. a. but is at the same time a contract in which the offeror promises that she will keep the offer open for a certain time.95 for your free cotton t-shirt" is an offer. Language indicating offer: if the invitation to submit a bid contains language indicating a commitment on the part of the inviter to award the contract or sale to the highest bidder.the legal effect of an offer is to create a power in the offeree to enter into a contract. Price Quotations distinguished from offers: it is frequent business practice for one person to request a "quote" from another. An invitation is simply a solicitation of offers. handbill. This is b/c they don't contain sufficient words of commitment. Instead. i. d. Statements made in language or under . then it may be an offer. and the inviter will be bound to a contract to the highest bidder. In such a situation. The general rule is that an advertisement does not constitute an offer. c. Leonard v Pepsico . and cannot be accepted. Validity of Particular types of Offers: i. Preliminary Negotiations: if a party who desires to contract solicits bids. of the bids to accept. Restatement 26(b) "advertisements of goods by display. The offeree enters into the contract by making his acceptance. Rule: An advertisement is not transformed into an enforceable contractual offer merely by a potential offoree's acceptance by filling out an order form. sign. for the price quotation to be an offer. this solicitation is not an offer. if it especially contains the particular number of units. and the use of the term. Offers compared with Invitations to deal i. if any. it merely serves as a basis for preliminary negotiations. Example: "send 3 boxes of box tops plus $1. Advertisements: Most advertisements are not offers to sell. ii. this is b/c the advertiser is committing himself to take certain action in response to the consumer's action. specific addressee.An offer creates a power of acceptance . i. Invitations to bid: where bids are solicited through the sending out of invitations to submit beds. c. "offer". there must be a definite quantity. Specific Terms: if the advertisement contains specific terms. v. Option Contract: One kind of offer. iii. the Option is not only an offer to contract.
When the circumstance indicate otherwise. a price quotation is normally not an offer to sell but simply an invitation to the buyer to make an offer to purchase. c. ii. Traditional Rule: Advertisements in newspapers. but what a reasonable person in the position of the parties would have thought it to have meant. Acceptance: Restatement 50 a. iii. or preliminary negotiations. Assent: in order for an acceptance to constitute a manifestation of assent. There must be commitment b. 4. b. An effective acceptance has three elements: a. etc are not offers but merely invitations to offers. newspaper. An offer may be accepted only by a person in whom the offeror intended to create a power of acceptance. Restatement 26(b) "advertisements of goods by display. three criteria generally must be met: a. This case makes an exception: The test of the true interpretation of an offer or acceptance is not what the party making it meant or thought it to mean. however. a person must know of the reward to claim it. c. Izadi v Machado (Gus) Ford a. c. then the acceptance may be given in any manner and by any medium reasonable in the circumstances. An acceptance requires the offeree to know of the offer at the time of his alleged acceptance. magazines. b. For example. handbill. a. a quotation may be elevated to the status of an offer. if the method of acceptance is not specified. Acceptance by a promise requires that the offeree complete every act essential to the making of the promise i. radio or tv are not ordinarily intended or understood as offers to sell« To make an offer by an advertisement there must ordinarily be some language of commitment of some invitation to take action without further communication. the acceptance is not effective to create a contract. The acceptance must be made in the manner invited or required by the offer. iv. Ie if the offer has already been revoked. Ie rewards. The commitment must not be conditional . Solicitation of offer is not an offer. A manifestation of assent by the offeree to the terms of the offer. An acceptance of an offer is "a manifestation of assent to the terms thereof made by the offeree in a manner invited or required by the offer" b. Acceptance by performance requires that at least part of what the offer requests be performed or tendered and includes acceptance by a performance which operates as a return promise.circumstances indicating that the speaker only wants to begin negotiations are considered invitations to deal. rather than offers. sign. The acceptance must occur while the offer is still open. ii.
b/c a contract never came to fruition. he may be held to have accepted a contract for the goods even though he does not intend to do so. h. that is. Carries certain risks for the offeree. but instead simply acts. Assent must be implied ii. Rest 2d. 69 (1) a g. modern courts and authorities recognize that silence may sometimes manifest an intent to accept.where an offeree receives goods. i. Last Shot Rule: under which the terms of the last form prevail. Acceptance of a unilateral Contract: can be accepted only by full performance. i. the silence or inaction of the offeree will operate as an acceptance if she subjectively intends to be bound. Where the offeror has given the offeree reason to understand that silence will constitute acceptance. Acceptance of bilateral contracts: if the offer looks to a bilateral contract. a. Offers maximum protection for the offeror (would not be bound unless and until he received the performance he sought.c. Acceptance by dominion .May the offeree accept by virtue of his silence? Although the common law never treated silence as acceptance. That is. If the offeree started the performance. objective person would have understood the commercial to be an offer. the offeree receives an option contract e. Offer and acceptance in Unilateral Contracts: Unilateral Contract: A unilateral contract is one which involves an exchange of the offeror's promise for the offoree's act.g. the offeree would be out of luck. Silence .") But the acceptance may also be in the form of actions. a. a purported acceptance must mirror the terms of the offer to result in the formation of a contract. The commitment must be on the terms proposed without variation d. b. if these fairly indicate to the offeror that the offeree intends to enter into the contract. Acceptance of services: an offeree who silently receives the benefit of services (not goods) will be held to have accepted a contract for them if she (1) had a reasonable opportunity to reject them and (2) knew or should have known that the provider of the services expected to be compensated for them. but the offeror pulled the contract precompletion. a letter stating "I accept your offer of may 23. a. Petterson v Pattberg: . in a unilateral contract the offeree does not make a promise. f. Option contract arising on part performance: if the offeree begins to perform. The Mirror Image Rule: Under common law. Acceptance varying from Offer: Common law view i. ii. a. No reasonable. the acceptance will usually be in words (e. most courts treat the offer as having become temporarily irrevocable.
To whom an offer is addressed: 1. If the offeree makes a counter offer." he can set a time limit for acceptance. The new Rule: Section 45: When an offeree tenders or begins the requested performance under a unilateral contract. Restatement 45: now provides that when an offeree tenders or begins the requested performance under a unilateral contract. 2. What is a reasonable time is a question of fact. .Rule: Is is elementary that any offer to enter into a unilateral contract may be withdrawn before the act requested to be done has been performed. An offer may invited or require acceptance to be made by an affirmative answer in words. The offeree states that although she does not now intend to accept the offer. at the end of a reasonable time. an offer i. or if no time is specified. An offer may create a power of acceptance in a specified person or in one or more of a specified group or class of persons. Rejection or counter offer by the offeree Restatement 38 . 2. and subject to the rule stated in 49. b. or by performing or refraining from performing a specified act or may empower the offeree to make a selection of terms in his acceptance. 29 . acting separately or together. b. The offeror indicates that the offer still stands in spite of the rejection b. There are four ways in which the offeree's power of acceptance may be terminated.Form of Acceptance Invited 1. 41 . 2. Lapse of time . Restatement 36 1. c. the offeror becomes bound and cannot revoke his offer so long as the offeree completes performance in accordance with the terms of the offer. 30 . Unless otherwise indicated by the language or the circumstances.B/c the offeror is "master of his offer. Duration of the power of acceptance: i. a. The manifested intention of the offeror determines the person or persons in whom is created a power of acceptance. Unless otherwise indicated by the language or the circumstances. ii. the offeree's power of acceptance automatically terminates by "lapse". her power of acceptance is terminated unless either a. she wishes to consider it further. his power to accept the original offer is terminated just as if he had flatly rejected the offer. At the end to this time limit.if the offeree rejects the offer. An offoree's power of acceptance is terminated at the time specified in the offer. c.Lapse of Time a. depending on all the circumstances existing when the offer and attempted acceptance are made. the offeror becomes bound and cannot revoke his offer so long as the offeree completes performance in accordance with the terms of the offer. or in anyone or everyone who makes a specified promise or renders a specified performance. an offer invites acceptance in any manner and by any medium reasonable in the circumstances.
5. the rendering of the invited performance does not constitute an acceptance if before the offeror performs his promise the offeree manifests an intention not to accept. Revocation by the offeror . 3. the offeror is free to revoke his offer at any time before it is accepted. Death or incapacity of the offeror or the offeree. the power to accept is terminated. 54 . 52 . and offeree who learns of an offer after he has rendered part of the performance requested by the offer may accept by completing the requested performance. a contract can be created by acceptance within the period which would have been permissible if the offer had been dispatched at the time that its arrival seems to indicate.Effect of delay in communication of offer If communication of an offer to the offeree is delayed. In addition = Non-occurrence of any condition of acceptance under the terms of the offer. Where an offer of a promise invites acceptance by performance and does not invite a promissory acceptance. 3.Acceptance by Performance. . Manifestation of Intention Not to Accept 1. This is so even if the offeree does not learn of the offeror's death or incapacity until after he had dispatched what he intends as an acceptance. and the offeree neither knows or has reason to know that there has been delay.if either the offeree or the offeror dies. the period within which a contract can be created by acceptance Is not thereby extended if the offeree knows or has reason to know of the delay.Who may accept an offer An offer can be accepted only by a person whom it invites to furnish the consideration. 2. Except as stated in 69 the rendering of a performance does not constitute an acceptance if within a reasonable time the offeree exercises reasonable diligence to notify the offeror of non acceptance. A revocation by the offeror does not become effective until it is received by the offeree rest 42 4.Except in the case of an option contract. but if the delay is due to the fault of the offeror or to the means of transmission adopted by him. 5.sent by mail is seasonably accepted if an acceptance is mailed at any time before midnight on the day on which the offer is received.Acceptance by Performance. Necessity of Notification to Offeror .Effect of Part Performance without knowledge of offer Unless the offeror manifests a contrary intention. though it is due to the fault of the offeror. Restatements: 49 . 51 . An offer can be accepted by the rendering of a performance only if the offer invites such an acceptance. 53 . or if either loses the legal capacity to enter into the contract .
68 . rejection. a medium of acceptance is reasonable if it is the one used by the offeror or one customary in similar transactions at the time and place the offer is received. 57 . the contractual duty of the offeror is discharged unless i. or Acceptance A written revocation.Acceptance must be properly dispatched An acceptance sent by mail or otherwise from a distance is not operative when dispatched. The offeree exercises reasonable diligence to notify the offeror of acceptance.Reasonableness of Medium of Acceptance Unless circumstances known to the offeree indicate otherwise. unless it is properly addressed and such other precautions taken as are ordinarily observed to insure safe transmission of similar messages. it is essential to an acceptance by promise either that the offeree exercise reasonable diligence to notify the offeror of acceptance of that the offeror receive the acceptance seasonably. When Acceptance becomes Effective . Where an offer invites an offeree to accept by rendering a performance. The offeror learns of the performance within a reasonable time. 67 .) However.Effect of Equivocal Acceptance Where notification is essential to acceptance by promise. 66 . a. or of some person authorized by him to received it for him.most courts follow the general rule that the acceptance is effective upon proper dispatch. or ii. the rule also applies to acceptance dispatched by means other than letters (eg telegrams) The mailbox rule only . or acceptance is received when the writing comes into the possession of the person addressed. the offeror is not bound by an acceptance in equivocal terms unless he reasonably understands it as an acceptance. If an offeree who accepts by rendering a performance has reason to know that the offeror has no adequate means of learning of the performance with reasonable promptness and certainty. Rejection. no notification is necessary to make such an acceptance effective unless the offer requests such a notification.Effect of Receipt of Acceptance Improperly Dispatched Where an acceptance is seasonably dispatched by the offeree uses means of transmission not invited by the offer or fails to exercise reasonable diligence to insure safe transmission.a.Acceptance by Promise.What Constitutes Receipt of Revocation. 56 . b. Necessity of Notification to Offeror Except as stated in 69 or where the offer manifests a contrary intention. it is treated as operative upon dispatch if received within the time in which a properly dispatched acceptance would normally have arrived. or when it is deposited in some place which he has authorized as the place for this or similar communications to be deposited for him. or iii. 65 . The offer indicates that notification of acceptance is not required. The rule is often called the mailbox rule (since deposit of a letter of acceptance into a mailbox will cause the acceptance to become effective.
2. or manifestation of intention. etc. Acceptance of option Contracts: is effective not upon dispatch. R2d 64 b 3. no enforceable contract was made. And acceptance under an option contract is not operative until received by the offeror. but b. a. The Doctrine of Consideration . Lonergan v Scolnick page 34 . he has not made an offer 3. 2. without regard to whether it ever reaches the offeror. Indefiniteness: If a contract is too indefinite. In some situations. There are for elements needed for an agreement to be enforceable. Subject matter of the contract c. See walker v keith p 168 where: rental agreement could not be enforced: The fact that the parties themselves never were able to agree on rent evidences that only an agreement to agree existed. There can be no contract unless the minds of the parties have met and mutually agreed upon some specific thing. Court used Restatement Section 25: If from a promise.applies to acceptances by promise. Time for performance d.Mailbox Rule: Time when acceptance takes effect Unless the offer provides otherwise. the contract will not be enforceable. In order for a contract to be formed. telegraphed. or from the circumstances existing at the time. all of the material relates to acceptances dispatched by mail. Property was sold to another individual and plaintiff brought suit. Because rent is a material term of a lease and the parties did not agree to a substantially certain rent or method of determining rent.) by the offeree. The Mailbox rule: common law has traditionally held that although both an offer and a revocation (by the offeror) must be communicated to be effective. the person to whom the promise or manifestation is addressed knows or has reason to know that the person making it does not intend it as an expression of his fixed purpose until he has given a further expression of assent. 1. 2. Rules: 1. An acceptance made in a manner and by a medium invited by an offer is operative and completes the manifestation of mutual assent as soon as put out of the offeree's possession.telegram. etc. 63 .Ad placed in paper for land for sale. the courts may supply the missing terms 6. not by performance. a. an acceptance will in some circumstances by treated as effective as soon as dispatched (mailed. not acceptances which occur through either part or full performance. the law requires substantial certainty as to material terms upon which the parties have agreed. Parties to the contract b. a. but upon receipt by the offeror. Price 1. That is.
Nominal Consideration d. a gross inadequacy of consideration may be evidence of fraud. The promisor made his promise as part of a bargain that is. loss. unilateral 2. charity. or responsibility given. detriment . bilateral. The courts infer a legal detriment whenever a party obliges himself through a bargain to perform in a certain manner.donee must do something he does not have to do. General rule: such promises are generally not enforceable. without requiring a promise or performance in return. Consideration: A promise is supported by consideration if two requirements are met: a. There is no bargain involved. he made his promise in exchange for the promisee's giving of value or circumscribing of liberty. Donative promises . (This is the bargain element) 1. a. even if the performance is not detrimental in the ordinary sense of the term. or b.Any performance that is bargained for is consideration. Moral Consideration . 3.See Dougherty v Salt . and the promisor is unlikely to have been enriched at the promisee's expense. 1. or undertaken by the promisee. the likely injury that would result from the breach of a donatives' promise is relatively slight. See batsakis v demotsis . or refrain from doing something that he had a right to do.1. the person making the promise acts out of affection. The law does not provide a remedy for a lost hope. if performance. the court permitted P to recover the full . 79) However. 2. because there is no bargain element. Can be either promise or performance if promise.where D signed an agreement stating that P had lent D $2000 although the actual loan was approximately $25. c. gambling and using tobacco until 21. or some other personal motivation. A detriment to the donee . profit. duress. A right.not legally binding.Aunt b. Examples of Benefit or detriment . or circumscribed her liberty in some way (this is called the legal detriment requirement) b. A benefit to the donor or . or benefit accruing to the promisor. Abstention from bringing legal action c. or undue influence. The promisee gave up something of value. 72. Not considered to be valid consideration: a. regardless of whether the values exchanged are equivalent (See restatement 2d 71. Adequacy of consideration . but not in law. Promissory note evidencing future gift . Abstention from legal conduct . a promise that is enforceable in morality.ie bargain for the promise b.A donative promise is a promise to make a gift.see Hamer v Sideway where uncle requested that nephew abstain from drinking. suffered. interest. Classic Consideration involves: a.Legal consideration may be either: a. mistake. b. A forbearance.
Therefore neither party is bound. Promises to pay for past services .Illusory and alternative Promises: A promise or apparent promise is not conisderation if by its terms the promisor or purported promisor reserves a choice of alternative performances unless 1.e. One of the alternative performances would have been consideration and there is or appears to the parties to be a substantial possibility that before the promisor exercises his choice events may eliminate the alternatives which would not have been consideration. If D changes their behavior slightly in exchange for more money. restatement 77 .similarly. If the person threatens not to complete a job they have already agreed to unless more $ is given. an unconscious person who later promises compensation and then reneges.D promises to pay for past services which P rendered to him. 5.not sufficient consideration to support a counter-promise. 4. Situations when the issue of consideration will arise: 1. 3. Most commonly.when one party is given total discretion on whether to perform. Each of the alternative performances would have been consideration if it alone had been bargained for 2. consideration. 2. Promise to pay for past services received . The most common scenario is K modification a." the promise to take less is supported by consideration. no consideration b.D's return promise is not supported by consideration. Pre-existing duty . Held that the court will not inquire into the adequacy of the consideration. usually to a relative or charity. Settlement of Claim .P promises to pay (or perform services) that P is already legally obligated to pay/perform . if a party who has a contractual claim for money agrees to take less in a "settlement. Illusory Promises .Past consideration is not valid consideration. so long as the other party disputed in good faith the amount or validity of the claim. h. there is no consideration supporting D's promise so it is not enforceable. An illusory promise is a statement which appears to be promising something but which in fact does not commit the promisor to anything at all.a promise to pay for services received in the past is usually held not to be supported by consideration. f. Illusory Promises . P is a good samaritan who saves D. . Past consideration not sufficient . g. Promises to make a gift: D promises to make a gift. $2000 on the theory that there was in reality a bargain despite the falsity of the recital of consideration. the party's promise is illusory b/c the party hasn't committed to anything. a.
under the "promissory estoppel" doctrine. Court held D's promise was not supported by consideration since the son had long since left home. Mills v Wyman f. Guaranty Contract: A guaranty (i. Is made irrevocable by statute 2. this action or forbearance was reasonably foreseeable by the promisor.ie ambulance driver. Promises to pay debt . and (2) states that consideration has been paid for the guarantee. b. a promise to pay for services already received is enforceable in many situations. er doc 2..ex mills v wyman wher D's son 25yo becomes ill while travelling. b. recites a purported consideration for the making of the offer. a promise to pay the already-existing debt of another person) is usually enforceable if it is in writing that (1) is signed by the guarantor. or b. 1. Son's request should not be enforced on the father.most courts hold that a promise to pay a past debt that is no longer legally enforceable is binding without consideration. To constitute consideration. The doctrine is often applied in a situation where there has been a promise to make a gift. Moral consideration . 1.Requirement of Exchange. 6. Today . Promise to pay for benefits received: similarly. 5. (this is the main rule we will follow) e. Promissory estoppel . Restatements: 71 . An offer is binding as an option contract if it a.a modern court might hold that such a promise made on account of "moral obligation" should be enforced. a promise will be enforceable without consideration if: 1.The UCC provides that a modification of a contract for the sale of goods does not have to be supported by consideration. The remedy may be limited as justice requires. The enforcement of the promise is necessary to avoid injustice. Types of Exchange: a. Option Contract .2. An offer which the offeror 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 is binding as an option contract to the extent necessary to prevent injustice. the promisee acts or forebears in reliance on the promise 2. c. or rendered with an expectationof payment . 3.e. Where services were requested. if it is in writing. a performance or a return promise must be bargained for. and is nursed by P.Restatement 87 1. d. 1. Promises binding without consideration: a. promising to pay P's expenses. Is in writing and signed by the offeror. and proposes an exchange on fair terms within a reasonable time. Modification . 4. D later writes to P. 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 . .not enforceable no bargain present. Benefits previously received but not requested .
The performance or return promise may be given to the promisor or to some other person. duress. be a similar performance is consideration if it differs from what was required by the duty in a way which reflects more than a pretense of bargain. The creation. 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. profit or benefit accruing to the one party. a gross inadequacy of consideration may be evidence of fraud. interest. payable at or before her death. or iii. The aunt gave P the note b/c she loved him and wanted to take care of him. or undue influence. or ii. disadvantage. Mutuality of Obligation If the requirement of consideration is met. suffered or undertaken by the other. advantage." 81 . d. (Restatement 71. Rules: A valuable consideration in the sense of the law may consists either in some right. detriment. 8yo boy received a promissory not from his aunt. there is no additional requirement of i. 79 .Performance of a legal duty Performance of a legal duty owed to a promisor which is neither doubtful nor the subject of honest dispute is not consideration. or destruction of a legal relation. A gain. ii. 72. in certain types of cases the courts have held that no consideration is present even though a bargain had apparently been reached. 2. or ii. or iii. It may be given by the promisee or by some other person. Rule: Any performance that is bargained for is consideration regardless of whether the values exchanged are equivalent. or detriment to the promisee. Rule: in general a waiver of any legal right at the request of another party is a sufficient consideration for a promise. 2. 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. 79) However. An act other than a promise. 3. or benefit to the promisor or a loss. The performance may consist of i. Equivalence in the values exchanged. "mutuality of obligation. Dougherty v Salt: page 87 1. or some forbearance. i. 73 .c. These include: . modification. loss or responsibility given. A forbearance. The form on which the note was written contained the words "value received".Adequacy of Consideration. b. Hamer v Sideway page 72 1.Consideration as Motive or Inducing Cause a. mistake. Exceptions to Consideration: Despite the general rule.
Bargains between members of a family relating to their ongoing relationship b. Transactions that are bargains in form but no in substance, where neither party really views each promised performance as the price of the other; c. Bargains involving the surrender of a legal claim, if the claim is unreasonable or dishonestly asserted. d. Apparent bargains involving an illusory promise e. Bargains involving a preexisting legal obligation iii. Batsakis v. Demotsis page 93 1. Rule: mere inadequacy will not void a contract. 2. Courts do not have to weigh or insist on a fair exchange. 3. The exception is, gross inadequacy of consideration may be relevant to the application of other issues, such as fraud, mistake, lack of capacity, duress, or undue influence. 4. Illusory promise: an agreement given at will, will not serve as consideration, even if bargained for. (I promise to do what you say if I want to - conditional promise) iv. Plowman v Indian Refining Co., 1. Rule: Moral consideration, past consideration, and a condition are not sufficient to establish consideration 2. Rule: appreciation of past services or pleasure afforded to the employer is not a sufficient consideration. 3. Rule: The morality of a promise, however certain or urgent the duty, does not, of itself, suffice for a consideration. 4. Rule: Something which has been delivered before the promise is executed, and therefore, made without reference to it, cannot properly be legal consideration. 7. Promissory Estoppel - a promise which the promisor should reasonably expect to induce action or forbearance on the part of the promise or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires. a. Elements of Promissory Estoppel - A promise coupled with detrimental reliance on that promise. Although these two prerequisites do not always receive the same emphasis, a combination of them must be present for relief to be granted. i. Promissory Estoppel has developed to provide relief for non enforcement of a promise due to lack of consideration. Promissory estoppel has developed to provide relief when the promisee incurred some loss in relying justifiably on the promise. When all of the elements of PE are satisfied, a promisor may be held accountable for a promise without consideration, and the court
may enforce it either to the same extent as if a contract was made, or to the extent necessary to remedy the unfair result of reliance on it. ii. Main Elements: A promise coupled with detrimental reliance on that promise. The Elements of Promissory Estoppel (Restatement 90) i. Requirements - Under the original Restatement section 90, a promisor will be estopped to deny the enforceability of his promise if the following elements appear: 1. The promisor made a promise which, although gratuitous, was the type of promise that might foreseeably induce the promisee to rely or to take some action based thereon; 2. The promisee did in fact rely thereon, and his reliance was reasonable under the circumstances; 3. As a result of such reliance, the promisee has suffered a substantial economic detriment; and 4. Injustice can be avoided only by enforcing the promise. Class description of Promissory Estoppel: i. A Promise which ii. Promisee reasonably expect to induce action (definite and substantial) iii. Induces action (reliance) iv. To avoid injustice Introduction: Reliance on a promise to one's detriment may operate as a substitute for legally sufficient consideration, making a promise enforceable that otherwise would not be. This concept is known as promissory estoppel. i. Traditional View - Before the doctrine of promissory estoppel was established, the rule that agreements were not enforceable absent bargained for consideration was rigidly enforced. One relied on promises of another at his own risk, unless one had given legal consideration for the promise. ii. Modern trend - The modern trend is to enforce promises that one relies on to his detriment so long as such reliance is reasonable and foreseeable. iii. Gifts vs. bargain promises - Traditionally, the doctrine of promissory estoppel had been recognized only where reliance was on a gratuitous promise, as opposed to a promise intended as a bargain but which for some reason proves to be unenforceable (e.g. a promise which is too indefinite, illusory, or otherwise without consideration). If the parties were bargaining, the courts have tended to leave the parties in the position that they placed themselves in. i.e. the mere fact that one party has detrimentally relied on the unenforceable promise of the other had not been enough to make the promise enforceable. However, many courts have applied the doctrine of promissory estoppel even in commercial situation - at least to the extent of allowing recovery of the expenses incurred in good-faith reliance on the promise.
Restatement (Second) - Under the Restatement (Second), the remedy may be limited to the extent of the reliance, rather than allowing recovery for the full promised performance. Family Promises - However, modern courts usually apply the principles of promissory estoppel in family cases. i. Intra-family promises - Promissory estoppel may be used to enforce certain promises made by one member of a family to another, if the latter reasonably and detrimentally relies on the promise. ii. Greiner v Greiner page 218 (Fact summary) Greiner (P) promised her son (d) an 80 acre section of land if her moved back to the land owned by her (Concise Rule of Law) Promise reasonably inducing definite and substantial actions are binding if injustice can be avoided only by enforcement of the promise. Court decided for plaintiff using promissory estoppel. Remedy when Promissory Estoppel is applied: i. Full contractual relief ii. Reimbursement of the actual loss or expense iii. 1. Pops Cones: a. Rule: Assurances made during negotiations that a contract will be forthcoming, amount to a promise sufficient to invoke promissory estoppel when the promisee has relied to its detriment. b. Restatement (Second) of Contracts 90: Promise Reasonably Inducing Action or Forbearance i. A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise: Promises to pay pensions - the doctrine of PE has occasionally been applied to promises by employers to pay pensions and other fringe benefits. Many such promises, insofar as they represent an employer's attempt to ensure continued service by his employees, are supported by consideration. But if the promise of pension is made after the employee has retired, or made under terms allowing the employee to retire immediately, the bargain element necessary for consideration will usually not be present. It is in this kind of situation that the courts have used promissory estoppel theory to bind the employer. i. Katz v. Danny Dare page 238 (PE case) Issue: Were the promise of pension payments made to plaintiff by Dare, binding under the doctrine of PE? Held: Yes, reversed and remanded.
Rule: There are three elements to be satisfied to invoke the Doctrine of Promissory Estoppel. When Dare elected to stop paying Katz.if the gc relies upon the sub's bid to figure out her own bid on a job which she obtains. b. and relied on the lesser amount provided him by dare. Reasoning: a. James Baird Co. the sub's bid is temporarily irrevocable for the time that the contractor is obtaining the job. Common concern c. 1975 at age 67. v Gimbel Bros Inc 1. therefore in ceasing to pay Katz. and (3) injustice can be avoided only be enforcement of the promise. e. Rule: The doctrine of "promissory estoppel" is to avoid the harsh results of allowing the promisor in such a case to repudiate. For 13 months they went back an forth with Kats and finally agreed on a pension of $13000 per year for life. (Harry Shopmaker) reached the decision that he would have to work out an agreeable pension to get Katz to retire. a. he gave up his much greater salary.000 less than his annual salary of $23000. NOTE: past consideration is not valid consideration e. b. (2) a detrimental reliance on such promise. injustice would have resulted. Note: The Drennan court says there is an injustice to the cases like this. Rules Unless there are circumstances to take it out of the ordinary doctrine. This was $10. When Katz retired. Katz retired on June 1. Then it looks at the law in the 1950's unilateral contracts . (the court induced a reliance that they would reasonably expect the plaintiff to rely upon) d. Offers by sub-contractors . and not being able to work a job to earn the amount provided by Dare. i. since the offer was withdrawn before it was accepted. he was too old to work a 40 hour week. c.. The legal rule that has been applied in Baird is unfair. Note: The Baird court . These are (1) a promise. A promise was found in the promise to Katz by Dare in a pension of $13000 per year to induce Katz to retire. the acceptance was too late.cites restatement on that. by him not having the money to survive. when the promisee has acted in reliance upon the promise.Facts: Katz worked for Dare for 25 years from 1950 to 1975. Dare's president. In 1973 he was injured on the job and could no longer perform his job functions due to disabilities from his injury on the job. Then they state that reliance on a promise means that you are held to that .judge Hand takes the formalist view which says we are going to have set rules and not change those rules.
Many courts do not require consideration for an irrevocable offer (i. A charitable subscription or a marriage settlement is binding under Subsection (1) without proof that the promise induced action or forbearance. to enforce a promise even though that promise is not supported by consideration. by statute. Otherwise the so-called option was revocable.d. and iv. by detrimental reliance. the only way an option contract could be formed was if the offeree gave the offeror consideration . ii. Rule: The doctrine of PE allows a party. An option contract may be contained in the offer itself or separately in a collateral offer agreeing to keep the offer open. b. P lost house after bank allowed insurance to lapse. The option contract limits the power of the offeror to revoke the offer. OPTION CONTRACTS: Restatement 25 . Restatement § 87(2). under a certain circumstances. and never told them when the insurance would lapse.at common loaw.C.§ 87(1)(a)." An option contract can be formed: i. iii.in return for the offer. a. b. Drennan v Star Paving: i. promise. A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. Court takes these issues and brings them into the case. 2. Common law requirement .C. P's claim the bank verbally told them that the house was covered. Formation of Option Contracts . ii. Rule: Section 90 Restatement: 1.e. and the home caught on fire. f. i. b. Restatement 87: .essentially something of value . including a firm offer under U. Realist approach and the gc can recover on PE if the sub pulls out and it is known that the gc relied on the bid.an option contract is a promise which meets the requirements for the formation of a contract and limits the promisor's power to revoke an offer. a. § 2-205. by a writing signed by the offeror which recites a purported consideration and proposes a fair exchange. The promise to limit the revocation is called the "option.§ 45. The remedy granted for breach may be limited as justice requires. an option contract) to be binding. Shoemaker v. by the offeree rendering partial performance or tender when the offer anticipates acceptance by performance only. Commonwealth Bank: (PE case) i.
2. an option contract is created when the offeree tenders or begins the performance requested in the offer. (Concise Rule of Law)1. 3.ii. Rule: It is elementary that any offer to enter into a unilateral contract may be withdrawn before the act requested to be done has been performed.Walker (P) rented property from Keith (D) for ten years with an additional ten year option. ii. 1. Is made irrevocable by statute. Is in writing and signed by the offeror. or b. 2. Preparations for performance: r2d 45 . Action of case Action alleging breach of an option to renew lease. An offer which the offeror 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 is binding as an option contract to the extent necessary to avoid injustice. Part Performance or Tender: Restatement 45 1.only takes effect when the offeree starts the actual performance requested by the offer. An agreement to agree cannot constitute a binding contract. without providing a method . 2. Courts do not typically inquire as to the adequacy of consideration (the amount paid for the option contract). and proposes an exchange on fair terms within a reasonable time. Merely leaving the terms for future ascertainment . a. Signed Writing Supported by Consideration: 4. Then. An offer is binding as an option contract if it a. iii. is typically sufficient to make an offer irrevocable as an option contract. however. is conditioned on completion of performance by the offeree. the offeror becomes bound and cannot revoke his offer so long as the offeree completes performance in accordance with the terms of the offer. recites a purported consideration for the making of the offer. Fact summary . ii. An option contract must be supported by consideration. such as one dollar paid. Petterson v Pattberg: i. a. In the case of an offer for a Unilateral contract. said rental values to reflect the comparative business conditions between the periods. It does not take effect upon preliminary preparations that are not explicitly called for by the offer. the offeree has the ability (but not the obligation) to complete the invited performance. especially when it is a short term option for fair terms. Walker v Keith page 168 i. The offeror's duty to perform. rent to be fixed mutually by the parties. The new Rule: Section 45: When an offeree tenders or begins the requested performance under a unilateral contract. Nominal consideration.
Such an offer is irrevocable even though there is neither consideration nor a recital that consideration has been paid. Rule: An option contract to purchase land to be binding must be supported by consideration the same as any other contract. It is in a signed writing and 2. UCC 2-205 entitled "firm offers" provides that an offer by a merchant to buy or sell goods is irrevocable if the offer meets two conditions: 1. i. An offeree's power of acceptance is terminated when the offeror takes definite action inconsistent with an intention to enter into the . There are three main situations in which an offer can be made temporarily irrevocable: a.The UCC allows formation of an irrevocable offer under certain circumstances even if no recitation of the payment of consideration is made. The offeree makes preparations prior to acceptance (whether acceptance is to be by promise or by performance) c. 3. and the offeree begins to perform c. It gives explicit assurance that the offer will be held open. . and the offeree begins to perform (see Marchiondo v Scheck where the d attempted to revoke the commission for finding a buyer owed to P) b. Statutes and Firm Offers Under the UCC . An offer which the offeror should reasonably expect to induce action or forbearance of a substantial character of the part of the offeree before acceptance and which does induce such action or forbearance is binding as an option contract to the extent necessary to avoid injustice. The offer for a unilateral contract. but there is no such condition imposed if the acts were not intended to benefit nor were they incurred on behalf of the optioner. It is not clear whether the offer is for a unilateral or bilateral contract. This case. 3. d. An offer is also binding as an option contract if the offer is made irrevocable by statute. An option contract which is not supported by consideration is a mere offer to sell which may be withdrawn at any time prior to acceptance. i. would have been decided differently under the UCC 2-305 iii. 4. renders the agreement unenforceable for uncertainty. iv. Berryman v Kmoch 1. Restatement 43 Indirect Communication of Revocation. Rule: When an option is conditioned upon a performance of the acts may constitute a consideration to uphold a contract for option. Detrimental Reliance: 1. however.for their determination. 2. RESTATEMENT 87-2 only applies to offer/contract situations. The maximum time that an offer can be held irrevocable is 3 months.
To simplify. UCC Article 1 . b. Thus. Article 2 applies. OTHER METHODS FOR REACHING MUTUAL ASSENT.deals with the sales of goods. c. If a person buys bric-a-brac from the owner at a yard sale (a consumer-consumer contract). Article 2 does apply. if a consumer buys an automobile from a dealer ( a consumer . Variation by Agreement 1. the principles of law and equity. To make uniform the law among the various jurisdictions. or other intellectual property. b. proposed contract and the offeree acquires reliable information to that effect. Unless displaced by the particular provisions of this Act. . Words of masculine gender include the feminine and the neuter. usage and agreement of the parties. Application and Subject Matter of the Ace i. 3. 1-102. Part 1. 1. contracts to provide services or contracts to lease goods. to both consumer and commercial sales of goods. 1-103 Supplementary General Principles of Law Applicable i. and when the sense so indicates words of the neuter gender may refer to any gender.Article 2 does not cover contracts for the sale of real estate. except as otherwise provided in this Act and except that the obligations of good faith. Article 2 applies. don't need to memorize . Rules of Construction. Underlying purposes and policies of this Act are a. including the law merchant and . a.c.Articles. This Act shall be liberally construed and applied to promote its underlying purposes and policies 2. b. The effect of provisions of this Act may be varied by agreement.merchant contract). reasonableness and care prescribed by this Act may not be disclaimed by agreement but the parties may by agreement determine the standards by which the performance of such obligations is to be measured if such standards are not manifestly unreasonable. To permit the continued expansion of commercial practices through custom.General provisions . 4. UCC . Words in the singular number include the plural. Short Title. and in the plural include the singular. In this Act unless the context otherwise requires a. trademarks. Construction. Article 2 does not cover contracts involving patents. clarify and modernize the law governing commercial transactions. diligence. Purposes. The presence in certain provisions of this Act of the words "unless otherwise agreed" or words of similar import does not imply that the effect of other provisions may not be varied by agreement under subsection 3. THE UCC i. 5.
"Between Merchants". 2. otherwise by the law of contracts (Section 1-103). Part 2. e. Whether an agreement has legal consequences is determined by the provisions of this Act. General Definitions and Principles of Interpretation 1-201 General Definitions i. 3. Unless the context otherwise requires. Merchant . estoppel. 2-103 Definitions i. In this Article unless the context otherwise requires 1. c. "Buyer" means a person who buys or contracts to buy goods. . principal and agent. "Receipt" of goods means taking physical possession of them. 2-104 Definitions: "Merchant".means a person who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction or to whom such knowledge or skill may be attributed by his employment of an agent or broker or other intermediary who by his occupation holds himself out as having such knowledge or skill. fraud. mistake. Certain Security and Other Transactions Excluded from this Article i. Contract: means the total legal obligation which results from the parties' agreement as affected by this Act and any other applicable rules of law. farmers or other specified classes of buyers. f. it does not apply to any transaction which although in the form of an unconditional contract to sell or present sale is intended to operated only as a security transaction nor does this Article impair or repeal any statute regulating sales to consumers. coercion. misrepresentation. "Financing Agency" i. Short Title. Agreement: means the bargain of the parties in fact as found in their language or by implication from other circumstances including course of dealing or usage of trade or course of performance as provided in this Act (Sections 1-205 and 2-208). General Construction and Subject Matter 2-102 Scope. this Article applies to transactions in goods. (Compare Contract) ii. Part 1. Sales i. (compare Agreement) Article 2. g. or other validating or invalidating cause shall supplement its provisions. if applicable.the law relative to capacity to contract. h. 4. duress. "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. bankruptcy. "Seller" means a person who sells or contracts to sell goods. d.
iii. 2-204 Formation in General i. as by purchasing or paying the seller's draft or making advances against it or by merely taking it for collection whether or not documents of title accompany the draft. 2-206 . 2. ii.Offer and Acceptance in Formation of Contract i. A contract for sale of goods may be made in any manner sufficient to show agreement.means in any transaction with respect to which both parties are chargeable with the knowledge or skill of merchants. but such a shipment of nonconforming goods does not constitutes an acceptance if the seller seasonably notifies the buyer that the shipment if offered only ass an accommodation to the buyer. 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. "Financing agency" includes also a bank or other person who similarly intervenes between persons who are in the position of seller an buyer in respect to the goods (Section 2-707) Between Merchants . ii. An offer to make a contract shall be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances. Unless otherwise unambiguously indicated by the language or circumstances 1.when both the offer and acceptance are printed on pre-printed forms. i. with blanks left for the particular "negotiated" terms to be filled in j. 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.means a bank. 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 nonconforming goods. . Battle of the forms . k. including conduct by both parties which recognizes the existence of such a contract.ii. Financing agency . iii. finance company or other person who in the ordinary course of business makes advances against goods or documents of title or who by arrangement with either the seller or the buyer intervenes in ordinary course to make or collect payment due of claimed under the contract for sale. An agreement sufficient to constitute a contract for a sale may be found even though the moment of its making is undetermined.
Notification of objection to them has already been given or is given within a reasonable time after notice of them is received. a. They materially alter it. this form. Between Merchants. A definate and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance eventhough it states terms additional to ro different from those offered or agreed upon. The offer expressly limits acceptance to the terms of the offer. c. Purchase order . shipment date. some dispute erupts concerning the adequacy of the the seller's performance. the i. iii. etc. the seller goes ahead and ships the goods and. quantity. b. More typically. . too has blanks.thus the buyers PO department typically sends a pre-printed "purchase order" form. filled with lots of fine print clauses favoring the buyer (ie extensive warranties). to determine what the terms of that K are. Performance: Sometimes a dispute will arise following this exchange of PO and acknowledgement forms. either before or after the buyer has paid for them. ii. such terms become part of the contract unless: a. ii. The additional terms are to be construed as proposals for addition to the contract. Acknowledgement: The seller's order department then typically responds with a pre-printed "acknowledgment form" containing fine-print clauses that favor the seller (eg a complete disclaimer of all warranties). have subscribed to what is sometimes called the "knockout rule" Under this approach. To determine whether a K has been formed at all by the exhcaange of documents. together with any supplementary terms incorporated under any other provisions. but prior to any shipment of goods. 3. And discover that these forms are not in complete agrement on some or many of the "non-negotiated" terms. If a K has been formed. In such case the terms of the particular contract consist of those terms on which the writings of the parties agree. 2-207 .a majority of courts. Additional Terms in Acceptance or Confirmation "Knockout Rule" 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. and the seller probably copies these terms from the corresponding entries on the PO. Knock-out Rule . unless acceptance is expressly made conditional on assent to the additional or different terms 2.l. Only then do the parties consult the PO and ack. Role of 2-207: 2-207 has two main jobs to perform in this "battle of the forms" situation i. and most commentators. The buyer simply fills in the blanks for product description.Additional Terms in Acceptance or Confirmation: 1. iii.
. ii. a contract for ale does not fail for indefiniteness if the parties have intended to make a contract and there is reasonably certain basis for giving an appropriate remedy. The UCC Firm Offer: 1.conflicting clauses knock each other out of the contract. so that neither enters the contract. It provides in 2-207(1) that a document can constitute an acceptance "even though it states terms additional to or different from those offered or agreed upon. In such case the terms of the particular contract consist of those terms on which the writings of the parties agree. can be revoked before its expiration. The rationale is that no consideration was given for the promise. the additional terms proposed in the acceptance can become part of the contract in certain circumstances if the other party (the offeror) merely remains silent. together with any supplementary terms incorporated under any other provisions of this Act. 2-207 requires both parties to be merchants 2-205 can have only one merchant 2-207(b) Determining material alteration: if the added term is going to surprise or cause hardship to the offeror it doesn't get it.2-207 makes two major changes from the common law approach i. Introduction . thus abolishing the common-law "mirror image" rule and ii. A contract for sale of goods may be made in any manner sufficient to show agreement. a. UCC Firm OFFER i. so the promise to hold the offer open is not binding. Rule: UCC 2-207(3) knock out rule 1. m. 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. It provides in 2-207(2) that between merchants. 2-207(2) modifies the common-law rule that a proposal for a contract cannot be accepted by silence. Summary . Rule: UCC 2-204 1. Instead a UCC gap filler provision is used if one is relevant' otherwise the common law controls. Even though one or more terms are left open. d. 3. meaning an offer that by its terms is to remain open for a specified period. Harlow and Jones page 64 i. including conduct by both parties which recognized the existence of such agreements 2.Case law generally provides that a firm offer. just as an ordinary offer. An agreement sufficient to constitute a contract for sale may be found even though the moment of its making is undetermined .
each party's forms contain different terms' each wants terms most favorable to itself. If the seller does elect to ship goods. the offer is irrevocable. This was called the "last shot" rule because the last form sent by either party controlled the terms of the transaction. so a seller would have no duty to ship goods. i. Reliance .if the offeror should have foreseen that the offer would induce reliance. U. Statutory Firm Offers . which is an offer that the original offeror can accept or reject. It is common for an offeror to propose terms that are close to what the offeree can accept. the offeree may give a qualified or conditional acceptance. The effect of UCC section2-207 depends on whether the parties are merchants.C. i.C section 2-207 (1) changes the common law mirror image rule so that a definite and seasonable expression of acceptance functions as an acceptance even though it states terms additional to or different from those offered or agreed upon.Modern business transactions are commonly documented with preprinted forms exchanged by the parties.Most courts. Section 2-205 of the UCC provides that a signed.One exception to the general rule is where consideration is given for the promise to hold the offer open. Typically. The irrevocability period cannot exceed three months. the last form was a counteroffer. i.The general rule is that a purported acceptance that adds to or changes the terms of the offer (a qualified or conditional acceptance) terminates the offeree's power of acceptance.U. This rule applies to offers by buyers and sellers equally. . Nominal Consideration . if the offer is in writing and proposes a fair exchange within a reasonable time. Qualified Acceptance and the battle of forms 1. E. c. Introduction . An exchange of such forms would not result in a contract. but not quite.The UCC adds a new type of firm offer. however. Battle of forms .ii.C.The ideal negotiation process involves a give and take that ultimately leads to a meeting of the minds. make a firm offer irrevocably if it recites a nominal consideration. and the Restatement. the parties struggle to get to that point. a. Frequently. unless acceptance is expressly made conditional on assent to the additional or different terms. Options . This has been called the "mirror image" rule. such as a buyer's Purchase Order of a seller's Sales Order. ii.e. In this situation. the law would imply acceptance by the seller of the last form sent. It is deemed a counteroffer.C Rule . iii. General Rule . Note that UCC section 2-205 does not require reliance. and shipment and acceptance of goods was considered acceptance of the counteroffer. This is an option agreement. b. written offer by a merchant to buy or sell goods is not revocable for lack of consideration if it gives assurance that it will be held open.
2. Additional terms become a part of the contract between merchants unless d. Nonmerchants .C. the contract terms are those in the offer. depending on whether the terms are different or additional. Some courts treat different terms the same as additional terms. The Mirror Image Rule: Under common law. Merchants . Princess Cruises v General Electric page 144 i. 2. Last shot rule: The last form sent is the terms of the contract b/c the other side didn't object and performed which can be acceptance. orders are considered as offers to purchase. Last Shot Rule: under which the terms of the last form prevail. However. Different Terms . Brown Machine v Hercules page 153 i. so that the contract terms are only those to which both parties agree. or (iii) the offeror objects to the additional terms by reasonable notification to the offeree. 1. but rather is an invitation to enter into negotiations or a mere suggestion to induce offers by others.Most courts have held that different terms are not part of the agreement and they cancel each other out. Mirror Image rule: the acceptance must mirror the offer iv. a purported acceptance must mirror the terms of the offer to result in the formation of a contract. to do so it must reasonably appear from the price quote that assent to the quote is all that is needed to ripen the offer into contract.Additional terms are part of the contract unless: (i) the offer expressly limits acceptance to the terms of the offer. supplemented by terms implied by the I. . Rule: As a general rule. UCC 2-207 1.. 2. ii. e. Rule: At common law. price quotes. an offeror who proceeds under a contract after receiving the counteroffer can accept the terms of the counteroffer by performance.The rules are more complex for merchants. General Rule: A price quotation is not an offer. (ii) the additional terms materially alter the terms of the contract.C.iii. and any additional or different terms are not part of the contract. Rule: Standard Commercial practice requires that a transaction be predominantly for the sale of goods before the UCC applies ii. Acceptance will be considered a Counter offer only if the acceptance is expressly made conditional on assent to the additional terms. iii. b. iii. Common Law Doctrines: Acceptance varying from the offer 1. a. if detailed enough can amount to an offer creating the power of acceptance.if the parties are not merchants. Additional terms .
if the parties intend to be bound by their agreement. if they so intend can conclude a contract for sale even though the price is not settled. When a price left to be fixed otherwise than by agreement of the parties fails to be fixed through fault of one party the other may at his option treat the contract as cancelled or himself fix a reasonable price 4. Has a contract been formed when the parties exchange documents or use confirmations that have different or additional terms? ii. iii. Rule: Express assent under 2-207(2) cannot be presumed by silence or mere failure to object. a. renders the agreement unenforceable for uncertainty. Revised article 2 looks at two issues: i. UCC 2-305 Open Price Terms . 2. If one party has the power to fix the price he must do so in good faith.i. UCC 2-305 1. In such a case the price is a reasonable price at the time for delivery if i. b. ii.an open price terms will not prevent enforcement of a contract for sale. rent to be fixed mutually by the parties. what are the terms of the contract? iii. said rental values to reflect the comparative business conditions between the periods. Action of case Action alleging breach of an option to renew lease. iv. Merely leaving the terms for future ascertainment . If the parties later fail to agree on price. Whether the parties leave price for their later mutual determination or agree in advance that one of them shall have the power to fix a price. 3. without providing a method for their determination. Fact summary . Walker v Keith page 168 i. The price is to be fixed in terms of some agreed market or other standard as set or recorded by a third person or agency and it is not so set or recorded. (Consise Rule of Law)a. A price to be fixed by the seller or by the buyer means a price for him to fix in good faith.Walder (P) rented property from Keith (D) for ten years with an additional ten year option. They materially alter it. The parties. An agreement to agree cannot constitute a binding contract. The offer expressly limits acceptance to the terms of the offer. 3. the court in either case may enforce the contract. If a contract has been formed. ii. the court may enforce a "reasonable" price. iii. The price is left to be fixed in terms of some agreed market or other standard iii. . Notification of objection to them has already been given or is given within a reasonable time after notice of them is given. Nothing is said as to price ii.
c. However. American Airlines page 177 d. Rule: Thus. ii. Rule: the fact that parties contemplate that a formal agreement will eventually be executed does not necessarily render prior agreements mere negotiations. v. although letters of intent may be enforceable. that intention would not be defeated by the mere recitation in the writing that a more formal agreement was yet to be drawn. where it is clear that the ultimate contract will be substantially based upon the same terms as the previous document. If the parties intended that the document be contractually binding. iv. This case. would have been decided differently under the UCC 2-305 Quake Construction v. parties may specifically provide that negotiations are not binding until a formal agreement is in fact executed. UCC 2-207 Flowchart: . such letters are not necessarily enforceable unless the parties intend them to be contractually binding. however.
Electronic Contracting Electronic Contracting: The classical model of contract formation was based on two major assumptions: a. The contracting parties had relatively equal bargaining power b. . perhaps by mail. but often in person.a. They engaged in a bargaining process.
2. the crucial factor will often be whether the party receiving the benefit of services or property had "Requested" it. Pelo page 254 1. D was baker acted and at no time assented to being in the hospital.an actual contract 1. The circumstances are such that it would be inequitable for the defendant to retain the benefit without paying fair value for it. **While the distinction between implied-in-fact contracts and restitution claims may be hazy. Restatement of Restitution 1: A person who has been unjustly enriched at the expense of another is required to make restitution to the other. Elements central to restitutionary recovery: a. Such a contract is based on a legal fiction that arises from considerations of justice and equitable principles of unjust enrichment. Contract implied in Law ."Quasi Contract" . The retention of benefits would be unjust ii. Remedy for Contract implied in fact: a. Restituation without a promise: A contract may be imposed by law under the doctrine of contract implied in law. ii. Enrichment under circumstances where b. it is based on a tacit promise. The claimant must not have imposed on the defendant i. but merely a legal fiction 1. Contract implied in Fact .the act of restoring something to its value i. v. the presumption is that the one rendering the services expects to be compensated. a. Rules: The general rule is that where one renders services of value to another with his knowledge and consent. The defendant has knowledge of the benefit iii. Unjust Enrichment: must meet two criteria a. The claimant must have intended to charge b. i. ii. not solely from their words. Court found for p. Contract implied in fact: a contract implied is one form of an enforceable contract. Restitution: a remedy for a quasi Contract. . The plaintiff has conferred a benefit on the defendant. 1. ELEMENTS for a quasi K or K implied in Fact: i. one that is inferred in whole or in part from the parties conduct. 2. Inc. Restitution and unjust enrichment are modern terms for what used to be called quasi contracts or contracts implied in law. Credit Bureau Enterprises. Restitution is the act of restoring something or its value. ii.not a contract at all. an obligation created by the law without regard to the parties' expression of assent by their words or conduct. Contract Implied in Law: a contract implied in law is a legal fiction. The defendant has accepted or retained the benefit conferred and iv. Restitution . The fiction was adopted to provide a remedy where one party is unjustly enriched. where that party received a benefit under circumstances that made it unjust to retain it without giving compensation.8.
Protection of Another's Life or Health: 1. A person who. is not entitle d to compensation therefore other than in accordance with the terms of such bargain. and 3. Restatement 107 . A person who performs. He was in lawful possession or custody of the things or if he lawfully took possession thereof. duress. v. undue influence or illegality. the other's consent would have been immaterial. because of extreme youth or mental impairment. In the absence of circumstances indicating otherwise. and b. mistake. . and 4. The things or services were necessary to prevent the other from suffering serious bodily harm or pain. supplies.and that the one to whom the services are rendered intends to pay for the same and so the law implies a promise to pay. and 2. and the services or expenses were not made necessary by his breach of duty to the other. Restitution under this section is measured by a reasonable charge for the services provided. although acting without the other's knowledge or consent. 2. Restatement 117 . It was reasonably necessary that the services should be rendered or the expenditures incurred before it was possible to communicate with the owner by reasonable means. has performed services or transferred property to the other or otherwise has conferred a benefit upon him. has preserved things belonging to another from damage or destruction. if a. Restatement section 116 : A person who has supplied things or services to another. and iv. it is inferred that a person who requests another to perform services for him or to transfer property to him thereby bargains to pay therefore. or obtains professional services reasonably necessary for the protection of another's life or health has a claim in restitution against the other if the circumstances justify the claimant's decision to intervene without a prior agreement for payment or reimbursement. is entitled to restitution for services rendered or expenditures incurred therein. Restatement 20 . A person of full capacity who. It was impossible for the other to give consent or. The person supplying them had no reason to know that the other would not consent to receiving them. iii. although acting without the other's knowledge or consent. unless the transaction is rescinded for fraud. or unless the other has failed to perform his part of the bargain. vi.Preservation of another's things for credit: 1.Effect of Existence of Bargain upon Right of Restitution 1. pursuant to a contract with another. if mentally competent. is entitled to restitution therefor from the other if: 1. He acted unofficiously and with intent to charge therefor.
vii. i. it is based on a tacit promise. . Equity Contracting Co. ii. Watts Page 273 1. c. Page 266 (quasi-K case) a. The plaintiff has conferred a benefit on the defendant. i. and d. He intended to charge for such services or to retain the things as his own if the identity of the owner were not discovered or if the owner should disclaim and e. where that party received a benefit under circumstances that made it unjust to retain it without giving compensation. Rule: A change in one party's circumstances in performance of the agreement may imply an agreement between the parties. Rule: Where an owner has given consideration for the subcontractor's work by paying out the contract price for the work. A person who takes effective action to protect another's property or economic interests has a claim in restitution against the other if a.Protection of Another's Property 1. The circumstances justify the claimant's decision to intervene without a prior agreement for payment or reimbursement. Watts v. The defendant has knowledge of the benefit 3. He had no reason to believe that the owner did not desire him so to act. The circumstances are such that it would be inequitable for the defendant to retain the benefit without paying fair value for it. Court found for her (p) 2. b. Commerce Partnership 8098 Limited Partnership v. The things have been accepted by the owner Restatement 21 . The fiction was adopted to provide a remedy where one party is unjustly enriched. not solely from their words. Rules: Contract Implied in Fact: a contract implied is one form of an enforceable contract. Contract Implied in Law: a contract implied in law is a legal fiction. and b. 5. The defendant has accepted or retained the benefit conferred and 4. an unpaid subcontractor's claim that the owner has been unjustly enriched must fail. an obligation created by the law without regard to the parties' expression of assent by their words or conduct. P and D lived together for many years and had a common law marriage. moved in with him. The elements of a cause of action for a quasi contract (contract implied in law) are 1. one that is inferred in whole or in part from the parties conduct. She says he was unjustly enriched by her actions. 2. They broke up and she sued him for a share in the accumulated property. It is reasonable for the claimant to assume that the defendant would wish the action performed. (she quit her job and at his urging.
but then changed his mind. A benefit conferred on the defendant by the plaintiff. The law will only give a promise validity if the promisor gains something. 4. A promise for something that happened in the past is not enforceable. and in the process of avoiding harm to him. or quasi-contract. d. Mills v Wyman 1. Appreciation or knowledge by the defendant of the benefit. and the promisee suffers a material detriment. i. P himself fell and sustained permanent injuries. judgment reversed. McGowan promised to pay P a monthly sum for life. Issue: Is moral consideration sufficient to support a promise given in recognition of a past economic benefit received by the promisor? Held: yes. D was granted a nonsuit. b. Promissory Restitution i. 9. b. P sued. and c. McGowan page 291 1. D subsequently promised to repay P's expenses. 2. Webb v. Facts: Webb (P) was cleaning the upper floor of a mill and was about to drop a heavy weight to the floor below. The court granted nonsuit (dismissal of case) to D. or the promisee loses something by the promise. Material Benefit Rule: holds that if a person receives a material benefit from another. Where the promisor receives a material benefit. P appeals. A moral obligation is generally not sufficient consideration for an express promise. McGowan's executor (D) stopped the payments. An action for unjust enrichment. moral obligation is sufficient consideration to support a promise.3. c. Promissory Restitution Principal 1. Acceptance or retention of the benefit by the defendant under circumstances making it inequitable for the defendant to retain the benefit. P cared for him for two weeks. P saw McGowan there. P sued to recover the expenses. a. Rules. . is based upon proof of three elements: a. i. The execution of such a promise is left to the conscience of the promisor. a subsequent promise to compensate the person for rendering such benefit is enforceable. The claim of consideration that comes after the fact is called past consideration. and made payments for 8 years until he died. (dismissal) P appeals. Facts: Mills (p) took in Wyman's (D) 25yo son who was poor and had become sick on a sea voyage. other than gratuitously.
Types of contracts covered: the statute of frauds requires writings for ii. Contracts that must be made in writing Statute of Frauds: 1. **To enforce one of these contracts. or Material Benefit Rule. if there is any possibility. ³Past consideration´.Restatement 86 Promise For Benefit Received "moral Obligation. Mere possibility enough: However. Exceptions: . and there seems to be no consensus as to what constitutes a ³moral obligation. 10. i. Those terms are not used here: ³past consideration´ is inconsistent with the meaning of consideration stated in § 71. i. The effect of this is to allow relief. no matter how small. a plaintiff must produce a writing signed by the other party. the later promise shifts the burden of showing gratuitous intent to the recipient. A contract for the sale of goods worth $500 dollars or more iii. i. ii. that the contract can be completed in a year. Types of contracts that must be in writing: 1.´ The mere fact of promise has been thought to create a moral obligation. (2) indicate that a contract has been made between parties. 5. and (4) be signed "by or on behalf of the party to be charged. Contracts that cannot be performed within one year: a. The promisor has been unjustly enriched by a benefit previously received from the promisee. ³moral obligation. A contract made in consideration of marriage 3. It is the best of the promissory restitution rules. even if the benefit was gratuitous. it need not be in writing. Comment: a. Nor are moral obligations based solely on gratitude or sentiment sufficient of themselves to support a subsequent promise. there must be a signed writing. General rule . The benefit was not given as a gift. Elements of the writing: To satisfy the statute of Frauds. mortgages and leases are also covered. Promissory Restitution creates a higher liability than you would get with just one or the other. Courts are likely to use this rule. and there are statutes in such terms in a few states. but it is clear that not all promises are enforced. according to comment d. A contract that is not to be performed within one year of the time it is made a.Contracts that by their terms cannot by any possibility be performed within one year from the date the contract is made must be in writing. A contract for the sale of an interest in land. (3) state with reasonable certainty that essential terms of the contract.´ Enforcement of promises to pay for benefit received has sometimes been said to rest on ³past consideration´ or on the ³moral obligation´ of the promisor. The Statute of Frauds i. 4. A contract to pay someone else's debt 2. unless the recipient (promisor) can prove that the benefit was intended as a gift). (However. The writing must normally (1) reasonably identify the subject of the contract. iii.
This avoids the injustice that would result if the party who had received the other's performance could use the Statute to escape his own obligations. Performance within one year possible: Contracts that are capable of being performed within one year. Those contracts are not within the Statute and hence are enforceable through oral. iii. Contracts for the sale of an interest in land: a contract for the sale of land or any interest therein must be in writing i. The Required Writing: Document must be in a permanent. contracts to perform until the happening of some condition that conceivably might occur within one year are enforceable. the great weight of authority holds that if it is fully executed on one side. Alternative Performance possible within year: Agreements for alternative performances any one of which is capable of full performance within one year (to furnish goods to another for 5 years or as long as he should remain in business) are enforceable. Contracts to make a will. Leases ii. Easement . or to be performed after death: Other contracts within the Statute: a. although oral. An "interest" in land . and must therefore be in writing. this will take the entire contract out of the Statute and make the oral promise enforceable. c. Fully executed contracts: Even if a contract is impossible to perform within one year. or even mere notations iii. Memorandum of essential terms: A memorandum of essential terms of the agreement (letters. written form and signed by the party to be charged. It need not be a fully integrated. iv. c. even though it is highly unlikely. Performance until happening of condition: Likewise. formal contract 1.it is often difficult to determine what is included under the term "interest in land" .regardless of how unlikely it is that the condition will occur within that time. although oral. b. Mortgages . . a. Performance on happening of condition: an oral agreement to perform on a condition that conceivably might occur within only year is not subject to the Statute of Frauds . telegrams. a. liens.2. etc all have been held to be "interests" in land.a promise to grant an easement over land falls within the land-contract provision. Fixtures. b.a promise to give a mortgage on real property as security for a loan is usually held to be within the statute. growing timber.
Issue: The issues are (1) whether a personal check signed by plaintiff describing the property involved and containing an amount representing partial payment is sufficient to constitute a writing under the statute of frauds and (II) there is substantial relevant evidence that plaintiff "accepted" the i. Issue: Can an unsigned document or oral testimony be used to establish the connection between written documents to derive the terms of a contract? Held: yes judgment affirmed 2. Terms and conditions of the agreement d. General Exceptions to the statute of frauds: 1. but Miss Arden refused to sign the document. Signature of the party to be charged The party's initials or seal may be sufficient. 214 i. Rules: It is enough. D appeals. 209. Integration of documents: the requisite writing may be composed of several documents. a six month increase to $25000 and a one-year increase to $30000. Facts: Crabtree (P) agreed to work for Elizabeth Arden sales corporations(D) under an unsigned employment agreement which detailed the salary he was to be paid. Restatement Contracts. P quit and brought suit for breach of contract by D. Identity of the contracting parties b. Description of the subject matter of the contract c. The contract was put in Crabtree's name and dated. as well as the duration of the contract. to meet the statute's demands. . Contract-related rights outside the statute ii. The memorandum must contain the following elements: a. Six months later P received his scheduled pay increase. or they are otherwise integrated (ie physically attached) Crabtree v. At the one year mark. provided each document refers to or incorporates the others. a pay-roll change card was made up and initialed by D's general manager and implemented. Elizabeth Arden Sales Corp page 306 1. Reliance 3. another payroll increase card was filled out and submitted as signed by D's comptroller. and a notation two years to make good was also stated on the contract. The contract detailed that he would be paid a $20000 starting salary.2. 210. that they were signed with intent to authenticate the information contained therein and that such information does evidence the terms of the contract. When P reported to work. 3. in the private books of one of the parties that were never communicated to the other) may satisfy the Statute. Part performance 2. From a judgment for P. Buffaloe v Hart page 336 1. Recital of the consideration e.
On October 22/23 P went to the house of D and gave her a check for 5000 dollars. Held: No Judgment affirmed on other grounds 2. D asked if P wanted a receipt. to which he did not. it satisfies the requirements of subsection (1) against such party unless written notice of objection to its contents is given within 10 days after it is received. check may constitute a writing sufficient to satisfy the requirements of Section 25-2-201(1) provided that it a. The next night D called the P and told him that she did not want to sell the barn. taking the contract out of the statute of frauds. P ended up selling the barns for 8000 each and went to pay D for the first 5000 for the barns. Rules: Since the barns are considered "goods" and valued at more than 500 dollars the UCC 25-2-105 apply 4. Facts: P offered to purchase the barns from D under an oral agreement.i. This constitutes acceptance by Ds. States a quantity. combined with P's acceptance of the barns. Rule: to constitute as part performance. suffices to establish that the parties had a contract. P agreed to pay 5000 per year for 4 years for a total of 20000 dollars. . A writing is not insufficient because it omits or incorrectly states a term agreed upon but the contract is not enforceable under this paragraph beyond the quantity of goods shown in such writing. but were reimbursed by P at the point that they were in the buying process. made out to D and with a description of the 5 barns. 3. Contains a writing sufficient to indicate a contract of sale between the parties b. Between merchants if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents. and had sold the barns to someone else. UCC 2-201 Formal Requirements of the Statute of Frauds 1. That. The jury found that P did deliver the 5K check and that Ds did not return it for 4 days. 2. check. Except as otherwise provided in this section a contract for the sale of goods for the price of $500 or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker. D agreed and they shook on it. D continued to pay insurance. P must have delivered something that Ds accepted. On October 26. 5. Is signed by the party or his authorized agent against whom enforcement is sought c. P decided to sell the barns and successfully did so by running an add in the paper as well as approached an auctioneer about selling the barns. 1989 P received his torn up check in the mail which the D had torn off his and her name.
Rules: (two minority rules were used in this case) d. recovery of the full purchase price is subject to a deduction for the minors use of the merchandise. For our class the only ones that we will be concerned with are the 1. Bargaining Misconduct iii. 2-606). but the contract is not enforceable under this provision beyond the quantity of goods admitted. testimony or otherwise in court that a contract for sale was made. depreciation or other diminution in value. or (c) with respect to goods for which payment has been made and accepted or which have been received and accepted (Sec.A contract which does not satisfy the requirements of subsection (1) but which is valid in other respects is enforceable (a) if the goods are to be specially manufactured for the buyer and are not suitable for sale to others in the ordinary course of the seller's business and the seller. Minority Case . Dodson v Shrader: page 519 a. Issue: Whether the P. Statute of Frauds Used as an affirmative defense. and allowed to be destroyed by lack of good care while in his possession for 9 months. should be refunded the money paid for an automobile that he knowingly purchased. Incapacity (Minority or Mental Incapacity) 1. 11. Real estate 2.one in which the party may enforce or not enforce if they have entered into it as a minor or through fraudulent actions. a minor. ii. Separate line of defense to say that this is a K covered by the Statute of Frauds and you can not use the contract. 1. It is a shield put up as an affirmative defense to the enforcement of a K. Public Policy v. Majority Rule: (not used in this case) "infancy doctrine: A minor who disaffirms a K may recover the purchase price w/o liability for use. has made either a substantial beginning of their manufacture or commitments for their procurement. ii. Performance within one year possible 3.Infants . or (b) if the party against whom enforcement is sought admits in his pleading. This . Benefit Rule: The rule holds that. Voidable Contracts . Held: No b. c. upon rescission. Unconscionability iv. UCC 3. Avoiding Enforcement of Contracts: i.until a person reaches his majority age (18) most contracts which he enters into are voidable at his option. before notice of repudiation is received and under circumstances which reasonably indicate that the goods are for the buyer.
This reflects the reality that there are varying degrees of infirmity. depreciation or other diminution in value. and the K is a fair and reasonable one. and taken and used the article purchased.Persons who are mentally incompetent (the insane. however. iii. f. where he failed to restore what he has received under them to the extend of the benefit actually derived by him from what he has received from the other party to the transaction e. Rule: Where a K is made on fair terms and the other party has no reason to know of the incompetency. without allowing the vendor of the goods reasonable compensation for the use of. Reasoning: When the minor has not been influenced. The mental incapacity doctrine. and the minor has actually paid money on the purchase price. or for the "depreciation" or "deterioration" of the consideration in his or her possession. unless there was fraud or knowledge of the incapacity by the other contracting party. (Restatement 15 f) If on the other hand the other party knew of the incompetency or took unfair advantage of the incompetent. . the incompetent has the power to void the K entirely. therefore P's complaint properly stated a cause of action. and willful or negligent damage to the article purchased while in his hands. allows a contract to be voided only if avoidance accords with equitable principles. Mental Capacity to Contract: i. Hauer v Union State Bank of Wautoma page 526 Issue: May a loan agreement be voided when the lender knew the borrower lacked sufficient mental capacity to enter the agreement.rule recognizes that the traditional rule in regard to necessaries has been extended so far as to hold an infant bound by his contracts. retarded and intoxicated) may sometimes avoid contracts they sign. as here. P cannot return any of the proceeds. 2nd Minority Rule: holds that the minor's recovery of the full purchase price is subject to a deduction for the minor's "use" of the consideration he or she received under the contract. the K ceases to be voidable where performance in whole or in part changes the situation such that the parties cannot be restored to their previous positions. consideration dissipated without benefit to the incompetent need not be restored. even where the borrower has spent the money? Held: yes 1. Mentally incompetent . ii. vi.. Rules: a mentally incompetent persons transactions are voidable . mentally ill. and seeks a fair balance between the competing interests when. depreciation. he shouldn't be able to receive the actual amount paid. 1. Rule: The infancy doctrine allows and infant who disaffirms a contract to recover the purchase price w/o liability for use.
Threats to breach a contract or to commit other wrongful acts (threats to exercise legal rights in oppressive ways) 3. or into modifying it. Imprisonment or threats of it iii. He is unable to understand in a reasonable manner the nature and consequences of the transaction.e. Restatement section 492b of Contracts . i. 4. The act or threat must be great enough to overcome the free will of the party asserting the defense. 3. the power of avoidance under subsection (1) terminates to the extent that the contract has been so performed in whole or in part or the circumstances have so changed that avoidance would be unjust. In such a case a court may grant relief as justice requires. or ii.a party may assert the defense of "duress" i. A person incurs only voidable contractual duties by entering into a transaction if by reason of mental illness or defect i. Duress and Undue Influence .Duress: any wrongful threat of one person by words or other conduct that induces another to enter into a transaction under the influence of such fear . The essential rule is that duress consists of "any wrongful act or threat which overcomes the free will of a party. Ways of committing duress: facts which constitute duress seem to fall mostly into four categories: i. He is unable to act in a reasonable manner in relation to the transaction. Restatement 2d 15 Mental Illness or Defect: i. Bargaining Misconduct: i." ii. Violence or threats of it ii. He is unable to understand in a reasonable manner the nature and consequences of the transaction. a natural person has the capacity to incur only voidable contractual duties until the beginning of the day before the person's eighteenth birthday. The defense of duress . or ii. Where the contract is made on fair terms and the other party is without knowledge of the mental illness or defect.Intoxicated Persons: A person incurs only voidable contractual duties by entering into a transaction if the other party has reason to know that by reason of intoxication i. He is unable to understand in a reasonable manner in relation to the transaction and the other party has a reason to know of his condition ii. 7. or had reason to suspect P's incompetence. Restatement 2d 14 Infants: Unless a statute provides otherwise.available if the defendant can show that he was unfailrly coerced into entering into the contract.Reasoning: in this case. Wrongful taking or keeping of a party's property or threats to do so iv. Restatement 2d 16 . that he entered into or modified a contract b/c of unfair coercion arising from the other party's wrongful act or threat. 2. there is sufficient evidence that D knew of.
Restatement section 492b of contracts a. rather than physical compulsion.as precludes him from exercising free will and judgment. Thus. Circumstances permitted no other alternative.500 instead of the actual amount due regarding the breach of contract? Held: Yes. Economic Duress: Basic Elements: 1. Alyeska Pipeline Service Co. Elements: i. v. Totem Marine Tug and Barge. Rule: Many courts state the test somewhat differently . A lack of reasonable alternative iii. A lack of reasonable alternative iii. if the threat was intended or should reasonably have been expected to operate as an inducement. Actual inducement of the contract by the threat 2. Contracts made under economic duress. Restatement (Second) 174 . Actual inducement of the contract by the threat i. Actual inducement of the contract by the threat b. Coercive acts produce the assent 4. 3. when they offered to pay 97. duress exists where: 1. A wrongful or improper threat. 2. are deemed voidable rather than void. A wrongful or improper threat (intentional threat) ii. 2. Inc. reversed and remanded to superior court for trial Rules: Duress: any wrongful threat of one person by words or other conduct that induces another to enter into a transaction under the influence of such fear as precludes him from exercising free will and judgment. Economic Duress: i. ii. A wrongful or improper threat.recognizes that a contract is void if made under coercion involving a physical threat. c. Elements i. such K will be binding unless disaffirmed and may be expressly or implicitly ratified by the purported victim . Such circumstances were the result of coercive acts of the other party. One party involuntarily accepted the terms of another. A lack of reasonable alternative 3. if the threat was intended or should reasonably have been expected to operate as an inducement. 1. Page 538 Issue: Did D knowingly place P in a position of economic duress. eliminating use of the vague term "free will" but retaining the same basic idea: Under this standard. contracts i.
People protected by contract law a. Increased susceptibility b.When duress by physical compulsion prevents formation of a contract If conduct that appears to be a manifestation of assent by a party who does not intend to engage in that conduct is physically compelled by duress. If a party's manifestation of assent is induced by an improper threat by the other party that leaves the victim a. Elements: a. Absence of third party advisers to the servient party 7. Excessive pressure to persuade one vulnerable to pressure b.h. Insistent demand that the business be finished at once. Misrepresentation of law or fact is not essential to a determination of undue influence. pressure applied by a dominant subject to a servient object. Excessive pressure. the conduct is not effective as a manifestation of assent. 4. Bloomfield School District page 548 Issue: Can the threat of termination and embarrassment and humiliation if P did not sign a resignation form constitute undue influence? Held: Yes. Avoiding Enforcement: 1. Undue Influence: Rule: Elements of Undue Influence: a. The essence of undue influence involves the use of excessive pressure to persuade one vulnerable to such pressure. Restatement (second) 175 . Restatement (second) 174 . Characterized by high pressure that works on mental. iii. Pressure applied by a dominant subject to a servient subject ii. Undue Influence: is persuasion which tends to be coercive in nature. persuasion which overcomes the will without convincing the judgment. Extreme emphases on untoward consequences of delay 5. judgment reversed. 4. moral or emotional weakness. . Children b. Statements that there is no time to consult financial advisers or attorneys. Characteristics of Undue Influence: 1. Mentally Ill **Lack the capacity to contract b. Odorizzi v.When Duress by Threat Makes a Contract Voidable i. 1. Discussion of the transaction at an unusual or inappropriate time 2. Consummation of the transaction in an unusual place 3. The use of multiple persuaders by the dominant side against a single servient party 6.
no reasonable alternative. 9. A threat is improper if the resulting exchange is not on fair terms. or as a grounds for rescission or damages by the misrepresentedto party suing as plaintiff. the contract is voidable by the victim. What is threatened is a criminal prosecution c. the contract is voidable by the victim. or c. If a party's manifestation of assent is induced by one who is not a party to the transaction. The contract law of misrepresentation is somewhat similar to misrepresentation in tort law.When Undue Influence Makes a Contract Voidable i. A threat is improper is a. The threatened act would harm the recipient and would not significantly benefit the party making the threat. What is threatened is otherwise a use of power for illegitimate ends. the contract is voidable by the victim unless the other party to the transaction in good faith and without reason to know of the undue influence either gives value or relies materially on the transaction. or d. Restatement (second) 176 . ii. 6. Restatement (second) 177 . ii. the contract is voidable by the victim unless the other party to the transaction in good faith and without reason to know of the duress either gives value or relies materially on the transaction.a claim of misrepresentation can be used either as a defense against enforcement in a suit brought by the misrepresenting party. b. Misrepresentation . ii. The effectiveness of the threat in inducing the manifestation of assent is significantly increased by prior unfair dealing by the party making the threat. If a party's manifestation of assent is induced by undue influence by the other party. Undue influence is unfair persuasion of a party who is under the domination of the person exercising the persuasion or who by virtue of the relation between them is justified in assuming that that person will not act in a manner inconsistent with his welfare. The threat is a breach of the duty of good faith and fair dealing under a contract with the recipient. If a party's manifestation of assent is induced by one who is not a party to the transaction. What is threatened is a crime or a tort. 5.\ . or the threat itself would be a crime or a tort if it resulted in obtaining property b. iii. and a.When a Threat is Improper i. What is threatened is the use of civil process and the threat is made in bad faith.
. She is elderly and lonely 2. The misrepresentation need not be fraudulent. Several pp coming to her work and home ii. The susceptibility of the victim i. The person making it must know it is false and 2. a. The lawyer stepping back which puts pressure on her in a way b/c he is there. but is really a false advisor. Party must make a false representation of fact with knowledge of its falsety and 2. Elements 1. The repetitive nature.i. by falsely telling the customer that she can become a professional dancer constitute fraud? Held: Yes. Intent to induce the other party to enter into the contract. D falsely represented to P that she was improving and had the potential to become a professional dancer. iv. Misrepresentation: A contract is voidable by an innocent party who justifiably relies on a material misrepresentation made by another. The pressure put on by the defendant i. Fraudulent Misrepresentation a. Material Misrepresentation a. 2. affirmed ii. Rules/reasoning: D's course of conduct in this case was beyond the limits of propriety. a. Syester v. Likely to induce a reasonable person 2. It is enough if the misrepresentation would induce a reasonable person to agree. v. must intend to induce the other party to enter the contract. and the false impression that the lawyer is watching out for her even if it is not her lawyer. This is really an UNDUE INFLUENCE Case Elements: 1. Issue: May a course of continually selling services to a customer who neither needs no uses them. Elements: 1. She is very gullible ii. Elements: 1. and coming at her with someone that she trusts that looks like an advisor. Banta i. Actions of a 3rd party advisor ("you don't need your attorney) iii. or the misrepresenting party knows that the misrepresentation would make the particular person agree. Two Types of Misrepresentation: 1. Besides continually selling P dancing lessons that D knew she would not use. The misrepresenter has knowledge of the inducement. 2. The actual settlement occurred in her home.
Where he knows that disclosure of the fact is necessary to prevent some previous assertion from being a misrepresentation or from being fraudulent or material. 2. . Renders the opinion to one who. Stands in a relationship of trust or confidence to the recipient (a fiduciary relationship) b.1. fox would first want to see the Undue Influence argument. Typically opinions deal with matters such as quality or value of property. reversed and remanded ii. i. an approach based on the view that the morals of the marketplace required a certain degree of leeway for bargaining. and not termites. w/o certainty as to the existence of a fact. is peculiarly susceptible to misrepresentation. Misrepresentation based on false opinion or prediction: the revised restatement defines an opinion as the expression of a belief. Hill v Jones page 567 i. 161 . and you also have a termite report saying there was no damage. **If we got this fact pattern in class. Rules: a. R2D 169 states: a statement of opinion may be actionable if the one giving the opinion a. Is an expert on matters covered by the opinion c. Restatement 161 . Fraudulent or material misrepresentation: Section 164(1) of the Second Restatement provides that a K is voidable if a party's "manifestation of assent is induced by either a fraudulent or a material misrepresentation by the other party upon which the recipient is justified in relying" Restatement 162(1)(b) and © define "fraudulent" also to include an assertion made as true but w/o knowledge or confidence by the maker whether it is true of false. 3. R2D168(1) the classical rule was that a statement of opinion could not be fraudulent. Where he knows that disclosure of the fact would correct a mistake of the other 3. Issue: must the seller of a residence disclose to the buyer facts pertaining to past termite infestation? Held: Yes. and thus may include statements that are made recklessly or negligently. and then the misrepresentation. 1. A person's non-disclosure of a fact known to him is equivalent to an assertion that the fact does not exist in the following cases only: 2.When Non-Disclosure Is Equivalent to an Assertion: 1. b/c of age or other factors.you have the owner saying that the damage was from water.
Where the other person is entitled to know that fact because of a relation of trust and confidence between them. i. the facts in the Hill case raise the possibilities of actual fraud through concealment by taking steps to prevent another party from learning a fact (r2d 160) and nondisclosure. 1. Disclosure would correct a mistake of the other party as to the contents of effect of a writing. evidencing or embodying an agreement in whole or in part. Modern approach to nondisclosure. party as to a basic assumption on which that party is making the contract and if non-disclosure of the fact amounts to a failure to act in good faith and in accordance with reasonable standards of fair dealing. Information which affect the value of the subject matter of a contract may have been acquired by 1. several factors that a court should consider in deciding when fairness requires disclosure of material information: a. The other person is entitled to know the fact b/c of a relationship of trust and confidence between them. 161(b) states a broader basis for relief: when the nondisclosure amounts to a failure to act in accordance with standards of good faith and fair dealing.4. . The difference in the degree of intelligence of the parties to the transaction. Disclosure is necessary to prevent a previous assertion from being a misrepresentation or from being fraudulent or material ii. The relation that the parties bear to each other c. The modern approach under Restatement (Second) of Contracts 161 is that a vendor has an affirmative duty to disclose material facts where: i. Where he knows that disclosure of the fact would correct a mistake of the other party as to the contents or effect of a writing . This is simple b/c the community sense of justice demands it. 5. evidencing or embodying an agreement in whole or in part iv. The manner in which the information is acquired. b. Disclosure would correct a mistake of the other party as to a basic assumption on which that party is making the contract and if nondisclosure amounts to a failure to act in good faith and in accordance with reasonable standards of fair dealing iii.
3. The active concealment of any material fact . as a matter of law. if the vendor conceals an intrinsic defect not discoverable by reasonable care. g. Where he knows that disclosure of the fact is necessary to prevent some previous assertion from being a misrepresentation or from being fraudulent or material. by effort.When Non-Disclosure Is Equivalent to an Assertion b. h. or by an illegal act. It makes a difference on the ethical quality of nondisclosure The nature of the fact not disclosed. In releases. It is much more likely that a seller will be required to disclose information than a purchaser The nature of the contract itself. Restatement 161 . practically all material facts must be disclosed. fraudulent. Where he knows that disclosure of the fact would correct a mistake of the other party as to the contents or effect of a writing .d. Misrepresentation a. f. 3. e. Where the other person is entitled to know that fact because of a relation of trust and confidence between them. The importance of the fact not disclosed Any conduct of the person not disclosing something to prevent discovery. A person's non-disclosure of a fact known to him is equivalent to an assertion that the fact does not exist in the following cases only: 1. and contracts of insurance. evidencing or embodying an agreement in whole or in part. chance. 4. . Where he knows that disclosure of the fact would correct a mistake of the other party as to a basic assumption on which that party is making the contract and if non-disclosure of the fact amounts to a failure to act in good faith and in accordance with reasonable standards of fair dealing. In contracts of sale of real property. and should be. Restatements: i. 2.anything that might prevent the purchaser from buying at the price agreed upon is. there is a much greater likelihood of the existence of a duty to disclose the nondiscoverable and intrinsic defect than there would be to disclose something extrinsic likely to affect market value The general class to which the person who is concealing the information belongs.
or if the maker knows that it would be likely to induce the recipient to do so. or 3. If a party's manifestation of assent is induced by either a fraudulent or a material misrepresentation by one who is not a party to the transaction upon which the recipient is justified in relying. 163 . knows that he does not have the basis that he states or implies for the assertion.when a Misrepresentation Makes a contract voidable: a. the contract is voidable by the recipient. v. b. unless the other party to the transaction in good faith and without reason to know of the misrepresentation either gives value or relies materially on the transaction. § 162. or 2. authenticity. does not have the confidence that he states or implies in the truth of the assertion. value. b. A misrepresentation is fraudulent if the maker intends his assertion to induce a party to manifest his assent and the maker 1. 164 . without certainty. iv. as to the existence of a fact or expresses only a judgment as to quality. If a party's manifestation of assent is induced by either a fraudulent or a material misrepresentation by the other party upon which the recipient is justified in relying. knows or believes that the assertion is not in accord with the facts. the recipient of an assertion of a person's opinion as to facts not disclosed and not otherwise known to the recipient may properly interpret it as an assertion . b. If it is reasonable to do so.Reliance on Assertions of Opinion a.When a Misrepresentation Prevents Formation of a Contract a. An assertion is one of opinion if it expresses only a belief.ii. When A Misrepresentation Is Fraudulent Or Material a. A misrepresentation is material if it would be likely to induce a reasonable person to manifest his assent. his conduct is not effective as a manifestation of assent. If a misrepresentation as to the character or essential terms of a proposed contract induces conduct that appears to be a manifestation of assent by one who neither knows nor has reasonable opportunity to know of the character or essential terms of the proposed contract. 168 . the contract is voidable by the recipient. iii. or similar matters.
vii. The two principal tools at his disposal for doing this are the special rules on adhesion contracts. (eg price and quantity) If is often the case that the party for whom the standard contract was drafted has substantially greater bargaining power than the other party to the transaction.vi. exceptionally favorable to the drafter and printed in small type.When Reliance on an Assertion of Opinion Is not Justified a. Adhesion Contracts: most business contracts in use today are probably "standardized" that is. they consist of a large number of non-negotiated pre-drafted terms put together by one party. (b) all parties beneficially interested manifest assent with full understanding of their legal rights and of all relevant facts that the fiduciary knows or should know. as compared with himself. That the contract itself is an adhesion contract b. 169 . Unconscionability: if the provisions of a contract are so grossly unfair as to shock the conscience of the court. 1. 2. (a) it is on fair terms. with room for negotiation as to only a few aspects of the deal. reasonably believes that. A litigant who wants to avoid enforcement of a contractual term on the grounds that it is part of an adhesion contract usually has to make two showings: a. unless a. the contract is voidable by the beneficiary. stands in such a relation of trust and confidence to the person whose opinion is asserted that the recipient is reasonable in relying on it. unclear. or 2. To the extent that an assertion is one of opinion only. or 3. and the related doctrine of unconscionability. These contracts are called adhesion contracts. the judge may decline to enforce the offending terms. i. that the facts known to that person are not incompatible with his opinion. That the contract either violates his reasonable expectations or is unconscionable. is for some other special reason particularly susceptible to a misrepresentation of the type involved. that he knows facts sufficient to justify him in forming it. the recipient is not justified in relying on it unless the recipient 1. 1. It is also frequently the case that the standardized terms are complicated. viii. 173 -When Abuse of a Fiduciary Relation Makes a Contract Voidable If a fiduciary makes a contract with his beneficiary relating to matters within the scope of the fiduciary relation. or the entire contract. judgment or objectivity with respect to the subject matter. and b. . the person whose opinion is asserted has special skill. or 2.
The UCC 2-302 adopted the doctrine as a general rule. or it may lo limit the application of any unconscionable clause as to avoid any unconscionable result. the transaction must show both elements. 2. unfair. Unconscionability is decided by a judge. 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. A contract is substantively unconscionable when its terms are: harsh. page 586 . not jury. If you have a contract of adhesion. When one party is able to impose an unfair contract on the other. Substantive unconscionability arises when a contract term itself is unconscionable. The Elements of Unconscionability: 1. b. Substantive unconscionability: unfair contract terms. or it may limit the application of any unconscionable provisions. A court can also partially enforce the contract by deleting unconscionable provisions. This typically arises in adhesion contracts of insurance. or distress. Procedural Unconscionability: unfair bargaining. To show Unconscionability. Procedural unconscionability arises when one party inserts a contract term that the other does not agree with and does to notice. 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. and residential leases. 1. Unconscionability originated a discretionary bar to equitable relief in a contract suit.2. courts have applied the rule of unconscionability to all contracts. Introduction: Under UCC 2-302. purpose and effect to aid the court in making the determination. Type of Unconscionability: courts have recognized both procedural and substantive unconscionability. a. or unfair persuasion present in the formation process. a contract that was unconscionably at the time it was made may be entirely unenforceable. UCC 2-302 Unconscionable Contract or Clause 3. a. or unduly favorable to one of the parties. ignorance. then they are enforceable. applicable to all contracts for the sale of good. or it may enforce the remainder of the contract w/o the unconscionable clause. The Unconscionability Doctrine was put in place to deal with unfair contracting. using a strong bargaining position or unethical tactics to take advantage of the other's weakness. There are elements of pressure. but these are not sufficient to qualify as duress. but the terms are fair. fraud or undue influence. Scope: Although the UCC applies only to the sale of goods. consumer loans. Williams v Walker-Thomas Furniture Co. deception. i.
the latter on "overly harsh" or "one-sided" results. Higgins v Superior Court of Los Angeles County page 599 i. with surprise being a function of the disappointed reasonable expectations of the weaker party. relegates to the subscribing party only the opportunity to adhere to the contract or reject it.i. which imposed and drafted by the party of superior bargaining strength. ELEMENTS: a. it must then determines whether "other factors are present which. under established legal rules. iii. 4.even if the K or a disputed clause is not at variance with the P's reasonable expectations" (eg the P knew exactly what the K said) the P can still get the contract or clause knocked out on the grounds that it is "unconscionable" Essentially. Unconscionability . and in contrast to several other paragraphs. Substantive Unconscionability . Issue: Does the petition here challenge the enforceability of the Agreement and the Release. Rule: The term contract of adhesion signifies a standardized contract. and the arbitration provision is unconscionable. The prevailing view is that procedural and substantive unconscionability must both be present in order for a court to exercise its discretion to refuse to enforce a contract or clause under the doctrine of unconscionability.has both a procedural and a substantive element.terms may generally be described as unfairly one-sided. Although P's were required to put their signatures in boxes adjacent to six other paragraphs. Procedural Unconscionability focuses on the factors of surprise and oppression. 3. ii. a. i. a contract or clause will be found unconscionable when it is so shockingly unfair that the court decides that should not be enforced. Issue: Are the sellers contract provision on repossession unconscionable where there is an inequality of bargaining power? Rules: Unconscionability has been recognized to include an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party 2. the former focusing on "oppression" or "surprise" due to unequal bargaining power. 2. If a court finds a contract to be adhesive. One "established rule is that a court need not enforce an adhesion contract that is unconscionable. or does it contests only the arbitration provision? If it contests only the arbitration provision. Unconscionable . it was not highlighted or made note of in any way. operate to render it "unenforceable". no box appeared next to the arbitration provision. in toto. ii. the arbitration agreement was under the heading miscellaneous. . ii. it the provision unconscionable? Held: Yes it contests only the arbitration provision. In this case.
Rules/Reasoning Appellant's principal contention. The lower courts did not make findings on the possible unconscionability of the contracts. separated from her husband. and the arbitration provision is unconscionable. D appeals. The court of appeals affirmed. rejected by both the trial and the appellate courts is that the contracts. in toto. Williams v Walker-Thomas Furniture Co. and they were asked to "flip through the pages. P brought an action to repossess all items D was purchasing on credit. Higgins v Superior Court of Los Angeles County page 599 Issue: Does the petition here challenge the enforceability of the Agreement and the Release. and US court of appeals granted motion for appeal and remanded case back to trial court for further proceedings. and caring for seven children. The gross inequality of bargaining position makes it possible for a sophisticated party such as P to exploit D by providing preprinted contract containing unreasonable provisions. are unconscionable and hence. The trial court granted judgment for P. (P) adopted a standard form contract for credit sales that provided that (i) all credit transactions of a buyer were to be lumped into one account and each installment payment made was to be spread pro rata over all items being purchased (even when purchased at different times) until all items were paid off. 2. Rules: Unconscionability has been recognized to include an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party Reasoning: D is in a poor economic class with little bargaining power. page 586 Issue: Are the sellers contract provision on repossession unconscionable where there is an inequality of bargaining power? Held: Yes. remanded to trial court for further proceedings Facts: Walker-Thomas furniture Co. . Eventually. D was on welfare. Facts: Plaintiffs entered into an agreement with Defendants and were required to sign a lengthy contract before the show would proceed. Williams (D) purchased several items on credit at different times. or does it contests only the arbitration provision? Held: Yes it contests only the arbitration provision.1. she failed to make payments sufficient to cover the most recent item (a stereo). and (ii) if purchaser defaulted. P could repossess all items. not enforceable. or at least some of them. so the case must be remanded. The contract was given to the children.
would not be able to practice for 3 years after termination. operate to render it "unenforceable". Rules: A restriction is unreasonable if (1) the restraint is greater than y necessary to protect the employer's legitimate interest. (2) if that interest is outweighed by the hardship to the employee and the likely injury to the public . There is no serious doubt that the bargainers had more power than P's. which imposed and drafted by the party of superior bargaining strength. y Public Policy .At common law. instead of trial proceedings. Many cases refer to this principle by calling the contract unenforceable b/c of "illegality. and would not be able to solicit prior customers for his new business. would not be able to practice medicine within a 5 mile radius of the employer. and there was nothing in the agreement that would have brought their attention to the section of the agreement that stated that they would agree to go through arbitration." but the principal extends beyond matters that are strictly illegal. If a court finds a contract to be adhesive. and thus unenforceable. P claims that the document consisted of complex legal terms. that he did not understand. courts occasionally refused to enforce contracts on grounds of public policy. P sued b/c the restrictive covenant was unfair and The supreme court found for P stating that any agreement that potentially harms the public can not be enforced. such as contract that called for excessive interest rates (usury) or restraint of trade. One "established rule is that a court need not enforce an adhesion contract that is unconscionable. Rule: The term contract of adhesion signifies a standardized contract. under established legal rules. It is a standardized contract.y y y y and sign. non of the P's names or other identifying information is included in the body of the document. Facts: D (employer of P) entered into a covenant agreement with P stating y that P upon termination from the company. In this case. Appellate court found that the arbitration clause was unconscionable. it must then determines whether "other factors are present which. it is undisputed that the lengthy agreement was drafted by the television defendants. relegates to the subscribing party only the opportunity to adhere to the contract or reject it. Farber Issue: Whether the restrictive covenant between P and D is enforceable? y Held: No." P claim that they were never told about the arbitration agreement. Page 633 Valley Medical Specialists v.
where the buyer deserves protection against competition from the former owner.why do firms write form contracts? Answer o Promote efficiency and reduce transaction costs Transaction costs are reduced by needing less lawyers to write the y K's. covenants not to compete were deemed restraints of trade and were not enforceable. y Allows for the people at the bottom to not make many decisions y . Try to understand it so that you can summarize effectively. y and where it should go. It is not like one involved in the sale of a business. However. Then decide if you agree with it. Restraints that were ancillary. first establish the points the author is trying to get y across by identifying the structure.a real evaluation of what the law is. c. The forms are pre-written with blanks for where you fill in the info. The non-lawyer people in the company don't have to haggle. were enforceable. o Normative will analyze the law in a theoretical perspective. Shopping aspects for terms. Allows you to have uniform terms that apply to all aspects so that y the company can focus on the terms that matter. and setting out a different way of thinking about the law to try to get a broader basis for understanding the law. Puts all of the power at the top of the company. restrictions on physicians were considered in light of the impact on public interests The modern rule makes covenants not to compete invalid unless they protect a legitimate interest beyond the employer's desire to protect itself from competition. y o Maintain a hierarchy of a corporate structure. One legitimate interest is preventing the competitive use of proprietary information that the employee acquired in the course of employment.y y y At common law. The covenant in this case resembles an employer-employee agreement. there y is less training of the sales force. Saves time and expense by allowing the parties to focus only on y the things that they need to. y y Question . Can also help if you get a theoretical approach that helps explain other aspects of the law that may not be as clear. What are the Counterarguments etc. such as part of an employment or partnership agreement. When analyzing an essay. Contracts of Adhesion Notes: Class 11-17-08 Law Review Essays: Descriptive aspect of law review essays y Normative aspect of law review essays .
For the consumer most transactions that she enters. the uncertainty connected with risk. the consumer would need to read a lot of form terms. and in the case of form terms. y y . Rakoff's solution to this is that they should enforce the visible terms and not enforce the invisible terms. are structured like these types of contracts.o Control risks.the terms that are not dickered or shopped for can be thought as invisible. from a business pov is probably more important than the risk itself. b/c a person could not do this. This is irrational. What should that person do when dealing w/ these types of contracts? The consumer would want to shop around. y Form Terms: o Visible o Invisible . The only rational thing to do is to deal with the basic terms and take what you get on the rest.Businesses are particularly concerned with risk.