Princess Cruise –PP Test

1. Nature of Business of Supplier

2. Language of K
3. Intrinsic worth of materials

Interpretation
209/210
Ambiguity –[Oliver Wendell Holmes – Don’t know of any word or even given collocation of words that has one meaning]
200
201 – attys can be their own lexicographers
202
7 Factors [Frigaliment]
[Taylor – negotiation history – when parties have expressed their K in writing, PER bars admission of extrinsic evidence that
contradicts written K, but can extrinsic evidence can be used for interpretation]
Maxim – Expresio Unius Exclusio Alterius
206 [Contra Proferentem]
[Joyner- maxim for construing an agreemt against the drafter applies to K interp.]
(204)

Warranties or Obligations
Common Law – Implied Obligation of Good Faith and Fair Dealing
205
[Seidenberg- ill motive or willful or wanton conduct]
228 [Locke- discretion; commercial work use objective standard; for personal use subjective]
[Seidenberg- parol evidence can be used to prove GFAFD]
[Sons of Thunder- 90 day termination clause, but exercised b4 allowing other party any business]

UCC - Warranties
1-201, 2-103 Def of Good Faith
2-309 [Leibel – must give reasonable notice before termination – garage doors]
2-306 [Wood- Must use “best efforts” to sell in a requirement/output K; reasonable term can be imputed into the K when it
can increase business efficacy]

Caveat Emptor
2-313 Express Warranty (written/oral)
[Bayliner-mere puffery/opinion not a warranty]
2-103 Buyer/seller
2-105 Goods
Dickered Terms count
[Keith – seller has burden of proving that basis of bargain does not rest on representation – not that buyer did not rely]

2-314 Merchantability
2-104 Seller/Merchant
Goods must meet “ordinary purpose”
[Bayliner- Boat was used as a boat, so no problem]

2-315 Fitness for Part. Purpose

[White Patent leather shoes]
[Bayliner- Seller had no reason to know of particular purpose]
If buyer insists on certain brand, he’s not relying
[Neilson- goods do not have to be defective, only not fit for part. Purpose]

2-316 Waiving Warranties

 Merchantability
-Must mention “merchantability in waiver
-1-201(10) Writing must be “conspicuous”
Fitness for Part. Purpose
-Writing
-1-201(10) Writing must be “conspicuous”
All warranties
-“As is” clause negates all implied warranties
-If buyer examines and should’ve found defects, warranties are waived

Defenses
14 Infancy (voidable)
[Halbman- minor did not need to return what he still possessed] – generally they must*
[Kobe Bryant- minor can ratify at 18 yrs old, must act w/in reasonable time or auto ratification]
[Dodson- minor must make restitution for benefit received or depreciation when minor seeks to recover pmt]
K is Not voidable under these exceptions:
1. Necessities (minor needs these things)
2. Tortious conduct
3. Willful destruction
[Infancy Doctrine- protect minors from lack of judgment & from squandering their wealth through improvident Ks w/ crafty
adults]

15 Mental Illness (voidable)

Cognitive
[Hauer- when other party should have known of illness, k is voidable—bank lost $ b/c of bad faith actions, they
knew she was ill]
Restatements differ from Hauer b/c they say you must know rather than should have known
Volitional
[Orterle- Teacher had nervous breakdown & mental problems, she carelessly changed retirement plan and school
knew of illness, so it was voidable]
[Williston- K is only voidable if it coincides w/ equity principle]

16 Intoxication (voidable)
[Hakimoglu- party defended himself against gambling debts on grounds of intoxication]
[Lucy v. Zehmer]
Cts. Are not usu. sympathetic to voluntary intox.

Duress
174 Physical Duress
[Williston- K can be avoided on grounds of duress only if fear of loss of life, limb mayhem or imprisonment]

175 Duress
[Williston- whether the will of person induced by threat was overcome rather than that of a reasonably firm person]
[Hyman- k under economic duress are voidable rather than void]

176 When a threat is improper

[ Quigley- threat does not have to be illegal]
[examples:
1. Last source of its kind
2. No one else can provide goods in time
3. Monopolies
4. More than near bankruptcy, no alternatives]
[Totem/Alyeska- the threat actually induced the settlement]
[Selmer- One party settles b/c desperate need for cash is not basis for duress, unless other party caused the financial hardship]

177 Undue Influence

[Odorizzi- Two superior persons dominated a servient teacher to convince him to resign]
[Sepulveda- there may be a confidential relationship]
See comments for relationship examples- mother-child, doctor-patient, husband-wife, lawyer-client
[Robertson- special relationships are not dispositive, but strong factor in undue influence]

Misrepresentation
164 Misrepresentation (voidable)
[Syester- tricked old woman into dance lessons; professional dancer]
159 Misrep Defined
1. Fact
2. 2 Promise
3. 168 Reliance on Opinion
Exceptions
-Knew contradictory facts
-No facts to support assertion
4. 169 Reliance on Opinion not justified
5. 160 Concealment
6. 161 Non-disclosure=assertion
[AK- I don’t have to tell you anything, but if I do, it must not be a lie]
162 Misrep=1)Fraud or 2)Mistake
167 When Misrep Induces Assent
[Syester- Induced Woman into purchasing lessons]
163 Fraud in Execution
[Park 100- party claimed personal guaranty was a lease]

Unconscionability
208 Unconscionability
Procedural
1. Absence of meaningful choice
2. Unequal bargaining power
3. Unfair surprise
a. Unintelligible language
b. Lack of education
c. Inconspicuous language in K
2-302 Unconscionability
[Kansas wholesale grocer- clause did not allow enough time to find/report microscopic bacteria in ketchup]
Substantive
[Walker- installmts were not paid so they repossessed ppl’s furniture; mores and business practice of time and place]
[Walker Factors:
1. Whether seller believes buyer is likely to default
2. Will consumer receive a subst. benefit
3. Gross disparity b/t k and market norms
4. Seller take advantage of buyer’s bargaining impairmt
*Public policy- is enforcement of K against public policy?

Mistake
152 Mutual Mistake
151 Mistake
[Lenawee (Pickles)- both parties k made mistake as to sewage on property & health inspector condemned property]

153 Unilateral Mistake

151 Mistake
[Earlier cases required mistake to be palpable- so obvious the other party should have known about mistake; recent cases
relax this requirement]
[Wil-fred’s – bid on water plant was mistake b/c didn’t know machinery was incapable of driving on plastic pipes w/o crushing]
-Resulting imbalance between parties is so extreme the exchange shouldn’t happen
-Mistake of fact is the only defense, mistake of judgment does not afford a party relief

154 Party Bears risk of mistake

[Lenawee- risk was allocated to Pickles in the “as is” clause]
[Nelson- man sold paintings for $60 but they were worth $1 million – he had limited knowledge and relied on it]

Impossibility, Impracticability, Frustration

261 Impracticability
[Transatlantic- most cts hold that relief should not be denied b/c event was foreseeable]
-Basic assumption that event will not occur is tacitly understood
[Wendt- occasionally extreme costs will suffice, but did not relieve the tractor owners in this case]
-Most cts. Will not discharge K duties b/c of market conditions

262 Death/Incapacity of Person necessary for Perf.

[Luther Vandross; Spider man on broadway – there has been 4 different ppl playing it; sometimes ppl are fungible]

263 Thing necessary for Performance is destroyed

264 Prevention by Gov’t Regulation

265 Discharge by Supervening Frustration

[Krell – King’s coronation- booked hotel w/ balcony, but king did not attend]
[Force Majeure Clause- allocate risk in a K clause for any acts of God; b/c there are usu. boilerplate clauses, sometimes cts. Use
the maxim contra proferentem which is construe against drafter]

Modification
Common Law
89 Modification (preexisting duty rule)
[Alaska Packers – cannot modify K w/o new consideration]
[Lingenfelder- permitting a plaintiff to recover under modification of preexisting duty would award them for bad faith]
[Oscar- even modest consideration like paying rent a day in advance is valid to uphold a modification]
[Posner in Selmer- if undermines institution of K to allow a party to threaten breach to get a K modified in his favor]
Exceptions:
1. Unforeseen circumstances [Roussalis- modification that increased the size of a building was enforceable w/o
consideration b/c there was unforeseen circumstances]
2. Reliance
3. Mutual Release [Schwartzreich- cts. Found mutual rescission where a new K was made did not require new consid.]
281 Accord and Satisfaction – accept less than whats originally offered, discharges original duty
UCC
2-209 Modification; Waiver; Rescission
1. No consideration needed
2. If signed writing excludes modification, cannot except b/t merchants(2-104) is separately signed form
3. Satisfy SoF
a. Diff b/t old & new K is $500+
b. Addition makes total K $500+
4. May retract waiver w/ reasonable notification unless detr. Reliance
 5. Use of bad faith to escape original K is barred
-NOM clause requires separate signature; boilerplate forms are enforced in UCC

Breach
Obligor/Obligee
224-226 Condition Explained
227 Preferences of Condition
[Oppenheim- parties did not intend for K to take place until condition was strictly satisfied]
Ways to excuse from condition:
-Strict compliance, or
-Time for condition passed, or
-Excused under:
1. 84 waiver
2. 245 Prevention
3. 229 Forfeiture
[Cross Bay Chelsea – tenant made improvemts. & renewed lease too late, cts. waived cond. b/c disprop forfeiture]
234 Constructive condition (Timing)
237 Substantial Performance (no uncured material failure)
241 What’ material
[Jacob & Young – reading pipe- when minor or immaterial deviations, it doesn’t excuse other party’s performance obligations]
240 Perf can be broken down into equal equivalents - (Build 3 houses for $300, pay $100 after each house is built)
235 Perf=discharge, Non-perf = breach
242 Discharge

Anticipatory Repudiation
UCC
2-609 Assurance of Performance
2-611 Retraction of Anticipatory Repudiation
Common Law
250 Stmt or Act is Repudiation
Language must be “sufficiently positive”- doubt is not enough
251 Failure to give assurance = repudiation
253 Repudiation as breach & other party’s duties
256 Nullification of Repudiation or Basis for Repudiation

Damages
344 Type of Damages
347 Formula for Damages
LIV + Other Losses
351 Damages not recoverable if Party did not foresee them
[Hadley v. Baxendale- parties did not communicate their urgent need for the mill shaft]
352 Only recover reasonably certain damages – not speculated damages
350 Costs avoided, loss avoided
Nonrecoverable damages
-Punitive
-353 Mental anguish
-atty’s fees (unless K says so)