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What are the terms of the deal? When is someone who made an enforceable deal excused from doing what she agreed to do? How does the law enforce a deal? When do you have rights and/or duties under a contract that you did not make? Elements of a quasi-contract claim?
Has your client made a deal? Determining Mutual Assent
1) §17: Requirement of a bargain- the formation of a contract requires a bargain in which there is a manifestation of mutual assent 2) §18: Manifestation of Mutual Assent to an exchange requires that each party either make a promise or being or render a performance a. Objective Theory of Assent i. Would a reasonable person in the position of the offeree understand from the offeror s words and conduct (manifestations)as an intent to be bound? (objectivemost important) ii. Did the offeree in fact so believe? (Subjective- some evidence/marginally used) 3) Pol- Priority on Protecting Reliance (reliability in the market) over Actual Assent (subjective-not being bound to something you didn t agree to) 4) Lucy v Zhemer: P and D made contract, which D believed was a joke but did not demonstrate jest to P. P had no reason to know of joke and K formed. a. Hold: Law imputes to a person an intention corresponding to the reasonable meaning of his words and act. If words and acts, judged by reasonable standard, manifest an intention to agree, it is immaterial what may be the real but unexpressed state of mind b. Rule: §18.c: if one party is deceived and has no reason to know of the joke the law takes the joker at his word 5) Leonard v Pepsico: P attempted to purchase Harrier jet, which appeared in a commercial, using Pepsi points. a. Hold: Reasonable viewer would not have interpreted this ad (or most ads) as conferring on them the power of acceptance. Generally seen as invitations to bargain. b. Rule: §26.b: Advertisements are not ordinarily intended or understood as offers to sell (unlimited liability problem)
6) Smith v Boyd: D negotiated with two parties for the purchase of their home, and had both fill out a standard purchase-and-sales-agreement form. D decided to take 2nd offer and P sued for breach. Was K formed from conversations, before written K signed by D? i. §27: Manifestation of mutual assent are sufficient to form K even where parties show intention to prepare written K. Must be judged by circumstances 1. Com. C: if offeree has reason to know offeror does not intend to be bound until whole transaction reduced to writing, negotiations do not form K b. Hold: The practice of the trade or profession in real estate and prior practice of the parties, make it reasonable that D actions did not manifest an objective intent to contract before written agreement executed. 7) Problems on Mutual Assent a. P offers to sell car to E for 20,000 but he meant to say 22,000 b. §20: Effect of misunderstanding: no mutual assent if the parties attach materially different meaning to their manifestation and i. Neither party knows or has reason to know meaning attached by other ii. Each party knows or has reason to know the meaning attached by other
1) §24: Offer Defined a. An offer is the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it i. Creates Power of Acceptance in Offeree ii. Elements: (E&E) 1. Offer must be communicated 2. Indicate a desire to enter into a K (specifies performances to be exchanged and terms that will govern relationship) 3. Directed at some person or group: §29 4. Invite Acceptance (may or may not have specific mode and time for acceptance) §30 5. Power of Acceptance: contract will arise w/o any further approval required from offeror a. Different from invitation to deal look at words of K, omission of key terms, # of people offer directed to, previous dealings, common practices/trade usages Cases 2) Lonergan v Scolnick: D sent form letter to P describing land. P replied to confirm he was in the right spot. D replied yes, but if you wish to buy you will have to decide fast. D sold to 3rd party. a. Hold: o offer. Language used by D (you will need to hurry) demonstrates correspondence not intended as an expression of a definite offer, and further expression of assent by D necessary i. Words show no intent to enter into bargain
b. Rule: §26: Preliminary Negotiations: Manifestation of willingness to enter into bargain is not an offer if 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 afer he has made further manifestation of assent 3) Fairmount Glass Works v. Grunden-Martin Woodenware Co.: D made inquiry to prices of jars. P replied stating specific quantitites, prices, delivery terms, and for immediate acceptance . D accepted. P- output sold a. Holding: P letter was not price quote, but a definite offer to sell on terms indicated based on terms for immediate acceptance , price, and context of letter. Intent determined from reading as a whole b. §26.c: Quotation of price is usually not an offer. Except when quotation indicates an offer via via the terms of a previous inquiry, completeness of terms of the suggested bargain, and the number of person to whom it is addressed i. (Definiteness of terms can demonstrate intent) c. UCC §2-204: Formation in General (applicable here because contract was for sale of goods) i. K for goods may be made in any manner sufficient to show agreement ii. Agreement sufficient to constitute a K for sale may be found even though the moment of its making is undetermined iii. Even though one or more terms are left open a contract for sale does not fail for indefiniteness if the parties the intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy 1. Defines agreement to mean bargain in fact: derived from words spoken as well as from other circumstances, including course of dealing or usage of trade 4) Leonard v Pepsico, Inc a. P attempted to buy jet using Pepsi points based an ad he believed was an offer b. Hold: No K, not sufficiently definite . Ads are presumed to be mere requests to consider and examine and negotiate; and no one can reasonably regard them as otherwise unless the circumstances are exceptional and the words used are very plain and clear c. §26: A manifestation of willingness to enter into a bargain is not an offer if the person to whom it is addressed knows or has reason to know that the person making it does not intend to conclude a bargain until he has made a further assent i. b: Advertisements of goods by are not ordinarily intended or understood as offers to sell (too many people) d. §29 To Whom Offer is Addressed: i. The manifested intention of the offeror determines the person or persons in whom is created a power of acceptance
Destroying the Offer
1) §38: Rejection a. Offeree s power of acceptance terminated by rejection, unless offerror manifests contrary intention
2) §39: Counter-Offers a. Counter offer is both a rejection and a new offer i. Destroys original offer ii. Gives power of acceptance to original offeror b. Types of NON-TRUE-COUNTER OFFERS (non-conforming responses) i. Outright rejection w/ explanation: no new power of acceptance ii. Request for Information or Suggestion for changes: (look at wording) doesn t foreclose acceptance 1. §61: An acceptance which requess a change or addition to terms of offer is NOT invalidated unless acceptance made to depend on assent to changed or added terms 2. Ex: Would you take cash? Before I decide, let me know if you would be willing to throw in the living room furniture? B. Lapse 1) §41: Lapse of Time i. Offoree s power of acceptance terminated at time specified in offer, or if not time, at the end of a reasonable time ii. Reasonable time depends on all the circumstances existing when offer and attempted acceptance made (usage of trade, prior dealings, nature of K) 1. Com.b: Reasonable time: What time would be thought satisfactory to the offeror by a reasonable man in position of offeree 2. Com.d: Direct/Face to face offer terminates at end of conversation 2) Minnesota Linseed Oil Co. v Collier White Lead Co.: P sent offer to sell Linseed oil to D. 3 days later D tried to accept. i. Hold: No K. Delay was too long, and manifestly unjust to the P bc D had opportunity to take advantage of a change in the market (very volatile) Have to examine circumstances ii. Reasoning: Linseed oil market is very volatile (commodity market) and delay gave D and unfair economic advantage 1. Speculative Offer: Promisor does not intend to bear all the risk of the market over extended period of time C. Death or Incapacity of the Offeror 1) New Headley Tobacco Warehouse Co. v Gentry s Ex r: D gave option contract to P to extend lease with condition that P build addition to warehouse. D died in September and P attempted to accept offer in April. a. Hold: No K. Option was not supported by consideration and thus revocable at any time, and was automatically revoked upon death of offeror b. §48: Death or Incapacity of Offeror or Offeree: Power of acceptance terminated when offeree or offeror dies or is deprived of legal capacity to enter into proposed K i. Pol: Reflects old view of K requiring meeting of minds . Inconsistent with objective theory. D.1) Direct Revocation
An offer which the offeror should reasonably expect to induce action or forbearance on the part of the oferee before acceptance and which does induce such action or forbearance is binding as an option K to the extent necessary to avoid injustice (Promissory Estoppel) i.2) Indirect Revocation 2) Rule: §43: Indirect Communication of Revocation 1) Offeree s power of acceptance terminated when offeror takes definite action inconsistent with an intention to enter into the proposed K and offeree acquires reliable info to that effect i. 1) Is in writing and signed by offeror 2) recites a purported consideration 3) proposes an exchange on fair terms within a reasonable time b. it is too late for him to accept the offer Preserving the Offer 1) Option Contracts 2) §25 Option Contracts a. Equal dignities rule: Offer made by general publication should be revoked by general publication 3) Dickinson v Dodd: D delivered offer to purchase his house to P open until June 12th. Promise to keep offer open is NOT enforceable. Demonstrates greater level of flexibility for Consideration in Option Ks 4) Effect of Option Contracts a. but is offer to sell unless revoked before acceptance 3) §87 Option K: an offer is binding as an option K if it a. Thursday 11th. Rejection or Counter-Offer does not terminate original offer c. Reliable Information of this action (not revoked until notified) ii. Promise to keep offer open not binding unless supported by separate consideration (Option K or Firm Offer-UCC) D. An option K is a promise which meets requirements for formation of K and limits promisor s power to revoke the offer (option needs own consideration-unless part of pre-existing K) i. P found out D offered to sell property to Allan. Acceptance must be communicated to offeror within option period i. but K with Allan already formed i. Action Clearly Inconsistent w/ intent to enter into K 2. P attempted to get acceptance to D. Mail-box rule doesn t apply to option K: actual receipt by offeror . Reasonable offoree would be aware that K no longer available ii. Hold: 1) option K w/o consideration is revocable at any time 2) once offeree knows that the property has been sold to someone else.1) §42: Revocatoin by COmunicaion From Offeror Received by Oferee 1) Offeree s power of acceptance terminated when offeree receives from the offeror a manifestation of an intention not to enter into the proposed K i. Elements: 1. Promisor cannot revoke offer within specified period b.
Hold: Signed option not an enforceable option. revocation. (From old tort law based on social policy) Promissory Estoppell e. for lack of consideration. Rule: §37 Termination of Power of Acceptance Under Option K: not terminated by rejection or counter-offer. i. If no mode specified: any customary or reasonable method under the circumstances .2) Offer which offeror should reasonably expect to induce action or forbearance of a substantial character by offeree before acceptance and does induce such action or forbearance is binding as an option contract to the extent necessary to avoid injustice i. but D refused stating option invalid due to lack of consideration.5) UCC §2-205: Firm Offers a. b. a. If manner specified but does not reasonably appear intended as exclusive ay reasonable method of acceptance is effective if consistent with prescribed mode and provides protection to offeror equal to that of stated mode c. or death or incapacity of the offeror. Sham consideration b. D rejected P s tender of purchase price for house a. Pol: Protect reliance interest. unless revoked before acceptance c. during time stated or if not time for a reasonable time no more than 3 months i. Counter Rule: §87 (1): An offer is binding as an option contract if it: (a) is in writing and signed by the offeror. 87. Counter Rule: §2-205 Firm Offers: Offer by merchant to buy or sell goods in a signed writing which by its terms gives assurance that it will be held open is not revocable. Rule: written acknowledgment of receipt of consideration merely creates a rebuttable presumption that consideration has. (common law rule) c. Rule: Option contract w/o consideration valid. and proposes an exchange on fair terms within a reasonable time. Offer by a merchant to buy or sell goods in a signed writing which by its terms gives assurance that it will be held open is NOT revocable for lack of consideration. Must be signed by offeror Cases 6) Beall v Beall: D made option K (w/o consideration) to purchase land. P attempted to execute K. Pol: facilitate commerce Modes and Methods of Acceptance 1) Generally: (E&E): Substantive vs Procedural Terms a. When offer clearly manifests mode of acceptance (procedure) is mandatory and exclusive offeror s intent must be deferred to and complied with exactly (offeror is king) b. not exceeding three months. For time stated or a reasonable time. v Burgess: D signed option K to purchase D s home for $1 and other valuable consideration . unless requirements are met for discharge of a contractual duty 7) Board of Control of Eastern Michigan Univ. Holding: Option K w/o consideration becomes offer to sell enforceable in equity unless revoked before acceptance. in fact passed. Pol: allow intentions of parties to perseveres despite technicalities of law d. recites a purported consideration for the making of the offer. No consideration ever paid.
No execution=No acceptance=No K b. Mere Preparations-not acceptance c. Unless otherwise indicaed by language or the circumstances. is not acceptance c. Offeror s Control Over the Manner of Acceptance 1) La Salle National Bank v Vega: D attempted to hire P as trustee over land interest. Pol: Offeror is king/freedom of and from K. (Must comply w/o variation to the terms of the offer) c. b. P never signed document. i. Rule: §50. Reasoning . by the principal or authorized officer of the Contractor (P). no K. Hold: K was formed when P loaded up trucks (began performance).effectuating intent of parties (bank wanted to sell land) 2) Ever-Tite Roofing Corp. Reasoning i. v Green: D hired P to fix roof. Rule: Acceptance in any form other than the one prescribed by the offeror is ineffective as acceptance. however. Hold: Full force upon execution indicates that the only mode by which Mel s offer could be accepted was execution of the document by the trust. 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 at least part of what the offer requess be performed or tendered i. K stated Agreement shall become binding only upon written acceptance hereof. K never signed. §50. Procedure exclusively specified ii. Performance began before any notice of revocation by D. K stated upon trust s execution. In this case. this K will be in full force . and forbade the P from working. Modern K law: assumes bi-lateral K (can be accepted by promise) 3) UCC 2-206: Unless clearly indicated otherwise oferee may choose either way to accept (promise or performance) 4) §50: Acceptance of Offer Defined a. or upon commencing performance of the work. but P loaded trucks and headed to D s house.2) §30 Form of Acceptance Provided a. a. a. §50-com b: Mere preparation to perform. so K formed. an offer invites acceptance in any manner and by any medium reasonable in the circumstances i.2: 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. Acceptance by a promise requires offoree complete every act essential to the making of the promise A. An offeror has complete control over an offer and may condition acceptance to the terms of the offer 1. rule frustrated intent of K law.1: Acceptance of an offer is a manifestation of assent to the terms thereof made by the offeree in a manner invited or required by offer d. where another crew had already begun work.
P received offer on 5th. or by rendering the performance. received acceptance 9th. a. Bilateral K: both parties make promises (mutual promises). Reasoning: 1) Didn t prescribe mode of acceptance and 2) let me hear from you as soon as possible indicated promissory acceptance OK 3) close relationship b. and right on only one side. §56: Essential to acceptance by promise either that offeree exercise reasonable diligence to notify the offeror of acceptance or that the offeror receive the acceptance seasonably i. Allows for promissory acceptance. Smiths signed agreement. and sent acceptance back that night. Hold: Offer made was for a bilateral K and thus could be accepted by promise. Rule: Mailbox Rule: §63: 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. Inconsistent with objective theory . will inherit everything . Unilateral K: only one party makes a promise. and requesting that you let me hear from you as soon as possible . w/o regard to whether it reaches offeror i. D expected answer by 7th and sold wool. Duty on only one side. Traditional Rule: K had to be classified as either unilateral of bilateral i. Caro. Part performance makes offer accepted (but no notification may still lead to discharge of Promisor s duty) 2) Adams v Lindsell: D mis-addressed offer to P for purchase of wool. Whitehead made offer to P stating. ii. W committed suicide before P arrived a. Assumption in favor of bilateral offer---acceptance by promise or performance (unless clearly indicated otherwise) d. Restatement Rule: §32. UCC Rule: UCC-2-206: Unless otherwise indicated by language or circumstances an offer to make contract shall allow acceptance in manner and mode reasonable under circumstances B.i. therefore valid K formed. before notification of acceptance and withdrew offer. as the offeree chooses i. Unilateral K can only be accepted by full performance. Mr. i. but didn t notify P. Valid K. Response was timely. D s must be considered in law making the same offer to P s the whole time the letter is travelling. Effectiveness of Promissory Acceptance 1) Hendricks v Beehee: P mailed offer to purchase their home to Smiths. if you can come.In case of doubt it is presumed that an offer invites the formation of a bilateral contract by an acceptance amounting in effect to a promise by the offeree to perform what the offer requests. Duty and right on both sides. Questionable whether prep or not: likely influenced court that D made no attempt to contact D to say they wished to revoke 3) Davis v Jacoby: Mr. Offeror bears burden of address mistake (§49) i. b. c. P wrote back saying she would come. Hold: K completed when response left oferee s hand. a. When offer calls for promise notice of acceptance is always essential NO K b. Method not prescribed ii. Hold: Uncommunicated intention to accept offer is not an acceptance. P contacted Smith s agent.
Is governed by principles applicable to acceptances where the parties are in presence of each other 2-204(4)(a): K may be formed by interaction of electronic agents of the parties even if no individual was aware of or review electronic agen ts actions (clik-through-contracts) C. If communication to offeree delayed. no notification is necessary to make such an acceptance effective unless offer requests such a notification i. a K can be created by acceptance within period which would ve been permissible if offer had been dispatched at time arrival seems to indicate. period of acceptance not extended if offeree knows or has reason to know of the delay. What if P didn t know about offer until after performance began? . D bought and used product. so notice is unnecessary e. Doesn t apply to Option Firm Offers ---exercising option only effective on recipet v. Notice dispensed with impliedly d. D. b. §49: Effect of delay in Communication of Offer i. b) offeror learns of performance within reasonable time 3. Pol: offeror had opportunity to protect against risk by stating effective on receipt .ii. Thus. so they should bear the risk if they don t do so (risk assignment) c.2: unless otherwise indicated by the language or circumstances. c) offer indicates notification of acceptance not required c. C. got flu. K duty of offeror discharged unless: 1. P can reclaim at post office and offer not binding (expection) vi. Internet and Mail box Issue §64. even if delay is due to fault of offeror. if Delay is due to fault of offeror and offeree neither knows nor has reason to know that there has been delay. §54: 1) Where an offer invites an offeree to accept by rendering a performance. a) offeree exercises reasonable diligence to notify 2. Mailbox rule must be activated by offer iii. 2) Where offeree who accepts has reason to know that offeror has no adequate means of learning of performance. However. no notice required except for notification of the performance of the condition.acceptance given by telephone or other medium of substantially instantaneous 2 way comm. Pol: offeror indicates he wants performance not promise. Effectiveness of Acceptance by Performance 1) Generally: §30. 63(b)Applies so long as mode of acceptance is as fast/reliable or faster than that by which the offer is made-----equivalence iv. an offer (is treated as inviting) acceptance in any manner and by any medium reasonable in the circumstances a. and attempted to collect a. Hold/Rule: If offer is for the performance of a condition (unilateral K/offer).: D ran ad promising to pay 100 to anyone who used smoke ball as directed and contracted flu. in most cases acceptance may occur by Performance or Promise 2) Carlill v Carbolic Smoke Ball Co.
P sued for commission claiming breach of K. General unfairness b. §51: Unless offeror manifests contrary intention. is not enough ii. so silence is not acceptance. Offeree takes benefit/ownership of offered goods/services with reasonable opportunity to reject them and reason to know they were offered with expectation of compensation . though they may be essential to carrying out the contract or to accepting the offer. Prior dealings inicae it was reasonable for offeror to expect oferee to give notice of rejection 2) Laredo National Bank v Gordon: P hired D as attorney on contingent fee. and gave six day time limit for acceptance. b. Offeror provides service or goods and offeree having a reasonable opportunity to return or refuse accepts benefits ii. the latter s silence will be regarded as acceptance. D said 12. But where relation between parties is such that offeror is justified in expecting a reply. bc a. §69: Silence and inaction operate as acceptance only if: i. a. received that morning by broker (P). Hold: Partial performance by the offeree of an offer of a unilateral K results in a contract. Hold: Under circumstances. c.500 fee.i. Beginning preparations. Exceptions: Usually entail Silence + Some other factor i. §62 (non-exclusive): Where offer allows for acceptance promise or performance ±beginning performance constitutes acceptance---such acceptance (beginning of performance) operates as implied promise to complete performance D. and said they never agreed to it a. D refused to pay 12.500 and no further negotiations ensued. Inconsistent with objective theory: offeror is not usually reasonable in assuming failure to reject is intended by offeree as acceptance of offer c. Rule: Generally offeree has a right to make no reply to offers. Com f. P repeatedly asked D to state fee if case was settled. §45 (exclusive): 1) Where an offer invites an offeree to accept by rendering a performance and does not invite a promissory acceptance. What is begun or tendered must be part of the actual performance invited in order to preclude revocation under this Section. On 6th day D revoked offer. Acceptance by Silence of Inaction 1) Generally Rule: Silence or inaction alone are not sufficient to constitute acceptance. P s silence was equivalent to acceptance b. Preparations for performance. conditional on full performance by offeree. 2) offer s duty of performance under any option K conditional on completion 1. or offeree is under a duty to reply. an offeree who learns of an offer after he has rendered part of the performance requested by the offer may accept by completing performance 3) Marchindo v Scheck: D offered to sell real estate to specified buyer. an option K is created when the offeree tenders or begins invited performance c. later that day P received offeree s acceptance. After settling. Later.
unless expressly agreed to b. place. D accepted but asked for additional papers in reference to the land. Imperfect Acceptances 1) Egger v Nesbit: D made offer to sell title of land to P for 400. Corp. Mirror Image Rule: § 59: A reply to an offer which purports to accept but is conditional on the offeror s assent to terms additional to or different from those offered is not an acceptance but is a counter offer-(rejection and new offer) (or could be rejection with an explanation no offer) i. 2207-2 i. Exclusion §60: If time. Acceptance coupled with any qualification or condition. Of Jud. Possible incorrect holding if paper to land were implicit in deal---matter of common usage in land sale b. Hold: Exception to general rule (party that fails to read K does so at their peril) exists when writing does not appear to be a K and terms are not called to attention of recipient No K F. P could download by clicking link at top. Where bc of previous dealings or otherwise. Offeror gives offeree option to accept by silence and offeree in remaining silent intents to accpet iii. Request for information 2. Resources 2) Dorton v Collins & Aikman Corporation: P attempted to sue D for misrepresenting quality of carpet sold to them over several transactions. Class issue: if acknowledgements forms were not acceptances. D stated that arbitration clause included on back of sales acknowledgment form prohibited P from going to court. will not complete K i. Movement towards affect intent of parties not strict mirror image d.: clikwrap agreement including arbitration agreement were in terms of download. Electronic Acceptances 1) Uniform Electronic Trasactions Act: enable electronic commerce by validating and effectuating electron records a. Conv.ii. And Pres. another method of acceptance doesn t invalidate offer c. which were accepted unless DC on remand decides they were material alterations of K. or manner of acceptance not exclusively stated (only suggests). But. Suggestion for change ii. However. Pol: Intended to protect offeror to becoming subject to contract under terms other than those the offeror wanted to deal on (offeror is king). a. Hold: Arbitration agreement in acknowledgement forms were proposals for addition to K. Exclusion: §61: Acceptance which requests a change or addition to terms of an offer is not invalidated unless acceptance is made to depend on an assent to the changed or added terms 1. it is reasonable that offeree should notify offeror if he does not intend to accept (applicable to this case) E. Hold: No K. but confirmations then they shouldn t be able to override K agreement. still primarily governed by contract common law 2) Specht v Netscape Comm. Also: Admin. a. without scrolling through a. Rule: UCC 2-207 .
2-207(2): Addit. Attempts to remedy last shot advantage. unless acceptance expressly made conditional on assent to add. operates as acceptance DESPITE additional or different terms than agreed upon. within reasonable time. Terms materially alter K 3. Particularly battle of forms or boilerplate contractual issues. Terms are proposals for addition. 2-207(1): A definite and seasonable expression of acceptance or written confirmation. Flow Chart . Or diff. Add/Diff terms not automatically a counter offer d. Pol: alter mirror image rule and facilitate business. and become part of K between merchants unless 1.i. 2-207(3): Conduct by both parties which recognizes the existence of a K is sufficient to establish a K for sale although writings don t establish K. terms ii. Notification of objection to terms has already been given or is given within reasonable time after they are received iii. In such a case. e. Offer expressly limits acceptance to the terms of the offer 2. terms are those on which writings agreed and gap fillers from UCC c.
Keeping for 5 days not sufficient to show expressed agreement b. Included was note stating: if you keep product for 5 days you agree to terms. and P not a merchant so terms not proposals under 2-207(2) i. Clearly reveals offeree is unwilling to go forward with transaction unless he is . Rule: UCC 2-207(1): focused on unless clause: unless acceptance expressly made conditional on assent to additional or different terms c. Hold: Ct. Therefore. concluded D showed no indication transaction in store conditional on subsequent terms. because sale allowed before terms introduced and thus not expressly made conditional on assent to the additional or different terms. shipped to his house. so K concluded before box was opened.3) Klocek v Gateway: P bought computer from D s store. One terms was arbitration agreement a. Strict interpretation of unless clause: Must Be Expressly Conditional on Offeror s ASSENT to those terms. §2-207 (1). No K.
UCC Notes: i. by a ship called the Peerless . for 17. from Bombay. Inadequate. Fall out: if different term is a material terms than it falls out (just like additional terms) e. Incomplete. Manifestations of parties are operative in accordance with the meaning attached to them by one of the parties if: .25. Question is whether there is enough agreement to provide basis of enforcement. Common law: Buyer wants warranty but Seller doesn t so no mirror image thus no K. and Postponed Terms Common thread between topics is it is clear the parties have reached some agreement intent to be bound . as they stand generally sufficient to disclaim warranties Deficient Agreements: Insufficient. (Majority Rule) 2. Either bc parties attached materially different term. Knock out v Fall Out 1. Knock out: comes from com. However. A. he accepts K by performance and K formed w/o warranty (last shot advantage) ii. Hold: BC there were two ships called the Peerless and each party believed delivery was to be made by a different one. when Buyer accepts goods. Neither party knows or has reason to know the meaning attached by the other 2. or couldn t describe terms fairly. and Indefinite Terms 1) Raffles v Wichelhaus: (Misunderstood) Parties agreed P would sell D cotton. Misunderstood.assured of the offeror s assent to the additional or different terms therin Acceptance predicated on offeror s assent must be Directly and distinctly stated or expressed rather than implied or left to inference (basically they must directly say this is a Counter Offer) d. as is . or whether parties delayed agreement on some key parts of the deal. 6: Different terms cancel each other out and are supplied by UCC. UCC 2-314: implied warranty of merchantability that goods are fit for the ordinary purposes for which such goods are used UCC 2-316: allows merchant to disclaim all warranties but has to be expressly consented to by customer under 2-207(1) or else it does not become part of the K 1. D delivered and P refused bc cotton was delivered by a different ship named the Peerless from the one they intended a. within a certain time. Each party knows or has reason to know the meaning attached by the other ii. there was no mutual assent/meeting of minds therefore no binding K b. delivered to England. Warranty Disclaimer Problem i. Rule: §20 Effect of Misunderstanding i. There is no manifestation of mutual assent if parties attach materially different meaning to their manifestations and: 1.
1. v. Inc. D s complaint dismissed. 33. Pol: Illustrate movement of courts away from strict rules about K terms. a. quantity. b.2: The terms of a K are reasonably certain if they provide a basis for determining the existence of a breach and for giving an appropriate remedy 1. it cannot be accepted to form a K unless terms of K are reasonably certain ii. and hence remedies for breach of K must have a basis in the agreement of parties iii. P pulled out and went with another co. UCC Rule: 2-204: Formation i. Dissent: Agreement should not fail for vagueness. but negotiations continued. That party has no reason to know of any different meaning attached by the other. K for sale of goods may be made in any manner sufficient to show agreement. Even though 1 or more terms are left open a K does not fail for indefiniteness if parties have intended to make a K and there is a reasonably certain basis for giving an appropriate remedy 1. P appealed. Letter from D stated size. price. a. That party does not know of any different meaning attached by the other. Hold: Genuine issue of fact for TC under UCC and Common law. b. Terms must allow for court to determine proper remedy to be enforceable. An agreement sufficient to constitute a K for sale may be found even though the moment of its making is undetermined iii. 33. and if terms are too unclear than court has to step back d. Perrier Group of America: P and D entered negotiations for water bottle production. Com. Common Law/Restatement Rule: §33 Certainty i. Overall Contemporary View: if parties demonstrate intent to be bound. and delivery date terms. Com: more terms the parties leave open. including conduct by both parties recognizing existence of K ii. the less likely it is they have intended to conclude a binding agreement c. Pol: Not role of court to impose contractual obligations. so long as the parties seeking enforcement can show there was intent to be bound. and the other knows the meaning attached by the first party 2. and instead to flexible standards . 3) Nora Beverages. K doesn t fail for indefiniteness.1: Even though manifestation of intention is intended to be understood as an offer. role of court is to effectuate role of parties. and then provide evidence to establish meaning attached to ambiguous terms (fair share of profits).b: Pol: K should be made by parties. not by courts. c. than indefinite or incomplete terms may/should be implied/supplied by the court d. P later fired and sued to collect $. and the other has reason to know the meaning attached by the first party Indefinite: How far should court go in resolving ambiguities and supplying missing terms in order to provide a remdy for nonperformance? 2) Varney v Ditmars: (Common law: indefinite terms) D told P if he continued to work for him he would get fair share of profits . Common Law Rule: all terms must be certain and explicit so that their full intention may be ascertained. Hold: fair share of profits is too uncertain and indefinite to be enforceable.
(either party) may refuse to agree to anything the other party will agree to) ii. Pol: bring law into line with prevailing commercial practices and expectation c. Rule: A document should be construed where possible to give effect to every term c.000/month. It has been suggested UCC terms should be used as penalties to force parties to reach agreement on more terms B. Therefore. Renewal clauses have better claim for enforcement. Hold: Agreement to agree in the future is unenforceable. Should enforce agreements. Co-Build Companies: (Modern Rule) P had 5 year lease (375/month). In theory: gap fillers emulate what parties would have agreed to ii. it is specific enough to be enforceable. Partially due to long term complex relationships. P tried to renew but new owner D wanted 17.i. refused to enforce bc: i. the price Shall be renegotiated . Purpose (fork) i. not undertake Paternalistic task of rewriting what would constitute a proper contract 2) Moolenar v. Reasoning: Ct. Hold 1: Renewal Clause Valid. with 5 year renewal option for sheep/goat grazing land. No K b. Gap fillers: default rules that supply the governing rule as to various aspects of the agreement b. Agreements to agree in the future are unenforceable bc by the very terms of the agreements. a K to enter into a future covenant must 1) specify all material and essential terms and 2) leave nothing to be agreed upon as a result of future negotiations i. Reasoning: i. Actually: what a reasonable person in the position of the parties would have agreed to assuming they were bargaining from relatively equal positions 1. instead of traditional 1 shot K 4) Note on UCC Gap Fillers a. and if paries do not fix it with reasonable certainty it is not the business of courts to do so iii. Postponed Agreement Is agreement struck too indefinite to enforce or should court supply missing term in order to save the deal? 1) Walker v Ketih: (Traditional Rule) P leased lot from D for 10 years. The renewal clause contains an Implicit term that the new rent shall be fixed at its reasonable or fair market value. b. Traditional Rule: : To be enforceable and valid. with option for 10 more with rent fixed by actually agreed upon in the future based on comparative rental values at the time . bc consideration has already been given for it . during the original lease. Highlights tension between: certainty and predictability vs. Sub-Rule: Agreements to agree in a K prevents the formation of an enforceable K if that postponed term is an important/material one (parties really haven t met to form binding K c. a. fairness and equity ii. It will effectuate the intent of the parties better than striking out the clause altogether ii. a. Rent is a material terms term of a lease. Pol: Cts. Leassor sold the land to D (developer).
Looks to conduct of parties and terms of the K f. Would ve led to a different outcome g.bargained for ) a. Except as stated in Subsection (2). Whether or not there is a bargain a K may be formed under special rules applicable to formal contracts. 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 c. Testimony indicated original lessor intended that P be able to use the land for agricultural purposes ii. 1 Purpose of renewal clauses is to insulate parties from chances in circumstances iii. Nothing is said as to price or 2. D (Co-Build) had actual notice of the renewal clause held by P. The price is then a reasonable price a the time of delivery if : 1. A Forbearance . Majority rule: reasonable rent will be established at fair market value . Minority Rule (used in this case): reasonable rent is whatever will most accurately reflect the intent of the original signatories to the lease i. a performance or a return promise must be Bargained For b. Types of Exchange (Modern Rule. Renewal clause is a factor that induced lessee into signing K iii. Pol: reflects economic efficient---best use of limited resources ii. Reasoning i. To constitute consideration.1. which is the highest (and best sue) rent which a responsible bidder is apt to offer i. Hold 2: P is entitled to have the rent established at its fair value as used for agricultural purposes only. Pol: effectuating the intent of the parties ii. The performance may consist of i. An act other than a promise ii. stated in §§ 82-94 (exceptions) 2) Traditional Rule: detriment and benefit focused (no bargain) 3) §71 Requirement of Exchange. as it will most accurately reflect the intent of the original parties e. the formation of a K requires 1) a bargain in which there is manifestation of mutual assent to the exchange and 2) Consideration b. Price is left to be agreed by the parties and they fail to agree d. and thus a subsequent change in zoning should not defeat that understanding Is it a Deal the Law Will Enforce? Consideration Section 1: Contract Law Reasons for Enforcing Agreements: Consideration and Consideration Substitutes Bargain and the Legal Concept of Consideration 1) Requirement of a Bargain a. Guidance from UCC 2-305: Parties can conclude a K even though the price is not settled.
Possibility: could be unenforceable exculpatory clause based on Public Policy Consideration and Family Agreements: Distinguishing between Gratuitous and Non-Gratuitous Promises 1) General Rule: Promise to make a gift in the future is not enforceable a. May be given BY promisee or by some other person 4) §71 com. Formality funcion b. Paternalistic Device Pol: individuals should not bind themselves unless they receive some benefit in return (or detriment on promisee) c. rather than generous impulse or informal expression of intent i.iii. The consideration induces the making of the promise and the promise induces the furnishing of the consideration c. During race P suffered dehydration and severe damages to kidneys and liver a. Channeling: provide an objective basis for a court to determine that the promise is contractual. modification. Legitimacy of the transaction: policing bargaining behavior 6) Reed v UND and North Dakota Assoc. b. Limitation on free power of individuals to bind themselves as they wish iii. Evidentiary: provide evidence of the existence and terms of a K i. P aware they are stepping into commercial realm ii. Distinguish between gift and non-gift promise ii. Precedent: payment of fee and surrender of right to sue in exchange for skydiving constitutes valid consideration iii. Exceptions 2) Important Distinction: Promise that is a legal detriment vs on incidental detriment/condition of gift a. The creation. for the Disabled: P was required to run in 10K as part of hockey team conditioning. or destruction of a legal relation d. Reasoning: i. P signed release form---so he could run in race. Surrender of legal right to sue for negligence constitutes valid consideration ii.b: Bargained For a. Incidental Detriment and Condition for the use of a gift are NOT consideration . Hold: Valid consideration. APPARENT MOTIVE 5) Purposes of Consideration a. The consideration and the promise bear a reciprocal relation of motive or inducement b. P relinquished legal right in exchange for NDAD allowing him to run in race. Courts do not look into adequacy of consideration. ct. will enforce despite substantial difference in value of consideration i. Performance or return promise may be given TO promisor or to 3rd person. Traditional Rule: if there is a bargain. simply its existence (exceptions) c. Cautionary: make the parties aware that they have made a serious legal commitment i. Motive/Inducement: judged by objective/reasonable standard.
or play cards until he was 21 he would give him 5000 that day. and thus invalid bc past events can t induce promise (no reciprocal nature) ii. where such claim is legally groundless. Hold: Promise not enforceable. lived for 2 years. a. Not reciprocal in nature iii. Hold: Promise enforceable bc P had to forbear a legal right b. P later refused to pay. Judged by reasonable standard 3) Kirksey v Kirskey: D was widow of P s brother. D s promise wasn t motivated by getting P to move ii. 4)D s also agreed o abstain from collecting an real or supposed claim s on P s estate arising from wife s will. Rule: agreement to not sue. Sufficient P restrict lawful freedom upon faith of promise iii. Reasonable Person wouldn t understand condition (action) to be consideration c.b. Doesn t matter whether performance actually proved a benefit to the promisor 5) Schnell v Nell: P entered into K with 3 D s to pay each 200 bc 1) his wife materially aided him in acquisition of all assets 2) the love and respect he had for his wife and 3) in consideration of one cent received b him from D s. OR b. and lacked consideration. The consideration based on the love of P s wife are Past Consideration. The love of a wife does not constitute consideration c. Reasoning i. Hold: Promise not enforceable for lack of consideration. Reasoning: i. Rule: Forbearance of a legal right (or restriction of future legal right) at the request of another party is sufficient consideration for a promise c. P abandoned home and moved 60-70 miles. P used to use smoke and drink but gave them up in reliance on promise (possibility that wouldn t have mattered only giving up right to do. is not legally binding i. Rule: Conditions to a gratuitous promise are not valid consideration i. b. D s promise was mere gratuity. Forbearance to assert or the surrender of a claim of defense which proves to be invalid is NOT consideration UNLESS a. Test (not dispositive): Whether happening of the condition will be a benefit to promisor ii. §74: Settlement of Claims (reasonable and honest belief) 1. Rule: A Moral Consideration Only will not support a promise i. He forbearing or surrendering party believes that the claim or defense may be fairly determined to be valid . smoke. D sent letter to P stating that he would give D and her family a place to live if she moved to his land. b. a. a. and then kicked out. Claim or defense is in fact doubtful bc of uncertainty as to the facts or the law. One could make valid argument the other way (NOT CONCLUSIVE RESULT) 4) Hammer v Sidway: P promised D (his nephew) that if he wouldn t drink. P fulfilled terms and tried to collect. not something you actually do) ii.
If modification is fair and equitable in view of circumstances not anticipated by parties when K was made ii. A parties performance or promise to perform something they are already obligated/bound to do. Great disparity is a red flag which helps court determine if actual consideration occurs ii. Promises: A promise or apparent promise is NOT CONSIDERATION if by its terms the promisor or purported promisor reserves a choice of alt. performance UNLESS i. New/Separate consideration required to modify K b. Illusory Promise: words of promise which by their terms make performance entirely optional with the promisor . Courts don t ordinarily look into value of consideration BUT when value of consideration is fixed (money) the doctrine doesn t apply 1. Enforced based on reliance action or forbearance by another 2) Hooters v Phillips: D worked at Hooters from 1989-96. To the extent provided by statute iii. Might be different if coin (1 cent) had been a particular coin which had special value (Family piece. D s promise was Illusory and not valid consideration. i. Hold: Not enforceable promise.d. To the extent that justice requires enforcement in view of material chance of position in reliance on promise 1. Traditional Pre-Existing Duty Rule i. Consideration/Promises from both sides must be real and meaningful b. extrinsic value apart from money value) Consideration and K Modification 1) General Principles a. Nominal and intended to be so (intent of parties a factor) 1. Rule: §77: Illusory and Alt. Nominal Consideration Rule: a mere pretense of bargain does not suffice. does not constitute good consideration ii. P signed arbitration agreement in 1994 stating: in consideration of the Company offering you employment. ancient. Unfettered right to decided nature or extent of performance 1. you and the company each aggress to resolve claims based on rules of ADR as promulgated from time to time. a. Modern Rule: §89 Modification of Executory K: A promise modifying a duty under a K not fully performed on either side is binding i. Consideration allowed so long as it is intended to be real consideration iii. In such cases there is no consideration i. Each of the alternative performances would ve been consideration if it alone had been bargained for. OR . as where there is a false recital of consideration or where the purported consideration is merely nominal. P alleges sexual harassment and wants to go to trial not arbitration.
Rule: §89: A promise modifying a duty under a K not fully performed on either side is binding if it is i. Fair and equitable in light of circumstances not anticipated when K was formed ii. and D (citizen) filed suit for illegal payments. this was NOT the case here ii. Several other procedural rights given only to Hooters (inadequacy of consideration) 3) Alaska Packers v Domenico: D hired Ps to work as fishermen. a. ii. While consideration for one party s promise to arbitrate is the others to do the same. P agreed. Increase was substantial . P s did have any new responsibilities iv. than they were already under K to do b.ii. and none other. No doubt city voluntarily agreed to modify the K ii. rejected bad nets argument) ii. P could cancel agreement at any time iv. 3 years into K so not fully performed on either side iii. Hold: Valid K modification. P already agreed to be fishermen for specified time-gave no NEW CONSIDERATION iii. but later refused to pay increased salary. 400 unites went beyond any previous expectation 1. Rule: UCC 2-209(1): an agreement modifying a K needs no consideration to be binding i. Must meet test of 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. P s had no valid cause to breach (ct. Reasoning i. 3 years later he requested 10. Reasoning: i. Reasoning i. in whole or part the agreement at any time. Hold: D s promise is unenforceable for lack of consideration bc it as based soley on P s agreement to render the exact services. Promise modifying K is made before K fully performed on either side c. Modifications of performance Ks should be enforced when modification is due to unexpected difficulties as long as parties voluntarily agree b. When P arrived they stopped working unless salary increased.) 4) Angel v Murray: Maher entered into 5 year K to dispose of waste. Impossible for D to find replacements under circumstances (short fishing season. etc. w/o notice iii.000/year raise bc of 400 new dwellings (unexpected). a. 1 of the alternatives would ve 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 alternatives which would not have been consideration c. Pre-Existing Duty Rule: A promise to do what one is already obligated himself to do is unenforceable for lack of consideration c. D agreed. No coercion d. location of boat. P (Hooters) had right to modify. Voluntary iii.
Remedy is Restitution 3) Restitution a. Unjust Enrichment: c. Rest: officious intermeddler . Changed emphasis from was their consideration to was there duress i. And UCC) a. acceptance) i. and thus unanticipated 5) Pre-Existing Duty vs Modern Rule (Rest. Under Traditional K theory promise enforceable: past consideration is not god consideration no mutuality of promises ii. Better measure to see if goals of K modification were reached ii. Pol: prevent unjust enrichment b. either bc: i.iv. or 2. Rule: One who w/o intent to act. Modern: 2) Promise + Un-bargained For Reliance Restitution 1) Unjust Enrichment: cause of action that gives rise to the remedy of Restitution 2) Quasi K: implied-in-law agreement that rests on theory of unjust enrichment a. Ex: A helps B out during difficult period. Enrichment: economic benefit (benefit received or cost avoided) d. Has reasonable excuse for failing to do so ii. he is not required to make restitution unless: the actor justifiably performs for the other a duty imposed upon him by law 1. confers a measurable benefit upon another. Unjust: 1) Intent to charge (not gratuitous) 2) not imposed (request. Parties simply did not attempt to make a K . Got rid of problems involved in recission theory had to be released (even momentarily) from old K before entering into new K Consideration Substitutes 1) Promise + Prior Benefit Conferred a. He gives the other an opportunity to decline the benefit. Purpose of Restitution: independent theory of liability in cases when no K has come into existence. or ii. Addresses true concerns of party iii. IF the other refuses to receive the benefit. A person who has been unjustly enriched at the expense of another is required to make restitution to the other b. Circumstances were beyond Maher or D s control. emergency. After recovery grateful B tells A I promise to repay i.interference in affairs of others not justified by the circumstances---NO RESTITUTION e. Something went wrong or failed to happen in process of formation. is entitled to restitution if: 1.
P has stated a valid cause of action in unjust enrichment b. P made suggestion ungraciously (wanted reward) iv. a. Type: 1)Restitution when a benefit conferred on the strength of a promise without consideration (no consideration bc promise was illusory) or 2) Restitution in cases when no K interaction occured 6) Cable Vision of Breckenridge v Tannhauser Condo. A benefit was conferred on the D by P ii. P submitted an idea. Reasoning: i. and then resubmitted. independent of his suggestion. Goal: Restoration of Enrichment iv. Later P stopped billing all but 3 condos at request of D. Hold: Yes. Hold: P have valid claim for unjust enrichment. D attached their own amplifier so all condos still received service despite cancellation.: D created a suggestion program for employees. Benefit was appreciated by the D . Rule: Quasi-K may be found in the absence of any expression of assent by the party to be charged and may indeed be found in spite of party s contrary intention c. Rule: To recover for unjust enrichment a P must show: i. Assoc: P provided cable TV to 33 of D s properties. Unjust: requested by the D ii. stating if suggestion adopted awards would be given. which D paid for. On 2nd try D told P they were already doing a similar study.1. which was reject. a. Focus of Remedy: disgorgement of the value of what was received 4) Quasi-K cases: Restitution in cases when no K interaction occurred 5) Schott v Westinghouse Electric Co. D breached K implied in law. Also plays a role when Valid K breach---See Damages Section iii. Enrichment: Possibility that P s suggestion would save company costs iii. a.
Traditional Rule: past consideration is not good consideration i. Good consideration given at some previous time ii. Application doesn t depend on existence of K. Rule: Moral consideration is only sufficient when there was: i. Benefit was not given as a gift (com. D promise to pay P damages. P never intended to allow D to retain benefit without payment: common practice to pay for cable TV. upon reaching adult age c. No intent to charge (gratuitous promise) can t recover under unjust enrichment ii. Reasoning: i. Pol: don t want people forced to pay for benefits thrust upon them without there consent ii. a. Modern Rule: §86 Promise for Benefit Received: A promise made in recognition of a benefit previously received by the promisor from the promisee is binding to the extent necessary to prevent injustice. D never paid P. is not consideration as would entitle her to recover at law (Traditional Rule) 9) Mills v Wyman: P paid for care of D s son when he returned home sick from sea voyage. mutilating it badly. Revival of debt obligation where recovery has been barred by statute 2. Promisor SUBSEQUENTLY makes a promise in recognition of the benefit 8) Harrington v Taylor: D s wife was about to cut his head open with an axe when P intervened and axe struck her had. Subsequently. Which is voluntarily revived c. Damages based on K rate what D would ve paid for all condos to have service 7) Moral Obligation: Restitution when a promise is based on Prior Benefit a. notwithstanding the absence of actual agreement b. Promise o pay obligation that has been discharged under bankruptcy 3. but on need to avoid unjust enrichment. D sent letter promising to reimburse P for taking care of his son. Promise of infant to pay obligation. Reasoning i. Pre-existing obligation which had become inoperative under law and 1. It would be inequitable for it to be retained w/o payment 1. No mutuality of promises benefit wasn t bargained for (past consideration) . After payments had been made by P. if (rephrased in the affirmative) i. Promisor received benefit and made moral obligation/promise afterwards to pay b. Promisor has been unjustly enriched by a benefit previously received ii. Restitution appropriate to avoid unjust enrichment to D iv. a.recipient/promisor has burden of showing benefit was gratuitous) iii. Benefit: any form of advantage ii. D. voluntarily performed. P conferred benefit by saving D from having to pay for cable (cost avoided) 1. b. Hold/Rule: A humanitarian act of this kind. Hold: No K.iii. D did so pay previously (non-gratuitous) iii. Traditional Exceptions: (now in §82) 1. K lacks valid consideration bc moral consideration is not legal consideration.
To the extent that its value is disproportionate to the benefit d. Hold: Valid claim for promissory estoppel b. Exception: Charitable subscription or marriage settlement is binding without proof of action or forbearance 12) Ricketts v Scothorn: D wrote P (grand-daughter) note stating he would give her 2. note. pay. (must be justified/reasonable) 2. Int. (cause and effect relationship) iii. Injustice can be avoided only be enforcement iv. Reasoning: i. Limit on relief: (based on nature and extent of promisee s reliance) b. If time had allowed. Rule: Moral obligation as consideration allowed when: 1) promisor has received material benefit from the past act of the promisee (even though there was no original duty or liability)2) promisor subsequently promises to pay for said material benefit c. Not binding if: 1. Promisor only liable for reliance which he does (subjective) or should (objective) foresee ii. P seriously injured. Need consideration to separate enforceable and unenforceable promises 10) Webb v McGowin: P threw his body at falling pine block to save it from injuring D. bc none of his grand-daughters had to work and neither should she . Rule: When promisee changes his position to his disadvantage in reliance on the promise. Inducement of action or forbearance 1. a right of action does arise . which is not enforceable under common law iv. Promisor conferred benefit as gift or promisor as not been unjust enriched 2. D received no benefit and was relieved of no legal duty. so promise was a naked promise. D later promised to pay P 15/two weeks for rest of P s life. Promise + Reasonable expectation by promisor that it will induce reliance (objective) ii. P quit her job.iii. Material Benefit Rule (§86): Promise made for benefi previousy received is binding to the extent necessary to prevent injustice i. A Promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a 3rd person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. Hold: K valid. a. same agreement would have been reached ii. §90 Promise Reasonably Inducing Action or Forbearance i. Saving of life was clearly a material benefit 11) Reliance and Promissory Estoppel a. Basic Elements: (Promise + Detrimental Reliance) i.000 at 6% per anum. Benefit to promisor and/or injury to promisee + Subsequent Promise= Valid Consideration b. a. 2 years later D died after having paid only 1 yrs. D s estate refused to cont. Remedy may be limited as justice requires 1.
or similar requirement: a . Conceded that D intended that P rely on its promise and P did rely iv. P was not fired but voluntarily retired based on promise ii. Reasoning: i. DESPITE the fact that P could have been fired at anytime b. The likelihood that a refusal to enforce the term will further that policy iii. 13 month bargaining period (indicates benefit to D) Reasons Not to Enforce Agreements: Illegality and Pub. It would be grossly inequitable to permit the promisor. The parties justified expectations ii. The seriousness of any misconduct involved and the extent to which it was deliberate. Payments continued for 3 years v. Not a condition but a likely consequence iv. Hold: Valid claim for promissory estoppel. Any forfeiture that would result if enforcement were denied. In weighing a public policy against enforcement of a term. Reasoning i. Pol. D unquestionably made promise to pay ii. account is take of i. The directness of the connection between that misconduct and the term 2) §181 Effect of Failure to Comply with Licensing or Similar Requirement: If a party is prohibited from doing an act bc of his failure to comply with licensing. The strength of that policy as manifested by legislation or judicial decisions ii. Statement none of my other grand-daughters work made it reasonable that gift would induce P to quit job 1. a. Voluntarily retiring constitutes detrimental reliance even if employee was at will and could be fired summarily c. registration.000 salary 13.000 per year (23. 1) §178: When a term is unenforceable on Grounds of Public Policy a. Rule: Forbearance doesn t have to be legal right i. and iii. D later breached by only sending 250 instead of 500 bi-weekly check.000 per year. and suffered detriment by quitting job iii. to resist payment on the ground that the promise was given without consideration (injustice avoided) 13) Katz v Danny Dare: P worked for D. Any special public interest in the enforcement of the particular term c. account is taken of i. In weighing the interests in the enforcement of a term.000 retirement package)-detriment iii. D wanted to get P to retire so D offered 10. P initially rejected (wanted to work).c. P gave up about 10. and iv. A promise or other term f an agreement is unenforceable on grounds of public policy if 1) legislation provides that it is unenforceable or 2) the interest in its enforcement is clearly outweighed in the circumstances by a public policy against the enforcement of sucht erms b.000/year pension. P had job before. but after 13 months accepted 13.
: (Exculpatory Clause) P seriously injured while snowtubing on at D s resort. Statute barred relinquishment of custody/adoption rights until 4th day after birth ii. D later changed her mind and decided she wanted to keep child.3) 4) 5) 6) promise in consideration of his doing that act or of his promise to do it is unenforceable on grounds of public policy IF: a.000 + costs. Prevailing practices and notions of the community as to what is in the interest of the general welfare (Common Good) i. Stautory prohibition of reciving a child through adoption by payment iv. Reasoning: i. Pol interest in preventing desperate mothers from being forced into using their body for pregnancy v. The statutory prohibition of payment for receiving a child through adoption suggests that. Payment for relinquishing custody rights before birth not valid on pub. as a matter of policy.000). In pari delicto RR v MH: P hired D to be surrogate mother. Must determine if same public policy is still present (change time) c. Courts do not enforce agreements to exempt parties from tort liability if the liability results from that party's own gross negligence. and b. The interest in enforcement of the promise is clearly outweighed by the public policy behind the requirement Sources of Public Policy (Corbin) a. but didn t return previous payments (4. including negligence a. Hold: No K. P agreed to pay mother 10. Above polices outweigh Freedom of K and Ability to use body in any method of choice Hanks v Power Ridge Restaurant Corp. recklessness.Statutes and Constitutions i. Deterrence: Discourage problematic beavhior b. Not appropriate use of court s time and resources: no polluted hand shall touch the pure fountains of justice i. K stated natural father (P) would be given full legal parental rights upon birth. General Rule (corbin): The general rule of exculpatory agreements is that a party may agree to exempt another party from tort liability if that tort liability results from ordinary negligence. Intent behind statues will not be allowed i. The requirement has a regulatory purpose. Common Law Precedent i. Pol. b. or intentional conduct . Mass. interpreted policy behind statute to be given substantial weight to allowing mother to have time after child s birth to reflect on wishes for child iii. Regulations and ordinances (but given less weight) b. a. Change in time/values is key issue Rationales for not enforcing a. Grounds c. Rule: K s which violate pub. Ct. P had signed exculpatory clause stating P would not hold D liable for an and all claims arising from use of Power Ridge. Pol. Legislation. Hold: The exculpatory clause here violates public policy and is unenforceable b. a mother s agreement to surrender custody in exchange for money should be given no effect in deciding the custody of the child.
) entered into employment K containing non-compete clause with P. Reasoning: i. P has legitimate interest in retaining customer base ii. 2) P lacked knowledge to discern and ensure that land was in a reasonably safe condition 3) unequal bargaining power (K of adhesion) 4) P was under care and control of Ds and at risk of D s carelessness 5) clause wasn t limited to ordinary negligence (any and all) INEREST IN TORT LIABILITY 7) Valle Medical Specialists v Faber: (Restraint of Trade Non-Compete) D (DR. D left P s practice and began practicing within area. Six-Factor Analysis (corbin): Six factors guide courts in deciding whether a pre-injury exculpatory agreement violates public policy: (1) the transaction concerns a business of a type generally thought suitable for public regulation. Unreasonable bc not limited to pulmonolgy but all practice iv. 3 year period unreasonable bc pulmonologist patients have to have treatment every 6 months. subject to the risk of carelessness by that party or that party¶s agents e. time. the party invoking exculpation possesses a decisive advantage of bargaining strength against any member of the public who seeks his services. (3) the party holds himself out as willing to perform the service for any member of the public who seeks it. no exact formula exists. (2) the party seeking exculpation is engaged in performing a service of great importance to the public. b.c. therefore determination must be made by considering the totality of the circumstances in any given case against the backdrop of current societal expectations d. Rule: In determining whether an exculpatory agreement violaes public policy. the person or property of the purchaser is placed under the control of the seller. 1) restraint is greater than necessary to protect the employer s legitimate interests. 3 miles of ANY office unreasonable bc restriction covered more than 235 sq. and type of P s office. a. the party confronts the public with a standardized adhesion contract and makes no provision whereby a purchaser may pay additional reasonable fees and obtain protection against negligence. or 2) if that interest is outweighed by the hardship to the employee and the hardship to the employee and the likely injury to the public c. (5) in exercising a superior bargaining power. Reasoning i. so 6 months would make them decide whether or not to transfer iii. Hold: Unenforceable. Inerests Against: 1) Societal expectation that family oriented recreational activities will be reasonably safe. which is a matter of practical necessity. v. (6) as a result of the transaction. (4) as a result of the essential nature of the service. Pol. Unenforceable if: (balancing test) ii. Pub. mi. Rule: Restraint of trade must be reasonable based on the circumstances i. Significant public interest in allowing patients to get treatment for doctor of their choice best medical care . Restrictive covenant was too broad and outweighed by public policy concerns.
purpose and effect to aid the court in making the determination 1. Rule: UCC 2-302: Ct. Credit K contained cross collateralization clause. where D kept some balance on all items until completely eliminated. D reposed goods. as a matter of law. and later could make payments. or it may so limit the application of ay unconscionable clause as to avoid any unconscionable result ii. Factors/Elements: i. Disparity in 1) bargaining power or 2) value of consideration alone is not sufficient to void K for unconscionably (strong evidence) ii. Hold: Ct. finds the K or any clause of the K to have been unconscionable at the time it was made the court may refuse to enfoce he K. Key: Did more powerful party abuse its power (procedural)----. (likely) b. a. Procedural (Absence of meaningful choice factors): 1) disparity in bargaining power. or it may enforce the remainder of the K w/o the unconscionable clause. If the court. B: Basic Test: is whether. Aim: to prevent oppression and unfair surprise d.Unconscionability 1) Generally a. the clauses involved are so one-sided as to be unconscionable under the circumstances existing at the time of making the K 2. P bought stereo. Substantive Unconscionability: K terms that are unreasonably favorable to one side c. Com. 2) unfair surprise manner in which K entered into. UCC §2-208: Unconscionable K or Term If a K or term is unconscionable at the time K is made a ct. or may enforce the remainder of K w/o unconscionable term.to impose unfair contractual terms (substantive) 2) Williams v Walker-Thomas Furniture Co. Procedural Unconscionability: an absence of meaningful choice on buyer s part ii. in light of the general commercial background and the commercial needs of the particular trade or case. may refuse to enforce the K. or limit application of any unconscionable terms as to avoid any unconscionable result i. When it is claimed or appears to the court that the K or any clause thereof may be unconscionable the paries shall be afforded a reasonable opportunity to present evidence as to is commercial setting. may refuse to enfrce or limit enforcement of K it finds Unconscionability at time K was formed c. Unconscionability: The use of a significant imbalance in bargaining power to receive unreasonably one sided contractual terms b.: P had continuous dealing with D where she purchased items on credit. has authority to deem K unenforceable if it was unconscionable at time it was made. UCC §2-302: Unconscionable K or Clause i. Unconscionability: 1) Procedural Unconscionability and 2) Substantive Unconscionability i. Needs remand to review possible Unconscionability. 3) reasonable opportunity to understand terms in light of education or lack there of .
D alleged new terms unconscionable bc class-wide arbitration was only cost-effective measure to sue P for fraudulent fee collecting. Procedural Uncons. One-sided: P would never really sue all its customers in class action (no limit on them) Breach Material Breach and Substantial Performance 1) §237: Effect on Other Party s Duties of a Failure to Render Performance Except as stated in §240 (part perf. at least temporarily. Rule: §208 Rest. 2) Await Cure. Reasoning: i. Reasoning: i.: c. and discharges hose duties if it has not been cured during the time in which performance can occur 2) Types of Breach a. 2) terminate. Total/Material: Promisee may 1) withhold performance. Effect: it prevents performance of non-breaching parties duties from becoming due. Not Material (Substantial Performance): 1) Claim compensation for any loss suffered 3) Material/Total Breach: promisee s expectations completely dashed. at least to the extent they operate to insulate a party from liability that otherwise would be imposed under law. are generally unconscionable b. a. Found UCC-302 to be persuasive authority ii. Hold: Yes. Or agreed equivalents) it is a condition of each party s remaining duties to render performances to be exchanged under an exchange of promises that there be no uncured material failure by the other party to render an such performance due at an earlier time a. found method around traditional duty to read where party didn t actually assent bc of 1) lack of choice and 2) little to no understanding of terms they were signing 3) Discover Bank v Superior Court. exculpatory Ks in a K of adhesion. 3) claim full damages for breach b.: P sent members a change of terms agreement prohibiting classwide arbitration in a bill stuffer . §241 Circumstance Significant in Determining Whether a Failure is Material . Material but not total: (could become material in time if not cured) 1) Suspend performance.: Found where agreement was in bill stuffer and would be deemed to accept if he did not close his account (adhesion) ii. such one-sided. Lost Essence of Bargain a.d. Ct. 3) Claim compensation for any loss suffered c. Substantive: effectively deprived D of remedy by closing off only cost efficient measure to pursue fee collection claims 1.
a. Rule: §241 Factor of Material Breach: i. the buyer may 1. Reject the whole. for school district. (E &E): Breach is so central to the K that it substantially impairs its value i. or 2. including reasonable assurances v. taking account of all circumstances. Value ii. The extent t which the party failing to perform or to offer to perform will suffer forfeiture iv. or 3. Extent to which the injured party will be deprived of the benefit he reasonably expected ii. Rule: Material breach of employment K must be so important that it makes continued performance by P virtually pointless c. If within K time for deliver: seller may notify buyer of his intention to cure and then make conforming delivery ii. Extent to which the injured party can be adequately compensated for the part of that benefit of which he will be deprived iii. Likelihood that party failing to perform or to offer to perform will cure his failure. Proportion to performance as a whole 1. Accept any commercial unit or units and reject the rest b.i. D failed to provide P with evaluations as stipulated in K and restricted P from Committee reviewing improper pyames to committee member. Hold: D s breaches were NOT material as they didn t go to the essence of the K . §2-508 Cure by Seller i. Where buyer rejects and seller had reasonable grounds to believe goods would be accepted with or without money allowance the seller may if he seasonably notifies the buyer have a further reasonable time to substitute conforming tender c. Extent to which the behavior of the breaching party comports with standards of good faith and fair dealing (willfulness) 4) Breach Under the UCC a. §2-601Buyer s Right on Improper Deliver: perfect tender rule i. P quit and sued for breach of K by D. Non-breaching party deprived of benefit reasonably anticipated ii. Non-breaching party can be adequately compensated for benefit of which deprived iii. Extent of forfeiture for breaching party . b. Must consider entirety of exchange and decide if defect is a significant part of the consideration bargained for by performance 5) Gibson v City of Cranston: P hired as chief admin. Accept the whole. P cannot recover. If goods or the tender of delivery fail in any respect to conform to the K.
which would be effectively nothing. Has substantially complied with K in the sense that defects are not so pervasive as to constitute a deviation from the general plan contemplated for the work (significance of breach) iii. of which P s complaints were only a small part ii. Deviations are not so essential that object of parties in making the K (Intent) and its purposes cannot w/o difficult be accomplished by remedying hem c. 2 ways to measure damages in case of substantial performance a. Hold: P-full recovery. In matter of homes and their decoration. Likelihood breaching party will cure failure v. and homeowner cannot be compelled to accept something else . Rule: When breaching party substantially performed the non-breaching party is entitled to the cost of completion UNLESS the cost of completion is grossly and unfairly out of proportion to the good to be attained c. 7 of 9 committee members gave feedback in some form iii. No substantial performance. Difference in market value of pipes was very small (insignificant) while cost of replacement would require tearing apart much of the house---extremely costly (economic waste) 1. more than in other fields. A roof which lacks uniformity in color does not serve substantially the same purpose as a roof of uniform color b. but a promise. D (committee) had scheduled meeting to evaluate P s performance (cure) 6) Jacobs & Youngs v Kent: P hired D to build house for 77. D in good faith intended to comply with K ii. b. mere taste and preference may be controlling. D completed building. Rule: Substantial Performance Requires: i. and evidence showed uniform color roof can be achieved only by installing a completely new roof. Construction K included clause stating all pipe to be Reading Pipe . but P learned much of the pipe used was not Reading pipe.iv. Extent breaching party comports with good faith and fair dealing d. 46 due on K---P refused to pay a. Completed roof was not of uniform color. Reasoning: i. Reasoning: i. Cost of completion usual/normal rule b. (condition to K would result in discharge of P s duty to pay) P substantially performed and thus D can only recover difference in value between pipes.000. D failed to cure defect. Installatoin of the pipe was NOT a condition to K. Hold: P s breach was NOT material. a. P s job included vast array of functions. Reasoning: i. D sued for remaining 3.483. Difference in value when cost of completion would result in unreasonable forfeiture and economic waste 7) OW Grun Roofing & Construction Co. v Cope: D entered into K with P to install new roof of uniform color for $648. P s error was not willful (unintentional and trivial) ii.
Look at intent of parties (purpose of K series vs individual) b. a party s language must be reasonably interpreted to mean that the party will not or cannot perform. Recovery of some damages under substantial performance won t remedy problem bc only adequate fix is a whole new roof Divisible Ks and Part Performance 1) §240: Part Performance as Agreed Equivalents If the performances to be exchanged under an exchange of promises can be apportioned into corresponding pairs of part performances so that the pairs of each pair are properly regarded as agreed equivalents. Breach of one part doesn t precluded obtaining consideration for another portion of the K. not just a serviceable roof----therefore D did not substantially perform ii. if reasonable. a party s performance of his part of such a pair has the same effect on the other s duties to render performance of the agreed equivalent as it would ve if only that pair of performances had been promised. Nature of Statement: In order to constitute a repudiation. Look at substance of K and how K was made Anticipatory Breach and Adequate Assurances Repudiation: A definite and unequivocal manifestation of intention on the part of the repudiator that he will not render the promised performance when the time fixed for it in the K arrives Restatement §250: When a Statement or an Act Is a Repudiation: A repudiation is a) A statement by the obligor to the oblige indicating that the obligor will commit a breach that would of itself give the obigee a claim for damages for total breach under §243(Material Breach) (Express repudiation) b) A voluntary affirmative act which renders the obligor unable or apparently unable to perform without such a breach (Implied Repudiation) a. Com A: reduces risk of forfeiture . P bargaining for mental satisfaction and look of house. suspend any performance for which he has not already received the agreed exchange until he receives such assurances . 2) Must Determine if K is divisible or if it is contract in its entirety a. the oblige may demand adequate assurance of due performance and may.1. §251: When a Failure to Give Assurance May Be Treated as a Repudiation 1) Where reasonable grounds arise to believe the obligor will commit a breach by nn-performance that would itself give rise to obliges claim for total breach. Mere expression of doubt is not enough.
one party s repudiation of a duty to render performance discharges the other party s duties t render performance §255 Nullification of Repudiation 1) Repudiation or failure to give adequate assurances is nullified by a retraction of the repudiation if it comes to the attention of the injured party before he materially changes his position in reliance on the repudiation or indicates he considers the repudiation final UCC §2-610 UCC: Anticipatory Repudiation When either party repudiates the K with respect to a performance not yet due the loss of which will substantially impair the value of the K to the other.2) Obligee may treat oblior s failure to provide assurances within a reasonable time as a repudiation §253: Effect of Repudiation 1) Where obligor repudiates a duty before he has committed a breach by non-performance and before he has received all of the agreed exchange for it. the aggrieved party may a) Await performance by repudiating party for a commercially reasonable time b) Resort to any remedy for breach (2-703 or 2-711) c) In either case suspend his own performance or proceed in accordance with the provisions of this Article on the seller s right to identify goods to the K notwithstanding breach or to salvage unfinished goods (2-704) §2-609 Right to Adequate Assurance of Performance: 1) When reasonable grounds for insecurity arise with respect to the performance of either party the other may in writing demand adequate assurance of due performance AND until he receives such assurance may if commercially reasonable suspend any performance for which he has not already received the agreed return 2) After receipt of a justified demand failure to provide assurances within a reasonable time NOT EXCEEDING 30 DAYS is a repudiation of the K §2-611 Retraction of Anticipatory Repudiation 1) Until repudiating party s next performance is due he can retract his repudiation unless the aggrieved party has since the repudiation cancelled or materially changed his position or otherwise indicated that he considers the repudiation final Cost of Cover Rule: UCC 2-708: Difference between the K price and the market price at the time and palce for tender . his repudiation alone gives rise to a claim for damages for total breach 2) Were performances are to be exchanged under an exchange of promises.
later.500 a final repudiation iii. Option to sue now or wait until actual breach should be given to innocent party iii. If she fails to do so. D rejected and then P wrote back stating intention to purchase land at initial price 160. P sued seeking injunction declaring D had no right to seek adequate assurances and to prevent D from terminating K . that they impliedly promise that in the meantime neither will do anything to prejudice the other inconsistent with that relation ii.000 conditioned on P getting city to rezone land. b. Hold: P can recover. D wrote to P saying he changed his find. (Adequate Assurances): 1989 D entered into25 year K to purchase electricity from P.000. Reasoning i. but D refused to sell. saying no chance of rezoning and that D but D would buy land as zoned for 142. 1994 D sent P letter showing P was likely to owe $610 million to D and wanted adequate assurance that P could fully perform (pay). she is not entitled to recover the damages she could have otherwise avoided.Duty of Innocent Party to Mitigate Damages Innocent party in case of an anticipatory repudiations owes a duty to mitigate the damages arising from the repudiation. Reasoning i. Rule: A repudiation by the promisor dispenses with the condition precedent to the promisee s promise to perform. with avoided cost credit system based on market rate. Rule: Repudiating party may retract repudiation unless 1) aggrieved party has materially changed his position in reliance on repudiation 2) has indicated to the repudiating party he considers the repudiation final c. Rule: P may wait til time act K was to be performed or sue immediately upon repudiation i. D s gave no notice to P that they considered offer for 142. If they wait they leave themselves open to 1) retraction and 2) claim for failure to mitigate damages d. D admitted they had not discussed. Pol. a. and thus can sue immediately for breach of K c. P wrote letter. Pol: Allowing aggrieved party to treat K as terminated w/.500. Pol: Unreasonable to make P wait for a job the other party has told them they no longer have. Both parties benefit. and refused to pay P.o notice would effectively eliminate doctrine of retraction 3) Norcon Power Partners v Niagara Mohawk Power Corp. Hold: 1) Letter was not repudiation as a matter of law (should ve gone to jury) 2) Even if it was repudiated P had retracted its repudiation b. No need to wait until June 1 to seek remedy. 1) Hockhester v De La Tour: D hired P to accompany him on tour starting June 1. Laater. P brought suit for breach of K. In a K for future performance there is a relationship created b/w parties. considered or entered into another agreement to sell property (no change in position) ii. Flatt and Sons v Schupf: P entered into K in which D agreed to sell P land for 160. bc P can get a new job which mitigates damages D would otherwise have to pay 2) Truman L. and D argued he couldn t breach until June 1 when K was to start a.
b. Any cost or other loss avoided by not having to perform i. or c. The loss in value to him of the other party performance casued by its failure or deficiency. analogized to UCC bc sale of electricity so closely mirrors sales of goods. including incidental or consequential loss.a. Particularly persuasive in long-term K (like this) where potential consequences of failure to perform could be enormous Money Damages 1) §344 Purposes of Remedies a. only difference is electricity not tangible ii.us b. Expectation Interest: Injured parties interest in having the benefit of his bargain by being put in as good a position as he would have been in had the K been performed b. Reasoning i. pl. Mitigates damages (eliminates some of the catch-22 when unsure if others actions constitute a repudiation) iii. Any other loss. within a reasonable time not exceeding 30 days. Cost Avoided= Money saved by not having to complete performance . Failure to provide. Rule §2-609: When reasonable grounds for insecurity arise with respect to performance of either party the other may demand adequate assurance of due performance and until he receives such assurance may suspend performance (right to withhold then breach if not assured) i. Ct. Other Loss= Incidental Damages 3. Hold: P had right to seek adequate assurances and failure to provide them was a repudiation. Reliance Interest: Injured parties interest in being reimbursed for loss caused by reliance on the K by being put in as good a position as he would have been in had the K not been mad. Loss in value= What P got What P was promised 2. less c. such assurance of due performance is a repudiation of the K c. Restitution Interest: Parties interest in having restored to him any benefit that he has conferred on the other party Expectation Interest: Compensatory Damages 1) §347 Measure of Damages in General Subject ot limitation in §350-53 the injured party has a right to damages based on expectatoin interest as measured by a. casued by the breach. §251 Rest: modeled after UCC 2-609: d. Formula: (Loss in Value +Other Loss) (Cost Avoided + Loss Avoided) 1.
and the actual value at the time of the sale. and such other damages as could be reasonably anticipated by the parties as likely to be caused by the vendor s failure to keep his agreement. D guaranteed he would make hand 100% perfect. K law designed to put P in position he would ve been if D kept his K (not to punish) ii. Designed to give aggrieved party the benefit of their bargain c. §2-715. Fixed costs not subtracted from damages c. Failure of buyer to effect cover does not bar him from any other remedy i. and could not by reasonable care on the part of the vendee have been avoided d. Hold: P entitled to damages for full amount of detriment caused.2) 3) 4) 5) 4. Rule: Not purpose of K law to award punitive damages c. Operation went horribly and P ended up with deformed and restricted hand. including gains prevented and losses sustained. Usually the most generous Hawkins v McGee: P hired D for surgery on his had. Cost saved must be tied directly to breach ii. Fixed Costs (overhead) have to be paid regardless of whether D breached. so subtracting them from damages would be making P pay them twice . the buyer may cover by making in good faith and without unreasonable delay any reasonable purchase of or K to purchase goods in sub. Standard method of measuring promise damages b. D argues TC should ve subtracted % of overhead cost from P s damages a. Reasoning i. Rule: The measure of the vendee s damages (D) is the difference b/w the value of the goods as they would had been if the warranty as to quality had been true. For those due from seller b. Buyer may recover from seller the difference between cost of cover and K price + incidental or consequential damages. but less expenses saved c. Rule: Damages are only reduced by expenses actually saved because K did not have to be performed i. P learned D was improperly assigning large lots by assigning some to another contractor.2: Consequential damages limited from to those which buyer could not have reasonably prevented by cover (mitigation) Generally a. and constant overhead expenses are not deducted from K price b. After a breach. Loss Avoided (mitigation)= reselling of materials/finding new job UCC 2-712 Cover Buyer s Procurement of Substitute Goods a. P only entitled to difference in value of good had and hand in current state Leingang v Mandan Weed Board: D hired P to cut weeds on large lots. P sued for breach. TC allowed jury to award damages for pain and suffering a. Hold: TC instruction was erroneous bc it allowed for pain and suffering b. Reasoning i.
No economic waste because no work had been done 1.: P leased land to D. Further losses in other transaction that were dependent upon the K 3) §351 Unforseeability and Related Limitations on Damages a. D arg: dimunition in value -----P arg: cost of completion b. Exception: Lost Volume Seller i.000) iii. or lost gains under K) a. Limitation on Money Damages 1) 2) 3) 4) Unforseeability Certainty Avoidability/Mitigatoin Causation Unforseeability 1) Direct Damages: damages that directly tie to benefit of bargain (cost of sub.000 but Increase in Property Value of Work= 12. Hold: P entitled to cost of completion substitute services 60. Could view as restitution problem: P paid in advance and was seeking reasonable FMV of benefit conferred (60.Net profits approach used by TC was improper and not necessary bc evidence clearly showed exact costs (not estimate needed) d. Tort: compensation for deterioration in value caused by tort 2. LVS: can out-supply market (need to include overhead expenses in damage calculation) ii.000 c. Particularly applicable only when remedy would requiring undoing work or tearing down structure (not improvement K) ii.160 a. Rule: Absent economic waste the method for calculating damages is the reasonable cost of completion d. K stated D was to remove sand and gravel on property and leave property at a uniform grade . D willfully breach and left ground broken and rugged. Damages are not recoverable for loss that the party in breach did not have reason to foresee as a probable result of the breach when the K was made . D s breach was willful iii. Reasoning: i. Cost to complete work= 60. Tort v K damages 1. LVS and mitigation: don t deduct loss avoided by resale bc seller could ve made sale anyways 6) Groves v John Wunder Co. Easily attributable 2) Consequential Damages: Loss that do not flow directly and imediatley from the injurious act but that result indirectly from the act a. K: damages valued from peak of accomplishment not value iv.
or ii. Needed actual statement to D of consequences due to their delay 6) Manoucheri v Hein: P bought x-ray machine from D. reasons could explain why P were sending shaft and mill stopped 1. Reasoning i. As a result of special circumstances. Mill had another shaft (weak) 2. Direct Damages: i. Consequential damages resulting from the seller breach include i. and told D mill was stopped and shaft must be delivered immediately. Rule (Exception): if special circumstances under which K were actually communicated by Ps to Ds and thus known to both parties. Hold: No consequential damages. damages resulting from breach would be the ordinary damages under these special circumstances so known and communicated i. In the ordinary course of event. when goods as delivered cannot be repaired to function as they promised ii. Rule: Non-breaching party receives dmages which may fairly and reasonably be considered either 1) arising naturally from breach of K or 2) such as may reasonably be supposed to have been in contemplation of both parties. Tacit agreement test rejected 5) Hadley v Baxendale: P ran mill. P realized and notified D. Pol: unfair to hold D liable for special circumstances if he didn t know of them. a. that party in breach had reason to know 4) UCC 2-715: Buyer s Incidental and Consequential Damages a. P hired D to have crank delivered of repairs. Lost profits cannot reasonably be considered a consequence of breach of K. beyond ordinary course of events. However. D said he would cure. Any loss resulting from general or particular requirement and needs of which the seller at the time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise. Rule: Measure of direct damages is usually cost b/w goods as warranted and value of goods as accepted ---approximated by cost of rapir 1. Injury to person or property proximately caused by breach of warranty 1. Delivery was delayed due to negligence by D. but failed to do so. In this case judge though alt. Mill shut down for other reasons iii. and ii. Traditional Rule: Express/Tacit Agreement d. a. P sued for lost profits from delay. b. which had to stop bc of broken crank. at the time they made the K as the probable result of the breach c. D delivered weaker x-ray machine to P.b. where goods are irreplaceable court may use other reasonable measures to calculate damages (cost of new machine) . Hold: Cost of new machine is appropriate measure of damages. P sued for direct and consequential damages. Loss may be forseeable as a probable result of a breach bc it flows from the breach i. and couldn t raise price in response to additional liability ii.
This may be true. for example.b. §350(g) Efforts Expected: In some situations. that the injured party is barred from recovery unless he establishes the total amount of his loss. In such a situation the injured party is not expected to arrange a substitute transaction although he may be expected to take some steps to avoid loss due to a delay in performance. Consequential Damages i. Hold: Consequential damages were appropriate ii. Requirement of certainty. Damages are not recoverable for loss beyond an amount that the evidence permits to be established with reasonable certainty i. and D said he would. It merely excludes those elements of loss that cannot be proved with reasonable certainty 2) Elements: P must prove a.b): Damages awarded as a result of special circumstances. implied) requirement of proof must be viewed in context of amount at stake (sliding scale of certainty) c. §351(2. Forseeability: 1. it is reasonable for the injured party to rely on performance by the other party even after breach. ) would earn money from x-ray machine Certainty 1) §352 Uncertainty as a Limitation on Damages a. Reasoning: i. Avoidability: P asked D to fix machine. A party cannot recover damages for breach of a contract for loss beyond the amount that the evidence permits to be established with reasonable certainty ii. that the party in breach had reason to know iv. iii. Rule (Foreseeability): P did not need to expressly state to D how much income he would earn from machine. Rule (Certainty): (ct. P testified to conversation with D about how much he charged for x-rays 3. so long as the consequence of lost income was reasonably forseeable 1. Rule (Mitigation): P has duty ot mitigate but is not precluded from recovery when he has made reasonable but unsuccessful effort to avoid loss 1. however. It was reasonable for P to rely on D s statement and D cannot assert his own failure as reason for mitigation of damages ii. The requirement does not mean. D knew his customer and how x-ray machine was to be used (contrasted to mass-produced anonymous buyer) 2. Injury b. if the breach is accompanied by assurances that performance will be forthcoming. Reasonable for person in D s position to assumed P (Dr. Amount of loss .
Proximate Cause 3) ESPN v Baseball: P breached K with D by showing NFL instead of MLB games without D s approval. Hold: P can recover for out-of-pocket (reliance) expenses of 57. to the measure of damages stated in §347 (Expectation) the injured party has a right to damages based on his reliance interest. 2) promotional opportunities. Sub-Rule: For goodwill. D unsupported allegation inadequate to sustain a claim for damages b. Sub-Rule: When existence of damage certain but amount uncertain. or future profit P must show 1.000 from not being able to create TV blooper show and 3) 200. 3) prestige.000. This instance was one where expectation couldn t be proved. 4) sponsorships (consequential) a. Modern Rule: No per se ban but Need strong evidence to provide reasonable basis for determining damages c. Traditional Rule: profits which are largely speculative such as those dependent on the success of an untried enterprise. No evidence of decrease in ratings or box office sales 4) Hollywood Fantasy Corp.500 d. D didn t cite single lost promotional opportunity. For performance or in performance.000 in lost investment a. 2) 1. but reliance could e. (more than conjecture/guesswork) i. Testimony refused to state exact loss number or reasonable basis for evaluating losses iii. As an alt. is not enough for recovery of lost profits i. business reputation. D damages it belived to exceed millions as a result of lost 1) exposure.i. less proof ended but P must show stable foundation for reasonable estimate of damages ii.000 for loss of profits from ten future events (P went out of business). P sued for 1) 250. Exception: firm reasons for expectations of profits (higher level of certainty) ii. §349: Reliance 1. Hold: P cannot recover for future lost profits or TV show losses because they were not proved with reasonable certainty b. Rule: P may recover out-of-pocket expenses he made in reliance upon D s promise i. Reasoning i. even when that hope is realistic. Hold: No liability for consequential damages. Amount of loss reasonably certain in amount and directly traceable to breach (proximate cause) c. less any lsos that the party in breach can prove with reasonable certainty the injured party would have suffered had the K been formed a. or advertising dollar ii. Rule: P seeking compensatory damages has burden of proof and must present court with a proper basis for ascertaining damages. Fact of loss with certainty 2. including expenditures made in prep. sponsor. Reasoning: . v Gabor: D breached K by not showing up to P s fantasy vacation business as guest celebrity. Not as generous as Expectation (profit not included) b.
P refused. to that of which the employee has been deprived 1. the employer must show that the other employment was comparable or substantially similar.: D cancelled production of Bloomer Girl and repudiated P s agreement to play leading role. or humiliation b. D argues refusal of Big Country is failure to mitigate. Damages are not recoverable for loss that injured party could ve have avoided without undue risk. General Rule: Damages for wrongfully discharged employee: Amount of salary agreed upon for the period of service. dance. a. 2) LA vs Australia. D offered role in Big Country as substitute. marketing costs. Exception: Injured party not precluded from recovery by the rule stated above to the extent that he has made reasonable but unsuccessful efforts to avoid loss 3) Exceptions a. employment P has broken chain of causation i. 3) Musical (sing. D s failure to seek other available employment of a different or inferior kind may not be resorted to in order to mitigate damages c. Expectation/Consequential: 1) only one prior vacation which lost money. Exception: Before projected earnings from other employment can be applied in mitigation. and miscellaneous expenses they made based on D s promise to participate 1.i. Breaks causal link b/w breach and damage b. 3) only 2 people had bought tickets. Usuall P must have through bad faith or unreasonable action/inaction aggravated her damages (failed to minimize losses ook out for own economic welfare) 2) §350 Avoidability as a Limitation on Damages (mitigation) a. Reasonable discretion in declining alternatives: substitute employment must be Comparable or Substantially Similar b. Lost Volume Seller: If P (LVS) could ve made 2nd sale regardless of D s breach/repudiation than 2nd sale is not substitute for the first and doesn t mitigate damages (P gets full profits from sale) 4) Parker v Twentieth Century-Fox Film Corp. Reasoning i. Small amount testimony sufficient Mitigation of Damages 1) Mitigation: non-breaching party cannot continue to perform after being told that other side will breach and then charge for full K price a. 2) no future packages scheduled. (-) less the amount which the employer proves employee has earned or with reasonable effort might have earned from other employment b. Reliance: P testified to printing costs. burden. not applied in mitigation bc big Coutry was both different and inferior employment i. Differences: 1)Female lead vs Actual Lead. 4) P had not sold right to TV pilot or showed any objective data supporting TV claim ii. Hold: P s failure to accept substitute role. Pol: By refusing alt. and act) vs Dramatic Film .
so no damages a. in terms of what it would ve cost him to obtain it from a person in the claimant s position (Market Value of Benefi/Service) i. and testimony to decide how substantial difference is ii. TC found amount due to P under K was 37. Net Benefit Rule: The party in breach is entitled to the restitution for any benefit that he has conferred in excess of the loss that he has caused by his own breach 5) K Price as a CAP on Damages a. Rule: Recovery for restitution is value of benefit conferred undiminished by any loss which would ve been incurred by complete performance d. c. Preferred Measure b. the injured party is entitled to restitution for any benefit he has conferred on the other party by way of party performance or reliance 4) §374 Restitution in Favor of the Party in Breach a. Weighing of evidence is a JURY question and court shouldn t have made decision as a matter of law Restitution: As an Alt.ii. it may as justice requires be measured by either: a. Need to take in facts. Reasonable value to the other party of what he receives.000 but P would ve had to spend over 37. Hold: TC incorrect. Measure to Expectation 1) Restitution: designed to restore to one party the value of a benefit unjustly conferred to another 2) §371: Measure of Restitution Interest If a sum of money is awarded to protect a party s restitution interest. Reasoning . P s choice under which theory to sue under. P can recover value of benefit conferred under quantum meruit (restitution) claim and loss avoided not deducted from restitution claim b. On a claim that gives rise to MaterialBreach . One week to accept could indicate D s offer was not made in good faith but simply an attempt to decrease losses from earlier breach d. No Cap: gives incentive to breach K 6) Coast Steel Erectors v Blair: D breached by not paying for crane use. Dissent: i. Expenses not directly tied to benefit are excluded (cost of service likely to be less than damages) 3) §373 Restitution When Other Party is in Breach a. circumstances.000 to complete project. Ex: What if painter underbid job for 500 when market value of job is 600---should Painter be able to recover full 600 under restitution claim (FORK) i. Cap: would create windfall for contracting party (give benefit of bargain outside of true K claim) ii. Rule: P can forego any suit on K and claim on reasonable value of performance (benefit conferred). Extent to which the other party s property has been increased in value or his other interests advance (Increase in Value) i. P sued for work already done on construction K.
5 months into K. 2) difficulties of proof of loss. Damages may be liquidated BUT ONLY 1) at an amount that is reasonable in the light of the anticipated or actual loss caused b the breach and 2) The difficulties of proof of loss. Damages may be liquidated BUT ONLY at an amount 1) which is reasonable in light of anticipated or actual harm caused by the breach. A term fixing unreasonably large liquidated damages is unenforceable on grounds of public policy as a penalty (K law designed for COMPENSATION no PENALTY) 3) UCC 2-718 Liquidation or Limitation of Damages a.5 months of work and showed evidence of increased value of D s land ii. 2) §356 Liquidated Damages and Penalties a. P did 9. a party actually receives labor or material and thereby derives a benefit and advantage over and above the damage which has resulted from the breach of the K by the other party. Or divisible K b. P sued for restitution. and the value received furnish a new consideration and the law thereupon raise a promise to pay to the extent of the reasonable worth of such excess c.i. D showed no damages due to breach so nothing subtracted 1. Value Measure: Amount for which such services could ve been purchased from one in the P s position at the time and place the services were rendered 7) Britton v Turner: P entered into 1 year service K with D to be paid on completion. a. P left 9. the labor actually done. Hold: P can recover bc restitution is claim outside of K i. D argues P s full performance was a condition precedent to receiving payment. P withdrew after June 1 but refused to pay full tuition (liquidated damages clause) . True Concern: Did parties INTED compensation or penalty? 5) 6) O Brian v Langley School: P enrolled daughter at school and signed Membership K. Higher levels of uncertainty/predictability should be given more leeway in reasonability of damages estimate b. Reasoning i. D would ve had $95 windfall if P couldn t recovery (K law avoids windfalls) Agreed Remedies: Liquidated Damages 1) Liquidated Damages Clause: A contractual provision that determines in advance the measure of damages if a party breaches the agreement. Recovery despite not substantial perf. Rule: Net Benefit Rule: Where a K is made of such a character. and 3) inconvenience or nonfeasibility of otherwise obtaining an adequate remedy Unreasonably large liquidated damages: VOID as a penalty 4) Reasonability and Uncertainty are factors balanced against each other a. K included liquidated damages clause stating P liable for full Tuition if withdrawal not made by June 1. D was breaching party by breaching D lost right to retain benefits of advantageous bargain (P would ve lost money on construction deal) by breaching ii.
K included LDC stating if buyer repudiates P gets damages at $5 per case.000 cases a. That evidence not available so remand for further review/evidence. i.800 (10%) as down payment. Hold: Subsequent increase in value doesn t factor into D s losses. Reasoning i. Key evidence missing: value of property at time of breach (not 6 years later) iii. c.800. P assented to LDC so he carries Substantial Burden in proving non-breaching party was unjustly enriched (higher burden-but no substantial effect) ii. 3) difficulty of obtaining adequate remedy c. P s business was a NEW BUSINESS so reasonability of anticipated harm should be given more leeway (can t accurately state expected harm) ii. 16. b.5%-41% increase over projected profits likely unenforceable. P assented to clause and thus presumption in favor of non-moving party 7) Kvassay v Murray: P agreed to sell 24. Rule: Party attempting to prove invalidity of LDC bears the burden of showing either 1) damages resulting from breach were susceptible of definite measurement 2) stipulated amount grossly in excess of actual damages i. D breached after 3. K had LDC stating D would retain all monies paid as liquidated damages. Damage to nonbreaching party (D) must be calculated at time of breach. §365: Liquidated Damages and Penalties c. P breached and attempted to recovery 7. Rule: UCC 2-718: LDC must be reasonable in light of 1) anticipated or actual harm caused by breach. Neither party argued LDC unreasonably as Estimate so P must prove LDC gross out of proportion AT TIME OF BREACH Specific Performance 1) Specific Performance used when legal (money) damages are insufficient to make P whole and D must then look to Equities (specific performace) . Hold: TC erred by not allowing P to challenge validity of liquidated damages clause b.800 under restitution. P paid 7. bc D s property subsequently doubled in value over next 6 years (no actual loss thus unjust enrichment) a. Reasoning i. Rule: §374(2) Net Benefit w Liquidated Damages: Party in breach not entitled to restitution if liquidated damages are reasonable in light of anticipated or actual loss caused by breach and difficulties of proof of loss. Reasoning i. Actual loss better measure of determining inequality (highly important when actual damages capable of definite assessment) 8) Vines v Orchard Hills. Inc: P entered K to buy condo from D for 78. 2) difficult of proving loss. but actual losses are better measure when available b. Hold: Reasonability of LDC best determined by looking at actual lost profits not estimates so remand needed.a.000 cases of baklava to D.
in measuring for money damages. D informed P they were going to breach by letting Phar-Mor join---P sued for injunction. Exchange is grossly inadequate or terms of K otherwise unfair 7) UCC §2-716: a. Rule: What matters most. Hold: P cannot receive specific performance bc he has an adequate remedy at law. SP is when court can t obtain (at reasonable cost) enough info about substitutes to permit it to calculate an award of money damages---w/o unacceptably high risk of inaccuracy c. Abscenece of liquid market 6) §364 Effect of Unfairness: (slightly lower standard than procedural or substantive unconsc. Difficult of proving damages with reasonable certainty b. D sent P a letter stating termination of agreement (breach). Prohibitory Injunction: restrains D from taking a particular action (often an indirect means of getting D to do what they promised to do) (restricting alternative) b. Building was sold to D. P had other properties the court could use to value his loss (substitute) iii. . a.) a. Likelihood damages can t be collected (Insolvency) d. Injunction cost low iii. due to the ability of the court to value his damages b. SP or injunction will be refused if such relief would be unfair bc: i. Other: Inability to cover/Requirements contract (Campbell sTomato Soup Example) 8) Van Wagner Advertising v S&M Enterprises: P leased exterior wall of building to sub-lease for advertising.: P had 30 year lease with D s mall including a clause prohibiting mall from allowing other pharmacies. K was induced by mistake or unfair practices ii. SP would disproportionately harm D and benefit P bc of D s plans to develop their property after significant investment 9) Walgreen Co. Factors from Cases: i. is the volume. Mandatory Injunction: Specific Performance: directs D to do a certain act 3) When will court exercise discretion and Order Specific Performance: factors/guidelines 359-69 4) §359: Effect of Adequacy of Damages: a. Damages difficult to prove ii. No SP when money damages would be adequate to protect expectation interest of injured party 5) §360 Factors Affecting Adequacy of Damages a. Difficult of procuring a suitable substitute by means of money damages (Uniqueess) c. SP may be decreed where the goods are unique or in other proper circumstances i. At some level al property is interchangeable with money ii.2) Forms: a. Reasoning: i. refinement and reliability of the available information about substitutes i. P seeks specific performance. Relief would cause unreasonable hardship or loss to party in breach or 3rd person iii. v Sara Creek Property Co.
Hold: Proper SP/Injunction case. b. Injucntion cost low: Not difficult for court to monitor/enforce iii. Damages very difficult to prove bc of nature of business loss (goodwill) and length of time 30 years ii.a. D enjoined from allowing Phar-Mor in. This situation similar to non-compete and SP for sale of real property . Reasoning: i. Rule: SP may be/is appropriate where cost of gathering information/proving damages would exceed the costs of the injunctive remedy c.
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