CONTRACTS

In-Class Notes
8/29/22
 Can schedule a meeting with either of the TAs on his website
 Read supplemental materials before reading casebook
 IRAC – Issue, Rule, Application, Conclusion
 CRAC – Conclusion, Rule, Application, Conclusion
 Will post practice questions for each topic as we complete them
 Definition of what a “good” is is given in the definitions section of the UCC
o Good – tangible item of personal property that is moveable at the time of sale
 Commodity exchanges (stocks, intellectual property, etc.) are NOT goods
 A mix of goods and non-goods – do a primary purpose test to determine the main purpose
of the contract.
 OVERVIEW OF CONTRACT LAW
o Contracts are enforceable promises
o Not everything you say you will do is a contract
o Gratuitous promises are not enforceable – there is no duty of the promiser
 Remains a gratuitous promise even when put in writing
o In theory...
 Contracts are the perfect way to regulate relationships.
 2 parties agree to something they both want.
 Statutes and rules will never make everyone happy.
 If you don’t like what a contract says, just don’t agree to it.
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8/31/22
 After reading a case, you should be able to answer the following questions:
o What rule did this case add? Why did I read this case?
o How does this case fit in with the other cases?
o What are the facts?
o Do I agree with this rule? What is the policy behind it?
 Questions to ask:
o What law applies?
o Was there an offer?
 LUCY v. ZEHMER
o The Statute of frauds says that certain things (such as land) need a written
contract.
o Manifestation of mutual assent – the appearance of mutual assent through words,
actions, earlier interactions, etc.
 Used to determine if there was a meeting of the minds
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o Meeting of the minds – the mutual agreement between two people to do

something.
 If both parties have equal evidence for themselves/against the other (if they’re tied), then
the defendant wins because the burden of proof was on the plaintiff.
 For a contract to have formed, there needs to have been an objective manifestation of
mutual assent (meeting of the minds).
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9/2/22
 Restatements
o §24 (Offer) – “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.”
o §26 (Preliminary Negotiations) – “A manifestation of willingness to enter into a
bargain is not an offer if the person to whom it is addressed knows or has reason
to know that the person making it doesn’t intend to conclude a bargain until he
has made a further manifestation of assent.”
 Lonergan v. Scolnick
o “Form letter” - a letter sent to everyone interested.
o RULE – When the parties’ intentions are to engage in preliminary negotiation,
there is no offer.
 Must have a fixed purpose to make a definite offer.
o Was the offer definite here?
 Appellate court decided no – there was never an offer made
 Appellate court’s reasoning is the one that sets precedent
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9/7/22
 If you see conditional language in a multiple-choice question, it is not enough to
constitute an offer/contract
 UCC 2-204 “reduces” the formalities needed to form a contract – doesn't need to be an
explicit offer & acceptance, you just need to be able to reasonably infer from the
interaction that an offer was made, and acceptance was given.
 UCC makes it easier to form a contract compared to common law
o Creates some “fuzzier” circumstances – not always a distinct yes or no.
 Interlocutory appeal – before the decision of the trial court, a party can ask the appellate
court to review part of the case, if it is something that is of material relevance to the
outcome of the case.
 Not a bright line rule – not every price quote doesn’t constitute an offer
 Interstate v. Barclay
CONTRACTS

o Cites both the UCC and the Restatements – there are some sections that are the
same.
o Argue August letter from Barclay is an offer
 Provided price for over 75k sq. Ft.
 Advised that Barclay would be able to manufacture panels per specified
standards
 Doing business for 5yrs
o Argue August letter from Barclay isn’t an offer
 Specifically used “price quotation” language
 No quantity, time, or method of payment
o Correspondence between Interstate & Barclay in November
 Interstate sent two purchase orders to Barclay
 These would be offers
 HOWEVER, ...
 Barclay rejected them
 Could not supply the panels
 NO CONTRACT because you need both offer and acceptance.
 One way to think about whether something is an offer or not – If it is an offer, all that is
left is to say yes/agree to it.
 RULE – price quotes
o Generally, not an offer
o UNLESS
 Detailed enough
 It must reasonably appear from the quote that consent is all that is needed.
 The word quote is commonly understood as inviting an offer rather than making an offer,
even when they’re directed at a particular customer.
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9/9/22
 Questions to ask:
o What law applies?
 UCC or Common law
o Was there an offer?
o WAS THE OFFER TERMINATED?
 Start with the presumption that an advertisement is not an offer and decide if there are
sufficient details to decide otherwise – must be VERY specific for an advertisement to
constitute an offer.
 RULE – Advertisements
o Advertisements are not ordinarily understood as offers to sell.
o Advertisements are simply invitations to negotiate
o UNLESS …
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 Clear, definite, explicit, and leaves nothing open for negotiations

 Reward
o It is possible to make an offer via advertisement, but there must be some language
of commitment or an invitation to act without further communication/assent.
 KEARNEY V. EQUILON
o Issue - Whether the advertisement could be an offer when it said if you buy 10
gallons of gas, you will get a free lift ticket.
 Destroying the offer
o Rejection – When an offeree rejects an offer, the offer is nullified and can no
longer be accepted.
 Once you say no, you can no longer accept.
o Revocation – When an offer has been taken away, it can no longer be accepted.

 DODDS V. DICKINSON
o Asks when an offer can be withdrawn or revoked
o Who has the power to accept?
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9/12/22
 RULE – Offeror may revoke an offer at any point prior to acceptance
o Must be communicated, either directly or indirectly
 Indirectly – offeree learns of acts by the offeror from a reliable source that
would lead a reasonable person to believe that the offeror no longer wishes
to make the offer.
o If the offer is revoked, it cannot be accepted.
 BREWER V. LEPMAN
o Whether the offer lapsed when it required prompt acceptance, and the offeree did
not respond for several hours due to circumstances beyond his control.
 RULE – An offer can state a time at which it will lapse.
o If it does not state a time of lapse, that will be a reasonable time.
o What is reasonable is determined by looking at all the circumstances
o The length of time that is reasonable to accept may vary depending on what the
offer is for (buying eggs vs buying stocks).
 PAINE V. PACIFIC MUTUAL LIFE INSURANCE CO.
o Death will not terminate a contract that has already been formed.
o However, if a person dies before the meeting of the minds occurs, no contract can
be formed
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9/14/22
 Questions to ask:
CONTRACTS

o What law applies?

 UCC or Common law
o Was there an offer?
o Was the offer terminated?
o NEW: Was there an option or firm offer?
 RULE: Death or incapacity of either the offeror or offeree will terminate an offer.
o The other party does NOT need to have notice of death or incapacity
o An offeree also is unable to accept an offer if they die or are incapacitated.
 In an option contract, you’re essentially buying time
 Death will NOT destroy an option contract
 An option contract can be either written or verbal.
 An option contract requires additional consideration to be valid
 Firm offers are only valid when a merchant promises to hold it open.
 An offer cannot be accepted after it is revoked, either directly or indirectly.
 Consideration for an option contract does not have to be money; it just usually is because
it’s most convenient/efficient
 RULE: An option is a CONTRACT, so it needs:
o Offer
o Acceptance
o Consideration
 What you are buying in an option contract is TIME
 Firm offers only apply to goods (UCC 2-205), but option contracts can exist for goods
and non-goods
 A firm offer cannot last longer than three months.
o Can be less but cannot be more!
 You can make a firm offer and an option contract on the same item, but realistically, one
would likely only make an option contract!
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9/16/22
 There can be valid consideration before the money or other consideration has been
exchanged – if you are legally bound to give the other party the consideration it has been
tendered.
 Death will not terminate an option contract
 UCC can have option contracts or firm offers
 SYNTHESIZING RULES
o Each case you read adds a new part to your rule
o Piecing all these rules together creates your synthesized rule
o Your synthesized rule should be able to answer new questions about that area of
law
o Should be
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
Easily understood (simple and concise)

Unambiguous (each term is well-defined and has a non-circular meaning
which can easily be applied)
 Consistent (if applied to a new case the rule would accurately predict the
outcome)
o Group and organize into categories
 Mutual assent
 Requirements to be an offer
 Destroying an offer
 Preserving an offer
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ACCEPTANCE
9/19/22
 Acceptance requires mutual assent! -- Objective standard.
 Acceptance has been given when an objective person would believe that a contract had
been formed.
 Questions to ask:
o What law applies?
o Was there an offer?
o Was the offer terminated?
o Was there an option or firm offer?
o Was there acceptance?
 Acceptance of an offer is a manifestation of assent to the terms of the contract made by
the offeree in a manner invited or required by the offer
o Offeree must be accepted according to the terms defined by the offer.
 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.
o Acceptance by performance is the only way to accept a unilateral offer
 Acceptance by a promise requires that the offeree completes every act essential to the
making of the promise.
 RULE – Terms of the offer control the manner of acceptance
 If the offer sets forth a specific manner for accepting, the offeree must follow steps laid
out in the offer.
 RULE – Offer controls manner of acceptance, promise is one means of acceptance and
performance is another.
o Individual must begin performance
o Mere preparation is not enough
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CONTRACTS

9/21/22
 The moment you have offer, acceptance, and consideration at the same time, a contract is
formed.
 Bilateral (favored if not explicitly stated in the offer)
o Promise for a promise
o A contract is formed as soon as you promise
o Ex: I promise to give you $5 if you promise to give me this marker.
 Unilateral
o Promise for performance
o Contract is formed once performance commences
o Ex: I will give you $5 if you get an A on the Contracts exam
 The Restatements and UCC don’t use these terms and say that promise or performance is
acceptable.
 When you have a bilateral contract, you also must complete performance, you can’t just
promise and not perform.
 Verbal offer/acceptance is fine to create a contract, unless the Statute of Frauds
specifically says that it isn’t.
 Uncommunicated intention to accept does not create a contract
o No objective manifestation
 A private act by an offeree without notice to the offeror is not sufficient for acceptance
(rewards can be an exception to this)
 Notice of acceptance/revocation/etc. To an authorized agent is the same as notice to the
principal.
 An offeree’s communication to their agent is not sufficient to manifest acceptance.
 Rules for writing exams
o Write to your audience (follow prof’s rules)
o Answer the question, not what you want the question to ask
o Organize and take time up front to plan (headings are your friend!)
o Use facts and law in application
o IReAcrC
 e – explanation (part of R)
 c – counterargument (part of analysis)
 r – rebuttal (part of analysis)
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9/23/22
 Mailbox rule gives power to the acceptor, but more uncertainty to the offeror
 For the mailbox rule to apply, you must put the acceptance in the mailbox properly
addressed and with correct postage.
 Mailbox rule – acceptance by mail or similar means is effective upon dispatch if properly
addressed/stamped/etc.
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o UNLESS offer says otherwise

 Revocation is not effective until receipt
 For option contracts, acceptance is not effective until receipt by the offeror.
 Option contract protects an offer from termination in any way, including death
 If you mail a rejection THEN mail an acceptance, whether a contract exists or not is
dependent upon which arrives first
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9/26/22
 When an offer is made, both acceptance and notification of acceptance are required to
make a binding contract.
 In unilateral contracts, one does not have to notify the offeror of their acceptance prior to
the performance.
o The person who made the offer gets notice of acceptance contemporaneously with
notice of the performance of the condition.
 Once you have begun performance, the offeror cannot revoke the offer.
 When an offer invites acceptance by performance, no notification is necessary to make
such an acceptance effective unless the offer requests such a notification.
 If an offeree who accepts by performance has reason to know that the offeror has no
adequate means of learning of the performance with reasonable promptness or certainty,
the offeror has no contractual duty unless:
o The offeree exercises reasonable diligence to notify the offeror of acceptance
o The offeror learns of the performance within a reasonable time
o The offer indicates that notification of acceptance is not required.
 If you find out about an offer halfway through completing performance of said offer, you
can still accept by completing performance.
 When an offer invites an offeree to accept by performance and doesn’t invite promissory
acceptance, an option contract is created when the offeree begins performance.
 Part performance by an offeree on a unilateral contract creates a contract with a condition
of full performance, but the offeror cannot revoke said offer for a reasonable period of
time once part performance has begun.
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9/28/22
 Generally, silence is not to be construed as acceptance.
 However, there are exceptions to this rule
o The offeree takes the offer, knows the offeror expects compensation, and had the
opportunity to reject.
o The offeror states that silence will operate as acceptance and, by being silent, the
offeree intends to accept the offer.
CONTRACTS

o Where because of previous dealings or circumstances, the offeree should notify

the offeror if they don’t want to accept.
 Silence plus some other knowledge = acceptance
 Silence is not acceptance
o UNLESS
 There is a relationship between the parties
 The offeror is justified in expecting a reply (or the offeree has a duty to
reply)
 Silence will reasonably be interpreted as acceptance
 Different from lapse in that in acceptance by silence, parties are benefitting from the
agreement, while in lapse, nothing is happening.
 Under common law, anything that changes an offer at all is not an acceptance, but a
rejection & counteroffer.
o Altered OR additional terms
 Mirror image rule – the material terms of an acceptance must be the same as those in the
offer to form a binding contract.
o There may be no material terms that are altered or added.
 An unequivocal acceptance with a SUGGESTION to modify is still an acceptance.
 Mirror image rule – acceptance must be coextensive with the offer and may not introduce
additional terms or conditions (acceptance must be identical to the offer)
o Adding a term that is already implied does not violate the mirror image rule
o Nonmaterial changes might not violate the mirror image rule
o Suggested modifications will not defeat the mirror image rule.
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9/30/22
 Acceptance by silence CANNOT be used to accept additional terms to a contract/offer
 A counteroffer is a rejection of an offer, while a request for a change is still an acceptance
if you say yes.
 Qualified acceptance is NOT okay, you can’t say “this acceptance is not effective
unless...”
 Courts will usually say that if you bothered to include a term in your contract, it is likely
of material value.
 Mirror Image Rule
o Acceptance must be coextensive with the offer and may not introduce additional
terms or conditions (acceptance has to exactly match the offer)
o Adding a term that is already implied does not violate the mirror image rule
 A contract to purchase property would contain an implied term that the
seller can deliver marketable title.
 So, if you add that term explicitly, the mirror image rule wouldn’t
invalidate the contract.
o Nonmaterial changes MAY not violate the mirror image rule.
CONTRACTS

o Suggested modification --> will not defeat the mirror image rule
o Grumbling acceptance --> will not defeat the mirror image rule
o Request for clarification --> will not defeat the mirror image rule
 Nonmaterial changes could include spelling corrections or correcting other errors such as
typos.
 UCC 2-207 QUESTIONS TO ASK (functions like a flow chart)
o Is this the sale of goods?
 If not – use mirror image rule
o Was there a definite and seasonable expression of acceptance?
 Agreed on the main components of the contract
o Are there conflicting terms?
o Was acceptance expressly conditioned upon accepting the additional terms?
 If not, go to merchants' question to determine contract
 If yes, go to the final question
o Are both parties merchants?
 If not, the additional terms are treated as proposals.
 If they are merchants, then you ask:
 Did the offer expressly limit the terms?
 Do additional terms materially alter the contract?
 Notification of objection?
o If YES to these, there is a contract, but the additional terms
are just proposals
o If NO to these, there is a contract, and the additional terms
are part of it.
o Are the parties acting like there is a contract?
 If no, there is no contract.
 If yes, there is a contract but only on the terms that were agreed upon.
 We only use 2-207(2) if there is a contract.
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10/3/22
 Often both sides of a business transaction use their own forms, and each side’s form has
language that protects its own image.
o If mirror image was required under UCC, then one minor change would destroy
the contract and most business transactions would not be valid contracts
 UCC 2-207 was designed to deal with situations like this when we have competing
purchase order and order acknowledgement forms.
o See SFEG v. Blendtec
 Companies care about/would rather use arbitration because it prevents class action suits
and prevents individuals from filing any claims against them
CONTRACTS

 Cannot use silence or inaction to prove that a party agreed to additional terms under UCC
2-207 (2) or (3)
 Rolling contracts – a purchaser orders goods and pays for them before seeing most of the
terms, which come later in or on the packaging of the goods.
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10/5/22
 The offeror has the burden to show notice
o Because they are the ones drafting & they are “repeat players”
o Must show the importance of the term that was conveyed & must explain how the
term is relevant to the contract
 “Informed Minority” hypothesis states that a small number of very conscientious buyers
will keep the company honest.
o However, if the Chief Justice of SCOTUS isn’t reading the terms, who is?
 Usually a contract of adhesion if:
o Printed and clearly purports to be a contract
o Drafted by one party
o Drafting party does these transactions a lot
o Take it or leave it (the drafting party isn’t negotiating)
o Document is signed by the offeree
o The offeree does not do these transactions a lot
o The principal obligation of the offeree is money
 A contract of adhesion’s terms will only apply if they are reasonable
 The same rule of notice applies for goods and services
 The ABA recommends that for a contract of adhesion to be binding, a user must be given
notice, have an opportunity to review the contract, must be given notice that a specific
action means acceptance, and the user takes said action.
 Browsewrap → by just using a site, you agree to their terms and conditions
o Light notice, less likely to be enforceable
 Clickwrap → clicking “I Agree,” but not necessarily seeing the terms themselves
o Should use scrollwrap instead of clickwrap to make terms more obvious
 Scrollwrap → user has to scroll to the bottom of the terms and conditions and then click
“I Agree”
o More opportunity of notice, likely to be enforceable
 Sign-in-wrap → signing up to use the service is acceptance to the terms
 RULES
o Burden is on the offeror to show the importance of the terms you’re agreeing to
o Immediately visible notice of any terms that the average person would not
anticipate being present is given.
o Reference to terms on a submerged screen are not enough
CONTRACTS

o Reasonably conspicuous notice of terms + unambiguous assent = binding contract

of adhesion
 It is the offeror’s duty to show that there was notice of the terms!!
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CONSIDERATION
10/14/22
 Questions to ask:
o What law applies?
o Was there an offer?
o Was the offer terminated?
o Was there an option or firm offer?
o Was there acceptance?
o Was there consideration?
 If you have some legitimate chance of winning a claim, it can act as consideration w/
forbearance.
o You can give up a legal right that you may doubt you have, but there is a chance
you do have it.
 You have a legal right even if your claim is doubtful or uncertain. All that the party who
is giving up the legal right must show is that they believe the claim may be valid.
 Restatement §71
o To constitute consideration, a performance or return promise must be bargained
for.
o A performance or return promise is bargained for if it is sought by the promisor in
exchange for their promise and is given by the promisee in exchange for that
promise
o The performance may consist of:
 An act other than a promise,
 A forbearance, or
 The creation, modification, or destruction of a legal relation.
o Ther performance or return promise may be given to the promisor or another
person; it may be given by the promisee or by some other person.
 Restatement §81
o The fact that what is bargained for does not of itself induce the making of a
promise does not prevent it from being consideration for the promise
o The fact that a promise does not of itself induce a performance or return promise
does not prevent the performance or return promise from being consideration for
the promise.
 Consideration is any benefit conferred or detriment suffered.
 Forbearing from a legal right is consideration.
 Giving up a legal claim against another can be consideration
CONTRACTS

o There must be an honest and reasonable belief that the claim is true
o Do not need to be 100% sure but agreeing to waive a frivolous claim will not be
enough.
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10/17/22
 A gift is not consideration
 A gratuitous promise is not consideration
 A mere gratuity is not consideration
 If something benefits the promisor as well as the promisee, there is likely consideration
 Consideration is not that one party is profiting
 Consideration requires that one party does something not required or refrains from doing
something legally allowed
 Action must be induced by the promise
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10/21/22
 Common law rule for modification:
o When there is already a contract, additional consideration is needed to modify
o It is not consideration for additional promises when...
 One party coerces the other to pay them more
 Nothing additional is given for the increased amount.
o Restatement § 89 – A promise modifying a duty under a contract not fully
performed on either side is binding
 If the modification is fair and equitable in view of circumstances not
anticipated by the parties when the contract was made; or
 To the extent provided by statute; or
 To the extent that justice requires enforcement in view of material change
of position in reliance on the promise.
 UCC 2-209
o An agreement to modify a contract within UCC needs no consideration to be
binding.
o A signed agreement which excludes modification or recission except by a signed
writing cannot otherwise be modified or rescinded, but as
o The requirements of the Statute of Frauds section of this Article (2-201) must be
satisfied if the contract is modified within its provisions
o If an attempt at modification or recission does not satisfy the above requirements
it can operate as a waiver
o A party who has made a waiver affecting an executory portion of the contract may
retract the waiver by reasonable notification received by the other party that strict
performance will be required of any
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 A modification of a contract is just another contract, so it needs consideration

 Preexisting duty rule
o Agreements to modify do not have consideration if all one party is doing is
something they were already required to do by the original contract.
 Modern trend (MINORITY RULE)
o Even if there is a preexisting duty, a modification without consideration will be
enforced when
 Unanticipated difficulties arise during course of performance
 Parties agree to the change
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10/24/22
 Past consideration is generally not consideration
 Exceptions:
o Past debt revived
 Debt is barred by a technical defense (statute of limitations)
 If you make a payment on a debt for which the statute of
limitations has run, the statute of limitations is revived.
 New promise partially performed or in writing
 If you promise to pay something you don’t have to do, the court
will revive the debt against you
 The court will enforce the new promise
o Material benefit rule (more modern)
 Restatement §86
 Some courts use this
 Material benefit is conferred to the promisor
 The promisee did not intend it to be a benefit
 Restatement § 86 (material benefit rule, not binding everywhere)
o 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.
o A promise is not binding under subsection 1
 If the promisee conferred the benefit as a gift or for other reasons the
promisor has not been unjustly enriched; or
 To the extent that its value is disproportionate to the benefit.
 Majority rule for past consideration
o Past consideration is not consideration
o Needs to be bargained for to be enforceable
 Minority rule for past consideration
o Webb & Restatement § 86
o The promise is enforceable if:
 Material benefit conferred
 Not intended as a gift
CONTRACTS

 As needed to prevent injustice

 Unjust enrichment
 No contract doesn’t mean you’re completely out of luck
o You don’t get all the damages you would get if you had a contract
o You might get restitution
 Return of the value of the benefit you conferred to the other person, not
the profit you expected to realize.
 Ex: If it cost Mills $100 to take care of Wyman, and the defendant told
him he’d pay $200 but there was no contract, restitution would likely give
Mills $100.
o Plaintiff conferred a benefit --> Plaintiff had a reasonable expectation of
compensation --> Defendant knew or had reason to know of that expectation -->
Defendant would be unjustly enriched by retaining the benefit without payment.
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10/26/22
 Questions to ask:
o What law applies?
o Was there an offer?
o Was the offer terminated?
o Was there an option or firm offer?
o Was there acceptance?
o Was there consideration?
o If not a contract, was there reliance?
 Consideration is a bargained-for exchange
o Detriment or benefit exchanged from both sides
 Modification
o Under UCC – do not need additional consideration
o Under Common Law – need additional consideration unless exception applies
 Past Consideration
o Majority rule – past consideration does not count
o Minority rule – usually does not count, but there could be an exception under the
material benefit rule
 Reliance and promissory estoppel
 We only get to promissory estoppel if there is no contract
o Not as good as having a contract but better than nothing
 Restatement § 90
o A promise which the promisor should reasonably expect to induce action or
forbearance on the part of the promisee or a third person and which does induce
such action or forbearance is binding if injustice can only be avoided by
CONTRACTS

enforcement of the promise. The remedy granted may be limited as justice

requires.
 If a court adopts a Restatement section, then it becomes the law in that jurisdiction.
 Promissory estoppel
o A promisor makes a promise that the promisee will foreseeably rely upon
o The promisee does rely upon the promise
o It was reasonable for the promisee to rely on the promise
o Promisee suffered a detriment based on their reliance
o Damages are required to prevent injustice
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REMEDIES
10/31/22
 Questions to ask:
o What law applies?
o Was there an offer?
o Was the offer terminated?
o Was there an option or firm offer?
o Was there acceptance?
o If no contract, was there reliance?
o What remedies are available?
 Expectation damages put the non-breaching party into the position they would have been
in without the breach.
 Damages must be reasonably calculable.
 Damages must be foreseeable to both parties at the time of entering into the contract.
 The non-breaching party has a duty to mitigate damages.
 Expectation damages are a type of direct damages.
 Restatement §345 states the remedies available
 Restatement §347 states the method of calculating money damages
 Direct damages put the plaintiff in as good a position as they would have been if the
contract had been performed.
 The proper measure for damages is the difference in value between what was promised
and what was actually received.
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11/2/22
 Mitigation, foreseeability, and certainty are three limitations on damages. Must have all
three!
 Restatement § 351
CONTRACTS

o 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 contract was made
o Loss may be foreseeable as a probable result of breach because it follows form the
breach
 In the ordinary course of events, or
 As a result of a special circumstance beyond the ordinary course of events,
that the party in breach had reason to know.
o A court may limit damages for foreseeable loss by excluding recovery for loss of
profits, by allowing recovery only for loss incurred in reliance, or otherwise if it
concludes that in the circumstances justice so requires in order to avoid
disproportionate compensation.
 Consequential damages can only be awarded when they are foreseeable at the time the
contract was entered.
o Can be foreseeable by being directly known or the breaching party having reason
to know
 Restatement § 352
o Damages are not recoverable for loss beyond an amount that the evidence permits
to be established with reasonable certainty.
 Consequential damages can only be awarded when they can be estimated with reasonable
certainty.
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11/4/22 (two classes)
 Liquidated damages – parties agree ahead of time what the damages will be if there is a
breach
 Benefits of liquidated damages:
o Provide certainty
o Help minimize or avoid litigation
 Liquidated damages provision may not be a penalty or punishment
 Common Law – Damages for breach may be liquidated in the agreement but only at an
amount that is reasonable in the light of the anticipated or actual loss caused by the
breach and the difficulties of proof of loss. A term fixing unreasonably large liquidated
damages is unenforceable on grounds of public policy
o Two prong test
 Must be reasonable
 Must be difficult to prove
 UCC – Damages for breach by either party may be liquidated in the agreement but only
at an amount which is reasonable in the light of the anticipated or actual harm caused by
the breach, he difficulties of proof of loss, and the inconvenience or nonfeasibility of
otherwise obtaining an adequate remedy. A term fixing unreasonably large liquidated
damages is void as a penalty.
o One prong test
CONTRACTS

 Must be reasonable
o UCC is much more liberal with “difficult to prove” and “inconvenience or
nonfeasibility”
 Under common law:
o Damages must be difficult to estimate at the time the contract was formed
o Damages must be reasonable forecast of what the actual damages would be in the
case
 Compare damages probable at the time of contract to the agreed upon
amount
 If they are grossly disproportionate, then the liquidated damages are a
penalty and not enforceable.
 Under UCC:
o Damages for breach for either party must be reasonable in light of the anticipated
or actual harm caused by a potential breach.
 You cannot get contract damages when you are the breaching party, but you can get
restitution damages!
 Restitution allows a party to recover the reasonable value of their performance when that
performance unjustly benefitted another party.
o Can result from a breach of contract or a quasi-contract
 The goal of restitution is to eliminate any unjust advantage obtained by the other party
 Always have to mitigate!!
 Cannot get both contract damages and restitution.
 Restitution damages are the return of any benefit conferred to another party to prevent
unjust enrichment.
 If you are the breaching party, you can never get more than what the contract set as the
payment amount under restitution
 If the non-breaching party can refuse to receive any benefit, they have that choice and
will pay no damages under restitution
 If that is not an option, they should pay the value of the benefit received, but they will
never pay more than the contract price
 For restitution and contracts, the parties can put a provision in the contract that there
would be no payment if performance is not completed.
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11/7/22
 Specific tracts of land have long been regarded as unique
 Specific performance is appropriate when the subject of the contract is unique and will
only be granted if there is no adequate remedy at law and justice requires specific
performance
o Real estate contracts are traditionally appropriate for specific performance
 Specific performance is appropriate when money is inadequate to uphold the expectations
of the injured party
CONTRACTS

 Specific performance is appropriate when the subject of the contract is unique and has no
market value
 Specific performance is the same under the UCC and the Common Law
 Remedies
o Direct Damages
 Expectation
 Reliance
 Incidental
o Indirect Damages
 Consequential damages (lost profits)
o Liquidated damages
o Specific performance
o Restitution
o Limits
 Foreseeability
 Certainty
 Mitigation
 Direct damages are directly related to the contract, consequential damages are not
o Expectation damages are what you would have made from the contract,
consequential damages are profits you would have made as a result of the
contract, but not directly related to it
 Me building your house will lead to other people having me build them
houses
 Your house is expectation damages
 Other houses are consequential damages
 Attorney’s fees can be incidental damages, but they are not often awarded in the U.S.
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TERMS
11/9/22
 Questions to ask:
o What law applies?
o Was there an offer?
o Was the offer terminated?
o Was there an option or firm offer?
o Was there acceptance?
o Was there consideration?
o If no contract, was there reliance?
o What remedies are available?
o What are the terms?
 Mutual misunderstanding – an ambiguous term that the parties set different meanings to.
CONTRACTS

 Restatement § 20
o There is no manifestation of mutual assent to an exchange if the parties attach
materially different meanings to their manifestations and:
 Neither party knows or has reason to know the meanings attached by the
other; or
 Each party knows or each party has reason to know the meaning attached
by the other.
o The manifestations of the parties are operative in accordance with the meaning
attached to them by one of the parties if:
 That party does not know of any different meaning attached by the other,
and the other knows the meaning attached by the first party; or
 That party has no reason to know of any different meaning attached by the
other, and the other has reason to know the meaning attached by the first
party.
 Mutual mistake (preview for defenses) -- both parties attach the same meaning to
something and they’re both wrong.
 Mistake and misunderstanding are DIFFERENT – in mistake, a party is wrong, but in
misunderstanding, neither party is necessarily wrong, they just assigned different
meanings to an ambiguous term.
 There can only be a misunderstanding of an ambiguous term – if the term is not
ambiguous, there is no misunderstanding.
 Misunderstanding has to do with offer and acceptance (mutual assent/meeting of the
minds)
 Restatement § 33
o Even though a manifestation of intention is intended to be understood as an offer,
it cannot be accepted so as to form a contract unless the terms of the contract are
reasonably certain.
o The terms of a contract are reasonably certain if they provide a basis for
determining the existence of a breach and for giving an appropriate remedy.
o The fact that one or more terms of a proposed bargain are left open or uncertain
may show that a manifestation of intention is not intended to be understood as an
offer or as an acceptance.
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11/14/22
 For a contract to be definite enough there just have to be sufficient facts for a court to
determine missing terms
 Gap fillers under the UCC
o UCC fills in market price if no price in contract
o UCC fills in place of delivery if no place in contract
o UCC fills in time of delivery if no time in contract
o UCC fills in time of payment if no payment in contract
CONTRACTS

o You just need to know they exist for this class!

 Parol evidence does not bar anything subsequent to the contract
o Only things that happened prior to the contract and concurrently with it can be
barred under the parol evidence rule
 Restatement 213
o A binding integrated agreement discharges prior agreements to the extent that it is
inconsistent with them.
o A binding completely integrated agreement discharges prior agreements to the
extent that they are within its scope.
 Common Law/Restatements presume that agreements are fully integrated.
 When there is a written instrument, it is presumed that all prior negotiations are merged
into that writing.
 Parol evidence rule applies to anything that happened prior to or contemporaneously with
the written instrument.
 Parol evidence rule bars the admission of evidence to contradict or add terms to a clear
and unambiguous contract.
 Parol evidence rule applies only when there is an integrated written agreement
 An integrated agreement is a final expression as to one or more terms.
 If there is not a final expression as to a term, extrinsic evidence can be used to show
meaning.
 Parties must intend for the writing to be a final expression.
 If there isn’t anything in writing, the parol evidence rule doesn’t apply.
 An integration clause will prevent any parol evidence from being usable.
o Unless its evidence to define a term
 You can always use prior statements, written or oral, to prove that no contract ever
existed.
 UCC 2-202
o Terms with respect to which the confirmatory memoranda of the parties agree or
which are otherwise set forth in a writing intended by the parties as a final
expression of their agreement with respect to such terms as are included therein
may not be contradicted by evidence of any prior agreement or of a
contemporaneous oral agreement but may be explained or supplemented
 By course of dealing or usage of trade or by course of performance and
 By evidence of consistent additional terms unless the court finds the
writing to have been intended as a complete and exclusive statement of the
terms of the agreement.
 Course of dealings, usage of trade, and course of performance are always okay to use
BUT evidence of consistent additional terms can only be added if it isn’t a fully
integrated agreement.
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11/16/22
CONTRACTS

 Under parol evidence rule, what you’re looking for is:

o Whether the agreement was fully integrated or partially integrated
o If fully integrated, no previous/concurrent discussions can be added to the
contract, but if partially integrated, additional (NOT conflicting) discussions can
be added to the contract.
 Prior evidence of a condition will be allowed.
o Condition is NOT a term – it is an agreement that the deal would/wouldn’t take
place under certain circumstances
 Every contract has in it a duty of good faith and fair dealing.
 If you have misrepresented something, that goes directly to whether there was mutual
assent.
o When there was a misrepresentation, it is generally impossible to have a meeting
of the minds, because one party was lying to the other.
 Parol evidence can be used to show errors in contract formation such as
misrepresentation, mistake, or misunderstanding.
 Parol evidence may be offered to show misrepresentations that induce a party to enter
into a contract.
 Subsequent agreements or modifications are not barred by the parol evidence rule.
o Still need to prove that the modification occurred, but it will not be barred by the
parol evidence rule.
 Trade usage is admissible to show intent under the UCC parol evidence rule
o BUT it is not dispositive and may not be admissible if the contract expresses the
clear intent of the parties.
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11/18/22
 The party seeking to enforce a waiver must show an unambiguous release. Then, the
burden shifts to the other party to show fraud or duress.
 Standard for ambiguity is a reasonably intelligent person in the field of the contract’s
subject matter.
 A party can use trade usage as evidence under the UCC parol evidence rule
 Extrinsic evidence is permitted to explain and define an ambiguous term
 Party bringing the claim has the burden of proving their definition is correct.
 You can use extrinsic evidence to resolve an ambiguity even if the agreement is
completely integrated.
 The four corners rule is the majority rule for the admission of parol evidence to resolve
ambiguity.
 Provisional admissions rule is very much a minority rule – should be used as a
counterargument
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11/21/22
CONTRACTS

 Ambiguous – capable of more than one meaning when viewed objectively by a

reasonably intelligent person who has examined the context of the agreement and is
cognizant of the customs, practices, usages, and terminology as generally understood in
the business or trade.
 If a term is ambiguous, you can bring in extrinsic evidence to resolve that ambiguity.
 Four corners rule – look to the four corners of the document, if the language speaks to the
intent of the party, don’t bring in extrinsic evidence.
o Majority rule
o STEPS:
 Look to the language of the contract
 If unambiguous – NO extrinsic evidence
 If facially ambiguous – judge admits extrinsic evidence and fact finder
weighs and determines meaning
 Provisional admission rule – a party can use extrinsic evidence to show that the contract
is ambiguous when you look at it in context.
o Contract language is facially unambiguous
o Goal is to get to the intent of the parties even if that is not what is shown in the
language of the contract
o ONLY USE AS COUNTERARGUMENT!
 Parol evidence rule!!!!
o Is the contract written?
 If it is, parol evidence rule might bar evidence
 If not, parol evidence rule does not apply
o Is the contract integrated?
 This means it has all the terms
 Complete manifestation of the agreement between the parties
 Merger clause – not definitive, but important to look for
o Are there exceptions?
 Subsequent agreements get in
 Evidence barring formation (fraud in the inducement) gets in
 Conditions
o What additional terms can get in if not fully integrated
 Consistent additional terms only (NO CONFLICTING)
 UCC Only!
 Trade usage and course of performance
 Evidence related to the intent of the parties
o What do we do with terms in the contract if they are ambiguous
 See above
 Trade usage or course of dealing is only used in the UCC
o DO NOT USE FOR COMMON LAW!
 A misunderstanding occurs when there is an ambiguous term that the parties assign a
different meaning to. If neither side or both sides are aware of the misunderstanding,
CONTRACTS

there is no contract because their minds never met. If one side knows of the other’s
misunderstanding, then there is a contract and the meaning attached by the party who did
not know controls.
 The UCC does not require consideration for modifications.
 Subsequent terms can be contradictory to the written agreement because they are
modifications!
 Parol evidence showing course of dealing, usage of trade, or course of performance can
be used even in a fully integrated contract!!!
o Only parol evidence barred in fully integrated contracts are consistent additional
terms.
 Under the UCC, additional terms can be added if they supplement or explain terms in the
agreement.
 Trade usage under the UCC is viewed as an explanation or supplement rather than a
contradiction
 Prior dealings are permitted to explain the intent of the parties for an agreement under the
UCC parol evidence rule.
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11/30/22
 Questions to ask:
o What law applies?
o Was there an offer?
o Was there an option or firm offer?
o Was the offer terminated?
o Was there acceptance?
o Was there consideration?
o If no contract, was there reliance?
o Was there a breach?
o What remedies are available?
o What are the terms?
o Are there any defenses?
 A contract must be in writing when:
o Sale of interest in land
o Performance that cannot be completed in a year
o Goods of $500 or more
o Marriage
o Promise to pay debt of another
o Executor promises to personally pay the debts of the estate.
 If it is in one of these categories of the Statute of Frauds, the contract must be written
and signed by the parties to be bound.
CONTRACTS

 A material misrepresentation permits the other party to rescind a contract (void) or to

go through with the contract and collect damages (voidable)
 A misrepresentation is material if it is something that would impact a reasonable
person’s decision to enter into a contract.
 The measure of damages is the value of the contract if the misrepresentation was true
minus the actual value.
 It doesn’t matter if the misrepresentation was innocent OR that the person making it
thought it was true.
o If you make an unqualified statement that turns out to be false, you are
responsible!
 Nondisclosure is NOT material misrepresentation.
 There can be no material misrepresentation if no statement is made UNLESSS:
o There is some fiduciary relationship
o The other party did not have the ability to check for themselves
o Some other special relationship or position of confidence or dependance
exists.
 Nondisclosure is equivalent to assertion when:
o The party knows of a fact that the other party does not,
o The party knows that disclosure would correct a mistake of fact by the other
party as to a basic assumption about the contract,
o Nondisclosure amounts to failing to act in good faith and fair dealing.
 An infant (person under 18) will not be bound by a contract and can disaffirm upon
reaching the age of majority.
o If an infant affirms a contract upon reaching the age of majority, the infant
will be bound by those terms.
o There is an exception for necessities. An infant will not be permitted to void
those contracts on grounds of capacity.
 Only the person “lacking” the capacity to contract is able to void a contract on those
grounds.
 No one can be bound by a contract who has not legal capacity to incur at least
voidable contractual duties. Capacity to contract may be partial and its existence in
respect to a particular transaction may depend upon the nature of the transaction or
upon other circumstances.
 Restatement § 12
o A natural person who manifests assent to a transaction has full legal capacity
to incur contractual duties thereby unless he is:
 Under guardianship,
 Court-ordered appointed guardian (Britney Spears)
 An infant,
 Mentally ill or defective, OR
 Intoxicated.
o Guardianship (VOID)
CONTRACTS

o Infant (VOIDABLE by the infant if contract is not for a necessity, BINDING

on the adult)
o Mentally ill (VOIDABLE by mentally ill person, BINDING on the other
party)
o Intoxicated (VOIDABLE by intoxicated person only if the other had reason to
know of their intoxication)
 Restatement § 176
o A threat is improper if:
 What is threatened that is crime or a tort, or the threat itself would be a
crime or a tort if it resulted in obtaining property,
 What is threatened is a criminal prosecution,
 What is threatened is the use of civil process and the threat is made in
bad faith, or
 The threat is a breach of the duty of good faith and fair dealing under a
contract with the recipient.
o A threat is improper if the resulting exchange is not on fair terms, and
 The threatened act would harm the recipient and would not
significantly benefit the party making the threat,
 The effectiveness of the threat in inducing the manifestation of assent
is significantly increased by prior unfair dealing by the party making
the threat, or
 What is threatened is otherwise a use of power for illegitimate ends.
 Whoever raises a defense has the burden to prove the elements of that defense.
 Restatement § 175
o If a party’s manifestation of assent is induced by an improper threat by the
other party that leaves the victim with no reasonable alternative, the contract
is voidable by the victim.
 Duress is when you leave the other party with no reasonable alternative.
 Duress can be physical or economic
o Physical duress will make a contract voidable
o Economic duress is rare, but can make a contract voidable if:
 Party threatens to commit wrongful acts that would seriously threaten
the other party’s property or finances
 No adequate alternative
 Undue influence is unfair persuasion of a party who is under the domination of the
person exercising the persuasion or who by virtue of the relation between them is
justified in assuming that the person will not act in a manner inconsistent with his
welfare.
 If a party’s manifestation of assent is induced by undue influence by the other party,
the contract is voidable by the victim.
 If a party’s manifestation of assent is induced by one who is not a party to the
contract, the contract is voidable by the victim unless the other party to the
CONTRACTS

transaction in good faith and without reason to know of the undue influence either
gives value or relies materially on the transaction.
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12/2/22
 Duress requires that someone threaten to do something unlawful.
 Undue influence is persuasion that tends to be coercive and overcomes a person’s will
without convincing their judgment.
 Undue influence is the unfair persuasion of a party who is under the domination of the
person exercising the persuasion or who by virtue of the relationship between them is
justified in assuming that the person will not act in a manner inconsistent with his
welfare.
 Undue influence will exist when there is vulnerability to pressure by one party
o Must be unduly susceptible to pressure
o Lack of full vigor (often undue influence in cases of elderly making a will)
 Excessive pressure applied by the other party.
o Often due to holding a dominant or authoritative position by that party.
 The vulnerability to pressure is the main component of undue influence, but a person is
more vulnerable because of the dominant position held by the other party.
 UCC 2-302
o If the court finds, as a matter of law, that a contract or any clause was
unconscionable at the time the contract was made, the court can refuse to enforce
either the entire contract or the specific clause. The court may also limit the
application of unconscionable clauses to avoid the unconscionable result.
 A contract can be voided for being substantively unconscionable or procedurally
unconscionable.
 If a contract is unreasonable and unconscionable but not void for fraud, a court of law
will give to the party who sues for its breach damages, not according to its letter, but only
such as he is equitably entitled to.
 What to look for when determining unconscionability:
o Circumstances of the parties at the time the contract was made
 Must look at ALL circumstances
 Was there any meaningful choice? -- bargaining power
 What was the sophistication of the parties? -- levels of education
and ability to understand terms.
o How extreme was the unconscionability?
 Must be extreme unconscionability
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12/5/22
 Factors for unconscionability of a contract:
CONTRACTS

o Standard agreement and unequal bargaining power

o Lack of opportunity to read document
o Use of fine print
o Absence of evidence that the provision was commercially reasonable
o Terms of the contract
o Relationship of the parties, including factors of assent, unfair surprise, and notice
o All the circumstances surrounding the formation of the contract
 An otherwise valid contract can be unenforceable for unconscionability
o Procedural
 Unfair surprise
 Hidden or new terms
o Substantive
 Oppressive terms
 Also, terms are often hidden
o Look at ALL circumstances surrounding contract formation
o Must be EXTREMELY unfair
 Restatement §152 – mutual mistake
o Where a mistake of both parties at the time a contract was made as to a basic
assumption on which the contract was made has a material effect on the agreed
exchange of performances, the contract is VOIDABLE by the adversely affected
party unless they bear the risk of the mistake.
 Restatement § 154
o A party bears the risk of a mistake when:
 The risk is allocated to them by the agreement of the parties,
 They are aware, at the time the contract is made, that they have only
limited knowledge with respect to the facts to which the mistake relates
but treats their limited knowledge as sufficient, or
 The risk is allocated to them by the court on the ground that it is
reasonable in the circumstances to do so.
 A mutual mistake occurs when both parties made a mistake as to a basic assumption
about the contract that had a material effect on the exchange
 Mistake must exist at the time of entering the contract
 A mutual mistake makes the contract voidable
 UNLESS
o The contract allocates risk to a particular party.
o One party is aware at the time of entering the contract that they have only limited
knowledge, but they treat that knowledge as sufficient.
o The court finds it reasonable to allocate the risk to a particular party.
 Restatement § 153 – unilateral mistake
o Where a mistake of one party at the time a contract was made as to a basic
assumption on which they made the contract has a material effect on the agreed
CONTRACTS

exchange of performances that is adverse to them, the contract is VOIDABLE by

them unless they bear the risk of the mistake.
 Same rules for who bears the risk as mutual mistake
 A unilateral mistake occurs when one party made a mistake as to a basic assumption
about the contract that had a material effect on exchange
 Mistake must exist at the time of entering contract
 A mutual mistake makes the contract voidable by the adversely affected party
 If a party knows or has reason to know of the other party’s mistake and does not disclose
it, the contract is voidable.
 UNLESS the adversely affected party bears the risk!
 MIS rules
o MISUNDERSTANDING
 Ambiguity
 Both sides attach different meaning to same term
 No meeting of the minds – void!!
 Restatement §20
o MISREPRESENTATION
 Affirmative statement or conduct that is untrue
 Like telling a lie
 Defense – voidable!
o MISTAKE
 One or both parties are wrong about a material assumption
 Not a lie, one party is just wrong
 Defense – voidable!
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12/7/22
 Questions to ask:
o What law applies?
o Was there an offer?
o Was there an option or firm offer?
o Was the offer terminated?
o Was there acceptance?
o Was there consideration?
o If no contract, was there reliance?
o What are the terms?
o Was there a breach?
o What remedies are available?
o Are there any defenses?
 Contractual duties are discharged when it is impossible to perform them
 Impossibility must be objective
CONTRACTS

 Examples:
o Death where a particular person is necessary for performance
o Supervening illegality
 Something not illegal at the time of contract becomes illegal
o Destruction of subject matter of contract
 Because there is no contract, the parties would be entitled only to seek restitution
 Broad areas of impossibility
o Death of a party when that party’s performance cannot be delegated to someone
else
o Subject matter of the contract becomes illegal after entering the contract
o Subject matter of the contract is destroyed, and it is not the fault of the party
trying to get out of the contract
 Paying money is not impossible
 Impossibility is used mostly by sellers (the people who have to do something rather than
just pay)
 If someone who is required to PERFORM is trying to get a contract excused, think about
impossibility
 If someone who is required to PAY is trying to get a contract excused, think about
frustration of performance.
 Questions to ask with frustration of purpose:
o What was the foundation of the contract?
o Was that purpose prevented?
o Was the prevention of the purpose not contemplated by the parties at the time they
entered the contract?
 Frustration of purpose occurs when there is a supervening event that was not reasonably
foreseeable at the time of the contract that destroys the purpose of the contract
 The purpose of the contract was realized by both parties at the time of the contract.