Contracts Outline – Prof. P.
I. Intro/Nature and History of Contracts II. Damages for Breach A. Expectance v Reliance v Restitution B. Limitations on Damages 1. Remoteness or Foresee ability of Harm 2. Certainty of Harm 3. Avoid ability of Harm C. Contracting around the Default Rules of Damages 1. Express Limitations on Consequential and Incidental Damages 2. Liquidated Damages v Penalty Clauses III. Other Remedies and Causes of Action A. Specific Performance and Injunctions 1. Contracts for Land 2. Contracts for Goods 3. Contracts for personal service B. Restitution – Damage interest and Cause of action 1. Restitution and “Quasi-Contract” IV. Reaching an Agreement A. Intro to Offers and Acceptance B. The Objective Theory of Assent C. What is An Offer? 1. Preliminary negotiations 2. Written Memorial Contemplated D. What is Acceptance? 1. Acceptance by Correspondence – “The Mailbox Rule” 2. Acceptance by Silence E. Acceptance by Performance and “Unilateral” Contracts V. Interpreting Assent A. Filling Gaps in Assent 1. Agreements to Agree 2. Illusory Promises B. Interpreting Assent Subjectively or Objectively VI. Written Manifestations of Assent A. Interpreting a Writing – The Parole Evidence Rule B. Interpreting Conflicting Writings – “The Battle of the Forms”
VII. The Doctrine of Consideration A. The Historical Origins of the Doctrine B. The Bargain Theory of Consideration 1. Distinguishing Bargains form Gratuitous Promises 2. Past Consideration 3. Moral Consideration D. Contract Modification and the Preexisting Duty Rule E. Adequacy of Consideration
Contracts Outline – Prof. P. Siegelman
The Doctrine of Promissory Estoppel A. The Development of Promissory Estoppel as A Substitute for Consideration 1. Family Promises 2. Charitable Subscriptions 3. Promises of a Pension 4. Construction Bids B. Promissory Estoppel as an Alternative to Breach of Contract C. Some Modern Applications and Limits of Promissory Estoppel 1. Promise 2. Reasonable Reliance 3. Injustice of Nonenforcement
IX. Performance A. The Implied Duty of Good Faith Performance B. Implied and Express Warranties 1. Implied Warranties of Merchantability 2. Express Warranties 3. Express Disclaimers of Warranty X. CONDITIONS XI. Breach A. Prospective Nonperformance 1. Anticipatory Repudiation 2. Adequate Assurances of Performance B. Constructive Conditions and Material Breach 1. Constructive Conditions 2. Material Breach 3. The Perfect Tender Rule: Cure and Recission C. Cost of Completion v. Diminution in Value: The Expectation Interest Revisited XII. Obtaining Assent by Improper Means D. Unconscionability
Contracts Outline – Prof. P. Siegelman
Restatement (Second) of Contracts §251 1.Where reasonable grounds arise to believe that the obligor will commit a breach by non-performance that would of itself give the obligee a claim for damages for total breach, the obligee may demand adequate assurance of due performance 2.The obligee may treat as a repudiation the obligor’s failure to provide within a reasonable time such assurances of due performance as is adequate in the circumstances of the particular case. Intro to Remedies: What is court’s goal when it steps into a contract? • • • • • Make both better off Encourage economic efficiency Clarify the commercial system that parties are operating in Primary focus of courts: to make the injured party “whole” Punishment? NOT REALLY o Punitive damages are usually not awarded, courts don’t see that as their role o If punish all the time, run the risk that people will not enter into contracts
Assumpsit - He promised; he undertook Special assumpsit – Under mature English law, actions in assumpsit for expectation damages, based on defendant’s breach of an express contract whose details were alleged in the complaint General assumpsit – Actions in assumpsit to recover a debt SALES CONTRACT: THE UNIFORM COMMERCIAL CODE §1-103. Supplementary General Principles of Contract Law Applicable (p. 89) Unless displaced by this act the principles of law and equity, including the law merchant and the law relative to capacity to contract, principal and agent, estoppel, fraud, misrepresentation, duress, coercion, mistake, bankruptcy, or other validating or invalidating cause shall supplement its provisions
§2-102. Scope; Certain Security and Other Transactions Excluded From this Article (p. 89) Unless the context otherwise requires, the Article applies to transaction in goods; it does not apply to any transaction which although in the form of an unconditional contract to sell or present sale is intended to operate only as a security transaction nor does this Article impair or repeal any statute regulating sales to consumers, farmers or other specified classes of buyers.
§2-105. Definitions: Transferability; “Goods”… (p. 89) “Goods” means all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale other than the money in which the price is to be paid, investment securities (Article 9) and things in action. “Goods” also includes the unborn young of animals and growing crops and other identified things attached to realty as described in goods to be severed from realty (Section 2-107)….
“Contract for Sale”. P sought breach of contract to cover expenses of raising child.Contracts Outline – Prof. damages are awarded by the promisee’s expectation interest. Sometimes. what about freedom of contract? Also. Knight (D) agreed to perform the operation and told Shaheen it would be effective. P. D argues no one would understand that to be a contract. Siegelman
Shaheen v Knight . Damages for Breach In general. Expectance v Reliance v Restitution
Expectation: attempts to put promisee in position they’d have been if promiser had come through Reliance: If promisee chaged position because of the promise to his detriment (built something) then restitution interest puts them back in the place they’d be in if no promise had been made. However. McGee (pg 63) – the hairy hand FACTS: Dr.
. A “present sale” means a sale which is accomplished by the making of a contract…. Then recovery is calc using rest interest to put the promisor back in the place they’d be in if no promise had been made. to allow damages for the birth of a normal child would be against public policy. 1. Also. which.
Totten v. Discussion: sterilization contract void because it is against public policy (not void when wife’s life in danger. NOT! FACTS: Shaheen (P) and his wife decided to get him sterilized b/c they couldn’t afford more kids. D stated the hospital stay should be 3-4 days and then D could return to work with a 100% perfect hand. HOLDING: A doctor and a patient may bargain for a particular result. A “sale” consists in the passing of title from the seller to the buyer for a price (Section 2-401). but otherwise void) Problem with using public policy argument is that when court decides what public policy is it has its own view – court said if controversial it won’t rule against it. Shaheen’s wife gave birth to another kid 2 years later. McGee (d) was to remove scar tissue from the right hand of Hawkins (P) and then graft skin from the chest of P to the palm. (no promisee lost profits) Award is measured by expectation interest or benefit of bargain Hawkins v. “Sale”. Restitution Interests: If promisee gave promisor something the court depraved the promisor of this benefit. “Present Sale” … (p. 89) In this Article unless the context otherwise requires “contract” and “agreement” are limited to those relating to the present or future sale of goods. Definitions: “Contract”. The court attempts to put the promisee in the position he would have been in if the promise had been fulfilled.
II. “Agreement”. though the court will instead award damages to put promisee in the position he would have been in had the promise not been made. if not achieved. can be the basis for an action for breach of contract. Allan Farnsworth Contract Rest.Sterile. “Contract for sale” includes both a present sale of goods and a contract to sell goods at a future time. United States (1876) An action cannot be maintained against the government in the Court of Claims upon a contract for secret services during the war made between the President and the claimant. public opinion is not constant.
you had photocopied but not given to me and not paid in advance? a) Expectation interest? Profit=2 so $5 b) Reliance interest? $3 c) Restitution interest? $0
FACTS: I contract w/ you to sell a machine I price at $100. (b) and (c) are describe above in restatement. I refuse to deliver the restatement or return your money and you sue. predelivery.Expectation FACTS: The D lent P an iron mine for 10L for 6 months when it appeared the mills were worth 20L per year. Yet damages were given to 500L by reason of the loss of stock laid in. 1) 2) 3) 4) How much would you get if limited to restitution damages? 10 + 1 =11 (as if no promise) If limited to reliance interest 10 +3=$13 Applying McGee? $15-10-3=$2 is profit so we need $2+3+10= $15 in expectation If you had photocopied them and given them to me. Siegelman
HOLDING: The true measure of a buyer’s damages is the difference between the value of the goods as they would have been if the warranty as to the quality had been true and the actual value at the time of sale (including incidentals). P. Measure of Damages (p. less (c) any cost or other loss that he has avoided by not having to perform. caused by the breach. Therefore damages were the difference between the value to D of a perfect hand and the value of his present hand. but not paid me? a) Expectation interest? $2+$3=5 b) Reliance interest? $3 c) Restitution interest? $5 If you had not paid nor photocopied a) Expectation interest? $2 b) Reliance interest? $0 c) Restitution interest? $0 If the market value was $9 and you had already paid $10 and given me the photocopy of your notes? a) Expectation interest? Profit=9-10-3=-4 therefore since now out –13 give $9 b) Reliance interest? $13 c) Restitution interest? $11 Assuming MV was $15. (pg 72) FACTS: I agree to sell you a copy of the restatement (to be delivered tomorrow) in return for your agreement to pay me $10 and to give me a photocopy of your class notes. ** (a). Restatement (Second) of Contracts §347. 70) Subject to the limitations in §350-353. plus (b) any other loss. Assume that the restatement has a market value of $15 and your notes have a market value of $1 and that it costs you $3 to photocopy your notes. Calculating…. 1) If you default preproduction expectation damage = $40 ie 100 loss (a) +0 other loss (b) -60 costs/other losses avoided © =40 2) You default after production. the injured party has a right to damages based on his expectation interest as measure by (a) the loss in value to him of the party’s performance caused by its failure or deficiency. including incidental or consequential loss. You pay me the $10 and give me the photocopy of your notes. ignoring all other damages. but disposal costs are $15. Therefore expected profit is $40. Nurse v Barns (pg 71) . Include in price is my $50 cost to produce it and $10 to deliver it. = $105
.Contracts Outline – Prof.
Price ads=$5 market price = $20. a plastic surgeon. No precedent.
Sullivan v O’Connor (nose girl) (p. make $5 ads -6. Worth $30 for scrap. but by analogy (horses and arbitration) answer is No. Thus pre ad and pre paying of $1 damages are? $14 What if market value really = $15? (-1 + -5 + 15) $9 What would reliance damages be (put me in position I’d be in if I hadn’t made contract so note ($1) + ads ($5) =$6 What about restitution damages Spent $1 and ads for $5 but just pay back $1. Price notes=$1. pay $1 -1. Ruling: Plantiff was not confined to recovery of out of pocket expenses. Incurr $10 to bring it back. In NY get all expenditures back Holding: For breach of Dr-Patient agreements restitution seems too meager. Holding: Breach of contract does not warrant pain and suffering Might have received Cost of first 2 operations Pain and suffering (1 & 2) Cost of 3rd operation Pain and suffering (3rd) Reliance no no yes yes Expectation yes no yes yes Actual
yes yes yes
. P.Contracts Outline – Prof. Issue: Is P entitled to expectation damages? Rule: Hawkins: get difference btwn promise and received. Siegelman
100 loss (a) +15 other loss (b) -10 costs/other losses avoided © =105 3) Discover delivery is actually $60 and there is no trash disposal.
2) 3) 4) 5)
What is level of expectation damages? Start at 0. =$80 100 loss (a) +10 other loss (b) -30 costs/other losses avoided © =80 6) Breach after production and delivery? = $100 100 loss (a) +0 other loss (b) -0 costs/other losses avoided © =100 FACTS: Buy class notes from prof. = $40 100 loss (a) +0 other loss (b) -60 costs/other losses avoided © =40 4) So if delivery is $60 what would reliance interest be? $50 for production 5) Breach after production and delivery. set ads for $20 +14. to fix her nose. It ruined her nose causing three failed surgeries to attempt to fix it. The $1 is essential reliance in that you must do it to perform on contract while the $5 is an incidental reliance in that you chose to do it. Expectancy recovery would be excessive. 72) Alice Sullivan (P) asked James O’Conner (D). Moderation is chosen. ISSUE: Is P entitled to pain and suffering? Rule: Putting price on result would strain imagination. she’s also entitled to recover for the worsening of her condition and for pain and suffering of third operation.
(he pays rent. The rules of statutory construction require that where two seemingly conflicting statutes apply to the particular situation.current
Calculating Expectation Interest J.Shirley McClaine Lost Volume exception to duty to mitigate -. a general contractor for renovation of public housing residences. Have to act in good faith)
Shannon’s Limit’s on default rules Damages checklist Uncertainty – Chicago Coliseum (Boxing) rejects some profit calc b/c uncertain -. P successfully sued for breach of contract. (Ex. Issue 1: Whether Article II of Uniform Commercial Code Applies. UCC – 1-103. In this case P didn’t have to rent additional space so no storage damages. P. HOLDING: A party is entitled to recover damages for expenses in storing goods that it would not otherwise have incurred absent other party’s breach. The court was correct in applying the MP measure of damages. Limitations on Damages There are two types of contract rules:
default rules – parties can contract around i. Hooker Case (pg 78) – Cabinet Caper FACTS:When Hooker (D). YES HOLDING: The general rule for damages in a breach of K action is to restore the injured party to the position he would have been had the K been performed. the more specific provision giverns. USC doesn’t apply to services so it would apply to cabinet but not to installation Issue 2: $1400 in damages for storage of cabinets in his facility. Thomas (pg. This reveals information. 2-105. 2-102. Baxendale) immutable rules – can’t contract around (ex. …. 86) – Sunflower Seeds FACTS: D intervened in a breach of K btw P and Thomas. The Crt awarded this measure of damages to D based on its actual loss of expected profits. the injured party has available alternative remedies under state statute. Choose default rules that people would want in order to make contracting easier or ii. Hadley v. is the proper measure of damages the difference btw the MV of the goods and the K price agreed upon by the parties? .Anglia (Mike Brady) Avoidablility/Duty to mitigate (doesn’t require best decision in hindsight) -. but says it took up 1/10 of the space wants 1/10 of the rent). terminated Roberts’ (P) subcontract due to a dispute over the disposal of old cabinets. 2-106 Tongish v.Neri (boat sale)
.Contracts Outline – Prof.O. However where the seller is in a breach of a K for the sale of goods. However manager’s time spent on project is recoverable. Siegelman
Original nose-current nose yes Promised nose-original nose yes no yes yes no Hawkins got both = Promised . Issue: In an action for breach of K for the sale of goods. claiming that P (Tongish) breached its initial K with D in failing to deliver the 3rd installment under a K to sell sunflower seeds. Penalty default rules – set up in a way people don’t want them to work so they have to contract around them. B.Rockingham (cancelled bridge) -.
A new crank shaft was ordered. Marinez’ (P) delay claim involved two different items. Where special circumstances exist that would give rise to damages in excess of those reasonably foreseeable. DISCUSSION: Before we talked about damages that arose form the breech of the contract itself. Foreseeability of Harm Hadley v. A lower court dismissed the claim for delay damages because it claimed that the damages were special and Martinez (P) had failed to allege that the carrier had any notice of the possibility that such damages would accrue upon a breach of contract. However. Hector Martinez and Co. plaintiffs are only entitled to recover the measure of damages both parties may reasonably foresee as a result of the breach. thereby requiring them to close the mill and resulting in a loss of profits. Siegelman
1. Baxendale (p. are plaintiffs entitled to recover the measure of damages both parties may reasonably foresee as the result of the breach? HOLDING: In an action for breach of contract. maybe shipped for higher price (act like insurers)
. Martinez (P) settled with South Pacific (D) regarding the cost of repairing the damage to the dragline and storage charges incurred. (p. The Hadleys (P) brought suit claiming that Baxendale (D) breached its duty to deliver the shaft. a carrier. Southern Pacific Transportation Co. in order for the injured party to recover such damages. The court held that the lost use from the repair of the damaged goods was part of the claim of physical damage to the dragline and had already been settled. The shaft was not delivered for several days. thus the Hadleys cannot recover these damages. Lost use during the period resulting from the delay in transit and lost use resulting from the repair of the damaged goods. DISCUSSION: foreseeability Why does court care so much about foreseeability? Full compensation would be unfair to the defendant and hurtful to commerce The defendant in the case might have done something differently if new of special circumstances that would have resulted in higher damages – would have taken higher precautions.93) – late mill crank FACTS: The Hadleys (P) were engaged in the operation of a mill. In Hadely. Case remanded. we’re talking about the damages that arise as the consequence of the breech due to the specific nature. Baxendale (D). Martinez (P) had to make repairs and could not use the equipment until four months later. The dragline was delayed and it was damaged in transit. requiring the mill to shut down. Martinez (P) appealed and asserted that the loss was reasonably foreseeable when he entered in the contract. v. The crank shaft broke. A clerk at Baxendale’s (D) office was told that the shaft must be sent immediately. He sued for damages for the wrongful deprivation of the dragline’s use during the periods of delay in transit and of repair. ISSUES: Are special damages awarded only if actual notice was given to the carrier or the possibility of injury? HOLDING: General damages are awarded only if injury would have been foreseeable to a reasonable man and special damages are awarded only if actual notice was given to the carrier of the possibility of injury. The amount of damages that was reasonably foreseeable involves a fact question that Martinez (P) is entitled to present to a jury. the defendant must have been informed of the special circumstances. agreed to deliver it.Contracts Outline – Prof. 104) – delayed dragline FACTS: Martinez (P) shipped a dragline through Southern Pacific (D). P. ISSUE: In an action for breach of contract. the loss resulting from the delay in transportation may be measured by the rental value of the machinery. Baxendale (D) was not informed that a delay in the delivery of the shaft would close the mill.
by allowing recovery only for loss incurred in reliance. P must demonstrate that D expressly assumed responsibility for P’s sustaining special damages as a result of the D’s breach Holding: P agreed to rent three safety deposit boxes for a total of $75.Contracts Outline – Prof. just has to have reason to foresee it. that the party in breach had reason to know 3. P. The justification for seeking the order was that Dempsey (D) would be undercut for value if he lost his bout with Tunney. The court does not consider this K to signify FNB agreed to indemnify P in the amount of app. If have the opposite default…the regular consumer may not know much about the law. Why? Don’t want to encourage ignorance Hard to know subjective mind of parties At what point is foreseeability assigned? When contract is signed There is a notion of consent. or b. In the ordinary course of events. FedEx states explicitly that they don’t care what you told us. Rule: In an action for consequential damages. Damages are not recoverable for loss that the party in breach did not have reson to foresee as a probable result of the breach when the contract was made.000 for failure to notify him as to the availability of the boxes. A court may limit damages for foreseeable loss by excluding recovery for loss of profits. 112) – canceled boxing match FACTS: Dempsey (D) contracted with the Chicago Coliseum Club (P) to fight Wills in an upcoming bout. 109) (stolen coints) FACTS: Ps(Morrow and Goslee) sought damages from First NB for losses incurred by the burglary of their coin collection. The contract provided that the Coliseum (P) would be expending large amounts in promoting the fight and that Dempsey (D) would be prohibited from engaging in any other bouts until the bout with Wills was completed. Siegelman
The defendant doesn’t actually have to foresee it. $ 32. Loss may be foreseeable as a probable result of a breach because it follows from the breach a. As a result of special circumstances. Unforeseeability and Related Limitations on Damages (p.
2. Thus. as a result of D’s failure to notify them as to the availability if three safety-deposit boxes. 108) 1. beyond the ordinary course of events. Dempsey (p. however the failed to do it although the boxes were available before the burglary. 2. under the “tacit agreement (zimni anlasma) test”. (b/c FNB agreed to notify them. The default rule is for the agent to be responsible. But. Its good to force FedEx to tell me that they won’t take responsibility. Morrow v. we are still not taking responsibility…rule in Hadley is a default rule. Later Dempsey (D) repudiated the contract in order to fight Tunney instead. First National Bank of Hot Springs (p. Restatement (Second) of Contracts §351. Certainty of Harm Chicago Coliseum Club v. or otherwise if it concludes that in the circumstances justice so requires in order to avoid disproportionate compensation. The Coliseum (P) acquired a restraining order against Dempsey (D) and then brought suit for damages.can restrict classes of damages to which they will be responsible
What if mill employee told clerk at shipping company how much loss there would be? Would shipping company be responsible? Yes. the Coliseum (P) claimed that
. but parties can contract around it (like FedEx does) Why shouldn’t we change default rule? (since everyone seems to be trying to avoid this law) Why don’t we say that we won’t give you damages unless you expressly say what the damages might be? One reason why don’t change default rule is because of information revelation.
But. In this case. ISSUES:
1. 2. (4) Court costs are not recoverable unless provided for in the contract. entertainment What are the alternatives to this rule? : 1. Siegelman
there would be irreparable damages and the injunction was the only available remedy. P. Co. Expected value: 25% 50% 25% 0 50 200
¼(0) + ½(50) + ¼(200) = 75 Does this solve the problem? Maybe. In these types of cases courts award reliance damages. However. these are negotiation costs and do not naturally flow from a subsequent breach of the contract.Contracts Outline – Prof. so the Coliseum cannot recover. v. In this case the profits are too speculative. Expected value 2. 123) This case gives a defense of the doctrine of uncertainty. But only if we understand the distribution of damages. Liquidated damages 1. (3) Attorney fees are not recoverable unless provided for in the contract. A party can recover only on damages which naturally flow from and are the result of the act complained of. Who will be hurt the most by this rule? : New business. 4. (2) Costs incurred in preparing the contract are also not recoverable. these expenses cannot cover officials who are on a regular salary as they would have been incurred anyway.
May a party recover special damages (lost profits) for breach of a contract if the damages are not definite and certain? May a party recover for costs incurred in preparing the contract (expenses incurred prior to signing the contract)? May a party recover attorney fees when there is no provision in the contract for such recovery? May a party recover costs incurred in preparing for the performance of a contract?
HOLDING: (1) A party may not recover special damages (lost profits) for breach of a contract unless such damages are definite and certain. Wells-Whitehead Tobacco Co (p. After D’s breach of contract. Liquidated damages: The parties may agree to liquidated damages—state in contract how much you get if contract is broken Winston Cigarette Mach. P continued spending money at its own risk.
3. costs incurred in preparing for the performance of a contract between the signing date and the date of repudiation are recoverable. 2. They are not particularly concerned about under compensating for lost profits because reliance damages still get the parties back to where they were before the contract.
. service industries. Notes: Expenses incurred before the signing of the contract are not recoverable DISCUSSION: A party may not recover lost profits unless they are definite and certain.
but instead claimed wasted expenditures. here the court erred in calculating. Appealed.
Rockingham County v. less any loss that the party in breach can prove with reasonable certainty the injured party would have suffered had the contract been performed. §349. D notified its intent to terminate three and a half months in advance of the contract’s termnation date. P. P agreed to run a pickup and delivery service for Mistletoe for one year (after month-to-month). Jury awarded Locke damages of 19. 2. to terminate the arrangement. Foreseeablility issue.Contracts Outline – Prof. V.400. (p. 131) – cancelled bridge
. can wasted expenditure be recovered when it is wasted by reason of the defendant’s breach of contract? HOLDING: In a breach of contract action. If the breach caused no loss or if the amount of the loss is not proved under the rules stated in this Chapter. wasted expenditure can be recovered when it is wasted by reason of the defendant’s breach of contract. Availability of Damages (p. Luten Bridge Co. Issue: When a party makes expend. a small sum fixed without regard to the amount of loss will be awarded as nominal damages. Reed (p. a breach of a very simple contract or failure in some part might bring ruing upon the party in default. including expenditures made in preparation for performance or in performance. A plaintiff can claim for his loss of profits or for wasted expenditure. Siegelman
It is safer to adopt definite rules for the jury to follow when awarding damages. The injured party has a right to damages for any breach by a party against whom the contract is enforceable unless the claim for damages has been suspended or discharged. (until that time P made app 19. provided that the expenditures were such as would reasonable be in the contemplation of the parties as likely to be wasted if the contract was broken. Reed (D) repudiated the contract. not both. the injured party has a right to damages based on his reliance interest. Locke (p. 125) Damages are not recoverable for loss beyond an amount that the evidence permits to be established with reasonable certainty. 125) As an alternative to the measure of damages stated in §347. Anglia (P) did not claim loss of profits as damages. §352. Mist. It is better for the parties when contracting to expressly provide for uncertain damages (liquidated damages)
Restatement (Second) of Contracts §346.128) – cancelled shipping service – losing K FACTS: Locke (P) sought damages for exoenses she incurred in preparation for performance pursunt to a K with MES (D). 125) – Brady Bunch dad breaches FACTS: Anglia Television (P) entered into a contract with Reed (D) to perform in a television play. 125) 1. thirty days’ written notice were required.
3. Uncertainty as a Limitation on Damages (p.500 expenditures – 15. In preparation for the K. However. does the proper measure of damages for breach include the recovery of her investment? Holding: YES. Reed (D) contended that Anglia (P) could not ask for damages for wasted expenditures incurred before the contract was concluded because these expenditures were for Anglia’s (P) benefit at a time when it was uncertain whether there would be any contract or not. Because of a booking error. Otherwise. Damages Based on Reliance Interest (p. ISSUE: In a breach of contract action.
Anglia Television Ltd. He can also claim expenditure which happened before the contract was concluded. Anglia (P) could not find a substitute and had to cancel the project.000 of it borrowing). Under this K. Avoidability of Harm / Mitigation Mistletoe Express Service v. P is entitled to damages on the basis of her total expenditures LESS the property sold after the breach.
154) – canceled boat purchase
. burden or humiliation. Avoidability as a Limitation on Damages (p. Luten (P) proceeded to construct the bridge. Decided in summary judgment DISCUSSION: This issue is complicated. DISCUSSION: * Exception to mitigation: “lost volume” rule Suppose that I’m selling a car. Same thing with employment. Shirley sues.Contracts Outline – Prof. (p. However. Retail Marine Corp. This is the “lost volume” rule. When three of the five commissioners resigned. damages are not recoverable for loss that the injured party could have avoided without undue risk. is she really that damaged by the breach? Duty to mitigate is a bit of a misnomer – court won’t force someone to take another job. 20th cent. and then I resell. I don’t really have damages. I can only sell my services to one employer. 142) –canceled movie FACTS: In 1965 Shirley Maclaine singed to play in lead musical. DISCUSSION: damages mitigation rule What is the justification for the damages mitigation rule? Not due to breach of contract. If she finds another job. may the other party continue to perform and recover damages based on full performance? HOLDING: After repudiation of performance by one party to the contract. ISSUE: After repudiation of performance by one party to the contract. The injured party is not precluded from recovery by the rule stated in Subsection (1) to the extent that he has made reasonable but unsuccessful efforts to avoid loss. But then the court also says this role was inferior. 153) 1. the new board voted unanimously to repudiate its contract with Luten (P). My selling a car is more like an employment contract: I as a person with one car. someone breaches. After receiving notice of the County’s (D) repudiation. Court doesn’t want to force people to just take any job…but on the other hand don’t want to automatically pay her the full amount. 2. but offered her lead in another movie. They must mitigate damages. the other party cannot continue to perform and recover damages based on full performance.c didn’t take the second role HOLDING: The court says that the principle is the money she should get from the contract minus what she could have earned in another movie or what she did earn. There is no notion of additional things I could have sold. P. but will adjust the damages
Restatement (Second) of Contracts §350. Fox tries to lower its liability saying she didn’t mitigate damage b. some people argue that certain jobs are not strictly 9-5 jobs. (p. opening the possibility that they might be able to work for more than one employer at a time. Except as stated in Subsection (2). Neri v. Twentieth Century-Fox Film Corp. Siegelman
FACTS: The County (D) Board of Commissioners voted to award a contract to Luten (P) for the construction of a bridge. if I’m a car dealer even if I resell I still have damages. but due to your stupidity Economic concept of waste (Pareto improvement) Why would plaintiffs continue to work? Maybe they think that the court will award damages Maybe they think that the contract wasn’t really repudiated Maybe wasn’t sure and didn’t want to be in breach himself
Shirley Maclaine Parker v. But. Why not? Fairness to the defendant and a question of what is really the damage to the plaintiff. 20th century fox decided not to produce that movie. that’s all I have.
the seller theoretically would have profited form both sales. but less expenses saved in consequence of the buyers breach. Seller’s Resale Including Contract for Resale (p.579.
§2-708. Subject to subsection (2) and to the provisions of this Article with respect to proof of market price (Section 2-723). but less expenses saved in consequence of the buyer’s breach.
It must be made at a usual place or market for public sale if one is reasonably available and except in the case of goods which are perishable or threaten to decline in value speedily the seller must give the buyer reasonable notice of the time and place of the resale. 157) 1. otherwise. manner. the subsequent sale of the item at issue is not sufficient to restore the seller to his expected position. Marine (D) sold the boat ordered to another buyer. Seller’s Damages for non-acceptance or Repudiation (p. The resale must be reasonably identified as referring to the broken contract. as hereinafter defined (subsection (3) of Section 2-711). time. but minus any expenses avoided. Except as otherwise provided in subsection (3) or unless otherwise agreed resale may be at public or private sale including sale by way of one or more contracts to sell or of identification to an existing contract of the seller. the measure of damages for non-acceptance or repudiation by the buyer is the difference between the market price at the time and place for tender and the unpaid contract price together with any incidental damages provide in this Article (Section 2-710). Where a seller has an unlimited supply of goods at his disposal. Neri (P) paid a deposit of $4. as long as this amount is sufficient to place the seller in as good a position as performance would have done. ISSUE: In an action for breach of contract based on repudiation by the buyer. and The seller may buy. plus any incidental damages and reasonable costs. and refused to refund the deposit. place and terms must be commercially reasonable.
A purchaser who buys in good faith at a resale takes the goods free of any rights of the original buyer even though the seller fails to comply with one or more of the requirements of this section. Where the resale is made in good faith and in a commercially reasonable manner the seller may recover the difference between the resale price and the contract price together with any incidental damages allowed under the provisions of this Article (Section 2-710). and
b. Where the resale is at public sale a.250.250. 2. If the measure of damages provided in subsection (1) is inadequate to put the seller in as good a position as performance would have done then the measure of damages is the profit (including reasonable overhead) which the seller would have made form full performance by the buyer. P. the seller may recover his lost profit. Thus. Neri (P) then rescinded the contract because he was hospitalized. 3. Siegelman
FACTS: Neri (P) contracted with Retail Marine Corporation (D) to purchase a specific model of boat. Neri (P) sued for his deposit and Marine (D) counterclaimed for damages due to Neri’s (P) breach. Sale may be as a unit or in parcels and at any time and place and on any terms but every aspect of the sale including the method. Only identified goods can be sold except where there is a recognized market for a public sale of futures in goods of the kind. and If the goods are not to be within the view of those attending the sale the notification of sale must state the place where the goods are located and provide for their reasonable inspection by prospective bidders. and proven incidental damages amounting to $674. Marine (D) had already ordered and received the boat. The seller is not accountable to the buyer for any profit made on any resale. 4. minus Marine’s (D) offset of its lost profit of $2. since had the buyer performed.Contracts Outline – Prof. due allowance for costs reasonable incurred and due credit for payments or proceeds of resale. 158) 1. the seller may resell the goods concerned or the undelivered balance thereof. may the seller receive damages based on his lost profits where he subsequently sells the item at issue to another buyer? HOLDING: Uniform Commercial Code §2-708 permits the seller to recover as damages the difference between the market price and the contract price plus any incidental damages incurred. Where the resale is at a private sale the seller must give the buyer reasonable notification of his intention to resell. d.
5. Under the conditions stated in Section 2-703 on seller’s remedies. 2. Neri (P) may recover his deposit of $4. Marine (D) claimed that it could have sold both boats. Sales Contracts: The UCC §2-706.
. A person in the position of a seller (Section 2-707) or a buyer who has rightfully rejected or justifiably revoked acceptance must account for any excess over the amount of his security interest. together with any incidental damages provided in this Article (Section 2-710). 6. but it is not necessary that the goods be in existence or that any or all of them have been identified to the contract before breach.
1. Seller’s Incidental Damages (p. These clauses are expressly intended to be the exclusive remedy for a breach. A term fixing unreasonably large liquidated damages is void as a penalty. 171-172) Warranty Clauses can be included by parties in a contract as a means to limit their liability under the default rules of contract damages. his resale is subject to the conditions laid down in this Article on resale by an aggrieved seller (Section 2-706) C. outlining the proper measures of damages. care and custody of goods after the buyer’s breach. but if the seller has notice of the buyer’s breach before reselling goods received in part performance. in the transportation. 4. 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. §2-718.
. in which case it is the sole remedy. whichever is smaller. i. 159) 1. Where a seller has receive payment in goods their reasonable value or the proceeds of their resale shall be treated as payments for the purposes of subsection (2). 160) § 2-719. A right to recover damages under the provision of this Article other than subsection (1). 2. Where the seller justifiably withholds delivery of goods because of the buyer’s breach. Contracting around the Default Rules of Damages Most contract rules are default rules and can be contracted around by inserting an expressed clause to the contrary. 159) Incidental damages to an aggrieved seller include any commercially reasonable charges. Deposits (p.e) computer spreadsheet software disclaimer Sales Contracts: The Uniform Commercial Code (pp. Express clauses can disclaim liability for consequential damages. as by limiting the buyer’s remedies to return of the goods and repayment of the price or to repair and replacement of non-conforming goods or parts: and (d) resort to a remedy as provided is optional unless the remedy is expressly agreed to be exclusive. (2) Where circumstances cause an exclusive or limited remedy to fail of its essential purpose. Express Limitations on Consequential and Incidental Damages (pp. the buyer is entitled to restitution of any amount by which the sum of his payments exceeds a. Commerical Contracts often contain clauses the give one or both parties the right to have the dispute. The buyer’s right to restitution under subsection (2) is subject to offset to the extent that the seller establishes a. remedy may be had as provided in this Act. and b. expenses or commissions incurred in stopping delivery. P. or b. settled by arbitration or what is now known as ADR. The amount to which the seller is entitled by virtue of terms liquidating the seller’s damages in accordance with subsection (1). Liquidation or Limitation of Damages. Contractual Modification or Limitation of Remedy (1) Subject to the provisons of subsections (2) and (3) of this Section and of the preceeding section on liquidation and limitation of damages (c) agreement may provide for remedies in addition to or in substitution for those provided in this Article and may limit or alter the measure of damages recoverable under this article. The amount or value of any benefits received by the buyer directly or indirectly by reason of the contract. 20% of the value of the total performance for which the buyer is obligated under the contract or $500. in connection with return or resale of the goods or otherwise resulting from the breach. 3. and they can either limit or expand damages. the difficulties of proof of loss. and the inconvenience or nonfeasibility of otherwise obtaining an adequate remedy. In the absence of such terms. thereby excluding damages for any other foreseeable losses. even though damages may be foreseeable.Contracts Outline – Prof. Siegelman
Court explained that Towne Hotel failed meet its burden of proof showing that the stipulated damages were unreasonable. the practice of relieving defaulting obligors from forfeiture of the penalty due the bonds led to the acceptance of the modern principle of contract law according distinctions to penalty and liquidated damages. awarding the same damages for any breach. which are enforceable. RULE OF LAW: Where a contract provides that a very large sum is to become immediately payable for any breach. in this case. Concerning contractual enforcement. The three next cases examine the modern distinction between penalty clauses. however. Towne Hotel (p. RULE OF LAW: A stipulated damages clause is valid if it is reasonable under the totality of the circumstances. Jury assessed damages as 750 pounds. Although the court holds that it is neither unreasonable nor illegal to fix the amount to be paid for breach if the resultant damages would be uncertain in nature. to perform at the theatre for four seasons. the agreement foresaw possibility of harm and agreed on an estimated amount thus Wassenaar’s subsequent earnings do not factor into court’s holding. manager of Covent Garden Theatre. court held that the liquidated damages clause eliminates Wassenaar’s duty to mitigate damages. however. assigning positive value to breach in certain instances (i. an actor. Contracts in terrorem (“by way of threat”) were made by the party from whom performance was due.) Towne Hotel did not present facts showing that Wassenaar did not suffer or suffered significantly less damages than the stipulated amount.163) – Comedian quits FACTS: Farren (D). Kemble v. HOLDING: Court reversed decision holding that the stipulated clause was a valid provision for liquidated damages. such party should pay the other 1000 pounds. the clause was not sufficiently limited.e. Eventually. this tool has not disappeared.e personal services contracts). not a clause for liquidated damages. Siegelman
(3) Consequential damages may be limited or excluded unless the limitation or exclusion is unconscionable. (2) It suffices for the law to provide compensation for loss suffered by failure to perform agreements. was contracted by Kemble (P).
. 2. in modern times. as they would had there been no stipulated damages clause. but rather the courts now hold monopolistic control over using threats to enforce contracts. the courts will direct the jury to assess the real damages sustained as a result of the breach of contract. i. which are unenforceable. no matter how minor.165) – Hotel worker fired FACTS: Wassenaar (P) entered into an employment contract with Towne Hotel (D). Towne Hotel terminated Wassenaar’s employment prior to expiration and P sued for the stipulated damages. Also. Towne Hotel made affirmative defense that Wassenaar failed to mitigate damages. and liquidated damges clauses. Farren refused to act during the second season. Since the clause is a valid liquidated damages provision. P. They are as follows: (1) The aim of contractual institutions is to make sure that agreements are performed. however. Farren (pp. there exists two competing notions that are not necessarily incompatible. 161) Prior to the assumpsit. which included a liquidated damages clause. (2) is bound to impose limitations on the enthusiasm in which (1) is pursued. Thus. conditioned “penal” bonds were the basic contractual institution. which would reduce any promise to debt. Their agreement contained a clause which stated that if any party failed to perform any or all stipulations agreed upon. however minor. VOCABULARY: Mitigation of damages A plaintiff’s implied obligation to reduce the damages incurred by taking reasonable steps to prevent additional injury. Limitation of consequential damages for injury to the person in case of consumer goods is prima facie unconscionable but limitations of damages where the loss is commercial is not. breaching the contract.Contracts Outline – Prof. to which Kemble appeals. the Wassenaar v. HOLDING: Court concluded that the clause in question was an unenforceable penalty clause. Liquidated Damages v Penalty Clauses (pp. VOCABULARY: limited damages An amount of money specified in a contract representing the damages owed in the event of breach.
Equity is more flexible. Most often solved by specific performance.000 for the property. 173) – Coal Purchase HOLDING/RULE: In order for a liquidated damages clause to be enforceable. §356 Liquidated Damages and Penalties (1) Damages for breach by either party 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. Specifically. Coercive = order commanding some specific conduct w/ punishment for noncompliance. this advantage is outweighed by several countervailing concerns: (1) presence of penalty clauses increases costs of contracting and (2) penalty clauses may discourage efficient breaches of contract. (2) A term in a bond providing for an amount of money as a penalty or non-occurrence of the condition of the bond is unenforceable on grounds of public policy to the extend that the amount exceeds the loss caused by such non-occurrence. Ps sought a buyer in order to recoup investment when they were unable to fund the purchace themselves. there must be a reasonable estimation at the time of contracting of the probable damages from breach.440. v. Restatement (Second) of Contracts (p. (1) Enforcement avoids uncertainty and delay. (pp. OTHER REMEDIES and Causes of Action (specific performance) p. as well as increases economic efficiency. Lake River Corp. restitutionary or declaratory. Equitable remedies are coercive. notably a promissory note to D for $1. A term fixing unreasonably large liquidated damages is unenforceable on ground of public policy as penalty. Siegelman
ANALYSIS: There are competing viewpoints in regards to enforcing stipulated damage clauses. ANALYSIS: Judge Posner (our hero) notes his disagreement with decision by explaining that while penalty clauses impute a sense of exigency into the terms therein [notes additional risk to creditors of contract breakers]. otherwise. A P may only seek equitable relief if remedy at law is inadequate. D leased a farm to P for 3 years w/ an option to purchase anytime during that period for $21. (2) Enforcing damages becomes punitive or unfair under certain considerations. however.000. Hart agreed to pay the $22.193 Money damages are the norm. ISSUE: In a contract for the sale of real property.95 for a milking system. such clause is void as penalty.172) § 355. P.Contracts Outline – Prof. Money damages are known as legal relief while other remedies are called equitable relief (b/c they were settled in equity courts). and the need for estimation must be based on the likely difficulty of assessing the actual damages suffered in the event of breach.
III. so other damages are deemed extraordinary relief. may the court award the remedy of specific performance as a matter of course?
. Declaratory = Obtain a declaration of your rights Restitutionary = Restore plaintiff something which belonged to him A) SPECIFIC PERFOMANCE AND INJUNCTIONS 1) CONTRACTS FOR LAND Land is presumed to be unique. Carborundum Co. Loveless v Diehl (pg 198) – buying the farm FACTS: The Diehls (P) sought specific performance of an agreement for the sale of a farm they leased from the Lovelesses (D) pursuant to an option-to-buy during lease for a specific amount contract. but reneged when D refused to sell the property to P. P’s improved property requiring. Punitive Damages Punitive damages are not recoverable for a breach of contract unless the conduct constituting the breach is also a tort for which punitive damages are recoverable.
Economic efficiency Sedmak v Charlie’s Chevrolet. P tried to repay. Court acted w/in its bounds to say they get the damages equal to the amt they would have received if contract had been executed.000 worth of improvements. D’s sales man told them they would have to bid on the car. when a contract is executory. by D hid from him. P’s made $5. Generally. P. The salesman claims that the deposit was just giving them the right to bid first and last. Rich offers Scholl’s valuation of car Hartzell gets Price Scholl offers Hartzell If award expectation Scholl gets If liquidated damages are set above valuation (thus a penalty) then people won’t breach. Rich he gets the $.000. Efficient Breach Revisited Want item to go to the highest bidder Hypo: Lets say someone (Mr. Rich) offered Hartzell more $ for car. Award unjustly enriches D for their breach and would diminish transferability of land. P has remedies including cover. (pg 208) – another ‘Vette FACTS: The Sedmark’s (P) entered into an oral contract with Charlie’s (D) upon which they placed a $500 deposit to purchase a limited addition Corvette for approximately $15. the tendering of a deposit does not give rise to an action in replevin. Therefore reversed and specific performance ordered. irrespective of the inadequacies of remedies at law. Siegelman
HOLDING: Yes. Rich ends up with car either way because either he buys it from Scholl or Hartzell. P sued for specific performance b/c the items were unique and some were difficult to replace. ISSUE: Will the court order specific performance for the sale of an item of personal property? HOLDING: No. specific performance is not warranted unless there is no specific remedy of law. If Scholl seeks specific performance and manages to sell it to Mr. (ie not unique item). Cumbest v Harris (pg 203) FACTS: Cumbest (P) and Harries (D) entered into a loan disguised as a sale agreement that allowed repurchase by a specific date. Both sides were executory. P demands delivery or $4655 (difference btwn cost and value) ISSUE: When a contract is executory.000 of their investment and results in a benefit to a third party who suffered no injustice as a result of the breach. DISSENT: (McFaddin) It is also w/in courts power to deny specific performance if resolution of issue is not obvious or where there exists other prevailing concerns. Court only permits equitable remedies when remedies at law are inadequate. DISSENT: (Harris) Specific performance results in P recouping only $1. He put $100 down and contracted to return with the rest. Rich the Scholl gets
. When the car arrived. If specific performance is ordered and he sells it to Mr. (room to bargain?) price Mr. (that which has yet to be performed) does the tendering of a deposit give rise to an action in replevin (equitable remedy by which a party claiming exclusive and immediate rights to personal property in the possession of another seeks recovery of said property) to enforce? HOLDING: No. But this was conceded unique. 2) CONTRACTS FOR GOODS Goods must be unique to warrant specific performance.Contracts Outline – Prof. and the injured party must seek relief based on breach of contract. Deposit ≠ immediate and exclusive right to take possession. Post Theorem: Mr. Scholl v Hartzell (pg 206) FACTS: Scholl (P) bought a car and parts advertised by Hartzell (d) for $4000. Inc.
P. After a year. P had entered into an agreement with D whereby she voluntarily agreed to render services as a house servant for 20 years.Breaching party can’t sue on the contract (in other words. Reversed ISSUE: May the court order specific enforcement of a contract for personal services? HOLDING: No. Circuit court upheld told her to return to D. contracted to play football for LA Rams for one year. Restitution damages usually measured by market value of P’s performance rather than actual enrichment of D. operates a theatre where Wagner. P.enjoined singer FACTS: Lumley. Harris (p. Harris. was to perform. Under a broad interpretation of “unique” a star football player has a “unique ability. However upon filing the petition for relief. Enforcement of a contract under such conditions is akin to slavery. Siegelman
ISSUE: May specific perform. P can usually seek damages. 211 (1) Specific performance may be ordered where the goods are unique or in other proper circumstances. which could be less than the market value.” (similar to UCC and goods)
B) RESTITUTION – DAMAGE INTEREST AND CAUSE OF ACTION If a D breaches. but Harris’ Rams contract was assignable. A Woman of Color (pg 212) – we didn’t read FACTS: Mary Clark (P) claimed she was illegally indentured to Johnson (D). 3) CONTRACTS FOR PERSONAL SERVICE The Case of Mary Clark. Circumstances include situations where p has no legal remedies and where a substitute could not be found without substantial cost/delay. She them made a commitment to perform at another theatre. D agrees not to perform at any other theatre without permission. Lumley v. such services were presumed to have been performed voluntarily. . (2) The judgment (decree) for specific performance may include such terms and conditions as to payment of the price. Wagner (opera singer) pp. who filed suit. HOLDING: Court orders injunction barring the D from singing elsewhere. but distinguished injunction from SP by saying that D cannot complain if she is barred from singing elsewhere and thus fulfilling her contractual commitment. and Rams assigned it to Cowboys. Contract said Harris could not play for any other team because of his unique ability. Principles of the Bush rule: i. Dallas Cowboys v. HOLDING: The court orders injunction barring Harris from playing for other teams. As long as she performed her services pursuant to the contract. such service was no linger voluntary and the court may not constitutionally compel her to continue to perform pursuant to the contract.232) Injunction for athlete’s unique ability D. damages.000 made and arrived tailored to the P’s needs and thus was “sufficiently unique” Sales Contracts: The Uniform Commercial Code: § 2-716. Here car was 1 of only 6. or other relief as the court may deem just (3) The buyer has a right of replevin for goods identified to the contract if after reasonable effort he is unable to effect cover for such goods or the circumstances reasonably indicate that such an effort will be unavailing or if the good have been shipped under reservation and satisfaction of the security interest in them has been made or tendered. be ordered when the subject matter is of a sufficiently unique nature? Holding: Yes. 216 . OR bring an action in “quasi-contract” for restitutionary damages to recover the reasonable value of the benefit plaintiff conferred on D.Contracts Outline – Prof. – p. the fact that his breach helped the other party doesn’t allow him to recover because of that)
. The court states that it cannot force her to sing. P brought suit to refrain D from singing anywhere else. Harris left to play with an AFL team.
Abel won’t quit and society loses the benefit. Abel does both plumbing and electrical work. His breach wasn’t efficient—it was against his own interests. the price of that wheat has fallen to $11.
. $5. then takes on an electrical job ($15).
1. the employer would be double-paying Employers are often risk-averse Conclusion: expectation damages would encourage efficient breach. it may as justice requires be measured by. HOLDING: Court gives Bush restitution because: It would be unfair enrichment if Canfield reaped the surplus of the breach Court didn’t want Canfield to benefit. but the Contractor gains the $10 surplus from the breach. Abel quits and sues for the breach savings ($15). Don’t want to encourage inefficient breaches The Plumber/Electrician Hypothetical i. meaning Abel’s +$10. the reasonable value to the other party of what he received in terms of what it would have cost him to obtain it from a person in the claimant’s position.000—Bush’s lost profits (expectation interest) are -$3000. Under Bush rule. Canfield would’ve made $3. Restitiution and “Quasi-Contract” R2d. Had the contract been fulfilled. The reason this doesn’t happen today is because: Transaction costs (hiring/training new employee) aren’t zero • If the employee couldn’t find immediate or equal-value work . However. on a breach by nonperformance that gives ruse to a claim for damages for total breach or on a repudiation. Contractor doesn’t know Abel is electrician. iv. § 373 Restitution When other Party is in Breach p 256 (1) Subject to rule stated in Subsection (2). OR b.000 for wheat. He signs on for plumbing work with Contractor (employer) for $20/period. Contractor would fire Abel and pay him $5 in expectation damages ($20 from lost contract less mitigation damages-the $15 he gets from electrical work). ii. Now Abel is even and Society is better. That would create its own inefficiencies and market instability. The going rate for electricians is $15/period.Contracts Outline – Prof. Siegelman
ii. the injured party is entitled restitution for any benefit that he has conferred on the other party by way of part performance or reliance (2) The injured party has no right to restitution if he has performed all of his duties under the contract and no performance by the other party remains due other than payment of a definite sum of money for that performance.Breached party gets any surplus from a breach Bush v. Under an anti-Bush rule.000. the extent to which the other party’s property has been increased in value or other interests advanced. while Bush rule potentially prevents efficient breach. R2d. Canfield never delivers but by time of delivery. If Contractor knew of Abel’s dual talents and Abel had no preference between plumbing and electrical work. there’d be a race to breach whenever the market changed or whenever people learned new information about each other (because information is incomplete and asymmetric). P. Society would be better off by $10 if Abel did electricians’ work and Contractor could find a new plumber (electrical work is valued at $10/period more than plumbing) iii. 250) – non-delivery of flour FACTS: Bush pays $14. and the contractor loses nothing.000 up front. Contractor suffers small cost for any termination. a. § 371 Measure of Restitution Interest p 256 If a sum of $ is awarded to protect a party’s restitution interest. without Bush. Canfield – (p. Plumbers flood market and now going rate is $5/period. society is +10.
(obviously. Wisdom pp298 – Dr. The court denied Orchard Hill’s motion and entered judgment in favor of the plaintiff. 260) – condo sale FACTS: Vines (P) placed a down payment of $7. § 374 Restitution in Favor of Party to Breach Please see pg.Contracts Outline – Prof. The settled rule was unfair which held the opposite.5 months for which time D refused to pay. Restitution can’t provide a windfall for the breacher but allows them to receive what they’re owed. b. he might not be required to pay
vii. The court held that the case be remanded for the plaintiff to substantiate his claim. because one party could receive nearly all of the performance while the other party would get nothing. than price immediately increases to $50/quarter. rendered medical aid to the decendent (Mr.the party who fails to perform the whole of the labor contracted for can recover to the degree it is greater than the damage done to the other party. One approach to determining restitution is:
vi. FACTS: P contracted to work for Turner for a period of one year.256) – worker quits Breaching party can sue for restitution when he’s given partial performance. A defaulting party has the right to seek restitution. Orchard Hills. less damages. A party whose breach is not willful can bring a claim to recover moneys paid that unjustly enrich the seller. surgeons (one of which was Wisdom).
There is no requirement that the employer have “approved” the work.restitution damages for quasi contract P. The contract stipulated that Orchard Hills would retain the down payment as liquidated damages in case of default. Orchard Hills appealed. Laborer works for three quarters.
Britton v. helps dying man . viii. Vines was then transferred to New Jersey and decided not to complete the transaction for the real estate.
If the contract were such that breached didn’t receive the benefit until completion of the term. Harrison) of D (administrator of estate. c.800 condominium that was being sold by Orchard Hills (D). Vines brought suit and the defendant demurred to the complaint and moved for summary judgment on the issue of damages. but P quit work after 9.The court held that Vines had the burden of proof in showing that the liquidated damages clause was invalid and unenforceable. P. (Britton) HOLDING: Where labor is performed under a K for a specified price . at the end of which he would be paid $120 for his labor. c. Issue: Does a defaulting party have the right to seek restitution? Holding and Rule: Yes. Vines explained the circumstances to Orchard Hills but Orchard Hills refused to refund the down payment.
d. then quits. The breaching party must satisfy his burden of proof that the other party has acquired a net gain in order for a claim for unjust enrichment to be sustained. 374 Cotnam v. Another approach for restitution: Start with the money employee would’ve earned under the contract for three quarters ($30 x 3 = $90) Subtract out the damages employer will face in the 4th quarter because of the breach ($50-$30 = $20 Court would grant $70
breach—laborer can’t increase his wages by quitting). b.880 on a $78. Inc (p. Turner (p.
. or that the seller’s damages were substantially less than the amount of liquidated damages.
quarter. the decedent didn’t make it). it subtracts the $20 in damages that defendant will lose in the fourth quarter by having to contract at market rate in the 4th So the court would grant $70 as time worked. R2d.
Start with the value employer received in market terms ($150)—Court would never grant that (it would create a crazy incentive to Court then subtracts the difference between market and contract in each period worked ($20 x 3 = $60) Then.
Laborer Hypo: Laborer agrees to work for $30/quarter. Cotnam) after a car accident.
there was an implied-in-law or quasi contract. Battle of the forms: When there are dueling forms. there would be no contract. INTRO TO OFFERS AND ACCEPTANCE CHAPTER 4 REACHING AN AGREEMENT A. Siegelman
HOLDING: Court says there was no contract. BUT. INTRO TO OFFERS AND ACCEPTANCE Legally binding contracts need 1) Offer 2) Acceptance and 3) Consideration.
IV. a court will take the two forms together and fill in the gaps. instead. and one party acts. even though there was no benefit conferred because the guy died. Doctors are entitled to recovery for the services rendered. usually in favor of the offeror-purchaser.Contracts Outline – Prof.
. UCC’s stance overthrows the mirror image rule Mirror Image Rule: an acceptance must mirror the offer exactly in order to form a binding contract. P. the last form is the one that is enforceable??? Under UCC. this is not the case. REACHING AN AGREEMENT A. If the acceptance varies or adds to the offer. • Courts create “legal fiction” for doctors’ legal remedy since if Harrison were able to contract he would have • quasi/implied in law contracts exist when one party is required to compensate another for a benefit conferred in order to avoid unjust enrichment.
Offer and acceptance both unclear here. Plaintiff’s Belief YES NO YES Contract No Contract Defendant’s Belief if unreasonable. the claim that the assentor was not serious is not a defense to a claim on the contract. his undisclosed intention is immaterial (until disclosure). McKittrick. It’s only at work in bottom left. D said P didn’t have the money. Only intention that matters is the one the parties indicate by their words or acts. π told co. as if one party’s inner intention is at odds with his express words. Test protects the parties’ reasonable expectation • words and conduct are not interpreted as to what the offeror/acceptee subjectively thought them to be.’s president he would quit working if his contract was not renewed. P said “Do too” and that he would pay that much for the farm. D said he didn’t think P had the money and that it was a big joke. Argue manifest offer vs too good to be true. But in the end the judge decided guy got the car.. The law favors the naïve over the informed. Fires him three months later. Contract was in writing: writings provide proof of solemnity and consideration. Boss says “Go ahead. One evening P and D were drinking and P offered to buy the land from $50. which P took to mean that the contract was being renewed. It was reasonable for P to interpret D’s words as renewal. and the other party does so interpret them • IE) An offer made by party A to B purely in jest will result in a binding contract if B reasonably believes that A was serious.290) – fired worker / objective theory of assent FACTS: P. Dealer refused to give car b/c the sign was there for a tourney for charity 3 days before. Court holds that because Embry said. HOLDING: Mental assent of the parties is not a requisite for the formation of a contract. You’re all right. D told him to just keep working. Hargadine.Contracts Outline – Prof. Contract Embry v. Employer. had an employment contract with D. NO no contract No Contract If Reas.Drunken joke land deal FACTS: Lucy (P) had tried several times to buy a farm form the Zelmers (D).
Lucy v. Intoxication didn’t count. Should have know that only happens at tourneys. • an actual “meeting of the minds” is not required because that implies subjectivity • there is sufficient manifestation of assent whenever a party uses words or acts as if he knows. If the words and acts have but one reasonable meaning. Employee asks for contract extension. regardless of what defendant may have actually meant. it incentivizes the informed to tell the naïve how it really works. D also made his wife sign the sales draft. TEST: what a reasonable person in the position of each of the parties would be led to believe by the words or conduct of the other party or the words of a written contract. When contract was expiring. P offered money to seal the deal. Zehmer (pg 296) .” and sends him out. Got hole in one. actual subjective intention is irrelevant. HOLDING: Court finds for P. That way. “Renew or I quit. P. the express words are that counts. it was refused.000. D claims he was never going to renew the contract. HYPO: Sign Hole in-one wins car. D wrote out a sales draft and spent 40 mins discussing the deal with P during which time revisions were made to the contract. P was later let go. OBJECTIVE THEORY OF ASSENT The Objective Theory Of Assent is to be applied to determine whether mutual assent has been achieved.
. Not reasonable. Siegelman
B. • theory requires a subjective element in that it looks at the π’s belief. CONCISE RULE OF LAW: If his outward manifestations of assent otherwise create a contract. McKittrick Dry Goods (pp.” any reasonable man would have taken defendant’s words as an assent to renewal. Embry. or has reason to know the other party would reasonably interpret as an offer or acceptance.
308) .. for lack of consideration. is “manifestation of mutual assent. (3) The conduct of a party may manifest assent even though he does not in fact assent.304) § 17. v Harsh (pg 305) – millet seeds FACTS: Harsh (D) a farmer. Conduct as a manifestation of assent (1) The manifestation of assent may be made wholly or partly by written or spoken words or be other acts or by failure to act.
Intent to enter into a bargain: there is no intent to enter into a bargain if by the language/communications it is clear that a statements merely reflects an intent to begin negotiation. (2) The conduct of a party is not effective as a manifestation of his assent unless he intends to engage in the conduct and he knows or has reason to know that the other party may infer from his conduct that he assents. but it is clear that a mental reservation of a party to a bargain does not impair the obligation he purports to undertake. HOWEVER. during the time stated or if not the time states for a reasonable time. 305
An offer is the manifestation of willingness to enter into a bargain. mistake. Two Essential Elements of an Offer
1. contract complete when Pepsi receives the order form from p
. is more like an ad than an offer. PRELIMINARY NEGOTIATIONS Nebraska Seed Co. considered invitations to deal.000 product points. UCC §2-205 : Firm Offers: An 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. terms. (P a letter stating that he had 1800 or thereabouts bushels of millet that he would sell for $2. D told P that it had a certain quantity to sell at a certain price.25 per hundered-weight. duress. D moved for summary judgement and such was granted by district court. and stated the delivery instructions. Pepsi (p. If one is missing but there is a clear intent to conclude a bargain.Contracts Outline – Prof. such as quantity and price. or other invalidating cause. In such cases a resulting contract may be voidable because of fraud. forwarded to Nebraska Seed Co.” The parties to most contracts give actual as well as apparent assent. and the quantity involved. 2. D did not deliver and P sued for breach of contract. courts will often fill in the item. so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it. CONSICE RULE OF LAW: An ad of a product is not an offer if it contains general. 1.Handout about the Harrier Jet p sued to enforce alleged contractual commitment of manufacturer. § 19. therefore. there are two exceptions: 1) definite terms clearly indicate a bargain and 2) ad invites specific action without further communications.
B. or to provide fighter jet aircraft in return for his submission of 7. HOLDING: An offer must be specific as to the terms of sale. nonspecific. “Meeting of the minds.” as in the definition of “agreement” in §3. The phrase used here. but 1800 thereabouts is not a sufficiently specific amt to constitute an offer.
Advertisements are usu.000. A communication that is nonspecific. D. NOT TO EXCEED 3 Months.
WHAT IS AN OFFER? P. even if the term “offer” is used. P. the price. Siegelman
RESTATEMENT (SECOND) OF CONTRACTS (P. Certainty and Definiteness of Terms: A statement will not be an offer unless it makes clear: the subject matter of the proposed bargain. P wrote back saying it accepted the offer. not offers. Leonard v.” The element of agreement is sometimes referred to as a “meeting of the minds. Requirements of a bargain c. ISSUE: Has offer been made thru an Ad when the alleged offeree has an objectively reasonable belief that the offer was intended to be made? · D advertisement was not an offer à Court says it was a solicitation of offers? If solicitation.
. SALES CONTRACTS: THE UNIFORM COMMERCIALL CODE § 2-204. . · Court points out that the commercial was "evidently done in jest" because it costs 23 million and primary use is for military. (2) 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. Siegelman
· An Objective Reasonable Person would not have considered commercial (due to its content) an offer à Leonard objects to sum jud on grounds that jury should decide reasonability. or in anyone or everyone who.In determining whether an offer has been made or not. P. (3) 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.316 § 26. (3) Even though one or more terms are left open a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy. § 26. but Court rejects à no need for any particular "real life" experience to decide on contract case. (2) A price to be fixed by seller or by the buyer means a price for him to fix in good faith. · Additionally. Certainty (1) Even though a manifestation of intention is intended to be understood as an offer. . the completeness of the terms of the suggested bargains and the number of persons to whom a communication is addressed. Open Price Term (1) The parties if they so intend can conclude a contract for sale even though the price is not settled. makes a specified promise or renders a specified promise. (3) When a price left to be fixed otherwise than by agreement of the parties fails to be fixed through fault of one party the other may at his option treat the contract as cancelled or himself fix a reasonable price. The commercial just used it for effect. Preliminary negotiations At manifestation of willingness to enter into a bargain is not an offer if the person to whom it is addresses knows or has reason to know that the person making it does not intend to conclude a bargain until he has made a further manifestation of assent. Formation in General (1) A contract for sale of goods may be made in any manner sufficient to show agreement. § 33.Contracts Outline – Prof. it cannot be accepted so as to form a contract unless the terms of the contract are reasonably certain. contract does not satisfy the statute of frauds
RESTATEMENT (SECOND) OF CONTRACTS P. which recognizes the existence of a contract. or (c) the price is to be fixed in terms of some agreed market or other standards as set or recorded by a third person or agency and it is not so set or recorded. including conduct by both parties. § 2-305. relevant factors include the terms of previous contracts. To whom an offer is addressed (1) The manifested intention of the offeror determines the person or persons in whom is created a power of acceptance (2) An offer may create a power of acceptance in a specified person or persons or in one or more of a specified group or class of persons. acting separately or together.reason to know depends not only on words or conduct but other circumstances including previous communications of the parties and the usages of their community or line of business. or (b) the price is left to be agreed by the parties and they fail to agree. (2) An agreement sufficient to constitute a contact for sales may be found even though the moment of its making is undetermined. In such a case the price is a reasonable price at the time for delivery if (a) nothing is said as to price.
the parties intend not to be bound unless the price be fixed or agreed and it is not fixed or agreed there is no contract. notice of termination (1) The time of shipment or delivery or any other faction under a contract if not provided in this Article or agreed upon shall be a reasonable time. and © documents of title may be delivered through customary banking channels.Oil Issues FACTS: Based on informal negotiations Penzoil )P) contends that a valid contract was formed btwn itself and Texaco (d). P. and not merely on the form that the agreement has taken. amoung five other conditions. The letter stated. Existence of a contract where written memorial is contemplated Manifestations of assent that are in themselves sufficient to conclude a contract will not be prevented from so operating by the fact that the parties also manifest an intention to prepare and adopt a written memorial thereof. § 2-308. CONSICE RULE OF LAW: Parties who have made their pact “subject to” a later definitive agreement have manifested an intent not to be bound. but (b) in a contract for sale of identified goods which to the knowledge of the parties at the time of contracting are in some other place. “the approval of the shareholders and board of directors of Empro. § 2-309. D had not intended to be bound by agreement.Contracts Outline – Prof.322 § 27. Siegelman
(4) Where. (3) Termination of a contract by one party except on the happening of an agreed event requires that reasonable notification be received by the other party and an agreement dispensing with notification is invalid if its operation would be unconscionable. but the circumstances may show that the agreements are preliminary negotiations. Absence of specified place for delivery Unless otherwise agreed (a) The place for delivery of goods is the seller’s place of business or if he has none his residence. HOLDING: Only openly expressed wishes count. contending letter of intent bound D. Absence of specific time provisions. CONSICE RULE OF LAW: The formation of a valid contract depends on the objective intent of the parties as expressed outwardly in their words and deeds. When D started negotiating w/ someone else.000 to be paid on closing and a 10-year promissory note for the remainder. In such a case the buyer must return any goods already received or if unable so to do must pay their reasonable value at the time of delivery and seller must return any portion of the price paid on account. “Empro’s purchase shall be subject to the satisfaction of certain conditions precedent to closing including. W/ $650.” The sticking point for the deal turned out to be the security for P’s promissory note.
2. WRITTEN MEMORIAL CONTEMPLATED Empro Manufacturing Co v Ball-Co Manufacturing Inc (pg 319) FACTS: Empro (P) and Ball-Co (D) signed a letter of intent containing the general provisions of the sale of D’d assets to P. The words “subject to a definitive agreement” and “general terms and conditions” in letter imply not binding.
. TEXACO V PENNZOIL (PG 323) . that place is the place for their delivery. RESTATEMENT (SECOND) OF CONTRACTS P.4 mill. which proposed to pay $2. notwithstanding D’s assertion that P did not intend to be bound since a more formal document had not been executed to memorialize the event. but not limited to” the definitive Asset Purchase Agreement and. P sued. (2) Where the contract provides for successive performances but is indefinite in duration it is valid for a reasonable time but unless otherwise agreed may be terminated at any time by either party. however.
Revocation. which is equivocal or upon condition or with a limitation. The court held that the letter of acceptance by P was not consistent with an absolute acceptance accompanied by a request for a gratuitous benefit and therefore was a conditional acceptance or counteroffer.Contracts Outline – Prof. not an act. Whether parties intend to be bound only by a formal signed writing depends on (1) whether a party expressly reserves the right to be bound only when a written agreement is signed. Horan (p.?? Unilateral Contract: An offer that calls for acceptance by performance of an act can only be accepted by performance. and (4) whether the complexity or magnitude of the transaction was such that a formal. The court held that the P’s request for confirmation regarding the additional items was a conditional acceptance and therefore a counteroffer. an acceptance may be valid despite conditional language if the acceptance is clearly independent of the condition.328) 9am estate sale offer can be revoked anytime before acceptance FACTS: On Wed. Bilateral Contract: general rule is that an offer that requires acceptance by promise can be accepted only by a promise . Restatement (Second) of Contracts §61 – Acceptance which requests change of terms (p. or performance. Option Contract. Please see pgs 331-332 UCC § 2-206 Offer and Acceptance in Formation of Contract Dickinson v. parties have the right to bind themselves either formally of informally. To determine intent.. stating that he would hold open an offer to sell him land until Friday morning. The offer.336) – home sale Facts: Ardente (P) made a bid of $250. In this case it was found enough had occurred to bind the parties. the terms of the letter conditioned that acceptance upon the inclusion of the furniture. An acceptance.. Siegelman
HOLDING: Under the relevant law. An acceptance may not impose additional conditions on the offer. Affirmed. so Dodds left an acceptance at Dodds’ house. silence. Dickinson. However. Horan notified Ardente that the offer was accepted and forwarded a formal written agreement. can be implied from an act. and Indirect Communication of Revocation. An acceptance must be definite and unequivocal to be effective. as an offer can be revoked at any time before acceptance. Issue: Must an acceptance be definite and unequivocal to be effective? Holding and Rule: Yes. sent a memo to P. However. On Thursday. although the required promise may be express or implied. D refused to sell those items or the property and did not sign the purchase and sales agreement. is a counteroffer and requires acceptance by the original offeror before a contractual relationship exists. WHAT IS ACCEPTANCE? Acceptance can be in the form of correspondence.P sued for specific performance and D moved for summary judgment on the grounds that no contract had formed.000 on real property owned by Horan (D). was not binding.
R2d §17 43 Describe Requirements of a Bargain and Define Offer. nor may it add limitations. Dodds said he already sold the land and Dickinson sued. P signed the agreement and returned it together with a $20.338)
. HOLDING: Court finds for D. Dickinson. Dickinson and his agent told Dodds in person that Dickinson was accepting the offer.
D. In this case the mere execution of the agreement alone would have operated as acceptance. Dodds. Also.000 check and a request for confirmation that certain items of furniture would be included in the transaction. being nothing more than a promise without consideration. P. not be a promise to perform (offer is not revocable once performance (not prep) has begun) Ardente v. The court granted D’s motion for summary judgment and P appealed. and in some cases. Dodds found out Dickinson has been agreeing to sell the property to someone else. (3) whether all essential terms of the alleged contract had been agreed upon. courts will look to outward actions not to subjective or unexpressed intentions. executed writing would normally be expected. Dodds (p. an offer does not need to be expressly revoked. D. Methods of Termination of Acceptance. The court also held that there was no meeting of the minds. On Friday. (2) whether there was any partial performance by one party that the party disclaiming the contract accepted.
P. 341) Unless circumstances known to the offeree indicate otherwise. (p. Siegelman
An acceptance which requests a change or addition to the terms of the offer is not thereby invalidated unless the acceptance is made depend on an assent to the changed or added terms. a medium of acceptance is reasonable if it is the one used by the offeror or one customary in similar transactions at the time and place the offer is received. it can be revoked before it reaches the offeree. Acceptance by Telephone or Teletype (p. without regard to whether it ever reaches the offeror. a) an acceptance made in a manner and by a medium invited by an offer is operative and completes the manifestation of mutual assent as soon as put out of the offeree’s possession. when the Offeree sends the acceptance Under the Restatement §63. Time when acceptance takes effect (p. 332). 341) Acceptance given by telephone or other medium of substantially instantaneous two-way communication is governed by the principles applicable to acceptances where the parties are in the presence of each other. Basically. When someone sends an offer. A contract cannot be created by acceptance of an offer after the power of acceptance has been terminated in one of the ways listed in Restatement §36. 341) Unless the offer provides otherwise. unless it is properly addressed and such other precautions taken as are ordinarily observed to insure safe transmission of similar messages. According to the Restatement §66.Contracts Outline – Prof. 342) An acceptance sent by mail or otherwise from a distance is not operative when dispatched.
Offeror makes Offer (M)
Offeree sends Acceptance (T)
Offeror (M) receives acceptance
Mailbox rule – acceptance occurs at point B. ACCEPTANCE BY CORRESPONDENCE – “MAILBOX RULE” Restatement (Second) of Contracts §63. the mailbox rule is the default rule unless the offer otherwise provides or unless it is an option contract. §66. This is because of Restatement §35. *** Offeror retains power to revoke up to the time acceptance occurs ***
. the mailbox rule does not apply unless the acceptance is properly mailed. Acceptance must be properly dispatched (p. but b) an acceptance under an option contract is not operative until received by the offeror §64.
Question: Can an offer be revoked once it is mailed but before it reaches the offeree? Yes. Reasonableness of Medium of Acceptance (p.
Necessity of Notification to Offeror (p. An offeree who does any act inconsistent with the offeror’s ownership of offered property is bound in accordance with the offered terms unless they are manifestly unreasonable. Restatement (Second ) of Contracts §54. However. the better rule is that no prior notice of acceptance is necessary apart form the notice of performance. Carbolic Smoke Ball Co. there cannot be acceptance…you would not have a contract The second problem was that the promise was not made to anyone in particular. E. ACCEPTANCE BY SILENCE Restatement (Second ) of Contracts §69. circulars are not offers. Catalogs. 343) – failed flu prevention FACTS: Carbolic Smoke Ball Co. still fell ill. The actual contract was made with the people who accepted the offer by performing. But if the act is wrongful as against the offeror it is an acceptance only if ratified by him. his silence and inaction operate as an acceptance in the following cases only: a. COURT’S REASONING: The court explored whether the ad was intended to be a mere “puff” to make the product sound good. ISSUE: May a continuing offer be accepted by performance of the condition named in the offer? HOLDING: A continuing offer may be accepted by performance of the condition named in the offer. 2. pricelists. Question: When an ad is an offer. Carlill (P) tried the product. b. but there has to be something special in add that suggests that all you have to do is the act and then you have binding contract. Why is this relevant? Because if there was no promise. so she sued for breach of contract. P. 356) 1.Contracts Outline – Prof. The court concluded that it was not mere “puff” because in the ad it says that money was deposited in the bank to back up offer. c. Acceptance by Silence or Exercise of Dominion 1. (p. Where an offeree fails to reply to an offer. Acceptance by Performance. However. They are invitations for an offer. and the offeree in remaining silent and inactive intends to accept the offer. and tried to collect from the company. In a normal situation. It has to be something more precise than an everyday ad. it is possible to make an offer by ad to general public. The court says that’s ok. the court says that if you are concerned about notification. Where because of previous dealings or otherwise. (D) placed an ad offering 100 pounds to any person who became ill after using its product. you can think of notification being when people show up claiming reward as long as show up before offer is revoked. They would not pay. Siegelman
2. when do you have notification of acceptance? In Carbolic. no notification is necessary to make such an acceptance effective unless the offer requests such a notification. Where an offer invites an offeree to accept by rendering a performance.
. notice of acceptance is required for formation of a binding contract. Bilateral contract – Agreement that results from acceptance by a promise. Note: Everyday ads in windows.
Carlill v. Where the offeror has stated or given the offeree reason to understand that assent may be manifested by silence or inaction. it is reasonable that the offeree should notify the offeror if he does not intend to accept. when the offer is of a continuing nature.342 Unilateral contract – Agreement that results from acceptance by performance. ACCEPTANCE BY PERFORMANCE AND “UNILATERAL” CONTRACTS – P. The offer was made to everyone. Where an offeree takes the benefit of offered services with reasonable opportunity to reject them and reason to know that they were offered with the expectation of compensation.
Acceptance by Performance. or b. Acceptance by a promise requires that the offeree complete every act essential to the making of the promise. or may empower the offeree to make a selection in his acceptance. an option contract is created when the offeree [begins] tenders or begins the invited performance [and tenders part of it] or tenders a beginning of it. 3. Acceptance by Promise 1. 2. 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. an offer invited acceptance in any manner and by any medium reasonable in the circumstances.Contracts Outline – Prof. Acceptance of an offer is a manifestation of assent to the terms thereof make by the offer in a manner invited or required by the offer.
. the contractual duty of the offeror is discharged unless a. Unless otherwise indicated by language or the circumstances. Acceptance of Offer Defined. [Tentative Draft No. 2. The offeree exercise reasonable diligence to notify the offeror of acceptance. An offer may invite or require acceptance to be made by an affirmative answer in words. 1 (1964)] vs. 2. P.
Restatement (Second) of Contracts. Form of Acceptance Invited (p. Where an offeror invited an offeree to accept by rendering a performance and does not invite a promissory acceptance. or c. § 32.362) 1. as the offeree chooses. Siegelman
If an offeree who accepts by rendering a performance has reason to know that the offeror has no adequate means of learning of the performance with reasonable promptness and certainty. Invitation of Promise or Performance In case of doubt an offer is interpreted as inviting the offeree to accept either by promising to perform what the offer requests or by rending the performance. Option Contract Created by Part Performance of Tender (pg. Leonard v. or by performing or refraining from performing a specified act. Restatement (Second) of Contracts §45. 367) 1. The offer indicates that notification of acceptance is not required. The offeror’s duty of performance under any option contract so created is conditional on completion or tender of the invited performance in accordance with the terms of the offer.
§50. Pepsico Restatement (Second) of Contracts § 30. The offeror learns of the performance within a reasonable time.
but not to exceed price charged by Canadian Export Paper Company to its large customers. Default rules: legal rules that parties can avoid or vary by means of an express clause that differs from the terms a court will otherwise supply by default. 422) – newsprint FACTS: Sun (P) and Remington (D) agreement for D to sell P 16. claiming contract was incomplete – there was no longer an established price or length of time for price. such as the price. speaks of courts supplying terms. question arises as to whether this incomplete manifestation if sufficient to warrant legal enforcement. The terms of a contract may be reasonably certain even thought it empowers one or both parties to make a selection of terms in the course of performance. Court concedes that it can be reasoned that if only price was left open. and so it should then be invalid. 1. 2. ISSUE: Is a contract invalid due to incompleteness if the agreement does not establish the length of time the terms of the agreement. Restatement (Second) of Contracts §34. will apply.428): When the parties to a bargain sufficiently defined to be a contract have not agreed with respect to a term which is essential to a determination of their rights and duties.Contracts Outline – Prof. Also. and subsequent months had contract call for the parties to decide price. D refused to deliver paper to P. Effect of Performance or Reliance (p. Since courts were traditionally and somewhat still are reluctant to fill gaps in parties’ agreements.427) 1. instead. length of time invalidates this theory. INTERPRETING ASSENT Supplying terms: “gap-filling terms” terms when contracts are silent on a particular issue Interpreting terms: terms there were expressly manifested between the parties
A. Neither exists after the first four months of this contract. Certainty and Choice of Terms. FILLING IN GAPS IN ASSENT Courts distinguish between implied-in-fact terms [agreed upon implicitly by parties] and implied-in-law terms [imposed on parties without their consent]. Remington Paper & Power Co. P sued for damages resulting from D’s refusal to deliver. a term which is reasonable in the circumstances is supplied by the court. HOLDING/RULE: Yes. then the P could be the holder of an option. (2) How to interpret the assent that has been manifested. 3. Agreements to Argue Sun Printing & Publishing Assn v. Action in reliance on an agreement may make a contractual remedy appropriate even though uncertainty is not removed.000 tons of paper between September 1919 and December 1920 [1. There are two types of judicially supplied “gap-fillers” 1. Past performance under an agreement may remove uncertainty and establish that a contract enforceable as a bargain has been formed. 2. First four months of the agreement had price determined by D. After first four months. Immutable rules: maynto be varied by consent and will override any express clause to the contrary. P. (p. Texaco v. leaving the D on a day to day whim of the market. court makes assumption that the market will fluctuate this price over time. court acknowledges argument that maximum standard for price is set by Canadian Export Paper provision in contract. However. Siegelman
V. The Restatement. Both the price and the length of time that price shall pertain are essential parts of this contract. Cases thus discuss: (1) When a manifestation of assent is sufficient to justify concluding that a legally enforceable contract exists.428)
. however.000 tons per month]. Supplying an Omitted Essential Term (p. Pennzoil (p. §204. Length of time that price would hold was to be determined by parties as well.
What would defendant have to do to win? Show that orders exceeded needs and weren’t justified – this was not pleaded in the case. 1974. (D) was to furnish jet fuel to Eastern Air Lines (P) based on an alleged five-year requirements contract. the contract cannot be used for the purpose of speculation. P. How would the defendant show how much the plaintiff actually needed? One possibility is to not let them store (might be considered speculation) Another possibility is to not let them sell to competitors. [can’t carry inventory] RULE A buyer in a requirements contract may enforce the contract even if its requirements increase beyond the parties’ contemplation. CONCISE RULE OF LAW: A requirements contract is binding where the purchaser has an operation business. CONCISE RULE OF LAW: A buyer in a requirements contract may enforce the contract even if its requirements increase beyond the parties’ contemplation. • contract can’t be used for the purpose of speculation. ILLUSORY PROMISES A promise is “illusory” if it leaves complete discretion to perform or not in the hands of the purported promissory • Courts usually fill gaps in the manifestation of assent by supplying an obligation to exercise the discretion in “good faith. Any complaints regarding lack of mutuality or indefiniteness are easily resolved since the court may determine the volume of goods under the contract by examining objective evidence of the volume of goods required in good faith to operate the specific business. [can’t carry inventory] • good faith and fair dealing would limit the quantity a buyer could demand. That is.an agreement pursuant to which one party agrees to purchase all his required goods or services from the other party exclusively for a specified time period. and commercially impracticable. So long as the buyer’s needs are genuine and he is not merely speculating in the material. 431) – jet fuel FACTS: Gulf Oil Corp.Contracts Outline – Prof. the contract is enforceable. Eastern (P) filed this complaint for breach of contract and requested a permanent mandatory injunction requiring Gulf (D) to perform the contract in accordance with its terms. • ∆ could show how much needed by π by not letting π store or sell to competitors. (P) should not be enforced because Central’s (P) need supplies proved much greater than the parties had anticipated. So long as the buyer’s needs are genuine and he is not merely speculating in the material. (D) contended that a requirements contract it had entered into with New York Central Iron Works Co.S. New York Central Iron Works Co.” requirements contract . Inc. On March 8. was void for lack of mutuality. • For ∆ to win ∆ needed to show that orders exceeded needs and weren’t justified –not pleaded in the case. United States Radiator Co. good faith and fair dealing would limit the quantity a buyer could demand. v. Gulf (D) argued that the contract was not a binding requirements contract. Is the seller obligated to supply what the buyer wants? Is Buyers yes Stated in yes Was Buyers yes
. NOTES: According to the court. Gulf Oil Corp. Siegelman
Eastern Air Lines. 429) – radiators in high demand FACTS: U. (p. v. Gulf (D) demanded that Easter (P) meet its demand for a price increase or be shut off from its supply of jet fuel. the contract is enforceable. Radiator Co. (p.
except that no quantity unreasonably disproportionate to any stated estimate or in the absence of a state estimate to any normal or otherwise comparable prior output or requirements may be tendered or demanded. Wood (P) sued for damages for breach of a contract for an exclusive right. CONCISE RULE OF LAW: while an express promise may be lacking. 434) – fashion designer
FACTS: Wood (P). Raffles (P) sued to get Wichlhaus for breach of contract. Siegelman
Demand in Good Faith? No NO No Was Buyers Demand Disproportionate to Past Requirements? NO yes Estimate? Demand Proportionate? No Court will recognize=reasonably prop=contract enforceable NO Buyer happy In graph at right. Requirements and Exclusive Dealings (p. the promise to pay Lucy (D) half the profits and make monthly accountings was a promise to use reasonable efforts to bring profits and revenues into existence. but at different times. each named “Peerless” arriving at Liverpool from Bombay. Wichelhaus (D) refused to accept the later delivery.??? This includes the reasonable person standard that the addressee’s shoes would put one in. received the exclusive right for one year. the whole writing may be instinct with an obligation – an implied promise – imperfectly expressed so as to form a valid contract.language capable of more than one interpretation that seems clear on its face. Lucy (D) broke the contract by placing her endorsement on designs without Wood’s (P) knowledge.Contracts Outline – Prof. can contract Around location of green lines YES
Seller happy Price Quantity
Wood v Lucy. they should be given an objective interpretation. Sales Contracts: The Uniform Commercial Code §2-306. A term which measures the quantity by the output of the seller or the requirements of the buyer means such actual output or requirements as may occur in good faith. Raffles v. Lucy claimed that the agreement lacked the elements of a contract. but the introduction of extrinsic evidence proves it to have a different meaning. Wichelhaus (D) expected to get the October delivery while Raffles (P) expected the cotton to be shipped on the “Peerless” set to sail in December. Wichelhaus (p. P. INTERPRETING ASSENT SUBJECTIVELY OR OBJECTIVELY (Ambiguity&Vagueness) Latent ambiguity . for which she would receive one-half the profits derived. rather than a subjective interpretation. in a complicated agreement. 396) – two ships “Peerless” carrying cotton FACTS: Raffles (P) contracted to sell cotton to Wichelhaus (D) to be delivered from Bombay at Liverpool on the ship “Peerless. In this case. to endorse designs with Lucy’s (D) name and to market all her fashion designs. General rule of interpretation in contracts is that where the interpretation of words or conduct is an issue.
. A lawful agreement by either the seller or the buyer for exclusive dealing in the kind of goods concerned imposes unless otherwise agreed an obligation by the seller to use best efforts to supply the goods and by the buyer to use best efforts to promote their sale. Output.
B. as Wood (P) allegedly was not bound to do anything. 2.” Unknown to the parties was the existence of two different ships carrying cotton. renewable on a year-to-year basis if not terminated by 90-day notice.444) 1. Lady Duff-Gordon (p.
neither party is bound by the meaning attached by the other. however. 409) 1. P. 2. Words and other conduct are interpreted in the light of all the circumstances. HOLDING: Mental assent of the parties is not required for the formation of a contract. b. There is an exception. Technical terms and words of art are given their technical meaning when used in a transaction within their technical field
. NOTES: If both parties had been thinking of the December ship. Restatement (Second ) of Contracts §200. would there be a contract? Yes. Unless a different intention is manifested. the ambiguity is given the meaning that each party intended it to have. 3. Whose Meaning Prevails (p. there was no meeting of the minds and no binding contract. Where the parties have attached the same meaning to a promise or agreement or a term thereof. Allen (pg 407) Swiss coins FACTS: Dr. is there a contract? No. or b. would there be a contract? Yes. D. and the other had reason to know the meaning attached by the first party. If before the agreement was signed Raffles said something so that Wickelhaus understood that maybe Raffles was thinking of the December ship. If different meanings were intended there is no contract if the ambiguity relates to a material term. and the other knew the meaning attached by the first party. Except as stated in this Section. there cannot be a contract unless one of them should have been aware of the other’s understanding. §201. it is interpreted in accordance with that meaning. If the parties attach materially different meanings and neither party had reason to know. Since there was no meeting of the minds. In this case. In this case P believed that the offer was to buy all the Swiss coins owned by D.Contracts Outline – Prof. however. 3. it is interpreted in accordance with that meaning. then it will be interpreted according to this meaning. Rules in Aid of Interpretation (p. it would put an obligation on Wickelhaus. 408) Interpretation of a promise or agreement or a term thereof is the ascertainment of its meaning. 2. Where the parties have attached different meanings to a promise or agreement or a term thereof. and all writings that are part of the same transaction are interpreted together. for cases where there is no sensible way to choose btwn conflicting understandings. Under Restatement §201 – if parties attach same meaning to contract. there was no contract. Siegelman
CONCISE RULE OF LAW: Where neither party knows or has reason to know of the ambiguity or where both know or have reason to know. and if the principal purpose of the parties is ascertainable it is given great weight. Much trauma b/c they didn’t speak the same language. it is interpreted in accordance with the meaning attached by one of them if at the time the agreement was made a. and the terms would be interpreted according to Raffles understanding under Restatement §201 (2). §202. Oswald (P) negotiated to purchase two sets of rare coins from Mrs. A writing is interpreted as a whole. 409) 1. Allen (D). When no subjective agreement and no unambiguous meaning in the contract. but did not specify so “Peerless” was still an ambiguous term. even though the result may be a failure of mutual assent. then courts will hold that there is no contract. Interpretation of Promise or Agreement (p. a. CONCISE RULE OF LAW: When any terms used to express an agreement are ambivalent and the parties understand it in different ways. That party did not know of any different meaning attached by the other. Oswald v. Where language has a generally prevailing meaning. That party had no reason to know of any different meaning attached by the other. who believed that her Swiss Collection alone was being purchased. believed that the offer was for the Swiss coins in the Swiss Coin Collection.
Course of performance P could sell ladies dresses. Course of Performance or Practical Construction (1) Where the contract for sales involves repeated occasions for performance by either party with knowledge of the nature of the performance by either party with knowledge of the nature of the performance and opportunity for objection to it by the other. such course of performance shall be relevant to show a waiver or modification of any term inconsistent with such course of performance. Course oftrend from sportswear houses.
5. (2) A usage of trade is any practice or method of dealing having such regularity of observance in a place. he was selling “skirts” and “blouses” party… any course of performance accepted to acquiesced in without objection shall be relevant to originating in determine the meaning of the agreement. but when such construction is unreasonable express terms control both course of dealing and usage of trade and course of dealing controls usage of trade. D was prohibited form resulted in the manufacture of coordinates. vocation or trade as to justify an expectation that it will be observed with respect to the transaction in question. (6) Evidence of a relevant usage of trade offered by one party is not admissible unless and until he has given the other party such notice as the court finds sufficient to prevent unfair surprise to the latter. or usage of trade. If it is established that such a usage is embodied in a written trade code or similar writing the interpretation of the writing is for the court. which been a recent negotiations 3. any course of performance accepted or acquiesced in without objection shall be relevant to determine the meaning of the agreement. as well as any course of dealing and usage of trade. shall be construed whenever possible as consistent with each other. (3) A course of dealing btwn parties and any usage of trade in the vocation or trade in which they are engaged or of which they are or should be aware give particular meaning to and supplement or qualify terms of an agreement. express terms shall control both course of dealing and usage of trade.
SALES CONTRACTS: THE UNIFORM COMMERCIAL CODE §1-205 Course of Dealing and Usage of Trade (pg 410) (1) A course of dealing is a sequence of previous conduct btwn the parties to a particular transaction which is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct. Course of dealing UCC § 1-205: “A course of dealing is a sequence of pervious conduct between the parties to a particular transaction which is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct. the manifestations of intention of the parties to a promise or agreement are interpreted as consistent with each other and with any relevant course of performance. HOLDING: There has 2. vocation or trade as to justify an expectation that it will be observed with respect to the transaction in question. Wherever reasonable. Vague Terms Weinburg v Edelstein (pg 411) dress seller FACTS: Weinburg (P) leased a store and contracted not to sell ladies dresses. P. beginning before the present leases were entered into. but when such construction is unreasonable. Where an agreement involves repeated occasions for performance by either party with knowledge of the nature of the performance and opportunity for objection to it by the other. The existence and scope of such a usage are to be proved as facts.Contracts Outline – Prof. § 1-205: “A usage of trade is any practice or method for dealing having such regularity of observance in a place. D was not selling “dresses” in violation of the restrictive covenant. Since UCC § 2-208: “Where the contract for sale involved repeated occasions for performance by either selling those items.”
. underwear…) When he started selling matching skirts and shirts. (2) The express terms of the agreement and any such course of performance. coats and sports clothes. (5) An applicable usage of trade in the place where any part of performance is to occur shall be used in interpreting as to that part of the performance. 5 Types of evidence to consider when interpreting contract terms: CONSICE RULE OF LAW: A restrictive covenant is construed strictly against the person seeking its enforcement when the intent of the restriction is not clear. Words of the contract 1. any course of performance accepted or acquiesced in without objection is given great weight in the interpretation of the agreement.” the sportswear industry.” 5. (He was allowed to sell blouses. coats or suits. P sued saying he violated. (4) The express terms of an agreement and an applicable course of dealing or usage of trade shall be construed wherever reasonable as consistent with each other. Siegelman
4. skirts. course of dealing. Usage of trade. §2-208. (3) Subject to the provisions of the next section on modification and waiver.
They departed for their cruise from Los Angeles and the ship sailed to Mexico and back to Los Angeles. the Court must consider whether Carnival was. Mrs. forum selection clauses have been found to be counter to public policy. P. At trial. Analysis: The Court says that the ticket contract was a routine commercial passage contract. The Court enumerates several good reasons for a forum selection clause in a cruise ticket contract: 1. A cruise will have passengers from all over the country. and the cruise line appealed to the United States Supreme Court. and the parties did not have equal bargaining power. Procedural Posture: The suit was first brought in the Western District of Washington. Issue: Is the forum selection clause enforceable? Rule: Courts have the responsibility to determine whether forum selection clauses in form passage contracts are fair. especially “take it or leave it” contracts. in his dissent. Shute slipped on the ship and hurt herself. there was a forum selection clause that said any litigation related to the cruise must be tried in Florida. It was not negotiated. Forum selection clauses mean lower fares for passengers because the cruise company passes along savings from limiting the forums where the company must defend itself. they didn’t include the clause in bad faith.
The Court says that the key question is whether the clause is fair. Shute (p. At least in the past. (2) “create additional expense for one party”.
. they are not enforced if they (1) “were not freely bargained for”. The Shutes sued in Washington and Carnival moved for summary judgment due to the forum selection clause. The Court says that because Carnival does business primarily in Florida and has a lot of cruises that depart from Florida. In evaluating the fairness of such clauses. 2. On the ticket. in bad faith. The Ninth Circuit refused to enforce the clause. Courts look closer at contracts made between parties with unequal bargaining power. 445) – forum selection clause Facts: Shutes went on a cruise. Siegelman
What’s been agreed – Adhesion K’s Carnival Cruise Lines v. 2. Stevens. refers to two “strands” of contract law that come into play in this case 1. 3. or (3) “deny one party a remedy”. In particular. the cruise company could be subject to suit in all sorts of places. discouraging legitimate claims from its passengers. A forum selection clause eliminates uncertainty about the forum and avoids costly pretrial motions. and absent a forum selection clause. the Shutes conceded that they had notice of the forum selection clause.Contracts Outline – Prof.
the writing purports to be a complete expression of the entire afreement. HOLDING: When writing is incomplete. time and money involved in determining a forum. 2 yrs later D was assigned a lease of the hotel and occupied it. However a party may not use parol ev using oral testimony to show that part of the agreement was in writing and then use parol ev to prove the omitted part. and (3) forum selection clauses have benefits for Carnival that they pass along to their customers as lower fares. D refused to pay after he determined the logs were of poor quality. (2) a forum selection clause reduces the uncertainty. there would be no problem. a. a. The court gives three reasons why this is acceptable: (1) the diversity of Carnival’s passengers could subject them to suit in a variety of jurisdictions. CONCISE RULE OF LAW: Parol contemporaneous evidence is inadmissible to contradict or vary the terms of a valid written instrument. b. P brought suit for purchase price.
. P’s request for a new trial was refused. If Carnival only solicits business through travel agents and doesn’t have TV commercials then they might have a case for no jurisdiction in Washington. At trial. A forum selection clause will only help in cases that involve a contractual relationship. a.Contracts Outline – Prof. then parol evidence may be admitted to prove the omitted part. Brown v Oliver (pg 489) – hotel furniture FACTS: Brown (P) bought land from Oliver (D) which had a hotel on it.
VI. D argued that there was a warrenty made at the time of the sales on the quality of the logs that was not contained in the written agreement. Thus. So there’s a contract law issue. P and D entered into a written agreement that these logs would be sold to D for $10 per 1. P notifed D to quit the land. They also would not enforce a forum selection clause that was obtained by “fraud or overreaching”. Carnival would try to argue that it doesn’t have sufficient minimum contacts. They argue that the contract clause is enforceable even though the passengers were not allowed to negotiate it. The court ordered the furniture’s return to P.
2. The majority spends more time on the enforceability issue. Siegelman
Notes and Problems 1. These logs were cut in the winters of 1882 and 1883 and lying in the Mississippi river. c. then it is presumed that every material issue and term has been introduced and no parol ev will be admitted even when the writing is silent as to the term. preventing the admissibility of the ev on the sale of the furniture. P. Conclusion: The forum selection clause is enforceable. So there’s a public policy issue. D argued unsuccessfully that the parol ev rule applied.000 feet. b. The original contract for the sale of the land made no mention of personal property. Thus in this case parol ev of warrenty shouldn’t have been admitted. however. Possession of the hotel and its furniture was surrounded by D. It is most likely that the suit would either be brought in Florida or Washington. The majority implies that they would not enforce a forum selection clause that is intended to “discourag[e] cruise passengers from pursuing legitimate claims”. P contended D had verbally agreed to sell the furniture. If on its face. INTERPRETING A WRITING – THE PAROL EVIDENCE RULE Thompson v Libby (pg 488) – Log Person FACTS: Thompson (P) owned a quantity of logs marked HCA. Florida courts have general jurisdiction over Carnival because that’s their principal place of business.
d. In Washington. WRITTEN MANIFESTATIONS OF ASSENT A. any federal court located in Florida would have personal jurisdiction over Carnival.
3. D removed the furniture at night. The TC admitted oral testimony to prove the warrenty over P’s objection. In Florida.
the key is deciding whether or not the specific element of the alleged extrinsic negotiation is dealt with at all in the writing. it is taken to be an integrated agreement unless it is established by other ev that the writing did not constitute a final expression §210. (b) that the integrated agreement. (e) ground for granting or denying rescission.Contracts Outline – Prof. Effect of Integrated Agreement on Prior Agreements (Parol Ev Rule) (1) A binding integrated agreement discharges prior agreements to the extent it is inconsistent with them (2) A binding completely integrated agreement discharges prior agreements to the extent that they are within its scope. (2) An agreement is not completely integrated if the writing omits a consistent additional agreed term which is (a) agreed to for separate consideration. reformation. mistake. Siegelman
CONCISE RULE OF LAW: Parol ev that bears upon the question of the intent of the parties to integrate their transaction into a writing may be admitted when the writing does not conclusively establish the intent HOLDING: In deciding intent. Consistent additional terms (p. But an integrated agreement. (3) An integrated agreement that is not binding or that is voidable and avoided does not discharge a prior agreement. specific performance. Evidence of Prior or contemporaneous Agreements and Negotiations Agreements and negotiations prior to or contemporaneous with the adoption of a writing are admissible in evidence to establish (a) that the writing is or is not an intergrated agreement. P. is completely or partially integrated © the meaning of the writing. §214.493) Terms with respect to which the confirmatory memoranda of the parties agree or which are otherwise set forth in a writing intemded 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
.492) (1) An integrated agreement is a writing or writings constituting a final expression of one or more terms of an agreement (2) Whether there is an integrated agreement is to be determined by the court as a question preliminary to determination of a question of interpretation or application of the parol ev rule (3) Where the parties reduce an agreement to a writing which in view of its completeness and specificity reasonably appears to be a complete agreement. if any. Therefore it was necessary to allow parol ev and give the final decision to the jury to determine whether the furniture was sold as part of the land sale. lack of consideration. §216. may be effective to render inoperative a term which would have been part of the agreement if it had not be integrated. Completely and Partially Integrated Agreements (1) A completely integrated agreement is an integrated agreement adopted by the parties as a complete and exclusive statement of the terms of agreement. whether or not integrated. Restatement (Second ) of Contracts §209. In this case furniture was not mentioned at all.493) (1) Ev of a consistent additional term is admissible to supplement an integrated agreement unless the court finds that the agreement was completely integrated. Integrated agreements (p. or other invalidating cause. even though not binding. (2) A partially integrated agreement is an integrated agreement other than a complete integrated agreement (3) Whether an agreement is completely or partially integrated is to be determined by the court as a question preliminary to determination of a question of interpretation or to application or the parol ev rule. §213. (d) illegality. fraud. or other remedy. duress. or (b) such a term as in the circumstances might naturally be omitted form the writing UCC §2-202 Final Written Expression: Parol or extrinsic evidence (p.
in 1987. course of dealing.Contracts Outline – Prof.144. Df agreed to perform the work at its own risk and expense AND to indemnify PL against all loss. The trial ct found that the language used was “classic language for a 3rd party indemnity provision AND one could very easily conclude its intent is to indemnify 3rd parties.494) – damaged turbine Facts: Pl-P. terms were $56. P claims that the K language did not accurately reflect the parties intentions. Court Rationale: Offered extrinsic evidence is relevant to prove a meaning to which the language is reasonably susceptible. Plaintiff’s Argument: The language of the contract plainly included a third party indemnity provision and through the cross liability clause extended coverage to the pl’s property. P. Co (p. for P. in the light of the circumstances. or a course of performance.497) – office complex Facts:P borrowed 56. Limiting the determination of the meaning of a written instrument to its four corners b/c it seems to the court to be clear and unambiguous.
Comparing Pacific Gas (Traynor) and Trident (Kozinski)
. REMANDED for further proceedings to allow P to introduce evidence Rule: If one side is willing to claim that the parties intended one thing but the agreement provides for another. and in the case of default in years 1-12. Rule(s): If a court decides. it nevertheless held the plain language of the agreement also required df to indemnify pl for injuries to pl property. subject to the 10% fee.25% interest for a term of 15 years. Connecticut General Life Ins. is fairly susceptible of either one of the two interpretations contended for. P/S: District court dismissed P’s claim and sanctioned P for filling a frivolous lawsuit Issue: Whether P can introduce extrinsic evidence to determine the parties intention behind the prepay terms. The evidence was admissible to prove that the clause was reasonably susceptible of the meaning contended by the df and did not cover pl’s property. insisting that loan could not be pre-paid for the first 12 years. G & E. (Pacific Gas)
i. the court must consider extrinsic evidence of possible ambiguity. and that they are entitled to prepay the loan immediately. entered into a contract with Df Drayage. damage resulting from injury to property arising out of or connected with the performance.5 million from D for construction of an office building. would either deny the relevance of the intentions of the parties or presuppose a degree of verbal precision and stability our language has not attained. the K was entered into in 1983 when this rate was reasonable. reversed. Thomas Drayage&Rigging Co. REVERSED. and df’s conduct under similar contracts entered into with Pl prove that the indemnity clause was meant to cover injury to property of third parties only. Issue: Whether extrinsic evidence may be used to explain the meaning of the written instrument’s language? Holding: Yes Procedure: Trial ct ruled in favor of pl and did not allow evidence to prove df’s case.5 at 12. During the work the cover fell and injured the exposed rotor of the turbine. Exclusion of parol evidence b/c the words do not appear ambiguous to the reader can easily lead to the attribution to a written instrument of a meaning that was never intended. contract stated that P could not (were not allowed) prepay the principal for the first 12 years. Siegelman
(a) by course of dealing or usage of trade or by course of performance. Trident Center v. that the language of a contract. P started looking for way of refinancing the loan to take advantage of the lower rates and the D was unwilling to oblige. and not PL’s property. then extrinsic evidence relevant to prove either of such meanings is admissible. and (b) by ev of consistant additional terms unless the court finds the writing to have been intended also as a complete and exclusive statement of the terms of the agreement Pacific Gas and Electric Co. Rational interpretation requires at least a preliminary consideration of all credible evidence offered to prove the intention of the parties. G. Refusing to consider evidence offered to show that the indemnity clause in the contract was not intended to cover injuries to plaintiff’s property was erroneous. D has the option of accelerating the note and adding 1 10% prepay fee. (p.51. The cost of repair was $25. after considering extrinsic evidence. Defendant’s Argument: Pl’s agents. W. Holding: The P must be given an opportunity to present extrinsic evidence as to the intention of the parties in drafting the K. v. this rate compared very unfavorably. Df would furnish the labor and equipment to remove and replace the upper metal cover of the plaintiff’s steam turbine. Extrinsic evidence includes evidence of usage of a trade.
one hundred months certain. ten years certain. in effect. Any qualification of or departure from those terms invalidates the offer. The policy was to provided for an annuity at age 65 for $500 a year for the balance of his life. The plaintiff never had such a policy. When Mistake of both Parties as to Written Expression Justifies Reformation (p. with only a $40.
Can get around confusion with “here’s what we mean by this term” language
B. P. Siegelman
a. Bailey (p. the court may at the request of a party reform the writing to express the agreement. unless the same is agreed to by the party who made it. except to the extent that rights of third parties such as good faith purchasers for value will be unfairly affected. unless it is accepted by the latter according to the terms on which the offer was made. Kozinski ridicules Traynor for opening the flood gates: must allow objective meanings to prevail. Issues: Whether a plain written contract can be changed when there is definite evidence of a mistake in the written terms as opposed to the actual agreed terms. “parol ev” – all ev that comes from outside actual contract. and instead the policy produced an annuity obligation to pay $500 a month for life. Kozinski does admit that certain “terms of art” may require interpretation beyond plain meaning
e.Contracts Outline – Prof. V. Trial court judgment for the plaintiff to change the contract.
Should Parol ev be admitted?
Is written agreement intended to be final?
Is final agreement complete and exclusive?
Extrinsic ev that is Inconsistent will Not be allowed
No Extrinsic ev will be admissible
no Can bring in consistant ev to show additional terms
Traveler’s Ins. Procedural History: The plaintiff sought to change the contract. for his argument. Interpreting Conflicting Writings – The “Battle of the Forms” Restatement (Second ) of Contracts §155. otherwise no contract is safe and parties can’t move forward in peace c. Policy Facts: The plaintiff insurance company sold a life insurance policy with annuity provisions to the defendant. “battle of the forms” – when each party sends the other its form and these forms contain different or conflicting terms “mirror image rule” – An offer of a bargain by one person to another imposes no obligation upon the former.
Traynor says. like parties conversation. words don’t have “objective meanings” (here: whether an indemnity clause covered only 3d party property or also ∏’s property) and extrinsic evidence should be allowed on what the parties intended b. but the defendant claimed it was plaintiff’s own negligence and the contract should not be changed.507) – mistaken ins. Doesn’t give enough credence to the challenge faced by the court with “property” in Pacific Gas d.
. 509) Where a writing that evidences or embodies an agreement in whole or in part fails to express the agreement because of a mistake of both parties as to the contents or effect of the writing. Kozinski’s case (where they wanted “prepayment not allowed” to be overturned) was actually much easier. and would never have offered such a ridiculous bargain to the defendant. There was a mistake on the form used to display the terms of the contract.90 semi-annual premium.
to exclude or modify the implied warranty of merchantability or any part of it the language must mention merchantability and in case of a writing must be conspicuous. Language to exclude all implied warranties of fitness is sufficient if it state.
2. that “There are no warranties which extend beyond the description on the face hereof. The offer expressly limits acceptance to the terms of the offer. They materially alter it. Notification of objections to them has already been given or is given within a reasonable time after notice of them is received. The additional terms are to be construed as proposals for addition to the contract.” Consider Fax machines. In such case the terms of the particular contract consist of those terms on which the writings of the parties agree.
Signature What is a signature? UCC §2-201 requires a writing that is “signed by the party against whom enforcement is sought or by his authorized agent or broker. unless acceptance is expressly made conditional on assent to the additional or different terms. Exclusion or Modification of Warranties 1. Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract.Where there has been established beyond a reasonable doubt a specific contractual agreement between parties.
. but subject to the provisions of this Article on parol or extrinsic evidence (§2-202) negation or limitation is inoperative to the extent that such construction is unreasonable. Siegelman
Holding:Judgment affirmed. Additional Terms in Acceptance or Confirmation 1. emails. Words or conduct relevant to the creation of an express warranty and words or conduct tending to negate or limit warranty shall be construed wherever reasonable as consistent with each other. and a subsequent error in the written terms of the agreement. and to exclude or modify any implied warranty of fitness the exclusion must be by writing and conspicuous. Between merchants such terms become part of the contract unless: a. the contract is subject to reformation if no party will be unfairly affected by the reformation SALES CONTRACTS: THE UNIFORM COMMERCIAL CODE §2-207. b. P. or c. Subject to subsection (3). for example. etc. together with any supplementary terms incorporated under any other provision of this Act.Contracts Outline – Prof.
2. A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon.
there was a valid contract. The Doctrine of Consideration (Chapter 9) CHAPTER 9 – THE DOCTRINE OF CONSIDERATION (p. then you’ll have a consideration problem. or acts.looks to see if a promise has been “bargained for” consists of promisors benefit or promisees detriment. Want of consideration: This is the lack of consideration resulting in an invalid contract.” No consideration. or both. B. Consideration. Requirement of Exchange. Siegelman
How to Interpret? Do A + B attach the same meaning subjectively? (Look to contract words) yes yes There is a contract Enforceable with B’s meaning yes Contract’s objective meaning enforces Party whose subjective meaning matched Objective will prevail. resulting in a failure of consideration. With some exceptions §17(2) to be enforceable a promise must be supported by consideration§17(1) A promise is supported by consideration if it is bargained for (§71(1)) A promise is bargained for I”if it is sught by the promisor in the exchange for his promise and is given by the promisee in exchange for that promise. P. A contract is an enforceable promise (§§1. Nodding boy’s is the book.615) Promises and contracts lacking consideration are unenforceable unless the doctrine of promissory estoppel applies. Talking boy offers to give Nodding boy his book in exchange for $5. • Examples: “I’ll take your child to the park.618) R2d. A bargain is an exchange of promises. in which each party views what he gives as the price of what he gets. 2). D. There never was a valid contract. even in an agreement that has been sealed. C. Failure of consideration: Occurs when X and Y make mutual promises. §71. such a contract with no condieration and seal. Consideration is treated as equivalent to a bargain. resulting in consideration. such as an act or forebearance. but X and then Y each break their promise. Does A know or no have reason to know the meaning B has attached a particular meaning to the term?
Can objective meaning be No agreement determined? (Look no to course of Only seemed
To be mutual assent
VII. (Like what you’re gonna get) ex. • Consideration can consist of either promisor’s benefit or promisee’s detriment BARGAIN THEORY OF CONSIDERATION This is the excepted theory today. Talking Boy’s consideration is $5. Look for if a party seems to be getting something for nothing. A.”(§71(2))
§ 17 requires consideration and § 71 defines consideration in terms of a bargain (p. received from a promisuer from a promisee” • In plain English: the thing that motivates a promise. Definition: “something of value. At one point. Types of Exchange
.Contracts Outline – Prof.
swearing and gambling until he was 21. Nephew agreed and spent note after he was 21. Talking boy offers to give Nodding boy his book in exchange for $5. but court reversed and looked at the Uni’s RELIANCE on promise Courts are now generally reluctant to find lack of consideration in chartitable cases.Contracts Outline – Prof. profit or benefit accruing to one party or some forbearance. Hamer v Sidway (pg 622) – wayward nephew FACTS: Story promised his nephew in front of witnesses that he would give him $5. Uncle sent note back saying he had the money in the bank for his nephew and died before giving it to him. It may be given by the promisee or by some other person. which lacks consideration and is thus unenforceable.000 if he refrained from smoking. (4) The performance or return promise may be given to the promisor or to some other person. COMMENTS: (1) Consideration has many meanings including the conditions were met under which an action of assumpsit would lie. detriment. promising to give the university $100 in three years to help pay off its debt. P. Consideration doesn’t mean that one party is profiting when the other party abandons some legal right or limits his freedom of action. sent letter to π. loss or responsibility given. etc on the strength of the promise that Story would give him $5. Distinguishing Bargains from Gratuitous Promises Consideration.000. modification. It is sufficient that the nephew restricted his lawful freedom of action within the agreed limits. Talking Boy’s consideration is $5. (2) Bargained for – In the typical bargain. DISTINGUISHING CONSIDERATION FROM GRATUITOUS PROMISES Johnson v. (Like what you’re gonna get) For ex. (2) A performance or return promise is bargained for if it is sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise. • No bargain in University using money to pay off its debt. In plain English: the thing that motivates a promise. Nodding boy’s is the book. A promise to make a gift can thus be revocable at any time. then you’ll have a consideration problem. Restatement (Second) of Contracts
. as the promise to donate amounted to no more than a gift. In this case the nephew gave up his legal right to use tobacco. Otterbein Univ. Look for if a party seems to be getting something for nothing. suffered or undertaken by the other party. drinking. Note: Use the BURDEN ON THE COURTS argument if ur stuck with analyzing consideration 1. HOLDING: Court finds for π. D never paid. interest. • Court was looking for something that would either hurt the institution or benefit Johnson. Siegelman
(1) To constitute consideration. Instead consideration is the inducement of the promise. or (c) the creation. HOLDING: A valuable consideration may consist of some right. (p 620) –college gift difference between a conditioned gift and bargain for exchange D. or destruction of a legal relation. Synonym of quid pro quo. or (b) a forbearance. nor to the detriment of Uni.
1. drink. a performance or a return promise must be bargained for. University. It notes that the application of the payment to the debt is neither an act of advantage to Johnson. RULE OF LAW: A waiver of a legal right at the request of another party may serve as sufficient consideration for a promise.consists of promisors benefit or promises detriment. Johnson. the consideratuion and the promise bear a reciprocal relation of motive or inducement: the consideration induces the making of the promise and the promise induces the furnishing of consideration. • 12 years later same issue came up. (3) The performance may consist of (a) an act other than a promise.
Joe comes over. or (e) a forbearance. Uncle says. Synonym of quid pro quo.” Johnny buys the car for $500. like maybe its her estranged father. Example: A promises B $100 if B goes to college. 2. there is no offer. there must be an element of exchange. hey hottie if you cross the street. (2) Bargained for – In the typical bargain. Use section 90 to award damages. HYPO: Johnny says to his uncle I want to buy a car. COMMENTS: (1) Bargained for: Consideration requires that a performance be bargained for in exchanged for a promise. Types of Exchange (1) To constitute consideration. I’ll give you $100. it is not an offer unless it specifies a promise or performance by the offeree as the price or consideration to be given by him. the consideration and the promise bear a reciprocal relation of motive or inducement: the consideration induces the making of the promise and the promise induces the furnishing of consideration. It is either binding or not. A proposal of a gift is not an offer within the present definition. but for the bracelet she would.Yell to Joe. or destruction of a legal relation.Contracts Outline – Prof. If the circumstances give B reason to know A is not undertaking to pay B to go to college but is promising a gratuity. – conditioned gift Unless if she doesn’t want to meet him. PAST CONSIDERATION Discussion: HYPO: Walking down street w/ $100 in my pocket. P. “I’ll give you $1000. It is not enough that there is a promise performable on a certain contingency. Requirement of Exchange. Offer Defined a. It may be given by the promisee or by some other person. Whether or not a proposal is a promise. (3) The performance may consist of (d) an act other than a promise. a performance or a return promise must be bargained for. Proposal of Contingent Gift. then it is a bargain. §81. modification. A conditioned girft HYPO: Met me in front of Tiffany’s tomorrow and I’ll buy you a bracelet. or (f) the creation. Must be manifested intent (2) Immateriality of Motive or Cause: Subjective irrelevant. (4) The performance or return promise may be given to the promisor or to some other person. Consideration as motive or inducing cause (1) 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 (2) 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. May have more than one cause. §71. Enforcement at full value (based on 90) regardless if the reliance was at a lower level. (2) A performance or return promise is bargained for if it is sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise. COMMENTS: (1) Consideration has many meanings including the conditions were met under which an action of assumpsit would lie. Siegelman
§24. Uncle refuses to pay. Not a deal. Johnny would get full $1000 in damages.
Contracts Outline – Prof. However. Webb noticed McGowin standing as to get hit. Affirmed. Pine block from a higher to lower floor. By transient feelings of gratitude. As the block was to fall. Webb appeals on grounds that agreement was an enforceable express contract. 652) – (woodblock sacrifice) – (we did not read) FACTS: While working at a lumber yard. Webb v. Wyman did not request the bestowed care to his adult son. McGowin promised to pay $15 every two weeks for the rest of Webb’s life. McGowin received the material benefit of his life being saved. McGowin died and payments stopped. not legal consideration. so he jumped with the block to avoid McGowin’s injury and causing himself to be crippled. 640) – sick son (we did not read) FACTS: Levi Wyman. the plaintiff. wrote Mills a letter stating that he/she would pay for the relative expenses. Classical natural theorists distinguished between two types of moral rights: Perfect rights: legally enforceable Imperfect rights: dependent on situation alone Mills v. Consideratio – Yes. Wyman (pp. RULE: A moral obligation is sufficient consideration to support a subsequent promise to pay where the promisor has received a material benefit for which be subsequently and expressly promised to pay. Doesn’t change even if Dad meant it as a gift regardless if he ever got the shoes. McGowin (pp. Benefit to the promisor or injury to the promisee is a sufficient legal consideration for the promisor’s agreement to pay. I got your back (we did not read) FACTS: Webb saved McGowin’s life in an accident that left Webb crippled for life. Webb was dropping a 75 lb. giving up legal freedom. ‘Rents say give her $500 if she doesn’t until she’s 21. 25 year old who had severed relations with his family. HOLDING/RATIONALE: Yes. also rendering him incapable of mental or physical labor. McGowin agreed to care and maintain Webb for the rest of his life. McGowin (pp. so Webb brought suit against McGowin’s estate. Lower court rules a non suit due to lack of consideration under the Statute of Frauds. There was no bargain. Wyman (P) later refused to provide payment. Courts must differentiate between those promised left to an individuals consciousness and those requiring equity in law. was taken in by Mills after Levi Wyman’s long voyage at sea had left him ill. bankrupts) maybe enforced.] Webb v. In consideration. she gives up no legal freedom. and this suffices as consideration for his promise to pay. Here. 649) – you save my life. Siegelman
HYPO: Dad gives son $1000 for a pair of shoes. Reversed and remanded. CONDITIONED GIFTS ARE REVOCABLE!!! 3. P. Courts will avoid enforcing contracts where there is no quantifiable measure for services rendered.
. What if they said 18 instead of 21? Then b/c it is illegal to smoke. RULE: The general position that moral obligation is sufficient consideration for an express promise is limited to cases where good or valuable consideration previously existed. HOLDING/RATIONALE: Only express promised founded on pre-existing equitable obligations (debts of infants. Manifest intention to induce and be induced [to make a deal] HYPO: Madison doesn’t smoke and doesn’t want to. Consideration – YES. Mills appealed. [Note: there is no consensus as to what constitutes a moral obligation. then no money no consideration no cookies for Madison. MORAL CONSIDERATION A preexisting moral obligation to perform a particular act was considered to be a good reason for enforcing an express commitment to do so. even with huge dispairity. Life has pecuniary value and services rendered in saving life can be quantified. did Wyman promise to pay for the expenses incurred. Mills brought suit but judge rendered a nonsuit due to insufficient evidence. Payments went on for 8 years until McGowin passed. moral obligation is sufficient in this situation. Levi Wyman died and one of his parents.
under emergency conditions. However. Brian completed work on his own incurring large damages. Brighenti (pp. Contract Modification and the PreExisting Duty Rule We now focus on attempts by parties to modify contracts during the performance stage of the contract. Judgment for Myrick. so they contract for new terms with Defendant getting extra cost plus 10%. if the promiseee conferred the benefit as a gift or for the other reasons the promisor has not been unjustly enriched. Defendant discovered remains of another building at site. to the extent that its value is disproportionate to the benefit.655) (c) A promise made in recognition for a benefit previously received by the promisor from the promisee is binding to the extent necessary to prevent injustice. Defendant worked for several days then quit. P. courts where moral obligation is asserted. So. albeit for a different price. 2. HOWEVER. This was not the situation in this case. who subcontracted with Brighenti (D). QUASI CONTRACT 3 General Requirements D has to have known about benefit it would be unjust to retain the benefit without paying for it. Captain of a ship. If benefit is material and substantial and was to the promisor not his estate.” He was to receive $104. is unable to find replacements for two crew members deserting him. HOLDING/RATIONALE: It is an accepted principle that when a party agrees to perform an obligation which he is already obligated to perform. Where the crew members signed on to a voyage to complete it. Trial Court found for Defendant claiming no support for consideration. courts won’t enforce promise as morality is uncertain territory.
1. HOLDING/DECISION: Myrick cannot be held to pay additional wages. a new contract supported by consideration is formed. D.
D has to have received a benefit
Brian Construction and Development Co v. FACTS: Myrick. under unforeseen circumstances result in the performance of the
. the duties already required of them. 666) – excavation subcontract FACTS: Bennett contracted to build post office and assigned contract to Brian (P). This case may have been decided differently if the crew members could have left the voyage at any port or if the deserters had been purposefully let go to save wages. Is a promise to modify a preexisting contractual relationship enforceable? Stilk v. sometimes they will refer to the minority Webb rule. the second agreement does not constitute a valid contract. he wants additional compensation so parties agreed that this would be considerably more work. Siegelman
DECISION: Denied because it was well settled that a moral obligation is a sufficient consideration to support a subsequent promise to pay where the promisor has received a material benefit. the doctrine of unforeseen circumstances provides an exception to that general rule.Contracts Outline – Prof. (d) A promise is not binding under (1) a. majority Mills rule. 326 in return for this work. Myrick thus agreed to divide the two crew members’ pay if Stick and the rest of the crew would finish up the trip shorthanded. 656) – seaman gets told mo’ work isn’t mo’ money if he gotta get the job done anyway. RULE: Modifications of employment contracts which are occasioned by emergency or duress are unenforceable. NOTE: In most cases. if material benefit to promisor exists. Myrick (pp. OR b. and the parties agree in view of the changed conditions to an adjustment in price. RULE: Where unforeseen circumstances make the performance of a contract unduly burdensome. They chose to reply on rule that moral obligation is not a sufficient consideration. he has the privilege of recognizing and compensating for it. Myrick later refused to pay additional wages and Stick sued. Defendant agreed to provide all the foundation work for the building as well as “everything requisite and necessary to finish the entire work properly. Restatement § 86: Promise for Benefit Received (p. there is no consideration for an oral agreement to pay additional wages for performing.
P. . Restatement § 89. 681 The concept of intention to create legal relations can potentially be applied in two ways:
. adiditonal rubble was clearly unanticipated. Held for .” (§2-103). Will Modifications be Accepted?
Have Original Contract
Additional No Consideration?
Breach is a meeting of No accepted the minds (coersion. .671) The requirement of consideration has a distinct function in the modification setting – although one it does not perform well – and that is to prevent coercive measures. Law does not require consideration to be adequate . OR (e) to the extent that justice requires enforcement in view of the material change of position in reliance on the promise. the parties may agree. Court felt it was unreasonable for bank to get this kind of windfall. therefore. Official Comment: Purposes of Changes and New Matter States that modifications made thereunder Subsection (1) must meet the test of “good faith” imposed by this Act. Sales Contract: The UCC § 2-209 Modification. Siegelman
contract being unduly burdensome. and there would be no need to worry about consideration. This includes “observance of reasonable standards of fair dealing in the trade. In this case. Manufacturing (p. Adequacy of Consideration
Some Ct’s recognize renegotiated contract
Newman&Snell’s State Bank v. NOTES: this Article = Article on sale of goods Squib: US v. An agreement modifying a contract within this Article needs no consideration to be binding. Brian’s agreement to pay Brighenti more constituted new contract and Brighenti’s failure to carry out its terms is a breach. Recession. Husband was insolvent at his death. Stump Home Specialties. Widow gave only nominal consideration.Contracts Outline – Prof. The sensible course to take is to enforce contract modifications regardless of consideration and rely on defense of duress to prevent abuse. and Waiver i. etc)
Mod’s not (Alaska)
Will be Recognized (Brian) E. Hunter (p674) – bankrupt’s IOU (I owe u) P (widow) sued on a promissory note she gave to bank in return for her husband's note to bank for $3700. Exchange of worthless note for 's note was no basis for consideration. All coercive modifications would then be unenforceable. THE INTENTION TO BE LEGALLY BOUND (CHAPTER 10) (WE DID NOT READ) P. in an impulsive frame of mind. Modification of Executory Contract (p. . in view of circumstances to adjust price. and the new agreement is a valid binding contract. 670) A promise modifying a duty under a contract not fully performed on either side is binding (c) if the modification is fair and equitable in view of circumstances not anticipated by the parties when the contract was made. though also coercive. REVERSED. courts are unlikely to enforce manifestly unfair agreements like this.Slight consideration is acceptable. . OR (d) to the extent provided by statute. an inadequate safeguard against duress.
during the time stated or if no time is stated for a reasonable time. but a manifestation of intention that a promise shall not affect legal relations may prevent the formation of a contract. on the other hand. The absence of such a manifestation or a manifested intention not to be legally bound might prevent the enforcement of even bargained-for commitments or those that have induced reliance.
The presence of a manifested intention to be legally bound can justify the enforcement of commitments that lack either bargained-for consideration or detrimental reliance. The promisor and promisee are named in the document or so described as to be capable of identification when it is delivered… Sales Contracts: The Uniform Commercial Code §2-203. for lack of consideration. but any such term of assurance on a form supplied by the offeree must be separately signed by the offeror. USING FORMALITIES TO MANIFEST AN INTENTION TO BE LEGALLY BOUND The Uniform Commercial Code §2-205. Failure of consideration. 712) Neither real nor apparent intention that a promise be legally binding is essential to the formation of a contract. and b.
Evidentiary function – Compliance with formalities provides reliable evidence that a given transaction took place. moving from obligee to obligor. was contemplated (consideration contemplated was never received)
Restatement (Second) of Contracts §95. Want of consideration – embraces transaction where none was intended to pass Failure of consideration – implies that a valuable consideration. 724) 1. A. Cautionary function – The ceremony was imposing and there was ample opportunity to reflect and deliberate on the wisdom of the act.
Restatement (Second) of Contracts §21. Intention to be Legally Bound (p.724) The affixing of a seal to a writing evidencing a contract for sale or an offer to buy or sell goods does not constitute the writing a sealed instrument and the law with respect to sealed instruments does not apply to such a contract or offer. Clarification function – When the parties reduce their transaction to writing they are more likely to work out details not contained in their oral agreement. is a valid defense to a sealed instrument. Formalities
1. The defense of want of consideration is not available in an action on a sealed instrument. When the device is used. Firm Offers An offer by a merchant to buy or sell goods in signed writing which by its terms gives assurances that it will be held open is not revocable.
I.Contracts Outline – Prof. Therefore. Siegelman
1. 2. In the absence of a statute a promise is binding without consideration if a. The document containing the promise is delivered. THE SEAL The traditional view of the seal: it imports consideration in the absence of fraud. 4. Channeling function – The populace is made aware that the use of a given device will attain a desire result. Requirements for Sealed Contract or Written Contract or Instrument (p. the judicial task of determining the parties’ intentions will be facilitated. 3. and c. 2. It is in writing and sealed. but in no event may such a period of irrevocability exceed three months. Seals Inoperative (p. the document can be accepted by the legal system as a serious act of volition. P.
B accepts the offer knowing that the purchase of the book is a mere pretense. SHE
>$500. as a promise binding withoug consideration under §§82-94. Requirement of Exchange. as where there is a false recital of consideration or where the purported consideration is merely nominal. SOMEONE DIES AND HE PROMISED HIS NURSE/GIRLFRIEND HEIRS CLAIM THERE IS NO CONTRACT. ETC. P.
VIII. recites a purported consideration for the making of the offer. A desires to make a binding promise to give $1000 to his son B.
“Bargained for. and proposes an exchange on fair terms within a reasonable time….. A offers to buy from B for $1000 a book worth less than $1. NOMINAL CONSIDERATION
Restatement (Second) of Contracts §71. RECITALS
CONCISE RULE OF LAW: The recital of a one dollar consideration for an option contract gives rise to an implied promise to pay which can be enforced by the other party.” … Moreover. a mere pretense of bargain does not suffice. Being advised that a gratuitous promise is not binding. There is no consideration for A’s promise to pay $1000. [paragraph (2) appears in Chapter 11. I.Contracts Outline – Prof. THERE'S PROBABLY A STATUE OF FRAUDS ISSUE THERE TOO.
EVILSHANI: IF NOT IN WRITING NOT ENFORCIBLE EVILSHANI: BUT THEN WHAT IF SOMEONE RELIED?
. Types of Exchange (p. See Comments b and c to §87. 729)
b. if at all. PERFORMANCE TAKES >1 YEAR. EVEN IF THE PARTY CAN CLAIM THAT TECHNICALLY THERE WAS NO CONTRACT. Is in writing and signed by the offeror. LAND DEAL.000 IF SHE TAKES CARE OF HIM.. An offer is binding as an option contract if it a. Option Contract 1. HE IS STOPPED THE ARGUMENT BECAUSE THE PARTY TOOK AN ACT IN RELIANCE ON THE PROMISE TO HIS DETRIMENT KATHRYN H SMITH: YOU SEE IT ALOT IN ESTATE CASES. EVILSHANI: MUST BE IN WRITING IF
("ESTOPPED") FROM PRESENTING
$100.. In such cases there is no consideration and the promise is enforceable. STAYED ON AND TOOK CARE OF HIM. KATHRYN H SMITH: IN OTHER WORDS.E. Siegelman
I THINK OF IT AS A DEFENSE TO A CLAIM FOR NO CONTRACT BECAUSE OF LACK OF CONSIDERATION.
ILLUSTRATION 5.. THEN THE
YOU COULD ARGUE THAT THEY ARE ESTOPPED FROM PRESENTING THE ARGUMENT BECAUSE OF HER ACTS IN RELIANCE. §87. THE PROMISSORY ESTOPPEL (CHAPTER 11) (P. NO MUTUALLY OF OBLIGATION. KATHRYN H SMITH: OF COURSE.
Contracts Outline – Prof. P. Siegelman
KATHRYN H SMITH: YEAH, THINK OF IT AS A RULE YOU WOULD PUT IN TO MAKE SURE NO ONE COULD CHEAT YOU OR DEFRAUD YOU.
FOR EXAMPLE, I WANT YOU TO WORK
- AFTER THAT I'LL PAY YOU $1,000,000. WOULDN'T YOU WANT THAT IN WRITING? EVILSHANI: YES. BUT WOULD I ENFORCE IT IF IT WASN'T IN WRITING?
FOR ME FOR ONE YEAR KATHRYN H SMITH: IF ONE THE OTHER HAND, YOU ARE BABYSITTING AND WILL GET
$50 AT THE END OF THE NIGHT YOU PROBABLY DON'T NEED IT IN WRITING. THE
TIMING FOR PAYMENT IS SO CLOSE TO PERFORMANCE THAT YOU'RE NOT AS AFRAID THAT SOMEON WILL RENEGE ON THE DEAL EVILSHANI:
BUT FOR YOUR WORK EXAMPLE. THE PERSON RELIED AND WORKED A WHOLE YEAR. IF YOU WON'T PAY, SHOULDN'T THE COURT MAKE THEM PAY, EVEN IF IT $1M ISSUE. SEE I WOULD ARGUE THAT THERE WAS NO CONTRACT. I WOULD SY YOU COULDN'T COLLECT BECAUSE OF THE STATUTE
WASN'T IN WRITING? KATHRYN H SMITH: BACK TO MY OF FRAUDS
- NO WRITING I RELIED TO MY DETRIMENT? - YOU ACTED IN RELIANCE ON MY PROMISE AND I SHOULD BE ESTOPPED FROM ARGUING
EVILSHANI: EVEN IF
KATHRYN H SMITH: THEN YOU WOULD COUNTERARGUE THAT IT DOESN'T MATTER
STATUTE OF FRAUDS, I.E., PROMISSORY ESTOPPEL PROHIBITS ME FROM MAKING MY ARGUMENT.
A. THE DEVELOPMENT OF PROMISSORY ESTOPPEL AS A SUBSTITUTE FOR CONSIDERATION It is commonly assumed that the principle underlying promissory estoppel is compensation for detrimental reliance. I. FAMILY PROMISES Ricketts v. Scothorn (pg 723) – working granddaughter quits work FACTS: Katie Scothorn (P) was working as a bookkeeper when her grandfather Ricketts visited her at work and gave her a note promising to pay her $2000 at 6% interest per year. He told her that none of his grandchildren had to work and neither should she. Her right to the money was not conditioned on her not working or on anything else. Scothorn (P) later left her job at her grandfather’s influence. After Ricketts’ death, Scothorn (P) sued the estate’s executor (D) for the balance due on the note. CONCISE RULE OF LAW: When the payee changes her position to her disadvantage, in reliance on a promise, a right of action on the promise arises. The expenditure of money or assumption of liability by the donee, on the faith of the promise, constitutes a valuable and sufficient consideration. In this case, there is an equitable estoppel. Essential Elements of Equitable Estoppel (Pomeroy pg 727) 1. Conduct – acts lang or silence – amounting to rep of fact or concealment of fact 2. these facts must be known to the party estopped at the time of his said conduct, or at least the circ must be such that such knowledge is necessarily imputed to him. 3. The truth concerning these facts must be unknown to the other party claiming the benefit of the estoppel, at the time when such conduct was done., and at the time when it was acted upon him.
The conduct must be done with the intention, or at least with the expectation, that it will be acted upon by the other party, or under such circumstances that it is both natural and probable that it will be so acted upon. There are several farmiliar species in which it is simly impossible to ascribe any intention or even expectation to the party estopped that his conduct will be acted upon by the one who afterwards claims the benefit of the estoppel. The conduct must be relied upon by the other party, and, thus relying, he must be led to act upon it. He must in fact act upon it in such a matter as to change his position for the worse; in other words, he must so act that he would suffer a loss if he were compelled to surrender or forgo or alter what he has done by reason of the first party being permitted to repudiated his conduct and to assert rights inconsistent with it.
Equitable estoppel vs. promissory estoppel Equitable estoppel is a misrepresentation of some fact that was relied upon. Promissory estoppel is in the case of a simply gratuitous promise which the promisor knows is gratuitous.
Contracts Outline – Prof. P. Siegelman
Example of equitable estoppel: I call the bank to ask if I received a paycheck. The clerk at bank says yes, so I write out checks. As it turns out, the paycheck was never deposited. I get charged fees for bounced checks. Under the principles of equitable estoppel, I am not responsible for the bounced check fees. Estoppel based on a promise and not a misrepresentation of facts is now called promissory estoppel. Promissory estoppel also different because it is used in a offensive way rather than promissory estoppel. (promissory estoppel used as a sword, equitable estoppel is used as a shield) Also note that gifts in wills are treated differently than regular gifts. This is because we are much less concerned with the intention of promisor. We have to transfer the assets to someone. 2. CHARITABLE SUBSCRIPTIONS (DELETED)
Restatement (Second) of Contracts §90. Promise Reasonably Inducing Action or Forbearance (p. 811) 1. A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires. 2. A charitable subscription or a marriage settlement is binding under Subsection (1) without proof that the promise induced action or forbearance. Shannon’s test for consideration Need 1. a promise 2. (a) was reliance intended (b) was reliance forseeable 3. was there actual reliance 4. Is remedy necessary to prevent injustice 3. PROMISES OF A PENSION (DELETED)
4. CONSTRUCTION BIDS (P.742) James Baird Co. v. Gimbel Bros., Inc. (pg 742) – Tile bidding contractors FACTS: Gimbel (D) offered to supply linoleum to various contractors who were bidding on a public construction contract. Baird (P), relying on D’s quoted price, submitted a bid and later that same day received a telegraphed message from D that its quoted price was in error. P’s bid was accepted. RULE: The doctrine of promissory estoppel shall not be applied in cases where there is an offer for exchange as the offer is not intended to become a promise until consideration is received. HOLDING: Gimbel did not intend to be bound upon contractor’s (offeree’s) mere reliance on its quoted price. The doctrine of promissory estoppel may not be used by the offeree to bind the offeror. Since contractor could have repudiated the contract w/o D’s right to sue for breach, no right for P either. Drennan v. Star Paving Co. (p.745) – paving subcontractor FACTS: In formulating a bid to the Lancaster School District, Drennan (P), a general contractor, solicited bids for subcontracting work. Star (P), a paving company, submitted the lowest paving bid, and Drennan (P) used that bid in formulating its bid to the school district. Using this bid, Drennan (P) was awarded the general contract. Star (D) then told Drennan (P) that it could not do the work
Contracts Outline – Prof. P. Siegelman
for that amount and refused to do the work. Drennan (P) found a substitute company and sued Star (D) for the difference, claiming that Drennan (P) had reasonably relied on Star’s (D) offer. Star (D) claimed that it had made a revocable offer. CONCISE RULE OF LAW: Reasonable reliance on a promise binds an offeror even if there is no other consideration. ******Follow Drennan more important restatement 87 incorps Drennan holding******* Section 90 of the Restatement provides that when a promise is made that induces action or forbearance of the promisee, the promissor is bound if injustice would result from nonenforcement. In the case of a unilateral offer, the offeror is bound to the promise if it produces reasonable reliance. (Such reasonable reliance cases are often called firm offers) They often receive criticism on the grounds that one party (the subcontractor) is bound while the other party (the general contractor) is not. 3 ways to look at contractors rules 1) offer is revocable until post award acceptance (Hand uses in Baird) 2) offer becomes irrevocable after contractor submits bids (in Drennan) 3) bilateral contract formed by bid (both judges agree it is not this) Essentially, promissory estoppel was invoked as a substitute for consideration rendering a gratuitous promise enforceable as a contract. Specifically, the act of reliance by the promisee to his detriment provides a substitute for consideration. Restatement (Second) of Contracts §87. Option Contract (p.749) [Paragraph (1) appears in Chapter 10] 2. An offer which the offeror should reasonably expect to induce action or forbearance of a substantial character on the part of the offeree before acceptance and which does induce such action or forbearance is binding as an option contract to the extent necessary to avoid injustice. A Survey of Contract Practice and Policy (p. 793) The questionnaire defined “firm offer” as “a promise to buy or sell at a fixed price over a period of time...not given in exchange for a promise or other payment by the offeree.” The overwhelming majority of the companies that received firm offers relied on them, and those who made firm offers expected the offerees to rely. This can help to distinguish Drennan from Baird. In Drennan, the general contractor’s reliance was found to be “reasonable” and “foreseeable” because it was customary in the industry. In Baird, there was no evidence that, as a mater of trade usage, contractors relied on subcontractors’ bids. B. PROMISSORY ESTOPPEL AS AN ALTERNATIVE TO BREACH OF CONTRACT (P.749) Hoffman v. Red Owl Stores, Inc. (p.752) – franchise grocery store FACTS: The Hoffmans (P) sought damages they incurred in selling their business and relocating based on their reliance on an alleged promise made to them by Red Owl Stores (D) to furnish them with a franchise. Hoffman (P) informed Lukowitz (D) that he only had $18,000 to invest in the enterprise, which Lukowitz (D) assured him would be sufficient. After further negotiations, Red Owl (D) presented Hoffman with a final proposal requiring a capital investment by the Hoffmans (P) of $34,000, and requiring the father-inlaw to sign a document stating his $13,000 was a gift. Hoffman (P) declined, and negotiations terminated. CONCISE RULE OF LAW: A promise that the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee, and which does induce such action, is binding if injustice can be avoided only by enforcement of the promise.
Promise Reasonably Inducing Action or Forbearance (p. Also lack of good faith or large disparity whatever is easier to calculate. Restatement (Second) of Contracts §90. The jury properly awarded damages for the loss on the sale of the bakery building.762) 1. which in fact produced reliance or forbearance of that nature. it is to the extent necessary to avoid injustice. the promisee must have acted reasonably in justifiable relance on the promise as made. Where damages are awarded in an action for promissory estoppel.
. and the moving expenses. the purpose behind the doctrine is the prevention of injustice. as determined by the difference between the price at which the grocery was sold and its fair market value.
2. 2. the losses incurred by the Hoffmans (P) upon the sale of their grocery business should be limited to the actual loss suffered. it is not required that the promise on which the plaintiff relied be so definite as to constitute an offer giving rise to an action for breach of contract. in circumstances such that the promise must be enforced if injustice is to be avoided
Three limitations of Promissory Estoppel: 1. MADISON’S OVERARCHING RULE: With no terms [no offer] then reliance will be given b/c you can’t calculate expectation damages. promise that the promisor should reasonably have expected to induce action of a definite and substantial character on part of the promisee. Rather.
Impact? US Cts finds consideration most of the time in these cases but courts interp is different with charities. the substantial loss to the promisee in acting in reliance must have been foreseeable by the promisor. the rent. Three Elements in order for a promise to be enforceable under the Theory of Promissory Estoppel 1. A charitable subscription or a marriage settlement is binding under Subsection (1) without proof that the promise induced action or forbearance. However.Contracts Outline – Prof. 3. P. the detriment suffered in reliance must be substantial in an economic sense. 2. A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. Siegelman
Moreover. The remedy granted fro breach may be limited as justice requires.
of New York v. plus 10% of the gross profits. 824) – supermarket lease FACTS: Ganem (D) sought to compel lessee Stop & Shop (P) to continue operating a market on premises pursuant to a commercial lease agreement providing for minimum fixed yearly payments plus a percentage of gross sales.
(CHAPTER 12) (P. P opened two other supermarkets within a mile of the premises. Co. not just to save themselves money [this is Gillette’s reason. D moved to dismiss. Inc. D filed a counter
.818) FACTS: Lessor has lease that has to pay fixed amount + receipts. v. P’s obligation was to use reasonable efforts to bring profits into existence. P closed supermarket. not court’s who justifies it just as the allocation of risk]. P was engaged in the supermarket business at the time the lease commenced (1953). Sales Contracts: The Uniform Commercial Code §1-203. HOLDING: Court holds no breach of good-faith . THE IMPLIED DUTY OF GOOD FAITH PERFORMANCE All contracts contain an implied covenant to perform in good faith. Good Faith Performance (p.
Goldberg 168-05 Corp.893) (1) In this article unless the context otherwise requires… (b) “Good faith” in the case of a merchant means honesty in fact and the observance of reasonable standards of fair dealing in the trade. but continued minimum rent payments. The lease was silent as to the proposed use of the premises. Duty of Good Faith and Fair Dealing Every contract imposes upon each party a duty of good faith and fair dealing in its performance and enforcement. Levy (pg. They divert sales to 2nd lease where they have fixed rent (rentor thought they were renting the space as a warehouse).Contracts Outline – Prof. plus 1% of gross sales exceeding $1. If the business did not have profits exceeding $101. on the premises. v.815)
A. Mutual Life Ins. 817) – percentage lease FACTS: Goldberg (P) sought damages for unpaid rental payments based on a Levy’s (D) intentional diversion of profits so as to reduce his rental payments under a lease agreement and trigger provision allowing him to terminate the contract. §2-103. a good faith obligation is implied in a contract. Ganem (pg.
Stop & Shop.000 per year. Therefore. The business failed to make profits over $101. MOTION DENIED.800 per year. Restatement (Second) of Contracts §205.000 and D notified P of his intention to terminate the lease on Oct. 1937. requiring a party to a commercial lease that requires part of the rental payments be based on a percentage of gross receipts. The agreement provided that the percentage rate would be due only if sales exceeded $3 million.000 in damages. P entered into a lease agreement to rent property to D for nine years at $13. P sought $25.230. The minimum rental payment was $22.816) Every contract or duty within this Act imposes an obligation of good faith in its performance or enforcement. RULE OF CONCISE LAW: A covenant of good faith and fair dealing is inherent in every contract. D had the right to terminate the lease. D vacated premises and failed to pay rent under the agreement.000. In 1963. HOLDING: Even though an explicit promise is lacking. to utilize his best efforts in order to generate earnings.60. Tailored Woman (p. D entered into possession on Oct. Parties entered into a lease agreement where Stop & Shop was supposed to lease the place for 13 years and six months. P filed a bill for declaratory relief. Definitions and Index of Definitions (p.269.because it was joint profit maximizing. Siegelman
IX. Inc. P. 1929 and operated Crawford Clothes. P’s conduct was in direct violation of the good faith and fair dealing covenant that exists in every contract.
v. Product exceeded ordinary standards of the trade usage of product. into a commercial lease agreement providing for a portion of the rent based on the gross sales of the business conducted thereon. § 2-315 Implied Warranty: Fitness for Particular Purpose Where the (1) seller at the time of contracting has reason to know any particular purpose for which the goods are required and that the (2) buyer is relying on the seller’s skill or judgment to select or furnish suitable goods. buyer didn’t rely on seller’s expected knowledge of buyer’s purpose. and labeled as the agreement may require.”
Step-Saver Data Syst.” They need only be “of reasonable quality within expected variations and for the ordinary purposes for which they are used. When parties are silent.Contracts Outline – Prof. 832) The scope of performance is often defined by warranty. B. There id no evidence to show that the parties should have contemplated including a covenant to continue operations in the lease agreement. or for any purpose at all. and (e) are adequately contained. and (f) conform to the promises or affirmations of fact made on the container or label if any. Buyer must have blindly relied 1. buyer performed their own bench test. Duty of good faith performance v. Computers found to be incompatible with software used by P. of even kind. or for any purpose at all.” “high quality. Want to be able to rely without investigation. and (d) run. and (b) in the case of fungible goods. into a commercial lease agreement providing for a portion of the rent to be determined based on the gross sales of the business conducted there. (3) Unless excluded or modified other implied warranties may arise form course of dealing or usage of trade. The superior court held that lease agreement did not contain an implied covenant requiring P to continue operations on the premises. the courts will enforce a duty of good faith. including good faith negotiation. D appealed. Furthermore. 833) (1) Unless excluded or modified.
. AFFIRMED. IMPLIED AND EXPRESS WARRANTIES (P. IMPLIED WARRANTIES OF MERCHANTIBILITY The warranty of merchantability does not require that the goods be “outstanding or superior. duty to negotiate in good faith Where the parties are under a duty to perform that is definite ad certain.
Sales Contracts: The Uniform Commercial Code § 2-314 Implied Warranty: Merchantability (p. and (c) are fit for the ordinary purposes for which such goods are used.computers purchase incompatible with system Facts: P purchased D’s computer after conducting a bench test. are of fair average quality within the description. CONCISE RULE OF LAW: The court will not imply a covenant to continue operations for a specific purpose. in order that a party not escape from the obligation he has contracted to perform.” “low frequency of repair” means nothing = puffery. Wyse Technology. P. the lease agreement does not preclude the plaintiff from opening such markets in the area. Saying “will last a lifetime. within the variations permitted by the agreement. packaged. quality and quantity within each unit and among all units involved. HOLDING: The court will not imply a covenant to continue operations for a specific purpose. Under this section the serving for value of food or drink to be consumed either on the premises or elsewhere is a sale. (P. Issue: Was there an implied warranty of merchantability or fitness? Holding: No. (2) Goods to be merchantable must be at least such as: (a) pass without objection in the trade under the contract description. there is (3) unless exluded or modified under next section and implied warranty that the goods shall be fit for such purpose. seller did not know buyer’s particular purpose. a warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind.896) . contract law supplies some warranties by default. Siegelman
claim seeking to compel P to operate a market on the premises and to pay a percentage of the gross sales.
CBS. Lorraine Corp.To find an express warranty need: 1.Goes beyond implied warranties. P initiated suit against D alleging breach of warranties and fraud. (2) It is not necessary to the creation of an express warranty that the seller use formal words such as “warrant” or “guarantee” or that he have a specific intention to make a warranty. Thus. tested. acquisition Facts: Plaintiff bought a business from the defendant based on financial information released to him from the defendant. Inc. Ziff-Davis Publishing Co. Royal Business Machines. unless special circumstances show proximate damages of a different amount.835) Sales Contracts: The Uniform Commercial Code . and conducted his own research to find that the information was questionable. and it has to become the basis for bargaining between parties. Promise. such assurances must relate specifically to the goods tendered. the machines were marketable. In addition. P. Sample (p. (3) In a proper case any incidental and consequential damages under the next section may also be recovered. . replacement parts were easily obtainable. that P would gain significant profits. that affirmation has to relate to goods [not puffery] [must be really a warranty 3. CONCISE RULE OF LAW: The determinative question in resolving whether a particular promise constitutes an express warranty is whether the seller’s assertion constitutes a fact or is merely an expression of the seller’s opinion. (pg. holding that Royal (D) had breached several express warranties it made to P. EXPRESS WARRANTIES (P. the goods were safe. Although Royal’s assurances regarding the availability of parts and the copies were assurances of facts. affirmation of fact or promise 2. the promises that the copiers where of high quality. Thus. § 2-313. v. Express Warranties by Affirmation. (b) Any description of the goods which is made part of the basis of the bargain creates and express warranty that the goods shall conform to that description. He had doubts to the validity of the information. few repairs would be necessary. However. Royal’s assurances that the machines were safe. Royal (D) appealed. Reversed. the assurances relating to the costs of maintenance and the frequency of repairs constitute express warranties as to these representations. 2. Inc. the court must determine that the buyer relied on such warranties in entering the agreement.Contracts Outline – Prof. HOLDING: Statements regarding the quality of the goods are mere expressions of the seller’s opinion. The disctrict court awarded P compensatory and punitive damages and attorney fees. and service calls were required only every 7.000 copies. 836) – (copiers) FACTS: Booher (P) and Lorraine Corp (P) entered into a series of transactions with Royal Business Machines (D) for the sale of Royal’s (D) copying machines. v. 841) – corp. (c) Any sample or model which is made part of the basis of the bargain created an express warranty that the whole of the goods shall conform to the sample or model. P would reap substantial profits.840) (1) Express warranties by the seller are created as follows: (a) Any affirmation of fact or promise made by the seller to the buyer which related to the goods and becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the description. maintenance costs were low. These included the assurances that the goods were of high quality. but an affirmation merely of the value of goods or a statement purporting to be merely the seller’s opinion or commendation of the goods does not create a warranty.000 to 9. and do not constitute express warranties. or that the necessity of repair would be infrequent were all merely expressions of Royal’s (D) opinion regarding the goods. After presenting
. and marketable all constitute statement of facts relating to the goods’ prospective performance may also give rise to a finding that an express warranty was made. Description. Siegelman
§ 2-714 Buyer’s Damages for Breach in Regard to Accepted Goods (2) The measure of damages for breach of warranty is the difference at the time and place of acceptance between the value of the goods accepted and the value they would have had if they had been as warranted. (p.
the court in this case said the “as is” was enough because everyone understands what as is means. If he accepts it might be on the assumption that seller will fix the problem or because the buyer didn’t know there was a problem. P. entered into a contract to purchase a car from Miller’s (D) used car lot. Also. for example. Holding/Decision: Judgment for the plaintiff.849) Must have brought sellers promise. Siegelman
the conflicts to the defendant. and to exclude or modify any implied warranty of fitness the exclusion must be by a writing and conspicuous. The “as is” makes plain that there are no implied warranties. 2. the plaintiff signed an “integration clause” the effect of which was to bar extrinsic evidence. A related issue in the case was whether Miler’s (D) actions in disclaiming the implied warranties was unconscionable practice. The court held that Schneider (P) had not proved this. the clause shifts all risk to the buyer. to exclude or modify the implied warranty of merchantability or any part of it the language must mention merchantability and in case of a writing must be conspicuous. an attorney. Schneider v.Contracts Outline – Prof. but subject to the provisions of this Article on parol or extrinsic evidence (Section 2-202) negation or limitation is inoperative to the extent that such construction is unreasonable. Language to exclude all implied warranties of fitness is sufficient if it states. Thereafter he sought to rescind the contract on the basis that the car was unfit for driving and that Miller (D) breached his obligations in respect to implied warranties of merchantability. Exclusion or Modification of Warranties 1. Therefore latter doubts irrelevant. that “There are no warranties which extend beyond the description on the face hereof. no implied warranties exist and all risk is transferred to the buyer.” or where the buyer has had the opportunity to inspect the goods. In this case the buyer could not revoke the acceptance.” 3. He test drove the vehicle.849) – rusted car FACTS: Schneider (P). it negated the doubt of facts that the buyer had. the defendant assured him that his information was correct. Schneider (P) signed a bill of sale accepting the car “as is. Dissent: The plaintiff still should have had the doubt after the re-promise. Subject to subsection (3). he may have the option to revoke acceptance. Notwithstanding subsection (2)
. Sales Contracts: The Uniform Commercial Code §2-316. Issues: Whether a buyer’s manifested lack of belief in statements made by a seller relieves the seller of its obligation under an express warranty. 3. Reasoning: Because the seller re-promised the warranty. EXPRESS DISCLAIMERS OF WARRANTY (P. So the plaintiff went ahead with the transaction. Miller (p. If this happens.” Schneider (P) took the care to a mechanic for repairs. Notes: Revocation of acceptance: If a seller delivers a bunch of goods to the buyer and some of the goods do not conform to terms of the contract the buyer has two options: accept or reject. Even though you have to mention merchantability in writing and make it conspicuous to get rid of implied warranty of merchantability and you have to have it in writing to get rid of implied warranty of fitness. CONCISE RULE OF LAW: Where a buyer in a contract for the sale of goods signs a document expressly disclaiming any implied warranties and providing that the buyer accept delivery of the item “as is. Words or conduct relevant to the creation of an express warranty and words or conduct tending to negate or limit warranty shall be construed wherever reasonable as consistent with each other.
An implied warranty can also be excluded or modified by course of dealing or course of performance or usage of trade. Violates ordinary purpose. This was an action alleging unfair or deceptive practices in automobile sale.854) FACTS: Facts not stated. What if you went mountain climbing and they fell apart? No violation because could still be fit for house unless you told them you wanted mountain climbing shoes. and b.
Unless the circumstances indicate otherwise. Mack’s Used Cars (p. When the buyer before entering into the contract has examined the goods or the sample or model as fully as he desired or has refused to examine the goods there is no implied warranty with regard to defects which an examination ought in the circumstances to have revealed to him. and c. The UCC’s provisions may be supplemented.
In general. CONCISE RULE OF LAW: A provision providing for the disclaimer of all implied warranties under a contract for the sale of goods does not relieve the seller from liability under alternative causes of action pertaining to commercial transactions. the UCC provisions on warranty apply.Contracts Outline – Prof. but they may not be the only provisions out there that govern sellers’ liability to consumers.
4.” “with all faults” or other language which in common understanding calls the buyer’s attention to the exclusion of warranties and makes plain that there is no implied warranty. all implied warranties are excluded by expressions like “as is. Notes: What if you bought shoes walked around the house and they fall apart after 10 minutes. P. Remedies for breach of warranty can be limited in accordance with the provisions of this Article on liquidation or limitation of damages and on contractual modification of remedy (Section 2-718 and 2-719) a.
it is a promise of non-performance and does not make the non-performance a condition precedent of the insurer’s duty to pay. issued 3 policies to the pl. Since after December 17th the Defendant would not be able to satisfy the contract by shipping in December within two weeks. RESTATEMENT § 227 Standards of Preference With Regard to Conditions (p. Provisions of a contract will not be construed as conditions precedent in the absence of language plainly requiring such construction. the Plaintiff had not yet instructed on where delivery was to be made for the remaining 45.Contracts Outline – Prof. Whether a contract provision is construed as a condition or an obligation does not depend entirely upon whether the word ‘condition” is expressed. In other words. Plaintiff’s Argument: The fact that the term “condition precedent.000 pockets at Lake Charles. 5(f) specifies that something should not to be performed. constituted a failure to perform a condition precedent. contracted for the Defendant to deliver rice to the Plaintiff for exportation.862) – damaged tobacco Facts: Df.” and “warranty. Plowing or disking under the stalks does not of itself operate to forfeit coverage under the policy. Pl harvested and sold the depleted crop. df may recover whatever damage is sustained as a result of plowing the stalks under. Siegelman
X. insuring their tobacco crops. The Defendant delivered 50. it had the right to rescind the agreement. FCIC.600 pockets of rice. Howards. they will be construed as creating a promise. filed notice and proof of loss w/ FCIC.866) (1) In resolving doubts as to whether an event is made a condition of an obligor's duty. an agency of the U. (p. but prior to inspection they plowed or disked under the fields in question. CONDITIONS (CHAPTER 13) Internatio-Rotterdam v.S. River Brand Rice Mills. Does the Plaintiff’s failure to perform a condition precedent permit the Defendant to rescind the contract? Synopsis of Rule of Law: The nonoccurrence of a condition precedent to be performed by a party to a contract acts to permit the other party to rescind the agreement or treat the contractual obligations as discharged. the Plaintiff giving two weeks’ notice of the place of delivery to the Defendant was a condition precedent to the Defendant’s delivery of the rice. but by December 17.858) Facts: The Plaintiff. the Defendant cancelled the contract. P. When December 17th passed and the Defendant did not hear from the Plaintiff. Inc. unless the event is within the obligee's control or the circumstances indicate that he has assumed the risk. Holding: Yes. Because 5(f) is not a condition precedent there are other questions of fact to be determined. a Promise. Issue(s): Whether the plowing under of the stalks forfeits coverage b/c of section 5 (f) of the insurance policy ? Holding: Not by itself.” is in 5(c) but not in 5(f) means that the policy determined 5(f) to be considered other than a condition precedent. against weather damage and other hazards. Inc.” are synonymous with each other in application. Issue. but if it is a promise or covenant.600 pockets of rice to the Plaintiff. (Plaintiff) and the Defendant. or Both? Howard v.
. The failure to give sufficient notice for the Defendant to complete delivery in December as required by the contract. River Brand Rice Mills (p. The Defendant agreed to sell 95. and as to the nature of such an event. (Defendant). The agreement required that delivery must be made in December upon two weeks’ notice by the Plaintiff. A portion of the policy provides that the stalks shall not be destroyed until FCIC makes an inspection. Is the event a Condition. The Defendant’s obligation to ship the rice in December was conditioned upon the Plaintiff giving the Defendant two weeks’ notice of the place of delivery. Hence. on six farms. Court Rationale: If 5(f) is a condition precedent its violation causes a forfeiture of pl’s coverage. Rule(s): When it is doubtful whether words create a promise or a condition precedent. and will not cause a forfeiture. Federal Crop Ins. The Plaintiff sued for a failure to give notice of the place of delivery when the Defendant refused shipment on December 18. shipment was to be made by the Defendant with two weeks’ notice from the Plaintiff regarding where to ship the rice. Defendant’s Argument: The use of the terms “condition precedent. Insurance policies are generally construed most strongly against the insurer. an interpretation is preferred that will reduce the obligee's risk of forfeiture. Under the terms of the agreement. Corp. the last day in December that the Defendant could have performed on the agreement given the notice required was December 17th. the Defendant properly rescinded the contract. Therefore. The Plaintiff thereafter initiated this appeal. Internatio-Rotterdam. Pl’s alleged that their 1973 crop was damaged by heavy rains.
. must exist or occur before a duty of immediate performance of a promise arises Avoiding Conditions p.. A condition
. or (c) the event is made a condition of the obligor's duty and a duty is imposed on the obligee that the event occur. when it is doubtful whether (a) a duty is imposed on an obligee that an event occur. D was confident that that construction would be completed in Oct '71 unless unforeseen circumstances occurred. and after rescheduling the settlement date 2 more times for the same reason. or Neither? Chirichella v Erwin Maryland (p. 1972 for specific performance. have all occurred or been performed. which. such that D would be liable for the higher payment despite P’s use of alcohol? 3) Did the complaint allege facts demonstrating that there had been a valid waiver by D of such condition precedent? Issue: 1) Is a waiver a voluntary abandonment or a relinquishment of some right or advantage? 2) Can a condition precedent be waived? Holding and Rule: 1) Yes.-Although settlement for the house in q question was also scheduled for June 15. the first interpretation is preferred if the event is within the obligee's control. Is the event a Condition.-Although construction had not begun on the new home. Waiver and Estoppel Clark v.-D contracted to purchase "the New home" in April of 1971 and were to settle within 15 days from the date of completion. Holding: Passage of time cannot be a condition Reasoning: The inclusion of the phrase "approx. other than mere lapse of time. D's builder did not agree.200 and when D refused to settle. or constructive. when D entered into this contract. Clark completed a 3. 1973 was not within a reasonable time. The contract included an abstention agreement. D was wrong and the first settlement for the new house was scheduled for June 15. P brought suit on August 31. D did not show for that meeting or a subsequent meeting. P filed suit. 1. or (b) the event is made a condition of the obligor's duty. 2) Yes. A waiver is a voluntary abandonment or relinquishment of some right or advantage. with costs to Appellants Rule: Where a contractual duty is subject to a condition precedent. 1971 or sooner". They were required to do so within a reasonable time after October 1971.there is no duty of performance and. P. which never materialized because D claimed that the work was bad on the house. West (p.469 page text on corporations and West refused to pay Clark more than $2 per page because Clark had not abstained from alcohol. the builder sold the house to someone else. Oct 1971" effectively defeats the Appellants argument and instead of allowing them to avoid the contract. and that D had waived any objection by assuring P that he was entitled to the extra $4 per page despite his failure to abstain. Siegelman
(2) Unless the contract is of a type under which only one party generally undertakes duties.000 per year." Griffith v Scheungrab (219 Md. January 29.. Disposition: Affirmed. 1971". -In sum.-The contract was the "standard" form used by the County Board of Realtors and the "settlement" section of the contract was amended by the real estate agent to include the phrase "by Oct. which was amended by mutual agreement to read "Coincide with settlement of New home in Kettering Approx. "a decree for specific performance will not be granted unless conditions precedent. The higher court heard three questions on certification: 1) Did the complaint state facts sufficient to constitute a cause of action? 2) Was P’s abstinence from the use of alcohol a condition precedent which could be waived by D. 868 1. In P’s suit against D.Contracts Outline – Prof. express. Oct. a Promise. the phrase was designed to delay settlement for a reasonable amount of time while their new house was completed. 1972. implied. 1972. unless excused.866) – home purchase Facts:-Appellants contracted in June 1971 to sell their home to Appellees for $39. the Appellants (Chirichellas) duty to perform by settling under their contract with the Appellees (Erwins) was not subject to the condition precedent that they first settle on the new house.869) – drunken law professor Facts: Clark (P) agreed to write a series of law books for West (P) for $3. 27)-A condition precedent is a fact. P claimed that his alcohol consumption was not excessive and did not interfere with his execution of other obligations under the contract... whereby Clark promised to abstain from alcohol in order to be eligible for payment in excess of $2 per page.
C. Reality Corp. Cross Bay Chelsea Inc. unless (a) occurrence of the condition was a material part of the agreed exchange for the performance of the duty and the promisee was under no duty that it occur. U. but except as between merchants such a requirement on a form supplied by the merchant must be separately signed by the other party. whether the promise is made before or after the time for the condition to occur. P asserted that abstinence was merely a condition precedent to the payment of the additional $4 per page and that it could be waived without new consideration. D asserted that P’s total abstinence was the consideration for the payment of the additional $4 per page.Contracts Outline – Prof. If the words and acts of a party reasonably justify the conclusion that with full knowledge of all the facts it intended to abandon or not to insist upon a particular defense afterward relied upon. a restaurant. (3) The requirements of the statute of frauds section of this Article (Section 2-201) must be satisfied if the contract as modified is within its provisions. § 2-209 (p. a waiver has been established. (p. a promise to perform all or part of a conditional duty under an antecedent contract in spite of the non-occurrence of the condition is binding. D asserted that it could not be waived except by reformation of the contract based on consideration. The court held that P alleged facts which if proven would establish a claim of waiver. (5) 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 term waived. The agreement provided that Tenant
. The court held that it was clear from the contract that the abstention was not part of the basic consideration bargain but rather a condition precedent to the payment of the additional $4 per page. Excuse to Prevent Forfeiture J. 2. A condition precedent may be waived. unless the retraction would be unjust in view of a material change of position in reliance on the waiver. the promisor can make his duty again subject to the condition by notifying the promisee or beneficiary of his intention to do so if (a) the notification is received while there is still a reasonable time to cause the condition to occur under the antecedent terms or an extension given by the promisor. RESTATEMENT § 84 Promise to Perform a Duty in Spite of Non-Occurrence of a Condition (1) Except as stated in Subsection (2). (2) A signed agreement which excludes modification or rescission except by a signed writing cannot be otherwise modified or rescinded.ment of the risk assumed by the promisor. (2) If such a promise is made before the time for the occurrence of the condition has expired and the condition is within the control of the promisee or a beneficiary. (1) An agreement modifying a contract within this Article needs no consideration to be binding. v. P. (4) Although an attempt at modification or rescission does not satisfy the requirements of subsection (2) or (3) it can operate as a waiver. A waiver is an intentional relinquishment of a known right.Modification. Siegelman
precedent can be waived.873) – holdover tenant Facts: J originally leased the property.C. or (b) uncertainty of the occurrence of the condition was an ele. and (c) the promise is not binding apart from the rule stated in Subsection (1).A. Rescission and Waiver. and (b) reinstatement of the requirement of the condition is not unjust because of a material change of position by the promisee or beneficiary.N.872) . Once waived it cannot be revived. to Foro. having a 10-year lease agreement.
Defendant wrote a letter to
. that the option was to run in Jan ’74. in regards to the property taxes. he might suffer a forfeiture if he has made valuable improvements on the property (because now he has an interest in the property. Rule: Notice exercising an option is ineffective if it is not given within the time specified. Because it occurred before the performance is due it is called anticipatory repudiation. his improvements). J regularly interacted with Chelsea about various issues regarding the property. 878) Excuse of a Condition to Avoid Forfeiture To the extent that the non-occurrence of a condition would cause disproportionate forfeiture. The modification. ANTICIPATORY REPUDIATION One reason why a party could cancel a contract is if. XI. Foro was required to obtain a modification of the option to renew so that Chelsea would have the right to renew the lease for an addition term of 24 years. the other party indicates that she does not intend to perform and thereby repudiates the contract. Fountain Rationale: Default on an option usually does not result in a forfeiture. A few weeks before the period for employment was to start. (Unless there is willful or gross negligence. before the time for performance arrives. Foro then assigned the lease and sold its interest in the restaurant to Chelsea for 155k. P. that issue was not submitted at trial (due to the trial court not allowing J to submit such evidence). the Restatement (2nd) states as a general proposition that a court may excuse the nonoccurrence of a condition where forfeiture would otherwise result. 1968 Foro entered into a K with Chelsea. Restatement of Contracts §229 (p. First J modified the option and consented to the assignment. As a condition of the sale. and has resulted from an honest mistake. Siegelman
shall notify the landlord in writing by registered or certified mail 6 months prior to the last day of the term of the lease that tenant desires such renewal. J’s president. has neglected to perform an affirmative duty and thus breached a covenant in the agreement. two weeks prior to the expiration of the lease. Foro closed it down and offered if for sale or lease. 5 ½ years remained on the lease. Edgar De La Tour (p. from the expiration of the original term of the lease. PROSPECTIVE NONPERFORMANCE 1. may a court of equity grant the tenant relief when the forfeiture would result from the tenant’s own neglect or inadvertence Holding: Yes the tenant will suffer a forfeiture because of the investments made on the property. [Corollary is chapter 2 on avoidability!!!] Albert Hochster v. The closing took plase in June of ’68. J failed to mention the renewal condition in the lease. In March. however. One interaction occurred. Chelsea responded with a letter dated Nov ’73 and J refused to honor it. which relieves against such forfeitures contract of valuable lease terms when default in notice has not prejudiced the landlord. A tenant should not be denied equitable relief from the consequences of his own neglect or inadvertence if a forfeiture would result. BREACH (CHAPTER 14) A. or similar excusable fault. But when a tenant in possession under an existing lease has neglected to exercise an option to renew. instead of 10. The rule applies even though the tenant. unless the conditioning event was a matter of the parties’ exchange. And Tenant is entitled to equitable relief. and not rights accrue until the condition precedent has been met by giving notice within the time specified.892) – tour guide Facts: Hochster (“Plaintiff”) entered into a contract with Edgar De La Tour (“Defendant”) under the terms of which Defendant agreed to hire Plaintiff as a courier for three months. a court may excuse the non-occurrence of that condition unless its occurrence was a material part of the agreed exchange.Contracts Outline – Prof. (NOTE: there is evidence that J has used this technique to attempt to evict prior tenants. However.) Because the tenant made a considerable investment in improvements (55k total) and would loss a serious amount of business due to location change.) Finally. Note: §229. All other provisions in the lease shall remain in full force and effect…” (Including the 6-month requirement for renewal). to sell the restaurant and assign the lease. Because the option itself doesn’t create any interest in the property (lessor has no property interests). in Nov ’73 J took action to inform the tenant that the option had lapsed. by his inadvertence. states: “the tenant shall have a right to renew this lease for further period of 24 years. The tenant is entitled to the benefit of equity. therefore. After leasing from 1964-1968. admitted that throughout the time of the tenancy he was “most assuredly” aware of the time limitations on the option. At the time of the sale. Arena. and despite the failure to renew was at the tenant’s fault (although not culpable) the tenant would be entitled to equitable relief if there is no prejudice to the landlord. this matter must be resolved at a new trial. Issue: (1) will the tenant suffer a forfeiture if the landlord is permitted to enforce the letter of the agreement? (2) if there will be a forfeiture.
***Important b/c banks use acceleration clauses. The next month on the 23rd the condo said okay we cancel for you we keep your money. Buyer waits 1 month to see if seller performs. but said it had to be done by the 25th of this moth or he would get the money to keep the contract. Harrell v. Can’t retract if rely or if I consider repudiation final (if don’t act have right to retract) HYPO: A repudiates. What if B had sold widgets for scrap? A can no longer retract. Seller breaches. There is no need to make the Plaintiff wait until the date the contact was to commence to bring the lawsuit. Not for whole amt. The request to breach is not enough.900) When either party repudiates the contract with respect to a performance not yet due the loss of which will substantially impair the value of the contract to the other. P paid $5000 down. by then can’t buy grain unless pay lots. Plaintiff brought a breach of contract claim against Defendant. A says he’s repudiating. Sea colony had to pay the deposit back. P. Sea Colony. or (h) resort to any remedy for breach (Section 2-703 or section 2-711). Mr. Eight days before the employment was to start. and (i) 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 contract notwithstanding breach or to salvage unfinished goods. This says if buyer defaults entire amt becomes due at that time so bank can sue. A retracts 2 hours later. Issue: Whether Plaintiff’s breach of contact claim was premature as the contract term had not even started when Plaintiff brought the action. Suit is signal B considers repudiation final HYPO: Once one party has preformed all the way [garden co builds whole garden] have to wait. (Section 2704) UCC §2-611. provided sufficient assurance of breach. Siegelman
Plaintiff informing Plaintiff that it won’t be requiring Plaintiff’s services. Must be commercially reasonable. the aggrieved party may (g) for a commercially reasonable time await performance by the repudiating party. can B sue? Not really unless there were damages from lateness. therefore. Green had to pay by Dec 1. UCC §2-610.Contracts Outline – Prof. there must be an unequivocal manifestation of intention that he won’t perform at appointed time. HOLDING: In order for anti. CONCISE RULE: A mere request to cancel a contract does not constitute anticipatory breach thereof. Crown (pg 901) Eat Your Wheaties
. 3) Retraction reinstates the repudiating party’s rights under the contract with due excuse and allowance to the aggrieved party for any delay occasioned by the repudiation. Contract called for forfeit if P defaulted. G Co can’t sue until Dec 1. ADEQUATE ASSURANCES OF PERFORMANCE Scott v. Rationale: Defendant had clearly expressed its intent to breach the contract and. Breach to occur. Inc (pg 895) – Condo FACTS: Harrell (P) contracted with Sea Colony (D) to purchase a condo that was under construction. Must act soon. 2. Holding: No. HYPO: What if contract to buy grain. even though he has notified the repudiating party that he would await the latter’s performance and has urged retraction. Can you recover. remainder on completion. In this case he said he would not breach if they would keep his money. B sues 1 hr later. Anticipatory Repudiation (p. HYPO: If A+B have contract. but must include any assurance justifiably demanded under the provisions of this Article (Section 2-6009). Retraction of Anticipatory Repudiation 1) Until the 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 2) Retraction may be by any method which clearly indicates to the aggrieved party that the repudiating party intends to perform. (5 days after they sold it to someone else for more money). Harrell tried to cancel. If Mr Green says I won’t pay on Nov 16th after G Co is done. The later A says he retracts repudiation. Ex G Co had to finish by Nov 15.
A contract for sale imposes an obligation on each party that the other’s expectation of receiving due performance will not be impaired. Right to Adequate Assurance of Performance 1. Siegelman
FACTS: Scott (P) suspended grain delivery on their second grain delivery to Crown (d) because it learned form dept of ag that there were active complaints against Crown from other farmers and because D failed to respond to P’s inquiries about timely payment for previous deliveries. P. When reasonable grounds for insecurity arise with respect to the performance of each 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. CONSTRUCTIVE CONDITIONS AND MATERIAL BREACH Finding a constructive condition depends on a backward-looking inquiry into presumed intentions of the parties at the time of formation. he should have good security for the payment of the money. PRESTON (P. At the end of the period the Df did not surrender the premises b/c the Pl did not offer the security. of covenants was to be collected from the evident sense and meaning of the parties . Issue(s): Whether the Pl’s tender of sufficient security was a condition precedent to the Df’s surrendering of the premises. at a fair value. Plaintiff’s Argument: The covenants were mutual and independent. and stock? Holding: Yes Rule(s): Covenants called conditions and dependent. The essence of the agreement was that the Df should not trust to the personal security of the Pl. Therefore Scotts actions were really anticipatory repudiation which allowed Crown to cancel the contracts and resort to buyer’s remedies. B. therefor. HOLDING: Scott had reasonable grounds for insecurity. Between merchants the reasonableness of grounds for insecurity and the adequacy of any assurance offered shall be determined according to commercial standards. the other party is not liable to a an action on his covenant. the other party may in writing demand adequate assurance of due performance and if commercially reasonable may suspend any performance for which he has not received the agreed return. Court Rationale: The dependance or independence. his nephew. 4. CONCISE RULE: When reasonable grounds for insecurity arise with respect to the performance of a party under a commercial contract. In consideration for the business premises the Df covenanted that at the end of the period he would give up the business to Pl. 3. give them his stock in his trade. in lieu of the monthly production of stock in trade until the value of the stock was reduced to 4000 pounds. UCC §2-609. Acceptance of any improper delivery or payment does not prejudice the aggrieved party’s right to demand adequate assurance of future performance.
. CONSTRUCTIVE CONDITION KINGSTON V. whereas finding a material breach depends on a forward-looking inquiry into the likelihood of performance occurring in the future 1. where either may recover damages for the injury he may have received. However there were serious timing issues b/c they didn’t wait or really try to get an answer. and that btwn the young traders deeds of partnership for 14 yrs would be executed.880) – SILK BUSINESS Facts: Pl and Df entered into an agreement where the Df would serve the Pl for 1yr and a 1/4 as a servant in his trade as a silk-mercer for 200 pounds a year.Contracts Outline – Prof. and however transposed they might be in the deed. The giving of such security. The agreement also stated thereafter the Pl would at and before the sealing and delivery of the deeds cause and procure good and sufficient security to be given to Df. 250/mo. or some other person named by Df. It is no excuse to allege a breach by pl. but before he delivered up his stock and business. in which the performance of one depends on the prior performance of another. After receipt of a justified demand failure to provide within a reasonable time not exceeding thirty days such assurance of due performance as is adequate under the circumstances of the particular case is a repudiation of the contract. and until this prior condition is performed. must necessarily be a condition precedent. Immediately afterward the young traders would carry out the business in the Df’s house. their precedency must depend on the order of time in which the intent of the transaction requires their performance.
because not all of the pipe used was made in Reading. Holding/Decision: Judgment for the defendant. Lamb (p. Issues: Whether a liability for breach of contract exists where one part has reason to believe that the other party will not fulfill his obligation. thus does not fulfill his end of the bargain. value.974) – Reading pipes FACTS: Kent (D) refused to make the final payment on a construction contract that specified that Reading pipe was to be used throughout his house. Replacing the pipes would have meant demolishing substantial parts of the completed residence. NOTES – Why all the fuss? : Apparently. and trust Pl’s personal security. The evidence showed that the mistake made was due to an oversight by the subcontractor. the trial court was right in directing a verdict for Kent (D). Kent (p.Contracts Outline – Prof. P. the measure of damage is not the cost of replacement but the difference in value. and the appellate division reversed and granted a new trial. 2. which would be nominal or nothing. which might be worthless. the excuse for deviation. some courts go beyond and see if the beach was willful (This is an exception of the rule that courts don’t usually consider the reason for breach) Kent just has to pay (independent promises) a. The plaintiff told the defendant prior to delivery that he was unable to pay for the corn at the preset time of delivery. Kent may have seized upon the pipe substitution as an expression of other dissatisfactions in his relationship with Jacob and Youngs. Reading Pipe was specified because it was the normal trade practice to assure wrought iron pipe quality by naming a manufacturer. each party must be ready to perform his part of the contract at the time he charges the other with non-performance.
This case was not governed by UCC. The only difference found between Reading pipe and the others used was the name stamped on the pipe. Jacob & Youngs’ (P) evidence showing that the pipe used was the same in quality.
Dissent: says this was not a minor violation because the whole shipment of pipe was installed incorrectly.882) – corn sale Facts: The plaintiff agreed to buy a certain amount of corn from the defendant. Reasoning: Because the corn was to be delivered at the same time. When the certificate was refused. the security to be given for money was unreasonable to oblige Df to give up his business.
. stock. the desire to be gratified. and the cruelty of enforced adherence must be weighed in order to determine if literal fulfillment of the contract is to be enforced. Siegelman
Defendant’s Argument: The covenants were dependant in nature. Morton v. in particular when the transfer is to occur at the same time. perfect tender substantial performance a. CONCISE RULE OF LAW: where there is substantial performance with defects of trivial or inappreciable importance. RULE: The purpose to be served. There are 3 different rules the court could have applied: 1. As such. and it was agreed that he would pay at the time of delivery. cost. the measure of the remedy is the difference in value. and appearance as that of Reading pipe were excluded at trial. The trial court directed a verdict in favor of Kent (D). The defendant. Jacob & Youngs (P) filed suit. Jacob & Youngs (P) left the work untouched and requested certification that final payment was due. protecting his own interests did not deliver the corn in anticipation of the plaintiff’s inability to pay. The plaintiff filed suit for breach of contract because the defendant did not deliver the corn. Jacob & Youngs v. This is no longer the law
3. Under the circumstances of this case. DISSENT: Jacobs and Youngs’ (P) failure to perform its contract was either intentional or due to gross neglect.
B & B Equipment Co. or modified the contract Since builder relied. The “Lane Agreement” required the coating to be done in compliance with the ODOT specs and Lane
. 2) Whether the plaintiff can reasonably anticipate breach by the defendant or should be required to allow him more time to fulfill his obligations. Lane Enterprises.
2. only if a breach is material does it relieve the non-breaching party of its duty of performance under the contract. the breach must be substantial that the party despairs of additional performance in the future. Issues: 1) Whether the breach was a substantial part of the contract or incidental to the major purposes of the contract. the policy reason for not awarding cost of completion was unjust enrichment. they are not required to give him more time to fulfill his obligations. and they tendered his money paid up until this point plus dividends from the stock. and plaintiff made protest and gave fair warning concerning the unacceptability of his performance. Inc. Defendant Bowen was also to assume primary responsibility in the corporate record keeping of the company. Holding: Judgment affirmed for the plaintiff.500 plus the interest. (p. This “Hammond Agreement” required the components to be coated in accordance with ODOT specification. Kent could explicitly have Reading pipe as condition to pay The final inference dissent makes is where majority and dissent part. it hired Lane to do the coating. Foster Co. he would not be liable What Damages are proper? Cost of completion and diminution in value can both be viewed as expectation damages. Procedural History: Plaintiff filed suit to obtain a judgment declaring its right to terminate a contract under which the defendant was to purchase 100 shares of the corporate stock. and spent less time working for the company.B. P.910) – coated bridge components Facts: Foster agreed to sell bridge components to Hammond for use in constructing a bridge in Ohio. Siegelman
Majority agreed with most of dissent’s argument if purposefully installed bad pipe. v. Bowen became engaged in outside business activities. MATERIAL BREACH In absence of an expressed or constructive condition to the contrary. This result because the owner either waived his right.500 to plaintiff and a promissory note off $12.500 with interest. plaintiff was to deliver to defendant 100 shares of stock in the company. 2) Because his performance was partial but defective. Reasoning: 1) The intent of the contract was for the defendant to contribute valuable services to the company. Since Foster wasn’t equipped to coat the components.000. In other words. In most cases that will be appropriate measure.Contracts Outline – Prof. When those payments totaled $12. the court will not award it. v. Defendant paid $2. Bowen (p. and was not based on the necessity of capital offered by Bowen. He was discharged from the company. Start by looking at cost of completion. then would have to pay there is reason to say that if term in contract should have to pay Mr.907) – stock purchase Facts: Plaintiff entered into a contract with Bowen under which Bowen would become an equal participant in plaintiff’s business for $15. This is because getting the plaintiff in the same position had the promise been performed. L. In this case. but if the cost of doing this is really large relative to his loss. Trial court rendered declaratory judgment as prayed by plaintiff and defendant appeals. Hypo: What would happen if not Reading pipe was available and owner agrees to substitution but then becomes annoyed and sues under the contract? The builder would not be liable.
082. Procedural History :Trial court found Foster breached the Lane agreement by failing to remit the $7k. combined with its lukewarm expression of its ability to perform. ODOT Engineer Nist inspected the delivered components and found backside contamination on the coating. Foster repeated its assurance request. Lane informed Foster and Hammond that it was unable to meet the zero percent backside contamination requirement ODOT required. Additionally. P. the seller is required to furnish a “perfect tender” of the subject matter of the contract. On July 2. On January 5. Lane requested the amount it was owed after deducting the repairs.Where reasonable grounds arise to believe that the obligor will commit a breach by non-performance that would of itself give the obligee a claim for damages for total breach. Restatement (Second) of Contracts §251 1. 1993. 1993. and the contract was substantially performed. Since Lane refused to give such assurance. Although a party’s statement concerning its ability to perform may not be sufficient to constitute a repudiation of the contract. The ODOT inspectors were not satisfied with the contamination under the coating for Stage I components. Lane agreed to assume the cost of the repairs.
3. but allowed shipment pending removal and reapplication of the coating.
. Therefore. less the $7k. Lane responded that it wouldn’t discuss Stage II until it received the money. and the return of their trade-in van they had tendered pursuant to the sales agreement. damages to Foster for the amount it payed over the contract to another coater. if such a demand is warranted. $7. Since Lane was entitled to suspend performance because of the breach. ODOT informed Hammond that if the components underwent certain field repairs. Siegelman
wasn’t to ship any components without prior approval from an ODOT inspector. Lane isn’t liable for damages Foster incurred as a result of suspended performance.22. Per the restatement. it is uncontradicted that Foster planned to remit the monies due once it received assurance from Lane that Lane could perform stage II. the contract remains effective and the other party doesn’t have a right to suspend performance. it would accept the components. Lane’s quality assurance manager sent a letter to Foster explaining the inability to remove all the contaminants and asked whether Foster wanted Lane to coat the Stage II components. Foster sent a letter on June 15. Ramirez v. The court agrees that Foster’s breach was not material and that Lane was required to perform stage II. CONCISE RULE: Under a contract for sale of goods. and stating the money wouldn’t be released until assurances of Stage II commitment was given. in order to avoid delay damages. Trial court reversed. On February 5. Issues :Did the trial court err that Foster materially breached the Lane Agreement? Did Lane’s failure to give assurance amount to anticipatory breach? Applicable Rules of Law Holding: Yes. inquiring whether Lane intended to perform Stage II of the Lane agreement. the requesting party may treat a failure to respond as a repudiation of the contract. Thus P properly exercised their rights to terminate the contract. the obligee may demand adequate assurance of due performance 2. On August 17th. Lane materially breached. and the buyer may reject any nonconforming goods HOLDING: P rejected the nonconforming van within a reasonable time and D failed to cure the defects.055 more than it would have paid Lane. this court concludes the trial court erred in concluding Foster materially breached. On January 27. After the field repairs. Foster hired another coater for $42.The obligee may treat as a repudiation the obligor’s failure to provide within a reasonable time such assurances of due performance as is adequate in the circumstances of the particular case. Autosport (pg 919) – Defective Camper FACTS: P sought the recission of their contract to purchase a camper with defects from D. Due to Lane’s difficulties performing Stage I.Contracts Outline – Prof. THE PERFECT TENDER RULE: CURE AND RESCISSION Buyer’s right to reject non-conforming Goods. Reasoning: If breach is an immaterial failure to perform. yes. which would be deducted from the amount it was owed. Foster had reasonable grounds to demand assurance of performance. Lane materially breached. the statement may warrant the other party to demand assurance of performance. to which Lane responded again that it wouldn’t discuss Stage II before it was paid.
Definitions: …“Cancellation” 4. What Constitutes Acceptance of Goods 1. The buyer has no further obligations with regard to goods rightfully rejected. Acceptance of goods occurs when the buyer a. or c) accept any commercial unit or units and reject the rest. a. 3. When the buyer rejects a non-conforming tender which the seller had reasonable grounds to believ would be acceptable with or without money allowance the seller may if he seasonably notifies the buyer have a further reasonable time to substitute a conforming tender. Cure by Seller of Improper Tender or Delivery. if the goods or the tender of delivery fail in any respect to conform to the contract. after a reasonable opportunity to inspect the goods signifies to the seller that the goods are conforming or that he will take or retain them in spite of their non-conformity. P. It is ineffective unless the buyer seasonably notifies the seller 2. 2. 2. does any act inconsistent with the seller’s ownership. Acceptance of a part of any commercial unit is acceptance of that entire unit. fails to make an effective rejection (subsection (1) of Section 2-602). After rejection any exercise of ownership by the buyer with respect to any commercial unit is wrongful as against the seller. but c. UCC §2-508. but such acceptance does not occur until the buyer has had reasonable opportunity to inspect them. Siegelman
SALES CONTRACTS: The Uniform Commercial Code Pgs. If the buyer has before rejection taken physical possession of goods in which he does not have a security interest under the provisions of this Article (subsection (3) of Section 2-711). or c. the buyer may a) reject the whole. or b. Subject to the provisions of the two following sections on rejected goods (Sections 2-603 and 2-604). Manner and Effect of Rightful Rejection 1. 925-928 UCC §2-106. or b) accept the whole. UCC §2-601. The seller’s rights with respect to goods wrongfully rejected are governed by the provisions of this Article on Seller’s remedies in general (Section 2-703). UCC §2-602. Where any tender or delivery by the seller is rejected because mom-conforming and the time for performance has not yet expired.
. Rejection of goods must be within a reasonable time after their delivery or tender. but if such act is wrongful as against the seller it is an acceptance only if ratified by him. “Cancellation” occurs when either party puts an end to the contract for breach by the other and its effect is the same as that of “termination” except that the canceling party also retains any remedy for breach of the whole contract of any unperformed balance. UCC §2-606. he is under a duty after rejection to hold them with reasonable care at the seller’s disposition for a time sufficient to permit the seller to remove them. and b. Buyer’s Rights on Improper Delivery Subject to the provisions of this Article on breach in installment contracts (Section 2-612) and unless otherwise agreed under the sections on contractual limitations of remedy (Sections 2-718 and 2-719). Replacement 1. the seller may seasonable notify the buyer of his intention to cure and may then within the contract time make a conforming delivery.Contracts Outline – Prof.
4. then unless the buyer after seasonable receipt of the demand does turn over control the buyer is so barred.Contracts Outline – Prof. Siegelman
UCC §2-608. together with any incidental damages under the next section. Of goods accepted or of conforming goods lost or damaged within a commercially reasonable time after risk of their loss has passed to they buyer. Of goods identified to the contract if the seller is unable after reasonable effort to resell them at a reasonable price or the circumstances resoanbly indicate that such effort will be unavailing. or b. Effect of Acceptance. The buyer may revoke his acceptance of a lot or commercial unit whose non-conformity substantially impairs its value to him if he has accepted it. 2. If the claim is one for infringement or the like (subsection (3) of Section 2-312) the original seller may demand in writing that his buyer turnn over to him control of the litigation including settlement or else be barred from any remedy over and if he also agrees to bear all expense and to satisfy any adverse judgent. Acceptance of goods by the buyer precludes rejection of the goods accepted and if made with knowledge of a non-conformity cannot be revoked because of it unless the acceptance was on the reasonable assumption that the non-conformity would be seasonably cured but acceptance does not of itself impair any other remedy provided by this Article for non-conformity. 3. P. The burden is on the buyer to establish any breach with respect to the goods accepted. the price a. 2. after Acceptance. and b. IF the notice states that the seller may come in and defend and that if the seller does not do so he will be bound in any action against him by his buyer by any determination of fact common to the two litigations. Action for the Price 1. Without discovery of such non-conformity if his acceptance was reasonably induced either by the difficulty of discovery before acceptance or by the seller’s assurances. A buyer who so revokes has the same rights and duties with regard to the goods as if he had accepted them. UCC §2-709. Burden of Establishing Breach 1. When the buyer fails to pay the price as it becomes due the seller may recover. On the reaoable assumption that its non-conformity would be cured and it has not been seasonably cured. then unless the seller after seasonable receipt of the notice does come in and defend he is so bound.
3. 3. and (5) apply to any obligation of a buyer to hold the seller harmless against infringement or the like (subsection (3) or Section 2-312). a. The net proceeds of any such resale must be credited to the byer and payment of the judgment entitles him to any goods not resold. Revocation of Acceptance in Whole or in Part 1. (4). The provisios of subsections (3). and b. 2. Revocation of acceptance must occur within a reasonable time after the buyer discovers or should have discovered the ground for it and before any substantial change in condition of the goods which is not caused by their own defects. b. It is not effective until the buyer notifies the seller of it. 5. After the buyer has wrongfully rejected or revoked acceptance of the goods or has failed to make a payment due or has repudiated (Section 2-610). a seller who is held not entitled to the price under this section shall nevertheless be awarded damages for non-acceptance under the preceding section
. The buyer must within a reasonable time after he discovers or should have discovered any breach notify the seller of breach or be barred from any remedy. Notice of Claim or Litigation to Person Answerable Over The buyer must pay at the contract rate for any goods accepted. Where the seller sues for the price he must hold for the buyer any goods which have been identified to the contract and are still in his control excerpt that if resale becomes possible he may resell them at any time prior to the collection of the judgment. Where the buyer is sued for breach of a warranty or other obligation for which his seller is answerable over a. He may give his seller written notice of the lititgation.
6. Notice of Breach. If the claim is one for infringement or the like (subsection (3) or Section 2-312) and the buyer is sued as a result of such a breach he must so notify the seller within a reasonable time after he receives notice of the lititgation or be barred from any remedy over for liability established by the litigation. Where a tender has been accepted a.
How much profit? Commercial content of agreement? Contracts of adhesion are not necessarily unconscionable. On rightful rejection or justifiable revocation of acceptance a buyer has a security interest in goods in his possession or control for any payments made on their price and any expenses reaonbley incurred in their inspection. he may have reasonable time to substitute a conforming tender 2. receipt. Buyer’s Remedies in General.e. seller may cure (§2-508(1)) ii. The buyer can no longer reject (§2-607(2) but ii. Reject goods w/in reas time & w/ notification (§2-602) i.400 toward clearing her account. 1131 ( FACTS: P. and with respect ot the whole if the breach goes to the whole contract (Section 2-612).Contracts Outline – Prof. In doing so. sold furniture to D. Buyer may revoke his acceptance w/in reas amt of time after discovery of non-conformity. Shannon’s guide to if seller delivers nonconforming goods.e. even though she had already paid $1. As a result. the buyer may cancel and whether or not he has done so may in addition to recovering so much of the price as has been paid a. P. P retained – by terms of the contract – the right to reposses all items previously purchased in the event of every default. the court should examine the differences between the so-called procedural (having to do with the process of contracting. or b. “cover” and have damages under the next section as to all the goods affected whether or not they have been identified to the contract. whenever purchased. Buyer’s Security Interest in Rejected Goods 1. 3. illegality) conceptions of unconscionability. Walker-Thomas. D made her last purchase and still owed a balance of $164 from prior purchases. Williams. Where the seller fails to deliver or repudiates the buyer may also a. or b. Accept (by signifying he will retain despite non-conformity by not rejecting or by acting in a manner inconsistent w/ seller’s ownership (§2-606. Look at disparity between price and cost. Where the seller fails to make delivery or repudiates or the buyer rightfully rejects or justifiably revokes acceptance than with respect ot any goods involved. Siegelman
UCC §2-711. was liquidated. if substantially impairs its value. In a proper case obtain specific performance or replevy the goods as provided in this Article (Section 2-716). If time for performance hasn’t expired. i. UNCONSCIONABILITY Courts scrutinize an exchange under the doctrine of unconscionability. OBTAINING ASSENT BY IMPROPER MEANS (Chapter 16) D. care and custody and may hold such goods and resell them in like manner as an aggrieved seller (Section 2-706). ISSUE: Does the court have the power to refuse enforcement of contracts found to be unconscionable? RULE OF LAW: The defense of unconscionability to action on a contract is judicially recognized
. the buyer can (§2-601) 1. recover damages for non-delivery as provided in this Article (Section 2-713). The case involves D’s claim to defense for this action. But goods must have been accepted (§2-668) on the reasonable assuption that its nonconformity would be cured
XII. D defaulted on payment and P sought to replevy all goods previously sold to D. (especially if they have no surprising terms) Williams v. i. If the goods have been identified recover them as provided in this Article (Section 2-502). 2. The printed form contract contained a cross-collateral clause serving to keep a balance due on every item purchased until balance due on all items. So. i.. Walker-Thomas Furniture Co pp. fraud and duress) and substantive (having to do with the resulting contract. If seller has reason to believe goods were acceptable. transportation.
or it may enforce the remainder of the contract without the unconscionable clause. the parties shall be given a reasonable opportunity to present evidence as to its commercial setting. gross inequality. But. If such a contract is entirely executory. Remedies Specific Performance is denied where the contract as a whole was unconscionable when made. together with terms unreasonable favoring stronger party. purpose. but gross depravity in the values exchanged may be an important factor in a determination that a contract is unconscionable and may be sufficient ground. Historic Standards Modern procedural reforms have blurred the distinction between remedies at law and in equity.Contracts Outline – Prof. The determination of a term or contract is or is not unconscionable is make in light of its setting. Unconscionable Terms Particular terms maybe unconscionable whether or not the contract as whole is unconscionable. denial of money damages may also be appropriate.” Meaningfulness of choice is to be determined in light of all the circumstances – for example. However. P. Comment 1 defines “unconscionability” in terms of itself and says its principle is to prevent “oppression and unfair surprise. (2) When it is claimed or appears to the court that some or all of the contract is unconscionable. DISSENT: public policy arguments I’ll have to include after Madison brings them up… DISCUSSION:This majority decision relied heavily on UCC§ 2-302. Law and Fact Determining whether a contract or term within is unconscionable is make in light of all the material facts. without more. or did not in fact assent to the unfair terms. and effect. RESTATEMENT § 208 Unconscionable Contract or Term pp. policy is not penal: unless parties can be restored to precontractual positions the offending party will ordinarily be awarded at the reasonable value of performance rendered by him. or it may so limit the application of any unconscionable clause as to avoid an unconscionable result. purpose and effect to aid the court in making the termination. it may refuse to enforce the contract.
.C. runs the risk of substituting its own valuation of the contract goods for that of the parties involved. or it may so limit the application of any unconscionable clause as to avoid an unconscionable result. for denying specific performance.” Any court that declares a contract “substantively” unconscionable.” not disturb that “allocation of risks because of superior bargaining power. U. may point to elements of deception or compulsion supporting that the weaker party really did not have a choice. The case should be remanded to the lower court for findings on the issue of unconscionability. 1137 Same as (1) of UCC §2-302basically… If a contract or a term therein is unconscionable at the time it was made. it may refuse to enforce the contract. Weakness in the Bargaining Process Bargains are not unconscionable merely because parties are at unequal bargaining positions. This is paternalism that should be approached with caution. or it may enforce the remainder of the contract without the unconscionable clause. Unconscionability has generally been recognized to include an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party. no real alternative. “Where the element of unconscionability is present at the time a contract is made. the contract should generally not be enforced. whose meaning has been hotly debated.C. 1138-1140 Scope Applies to a wide variety of types of conduct. Siegelman
HOLDING: Yes. nor because inequality results in an allocation of risks to the weaker party. Comment pp. Relevant factors include weakness of the contracting process and public policy grounds rendering contract unenforceable. § 2-302 Unconscionable Contract or Clause pp 1137 (1) If a court finds as a matter of law finds a contract or term therein unconscionable at the time it was made. gross disparity of bargaining power. Overall Imbalance Inadequacy of consideration does not by itself invalidate a bargain.
(2) Such a writing is interpreted whenever reasonable as treating alike all those similarly situated. the ordinary remedy is to deny effect to the unconscionable term. 1140 (1) Except where stated in subsection 3. where a party to an agreement signs or otherwise manifests assent to a writing and has reason to believe that like writings are regularly used to embody terms of agreements of the same type. be adopts the writing as an integrated agreement with respect to the terms included in the writing. without regard to their knowledge or understanding of the standard of the writing. RESTATEMENT §211 Standardized Agreements pp.Contracts Outline – Prof. the term is not part of the agreement.
Where a term rather than the entire contract is unconscionable.
Where the other party has reason to believe that the party manifesting such assent would not do so if he knew that the writing contained a particular item. P.