ContractsK: promise or set of promise for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes a duty (R. 2d §1)

The private law parties make among themselves. There are limits as to what the law will use society’s resources to enforce. Contracts are pro-policy and pro-commerce.

o Contracts are amoral No punitive damages

Governing Law If the contract is for the sale of goods, it is governed by the UCC article 2 If the contract is for anything else (services, IP, real estate) it is governed by common law.

(Summarized in restatement 2d of contracts.)

I. AssentNeed mutual willingness to be bound to have a contract.

General this is shown through offer and acceptance, though it doesn’t have to be.

A. Intent to be boundBoth parties must intend to be bound.

Optimistic statements made by doctors are not evidence of intent to be bound.There are two ways to look at the contract formation process:

1) Subjective (old fashioned, but not completely out- individual mental process.o Presents problems of lack of evidenceo People would be reluctant to enter into contracts with people they do not know well.

2) Objective (modern approach) looks at what parties say and do an what can be reasonably inferred:

o Things that are reduceable to factso Still focus on parties’ intent, but impute to parties the intent that corresponds with

what parties say and do.o Lucy v. Zehmer- Defendant said contract was only a joke, but his actions and words

made it look like he wanted to be in a deal. His undisclosed intentions don’t matter.

The mental assent of the parties is not requisite for the formation of contract. If the words or other acts of one of the parties have but one reasonable meaning, his undisclosed intention is immaterial except when an unreasonable meaning which he attaches to his manifestations known to the other party.

Lucy v. Zehmer- Defendant said contract was only a joke, but his actions and words made it look like he wanted to be in a deal.

1. Gentlemen’s AgreementsGentlemen’s Agreement can mean two things:

1) Agreement with terms, that says at bottom that it will not be enforce.o Ex: employee handbook

2) Agreement written that looks fully enforceable, but there is a separate agreement on the side saying it won’t be enforced.

o Ex: big business deal needing to get proper approval before making binding contract.

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o These are about making business work in the real world.o Court has discretion in deciding whether to enforce these.

If one party is being taken advantage of.

2. Formal Contract Contemplated R2d. §27When two parties think they reached a deal through talking, but say they want to have it written up, they may already be sufficient to conclude a contract:

o If what is left is essentially administerial (literally just to write it up), then you do have a binding deal

o If the lawyers have a responsibility to do some further negotiations, there is probably not an enforceable deal yet. (It is not a deal until all of the terms are resolved.

Business people often think it is done, but the transactional lawyers often think of things that the business people didn’t

B. The OfferCorbin definition: An offer is an act whereby one person confers upon another the power to create contractual relations between them. (The offeror gives the offeree the power to bind the parties)

R2d. §24: An offer is the manifestation of willingness to enter into a bargain so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it.

Look for precise language distinguishing offer from inquiry

o Owen v. Tunison (sell store for 6k?)- Not an offer, the letters only intended to open negotiations.

o Harvey v. Facey (What’s the lowest price you’ll sell it to me for?)- not an offer.

o When in doubt, courts will usually err in deciding there is no offer. (If they are already in a contract, however, they will err on the side of enforcing the contract)

1. Price QuotesQuotations of prices are generally not offers, merely solicitations for offers.

Exception: If the language indicates it is an offer in the situation, it can be an offer. A specific response to a specific request with a quantity cap can be an offer.

o This is because the rationale behind the rule is to protect sellers from being overrun with demand, but if you have a quantity cap, it protects the sellers from this anyways.

o Fairmount Glass v. Crunden Martin- in this case, there was an offer, because they sent a response to an inquiry which stated a specific quantity cap.

2. Advertisements as offersQuotations Advertisements are generally not offers, they are usually just invitations for buyers to make an offer to purchase. (same rationale as above)

Exception: When ads are clear, definite, and explicit, they can be offers. (see rationales above) Lefkowitz ($1 Mink)- this was an offer because it said that they only had one, and it would go on

a first come, first served basis.

3. AuctionsTwo types (UCC §2-328):

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1) With reserve: Have right to take it back until minimum is reached. 2)Without reserve:Must sell to highest bidder.

4. Construction ContractsBig contracts, a lot of things can go wrong.

o Could be latent defects; or embedded Almost always multiple parties General contractor makes the offer to the owner

o Owner will then be obligated to pay, contractor will be obligated to perform. Subcontractors make offer to the general (subs only have contract with general)

If general stiffs subcontractors, subcontractors cannot sue owner, but in most jurisdictions, the subs can place lean against the property.

o Most property owners will require that the general contractor gets a surety bond

5. RescissionR2d. §151- A mistake is a belief that is not in accord with the facts.A unilateral mistake should result in rescission if:

1) An offeree knows or has reason to know that the offeror made a mistake, OR2) Satisfy the following three elements:

o Must be honest, preferably clerical mistakeo Would place undue burden on mistaken partyo Must be able to place non-mistaken party to the status quo ante.

Elsinore Union Elementary School v. Kastorffo Kastorff off the hook because he made an honest error while adding up his bid.

C. Termination of OfferAfter a party has made an offer, conferring on another the power of acceptance, that power can be terminated by:

1) Lapse (§41)2) Revocation (§§42,43) 3) Death or incapacity (§48)4) Rejection (§§38, 39)

1. Lapse of Offer (R2d. §41) If no period is specified in the offer, offer lapses after a reasonable time as determined by the

circumstances Ordinarily, an offer made by one to another in a face to face conversation is deemed to

continue only to the close of their conversation and cannot be accepted thereafter.o Analogous modernly to telephone conversation.

Including date/time does not mean that offer cannot be revoked before that date/time, only that acceptance is alright up to that date/time.

2. Revocation of Offer (R2d. §§42, 43)Offer may be revoked at any time before acceptance, either directly or indirectly, except in the case of a firm offer or an option contract. (See precontractual liability)

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Offeror, as master of the offer, has the power to revoke the offer directly or indirectly at any time prior to acceptance, except if there is an option contract (R2d. §25) or a firm offer (UCC §2-205).

§42 An offeree’s power of acceptance is terminated when the offeree receives from the offeror a manifestation of an intention not to enter into the imposed contract. (direct)

§43 An offeree’s power of acceptance is terminated when the offeror takes definite action inconsistent with an intention to enter into the proposed contract and the offeree acquires reliable information to that effect. (indirect)

Revocation effective when offeree receives notice. Offeror can be required to give notice of revocation publicity equal to that given the offer, but

the offeror is not bound by the acceptance of an offeree who was aware of the offer but missed the notice on revocation

3. Death or incapacity of offeror or offeree (R2d. §48)Offeree’s power of acceptance is terminated when the offeree or offeror dies or is deprived of legal capacity to enter into the proposed contract.

An offer ends with death of parties, a contract does not.

4. Offeree’s Rejection (§§ 38, 39)Once Offeree says no, offer is taken off the table unless offeror manifests intent to keep the offer open.

Not only is saying no to an offer a rejection, but a counter-offer is also seen as a rejection. o Only room for one offer on the table at a time. o But with language intended to do so you can make way for both offers on the table

(manifest an intention to take it under further advisement

D. The AcceptanceVerbal or non-verbal conduct reasonably interpreted as willingness.

Corbin definition: An offer is…an act whereby he exercises the power conferred upon him by the offeror, and thereby creates the set of legal relations called a contract.

R2d. §50: Manifestation of assent to terms; can be by performance or by promise. Offeror is “master of the offer”, and can revoke the offer at any time before it is accepted. Offeror, as master of the offer can decide how the offeree may accept:

o Performance ORo Promise to perform OR

The thing promised, must itself be consideration, or it is illusoryo Offeror could also leave it up to the offeree to decide between the above two

1. Notification of acceptance If the offeree is accepting by promise, the presumption is that you do have to give notice,

because a promise is an internal mental act §56. When an offeree is accepting by performance, notice is generally not required. §54

o Does not hold if performance takes place where the offeror cannot observe it unless: The offeree exercises reasonable diligence to notify the offeror of acceptance

(White v. Corlies & Tift), or4

The offeror learns of the performance within a reasonable time, or The offer indicates that notification of acceptance is not required.

Either of the above are rebutted if, under the circumstances, it doesn’t make sense, or if the offeror says otherwise.

Mere preparation is not performanceo Dedicated preparation is where it become problematic. (Ever-Tite Roofing)

Exception to notice requirement when accepting by promise: UCC §2-204(1)- A contract for sale of goods may be made in any manner sufficient to show agreement, including conducting by both parties which recognizes the existence of such a contract.

If parties behave like they have a contract, they have a contract. Allied Steel v. Ford- Ford asks by acceptance by promise (sign P.O. and send back), but both

parties perform on contract before that happens, and this is enough to make it a valid contract.o When allied delivered goods in advance of the promise, and Ford accepted it, Ford

waived the right, to stipulate manner of acceptance and there was clearly a deal. o Look at purchase order that precipitated the deal.

2. Shipment of Goods as AcceptanceUCC 2-206(1) Unless otherwise unambiguously indicated by the language or circumstances

(a) an offer to make a contract shall be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances;(b) an order or other offer to buy goods for prompt of current shipment shall be construed as inviting acceptance either by a prompt promise to ship or by the prompt or current shipment of conforming or non-conforming goods, but such a shipment of nonconforming goods does not constitute an acceptance if the seller seasonably notifies the buyer that the shipment is offered only as an accommodation to the buyer.

Shipment of nonconforming goods does not constitute acceptance if seller notifies buyer that it is an accommodation

Buyer’s revocation comes too late if the seller has already shipped. Non-conforming goods includes shipping dates, packaging, # of items, etc.

3. Silence not ordinarily acceptancePossible exceptions, if coupled with silence:

There are past dealings signifying a similar pattern of activity. Goods are retained for an unreasonable period of time.

4. Mailbox Rule (R2d. §63)When acceptance is mailed out, it is effective upon proper dispatch.

Originally mailbox rule was about delay between sending and receiving, but now it has more to do with the risk of loss

o Burden of risk is on offeror Rational- since offeror chooses the means of acceptance, risk should be on

them.

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5. Mirror Image Rule (R2d. §§ 58, 59)An acceptance must be on the terms by the offer, without the slightest variation. A response that does not exactly mirror the terms of the offer is a rejection, terminating the power of acceptance, and acts as a counter offer.

E. Offer and Acceptance Under the UCC (Battle of Forms §2-207)Purpose of 2-207 is to restore the offeror to his place as master of the offer.

Traditionally, there is no deal until both sides match, but modernly, standardized forms make this problematic, so 2-207 does away with the mirror image rule (though it still governs outside of the code) Before §2.207 Standardized forms have created the “last shot” principle.

Both sides have forms that protect their own interests, but parties aren’t reading these provisions and taking them seriously.

Usually nothing goes wrong, so there are no issues When something does go wrong, and standardized forms don’t match, Whoever sent the last form gets to control the offer

Purpose of §2.207 is to restore offeror to his position as “master of the offer” Part I applies to everyone who is buying or selling goods The main thing §2.207 does to restore power to the offeror is loosen up the def. of acceptance

o A wider range of responses will be counted as acceptance- as long as the difference is not too great, the acceptance does not have to be exactly the same as the offer.

o If you really intend to accept, and the form is filled out, there will be acceptance At least three ways that there will still not be acceptance

o 1) If it isn’t be definite (clear) and seasonable (timely)o 2)If material terms are changedo 3)The responsive communication is made expressly conditional to assent on new terms

Forces us back to rejection/counter offer. Gives lawyers a way to restore last shot principle.

Many courts will ignore these provisions if it is part of the standardized language on the form.

Only use part 2 of §2.207 if both parties are merchants.o No matter what you do in part two, you won’t undo the contract you determined in part

1, just look at the terms. What are terms of the contract?

o Additional terms acceptable unless 2.a) The offer expressly limits acceptance to the terms of the offer; 2.b)The additional terms materially alter the contract; OR 2.c) notification of objection to them has already been given or is given within

a reasonable time after notice of them is received. o Conceptually, very few changes survive, and those that do are not material

Part 3 (KO doctrine) If the writings don’t establish a contract, but both parties have performed (as to make a contract through conduct per §2-204), courts will take the terms the parties agree on and throw out everything they don’t agree on and start from there.

o Doesn’t matter who is offeror/ee

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If no contract on writings, but conduct results in a contract, then the terms are the terms on which the parties agree.

Seems fair because it is even-handed. Although it is at odds with purpose of §2-207, it has an appeal. Many courts go straight to this.

II. Bases for Enforcing Promises

A. Consideration as a Basis for EnforcementThe requirement of consideration is the defining feature that split contract law from tort law (covenant, debt, assumpsit).

Traditionally, the definition had three elements: 1) benefit to promisor, 2) detriment to the promisee, and 3) bargained for exchange. (usually when there is bargained for exchange the first two elements will be met.

The modern definition of consideration is just bargained for exchange. §71. The exchange bargained for may be a performance or return promise. The performance may be an act or a forbearance.

OWH’s def: Reciprocal conventional inducement Each party must have been drawn into agreement because of the other party doing or not doing

something.o Past actions cannot be consideration because they were not induced by the promise.

o The test of consideration is not what is done under the agreement, but what was done at the time of the agreement.

1. Forbearance as consideration. Forbearance may be consideration, but you must have the right to do the thing you are forbearing

to do. (Hamer v. Sidway)

Forbearance to sue is consideration so long as the suit is sufficiently plausible (objective test) and the forbearing party honestly believes the claim may be determined to be valid (subjective test). (Fiege v. Boehm) (§74)

2. Promises as consideration

a) Unilateral ContractOne side has an outstanding promise. Contract may begin as unilateral- if you do A, I will give you B. (promisee has a right to perform,

promisor has a duty)

b) Bilateral ContractBoth parties are promisors, and both promises are unfulfilled.

Contract can start as bilateral and become unilateral when one side performs.

3. Post Employment Non-Compete CovenantsPENCC are enforceable if they are reasonable as to:

a) Duration,b) Geographic scope, AND

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c) Range of activities prohibited.(Lake Land v. Columber)

Courts are divided on what to do when employer reaches for two much, they will either:A. Throw out the contract ORB. Change the contract to make it reasonable.

Problem with this policy is that it will encourage employers to reach too far. In CA, PENCCs are presumptively invalid.

4. RewardsReward s are enforceable as contracts if the actor was aware that it existed and the reward what induced his action.

If actor didn’t know about reward, no consideration- no reciprocal conventional inducement.

5. Satisfaction ClausesSatisfaction clauses are enforceable (not illusory promises) because of the requirement to act in good faith:

R2d. §205, UCC 1-203- Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement.

Two categories of satisfaction clauses: 1) Objective/reasonable/commercial clause

o Dissatisfaction must be reasonable

2)Taste, whim or fancy (subjective)o Dissatisfaction need only be honest.

6. Requirements /Output ContractsUCC §2-306 (1) A term which measures the quantity by the output of the seller or the requirements of quantity unreasonably disproportionate to any stated estimate or in the absence of a stated estimate to any normal or otherwise comparable prior output or requirements may be tendered or demanded. Output/requirements contracts are fine because parties are required to act in good faith, but the

amount must be reasonable compared to the stated estimate (if there was one), and if no stated output, must be comparable to prior outputs/requirements.

If there is an unforeseen circumstance whereby the seller cannot meet the requirements, look to UCC §2-615 “Excuse by Failure of Presupposed Conditions” If performance as agreed becomes impracticable due to an a contingency (and the non-occurrence

of which was an assumption on which the contract was made) , delay or non-delivery in whole or in part by the seller is not a breach if he complies with both of the following:

o When the contingency affects only a part of the sellers capacity to perform, he allocates production and deliveries among his customers.

He must allocate in a manner which is fair and reasonable, but he may choose to include his regular customers not under contract, and allocate to his own requirements for further manufacture.

o The seller must notify the buyer in a timely manner of delay or nondelivery. When an allocation is required, he must notify the buyer in a timely manner how

much will be made available to the buyer.

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a) Requirements contractsQuantity is not specified, but based on buyers needs. (Eastern Air v. Gulf)

b) Output contractsQuantity is not specified, but is based on sellers’ production.

7. Exclusive DealingsWhen exclusive dealings are made, BEST EFFORTS attach automatically. (Lucy v. Lady Duff-Gordon)

Best efforts are a higher standard than good faith. UCC §2-306(2) 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.

8. NOT Consideration

a) Gratuitous Promises/Gifts A promise made in exchange for nothing. Not legally enforceable because not supported by consideration.

b) Sham/Nominal ConsiderationUsing the word “consideration”, or taking a dollar “in exchange” do not make contract enforceable.

c) Actions in the pastPast actions cannot be consideration because they were not induced by the promise.

Feinberg v. Pfeiffer- court determines that pension promised to her on the basis of her faithful service was a gift because she worked there all those years without expecting it.

d) Moral ObligationsMoral obligations are not generally enforceable. (contract law is amoral)

Mills v. Wyman- promise to pay for care of sick son not enforceable because action was in the past, and moral obligation is not enforceable.

Exceptions: §82 promise is enforceable because statute of limitations has run, but obligor promises to pay

anyways §83 promise is enforceable in case of bankruptcy, one promises to pay a debt.

o This is actually just reviving an enforceable contract which has been extinguished through forces of law.

e) Indispensible Practical PrerequisitesKirksey v. Kirksey- poor sister Antillico gave up her home, so there was a detriment to the promisee, but there was no bargained for exchange because though her brother-in-law said she could have the land if she came to see him, this just an independent practical prerequisite- it was what was required in order for her to obtain the gift.

f) Illusory promisesA promise is illusory if it leaves the promisor an unfettered route of escape.

Strong v. Sheffield- uncle says he promises not to collect debt until he wants to- no consideration because no reciprocal obligation.

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B. Reliance as a basis of Enforcement Where there is no consideration, a promise may be enforceable if relied upon in order to prevent injustice.

1. Promissory Estoppel Restatement, R2d. §90Part I: A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires. Should promisor reasonably have expected/ foreseen that the promisee was going to rely on this?

o Reliance can take form or action or forbearance.o Reliance needn’t be detrimental- there are different ideas about what is detrimental.

Part II -A charitable subscription or a marriage settlement is binding under subsection without proof that the promise induced action or forbearance

Three requirements for promissory estoppel:1) Promise,2) Reasonable reliance on that promise,

a. Reasonable to promiseeb. Foreseeable to promisor AND

3) Enforcement is required to prevent injusticePromissory estoppels stops someone from using lack of consideration as a defense Feinberg v. Pfeiffer Co.- Since she relied on the promise when she retired, they let her recover on the

theory of promissory estoppel to prevent injustice. Cohen v. Cowles Media Co.- Cohen gave information to media on condition that they not reveal his

identity. They leaked his identity, and Cohen recovered on grounds of promissory estoppels because it would be unjust not to do so.

D & G Stout v. Bacardi- Promised to keep the company alive, so they did not sell the company, lost a lot of money when they sold six months later (reliance), recovered on promissory estoppels.

C. Restitution as an Alternative Basis for RecoveryIf restitution is the reason for recovery, restitution is also used as the measure of recovery

This is because often, restitution is the reason for recovery even where there is no promise.

1. Quasi ContractsWhen the plaintiff cannot prove that the defendant made an enforceable promise, the plaintiff may seek restitution damages if the defendant has been unjustly enriched at the plaintiff’s expense.

Gains procured through another’s loss are unjust and should be restored. o Usually this doctrine is employed where there is a mistaken benefit like a bank deposit,

or a medical emergency. Court will impute to unjustly enriched party a promise to pay. (legal fiction)

o A contract implied in law. Two step analysis:

Has someone been enriched? Would it been unjust to let that benefit sit?

If you are in a relevant line of work, and you assist someone in that line of work, presumption is that you intend to be compensated for it. (Cotnam v. Wisdom)

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o Somebody must have received and retained the benefit, and you must have done no more than necessary

The doctrine of a contract implied in law (quasi contracts) cannot be used as a means to substitute a defendant when you have a contract with another party. (Collano v. Oakwood)

III. Precontractual LiabilityThere are circumstances in which parties are bound and potentially liable before the formation of a contract.

Some of these situations are contracts in and of themselves, but they are precontractual in the sense that they come before the main contract.

A. Option ContractPromise made by an offer that effectively limits the offeror’s power to revoke, for a fixed period of time.

It is a separate contract that must be supported by consideration (most common is the paid-for option contract)

B. Firm Offer (UCC §2-205)An offer by a merchant to buy or sell goods in a signed record which by its terms give s assurance that it will be held open and is not revocable, for lack of consideration, during the time stated, or it no time is stated, for a reasonable time, but in no event ay such period of irrevocability exceed 3 months, but any such term of assurance is in a form supplied by the offeree and must separately be signed by the offeror.

Offer will be kept open despite lack of consideration/relianceo Must be buying/selling goods (see 2-105)- all things 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 ssecurities, and things in action. “Goods also includes the unborn young of animals and growing crops and other identified things attached to realty…to be severed from realty

o Must be by a merchant (see 2-104) a person who dealsin goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction or to whom such knowledge or skill may be attributed by

o Must be kept open for some specified period of time (or a reasonable amount of time not to exceed three months.

C. Reliance

1. Option Contract Created by Part Performance (R2d. §45)1) Where an offer invites an offeree to accept by rendering a performance and does not invite a promissory acceptance, an option contract is created when the offeree tenders or begins the invited performance or tenders the begin of it.2) The offeror’s duty of performance under any option contract so created is conditional on completion or tender of the inviteted performance in accordance with the terms of the offer.

Particularized employment of promissory estoppels. 11

Reliance of person who begins to perform estops A from using the doctrine of consideration to say there was no contract.

Brooklyn Bridge Hypo Limited to offers seeking acceptance only by performance

2. Reliance on an Offer when acceptance is by promise (R2d. §87(2)) Another kind of option contract.

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.

Impute a promise to offeror that will keep offer open. Eliminates need for consideration by the creation of an option contract. Drennan v. Star- Use promissory estoppels becauseofferee can’t accept the offer until he gets

the main job done.

3. Reliance on an offer when acceptance is by offeree’s choice (R2d. §62)Where an offeree is invited to choose and the offeree starts to perform or promises, they are both bound to the main contract.

If by promise, then it is a bilateral contract and both parties are bound to maintain contract. If If by performance, then beginning of performance is a promise to finish, so it’s a bilateral

contract, and both parties are bound to maintain the contract.o In Brooklyn Bridge hypo and Drennan case, the offeree is protected by an option

contract (they are not bound by their part performance or reliance, but here there is no option contract to protect them, so they are bound just as the offeror.

4. Reliance on a Promise that is not an offer (R2d. §90)Use promissory estoppels because it only requires a promises, not an offer. (Hoffman v. Red Owl)

If expectancy cannot be calculated since promise is not enough to determine expectancy, reliance will be measure of damages. (Cyberchron, at-will jobs)

D. Pre-Contract ContractPreliminary contract about the main contract, but it is not an option contract because neither party may force the other party into the main contract.

Agreements to agree are not enforceable because there is no considerationA pre-contract contract is enforceable because normally, in negotiations, there is no requirement to deal in good faith, but in a pre-contract contract, parties have agreed to operate in good faith and exclusivity (consideration).

Grossman v. Channel- agree to negotiate exclusively and in good faith and give Grossman a letter of intent. This is enforceable because:

o both parties showed intent by actingo it is definite enough to be specifically enforcedo there is bargained for exchange.

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IV. The Requirement of DefinitenessAfter you have assent and consideration, you still don’t have an enforceable contract unless the terms of the contract are sufficiently definite. (Specificity/clarity) Two reasons for requirement:

Court must be able to figure out if there’s been a breach. (Need to know the terms of the deal.) Court needs to be able to fashion a remedy.

o Since in contracts we want to give someone the benefit of the bargain (give them what they expected) we must know what is expected.

R2d. §33. Certainty- terms left open may show lack of assent1) You must have definiteness/specificity.2) The terms of a contract are reasonably certain if they provide the

basis for determing the existence of a breach and for giving an appropriate remedy (how much definiteness you need)

3) The fact that one or more terms of a proposed bargain are left open or uncertain may show that a manifestation is not intended to be understood as

UCC §2-204 (3) Even though one or more terms are left open a contract for sale does not fail … If parties intended to be in a deal, and there is a reasonably certain basis for giving an appropriate remedy.(code is more flexible)

Must either know the terms, or have means of determining them when needed. Toys, Inc. v. F.M. Burlington Co= New rent based on going rate at mall at the time

o Sufficiently definite because the rate can be determined with reference to the prevailing rate … OR

o Not definite enough because prevailing rate not defined and they used the term renogitiate

UCC §2-305 Unless otherwise agreed, the court can determine price. Oglebay Norton v. Armco

Different levels of Specificity Required: SQA- Need to know where the parties were Expectancy: need to know where the parties were going Specific Performance: must know exactly where the parties were going- highest degree of

specificity.

V. Statute of FraudsIn general, it is good to get contracts in writing, if only for evidentiary purposes, but there is no requirement that contracts need to be in writing, unless it is one of four types that must be in writing

1) contracts taking more than a year to perform 2) Interests in real Property 3) Sales of goods priced at or above $500

o The price it is being sold at, court will not second-guess value.

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4) Suretyship (cosigner)o Anytime someone promises to answer for someone else’s debt, it is suspect because

there is no consideration.It is possible for contract to be in more than one of the categories.

If that is true, you will need to satisfy the writing requirement for all of the categories.

A. Judicial HostilitySince the statute of frauds makes a writing requirement, the lack of the writing becomes a defense, which can sometimes lead to unfair results- letting someone win on a technicality when they would lose on the merits.

Hostility is manifest in three ways: o 1)Tend to narrowly construe these categorieso 2) Tend to find the writing requirement easily satisfiedo 3) Sometimes courts will enforce the contract even if there is not a writing and it does

fall into one of the categories. (Monarco v. LoGreco)

B. Requirements§131 General Requisites of a Memorandum

Unless additional requirements are prescribed by the particular statute, a contract within the statute of frauds is enforceable if it is evidenced by any writing, signed by or on behalf of the party to be charged, which,…

o a) it must identify what we are buying and sellingo b)it must make clear that it is a contract, or if even just the offer is in writing

Need something signed by the party seeking escape.o c) must state the essential terms.

§2-201 Formal Requirements; Statute of Frauds When they update this, it will be moving from $500 to $5,000 (43)p. 203, “Writing” includes printing, typewriting, or any other intentional reduction to

tangible form. (37) “Signed” includes using any symbol executed or adopted with present intention to adopt or

accept a writing.’ (31) “Record” means information that is inscribed on a tangible medium or that is stored in an

electronic or other medium and is retrievable in perceivable form.

C. One Year + General Rule: Promise incapable of being performed within one year after making contract needs to be in writing.

Contracts that by their express terms cannot be fully performed within a year of their making must be in writing. (need dates, or a description of duration, description of work not enough.)

Clock starts ticking from when contract is made, not when performance beginsExceptions to one year requirement:

(1) Mere possibility (even fictional possibility) of completion in one year (2) Alternative Options with one option that could be completed within one year.

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In most courts, if there is an unspecified duration, most courts will hold that the contract needn’t be in writing. (Klewin v. Flagship)

o It must be possible to end by fully performed (so if A promises to work for B and he works for five months, than quits, full performance hasn’t taken place. If, however, A promises to work for B for five years or until B dies, it wouldn’t have to be in writing, because it is possible that you can fully perform in under a year if B dies in that amount of time.)

1. Lifetime Clauses

D. Sale of Interest in land§125- Promise to transfer or buy any interest in land needs to be in writing. Exception (Richard v. Richard): Part Performance (really reliance):

o Taking possession and making improvements that:1) Would have not been done had oral contract not existed, AND2) Amount to detrimental reliance.

E. Sale of Goods Priced at or Above $500§§2-201(1)General Rule- Contract for the sale of goods for $500 or more is not enforceable unless in writing§2-201(2) Between merchants, confirmation of an order in writing is sufficient and buyer, who has reason to know of its contents, has written objection.

Creates a situation where silence can be acceptanceException: §2-201(3)

1) custom manufactured goods 2) party admits in court that there was a deal. 3) part performance(goods shipped/accepted, payment made)

First words of §2-201(1) imply that this is an exclusive list of exceptions (“except as otherwise provided in this section), but §1-103(b) says that unless displaced by provisions of UCC, common law is cool…

So what about estoppel?Most jurisdictions say that estoppels is ok. (allowed in proposed amendment.)

F. Suretyship§110- Promise to pay the debt or default of another enforceable only if in writing. Promise must be made to creditor Third party must actually be liable for debt.Exception: Leading Purpose Rule§116- If a promisor’s chief purpose in making the promise of suretyship is to further his own interests, his promise does not fall within the SOFNovation §115: change in contract, substituting one party for another, so a new contract, not subject to statute of frauds for suretyship.

G. Equitable OverrideUCC §2-201(3); R.2d §139

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VI. Policing the Bargaining ProcessThree categories of constraints on freedom of contracts:

1) Status/Capacity of the Parties2) Process/Behavior of the Parties3) Substance/content of the agreement (next semester)

A. MinorsContract of a minor, other than for necessaries, is voidable at his option. (Kiefer v. Fred Howe Motors)

The right to disaffirm continues to a reasonable time past the age of majority.o The right to disaffirm continues to a reasonable time past the age of majority. o §14- Infants- Unless a statute provides otherwise, a natural person has the capacity to

incur only voidable contractual duties until the person’s eighteenth birthday. You can lose the right to disaffirm by ratifying the contract, but a minor cannot

ratify the contract Can ratify the contract by making changes to the contract, or by

continuing to perform It doesn’t matter whether kid lied about an age- that’s the type of thing a

person lacking judgment would be do.o Party in protected class has the option to void the contract, the other party does not.o Two basic exceptions (Δ wants to apply exception, but court rules that it’s not

applicable here): Necessities Emancipated Minor- p. 313 No one really questions that a line as to age must

be drawn somewhere blow which a legally defined minor must be able to disaffirm m his contracts for non-necessities.

In some jurisdictions, they allow minors to become legally emancipated.

B. Lack of Mental Capacity§15- (part 1) A person incurs only voidable contractual duties by entering into a transaction if by reason of mental illness or defect

A) he is unable to understand in a reasonable manner the nature and consequences of the transaction (has to do with what you know, more extreme/old fashioned crazy standard M’Naghten ), OR

B) he is unable to act in a reasonable manner in relation to the transaction and the other party has reason to know of his condition (know what they’re doing, but they’re out of control.)

Orterle v. Teacher’s Retirement Bd.- School should have known- they knew she was on leave for mental problems.

Must have more evidence than just the deal at issue to establish lack of mental capacity. (Cudnick v. Broadbent) Court felt he had the capacity

C. Intoxication§16- A person incurs only voidable contractual duties by entering into a transaction if the other party has reason to know that by reason of intoxication:

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a) He is unable to understand in a reasonable manner the nature and consequence of the transaction, OR

b) He is unable to act in a reasonable manner in relation to the transaction

D. Pre-Existing Duty RulePromise or act that you’re already obliged to do is not consideration for promise to pay greater amount than set by original contract.

Exceptions:o 1)Similar but different acto 2)???Pre-existing duty owed to a third party

Exception: Modification of Duty (R2d. §89) – A promise modifying a duty under a contract not fully performed on either side is binding:

a) If modification is fair and equitable in view of circumstances not anticipated; ORb) To the extent provided by statute; ORc) In reliance on promise (promissory estoppels)

Exception: Modification of Goods Contract- UCC §2-209- An agreement modifying a contract within UCC-2 needs no consideration to be binding; however, good faith and prohibition against duress are still required.

E. Duress R.2d §175- Contract voidable by victim when duress:

1) Induces assent by an improper threat that leaves no reasonable alternative,2) Assent induced by improper threat from non-party unless other

R.2d§175 K voidable by victim when duress (1) induces assent by an improper threat that leaves no reasonable alternative, (2) assent induced by improper threat from non-party unless other party in good faith and w/o reason to know of duress either gives value or relies materially on the K

For economic duress, need to show: (1) wrongful threat to economic well-being, (2) threatened party could not obtain goods from alternative source, and (3) lawsuit is not feasible course of action (no appropriate remedy)

When threat is improper: R.2d§176(1) (a) threat of crime – “sign this K or I’ll shoot you” (b) threat of criminal prosecution – “we’re going to put your son in jail unless you pay his debt” (c) threat to sue for false claim – ie, Fiege v. Boehm – if Π knew there was no way Δ could be father (d) breach of duty of good faith and fair dealing

F. Undue InfluenceR.2d§177 undue influence is unfair persuasion by dominant party

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K voidable by victim when undue influence:(1) induces assent, (2) assent induced by undue influence from non-party unless other party in good faith and w/o reason to know of duress either gives value or relies materially on the K

Unfair persuasion generally accompanied by several of the following elements (Ottorese):(1) unusual/inappropriate time(2) unusual place(3) insistent demand to be finished at one(4) extreme emphasis on negative consequence of delay(5) multiple persuaders of dominant party(6) absence of 3d party advisers(7) statements that no time to consult adviser/atty

G. MisrepresentationR.2d.§159 Assertion that is not in accord with the facts • See R.2d.§§ 161-164K voidable by victim when misrepresentation

(1) induces assent by an improper threat that leaves no reasonable alternative, (2) assent induced by misrepresentation from non-party unless other party in good faith and w/o reason to know of duress either gives value or relies materially on the K

Defense requires misrepresentation and reliance on material fact, not just opinion Exception: statement of opinion can be treated as statement of fact in:

(1) fiduciary relationship, (2) where one party has tricked another, OR (3) where one party has greater opportunity to learn truth

VII. RemediesExpectancy: Preferred. Amount necessary to put the π back in the position he would have been had the K been performed (not always possible)

Reliance: Amount necessary to put the π back in the position he would have been had the K not been performed (SQA-state of affairs prior to K)

Restitutition: Amount necessary to put the ∆ back in the position he would have been had the K not been performed (any benefits, cost avoided & net enrichment, given by the π to the ∆ prior to breach of the K)

Efficient Breach Hypo: when a promisor will exercise the option to breach and pay expenctancy damages instead of performing when it is in her economic interest to do. Gain from breach > Damages to be paid for breach

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