Final Contracts Outline Cimino

8/9/2019 Final Contracts Outline Cimino

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Contracts OutlineIntroduction

Two key elements of a K

A promise or promises and

Enforcement

A contract is an agreement the law will enforce.

Hill v. Gateway Judge Easterbrook pro-business opinion (U of hicago!

Ks are formed when e"pectations of both sides are met

#aw looks to protect those e"pectations

#aw and Economics sol$ing the problem through the most cost

e%ecti$e method with wealth ma"imi&ation in mind

'usinesses can operate more eciently when the terms of the K may

be included with the product

)$erlooks the application of U * +-+,- additional terms to a K arent

applicable unless the consumer e"plicitly agrees in merchant-consumer transactions

ompare with Klocek

I. Has a deal been made?Tested through an Objective StandardA. Mutual Assent

Lucy v. Zehmer

Facts:/arties signed contract o$er drinking for #ucy to buy0ehmers farm for 1,K2 a reasonable price. 0ehmer laterreneged.

Rule: #ucy actually belie$ed 0ehmer was serious2 A34 was

justifedin belie$ing so. 3o e$idence that 0ehmer was toodrunk to make contract.

)b5ecti$e theory of Ks6 modern theory

7easonable meanings of actions of parties

)utward e"pression manifests intention o$er secret2une"pressed intention

#iteral meeting of the minds not re8uired

7educe business risk and enhance predictability

Undisclosed intentions are immaterial

3ot what the o%eror meant but the reasonable impression

created/olicy9 This decision pa$es the way for a more predictable businessen$ironment. 'usinesses risk less when creating a K as the other partycannot bring in their inward intents.Leonard v. Pepsico

Facts:/epsi ad$ertised 5unk for points2 including :arrier Jet for

; points as a 5oke. Rule:An ad$ertisement doesnt represent a $alid o%er unless

speci


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/reliminary negotiations

=. Ad$ertising+. >n$itation of bids or other o%ers

Gleason v. Freeman

Facts:?ellers use E-bay auction to


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An o%er is the manifestation of willingness to enter into a

bargain2 that is made in a way that 5usti desire to purchase2 thisbank ok ?kolnick says Ceah but hurry >m going to sell it

soon. :e sells it not to third party. There is no $alid o%er if party accepting knows that some

further e"pression of assent is needed

Ad$ertisements are requests for oersunless speci


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Facts:/epsi ad$ertised 5unk for points2 including :arrier Jet for; points as a 5oke.

Law:Ad$ertisement is generally not o%er2 but solicitation ofone. )b5ecti$e person must construe an ad as an o%er2 which e"cludesacts in 5est. 3o real o%er made by /epsi.Le&kowit' v. Great (inneapolis Surplus

Facts9 4 published in newspaper C?at Nam2 B new coats2 worthO=,,2 mplied in Lact K)%eror can bind themsel$es to terms by their

conduct e$en if they dont necessarily write it down and say Chere2 signhere

C. *estro,in t3e O$er)%ers create the power of acceptance in the o%eree. Dhen an o%er ismade in face to face con$ersation2 the default rule is that it e"pireswhen the parties part company.Rest 89 +o'er o! Acce&tance

An o%er gi$es the o%eree a continuing power of acceptance

)%eree cannot accept until the o%er is complete

Rest 8 Met3ods o! 5erminatin t3e +o'er o! Acce&tance

Termination may occur by

=. 7e5ection or counter o%er by the o%eree+. #apse of timeB. 7e$ocation by the o%erorI. 4eath of the o%eror or o%eree

. Indirect Revocation)ickinson v. )odds ;Indirect Revocation


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Rule:'efore acceptance2 parties free to change F if o%erre$oked2 then there is no meeting of minds at time ofsupposed acceptance. 4ickinson knew o%er wasre$oked because 4odds sold to Allen. 3o contract. ?eeRestmt. )8

2. 7a&se

(innesota Linseed *il %o. v. %ollier +hite Lead %o. Acceptance is a%ected once dispatched unless the K is

an option

7e$ocation when recei$ed

)%ers are $alid only for a reasonable amount of time (N,

days!

7easonable time depends upon the circumstances and

character of the sub5ect matter of the K

>tems that Quctuate greatly in price o$er short periods of

time re8uire immediate acceptance

)%ers for unstated periods of time lapse after a

reasonable time

A reasonable time contemplates how rational parties

would ha$e understood each other8. *eat3 or Inca&acit, o! O$eror

Rest. )o A power of acceptance is terminated at the time

speci


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more years (until N!2 but no consideration paid by arlton. >nS2 arlton tries to in$oke option ecilia says no. )%er wasopen bc no consideration2 but issue is whether ecilia re$okedduring that time

onsideration gi$en to hold o%er open creates a binding option

to contract

)ption sells the power to re$oke 4eath doesnt terminate an option

An option without consideration is simply an o%er (doesnt need

to be held open as promised wHo consideration!

)%ers accepted within the time limit of an option without

consideration will create a K unless the o%er is withdrawn priorto acceptance

The time limit will generally represent a reasonable amount oftime

oard o& ,(- v. ur"ess

Facts:'urgess signed doc granting E;U @, day option to buy

her home. 4oc acknowledged receipt by 'urgess of CO= andother $aluable consideration. E;U admits they ne$er paid the

consideration. E;U sends 'urgess notice of intent to e"erciseoption. 'urgess re5ects E;Us price.

Trial9 'urgess acknowledging receipt of consideration is good

enough F it doesnt matter if she didnt actually get it(formalities matter!

Appeals9 Dritten acknowledgment of receipt of consideration

creates rebuttal presumption that consideration has passed Fnothing bars the presentation of e$idence to contradict suchacknowledgment Cshe hadnt gotten anything she bargained foryet

'ut2 e$en if there was no consideration2 the o%er was still open

unless she e%ecti$ely re$oked before acceptance

'urgess said after signing2 called E;Us agent and said optiono%

>f she did this2 she e%ecti$ely re$oked before E;Us acceptanceand no K was created F E;U said this didnt happen

ase remanded to


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o An o%er that is reasonably e"pected to cause action or

forebearance on the part of the other party and does so2creates a binding option

CC 2@2B9 ;"IRM O""0RS=:>f a merchant makes an o%er2 in

writing2 signed2 and which contains an assurance that it will beheld open2 then it will be regarded as irre$ocable in spite of the

absence of consideration for the time stated or a reasonabletime2 but no longer than B months.

reates e"ception to 'eall rule

0. Modes and Met3ods o! Acce&tanceAcceptance of an o%er is a manifestation of assent to the terms madeby the o%eror in a manner in$ited or re8uired by the o%er. Anacceptance is a statement or act that indicates the o%ereesimmediate intent to enter into the deal proposed by the o%er. As longas the acceptance takes place while the o%er is outstanding2 a K isformed as soon as the acceptance occurs. An o%er can only beaccepted by the person whom it in$ites to furnish the consideration.5ermination o! an o$er:

7e5ection

ountero%er 7e$ocation

#apse

Rest 9) Acce&tance b, +er!ormance -ecessit, o! -otifcation

Dhen an o%er in$ites acceptance by performance2 no

notif the o%eree knows the o%eror would ha$e diculty learning of

his performance2 the o%erors duty is discharged unless=. The o%eree e"ercises reasonable diligence to notify the

o%eror+. The o%eror learns of acceptance within a reasonable time2 orB. 3oti


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after bank appro$ed 4s credit2 / went to start reroo?T>3GU>?:E4 L7); #A?A##E9

o ?>;>#A7>T>E?9 both E$ertite and #a?alle drafted

the documents to protect themsel$es2 both hadan issue with the signature

o 4>LLE7E3E?9 Dorked in E$ertites bene


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2dams v. Lindsell +, )3)#40 )* 0H3S %2S,

Mailbo1 rule

Acceptance is e%ecti$e upon dispatch e$en if the letter

is lost

All other communications are e%ecti$e upon receipt2

meaning once the writing comes into the persons

possession Along with death terminating an o%er2 this represents

the most glaring holdo$ers from sub5ecti$e theory

7esistant to change due to its uni$ersal nature

4oesnt apply to option Ks under 7est2 but does under

common law

>f you dont want to be sub5ect to rule2 use a di%erent

medium or speci## 4>?T>3GU>?:E4 L7); /E/?>)

o :ere2 money reward e"isted. :arrier 5et wasnt. >f

it was2 #eonard wouldnt ha$e been unreasonable(archiondo v. Scheck

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Facts:4 o%ered to sell real estate to buyer (o%eree! and

agreed to pay commission to broker (/!. )%er had @-daylimit for acceptance. 4 re$oked the o%er2 / recei$edre$ocation on the @thday. #ater that day2 broker goto%erees acceptance.

'eginning of performance upon a unilateral K creates a

binding option Lull performance within terms of the o%er are re8uired

)%eror must let performance be done

/erformance must be completed in a reasonable time

Rest. )9 ;Above=

). Im&er!ect Acce&tances C7 MIRROR IMAE0 R709 Any di$ergence in the f re5ection of o%er creates a

counter o%er2 o%eree becomes o%eror F meaning o%eree isnow Cmaster of the o%er F this is the o%erees last shot to getterms in

CC 2@2B) ;reasonableness=:>f parties of a K ha$e not

agreed to a term2 a term which is reasonable in thecircumstances is supplied by the court

CC 2@2B ;reasonableness=:7easonable meaning of term

is usually term that operates against the party that supplies it)orton v. %ollins 5 2ikman %orp.

Facts:(arpet manHo%eror! wants damages from

4(o%eree! selling carpets of cheaper 8uality than what /paid for. 4 said / was bound to arbitration agreement onback of 4s sales acknowledgment form (said Csub5ectto!. / said their oral agreements were di%erent2 butthey took deli$ery of paid for carpets without ob5ectingto the terms.

o 4istrict court9 Under +-+, (B! F U does not

impose an arbitration term on the parties wheretheir K is silent on the matter. onQict betweenarbitration and no arbitration clause would resultin no arbitration clause becoming e%ecti$e. Arbagreement was not among the Cagreed uponthings. Assumed oral agreement o$er the phone arb terms were di%erent

o Appeals court9 4s arbitration agreement was

3)T within +-+,(=! pro$iso (Csub5ect tolanguage not enough!9 acceptance was not madee"pressly conditional on assent to additionalterms (formation under = (K recogni&ed!2 go toM+2 additional terms are added to K unless theymaterially alter the K2 case was remanded to


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T:)UG:T UE?T>)39 Dhat if they were within pro$iso

(=! ?ince / didnt assent to it2 which would be re8uired24s arb terms would be out. 'ut2 you would go to (B! andterms of the K would be what the parties agreed on (thisis 3)T 4s arb terms!

CC 2@2B/(?EE 'E#)D!once material terms areagreed upon2 a K e"ists and any trade of additionalterms does not $oid K

#attle o! !orms

Additional terms that dont materially alter the terms of

the K are treated as proposals in addition to the K andbecome e%ecti$e after =, days unless ob5ected to byone of the parties. ('etween merchants!

Klocek v. Gateway

Facts:/ brings suit against 4 alleging 4 induced him to

purchase computer special support packing with falsepromises of tech support. / claims breach of K warranty. 4 says / must arbitrate under 4s standard

terms included in the bo" power cableHinstructions camein. Ga$e 1 days for / to return the computer F 7uled for /

U * +-+, does apply

Additional terms dont apply under * +-+, unless

e"plicitly agreed to (Dhen consumer is in$ol$ed!

'uyer is o%eror2 Gateway accepted as o%eree and

proposed additional terms

omparisons between this case2 Dorton2 and Hill

encompass ma5or issues of the course

Terms that Accompany Product

ProCD v. Zeidenberg

Facts:ProCD has license inside box. Zeidenberg bough

!roduc and "iolaed license.

Law:#oice on ouside$ license on inside$ righ o reurn

%or re%und is an acce!able &a' o% doing business. (ince

onl' one %or)$ * 2+207no rele"an$ alhough conrac sillcanno be unconscionable,&hich i isn- in his case.

Hill v. Gateway, Klocek v. Gateway

Facts:Plaini%% bough /ae&a' &ih conrac inside he

box$ had !roble)$ and did no &an o sub)i o arbiraion.

Hill:,udge &as an asshole * 2+207does # a!!l'

because here &as onl' one %or) and re%und allo&ed.

Klocek:* 2+207D( a!!l' because er)s in box areaddiional er)s o &hich !urchaser did # consen. #o

e"idence loce gi"en noice.

UCC 2-207 Explained

,1(ar &ih an acce!ance or &rien con%ir)aion ha"ing "ar'ing er)s.s i ex!ressl' )ade condiional on assen o he "ar'ing er)s

YEIf it is an acceptancei o!eraes as a counero%%er$ &hich

)a' in general be acce!ed "ia !arial or co)!lee

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!er%or)ance. !o to ".

If it is a written confirmation$ i o!eraes as an o%%er o )odi%'

a !re+exising conrac. !o to 2.

#$ !o to 2.

,2ddiional er)s ser"e as !ro!osals %or an addiion o he conrac and

be&een )erchans beco)e !ar o% he conrac unless he o%%er ex!ressl' li)is acce!ance o is er)s:

he' )aeriall' aler he conrac: or

noi%icaion o% ob;ecion has alread' been gi"en or is gi"en

&ihin a reasonable i)e a%er recei! o% noice o% he

addiional er)s.,3% he &riings o% he !aries do no esablish a conrac$ he conduct of

the parties may establish a contractconsising o% he er)s on &hich heir

&riings agree and an' su!!le)enar' er)s !ro"ided b' oher !ro"isionso% he c.

". *e!eatin Areements #ased on Misunderstandin o! t3e 5ermsThere is no mutual assent if the parties ha$e assented to di%erent

things.Ra6es v. +ichelhaus 78 Ships named Peerless/ %lass Hypo9

Any mistaken term can $oid the agreement

Pery sub5ecti$e $iew

lassic case of mutual mistake

E. ConsiderationA #AREAI-0* "OR 0FCHA-E0/urpose of consideration is to distinguish between gratuitous and non-gratuitous promises

a. M5A7 I-*C0M0-5:bilateral promise2 with the promisor trying torenege

3);>3A# )3?>4E7AT>)3 C/E//E7)739 An e"change where

mutual inducement is lacking and its really a gift (other than$alue reasons! F the consideration was a sham F the courtsuspects dressing up a gift to look like a 'LE

3ominal consideration sits in between bargain gift

A way to determine if there was mutual inducement is if there is

a real bene


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duty as a police ocer. 's performance is not consideration. >f' was on $acation in another state2 howe$er2 his performancewould be $alid consideration.

. C3anin our Mind About Areein to Eive ;+romissor,Ei!t=

Kirksey v. Kirksey;Ei!t vs. #"0=

Facts:Didowed womens brother-in-law tells her to sellher land and that he has a place for her to raise herfamily. :e says he has more land than he needs andwants to see herHher kids do well. ?he mo$es2 and aftertwo years2 he reneges on his promise2 re8uired her tolea$e.

;ere gratuitous promises arent enforceable

Gift promises may ha$e conditions that dont represent

consideration

onte"t and surrounding circumstances

Dhat about reliance

ompare to Hamer

Gift $ 'LE9 Use facts to determine whether mindset of

promisor is a Csel


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/romisee su%ered legal detriment (Tramp wasnt legally

obligated to walk around the block! 4etriment induced the promise LA>#? :E7E F walking

around the block did not induce promise of fur coat2 itwas the man being altruistic2 he did it to be a goodperson F 3) 'LE onsideration

/romise induces detriment /romise of fur coat induceswalk around the block

Reed v. -niversity o& #orth )akota 5 #)2)

Facts: 7eed is on scholarship at U342 gets disabled after

running on the same course as a race sponsored by34A4. / sues for 34A4 for negligence. 34A4 says raceregistration forms signed by 7eed (wai$er! was a Kreleasing 34A4 from liability.

7elease forms are supported by consideration as one

party gi$es up the right to sue and the other allowsparticipation

The forbearance of a legal right is a legal detriment

which constitutes good consideration

Rest. /9- a promise for a promise is $alidconsideration if the promised performance would beconsideration6 The promise is enforced by fact of bargain

#"0 CO-SI*0RA5IO- 8 +RO-E 50S5:

o /romisee must su%er legal detriment (34A4 is

not legally obligated to let 7eed run the race!o The detriment must induce the promise (34A4

allowing 7eed to run induces 7eeds promise notto sue F ;utual >nducement!

o The promise must induce the detriment (7eeds

promise not to sue induces 34A4 allowing 7eedto run the race F ;utual >nducement!

8. C3anin our Mind About Areein to C3ane t3e *eal

2laska Packers 2ssociation v. )omenico 3n Sylla$us)idn4t Read

A party cannot demand more compensation for

something that they are already obligated to do bytaking ad$antage of the necessities of the ad$ersary

A party shall not pro


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Rest. >D- a promise modifying a duty under a K not

fully performed on either side is binding ifo The modin5ustice absent enforcement

EU>TA'#E E?T)//E#9 conduct by one party2 which leads toanother party2 in reliance thereon2 to adopt a course of actionresulting in detriment or damage if the KETT?!

>n$ol$es factual misrepresentations that induce relianceRicketts v. Scothorn ;+0 as a S3ield=

Facts:Grandfather gi$es note saying hes going to gi$e

granddaughter enough O so she wont ha$e to work. Giftwas not conditioned on her 8uitting her 5ob. 3ote gi$enwHo consideration2 it was 5ust a promise to make a gift inthe future. Grandfather died and estate didnt want topay the granddaughter. GLathers conduct implied hewants her to 8uit

Dhen a donee prior to re$ocation acts upon a promise to

his detriment2 the donor is estopped from pleading wantof consideration

Argument used in the past by charities

4id promise induce reliance and do we now feel that we

should enforce the promise

Linding of reliance rather than consideration

B critical aspects of early cases

=. Lamilial relationship+. /romise sincerely o%eredB. 7eliance on promise to detriment

)ld rule re8uired full enforcement of the promise

ompare to Hamer

'eginning of doctrine- promise the most important factor

(idwest ,ner"y 3nc. v. *rion Food Systems 3nc.;+0 asS'ord=

Facts: / was a builder contracting to franchise a storewith 4. 4 made / change the design of the building toaccommodate their store. After / was told to Cgo aheadby 42 / changed their building and didnt get thefranchise.

/HE9 4 made a promise (go ahead!2 it was foreseeable /

would rely on it (to get the franchise!2 / relied in fact(modi


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enforcement (court said more info needed here Fperhaps lost opportunity costs!.

;ost important aspect is 5usti


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1. ?ub is bound only to pre$ent in5ustice

E$idence of bid shopping by the general will re$oke any

later reliance argument and free the sub from his bid

Justice :and $iew9 7enegotiation is part of the process

and it is not the 5ob of the courts to get in$ol$ed./romissory Estoppel shouldnt be used in a commercial

setting. Justice Traynor $iew9 Apply 7est. * N,as consideration

for an implied promise to keep the bid open for areasonable amount of time

/rotects 7eliance >nterests

U Art. +- written o%er re8uires no consideration". Statute o! "rauds @ *e!enses

Rest B Classes o! s CoveredThese Ks wont be enforced without a written memorandum orapplicable e"ception9

=. A K of an e"ecutor or administrator to answer for the duty of adecedent

+. A K to answer for the duty of another

B. A K made upon consideration of marriageI. A K for the sale of an interest in land1. A K that is not to be performed within = year from its making

Ks for o$er O1,, were traditionally go$erned by the ? of L but are nowregulated by the ? of L pro$isions of the U * +-+,=.

The primary purpose of the ? of L is e$identiary2 pro$iding

rele$ant e$idence of the e"istence and terms of a K. Ks that areco$ered are so because of their comple"ity or importance.

R2 8B:The one year pro$ision (K made at moment of formation! >f cant be completed in = year (Cwithin ?)L!2 need writing

>f it can be completed in a year without breach of K (not Cwithin

?)L!2 do 3)T need writingRadke v. renon

Facts: 4 o%ered to sell / property for O+@+2 / accepted. / triedto complete the sale but 4 refuses. 4 o%ered to sell lots toneighbors for O+=+ with a letter2 a few didnt want to buy soprice increased to O+@+. The re8uirements for the memo by thecourts were satistems that must be included

=. /arties to the K+. >tems to be soldB. General termsI. onsideration

ourts loosely interpret the signature re8uirement

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=. #etterheads+. Typed communications6 must be clear it is from the

person specin5unctions

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4amages

?pecin determining materiality2 account is taken of relief by

reformation2 restitution2 or otherwiseo /E7 doesnt bar e$idence that establishes the mistakes

o /arties must be mistaken as to the same assumption or

it is a unilateral mistake2 making the K $oidable only ifthe $oiding party does not bear the risk

o ;ust a%ect the basic assumption on which the K wasmade

Rest. 9)

o A party bears the risk of mistake when it is allocated to

him in the agreement2 he is aware of the mistake at thetime of formation that he only possesses limitedknowledge2 or the risk is allocated to him by the court

Unconscionability

7est ** =1+2 =1I

Rest. 98

o A mistake at the time of formation by one party may

make the K $oidable if he doesnt bear the risk and thee%ect of enforcement would be unconscionable or theother party had superior knowledge

Lirst 7estatement only allows rescission for mistake due to the

fault of another or where one party has reason to know that themistake e"ists

Rest 99

Dhere a writing embodying an agreement fails to e"press the

correct terms due to a mistake in the writing2 the court may

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reform the writing to e"press the agreement to the e"tent thatit does not a%ect Brdparty good faith purchasers

Rest 9/

)nly a mistake that in$ol$es a failure to act in good faith will

bar a$oidance or reformationC. "raudK "raudulent or Material Misre&resentationK and

-ondisclosure/art law2 /art common senseHalpert v. Rosenthal ;"raudulent Misre&resentation=

Facts:4 (buyer! says court shouldnt enforce K to buy /

(sellers! house because /s misrepresentation as to termites. 4said / and /s agent had intentionally misrepresented the houseas being termite-free. / armati$ely stated there was notermite problem. / says2 for fraud. misrep2 there has to bee$idence that / knew they were lying. 4 said they cant pro$idethat e$idence2 but innocent misrepresentation is grounds forrescission.

>f one is induced into a contract by material

misre&resentation2 the contract may be rescindede$en if

the misrepresentation was innocent when the other party relieson it to his detriment

Knowing representations are easy cases

?peaker of the misrepresentation bears the loss

4i%erent cateories o! misre&resentation9

=. 4eceit (tort!- re8uires some degree of culpability on the partof the misrepresenter. V has burden of pro$ing that W madestatements that were false and likely to decei$e V

+. ;aterial misrepresentation- a suit to rescind a contractbased on misrepresentation whether it was innocent or not

B. >nnocent misrepresentation- the speaker actually belie$eswhat he is saying. Un8ualif assent is induced by fraudulent or material

misrepresentation the other party may $oid the K

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=!;ateriality +! Das there reliance B!7easonable

7elianceA. %3%,R* ,=2(PL,;-O-*ISC7OSR0=: Grain merchant was the


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dealing demand it F refusal to speak constitutes unfairconduct!

o / intended to mislead F it was the silence that showed

she had info that they wouldnt see for themsel$es(latent concealment! and would need to know

Intentional 3idin or nondisclosure t3at 'as sinifcant

to t3e contract justifes rescission Lair 5ustice and dealing re8uire both parties to disclose material

facts that greatly a%ect $alue

;inor conditions not included

Silence is !raudulent i! a material !act is concealed or

su&&ressed '3en ood !ait3 reGuires disclosure

Dhat constitutes a material fact or condition

ompare to wintonand e"amine the arguments and

ambiguities in between these two positions

#ess up front transaction costs

Rest

These types of cases now allocate risk through standard

contracts*. nconscionabilit,#ooks at both bargaining process and terms of the bargain whilecombining elements of misrepresentation2 undue inQuence2 duress2and nondisclosureCC 2@8B2+illiams v. +alker/0homas Furniture %ompany

Enactment of U by ongress has allowed for contracts that

are unconscionable at the time of their formation to be $oidable

The contract must ha$e an absence of meaningful choice by

one of the parties as well as unreasonable terms

4oes moral obligation become a legal obligation

;eaningfulness of the choice may be negated by a gross

ine8uality of bargaining power onsiderations to obser$e in contract9

=. ;anner in which the contract was entered+. 7easonable opportunity to understand the terms of the

contract with respect to the partys education of lack thereofB. 'argaining power

Dhether the terms are so unfair the enforcement should be

withheld

/rimary concern is the terms of the contract in the light of the

commercial background and the commercial needs of theparticular trade or case

Dhat about freedom to contract

Triggering mechanisms are if there are apparent or ob$ious

ine8ualities of bargaining power and it appears that the partytook ad$antage

?hould stores ha$e to protect customers from themsel$es

?uccess depends on the facts

Dhen the concept of unconscionability de$eloped it appeared

that it would be huge force in K law6 The opposite has been true

;any oppose its application in commercial bargaining

/orrison $. ,ircuit ,ity

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?ubstanti$e9 A contract is unconscionable when its terms are

unfair and unreasonable

/rocedural9 The relati$e bargaining power

Adhesion contract- a standardi&ed contract o%ered on a take it

or lea$e it basis

Adhesion contracts dont e"ist where meaningful choices e"ist

?tandardi&ation of contracts allows for the use of cheaperpersonnel2 greater eciency2 and more operational Quidity

III. 43at are t3e 5erms o! t3e *eal?

Dhat are the terms of the contract

Dhat do the contract terms mean

A. Inter&retin 53e Areement: #e,ond t3e 4ritten 4ord0hread"ill v. Pea$ody %oal %o.

Facts9 (Agreement contains terms parties didnt

discussHe"press F GA/ >3 K!9 / hired by 4 to probe holes. /se8uipment gets stuck. 3o discussionHe"pression as to whowould pay for damaged e8uipment. (E"trinsic E$idence case F

outside of writing2 no problem2 brought it in! 5rade CustomF places risk of probe loss on driller (4! when no

other agreementsaid otherwiseo 5o be bindinK must be suLcientl, eneral so

&arties could be said to 3ave contracted '3T9 #))K L)7AG7EE;E3T C/7>)7 )7 )3TE;/)7A3E)U? T) >3:/)!

+. Is t3e 'ritin


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b. R2 jurisdiction9 admit any rele$ant e$idenceto determine f partial F E"trinsic E$idence admissibleb. Merer Clauses9 indicates writing


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Rest. 2B@A completely integrated agreement is adopted by

the parties as a complete and e"clusi$e statement of the terms

;erger clauses that frustrate the intentions of the parties

should not be enforced

Dhen parties disagree as to whether a document represent the

full agreement of the parties and conQicting e$idence e"ists2 a

factual determination is necessaryRo"ers v. f no integration clause e"ists2 rele$ant terms that arentdiscussed in the written agreement re8uire e"trinsic e$idence

?ophistication of the parties is an important factor as they tend

to lea$e out important pro$isions

Trade customs can always be brought in from oral testimony

/E7 doesnt bar information regarding conditions precedent

An agreement is fully integrated when the writing is intended as

a complete and e"clusi$e statement of the terms

An agreement is partially integrated regarding the terms

speci


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Agreement before or simultaneous with the adoption of a

writing are admissible to establish=. Dhether the writing is an integrated agreement+. That the agreement is only partially integratedB. The meaning of the writingI. >llegality2 fraud2 duress2 mistake2 lack of consideration2 or

other in$alidating cause1. Grounds for granting or denying rescission2 reformation2speci


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3o ambiguity e"ists in most 5urisdictions when a deGU>T )L >3TE3T>)3!9 / constructed bldg


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+. A general term 5oined with a speci


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. >mpracticabilityS. Lrustration of purposeN. 7epudiation=,. Lailure of Ade8uate Assurance of Luture /erformance==. ;aterial 'reach

#. Conditions

onditions may be used to allocate risk.5,&es o! Conditions01&ress

an be stated e"pressly (and unambiguously!

an be stated ambiguously (and so implied-in-fact!

Constructive- )rder performance

>mplied by law F Cto do 5ustice

E"9 ser$ices F usually paid after ser$ice rendered (i.e.2 autobody work6 employment!

Dhen we talk about e%press conditions2 we cannot say Cbreach. >f a conditionisnt met2 there is not Cbreach but the duty to abide by the agreement ise"cused.All non@&er!ormances are not breac3es

Strict Com&liance4i%erence between promise and condition

E"press conditions modify promissory obligations

Lunction of e"press conditions (8uestion of fact!

Allocate risk of the non-occurrence of critical e$ent to one party or

the other

7eQects parties intent F so thats how it is Cfound

Dhen something is a 8uestion of fact2 it means that the parties can contractaround it.

Condition &recedentF the obligation ne$er arises if the condition isnt metCondition subseGuentF the obligation happened2 but later the condition

failed

+romissor, obliationsare under the control of the partyConditionsare not under the control of the party

E"press conditions are di%erent from promises4i%erences between promise condition

Triggering of obligation

o /romise - Agreement between the parties (Lormation!.

/romises are Cabsolute. )nce formation has happened2they are not changingHgoing away.

o ondition F uncertain e$ent (Cconditional!

)bligation re8uires what le$el of performanceHoccurrence

o /romise F absolute but can be performed partiallyo ondition F ?trict compliance

E%ect of not meeting the obligation

o /romise F breach (partial or material!

/artial breach F stuck

;aterial breach F full - done

o ondition F dischargeHe"cused from K duty

29


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Rest. 22)@ A condition is an event '3ic3 must occur be!ore&er!ormance under a is due

onditions are about when2 if e$er2 a party must perform4est $. 70

,onditions precedentmust be closely followed when e"pressly

laid out in an agreement

Rest. 229E%ects of 3on-)ccurrence of a onditiono /erformance of a duty sub5ect to a condition cannot

become due unless the condition occurs or is e"cusedo 3on-occurrence of the condition discharges the duty

under the K once performance of the condition can nolonger occur

o 3on-occurrence is not a breach unless a duty e"ists for

that conditionPullman %5R v. 0uck/it/away rid"eport 3nc.

Facts:()3?T7UT>PE )34>T>)3? )L EY:A3GE >3

U77E3T /7AT>E!9 4 (seller! and Pestpro (buyer! signed a Kfor sale of property. P deposits =,,K in escrow with 4s lawyers.E"tended closing period many times2 Ithtime 4 told P to pay

fee2 P refused. P wanted out of the K F Ps lawyer found loophole(incorrect description of land sold!2 sent letter cancelling the Kon B defects2 no closing took place. Trial court found for 4

Unless otherwise specif one party is to go


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Facts:(L>3A# /A;E3T /7)P>?>)3- C/A-D:E3-/A!9 Gen

contractor had two Ks with two subs for building pro5ect. 'othKs said gen would make


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4aiver=. intentional relin8uishment of a known right6 or+. E"cuse of the nonoccurrence of or a delay in the occurrence of a

condition or duty Dai$er may be e%ectuated by one party (unilateral!

Dai$er is retractable in absence of reliance

Dai$er only applies to conditions F doesnt apply to promisesModifcation

the changing of the terms of the agreement which may diminish or

increase the duty of either party The result of the bilateralaction of both parties to the sales

transaction ;odinstead2

the e8uitable doctrine of estoppel looks to whether the partyasserting estoppel would otherwise su%er an ine8uitable detrimentbased upon the conduct of the other party

)ynamic v. (achine 5 ,lectric %o.

Facts9 / (buyer! agreed to buy lathe from 4. /ayment in segments F in

meantime2 / rented a lathe from 4. / told 4 rental lathe had problemsand if these problems werent f modif wai$er2can retract unilaterally if youre the one that bene


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wai$er2 wai$er can be inferred from circumstances and partiesconduct

(ay %enters 3nc. v. Paris %roissant

Facts:=, year lease agreement bHt landlord and lessee2 lease

began April =12 =NS@2 guarantee signed that if 4 defaults2 must

pay penalties2 if in default after two years indi$idual guarantorsliable2 lease says to be paid on ;/)??>'>#>TH>;/#>E4 )34>T>)3!9 / and 4 entered K

F 4 agreed to let / ha$e use of ;usic :all2 so they can use themday and night for concerts. After K was made and beforeconcert2 hall destroyed by


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The occurrence of unforeseen accidents that destroy the reason

for the K may discharge the duties of the parties

This stipulation is im&lied

Im&lied conditionF the continued e"istence of the hall being

up at the time of concert (the continued e"istence of the hall isnecessary for the ful


35/43

Facts:4 chemical manufacturer renting warehouse from /2

some chemicals are ha&ardous but / not e"pressly aware whensigning lease2 city ordinance later passed that states youcannot ha$e ha&ardous materials2


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;U?T #))K AT T:E >7U;?TA3E? F LAT?

Lor frustration of purpose2 impracticability2 and impossibility C0-5RA7

ISS0: A77OCA5IO- O" RIS

0. 01cuse 53rou3 Actions O! a +art, #e!ore +er!ormance isOt3er'ise *ue

Truman 8. 9latt ons ,o." Inc. $. chupf 7epudiation must be $ery clearly communicated

Anticipatory repudiation must be clear and une8ui$ocal

Rest. 29B- a repudiation is a statement indicating that a

party will commit a breach that would gi$e the other a claim fordamages or a $oluntary armati$e act which makesperformance impossible

Dhether an anticipatory repudiation occurred is a 8uestion for

the 5ury

7etraction may occur if the other party has not substantially

altered their position and does not immediately refuse theretraction

Rest. 29- a failure to pro$ide ade8uate assurance may

represent a breach when a party reasonably demands them Rest 29- a party may retract its repudiation

;odern doctrine re8uires V to mitigate damages

#orcon Power v. #ia"ra (ohawk Power

4emands for ade8uate assurance of future performance are

allowed in long and comple" deals

4emands for assurance may come

=. ommunication from one party making the other unsure+. uestions about sol$ency

#aw is mo$ing toward allowing parties to seek assurances

>f a demanding party o$erreacts2 they may become the

breaching party

These demands allow parties to reach an e8uilibrium in terms ofuniformity and reliability in resol$ing problems without 5udicialinter$ention

>f the demanding partys assurance isnt met2 they may take

reasonable action to act as if repudiation occurred

Rest. 2)8

". 01cuse +rovided b, a Material #reac3 b, t3e Ot3er +art,/ossible responses to breach9

=. Dai$er+. AmendmentB. /artial breachI. Ade8uate assurance1. Total breach

Rest 28/@ performance can only be suspended due to the otherpartys material breach6 the duty to tender performance is conditionedon the other partys not being in material breach;i#son $. ,ity of ,ranston

A contracting party may cease performance and seek damages

if a material breach that goes to the essence of the K occurs

uestions of materiality are to be determined by the 5ury unless

no reasonable person could


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o E"tent of depri$ation of bene


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The failure to perform one part does not bar reco$ery for

performance of another The performance of each di$ision of the ser$ice will be impliedly

a condition precedent to the reco$ery of a correspondingportion of the price

The party who has performed one of these partys has the right to its

agreed e8ui$alent 5ust as if the parties had made a separate contractwith regard to that pair of corresponding parties (7+K +I,!

6. Ho' *oes t3e 7a' 0n!orce t3e *eal?A. S&ecifc +er!ormance

The granting of speci


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B. The in5unction wont pre$ent the employee from possessingreasonable mean of making a li$ing (pre$enting thee8ui$alent of re8uiring W to perform the K!

I. The party seeking the in5unction is not in default or unableto perform its obligations (lean hands!

/olicy 5ustin contrast to the past2 where ?/ was granted typically for

heirlooms or priceless works of art2 ?/ is now commonlygranted for output and re8uirements Ks in$ol$ing a peculiarlya$ailable source or market

A party may not get ?/ e$en if agreed to in the K2 if the

breaching partys sole remaining obligation is to pay money#. *amaes and t3e Conce&t o! 0Lcient #reac3

:olmes- there is no moral component to the law of contracts. A partymust pay damages for breach but nothing else.

This attitude is supported by the lack of puniti$e damages in contactlaw.0Lcient breac3- if W can make more money by breaching a K than Wwould ha$e to pay in e%pectation damagesto V2 than e$eryone isbetter off by W breaching and repairing V while W uses its resourcesmore eciently

This theory fails to take into account transaction costs and attorneysfees.. +enaltiesK 7iGuidated *amaesK and 0Lcient #reac3

Judge /osner represents one of the many proponents ofenforcing li8uidated damages clauses. Especially when a

substantial corporation is in$ol$ed2 the promise to pay a penaltyclause is a way of reducing credit risk and may be essential to some$alue- ma"imi&ing Ks. The penalty clause could also represent a$aluable negotiating tool when one party wishes to take ad$antage ofan ecient breach.2. *issentin 6ie' on 0Lcient #reac3

ertainty of performance is the essential $alue of many Ks andto allow parties to breach at will undermines the public con


40/43

Hawkins v. (cGee

C:airy :and ase

General rule gi$es e"pectancy damages

/uts V in as good of position as he would ha$e been in had W

performed

4i%erence in $alue

E"pectancy may be dicult to compute in some conte"ts 4amages are compensation for a breach measured in the terms

of the KPanorama illa"e Homeowners 2ss4n v. Golden Rule Roo1n"

"acts:4 contracted to install roofs and issue manufacturers

warranties. onstruction was defecti$e and warranties notissued

Rule:>n5ured party must establish cost to remedy breach6

contractor then bears the burden to challenge the e$idence toreduce the award.

Lein"an" v. (andan +eed oard

"acts:Deed control company - ity mistakenly assigned large

lots to other company Lor a breach of K2 V is entitled to compensation for the loss

su%ered2 but can reco$er only the amount that would ha$ebeen gained by full performance

>n a K for ser$ices2 the $alue of the K when breached is

=. Vs reasonable e"penditures that would ha$e been spent inperformance subtracted from

+. the anticipated re$enues

V may reco$er lost profits if they are reasonable and not

speculati$e

)$erhead costs are not deducted as they must be paid anyway

and thus factoring them in causes V to pay them twice

K price is reduced by reduced by e"penses actually sa$ed

Groves v. f there is a windfall2 it must go to the innocent party

ost of completion $s. 4iminution in $alue

orrect doctrine is the cost of remedying the defect

W is liable for the reasonable costs of doing what they promised

to do and ha$e willfully declined to do V has bargained for the performance2 not the increase in the

$alue of the land

>f the court


41/43

"acts:4 contracted for the right to strip mine coal on /s

property for nterest costs

I. 7eliance costs0. 7imitation on Mone, *amaes

7imitations on damaes

=. Loreseeability (7+K B1=HU +-=1!+. ertainty (7+K B1+!B. ;inimi&ation or mitigation (7+K B1,HU +-=+!

ConseGuential damaes- the dislocation of ones business by thefailure of another party to perform.Rest 89B;= Avoidabilit, as a 7imitation on *amaes

(=! E"cept as stated in ?ubsection (+!2 damages are not r

eco$erable forlossthat the in5ured party could ha$e a$oided without undue risk2 burden or humiliation.

(+! The in5ured party is not precluded from reco$ery by the rule stated?ubsection (=! to the e"tent that he has made reasonable butunsuccessful e%orts to a$oid loss.

Parker v. 8?th%entury/Fo! Film %orp.

"acts:Actress contracted for lead in


42/43

4i%erent and inferior employment will not be considered a

substitute re8uiring mitigation

Just because employment is different2 doesnt mean V may

re5ect it

Geographical concerns depend on the career path

;easure of reco$ery for a wrongfully dismissed employee is the

salary for the period of ser$ice agreed upon2 less the amountthe employer pro$es the employee has earned or reasonablycould ha$e earned from other employment

The employment must be comparable or substantially similar

/olicy F party who has been in5ured cannot sit idly by and allow

damages to accumulate

Ultimate 8uestion is whether the employee acted reasonably

Rest 89F Unforeseeability 7elated #imitations on 4amages

(=! 4amages are not reco$erable for loss that the party in

breach did not ha$e reason to foresee as a probable result ofthe breach when the contract was made.

(+! #oss may be foreseeable as a probable result of a breach

because it follows from the breach9a. in the ordinary course of e$ents2 orb. as a result of special circumstances2 or beyond the

ordinary course of e$ents2 that the party in breach hadreason to know.

Hadley v. a!endale

"acts:/ sends component of steam engine for replacement F 4

delays shipping component causing /s mills shutdown to bee"tended

V may only reco$er damages that were contemplated at the

time of formation (the direct damages F the cost of shipping!

Llow of damages go only as far as foreseeable

>f a K is made under special circumstances2 they must be known

to both parties in order for lost pro


43/43

onse8uential damages arent awarded if they could be

pre$ented by co$er or otherwise

V isnt precluded from damages by unsuccessful attempts to

co$er

>t is reasonable for V to rely on Ws promises that the breach will

be remedied

V isnt re8uired to tell W how much income relies on the K2 aslong as the lost income was reasonably foreseeable

V must produce e$idence of the loss in proportion to the conte"t

of the claim (The bigger the claim2 the more e$idence re8uired!

;ass produced items to anonymous buyers dont allow for

conse8uential damages

Documents

Final Contracts Outline Cimino