My Contracts II Outline

8/8/2019 My Contracts II Outline

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Contracts II OutlineProfessor Albert

For Test: 35 multiple choice questions (2pts each); 2 writing questions with 2 sub parts each-Spend 2 hrs on multiple choice, 1 hr on essay

-One of the Essays: What are all of the arguments she can make and what is the likelihood of the success ofeach argument

I. Defective formulation and indefinite agreements

a. General rule: the terms of an agreement must be reasonably definite to create an enforceable

contract, as perRestatement 33.i. What approach should we take to determine if an agreement is too indefinite to be

enforceable?1. Make sure there is incurable uncertainty about what the parties agreed to.2. Make sure the uncertainty relates to a material aspect of the relationship between

the parties.ii. Raffles v. Wichelhause - The Peerless Case

1. Who should bear the risk of ambiguity of terms?a. Restatement 206: Interpretation against the drafter: In choosing among

the reasonable means of a promise or agreement or a term thereof, thatmeaning is generally preferred which operates against the party whosupplies the words or from whom a writing otherwise proceeds.

2. Suppose what was said was ambiguous but both parties had the same ship inmind- would there be a contract in that case?

a. Ambiguities : Basic rule. If the agreement is ambiguous on its face, orbecomes ambiguous in performance, parol evidence is admissible to

clarify the parties intent.i. But, if the ambiguity is so fundamental that there is no way that thecourt could determine what the parties intended, there may be noenforceable contract at all.

ii. Minority view: the trend is to admit parol evidence morefrequently. Even where the terms of a contract appear to have aplain meaning; parol evidence will still be admitted to interpret theterms if the language of the contract is reasonably susceptible tothe interpretation offered by the party wishing to admit the parolevidence.

b. Restatement 20 Effect of Misunderstanding

i. (1) There is no manifestation of mutual assent to an exchange if theparties attach materially different meanings to their manifestationsand

1. (a) neither party knows or has reason to know the meaningattached by the other; or

2. (b) each party knows or each party has reason to know themeaning attached by the other.

ii. (2) The manifestations of the parties are operative in accordance

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1. Restatement 204 . Supplying An Omitted Essential Term - When the parties to a

bargain sufficiently defined to be a contract have not agreed with respect to a termwhich is essential to a determination of their rights and duties, a term which isreasonable in the circumstances is supplied by the court.

a. Omission of Price Termi.

No K under33ii. 2-305(4). Where they intend to conclude a contract for the sale of

goods, however, and the price is not settled, the price is areasonable price at the time of delivery if

1. (a) nothing is said as to price, or2. (b) the price is left to be agreed by the parties and they fail

to agree, or3. (c) the price is to be fixed in terms of some agreed market

or other standard as set or recorded by a third person oragency and it is not so set or recorded. UniformCommercial Code 2-305(1). Or one party may be given

power to fix the price within limits set by agreement orcustom or good faith. Similar principles apply to contractsfor the rendition of service.

III.Infancy and mental incompetence

a. Capacity to Contract Generallyi. Restatement 12. Capacity To Contract

1. No one can be bound by contract who has not legal capacity to incur at leastvoidable contractual duties. Capacity to contract may be partial and its existencein respect of a particular transaction may depend upon the nature of the

transaction or upon other circumstances.2. A natural person who manifests assent to a transaction has full legal capacity toincur contractual duties thereby unless he is

a. 13 - under guardianship, orb. 14 - an infant, or

c. 15 - mentally ill or defective, ord. 16 - intoxicated.

b. Infancy - Voidablei. Restatement 14. "Unless a statute provides otherwise, a natural person has the capacity

to incur only voidable contractual duties until the beginning of the day before the person's18th birthday"

1. Those who deal with minors do so at their own risk, and knowing of the fact thatthe minor can void the contract at any time, but they (adult) cannot.ii. If minor turns 18 after the contract, after time silence will count as affirmation of its

terms.iii. Bowling v. Sperry

1. Minor (P) buys a car (with help of aunt) from D for $140 and returns it afterdiscovers that it is defective. D estimates that repairs will cost $45-95, so P triesto disaffirm the contract. D responds that Ps grandmother and aunt were present

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at the time of purchase. Trial court holds for D. Reversed.2. Can a minor enter into a contract to purchase a non-necessary item? No.

a. General rule that contracts of minors are voidable. Irrelevant whetheradults were present at the time of purchase, or even loaned P money.

b. Lying Exception: Contract valid if minor lies about his/her age (depends

on jurisdiction). In this case, D was aware of Ps age when sale wasnegotiated.c. Necessity Exception: Infants can contract for necessities if they are offered

at a reasonable price. Burden of proving this is on the D. In this case, itdoes not seem that the car was necessary to P.

d. Standard remedy is restoration- just give back whatever the minor has.Does not matter even if P caused the damage to the car. The parties do notneed to be placed in statu quo (whereas restoration would require the itemto be back in its original state).

c. Mental Incompetence - Voidi.

Restatement 15 - Mental Illness of Defect - a person incurs only voidable K duties ifmentally incompetent.1. Unable to understand nature and consequences of transaction2. Unable to act in reasonable manner in relation to transaction & other party knows

ii. CitiFinancial, Inc. v. Brown1. D, a severely retarded individual, and his mother obtained a loan from P that

consolidated their debts and lowered their monthly payments. The D was requiredto sign a contract with an arbitration clause that required any claims against P tobe arbitrated. D brings suit alleging fraud and breach of contract, and seeks toavoid arbitration on the grounds that D is incompetent and thus the agreement isvoid. P argues that the Ds mother signed the agreement as guardian, and that the

issue of competence should be decided by an arbitrator.2. Can a party void a contract based on incapacity? Yes.a. If a party lacks capacity to consent, there is no contract.b. Whereas contracts with infants or incapacitated individuals are voidable,

those with incompetent individuals are void. For instance, contacts withdrunks can be affirmed once they sober up, but contracts withincompetents can probably never be confirmed.

d. Intoxication Voidablei. Restatement 16 - Intoxicated Persons

1. A person incurs only voidable contractual duties by entering into a transaction ifthe other party has reason to know that by reason of intoxication

a. (a) he is unable to understand in a reasonable manner the nature andconsequences of the transaction, or

b. (b) he is unable to act in a reasonable manner in relation to the transaction.ii. Evidence of impairment must be present

IV.Mistake

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a. Definedi. Restatement 151 - Mistake Defined - A mistake is a belief that is not in accord with the

facts.b. Mutual Mistake

i. Restatement 152 - When Mistake Of Both Parties Makes A Contract Voidable1. Where a mistake of both parties at the time a contract was made as to a basic

assumption on which the contract was made has a material effect on the agreedexchange of performances, the contract is voidable by the adversely affected partyunless he bears the risk of the mistake under the rule stated in 154.

2. In determining whether the mistake has a material effect on the agreed exchangeof performances, account is taken of any relief by way of reformation, restitution,or otherwise.

ii. Beachcomber Coins, Inc. v. Boskett

1. Facts : Pl purchases rare dime from Df. Both parties believe it is genuine and

worth $500 (price); no fraud. 3rd party wants to buy dime from Pl for $700,

provided its authentic. Then discovered its counterfeit. Pl sues to rescind K.

a. No one assumed the risk ; both thought it was real. Court decides to use

industry custom of a return privilege for altered coins. Pl can return &get money back.

c. Unilateral Mistakei. Restatement 153. When Mistake Of One Party Makes A Contract Voidable - Where a

mistake of one party at the time a contract was made as to a basic assumption on whichhe made the contract has a material effect on the agreed exchange of performances that isadverse to him, the contract is voidable by him if he does not bear the risk of the mistake

under the rule stated in 154, and1. (a) the effect of the mistake is such that enforcement of the contract would beunconscionable, or

2. (b) the other party had reason to know of the mistake or his fault caused themistake.

ii. Boise Junior College District v. Mattefs Construction

1. Facts : Bids for construction K, costs estimated at $150k. Df places bid for $141k+ promise to pay diff with next lowest bid if they refuse to perform. Df bid verylow due to mistake. Next lowest bidder $149k. Pl sues to recover diff.

2. Court uses a 5-part test to decide whether a mistake in bidding in public works K

can be rescinded for mistake: dont need to know this test.

a. Mistake is material? omission of an item represents 14% of total cost yes.

b. Unconscionable to enforce? Cost for Df is $151. yes.

c. Mistake due to violation of positive legal duty or culpable negligence?Clerical error. No

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d. Party to whom bid is submitted will not be prejudiced except by loss ofbargain? Pl expected to pay $150k, next lowest $149k. No hardship.

e. Prompt notice of error given? Notice before Pl could accept. Yes.

d. Substance vs. quality as a basic assumption - Party excused from performance if there is a

mistake about the very nature/character of the thing being bargained over. No relief if it is just adisagreement or mistaken belief over the quality or value.

i. Sherwood v. Walker

1. Facts : Pl wants to buy cow from Df, and chooses one that both parties believe isbarren, and only worth price of its beef $80. Df discovers cow is not barren andworth $750+, and refuses to sell.

2. Substance (nature/character) vs. quality

a. Substance - (majority view). Mistake made on what was actually sold

the beef or the breeding cow.

b. Quality (dissent) b/c it was the same cow, whether it was barren orbreeding

e. As is Clauses Buyer is assuming the risk

i. Lenawee County Board of Health v. Messerly

1. Facts : Pickles buys property from Messerly. Neither party knew that there was anillegal septic tank there. K said that buyer has inspected property & accepts inpresent condition. Board of health subsequently obtains an injunction & says its

uninhabitable by humans until sewage fixed. Pickle seeks to rescind/avoid Kbased on the mutual mistake.

2. Contract cant be rescinded due to a mutual mistake as to the nature of theproperty when the K included an as is clause b/c buyer had assumed the risk.

f. Who bears the risk?

i. Restatement 154. When A Party Bears The Risk Of A Mistake1. A party bears the risk of a mistake when

a. the risk is allocated to him by agreement of the parties, orb. he is aware, at the time the contract is made, that he has only limited

knowledge with respect to the facts to which the mistake relates but treatshis limited knowledge as sufficient, or

c. the risk is allocated to him by the court on the ground that it is reasonablein the circumstances to do so.

ii. When a Party bears the risk of mistake ( 154)

1. When by agreement risk is allocated to him

2. He is aware, at time K made, that he has only limited knowledge with respect to

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facts to which the mistake relates but treats his limited knowledge as sufficient

3. Court allocates risk b/c its reasonable to do so.

iii. Ayer v. Western Union Telegraph Co.

1. Plaintiff sends offer for sale to buyer via telegraph (Df). Df makes a mistake intransmission, and offer sent to buyer for less than Pl wanted. Pl still sold to buyer,then sues Df for diff in value.

2. The person who chose the means of communication bears the risk.

g. Theres a Mistake, Now What?

i. Restatement 155. When Mistake Of Both Parties As To Written Expression JustifiesReformation - Where a writing that evidences or embodies an agreement in whole or inpart fails to express the agreement because of a mistake of both parties as to the contentsor effect of the writing, the court may at the request of a party reform the writing to

express the agreement, except to the extent that rights of third parties such as good faithpurchasers for value will be unfairly affected.

ii. Restatement 156. Mistake As To Contract Within The Statute Of Frauds - If

reformation of a writing is otherwise appropriate, it is not precluded by the fact that thecontract is within the Statute of Frauds.

iii. Restatement 157. Effect Of Fault Of Party Seeking Relief- A mistaken party's fault infailing to know or discover the facts before making the contract does not bar him fromavoidance or reformation under the rules stated in this Chapter, unless his fault amountsto a failure to act in good faith and in accordance with reasonable standards of fairdealing.

V. Fraud

a. When Misrepresentation makes a K Voidable not necessary that misrepresentation wasintentional; a negligent or even innocent misrepresentation may be sufficient to make a Kvoidable if it is material.

i. Restatement 159 Misrepresentation Defined1. A misrepresentation is an assertion not in accord with the facts.

ii. Restatement 160 When an action is equivalent to an assertion (concealment)1. An action intended or know to be likely to prevent another from learning of a fact

is equivalent to an assertion that the fact does not exist

iii. Restatement 164. When A Misrepresentation Makes A Contract Voidable - when itinduces a party to assent and:

1. When one party makes a fraudulent or material misrep, on which other partyjustifiably relies

2. When a 3rd party makes a fraudulent or material misrep, on which a partyjustifiably relies, unless the other party to the transaction in good faith & w/oreason to know of misrep gives value or relies materially on the transaction.

iv. Restatement 162. When A Misrepresentation Is Fraudulent Or Material when it

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induces a party to assent, and:1. He knows or believes that the assertion is no in accord with the facts, or2. He does not have the confidence that he states or implies in the truth of the

assertion, or3. He knows that he does not have the basis that he states or implies for the

assertion.b. When Reliance is Justified - Must show that you in fact relied, and that it was justifiable.However, if misrep is intentional, may not need to show reliance is justifiable.

i. Restatement 1711. Not justified when its an assertion of Intention only, as long as intention is

consistent with reasonable standards of fair dealing. ( 171(1))2. If reasonable, promisee may interpret a promise as an assertion that promisor

intends to perform ( 171(2))3. A recipient's fault in not knowing or discovering the facts before making the

contract does not make his reliance unjustified unless it amounts to a failure to actin good faith and in accordance with reasonable standards of fair dealing. ( 172)

c. Non-Disclosure as a Misrepresentation and the Duty to Disclosei. Non-disclosure does not necessarily amount to fraud, but one cannot falsely imposeinformation on the other party (or if there is silence in bad faith). If the information is inthe public domain where one party could have obtained it with due diligence, then thereis no duty to disclose.

1. Laidlaw v. Organa. Plaintiff to sell tobacco to Defendant. News spread that War of 1812 is

over, and price of tobacco expected to go up once war was over. Buyercalls seller next day and wants to buy the tobacco. Seller didnt know waris over, but asked buyer if there was any news. Buyer silent; purchasemade.News was in public domain & both parties had access to info.

Defendant had no duty to disclose. However, you cannot by implying oracting in a certain way to impose on the other party so that they wouldinterpret it in a certain way. Jury would need to decide if silence made inbad faith.

b. Even in contractual situations where a party to a transaction owes no dutyto disclose facts within his knowledge or to answer inquiries respectingsuch facts, the law is if he undertakes to do so he must disclose the wholetruth.

ii. Restatement 161. When Non-Disclosure Is Equivalent To An Assertion1. (a) Where he knows that it is necessary to correct a previous statement or false

impression2. (b) Where he knows that disclosure would correct a mistake made by other party

as to a basic assumption on which K made, & if non-disclosure made in bad faith.3. (c) Where he knows the disclosure would correct a mistake made by other party

as to a writing4. (d) If there is a special relationship of trust& confidence btwn the parties.

a. Failure to Correct a Mistake (161(b)) If one party knows that the otheris making a mistake as to a basic assumption, failure to correct thatmisunderstanding will constitute a misrepresentation if the non-disclosure

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amounts to a failure to act in good faith or to act in accordance withreasonable standards of fair dealing.

iii. Hill v. Jones1. Pl wants to buy house from Df. Looking at house, Pl sees something that looks

like termite damages & asks Df if it is, Df answered that its water damage. House

passes a termite inspection, and Pl buys the house. Then Pl finds out there hadbeen termite infestation in the past, causing $5k in damages, and sellers knew andnever told anyone.If Hill hadn't asked about the ripple, then probably no duty todisclose. But they asked. Saying it is water damage may be factual, but heprobably knows that he is misleading them into believing that there are no termiteproblems by that statement. He knew they were making a mistake (161(b)), anddidnt correct that mistake. But court still has to decide if the misrepresentationwas material or not.

a. Positive Concealment 160. when you act in a way that is intended oryou know its likely to prevent the other from learning a fact, even thoughits not verbal. (Ex: Maybe in Hill they put boxes on termite holes

specifically so that inspector wouldnt have seen it).b. Half-Truths ( 159 comment b) Of part of the truth is told, but anotherportion is not, so as to create an overall misleading impression, this mayconstitute misrepresentation.

d. Misrepresentation of Fact vs. Opinioni. Misrepresentation must be of fact, rather than opinion (which is usually merely

puffing). However, there are special circumstances that make an assertion of opinionactionable.

ii. Restatement 169. Reliance on an opinion is not justified unless:1. When there is a special relationship of trust & confidence, that recipient

reasonably relies

2. Recipient reasonably believes that, as compared with himself, the person whosegiving the opinion has a special skill, judgment or objectivity with respect to thesubject matter

3. Recipient is for some other reason particularly susceptible to a misrep of the typeinvolved.

4. A statement of a party having superior knowledge may be regarded as a statementof fact although it would be considered as opinion if the parties were dealing onequal terms.

iii. Vokes v. Arthur Murray, Inc.1. Pl bought a whole bunch of dance lessons and is alleging that Df induced her into

buying them by telling her she was a wonderful dancer, and encouraging her thatshe should keep progressing, when in fact this was not true.

2. Dfs were experts in the field (they had superior knowledge), so their opinionmattered, and Pl takes it at face value (& theyre not dealing on equal terms). Dfbelieved the opposite of what they actually told her (he lied). Although Df had noduty to disclose, once he decides to disclose, he must tell the truth.

iv. Restatement 168. Reliance On Assertions Of Opinion An opinion is one of belief, w/ocertainty as to the existence of a fact or expresses a judgment on something. A recipientmay interpret that the assertion is not incompatible with his actual opinion, and that he

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knows enough facts to justify in him forming the opinion.

VI.Duress and undue influence

a. Duress Generally

i. Defense of duress is available if Df can show that he was unfairly coerced into enteringinto the contract, or into modifying it. The essential rule is that duress consists of anywrongful act or threat with overcomes the free will of a party.

1. Restatement 174 When duress by physical compulsion prevents contractformation

a. If conduct that appears to be a manifestation of assent by a party who doesnot intend to engage in that conduct is physically compelled by duress, theconduct is not effective as manifestation of assent

2. Restatement 175 When Duress by Threat Makes a Contract Voidable - Where

assent is induced by an improper threat by other party that leaves victim with noreasonable alternative.

a. Also if its a 3rd party who threatens, unless the other party enters in goodfaith, doesnt know of duress, and gives value or relies materially on thetransaction.

3. Subjective standard: Look at the subjective to determine if someones free willhas been overcome. Moral compulsion or psychological pressure may constituteduress if the subject of the pressure is overborne and he is deprived of the exerciseof his free will. Also you would take into account if a person of ordinary firmnesswould have also been coerced in the situation.

a. Rubenstein v. Rubensteini. Under duress by his wife, Pl conveyed to her property. She

threatened to poison him w/ arsenic etc., plus her dad in jail for

murdering ppl w/arsenic, so this shows he really believed shewould do it.ii. This court used a subjective standard: the partys state of mind is

relevant in determining whether there is an interference of free willin contracting (eggshell plaintiff).

4. Restatement 176 - When a threat is impropera. Threat is improper if what is threatened or the threat itself is a crime or

tort, if criminal prosecution is threatened, if you threaten to sue, but nobasis so in bad faith, or the threat is a breach of the duty of good faith andfair dealing under a K with the recipient.

b. Economic Duressi. There will be duress if the threatened breach would, if carried out, result in irreparable

injury that could not be avoided by a lawsuit or other means, and the threat is made inbreach of the duty of good faith and fair dealing.

1. Austin Instrument, Inc. v. Loral Corp.a. Loral got a govt K, and contracted with Austin for some goods it needed

for the govt K. Then Austin threatened to breach unless Loral agrees tosome new Ks and a raise in the price of the existing K.

i. To find economic duress in a business K:

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1. There is a wrongful threat to breach2. It overcomes free will3. There are no alternative sources of goods,4. Ordinary remedies doesnt cover the loss

ii. Machinery Hauling, Inc. v. Steel of West Virginia

1. Pl contracted to buy steel from Df, and have it delivered to a 3rd party. 3rd partyrejected the steel b/c it was defective, and told Pl to return remaining undeliveredloads. Df told Pl that if it did not pay $31k, price of undelivered loads, it wouldcease doing business with Pl (this potential loss was over $1mm/year).

2. Df has no obligation to Pl - no legal duty to do business w/Pl, and no K exists for

future business. No duty of good faith in negotiations. The threat to not dobusiness in the future is not economic duress.

c. Undue Influencei. Restatement 177 - When Undue Influence Makes a contract Voidable

1. Undue influence is unfair persuasion of a party who is under the domination ofthe person exercising the persuasion or who by virtue of the relation between

them is justified in assuming that that person will not act in a manner inconsistentwith his welfare2. If a partys manifestation of assent is induced by undue influence by the other

party, the contract is voidable by the victim3. If a partys manifestation of assent is induced by one who is not a party to the

transaction, the contract is voidable by the victim unless the other party to thetransaction in good faith and without reason to know of the undue influence eithergives value or relies materially on the transaction

VII. Unconscionability

a. Restatement 208 Unconscionable Contract or Term

i. If a contract or term thereof is unconscionable at the time the contract is made, a courtmay refuse to enforce the contract or may enforce the remainder of the contract withoutthe unconscionable term, or may so limit the application of any unconscionable term as toavoid any unconscionable result.

b. UCC 2-302. Unconscionable contract or Term.i. Provides that if the court as a matter if law finds the contract or any clause to have been

unconscionable at the time of was made, the court may refuse to enforce the K, or mayonly enforce part of it w/o unconscionable terms, or may limit the application of it toavoid an unconscionable result.

ii. No definition of unconscionability this gives courts discretion1. Policy: to prevent oppression and unfair surprise

c. Consumer Transactionsi. The defense of unconscionability is mainly used by consumers

ii. Williams v. Walker-Thomas Furniture Co.1. Buyer enters into installment Ks for sale of furniture. K had a provision where

debt incurred at time of purchase would be added onto outstanding debts, so untileverything paid off, it extended a security interest to everything she bought (eventhough she might have paid that balance already). She defaults, and store wants toget all her stuff.

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2. Ordinarily one who signs a K w/o full knowledge of its terms might be held toassume that risk. But when a party of little bargaining power (no real choice)signs a commercially unreasonable contract with little or no knowledge of itsterms, it is hardly likely that consent was really given to those terms. In such acase, the court should consider whether the terms of the contract are so unfair that

enforcement should be withheld (is it unconscionable?).a. Unconscionability has generally been recognized to include an absenceof meaningful choice on the part of one of the parties together withcontract terms which are unreasonably favorable to the other party.

d. Contracts of Adhesioni. Contracts that have a standardized form and are presented on a take it or leave it basis

1. At common law these Ks have been "presumptively enforceable" - excuse onlywhen P able to show that the drafter actively caused the misrepresentation.

2. Restatement 211- if a party has reason to know that the other party wouldn't

assent to a particular term, that term wont be part of the K.3. Basically, they are enforceable, unless unconscionable

e. Procedural and Substantive Unconscionabilityi. For K to be unconscionable there must be procedural and substantive unconscionability(although a greater degree of one can make up for less of the other).

1. K can be procedurally (manner in which K was enacted) unconscionable if thereis oppression or surprise (unequal bargaining power; lacks meaningful choice).

2. K can be substantively unconscionable where the actual terms of the agreementare so one-sided they shock the conscious (party benefits from unreasonablyfavorable terms).

a. Ferguson v. Countrywide Credit Industries, Inc.i. Pl brings tort claims against employer. Df says K has an arbitration

clause.

ii. Standardized K is enforceable unless its unconscionable patternof one-sided terms1. There was procedural unconscionability oppression;

wouldnt have a choice if you want the job; no negotiations2. There was substantive unconscionability terms so one-

sided it shocks the consciousa. One-sided coverage of claim (those that employee

would bring covered, those that employer wouldbring not covered)

b. Arbitration fees may be unconscionable if costsmore than normal litigation

c. One-sided discovery provision Df had certainadvantages

VIII. Illegality

a. Unenforceable on Grounds of Public Policyi. Agreements Unenforceable on Grounds of Public Policy - Although all the conditions of

a K are satisfied, a K can be held unenforceable if there's something in the bargain,

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performance or objectives that are "illegal" or against "public policy."ii. Where both Parties are guilty of Illegality the court will do nothing; no one can recover

This may be unfair because one party will benefit at the loss of another. However, thedenial of K's enforceability would help public policy by deterring parties from enteringinto these types of agreements b/c of the lack of judicial protection. However, sometimes

a guilty party ends up being rewarded for engaging in the illegal transaction. In this typeof situation, the courts may allow restitution.1. Sinnar v. Le Roy

a. Store owner denied beer license. He agrees with his friend that, through a3rd party, to get him a beer license for $450. Couldnt get license, Pl(owner) wants money back (3rd party has it).

b. Clearly illegal b/c only state can give you this type of license. Pl cannotrecover; we want to discourage people from entering into illegalagreements.

iii. Restatement 178 When a term is unenforceable on grounds of public policy1. A promise or other term of an agreement is unenforceable on grounds of public

policy if legislation provides that it is unenforceable or the interest in itsenforcement is clearly outweighed in the circumstances by a public policy againstthe enforcement of such terms.

2. In weighing the interest in the enforcement of a term, account is taken ofa. the parties' justified expectations,b. any forfeiture that would result if enforcement were denied, andc. any special public interest in the enforcement of the particular term.

3. In weighing a public policy against enforcement of a term, account is taken ofa. the strength of that policy as manifested by legislation or judicial

decisions,b. the likelihood that a refusal to enforce the term will further that policy,c. the seriousness of any misconduct involved and the extent to which it was

deliberate, andd. the directness of the connection between that misconduct and the term.

iv. Hard to define public policy; also would be an argument of last resortv. "Public policy is but a shifting and variable notion appealed to only when no other

argument is available, and which, if relied upon today, may be utterly repudiatedtomorrow."

vi. Court may decide that there is a public policy strong enough to deny enforcement of theK, but not deny restitution. Court will look at a legislative mandate to direct. When noneavailable, the promise or term is unenforceable if the "interest in its enforcement isclearly outweighed in the circumstances by a public policy against the enforcement ofsuch terms."

1. Factors in weighing this interest:a. The parties' justified expectationsb. Any forfeiture that would result if enforcement were denied, andc. Any special public interest in the enforcement of a particular term.

vii. Watts v. Watts1. Parties lived together for 13 years, but never married. When relationship ends,

shes left with nothing. She files suit to get a portion of property accumulated

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final expression.b. When two parties have made a K and have and have express in a writing to which they have both

assented as the complete and accurate integration of that K, evidence whether parol or otherwiseof prior understandings or negotiations will not be admitted for the purpose of varying orcontradicting the writing.

i. Even if PER excludes evidence, may have a cause of action for fraud or other K actionthat may make the writing worthlessii. The person who is trying to exclude the evidence that is not in the writing will raise the

parol evidence rule, he then must prove that the writing was created with mutual intentionto be final and complete

iii. The judge will then evaluate all relevant evidence to establish the intent of the parties andsee if they intended the writing to be final and whether the evidence should came in ornot

1. Four Ways to Get Parol Evidence In : (Must be collateral to K, Consistent with K,

and not expected to be included in the K)a. Enforcement of an oral agreement

b. Modification of the written agreementc. Challenge the contractd. Differing interpretation of Contract

2. Questions to Ask when dealing with Parol Evidencea. Is the K written-

i. YES go to bii. NO PRE does not apply

b. Is the K final-

i. YES go to cii. NO parol does not apply

c. Does the outside agreement contradict the writing

i. YES evidence outii. NO go to dd. Is the K complete- see approaches

i. YES evidence outii. NO evidence in

3. Approaches to decide whether a K is completea. Four corners- look at the document in writing itself and see the intent of

partiesb. Traditional-MAJORITYlooks at the parties objective intent- what

would parties naturally doc. Modern- MINORITY subjective intent- more likely to allow evidence

ind. UCC 2-202-requires that the K be in writing, that it be final and that the

evidence of the prior agreement does not contradict the written K but onlyexplain or supplement it by:

i. (a) by course of dealing /or usage of trade /or by course ofperformance

ii. (b) By evidence of consistent additional terms unless the K iscomplete- to decide whether the K is complete the UCC looks at

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whether the parties would certainly put it on writing. This lets a lotof stuff in, b/c we must be CERTAIN that they people would haveput it on writing

c. The Parol Evidence Rule : provides that to the extent that the parties execute a writing that is and

is intended to be a final expression of their agreement, no parol evidence may be admitted to

supplement, explain, or contradict it. However, to the extent that the writing is not a final andcomplete expression of agreement, consistent but not contradictory parol evidence may beadmitted to supplement or explain those parts of it which have not been finally expressed.

i. The rule deals with both written and oral terms allegedly agreed to prior to the executionof the final agreement, but only terms agreed to orally at the time of the contract (no barof written contemporaneous evidence because a contract can consist of 2 writings so itcould result in a bar of a part of the actual contract).

ii. The fact that the written or oral term is not in the final agreement weighs heavily againstallowing its use, if the parties wanted it they would have included it.

iii. Parol Evidence Rule does not cover terms agreed to after the execution of the writtenagreement these are dealt with as modifications. Exception is when the subsequent

agreement occurred during the same process of formation like a subsequent oralagreement during a closing that happened contemporaneously.1. Contemporaneous Agreements-if another document is executed at the same time

the formal document was signed then that document is treated as part of the K andwill not be subject to the PER but if an oral agreement is made before or at thetime the formal document is signed then the it must meet the elements of PRE inorder to be admitted into evidence. Contemporaneous oral agreements areNEVER allowed in.

iv. Restatement 213. Effect of Integrated Agreement on Prior Agreements (Parol EvidenceRule)

1. A binding integrated agreement discharges prior agreements to the extent that it is

inconsistent with them.2. A binding completely integrated agreement discharges prior agreements to theextent that they are within its scope.

a. Comments:i. (a) Parol evidence rule. This Section states what is commonly

known as the parol evidence rule.... It renders inoperative priorwritten agreements as well as prior oral agreements. Wherewritings relating to the same subject matter are assented to as partsof one transaction, both form part of the integrated agreement.Where an agreement is partly oral and partly written, the writing isat most a partially integrated agreement. See 209.

ii. (b) Inconsistent terms. Whether a binding agreement is completelyintegrated or partially integrated, it supersedes inconsistent termsof prior agreements. To apply this rule, the court must makepreliminary determinations that there is an integrated agreementand that it is inconsistent with the term in question. See 209.Those determinations are made in accordance with all relevantevidence, and require interpretation both of the integratedagreement and of the prior agreement. The existence of the prior

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agreement may be a circumstance which sheds light on themeaning of the integrated agreement, but the integrated agreementmust be given a meaning to which its language is reasonablysusceptible when read in the light of all the circumstances. See212, 214.

iii. (c) Scope of a completely integrated agreement. Where the partieshave adopted a writing as a complete and exclusive statement ofthe terms of the agreement, even consistent additional terms aresuperseded. See 216. But there may still be a separate agreementbetween the same parties which is not affected. To apply the ruleof Subsection (2) the court in addition to determining that there isan integrated agreement and that it is completely integrated, mustdetermine that the asserted prior agreement is within the scope ofthe integrated agreement. Those determinations are made inaccordance with all relevant evidence....

v. Restatement 214 Evidence to prior or contemporaneous agreements and negotiations

1. Agreements and negotiations prior or contemporaneous with the adoption of awriting are admissible evidence to establisha. That the writing is or is not an integrated agreementb. That the integrated agreement, if any, is completely or partly integratedc. The meaning of the writing, whether or not integratedd. Illegality, fraud, duress, mistake, lack of consideration, or other

invalidating cause.e. Ground for granting or denying rescission, reformation, specific

performance, or other remedyvi. Restatement 216: Consistent Additional Terms

1. Evidence of a consistent additional term is admissible to supplement an integratedagreement unless the court finds that the agreement was completely integrated.

2. An agreement is not completely integrated if the writing omits a consistantadditional agreed term which is

a. Agreed to for separate considerationb. Such a term as in the circumstances might naturally be omitted from the

writingvii. UCC 2-202. Final Written Expression: Parol or Extrinsic Evidence - Terms with respect

to which the confirmatory memoranda of the parties agree or which are otherwise setforth in a writing intended by the parties as a final expression of their agreement withrespect to such terms as are included therein may not be contradicted by evidence of anyprior agreement or of a contemporaneous oral agreement but may be explained orsupplemented

1. by course of dealing or usage of trade (Section 1-205) or by course ofperformance (Section 2-208); and

2. by evidence of consistent additional terms unless the court finds the writing tohave been intended also as a complete and exclusive statement of the terms of theagreement .

d. Just as Review: Additional Terms (Battle of the Forms)i. At common law the mirror image rule was followed - acceptance must be a mirror image

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of offer, other wise they are considered counter offersii. UCC 2-207

1. Was the additional term a condition of the acceptance?a. Yes

i. Did the offeror assent to new terms?

1. Yes contract2. No No K under 2-207 (1) but maybe an implied in factcontract based on new terms and the UCC gap fillers

b. Noi. Conflicting Terms Use the knockout rule

ii. Additional Terms In the contract unless they materially alter thecontract

e. Merger Clauses - a clause stating that the writing constitutes the sole and final agreement b/enthe parties

i. Although merger clause may make the court more likely to say the K is final- or totallyintegrated- if the court finds that there is a disparity of bargaining power or the clause

was hidden, or if there was a condition* to the entire K the merger clause may notpreclude the evidence from being admitted.1. Restatement 217- where parties agreed orally that the performance of the

agreement is subject to a condition, the agreement is not final/integrated withrespect to that condition UNLESS the oral evidence SPECIFICALLY contradictsthe writing- Williams v. Johnson

X. Interpretation

a. The relationship between parol evidence and interpretationi. Unless there is no evidence of context available, the meaning of the language used in the

contract is not determined purely by reference to the dictionary meaning of the words, but

by reading the words in the entire context of the transaction.ii. This context includes discussions between the parties in forming the contract, theirprevious course of dealings in prior contracts of the same kind, trade usage, and theirpost-formation course of perfomance.

iii. A written agreement serves to limit the extent to which some contextual evidence may beconsidered in deciding what the parties intended in entering the contract.

iv. The clearer and more comprehensive the writing the higher the barrier to admittingextrinsic evidence.

b. If the plain meaning is of the contract is ambiguous then evidence can be admittedi. Read K No ambiguity apply the plain meaning rule

ii. Ambiguous admit extrinsic evidence to determine parties intent in order to interpret theK

1. Patent ambiguity apparent on the face of the contract2. Latent ambiguity cannot determine if the contract is ambiguous until parties

begin performingiii. Approaches to Interpretation

1. The Plain Meaning- (majority) follow the plain meaning approach in whichthey only let the evidence in if the document is ambiguous, but if the meaning isclear they will not even let the evidence in

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2. Reasonably Susceptible Test (minority) the court will hear extrinsic evidence todetermine if a party could have reasonably interpreted a terms as having aparticular meaning. If the evidence shows that the K is reasonably susceptible tothat interpretation the court will admit the evidence

3. UCC 2-202the code encourages the use of extrinsic evidence by allowing

trade usage, course of dealings and course of performance even if the K is totallyintegrated as long as the evidence does not contradict the written K- explain orsupplement. The court in interpreting the K will consider: ( in order ofimportance)

a. Express terms- that is the best evidence if it says middle of the month andthen it says the 15th of each month then terms are express, must followALWAYS

b. Course of performance- what have we done on this K, the even must havehappen more than once- you have received merchandise for 6 mth on the20th

c. Course dealing- normal way of doing business b/en those two parties-

assuming that they have deal w/ each other before- on previous K italways meant the 5 middle days of the monthd. Trade usage- what ever is the usage of that word in the trade

4. Restatement 201(2)- Whose meaning Prevailsa. Both parties understand the terms k- then the K is interpreted as is-Plain

meaningb. If A knew, or had reason to know both meanings and B only knew one

then Bs interpretation will prevail. If A can show that B should haveknown through trade usage or common knowlegde then A can rebutpresumption in favor of B

c. When neither party knows nor had reason to know what the other party

meant then there is no K b/c there was never a meeting of the minds5. Restatement 202- Rules in Aid for Interpretationa. The intent of the parties is giving great weightb. Words and conduct are to be interpreted in light of all the circumstances-

(course dealings and course performance, trade usage.)c. the K should be interpreted w/ PP in mindd. a writing interpreted as a whole and all writing are interpreted togethere. unless a different intention is manifested

i. words are interpreted w/in their prevailing meaningii. technical words or words of art are given their technical meaning

f. interpretation is usually against the drafter, b/c the drafter has moreadvantage

g. interpretation should favor specific over general termsc. Interpreting Deceptive/Hidden/Surprise Terms in standardized agreements

i. Restatement 211(3)- surprise terms- we are only agreeing to the expectable term

ii. UCC 2-206- if a consumer manifest assent to a standard form, a term contained in theform which the consumer would not have reasonably expected is not part of the k unlessthe consumer expressly agrees to it

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faith effort to satisfy the condition4. Some instances require subjective test: matters of personal taste or fancy. self

portraits are an example; the other party must know it is a subjective decisionbased on personal taste.

a. Although these contracts look like illusory the parties both have an

obligation under the K, he must at least look at the portrait and in goodfaith say he doesn't like it.5. UCC: under the UCC, it is an objective test using "reasonable commercial

standards" (UCC 2-103)- good faith of a merchant is honesty in fact and theobservance of reasonable commercial standards of fair dealing in the trade

6. Employment at will: in at will employment contracts a person could get fired forno reason at all, but the legislature has limited at will discharges by protectingemployers form discrimination firings. Many states say that the resumption of atwill contracts can be altered by stmt in employee handbooks or manuals, or byother K theories such as promissory estoppel, or implied covenant of good faith orpolicies established by the employer

a. Seuberti. Although he did not meet the quotas it was the employee whoprevented him from performing thus his non-performance isexcused

ii. He still could have a cause an action not for the termination but forthe performance b/c seller misrepresented that the items were good

b. Satisfying 3rd partiesi. This happens often in construction k- engineers or architects

ii. The purpose of having a 3rd party decide is to get their subjectiveview on the decision. So it is a subjective test; but, if there isevidence of bad faith, then we will bring in others, to see if it meetsan objective standard.

7. Implicit agreement not to interfere with other partya. There is a duty to perform in good faith, that also means that one will

exercise best efforts to sell or try to perform- service stations across thestreet

b. In all contracts there is an implicit agreement by each party to not interferewith the other party's ability to perform the contract.

c. A party can not intentionally and purposefully do any thing to prevent theother party from performing, and he then may not recover damages for thebreach

d. This case was different b/c he did not know that when he bought fromother party he was diminishing the supply of the market that is why hecould still recover, so they were not acting in good faith

8. Conduct that makes the other party's performance more difficulta. one parties makes performance more difficult by making other purchases

that decreased the supplied of those goods availableb. A party's action that only makes the other party's performance more

difficult will not release the party that must perform from doing so, whenthe party causing the difficulty does so in good faith and does not intend to

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interfere then no release. If in bad faith, then this would amount to abreach due to interference

XII. Warranties, Express Conditionsa. Definitionsi. Restatement 224. Condition Defined A condition is an event, not certain to occur,

which must occur, unless its non-occurrence is excused, before performance under acontract becomes due.

ii. Condition Precedent - condition that must be satisfied before a duty comes into existence.Burden of proof- on the - to prove that the condition was fulfilled Most conditions areof this kind

iii. Condition Subsequent - event that terminates a duty. Burden on the -condition not

fulfilled. i.e.-insurance requires damage and notice before they pay, that is the conditionprecedent. If the policy holder after the notice dont make a claim to be paid then at some

point the duty to pay is terminated, that is the condition subsequentiv. Negative Conditions - things that must not occurred for the other party to perform, butthere must also be a time frame. If it has not happen by the 10th then

v. Express condition - clearly explicit and stated in the K and are always strictly enforced, a

condition is an express condition if the language of the contract, on its face and withoutreference to extrinsic evidence, articulates the intent to make performance contingent onthat event. The court will generally apply the condition strictly, even if results of this aresometimes harsh (see below case)

1. Dove v Rose Acre Farms: In this case the law student was working during the

summer and he wanted to participate in the bonus program. He had to work tenweeks everyday and could not miss any day for any reason. This is a perfect

example of a condition that must be met by him before his boss must perform theact of giving him his bonus. He did not meet the condition, so there was notcontract. He did not get the 5,000 b/c he missed 2 days.

vi. Implied Conditions can be of two kinds

1. Condition implied in fact - is the real agreement of the parties, this conditions aretreated like express conditions - this is a condition that we know the parties reallyintended to be a part of the contract (look at the contextual evidence to determineif one exists or not). Such as the notice that we know the parties intended to begiven in the Wal-noon Case. We know this b/c no one would have written thecontract without the notice, b/c it would not have made sense.

a. Wal-Noon Case: If notice of the damaged roof was found to be an implied

condition then the contract would not make sense. How could thelandlord inspect the roof to make sure no negligence existed on part oftenant if he was not made aware of damage before the roof was repaired.Therefore, he is not held to pay for the roof b/c the tenant did not meet thecondition of giving the landlord notice, which was a condition of the dutyof landlord to pay for the repairs. (notice was implied in fact condition)

2. Condition implied in Law/Constructive - is not on the K and is not necessarilywhat the parties agreed on. The law will construe a condition, they are not very

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strictly enforced - - this is a condition that the court will find was implied in thecontract b/c it will reach a favorable and just outcome. It reaches an appropraiatedecision by saying that the implied condition is one that reasonable parties wouldhave intended in a contract of this type.

vii. Warranties -

1.Implied warranties - to exclude or modify the implied warranty of merchantabilitythe language must mention merchantability by using specific language

2. Warranties v Disclaimers - if k gives both disclaimer and warranty, then the

disclaimer is invalid. This applies when the disclaimer is in writing or givenorally BUT if the disclaimer in is in the K and the warranty is oral the warrantycontradicts the K and the disclaimer stands b/c parol evidence bars the oralwarranty

b. Distinction between conditions and promises: If the act is a condition on the other partys duty,and the act fails to occur, the other party wont have to perform. If the act is a promise, and itdoesnt occur, the other party can sue for damages.

i. Distinguishing: To determine whether a particular act is a condition, a promise, or both,

the main factor is the intent of the parties. Words like upon condition that indicate anintent that the act be a condition; words like I promise or I warrant indicates apromise and failure to keep the promise will also generally constitute the failure of aconstructive condition.)

ii. The Court will treat condition as promises in order to avoid forfeiture where the default isgrossly out of proportion to the forfeiture b/c where a condition has failed, the promisorhas a defense and may be discharged from the contract without ANY obligation tocompensate the promisee for part-performance

iii. RULE- where two parties have freely fairly and voluntarily bargained for certain benefitsin exchange for undertaking certain obligations, it would be unfair to imply a differentresult and to w/draw from one party benefits for which he has bargain and to which he is

entitled- the right to control over repairs as they see fitc. Restatement 227- Standards of Preference with regard to conditions - helps decide whether apromise or a condition

i. In resolving doubts as to whether an event is made a condition of an obligor's duty, andas to the nature of such an event, an interpretation is preferred that will reduce theobligee's risk of forfeiture, unless the event is within the obligee's control or thecircumstances indicate that he has assumed the risk.

ii. Unless the contract is of a type under which only one party generally undertakes duties,when it is doubtful whether

1. a duty is imposed on an obligee that an event occur, or2. the event is made a condition of the obligor's duty, or3. the event is made a condition of the obligor's duty, and a duty is imposed on the

obligee that the event can occur. The first interpretation is preferred if the event iswithin the obligee's control.

iii. Notes1. if the event is in the person's control then we can presume that it is a promise2. a condition not met = no contract at all3. a promise not met = other party can sue for breach, but usually does not relieve

them from their duty to perform if the other party performs their duty (they

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performed, just not when the agreement said they would)iv. Example:

1. A painter agrees to start painting your house on Monday. He does not start untilTuesday. This is in his control so it is likely a promise. He still has a contract topaint your house, but you can sue for the damages caused by his starting one day

late, which are likely to be none.a. SO, IF EVENT IS IN PERSON'S CONTROL = USUALLY A PROMISEb. BUT, IF EVENT IS NOT IN THEIR CONTROL = USUALLY A

CONDITIONd. Standards of performance with regard to conditions

i. In resolving doubts as to whether an event is made a condition of an obligors duty, andas to the nature of such an event, an interpretation is preferred that will reduce theobligees risk of forfeiture, unless the event is within the obligees control or thecircumstances indicate that he has assumed the risk

ii. Unless the contract is of a type under which only one party generally undertakes duties,when it is doubtful whether

1. A duty is imposed on an obligee that an event occur or;2. The event is made a condition of the obligors duty or;3. The event is made a condition of the obligors duty and a duty is imposed on the

obligee that the event occurs.e. The first interpretation is preferred if the event is within the obligees control

i. Summary- when a particular event is under the control of the obligor, the court tends tointerpret it to be a promise. However when the even is not in the control of either partythe court will interpret as a condition. In any even the court will seek and interpretationthat will not cause forfeiture

f. Hypo-If you mow the lawn by 5pm on Friday Ill pay you.i. If he does not finish mowing by 5pm and 5pm was a condition then no pay

ii. If it is a promise then he will get pay but the other can sue for damages for not beingfinished

XIII. Excuse of Express Conditions

a. Reasons for Excusing a Conditioni. Reasons for Excusing Conditions:

1. an agreement by both parties modifying the contract to discharge the condition2. conduct, by the party that is benefiting from the condition, that waives the

condition (Clark v West: he represented waiver of drinking condition)3. changed circumstances that make compliance by the promisee with the condition

impracticable4. condition can be discharged by the court5. foreiture; see restatement 84 & Aetna Casualty Insurance case

b. A party can excuse a condition in several different waysi. Restatement 229 Excuse of Condition to Avoid forfeiture

1. To the extent that the non-occurrence of a condition would cause disproportionateforfeiture, a court may excuse the non-occurrence of that condition unless itsoccurrence was a material part of the agreed exchange.

a. The courts look at ways to waiver provision of K because the court deems

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that the provision is too harsh. The court may excuse the non-occurrenceof that condition unless its occurrence was a material part of the agreedexchange

ii. Estoppel waiverWhenever a party indicates that she is waiving a condition before it isto happen, or some performance before it is to be rendered, and the person addressed

detrimentally relies upon such an indication, the courts will hold this to be an binding(estoppel) waiver. Note that the promise to waive a condition may be retracted at anytime before the other party has changed his position to his determent.

iii. Election waiver- When a condition or a duty of performance is broken, the beneficiary of

the condition or duty has an election she may; (1) terminate her liability, or (2) continueunder the contract. If she chooses to continue she will be deemed to have waived thecondition or duty. This election waiver requires neither consideration nor estoppel.

iv. Implied waiver - A waiver evidenced by a partys decisive, unequivocal conductreasonably inferring the intent to waive

v. Express waiver - a voluntary and intentional waives a known right

1. Anti waiver clause - clause in the K to prevent waivers but can still be waived if

the waiver happens very often, and party does not cancel the K then the he hasprobably waived the right to cancel, b/c gave false sense of reliance

vi. If the court finds circumstances that makes compliance with the condition impracticalc. UCC 2-313. Express Warranties by Affirmation, Promise, Description, Sample; Remedial

Promise.i. (1) In this section, immediate buyer means a buyer that enters into a contract with the

seller.ii. (2) Express warranties by the seller to the immediate buyer are created as follows:

1. (a) Any affirmation of fact or promise made by the seller which relates to thegoods and becomes part of the basis of the bargain creates an express warrantythat the goods shall conform to the affirmation or promise.

2. (b) Any description of the goods which is made part of the basis of the bargaincreates an express warranty that the goods shall conform to the description.3. (c) Any sample or model that is made part of the basis of the bargain creates an

express warranty that the whole of the goods shall conform to the sample ormodel.

iii. (3) It is not necessary to the creation of an express warranty that the seller use formalwords such as warrant or guarantee or that the seller have a specific intention tomake a warranty, but an affirmation merely of the value of the goods or a statementpurporting to be merely the seller's opinion or commendation of the goods does not createa warranty.

iv. (4) Any remedial promise made by the seller to the immediate buyer creates an obligation

that the promise will be performed upon the happening of the specified event.d. UCC 2-314. Implied Warranty: Merchantability; Usage of Trade.

i. (1) Unless excluded or modified (Section 2- 316), a warranty that the goods shall bemerchantable is implied in a contract for their sale if the seller is a merchant with respectto goods of that kind. Under this section the serving for value of food or drink to beconsumed either on the premises or elsewhere is a sale.

ii. (2) Goods to be merchantable must be at least such as:1. (a) pass without objection in the trade under the contract description;

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2. (b) in the case of fungible goods, are of fair average quality within thedescription;

3. (c) are fit for the ordinary purposes for which goods of that description are used;4. (d) run, within the variations permitted by the agreement, of even kind, quality

and quantity within each unit and among all units involved;

5. (e) are adequately contained, packaged, and labeled as the agreement may requireand6. (f) conform to the promise or affirmations of fact made on the container or label if

any.iii. (3) Unless excluded or modified (Section 2- 316) other implied warranties may arise

from course of dealing or usage of trade.e. UCC 2-104. Definitions: "Merchant. (UCC 2-314 Only Applies to Merchants)

i. (1) "Merchant" means a person who deals in goods of the kind or otherwise by hisoccupation holds himself out as having knowledge or skill peculiar to the practices orgoods involved in the transaction or to whom such knowledge or skill may be attributedby his employment of an agent or broker or other intermediary who by his occupation

holds himself out as having such knowledge or skill.f. UCC 2-315. Implied Warranty: Fitness for Particular Purpose.i. Where the seller at the time of contracting has reason to know any particular purpose for

which the goods are required and that the buyer is relying on the seller's skill or judgmentto select or furnish suitable goods, there is unless excluded or modified under the nextsection an implied warranty that the goods shall be fit for such purpose.

g. UCC 2-316. Exclusion or Modification of Warranties.i. (1) 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 asconsistent with each other; but subject to Section 2- 202, negation or limitation isinoperative to the extent that such construction is unreasonable.

ii. (2) Subject to subsection (3), to exclude or modify the implied warranty ofmerchantability or any part of it in a consumer contract the language must be in a record,be conspicuous, and state The seller undertakes no responsibility for the quality of thegoods except as otherwise provided in this contract, and in any other contract thelanguage must mention merchantability and in case of a record must be conspicuous.Subject to subsection (3), to exclude or modify the implied warranty of fitness, theexclusion must be in a record and be conspicuous. Language to exclude all impliedwarranties of fitness in a consumer contract must state The seller assumes noresponsibility that the goods will be fit for any particular purpose for which you may bebuying these goods, except as otherwise provided in the contract, and in any othercontract the language is sufficient if it states, for example, that There are no warrantiesthat extend beyond the description on the face hereof. Language that satisfies therequirements of this subsection for the exclusion or modification of a warranty in aconsumer contract also satisfies the requirements for any other contract.

iii. (3) Notwithstanding subsection (2):1. (a) unless the circumstances indicate otherwise, all implied warranties are

excluded by expressions like as is, with all faults or other language that incommon understanding calls the buyer's attention to the exclusion of warranties,makes plain that there is no implied warranty, and, in a consumer contract

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evidenced by a record, is set forth conspicuously in the record;2. (b) if the buyer before entering into the contract has examined the goods or the

sample or model as fully as desired or has refused to examine the goods after ademand by the seller there is no implied warranty with regard to defects that anexamination in the circumstances should have revealed to the buyer; and

3. (c) an implied warranty may also be excluded or modified by course of dealing orcourse of performance or usage of trade.iv. (4) Remedies for breach of warranty may be limited in accordance with Sections 2- 718

and 2- 719.h. Waivers a relinquishment of a known right by one of the parties. Waiver unilateral happens

when one party waives a condition of the contract you dont have to perform thats ok im notgonna sue you, even if its material you can waive it. Differs from a modification bilateral, bothparties agree to a change in the contract doesnt need consideration

i. Restatement 84(1) - a waiver is enforceable if it is given in exchange for separate

consideration; It is enforceable without consideration if:1. the waived condition was not a material part of the agreed exchange &

2. uncertainty of the occurrence of the condition was not an element of the riskassumed by the party who gave the waiver3. because there is not consideration for waivers they can be receded until the other

party relies on the waiver to their detriment then, the party making the waiver willbe estopped from rescission of the waiver.

4. No waiver clauses can be waivedii. Clark v. West

1. Write books for $2 and will pay $6 if abstained from drinking during k2. RULE- A waiver is a voluntary relinquishment of a known right. A party can

waive a non-material part of a K any time during the executory portion of the Kw/out consideration, if the part waived is a material part of the K there must be

consideration and that is really a modification.a. A waiver given w/o consideration can be can reestablish as long as hegives fair notice to the other party

b. Equitable Estoppel- in this case party waive condition and refuses to payparty is bound to waiver b/c of reliance

c. Continuation of performance: If a promisor continues his own

performance after learning that a condition of duty has failed to occur, hisconduct is likely to be found to operate as a waiver of the condition

i. Disproportionate Forfeiturei. Aetna Casualty Insurance Case (murphy & chubb)

1. this case gave us a situation in which murphy did not give his insurance company

adequate notice (this was the condition that he failed to meet). He would havesuffered great loss by not being able to get his claim and this was considereddisproportionate forfeiture. So, the court asks the question of whether or not thenotice requirement was a "material part of the agreed exchange". It was notfound to be a "material part", so murphy had a chance to show that his failing tomeet the condition did not prejudice the insurance company. If he could provethis then he would get his claim and not suffer the disproportionate forfeiture; hedoes not meet his burden of proof though.

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2. failed to timely notify issuance co. of a claima. RULE- Under appropriate circumstances a party, despite his owns default

may be entitled to relief from the rigorous enforcement of K provisionsthat would otherwise deny him recovery. But for this rule to apply themoving party must prove: 1) unfairness if performance of the condition is

executed 2) that the condition is not material so that it would not prejudicethe other party

b. Disproportionate forfeiture- forfeiture is the denial of compensation, it iskind of the unconsionability concept but it focuses on the performance ofthe K as being unfair v the written k as is, the court also looks at theimportance of the condition

c. Considerations-i. Contract of adhesion- one party had little choice as to the

terms of the K- there was no bargaining process

ii. will lose insurance money even though he pays his premiumsiii. there was no prejudice to the insurance co. b/c of the late notice

d. Notice is a condition, it is not a material part of the K

XIV. Constructive conditions -A constructive condition is a condition which is not agreed upon by the

parties, but which is supplied by the court for fairness. The principal use of constructive conditions isin bilateral contracts. Constructive conditions are normally satisfied by substantial performancewhile express conditions must be fully performeda. Material Breaches

i. Restatement 229ii. Restatement 234

1. whenever performances may be rendered simultaneously they re to be performedsimultaneously unless the language or the circumstances indicate otherwise

2. except as to number (1) where the performance of only one party requires a periodof time his performance is due at an earlier time than that of the other party unlessthe language or circumstances indicate otherwise- so usually performance is dueb/f pay, performance must be fully or substantially completed but there are someexemptions

a. if the K is divisibleb. if the parties have agreed upon installment paymentsc. trade usage is to the contrary

3. REMEMBER: Substantial performance is not perfect performance though; that iswhy the party must pay the performer for the substantial performance and thensue them for any damages caused by the breach of contract. So, the worker gets $

for the substantial performance, minus any amount assessed for damages causedto the other party. (ie wrong plumbing pipe)a. RULE: Damages are measured by the difference in what you were

supposed to get and what you actually got. (difference in value)b. Example: Jacob &Young v Kentcase: (wrong plumbing pipe)

i. Good pipe worth = $5,000 (pipe you wanted)ii. Bad pipe worth = $4,000 (pipe you got)

iii. Damages worth = $1,000 (you get bad pipe + $1,000)

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iii. Restatement 237 - Effect on other party's duties of a failure to render performance1. Except as stated in section 240, it is a condition of each party's remaining duties

to render performances to be exchanged under an exchange of promises that therebe no uncured material failure by the other party to render any such performance

due at an earlier time.a. This basically means that if one party does not render his performancethen the other party is discharged of his duties, at least temporarily. (so inthe note case above, this is why the other party was able to quit paying forthe land, b/c the other party did not make the agreed upon improvements.)

2. Goodison v Nunna. this was the case where the parties contract for the buy/sell of land and

there was a 21lb. Penalty for backing out. One party backed out and thecourt said that since the other party did not tender the performance to thenon-tendering party he could not bring suit. (must at least tenderperformance to bring a suit for breach of contract against other party)

iv.Restatement 240. Part Performances As Agreed Equivalents - If the performances to beexchanged under an exchange of promises can be apportioned into corresponding pairs ofpart performances so that the parts of each pair are properly regarded as agreedequivalents, a party's performance of his part of such a pair has the same effect on theother's duties to render performance of the agreed equivalent as it would have if only thatpair of performances had been promised.

v. Restatement 241. Circumstances Significant In Determining Whether A Failure IsMaterial

1. In determining whether a failure to render or to offer performance is material, thefollowing circumstances are significant:

a. The extent to which the injured party will be deprived of the benefit which

he reasonably expected;b. The extent to which the injured party can be adequately compensated forthe part of that benefit of which he will be deprived;

c. The extent to which the party failing to perform or to offer to perform willsuffer forfeiture;

d. The likelihood that the party failing to perform or to offer to perform willcure his failure, taking account of all the circumstances including anyreasonable assurances;

e. The extent to which the behavior of the party failing to perform or to offerto perform comports with standards of good faith and fair dealing.

vi. Palmer v Fox1. Bought property promise to put gravel on the street did not, refused to

pay the rest of the payments.a. Where the acts or promises of the parties are concurrent and to be done or

performed at the same time the K is dependent and neither party canmaintained an action against the other without providing performance onhis part

b. When there is a K that requires mutual concurrent conditionalperformance and one of them has breached a material part of then the

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condition is not met and the other may get out of the k and sue for totalbreach

c. A delay in performance is not a total breached unless time was of theessence

b. Substantial Performance

i. TEST- Ask Whether the K purpose has essentially been fulfilledii. Substantial performance does not apply to the sale of goods, the UCC uses the perfecttender rule

iii. Jacob v Kent1. Promise to build a house with pipes of a certain kind, did not use the special

pipe, realized and he refused to pay. In the K there was a express condition thatsaid that if did not get the certificate from the architect then no money.

a. The requirement of using reading pipes is not a condition, but a promiseb/c the payment was not conditioned on the using the reading pipes, theonly condition was that the house be build

2. RULE- if a party has completed substantial performance on his promise but has

committed a minor omission due to inadvertence he should be able to recover themoney due to him less the amount necessary to fully compensate the other partyfor the damages caused by the omission

3. How do we determine if the work is substantial?a. look at the k in comparison to the breach- hired to pay one room or to pain

buildingb. the party must performed but just a small mistake

4. Since the breach his promises by not putting reading pipes, then he has to pay

damages either by paying the cost of replacement OR the difference in valuesb/en the 2 pipes, normally the courts go with the difference in value b/c the otheroption is economically disproportionate where there is no gain from replacing.

c. Substantial Performance and Material Breachi. OW Grun Roofing v Cope1. Promise to install a roof, he did but the roof was not uniform in color. The

court said that there is a material breached, because the way the house looks isvery important, so the did not recover, and had to pay the house owner extramoney so that she could replace her ugly roof.

2. RULE- if the party has breached a material part of the K then they have notsubstantially perform, if the part that was breached was immaterial and the rest ofthe performance is complete then the other party has substantially performed andhe may recover

3. Substantial performance- the contractor must have in good faith intended tocomply with the K and should have substantially done so , in the sense that thedefects are not pervasive nor do they constitute a deviation from the general plancontemplated and that the K and its purpose can not without difficulty beaccomplish by remedying them-basically not material

4. Doctrine of Substantial Performance- A promissory who has substantiallyperformed is entitle to recover although he has failed in some particular way tocomply with his agreement

5. Restitution argument- the did not receive a benefit, because she is going to have

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to get a new roof6. There are some factors that helps decide whether a parties performance amounts

to substantial performance, they are:a. What purpose does the performance serves

b. The excuse for deviating from the K

c. The cruelty of enforcing strict adherence or compelling the promisee toreceive less than what he bargained ford. The difference b/en the tendered performance and the performance of the

promiseee. Restatement 241(e)-whether the party performed in good faith and in

accordance with fair dealingsd. Material Breach and Substantial Performance UCC

i. UCC 2-601: Buyer's Rights on Improper Delivery: subject to the provisions of thisarticle on breach in installment contracts (2-612) and unless otherwise agreed under thesections on contractual limitations of remedy (2-718,719), if the goods or the tender ofdelivery fail in any respect to conform to the contract, the buyer may

1. reject the whole, or2. accept the whole, or3. accept any commercial unit or units and reject the rest.

ii. Problem p 685- valve tester that needs to be 95% accurate, machine not good only 93% isthis substantial performance?

iii. This is controlled by the UCC- sale of goods1. Perfect tendered rule 2-601- if the product does not conform to the K and it is

not a perfect tendered then you may reject the product or keep it but the other hasthe choice.

2. The difference between goods and performance is that the other party can keepthe good and can sell to others, but you cant take back a performance

3. The good must not be perfect, it must only adhere to what you agreed to sell otherwise the buyer has the right to reject4. Commercial unit- does not mean parts, it must be the whole unit- oven example5. the seller generally has the right to cure the defect

e. Divisibility and Restitution - If a contract is severable, the doctrine of substantial performance

can be applied to a portion of it. A contract is only divisible if it is expressly made so (iestipulating a payment for each separate installment to be performed) or if a reasonableinterpretation indicates that a failure to perform one installment would not constitute a failure ofthe basic consideration bargained for.

i. Definition of Divisibility1. A K is divisible where by its terms

a. performance of each party is divided into two or more partsb. the number of parts due from each party is the same- consideration for

each partc. and the intent of the parties on whether they intended the k to be divisible-

kitchen remodeling, a lot of things for remodeling but you only wantedone job

2. Compare the following two examples:a. contract to build 50 houses @ $100,000 for each house built; builder only

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builds 35 houses and then stops work = this is divisible and he will likelybe paid for the 35 houses

b. contract to build 50 houses for a total of $5,000,000. Worker builds 35and then stops work. Divisible? Probably not due to the fact that thebuilding of each house may not be worth the same amount, and therefore,

the contract is not as easily divisible. (look at the intent of the parties)ii. Definition of Restitution1. a who has committed a material breach and has not substantially performed can

still recover the reasonable value of the work he has done up to the breach , b/cthe has received a benefit

a. (benefit) (damages caused by the breached) = RESTITUTIONb. the party in breach is never allowed to recover more than the Ks price and

he will always get pay the lowest amount possiblec. if the person seeking restitution has breach a fiduciary duty- doctors,

lawyersetc. then they have breach their right to feesiii. Rule

1. Whether a k is divisible depends on the intent of the parties, and the intent can beinferred by the ease with which the agreed consideration can be apportioned toseparate performances

a. Restatement 240- if the performance can be exchanged can be

apportioning into corresponding pairs so that the part of each pair areproperly regarded as agreed equivalents, a parties performance of his parthas the same effect on the other party to performed as it would have ifonly that pair of performance had been promised

b. UCC 2-307- Unless otherwise agreed all sale of goods must be tenderedin a single delivery and payment is due only on the goods tendered butwhere the circumstances gives one party the right to make or demand

delivery in lots, the prize if it can be apportioned may be demanded foreach lot2. If the K is entire- meaning not divisible then the party who breached the k is not

entitled to recovery unless he has substantially performed3. The court will not find a K divisible if it would be unfair to the non breaching

party4. Under both theories of restitution and divisibility the s award is always reduced

by the damages caused to the non-breaching partyiv. Lowy

1. This was a divisible K that had to parts 1)grade, 2) was to make improvement tothe streets, BUT in general construction K are not divisible

v. Britton1. RULE: employment k are normally divisible2. RULE: when a party has not substantially performed and has materially breach a

k he may still recover even if the k is not divisible as long as the other party hasreceived a benefit the court tries to prevent unjust enrichment and allows him trecover for the benefit he conferred

3. A hired laborer is entitled to compensation for his services though he does notcontinued to work for the entire duration of the K, b/c the other party is

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continuously receiving a benefit and the worker is working under the expectationthat he will get pay, the contractor cannot refuse to receive what he has alreadyreceived

vi. Problem p. 700: A was to build a pool for B for 15,000. A intentionally built used an

inferior product in the construction of the pool so he would make more money. The pool

he built was worth 10,000. This was considered a material breach, so no substantialperformance doctrine applies here. How do we compensate builder under a restitutiontheory?

1. Some courts say nothing b/c he breached in bad faith, others say yes. The courtapplies to different theories

a. The reasonable value to the other party of what he receive in terms of whait would have cost him to replicate the benefit from another person

b. The extend to which the other partys property has been increased in valueor his other interest advanced

c. The will recover the lowest amount because they have breached2. Others would compensate as follows:

a. cost to obtain the pool he got from another builder = 10,000b. increase in value to his property due to adding the pool = 5,000

XV. Impracticability

a. Existing Impracticabilityi. This doctrine as well as frustration of purpose excuses performance but does not excuses

a condition, unless the conditions are really minor or just technicalii. Restatement 266 Existing Impracticability or Frustration

1. where at the time a K is made, a parties performance under it is impracticable w/ohis fault b/c of the fact of which he had no reason to know and the none existenceof which is a basic assumption on which the K is made no duty to render that

performance arises unless the language or circumstances indicate to the contrary-assumption of the risk.iii. UCC 2-615- Applies to both impracticalities and frustration- excuse for the seller

1. (a)Delay in delivery or non delivery in whole or in part by a seller who complieswith paragraphs b and c is not a breach of his duty if performance as agreed hasbeen made impracticable by the occurrence of the contingency the non occurrenceof which was an assumption on which the K was made

2. (b) The buyer then has an option to receive the goods or not but they have noclaim

3. (c) Where the caused mentioned in paragraph a affects only a part of the sellercapacity to perform he must allocate production and delivery among his

customers but may at his option include regular customers not then under k aswell as his own requirements by further manufacture. He may also allocate in anymanner which is fair and reasonable

iv. Elements of existing impracticability1. at time K is made performance is impracticable2. without the fault of the party seeking to be excused3. not foreseeable by the party seeking to be excuse4. event is the basic assumption of K

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5. UNLESS the party assumed the riskv. Mineral v Howard

1. A thing is impossible in legal contemplation when it is impractical and a thing isimpractical when it can only be done at an excessive and unreasonable cost

2. Where performance depends upon the existence of a given thing and such

existence was assumed as the basis of the agreement performance is excuse to theextend that the thing ceases to exist or turns out to be non-existence. cows beingpasture

3. Normally increase in cost in performance is NOT an impracticable eventUNLESS the cost was considerable increased due to the necessity of performingin a manner radically different from what was originally contemplated

vi. Wegematic - Assumption of the Risk

1. The try to used the UCC, to excuse non delivery b/c of impossibility to deliverbut the court said that when a party assumes a risk that they may not be able toperform, then they should be subject to the penalties

2. Follows restatement- (1) a party has no duty to render a performance, which was

impracticable at the time of contracting, (2) if the parties did not know at the timethat it was impracticable (3) Unless there was an assumption of the riskb. Supervening Impracticability (after the parties have entered into the K)

i. Restatement 261 Discharge by Supervening Impracticability where,

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