1. 2. II. Formation _ PAGEREF _Toc102177208 \h __1_ 3. III. Interpretation _ PAGEREF _Toc102177209 \h __15_ 4. IV.

Defenses to Enforcement _ PAGEREF _Toc102177210 \h __20_ 5. V. Performance and Breach _ PAGEREF _Toc102177211 \h __25_ 6. VI. Remedies _ PAGEREF _Toc102177212 \h __28_ 7. VII. Tortious interference with Contracts _ PAGEREF _Toc102177213 \h __44_ 8. VIII. Answering a Question _ PAGEREF _Toc102177214 \h __45_ 9. _ 10. I.

What law applies? a. a. Is it a contract for the sale of a good? UCC 2-105(1) b. b. Mixed transactions - contracts for the sale of goods and provision of services. i. i. To determine whether the UCC applies to a mixed contract, we look at: 1. 1. Contract 2. 2. What does the contract primarily concern? 3. 3. What is the consideration primarily being paid for? 4. 4. Is the consideration primarily going towards supplies or employees? 5. 5. What is the intent of the buyer? 6. 6. Labor allocation: how much of the labor was spent on making the product vs. the service component? 7. 7. The Court says that a contract that deals primarily with goods with a dispute over the only tiny service element, the UCC will apply. 8. II. Dispute c. a. What is the nature of the dispute? d. b. If both elements are equal in the contract - good and service - then the court will focus on the nature of the dispute to determine whether to apply the UCC. i. i. Hooker - contract between general contractor and subcontractor for cabinet installation; dispute over delegation of duties (disposing of old cabinets). UCC does not apply. e. c. Security Transactions: Cumbest i. i. If it looks like the sale of a good, but in fact it is a security transaction, the UCC doesnt apply. ii. ii. Common law applies f. d. Outputs contracts - a contract to buy whatever a seller has; no quantity is specified i. i. Tongish - Coop did not owe damages to Bambino, who had only promised to buy whatever seeds Coop had. g. e. Contract of Adhesion: no room for negotiation or to shop around; take it or leave it. h. f. Requirements Contract - promise to fulfill all requirements of the buyer (New York Central Iron Works, Wood v. Lucy, Lady Duff-Gordon) i. III. Formation j. a. Restatement 1. Contract Defined i. i. A contract is a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes a duty. k. b. Promise i. i. A manifestation of intent that will convince the other person that an agreement has been made. l. c. Restatement 2. Promise; Promisor; Promisee; Beneficiary

i. i. A promise is a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made. ii. ii. The person manifesting the intention is the promisor. iii. iii. The person to whom the manifestation is addressed is the promisee. iv. iv. Where performance will benefit a person other than the promisee, that person is a beneficiary. m. d. Restatement 4. How a Promise May Be Made i. i. A promise may be stated in words either oral or written, or may be inferred wholly or partly from conduct. ii. IV. How might an implied contract be formed? n. a. The promisee doesnt do anything to stop the promisor. o. b. There could be a community norm that if a person is offered a service and doesnt object, they have accepted the service. p. c. There is common sense that the promisor should be paid for their services. q. d. Default Rule - the rule contracts fall back on; it can be easily changed or contracted around. i. i. If the default rule was that there was an implied warranty in every contract, no one would make any contract because they couldnt keep the promise. ii. ii. Setting the default rule to one that we know the party it regulates wont like makes the contracts expensive. r. e. Reasons for setting default rules: i. i. We make contracting more efficient by identifying the contract term that is most likely to occur in the market. ii. ii. If one of the parties is not likely to know the default rule, or is likely to presume the law is something other than what it is, there is an argument for setting the default rule to the rule that the party with the power to dictate contract terms does not want, forcing them to be explicit about what the contract terms really are. iii. iii. If we believe that the laws should be a certain way and people shouldnt be able to get around them, we set a mandatory rule and not a default rule. s. f. Guarantee - a promise that the contract will be carried out; a guarantee makes explicit what is latent (subject to interpretation) that one bears the risk of whatever might happen. i. i. Insurance companies pay money if certain events happen, even though they have no control over whether those events will happen or not. ii. ii. An insurance company is better at allocating risk because it can distribute the cost of its guarantee over a large number of people, not all of whom will be affected by the event. iii. iii. A guarantee can be made above and beyond a default rule, which may be not to require guarantees

viii.

Shaheen v. Knight (1957) i. i. Dr. Knight made an express promise (guarantee) that the vasectomy would work. ii. ii. His jurisdiction did not recognize a warranty of cure but he made an express promise anyway. iii. iii. A breach has occurred, however the damages requested - the cost of raising an unwanted child (expectancy)- are not acceptable damages for the breach of this promise. iv. iv. Public policy dictates that there should be no precedent set to award damages for the normal birth of a normal child. !. h. Promise implied in fact - an express promise is made v. i. Promise implied in law - the law presumes this promise to be included in every contract of this sort (tortlike) ". j. Why should this promise be treated differently from other promises and legally enforced? #. k. Why does the law enforce promises? i. i. Exchanges cannot be simultaneous ii. ii. If people were free to break promises without the law enforcing it iii. iii. It would be socially destabilizing iv. iv. It would render contracts worthless v. v. People might keep promises for reputations sake vi. vi. Escrow officers would be needed to facilitate exchanges vii. vii. The marriage promise is an ex ante promise (made before the action) and it is not something to enforce. V. Factors for formation $. a. Mutual assent to be bound %. b. To a sufficiently definite agreement. aa. c. Offer (Rest. 24) - manifesting ones assent to enter into a deal in such a way that justifies the other persons understanding that his assent to the bargain is wanted and will conclude it. bb. d. How may the offeree accept the offer? Must be reasonable. i. i. Bilateral contracts can be accepted by a promise. ii. ii. Unilateral contracts can only be accepted by performance. cc. e. The contract is finished only when both people have performed. dd. f. Because of the need for certainty, most offerors want a return promise before performance. ee. g. Two-part approach (assessed at the time the conduct was performed) (from Embry): ff. h. A reasonable person would have to understand the conduct to be a manifestation of assent. gg. i. Promisee must in fact so understand the conduct to be a manifestation of assent.

. g.

hh. j. If there is a fact dispute about what happened, that goes to the jury. ii. k. Once we know what the manifestations were, the court decides whether K or not. jj. VI. Admissibility of evidence: kk. a. anything that the promisee saw or knew about before the offer was made, that would have indicated there was not an offer, would be admissible. ll. b. Anything showing the subjective intent of the promisor, which the promisee did not have access to, is irrelevant. mm. c. For agreement to be enforced, it must be sufficiently definite. nn. d. If term was left open, and deal was meant to be concluded, court may supply term. (Texaco) oo. e. Common law is not usually willing to supply terms to a contract that are not already included. pp. f. UCC 2-305: allows parties to bind themselves to a contract before specifying the price term. qq. g. Missing terms could indicate parties are not done negotiating. (Embry) i. i. Court can conclude contract is done but fail to enforce contract for lack of definiteness. ii. ii. Parties have agreed to something different from what the other cases we have read have taken for granted. (Dickinson v. Dodds) iii. iii. Restatement 26 - manifestation of willingness to enter into a bargain is not an offer if the person to whom it is addressed knows or has reason to know that the person making it does not intend to conclude a bargain until after he has made a further manifestation of assent. rr. h. To determine if an offer has been made, the court considers: i. i. Missing terms (no exact amount or terms for acceptance) ii. ii. Prior correspondence iii. iii. Indication that a similar communication in the past was not construed as an offer iv. iv. Number of recipients v. v. The more, the less likely its an offer vi. vi. Trade practices vii. vii. Would a reasonable person in this trade construe this as an offer? ss. i. Factors indicating intent to be bound: . j. Whether a party expressly reserved the right to be bound only when a written agreement is signed; !!. k. Whether there was any partial performance by one party that the party disclaiming the contract accepted; vv. l. Whether all essential terms of the alleged contract had been agreed upon; and "". m. Whether the complexity or magnitude of the transaction was

such that a formal, executed writing would normally be expected ##. n. Restatement 33: Even though manifestation is intended to be understood as offer, it can NOT be accepted if terms arent reasonably certain: i. i. Terms must provide a basis for determining existence of breach ii. ii. And for making appropriate remedy $$. o. UCC 2-204: %%. p. K is made as long as theres sufficient agreement, including conduct by bother parties which recognizes the existence of K. aaa. q. Moment of making K doesnt have to be determined. bbb. r. Even if terms are left open, there can still be a K if there is intention to make one and a reasonable basis for awarding remedy (UCC will provide default for missing terms) ccc. s. 2-305 gives default rules for price (market value at time of delivery) ddd. t. 2-308 gives default for place of delivery (sellers place of business) eee. u. 2-309 gives default for time of delivery (reasonable time) fff. VII. Embry v. Hargadine, McKittrick Dry Goods ggg. a. Consider how a reasonable person would have interpreted McKittricks comment. hhh. b. Embrys continuing to work is his acceptance of what he believed was a unilateral contract. iii. c. Memo indicates McKittrick did not intend to renew contract; it is evidence to back up what happened in the conversation, but promisors subjective state of mind is irrelevant. jjj. d. If Embry had seen the memo prior to the contract, it would be evidence. kkk. e. If McKittrick had been acting in a busy and distracted manner, that would be evidence (that a reasonable person should not have taken his words seriously). lll. VIII. Lucy v. Zehmer mmm. a. Zehmers offer to sell the farm is construed as real even though he meant it to be a joke. nnn. b. Undisclosed intentions are immaterial (although extreme intoxication can be a defense). ooo. c. The Court finds Lucys subjective perception reasonable. ppp. d. Although the parties disagree re: whether a contract was formed, the terms and objective evidence indicate it was. qqq. e. Lucys actions after the offer indicate his acceptance. rrr. IX. Nebraska Seed v. Harsh sss. a. Advertisement is not an offer unless it contains explicit instructions on how to accept. . b. Telegram from Nebraska Seed could be seen as counter-offer. !!!. X. Lefkowitz

vvv. a. Advertisement considered an offer because it specifies exactly what must be done to accept, the supply being offered, and a price point. """. XI. Leonard v. Pepsico ###. a. Harrier Jet was not mentioned in catalog (although it was in TV ad with price point), and limited quantity was not provided. $$$. b. Reasonable person standard applies. %%%. XII. Texaco v. Pennzoil aaaa. a. After signing the memorandum of agreement, Getty and Pennzoil had promised to continue negotiating in good faith with each other, and fixed the terms already agreed upon. bbbb. b. Did Getty breach by negotiating with Texaco? Maybe, maybe not. i. i. If Getty was unable to walk away from the negotiations with Pennzoil without breaching, it was not an agreement to continue negotiating; it was an agreement to sell. ii. ii. If Getty did have the right to walk away in good faith, why was there a suit? cccc. c. Damages must be reliance, as the profits obtained (and their likelihood) is impossible to find. dddd. XIII. Empro v. Ball-Co eeee. a. Building escape clauses into the lease indicates understanding that the contract isnt binding. ffff. XIV. Revoking an Offer gggg. a. C/L: offer cannot be accepted after it was revoked; it can be revoked until it is accepted. hhhh. b. The acceptance must mirror the offer. Adding a term in the acceptance is material. iiii. c. 35. The Offerees Power of Acceptance i. i. An offer gives to the offeree a continuing power to complete the manifestation of mutual assent by acceptance of the offer. ii. ii. A contract cannot be created by acceptance of an offer after the power of acceptance has been terminated in one of the ways listed in 36. jjjj. d. 36. Methods of Termination of the Power of Acceptance i. i. An offerees power of acceptance may be terminated by 1. 1. Rejection or counter-offer by the offeree, or 2. 2. If the offeree makes a counter-offer and the offeror accepts, there is a contract. ii. ii. If the offeree makes a counter-offer, the offeror does not accept, and then the offeree agrees to accept the original offer, there is not a contract until the offeror agrees to this return to the original offer. iii. iii. A counter-offer confers on the other party the power to complete the deal. A rejection just ends the transaction. iv. iv. Lapse of time, or

v. v. Revocation by the offeror, or vi. vi. Death or incapacity of the offeror or offeree. vii. vii. In addition, an offerees power of acceptance is terminated by the non-occurrence of any condition of acceptance under the terms of the offer. kkkk. e. 42: Offer revoked and offerees power of acceptance is terminated when offeree receives manifestation from offeror of unwillingness to enter K (direct revocation) llll. f. 43. Indirect Communication on Revocation i. i. An offerees power of acceptance is terminated when the offeror takes definite action inconsistent with an intention to enter into the proposed contract and the offeree acquires reliable information to that effect. mmmm. g. A promise not to revoke an offer is an Option Contract (Rest. 25). nnnn. h. Options are usually paid for with some consideration. oooo. i. A promise to keep the offer open for a period of time prevents revocation during that time (Rest. 37) pppp. XV. Dickinson v. Dodds qqqq. a. Dickinson did not know the offer has been revoked until he was told it was offered to someone else. rrrr. b. There was a manifestation of mutual assent to the piece of the contract keeping the offer open, but there was no consideration. ssss. XVI. Usually, options are paid for . a. UCC 2-205 allows merchants to make firm offers limiting their own rights to revoke. We need: i. i. A written promise from the merchant to buy or sell goods, ii. ii. A promise that makes clear that it limits the offerors right to revoke iii. iii. The period of time in which the offeror cannot revoke is the shorter of two time periods: iv. iv. The amount of time specified in the contract, or v. v. Three months. vi. XVII. Acceptance !!!!. a. Common law: The acceptance must mirror the offer. Adding a term in the acceptance cannot be material. vvvv. b. When it looks like the acceptance does not match the offer: """". c. Conclude that no contract has been formed ####. d. Ardente v. Horan - asking for confirmation of some additional terms of the contract is not an exact acceptance. $$$$. e. Conclude that a contract has been formed but with some uncertainty about its terms. %%%%. f. Part performance makes us more likely to recognize that the contract has been formed, but were not sure of its terms. aaaaa. g. The offeree can make their acceptance clear, independent of any additional conditions, while also asking about the additional

iiiii. i. ii. 11. a. b. c. d. e.

conditions. bbbbb. h. Restatement 63: Acceptance must be in the means specified by the offeror. ccccc. i. Part performance can be acceptance if the means of acceptance is not clear; but beginning performance is construed as a promise, not complete performance. ddddd. j. Mailbox rule: Unless offer says otherwise, acceptance is effective upon dispatch (if properly addressed), but option K acceptance effective upon receipt. eeeee. k. Restatement 32. Invitation of Promise or Performance i. i. In case of doubt an offer is interpreted as inviting the offeree to accept either by promising to perform what the offer requests or by rendering the performance, as the offeree chooses. fffff. l. Traditional rule is that unilateral offer can be revoked at any time before performance is COMPLETE. i. i. But, 62. Effect of Performance by Offeree Where Offer Invites Either Performance or Promise ggggg. m. Where an offer invites an offeree to choose between acceptance by promise and acceptance by performance, the tender or beginning of the invited performance or a tender of a beginning of it is an acceptance by performance. i. i. Such an acceptance operates as a promise to render complete performance. hhhhh. n. If part performance constitutes acceptance, the offeree has a right to finish performance once it is started. i. i. The promisor does not have a right to revoke once performance has begun. ii. One could make the offer explicitly one that could only be accepted by full performance - in which case beginning performance would not constitute acceptance. A condition has to occur (complete performance) before the contract can be complete. Petterson Offer (of $780 deduction) could only be accepted by complete performance (paying off the mortgage by 5/31/24). Offeror has the right to sell the mortgage to someone else in the meantime; it was a unilateral offer that could only be accepted by complete performance. Carlill v. Carbolic Smoke Ball Offer is clear, definite, and explicit. It can only be accepted by complete performance (using the ball as directed; and getting sick is the condition) Getting the flu is not intentional conduct, so thats why it cannot be acceptance - only a condition. Beginning performance with the smoke ball created an option contract. There wasnt notice of acceptance, which is OK because notice was not required.

12. 13. 14. 15. 16. 17. 18. 19.

20. 21. 22. 23. a. b. c. d. e. 24. a. i. 25. a. 26.

Restatement 45: When performance is exclusive mode of acceptance, beginning performance (not preparation for performance) creates an option K and offeror loses right to revoke. 19. Conduct as Manifestation of Assent The manifestation of assent may be made wholly or partly by written or spoken words or by other acts or by failure to act. The conduct of a party is not effective as a manifestation of his assent unless he intends to engage in the conduct and knows or has reason to know that the other party may infer from his conduct that he assents. The conduct of a party may manifest assent even though he does not in fact assent. In such cases a resulting contract may be voidable because of fraud, duress, mistake, or other invalidating cause. 54. Acceptance by Performance; Necessity of Notification to Offeror Where an offer invites an offeree to accept by rendering a performance, no notification is necessary to make such an acceptance effective unless the offer requests such a notification. If an offeree who accepts by rendering a performance has reason to know that the offeror has no adequate means of learning of the performance with reasonable promptness and certainty, the contractual duty of the offeror is discharged unless The offeree exercises reasonable diligence to notify the offeror of acceptance, or The offeror learns of the performance within a reasonable time, or The offer indicates the notification of acceptance is not required. White v. Corlies & Tift The request for an estimate was not an offer - an offer gives the other party the power to close the deal. White claims that he accepted by buying the lumber. This was not an appropriate manner of acceptance because: White did not notify Corlies of his acceptance. Corlies letter, which may not have been an offer, indicated that he wanted to establish the agreement explicitly. White is a builder and could have bought wood for anything; Corlies had no way of knowing his buying wood was acceptance of this particular contract. Last shot rule - the person who made the last offer gets their terms accepted, once the contract is complete. (Common law only) When faced with uncertainty about what the parties have agreed on, the courts will: Reduce the damages to reliance damages (as long as the offeror believed a contract had been formed) Deposited acceptance rule - acceptance is made on dispatch. It doesnt matter when it arrives. If the offeror revokes before receiving the acceptance, but after it has been mailed, there is still a contract. There is a different rule for option contracts, when acceptance is effective only on receipt.

27. a. 28. a. b. c. d. i.

ii. iii.

e. f. i.

g. 29. a. b. c. i. ii. d. i. ii. e. i. ii. f.

E-commerce offers and acceptances: Shrink-wrap license: there are terms and conditions inside the box to which you assent by using the product. Failure to return the merchandise within a reasonable time (specified) indicates assent. Easterbrook says the following requirements are needed for contract: Notice on the outside Contract on the inside Right to return if you reject the terms of the contract. Think of it in stages: Money is exchanged for a product. In exchange for the money, the buyer is getting the right to review the terms of the contract; he has the right to reject them. The merchant gets to hold his money for 30 days. Review of the terms. Using the product manifests assent to the terms; merchant can keep money. Notice of the contract must be on the outside of the box for the exchange of money to create the initial contract, for 30 days to look over the terms. The terms inside the box constitute additional terms to be assented to before use. Forcing a party to click I agree to new terms before using the software is not allowed; this makes it so the person is not allowed to accept the product without accepting the new terms. (ProCD v. Zeidenberg) Click wrap licenses are when you have to click on a button on a website in order to proceed, to indicate assent to terms of agreement. The fact that Ticketmaster gives you only a limited time to agree to the terms before your tickets are released back into the bin, and no reasonable person could read all that info in the time provided, should indicate to them that most people do not read the terms before agreeing to them. Browse wrap licenses have terms and conditions available on the website but the user does not have to click anything to indicate their acceptance of the terms before proceeding. Does offer invite acceptance by performance? If no, performance does not = acceptance If yes, then: Does offer require notice? If yes, then must notify If no, then acceptance means contract is created. Does offeree have (1) reason to know (2) offeror has no adequate means to learn (3) within reasonable certainty? If no, offeror must perform If yes, then: Did offeree exercise reasonable diligence to notify? If yes, offeror must perform If no, then: Did offeror learn within reasonable time?

i. ii. g. i. ii. 30. a. i. b. i. ii. iii. c. i. 31. a. b. 32. a. b. c. d. i. ii. e. i. ii. f. i. ii. g.

If yes, offeror must perform If no, then: Did offer dispense with notice? If yes, offeror must perform If no, offerors duty discharged._ Theory of obligation - what makes a promise legally enforceable Formalities signatures, seals, etc. so that we know that the parties really meant to have this promise enforced Functions: Cautionary (makes you think about the promise you are making before you make it) Evidentiary (provides evidence that you intended to enter into this promise) Channeling (signals that this is a promise you intend to be enforced) Bargain Provides the same functions as formalities, in their absence 17. Requirement of a Bargain Except as stated in Subsection (2), the formation of a contract requires a bargain in which there is a manifestation of mutual assent to the exchange and a consideration. Whether or not there is a bargain a contract may be formed under special rules applicable to formal contracts or under the rules stated in 82-94. Consideration To constitute consideration, a performance or return promise has to be bargained for. It is deemed to have been bargained for, if: it is sought by the promisor in exchange for the promise; and given by the promisee in exchange for the promisors promise. Two components: Substantive - the promisor received something of Substance from the promisee. It could be almost anything - money, a return promise to do or not to do something Reciprocity - each person must have given their promise or performed their act in order to induce an equally valuable promise or act from the other party. Common law consideration is made when the following exists: The promisor receives some benefit from the promisees promise The promisee suffers detriment as a result of the promisees promise Restatement does not require benefit to the promisor or detriment to the promisee - only that the promises/performance be in exchange for each other. A gross disparity in consideration does not mean we dont have a bargain. Johnson v. Otterbein: Donative gifts to a university, without consideration (only reliance) are not enforceable. Limited freedom of action by agreeing to use the money only for a particular

h. 33. a. 34. a. b. c. i. ii. iii. d. e. 35. a. b. c. d. e. f.

g. 36. 37. a. b. i. c. d.

purpose - not consideration. This was merely a conditioned gift. Hamer v, Sidway: the nephews foregoing legal rights is a detriment. The nephews actions were something the uncle really wanted. Dahl v. HEM Pharmaceuticals Corp.: the benefit obtained (free drug) in exchange for performance (test subject) is proper consideration. Reliance Can expand the number of enforceable promises. Must be: Reasonable To the promisees detriment Default remedy is unjust enrichment Unjust enrichment Restitution (in the quantum meruit/ quasi K sense) Marvin v. Marvin (1976) Consideration: Michelle Marvin promised to contribute half her earnings and efforts, and committed her services as companion, housekeeper, homemaker, and cook. This demonstrates a bargain. Reciprocity: Lee didnt make his promise in order to induce Michelle to become his companion - they were already in a cohabiting relationship when the agreement was made. Michelle could have argued that she wouldnt have continued the relationship without this promise, if that was true, and that would have counted as reciprocity. But she didnt raise this in the case. Reliance: Michelle relied on this promise when she quit her job, suffering a loss of income/career advancement potential. Reliance remedy is similar to torts - puts the person back into the position they were in before the contract was made. Unjust enrichment: If Michelle had not performed the housekeeping and cooking duties, Lee would have had to do them himself or pay someone else to do them. The time/ money he saved could be considered unjust enrichment. A nonmarital partner may recover in quantum meruit (unjust enrichment dealing with the reasonable value of a service provided to someone). Mutual disgorgement - we are trying to make each party disgorge the value they received from the other. 86. Promise for Benefit Received A promise made in recognition of a benefit previously received by the promisor from the promisee is binding to the extent necessary to prevent injustice. A promise is not binding under Subsection (1) If the promisee conferred the benefit as a gift or for other reasons the promisor has not been unjustly enriched; or To the extent that its value is disproportionate to the benefit. You cant bargain for something that you already have (past performances cannot constitute consideration for future promises) Moore v. Elmer (soothsayer)

38. 39. a. b. 40. a. 41. 42. a. b. c. i. ii. d.

Moral consideration - whatever happened in the past that gives rise to some kind of social obligation can be converted into a legal promise. Mills - father is not obligated to pay for his sons caretaking. Father was not the direct recipient of the benefit. If the son had been a minor, it would have been different. Webb - saving McGowins life by risking his own is adequate consideration worthy of payment for the rest of his life. The court presumes that McGowin asked Webb to do what he did. Interpretation Ambiguous Terms - Filling in the Gaps Illusory Promise - apparent promise that is so qualified, or which reserved such discretion to promisor, that promisor makes no binding commitment. Contract based on illusory promise can be terminated by either party. Raffles v. Wichelhaus (Peerless) The parties subjectively agreed to different circumstances, therefore there can be no contract. This subjective difference in meaning is reasonable. Restatement 202: We assume parties mean whatever is the reasonable interpretation of their observable behavior. Course of dealing (between the parties), course of behavior (regarding this contract), and customs in industry help courts resolve meaning of ambiguous terms. Restatement 201: If parties mean same thing by term, thats how the term is interpreted If parties mean different things, term is given meaning of party who Did not know of other partys different meaning, when other party did know. Had no reason to know of other partys different meaning, when other party did. Otherwise, neither party is bound by meaning attached by other. Restatement 204: When a term is missing from a valid K thats essential to determining parties rights and duties, court will supply a term reasonable in the circumstances. UCC more readily supplies missing terms. Requirements Contracts - promises to fulfill all requirements of the buyer. Rule: Cant buy in any amount in excess of reasonable means. Implied promise to act in good faith. Purchase amount also must be justified by condition of the business. New York Central Iron Works - (common law, pre-UCC) plaintiff failed to make the proper argument that defendants buying up a much larger amount than usually supplied is evidence of bad faith, as it was not justified by the conditions of business or customs of trade. UCC 2-306: A term which measures the quantity by the output of the seller or the requirements of the buyer means such actual output or requirements as may occur in good faith, except that no quantity unreasonably disproportionate to any stated estimate or

e. i. ii. f. g. h. i. j. k. i. ii. l. 43.

44. a. b.

c. 45. 46. 47. 48. a.

49. 50. 51. 52. a. b. c. 53. a. b. c. i. ii. d. 54.

55. 56.

any normal/comparable prior output or requirements With merchants, good faith means honesty in fact. Good faith requirement applies to orders that are larger or smaller than the amount expected. Unreasonably disproportionate test only applies to orders that are larger than the amount expected. Eastern Air: UCC uses Iron Works test for good faith but adds that requirement be reasonably foreseeable All requirements contracts are not exclusive requirements contracts - the quantity-determining party in an outputs-determining contract is not completely at the other partys mercy, like they are in exclusive requirements contracts. Wood v. Lucy, Lady Duff-Gordon: (common law) exclusive dealing contract; Lucy is at Woods mercy, so we impose a slightly larger burden on him to behave well under the contract. Good faith implies you are not doing anything below the minimum bar; it sets a floor as the absence of bad faith. Best effort requires you to do the best you could possibly do (this is required in the UCC unless otherwise stipulated) Battle of the Forms When parties begin performance, the courts will find a K even though offer and acceptance doesnt satisfy mirror image rule. If the substance of the acceptance differs in any way from the offer, it is not an acceptance, it is a counteroffer. If performance begins, however, the offeror is assumed to have accepted the terms of the counteroffer by allowing the performance to begin (which he must have noticed). The UCC does not follow the Mirror image or last shot rules UCC 2-207: Definite and seasonable acceptance operates as an acceptance even though it states additional to or different from terms, unless acceptance is expressly made conditional on assent to new terms. Additional terms are proposals for addition to K. If both parties arent merchants they dont become part of K unless intentionally accepted. If both are merchants, new terms become part of the contract, unless: Offer expressly limits acceptance to terms of offer They materially alter it, or Notification of objection to them has already been given or is given in reasonable time. Conduct by both parties which recognizes the existence of a K is sufficient to establish a K, although writings do not otherwise establish a K. The court uses UCC to supply missing or conflicting terms (and knocks out the terms that dont match) Merchant is a person who deals in goods of that kind or who represents having knowledge or skill concerning the goods. When you change a term in a way that is both obvious and important, it is

a. b.

c. 57. a. i. b. i. c. i. d. i. e. i. f. i. ii. g. i. h. i. ii. iii. 58. 59. a. b. c. d. i. ii.

probably not a definite and seasonable expression of acceptance. Where the differences are not material, the response is an acceptance. If merchant wants to form a contract but only if the buyer assents to its new or different terms, the best way to ensure this happens is to include language that acceptance is expressly made conditional on assent to the additional or different terms. If there is not a definite and seasonable acceptance then no contract is formed, and we stay in 2-207(3). Cant go to 2-207(1) or (2). We have at least one writing that is different/additional terms. Start by asking: Is there a definite and seasonable expression of acceptance or a written confirmation of that existing deal sent within a reasonable time? If No, no contract unless Conduct by both parties indicates that a contract was formed (2-207(3)) If Yes, ask: Is the acceptance expressly made conditional on assent to these new/different terms? If Yes, no contract unless Conduct by both parties indicates a contract was formed (2-207(3)) If No, we ask: Are the terms additional or different? If the terms are different, then Do we distinguish between different and additional terms? If no, then we hop right back into the 2-207(2) analysis below. If yes, courts do a number of different things: They apply the knockout rule (2-207(3)), or The buyers offer controls (the terms are those in the buyers offer) If the terms are additional, ask: Are both parties merchants? If no, then the terms are proposals for addition; explicit assent is required for them to become part of the contract. If yes, the terms are included in the contract, unless an exception applies in 2-207(2). Parol Evidence Rule Parol Evidence - evidence of alleged terms not in written record of agreement but claimed by one party to have been agreed to at time of (written evidence) or prior to (oral or written) making of K. Integrated agreement: writing intended to constitute final expression of one or more terms of the parties agreement. Whether a writing is integrated or not depends on the intentions of the parties. A Memorandum of Agreement becomes an integrated agreement with respect to the core terms, but it is not completely integrated if it includes everything - the core terms plus additional terms A writing is completely integrated when it is intended as the final and exclusive expression of all terms. If the final contract is missing one of the key terms that the parties

iii. e. f. g.

h.

i. 60. a. b. c.

d. e. f. i. ii. iii. g. h. i. i. i.

discussed earlier in the negotiations, it can be considered an integrated writing but not a completely integrated writing. If a writing is not integrated, extrinsic evidence of prior agreements can come in. Extrinsic evidence is anything outside the writing itself. The rule excludes presumptively irrelevant or concocted testimony The Rule applies to each term that is fully, finally, and clearly expressed in (integrated into) written record. Parol evidence is used to fill gaps in partially integrated (some terms fully and clearly expressed) or unintegrated (no terms fully an clearly expressed) in written record. Even if writing is clearly the complete (all terms) and final (intended to be exclusive) record (total integration), parol evidence may be used to resolve ambiguity of unclear language. To determine integration, judges traditionally used Four Corners test (minority rule) (disallow parol evidence if no obvious gap or inadequacy). But modern courts use Extrinsic Evidence test, allowing judges to look outside the writing (like to relationship between parties) to decide if writing was intended to be a complete and exclusive statement of agreement. Judge decides whether evidence is admissible (question of law). Then factfinder determines its credibility. Restatement 216 and UCC 2-202 ask how natural or likely it is that such a term be omitted from the writing. Admitted evidence may supplement or explain the writing, provided that it is consistent with the writing. If term would change effect of recorded provisions or meaning is implausible given the purpose of writing, parol evidence will probably be held inconsistent and excluded. If parol term is different from the normal factual or legal implication, or meaning of parol evidence is plausible but different from that which would be factually or legally implied, the parol evidence will probably be held inconsistent and excluded. UCC 2-202 says that evidence of course of dealings or course of performance is admissible, even if writing is intended as a final expression of agreement. If evidence is believed by factfinder, parol term becomes part of contract. Exceptions to the parol evidence rule: It doesnt apply to subsequent agreements To show that the contract was void or voidable (thus not enforceable as a contract) Testimony of coercion to accept is extrinsic but accepted when its purpose is to show that the contract is void or voidable. Evidence used to resolve ambiguity in the contract is allowed to be introduced it is not barred by the parol evidence rule. (Raffle v. Wickelhaus) Showing that no contract ever came into existence. Ex. Lucy v. Zehmer Most courts entertain lawsuits brought seeking to reform contracts. Parties had a prior agreement that contained all of their terms, but the

ii. iii. iv. 61. a. b. c. d. e. f. i. ii. iii. iv. v. g. h. i. i. ii. iii. j. 62. 63. 64. a. b. i. ii. iii. iv. 65.

writing misstates those terms. The requested relief is to reform/change/revise the writing to accurately state the terms of the agreement. The party claiming the terms are inaccurate has a high burden of proof. Try to limit it to situations where there has been a drafting mistake Make it only available if the party opposing reformation has acted in justifiable reliance on the right. Statute of Frauds Certain kinds of Ks are only enforceable if in writing (not necessarily signed by both parties). This is bc the subject of the Ks is important and we want people to know theyre doing something with legal consequences: Agreement to guarantee anothers obligation or answer for anothers duty (cosign a loan) Sales or leases of real property Agreements not capable of being fully performed w/in one year of making (but if theoretically possible to perform w/in a year, most cts will say its outside statute) Contracts for the sale of goods worth $500 or more (Revised UCC raises this limit to $5,000). The writing must: Reasonably identify the subject matter of the contract. Be sufficient to indicate that a contract in fact was formed. State the essential terms with reasonable certainty. Be signed by the person whose promise is being enforced. It need not be in the form of a contract, or signed by both parties. ASK: Does Statute apply? Do we have writing thats formally sufficient? (reasonably identify subject of K?) 2 exceptions: Part performance accepted by the promisor. This takes the case outside of the statute and allows the promisors promise to be enforced. Promissory estoppel - part performance and reliance on the promise takes us out of the statute of frauds. Statute of frauds is an affirmative defense - if you dont raise it in your answer, it is considered waived.

Defenses to Enforcement Void as against public policy Contract is void as against public policy if the public sentiment with regards to the policy is: Positive Well-defined Universal Deeply integrated in customs and beliefs Shaheen v. Knight - it is against public policy to award damages for the normal

66. 67. a. 68.

69. a. b. c. 70. a.

b. 71. a. b. c. d. e. 72.

a. b.

birth of a normal child. Duress - if I have no choice but to enter into a contract, even though I have formed one, it is not enforceable (because of a problem with the bargaining process) Stilk v. Myrick - captain voluntarily increased the wages of the seamen, likely to keep them from leaving. Since seamen did not provide additional consideration for the promise to pay them more (for work they would have had to do under the original contract), so the contract was unenforceable. Brian Construction v. Bringheti Ct says promise of additional compensation for unforeseen, burdensome aspect of work already bargained for constitutes a separate, valid K. P promised extra pay and D promised to do something not obliged to do, so THERE IS CONSIDERATION. R 89: A promise modifying a duty under K not fully performed on either side is binding if modification is fair, in view of unanticipated circumstances, or to the extent provided by statute, or as required by justice UCC 2-209: An agreement modifying a K (made in good faith) needs no consideration. Where there is already a K, we arent worried about whether people know their promises are legally binding. Also, not allowing K modification w/o consideration doesnt prevent coercion bc consideration isnt required to be adequate. We should enforce all modifications as long as there is a safeguard against duress and coercion. If there is ANY consideration, then courts dont ask about adequacy, unless consideration appears to be a sham (sham consideration only given to make term/modification enforceable) or used as evd of coercion or duress. Promissory Estoppel Hard to distinguish bt bargained-for exchange & conditional gift. For a contractual exchange: must usually have evd of benefit or detriment, and parties must have control over performance PE allows for enforcement of a promise w/o consideration and requires a promise that reasonably induces promisees action or forbearance AND promisees detrimental reliance on that promise. Cts traditionally apply PE to family relationships bc not normally accompanied by contractual formalities. R 90: Where promisor should have reasonably expected to induce action in reliance on promise and promisee acted in reliance on the promise to his detriment (so that injustice can be avoided only by enforcement), the promise is enforceable even if no K. Remedy is expectancy, but may be limited as justice requires. PE can be seen as consideration substitute, or as alternative theory of obligation. Consideration serves 1. evidentiary, 2. cautionary, and 3. channeling (legal

73.

74. 75.

a. b. c. d. 76.

a.

77.

a. b. c. d. e. f.

signal) functions. But those functions can be served by PE, analyzing Ks functionally instead of formally. (Cts dont usually do this explicitly, and often dont do this at all.) Greiner, Ct says theres no K, only mothers gratuitous gift of land. But since mother, by promising, reasonably expected to induce action or forbearance of a substantial character and injustice is avoided by enforcing promise, the promise should be enforced. Here, channeling function doesnt appear to be met. Promissory estoppel is used to reach a result that the statute of frauds wouldnt have Feinberg, There is actual harm and injustice caused by reneging on retirement benefits promise after P got sick. Even if there was no reliance, if she didnt even rely on the promise, we could still enforce promise using the functional analysis bc its clear that D meant to make legally binding promise. Feinberg Approach: Was there a bargained-for K? ( No. Can we enforce under R 90? ( No reliance. Did the promisor intend to make a legally binding promise (cts ask this implicitly)? ( Yes, so we can enforce. Baird, (Hand) SubContractors revocation of offer to GC is after GC submits bid to owner but bf owner accepts GCs bid. At that point GC could withdraw but not resubmit. Ct says PE only works for gifts. An offer to enter exchange cant be relied on until theres acceptance. Simply using the bid in another bid without notice does not constitute acceptance in this case; acceptance did not occur until GC accepted entire contract (with bid as a part of it). That was after the original bid was revoked. Drennan, (Traynor) Ct says that since GCs hands are bound, GCs making the bid is the consideration substitute for SCs promise to keep the offer open, binding the SC during bidding process. Reliance has created an option K. The GC isnt bound until he accepts SCs offer, but he is required to do so immediately after getting the job. What is the unfairness in Traynors approach? It is binding the subcontractor when the subcontractor may not intend to be bound. The subcontractor is bound to the general contractor, but the general contractor is not bound to do anything until it decides to exercise the option. After the general contractor is awarded the main contract, it can shop around to other subcontractors. The general contractor is not free to delay communicating their acceptance beyond a reasonable time, however. Once the general contractor has used a subcontractor bid in its general bid, it is not allowed to go back and renegotiate with the subcontractor for a lower price. Including the subcontractors bid constitutes acceptance, and if the general goes back and says anything other than that, it is considered a counteroffer and not an acceptance and no contract has been formed.

78. 79. a. b. c. d. e. 80. 81. 82. 83.

84. a. b. 85. 86. a. b. c. d. e. 87. 88. 89. a. b. c. d. 90. 91.

UCC 2-205: If a merchant agrees in writing to hold offer open (for 3 months or less) and separately signs the term, the offer is irrevocable. R 87: (1) An offer is binding as an option K if theres a statute, or if In writing, Signed by offeror, Recites purported consideration for making offer, and proposes an exchange on fair terms w/in a reasonable time. (2) An offer which offeror should reasonably expect to induce action on part of offeree bf acceptance and which does induce such action is an option K. [This is the decision in Drennan.] R 87(1) allows sham consideration to make parties legally bound to option Ks. In above cases, remedy was expectancy, but sometimes remedy in PE cases is reliance Goodman, (Emerson Radio franchise case) Ct says P get reliance damages, not expectancy damages, bc ct isnt enforcing promise, but using PE for a misrepresentation of a fact (seems like EE). Hoffman v. Red Owl Stores, Theres no indication that D intended to make a legally binding promise. D wasnt really being honest with P (careless if not malicious), conveying certainty when none existed. So, PE is a tort-like remedy that fills the gap, only awarding the amount necessary to prevent injustice (just out-of-pocket costs). Incompetence and Infancy (see notes pp. 154-157) Restatement 15 Improper Means, Misrepresentation R 470: Misrepresentation is any manifestation (purported assertion of fact) that is not in accordance with the facts. Rest. 164: Misrepresentation may be used as a defense to K enforcement if there is Assent Induced By other party With a misrepresentation that is fraudulent and/or material, and Reliance was justified. Rest 168: Statements of opinions arent treated as material, except if there is some special relationship with opinion-giver, or if some other good reason to rely on opinion (maybe expert). Halpert v. Rosenthal (termites case) (notes p. 158-161) R 161: Silence amounts to assertion and party required to disclose when Disclosure is necessary to prevent a previous assertion from being a misrepresentation Knows disclosure would correct mistake as to basic assumption AND failure to disclose = lack of good faith Knows would correct mistake contents/effect of writing Other party is entitled to know bc of special relationship Rest 164 Improper Means, Duress

a. 92. a. b. c. d. e. 93. a. b. 94. 95. 96. a. b.

c. 97. a.

98. a. b. 99.

a.

Duress occurs when there is no real choice but to enter K. When party agrees to make or modify K bc other party forces them. R 175: K voidable by victim if theres: Improper threat w/o any change in circumstances, exploited K leverage to undo bargain even with change, knowledge of dire economic straits of the other party No reasonable alternative no free will (time limits, commercial practices, consequences) R 176 Consideration may be an issue, but oftentimes, consideration isnt required for modification. A party may be allowed to demand modification for legitimate reasons (e.g., if its cost of performance has increased), as long as its not just exploiting leverage, taking advantage of other party. Austin (note p. 163-164) U.S. v. Progressive Improper Means, Unconscionability Substantive unconscionability: Some terms are always too offensive to be enforced, things no reasonable person would agree to, so extreme as to appear unconscionable. Procedural unconscionability: Other terms may be offensive because of bargaining defect, people werent deliberative and informed, theres an absence of meaningful choice, no ability to deliberate, costs of looking for new terms, complexity, pressure (e.g., K of adhesion). Sometimes, theres a combination. REALNETWORKS, Basically, the K made it very hard to sue (substantive problem). Ct says K not substantively unconscionable bc high cost of arbitration doesnt prevent enforcement of valid arbitration agreement. The benefit of giving up right to sue is that you get RealPlayer for free, and individuals right to sue isnt worth very much. But if company is insured against the danger of screwing people over, it might be more likely to screw people over (moral hazard), so there is benefit of someone being able to sue. Unconscionability is mostly regulated by statute now. Mistake Party may not be required to perform if it made a fundamental mistake about present facts (as opposed to mistake about what would happen later). Sherwood (mutual mistake), D agreed to sell cow to P for $80, thinking that it was infertile and would not breed. Maj says both parties had the same cow in mind, but were both mistaken as to the fertility of cow. The mistake went to the substance of the thing bargained for, went to the very nature of what was contracted for. There would have been no K but for mistake. The cow was the kind bargained for and this was a fact in existence when K was made. Ct grants recession of K. Dissent says they only agreed that cow hadnt bred yet, but P thought that cow might still breed. They agreed to the actual substance of the K, and the

100.

101. a. b. c. d. e. 102. 103. a. b. c. d. e. i. ii. iii. 104. a. 105.

mistake was about the quality of the cow. Since no one knew whether cow was fertile when K was made, it was not a fact but merely a failed prediction. Messerly, Prior owner improperly installed septic tank on property (latent defect) and sold rental property to D. D sold property to P, then septic system failed, making property worthless. Ct throws out distinction bt substance and quality, it adopts an equitable (case-by-case) analysis: R 152: If theres a mistake by both parties at time K made as to a basic assumption that has a material effect on performance voidable by adversely affected party, unless he bears risk of mistake (Messerly disagrees with this part) Performance and Breach One can breach by: Failing to perform when performance is due; or Repudiation or anticipatory breach - telling someone you arent going to keep your word ahead of the date when you were supposed to perform. Breach of contract for sale of goods: When did it occur? Before the goods were completed: Common law says the seller should stop building the goods UCC reverses this rule so the seller can complete the goods and sell the finished product to an alternate buyer. Duty of Good Faith Performance Implied duty of good faith performance: Neither party can do anything thatll destroy others right to benefit from K. Cts now insert this obligation to take good faith steps into every K, its implied in law. Mutual Life v. Tailored Woman, Tenant exploited a contractual gap by changing physical structure of building and moving expensive goods to area w/o % sales rent. Ct says tenant didnt breach implied covenant of fair dealing by exercising it contractual rights. As long as there is no intent to cheat the landlord, its OK. Ct seems to say that parties can do anything that doesnt violate express terms in the K, so long as there is a legitimate business justification. But some cts may look to malicious motives of a party. Stop & Shop, If the base rent is substantial, then % sales rent doesnt create a covenant. Its ok to exploit K gap as long as theres some reasonable purpose. But if base rent is well below market value, then its not ok. The Original Great American Chocolate Chip Cookie Co. (Posner) - you dont have a duty to be benevolent to your counterpart, but you cant enact rights dishonestly to achieve a purpose contrary to that for which the contract was made. Even if you are allowed to do something by contract, if you invoke that right dishonestly, thats not allowed by the duty of good faith. But this is not an

a. b. 106. 107.

108. a. i. ii. iii. b. c. 109. 110. a. b. c.

d. e. f.

g. h.

111.

easy question to act. What constitutes a material breach? Big B Breach: They dont perform at all They perform imperfectly They repudiate obligations - clearly and unequivocally signal that when the time to perform comes, it cant or wont fulfill its obligations Sometimes these doubts are doubtful and dont amount to a complete repudiation The party whose doubts have been raised is justified to demand adequate assurance of performance and to refuse to perfom until that assurance has been made. Restatement 251 - rule for when a demand is justified (if there are reasonable grounds to believe that the obligor will commit a breach by nonperformance that would of itself give the obligee a claim for damages for total breach) Jacob & Youngs, Performance (to build house using Reading Pipe) is a condition for duty to pay, and promise to pay is conditioned. Language of contract was ambiguous. Trade custom could have illuminated it. Not all promises are conditions (conditions are those things upon which the K depends). Majority says the difference is trivial enough that it didnt frustrate the purpose of the K, as long as it was done accidentally and there was some excuse for it. K was dependent on type of pipe used, but there was only a trivial departure. When the cost of remedying the imperfect performance is grossly disproportionate to the value of the promise, we award the difference in market value, not the cost of completion. Granting the remedy, we have no way of knowing whether or not it will be used to install the correct pipe. If party commits a material breach, breached against party may recover expectancy damages, but a breach that isnt material (dont get what you bargained for) may require a remedy, but you dont get to treat K as at an end. Parties may proscribe remedy and may theoretically say that perfect performance is a condition, but ct can still call failure trivial and not require perfect performance. Remedy for minor breach w/ substantial performance is expectancy damages. When expectancy damages are grossly disproportionate to diminution in value, then alternate remedy is diminution in value, but subjective value could factor in and foreseeability of that value would be essential. Lane Enterprises v. Foster, Lane performed Stage I of K w/ Foster, but indicated that it would not perform Stage II. Foster demanded assurance that Lane would perform Stage II bf it paid for Stage I in full. Lane did not give assurance and sued for expectancy. If Fosters breach (not to pay) is material, then Lane is entitled to treat the K as at an end and sue for expectancy ($7000 owed + profit on the K). But ct says the breach is not material, and Lane was not entitled to

a.

112. a. b. c. d. e. f. 113. 114. 115. 116. a. b. 117. a. b. c. 118. a. b. c. d. i. 119. a. b. i.

treat K as at an end and gets only restitution ($7000). Then its own breach (stopping work) is material, and Foster can treat K as at an end and recovery expectancy. Fosters breach was not material bc it was entitled to demand Lanes assurances (bc it had reasonable belief that Lane commit material breach by repudiating), and Lanes failure to give such assurances was a material breach. Ct also says not material bc Stage I payment was only 5% of K price. R 241: When determining the materiality of a breach, cts consider the following factors: Extent to which injured party is deprived of benefit reasonably expected Extent to which injured party can be adequately compensated Extent to which party failing to perform will suffer forfeiture Likelihood that party failing to perform will cure failure, considering all circumstances Extent to which party failing to perform complied w/ standards of good faith and fair dealing Failure to pay $ usually constitutes a material breach, but not if only small percentage withheld, and other party knows or believes that its coming. R 250: Repudiation must be positive, and reasonably interpreted to mean party will not commit or perform. Expressions of doubt are not repudiation.

Remedies Specific Performance - order that the promise be kept (an affirmative injunction) Money damages must be inadequate (Rest. 359/360) Difficulty of proving damages. Can you buy a substitute with money damages? Does the thing have subjective value money cant cover? What is the likelihood you would be able to collect money damages? Land Presumed unique Money damages are inadequate Replacement cannot be obtained Potential differences: Is this land unique in this particular case? Loveless v. Diehl - land was not arguably unique, because the buyers would not be able to actually possess it; it was just a means of getting a payment. Still, specific performance was the only remedy available. The sellers must value the money more than the land, so they should not be forced to keep the land if breached against. Sellers too? Sellers could be just getting rid of something to get money. Do we presume uniqueness when the breached-against party is the seller? Yes, with some exceptions.

c. i. 120. a. b. c. d. e. f. i. 121. a. b. 122. 123. a. 124. a. 125. a. b. c. d. e. f. g. i. ii. 126. a. b. c. d. i. e.

Discretion to deny? Case isnt clear Specific performance is an equitable remedy, so it is always subject to discretion Countervailing equities Goods Money presumed adequate Difficult remedy to award; requires monitoring, potential jail, etc. Start with the presumption that goods are not unique SP available when: C/L rule: no adequate remedy at law; one-of-a-kind; sentimental (Cumbest); judgment-proof defendant UCC 2-716: for specific performance to be the appropriate remedy, the item must be Unique, or in other proper circumstances If the cover is not commercially feasible, specific performance can be allowed Scholl car is not unique enough to warrant specific performance; no evidence presented that it would be infeasible to cover. Sedmak car is similar to that in Scholl, but in this case the plaintiffs showed evidence of infeasibility of cover. Personal Services Is it a PS contract? (is it a contract with an individual or a company?) If its with an individual it is a personal service contract, and specific performance cannot be enforced. Is the person unique in some way and no one else can do it? Neg. injunction might be awarded. If its with a company, and money damages are inadequate, specific performance can be enforced. Industry customs - do you expect the person to show up or do you expect their staff? Can the court issue a negative injunction, forbidding work for someone else? Did employee promise not to work for someone else? If yes, injunction may be awarded if money damages are inadequate (Lumley) Harris - injunction may only be awarded if the person is unique/exceptional. Precision Walls - non-competition clauses must be reasonable with their substantive scope, geographic scope, and temporal scope. This is to balance the harm to the employee, the employer, and the general impact on trade. The larger the geographic scope, the shorter the time allowed, and v.v. If it is unreasonable it could be likened to a penalty clause.

f. g. h. i. ii. i. i. ii. j. k. i. l. m. 127. 128. a. b. i. 129. a. b. c. d. 130. a. b. 131. a. b. c. d.

If no, injunction may be awarded if the promise is implied, but not if the promise is not implied. Two different frames of analysis: Retrospective - at the time the employee wants to make this decision to leave, what are the harms that will be suffered as a result of the non-competition clause? Employee might not be able to find other work. Employee might be locked into a disagreeable workplace. Ex ante - at the time of contracting, what are the benefits gained by this contract? Employee might not get access to confidential information without this clause in the contract. Did employee breach? If the employer breached, he cannot enforce any of the other promises in the contract. If the employee breached, the employer may be able to enforce some of the other promises in the contract (such as a non-competition clause) Including the non-competition clause allows for an additional, independent breach What is remedy? $$ damages adequate? Lumley (her performing for someone else could hurt the theater, injure her voice) Harris (is the employee unique, exceptional, irreplaceable) If it is commercially infeasible to find a replacement person, Post-contract restrictions: Reasonable test (Precision Walls) Restatement 367 Promise to render personal services will not be specifically enforced. A promise to render personal services exclusively for one employer wont be enforced by enjoining work for another if The probable result of the injunction is to compel performance of the personal services contracted for (the court in Lumley does not follow this - it says it does, but it does not) The injunction would leave the employee with no practical or reasonable means for making a living. Discretion not to award Injunction is equitable relief, always discretionary Courts differ in how willing they are to exercise discretion. Damages - give the injured person money Common Law Expectancy - damages that will put the injured person back in the position they would have occupied had the promise been performed. (i.e. damages caused by the breach) Justified by the notion of efficient breach. Damages put promisee in same position as if the promise had been kept. Expectancy is the baseline method of remedy.

e. f. 132. a. b. c. d. 133. 134. 135. a. b. c. d. e. f. g. h. i. j. k. 136. a. b. 137. 138. 139. 140.

Breaching parties are not entitled to expectancy. Damages, as a rule, are capped by the expectancy interest. Restatement 347. Measure of Damages in General The injured party has a right to damages based on his expectation interest as measured by the loss in value to him of the other partys performance caused by its failure or deficiency, plus any other loss, including incidental or consequential loss, caused by the breach, less any cost or other loss that he has avoided by not having to perform. Value of performance + Other loss (consequential or incidental damages; does not include essential reliance) - Cost or loss avoided Essential reliance - whatever a person must do in order to complete the contract. Class example: Tom would have obtained $120,000 from the house, if he can prove that is what the house was worth $120,000 is what the asking price of similar houses was at the time, but sellers rarely get their asking price. We could question whether these other houses are really similar to Janes house Other loss: $500 in paint He purchased it in reliance on the promise, and cannot use for anything else If this is not a reasonably foreseeable or naturally occurring expenditure, it might not be recoverable If it is not naturally occurring, the breaching party would have had to have received notice. After the breach the breached-against party is expected to take reasonable measures to mitigate damages - if it would not be unreasonable to sell the paint, it might not be recoverable. We do not add the $250 because it is a cost Tom would have had to incur in order to get the benefit of Janes performance. Cost or loss avoided: $90,000 Total expectancy damages: $30,500 Consequential damages: those that dont flow directly from the breach, but they are caused by the breach (often in reliance on the promise) Example: Lost profits from not being able to operate as quickly as you would have if the promise had been kept. Must be foreseeable in order to be recoverable. (Nurse v. Barns - the cost of iron purchased for smelting in rented iron barns is recoverable, so long as the amount purchased is reasonable) Avoidability: if the loss could be reasonably avoided, it is not recoverable. Certainty: if the loss caused by the breach cannot be proven with reasonable certainty, it is not recoverable. If a large loss is foreseeable, the promisor can avoid liability by writing a clause into the contract. Hooker - the waste of a key employees time working on a contract is awardable.

a. b. c. 141. 142. a. b. c. 143.

a. b. c. d. 144. 145. 146. a. b. c. d. 147. a. 148. a. b. 149. 150. a.

Hooker - storage space that would have been rented otherwise is not awardable. Incidental damages: expenses incurred trying to avoid the harm caused by the breach. Example: Paying someone to sell the excess materials that will no longer be used. It doesnt matter whether damages are consequential or incidental for purposes of recovery. It matters when drafting the contract. Another formula: Lost profit: $120,000 - $100,000 - $250 = $19,750 Reliance costs: $500 + $250+ $10,000 = $10,750 Total expectancy damages: $30,500 Hawkins v. McGee - the trial court wanted to award reliance damages (pay Hawkins for the pain and suffering of the operation + future pain and suffering). The Supreme Court decides to award expectancy damages - the difference between the value of the perfect hand and the value of the present hand, along with incidental consequences - anything else caused by the operation. He is awarded any damages caused by the breach: He cannot recover for any of the pain and suffering he would have undergone in the surgery for the perfect hand (essential reliance). He can recover for the pain and suffering that would not have occurred if the operation had been performed as promised. The doctor guaranteed the success of the surgery, and pressured plaintiff into it so he could experiment. Reliance - put the promisee back in the position the promisee occupied before the promise was made. Restatement 349 Damages Based on Reliance Interest Reliance expenditures - Loss avoided (if proven by breaching party) If the party in breach cant prove the loss the other party would have suffered if contract had been fully performed, it doesnt count. Reliance might be fall-back damages if expectancy cant be proven. Reliance usually does not include opportunity costs. Tend to be requested in losing deals, because it shifts the burden of proving the loss to the defendant. Can pre-contract expenses be recovered? General Rule: No. Pre-contract expenses can only be recovered as part of reliance damages if the promisee passed up an opportunity to recover those pre-contract expenses because of reliance on the promise. Dempsey - no, they cannot, because they were not made in reliance on the contract it does not appear that the promisor would have had the chance to negotiate with another boxer to recoup the investments. Reed - yes, they can when the breach costs the promisee the chance to recoup those investments. Limitations? These elements of the damages must be foreseeable.

151. a. b. 152. 153. a. i. ii. b. c. d. 154. a.

b. 155. a. 156. a. b. c. d. 157. 158. a. b.

Sullivan - reliance is the best measure of damages because we cant measure the value of what was promised (improved nose). Because there was no negligence found, the cause of action is suspect because doctors cannot be held responsible for the expectations of their patients. The jury provides a mixed reward - pain and suffering for the third operation only, an expectancy interest, along with some reliance. Not common. Restitution - unjust enrichment must be disgorged from the promisor. We want to put him back in the position he would have been in before the promise. 371. Measure of Restitution Interest If a sum of money is awarded to protect a partys restitution interest, it may as justice requires be measured by either the reasonable value to the other party of what he received in terms of what it would have cost him to obtain it from a person in the claimants position, or the extent to which the other partys property has been increased in value or his other interests advanced. The court will choose the first measure when the second one is hard to figure out; the court will choose the smaller one when the party seeking damages is the one that breached. If damages are stipulated in the contracts as a liquidated damages clause, and these are reasonable damages, then restitution cannot be awarded. As a remedy for breach 373. Restitution when Other Party is in Breach Subject to the rule stated in Subsection (2), on a breach by a non-performance that gives rise to a claim for damages for total breach or on a repudiation, the injured party is entitled to restitution for any benefit that he has conferred on the other party by way of part performance or reliance. The injured party has no right to restitution if he has performed all of his duties under the contract and no performance by the other party remains due other than payment of a definite sum of money for that performance. If Janes home had decreased in value to $80,000, Tom would have incurred a loss on the deal of $20,250, so he would recover nothing for expectancy This is why Tom might seek restitution. Bush v. Canfield Seller of grain breached, after the price dropped. Buyer received down-payment + interest. The breached-against party has to give back any benefits they received from the contract. We are really only interested in benefits the breaching party received from the non-breaching party; not the benefits the breaching party gained from the breach. As a remedy for breaching party Restatement 374 Benefit conferred - harm caused The breaching party has neither the incentive nor the willingness to complete

159. a. b. 160. 161. a. b. c. d. 162. a. b. c. 163. 164. a. b. c. d. e. f. g. h. 165. a. 166. a. b. c. d.

the contract Burdens of proof? The party in breach has it. But the court must consider the damages of the breached-against party. Impact of liquidated damages Britton v. Turner The fact that Turner let Britton keep working is an implicit acceptance of his work. You have been unjustly enriched if you have the opportunity to refuse performance, and dont refuse it. Turner has a duty to pay for the work received, even if it wasnt for 12 full months Condition to work the full year before pay sounds like a penalty. Vines v. Orchard Hills, Inc. The fact that Orchard Hills decided not to mitigate damages by selling the condo to someone else, because it could increase in value, that is their choice. But the court treats them as if they mitigated. So the amount they could have gotten for resale at that time is what they could have offset the loss by mitigating. As a free-standing remedy in cases where there is no other available legal theory that would supply a remedy. quantum meruit or quasi-contract An implied-in-fact contract involves promising to pay the reasonable value of the service: When one performs for another with the others knowledge a useful service usually charged for the latter expresses no dissent or avails himself of the service. No implied-in-fact contract: promise is a gratuity (volunteering) without expectation of payment the person benefited must do something from which his promise to pay may be fairly inferred. A quasi-contract (contract implied in law) is based on policy and requires no meeting of the minds. Quasi-K requires wrongfully secured or passively retained benefit that would be unconscionable to retain. Four variables that make a strong case against unjust enrichment: If you intended to act gratuitously (voluntarily), no restitution. Nontrivial and quantifiable enrichment is needed. If the beneficiary tries to or actually rejects the benefit, they have not been unjustly enriched. No restitution. Sometimes the plaintiff seeking restitution could have given the beneficiary the opportunity to reject the benefit, but he doesnt - less likely to get restitution.

167. a. b. 168. a. 169. a. b. c. 170. a. b. c. d. e. f. i. ii. 171. a. b. c. d. e. 172. a. b. i. 173. 174. a. b.

c. d. 175.

Cotnam v. Wisdom Harrison got services - attempt to save his life - while he was unconscious. The court assumes he would have been willing to pay money to increase his chances of survival. Restatement 371 tells us how much the cost of the services should be. We create an implied contract in law, because payment for medical services is expected and common. Martin v. Little. Brown Law student volunteered information about plagiarism to publisher. Court did not award damages. Method of computing Restatement 371 Generally, pick the higher amount unless Party seeking breached Emergency/life-saving services Recovery by a wrongfully discharged employee: The amount of salary agreed upon for the period of service, minus Amounts the employer must prove: Earnings from other employment, or Earnings the employee could have made (in available, substantially similar employment) during the time of the breached contract. UCC Applies to the sale of goods. Goods are all things Moveable At the time identified to contract this might be at the time the contract is made, or it might be later. Goods are not Investment securities Money (which can be a good in currency exchange, but not as part of consideration for a sale of real property or other non-goods) Things in action (legal claims) Buyers UCC 2-712. Cover: Buyers Procurement of Substitute Goods (cover + incid/conseq damages) After a breach the buyer may cover by making in good faith and without unreasonable delay any reasonable purchase of or contract to purchase goods in substitution for those due from the seller. The buyer may recover from the seller as damages the difference between the cost of cover and the contract price together with any incidental or consequential damages as hereinafter defined (Section 2-715), but less expenses saved in consequence of the sellers breach. Failure of the buyer to effect cover within this Section does not bar him from any other remedy. If you dont cover, the UCC treats you like you did: UCC 2-713 (MP - K price + incid/conseq)

a.

b. 176. 177. a.

178. a. b. 179. 180. 181. a. b. c. d. 182. a. b. 183. 184. a. b. 185. 186.

The measure of damages for non-delivery by the seller is the difference between the market price at the time the buyer learned of the breach and the contract price + incidental or consequential damages, minus expenses saved by the breach, Market price should be determined at the place for tender Tongish - you get the market price remedy, even if it exceeds the profit you would have gotten if the promise had been kept UCC 2-715. Buyers Incidental and Consequential Damages Incidental damages include expenses reasonably incurred in inspection, receipt, transportation and care and custody of goods rightfully rejected, commercially reasonable charges, expenses or commissions incurred in effecting cover, and any other expenses due to delay or the breach. Consequential damages include: Any loss resulting from requirements and needs that the seller had reason to know about at the time of contracting and which could not be reasonably prevented by cover; Injury to person or property proximately resulting from any breach of warranty. Sellers UCC RULES? Resale: you get the difference between the contract price and the resale price + incidental damages - expenses saved Must be done In good faith In a commercially reasonable manner if done in a private sale, with notice to the breaching buyer (who could bid on the item or supervise to make sure it is being sold at a fair price). Market Price: You get the difference between the contract price and the Market price + incidental damages Measured at time and place of tender - delivery of goods from the seller to the buyer. If you are a lost volume seller, who would have made unlimited sales and lost one as a result of your breach, the measure of damages is the profits on that sale. Neri v. Retail Marine Corp. - boat seller awarded lost profits from breached sale, even after resale of boat, because it was a lost volume seller. Majority rule Most courts consider whether the seller is a lost volume seller a question of fact for the jury to decide. $674 in storage costs was also awarded in this case, because those costs were caused by the breach. There is no consequential damage for sellers. Incidental damages are covered if it costs you to go out and sell to someone else. If there is reputational harm that can be proven, it seems you should get it but there is not a provision for it in the UCC. Limitations

187.

a. 188. a. b. c. 189. a. i. b. c. 190. 191. a. 192. a. b. i. ii. 193.

194.

195.

a.

Foreseeability Damages are only awarded when they are foreseeable: When they are naturally occurring When they are in the contemplation of both parties at the time of contract (special). This is typically accomplished through notice. Hadley - damages due to the shutdown of the mill not awarded, because the delivery guy had no way to know the crankshaft was essential to the operation of the mill. Why is notice required for special damages? Information-forcing: figuring out exactly what the parties agreed to. If the promisee has some private info regarding the value of the promise, he must disclose it so the promisor can take necessary steps to avoid breach. Hadley presumes that the shipper has agreed to be liable if he knows about the special circumstances of the promisee. Default Rule: Parties are presumed to accept any liability for any loss they can foresee. Default Rule: the more sophisticated party is required to disclose to the less sophisticated party what risks they will not cover. Rule from Hadley v. Baxendale: general damages are awarded only if injury were foreseeable to a reasonable man and special damages are awarded only if actual notice was given the carrier of the possibility of injury. Restatement 351. Unforeseeability and Related Limitations on Damages. Damages are not recoverable for loss that the party in breach did not have reason to foresee as a probable result of the breach when the contract was made. Loss may be foreseeable as a probable result of a breach because it follows from the breach In the ordinary course of events, or As a result of special circumstances, beyond the ordinary course of events, that the party in breach had reason to know. A court may limit damages for foreseeable loss by excluding recovery for loss of profits, by allowing recovery only for loss incurred in reliance, or otherwise if it concludes that in the circumstances justice so requires in order to avoid disproportionate compensation. Hadley - if the mill stoppage had been foreseeable, because of notice or natural occurrence, Restatement 351 acknowledges that it would have been disproportionate to award a large amount of profits after a small payment to the shipper (who likely would not have agreed to such a low shipping fee if he had known he was assuming such a large risk) Loss of Use Value - The Court finds it is naturally occurring that the use of equipment will be lost during the time when the delivery of the equipment is delayed - especially when the equipment delayed is a complete piece of machinery (Martinez). One way to measure the use value of a complete piece of machinery is its fair market rental value.

b. c. d. 196. 197. a. 198. a. 199. 200. a.

201. 202. a. 203. a. b. 204. a. b. i. ii. 205. a. b. c. d. e. f.

The jury decides whether a type of harm is a naturally occurring harm. Lost profits are usually considered to be OUTSIDE naturally occurring as a result of the breach, depending on foreseeability. FedEx contracts around the default rule - they cover up to $100 of value. Otherwise you buy insurance. Morrow and tacit acceptance - the shipper must have indicated willingness to bear the consequential damages in Arkansas. Minority rule Presumes that the shipper has not agreed to be liable unless he has given some indication of that assumption. Certainty Profits are hard to prove with substantial certainty. Dempsey - cannot claim lost profits (expectancy) because they werent proven with reasonable certainty. Restatement 349. Damages Based on Reliance Interest As an alternative to the measure of damages stated in 347, the injured party has a right to damages based on his reliance interest, including expenditures made in preparation for performance or in performance, less any loss that the party in breach can prove with reasonable certainty the injured party would have suffered had the contract been performed. Mistletoe - the party in breach could not prove that it was a losing contract with reasonable certainty, so the breached-against party receives reliance damages. Avoidability The doctrine of avoidability requires the seller to mitigate damages by reselling the goods. Restatement 350. Avoidability as a Limitation on Damages Except as stated in Subsection (2), damages are not recoverable for loss that the injured party could have avoided without undue risk, burden or humiliation. The injured party is not precluded from recovery by the rule stated in Subsection (1) to the extent that he has made reasonable but unsuccessful efforts to avoid loss. Common Law for recovery by a wrongfully discharged employee: The amount of salary agreed upon for the period of service, minus Amounts the employer must prove: Earnings from other employment, or Earnings the employee could have made (in available, substantially similar employment) during the time of the breached contract. MacLaine Awarded lost salary for rest of term, less Amount employer proves Employee earned from replacement job Employee could have earned with reasonable effort Must be substantially similar MacLaine is not required to take any substantially similar employment she finds, but if it exists and she does not take it, the responsibility for that

g. h. 206. a. b. c. d. e. f. g. i. ii. iii.

iv. 207. a. b. c. d. e. f. g.

salary shifts to her. One thing missing from the Courts formulas is that there are certain unquantifiable aspects to finding substitute employment - reputational elements, prospects for future employment, etc. Prevents parties from engaging in socially wasteful activity. Luten Bridge The county decided the bridge was useless, but Luten continued to build even though stopping at that point would not have hurt them (they still would have gotten all profits they were entitled to after the breach). All the work between the breach and the end of construction is of no social value - contract law wants to avoid this. Contracting Around the Default Rules of Damages Penalty clauses are stipulated damages clauses that the court refuses to recognize. Liquidated damages are the main tool of contract enforcement - they put the damaged party in the position it would have been in had the promise been kept. Factors for determining whether a particular clause is reasonable: Did the parties intend to provide for damages or for a penalty? Simply calling something liquidated damages is usually not enough to change the nature of the clause or the intent. Is the injury caused by the breach one that is difficult or incapable of accurate information at the time of contract? When the parties entered into their agreement, is it reasonable they would have believed they would have a hard time quantifying or proving their damages? If yes, the court views this on the liquidated damages side of the scale. If the damages are easy to quantify at the time of trial, the court will find it was not reasonable to stipulate the damages at the outset of the case. Kemble v. Farren To contract around the uncertainty of lost profits, K included a stipulated damages clause. The damages apply to any breach, not just one causing damages of unknown amount. This makes it look like a penalty. Are the stipulated damages a reasonable forecast of the harm caused by the breach? Were the estimated damages reasonable given the information available at the time? If so, the court may award. If the damages provided for in the contract are grossly disproportionate to the actual harm sustained, the courts usually conclude that the parties original expectations were unreasonable (and do not award the damages). Liquidated damages cannot be recalculated by the court - to do so would defeat the purpose of liquidated damage clauses. An earnest of performance means that promising to suffer a grievous harm (penalty) in the event of a breach tells the promisee that promisor does not

208. a. b. c. d. e. f. g. h. 209. a. 210. a.

b.

211. 212. 213.

intend to breach. Wassenaar v. Towne Hotel The court upholds the liquidated damages because They believed the estimate was reasonable It took into account consequential damages that would be difficult to quantify (like what Wassenaar might have given up to get this clause) They recognized that Wassenaar was actually harmed during the period he was unemployed. The old employer provided no evidence that his new job was comparable to his old job - and that evidence is their responsibility. Once the court decided to enforce the stipulated damages clause, we dont count the new job as mitigation. If the employer knew it could wriggle out of a penalty clause it could use that to gain leverage with a less sophisticated party who doesnt know the clause will be unenforceable in court. Including a penalty clause, knowing it wont be enforced, could amount to fraud. 355. Punitive Damages Not recoverable for a breach of contract unless the conduct constituting the breach is also a tort for which punitive damages are recoverable. 356. Liquidated Damages and Penalties Damages for breach by either party may be liquidated in the agreement but only at an amount that is reasonable in the light of the anticipated or actual loss caused by the breach and the difficulties of proof of loss. A term fixing unreasonably large liquidated damages is unenforceable on grounds of public policy as a penalty. A term in a bond providing for an amount of money as a penalty for nonoccurrence of the condition of the bond is unenforceable on grounds of public policy to the extent that the amount exceeds the loss caused by such non-occurrence. Lake River

214. 215. 216. 217.

218. 219. 220. 221. 222. 223. 224. 225. 226. 227. 228. 229. 230. 231. 232. 233. 234.

Torts Tortious interference with Contracts Restatement (Second) of Torts 766. Intentional Interference with Performance of Contract by Third Person One who intentionally and improperly interferes with the performance of a contract (except a contract to marry) between another and a third person by inducing or otherwise causing the third person not to perform the contract, is subject to liability to the other for the pecuniary (monetary) loss resulting to the other from the failure of the third person to perform the contract. Acting in ones own best business interests is normally not considered improper. Improper would be attempting to take something away from a party without really wanting it; doing it just to hurt the other party. If you understand that facts exist, and the court later decides those facts indicate a contract, you are expected to have known this was a contract at the time. Actual knowledge is required; constructive knowledge is not enough. Texaco v. Pennzoil Is there any reason to believe that Texaco knew: That the Pennzoil contract was enforceable. When they were asked to indemnify Getty from any damages Pennzoil might seek, they probably should have guessed that the contract with Pennzoil was enforceable. They were trying to structure the agreement to look like Getty was actively soliciting and desiring an offer from them, and it was not Texaco who initiated the contact. We can infer actual knowledge because Texaco called a big meeting, hired a consultant, etc. That their interference could cause a breach of the contract with Pennzoil. Texaco misinterpreted the facts to arrive at a mistaken belief that no enforceable contract existed, so Texaco is liable. The court treated the Memorandum of Agreement as a contract It had manifestations of assent It had promises (consideration) It wasnt sufficiently definite because it did not include all the terms needed to understand the deal.

235. 236. 237. 238. 239. 240. 241. 242.

243. 244. 245. 246. 247.

Answering a Question Consideration is the main theory of obligation. Questions to ask and answer: Was an offer made? We need to have someone manifest their willingness to enter a deal in a way that allows the other party to complete that deal. We have to have an actual offer, rather than preliminary negotiations. Nebraska Seed, Texaco, Restatement 24. Was there an acceptance? The offer must have been met by a return manifestation of assent. Was it made in an appropriate manner? The offer can specify the appropriate method of acceptance. More fundamentally, were concerned with whether the offer can be accepted by a promise, or only by performance. Or is it a case where the offeror wants a return commitment? This doesnt exclude acceptance by beginning performance. White v. Corlies - no acceptance (buying the wood and starting work was not good evidence of acceptance because thats what he did every day). Did the terms of acceptance match the offer? Did the offeree manifest assent to the same terms the offeror did? Different set of rules under UCC 2-207 Timing of the acceptance? Was it within the time period specified in the offer, or within a reasonable period of time? Time period matters most when the offeror tries to revoke. Was the acceptance valid before the revocation? Even if the revocation beats the acceptance in terms of time, we ask whether the offer was revocable. Sometimes offers cannot be revoked (option contracts): Was there consideration for the option? Restatement 87(2) - reliance and promissory estoppel. You create an option contract when the promise induces reliance. Notice? Did the offeree give any required notice of their acceptance? Was there consideration? Was there a bargain? (Restatement 71) Was the return promise or performance sought by the promisor, and given in exchange for the promisors promise? Was the consideration adequate? (not super important) If it looks like a sham, the court could refuse to enforce the promise, which is puzzling because sham consideration seems like a signal that the promisor wants the promise to be enforced. Was consideration necessary? Not always in contract modifications (UCC 2-209, Restatement 89) Promissory Estoppel Unjust Enrichment Four senses in which weve encountered unjust enrichment. Cotnam Questions of Interpretation Sometiems the parties have a misunderstanding about what the parties have agreed to do (Raffles v. Wichelhaus) - sometimes the court decides no contract exists in this case.

248. 249. 250. 251. 252. 253. 254. 255. 256. 257. 258. 259. 260. 261.

262. 263. 264. 265. 266. 267. 268. 269. 270. 271.

Restatement 201 gives us tools for deciding which of the two parties we should favor. Whose understanding wins? Restatement 202 resolves ambiguities (if there is an ambiguous term like Peerless), there is a way we can construe it (according to industry customs) that resolves the ambiguities. Did the parties deal omit important terms? Texaco v. Pennzoil, Greiner v. Greiner, Hoffman v. Red Owl. What do we do when the parties agreement is missing terms we would expect to find there? The court could determine they werent done negotiating The court could conclude that they were done negotiating but the contract is insufficiently definite to be enforced. The court could supply the missing terms (add a reasonable term) if the court is willing. Did the writing omit or mistake terms that the parties had previously talked about? Parol evidence - did one party mess up in the draft of the contract? Defenses to Enforcement Statute of Frauds - is this promise one of those that only can be enforced if it is evidenced by a writing? The promise must be evidenced by a writing, signed by the person whose promise is going to be enforced. It need not be the contract itself, just evidence of the contract. Greiner v. Greiner What theories are available to Frank Greiner to enforce Maggies promise? Is this common law or UCC? Common law (could mention UCC if that is relevant, especially if the only rule we have is in the UCC). common law applies if its not a contract for the sale of goods UCC applies if its a contract for the sale of goods. We would start by trying to prove a breach of contract. To prove a breach, wed have to prove that a contract had been formed. Maggie Greiner promised to give Frank 80 acres of land, but she didnt specify exactly where it was. Frank might say that a contract was formed when Maggie offered to give him the land if he moved to Mitchell County. His moving was a consideration for her offer of the land. Was an offer made? She made it appear that it was reasonable for him to believe that he could accept the offer by moving to the land. We dont need to talk about the offer of money, because he didnt accept that offer. The doubt comes with regards to her offer to give him land and whether that was in exchange for something. Did he supply consideration? Assuming her promise was in exchange for his moving there. There is always consideration required, even in a unilateral contract. Usually giving that complete performance is the consideration

272. 273. 274. 275. 276. 277. 278. 279. 280.

281. 282. 283. 284. 285. 286.

(something the person does that they wouldnt have done otherwise). 287. 288. Internal deliberation of Greiner v. Greiner: there is always a question whether the manner of acceptance was allowed - what kind of acceptance did Maggie want? Its not clear whether she wanted a promise or full performance. This is not a serious question because Frank likely satisfied whatever it was that was required by moving to Mitchell County. The offer came close to implying that he needed to actually move. It did not specify a specific way of acceptance. Promissory acceptance can also be rendered by performance. Corlies (wood paneling case). Restatement 32 and 62 - you can render a promise by performance. Starting to perform constitutes promising to perform. The main thing to talk about is that there are three core, fundamental problems in saying that there is a contract: There is at least arguably no consideration. There is at least an argument that Maggie wasnt arguing for Frank moving - that his moving was a condition for him to fill in order to get the land. It is possible that she would have given him the land regardless. Lack of definiteness - at the time the contract was formed the land itself had not been identified. Part performance can cure those kinds of problems, and here the course of parties dealing is such that we know what land was at issue. Statute of frauds - the contract was for the conveyance of land and therefore must have a sufficient writing, signed by Maggie, to evidence the deal. We have one letter written by one of Maggies sons (as she could not read or write) asking Frank to come down. Could this be treated as signed by Maggie, even though it wasnt? Not normally, but possibly because she didnt know how to read or write and asked her son to write the letter for her, it could be allowed. This is likely insufficient. For the same reason, it probably wouldnt help Frank to liken this case to moral consideration cases. This case is when someone conveyed a benefit on someone else - Frank moved to Mitchell County and improved the land. After he did that she behaved in ways that led him to believe she would convey the land and she told her other children she was going to do this. If were trying to create a contract - to enforce the statute of frauds Franks other arguments could be promissory estoppel (Restatement (Second) 90). Use the facts to argue that Maggies actions led Frank to act reasonably in reliance. Frank likely lost his rights to the land he left behind under the Homestead Act. Promissory estoppel is a valid legal theory, but it doesnt tell us what the remedy would be. Blatt suggests that promissory estoppel can only be used to overcome particular defects. You cant use it to get you any kind of

289. 290. 291. 292. 293. 294. 295.

296. 297. 298.

299. 300.

301. 302. 303. 304.

remedy in some cases. Cases with a more expansive notion of promissory estoppel - varied interpretations of what the remedy should be. You have to analyze whether specific performance is available as a remedy. Decide whether specific performance is likely to be a remedy even for those courts that recognize promissory estoppel as a way to get it. 305. 306. Other courts, recognizing that justice is going to award less, might give an award of reliance damages. His big loss is that he no longer has a place to live if he cant live on her land. If he sold his old land, he has money from that, but if he has to buy or rent a new property and this money is insufficient, he should be awarded damages sufficient to provide him with an equivalent place to live. Land improvements under the 80 acres - measured by how much he spent in money and time. Under reliance, we would not give Frank the amount of money he had improved the land by - that would fall under unjust enrichment. Freestanding remedy when you dont have a contract you can enforce, and no one has behaved in a tortious way. Here the benefit Maggie received was the improvement to her land. If we had a valid theory of unjust enrichment, Frank would be entitled to recover the benefits of his improvements. But we have to deduct some stuff - benefits that he got (food or lodging - rental value of her house/land during the time in which he lived there). Two ways to recover - what it would have cost her to pay someone else to make the same improvements, or the amount in which her lands value was increased. We would likely pick the larger of the two recoveries. He only gets to recover the benefits he incurred on her. Suppose she spent money preparing the land and house for him to move in. Suppose he improved the land $100, but she spent $50 getting the land ready. Prof. Says the remedy would be $25 or $75 - Im not sure how he got that calculation. Gustie - without going into all the details of that claim, did Gusties conduct, which amounts to interference with a gift, constitute tortious interference? There is not a question that Maggie meant to convey the land to Frank. At the least, it was a gift. Then Gustie comes along and threatens to throw her off the land if she gives any of it to Frank. Gustie interfered with Maggies intention to give the land to Frank - we could raise this point in the answer but not linger on it. Questions of interpretation can be linked to questions of formation - what was the manifestation of assent exactly to? You cant tell whether someone has performed the obligations under the contract unless you know what the contract requires. Now we pay attention to the language of promises and the language of writings. In interpretation, two things we need to talk about: How we know whether somebody has behaved in a manner that is consistent or

307. 308.

309. 310. 311. 312.

313. 314. 315. 316.

317.

318. 319. 320. 321. 322.

inconsistent with their obligations under the contract. What happens if they have behaved inconsistently with their obligations under the contract? The first set of questions is easy - once you decide what the contract requires, any failure to do that is a breach. The hard stuff comes when we talk about whether a party can breach a contract even when their behavior seems to be permissible under the legal terms of the contract. Implied duty of good faith. If you behave in a way that is not prohibited by the contract, but that somehow harms the promisor, is that a breach? The outputs in requirements contracts, exclusive dealings contracts - one party said there was no promise, the other party had complete discretion, and the court said that was not true, there was an implied obligation to behave reasonably. We didnt talk about what it means to have an obligation to act in good faith. Its tempting to say that parties have to behave in a commercially reasonable manner. Anytime you dont, you are violating your obligation to act in good faith. How we define the scope of this obligation for good faith. What are contract gaps? Missing terms that the parties didnt think about at the contract formation stage. Does the contract allow me to do X? Not clear if the contract doesnt say. If X arises, party A may exercise its right to do the following. Contracts never provide the explicit answer to any question.

323. 324.

325. 326. 327. 328. 329. 330.

331. Gaps also arise because performance is sequential (Posner