Contracts Outline Elements of consideration o Bargain for exchange o Benefit to the promisor or, o Detriment to the promisee o Not

t Consideration Past deeds Past Consideration Prior Obligation/Commitment Illegal stuff Nominal Consideration o Peppercorn o A small payment used to satisfy the requirement of consideration. Usually not valid consideration Bilateral vs. Unilateral o Bilateral contract- when both parties are promisors and promisees o Unilateral Contract- A contract in which only one party makes an express promise, or undertake a performance without first securing a reciprocal agreement from the other party Can only accept a unilateral contract when the performance is completed Cannot revoke a unilateral contract when there has been partial performance towards the completion of the contract Revocation is stayed one performance is started Illusory promise o Courts will not enforce this For example, a promise of the form, "I will give you ten dollars if I feel like it," is purely illusory and will not be enforced as a contract. o Always subjective Impossible to tell when the contract will be fulfilled Satisfactory Clause o I will pay you if these pants feel nice The feel nice is difficult to determine o Can be Objective Have to be satisfied by an objective measure o If it works properly Subjective Need to be in good faith o if in bad faith, its illusory and not valid consideration At the whim of the persons fancy Mutuality o Bilateral contracts only o Both parties are bound or neither party is bound In the case of an illusory promise, neither part is bound. Restitution as an Alternative Basis for Recovery

o Can only be used in an implied-in-law contract situation o When a contract is unenforceable or no contract exists between parties, action to recover restitution damages often is referred to as an action for implied in law contract o Use this argument to recover damages for unjust enrichment Implied-in-Law Contract o Constructed to avoid unjust enrichment by permitting the P to bring an action in restitution to recover the amount in benefit conferred on the D Implied-in-Fact Contract o Imply to pay for something after it is done Example: Hair cut o By conduct Moral Obligation o You have received a material benefit, from a moral obligation, although there is no duty or liability resting on the promisor. Breach of Contract o Failure to perform ones promise or the terms of the contract Damages: o Compensatory: Interests: Expectation- put in the position had the there been no breach, i.e. as if the promise had been fulfilled; pay for what the person expected to have happened Reliance- reimbursement of the loss incurred by the reliance of the promise being fulfilled. Restitution- back to a position as if there had not been a contract. Get Deposit or earnest money back, or bailment, refund o Punitive: There are no punitive damages for a breach of contract o Nominal: a small sum when a breach of contract, but no substantial loss or injury to be compensated. Reward as Contract: o Knowledge of the rewards existence is necessary o Motive counts and intent counts Greed must induce action, not serving community. Gratuitous promiseso Generally not enforceable, yet is enforceable if there is reliance or moral obligation o When one party makes a promise and the other party offers nothing in exchange; it lacks consideration Good Faitho Contracts made in good faith are enforceable. Good faith belief that the consideration is valid. i.e. I really did think you were the dad. Legal Dutyo By virtue of accepting an exclusive agreement, you a have obligation to perform a good faith effort. Exclusivity Agreements

o When one group promises to be exclusive with another though a contract Promises to give their business or name or whatever only to them Conditiono A condition is an event, not certain to occur, which must occur, unless its nonoccurrence is excused, before performance under a contract becomes due. Requirements contractso When the seller will provide the buyer will all the requirements that they will need o Are neither indefinite or lacking in mutuality, it also requires good faith effort to meet all the buyers requirements. o A contract in which the seller agrees to make a good faith effort to meet the buyers requirements and the buyer agrees to purchase all of his requirements from the seller. o The seller is promising to give the buyer all that he requires and the buyer is promising to buy all they require from the seller Out-put Contract o The buyer promises to buy all that the seller produces At-Will Employment o When either an employer or employee can quit or be fired without any reason, that is an at-will relationship o Consideration exists where an at-will employer and at-will employee continue their employment relationship, rather than terminate it, after the employer imposes a new requirement Voidable Contract o When the law doesnt recognize the contract Like with a minor Promissory Estoppel (Reliance in place of Consideration) or Detrimental Reliance o Doctrine of Promissory Estoppel Consideration is not necessary if you have reliance o Stops the defendant from using reliance or lack of consideration as a defense against contract formation o Elements The person has to reasonably believe that you can rely on that promise The promise induced the reliance Actual reliance o As an alternative basis for recovery Put in place of consideration, if promisee relied on a promise and that promise induced the action Objective Theory of Contract Formation o We judge by what the parties manifests by behavior rather than state of mind by a reasonable person standard Their actions, not state of minds o Assent Meeting of the minds, agree o Lucy v. Zehmer Drunk Guys Case Offer

o An act that leads the offeree to reasonably believe that a power to create a contract is conferred upon him o Specific quantity and price are usually needed for an offer. o Quotes Usually not considered offers under common law, but depends on language used. o Advertisements as Offers General rule is that an advertisement is not an offer, but rather an invitation by the seller to the buyer to make an offer Subject to the inventory the seller has in stock, he may be sold out Exceptions: First come first serve Expiration dates A specific number on hand o Construction Contracts Bids are offers as well as estimates Mistaken bids A contractor is allowed to rescind his bid for a mistake of fact if: o 1) The other party knows or has reason to know of the contractors clerical error; o 2) The mistake is material to the contract; o 3) Enforcement of the contract would be unconscionable; o 4) The other party can be placed in status quo; o 5) The party seeking relief gives prompt notice of the rescission and o 6) Restores everything of value that he received. Invitation to submit a bid Advertisement for offers of jobs Same as request for quote Need a price Estimates Willingness that manifests an offer to contract Acceptance o A voluntary act by the offeree whereby he exercises the power conferred upon him by the offer, and thereby creates the set of legal relations called a contract. o The manifestation of acceptance has in a manner consistent with the offer o Silence is never acceptance Exceptions = subscriptions o Mailbox rule Acceptance occurs upon dispatch Rejection is valid upon receipt (usually at place of business. The law expects people to read their mail) You cannot revoke an acceptance after its been dispatched If sends rejection then acceptance, then whichever once gets there first takes control o Unilateral Contracts

Invites acceptance by means of performance, not a promise. (Smoke Ball) o Shipment of Goods As Acceptance UCC 2-206(1)(b) provides that an order for prompt or current shipment shall be construed as inviting acceptance either by a prompt promise to ship or by the prompt or current shipment of conforming or nonconforming goods. Termination of the Power of Acceptance o Lapse In face to face conversations, an offer lapses after the conversation terminates and cannot be accepted In other cases, if an offer does not specify a period, it lapses after a reasonable time and cannot be accepted. o Option Contracts A promise made by the offeror that effectively limits the offeror's power to revoke usually for a fixed period of time. Options may be created by: (1) Consideration; (2) firm offer under UCC; (3) Reliance by the offeree. (Dickinson v. Dodds) Need to give the offeror something to keep the window open (example: money, collateral, etc.); by the offeree giving up something, that is a detriment to hem and that satisfies consideration Dont need consideration for a merchant for an option contract UCC 2-205 Article 2, if a merchant offers to sell goods in a signed writing and the writing gives assurances that it will be held open for a given period of time, the offer is not revocable for lack of consideration for the time stated, and if no time is stated, for a reasonable time not exceeding three months. o Revocation In common law, revocation of an offer can occur anytime before acceptance. Must be an outward manifestation of this revocation Notice must be given. (Dickinson: Indirect Communication sufficient) Unilateral Contract: the offer is irrevocable once specific performance has been done o Death of the Offeror Power of acceptance is terminated by the offeror's death or supervening incapacity o By destruction of subject matter If the item that is being sold gets destroyed after a contract is formed, the contract does not need to be fulfilled and can be cancelled o By supervening legal prohibition of contract When a law is passed out of your control before the actual contract is made, that makes the contract illegal

o Auctions with Reserve (termination of offer) UCC The auctioneer may withdraw the goods at any time until he can announce his completion of the sale An auction without reserve o The article cannot be withdrawn unless no bid is made within a reasonable time Mirror Image Rule o A response that does not exactly mirror the terms of the original offer is a rejection, and acts as a counter-offer o The offeror is the master of the offer and enjoys freedom from contract except on the offeror's own terms. o Rejection Rejection of an offer by the offeree terminates the power of acceptance o When the mirror image rule is broken with a contract related to goods, you need to look at the UCC to see if it can still be a valid contract. UCC only pertains to the sale of goods All things movable; most tangible things o Common law rule: if the offer and acceptance are different and have different terms, it is seen as a rejection and now is a counter-offer. Applies to everything but sales of goods o If performance has been done during the battle of the forms, then the last shot rule takes control UCC 2-207 o If If you have a conditional additional or different term without performance, no contract If you have a conditional additional or different term with performance, its a paragraph 3 contract If you have an additional or different term (not conditional), its a paragraph 1 contract to paragraph 2 If its between merchants, you go to paragraph 2, sentence 2 o Paragraph 1 If there were varied terms of the acceptance, there can be a contract Common law under the mirror-image rule is strict and won't allow a contract, while paragraph 1 might First part of this paragraph expresses a rule ha is different from the common law rule The second part which starts with unless or unless clause If it falls within this unless clause, then there is not a contract and the common law rule applies o Paragraph 2

Acceptance by the offeree with additional terms is what this paragraph deals with These terms can become part of the contract if there is mutual assent Paragraph 2 has two sentences Sentence 1 o Proposals for additions to the contract The new terms can be added if the offeror agrees to them, but they might not necessarily be added Sentence 2 o Special separate merchant rule o The proposals are added except o Dont need the offerors acceptance (a) the offer expressly limits acceptance to the terms of the offer Not likely part of an oral offer but in a written offer o Way of reinstating the offeror as the master of the offeree to affect if there is a contract formed, if there is a contract is going to be on the offerors terms only (b) materially alter Could ask would it be an unfair surprise for the offeror to face this term? Some courts will look at the examples given in the official comments For example, if variant term would materially alter, but offeror accepts, the court would go out of its way to make sure its included o First sentence would trump the first sentence An acceptance can override (c) or o Notification of objection to them has already been given Them= additional or different terms Notification= come from the offeror Made before the acceptance that contains the variant terms How can the offeror object to the terms before they are even sent to him? o They could have been discussed prior o If during the course of the original negotiations, the offeror expressed

that he didnt want something which is the substance of that additional or different term o Is given within a reasonable time after notice of them is received The notice of variant terms is received when the offeror gets it in the mail When it arrives at his place of business o Want to impose an obligation for him to read it, so they want the reasonable time clock to start counting when it arrives o Paragraph 3 We look at paragraph 3 when there is not contract under paragraph 1 Looks at the conduct of the parties and at their intent Even if there isnt a contract created in the formal way, if the parties are acting as if there is a contract, then there is

I.

II.

Option Contracts A. Some type of consideration is needed to keep an option contract open B. If there is a way in the contract to come up with an answer, then we need to use it C. If both parties agree, then that agreement controls Pre-contractual Liability A. Neither party to contractual negotiations is bound until an offer has been accepted and a contract has been formed B. Revocability and Reliance a. When an action is done in reliance on an offer, the offeror is estopped from revoking the offer for a reasonable amount of time, even though he never promised not to revoke b. When you substantially rely on an offer, the offeror is estopped from revoking it c. Theory of reliance trumps theory of revocability d. Even when they are based on a reliance theory, they recovery is an expectation formula e. Unilateral contracts (1) Restatement 45: similar to partial performance of a unilateral contracts where part performance can bind an offeror, although, completed performance is acceptance in this case f. Construction contracts

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IV.

(1) If you have a binding bilateral contract, in the event of the general contractor getting the construction job, both the general contractor and subcontractor are obligated. The general contractor has the right to reject the offer, but not the subcontractor cannot revoke its offer. The general contractor can hold the subcontractor to its bid, but the subcontractor cannot hold the general contractor. (2) Government construction jobs require general contractors to name their subs; this is mandated by statute and the subs then have a right of action (a) Also states that have a similar statute have a right of action g. Agreements to agree are not generally enforceable, but if you contract to negotiate a potential contract but refuse to negotiate in good faith, you could have a right of action (1) When there is not an agreement to negotiate, you are not required to act in good faith. Once the contract is made, however, both parties are obligated by law to act in good faith on performance and enforcement Definiteness A. Contracts must be definite a. Difficult for a court to see if a contract is breached if it doesnt have definite terms b. Also hard to calculate damages if they dont know what the terms are B. In deciding whether or not an agreement is sufficiently definite, a cout man y piece together terms from such sources as preliminary negotiation, prior communications, external sources such as governmental regulations and applicable trade usage C. Terms such as good faith and reasonable efforts are regarded as sufficiently definite if their content can be determined by reference to some external standard D. It is enough if the agreement provides means for making its terms sufficiently definite by the time performance is called for E. The court can set a price if they can show the parties intended to be bound Statute of Frauds A. Contracts that are required to be in writing... a. 1) An agreement for any performance that cannot be completed, on one side or the other, within one year of the agreement (1) Any contract that will take longer than a year to complete must be in writing (2) If a contract could be performed within one year, no matter how unlikely, it does not need to be in writing (3) When they are not specific about the time frame and it could be completed within one year, it is not deemed indefinite and it does not have to be in writing b. 2) An agreement for the transfer of interest in real estate (1) A court generally will enforce an alleged oral contract pursuant to the doctrine of part performance only I a party can adequately demonstrate, in reliance on

said agreement, possession of the property, improvements thereon, or payment of a substantial par t of the purchase price c. 3) An agreement for the sale of goods for $500 or more (1) UCC 2-201 makes a special performance by the parties to a contract for the sale of goods, if the performance takes the form either of the making and acceptance of a payment or the receipt and acceptance of goods (2) Custom goods (a) Either party can enforce an oral agreement for the sale of custom goods, once the seller has passed a certain point in their production or procurement (b) The evidence is probative on the assumption that the claimants conduct would not make sense, absent an agreement providing her with compensation for it d. 4) An agreement for the lease of goods providing for rent of $1000 or more e. 5) An agreement by a person or firm to be a surety for the debt or other obligation of another (1) When you agree to take on someone elses debt or obligation (2) By the law in every state, an undertaking to be a surety is not enforceable, as a rule, unless it is expressed in a signed writing (3) Surety is not just agreeing to take the debt of another, its agreeing with the person to whom the debt is owed to pay said debt f. 6) An agreement by which personal property is to stand by security for an obligation g. 7) An agreement for the performance of which is not to be completed before the end of a lifetime (1) If it contract will not be completed before that persons lifetime, it needs to be in writing (2) Must be a bilateral contract h. 8) An agreement to pay a commission for the services of real-estate i. 9) An agreement by which a person or firm undertakes to extend credit to another B. Within or Without a. Within the statute- has to be in writing (1) Not capable of performed in a year within the statute (2) Is this problem within one of the categories in the statute of frauds b. Not within the statute- does not have to be in writing c. Contracts that do not specify a time frame, indefinite within the statute (1) Measure from the time of the making of the contract d. A contract, very large, very substantial, where no one anticipate that it would be done within a year, but there was nothing to prevent it from being done in a year C. There is one thing we want to do when applying the Statute of Frauds

V.

a. Protect the non breaching partying by protecting the contract, even though the statute of frauds is there to provide a defense b. We dont like the statute of frauds, we will apply it in ways to reduce its effectiveness (1) They think the defaulting defendants are using it immorally (2) Designed to protect people who thought they entered into an oral contract, but they didnt (3) Now, it is the fraudulent assertion that I didnt enter into a contract, but they did D. The contract does not have to be signed by both parties, only has to be signed by the person being sued (the defendant) E. The statute does not require a formal writing; there could have been a more informal statement of the contract a. Could be years later, the writing doesnt have to be at the time of the contract Incapacity (defense) A. Minors a. Minors, as defined by law, cannot enter into a contract that is legally binding without a guardians support, unless its for a necessary or a statute applies (1) The age of majority is fixed by statutes in jurisdictions b. Guardians (1) A fundamental assumption is that the minor is incompetent by law and therefore needs protection against the contracting process c. We protect the minor by giving them the choice of enforcing or not enforcing a contract d. A contract of a minor whether emancipated or un-emancipated is either void or voidable at the option of the minor unless it is a contract for necessaries e. What has to be done to void this voidable contract? (1) Go to sue to get your money back (2) Timing satisfies the contract (a) If you perform while you are still a minor, that doesnt count; if you perform after the age of majority, you ratify the contract and make it valid f. Restitution (1) A minor can get restitution of payments already made to the seller, but must return the goods to the seller g. Necessaries Exception (1) When something is necessary, the contract can be upheld (a) Food, clothing, shelter B. Mental Infirmity a. Ortelere: A person incurs only voidable contractual duties by entering into a transaction if by reason of mental illness or defect he is unable to act in a reasonable

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VIII.

manner in relation to the transaction and other party has reason to know his condition b. Acting during a lucid interval can be the basis for executing a will.... Competence to enter into a contract presupposes something more than a transient surge of lucidity c. Two tests: Cognitive and Volitional (1) Cognitive is the majority view (2) Restatement blends the two and has gain wide acceptance d. Cundick: a person mental capacity to enter a contract depends upon whether a person can understand the nature and effect of the contract; the disabled person needs to process sufficient ability to reason at the time of entering the contract Mistake (defense) A. Mutual Mistake (defense to formation) a. A mistake in which each party misunderstands the others intent B. Unilateral Mistake a. A mistake by only one party to a contract b. A unilateral mistake is generally not as likely to be a ground for voiding the contract as a mutual mistake (1) Ex: mistaken bid analogy c. The non-offending party must act in good faith if he knew or should have known of the mistake and not enforcing, unless he has consent form the mistaken party to enforce the contract Duress (defense) A. When a person has used compulsion on another to obtain a benefit, the victim can sometimes compel restoration B. Why is duress grounds for undoing a contract? a. Goes to the process in which the contract was entered into b. Bad process c. Unfairness, one party is taking advantage of the other d. The court will step in and stop that party from benefiting from their wrong doing C. Limitations a. Insistence upon a reasonable degree of temerity in the fact of a threat b. The threat has to be substantial Pre-Existing Duty Rule A. How do you avoid the pre-existing duty rule? a. There are at least two ways (1) The problem is unforeseeablity because of the pre-existing duty rule (2) The other problem is the unpredictability is the outcome b. They both depend on the understanding of the consideration theory (1) No consideration when you pay for something that person was already supposed to do

c. New Consideration (1) Have A promise to do something more, not much more, just not identical and you dont have a pre-existing duty rule (a) Dont need consideration to modify a UCC contract (2) If there is no consideration on a particular promise, that particular promise cannot be enforceable, not enforceable in one direction d. The problem arises when only one partys obligations under the new contract is the same B. When do you have a pre-existing duty? a. Never (1) Duress is never enforceable (2) Restatement 73 (a) Performance of a legal duty owed to a promisor which is neither doubtful nor the subject of honest dispute is not consideration (3) The New York Rule (a) You can modify the contract if its in writing and signed by the party who is asked to pay more (4) Schwartzreich v. Bauman-Rasch (a) A contract is never enforceable unless it expressly shows that K-1 is terminated, need more than a reasonably inferred termination of K-1 i. Can put in the first clause of K-2 that the parties are not bound by K-1 (5) Arzani (a) Interpreted Schwartzreich court needed express showing of termination of K-1 b. Sometimes (1) Watkins & Son v. Carrig (a) If the owner agrees to forgo the first contract and agree to the second, then that is ok (b) Rule i. The second contract is enforceable if its in response to changed circumstances ii. A judicial finding that the second contract is fair is needed c. Always (1) Mutual assent/consent (2) When both parties agree to breach the first contract and agree to the new contract (3) The Alabama rule (a) No new consideration is needed for a second contract other than mutual assent C. Avoiding the pre-existing duty rule

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a. Any consideration for the new undertaking, however insignificant, satisfies the rule b. Be aware that you can run into a problem of nominal consideration D. Economic Duress a. Withholding something someone wants or needs will constitute economic duress if: (1) The party threatens to commit a wrongful act that would seriously threaten the other contracting partys property or finances; and (2) There are no adequate means available to prevent the threatened loss E. Undue Influence a. Lessened capacity of the object to make a free contract b. Involves an application of excessive strength by a dominant subject against a servient object F. Over-persuasion a. Elements (1) Unusual or inappropriate time of discussion (2) Unusual place of discussion (3) Insistent demand that business be finished at once (4) Emphasis on consequences of delay (5) Use of multiple persuaders by the dominant against a single servient party (6) Absence of third party advisors (7) Statements that there is no time to consult third parties Unconscionability/ Unfairness (defense) A. The common law courts could already declare a contract or part of a contract unenforceable due to unconscionability a. The UCC also gives that power B. Courts have this power to render a contract unenforceable due to unconscionability a. Industry customs are normally allowed, but (1) In unconscionability, if all of these stores have the same policy, then the customer has no choice and the industry custom is taken badly C. McKinnon: a contract which is harsh, oppressive, unconscionable may still be enforceable at law but it is within the courts discretion to not enforce equitable remedies against a party who suffers from such harshness and oppression under the contract D. Tuckwiller: the court should look at a transaction prospectively from the view point of the parties at the time of the agreement to determine the fairness of the transaction and the sufficiency of its consideration E. Black Industries, Inc. v. Bush: not the function of the court to interfere with the contractional relationship with businessmen dealing at arms-length F. Williams v. Walker-Thomas Furniture a. Cross-collateralization: all items are in one big pot and you need to pay it all off before they own anything

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G. 2 Views of Unconscionability a. Procedural Unconscionability (1) Unfairness in creating the contract b. Substantive Unconscionability (1) Unfairness in bargaining terms of the contract Standard Form Contract/Adhesion Contracts/Boilerplate A. Standard Form a. Preprinted contract containing set clauses, used repeatedly by a business or within a particular industry with only slight additions or modifications to meet the specific situation B. Adhesion a. Standard form contract prepared by one party, to be signed by another party in a weaker position, usually a consumer, who adheres to the contract with little choice about the terms C. Boilerplate a. Ready-made or all-purpose language will fit in a variety of documents Concealment and Misrepresentation (defense) A. These are grounds for rescinding a contract B. Massechusetts Test a. Kannavos (Mass.) (1) If either raises an issue, the other party is obligated to divulge all of the issues truthfully (a) If the buyer asks a question, the seller is obligated to respond truthfully (b) Only have to say what the buyer knows, not what he should know or not what he doesnt know (2) If buyer asks about something that would affect the resale value of the property, seller must respond truthfully b. Swinton (Mass.) (1) Do not need to disclose defects C. Stambovsky Test a. Haunted House Case (1) Just being tricked into entering a contract that you wouldnt otherwise enter into is not grounds for recession; needs to be more plus the decrease in market value (2) Latent defects created by seller that martially affect the value of the contract b. Common law rule (1) Caveat emptor = buyer beware D. Laidlaw Test a. Laidlaw v. Organ (1) No obligation for the person with superior knowledge to inform the other party (a) No required disclosure

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(2) If one party touches on an issue, then there is the obligation to disclose Performance and Good Faith A. Obligated to act in good faith and fair dealing during performance and enforcement, not in negotiations and formation B. Good faith a. Honesty in fact and the conduct or transaction concerned C. Between merchants, honesty in fact and the observance of reasonable commercial standards of fair dealing within the trade D. The last contract that is signed controls a. 1) Why does it control? (1) They agreed to the new contract (2) New situation requires a new contract (3) Parties to an ongoing reserve the right to change it as long as its mutual b. 2) If the later contract controls, do we ignore the original? (1) Yes, the agreed to the new contract (2) From time to time, there will be conflict about the meaning of the second contract, and we can look to the first contract to help determine c. 3) What is the most likely exception to the second contract doesnt control? (1) Lack to consideration in the new contract renders it void, then you would have to rely on the original contract (2) Public policy, duress, misrepresentation could void the later contract Public Policy A. Illegal Contracts a. Examples of illegal contracts: (1) Inducing Official Action (2) Commercial Bribery (3) Licensing Laws B. Judicially Created Public Policy a. Restraints of Trade (1) Hopper v. All Pet Animal Clinic (a) A covenant not to compete is valid and enforceable only if it is shown that the covenant its... i. In writing ii. Part of a contract of employment iii. Based on reasonable consideration iv. Reasonable in duration and geographical limitation (A) Should be one year duration v. Not against public policy (2) Sheets v. Teddys Frosted Foods (a) Improper to fire an employee who has a legal duty to report

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b. Blue Pencil Rule (1) A form of reformation (2) Crossing out problematic language in a contract C. Family Relations a. Simeone v. Simeone (1) Absent fraud, duress, or misrepresentation, spouses should be bound by the terms of prenuptial agreements b. In The Matter of Baby M (1) Best interest of the child should control Parol Evidence Rule (PRE) A. PER is when we look at the written document B. Requires there must be a written document that is ambiguous where outside writings and evidence may be introduced to clarify the meaning of the ambiguous term C. Evidence extrinsic to the document would be excluded if the document is the complete agreement a. If its not a complete agreement, meaning its a partial contract, then evidence is admissible and the PER is applicable D. How do they know if the contract is complete? a. The judge looks at the document to determine the intent of the parties E. What is the best evidence of a complete document? a. The merger clause (1) This is a complete statement of all of our agreements b. The contract itself F. Exceptions to the PER (Gianni v. R.Russell & Co.) a. Fraud or misrepresentation (1) Fraud is being introduced to prove there is no valid contract, not to alter the terms of the original contract b. Mistake (1) If there was a mistake by the parties in not including in the written document something that had been agreed to, then extrinsic evidence can be introduced and include that term and reformation (rewrite the contract) c. An ambiguous term (1) If the term in the written document is ambiguous and susceptible to more than one meaning, then parole evidence (extrinsic evidence) is admissible to help figure out the meaning, even if a complete agreement G. In oral agreements, think of Statute of Frauds H. Written contract, think of PRE No-Oral-Modification Clauses A. At common law, generally, these clauses are not enforceable a. If there is a oral modification, the court normally upholds that new term or terms

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b. Retain the power of the parties to modify their contract B. UCC... a. Does away with this idea b. If it has a clause not to orally modify, the UCC doesnt allow them to orally modify c. The clause in the contract is binding C. Parol evidence acts to exclude prior to the written document or contemporaneous to the written document; while the no-oral-modification clause refers to the time period after the contract has been made Rules of Contract Interpretation A. Frigaliment Importing Co. v. B.N.S. International Sales Corp. a. To interpret a contract, look at the following.... (1) Trade Usage (a) Industry Custom i. When is trade usage not admissible? (A) When one of the parties not a member of the trade (B) When one of the parties is new to the trade 1. Maybe be governed by if the usage is so long and continuous, well established, notorious, universal, and reasonable (2) Language of the contract (3) Look at negotiations (4) Performance under the contract (5) Dictionary (6) Incorporation by reference (7) Circumstances surround the contract (8) Maxim B. Interpretation of Terms a. Contract Terms in order of prevalence (1) 1) Express terms (a) Terms that are written in the contract (2) 2) Course of performance (a) A sequence of conduct between the parties to a a particular transaction that exits if... i. A) the agreement of the a parties with respect to the transaction involves repeated occasions for performance by a party; and ii. B) the other party, with knowledge of the nature of the performance and opportunity for objection to it, accepts the performance or acquiesces in it without objection (b) Actions of both parties under that particular transaction commit actions based on a particular belief about the terms in the contract

(c) Inaction may count in some situations when one party does something and the other doesnt act (3) 3) Course of dealing (a) A sequence of conduct concerning previous transactions between the parties to a particular transaction that is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct (b) What the parties have done before (c) What these parties have done with previous contracts (d) How these parties have acted under previous contracts (e) How have they dealt with past particular language (f) Assuming that what you did before is what you probably intended to do now (4) 4) Trade usage (a) Any practice or method of dealing having such regularity of observance in a place, vocation or trade as to justify an expectation that it will be observed with respect to the transaction in quesiton (b) Evidence that they had trade usage in mind b. Nanakuli Paving & Rock Co. v. Shell Oil Co. (1) The UCC looks at actual performance as a best indication (a) One instance does not make for course of performance (2) General rule (a) Express language controls over all others c. Columbia Nitrogen Corp. v. Royster Co. (1) Evidence of usage of trade and course of dealing should be excluded whenever it cannot be reasonably construed as consistent with the terms of the contract d. Latent Ambiguity (1) Objective Interpretation (Majority) (a) Usually courts require the objective intent of the parties to govern the interpretation of the contract (2) Subjective Interpretation (Limited Minority) (a) A contract can be voided if it contains an ambiguous term which was in fact interpreted differently by the parties (Raffles) (b) A contract should be voided if the parties each held different understandings of an ambiguous term and neither party should have been aware of the others understanding (Oswald v. Allen) i. The creator of the ambiguity bears the burden of clarification and has to reap the consequences of the confusion (3) Rescission (a) May be raised when there are mutual misunderstandings

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(b) A party to a contract who agrees to a term knowing that term is ambiguous may not obtain rescission based on the ambiguity Warranties A. Express a. They are the product of bargaining between the parties rather than implication by law b. Created 3 different ways (1) Affirmation of fact or promise made by the seller that goods with conform to the affirmation or promise (2) Description of goods creates a warranty (3) A sample or model of the goods creates a warranty that the whole of the good will conform to the sample or model B. Implied a. All contracts in sales of goods have an implied warranty of merchantability b. Implied consent to an absence of warranty (1) If a seller doesnt want a warranty, he has to negotiate for it (2) If a buyer wants a warranty, he might have to pay extra c. 3 Types of Warranties (1) Implied Warranty of Merchantability (a) Attaches to the sale of any good (b) Merchantability = good must be fit for the ordinary purposes for which such goods are sued i. Average product to be sold (c) A breach of the IWOM is shown when a product does not perform does not perform to the reasonable expectations of an ordinary user or consumer (Koken v. Black) i. Reasonable expectations is objective standard (d) Buyers must have notice of warranty disclaimers (South Carolina Electric and Gas Co. v. Combustion Engineering, Inc.) (2) Implied Warranty of Fitness (a) Warranty for a specific purpose (b) Informed the seller for what he was going to use the product for and if that product could do what he wanted it to do and relying on what you said (Lewis v. Mobil Oil Corp.) (c) 2 Requirements i. 1) That the seller have reason to know of the use for which the goods are purchased, and ii. 2) That the buyer relies on the sellers expertise in supplying the proper product (d) Can bargain your way out of these warranties

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(3) Implied Warranty of Title d. Warranty can be related to the subject matter of the product or the nature of the bad action of the seller Remedies A. Measuring Expectations a. Expectation Damages (1) A sum of money that will, to the extent that money can, put the promisee in the position he would have been in had the promise been performed (2) Damages = (a) loss in value + (b) other loss (c) cost and loss avoided (a) (a) the loss in the value to him of the other partys performance caused by its failure or deficiency, plus i. Expected value Actual value = Absolute value ii. Market value contract value (b) (b) any other loss, including incidental or consequential loss, caused by the breach, less i. Suffered by the P as a result of the breach; ignore fixed costs ii. Costs incurred to the breach (c) (c) any cost or other loss that he has avoided by not having to perform i. Expenses saved B. Limitations on Damages a. Avoidability (1) Mitigation (a) The injured party does not have a duty to mitigate damages, the injured party incurs no liability to the party in breach for a failure to mitigate (b) Cannot recover for losses that could have been mitigated i. Requires the non-breaching party to reasonably mitigate (2) Cover (a) Market price contract price = recovery (3) Inferior Jobs (under employment contracts) (a) A person is not required to take an inferior job in order to mitigate their damages (4) Cost of Remedy Defect (a) Incomplete performance i. If the breach consists merely of incomplete performance, the injured party can usually arrange to have someone else complete work at less than the loss in value to the injured party (b) Defective performance i. Part of the cost to remedy the defect and complete performance as greed with probably be the cost of undoing some of the work already done

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XX.

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The total cost to remedy the defect may then exceed the loss in value to the injured party so that an award based on that cost would to that extend be a windfall b. Foreseeability (1) Limit the obligation of the promisor (2) Foreseeability could depend on what the promisee told the promisor (3) A party injured by another partys breach of contract can only recover those damages that y fairly and reasonably be considered either as arising naturally, or as may reasonably be supposed to have been in the contemplation of both parties, at the time that contract was made, as the probable result of such a breach of the contract c. Causation (1) But-for the breach, the damages would not have been incurred Specific Performance A. Liquidated damage material a. If the parties to the contracts have negotiated what recovery will be when there is a breach, this is a penalty clause (unenforceable- they interfere with the judge/courts power to decide a remedy and cost of breach) or liquidated damage provision (enforceable) Problems of Interpretation A. Condition a. An event other than the passage of time via occurrence or non-occurrence of which will create, limit, or extinguish the other contracting parties absolute duty to perform (1) A condition is a promise modifier, there can be no breach of promise b. A condition is an event, not certain to occur, which must occur, unless its nonoccurrence is excused, before performance under a contract becomes due B. Satisfaction Clauses C. Constructive Condition Precedent a. A contract for the exchange of promised performances may give rise to an implied condition on that exchange, making each partys performance dependent on the others (Kingston v. Preston) (1) Kings bench implied a condition precedent on a contract to protect a party from the others nonperformance Performance and Breach A. Substantial Performance a. Performance of the primary, necessary terms of an agreement b. The rule that if a good-faith attempt to perform does not precisely meet the terms of an agreement or statutory requirements, the performance will still be considered

ii.

complete if the essential purpose is accomplished, subject to a claim for damages for the shortfall c. Not in commercial contracts, only specific performance B. Specific Enforcement a. When only a part of a contract is enforced C. Assurance of Due Performance a. When one party asks for assurance that the contract will be fulfilled or completed D. Mitigating Doctrines a. Prevention (1) One who prevents the occurrence of a condition of ones own duty may be precluded from later asserting the non-occurrence of that condition b. Waiver (1) After a contract is made, an obligor whose duty is conditional may promise to perform despite the nonoccurrence of a condition or despite a delay in its occurrence (2) A party that, without consideration, has waived a condition that is within the other partys control before the time for occurrence of the condition can retract waiver and reinstate the requirement that the condition occur unless the other party has relied on such an extent that retraction would be unjust (3) Courts dont like anti-waiver clauses (4) If you waive a condition on your promise, you can get it back by notifying the other party by saying you are going to insist on it c. Estoppel (1) Reliance d. Election (1) Choice; one that is binding on the party that makes it, even without reliance by the other party (2) If you make a choice between two alternatives, the choice is binding (3) When the time for occurrence of a condition has expired, the party whose duty is conditional has a choice between taking advantage of the nonoccurrence of the condition and treating duty as discharged or disregarding the nonoccurrence of the condition and treating the duty as non-conditional e. Restitution (1) Avoid unjust enrichment (2) The person who is in breach gets to recover for the work that they did f. Perfect Tender Rule (1) According to the UCC (a) a seller has the power to cure a perfect tender if the time for performance has not expired, but in some situations, it could have.

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(b) Allows a buyer who has already accepted goods (and return the goods to the seller) only if non-conformity substantially impairs their value to him (c) Allows a buyer under a contract for delivery of goods and installments to reject an installment only if a non-conformity as to the goods substantially impairs the value of that installment and to claim a breach of the whole contract only for a breach that substantially impairs the value of the whole contract E. Forfeiture a. Courts are reluctant and avoid forfeiture and treat a nonoccurrence of a condition as unconditional and not imposing a condition to keep the contract in tract F. Repudiation a. The announcement of a intention not to perform in a positive and unequivocal manner b. You can retract a repudiation as long as the other party has not relied to their detriment G. Material Breach a. A breach of contract that is significant enough to permit the aggrieved party to elect to treat the breach as total (rather than partial), thus excusing that party from further performance and affording it the right to sue for damages b. All breaches need to be material breaches when you want to repudiate a contract H. Anticipatory Repudiation a. Amounts to a statement of intention not to perform except on conditions that go beyond the contract constitutes a repudiation (1) The language must be sufficiently positive to reasonable interpreted to mean that a party cannot not or will not perform b. When you enter into a contract, you are entitled to a continuing security that the contract will be performed c. Need express repudiation (1) Constitutes grounds for a lawsuit d. Hochster v. De La Tour (1) Rule: A party who announces their intention to breach an contract releases the other party from any obligation under the K e. Party fearing the breach can either (1) Sue immediately (2) Wait to see what the damages are and ignore the possible breach f. Notify (1) If you fail to notify the repudiator that you are accepting the repudiation, you are not accepting it and going as planned (a) Repudiator cannot retract Impossibility (defense)

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A. Where it is impossible for the contract to be performed, the courts might not hold the offeror or offeree to that contract a. Is it a total defense? (1) Sometimes b. UCC commercial impracticability (1) Extreme changes may amount to justifiable grounds to use this defense (2) A simple increase in the expenditures is not a excuse, but a drastic one could be B. In contracts in which performance depends on the continued existence of a given person or thing, a condition is implied that the impossibility of performance arising from the perishing of the person or thing shall excuse the performance C. If the contract becomes impossible of performance by reason of the non-existence of the state of things assumed by both contracting parties as the foundation fo the contract, there will be no breach of the contract thus limited (Krell v. Henry) Assignment A. Can transfer (assign) rights, not duties, to another party a. Has to be material B. Dont need consideration for assignment C. 2 Types a. Gift Assignment (1) Enforceable but revocable by the assignor b. Assignment for Value (1) An assignment given in exchange for consideration (2) Not revocable D. UCC a. All right of either th buyer or the seller can be assigned b. It does not so, however, when the assignment would materially change the duty of the other party E. Assign rights and delegate duties F. Assignment of Future Rights a. You can assign a future right Third Party Beneficiaries A. When you look at which kind of third party they are, you look at the intent of the promisee B. 2 Types a. Incidental (1) When the third party is not intended to receive a benefit of a contract, but is benefitted nonetheless b. Intended (1) When the third party is an intended beneficiary of the contract C. A promisee can specifically state that they dont want someone to be a beneficary