Contracts-outline

Contracts1. ContractsWhat is a “contract”?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 as a duty. What is a “promise”?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.2. OfferRest. 24:An offer is a “manifestation of a willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it.”AcceptanceRest. 50:Acceptance is “a manifestation of assent to the terms thereof made by the offeree in a manner invited or required by the offer.”Manifestation of mutual assentRest. 22(1)The manifestation of mutual assent to an exchange ordinarily takes the formof an offer or proposal by one party, followed by an acceptance by the other.(2)(2) A manifestation of mutual assent may be made even though neither offernor acceptance can be identified and even though the moment of formationcannot be determined.Objective vs. subjective theory of mutual assentIs there a contract?Effect of Misunderstanding, Rest. 20(1)No manifestation of mutual assent if the parties attach materially differentmeanings to their manifestations and:(a)Neither knows or has reason to know of confusion, or(b)Both know or have reason to know the meaning attached by theother.(2) The manifestations of the parties are operative in accordance with the meaning attached to them by one of the parties if:(a)That party does not know of any different meaning attached by theother, but the other knows the meaning attached by the first party, or(b)[No reason to know and has reason to know.]3. Preliminary InjunctionBalancing test(1)Movant is substantially likely to succeed on the merits of the case.(2)Faces irreparable injury.(3)Balance of harms favors the movant.(4)Grant of injunction would serve the public interest.When is a promise enforceable•Mutual AssentObjective standardCertainty of terms•ConsiderationUCC 2-204(3)Even though one or more terms are left open a contract for sale does not fail for indefiniteness ifthe parties have intended to make a contract andthere is a reasonably certain basis for giving an appropriate remedy.UCC 2-305, Open Price Term(1) The parties if they so intend can conclude a contract for sale even though the price is not settled. In such a case the price is a reasonable price at the time for delivery if(a) nothing is said as to price; or(b) the price is left to be agreed by the parties and they fail to agree; or(c) the price is to be fixed in terms of some agreed market or other standard as set or recorded by a third person or agency and it is not so set or recorded.UCC 2-305(4)(4) Where, however, the parties intend not to be boundunless the price be fixed or agreed and it is not fixed or agreed there is no contract. . .UCC 1-303“A course of dealing is a sequence of conduct concerning previous transactions between parties to a particular transaction that can fairly be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct.”4.When is a promise enforceable?•Mutual AssentObjective standardCertainty of terms•ConsiderationIs this K is enforceable?A agrees to pay $X,B agrees to deliver a can of standard white paint.UCC 2-204(3)Even though one or more terms are left open a contract for sale does not fail for indefiniteness ifthe parties have intended to make a contract andthere is a reasonably certain basis for giving an appropriate remedy.UCC 2-305, Open Price Term(1) The parties if they so intend can conclude a contract for sale even though the price is not settled. In such a case the price is a reasonable price at the time for delivery if(a) nothing is said as to price; or(b) the price is left to be agreed by the parties and they fail to agree; or(c) the price is to be fixed in terms of some agreed market or other standard as set or recorded by a third person or agency and it is not so set or recorded.UCC 2-305(4)(4) Where, however, the parties intend not to be boundunless the price be fixed or agreed and it is not fixed or agreed there is no contract. . .Is this K is enforceable?A agrees to pay $X,B agrees to paint A’s fence with A’s can of standard white paint.A agrees to pay $X,B agrees to paint A’s fence with B’s can of standard white paint.Carloads of Mason Jars•April 20: advise on lowest price for 10 car loads of mason jars.•April 23: pints $4.5/dozen, quarts $5/dozen, half-gallons $6.5/dozen, for immediate acceptance•April 24: enter order for 10 car loads as quoted.•April 24: output all sold.•April 20: advise on lowest price for 10 car loads of mason jars.inquiry•April 23: pints $4.5/dozen, quarts $5/dozen, half-gallons $6.5/dozen, for immediate acceptance invitation to make an offer•April 24: enter orde•r for 10 car loads as quoted. offer•April 24: output all sold. rejection5. AcceptanceRestatement 50Acceptance of an offer is a manifestation of assent to the terms of the offer in the manner invited or required by the offer.CounterofferRestatement 59A reply to the offer wh ich purports to accept it but is conditional on the offeror’s assent to additional or different terms is . . . a counteroffer.Exception: AcceptanceRestatement 61An acceptance which requests a change or addition to the terms of the offer is a valid acceptance, so long as it is not conditional on assent to the changed or added terms.Offeror is the Master of the OfferRestatement 30Offeror dictates the manner of acceptance.Restatement 29Offerordetemineswho may accept the offer.Restatement 60Offeror may prescribe the time, place and manner of acceptance.No Acceptance by SilenceRest. 69NotificationRestatement 56Offeree in bilateral Ks must notify the offeror of her acceptance.Restatement 54Offeree in unilateral K does not have to notify the offeror of acceptance unless(1)the offer requires it, or(2)offeree has reason to know that offeror has no reasonable means of learningof acceptance by performance.UCC 2-206(1)(a) an offer to make a contract shall be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances.(1)(b) . . . Shipment of conforming or non-confirming goods constitutes acceptance, exceptif the seller shipping non-conforming goods seasonably notifies the buyer that the shipment is offered only as an accommodation to the buyer.Termination of OffersRestatement 36(1)Revocation(2)Rejection (sometimes coupled with counteroffer)(3)Lapse of time(4)Death of offeror or offereeManner of AccceptanceRestatement 62(1) When the offer does not specify the manner of acceptance, beginning performance is acceptance.(2) Such acceptance operates as a promise to render complete performance.6.UCC 2-607(1)The buyer must pay at the contract rate for any goods accepted.UCC 2-606(1)Acceptance of goods occurs when buyer(a) after a reasonable opportunity to inspect the goods signifies to the buyer that he will take them, or(b) fails to reject them after a reasonable opportunity to inspect, or(c) does anything inconsistent with the seller’s ownership.Termination of OffersRestatement 36(1)Revocation(2)Rejection (sometimes coupled with counteroffer)(3)Lapse of time(4)Death of offeror or offereeDickinson v. DoddsThis offer to be left open until Friday, 9 o’clock A.M., on June 12, 1874.(signed) J. DoddsOption ContractsRestatement 25An option contract is a promise which meets the requirements for the formation of a contract and limits the promisor’s power to revoke an offer.Option Contract, Take TwoRestatement 87(1)An offer is binding as an option K if it:(a)Is in writing and signed, recites consideration for making the offer,and proposes exchange on fair terms . . .Firm Offer, UCC 2-205An offer by a merchant to buy or sell goods in a signed writing which by its terms gives assurance that it will be held open is not revocable . . . during the time stated or . . . a reasonable time.Equitable Option, Rest. 87(2)(2) An offer which the offeror should reasonably expect to induce action or forebearance of a substantial character, and which does induce such action . . . is binding as an option contract to the extent necessary to avoid injustice.Restatement 43An offeree power of acceptance is terminated when the offeror takes definite action inconsistent with an intention to enter into the proposed K and the offeree acquires reliable information to that effect.When is Acceptance Effective?Restatement 63Unless offer provides otherwise:(a)When dispatched, regardless of whether the offeror receives it, but(b)Acceptance under option K is effective when received by the offeror.Parallel Rejection and AcceptanceRestatement 40Rejection by mail does not terminate the power of acceptance until received by the offeror.But, if acceptance is sent after sending an effective rejection, it is only a counter-offer unless the offeror receives the acceptance first.ConsiderationRestatement 71(1)To constitute consideration, a performance or a return promise must bebargained for.Consideration, Cont’dRest. 71(2)Bargained for = sought by the promisor, given by the promisee in exchange7.I.Contract FormationII. Affirmative Defenses to Contract EnforcementIII. Contract InterpretationIV. Defining Performance Obligations:Conditions and ExcusesI. Remedies for BreachII. Alternative Bases for Liability: Non-Contract ClaimsI.Contract Formationa.Mutual Assentb.Considerationi. Bargained-for Exchange vs. Giftii. Conditional Promisesiii. Illusory PromisesI. Affirmative Defenses to Contract EnforcementII. Contract InterpretationIII. Defining Performance Obligations:Conditions and ExcusesI. Remedies for BreachII. Alternative Bases for Liability: Non-Contract Claims ConsiderationRestatement 71(1)To constitute consideration, a performance or a return promise must bebargained for.Consideration, Cont’dRest. 71(2)Bargained for = sought by the promisor, given by the promisee in exchange Consideration Cases•Hamer v. Sidway: uncle promises to pay $5000 if nephew refrains from drinking, smoking and gambling•Mills v. Wyman:father promises to pay for son’s expenses that the son already incurred•Langer v. Superior Steel: firm promises to pay a pension if the retiree promises not to compete with the employer•In re Greene: man promises to pay $1000/month and 4 years of rent in exchange for $1 and a release of all claims8.Illusory promise vs. enforceable KA promises to do X if a condition is satisfied.An insurance company promises to pay the value of the house if the house is destroyed by fire, and I promise to pay the premium.An insurance company promises to pay the value of the house if the house is destroyed by fire and the manager wants to do so, and I promise to pay the premium.Illusory PromiseRestatement 77A promise is not consideration if by its terms the promisor reserves a choice of alternative performances unless(a)Each would be consideration, or(b)One would be consideration and the other is unlikely to materialize becauseof supervening events.Strong v. SheffieldUCC 2-306(2)A lawful agreement by either the seller or the buyer for exclusive dealing in the kind of goods concerned imposes . . . an obligation . . . to use best efforts.UCC 2-309(3)Termination of a contract by one party . . . requires that reasonable notification be received by the other party and an agreement dispensing with notification is invalid if its operation would be unconscionable.Affirmative Defenses•Statute of Frauds•Infancy•Insanity•Duress•Misrepresentation•Unconscionability•Public PolicyStatute of Frauds(1)Does a K fall within the Statute?(2)How do you satisfy the Statute?(3)What are the consequences of not satisfying the Statute?K That Fall Within the Statute(1)Executor’s promise to answer for the debts of the decedent.(2)Suretyship (guarantee performance of another)(3)Promise made in consideration of marriage(4)Sale of interest in land(5)K that can’t be performed within one year(6)UCC: sale of goods > $500 in value9.Statute of Frauds(1)Does a K fall within the Statute?(2)How do you satisfy the Statute?(3)What are the consequences of not satisfying the Statute?K That Fall Within the Statute(1)Executor’s promise to answer for the debts of the decedent.(2)Suretyship (guarantee performance of another)(3)Promise made in consideration of marriage(4)Sale of an interest in land(5)K that can’t be performed within one year(6)UCC: sale of goods $500 in or more in priceHow do you Satisfy the Statute?Restatement 131A contract within the Statute of Frauds is enforceable if it is evidenced by any writing, signed by or on behalf of the party to be charged.UCC 2-201(2)Between merchants if within a reasonable time a writing in confirmation of the K and sufficient against the sender is received, and the party receiving it has reason to know its contents, it satisfies the SoF against the recipient unless the recipient files a written objection within 10 days of receipt.When does the SOF not apply?•When one party has fully performed.•When one party has performed in part.•UCC 2-201(3)Infancy DefenseElements:(1)Age of minority at the time of contracting.Consequence:Minor can disaffirm the K within a reasonable time of reaching the age of majority.Minor can disaffirm the K within a reasonable time of reaching the age of majority unless the K was for necessaries.10.Infancy DefenseElements:(1)Age of minority at the time of contracting.Consequence:Minor can disaffirm the K within a reasonable time of reaching the age of majority unless the K was for necessaries.Incapacity Defense, Rest. 15Tests:(1)C ognitive testInability to understand what is going on(1)V olitional or affective testUnderstanding of what is going on, but inability to control one’s actions or to act reasonably.Elements:(A) Cognitive test:(1)unable to understand in a reasonable manner the nature andconsequences of the transaction(B) Volitional test:(1) unable to act reasonably, and(2) the other party has reason to know of his conditionLimit on the right to rescindRestatement 15(2)Where the contract is made on fair terms and the other party is without knowledge of the mental illness or defect, the power of avoidance . . . terminates to the extent that the contract has been so performed in whole or in part or the circumstances have so changed that avoidance would be unjust. In such a case a court may grant relief on such equitable terms as justice requires.Intoxication, Rest. 16Elements:(1)Because of intoxication a party is unable to understand in a reasonablemanner the nature and consequences of the transaction, or is unable to act ina reasonable manner in relation to the transaction, and(2)the other party has reason to know.11.Duress, Restatement 175Elements:(1) A party’s manifestation of assent is induced by an improper threat by the other party,(2) that leaves the victim no reasonable alternative but to accept.Improper Threat, Rest. 176A threat is improper if:(1) what is threatened is a crime or a tort,(2) it threatens a criminal prosecution,(3) it threatens civil litigation and the threat is made in bad faith,(4) the threat is a breach of the duty of good faith and fair dealing in the K with the recipient.Improper Threat, cont’dRestatement 176(2)A threat is improper if the resulting exchange is not on fair terms and(1) the threatened act would harm the recipient and would not benefit the party making the threat, or(2) what is threatened is a use of power for illegitimate ends.Contract ModificationRest. 89Contract modification is enforceable without additional consideration if:(a) modification is fair and equitable, in light of unanticipated circumstances that arose after the K was made, or(b) justice requires enforcement of the modified K in view of material change of position in reliance on the promise.Modification, UCC 2-209An agreement modifying a contract within this Article needs no consideration to be binding.12.Rest. 159A misrepresentation is an assertion that is not in accord with the facts.Non-disclosure is equivalent to an assertion, Rest. 161(a)Failure to prevent some previous assertion from being a misrepresentation.(b)Failure to correct the other party’s mistake as to a basic assumption and non-disclosure constitutes bad faith.(c)Failure to correct a known mistake as to the contents of a written K.(d)Relationship of trust and confidence.Fraudulent vs. material, Rest. 162Fraudulent: knowingly falseMaterial: likely to induce a reasonable person to manifest assent, or the recipient if the maker knows thatMisrepresentation, Rest. 164Elements:(1)False representation(2)Fraudulent or material(3)The recipient relies on the statement(4)Recipient’s reliance is justifiab le(5)Causes damages13.MisrepresentationElements:(1)Deceitful act-Affirmative representation-Half truth-Active concealment-Non-disclosure, R 161(2)Fraudulent or material(3)Justifiable relianceFraud, Rest. (Torts) §525Elements:(1) Misrepresentation of fact, opinion, intention or law,(2) Fraudulent,(3) Made to induce another to act on it in reliance,(4) Another justifiably relies,(5) Causes pecuniary loss.Unconscionable K or TermRest. 208If a K or a term is unconscionable at the time the K is made a court may refuse to enforce the K, orenforce the remainder of the K without the unconscionable term, orlimit the application of any unconscionable term to avoid any unconscionable result.Unconscionability, UCC 2-302•(1) If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of thecontract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.Unconscionability, UCC 2-302(2)When it is claimed or appears to the court that the contract or any clause thereof may be unconscionable the parties shall be afforded a reasonable opportunity to present evidence as to its commercial setting, purpose and effect to aid the court in making the determination.14.Unconscionable K or TermRest. 208If a K or a term is unconscionable at the time the K is made a court may refuse to enforce the K, orenforce the remainder of the K without the unconscionable term, orlimit the application of any unconscionable term to avoid any unconscionable result.Unconscionability, UCC 2-302•(1) If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of thecontract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result. Unconscionability, UCC 2-302(2)When it is claimed or appears to the court that the contract or any clause thereof may be unconscionable the parties shall be afforded a reasonable opportunity to present evidence as to its commercial setting, purpose and effect to aid the court in making the determination.I.Contract FormationII. Affirmative Defenses to Contract EnforcementIII.Contract InterpretationIV.Defining Performance Obligations:Conditions and ExcusesI. Remedies for BreachII. Alternative Bases for Liability: Non-Contract ClaimsI.Contract FormationII. Affirmative Defenses to Contract EnforcementIII. Contract Interpretationa.Standard Form Contractsb.The Battle of the Formsc.Parol Evidence Ruled.Interpretation of Ambiguous Termse.Implied Duty of Good Faith and Fair Dealing IV. Defining Performance Obligations:Conditions and ExcusesI. Remedies for BreachII. Alternative Bases for Liability: Non-Contract Claims16.I.Contract FormationII. Affirmative Defenses to Contract EnforcementIII. Contract Interpretationa.Standard Form Contractsb.The Battle of the Formsc.Parol Evidence Ruled.Interpretation of Ambiguous Termse.Implied Duty of Good Faith and Fair Dealing IV. Defining Performance Obligations:Conditions and ExcusesI. Remedies for BreachII. Alternative Bases for Liability: Non-Contract ClaimsI.Contract FormationII. Affirmative Defenses to Contract EnforcementIII. Contract Interpretationa.Standard Form Contractsb.The Battle of the Formsc.Parol Evidence Ruled.Interpretation of Ambiguous Termse.Implied Duty of Good Faith and Fair DealingIV. Defining Performance Obligations:Conditions and ExcusesI. Remedies for BreachII. Alternative Bases for Liability: Non-Contract ClaimsRestatement 59:the mirror-image ruleA reply to an offer which purports to accept it but is conditional on the offeror’s assent to terms additional to or different from those offered is not an acceptance but is a counteroffer.Restatement 69(1) Where an offeree fails to reply to an offer, his silence and inaction operate as an acceptance . . . where an offeree takes the benefit of offered services . . . and reason to know they were offered with the expectation of compensation.(2) An offeree who doe s any act inconsistent with the offeror’s ownership of offered property is bound in accordance with the offered terms . . .Rest. 30 & UCC 2-206Last shot ruleR 30(2)Unless otherwise indicated . . ., an offer invites acceptance in any reasonable manner. UCC 2-206Unless otherwise unambiguously indicated . . . an offer invites acceptance in any reasonable manner.Hypo•Buyer calls Seller and asks for the price of dining chairs.•Seller responds that they are $20 per chair.•Buyer responds “That’s good.”•Two days later, Buyer sends a purchase order for twenty chairs at $400. The fine print says the order is “subject to” delivery within 10days and a 2-year warranty.•Three days later, Seller acknowledges the order of 20 chairs at$20/chair, delivery in 2 weeks, no warranties.•The chairs arrive 13 days later and Buyer sends a check for $400, but includes a letter protesting the warranty disclaimer.UCC 2-207(1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.(2) The additional terms are to be construed as proposals for addition tothe contract. Between merchants such terms become part of the contract unless:(a) the offer expressly limits acceptance to the terms of the offer;(b) they materially alter it; or(c) notification of objection to them has already been given or is given withina reasonable time after notice of them is received.(3) Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. In such case the terms of the particular contract consist of those terms on which the writings of the parties agree, [and default provisions of the UCC].18.UCC 2-207(1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.(2) The additional terms are to be construed as proposals for addition tothe contract. Between merchants such terms become part of the contract unless:(a) the offer expressly limits acceptance to the terms of the offer;(b) they materially alter it; or(c) notification of objection to them has already been given or is given withina reasonable time after notice of them is received.(3) Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. In such case the terms of the particular contract consist of those terms on which the writings of the parties agree, [and default provisions of the UCC].I.Contract FormationII. Affirmative Defenses to Contract EnforcementIII. Contract Interpretationa.Standard Form Contractsb.The Battle of the Formsc.Parol Evidence Ruled.Interpretation of Ambiguous Termse.Implied Duty of Good Faith and Fair DealingIV. Defining Performance Obligations:Conditions and ExcusesV. Remedies for BreachVI. Alternative Bases for Liability: Non-Contract Claims1.Does the dispute raise a parol evidence issue?2.Is the writing completely or partially integrated?3.If the writing is only partially integrated, what additional terms areconsistent with the terms finalized in the writing?Question 1Did the parties intend the writing to be a final expression of at least those terms in the writing?(i.e., is the writing a least “partially integrated”?) (Rest. § 209)If YES,mthen PER applies.Go to Question 2.If NO, the PER doesnot apply at all. Each party can try to show that other oral agreements were made, incl. ones inconsistent with those in the non-final writing.Rest. 209(1) An integrated agreement is a writing constituting a final expression of one or more terms of an agreement.Question 2Is the alleged “parol” agreement inconsistent with the terms in the writing? Rest. §213(1)If YES, evidence of alleged inconsistentagreement is not admissible.If NO, go to Question 3.Question 3Did the parties intend the writing to be “completely integrated”?Rest. § 216: If the alleged consistent parol agreement is one that “naturally” would be omitted from the writing, then the writing is not “completely integrated”)If YES, evidence of allegedconsistent agreement is inadmissible.If NO, then evidence of consistent agreementis admissible.Rest. 210(1)A completely integrated agreement is an integrated agreement adopted bythe parties as a complete an exclusive statement of the terms of theagreement.. . .(3) Whether an agreement is completely or partially integrated is to be determined by the court as a question preliminary to determination of a question of interpretation or application of PER.UCC 2-202Terms with . . . set forth in a writing intended by the parties as a final expression of their agreement with respect to such terms as are included therein may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement, but may be explained or supplemented•(a) by course of dealing or usage of trade or by course of performance; and •(b) by evidence of consistent additional terms unless the court finds the writing to have been intended also as a complete and exclusive statement of the terms of the agreement.19.1.Does the dispute raise a parol evidence issue?2.Is the writing completely or partially integrated?3.If the writing is only partially integrated, what additional terms areconsistent with the terms finalized in the writing?Question 1Did the parties intend the writing to be a final expression of at least those terms in the writing?(i.e., is the writing a least “partially integrated”?) (Rest. § 209)If YES,then PER applies.Go to Question 2.If NO, the PER doesnot apply at all. Each party can try to show that other oral agreements were made, incl. ones inconsistent with those in the non-final writing.Question 2Is the alleged “parol” agreement inconsistent with the terms in the writing? Rest. §213(1)If YES, evidence of alleged inconsistentagreement is not admissible.If NO, go to Question 3.Question 3Did the parties intend the writing to be “completely integrated”?Rest. § 216: If the alleged consistent parol agreement is one that “naturally” would be omitted from the writing, then the writing is not “completely integrated”)If YES, evidence of allegedconsistent agreement is inadmissible.。