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UCC v. Restatement. When to use what: Introduction UCC Restatment The Restatement is a guide General Principles regarding contract formation:...

UCC v. Restatement. When to use what: Introduction UCC Restatment The Restatement is a guide General Principles regarding contract formation: created to generalize The UCC is a statue common law principles that Mutual Assent (Intent to be bound) which guides the sale of have come about via case 1. Offer law. It is persuasive GOODS. 2. Acceptance authority that, when used in 3. Consideration a case, becomes common Has provisions that guide law. intent, offer and Has Provisions that guide, If all of these are present (not taking into account acceptance, open assent, offer and things like promissory estoppel) then there is a terms...- §2-204, §2-206, acceptance, and valid and BINDING contract §2-207 §2-305 consideration (contract formation)- R2K 21, R2K 24, R2K 59, R2K 71, 01. Intent  Intent R2K 18 Manifestation of mutual assent to an exchange requires that each party either make a promise or begin or render a performance. Lucy v. Zehmer: No secret intent/ jokes: For an Objective Theory of Contract- What Courts Follow agreement to be valid, both sides must either make a promise or start doing what they Mutual assent: courts have stated that the agreed to. formation of a contract requires a “meeting of the minds” between the parties, but this does not R2K 21 mean what is “in your head” – what you Neither real nor apparent intention that a subjectively believe – but “how you act” – how your promise be legally binding is essential to the outward conduct shows your intent to the formation of a contract , but a manifestation of other person. intention that a promise shall not affect legal relations may prevent the formation of a The only intent of the parties to a contract which is contract. essential, is an intent to say the words and do the Put Simply: You don't need to actually intend acts which constitute their manifestation of assent. for a promise to be legally binding to create a contract. However, if you clearly show that you don't want the promise to have any legal effect, then it may stop a contract from being formed.  Letters of Intent Letter of Intent: Can be legally binding as to their R2K 27: Manifestations of assent that are in limited terms but usually not to the deal itself.- themselves sufficient to conclude a contract will Venture Associates Corp. v. Zenith not be prevented from so operating by the fact that the parties also manifest an intention to Contemplation of a Later Final Writing: This goes prepare and adopt a written memorial thereof; but back to intent to be bound. Just because the circumstances may show that the agreements something is in writing does not mean there were are preliminary negotiations. all the elements of a full contract- Arnold Palmer Golf Co. v. Fuqua Industries- In this case there was Simply put: Things like a memorandum of intent a memorandum of intent but both parties did not can be preliminary negotiations- use extrinsic intend to be bound by the terms of the contract- evidence and the facts that you have to see if this is and to prove this you can look at the situation as a the case. Likely not fully binding unless it has whole and see if extrinsic evidence leans towards characteristics of a binding contract (performance intent or lack of intent etc.) Agreements to Agree An agreement to agree occurs when parties agree to come to an agreement at a later date- leaving important terms open. In Joseph Martin Jr. Deli v. Schumacher the court found that there must be either an agreed fixed rental amount or a definite objective standard for determining rent in Pro Tip: On an exam this is likely just going to order for an open term contract to be enforceable. be an argument. Meaning that you are going Since there was no objective standard or set price, to want to say- to have en enforceable there was no enforceable contract. agreement to agree there must be an definite, objective standard to determine the open term... Then argue whether it was definite and objective. And then maybe throw in a “however, if the court were to conclude.... then....” just to cover your bases. UCC Open Price Terms Actual Wording of UCC 2-305 Synopsis of UCC 2-305 (1) The parties if they so intend can conclude a contract for 1. The parties must intend to be bound without saleeven though the price is not settled. In such a case the specifying price terms price is a reasonable price at the time for delivery if (a) nothing is said as to price; or 2. the gap filler is a reasonable price (b) the price is left to be agreed by the parties and they 3. (a) nothing must have been said about price in fail to agree; or (c) the price is to be fixed in terms of some agreed the contract, or market or other standard as set or recorded by a third (b) the price was left for future agreement and person or agency and it is not so set or recorded. the parties did not get around the agreeing, or (2) A price to be fixed by the seller or by the buyer means a price for him to fix in good faith. (c) the price was to be set to some external (3) When a price left to be fixed otherwise than by objective standard and this did not happen agreement of the parties fails to be fixed through fault of one party the other may at his option treat the contractas 4. the parties must act in good faith cancelled or himself fix a reasonable price. 5. if a party is at fault in a way that stops the fixing of a price, the other party can cancel the contract  Online Contracts Assent in Online Contracting Edmundson v. Klarna, 85 F.4th Adoption of standard contract 695 (2d. Cir. 2023) terms based on reasonable notice P used Klarna for installment If terms provided and consumer payments on internet puchase; has opportunity to review (and charged overdraft fees by her bank assents to transaction, standard for Ds withdrawals (said she never contract terms adopted) agreed) If terms provided after Rule: If an internet or app user has manifestation to assent, no actual knowledge of contract consumer has reasonable terms, a user is still bound if: (1) opportunity to terminate the reasonably prudent person would contract be on inquiry notice and (2) user unambiguously manifests assent (that a reasonable person would understand to mean consent) Offer & Acceptance Preliminary negotiation (R2K § 26): manifestation of Cases willingness, reason to know it’s not intended to be a Southwell v. Oliver (implied contract contract until there’s been further manifestation of based when, based on facts, a assent reasonable person could have inferred a promise from the party’s actions) Offer (R2K § 24): Manifestation of willingness to enter into a bargain; justifies another person understanding Patkis-Pico v. Cutter (ad that lists his assent to that bargain is invited and will conclude it goods at certain price is not an offer) Ads don’t constitute offer, are just invitation to receive MD Supreme v. Blake (guaranty of offer - R2K § 26(b) certain product @ certain price for certain time is offer) Offeree has power of acceptance (R2K § 35) BTE Tire Corp. (contract not accepted Unilateral v. Bilateral contract bc no performance) Promise for an act v. promise for a promise Offer & Acceptance Duration of Offers Cases Synnex Corp. (accepted offer by performance) R2K § 41: Offer terminated at time specified in offer (if not, then reasonable time - (2) rsb time Starlite Limited Partnership (defective depends on circumtances) acceptance can’t be waived by performance to create a binding contract) R2K § 70: Late or otherwise defective acceptance can be effective as an offer, but silence operates as Vaskie (offer open for reasonable amount of an acceptance time if time for acceptance not limited) Methods of Termination of the Power of Caldwell v. Cline (offer made by mail upon Acceptance (R2K § 36) receipt by offerree) Rejection of Offer (R2K § 38): rejection Chaplin v. Cons. Edison (rejection of extinguishes an offer, not effective until it reaches an offer terminates offer permanently) the offeror Offer & Acceptance Revocation (R2K § 42) Cases Not effective until received Ardente v. Horan (valid acceptance must be definite, can’t impose additional conditions Counteroffers (R2K § 39) or limitations on offer) (1) Rejects original offer by proposing dif. offer, (2) creates new power of acceptance Farley v. Champs (acceptance effective at mailing; option contract acceptance effective Mailbox Rule (R2K § 63) when received) Does not apply to option contracts Acceptance of offer valid from time it is sent Dickinson v. Dodds (indirect revocation) Rejection must be received to be valid Pro Tip: To maximize your points in this section Indirect Revocation (R2K § 43) on an essay, walk through every stage of the Definite action inconsistent w/ intention to contract formation in your analysis (not enter into contract, offerree gets reliable just offer and acceptance). information to that effect.  Option Contract R2K 25: An 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. Strengthens power of acceptance by A LOT R2K 37: “[T]he power of acceptance under an option contract is not terminated by rejection or counter-offer, by revocation, or by death or incapacity of the offeror, unless the requirements are met for the discharge of a contractual duty. An offeree may be able to accept an option even if the offeree had previously rejected it or counteroffered, unless the offeror had reasonably relied on the rejection. See Orlowski v. Moore (more than on year + offeree’s apparent inability to pay + another suitable offeree were facts that led to reasonable reliance) 4 Types Typical Option K. R2K 87(1) Merchant Option K. R2K 87(1)(b)/UCC 2-205 Reliance Option K. R2K 87(2) Unilateral K. R2K 45  Typical Option K R2K 87(1) An offer is binding as an option contract if it is in writing and signed by the offeror recites a purported consideration for the making of the offer and proposes an exchange on fair terms within a reasonable time Nominal consideration is OK! See R2K 87(1) Comment b. Merchant Option K R2K 87(1)(b)/UCC 2-205.”is made irrevocable by statute” = UCC 2-205 An offer by a merchant in a signed writing which by its terms gives assurance that it will be held open is not revocable consideration unnecessary during the time stated or reasonable time, Note: Reasonable time cannot exceed 3 months, unless there is consideration or renewal. Any such term of assurance on a form supplied by the offeree must be separately signed by the offeror. Reliance Option K R2K 87(2) An offer which the offeror should reasonably expect to induce action or forbearance of a substantial character on the part of the offeree before acceptance and which does induce such action or forbearance is binding as an option contract to the extent necessary to avoid injustice. Note 1: Basically the same elements of Promissory Estoppel in R2K 90. Note 2: This is different from part performance (R2K 45) because conduct has nothing to do with acceptance (e.g., preparation)  Unilateral K R2K 45 (1) Where an offer invites an offeree to accept by rendering a performance and does not invite a promissory acceptance, an option contract is created when the offeree tenders or begins the invited performance or tenders a beginning of it. (2) The offeror's duty of performance under any option contract so created is conditional on completion or tender of the invited performance in accordance with the terms of the offer. Note: In other words, acceptance through part performance limits offeror’s power to revoke.  Battle of the Forms 2-207 A way to avoid the mirror image and last shot rule (i.e., the last document sent with the different terms wins because it was a counteroffer).  Battle of the Forms Notes: Definite and seasonable expression of acceptance What is not: Buyer inserted handwritten statement that the contract included the terms of the buyer’s purchase order. The court found that the buyer’s inclusion of the handwritten provision on the supplier’s contract form was not a definite and seasonable expression of acceptance. Crossley Constr. Corp v. NCI Bldg. Sys., L.P., 2005 U.S. App. LEXIS 2702 (6th Cir. 2005). Expressly conditional Needs to be pretty clear; no boilerplate language (e.g., subject to... ) Materially alter Results in “surprise or hardship.” E.g., Waiving standard warranties. See Comment 4. Arbitration agreements probably not. Bargained for exchange Sought by the promisor and given by the promisee. R2K § 71(2) Performance must be bargained for The exchange must have legal value (not necessarily market value!) Nominal consideration is not sufficient (unless it is an option contract!) Benefit-Detriment Test: Benefit to the promisor or detriment to the promisee (Hamer v. Sidway / Kirksey v. Kirksey) Courts do not inquire into the value of consideration, unless grossly inadequate or sham. See R2K § 79. Illusory Promises R2K § 77: A promise or apparent promise is not consideration if by its terms the promisor or purported promisor reserves a choice of alternative performance, UNLESS: each of the alternative performance would have been consideration if it alone had been bargained for; or one of the alternative performances would have been consideration and there is or appears to the parties to be a substantial possibilitiy that before the promisor exercises his choice events may eliminate the alternatives which would not have been consideration. Pre-Existing Duty R2K § 73: Performance of a pre-existing duty is not consideration, unless it differs from the duty in a way which reflects more than the pretense of a bargain. Ex. You can’t offer to pay a debt you already owe in exchange for a promise. Rule is on the way out, see Betterton. Consideration for Modification Common Law UCC R2K §89: Modification needs UCC § 2-209: Modification needs no consideration unless: consideration! Unforeseen Circumstances Statutory Promissory Estoppel Mutual Agreement Past Consideration Majority Rule: Promise to pay for benefit received prior/moral obligation is not enforceable. Mills v. Wyman Material Benefit Rule (Minority) R2K § 86: 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. Webb v. McGowin Promissory Estoppel R2K § 90: A promise which the promisor should reasonably expect to induce action or forebearance on the part of the promisee, and which does induce such action or forebearance, is binding if injustice can be avoided only through enforcement. Reasonable reliance Promissory estoppel is not a contract and it is not consideration. It is a substitute the courts use for just outcomes.