Contracts Outline PDF - Kneshia Barlow 2024

Contracts Outline: Kneshia Barlow (Bressman 2024) Formation: Was K Formed?............................................................................................. 2 Promises.........................................................................................................................

Contracts Outline: Kneshia Barlow (Bressman 2024) Formation: Was K Formed?............................................................................................. 2 Promises......................................................................................................................... 2 Bargained for Exchange (BFE).................................................................................3 Gratutitous Promises.................................................................................................4 Conditional Promises/Illusory Promises...................................................................5 Mutual Assent.................................................................................................................6 Offer............................................................................................................................... 7 Termination of Offer................................................................................................. 9 Acceptance................................................................................................................... 12 Affirmative Denfenses: Is K Enforceable?.................................................................... 14 Statute of Frauds...........................................................................................................14 Duress...........................................................................................................................16 Misrepresentation......................................................................................................... 18 Unconscionability.........................................................................................................20 Interpretation: What Does K Mean?............................................................................. 22 Standard Form of Contracts......................................................................................... 22 Battle of the Forms....................................................................................................... 24 Parol Evidence Rule..................................................................................................... 27 Interpretation................................................................................................................ 29 Types of Conditions (Risk Allocation).........................................................................31 Substantial Performance & Material Breach................................................................34 Excusing Conditions.....................................................................................................36 Mistake......................................................................................................................... 38 Impracticability or Impossibility.................................................................................. 40 Frustration of Purpose.................................................................................................. 41 Remedies........................................................................................................................... 43 Mitigation..................................................................................................................... 43 Expectation Damages................................................................................................... 44 Punitive Damages.........................................................................................................47 Specific Performance................................................................................................... 47 Forseeability................................................................................................................. 48 Reasonable Certainty....................................................................................................49 1 Alternatives.......................................................................................................................50 Promissory Estoppel.....................................................................................................50 Quasi-Contract..............................................................................................................52 Formation: Was K Formed? Promises Promises Defintion: 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 ○ The person manifesting the intention is the promisor ○ The person whom the manifestation is addressed is the promisee 2  ○ Where performance will benefit a person other than the promisee, that person is a beneficiary Hawkins v. Mcgee ○ Facts: Defendant [doctor] said the plaintiff would only be in the hospital “three or four days, not over four; then the boy can go home and it will be just a few days when he will go back to work with a good hand” ○ Issue: Did the doctor make a promise? ○ Holding: Favored plaintiff ○ Legal Reasoning: the defendant pushed for the operation due to wanting the opportunity to experiment on skin grafting — which he had little experience with — therefore, his intentions seem clear However, if doctor said “I will guarantee to make the hand 100% → this is a promise” Other Notes ○ To be a binding promise there has to be some control over the event ○ Promises where the law can give a remedy is what can be considered a binding contract Bargained for Exchange (BFE) Definition: A consideration involves an exchange of promises or performances between two parties as part of a deal or bargain ○ (1) To constitute consideration, a performance or a return promise must be bargained for ○ (2) A performance or return promise is bargained for if it sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise Relevant Restatement ○ Restatement § 71: Requirement of Exchange Consideration is the legal conclusion that a promise os enforceable ○ Restatement § 73: Performance of a Legal Duty Performance of a legal duty (including contractul duty) owed to the promisor which is neither doubtful not the subject of honest dispute is not consideration; but a similar performance is considerations if it differs from what was required by the duty in a way which reflects more than a pretense of bargain ○ Restatement § 79: Adequacy of Consideration; Mutuality of Obligation If the requirement of consideration is met, there is no additional requirement of (a)a gain, advantage, or benefit to the promisor or a loss, disadvantage, or detriment to the promisee; or (b) equivalence in the values exchanged; or (c) “mutuality of obligation.” ○ Restatement § 81: Consideration as a Motive or Inducing Cause Hamer v. Sidway (1891) 3  ○ Facts: Uncle promised nephew that if he refrained from drinking, gambling, tobacco, swearing, playing cards/billiards, until he was 21 he would give him $5,000… the nephew completed the request and asked his uncle for the 5k… uncle died without paying out the money ○ Issue: Was there consideration, or was it a gratuitous promise? ○ Holding: Judgment for plaintiff ○ Legal Reasoning: The forbearance of giving up one's legal right to consume liquor of tobacco constitutes consideration… Law defined consideration as “the law may consist either in some right, interest, profit, or benefit accruing to the one party, or some forbearance, detriment, loss, or responsibility given, suffered or undertaken by the other” Gratutitous Promises Definition: A promise can be made with no expectation of any compensation [a gift] and is called a “gratuitous promise.” Since gifts lack consideration they are unenforceable contracts Langer v. Superior Steel Corp (1932) ○ Facts: Superior Steel Corp (SSC) told Langer that he will get paid $100 a month post retirement from the company as long as he remains loyal and doesn't become employed by competitors… Paid for 4 years and then stopped ○ Issue: Was there consideration, or was it a gratuitous promise? ○ Holding: Reversed and remanded for Langer ○ Legal Reasoning: Yes there was sufficient consideration → Langer refrained from finding another job and sharing his knowledge of the trade with a competitor In RE Greene (1930) ○ Facts: Plaintiff says her and defendant went into a contract in which: (1) The bankrupt undertook to pay the claimant $1000 a month during their joint lives (2) to assign a $100,000 life insurance on his life and continuously pay the premiums and he would pay $100,000 to her if he should lapse in payment (3) to pay the rent for four years on an apartment she leased She has to give him $1 and “other good and valuable consideration” He makes several payments called for by the instrument but stops ○ Issue: Whether there was any consideration for the bankrupt’s promises ○ Holding: Favored the bankrupt ○ Legal Reasoning: $1 and “other good and valuable consideration” is nominal and not enough for consideration – it doesnt become consideration just because one says so Nominal consideration ≠ consideration Levine v. Blumenthal (1936) ○ Facts: The plaintiff allowed them (defendants) to keep their same rent of $175/month “until business improved” … the defendants paid $175/month for the next 11 months and skipped out on rent the last month ○ Issue: Was the plaintiff modifying the rent actual consideration or a gratuitous promise 4  ○ Holding: Judgment for plaintiff ○ Legal Reasoning: A subsequent agreement, to impose the obligation of a contract, must rest upon a new and independent consideration… The secondary agreement at issue is not supported by a valid consideration; and it therefore had no legal obligation…There is no new inducement (they were just paying what they were paying before; landlord was just being nice by not raising the rent listed in OG contract) Alaska Packers Association v. Domenico (1902) ○ Facts: Defendant promised, among other things, to pay the sum of $100 for services the plaintiff rendered… Plantiffs docked in Pyramid Harbor and they demanded the APA pay $100 for their services and if they were not paid they would return to San Fran… the APA realizing they did have another choice they succumbed to the demands… the company denied its validity and refused to pay other than what was agreed on previously ○ Issue: Was the contract supported by sufficient consideration ○ Holding: Favored defendant ○ Legal Reasoning: The fisherman were offering the exact same services, and none other, that they were already under contract to render…Plantiffs broke the basic contract [$ in exchange for services] via extortion Conditional Promises/Illusory Promises Restatement § 90: Promissory Estoppel ○ (a) a promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person ○ (b) And which does induce such action or forbearance ○ [c] [and] is binding if injustice can be avoided only by enforcement and purpose ○ (d) The remedy granted for breach may be limited as justice requires **Promissory Estoppel is an alternative method and is not a contract; if there is not a contract promissory estoppel can be an alternative for remedy** UCC 2-306 ○ 2-306(1): A term which measures the quantity by the output of the seller or the requirements of the buyer means such actual output or requirements as may occur in good faith, except that no quantity unreasonably disproportionate to any stated estimate or in the absence of a stated estimate to any normal or otherwise comparable prior output or requirements may be tendered or demanded. ○ 2-306(2): Seller to use best efforts to supply and buyer to use best efforts to promote; best efforts = reasonable diligence as well as “good faith” Is it an illusory promise? If one party is free not to perform, then the other party is free not to perform… unless the promise is limited or restricted to allow them to break away ○ If there is a limit on the ability to walk away from the promise, then the promise is not illusory 5 Mutual Assent Relevant UCC: When Terms are Left Open 2-204(3) - Even though one or more terms are left open, a contract for sale does not fail for indefiniteness is the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy ○ How does the court determine the contract price when the price term is left open? 2-305 “Open price term” → 2-305 (1)(b) ○ What is a “reasonable” price? 1-303 “Course of dealings” : Look at the course at previous contracts Course of performance: we are going to look at the previous times 6 Offer Definition: A promise to provide a specified performance, conditional on the offeree assenting to the terms proposed ○ Advertisements ≠ an offer Unless it is so clear, definite, explicit, and left nothing open for negotiations besides saying “I accept” (Lefkowitz v. Great Minneapolis Surplus Store) Relevant Restatement ○ Restatment § 24: Offer 7  The manifestation of 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 ○ Restatement §§ 29, 30: Offeror Power Offeror gives offeree power if acceptance, but the offeror cna limit this power in any way, including terminating the power of acceptance (unless an option has been created) Other Notes ○ The consumer is the offeror [I am offering x amount of $ for your product] even if a certain price is advertised We do it this way because we are worried about quantities ○ An offeror needs to describe and name who can accept the offer Craft v. Edler & Johnston Co. ○ Facts: Defendant advertised an all electric sewing machine for $26 as a “Thursday Only Special”... Plaintiff came in to buy the machine and defendant refused to sell ○ Issue: Did the advertisement of the machine constitute an offer ○ Decison: Dismissed the petition ○ Legal Reasoning: “Upon consideration the court finds that said advertisement was not an offer which could be accepted by plaintiff to form a contract…”... In the absence of special circumstances an ordinary newspaper advertisement is not an offer, but is an offer to negotiate—an offer to receive offers Lefkowitz v. Great Minneapolis Surplus Store, Inc. ○ Facts: Defendant published an ad in the newspaper saying: “Saturday 9 a.m. Sharp… 3 Brand New Fur Coats Worth to $100.00…First Come First Served $1 Each”... Then published an advertisement that said: “Saturday 9 a.m… 2 Brand New Pastel Mink 3-Skin Scarfs…Selling for $89.50…Out they go Saturday Each $1.00…1 Black Lapin Stole Beautiful, worth $139.50... $1.00…First Come First Served” Both occasions the plaintiff tried to purchase… defendant refused to sell saying the offer was only for women ○ Issue: Did the advertisement constitute an offer ○ Holding: Allowed claim for Black Lapin and did not allow claim for fur coat (due to value of coat being speculative) ○ Legal Reasoning: The offer by the defendant of the sale of the Lapin fur was clear, definite, and explicit, and left nothing open for negotiation… The plaintiff having successfully managed to be the first one to appear at the seller’s place of business to be served, as requested by the advertisement, and having offered the stated purchase price of the article Consolidated Freightways Corp. of Delware v. Williams ○ Facts: Appellant posted a 5k reward for information leading to the arrest and conviction of someone stealing… Sign said: “We feel that all employees should be trusted. However, a dishonorable act on the part of one individual can cast suspicion on the rest of us. It is 8  our firm intention to quickly apprehend and prosecute any dishonorable person who may appear among us. All information will be held in strict confidence. Call Collect—CF Security Office—503-227-2561 Ext. 252 or contact your supervisor or terminal manager”... Williams (a supervisor) sued because he gave information and did not get the money ○ Issue: Was Williams eligible to get the reward ○ Decision: Affirmed for Williams…Williams was eligible to receive the reward and complied with the conditions of the reward ○ Legal Reasoning: The general wording of the offer indicates that it is directed to all employees [i.e. “all employees should be trusted”..] …The instruction to “contact your supervisor” did not imply that supervisors cannot be offerees…In these cases [rewards], the act is both the acceptance and the only subject of agreed exchange to be received by the offeror. Unless otherwise specified in the offer, no notice of acceptance by the offeree is necessary; his act is enough. Leonard v. PepsiCo, Inc. ○ Facts: Pepsi created an ad for a “Pepsi Stuff” marketing thing (collect pepsi points by buying pepsi then you can buy certain stuff listed in a catalog)... In the commercial ad Pepsi made a joke that you could buy a Harrier Fighter Jet for 7,000,000 pepsi points… Plaintiff took this seriously and accumulated the points and is demanding his jet ○ Issue: Did the advertisement constitute an offer? ○ Decision: Summary judgment for the defendant ○ Legal Reasoning: Plaintiff’s demand cannot prevail as a matter of law. First, the commercial was merely an advertisement, not a unilateral offer. Second, the tongue-in-cheek attitude of the commercial would not cause a reasonable person to conclude that a soft drink company would be giving away fighter planes as part of a promotion Termination of Offer Relevant Restatement ○ Restatement § 36: Termination Events 1. The revocation of an offer by the offeror 2. The rejection of an offer by the offeree 3. The expiration of the offer in accordance with its terms, or as a default, in a reasonable time 4. The death or incapacity of the offeror or offeree ○ Restatement § 42: Revocation by Communication from Offeror Recieved by Offeree An offeree’s power of acceptance is terminated when the offeree receives from the offeror a manifestation of an intention not to enter into the proposed contract ○ Restatement § 43: Indirect Communication of Revocation 9  An offeree’s power of acceptance is terminated when the offeror takes definite action inconsistent with an intention to enter into the proposed contract and the offeree acquires reliable information to that effect ○ Restatment § 38: Rejection (1) Offerees power of acceptance is terminated by his rejection of the offer (2) Intention not to accept an offer is a rejection ○ Restatement § 40: Time When Rejection of Counter-Offer Terminates Power of Acceptance Rejection or counter-offer by mail or telegram does not terminate the power of acceptance until received by the offeror ○ Restatement § 41: Lapse of Time (1) Offerees power of acceptance is terminated at the time of the specified offer or a reasonable time (2) Reasonable time depends of context and industry standards [i.e. you cant sell fish 3 weeks after it was caught] For conversations its by the end of the conversation ○ Restatement § 48: Death or Incapacity of Offeror or Offeree An offeree’s power of acceptance is terminated when the offeree or offeror dies or is deprived of legal capacity to enter into the proposed contract ○ Restatement § 39: Counter-Offers (1) Counter offers are in regards to the original offer and propose a substituted bargain differing from the original offer (2) An offerees power of acceptance is terminated once a counter offer is made Relevant UCC ○ UCC 2-205: An offer by a merchant to buy or sell goods in a signed record which by its terms gives assurance that it will be held open is not revocable, for lack of consideration, during the time stated or if no time is stated for a reasonable time, but in no event may such period of irrevocability exceed three months Option Contracts ○ A promise which meets the requirements of formation of a contract and limits promisors power to revoke an offer Ways to keep the offer open Considertation (two approaches) ○ True consideration ○ Nominal + writing (Restatement 87) UCC Firm offers § 2-205 and Restatement 87(1)(b): Signed writing by a merchan + Assurance and