Contracts Outline PDF

I. GOVERNING LAW...................................................................................................................................................... 3 A. RESTATEMENT...

I. GOVERNING LAW...................................................................................................................................................... 3 A. RESTATEMENT 3 B. UCC 3 II. TYPE OF K................................................................................................................................................................ 3 A. EXPRESS K 3 B. K IMPLIED IN FACT 3 C. K IMPLIED IN LAW 3 D. UNILATERAL K 3 E. BILATERAL K 4 III. GENERAL K FORMATION RULES............................................................................................................................ 4 IV. PROMISES...............................................................................................................................................................4 A. WAS THERE A PROMISE? 4 B. DID THE PROMISES CONSTITUTE A K? 4 V. MUTUAL ASSENT...................................................................................................................................................... 4 A. MUTUAL ASSENT 4 B. EXCHANGE 4 C. INTOXICATION 4 D. AGE 4 E. SERIOUS/JOKE 4 F. OBJECTIVE INTENT 5 VI. OFFER......................................................................................................................................................................5 A. DEFINITION 5 B. OPTION K 5 C. PRELIMINARY NEGOTIATIONS 5 D. ACCEPTANCE METHOD OFFERED 6 E. FIRM OFFER 6 VII. ACCEPTANCE......................................................................................................................................................... 6 A. DEFINITION 6 B. TERMINATION OF POWER OF ACCEPTANCE 6 C. REJECTION 6 D. COUNTER-OFFERS 6 E. ACCEPTANCE BY PERFORMANCE 6 F. ACCEPTANCE BY PROMISE 7 G. CHANGE OF MIND 7 H. TIME OF OPEN OFFER 7 I. ADDITIONAL TERMS UPON ACCEPTANCE: UCC 2-207 / BATTLE OF THE FORMS 7 J. COMMON LAW ACCEPTANCE 8 K. MAILBOX RULE 8 L. OFFEREE’S SILENCE 8 M. SETTLEMENT AGREEMENTS 8 VIII. CHANGE OF TERMS.............................................................................................................................................. 8 A. PAROL EVIDENCE RULE/MERGER CLAUSE 8 IX. CONSIDERATION.................................................................................................................................................... 9 A. NEW TEST 9 B. OLD TEST: BENEFIT-DETRIMENT 9 C. GIFT 10 D. PAST CONSIDERATION 10 E. LEGAL DUTY 10 F. NOMINAL CONSIDERATION 10 G. SURRENDER OF CLAIM 10 H. MATERIAL BENEFIT RULE 10 I. LOTTERY 10 J. ILLUSORY PROMISE 10 X. PROMISSORY ESTOPPEL........................................................................................................................................ 11 A. PROMISSORY ESTOPPEL – R2D §90 11 B. PROMISSORY ESTOPPEL – 1ST RESTATEMENT 11 C. EQUITABLE ESTOPPEL 11 CONTRACTS OUTLINE – FINAL PAGE 1 XI. INDEFINITENESS..................................................................................................................................................11 A. WAS THE K UNCERTAIN OR INDEFINITE? 11 XII. CONDITIONS....................................................................................................................................................... 12 A. CONDITION 12 B. NON-OCCURRENCE OF CONDITION 12 C. MATERIAL FAILURE 13 D. DEPENDENT PROMISE 13 E. INDEPENDENT PROMISE 13 F. SUBSTANTIAL PERFORMANCE 13 G. IDIOSYNCRATIC 13 XIII. MODIFICATIONS............................................................................................................................................... 13 A. PROMISE MODIFYING A DUTY 13 B. CONSIDERATION 13 C. MODIFICATION/RESCISSION 14 D. STATUTE OF FRAUDS – MODIFICATIONS 14 E. WAIVER 14 XIV. IMPOSSIBILITY.................................................................................................................................................. 14 A. IMPRACTICABILITY 14 XV. UNCONSCIONABILITY......................................................................................................................................... 15 A. GENERAL UNCONSCIONABILITY 15 B. PROCEDURAL UNCONSCIONABILITY 15 C. SUBSTANTIVE UNCONSCIONABILITY 15 XVI. STATUTE OF FRAUDS.......................................................................................................................................... 15 A. WRITING REQUIREMENT 15 B. PROMISSORY ESTOPPEL- STATUTE OF FRAUDS 15 XVII. RISK OF LOSS OF GOODS..................................................................................................................................16 A. GOODS SHIPPED BY CARRIER 16 B. GOODS HELD BY A BAILEE 16 C. NOT GOODS SHIPPED BY CARRIER OR HELD BY A BAILEE 16 XVIII. IMPROPER DELIVERY......................................................................................................................................16 A. PERFECT TENDER RULE 16 B. CASUALTY TO IDENTIFIED GOODS (W/O FAULT) 16 XIX. DURESS...............................................................................................................................................................16 A. DURESS 16 B. THREAT 16 XX. POLICY................................................................................................................................................................. 17 A. OPPORTUNISM 17 B. LEAST COST AVOIDER 17 C. EFFICIENCY 17 D. ECONOMIC THEORY 18 E. RELIANCE THEORY 18 F. AUTONOMY THEORY 18 G. PLURALIST/SKEPTICAL THEORIES 18 H. LEGAL REALISM 18 XXI. SPECIFIC PERFORMANCE................................................................................................................................... 18 A. SHOULD X RECEIVE SPECIFIC PERFORMANCE? 18 B. WHAT ADVANTAGE DOES THE Π HAVE IN SEEKING SPECIFIC PERFORMANCE? 18 XXII. DAMAGES.......................................................................................................................................................... 19 A. GENERAL 19 B. COVER 19 C. EXPECTATION 19 D. RELIANCE 19 E. RESTITUTION 19 F. FORESEEABILITY 19 G. INCIDENTAL 20 H. CONSEQUENTIAL 20 I. SELLER’S DAMAGES FOR NON-ACCEPTANCE OR REPUDIATION 20 J. BUYER’S DAMAGES FOR NON-DELIVERY OR REPUDIATION 20 CONTRACTS OUTLINE – FINAL PAGE 2  K. BUYER’S DAMAGES FOR BREACH IN REGARD TO ACCEPTED GOODS 20 L. SETTING YOUR OWN 20 M. NOMINAL 21 N. LIQUIDATED 21 O. COMMON LAW DAMAGES 21 CONTRACTS OUTLINE – FINAL PAGE 3 I. GOVERNING LAW A. RESTATEMENT B. UCC 1. Does UCC Article 2 govern this case? Article 2 applies to transactions in goods. UCC § 2-102 Article 2 does not apply to any transaction which although in the form of an unconditional K to sell or present sale is intended to operate only as a security transaction nor does this Article impair or repeal any statute regulating sales to consumers, farmers or other specified classes of buyers. UCC § 2-102 Article 2 does not apply to Ks creating a security interest Article 2 does not apply to any transaction, regardless of form, that creates a lease. UCC does not apply to real estate, bankruptcy, or the performance and enforcement of Ks for service. 2. Is X a “good” mea? “Goods” means all things (including specially manufactured goods) which are movable at the time of identification to the K for sale other than the money in which the price is to be paid, investment securities (Article 8) and things in action. “Goods” also includes the unborn young of animals and growing crops and other identified things attached to realty as described in the section on goods to be severed form the realty (§ 2-107). UCC § 2-105(1) If the stock is represented by a certificate, it is moveable. UCC § 2-105(1) Investment securities are not goods. 3. Should the predominant-purpose test be used? The predominant-purpose test applies the UCC/Article 2 to transactions if their predominant purpose is to sell goods, but applies the common law of Ks if their predominant purpose is to sell services. A number of courts use this test when there is a mixed K. II. TYPE OF K A. EXPRESS K 1. Was there an express K? a) The K is an express K if it is made in words, either orally or written. B. K IMPLIED IN FACT 1. Was there a K implied in fact? a) For a K implied in fact, there is no express agreement, but the conduct of the parties implies an agreement from which an obligation in K exists. b) Each party must have mutual agreement and intent to promise. (1) No: In Bailey v. West, there was not a K implied in fact bc there was no mutual agreement or intent to promise. The Π did not know with whom, if anyone, he had a K. He sent bills to both Δ and Strauss. In addition, Δ and his trainer had no prior business transactions with the Π. When the Δ received the lame horse, he had it sent back to the Strauss, not to the Π. When Strauss wouldn’t accept the horse, the Δ instructed his trainer that he wouldn’t be responsible for boarding it on any farm. C. K IMPLIED IN LAW 1. Was this a K implied in law/Quasi-K? a) A quasi-K or K implied in law is not a K, but an obligation imposed by law for the purpose of bringing about justice w/o reference to the intent or the agreement of the parties and sometimes in spite of an agreement between the parties. b) There is a quasi-K when the Δ benefits from Π, the Δ appreciates this benefit, and accepting this benefit w/o paying would be inequitable. (1) No: In Bailey v. West, there was not a Q-K bc West did not appreciate any benefit from Bailey. Bailey knew that West meant for the horse to go to Strauss bc when Bailey noticed that the horse was lame, Kelly, the van driver, told him, “that’s why they wouldn’t accept him at Belmont Track.” Also, Bailey acknowledged receipt of horse by signing the uniform livestock bill of lading, which showed that the horse was to go to Strauss’s trainer. (2) Yes: In the Lillian Hypo, there was a Q-K bc Lillian benefited the owner by giving the dog surgery. The owner appreciated the benefit by accepting the dog and saying that she would have paid the money for the surgery. Also, if the owner accepted the dog w/o paying, there would be unjust enrichment. **note that courts could go either way on this hypo c) There is no Q-K if one party is a volunteer. The court in Bailey v. West held that a person who officiously confers a benefit upon another is not entitled to restitution. (1) No: In Bailey v. West, there was not a Q-K bc Bailey was a volunteer. 2. Other a) This was a gap-filler, or a way to classify certain cases that did not already fit into a category CONTRACTS OUTLINE – FINAL PAGE 4  D. UNILATERAL K 1. Was this a unilateral K? a) In a unilateral K, there is a promise for performance. Only one party makes a promise. If that promise is made contingent upon the other party doing some act, which he is not under legal obligation to do, or forbearing an action which he has a legal right to take, then such affirmative act or forbearance constitutes the consideration for and acceptance of the promise. b) For a unilateral K, a promise is made that might be accepted by the doing of an act, which act would constitute consideration for the promise and performance of the K. (1) Yes: In St. Peter, once the court determined that there wasn’t a lottery, it next held that there was a unilateral K bc the act requested and performed as consideration for the K indicates acceptance as well as furnishes the consideration. E. BILATERAL K 1. Was there a bilateral K? a) In a bilateral K, there is a promise for a promise. The promise of each party to the K is consideration for the promise of the other party. III. GENERAL K FORMATION RULES 1. “In order to prove the existence of a K, a Π is required to demonstrate the essential requirements of an offer, acceptance, and consideration. A valid and binding K comes into existence when an offer is accepted.” 2. The formation of a contract requires a bargain in which there is a manifestation of mutual assent to the exchange and a consideration unless it is formed under special rule applicable to formal Ks or under rules stated in §§ 82-94. R2d §17 IV. PROMISES A. Was there a promise? 1. For a promise, a promisor manifests intent to do or not do something and the promisee must understand the commitment. R2d §2(1), 2. The promise may be stated orally or in writing or may be implied from conduct. R2d §4 3. “A promisor manifests an intention if he believes or has reason to believe that the promisee will infer that intention from his words or conduct.” B. Did the promises constitute a K? 1. A K is a promise or 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. R2d §1 2. Two necessary elements to a K are mutual assent and consideration. a) Yes: Hamer V. MUTUAL ASSENT A. MUTUAL ASSENT 1. Was there mutual assent? a) Each party must either make a promise or begin to render a performance for there to be mutual assent. R2d §18 B. EXCHANGE 1. Was mutual assent manifested when in the exchange? “The manifestation of mutual assent to an exchange ordinarily takes the form of an offer of proposal by one party followed by an acceptance by the other party or parties.” R2d §22(1) 2. Was there mutual assent even though there was no offer or acceptance? “A manifestation of mutual assent may be made even though neither offer nor acceptance can be identified and even though the moment of formation cannot be determined.” R2d §22(2) C. INTOXICATION 1. Was there a lack of mutual assent bc of intoxication? a) A person has voidable contractual duties if he is intoxicated and the other party knows that he can’t reasonably understand the nature and consequences of the transaction or can’t act reasonably in relation to the transaction. R2d §16 b) One can only be bound to a K if he has at least voidable contractual duties. R2d §12(1) (1) No: In Lucy v. Zehmer, Zehmer was not too intoxicated to enter into a K. This was proved bc Zehmer testified in great detail about what he said and did that night. Also, Zehmer’s wife testified that she suggested that her husband drive Lucy home. Most importantly, Zehmer’s counsel conceded that he was not to drunk D. AGE 1. Is the K unenforceable bc a party is an infant? a) A person has the capacity to incur only voidable contractual duties until the beginning of the day before the person’s 18th birthday, unless a statute provides otherwise. R2d §14 CONTRACTS OUTLINE – FINAL PAGE 5  (1) No: In Hamer v. Sidway, the nephew was an infant, about 15 years old, when his uncle made the promise. The court did not mention that the nephew was too young to enter into a K. This is probably mainly bc the infant was the promisee and therefore wanted the K to be enforced. E. SERIOUS/JOKE 1. Was this K a serious business transaction? a) There is a reasonable person’s standard for a party to a K to realize that an offer is a joke. If it is clear that an offer is not serious, then no offer has been made b) If there is not indication that the offer is evidently in jest, and that an objective, reasonable person would find that the offer was serious, then there may be a valid offer. (1) No: In Leonard v. Pepsico, a reasonable person would not believe that the commercial was seriously making an offer. The commercial is not serious bc it suggests that drinking pepsi will transform a fairly routine and ordinary experience. Also, the kid in the commercial is a highly improbable pilot, traveling to school in a jet is unrealistic, a Harrier jet is used to “attack and destroy surface targets under day and night visual conditions,” and 7,000,000 Pepsi points can be purchased for $700,000 and the Jet costs $23 million. (2) Yes: In Lucy v. Zehmer, there was a serious business transaction. The transaction was an express K and both parties objectively manifested intent to contract. Lucy considered the K to be a serious business transaction. The K was under discussion for 40 minutes before the parties signed it. The Π wanted the Δ’s wife to sign it. Both parties discussed what was to be included in the sale and there was a provision for the examination of the title. Also, Lucy took the K w/o Zehmer asking for it back. The next day, Lucy arranged for his brother to put up half of the money and two days later, Lucy had an attorney examine the title. F. OBJECTIVE INTENT 1. Was there objective intent? a) Learned Hand wrote, “A K has, strictly speaking, nothing to do with personal, or individual, intent of the parties. A K is an obligation attached by mere force of law to certain acts of the parties, usually words, which ordinarily accompany and represent a known intent. If, however it were proved by twenty bishops that either party, when he used the words, intended something else than the usual meaning which the law imposes upon them, he would still be held, unless there were some mutual mistake or something else of the sort.” b) The rule at early common law required a subjective agreement between the contracting parties, but the common law changed to require only objective intent. VI. OFFER A. DEFINITION 1. Did X make an offer? “An offer is 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.” R2d §24 “An offer is an act on the part of one person whereby he gives to another the legal power of creating the obligation called K.” Professor Arthur Corbin “Where the offer is clear, definite, and explicit, and leaves nothing open for negotiation, it constitutes an offer, acceptance of which will complete the K” Lefkowitz 2. Was the price quotation an offer? “While the inclusion of a description of the product, price, quantity, and terms of payment may indicate that the price quotation is an offer rather than a mere invitation to negotiate, the determination of the issue depends primarily upon the intention of the person communicating the quotation as demonstrated by all of the surrounding facts and circumstances.” Dyno “Thus, to constitute an offer, a price quotation must “be made under circumstances evidencing the express or implied intent of the offeror that its acceptance shall constitute a binding K.” Maurice Elec. Supply No: “Typically, a price quotation is considered an invitation for an offer, rather than an offer to form a binding K.” White Consol. Indus. No: In Thos. J. Sheehan Co., the letter was not an offer bc of the use of the term “price quotation,” lack of language indicating that an offer was being made, and absence of terms regarding quantity, time of delivery, or payments. No: In Dyno, the Δ’s price quotation was not an offer bc it contained words such as “estimate” and “please call” which made it seem to be an invitation to engage in future negotiations. In addition, nothing was stated about the place of delivery, time of performance, or terms of payment. Yes: “A price quotation may suffice for an offer if it is sufficiently detailed and it reasonably appears from the price quotation that assent to that quotation is all that is needed to ripen the offer into a K.” Dyno Yes: “A buyer’s purchase agreement submitted in response to a price quotation is usually deemed the offer. Dyno 3. Was the ad an offer? CONTRACTS OUTLINE – FINAL PAGE 6  “The test of whether a binding obligation may originate in advertisements addressed to the general public is whether the facts show that some performance was promised in positive terms in return for something requested.” Williston “Whether in any individual instance a newspaper advertisement is an offer rather than an invitation to make an offer depends on the legal intention of the parties and the surrounding circumstances.” Lefkowitz Yes: In Lefkowitz, the ad for the sale of the Lapin fur was an offer bc it was clear, definite, explicit, and left nothing open for negotiation. B. OPTION K 1. Was this an option K? “An option K is a promise which meets the requirements for the formation of a K and limits the promisor’s power to revoke an offer.” R2d §25 2. Was this offer binding as an option K? “An offer is binding as an option K 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.” R2d §87(1)(a) “An offer is binding as an option K if it is made irrevocable by statute.” R2d §87(1)(b) 3. Was this offer binding as an option K due to the offeree’s reliance? “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 K to the extent necessary to avoid injustice.” R2d §87(2) C. PRELIMINARY NEGOTIATIONS 1. Was this just preliminary negotiations and not an offer? “A manifestation of willingness to enter into a bargain is not an offer if the person to whom it is addressed knows or has reason to know that the person making it does not intend to conclude a bargain until he has made a further manifestation of assent.” R2d §26 D. ACCEPTANCE METHOD OFFERED 1. Did the offeror invite a valid type of acceptance? “An offer may invite or require acceptance to be made by an affirmative answer in words, or by performing or refraining from performing a specified act, or may empower the offeree to make a selection of terms in his acceptance.” R2d §30(1) “Unless otherwise indicated by the language or the circumstances, an offer invites acceptance in any manner and by any medium reasonable in the circumstances.” R2d §30(2) “In case of doubt an offer is interpreted as inviting the offeree to accept either by promising to perform what the offer requests or by rendering the performance, as the offeree chooses.” R2d §32 E. FIRM OFFER 1. For how long is the offer open? “An 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, for lack of consideration, during the time stated or if no time is stated, a reasonable time, but in no event may such period of irrevocability exceed 3 months; but, any such term of assurance on a form supplied by the offeree must be separately signed by the offeror.” UCC § 2-205. VII. ACCEPTANCE A. DEFINITION 1. Did X make an acceptance? “Acceptance of an offer is a manifestation of assent to the terms thereof made by the offeree in a manner invited or required by the offer.” R2d §50(1) “Acceptance by performance requires that at least part of what the offer requests be performed or tendered and includes acceptance by a performance which operates as a return promise.” R2d §50(2) “Acceptance by a promise requires that the offeree complete every act essential to the making of the promise.” R2d §50(3) 2. How does the acceptance relate to the offer? An offer gives to the offeree a continuing power to complete the manifestation of mutual assent by acceptance of the offer. R2d §35(1) B. TERMINATION OF POWER OF ACCEPTANCE 1. Has X lost his power of acceptance? “A K cannot be created by acceptance of an offer after the power of acceptance has been terminated in one of the ways listed in §36.” R2d §35(2) An offeree’s power of acceptance may be terminated by rejection or counter-offer by the offeree. R2d §36(1)(a) An offeree’s power of acceptance may be terminated by lapse of time. R2d §36(1)(b) An offeree’s power of acceptance may be terminated by revocation by the offeror. R2d §36(1)(c) CONTRACTS OUTLINE – FINAL PAGE 7  An offeree’s power of acceptance may be terminated by death or incapacity of the offeror or offeree. R2d §36(1)(d) An offeree’s power of acceptance is terminated by the nonoccurrence of any condition of acceptance under the terms of the offer. R2d §36(2) “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 K.” R2d §42 **Offeror manifests revocation “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.” R2d §43 Yes: In James Baird Co. v. Gimbel Bros, the court (Learned Hand) held that there was no K bc the Δ retracted the offer/bid before it was accepted by Π. *This is the Baird rule that the general contractor is bound to the price submitted to the letting party, but the subcontractors are not bound, and are free to withdraw. C. REJECTION 1. Did the offeree reject the offer? “An offeree’s power of acceptance is terminated by his rejection of the offer, unless the offeror has manifested a contrary intention.” R2d §38(1) “A manifestation of intention not to accept an offer is a rejection unless the offeree manifests an intention to take it under further advisement.” R2d §38(2) D. COUNTER-OFFERS 1. Was this a counter-offer and not an acceptance? “A counter-offer is made by an offeree to his offeror relating to the same matter as the original offer and proposing a substituted bargain differing from that proposed by the original offer.” R2d §39(1) “A reply to an offer which purports [seems] 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 counter-offer.” R2d §59 2. Did the offeree lose his power of acceptance by making the counter-offer? “An offeree’s power of acceptance is terminated by his making of a counter-offer, unless the offeror has manifested a contrary intention or unless the counter-offer manifests a contrary intention to the offeree.” R2d §39(2) E. ACCEPTANCE BY PERFORMANCE 1. Did the performance constitute an acceptance? “Where an offer invites an offeree to accept by rendering a performance and does not invite a promissory acceptance, an option K is created when the offeree tenders or begins the invited performance or tenders a beginning of it.” R2d §45(1) “Where an offer invites an offeree to accept by rendering a performance, no notification is necessary to make such an acceptance effective unless the offer requests such a notification.” R2d §54(1) “If an offeree who accepts by rendering a performance has reason to know that the offeror has no adequate means of learning of the performance with reasonable promptness and certainty, the contractual duty of the offeror is discharged unless the offeree exercises reasonable diligence to notify the offeror of acceptance.” R2d §54(2)(a) “If an offeree who accepts by rendering a performance has reason to know that the offeror has no adequate means of learning of the performance with reasonable promptness and certainty, the contractual duty of the offeror is discharged unless the offeror learns of the performance within a reasonable time.” R2d §54(2)(b) “If an offeree who accepts by rendering a performance has reason to know that the offeror has no adequate means of learning of the performance with reasonable promptness and certainty, the contractual duty of the offeror is discharged unless the offer indicates that notification of acceptance is not required.” R2d §54(2)(c) Yes: In Ever-Tite, the Π accepted by commencement of the performance of the work contracted to be done. 2. Does the offeror have a duty of performance? “The offeror’s duty of performance under any option K so created is conditional on completion or tender of the invited performance in accordance with the terms of the offer.” R2d §45(2) F. ACCEPTANCE BY PROMISE 1. Did the promise constitute an acceptance? “Except as stated in §69 or where the offer manifests a contrary intention, it is essential to an acceptance by promise either that the offeree exercise reasonable diligence to notify the offeror of acceptance or that the offeror receive the acceptance seasonably.” R2d §56 G. CHANGE OF MIND 1. What happens when an acceptance is sent after a rejection or counter-offer? “Rejection or counter-offer by mail or telegram does not terminate the power of acceptance until received by the offeror, but limits the power so that a letter or telegram of acceptance started after the sending of an otherwise effective rejection or counter-offer is only a counter-offer unless the acceptance is received by the offeror before he receives the rejection or counter-offer.” R2d §40 CONTRACTS OUTLINE – FINAL PAGE 8  H. TIME OF OPEN OFFER 1. When was the oferee’s power of acceptance terminated? “An offeree’s power of acceptance is terminated at the time specified in the offer, or, if not time is specified, at the end of a reasonable time.” R2d §41(1) Reasonable time: In Ever-Tite, the court held that “since the K did not specify the time within which it was to be accepted or within which the work was to have been commenced, a reasonable time must be allowed therefore in accordance with the facts and circumstances and the evident intention of the parties.” “A reasonable time is contemplated where no time is expressed.” Ever-Tite “What is a reasonable time is a question of fact, depending on all the circumstances existing when the offer and attempted acceptance are made.” R2d §41(2) In Pavel, the court held that it was unreasonable for the offer to continue during the time lapse between bid opening and award. “Unless otherwise indicated by the language or the circumstances, and subject to the rule stated in §49, an offer sent by mail is seasonably accepted if an acceptance is mailed at any time before midnight on the day in which the offer is received.” R2d §41(2) I. ADDITIONAL TERMS UPON ACCEPTANCE: UCC 2-207 / BATTLE OF THE FORMS 1. Do the additional terms become part of the K? “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.” UCC § 2-207(1). “The additional terms are to be construed as proposals for addition to the K” UCC § 2-207(2). “Between merchants, such terms become part of the K unless the offer expressly limits acceptance to the terms of the offer, they materially alter it, or notification of objection to them has already been given or is given within a reasonable time after notice of them is received.” UCC § 2-207(2). “Conduct by both parties which recognizes the existence of a K is sufficient to establish a K for sale although the writings of the parties do not otherwise establish a K. In such case the terms of the particular K consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provision of this Act.” UCC § 2-207(3). An acceptance which requests a change or addition to the terms of the offer is invalid if the acceptance is made to depend on an assent to the changed or added terms. R2d §61 UCC §2-207 is different from the mirror image rule bc now, an “acceptance” with additional terms can still be an acceptance if it isn’t conditional on assent by the other party. Under the mirror image rule, this “acceptance” could only be a counteroffer and not an acceptance because the terms did not match up with the offer. No: In Ionics, the additional terms did not become part of the K bc notification of objection to conflicting terms was given on the order form and also the new terms materially alter those in the offer. No: In Step-Saver, the box-top license did not become part of the K bc the acceptance was not conditional and the terms were materially altered. Yes: In Hill, the arbitration clause became part of the K bc the acceptance was not conditional and it also passed the test in UCC §2-207(2). **Or K might have been accepted by Hills’ silence. 2. Do the writings constitute a conditional acceptance? Step-Saver created three tests to determine whether a writing constitutes a conditional acceptance. an offeree’s response is a conditional acceptance to the extent that it states a term “materially altering the contractual obligations solely to the disadvantage of the offeror. An acceptance is conditional when certain key words or phrases are used, such as a written confirmation stating that the terms of the confirmation are “the only ones upon which we will accept orders.” The offeree is required to demonstrate an unwillingness to proceed with the transaction unless the additional or different terms are included in the K. **This approach was adopted in Step-Saver because it best reflects the understanding of commercial transactions developed in the UCC (§2-207). No: In Step-Saver, the acceptance was not conditional bc TSL did not clearly express its unwillingness to proceed with the transactions unless its additional terms were incorporated into the parties’ agreement. 3. Why was UCC 2-207 approach used instead of common law? “While a party may desire the terms detailed in its form if a dispute, in fact, arises, most parties do not expect a dispute to arise when they first enter into a K. As a result, most parties will proceed with the transaction even if they know that the terms of their form would not be enforced. The insight behind the rejection of the last shot rule is that it would be unfair to bind the buyer of goods to the standard terms of the seller, when neither party cared sufficiently to establish expressly the terms of their agreement, simply bc the seller sent the last form.” Step-Saver 4. Does 2-207 govern when there is only one form? When there is one form, “§2-207 is irrelevant” ProCD CONTRACTS OUTLINE – FINAL PAGE 9  J. COMMON LAW ACCEPTANCE 1. Was there acceptance based on the MIRROR IMAGE RULE? An offer could only be accepted if the offeree agreed precisely and completely to the terms offered. If the terms varied at all it was a counter-offer and not an acceptance. No: In Dataserv, Δ made a counteroffer instead of an acceptance when it made changes to the Π’s offer. 2. What was the last shot doctrine? It was effective where one or both parties performed even though the mirror image rule had not been satisfied. Both parties were bound to the terms of the last offer (or counteroffer) given by one party to the other before commencement of performance. The buyer by taking the goods accepted the counteroffer As a practical matter, unless the buyer could slip in his out piece of paper, the seller’s terms were used Overruled by UCC § 2-207(3) K. MAILBOX RULE 1. Was the acceptance valid even though it never made it to the offeror? “Unless the offer provides otherwise an acceptance made in a manner and by a medium invited by an offer is operative and completes the manifestation of mutual assent as soon as put out of the offeree’s possession, without regard to whether it ever reaches the offeror.” R2d §63(a) An exception is that “an acceptance under an option K is not operative until received by the offeror.” R2d §63(b) L. OFFEREE’S SILENCE 1. Did the offeree’s silence operate as an acceptance? “Where an offeree takes the benefit of offered services with reasonable opportunity to reject them and reason to know that they were offered with the expectation of compensation”, the offeree’s silence operates as an acceptance. R2d §69(1)(a) “Where the offeror has stated or given the offeree reason to understand that assent may be manifested by silence or inaction, and the offeree in remaining silent and inactive intends to accept the offer,” the offeree’s silence operates as an acceptance. R2d §69(1)(b) “Where bc of previous dealings or otherwise, it is reasonable that the offeree should notify the offeror if he does not intend to accept,” the offeree’s silence operates as an acceptance. R2d §69(1)(c) “An offeree who does any act inconsistent with the offeror’s ownership of offered property is bound in accordance with the offered terms unless they are manifestly unreasonable. But if the act is wrongful as against the offeror it is an acceptance only if ratified by him.” R2d §69(2) M. SETTLEMENT AGREEMENTS 1. Did X intend to be bound to the settlement agreement? To determine whether parties intended to be bound by a settlement agreement in the absence of a document executed by both sides, “we must consider (1) whether there has been an express reservation of the right not to be bound in the absence of a signed writing, (2) whether there has been partial performance of the K, (3) whether al of the terms of the alleged K have been agreed upon, and (4) whether the agreement at issue is the type of K that is usually committed to a writing.” Ciaramella VIII. CHANGE OF TERMS A. PAROL EVIDENCE RULE/MERGER CLAUSE 1. Can the evidence of prior agreement or of simultaneous oral agreement contradict the K? Terms which are intended to be final expressions of the parties’ agreement, either by confirmatory memoranda or other writings, may not be contracted by evidence of any prior agreement or of a simultaneous oral agreement, but may be explained or supplemented by course of dealing or use of trade or by course of performance and 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. UCC §2-202 “In this country, it has become a well-settled exception to the rule, that a sealed K may be modified by a subsequent parol agreement, if the latter has been executed, or has been so acted on that the enforcing of the original K would be inequitable…” Stees 2. Is this a merger/integration clause? A merger/integration clause is a contractual provision stating that the contract represents the parties' complete and final agreement and supersedes all informal understandings and oral agreements relating to the subject matter of the contract. Yes: In Ciaramella, the K had a merger clause that stated that the agreement superseded any and all prior agreements between the parties and no other promises or agreements shall be binding unless in writing and signed by the parties. This was persuasive evidence that the parties did not intend to be bound prior to the execution of a written K. 3. Is this a partial merger/integration clause? It is possible to have an agreement that is only partially integrated You can admit evidence to supplement, but not to contradict CONTRACTS OUTLINE – FINAL PAGE 10 IX. CONSIDERATION A. NEW TEST 1. Was there consideration? a) The new test that is used to determine if a promise has consideration is defined in R2d §71(1,2). A performance or return promise must be bargained for. The promisor gives the promise and accepts a performance or return promise while the promisee gives the performance or return promise and accepts the promise. b) Performance is defined as an act, forbearance, or the creation, modification, or destruction of a legal relationship. R2d §71(3) c) “The performance or return promise may be given to the promisor or to some person. It may be given by the promisee or by some other person.” R2d §71(4) d) The promisor’s motive is immaterial. R2d §81 e) “The giving away of property or prizes is not unlawful,” and, “profit accruing remotely and indirectly to the person who gives the prize is not a substitute for the requirement that he who has a chance to win the prize must pay a valuable consideration therefore.” State v. Hundling **overruled f) Consideration does not have to be money; it can be an act. as long as the act is what the promisor specified. St. Peter g) Consideration must not be confused with motive. (1) Yes: In St. Peter, the court held that the requested acts of showing up to theatre and signing one’s name in a book were bargained for. (2) No: In Scott v. People’s Monthly Co., Π sought a $1,000 prize offered in a word-building contest. There was no consideration bc Π failed to comply with terms of offer. B. OLD TEST: BENEFIT-DETRIMENT 1. Was there consideration by the benefit-detriment test? a) According to the old rule, there is consideration if there is a benefit to the promisor or a detriment to the promisee. b) “A valuable consideration, in the sense of 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.” Hamer (1) Yes: In Hamer, the uncle’s promise had consideration bc the nephew experienced a detriment by giving up his legal right to smoke and drink. It didn’t matter if the uncle benefit bc it was sufficient that the nephew had detriment. (2) Yes: In Davies v. Martel Laboratory Services, Inc., Δ offered Π a job if she entered into an MBA program. She entered MBA program, but was fired a year later. Court held that there was consideration bc Π suffered ‘legal detriment.’ (3) Yes: In Wolford, the court held that the Π did benefit bc “where a party contracts for the performance of an act which will afford him pleasure, gratify his ambition, please his fancy, or express his appreciation of a service another has done him, his estimate of value should be left undisturbed unless, indeed, there is evidence of fraud.” (4) No: In Kirksey, the court held that there was no consideration bc the Δ’s promise to give the Π a place to live was a mere gratuity. The Π abandoning her possessions and traveling to Δ’s home was not consideration. (5) No: In Williston’s Tramp example, although a walk to the shop was a legal detriment, it was not consideration bc it was not requested as the price of the promise. It was merely a condition in a gratuitous promise. 2. Under new test, is there consideration even though the old benefit-detriment test hasn’t been satisfied? “If the requirement of consideration is met, there is no additional requirement of a gain, advantage, or benefit to the promisor or a loss, disadvantage, or detriment to the promisee.” R2d §79(a) Once it is determined that there is consideration by the new test, there is no additional requirement of “equivalence in the values exchanged” or “mutuality of obligation” (both parties are bound or neither party is bound). R2d §79(b,c) C. GIFT 1. Was this just a gift (and therefore, no consideration)? a) “A promise to make a gift is without consideration and not enforceable.” Farlow v. Farlow (1) No: In Hamer, the money the uncle promised the nephew was not just a gift it was a K bc there was consideration. D. PAST CONSIDERATION 1. Can past performance act as consideration? CONTRACTS OUTLINE – FINAL PAGE 11  “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.” R2d §86(1) “A promise is not binding under R2d §86(1) (a) if the promisee conferred the benefit as a gift or for other reasons the promisor has not been unjustly enriched; or (b) to the extent that its value is disproportionate to the benefit.” R2d §86(2) “Consideration is therefore a test of the enforceability of executory promises, and has no legal effect when rendered in the past and apart form an alleged exchange in the present.” Hayes No: In Spickelmier, “an employer’s promise to an employee to pay him a year-end bonus was unenforceable bc it was made after the employee had performed his contractual responsibilities for that year.” E. LEGAL DUTY 1. Is there a lack of consideration bc the performance was a legal duty? “Performance of a legal duty owed to a promisor which is neither doubtful nor the subject of honest dispute is not consideration; but a similar performance is consideration if it differs from what was required by the duty in a way which reflects more than a pretense of bargain.” R2d §73 Past consideration is not consideration (see above) Promise to perform preexisting duty is not consideration F. NOMINAL CONSIDERATION 1. Was the consideration nominal? Nominal consideration does not satisfy the consideration requirement. “Disparity in value, with or w/o other circumstances, sometimes indicates that the purported consideration was not in fact bargained for but was a mere formality or pretense.” R2d §79, comment d G. SURRENDER OF CLAIM 1. Did X’s forbearance to assert/surrender of a claim/defense constitute consideration? “Forbearance to assert or the surrender of a claim or defense which proves to be invalid is not consideration unless the claim or defense is in fact doubtful bc of uncertainty as to the facts of the law.” R2d §74(1)(a) “Forbearance to assert or the surrender of a claim or defense which proves to be invalid is not consideration unless the forbearing or surrendering party believes that the claim or defense may be fairly determined to be valid.” R2d §74(1)(b) “The execution of a written instrument surrendering a claim or defense by one who is under no duty to execute it is consideration if the execution of the written instrument is bargained for even though he is not asserting the claim or defense and believes that no valid claim or defense exists.” R2d §74(2) 2. SEE “WAIVER” BELOW H. MATERIAL BENEFIT RULE 1. Does the material benefit rule apply here? a) Certain promises are enforced, even w/o consideration, if made in recognition of a prior material benefit conferred by the promisee on the promisor I. LOTTERY 1. Was this a lottery and not a K? a) There is a lottery if there is a prize to be given upon a contingency to be determined by chance to a person who has paid some valuable consideration or hazarded something of value for the chance. b) To constitute a lottery, one who has the chance to win the prize must pay something of value for that chance. St. Peter c) Lottery consideration needs to be $. St. Peter ****Overruled in Idea Research d) Lottery consideration does not need to be $. It can be something in the way of going each day or each week somewhere. Idea Research e) There is lottery consideration for all participants when some pay or buy merchandise and others do not. Idea Research (1) No: There was no lottery bc there was no lottery consideration. To have lottery consideration, a person must pay, or agree to pay, something of value for the chance. State v. Hundling **overruled (2) Yes: there was a lottery bc there was consideration when some people palying bingo purchased dinner and others didn’t. State v. Mabey (3) Dissent – No: The cards were free and accepting one from the cashier or picking one up from the courtesy counter is not consideration. Idea Research dissent. J. ILLUSORY PROMISE 1. Was this an illusory promise? a) An illusory promise is when either party reserves an unlimited right to determine the nature and extent of the performance. An illusory promise is too indefinite for legal enforcement CONTRACTS OUTLINE – FINAL PAGE 12  b) “A reservation to either party of an unlimited right to determine the nature and extent of his performance renders his obligation too indefinite for legal enforcement.” Corthell (1) No: In Corthell, the promise was not illusory bc the company was not free to do as it chose. It was bound in good faith to determine and pay the Π the reasonable value of what it accepted from him. (2) Yes: in Walker, the renewal provision was illusory bc it did not specify either an agreed rental or an agreed method by which it could be fixed with certainty X. PROMISSORY ESTOPPEL A. PROMISSORY ESTOPPEL – R2D §90 1. Should promissory estoppel be invoked in place of consideration? “A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires. R2d §90(1) “A charitable subscription or a marriage settlement is binding under Subsection (1) without proof that the promise induced action or forbearance.” R2d §90(2) No: There was no reliance in the example where after the divorce the husband wrote the wife a letter that said that he would see to it that their son gets to college, but before the son’s 18th birthday, the husband terminated child-support payments. No: In Hayes, Π did not rely on the Δ’s promised pension bc he announced his intent to retire well in advance of any promise. Furthermore, Δ’s promise did not induce the Π’s action or forbearance. No: In Pavel, the court did not allow promissory estoppel bc the Π did not have detrimental reliance. Yes: There was reliance in the example where the divorced husband was not the father of the child, but nevertheless promised to assume all of the obligations and responsibilities of fatherhood. Yes: In Drennan v. Star Paving, Justice Traynor used promissory estoppel as consideration for an implied promise to keep the bid open for a reasonable time and then recovery was predicated on traditional bilateral K, with the sub-bid as the offer and the general contractor’s acceptance. B. PROMISSORY ESTOPPEL – 1ST RESTATEMENT 1. Should promissory estoppel be invoked in place of consideration? “A promise which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee and which does induce such action or forbearance is binding if injustice can be avoided only be enforcement of the promise.” First Restatement §90 Yes: In Feinberg, Π’s reliance was her retirement from her lucrative position as a result of Δ’s promise to pay her an annuity or pension. No: In Coley, there was no “action or forbearance of a definite and substantial character” on the part of the Π, Lang. Yes: In Hoffman, promissory estoppel was used bc “injustice would result here if Πs were not granted some relief bc of the failure of Δs to keep their promises which induced Πs to act to their detriment. C. EQUITABLE ESTOPPEL 1. Does Equitable Estoppel apply to this case? “Equitable estoppel is the effect of the voluntary conduct of a party whereby he is absolutely precluded, both at law and in equity, from asserting rights which might, perhaps, have otherwise existed, either of property, of K, or of remedy, as against another person who in good faith relied upon such conduct and has been led thereby to change his position for the worse, and who on his part acquires some corresponding right, either of property, of K, or of remedy.” Ricketts For equitable estoppel there must be an inducing (need misrepresentation) but it does not necessarily go to manifestation of assent. Yes: In Ricketts, Π relied on her grandfather’s promise and although the promise did not have consideration bc it was a gift, equitable estoppel was invoked to act as consideration. (note that this is not the rule, it is the exception) XI. INDEFINITENESS A. Was the K uncertain or indefinite? 1. Terms a) Even if manifestation of intent is intended to be an offer, the terms must be reasonably certain to form a K. The terms are certain if they define a breach and give a remedy for the breach. If one or more terms of a proposed bargain are uncertain, the manifestation of intent may be shown to not be intended as an offer or acceptance. R2d §33 b) “An agreement, in order to be binding, must be sufficiently definite to enable the Court to determine its exact meaning and fix exactly the legal liability of the parties” Corthell c) “Indefiniteness may relate to the time of performance, the price to be paid, work to be done, property to be transferred or other miscellaneous stipulations of the agreement.” Corthell CONTRACTS OUTLINE – FINAL PAGE 13  (1) Yes: price to be paid was the cost plus “a nice profit” Gaines v. Tobacco Co. (2) Yes: “a reasonable amount from the profits” Canet v. Smith (3) Yes: “a sum not exceeding $300 during each and every week” United Press v. New York Press Co. (4) Yes: “a fair share of my profits” Varney v. Ditmars (5) Yes: “a due allowance” In re Vince (6) No: contractor agreed to “make it right with” a laborer who had been injured, if he was not able to resume work at the end of 6 weeks. Court held that “make it right” means “fair compensation.” Brennan v. The Assurance Corp. (7) No: “make it right with them with a certain sum” and “give them a sum of money that would be satisfactory.” “Right” or “Satisfactory” mean what ought to satisfy a reasonable person or what was fair and just as between the parties. Silver v. Graves (8) No: Cardozo in dissent said that if parties manifest, through express words or by reasonable implications, an intent on the one hand to pay and on the other to accept a fair price, a promise to pay a “fair price” is not as a matter of law, too vague for enforcement, and such damages as can be proved may be recovered. Varney v. Ditmars (9) No: reasonable rental under the existing conditions to be determined at the time of renewal. Edwards v. Tobin **Walker court does not like this reasoning (10) No: option for “a rental to be agreed on according to business conditions at that time.” Court held that rental can be determined with reasonable certainty by disinterested parties. Walker court: But, the parties did not agree to leave the matter to disinterested parties. Greene v. Leeper (11) No: In Metro-Goldwyn-Mayer, Inc. v. Scheider, Π sued Δ for breaching K by not appearing in a tv series after being compensated and Δ claimed that it was too indefinite as to the starting date for the series. Court held that this K was common in the entertainment industry and the K was valid. Δ was liable for breach. 2. Price a) At the time of delivery, the price is a reasonable price if there is nothing in the K about the price; the parties are supposed to agree, but fail to do so; or there is a prescribed method of determining price, but it has not yet been done. [this rule is also in Corthell] UCC §2-305(1), b) A price to be fixed by one party must be done so in good faith. UCC §2-305(2) (1) No: In Corthell, K said, “All of the above is to be interpreted in good faith on the basis of what is reasonable and intended and not technically…” c) If it is one party’s fault that a price is not set when it should be set by a way other than agreement of parties, then the other party may cancel the K or set a reasonable price. UCC §2-305(3) d) If the parties intend to be bound only if they agree or fix the price, but don’t, there is no K. If this happens, the buyer must return any goods or pay their reasonable value at the time of delivery and the seller must return any portion of the price paid on account. UCC §2-305(4) (1) You can’t agree to agree. Walker e) “If the terms of the K are uncertain as to price, but exclude the supposition that a reasonable price was intended, no K can arise.” Corthell (1) No: In Corthell, the court held that reasonable recognition meant a reasonable price. 3. Indefinite terms but still enforceable a) Even if one or more terms are left open, a K for sale does not fail for indefiniteness if the parties intended to make a K and there is a reasonably certain basis for giving an appropriate remedy. UCC § 2-204(3) b) “An agreement sufficient to constitute a K for sale may be found even though the moment of its making is undetermined.” UCC § 2-204(2) c) “Indefiniteness, vagueness, and uncertainty in the terms of such a provision will render it void unless the parties, by their subsequent conduct or acts supplement the covenant and thus remove an alleged uncertainty.” Walker v. Keith d) “The terms of an extension or renewal, under an option therefore in a lease, may be left for future determination by a prescribed method, as by future arbitration or appraisal; but merely leaving the terms for future ascertainment, without providing a method for their determination, renders the agreement unenforceable for uncertainty.” Walker v. Keith (1) Yes: In Walker v. Keith, if the parties had determined a method of fixing the price of the rental, there would have been an enforceable K. But, they did not do this. (2) Yes: In Walker v. Keith, “Comparative business conditions” is very broad. It is uncertain about whether it is meant to be local or national conditions. CONTRACTS OUTLINE – FINAL PAGE 14 XII. CONDITIONS A. CONDITION 1. Was this a condition? a) A condition is an event that is not certain to occur. It must occur unless before the time the performance is due, there is an excuse for it not occurring. R2d §224 b) An event can become a condition either by agreement of the parties or by a term supplied by the court. R2d §226 (1) An example is fire insurance: payment is conditional on there being a fire on the property. B. NON-OCCURRENCE OF CONDITION 1. Is performance due even though the condition was not fulfilled? a) When a performance is subject to a condition, it can only become due if the condition occurs or if there is an excuse for it not occurring. R2d § 225(1) b) If the non-occurrence of a condition has not been excused then the duty is discharged when it can no longer occur. R2d § 225(2) c) Non-occurrence of a condition is a breach only if a party is under a duty to make the condition occur. R2d § 225(3) d) An interpretation of an event that makes a condition is preferred to reduce the risk of the obligee’s forfeiture, unless the obligee has control of the event or assumes the risk. R2d § 227(1) (1) Yes: In Jacob & Youngs, Kent is still required to pay the balance on the house bc there was substantial performance even though the pipe was not the Reading pipe, as he specified. e) A court may excuse the non-occurrence of a condition, unless its occurrence was a material part of the agreed exchange, to avoid disproportionate forfeiture. R2d § 229 f) “An omission, both trivial and innocent, will sometimes be atoned for by allowance of the resulting damage, and will not always be the breach of a condition to be followed by a forfeiture.” Jacob & Youngs C. MATERIAL FAILURE 1. Is X excused from the K bc of a material failure to perform a condition? It is a condition of each party’s remaining duties to render performances to be exchanged under an exchange of promises that there be no uncured material failure by the other party to render any such performance due at an earlier time. R2d § 237 To determine whether a failure is material it is important to look at “the extent to which the injured party will be deprived of the benefit which he reasonably expected.” R2d § 241(a) To determine whether a failure is material it is important to look at “the extent to which the injured party can be adequately compensated for the part of that benefit of which he will be deprived.” R2d § 241(b) To determine whether a failure is material it is important to look at “the extent to which the party failing to perform or to offer to perform will suffer forfeiture.” R2d § 241(c) To determine whether a failure is material it is important to look at “the likelihood that the party failing to perform or to offer to perform will cure his failure, taking account of all the circumstances including any reasonable assurances.” R2d § 241(d) To determine whether a failure is material it is important to look at “the extent to which the behavior of the party failing to perform or to offer to perform comports (corresponds) with standards of good faith and fair dealing.” R2d § 241(e) D. DEPENDENT PROMISE 1. Was this a dependent promise? a) For a dependent promise, if one party breaches, then the other doesn’t have to keep the promise or perform. b) Dependent promises are conditions E. INDEPENDENT PROMISE 1. Was this an independent promise? a) For an independent promise, a party is obligated to perform even if the other doesn’t pay. F. SUBSTANTIAL PERFORMANCE 1. Was there substantial performance? a) “When there is much departure from a condition, then the promise will be dependent. But, if the departure from a condition is insignificant, the promise will be independent. In that case, there will have been substantial performance.” Jacob & Youngs b) “Nowhere will change be tolerated, however, if it is so dominant or pervasive as in any real or substantial measure to frustrate the purpose of the K.” Jacob & Youngs c) “the rule that gives a remedy in cases of substantial performance with compensation for defects of trivial or inappreciable importance, has been developed by the courts as an instrument of justice.” Jacob & Youngs CONTRACTS OUTLINE – FINAL PAGE 15  (1) Yes: The cost of replacing would be much greater than the benefits of having the Reading pipe. Jacob & Youngs G. IDIOSYNCRATIC 1. Does it matter that X was idiosyncratic, and therefore not satisfied with condition? a) When it is a condition of an obligor’s duty that he is satisfied with the performance, and it is practicable to determine whether a reasonable person would be satisfied, an interpretation is preferred under which the condition occurs if such a reasonable person in the obligor’s position would be satisfied. R2d §228 (1) Yes: Kent was idiosyncratic bc a reasonable person would not have been so adamant that the pipe is Reading, even though the other brand was of the same quality. XIII. MODIFICATIONS A. PROMISE MODIFYING A DUTY 1. Was the modification binding? “A promise modifying a duty under K not fully performed on either side is binding if the modification is fair and equitable in view of circumstances not anticipated by the parties when the K was made.” R2d §89(a) “A promise modifying a duty under K not fully performed on either side is binding to the extent provided by statute.” R2d §89(b) “A promise modifying a duty under K not fully performed on either side is binding to the extent that justice requires enforcement in view of material change of position in reliance on the promise.” R2d §89(c) “In order to have a valid K modification, especially when that modification may favor a merchant, the modification must be made in demonstrable good faith.” Ralston Purina No: In Alaska Packers’, the modification was not binding bc it was not made in good faith. B. CONSIDERATION 1. Is the modification supported by consideration? “An agreement modifying a K within this Article needs no consideration to be binding.” UCC §2-209(1) No: Under common law, in Alaska Packers’, the modification was not supported by consideration bc it was based solely upon the libelants’ agreement to render the exact services that they were already under contract to render and past consideration is not consideration. C. MODIFICATION/RESCISSION 1. Can the signed agreement be modified or rescinded? “A signed agreement which excludes modification or rescission except by a signed writing cannot be otherwise modified or rescinded, but except as between merchants such a requirement on a form supplied by the merchant must be separately signed by the other party.” UCC §2-209(2) D. STATUTE OF FRAUDS – MODIFICATIONS 1. Does the modification have to satisfy the requirements of the statute of frauds? “The requirements of the statute of frauds section of this Article (§2-201) must be satisfied if the K as modified is within its provisions.” UCC §2-209(3) E. WAIVER 1. Is this a waiver? A waiver is the intentional relinquishment of a known right. “Although an attempt at modification or rescission does not satisfy the requirements of subsection (2) or (3) it can operate as a waiver.” UCC §2-209(4) A party who has made a waiver affecting an executory portion of the K may retract the waiver by reasonable notification received by the other party that strict performance will be required of any term waived, unless the retraction would be unjust in view of a material change of position in reliance on the waiver. UCC §2-209(5) No: In Alaska Packers’, the Δ did not make a waiver because the company did not know of such breach until the expedition returned to San Francisco. XIV. IMPOSSIBILITY A. IMPRACTICABILITY 1. Is X’s duty of performance discharged bc of impossibility? “Where, after a K is made, a party's performance is made impracticable without his fault by the occurrence of an event the non-occurrence of which was a basic assumption on which the K was made, his duty to render that performance is discharged, unless the language or the circumstances indicate the contrary.” R2d §261 “Delay in delivery or non-delivery in whole or in part by a seller who complies with paragraphs (b) and (c) is not a breach of his duty under a contract for sale if performance as agreed has been made impracticable by the occurrence of a contingency the non-occurrence of which was a basic assumption on which the contract was made or by compliance in good faith with any applicable foreign or domestic governmental regulation or order whether or not it later proves to be invalid.” UCC §2-615(a) “Where the causes mentioned in paragraph (a) affect only a part of the seller's capacity to perform, he must allocate production and deliveries among his customers but may at his option include regular customers not CONTRACTS OUTLINE – FINAL PAGE 16  then under contract as well as his own requirements for further manufacture. He may so allocate in any manner which is fair and reasonable.” UCC §2-615(b) “The seller must notify the buyer seasonably that there will be delay or non-delivery and, when allocation is required under paragraph (b), of the estimated quota thus made available for the buyer.” UCC §2-615(c) If a man bind himself, by positive, express K, to do an act in itself possible, he must perform his engagement, unless prevented by the act of God, the law, or the other party to the K. Stees The only ground on which the parties or their executors can be excused from the consequences of the breach of the K is when from the nature of the K there is an implied condition of the continued existence of the life of the contractor, and in the case of the painter and his eyesight.” Taylor No: In Adams v. Nichols, when the house was nearly completed and then destroyed by accidental fire, the contractor was not relieved from the obligation to perform the K. No: In School-Dist v. Dauchy, nonperformance was not excused by the destruction of the building by lightning. No: In Paradine v. Jane, the court implied into the K a promise to pay rent which was not dependent on the lessee’s possession of the house and the Δ was obligated to pay rent even though the house had been invaded by the armies of Prince Rupert. On the other hand, the court also stated that if a house is destroyed by tempest, or by enemies, the lessee is excused. No: If a seller sells specific chattels to a buyer and the chattels perish w/o fault of the seller, then the buyer must still pay for them. Taylor No: In Ralston Purina, Δ did not have the defense of impossibility bc there was no evidence that the K was to sell a crop from a specified land. Yes: In United States v. Spearin, the Δ was excused from performance bc the govt had withheld information from him by giving him incorrect specifications. In addition, the govt was the least-cost avoider. Yes: “Where a K depends upon personal skill, and the act of God renders it impossible, as, for instance, in the case of a painter employed to paint a picture who is struck blind, it may be that the performance might be excused.” Taylor 2. Was __ the basic assumption on which the K was made? “If the existence of a particular person is necessary for the performance of a duty, his death or such incapacity as makes performance impracticable is an event the non-occurrence of which was a basic assumption on which the K was made.” R2d §262 “If the existence of a specific thing is necessary for the performance of a duty, its failure to come into existence, destruction, or such deterioration as makes performance impracticable is an event the non-occurrence of which was a basic assumption on which the K was made.” R2d §263 XV. UNCONSCIONABILITY A. GENERAL UNCONSCIONABILITY 1. Was this K unconscionable and therefore not enforceable? a) According to R2d §208 and UCC §2-302, if a K or term is unconscionable when the K is made, a court may refuse to enforce the K, the court may enforce the remainder of the K w/o the unconscionable term, or the court may limit the application of any unconscionable term as to avoid any unconscionable result. b) “One who refrains from reading a K and in conscious ignorance of its terms voluntarily assents thereto will not be relieved from his bad bargain.” Williams c) The court in Williams said that both procedural and substantive unconscionability are needed to hold a K unconscionable. Other courts have held that only one is necessary. (1) Maybe: In Williams v. Walker, on the second appeal, the court adopted §2-302 of the UCC bc it was just being enacted by Congress. B. PROCEDURAL UNCONSCIONABILITY 1. Was this K procedurally unconscionable and therefore not enforceable? a) Procedural unconscionability describes a defective bargaining process. That is, an unreasonable failure of one party to inform the other party about important aspects of the exchange. (1) Maybe: In Williams, the K might have been unconscionable, depending on the new fact-finding. b) A K or term is procedurally unconscionable if there is an absence of meaningful choice, or a gross inequality of bargaining power. 2. Did a party have little (unequal) bargaining power, making the K procedurally unconscionable? a) “When a party of little bargaining power, and hence little real choice, signs a commercially unreasonable K with little or no knowledge of its terms, it is hardly likely that his consent, or even an objective manifestation of his consent, was ever given to all the terms,” Williams (1) Maybe: The court in Williams suggests that Williams had little bargaining power and she should be excused from the general rule that anyone who signs a K should be treated as if they read and understood it. CONTRACTS OUTLINE – FINAL PAGE 17  C. SUBSTANTIVE UNCONSCIONABILITY 1. Was this K substantively unconscionable and therefore not enforceable? a) Substantive unconscionability refers to the terms of the agreement itself. There is substantive Unconscionability when an unreasonable price or term deprives a party of the essence of his bargain. XVI. STATUTE OF FRAUDS A. WRITING REQUIREMENT 1. Did the K have to