contracts final ol

8/7/2019 Contracts Final OL

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*Applicable Law?

I. UCC: Article 2 ofthe UCC governsthesale ofmovable goods.

*Formation

I. Agreement RequirementQ1: Objectivetest/ mutualassent

A. Objective test of Assent

1)Generally: Mutualassentisrequired forthe formation ofacontract,and, underan objectivetheory ofassent,contractlaw generallyenforcestheapparent,notnecessarilyrealintention ofthe promisor;thecourtmustlookto the outwardexpression ofa personas manifesting hisintentionratherthanto hissecretandunexpressedintentionLucy v. Zehmer. KEY: Whatis keyisthatthe promisoractsinawaywhichwouldleadthe promiseeto reasonably believe heintendedto bebound.

a)Reasonable person: Remember,the objective manifestations ofintentshould be viewed from the vantage pointofareasonable person.

A. Offer / Acceptance

Q2: Did OR makea valid offer?

1)Offer definition: the manifestation ofwillingnessto enterinto a bargain,which justifiesanother personin understanding thathisassentcanconcludethebargain.

2)Validity: Ifrequiredto determineinitiallywhethera valid offerhas been made.

rememberthatthisisaquestion of factanalyzed from the viewpointofareasonable person. ASK:has the party exhibited a willingness to be boundwithout further action on his own part?

i)NOTE: Distinguish from inquiries orexpressions ofinterest,whicharenotoffers becausetheydontindicateawillingnessto beimmediately bound uponassent.

ii)Possiblesituations:

a)Quotations: A pricequotationis usuallyconstruedasaninvitation,itmay beconsideredan offerifitisspecific enough thatthe offereeisreasonablein perceiving itasan offer.

b)Advertisements: Usuallyconsideredinvitations unlesstheyincludesufficientpromissorylanguage;thatis,specific terms (e.g. a promisetosella particularnumber of units).

c)Solicitationsforbids: Usually mereinvitations,withtherespondingbidsconsidered offers.

Q3: Did OE makea validacceptance?


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1)AcceptanceR2d definition: [a]cceptance ofan offerisa manifestation ofassentto thetermsthereof made bythe offereeina mannerinvited orrequired bythe offer.

2)ObjectiveTest: Remember, objectivity. Contractlawaskswhetherareasonablepersonwould believethe OE intendsto acceptthe ORstermsand form acontract,

no whetherthe OE actuallyintendedto do so.

SQ1: Did OR prescribeaspecific method ofacceptance? Did OE satisfythe method?

3)Method ofacceptance: The OR isthemaster of his offer;i.e. hehasthe powerto prescribetheterms ofthe offer,including the method bywhichthe offer may beaccepted. Ifthe OR unambiguouslyprovidesarequired manner ofacceptance(whatareasonable personwould believeacceptancerequires)therecan benocontractunlessitisacceptedinthatmanner.

a)Unilateral/Bilateral: InR2d ORscanrequires OEs to acceptbyrendering a performance or bya promise. Abilateral contractis

accepted bya promise,aunilateral contractisaccepted by performance. b)IFOFFERISAMBIGUOUSASTO METHODOFACCEPTANCE: BothR2d and UCC providesthatOE canacceptbyeither

1)UCCcreatesa presumptionthatanyreasonable manner ormedium ofacceptanceissatisfactory, unlessthe OR unambiguouslyindicates otherwise bythe language orcircumstances. 2-206(1).

e.g. Shipmentofgoods: ifa buyer of foods placesa purchaseorderthatdoesnotstatehowacceptanceisto occur,thesellermayacceptbyeither promising to ship the goods, or byin factshipping the goods. UCC 2-206(1)(b)

ii)AcceptancebySilence: Contractlawtreatssilencelikeany otherresponseto an offer:wouldareasonable person believethe PR intendedto accept? Thismeansthatsilenceis generallynotinterpretedasanacceptance, butitcan be:

a)Reasontounderstand: Silencecanconstituteacceptanceifthe offerorhas giventhe offereereason to understandthatsilencewillconstituteacceptance,andthe offereesubjectivelyintendsto be bound.

b)Benefitofservices: An offereewho silentlyreceivesthe benefitofservices (butnotgoods)will beheldto haveacceptedaK forthem ifhe:(1)hadareasonable opportunityto rejectthem;and(2) knew orshouldhave knownthatthe provider oftheservicesexpectedto becompensated.

c)Priorconduct: Theprior course of dealing may makeitreasonable forthe offereessilenceto beconstruedasconsent.

d)Acceptanceby dominion: Wherethe offereereceivesgoods,andkeeps them, thisexercise of dominionislikelyto beheldto beanacceptance.

SQ2: Didheacceptintime?i.e. didthe offerstillexistwhenheaccepted?


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Makesurethe momentatwhichacceptance occurredwasa momentatwhichtheofferwasstill open.

Mailboxrule: Rememberthatanacceptanceiseffective upon dispatch, provideditiscommunicated bya methodspecifiedinthe offer.

Counteroffer: Rememberthatacounteroffereffectivelyterminates the powertoacceptjustasiftherewasan outrightrejection ofthe offer.

4)Durationofacceptance: Foranacceptanceto be valid,itmustbecomeeffectivewhilethe power ofacceptanceisstillineffect. So wherethereisdoubtaboutwhetheracceptanceistimely:(1) pinpointthe momentatwhichthe acceptancebecameeffective;and(2)askwhetherthe power ofacceptancewasstillineffect(itwasntrevoked)atthatmoment.

5)Offerterminators: R2dsets forthseveral offer-terminators. Whenan offerterminates, OE canno longeracceptthe offer becauseitno longerexists. Importantoffer-terminatorsinclude:

i)Rejection: Rejectionterminatesthe offer. Whenareasonable personwouldbelieve OE doesnotacceptan offer,contractlawtreats OEsdecisionasarejection ofthe offer.

ii)Counter-offer: If OE makesacounter-offer, his powerto accepttheoriginal offeritterminated justasifhehadrejected.

iii)Lapseoftime: Orscan prescribethelength oftimetheir offerswillstayopen;attheend ofthistime period, power ofacceptanceterminates.

a)Nolapseoftimespecified: Ifan OR failsto specifyanamountoftimethe offerwillstay open,thecourtwillsupplya gap-filler ofreasonable

time (howlong wouldareasonable personthinkthe offerwouldstayopen).

-e.g. Conversations: This meansthatan offer madeduring thecourtsofaconversation mayreasonablyterminateattheend ofit.

iv)Revocation: Arevocation occurswhenareasonable personwould believethe offerorhaswithdrawnthe offer. Itiseffective upon receipt; i.e. arevocation becomeseffectivewhenthe OE receivestheinformationthattheofferisno longer open. Thusan offer is revocable at the will of the OR,HOWEVER, THERE ARE EXCEPTIONSBarstorevocation:

a)Optioncontracts: Typically,if OR promisesto keep an offer open fora

specific period,hecanstillrevokethe offerduring thatperiod becausetherewasno consideration forthatpromiseto keep itopen. However,courtswilltypicallyenforceacontractwere OE pays foritto stay open(forthe option).

1)R2d: Substantiatesthe positionthatoptioncontractsdo notrequirerealconsideration. Offersthatareinwriting andsigned bytheofferorareenforceableas optioncontractifthey proposea fair


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exchange withinareasonabletimeand recitea purportedconsideration. Therefore,fake considerationwillsuffice under R2d,you onlyneedto recite it.

2)UCC: 2-205enforces promisesto leave offers openwhen made bya merchant,inwriting,andsigned bythe OR. Thereisno necessary

fakeconsideration, butthereisatime limitoftimestated orthreemonths(whichever first).

NOTE:amerchantunderthe UCC issomeonewho dealsingoodsthatarethesubjectmatter oftheagreement.

b)Beginning performanceofunilateralKoffer: Ina unilateralK,whenOE has begun performance, butnotactually finished(therebyaccepting),the modern veiwisthatthe OR cannotrevoke. i.e. once OE beginstoperform the offerhas becometemporarily irrevocable, aslong as OEcontinuesto diligently perform untilhe finishes.

1)R2

d: Agrees by using optioncontract:ina unilateralcontract, anoptioncontractiscreatedwhenthe offereetenders or beginstheinvited performance ortendersa beginning ofit. 45(1). i.e. once OEbegins performance,itcreatesan optioncontractthatbinds OR.NOTE: OE who has begun performance mustexercisereasonablediligenceto notify OR, unlessthe OR would otherwisereasonablyknow performancehas begun.

c)DetrimentalrelianceinbilateralKoffer (sub-contractorbidproblem): When OR makesa promisethatheshouldreasonablyexpecttoinduceactioninreliance ofthe offer(e.g. a generalcontractmaking a bidbased onasub-contractors bid)the offer may becometemporarily

irrevocableto theextentnecessaryto avoidinjustice.

6)Whenacceptancebecomeseffective:

i. Mailboxrule: In mostcourts,theacceptanceiseffective upon properdispatch. Thisiscalledthemailbox rule.

a)Offer providesotherwise: The mailboxruledoesnotapplyifthe offerprovides otherwise(e.g. This offerwill beacceptedwhenandifyourletter ofacceptanceis personallyreceived by me).

b)Lostintransmission: Iftheacceptanceislostintransmission ordelayed,theapplicability ofthe mailboxruledepend onwhetherthe

communicationwas properlyaddressed.

i)Properlyaddressed: Iftheacceptanceisproperly addressed, itiseffectiveatthetime ofdispatchevenifitislostandnever receivedbythe offeroratall.

ii)No properlyaddressed: Iftheacceptanceisnotproperlyaddressed, ornotproperlydispatched(e.g. sentbyan unreasonableslow means),itwill beeffective upondispatch onlyifitisreceived


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withinthetimeinwhicha properlydispatchedacceptancewouldnormallyhavearrived. Ifitcomeslaterthanthis normaltime,itwillnotbeeffective untilreceipt.

ii. Bothacceptanceand rejectionsentbyofferee: Ifthe offereesendsbothanacceptanceandrejection,theruledepends onwhichisdispatched first.

a)Rejectionsentfirst: Iftherejection issentfirst,thentheacceptancewill beeffectiveif(and onlyif)the offerorreceivesitbeforehereceivestherejection.

b)Acceptance dispatched first: Iftheacceptanceissentbeforetherejection,theacceptanceiseffective upondispatch,andthesubsequently-dispatched rejection(reallya revocation ofacceptance)doesnotundotheacceptance,whetherthatrejectionisreceived bythe offeror before orafterhereceivestheacceptance.

iii. Optioncontracts: Theacceptance ofanoption contractiseffective upon

receiptbythe offeror,not upon dispatch.iv. Riskofmistakeintransmission: Therisk ofmistake in transmission oftheterms ofthe offeris uponthe offeror. Thatis,acontractis formed ontheterms ofthe offeras received by the offeree.

II. Consideration

2Tests: (1)Bargaintheory; (2)Benefit/detrimenttheory.

A. Bargain Theory

1. Generally: To makea promiseenforceable,the PR mustbargain foror requesttheconsiderationsupplied bythe PE in exchange forthe promise.

a)PRs MOTIVEisthekey: Was PRs motiveto obtain something in returnfor his promise?Forthe promiseto beenforceable, PRs motive mustbetoobtaintheconsiderationsupplied by PE inexchange forhis promise.

i)ObjectiveStandard: Motiveconsideredobjectively. Areasonableperson mustbelievethatPRs motive for making the promisewasto

receive PRs considerationinexchange.

ii)Need notbeonlymotive: Itdoesnothaveto bethe only motive,thefactthatthereisanother motiveinadditionto theconsiderationdoesnotcausethe promiseto fail forlack ofconsideration. R2d 81: the factthat

whatis bargained fordoesnotof itselfinducethe making ofa promisedoesnotpreventitfrom being consideration forthe promise

iii)Mustactuallyinduce: If PRs promisedoesnotactuallyinduce PE todeliverconsideration(e.g. PE doesitforanotherreason)the promiseisunenforceable forlack ofconsideration.

b)Whatmustbeextracted: To constituteconsideration,the PR mustbargainforeither:(1)areturn promise; or(2) performance. R2d 71.


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i)Bilateral: PR bargains for PEsreturn promise.

1)Illusory promises: Anillusory promiseis onthatdoesnotconstituteconsideration becausethe PO hasanunrestricted right torenege onhis promise. Ifa promiseisactuallyanillusory promise(i.e.ifthe partyhasreservedtherightnotto perform)then the

agreement is unenforceable for lack of mutuality of obligation.REMEMBER MUTUALITY OF OBLIGATION ONLY APPLIES TOBILATERAL CONTRACTS.

- Onetype: Onetype ofillusory promiseisa promisethatisconditional uponanevent,whicheventissolelywithinthepromisorscontrol.

- *EXCEPTIONImplied promises: Sometimesthestrictlanguageappearsto beanillusory promise butthecourtwillenforceitanyway byshowing animplied promise (i.e. despitethelanguage,the PR reallydidintendto commithimself). [a]

promise may belacking andyetthewholewriting may beinstinctwithan obligation,imperfectlyexpressed. Ifthatisso,thereisacontract. --Cardozo,Lady Duff

Implied promisessituations:

Implied reasonableeffortsinanexclusiverights promise:

When POs promiseisto share profitsinexchange fortheconsideration ofexclusive rights from PE, PO hastechnicallymadeno promise;i.e. hehasnotagreedto do anything, onlythatifhedoes,hewillshare profits. However,thecourtwillinsertthe

implied promise to use reasonable efforts to bring profits intoexistence, becausethewithoutanimplied promise,therecan beno business;i.e. PO and PE wouldnthaveagreediftheydidntassumetheimplied promise, otherwise,theywouldnotbeabletobenefitfrom theagreement.

Implied good faithinsatisfactionclauses

When PO promisesto purchasesomething (e.g. a productsenttohishouse) onlyifheis satisfiedwithit,strictlyspeaking hehasnotmadea promiseatall becausethereisno obligation,hecouldarbitrarilydeclineto besatisfied. However, manycourtsinterpret

satisfactionclausesto requiregood faith onthe partof PO;i.e.POsdecisionaboutthe productmustbereasonableandhonest.

Requirementsand outputcontract

A)Generally: Inarequirements K,the partiesagreethatthesellerwill betheexclusivesource ofallthe buyersrequirementsfora particulartype ofitem fora particulartime. InanoutputK,


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the buyeragreesto takeall ofthesellers outputofa particulartype ofitem.

i)Enforceabletoday: Undertraditionalconsiderationrules,requirementsand outputcontractsweresometimes foundlacking inconsideration. Buttoday,requirementscontractsare

generallyenforced, assuming thatthe buyeris foundto haveimplicitly promised to use his best efforts to generate a needfor the goods.Similarly, outputcontractsare generallyenforced,aslong asthesellerhasimplicitly promisedto attempttomaintainhis productionatareasonablelevel.

ii)UCC approach: TheUCC explicitly validates requirementsand output contract. UCC 2-306 providesthataterm whichmeasuresthequantity bythe outputoftheseller ortherequirements ofthe buyer meanssuchactual outputorrequirementsas may occuringood faith, exceptthatno quantity

unreasonably disproportionate to anystatedestimate orintheabsence ofastatesestimateto anynormal or otherwisecomparable prior outputorrequirements may betendered ordemanded.

ii)Unilateral: PR bargains for PEsperformance. Two types ofperformancecanconstituteconsideration:(1)Acts; or(2)forbearances.R2d 71(3).

1)Forbearancescanincludedesisting from exercising oneslegalrights.

B. Benefit/Detriment Theory

1)Generally: Courtslookto benefitsenjoyed ordetrimentssuffered bytheparties. Here,eithera benefitto the promisor oradetrimentto the promisee,exchanged for,isadequateconsideration.

C. Other Concerns

1)AdequacyofConsideration

i) Courtstheoreticallywillnotweighttheadequacy of consideration (thepeppercorntheory).

ii)NOTE: Anespeciallysevereimbalancedexchange mayserveasared flag

thatone party unfairlytookadvantage ofanotherandtheexchangeshouldnotbeenforced onan unconscionabilitytheory. Butfor purelyconsiderationpurposes,the fairness oftheexchangeisnotconsidered.

2)Pre-existing DutyRule: Ifa partdoes or promisesto do whatheisalreadylegally obligated to do, orifhe forbears or promisesto forbear from something heisnot legally entitled to do hehasnotincurredadetrimentfor purposes ofconsideration.


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i)Modification problem: generally,the pre-existing dutyruleimpliesthatiftwo parties voluntary modifytheirexisting agreementto the benefitof oneparty,thatpromiseisnotenforceable(becausethe partiesarealreadylegallybound bytheearlieragreement). Differentapproaches:

a)Commonlaw: saysthatitisunenforceable. Underthecommonlaw

pre-existing dutyrule,contractmodifications generallyrequireindependentconsiderationto beenforceable.

b)R2d: A promise modifying aduty underacontractnotfully performedoneithersideis binding ifthe modificationis fairandequitablein view ofcircumstancesnot anticipatedbythe partieswhenthecontractwasmade.89(a). Thus, under R2ditisenforceableifitwasfairandifthecircumstancesthatledto itwereunforeseeable.

c)UCC: Abolishes CL pre-existing duty rule. Under 2-209,salescontractscan be modifiedwithoutanadditionalconsideration: [a]nagreementmodifying acontractwithinthisArticleneedsno considerationto be

binding. 2-209. HOWEVER,itimposesatest of good faith:themodificationcannotbeanextortionwithoutanylegitimatereason.

3)Promisefor pastbenefitreceived: A promiseto pay fora benefitthathasalready beenreceivedistraditionally,atthe CL,notenforceable forlack ofconsideration. Harrington v. Taylor. Essentially,thecommonlawrefusestoenforce moral obligations.

i)R2d: A promise madeinrecognition ofa benefitpreviouslyreceived bythepromisor from the promiseeis binding to the extent necessary to preventinjustice.

--P Estoppel4)PromissoryEstoppel: R2d 90. Promiseswhich foreseeablyinducereliance onthe partofthe promisee mightbe unenforceablewithoutconsideration underthedoctrine of promissoryestoppel;in otherwords, PR isstopped from claiming thatthe promisecannotbeenforced forlack ofconsideration. Containsseveralimportantelements: [walkthrough]

i)Promise: First,there mustbea promise. ConsiderhowthecourtwillinterpretPRsstatements,whetheritwill usealiberalstandard ornotinitsinterpretation, orwillthecourtinsistthatthe promise beclearanddefinite.

ii)PRsreasonableexpectations: ThesecondelementisthatPR must

reasonablyexpect[the promise]to induceaction or forbearance.Althoughtherule focuses onwhatPR reasonablyshouldexpect,thecourtmayalsomakeaninquiryinto thereasonableness of PEsreliance.

iii)Inducementofactionorforbearance: Further, the promise mustactuallyinduceaction or forbearance. In otherwords, PE mustactbecause ofthe promise.


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iv)Injustice:90 also statesthata promiseis binding ifinjusticecan beavoided only byenforcementofthe promise. Courtshavealotofdiscretion.somewilltakeitasapolicy concern;e.g. inCohen thecourtenforcedthenewspapers promiseto preserveanonymity because ofthe importance ofhonoring promises ofconfidentiality.

*What are the terms?

Q1: Do theterms ofacceptance vary from the offer? [IfKis forsaleofgoodsdo battleoftheforms;ifnot,discussmirrorimagerule]

I. Mirror-image

No deal: Firstmakesurethatthetwo formsagree onthe basicterms(price,quantity,deliverydate)wellenoughthatthey form a contract. Iftheydontthentheresnoagreementunlessthesubsequentactions ofthe parties(sellerships, buyeraccepts goods)

isenoughto form acontract).A. Mirrorimagerule: Underthecommonlaw,the offereesresponse operatesasanacceptance onlyifitistheprecise mirror image ofthe offer. Iftheresponseconflictsatallwiththeterms ofthe offer, oraddsnewterms,the purportedacceptanceisin factarejection and counter-offer,notanacceptance.

i. Lastshot: NOTE: under CLina typicalsituationwhenthereareconflictingformsand(becauseneitherreadthem)the partyacts(e.g. byaccepting theproduct)thatpartywill beseento haveimplicitlyconsented(throughitsconduct)to the counter-offer. Therefore,the partythatsendsthelastform (typicallytheseller)hadthe lastshotandtheirtermswill betheacceptedterms.

II. Battle of the forms

UCC abrogatescommonlaw mirrorimagerule. Three possibleroutes:

IMPORTANT GENERAL NOTE:2-207applies onlyto additional terms notdifferent terms. Somecourts believethatdifferenttermsknock each other outofthecontract,andthecourtsimply fillsina UCC gap-filler. Thealternativeisthat2-207(2)appliesto bothadditional ordifferentterms

i. Route 1Thereareadditionalterms,no acceptanceexpresslymadeconditional...

1) Theadditionalterms(thosesentlater)areconstruedas proposals foradditionto thecontract. 2-207(2).

2) 2-207(2)(a)-(c) onlyappliesif both partiesare merchants

NOTE: merchantsarethose who dealin goods ofthe kind . . . selling thegood,and buying the goodto usecount2-104(1)

3)If not both merchants: onlythe firstsentence ofsubsection 2 applies,andwehaveto determinewhathappensto proposals foradditionto the


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contract. Onecouldarguethattheadditionaltermsare merelya proposal,notacounter-offer,andthustheydrop outifnotexpressly acceptedbythe otherparty.

4)If both merchants: if both partiesare merchantssubsections(2)(a)-(c)apply. (2)(a) providesthattheadditionalterms(e.g. from sellerin form of

acknowledgement) become partofthecontractunlessthe offer(e.g. frombuyerin form of purchase order) expresslylimitsacceptanceto theterms ofthe offer.

5)If no such language appears: (2)(b)statesthattheadditionaltermbecomes partofthecontractunlessitmateriallyaltersthe offer. [Considerwhethera materialalteration].

6)If it isnt taken to materially alter the offer: Inaddition,(2)(c)saysthattheadditionalterm becomes partofthecontractunless the other party notifies ofan objectionto itwithinareasonabletime.

ii.Route2Acc

eptan

ceisexpresslymade

cond

itional...

1)Subsection1containsthecaveat, unlessacceptanceisexpressly madeconditional onassentto theadditional ordifferentterms. Ifthecourtdeterminesthisto betrue,theadditionalterms makeitacounter-offer. Andifthecourtconstruesthesubsequentactions ofthe other partyto beanacceptance ofthecounter offer,itwillenforceit. [NOTE: Thisisessentiallythecommonlaw outcome].

-NOTE: Courts may behesitantto applyit. Itshouldapply onlyifthesecond partys form makesitclearthatthe partyis unwilling to proceedwiththetransaction unlessthe firstpartyagreesto thesecond partys

changes. iii. Route 3Formshopelesslyconflict

1) 2-207(3)appliesifthecourtinterpretsthe parties formsto hopelesslyconflictthatis,theyconflictto suchadegreethattheycannotbeseentoestablishanintentionto be boundyetthe partiesactasiftheyhaveacontract,suchas bydelivering or paying forthe goods.

2)Doessubsection 3 apply?Onecouldarguethatsubsection3appliesherebecauseeach ofthe formsheavily favoritsdrafter,andindeed mightevencontainadditionalconflicting terms.

3)Ifthecourtthinksitdoesapply,the provisionspecifiesthe governingterms. Specifically,thecontractconsists ofthematching termsinthetwoforms,andto fillremaining gapstermssupplied byUCCgap-fillers.

III. Rolling contracts

A)Generally: Whereconsumers orderand pay for goods beforehaving an opportunityto read mostoftherms,whicharecontained on orinthe packaging. Two possibleanalysis:


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i)2-207 doesntapply: Oneanalysiswould bethat2-207doesnotapply,andthatno contractis formed untilthe buyerhasreceivedthe goodsandhas keptthem forbeyondthe prescribed period. In otherwords,shipping the goodsalong withthereturnrightconstitutedanoffer,andnotexercising thereturnrightconstitutedanacceptance by performance. Therefore,sellerstermsarethecontract. Hill v.

Gateway.ii)Kformed under2-207attimeoforder: Anotheranalysiswould bethat2-207doesapply;i.e. theactof paying forthe productandtheshipping ofitconstitutesand offerandacceptance. Under 2-207(2)theadditionaltermsthatfollowedcontractformationdrop outas proposalsthatbuyerdidnotaccept.

IV. Parol Evidence Rule

Parol Evidence Rule

A)Generally: The parolevidencerulelimitstheextentto whicha party mayestablishthatdiscussions orwritings priorto thesignedwrittencontractshould

betakenas partoftheagreement. Insomecircumstances,therule barsthe fact-finder from considering anyevidence ofcertain preliminaryagreementsthatarenotcontainedinthe finalwriting,eventhoughthisevidence mightshowthatthepreliminaryagreementdidin facttake placeandthatthe partiesintendedittoremain partoftheirdealdespiteitsabsence from thewriting.

B)Definitions:

a)Integration: Adocumentissaidto beanintegration ofthe partiesagreementifitisintendedasthefinal expression oftheagreement.

NOTE: The parolevidenceruleappliesonly to documents which areintegrations, i.e. finalexpressions ofagreement.

b)PartialIntegration: Adocumentthatisisintendedto be final, butisnotintendedto includeall details ofthe partiesagreement.

c)Totalintegration: Adocumentthatisnotonlya finalexpression ofagreement, butthatisalso intendedto includeall details oftheagreement.

C)Statementofrule:

a)Partialintegration: Whenawriting isapartial integration,no evidenceof prior orcontemporaneousagreements ornegotiations may beadmittedifthisevidencewouldcontradictaterm ofthewriting.

b)T

ot

ali

nt

egrati

on: Whenadocumentisatotal integration,no evidence ofprior orcontemporaneousagreements ornegotiations may beadmittedwhichwouldeither contradictoraddto thewriting. o 3. Summary: Putting thetwo sub-partstogether,the parolevidencerule providesthatevidence ofaprioragreementmaynever beadmittedto contradictanintegratedwriting,and may furthermorenotevensupplementanintegrationwhichisintendedtobecomplete.


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c)Summary: Putting thetwo sub-partstogether,the parolevidenceruleprovidesthatevidence ofa prioragreementmaynever beadmittedtocontradict an integrated writing, and may furthermorenotevensupplementanintegrationwhichisintendedto becomplete.

d)Priorwritingsand oralagreements: The parolevidenceruleappliesto

oralagreementsanddiscussionsthatoccur priorto asigning ofanintegration.Italso appliesto writingscreated priorto anintegration. (e.g. draftagreementsthatwerenotintendedto be finalexpressions ofagreement).

e)Contemporaneouswriting: Ifanancillarywriting issignedatthesametimea formaldocumentissigned,theancillarydocumentistreatedas partofthewriting andwillnotbesubjectto the parolevidencerule.

f)Subsequentagreements:the parolevidencerulenever barsconsiderationofsubsequentoralagreements. Thatis,awrittencontractmayalways bemodifiedafteritsexecution, byan oralagreement. Therule onlyappliestoagreements made priorto the finalcontract.

i)No-oral-modificationclauses: However,to avoidadmission ofthistype ofevidence,some partiesinsertno-oral-modificationclausesthatfindstatutorysupportfrom UCC 2-209(2).

ii)Anattempted oral modification ofacontractthatcontainsano-oral-modificationclauseiseffectiveasawaiver onlyifitisreasonablyreliedupon.

D)The UCC version: 2-202essentially followsthecommon-lawrule:

a)Awriting intendedto bea finalexpression ofanagreementmaynotbecontradicted byevidence ofa priorwritten or oralagreementor ofa

contemporaneous oralagreement. UCC 2-202 (1)

b) Thewriting may beexplained orsupplemented bycourse ofdealing orusage oftradeevenifitisacompleteintegration, unlessthecourse ofdealingortrade usageiscarefullycanceled bythecontractsterms. UCC 2-202(2)

c) Thewriting may beexplained orsupplementedyevidence ofconsistentadditionalterms unlessthecourtfindsthewriting to becompleteandexclusive. UCC 2-202(2).

E)RoleofJudgeand Jury

a)Preliminary determinationsmadebyjudge: Nearlyallcourtsholdthat

the judge,notthe jury,decides(1)whetherthewriting wasintendedasanintegration;(2)ifso,whethertheintegrationis partial or total;and(3)whether particularevidencewouldsupplementtheterms ofacompleteintegration.

i)Conflicting views: Courtsdisagreeabouthowthe judgeshould makethesedecisions. Two extreme positionsare:


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- Thefourcornersrule: bywhichthe judgedecideswhetherthereisanintegration,andwhetheritistotal or partial, bylooking solelyatthedocument;and

- The Corbin view, bywhichthesequestionsareto beanswered bylooking atallavailableevidence,including testimony,to determine

theactualintention ofthe parties.

ii)Mergerclause:Mostcontractscontaina mergerclause,i.e. aclausestating thatthewriting constitutesthesoleagreementbetweentheparties. the presence ofsuchaclause makesitmorelikelythatthecourtwill findthewriting to have beenintendedasatotalintegration(inwhichcasenotevenconsistentadditional prior oral orwrittenterms may beshown).

F)Situations WhereParolEvidenceRuleDoesNOTApply:

a)Fraud,mistake,orother voidability: Evenifawriting isatotal

integration,a party mayalwaysintroduceevidence ofearlier oralagreementsto showillegality, fraud,duress, mistake,lack ofconsideration, orany otherfactthatwould makethecontractvoid or voidable. In otherwords,the parolevidencerulenever preventstheintroduction ofevidencethatwouldshowthatno validcontractexists orthatthecontractis voidable.

i)Particular disclaimer:Butifthecontractcontainsa veryspecificstatementthatno representations ofa particularsorthave been made,somecourts preventa partfrom showing thatthedisclaimeris false.

b)Existenceofacondition: Ifthe parties orallyagree ona conditionto theenforceability ofthecontract, orto theduty of one ofthem, butthiscondition

isthennotincludedinthewriting,courts generallyallow proof ofthisconditiondespitethe parolevidencerule.

c)Collateralagreements:An oralagreementthatissupported byseparateconsideration may bedemonstrated,eventhoughitoccurred priorto whatseemsto beatotalintegration.

d)Subsequenttransactions:recallthatthe parolevidencerulenever barsevidencethatafter the signing of the writing,the parties orally orinwritingagreedto modify orrescindthewriting.

**Parol Evidence Chart

NOTE: Usethischartto analyzewhetherevidencecan beintroducedto supplement orcontradictawrittenK. To determinewhetherevidencecan be usedto interpretthemeaning ofthetermscontainedinthewriting go to interpretation.

1) Isthereawrittencontract?Go to 2The parolevidenceruledoesnotapply

2) Istheevidenceinquestioncontainedinaside writing thatwassignedcontemporaneouslywiththe manwrittenK?Go to 3Theevidenceistreatedasifitwerepartofthe mainwrittenK.


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3) Doestheevidenceinquestioninvolveanagreementmadesubsequentto thewrittenK?The parolevidenceruledoesnotapplyGo to 4

NOTE:evidence ofsubsequentagreementsisnever barred bythe parolevidencerule. Thisistrueevenifthesubsequentagreementis oral(butthe oralagreementwontbeallowedinevidenceifthereisa validno-oral-modificationsclauseinthe originalwrittenagreement.

4) Istheevidenceintendedto prove fraud,illegality,duress, mistake,lack ofconsideration,or other facts making K void or voidable?The ParolevidenceruledoesnotapplyGo to 5

NOTE: The parolevidencerulenever preventstheintroduction ofevidenceto provethatno validcontractexists orthatthecontractis voidable.

5) Didthe partiesintendthewrittenKto bethefinal expression of their agreement(i.e.anintegration)?The ParolevidenceruledoesnotapplyGo to 6

6) Istheintegrationtotal?Orisitpartial?Applyappropriaterule:

NOTE: Thejudge notthe jurydecideswhethertheintegrationistotal or partial.TOTALRULE: Evidence of prior oral orwritten(orcontemporaneous oral)agreements ornegotiationsisinadmissibleto either supplementorcontradictthewriting.

PARTIALRULES: (1) Evidence of prior oral orwritten(orcontemporaneous oral)agreements ornegotiationsthatcontradictanyterm inthewriting isinadmissible;(2)however,evidence of prior oral orwritten(orcontemporaneous oral)termsthatmerelysupplement(dontcontradict)the partialintegrationisadmissible.

*Enforceable?

I. Statute of Frauds

A)Generally: Underthestatute of fraudscertainagreements mustbeinwriting to beenforceable. Walkthrough:

SQ1: DoestheStatuteofFraudsapply?i.e. doesitfallinto one ofthethreecategories?

i)Threemaincategories: (1)contracts forthesale ofland, oranyinterestinland;(2)contractsthatcannotbe performedwithin oneyear from thetime ofcontractformation;and(3)contracts forthesale of goods(UCC contracts).

1)Saleofland: Contracts forthesale ofland mustbeinwritings. Dontforgetthatcontracts for anyinterestin orconcerninglandalso mustbeinwriting

to beenforceable(evenleasing anapartmentmustbeinwriting).

2)Oneyear: Thiscategoryrequiresawriting onlywhenthe promisecannotbe performedinayear;i.e. ithasto beimpossiblethatthecontractcan be fullyperformedwithinayear.

3)Saleofgoods: 2-201 ofthe UCC requiresawriting whenthesale of goodsisforthe price of $500 or more.


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SQ2: Doesthewriting satisfythestatuteoffrauds?

ii)Whatsatisfies: Thestatute of fraudsdoesnotrequirea formalwrittencontract,justsomething inwriting thatprocessthecontractsexistence. In orderto satisfythis,thewriting mustreasonablyidentifythesubjectmatter ofthecontract,andincludewithreasonablecertaintytheessentialterms ofthe unperformed

promisesinthecontract. R2d131. Likewise, UCC 2-201 providesthataninformalwriting satisfiesthestate of frauds,itrequires only somewriting sufficienttoindicatethatacontractforsalehas been made betweenthe parties . . .

iii)Whomustsign?Thewriting mustbesignedbythe partyagainstwhomenforcementissought. . . UCC 2-201(1) [also typical ofcommonlaw].

1)Internet: Courtswill generallyinterpretclick or electronicsignaturestosatisfythesigning requirement.

SQ3:Doesanexceptionapply?

iv)2-201(3)(c): Partial performance: Acontractthatdoesnotsatisfythestatute

of fraudsisstillenforceable withrespectto goods forwhich paymenthas beenmadeandaccepted orwhichhave beenreceived oraccepted . . .i.e. ifa goodhasbeen paid for ordelivered,thereisno writing requirementwith respect to thatgood.

v)2-201(2):Appliesto contracts between merchants. Whentwo merchants makean oralcontractand one ofthem sendswrittenconfirmationthatissufficienttosatisfythestatute of fraudsagainstthesender,andtherecipienthasreasontoknowitscontents,thewriting is goodagainsttherecipient, eventhoughhedidnotsignit. Therecipienthasan opportunityto rejecttheconfirmationwithin10 days,ifhedoesnot,thenthestatute of fraudsstillapplies.

vi)2-201(3)(a):Speciallymanufactured goods: awriting isnotrequiredwhengoodsareto bespecially manufacturedso thattheyaresuitableonly for thebuyer,andthesellerhasstarted producingthe goods orhascommittedto obtainthem incircumstancesthatreasonablyindicatethatthe goodsare forthe buyer.

vii)2-201(3)(b): Admission: Ifa partyadmitsacontractin his pleading,testimony or otherwiseincourt,thestatute of fraudsdefense fallsaway. And,itisenoughifthe promisoradmits factssufficientto showthatthe parties madeacontract.

-Limitation: Itapplies onlywithrespectto thequantity of goods beingadmitted

SQ4: Dontforget,a partycanstill getacontractthatdoesnotsatisfythestatute offraudsenforced for promissoryestoppel.

II. Definiteness

Whenanalyzing anagreementforindefiniteness,look forthefour essential elements:(1) partiesto acontract;(2)subjectmatter;(3)time for performance;(3) price.


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KEY: The morecomfortableacourtis filling inan openterm,thelesslikelythecontractwill fail forindefiniteness. Ifthereisastrong industrystandard(suchaswith mostgoodscontracts)thecourtis morelikelyto fillin.

UCC Test: Underthe UCC theagreementisnotvoidifitexpressesanintention by bothpartiesto be boundandthereisareasonably certain basis for giving an appropriateremedy.

Missing terms: Besureto fillinany omittedterms. Mostfactpatternswill presentasituationwheretheessentialtermsarespecified,so thenthecourt(i.e. you) maysupplyareasonableterm.

-Realestatetransactions: Thesame generalrulesapply,eveninanon-UCC context.REMEMBER priceisanessentialterm inarealitycontractanditsabsence violatestheStatute of Frauds.

-Pastperformance: Watch forasituationwherethe partieshavealready beenconducting business underanagreementthatone partyisnowclaiming is void

becauseitis indefinite. The partiespast performance mayshowthatthereis mutualagreementregarding thesupposedlyindefiniteterm.

OpenTerm: DontworryiftheKindicatesthataterm will bespecified by one oftheparties(oragreed on by both)inthe future:theKwillstill beenforceableifthereisareasonableway foracourtto fillthe gap andto determinedamages.

A. Generally: No contractwill be foundiftheterms ofthe partiesagreementareundulyindefinite.. The offer mustbeso definiteasto its materialtermsthattheperformancesto berendered byeach partyarereasonably certain.

a)Courtsuppliesmissing term: indefinitenessasto aterm isnotnecessarily

fatal. Ifthecourtbelievesthatthe partiesintendedto contract,andthecourtbelievesthatitcansupplyareasonable value forthe missing term,itwillgenerallydo so.

i. UCC: The UCC expresslyallowsthecourtto fillinterms for price, placefordelivery,time forshipment,time for payment,etc.,aslong asthepartieshaveintendedto makeacontract. 2-204(3). The UCC also impliesaterm requiredgood faith ineverycontractforthesale of goods. 1-203.

ii. Non UCC: Innon-UCC cases, mostmoderncourts followthis supplythemissing term onareasonable basisapproach,aslong asthe partieshaveshownanintentto createa binding contract.

iii. Tooindefinite: Butthere may besituationswhereeventhoughthepartiesintendedto createa binding contract,theyhave fleshed outtheterms oftheirdealso littlethatthecourtsimplycannotmeaningfullysupplyall ofthe missing terms. Inthatcase,thecourtwill findtheagreementvoid for indefiniteness.

Cardozos policyarguments:


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Intentargument: Iftermsinacontractareindefiniteenoughto renderituncertainandthus void,the partiesneverintended to contractthecouldwouldhaveto exertitswill overthecontractto suchadegreethatitisnotthatactualintentofthe parties. [Cardozo]Sun Printing v. Remington

BUT: Intentiontobebound: you canalways maketheargumentthattheindefinitenessdoctrineshouldnotapply because both partiesexpressedtheirintentionto be bound. Thus,applying theindefinitenessdoctrineisinconflictwiththe partiesintentions.

Regulationargument: Partiescouldeasilyhavewrittena bettercontractbuttheydidnt;thus,refusing to changeitforthem encourages bettercontractwriting inthe future. [Cardozo]Sun printing v. Remington

b)Implied obligationofgood faith: In both UCC andnon-UCC contract,animportanttype ofterm thecourtwillsupplyisan obligation ofgood faith andfair dealing. Forexample. UCC 1-304,whichsaysthateverycontractorduty

withinthisActimposesan obligation of good faithinits performance orenforcement.

i)Consistencywithother partysexpectations: Animportantaspectofthisduty of good faithisthata partyisrequiredto behaveina waythatisconsistentwiththe other partysreasonable expectations abouthowthecontractwillwork.

c)Agreementtoagree: Theclassicexample ofacontractthatwill fail forindefiniteness.However,thecourtwill generallysupplya missing term ifpartiesintentionallyleavethatterm to beagreed upon later, andtheythendontagreeifthereisareasonableterm to fillin. UCC 2-305(1)(b)allowsthe

courtto supplyareasonableprice term if the priceisleftto beagreed bythepartiesandthey failto agree . . .

Remember: InSun Printingthecourtwastroubled bythe factthatthecontractlackedboth a priceterm andaduration of priceterm. Ifithad justlacka priceterm,itmayhave beenenforceable.

d)Partperformance: Evenifanagreementistoo indefinite forenforcementatthetimeitis made,thesubsequent performance ofthe parties maycurethisindefiniteness.

Remark: R2d 206:to theextentthatlanguageisambiguous,itshould be

construedagainstitsdrafter.

III. Impracticability

A)Modern view: Moderncourts generallyequateextreme impracticabilitywithimpossibility. In otherwords,ifdueto changescircumstance, performancewouldbeinfeasible from acommercial viewpoint,the promise may beexcused justashewould beif performancewereimpossible.


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a)UCC: 2-615(a) providesthatthesellersnon-deliveryisexcuse ifperformanceasagreedhas been madeimpracticable bythe occurrence ofacontingencythenon-occurrence ofwhichwasa basicassumption onwhichthecontractwas made . . . Completecutoffs ofsupplieswill often be foundto becovered by2-615,thusrelieving theseller.

b)Costincreases: Mostimpracticabilitycasesrelateto extreme costincreases suffered bysellerwho havesignedfixed price contracts. Herewileitistheoretically possible fortheseller of foods orservicesto escapetheK onthe grounds ofimpracticability,sellers generallylose. Thereasonisthatsuchsellersare generally foundto haveimplicitlyassumed the riskofcostincreases,whentheysigneda fixed-priceK. Thisistrue bothinservicesKsandinsalesKs governed bythe UCC. Itisespeciallylikelythatthesellerwilllosewherethecostincreasewasforeseeable.

c)Allocationofriskby parties: In both UCC andnon-UCC cases,the partiesarealways freeto make their own allocation of the risk of impracticability,

andthecourtswillenforce thatallocation.i)Implicitallocation: Thistype ofre-allocation bythe parties oftheriskofimpracticabilitycan beeitherexplicitorimplicit. Thus,the UCCcommentaryto 2-615saysthattheimpracticabilitydefense doesnotapplywhenthecontingencyinquestionissufficiently foreshadowedatthetime ofcontracting to beincluded among the business risks whichare fairly to be regarded as part of the dickered terms, eitherconsciously orasa matter ofreasonable, commercial interpretationfrom the circumstances.

IV. Unconscionability

A)Adhesion Contracts: Adhesion contractisanimpreciseterm usedto describeadocumentcontaining non-bargainedclausesthatarein fine print,complicated,and/orexceptionally favorableto thedrafter. Generally,adhesioncontractsarefoundinsituationswherethenon-drafterhasvery little bargaining power,becauseall potential parties onthe othersidehavesimilartermsthatthey offer onanon-negotiable takeitorleaveit basis.

a)Stepsforavoiding contract: Alitigantwho wantto avoidenforcementofacontractualterm onthe groundsthatitis partofanadhesioncontracthastomaketwo showings:

i) ThattheKitselfisanadhesion contract;and

ii) ThattheK(ortheclausecomplained of)isunconscionable.

B)Unconscionability: IfacourtfindsthataK orclauseisso unfairasto beunconscionable,thecourtmaydeclineto enforcetheK orclause. UCC 2-302.

a)No definition: Thereisno accepteddefinition of unconscionability. Theissueiswhethertheclauseisso one-sided,so unfair,thatacourtshouldasamatter of judicial policyrefuseto enforceit.


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b)Consumers: Courtshave veryrarelyallowedbusiness people to claimunconscionability; onlyconsumers are generallysuccessfulwithanunconscionabilitydefense.

c)Varieties: Clausescan bedividedinto two categories for unconscionabilityanalysis:(1)procedural unconscionability;and(2)substantive

unconscionability.

i)Procedural: occurswhere one partisinducedto entertheKwithouthaving anymeaningful choice. Possibletypesinclude:

- Burdensomeclausestuckedawayinthe fine-printboilerplate.

- High-pressuresalespeople who misleadthe uneducatedconsumer.

- Industrieswith few players,all ofwhom offerthesame unfairadhesioncontractsto defeatbargaining.

ii)Substantive: occurswheretheclause orKitself(ratherthantheprocess usedto arriveattheK)is unduly unfairand one-sided.

- Excessive price: Animportantexample ofsubstantiveunconscionabilityiswherethesellerchargesanexcessive price.Usually,anexcessive priceclause onlycomesaboutwhenthereisalsosomesortof procedural unconscionability,since otherwisetheconsumerwill usuallysimply findacheapersupplier.

- Remedy-meddling: Also,aterm bay besubstantively unfair becauseitunfairlylimitsthe buyersremedies for breach bytheseller. Typesofremedy-meddling thatmightbe foundto be unconscionableinaparticularcaseinclude:

+ Disclaimer orlimitation ofwarrantyespecially prohibitingconsequentialdamages for personalinjury.

+ Limiting theremedyto repair orreplacement,wherethiswouldbea valuelessremedy.

+ Unfairly broadrights ofrepossession bytheseller oncredit.

+ waiver ofdefenses bythe buyerasagainstthesellersassignee.

+ Across-collateralization clause bywhichasecuredsellerwhohassold multipleitemsto a buyer oncredithastherighttorepossessallitems untilthelastpenny oftotaldebtis paid.

Williams v. Walker-Thomas Furniture Co

-Remediesforunconscionability: Thingsthecourtmightdo toremedyaclause orcontractwhichitfindsto be unconscionableinclude:

+ Refusaltoenforceclause: Mostlikelythecourtwillsimplystrike the offending clause, butenforcetherestoftheK.


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+ Reformation: Alternatively,thecourtmayreform theoffending clause(e.g. by modifying anexcessive priceto makeitareasonable price).

+ RefusaltoenforcewholeK: Very occasionally,thecourtmaysimplyrefuseto enforcetheentire contract,denying P any

recoveryatall.

*Conditions/ Breach

A)Expressconditions precedent: Whenthe partiesexpresslyagreethatadutyisconditional uponthehappening ofsomeevent. Expresscondition precedenttoperformance.

i) Isthereanexpresscondition precedentto performance?

a) Courtslookatthelanguage oftheallegedexpresscondition onits face.

b) Courts mayalso consider usage oftrade,course ofdealing,andcourse of

performanceindetermining whethercontractlanguagecreatesandexpresscondition.

e.g. Ifin pastcourse ofdealing the partiestreatedsomelanguageasacondition precedentto performance.

ii) Cantheexpresscondition beavoided?Possibleways:

a)Impossibility: Ifacondition becomesimpossibleto satisfythecourtmightnotenforceit.

b)Waiver: Awaiverisanintentionalrelinquishmentofa knownright;andthewaiving partycando so expresslyor byconduct. Awaivereffectivelydefeats

anexpresscondition.NOTE: Enforceablewaiversdo not need:

- To beinwriting

- To besupported byconsideration

- To berelied upon

BUT:Acourtis very unlikelyto findanenforceablewaiver ofamaterial term.

iii)Also arguethat,ifitdoesexpresslyrequireperfect performance, perfectperformance could beanimpliedcondition,andthe partycouldtherebyhavesubstantially performed [below].

B)Implied conditions: When partieshave notdraftedexpressconditions,considerorder of performance,andquality of performanceissuesseparately.

i. Orderofperformance: Whenanagreementcontainsno expresslanguageastowho isto perform first. Courts mustusethetools ofinterpretationand gap filling


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to determinetheimplied orconstructiveconditionsinthecontractthatdictatetheorder of performance.

1) Courtswilllookto thecontract,and other factorsto seeif order ofperformanceisimplied.

2)ifnotimplied,courtswill usuallyrequiredthe partywhose performancewilltakelongerto go first, oritmay pushconcurrentperformances.

ii. Qualityofperformance

1)Substantial performances: Jacob & Youngs stands forthe propositionthat,intheabsence ofanexpress promissorycondition precedentrequiringperfectperformance,contractlaw usuallydoesnotrequirea perfectperformance beforethe other party mustperform. Rather, onlysubstantialperformance isneededto triggerthe other partysduty.

NOTE: Cardozo takewillfulness into account.

2)Materialbreach: A material breach occurswhena party failstosubstantially perform,i.e. the breaching partyhas failedto satisfyanimpliedcondition precedentto the other partysdutyto perform. R2d 241 factors fordetermining material breach:

(a) Theextentto whichtheinjured partywill bedeprived ofthe benefitwhichhereasonablyexpected;

(b)theextentto whichtheinjured partycan beadequatelycompensatedforthe partofthatbenefitofwhichhewill bedeprived;

(c)theextentto whichthe party failing to perform orto offerto performwillsuffer forfeiture;

(d)thelikelihoodthatthe party failing to perform orto offerto performwillcurehis failure,taking accountofallthecircumstancesincluding anyreasonablyassurances;

(e)theextentto whichthe behavior ofthe party failing to perform ortoofferto perform comportswithstandards ofgood faith and fair dealing.

ESSENTIALLY:Ask(1)whethertheaggrieved partywill getsubstantiallywhathe bargained forin making thecontract[(a)-(b)],andwhatthebreaching partysreasons for breachwereandwillhappento thebreaching partyifthecourtfindsa material breach [(c)-(e)].

3)Materialbreachincontractsforthesaleofgoods: The UCC imposesspecialrules governing whatconstitutessubstantial performance byaseller ofgoods(andthuswhena buyercanrejectthe goods).

A)Perfecttenderrule: UCC 2-601 UCCsanswerto Clssubstantialperformancedoctrine. Saysthataslong astheKdoesnotInvolveinstallments(i.e. multipledeliveries), unless otherwiseagreed . . . ifthegoods ortender ofdelivery failin any respectto conform to thecontract,the buyer may(a)rejectthewhole; or(b)acceptthewhole; or(c)accept


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anycommercial unitor unitsandrejecttherest. Oneits fact,thissectionseemsto imposetheperfect tenderrulethatis,itseemsto givethebuyertherightto cancelthecontract,andrefuseto pay,ifthe gooddeviate from thecontracttermsinanyrespect,no matterhowslight.

a)Notsostrict: Butinreality,thereareloopholesinthis perfect

tenderrule. Courtusually onlyallow buyersto rejectthesellersdeliveryifthedefectisasubstantial one. Also,the buyer mustfollowstrictprocedures forrejecting thedelivery,andtheseller generallyhastherightto curethedefect.

B)Mechanicsofrejection: The buyer mayrejectanynon-conformingdelivery from theseller. Asnoted,intheorythisrightexistsifthe goodsdeviatein any respectfrom whatisrequired underthecontract. butthebuyersrightofrejectionissubjectto some fairlystrictproceduralrules:

a)Time: Rejection mustoccurwithinareasonable time afterthegoodsaredelivered. The buyer mustgiveprompt notice to theseller

thatbuyerisrejecting. UCC 2-602(1).

b)Mustnotbe preceded byacceptance: The buyercan onlyrejectifhehasnotpreviously acceptedthe goods. Hewill bedeemedto haveacceptedthem ifeither:(1)afterareasonable opportunityto inspect,buyerhasindicatedto thesellerthatthe goodsareconforming orthathewill keep them despitenon-conformity; or(2) buyer failsto makeatimelyrejection(thoughthiscannothappen until buyerhashadareasonableinspection opportunity); or(3) buyerdoes anyactinconsistentwiththesellers ownership(e.g. using the goodsas partofa manufacturing process). UCC 2-606(1).

C)Revocationofacceptance: Evenifthe buyerhasacceptedthe goods,ifhethendiscoversadefecthe may beableto revoke thisacceptance. Ifherevokes,theresultisthesameasifhehadneveracceptedhecanthrowthe goods back onthesellerandrefuseto pay.

a)Revocation vs.Rejection: The buyerwho wantsto revokeanacceptance mustmakeastronger showing of non-conformitythanthe buyerwho rejectstherevoker mustshowthatthenon-conformitysubstantially impairs the value ofthe goods,whereastherejecter mustmerelyshowthatthe goods failto conform inanyrespect.

D)Cure: Boththe buyersrightto rejectandhisrightto revokeanacceptancearesubjectto thesellersrightto cure thenon-conformity.UCC 2-508(1).

E)Installmentcontract: Thecodeis morelenientto sellers underinstallmentKs(i.e. Kscalling forseveraldeliveries)thaninsingledeliveryKs. Inthecase ofaninstallmentK,:the buyer mayrejectanyinstallmentwhichisnon-conforming ifthenon-conformitysubstantially impairs the


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value ofthatinstallmentandcannot be cured. UCC 2-612(2). So aslightnon-conformityin oneinstallmentdoesnotallowthe buyerto rejectit,ashecouldina single-deliveryK.

a)Cancellationofwhole: The buyerhastherightto canceltheentireinstallment Kifthedefectis graveenough:cancellation ofthewhole

Kisallowedifthedefectiveinstallmentsubstantiallyimpairsthevalue ofthewholeK. 2-612(3).

*Remedies

I. EquitableRemedies

A. Twotypes: Sometimesthecourtwillawardequitable remedies instead oftheusualremedy of moneydamages. Therearetwo types ofequitablereliefrelevantto contractcases:(1)Specific performance; and(2)injunctions.

a)Specific performance: Adecree forspecific performance orderthepromisorto render the promised performance.

b)Injunction: Aninjunction directa partyto refrain from doing a particularact. Especiallycommonincaseswherethe D issued byhis formeremployerandchargedwith breachanemploymentcontractbyworking fro acompetitor.

B. Limitations: Therearethreeimportantlimits onwillingness ofthecourttoissueadecree ofspecific performance:

a) *Inadequacyofdamages: Equitablerelief for breach ofcontractwill notbe granted unlessdamages are not adequate to protecttheinjured party.Two reasonswhydamages mightnotbeadequateinacontractcaseare:

(i) becausetheinjurycannotbeestimatedwithsufficientcertainty; or

(ii) because moneycannotpurchaseasubstitute forthecontracted-forperformance.

b)Definiteness: Thecourtwillnotgiveequitablerelief unlesstheKstermsaredefinite enough to enablethecourtto frameanadequate order.

c)Difficultyofenforcement: Finally,thecourtwillnotgrantequitablereliefwheretherearelikelyto besignificantdifficultiesinenforcing andsupervising the order.

C. Land salesKs: The mostcommonsituation forspecific performanceiswhere D

breachesaK underwhichheisto conveya particularpiece of landto the P.

D. Saleofgoods: Specific performancewillsometimes be grantedinKsinvolvingthesale of goods. Thisisespeciallylikelyinthecase ofoutputandrequirementsKs,wheretheitem isnotinreadysupply.

II. VariousDamagemeasures:


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A. Threetypes: Therearethreedistinctkinds ofinterests onthe partofadisappointedcontracting partywhich may be protected bycourts:

a)Expectation: Inmostbreach ofcontractcases, P willseeks,andreceive,protection forhisexpectation interest. Here,thecourtattemptsto put P inthe position he would have been in had the K been performed.

b)Reliance: Sometimes P receives protection forhisreliance interest. Herethecourtputs P in as good a position as he was in before the K was made.To do this,thecourtusuallyawards P hisout-of pocketcostsincurredintheperformancehehasalreadyrendered(including preparationto perform).Whenrelianceis protected, P doesnotrecoverany partofthe profitshewouldhave mad ontheKhaditbeencompleted.

i)Whenused: Therelianceinterestis used mainly:(1)whenitisimpossibleto measure Psexpectationinterestaccurately(i.e. whenprofits from anew businesswhich P wouldhave beenableto operatecannotbecomputedaccurately);and(2)when P recovers ona

promissory estoppeltheory.

c)Restitution: Sometimesthecourts protectPsrestitution interest. Thatis,thecourtforces D to pay P anamountequalto thebenefit which D hasreceivedfrom Ps performance. Restitutionisdesignedto preventunjustenrichment.

i)Whenused: Mostcommonly usedwhere:(1)anon-breaching P haspartly performed,andtherestitution measureis greaterthanthecontractprice. and(2)a breaching P hasnotsubstantially performed, butisallowedto recoverthe benefitofwhathehasconferred on D.

B.E

xpectation

Damages:

a)Defined: Expectationdamagesarethe usual measure ofdamages for breachofcontract. Thecourttriesto put the P in the position he would have been inhad the K been performed by D. P shouldend up withasum equalto theprofithewouldhave madehadtheK beencompleted.

b)Formula: Psexpectationdamagesareequalto the value of Ds promisedperformance(generallythecontract price), minuswhatever benefits P hasreceived from not having to complete his own performance.

i)Overhead: Pscostofcompletion(theamounthehassaved bynothaving to finish)doesnotincludeany partofhisoverhead.

ii)Costofcompletionor decreasein value: Where D hasdefectivelyperformed, P normallycanrecoverthecost of remedying D;sdefectiveperformance. Butifthecostofremedying defectsisclearlydisproportionate to theloss in market value from thedefectiveperformance, P will onlyrecoverthelossin marketvalue.

iii)Reasonablecertainty: P may onlyrecover forlosseswhichheestablisheswithreasonable certainty. Mainly,this meansthata P who


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claimsthathewouldhavemade profits hadthe D notbreached mustshownotonlythattherewouldhave been profits, butalso thelikelyamountofthose profits.

- Profitsfroma newbusiness: Courtsareespeciallyreluctanttoawardlostprofits from anew business, thatis,a businesswhichat

thetime of breachwasnotyetinactual operation.

- Costofcompletionunknown: Also,thereasonablecertaintyrequirementmay failto be metwhere P cannotshowaccuratelyenoughwhathiscost of completion wouldhave been.

C. RelianceDamages

a)Generally: Reliance damagesaredamagedneededto putP inthepositionhe would have been in had the K never been made. Therefore,thesedamages usuallyequaltheamountP hasspentin performing orin preparingto perform. Theyare usedwitherwherethereisaK butexpectationdamages

cannotbeaccuratelycalculated, orwherethereisno K butsomereliefisjustifiable. The mainsituationwherereliancedamagesareawardedare:

i)Profittoospeculative: Whereexpectationdamagescannotbecomputed because Pslost profits aretoo speculative or uncertain.

ii)Vendeeinland contract: Where P isavendee underaland contract,and D failsto convey. Somestatesdo notallowexpectationdamagesinthissituation,so P canrecoverhisreliancedamages.

ii)Promissoryestoppel: Where P successfully bringsanaction based onpromissory estoppel. Here,thesuitis usuallynottruly onhecontract, butisratherinquasi-contract. Thecourtistrying to reduceinjustice,so it

gives P ahalf-way measure,lessthanexpectationdamages, butbetterthannothing.

b)Limitsonamountofreliancerecovery: Psreliancedamagesaresometimeslimitedto asum smallerthantheactualexpenditures:

i)Contractpriceaslimit: Where Ds only obligation undertheKisto payasum of money(thecontractprice),reliancedamageswillalmostalwaysbelimited to this contract price.

ii)Recoverylimited to profits: Also, mostcourtsdo notallowreliancedamagesto exceed expectation damages. However,the D hasto beartheburden of proving whatPs profitorlosswouldhave been.

-Subtractamountofloss: Anotherwayto expressthisideaisthattherewill besubtractedfrom Psrecoverytheamountofthelosswhich D shows P wouldhavesufferedhadtheK been performed.

- Expenditures priortosigning: P willnotnormally be permittedtorecoverasreliancedamagesexpenditures madebefore the K was


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signed, sincetheseexpenditureswerenotmade inreliance onthecontract.

c)CosttoP,notvaluetoD: Wherereliancedamagesareawarded,theyareusuallycalculatedaccording to thecost to the Pofhis performance,notthevalueto the D.

D)Restitution

a)Generally: Psrestitutioninterestisdefinedasthevalue to the D of the Psperformance. Restitutions goalisto prevent unjust enrichment.

i)Whenused: The main uses oftherestitution measureare:

- Non-breaching P who has partly performed beforethe other partybreached may bring suitontheK,andnotbelimited bytheK price(ashewould fortheexpectationandreliance measures);and

- A breaching P who hasnotsubstantially performed may bring aquasi-Ksuitandrecoverthe valuethathehasconferred uponthe D.

ii)Marketvalue: Restitutionis based onthevalue rendered to Dregardless ofhow muchtheconferring ofthatvaluecoststhe P andregardless ofhow much P wasinjured by Ds breach. This valueis usuallythesum which D wouldhave to pay to acquire P;s performance,notthesubjective valueto D.

b)Notlimited totheKprice: The main use oftherestitution measureisthat,in mostcourts,it is not limited by the K price. Iftheworkdone by P priortoDs breachhasalreadyenriched D inanamountgreaterthantheK price,thisentireenrichmentmay berecovered by P. This makesrestitutionsometimesveryattractive,comparedwith bothrelianceandexpectation measures.

i)NotavailablewerePhasfully performed: Ifatthetime of Ds breach,P hasfully performedtheK(and D only owes money,notsome other kindof performance) mostcourtsdo not allow P to recover restitutiondamages.

III. Foreseeability

A)Generalrule: Therule ofHadley v. Baxendalelimitsthedamageswhichcourtswillaward for breach ofK. Therulesaysthatthecourtswillnotawardconsequentialdamages for breach unlessthedamages fallinto one oftwo classes:

a)Arisenaturally: Thedamageswereforeseeable byanyreasonably personregardless ofwhetherthe D actually foresawthem; or

b)Remoteorunusualconsequences: Thedamageswereremote orunusual, butonlyifthe D hadactual notice ofthe possibility oftheseconsequences.

Essentially: The millercanrecoverlostprofits onlyifthecarrier,atthetime ofcontracting,shouldhavereasonably foreseenthatitsdelaywouldcausesuchlosses.


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B)UCC rule: UCC hascodifiedtheHadleyrule. In 2-715(2)(a) .

IV. Obligation to mitigate

A)GeneralRule: Where P might have avoideda particularitem ofdamage byreasonableeffort,hemay not recoverforthatitem ifhe failsto makesuchan

effort(sometimescalledtheduty to mitigate rule).ex. P agreesto workasanemployee of D fora 2 years. P iswrongfullyfired. P probablycantrecover forthe full 2 years oflostprofitwithoutmaking areasonableeffortto getanother job. Ifhedoesnot,thecourtmaysubtractfrom hisrecoverytheamountwhichitbelieves P couldhaveearnedatanalternative job withreasonableeffort.

a)Reasonableness: Thedutyto mitigate onlyrequiresthe P to makereasonable efforts to mitigatedamages. Forinstance, P doesnothaveto incursubstantialexpense orinconvenience,damagehisreputation, or breakanyotherKs,in orderto mitigate.

B)SalesKs: Whatthe UCC saysaboutanaggrieved buyer orsellers obligationtomitigate:

a)Buyer: Ifthesellereither failsto deliver, ordeliversdefective foodswhichthe buyerrejects,thebuyermustcoverforthe goodsifhecanreasonablydosohe maynotrecover forthosedamages(i.e. lostprofits)whichcouldhavebeen preventedhadhecovered. UCC 2-715(2)(a).

NOTE: If buyerdoesnotcoverwhenhecouldhavedoneso,hewillstill beentitledto thedifference betweenthe marketpriceatthetime ofthebreachandthecontractprice, buthelllosttheabilityto collectconsequentialdamagesthathe mightotherwisehave gotten.

- Defining consequential damages to include onlythoselosseswhichcouldnotreasonably be prevented bycover or otherwise . . .

b)Seller: Thesellerhas muchless ofadutyto mitigate,whenitisthe buyerwho breaches bywrongfullyrejecting the foods orrepudiating beforedelivery.Thesellercanchoose betweenreselling the foods(andcollecting thedifference betweentheresale priceandcontractprice), ornotreselling them(anrecovering thedifference between marketpriceand unpaidcontractprice);seller mayalso beableto recoverlostprofits.

c)Summary: So in UCC cases,itisreally onlythe buyerwho hasa practicaldutyto mitigate.

C)Lossesincurred inavoiding damages: Iftheaggrieved partytriesto mitigatehisdamages,andincurslosses orexpenses indoing so,he mayrecoverdamagesfortheselosses orexpenses. Aslong as P actedreasonablyintrying to mitigate,itdoesnotmatterwhetherhisattemptwassuccessful.


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V. Damages in sales contracts

A)Where goodsnotaccepted: Ifthe buyerhasnot acceptedthe goods(eitherbecausetheywerentdelivered, orweredelivereddefective, or becausethe buyerrepudiated),the UCC giveswell-definedrightto theinjured party:

a)Buyersrights: Iftheseller failsto deliveratall, ordeliversdefective foodswhichthe buyerrightfullyrejects,the buyerhasachoice ofremedies:

i)Cover: The mostimportantishisrightto cover, i.e. to buythe goodsfrom anotherseller,andto recoverthedifference between the K priceand the cover price from theseller. 2-712(2). The buyers purchase ofsubstitute foods mustbereasonable, and mustbe made in good faithandwithout unreasonable delay.2-712(1).

ii)Contract/marketdifferential: Ifthe buyerdoesnotcover,hecaninsteadrecoverthecontract/market differential,i.e. thedifferencebetweenthecontractpriceandthe marketprice atthetimewhenthe

buyerlearned ofthe breach . . . 2-713(1).-Timeofbreach: Typically,the buyer learns ofthe breachatthetimethe breachin factoccurs(eitherthroughnon-delivery orthroughreceiptofdefective goods. Butifthe breachtakesthe form ofarepudiation inadvance ofthetime for performance, mostcourtshouldthatthe marketpriceisto be measuredas ofthetimethebuyerlearns oftherepudiation.

-Buyercontractstoresellatfixed margin: Noticethatthecontract/marketdifferential maynotcorrectlycompensatethe buyerwherethe marketisrising andthe buyeralready made a fixed-price

or fixed-margin contract to resellthe goods. Ifthe market-priceincreasetimesquantityis greaterthanthe profitmargin onthebuyersresaleK, giving the buyerthecontract/marketdifferentialwillputthe buyerinabetter position thenhewouldhave beeninhadtheK been fulfilled.

+ Minority viewlimitsbuyertolostprofits: Therefore,a fewcourtslimit the buyer to the lost profits the buyer would havemade undertheresaleagreement.

+ Majority view doesntlimitbuyer: Butmostcourtsholdthatthe buyerisentitled to the full contract/market differential

even where this would put him in a better position thanhadthecontractbeen fulfilled, becauselimiting damagesto the buyerslostprofitswouldincentivizethesellerto breach.

iii)Consequentialand incidental damages: the buyer,regardless ofwhetherhecovers, mayrecover forincidentalandconsequentialdamages.


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- Consequential: Consequentialdamagesincludetheprofits whichthe buyercouldhave made byreselling thecontracted-for goodshadthey beendelivered. Butrememberthatthese profits mustbe provedwithappropriatecertainty,and mustbeshownto have beenreasonably foreseeableatthetime ofthecontract.

- Incidental: Incidentaldamagesincludesuchitemsastransportationexpenses,storageexpenses,and othersmall butdirectexpensesassociatedwiththe breachand buyersattemptsto cover forit.

iv)Rejection: All oftheaboveare judicialremedies. Butthe buyerwhoreceivesnon-conforming goodscanalso exercisetheself-help remedy ofrejecting the goods. The buyerthusthrowsthe goods back onthesellerandcancelstheK.

b)Sellers damagesforbreach: Whereitisa buyerwho breaches, bywrongfullyrefusing to acceptthe goods(or byrepudiating theK beforetheshipmentiseven made),thesellerhasseveral possibleremedies:

i)Contract/resale differential: Normally,thesellerwillresell the goodsto athird party. Assuming thattheresaleis madein god faithandinacommerciallyreasonable manner,theseller mayrecoverthedifferencebetweentheresale price andthecontract price,togetherwithincidentaldamages.

ii)Contract/marketdifferential: Ifthesellerdoesnotresellthe goods,he mayrecover from the breaching buyerthedifference betweenthemarket price atthetimeand place fordelivery,andtheunpaid contractprice, togetherwithincidentaldamages. 2-708(1).

iii)Lost

profits: Thecontract/resaledifferentialandthecontract/marketdifferential maynotmakethesellerwhole. Wherethisisthecase2-708(2)

letsthesellerrecoverhislost profits instead of using either ofthesedifferentials.

iv)Incidental damages: Asellerwho pursuesandachieves one oftheaboveremedies, mayalso recoverincidental damages. Theseincludesuchitemsastransportationcharges,storagecharges,and otherchargesrelating to thesellersattemptto dealwiththe goodsafterthe buyersbreach. 2-710.

v)Consequential damages: Nearlyallcourtsholdthattheseller maynot

recoverconsequential damages. Thisisa biddifference from how buyersaretreated.

B)Accepted goods: Ifthe buyerhasacceptedthe goods,thentheremedies givento buyerandselleraredifferent:

a)Selleractionfor price: Ifthe buyeracceptedthe goods,theseller mayrecoverthefull contract price.


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b)Buyersclaim: IFthe buyerhasacceptedthe goods,andtheyturn outto bedefective, buyersremedyisto sue for breach ofK.

a. Breachofwarranty: Mostimportantly, buyer maysue forbreach ofwarranty. These may beeitherexpresswarranties orwarrantiesimpliedbythe UCC. The measure ofdamages for breach ofwarrantyis the

differenceatthetimeand place ofacceptance betweenthe value ofthegoodsacceptedandthe valuetheywouldhavehadiftheyhad beenaswarranted, unlessspecialcircumstancesshow proximatedamages ofadifferentamount.2-714(2).

b.Non-warranty damages: Buyer mayalso beableto recover fornon-warrantydamages. Forinstance,damagesresulting from sellersdelayinshipping the goods, orhis breach ofanexpress promiseto repairdefective goods, may berecovered ontop of orinstead of breach-of-warrantydamages.

--Select Provisions--

UCC 2-207

AdditionalTermsinAcceptanceor Confirmation

(1)Adefiniteandseasonableexpression ofacceptance orawrittenconfirmationwhichissentwithinareasonabletime operatesasanacceptanceeventhoughitstatestermsadditionalto ordifferentfrom those offered oragreed upon, unlessacceptanceisexpressly madeconditional onassentto theadditional ordifferentterms.

(2) Theadditionaltermsareto beconstruesas proposals foradditionto thecontract.Between merchantssuchterms become partofthecontractunless:

(a)the offerexpresslylimitsacceptanceto theterms ofthe offer; (b)they materiallyalterit; or

(c)notification of objectionto them hasalready been given oris givenwithinareasonabletimeafternotice ofthem isreceived.

(3) Conductby both partieswhichrecognizestheexistence ofacontractissufficienttoestablishacontractforsalealthoughthewritings ofthe partiesdo nototherwiseestablishacontract. Insuchcasetheterms ofthe particularcontractconsistofthoseterms onwhichthewritings ofthe partiesagree,togetherwithanysupplementarytermsincorporated underany other provisions ofthisact.

R2d 90(1) PromiseReasonablyInducing Definiteand SubstantialAction

A promisewhichthe promisorshouldreasonablyexpectto induceaction orforbearance onthe partofthe promisee orathird personandwhichdoesinducesuchaction or forbearanceis binding ifinjusticecan beavoided only beenforcementofthepromise. Theremedy granted for breach may belimitedas justicerequires.


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-----NOTES-----

1) Inthese battle of forms problems,

i)considerwhich form,telephonecall,email,etc. constitutesanoffer/acceptance/confirmationinthe formationsection

ii) Considerifitsatisfiesthestatute of frauds

iii) Considerhowthetermsdiffer,whereareadditionalterms,wherearedifferentterms.

iv) Considerwhat the termsarewith battle of formsanalysis. i.e.

Uni -> revoke

2) Inaunilateral contract(atcommonlaw)when OE beginsto perform (orappearsto),and PE revokes; one oftwo situationswillarise:

i)OEstarted toactually perform: UnderR2d 45, once OE underan offer fora

unilateralKcommencesactual performance,the offer givesriseto an optioncontract;i.e. itbecomestemporarily irrevocable forthetimeneeded for OE to fully perform.Therefore,OE is entitled to full recovery.

ii)OEactionsaremere preparationsto perform: (e.g. buying materialsnecessarytoperform). UnderR2d 87(2),an offerwhichthe offerorshouldreasonablyexpecttoinduceaction . . . ofsubstantialcharacter onthe partofthe offeree beforeacceptanceandwhichdoesinducesuchaction . . . isbinding as an option contract to the extentnecessary to avoid injustice.Therefore,OE is entitled only to the amount necessaryto avoid injustice (e.g. the price ofthe materials).

Firm-offer

3) InaUCC contractwhen OE promisesto leavean offer open foraspecified period oftime,can OE revoke beforethattime?

No. Atcommonlawtherewould beno contract, because OE gaveno consideration forthe promise ofirrevocabilityatcommonlaw, offerarerevocableeveniftheysayotherwise, unlessseparateconsiderationhas been given foran option. ButUCCprovides forfirm offers; underUCC 2-205, a merchantwill beheldto have madeanirrevocable offereventhoughno considerationis given by OEifthe merchantmakesthe offerinwriting andwithexplicitassurancesthatthe offerwillremain openforaspecified period oftime. Therefore, OE hasno abilityto revoke.

NOTE: Mustbe made bymerchant

NOTE: Thereisa3-month time limit

Mailbox

- Acceptanceiseffective upondispatch.

- Revocationdoesnotbecomeeffective untilitisreceived


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Crim:B+ Safe(possibleA)

Contracts:B+ Safe(possibleA)

Civpro:B orB- (Could beanything,no wayhigherthanB)

Torts:

contracts final ol

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