OFFER: Obj. Manifestation of Assent

R2d

§ 1: K Defined A promise or a set of promises, that the law gives remedy for when breached or that the

law recognizes as a duty.

§ 2: Promise; Promisor; Promisee; Beneficiary (1) Promise = Manifestation of intention to do something or not do something (2) Promisor = person making the promise (3) Promisee = the person to whom the promise is made (4) Beneficiary = person other than the promisee that the promise will benefit

§ 3: Agreement Defined; Bargain Defined Agreement = Manifestation of mutual assent by two or more people. Bargain = an

agreement to exchange promises, to exchange performances, or to exchange a promise for a performance

§ 4: How a Promise May be Made Can be made orally, in writing, or by inference from conduct of the parties.

§ 17: Requirement of a Bargain (1) K = mutual manifestation of an exchange + consideration (2) Whether or not there is a bargain, a K can be formed under special rules applicable to

formal K or under § 82 - § 94

§ 18: Manifestation of Mutual Assent Requires that each party either make a promise or begin performance

§ 19: Conduct as Manifestation of Assent (1) Manifestation of Assent = made by a writing or spoken word, or by doing or not

doing something (2) Conduct is not enough unless there is intent behind the conduct or has reason to know

the other party will understand his conduct as assent. (3) Conduct can be assent even though he doesn’t consent. In that case, you might be able

to make it void by showing fraud, duress, mistake or other causes.

OFFER: Advertisements and Preliminary Negotiations/Written Memorandum Contemplated

R2d

§ 22: Mode of Assent: Offer and Acceptance (1) Offer Acceptance = Manifestation of Mutual Assent

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(2) There can be a manifestation of mutual assent even though you don’t know when it happened and you can’t find the offer or acceptance.

§ 24: Offer Defined Offer = manifestation of willingness to enter into a bargain asking the other party for

acceptance.

§ 25: Option Ks Option K = is a K that the offeror’s power to revoke is limited

§ 26: Preliminary Negotiations Manifestation of willingness to enter into a bargain is not an offer if the other party

knows that it’s not the final/complete offer.

§ 27: Existence of K where Written Memorial is Contemplated Just b/c parties intend to memorialize the K in writing doesn’t mean there isn’t a K if the

initial manifestations of assent are enough to make a K. But the context can show that the agreements were preliminary.

§ 29: To Whom an Offer is Addressed (1) The person who the offeror addresses the offer to is given the power of acceptance (2) The power of acceptance can be given to one person or many, or in anyone who

renders the specified promise or performance.

§ 33: Certainty (1) You can’t make a K by accepting an offer unless the terms are reasonably certain. (2) Reasonably Certain = if there is a way to determine breach and the appropriate

remedy. (3) If one or more of the terms are left open or uncertain, that might be because it wasn’t

supposed to be an offer.

ACCEPTANCE: Manifesting Assent

R2d

§ 30: Form of Acceptance Invited (1) An offer an ask for or require that the acceptance be made orally, by doing

something, by not doing something, or might give the offeree options for acceptance.

(2) If the mode of acceptance is not specified, acceptance can be made by any reasonable method.

§ 32: Invitation of Promise or Performance If you’re not sure, the offer invites acceptance either by a promise to perform or

by rendering the performance as the offeree chooses.

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§ 35: The Offeree’s Power of Acceptance (1) The offer gives the power to the offeree to accept. (2) If the power of acceptance has been terminated (see § 36 below) the offeree

cannot accept.

§ 36: Methods of Termination of the Power of Acceptance (1) Power of Acceptance can be terminated by

o rejection OR counter-offer (COUNTER OFFERS KILL) ORo Lapse of time ORo revocation by the offeror ORo death OR incapacity of the offeror or offeree

(2) The power of acceptance can also be terminated if a required condition of acceptance doesn’t happen

§ 37: Termination of Power of Acceptance Under Option K Despite §§ 38 – 49, power of acceptance under an Option K is not terminated by

rejection OR Counter-offer OR revocation OR by death OR incapacity of the offeror unless the requirements are met for the discharge of a Kual duty.

§ 50: Acceptance of Offer Defined; Acceptance by Performance; Acceptance by Promise

(1) Acceptance = agreeing to the terms laid out by the offeror in way that the offeror asked for or required

(2) Acceptance by performance = at least part of what the offer requests is performance + acceptance by performance, which becomes a return promise.

(3) Acceptance by promise = the offeree completes every act essential to the making of the promise.

§ 69: Acceptance by Silence or Exercise of Dominion (1) Silence can be acceptance if:

o (a) takes the benefits of the offered services when he had a chance to reject and knew that compensation was expected.

o (b) the offeror tells the offeree that silence can be acceptance and the offeree intends to accept by silence.

o (c) because of previous dealings, the offeree should have known to notify the offeror if he didn’t want to accept.

(2) If the offeree does anything inconsistent with the offeror’s ownership of the property, the offeree is bound by the terms of the offer, unless they are unreasonable. But if the act is wrongful against the offeror it is an acceptance only if ratified by him.

UCC

§ 2-102: Scope; Certain Security and Other Transactions Excluded from This Article Article 2 of the UCC applies to sale of goods

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§ 2-103: Def and Index of Defs (a) Buyer = person who buys or K to buy goods (b) Good faith = honesty and reasonable stnds of fair dealing (c) Receipt = taking physical possession of goods (d) Seller = person who sells or K to sell goods

§ 2-104: Def: “Merchant”: “Between Merchants”; “Financing Agency”. (1) Merchant = person who sells/buys a type of goods, is known by his job to be a person

who has the expertise in a particular good, or someone who hires a third party who has expertise in a particular good.

§ 2-105: Def: Transferabiltiy; “Goods”; “Future Goods”; “Lot”; “Commercial Unit”. (1) Goods = movable. Not real estate. (2) You have to know that it’s there what it is. (3) Can sell part interest in a good (5) Lot = parcel or one item which part of a separate sale or delivery, whether or not it is

sufficient to perform the K. (6) Commercial Unit = a unit of goods as by commercial usage

§ 2-204: Formation in General (1) If both parties to a K show that there is a K by conduct that is enough. (Trumped by §

2-206[1]) (2) You don’t need to know exactly when a K was formed. (3) A K doesn’t have to be complete to be enforced as long as the parties intended to

form a K.

§ 2-206: Offer and Acceptance in Formation of K (1) Unless otherwise stated

o (a) the offer can be accepted by any reasonable meanso (b)

(2) if the offer can be accepted by beginning performance and the offeror is not notified w/in a reasonable time that performance has begun, the offeror can treat it as non-acceptance.

** Beard v. KRUSA purchase order with space to sign- “this order subject to acceptance by dealer” with space to sign

- the form UNAMBIGUOUSLY indicated the only form of acceptance being to sign and return the form

- never signed never accepted**

MODES OF ACCEPTANCE: Revocation by Offeror & Option Ks

R2d

§ 25: Option Ks

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Option K = is a K that the offeror’s power to revoke is limited

§ 37: Termination of Power of Acceptance Under Option K Despite §§ 38 – 49, power of acceptance under an Option K is not terminated by

rejection OR Counter-offer OR revocation OR by death OR incapacity of the offeror unless the requirements are met for the discharge of a Kual duty.

§ 39: Counter-offers (1) Counter-offer = an offer by the offeree to the offeror (of the original offer)

proposing a diff. bargain. (2) The Counter-offer kills the offeree’s power of acceptance, unless the original

offeror states that despite the counter-offer the offer is still open OR the offeree says something contrary to the counter-offer

§ 45: Option K Created by Part Performance or Tender (1) Where an offer invites an offeree to acceptance by performance and does not

invite a promissory acceptance, an option K is created when the offeree tenders or begins the performance or tenders a beginning of it

(2) The offeror’s duty is conditional on completion or tender of the invited performance by the offeree.

§ 54: Acceptance by Performance; Necessity of Notification to Offeror (1) Unless the offer requests notification of performance, performance is enough

to make acceptance effective. (2) If the offeree has reason to know that the offeror might have a hard time

finding out that he performed, the offeror’s duty is discharged unless:o (a) the offeree diligently tries to notify the offeror of the acceptance ORo (b) the offeror learns of the performance w/in a reasonable time ORo (c) the offer says notification of acceptance not required.

§ 62: Effective of Performance by Offeree Where the Offer Invites Either Performance or Promise.

(1) Where an offer gives the offeree a choice between a promise or performance, starting performance is acceptance.

(2) which becomes a promise to complete performance.

§ 87: Option K (1) An offer is binding as an Option K if

o (a) in writing signed by the offeror, lists a consideration for the making of the offer, and proposes an exchange on fair terms w/in a reasonable time OR

o (b) it is made irrevocable by statute (2) An offer which the offeror can expect will induce offeree to do something or

not to do something, and the offeree actually does or doesn’t do something is binding as an option K to the extent necessary to avoid injustice.

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UCC

§ 2-205: Firm Offers If an offer is to be held open, and is signed in writing is not revocable for lack of

consideration for a reasonable time, if there is no specific limit, but for no more than 3 months. If the offeree brings that form, the offeror (must be a merchant) must sign it.

**OPTION K = additional promise to hold the offer open + consideration (payment) for that option

FIRM offer RULE (covered under the UCC) = sale of goods + merchant promising in writing not to revoke the offer

a. Firm offer only applies for sale of goods v. Option K always applies

b. Firm offer only applies if the promise was put in writing v. Option K doesn’t require a writing

c. Firm Offer doesn’t require any payment v. Option K requires some payment for promise not to revoke

(1) Offeror reasonably expects reliance(2) the reliance is to be of substantial character(3) reliance occurs(4) The offer is now a FIRM Offer

UCC § 2-205 allows for an option of option K w/o consideration. -offeror must be a merchant, the oferee need not be a merchant. -cannot be revoked even for want of consideration. **

TERMINATION BY REJECTION: The Mirror Image Rule

R2d

§ 36: Methods of Termination of the Power of Acceptance (1) Power of Acceptance can be terminated by

o rejection OR counter-offer (COUNTER OFFERS KILL) ORo Lapse of time ORo revocation by the offeror ORo death OR incapacity of the offeror or offeree

(2) The power of acceptance can also be terminated if a required condition of acceptance doesn’t happen

§ 38: Rejection (1) When the offeree rejects the offer, his pwr of acceptance is gone, unless the

offeror says otherwise (2) An offeree’s intent not to accept an offer is a rejection unless the offeree states

that wants to think about the offer.

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§ 63: Time When Acceptance Takes Effect Unless the offer says otherwise,

o (a) acceptance is effective as soon as it leaves the possession of the offeree, even if the offeror doesn’t get it BUT

o (b) for an option K, the offeror has to receive the acceptance.

§ 64: Acceptance by Telephone or Teletype Ks made over any sort of instantaneous two-way communication are treated as if

the parties in the same room as each other.

§ 65: Reasonableness of Medium of Acceptance Unless otherwise indicated, a medium of acceptance is reasonable if the offeror

uses it, or customary in similar transactions at the time and place the offer is received.

§ 66: Acceptance Must be Properly Dispatched If an acceptance by mail isn’t properly addressed, and precautions to ensure safe

transmission are not taken, the acceptance is not effective upon dispatch.

UCC

§ 2-207: Additional Terms in Acceptance or Confirmation/Battle of the Forms (1) Even though an acceptance adds additional OR diff terms, unless acceptance of the

offer is conditional on those new terms, it’s still an acceptance. (2) The additional terms are usually proposed terms. B/w merchants those additional

terms automatically become part of the K unless:o (a) the offer is clear that the terms of the offer cannot be changedo (b) they materially change the offer ORo (c) they are objected to w/in a reasonable time

(3) Even though the writings don’t match up but the party’s actions show there is a K, there is a K. In that case, the terms that match up make up the K along w/ any supplementary terms incorporated under Article 2.

** Analysis of “Different” v. “Additional” under UCC §2-207

(1) Just a drafting mistake; “Different” = “Additional” (1)(2)(2)(b)(2) “Diff” terms in a document cannot be part of K. (1)(2)(3) “Diff” terms fall out and terms agreed to stay in, and you look to Article 2 for “gap-fillers”

UCC: § 2-207(1) If there IS proviso language, then NO K on the writings subsection (3)(1) If there is NO proviso language, then there is a K on the writings, both are bound

subsection (2)

Under UCC §2-207(1), there is no K, if there is no agreement over the dickered terms.**

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EFFECT OF ACCEPTANCE: Electronic Acceptance

UCC

See § 2-206 above.

§ 2-602: Manner and Effect of Rightful Rejection (1) Rejection must be made w/in a reasonable time after the goods are delivered and the

seller must be notified (2) According to § 2-603 and § 2-604

o (a) Once the buyer has rejected, trying to own the goods is wrongful against the seller AND

o (b) if the buyer has the goods, then rejects them, (under § 2-711[3]) he is under a duty to protect the goods until the seller can come claim them

o (c) once the goods are rejected, the buyer has no other duties (3) § 2-703 governs the sellers rights to goods that have been wrongfully rejected.

§ 2-606: What Constitutes Acceptance of Goods (1) Acceptance is when the buyer

o (a) after being able to inspect tells the seller that the goods are conforming OR that he will take OR keep them even though they don’t conform OR

o (b) doesn’t make a rejection (§ 2-602[2]), after having inspected ORo (c) does anything inconsistent w/ the sellers ownership; but if such act is wrongful

against the seller it is an acceptance only if ratified by him (2) If any part of a commercial unit is accepted, the entire unit is accepted.

** ProCD v. Zeidenberg - shrinkwrap licenses- this sale conditioned on buyer’s assent to terms located inside - pop up on screen – must accept following terms or return this program- Zeidenberg accepted by using the program AFTER he had a reasonable opportunity

to reject Zeidenberg inspected package, tried software, learned of license, and DID NOT REJECT

UNUSUAL BECAUSE HERE THE SELLER WAS THE OFFEROR**

CONSIDERATION

R2d

§ 17: Requirement of a Bargain (1) K = mutual manifestation of an exchange + consideration (2) Whether or not there is a bargain, a K can be formed under special rules applicable to

formal K or under § 82 - § 94

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§ 71: Requirement of Exchange; Types of Exchange (1) Consideration = a bargained for promise or performance (2) A bargained for exchange is bargained for. (3) A performance can be:

o (a) something other than a promise ORo (b) Giving something up ORo (c) Making, changing or ending a legal relation

(4) the bargained for exchange can be given to the promisor or to a third party, the bargained for exchange can be given by the promisee or a third party

§ 74: Settlement of Claims (1) Giving up a claim, or defense which proves to be invalid is NOT consideration unless

o (a) the claim or defense is doubtful because of the uncertainty in the facts or the law OR

o (b) the party giving up the claim or defense believes the claim or defense may be fairly determined to be valid.

(2) The writing of a writing giving up 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 his not asserting the claim or defense and believes that no valid claim or defense exists.

§ 79: Adequacy of Consideration; Mutuality of Obligation If there is consideration, there is no additional requirement for

o (a) a gain, advantage, or benefit to the promisor or a loss, disadvantage or detriment to the promisee OR

o (b) equivalance in the values exchanged ORo (c) “mutuality of obligation.”

§ 81: Consideration as Motive or Inducing Cause (1) Just because something that’s bargained for doesn’t induce the promise, doesn’t mean

it’s not consideration for the promise (2) Just because a promise doesn’t induce performance, OR return promise does not

prevent the performance OR return promise from being consideration for the promise.

ILLUSORY PROMISES

R2d

§ 77: Illusory and Alternative Promises A promise or apparent promise is not consideration if the promisor reserves a choice of

alternative performances UNLESSo (a) each of the alternative performances would have been consideration if it alone

had been bargained foro one of the alternatives would have been consideration and it looks like the there’s

a good chance that before the promisor picks one his choices, the one alternative that would not be consideration is no longer a choice.

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UCC

§ 2-306: Output, Requirements and Exclusive Dealings (1) A term that measures the output or requirements of a seller or buyer are measured in

good faith. Except, you can’t give or ask for an unreasonable amount (output or requirement) compared to what’s stated and if no amount is stated it can’t be more than any normal or comparable amount.

(2) If parties have an agreement for an exclusive dealing, both parties are under an obligation to use their best efforts to supply the goods and to promote the sale of the goods respectively.

** COMMENTS:- A shut down for lack of orders may be permissible- a shut down for loss of profits might not be

o ISSUE OF WHETHER DONE IN GOOD FAITH - Sudden expansion, maybe not- normal expansion, maybe

o factor whether market price suddenly increases and contract has fixed price

Eastern Airlines v. Gulf Oil D claiming contract invalid for indefiniteness and lack of mutuality of obligation Court says VALID CONTRACT

- each had relied on each other to act in good faith - contract had stated a formula to determine requirements and price**

§ 2-309: Absence of Specific Time Provisions; Notice of Termination (3) The other party must be given reasonable notification of termination of a K, unless an

event that both parties occurred is cause for termination occurs. A clause which removes the need for notification is invalid if its operation would be unconscionable.

PAST CONSIDERATION & MORAL OBLIGATION

R2d

§ 82: Promise to Pay Indebtedness; Effect on the Statute of Limitations (1) A promise to pay all or part of an old debt is binding if the debt is still enforceable or

would be except for the statute of limitations (2) The following (a), (b) and (c) are a promise unless the facts indicate otherwise:

o (a) letting the obligee know that there is an unpaid debto (b) voluntary transfer of $ or anything else from the obligor to the obligee made

as interest on or part payment of OR collateral for the old debt. o (c) when the obligor tells the obligee that he won’t use the statute of limitations as

a defense.

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§ 86: Promise for Benefit Received (1) A promise made in recognition of a previously received benefit is binding to the

extent necessary to prevent injustice (2) A Promise in NOT binding under (1)

o (a) if the promisee gave the benefit as a gift or for other reasons the promisor has not been unjustly enriched OR

o (b) to the extent that its value is disproportionate to the benefit.

PRE-EXISTING DUTY & MODIFICATION

R2d

§ 89: Modification of Executory K A promise changing a duty under a K not fully performed on either side is binding

o (a) if the change is fair and equitable under the circumstances not expected when the K was made OR

o (b) to the extent provided by the statute ORo (c) to the extent that justice requires enforcement in view of material change of

position

UCC

§ 2-209: Modification, Rescission and Waiver (1) An agreement for the sale of goods modifying a K does not need consideration to be

binding. (2) If there is a signed writing that doesn’t allow modification OR rescission except by a

signed writing, it cannot be changed or taken back in any other way. But if it’s between merchants and the form w/ that provision is provided by the merchant, the other party must sign too.

(3) If the changes to the K are made, and it’s w/in the provisions of the Statute of Frauds (§ 2-201), § 2-201 must be satisfied.

(4) If an attempt to change or revoke the offer doesn’t satisfy (2) OR (3), it can become a waiver.

(5) If the waiver affects an executory portion of the K, the waiver may be retracted by notifying 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.

PROMISSORY & RESTITUTIONARY ESTOPPEL

R2d

§ 90: Promise Reasonably Inducing Action or Forbearance (1) A promise that can be expected to induce the promisee to do something or not do

something and the promisee does or does not do that thing, makes the promise binding if injustice can be avoided only by enforcement of the promise.

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(2) A charitable subscription or a marriage settlement is binding under (1) w/o proof that the promise induced action or forbearance.

STATUTE OF FRAUDS

R2d

§ 110: Classes of K Covered (1) (a)(b)(c)(d)(e) are covered under the statute of frauds, there must be a writing or an

applicable exceptiono (a) a K b/w a decedent and his executoro (b) a K to answer for the duty of anothero (c) a K made upon consideration of marriageo (d) a K for the sale of an interest in lando (e) a K for something longer than a year

(5) The requirements will differ from state to state

§ 131: General Requisites of a Memorandum Unless there are other statutory requirements, the Statute of Frauds is enforceable if it

there is any writing signed by or on behalf of the party charged, whicho (a) identifies the subject matter of the Ko (b) indicates there is a K b/w the parties or that there is an offer to K ANDo (c) states w/ reasonable certainty the essential terms of the unperformed promises

in the K

§ 139: Enforcement by Virtue of Action in Reliance (1) A promise w/ the promisor should expect will induce and does induce certain

actions/inactions of the promisee or a third party is enforceable despite the Statute of Frauds if enforcement is the only way to avoid injustice.

(2) Things to consider when determining whether injustice can be avoided only by enforcement of the promise are:

o (a) other remedy options, particularly cancelation and restitutiono (b) the definite and substantial character of the induced action/inaction in relation

to the remedy soughto (c) the extent to which the action or forbearance corroborates evidence of the

making and terms of the promise, or the making and terms are otherwise established by clear and convincing evidence.

o (d) the reasonableness of the action or forbearanceo (e) how foreseeable the action or forbearance was by the promisor.

UCC

§ 2-201: Formal Requirements; Statute of Frauds (1) Any K for the sale of goods over $500 requires a writing and must be signed by the

defendant. It’s OK if the writing doesn’t have all the terms or incorrectly states the terms agreed upon. But enforcement is limited to what is in the writings.

(2) B/w merchants if the writing is received w/in a reasonable time and the party

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receiving it knows what’s in the writing, (1) is satisfied unless written objection is made w/in 10 days after receipt.

(3) If K doesn’t satisfy (1), but is valid in other respects is enforceable IF:o (a) the goods are unique and cannot be sold to others and the seller, before

receiving revocation from the buyer, has started performance ORo (b) the defendant says there was a K. But the K is not enforceable beyond what is

admitted by the defendant ORo (c) payment for the goods have made and accepted.

**A K for more than a year must be in writing, or it violates the statute of frauds**

§ 1-201: General Definitions (39) “Signed” means any symbol used by the party to authenticate a writing

PAROL EVIDENCE

R2d

§ 209: Integrated Agreements (1) Integrated Agreements = writing or writings that are a final expression of one or more

of the terms of an agreement (2) The judge decides whether there is an integrated agreement and whether the parol

evidence rule applies (3) If a writing appears to be a complete agreement, it is taken to be an integrated

agreement unless it is established by other evidence that the writing is not a final agreement

§ 210: Completely and Partially Integrated Agreement (1) Completely Integrated Agreement = an integrated agreement adopted by the parties as

a complete and exclusive statement of the terms of the agreement (2) Partially Integrated Agreement = something other than a completely integrated

agreement (3) The Judge decides

§ 213: Effect of Integrated Agreement on Prior Agreements (Parol Evidence Rule) (1) A binding integrated agreement discharges inconsistent prior agreements (2) A binding completely integrated agreement discharges prior agreements w/in its

scope. (3) An integrated agreement that is not binding OR that is voidable AND avoided does

not discharge a prior agreement, BUT an integrated agreement even though not binding may be effective to render inoperative a term which would have been part of the agreement if it had not been integrated.

§ 214: Evidence of Prior or Contemporaneous Agreements and Negotiations Agreements/Negotiations made before or at the same time of the writing can be used to

establish

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o (a) that the writing is or is not an integrated agreemento (b) that integrated agreement is actually completely OR partially integratedo (c) to clear up any ambiguous termso (d) that there was some foul play (illegality, fraud, duress etc.)o (e) a reason for granting or denying cancellation, reformation, specific

performance or other remedy.

§ 215: Contradiction of Integrated Terms Except as stated above, evidence of agreements made before or at the same time as the

writing are not admissible if they contradict the writing.

§ 216: Consistent Additional Terms (1) Unless an agreement is decided to be a completely integrated agreement, consistent

additional terms can be used to supplement an integrated agreement. (2) the agreement is not completely integrated if the writing doesn’t have a consistent

additional agreed term which iso (a) agreed to for a separate considerationo (b) something that might naturally be left out

UCC

§ 2-202: Final Written Expression: Parol or Extrinsic Evidence If a writing is intended as the ‘final expression’ of an agreement, the terms w/in that

writing may NOT be contradicted by evidence of any prior agreement or a contemporaneous oral agreement but can be explained or supplemented by:

o (a) course of performance, course of dealing, or usage of trade (See § 1-303)o (b) evidence of consistent additional terms unless the court decides the writing

was intended to be a complete and exclusive statement of the terms of the agreement.

** additional consistent terms = collateral

Integrated Writing = FinalFully Integrated = Complete understanding, no additional terms are to be considered, but UCC §2-202(a) mattersPartially Integrated = consistent additional terms WILL be considered, but no contradictory terms

“Four Corners Rule”-Strictest application of parol evidence-least flexibility in allowing P to enter evidence

Two views on Four Corners Rule: Williston, would allow extrinsic evidence of circumstances, but not the intent of the parties. Corbin, a K’s purpose is to memorialize parties intentions.

Provisional approach: Modern view, allowing extrinsic evidence to determine finality and

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whether a K is complete

Extrinsic evidence is broader than Parol Evidence**

K INTERPRETATION

R2d

§ 202: Rules in Aid of Interpretation (1) Everything is to be viewed in the context of the agreement. The principle purpose of

an agreement, if found, is VERY persuasive (2) A writing is interpreted as a whole and all writings that are part of the same deal are

interpreted together. (3) Unless there otherwise stated

o (a) the general prevailing meaning of words are usedo (b) when technical words are used in a technical setting, the technical definitions

are used. (4) How the parties have dealt with each other is given great weight (5) When reasonable, the manifestations of intention of the parties are interpreted as

consistent w/ each other and w/ any relevant course of performance, course of dealing, or usage of trade.

§ 203: Standards of Preference in Interpretation When interpreting an agreement or a promise, apply these stnds

o (a) An interpretation that makes all the terms clear, lawful and effective is preferred to the opposite.

o (b) i. Express Terms > course of performance & course of dealing & usage of trade. ii. Course of Performance > course of dealing OR usage of trade, iii. Course of Dealing > Usage of trade

o (c) Specific Terms & Exact Terms > General Languageo (d) Separately Negotiated or Added Terms > Boilerplate

§ 206: Interpretation Against Draftsman When interpreting a K, the interpretation that operated against the person who wrote it is

preferred.

§ 207: Interpretation Favoring the Public When interpreting a K, a meaning that is for the public interest is preferred.

§ 212: Interpretation of Integrated Agreement (1) An integrated agreement is interpreted in light of the context of the agreement (2) The jury will decide any questions of interpretation of an integrated agreement if it

depends on the credibility of the extrinsic evidence or on a choice among reasonable inferences to be drawn from extrinsic evidence. Otherwise the judge will decide.

UCC

15

§ 1-205: Course of Dealing and Usage of Trade (1) Course of dealing: how the parties have previously dealt with each other and that

establishes a common basis of understanding between the parties. (2) Usage of trade: a way of dealing, between parties, that is expected to be observed in a

particular trade, or place. If these trade usages are in writing, the court interprets it. (3) Course of dealing and Usage of trade will be used to clarify or supplement any terms

in the agreement. (4) As long as express terms are consistent w/ usage of trade and course of dealing it’s

OK, but if their not consistent: Express terms > course of dealing and usage of trade & Course of dealing > usage of trade.

(5) if usage of trade replaces part performance, the usage of trade will be used to interpret the agreement in regard to that part performance.

(6) Evidence of relevant usage of trade can’t be admitted unless the other party is told about it.

** Nanakuli Paving & Rock v. Shell Oil- done business for 11 years, had offered Price Protection 2 times- Shell tries to raise prices when change management- NPR says Price Protection was impliedly in the contract as a course of

the court gets around consistency by saying the trade usage was an extreme exception to the term and didn’t totally swallow it up

NOTE THAT COURSE OF PERFORMANCE MAY BE USED TO ADD A TERM BECAUSE IT IS SUBSEQUENT TO THE WRITING AND THEREFORE NOT EXLUDED UNER PAROL EVIDENCE**

§ 2-208: Course of Performance of Practical Construction (1) If performance is repeated by the parties and there is knowledge of how things are

done and there was opportunity to object, anything done w/o objection shall be used to interpret the meaning of the agreement.

(2) When reasonable, the express terms, course of performance, course of dealing and trade usage should be seen as consistent with each other. But when that’s not reasonable Express Terms > Course of Performance > Course of Dealing and Usage of Trade

(3) Subject to § 2-209, course of performance can be used to show a waiver of modification of any term inconsistent w/ such course of performance.

GOOD FAITH & WARRANTIES

R2d

§ 205: Duty of Good Faith and Fair Dealing Every K imposes a duty of fair dealing and good faith on each party in the way the K is

conductedUCC

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§ 1-203: Obligation of Good Faith Every K or duty w/in the UCC has an obligation of good faith in it’s performance or

enforcement

§ 2-314: Implied Warranty: Merchantability; Usage of Trade (1) Unless excluded or modified (§ 2-316) if the seller is a merchant of a type of good,

that good has a implied warranty of merchantability. Sale of food is a sale. (2) Merchantable means:

o (a) the goods would not be objected to and meet the K description ANDo (b) in the case of fungible goods are of ‘fair avg. quality’ w/in the description of

the K ANDo (c) are fit for their ordinary purposeo (d) are w/in the variations permitted by the agreemento (e) are contained, packaged, and labeled as required by the agreemento (f) conform to any labeling

(3) Unless excluded or modified ( § 2-316), there may be other implied warranties from course of dealing or usage of trade.

** Express Warranties from Royal Bus Machines v. Lorraine1. the machines are of “high quality”

a. opinion, puffing2. experience and testing had shown frequency of repairs was very low and would remain so

a. lack of specificity, opinion3. replacement parts readily available

a. not a fact that relates to the goods4. cost of maintenance and cost of supplies would remain low; no more than ½ cent per

copya. maintenance- YES, relates to the goods + specificity of costb. supplies- NO, doesn’t relate to the goods

5. the machines had been extensively tested and ready to be marketed a. relates to the goods

6. experience and reasonable projections had shown that the machines and leasing of them to customers would return substantial profits

a. puff puff pass7. machines were safe and could not cause fires

a. Yes- related to goods + specific8. service calls were and would be required for machines on average 7,000 to 9,000 copies,

including preventative maintenance callsa. Yes- specific, relating to goods

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A promise is a contractual undertakingA Condition is a fact, the occurrence or nonoccurrence of which determines when and if a party must perform

in case of doubt it is considered a promise , that way the nonbreaching party isn’t unjustly enriched if the breacher substantially performed

Interpreting of provision as Promise or Condition - try to determine “intent of the parties”

o words of agreemento prior practiceso customo 3rd party performance o in doubt- promise (result usually fairer to prevent unjust enrichment)

Classifications of ConditionsTime of Occurrence

- condition precedent- condition concurrent – each is condition precedent- condition subsequent- insurance, fire, notification

Express, Implied, Constructive Conditions

if express Strictly performed if implied/constructive room for substantial performance

Notes from Bar Bri1. If the condition is Not me any performance obligations are excused/discharged 2. condition is separate from Duty

a. conditions do not create any liabilityb. conditions limit duties

3. language of Express Conditions Must be STRICTLY COMPLIED WITH

It is feasible to have a condition of “satisfaction” to the obligor- coupled with a reasonable person standard in the sense that the obligor cannot reject it

if a reasonable person in his position would say that it is satisfactory

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In order to establish substantial performance, a party must demonstrate that he intended in good faith to comply with his obligations and that any omissions or deviations which did occur were unintentional and comparatively insignificant.

if a party has substantially performed, any breach by this party can only be immaterial

if a party has committed a material breach, this party’s performance cannot be substantial**

§ 2-315: Implied Warranty: Fitness for Particular Purpose When K’ing the seller knows why the buyer wants to the good and that the buyer is

relying on the sellers expertise, unless § 2-316 applies, there is an implied warranty that the goods shall be fit for that purpose.

**Does not have to be by a merchant**

§ 2-316: Exclusion or Modification of Warranties (1) Subject to the Parol Evidence rule, negation or limitation of warranty is wrong if

unreasonable. Words or conduct creating an express warranty and words or conduct limiting or negating an express warranty shall be read as consistent w/ each other when reasonable.

(2) Subject to subsection (3), to exclude or modify an implied warranty of merchantability, it must be mentioned and conspicuous. To exclude or modify and implied warranty of fitness it must be done by writing and be conspicuous.

(3) Notwithstanding (2) o (a) unless the circumstances tell otherwise, all implied warranties of

merchantability are excluded by terms like “as is” or “with all faults,” making it clear that there is no implied warranty AND

o (b) there is implied warranty w/ regard to defects that an examination would have revealed if the buyer inspects the goods or has refused to inspect the goods

o (c) Course of dealing, course of performance, or usage of trade can exclude or modify implied warranty.

CONDITION & PROMISES

R2d

§ 224: Condition Defined Condition = something that might not happen, that needs to happen (unless excused)

before performance under a K becomes due.

§ 227: Standards of Preference With Regard to Conditions (1) If you’re not sure that an event is a condition, the interpretation that reduces the risk

of the obligee is preferred, unless the event is in the obligee’s control or the context shows that he assumed the risk

(2) Unless the K is the kind where only one party has duties, when it is unclear whethero (a) a duty is imposed on a obligee that an event occur OR

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o (b) the event is made a condition of the obligor’s duty ORo (c) the event is made a condition of the obligor’s duty and a duty is imposed on

the obligee that the event occur the first interpretation (see subsection [1]) is preferred if the event is w/in the obligee’s

control

MATERIAL BREACH & SUBSTANTIAL PERFORMANCE

R2d

§ 236: Claims for Damages for Total and for Partial Breach (1) Claim for damages under TOTAL breach = ALL of the injured party’s remaining

rights to performance (2) Claim for damages under PARTIAL breach = ONLY part of the injured party’s

remaining rights to performance

§ 240: Part Performance as Agreed Equivalents If the agreed exchange or promises or performances has been split into equal parts, one

party’s performance requires the performance of the other.

§ 241: Circumstances Significant in Determining Whether a Failure is Material Factors to consider when determining if a failure is material

o (a) the extent to which the party will be deprived of an expected benefito (b) the extent to which the party can be compensated for the loss of the expected

benefito (c) the extent to which the party that is failing will suffer forfeitureo (d) whether the failing party will cure (consider the circumstances and assurances)o (e) the extent to which the conduct of the failing party sticks to stnds of good faith

and fair dealing

§ 242: Circumstances Significant in Determining When Remaining Duties are Discharged When does the other party’s duties end when the failing party fails to cure under § 237

and § 238o (a) see § 241o (b) if it looks like waiting any longer will stop the injured party from finding a

substitute arrangemento (c) the extent to which the agreement provides for performance w/o delay but a

material failure to perform on a stated day does not discharge the other parties duties unless the written agreement states that performance by that day is important.

§ 243: Effect of a Breach by Non-Performance as Giving Rise to a Claim for Damages for Total Breach

(1) When there is a promise for exchanged performances, a breach by not performing gives rise for a claim of damages for total breach only if it discharges the injured parties remaining duties to give such performance, other than a duty to render an agreed

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equivalent under § 240 (2) Except under (3), a breach by not performing w/ or followed by a repudiation gives a

rise for damages for total breach. (3) When a breach happens and the only remaining duties are of the breaching party

AND are for the payments of $ in installments, his breach by non-performance, whether or not there is repudiation, does NOT give rise to claim for total breach

(4) In any other situation other than the ones stated above, a breach by not performing gives rise to a claim for total breach ONLY IF it seriously decreases the value of the K to the injured party , making it just to allow recovery of damages based on all his remaining rights to performance.

§ 245: Effect of a Breach by Non-Performance as Excusing the Non-Occurrence of a Condition

When breach by non-performance is the reason why a condition of one of his duties doesn’t happen the non-occurrence is excused

ANTICIPATORY REPUDIATION & PERFECT TENDER RULE

R2d

§ 250: When a Statement or an Act Is a Repudiation A repudiation is

o (a) when the obligor tells the obligee that he is going to breach, giving the obligee a claim for damages for total breach under § 243

o (b) a voluntary act which makes the obligor unable to perform w/o breaching

§ 251: When a Failure to Give Assurance May be Treated as Repudiation (1) If the obligor thinks the obligee is about to breach, he can ask for assurance that

breach will not occur and stop performance that he hasn’t received an agreed for exchange until he receives the assurance

(2) If the obligor doesn’t give assurance, the obligee can treat that as a repudiation if adequate under the circumstances

§ 252: Effect of Insolvency (Bankruptcy) (1) If the obligor’s bankruptcy is enough of a reason for the obligee to believe he will

breach, he can stop performance for anything he hasn’t received an agreed for exchange until he receives the assurance in the form of actual performance, an offer of performance or adequate security

(2) Bankrupt = stopped paying debts, or cannot pay debts or is bankrupt according to federal bankruptcy law

§ 253: Effect of Repudiation as a Breach and on Other’s Party’s Duties (1) When an obligor repudiates before breach and has received all of the agreed for

exchanges, the repudiation gives rise to claim for damages under total breach. (2) When there is a promise for exchange, one party’s repudiation of his duty, discharges

the other party’s duty to perform.

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UCC

§ 2-601: Buyer’s Rights on Improper Delivery/Perfect Tender Rule Subject to § 2-612, and unless otherwise agreed to under § 2-718 and § 2-719, if the

goods or the tender of the goods fail to conform to the K, the buyer mayo (a) reject all of ito (b) take all of ito (c) accept any commercial unit(s) and reject the rest

See § 2-606 above

§ 2-607: Effect of Acceptance; Notice of Breach; Burden of Establishing Breach After Acceptance; Notice of Claim or Litigation to Person Answerable Over

(1) The buyer must pay the amt K’ed for (2) Acceptance of goods precludes any rejection of goods already accepted, and if the

buyer knew of non-conformity of the goods the buyer cannot revoke unless he thought the seller was going to cure (fix the problem). Just b/c the buyer accepted the goods doesn’t mean he can’t recover for non-conforming goods.

(3) Where a tender has been acceptedo (a) once the buyer knows of breach he has to tell the seller w/in a reasonable time

or be barred from remedy ANDo (b) if the claim is for infringement or something similar (§ 2-312[3]) and the

buyer gets sued for that breach, he has to tell the seller w/in a reasonable time or be barred from remedy regarding that litigation

(4) The burden is on the buyer to establish breach w/ regard to the goods (5) If the buyer is sued for breach of warranty or any other obligation of the seller

o (a) he can give the seller the written notice of the suit, and if the notice says the seller can come and defend and he doesn’t then the seller is bound by any litigation against him by the buyer

o (b) if the claim is for infringement or something like that, the original seller of the goods can demand, in writing, that the original buyer hand over control of the litigation to him or else the buyer will be barred from any remedy, and if the seller agrees to bear all expense and to satisfy any adverse judgment.

(6) (3), (4) and (5) apply to any obligation of a buyer to hold the seller harmless against infringement or the like (§ 2-312[3])

§ 2-608: Revocation of Acceptance in Whole or in Part (1) The buyer can revoke if the non-conformity of the good lessens the goods value to

himo (a) assuming that the seller would cure but hasn’t ORo (b) w/o discovery of non-conformity, the acceptance was induced either by a sales

pitch or it was made difficult to discover the non-conformnity. (2) Revocation needs to happen w/in a reasonable time after discovery or should have

discovered the non-conformity before the goods ‘change’ not as a result of their defect. The buyer needs to tell the seller.

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(3) A buyer who revokes has the same rights as if he had initially rejected the goods.

§ 2-609: Right to Adequate Assurance of Performance (1) If there are reasonable grounds for insecurity of performance by the other party, the

other may demand in writing assurance of performance if commercially reasonable can suspend performance until assurance is received.

(2) B/w merchants commercial stnds determine what a reasonable ground for insecurity and what type of assurance is offered.

(3) Just b/c the party looking for assurance accepts an improper delivery or payment, doesn’t mean he can’t ask for assurance of future performance.

(4) After the demand is received, and no response is given w/in 30 days, it becomes a toal and material breach of K.

§ 2-610: Anticipatory Repudiation When either party doesn’t do something that isn’t supposed to happen yet, making the K

less valuable to the other party, the non-repudiating party mayo (a) wait for a commercially reasonable time for performanceo (b) seek remedy for the breach (§ 2-703 or § 2-711), even if he told the

repudiating party that he would wait for his performance and has asked the repudiating party to retract his repudation AND

o (c) stop his own performance or use the sellers right to identify the goods to the K notwithstanding breach or to salvage unfinished goods (§ 2-704)

** Hope v. Lundy a party in breach cannot request adequate assurances from the other and withhold performance

comments to § 2-610: - a demand for more than the contract calls for is not of itself a repudiation

o (give me assurances that you won’t backcharge)- when it amounts to “I won’t perform until you meet my conditions” it may be a

repudiation**

§ 2-611: Retraction of Anticipatory Repudiation (1) Until the repudiating party’s next performance is due, he can take back his

repudiation, unless the pissed off party treats the repudiation as final. (2) The repudiating party can take it back by any method that makes it clear to the pissed

off party that he intends to perform, but it must also include any justifiably demanded assurance under § 2-609

(3) If the repudiating party takes it back, and all of his rights are restored allowing for excuse to the pissed off party for any delay caused by the repudiation.

§ 2-612: “Installment K”; Breach (1) Installment K = one which requires or auth. the delivery of goods in separate lots to

be separately accepted, even if the K says that “each delivery is a separate K” or something similar.

(2) The buyer can reject any installment that is non-conforming, if the non-conformity

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lessens the value of the installment and can’t be cured OR if the non-conformity is a defect in the required documents. But if the non-conformity does not fall w/in (3) and the sellers gives the buyer assurance of cure, the buyer must accept the installment.

(3) Whenever an installment doesn’t conform and that non-conformity decreases the value of the whole K, there is a breach of the entire K. But the pissed off party revives the K, if he accepts non-conforming installments w/o objection, OR if he brings an action regarding only past installments, OR demands performance of future installments.

§ 2-508: Cure by Seller of Improper Tender or Delivery; Replacement (1) If the tender or delivery of a good is rejected b/c of non-conformity AND there’s still

time left to perform, the seller can tell the buyer he’s going to cure and cure w/in the time left in the K.

(2) If the buyer rejects a non-conforming payment, that the seller thought would be sufficient, if the seller notifies the buyer, he can have time to substitute a conforming tender.

MISTAKE

R2d

§ 20: Effect of Misunderstanding (1) There is no manifestation of mutual assent if the parties have materially diff

understandings of the K ANDo (a) both parties have no idea how the other party is understanding the K ORo (b) both parties know how the other party understands the K

(2) The manifestations are operative w/ the understanding attached to them by one of the parties IF

o (a) that party does not know of any diff. understanding by the other AND the other knows how the first party understands the K OR

o (b) that party has no reason to know of any diff understanding by the other AND the other has reason to know the understanding of the K by the first party

§ 151: Mistake Defined A belief that is not in accord w/ the facts

§ 152: When Mistake of Both Parties Makes a K Voidable (1) If both parties when making the K made a mistake as to the basic assumption on

which the K is made and that has a material effect on the agreed exchange of performances, the K is voidable by the injured party unless he assumed the risk of mistake under § 154

(2) When trying to figure out if the mistake has a material effect on the agreed exchange of performances, you must consider any relief by way of reformation, restitution or otherwise

§ 154: When a Party Bears the Risk of Mistake A party bears the risk of mistake when

o (a) he agreed to the risk in the agreement OR

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o (b) he knows, when making the K, that he doesn’t have enough information but figures it’s enough OR

o (c) the court decides he assumed the risk given the circumstances

IMPRACTICABILITY & FRUSTRATION OF PURPOSE

R2d

§ 261: Discharge by Supervening Impracticability Unless the K says otherwise, when something that the K assumes wasn’t going to happen

happens, and it wasn’t his fault, and that something makes performance under the K impracticable, that parties duty is discharged.

§ 262: Death or Incapacity of Person Necessary for Performance If someone integral to the performance of K dies, making performance impracticable, his

death is something that the K assumed wasn’t going to happen.

§ 263: Destruction, Deterioration or Failure to Come Into Existence of Thing Necessary for Performance

If something that’s required for the K is destroyed, deteriorates, or doesn’t come into existence, making performance impracticable, this was something that the K assumed wasn’t going to happen.

§ 264: Prevention by Governmental Regulation or Order If performance is made impracticable b/c of a governmental regulation or order, this was

something the K assumed wasn’t going to happen

§265: Discharge by Supervening Frustration After a K is made, a party’s principal purpose is frustrated w/o his fault when an event

that the K assumed wasn’t going to happen happens. If so, his remaining duties are discharged unless the K says otherwise.

§ 266: Existing Impracticability or Frustration (1) When a K is made, and something the K assumed wasn’t going to happen happens,

making performance impracticable, there is no duty to perform, unless the K says otherwise.

(2) When a K is made, a party’s principal purpose is frustrated w/o his fault b/c of something the K assumed wasn’t going happen happens, there is no duty to perform unless the K says otherwise.

UCC

§ 2-613: Casualty to Identified Goods Where the K requires the goods to be indentified when the K is made, and the goods are

damaged w/o fault to either party, before the risk of loss passes to the buyero (a) if the loss is total, the K is avoided

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o (b) if the loss is partial OR the goods have become so damaged that they do not conform to the K, the buyer can demand inspection and either treat the K as avoided or accept the goods w/ reimbursement from the K price for the damage to the good, but w/o further right against the seller

§ 2-615: Excuse by Failure of Presupposed Conditions Except for far as a seller may have assumed a greater obligation and subject to § 2-614

o (a) If there is a delay in delivery or there the goods are not delivered at all, in whole or in part, as long as the seller complies w/ (b) and (c) is not a breach of duty under the K if the performance of K was made impracticable by something that was assumed was not going to happen, happened.

o (b) When the causes in (a) mess with a sellers capacity to perform, the seller can allocate services among his customers and can include regular customers he’s not currently under K w/ and whatever he needs to continue running his business in a way that is fair and reasonable

o (c) The seller must tell the buyer of the delay or non-delivery and if under (b) the seller has allocated a quota to the buyer, he should tell the buyer how much was allocated to the buyer.

** Impracticability may be invoked if:- impossibility not caused by promisor- impossibility unforeseeable- promisor not assumed the risk of impossibility

Comments:- increased cost alone usually does not excuse performance

o unless due to some unforeseen contingencyProblem 132: chickens from supply source X (not exclusive supplier in agmt)

- If source X shuts down, supplier must find alternative supply sourceo will NOT be excused even if alternate source increases costso may be excused if serious shortage or prevents securing supplies necessary

i.e., embargo, war, local crop failure,

Problem 133: Farmer agrees to sell potato’s from HIS farm; both parties know that this is the source contemplated

- farm destroyed by tornadoo comment 9- failure of specific crop not due to any foreseen circumstances that

could have been guarded against - if failure by rabbits

o excuse would depend on foreseeability of existence of rabbits and whether they could have reasonable guarded against

Sunflower Electric- agreed to sell a lot of oil based on UNPROVEN reserves - PL relied and built a pipeline

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- the court found Objective Impracticability HOWEVER- the Oil Company ASSUMED THE RISK

o they knew the reserves were unproven

Groseth International v. Tenneco

Commercial Frustration- 3 factors1. the purpose frustrated must have been a principal purpose

a. basis of the contract b. to make money is not one- its is obviously the basis of all Ks

2. frustration must be substantial a. not enough that deal is less profitable or even sustain a loss

i. so severe that it is not fairly to be regarded as within the risks that he assumed under the K

3. the non-occurrence of the frustrating event must have been a basic assumption on which K was made

a. existing market conditions or financial situations of the parties’ usually not a basic assumption

If the frustrating event was within the promisor’s control or due to the promisor’s “fault”, he is NOT excused

- In Groseth, the franchise runners terminated the deal on their own decision. - the alleged frustrating event was economic losses, but this is NOT valid - market conditions and financial situations are not basic assumptions of K

Commercial ImpracticabilityGenerally: unexpected difficulty, expense, or hardship in performance will NOT excuse performance where performance has not become objectively impossible.

- in Groseth, if the company continued to perform they might lose a lot of $, but it wasn’t impossible to perform

May be an excuse when: very greatly increased difficulty is caused by facts not only unanticipated, but inconsistent with the facts that the parties obviously assumed would likely continue to exist EXTREME AND UNREASONABLE DIFFICULTY

- if continuing to perform will force a company into bankruptcy may be an excuse - would force a company to undertake a huge, presumably unexpected risk

also depends on reasonable alternatives**

MISREPRESENTATION, FRAUD, NONDISCLOSURE, DURESS, and UNDUE INFLUENCE

R2d

§ 161: When Non-disclosure Is Equivalent to an Assertion

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When a person doesn’t say something that he knows, it’s the same as saying that the fact doesn’t exist ONLY IF:

o (a) he knows that revealing that fact is needed to stop something that was previously said from being a misrepresentation or from being fraudulent or material

o (b) he knows that revealing that fact would fix a mistake of the other party about a basic assumption upon which the party is making the K AND if not revealing is a failure to act in good faith and w/in reasonable stnds of fair dealing

o (c) he knows that revealing the fact would fix a mistake of the other party about the content or the effect of the writing, evidencing or embodying an agreement in whole or in part

o (d) the other person has a right to know b/c of a special relationship.

§ 174: When Duress by Physical Compulsion Prevents Formation of a K If a party’s agreement is physically compelled, the conduct is not effective as a

manifestation of assent.

§ 175: When Duress by Threat Makes a K Voidable (1) If a party is made to agree by an improper threat that leaves the victim w/ no other

reasonable alternative, the K is voidable by the victim (2) If a party is made to agree by a third party, not part of the transaction, the K is

voidable by the victim UNLESS the other party in good faith and w/o reason to know of the duress either gives value or relies materially on the transaction

§ 176: When a Threat is Improper (1) A threat is improper IF

o (a) the threat is a crime, tort or the threat would be a crime or tort if it resulted in obtaining property

o (b) criminal prosecution is threatened o (c) civil process is threatened and it is made in bad faith. ORo (d) the threat is a breach of the duty of good faith and fair dealing under a K w/

the recipient (2) A threat is improper if the resulting exchange is not on fair terms AND

o (a) the threatened act would harm the recipient, but not really benefit the doer. o (b) the threat inducing the manifestation of assent is made more effective by prior

unfair dealing by the party making the threat ORo (c) the threat is a use of pwr for illegitimate ends

§ 177: When Undue Influence Makes a K Voidable (1) Undue Influence = use of domination to persuade another party OR (2) If a party is made to agree by a third party, not part of the transaction, the K is

voidable by the victim UNLESS the other party in good faith and w/o reason to know of the duress either gives value or relies materially on the transaction

UNCONSCIONABILITY, ILLEGALITY, & PUBLIC POLICY

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R2d

§ 178: When a Term is Unenforceable on Grounds of Public Policy (1) A promise is unenforceable if the promise is outweighed by public policy

considerations (2) Things to consider when weighing the interest in the enforcement of a term

o (a) the parties’ justified expectationso (b) any forfeiture if not enforced ANDo (c) any special public interest in the enforcement of a term

(3) Things to consider when weighing public policy against enforcement of a termo (a) the strength of that policy manifested by the legislative or judicial decisionso (b) the likelihood that denying enforcement will further that policyo (c) the seriousness of any misconduct and the extent that it was deliberate ANDo (d) the directness of the connection b/w the misconduct and the term

§ 181: Effect of Failure to Comply With Licensing or Similar Requirement If a party is stopped from doing something b/c he failed to comply w/ a licensing, or

similar requirement, a promise in consideration of his doing that act or of his promise to do it is unenforceable on grounds of public policy IF

o (a) that requirement has a regulatory purpose ANDo (b) the public policy interest behind the requirement is greater than the interest in

enforcement of the promise.

§ 186: Promise in Restraint of Trade (1) A promise is unenforceable on public policy grounds if it is unreasonably in restraint

of trade (2) A promise is in restraint of trade IF its performance would limit competition or stop

the promisor from gainful occupation

§ 187: Non-ancillary Restraints on Competition A promise to refrain from competition that imposes a restraint that is not in support of an

otherwise valid transaction is unreasonably in restraint to trade

§ 188: Ancillary (supporting) Restraints on Competition (1) A promise to not compete that imposes a restraint that is supporting an otherwise

valid transaction or relationship is unreasonably in restraint of trade IFo (a) the restraint is more than required to protect the promises legit interest ORo (b) what the promisee needs is less than the difficulty to the promisor and there is

likelihood of public injury (2) Promises imposing restraint that are supporting a valid transaction are:

o (a) a promise by a seller of a business not to compete w/ the buyer in way that would injure the value of the business sold

o (b) a promise by an employee not to compete w/ his employero (c) a promise by a partner not to compete w/ the partnership

29

UCC

§ 2-302: Unconscionable K or Clause (1) If a court finds the K to be unconscionable at the time it was made, the court may

refuse to enforce it, OR it may enforce the K w/o the unconscionable clauses, OR it can limit the application of the unconscionable clauses.

(2) If the court feels that a clause might be unconscionable, the parties shall be given an opp to present evidence about the commercial setting, purpose and effect of the clause to help the court sort it out.

** Unconscionability generally recognized to include an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party

- absence of meaningful choice might be indicated by severe disproportion in bargaining power

or where a contract (term) is grossly one sided & unfair

Courts are looking at the Adequacy of the consideration

This is NOT Duress or Fraud

Williams v. Walker Furniture- clause allowing to repossess all materials purchased at time of any failure to meet

installment payments o although clause wasn’t so clear as to these effects

- severe disproportion in bargaining power- limited knowledge of terms**

EXPECTATION & RELIANCE INTEREST

R2d

§ 344: Purposes of Remedies Judicial remedies are intended to protect interests of a promisee

o (a) Expectation Interest = being put in as good a position as he would have been if the K was performed

o (b) Reliance Interest = being reimbursed for the loss caused by reliance on the K, by returning him to his position if the K had not been made

o (c) Restitution Interest = giving back anything that was already exchanged or any benefit that was already given

§ 345: Judicial Remedies Available (a) awarding a sum of money due under the K OR as damages (b) requiring specific performance of a K or stopping it’s non-performance (c) requiring restoration of a certain thing to prevent unjust enrichment

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(d) awarding $ to prevent unjust enrichment (e) declaring the rights of the parties AND (f) enforcing an arbitration award

§ 346: Availability of Damages (1) Unless the claim for damages has been suspended or discharged, the injured party has

a right to damages for any breach (2) If the breach caused no loss, or the amt lost is not proved a small nominal reward w/o

regard to damages will be awarded

§ 347: Measure of Damages in General Subject to the limits in § 350-353, the injured party has a right to damages based on his

Expectation Interest as measured byo (a) the loss in value of the other party’s failure to perform PLUSo (b) any other loss, including incidental or consequential loss, caused by breach,

LESSo (c) any cost or other loss that he has avoided by not having to perform

**(Loss in Value + [any other loss + incidental + consequential loss]) – Avoided Costs = Expectation Interest**

§ 348: Alternatives to Loss in Value of Performance (1) If the breach delays the use of property and you can’t prove the value of the loss w/

certainty, the recovery will be based on the rental value of the property OR on interest on the value of the property

(2) If breach results in defective or unfinished construction and loss in value cannot be proved w/ certainty recovery can be made based on

o (a) the decrease in market value of the property caused by the breach ORo (b) the reasonable cost of completing or fixing the problem IF that cost is not

clearly disproportionate to the probably loss in value to him (3) If the breach is of a promise conditioned on a fortuitous event and it is unclear

whether the event would have happened if there was no breach the injured party may recover damages based on the value of the conditional right at the time of breach.

§ 349: Damages Based on Reliance Interest Reliance Interest = $ spent in preparing to perform or performing – any loss the

breaching party can prove w/ reasonable certainty the injured party would have had had the K been performed.

LIMITATION OF DAMAGES: Certainty & Foreseeability

R2d

§ 351: Unforeseeability and Related Limitations on Damages (1) Loss that was not foreseen as a probable result of breach, at the time of K, cannot be

recovered for

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(2) Loss my be foreseeable as a probably result of a breach b/c it follows from the breacho (a) in the ordinary course of events ORo (b) as a result of special circumstances, beyond the ordinary course of events, that

the party in breach had reason to know (3) Courts may limit damages for foreseeable loss by excluding recovery for loss of

profits, by allowing recovery for loss incurred by reliance or otherwise if the court concludes that in the circumstances justice requires in order to avoid disproportionate compensation.

AVOIDABILITY & DAMAGES by AGREEMENT

R2d

§ 350: Avoidability as a Limitation on Damages (1) Except as stated in (2), if the injured party could have avoided loss w/o undue risk,

burden or humiliation, those damages are not recoverable (2) As long as the injured party makes a reasonable effort to avoid loss, he is not barred

from recovery by (1).

§ 356: Liquidated Damages and Penalties (1) Damages for breach by either party may be liquidated in the agreement only at a

reasonable amount compared to the anticipated or actual loss caused by breach. If the liquidated damage is unreasonably large it is considered a penalty and unenforceable as a matter of public policy

(2) If the amt in $ penalty is greater than the loss caused by the non-occurrence, it is unenforceable on grounds of public policy.

RESTITUTION W/ and W/O K

R2d

§ 370: Requirement that Benefit be Conferred A party can get restitution ONLY IF he gave a benefit to the other party

§ 371: Measure of Restitution Interest If a sum of $ is awarded to protect a party’s restitution interest it can be measured by

o (a) the reasonable value to the other party of what he received in terms of what it would have cost him to get it from someone else (so pretty much market value) OR

o (b) the extent to which the benefit increased the value of the other party’s property or the advancement of the other party’s interest

§ 373: Restitution when the Other Party is In Breach (1) Subject to (2), if there is breach by non-performance that gives rise to claim for

damages for total breach or on a repudiation, the injured party can get restitution for any benefit he has already given to the other party.

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(2) The injured party has no right to restitution if he has done everything he was supposed to do under the K and the other party has fulfilled all of his duties, other than payment of a definite sum of $ for that performance.

INTRO TO EQUITABLE & UCC REMEDIES

R2d

§ 357: Availability of Specific Performance and Injunction (1) Subject to §§ 359-369, granting specific performance against a party that has

breached or if threatening breach is up to the court (2) Subject to §§ 359-369, granting an injunction against breach against a party that has

breached or is threatening to breach, is up to the court IFo (a) the duty is one of forberance ORo (b) the duty is one to act and specific performance would be denied only for

reasons that are inapplicable to an injunction.

§ 359: Effect of Adequacy of Damages (1) If an award of damages can protect the expectation interest of the injured party, then

specific performance or an injunction will NOT be granted (2) Just because the damage remedy is enough to cover the failure of performance of part

of the K, doesn’t bar specific performance or injunction of the K as a whole. (3) Just b/c there is remedy for breach other than damages, doesn’t mean that specific

performance or injunction will be refused. However, the remedy may be considered under § 357

§ 366: Effect of Difficulty in Enforcement or Supervision If the enforcement of a promise would be a heavy burden on the courts and the benefit

gained from enforcement is less than the harm suffered from refusing to enforce, then the courts will not enforce.

§ 367: K for Personal Service or Supervision (1) A promise to render personal service will not be specifically enforced (2) A promise to render exclusive personal service will not be enforced if the

enforcement will result in forcing someone to do something undesireable OR forces the employee to be w/o work.

UCC

§ 2-706: Seller’s Resale Including K for Resale (1) Under the conditions stated in § 2-703, the seller may resell the goods or the

undelivered balance thereof. If this is done in good faith, the seller can recover the diff. b/w the resale price and the K price along w/ any incidental damages allowed under § 2-719, but less expenses saved b/c of the breach.

**(Resale price – K price) + incidental damages – (expenses saved by breach)**

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(2) Except as stated in (3), or unless agreed to, resale may be at a public or private sale. The sale can be in pieces or units, at any place, time and terms but the aspects of the sale must be commercially reasonable. The resale must refer to the broken K, but it’s not required that the goods be in existence or that any or all of them have been identified to the K before the breach

(3) Where the resale is a private sale, the seller must give the buyer reasonable notice of his intention to resell.

(4) If the resale is publico (a) only identified goods may be sold unless there is a market for future goods

ANDo (b) it must be at a usual place for public sale, unless the goods are perishable, the

seller must give the buyer reasonable notice of the time and place of the resale AND

o (c) if the good can’t be seen by the ppl at the sale, the notice of sale must indicate where the goods actually are and give prospective bidders an opp to inspect.

o (d) the seller may buy (5) If you buy something in good faith at a resale, the goods are free of any rights of the

original buyer even though the seller fails to comply w/ one or more requirements of this section

(6) The seller is not accountable to the buyer for any profit made on any resale. A seller or a buyer who has rightfully rejected or revoked an acceptance must account for any excess over the amt of his security interest,

§ 2-708: Seller’s Damages for Non-acceptance or Repudiation (1) Subject to (2), and § 2-723 regarding proof of market price, the measure of damages

for non-acceptance or repudiation by the buyer is the difference between the market price at the time and place for tender and the unpaid K price together w/ any incidental damages provided for in § 2-710, but less expenses saved b/c of breach.

**Damages for Non-Acceptance or Repudiation by the Buyer = (Market Price at the time and place for tender – [Unpaid K price + incidental damages]) – Expenses saved b/c of breach**

(2) If the measure of damages in (1) is not enough to put the seller in a position as good as if performance had been made, then the measure of damages is the profit (including reasonable overhead) which the seller would have made from full performance by the buyer, together w/ any incidental damages provided in § 2-710, due allowance for costs reasonably incurred and due credit for payments or proceeds of resale

**Measure of Damages = Profit (including reasonable overhead) if there was full performance by the buyer + incidental damages + costs incurred – credit for payments or proceeds of resale**

§ 2-712: “Cover”; Buyer’s Procurement of Substitute Goods (1) After a breach, the buyer may “cover” by making a good faith reasonable purchase to

substitute for the goods that were due from the original seller. (2) The buyer can then recover from the original seller the diff b/w the cost of cover and

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the K price w/ any incidental or consequential damages , but less expenses saved as a result of breach.

**Damages recovered = (Cost of Cover – K Price) + Incidental or Consequential Damages – expenses saved as a result of breach**

(3) Failure of the buyer to cover doesn’t bar him from other remedy

§ 2-713: Buyer’s Damages for Non-delivery or Repudiation (1) Subject to § 2-723, w/ respect to proof of market price, the measure of damages for

non-delivery or repudiation by the seller is the difference between the market price at the time when the buyer learned of the breach and the K price together with any incidental and consequential damages, but less expenses saved by breach

**Measure of Damages for non-delivery or repudiation by the seller = (market price at the time the buyer learned of the breach – K Price) + (incidental damages + consequential damages) – expenses saved by breach**

(2) Market price is to be determined as of the place for tender or in cases of rejection after arrival or revocation of acceptance, as of the place of arrival .

§ 2-715: Buyer’s Incidental and Consequential Damages (1) Incidental Damages = expenses reasonably incurred in inspection, receipt,

transportation and care and custody of goods rightfully rejected, any commercially reasonable charges, expenses or commissions in connection w/ effecting cover and any other reasonable expense incident to the delay or other breach.

(2) Consequential Damages = o (a) any loss resulting from general or particular requirements and needs of which

the seller at the time of K’ing had reason to know and which could not reasonably be prevented by cover or otherwise AND

o (b) injury to person or property proximately resulting from any breach of warranty.

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