Formation - OFFER
Mailbox Rule: Effective Upon Receipt
Indicia
Suggest Offer
1) Extent of detail as to material terms (price, quantity, condition)
3) Whether K is usually put in writing or not
4) Gives power of acceptance
Not an offer if
1) Addressee knows/has reason to know lack of intent to conclude bargain
2) Material terms are too indefinite (e.g. Varney)
3) Looks like an ad (Lefkowitz)
4) Looks like an agreement to agree (Joseph Martin Deli)
5) Looks like a price quote (Dyno)
§20 - Misunderstanding
§24 – Offer Defined
§25 – Option Contracts
§26 – Preliminary Negotiations
§26 comment b - “advertising”
§26 comment d - “invitation of bids or other offers”
§27 – Existence of Contract where Written Memorial is Contemplated
§30 – Form of Acceptance Invited
§32 – Invitation of Promise or Performance
§33 – Certainty
§58 – Necessity of Acceptance Complying with terms of Offer
UCC 2-204 – Formation in General
UCC 2-205 – Firm Offers
UCC 2-206(1)(b) - “construed as inviting acceptance in any manner”
§20 - Misunderstanding
§24 – Offer Defined
§25 – Option Contracts
Manner of Acceptance
“The offeror is the master of his offer” - §58
Acceptance can be requested by:
1) Promise
2) Performance
3) Promise-or-performance (default when vague) - §32/2-206
Joseph Martin Deli v. Schumaker
Varney v. Ditmars
Lucy v. Zehmer
Dyno Construction v. McWane
Lefkowitz v. Great Minneapolis Surplus Store
§26 – Preliminary Negotiations
§26 comment b - “advertising”
§26 comment d - “invitation of bids or other offers”
§27 – Existence of Contract where Written Memorial is Contemplated
§30 – Form of Acceptance Invited
§32 – Invitation of Promise or Performance
§33 – Certainty
§58 – Necessity of Acceptance Complying with terms of Offer
UCC 2-204 – Formation in General
UCC 2-205 – Firm Offers
UCC 2-206(1)(b) - “construed as inviting acceptance in any manner”
Joseph Martin Deli v. Schumaker
Varney v. Ditmars
Lucy v. Zehmer
Dyno Construction v. McWane
Lefkowitz v. Great Minneapolis Surplus Store
Formation - ACCEPTANCE
Effect of Acceptance
Timing/Mailbox Rule
Acceptance by Performance-only
When acceptance by performance-ONLY is requested, performance acts to
create an Option K. The offeror is bound to hold the offer open until
completed, but no K is formed unless performance is completed.
Acceptance by Promise-only
When acceptance is by promise-only, K is formed at dispatch of
acceptance
Acceptance by Promise-or-performance
When acceptance is by any means, performance acts as a binding promise
of completion. K is formed at beginning performance.
Acceptance by Silence
Acceptance by silence is only binding if:
1) Offeree takes the benefit with reasonable opportunity to reject
2) Course of dealings makes this acceptable
3) Offeree exercises dominion
Acceptance by Performance-Only
K is formed at completion. No notification of performance required unless
the O'ee knows that O'or has no adequate means of learning of
performance.
Acceptance by Promise-only
K is formed at dispatch of acceptance if dispatched properly or it reaches
the offeror in time. No effective if preceded by rejection.
Acceptance by Promise-or-performance
K is formed at dispatch (see above) or start of performance.
Acceptance by Silence
K is formed with failure to return or object if (1) or (2);
K is formed with exercise of dominion
§30 – Form of Acceptance Requested
§32 – Invitation of Promise or Performance
§45 – Option K created by part performance or tender
§50 – Acceptance Defined
§51 – Effect of Part Performance
§51 comment a - “performance without knowledge”
§53 – Acceptance by Performance; Manifestation of Intention not to accept
§54 - Acceptance by Performance; Necessity of Notification to Offeror
§56 – Acceptance by Promise; Necessity of Notifiaction to Offeror.
§62 – Effect of Performance where offer invites either perf. or promise
§63 – Time when Acceptance Takes Effect
§66 – Acceptance must be properly dispatched
§67 – Effect of Receipt of Acceptance if Improperly Dispatched
§69 – Acceptance by Silence or Dominion
UCC 2-204 – Formation in General
UCC 2-205 – Firm Offers
UCC 2-206(1)(b) - “construed as inviting acceptance in any manner”
§30 – Form of Acceptance Requested
§32 – Invitation of Promise or Performance
§45 – Option K created by part performance or tender
§50 – Acceptance Defined
Ciaramella v. RDA Inc.
Ever-Tite Roofing Corp. v. Green
Hill v. Gateway 2000
§51 – Effect of Part Performance
§51 comment a - “performance without knowledge”
§53 – Acceptance by Performance; Manifestation of Intention not to accept
§54 - Acceptance by Performance; Necessity of Notification to Offeror
§56 – Acceptance by Promise; Necessity of Notifiaction to Offeror.
§62 – Effect of Performance where offer invites either perf. or promise
§63 – Time when Acceptance Takes Effect
§66 – Acceptance must be properly dispatched
§67 – Effect of Receipt of Acceptance if Improperly Dispatched
§69 – Acceptance by Silence or Dominion
UCC 2-204 – Formation in General
UCC 2-205 – Firm Offers
UCC 2-206(1)(b) - “construed as inviting acceptance in any manner”
Ciaramella v. RDA Inc.
Ever-Tite Roofing Corp. v. Green
Hill v. Gateway 2000
Formation - CONSIDERATION
Bargained-for Exchange
1) Must be bargained for
2) Must be sought by promisor in exchange for promise
3) Can be an act, forbearance, or other modification of legal relation
4) Look for inducement
Should not be
1) Action to receive a gift
2) Legal duty (unless circumstances have changed)
3) Grossly inadequate to the point that the court suspects fraud
4) Duress-induced
§71 – Requirement of Exchange
§72 – Exchange of Promise for Performance
§73 – Performance of Legal Duty
§73 comment c – “contractual duty to promisor
§75 – Exchange of Promise for Promise
§79 – Adequacy of Consideration
§79 comment d - “pretended exchange”
§79 comment e - “effects of gross inadequacy
UCC 2-209(1) – modification requires no consideration
UCC 2-209 comment 2 – must meet test of good faith
§86 – Promise for Benefit Received
§86 comment e - “benefit conferred as a gift”
§89 – Modification of Executory K
Material Benefit
Promise made after performance by one party
Indicia
1) Course of performance
2) Vanessa Principle (would've been made ex ante)
3) NOT a gift promise
§71 – Requirement of Exchange
§72 – Exchange of Promise for Performance
§73 – Performance of Legal Duty
§73 comment c – “contractual duty to promisor
§75 – Exchange of Promise for Promise
§79 – Adequacy of Consideration
§79 comment d - “pretended exchange”
§79 comment e - “effects of gross inadequacy
UCC 2-209(1) – modification requires no consideration
UCC 2-209 comment 2 – must meet test of good faith
§86 – Promise for Benefit Received
§86 comment e - “benefit conferred as a gift”
§89 – Modification of Executory K
Consideration
Hamer v. Sidway
St. Peter v. Pioneer Theater Corp.
Kirksey v. Kirksey (and Williston's Tramp)
Demotsis v. Batsakis
Wolford v. Powers
In Re Greene
Material Benefit
Mills v. Wyman
Webb v. McGowan
Formation - PROMISSORY ESTOPPEL
Consideration
Hamer v. Sidway
St. Peter v. Pioneer Theater Corp.
Kirksey v. Kirksey (and Williston's Tramp)
Demotsis v. Batsakis
Wolford v. Powers
In Re Greene
Material Benefit
Mills v. Wyman
Webb v. McGowan
Formation - PROMISSORY ESTOPPEL
Reliance as Consideration
Promissory Estoppel
Requirements
1) A promise, reasonably expected to induce action
2) Actually induces the action
3) Injustice can only be avoided by enforcement
4) Remedy to be limited as justice requires
General Rule: No PE without indication of intent to be bound
“agreements to agree”
§90 – Promise Reasonably Inducing Action or Forbearance
§87(2) – Option K
§90 – Promise Reasonably Inducing Action or Forbearance
§90 comment e - “gratuitous promises to procure insurance”
Hayes v. Plantations Steel Co.
Feinberg v. Pfeiffer Co.
Salsbury v. Northwestern Bell Telephone Co.
Congregation Kadimah Toras-Moshe v. DeLeo
Coley v. Lang
Joseph Martin Deli v. Schumaker
Hoffman v. Red Owl
Pavel Enterprises Inc. v. A.S. Johnson (subcontractor bids)
Requirements
1) An offer, reasonably expected to induce action
2) Action is of a substantial character
3) Actual inducement
Exceptions
1) Charitable Subscriptions do not require proof of inducement/forbearance 4) Injustice can only be avoided by enforcement.
2) Marriage settlements also do not require proof of
inducement/forbearance
Requirements
1) A promise, reasonably expected to induce action
2) Actually induces the action
3) Injustice can only be avoided by enforcement
4) Remedy to be limited as justice requires
General Rule: No PE without indication of intent to be bound
“agreements to agree”
§90 – Promise Reasonably Inducing Action or Forbearance
§87(2) – Option K
§90 – Promise Reasonably Inducing Action or Forbearance
§90 comment e - “gratuitous promises to procure insurance”
Hayes v. Plantations Steel Co.
Feinberg v. Pfeiffer Co.
Salsbury v. Northwestern Bell Telephone Co.
Congregation Kadimah Toras-Moshe v. DeLeo
Coley v. Lang
Joseph Martin Deli v. Schumaker
Hoffman v. Red Owl
Pavel Enterprises Inc. v. A.S. Johnson (subcontractor bids)
Requirements
1) An offer, reasonably expected to induce action
2) Action is of a substantial character
3) Actual inducement
Exceptions
1) Charitable Subscriptions do not require proof of inducement/forbearance 4) Injustice can only be avoided by enforcement.
2) Marriage settlements also do not require proof of
inducement/forbearance
Formation - REVOCATION and REJECTION
Revocation
Revocation is effective upon receipt
Irrevocable/Firm Offers
Restatement:
a) Beginning performance when acceptance is contingent on performance
b) Consideration exchanged for promise to hold open (Restatement only)
c) Justifiable reliance (PE) on (explicit or implicit) promise to hold open
(contractor/subcontractor relationship)
Rejection
Types
a) Manifestation of intent not to accept
b) Failure to accept within stipulated or “reasonable time”
c) Counter-offer conditional upon acceptance of new terms
Timing
Rejection is effective upon receipt.
If acceptance is sent before receipt of rejection, rejection is still effective if
it arrives first.
UCC:
Promise to hold offer open (even without consideration)
Separate signature if on a form supplied by the offeree.
§36 – Methods of termination of the power of acceptance
§37 – Termination of the power of acceptance under option K
§42 – Revocation by Communication from O'or rec'd by O'ee
§43 – Indirect Communication of Revocation
§47 – Lapse of Time
UCC 2-205
§36 – Methods of Termination of power of acceptance
§37 – Termination of power of acceptance under option K
§38 – Rejection
§39 – Counter-offers
§40 – Time when rejection or counteroffer terminates power of acceptance
§41 – Lapse of Time
Drennan
Pavel Enters. Inc. v. A.S. Johnston
Revocation is effective upon receipt
Irrevocable/Firm Offers
Restatement:
a) Beginning performance when acceptance is contingent on performance
b) Consideration exchanged for promise to hold open (Restatement only)
Types
a) Manifestation of intent not to accept
b) Failure to accept within stipulated or “reasonable time”
c) Counter-offer conditional upon acceptance of new terms
Timing
c) Justifiable reliance (PE) on (explicit or implicit) promise to hold open
(contractor/subcontractor relationship)
Rejection is effective upon receipt.
If acceptance is sent before receipt of rejection, rejection is still effective if
it arrives first.
UCC:
Promise to hold offer open (even without consideration)
Separate signature if on a form supplied by the offeree.
§36 – Methods of termination of the power of acceptance
§37 – Termination of the power of acceptance under option K
§42 – Revocation by Communication from O'or rec'd by O'ee
§43 – Indirect Communication of Revocation
§47 – Lapse of Time
UCC 2-205
Drennan
Pavel Enters. Inc. v. A.S. Johnston
§36 – Methods of Termination of power of acceptance
§37 – Termination of power of acceptance under option K
§38 – Rejection
§39 – Counter-offers
§40 – Time when rejection or counteroffer terminates power of acceptance
§41 – Lapse of Time
TYPES OF Ks
Output/Requirements
Default Contactual Obligations
1) Implicit requirement to act in good faith (“essential question”)
2) No demands “unreasonably disproportionate” to stated amounts, or:
3) No demands “unreasonably disproportionate” to past custom
Exclusive Dealings
Default Contractual Obligations
Implicit requirement to exert Reasonable Efforts
Operate as a unitary firm:
Maximize joint returns by exerting effort until marginal costs outweigh
marginal benefits if both parties were in a single firm
Sudden expansion of plant not in scope except if expansion in good faith
Vanessa Principle: maximal joint returns are the ideal ex ante bargain.
§205 – Duty of Good Faith and Fair Dealing
§205 comment d - “good faith performance”
UCC 2-306(1) – Ouputs/Reqs Ks
UCC 2-306 comment 2 – good faith; sudden expansions
UCC 2-306 comment 3 - elasticity
§205 – Duty of Good Faith and Fair Dealing
§205 comment d - “good faith performance”
UCC 2-306(2) – Exclusive Dealings
UCC 2-306 comment 5
Eastern Airlines v. Gulf Oil Corp.
Wood v. Lucy, Lady Gordon
Default Contactual Obligations
1) Implicit requirement to act in good faith (“essential question”)
2) No demands “unreasonably disproportionate” to stated amounts, or:
3) No demands “unreasonably disproportionate” to past custom
Default Contractual Obligations
Implicit requirement to exert Reasonable Efforts
Operate as a unitary firm:
Maximize joint returns by exerting effort until marginal costs outweigh
marginal benefits if both parties were in a single firm
Sudden expansion of plant not in scope except if expansion in good faith
Vanessa Principle: maximal joint returns are the ideal ex ante bargain.
§205 – Duty of Good Faith and Fair Dealing
§205 comment d - “good faith performance”
UCC 2-306(1) – Ouputs/Reqs Ks
UCC 2-306 comment 2 – good faith; sudden expansions
UCC 2-306 comment 3 - elasticity
§205 – Duty of Good Faith and Fair Dealing
§205 comment d - “good faith performance”
UCC 2-306(2) – Exclusive Dealings
UCC 2-306 comment 5
Eastern Airlines v. Gulf Oil Corp.
Wood v. Lucy, Lady Gordon
Terms - COUNTEROFFER/BATTLE OF THE FORMS
Restatement
Counteroffer:
1) Relates to same matter as original offer
2) Proposes different bargain
3) Conditional on acceptance of new terms
Acceptance with non-conditional new term request accepts the
original offer; new terms are not binding unless accepted.
(Can be accepted by silence per §69)
UCC
2-207(1) K accepted if:
1) Written agreement
2) Timely acceptance/confirmation
3) Additional or different terms
4) Not express conditional on their acceptance
2-207(2): New terms are proposals for addition
If Merchants, become new terms unless
a) Offer expressly limited to its terms
b) Materially alter it
c) Notification of objection (incl. contradictory term on other K)
2-207(3): Terms cancel out if:
1) Parties act as if the K exists.
§39 – Counter-Offers
UCC 2-207
§40 – Time when … Counter-Offer Terminates Power of Acceptance
§59 – Purported Acceptance which adds qualifications
§61 – Acceptance which requests Change of terms
Ionics v. Elmwood Sensors
Step-Saver Data Systems v. Wyse Technologies
Hill v. Gateway 2000
Counteroffer:
1) Relates to same matter as original offer
2) Proposes different bargain
3) Conditional on acceptance of new terms
Acceptance with non-conditional new term request accepts the
2-207(1) K accepted if:
1) Written agreement
2) Timely acceptance/confirmation
3) Additional or different terms
4) Not express conditional on their acceptance
original offer; new terms are not binding unless accepted.
(Can be accepted by silence per §69)
2-207(2): New terms are proposals for addition
If Merchants, become new terms unless
a) Offer expressly limited to its terms
b) Materially alter it
c) Notification of objection (incl. contradictory term on other K)
2-207(3): Terms cancel out if:
1) Parties act as if the K exists.
§39 – Counter-Offers
UCC 2-207
§40 – Time when … Counter-Offer Terminates Power of Acceptance
§59 – Purported Acceptance which adds qualifications
§61 – Acceptance which requests Change of terms
Ionics v. Elmwood Sensors
Step-Saver Data Systems v. Wyse Technologies
Hill v. Gateway 2000
Common Law Doctrines
Mirror Image
Last Shot
Terms - EVIDENCE OF ADDITIONAL TERMS (PAROL EVIDENCE RULE)
Four Corners Test
Look at the Contract to determine integration
STEP I: IS IT INTEGRATED?
Intended to be Final and Complete Agreement
Natural Omission Test (Restatement/UCC Test)
Look at everything to determine integration (§214(a),(b))
“Evidence of oral collateral agreements should be excluded only when the
fact finder is likely to be misled.”
1) Written K
2) Additional term is collateral in form (dependent promise or independent
promise?)
1) Written K
3) Does not contradict express or implied provisions in the written K
2) Term does not contradict express provisions in the written K
4) Not ordinarily be expected to embodied in the written K
3) Term “might naturally be omitted”
§210 – Completely and Partially integrated agreements
§209 – Integrated Agreements
§210 – Completely and Partially integrated agreements
§214 – Evidence of Prior or Contemporaneous Agreements.
UCC 2-202 comment 3
Mitchill v. Lath (Andrews)
Masterson v. Sine dissent (Burke)
Masterson v. Sine (Traynor)
Mitchill v. Lath dissent (Lehman)
Look at the Contract to determine integration
Look at everything to determine integration (§214(a),(b))
“Evidence of oral collateral agreements should be excluded only when the
fact finder is likely to be misled.”
1) Written K
2) Additional term is collateral in form (dependent promise or independent
promise?)
1) Written K
3) Does not contradict express or implied provisions in the written K
2) Term does not contradict express provisions in the written K
4) Not ordinarily be expected to embodied in the written K
3) Term “might naturally be omitted”
§210 – Completely and Partially integrated agreements
§209 – Integrated Agreements
§210 – Completely and Partially integrated agreements
§214 – Evidence of Prior or Contemporaneous Agreements.
UCC 2-202 comment 3
Mitchill v. Lath (Andrews)
Masterson v. Sine dissent (Burke)
Masterson v. Sine (Traynor)
Mitchill v. Lath dissent (Lehman)
STEP II: PAROL EVIDENCE RULE
Reqs
Reqs
1) Written K
1) Written K
2) Prior/Contemporaneous ORAL Agreement; Prior written Agreement
2) Prior/Contemporaneous ORAL Agreement
Contradiction
Implied integration clause: - Andrews/Lehman
K says X or is silent (and default rule is X); term says “not X”
Contradiction
K says X; term says “Not X” - Traynor/Lehman
§213 – Effect of Integrated Agreement on Prior Agreements
§214 – Evidence of Prior or Contemp. Agreements and Negotiations
§215 – Contradiction of Integrated terms
§216 – Consistent Additional Terms
STEP III: ADMISSION
Credibility of evidence is a question of fact for fact-finder determination.
Terms - INTERPRETATION OF EXISTING TERMS
California “Objectivist” (Restatement/UCC)
Ambiguity
As long as K is “reasonably susceptible” to meaning, “mere apparent lack of ambiguity” is insufficient to preclude examination of extrinsic evidence to
determine whether or not there is ambiguity.
(Goes to factfinder if ambiguous)
Weight of Admissible Evidence
Express terms > Course of perf > Course of dealing/Trade Usage (2-208, §203)
Reasonable and Lawful > Unlawful; Separately negotiated or added > standardized and not separately negotiated terms (§203)
Trade Usage (UCC cases)
Columbia Nitrogen
Contradictory only if parties opt out of trade usage.
Southern Concrete
Contradictory unless the parties opt into trade usage.
Whose Meaning Prevails - §201, 202
As with Misunderstanding, Term fails if neither knew or had reason to know of the meaning attached by the other.
If there was an objective meaning, that one wins / If one knew of the other's meaning, that one wins.
Terms of art have that meaning in a technical Context
§200 – Interpretation of Promise or Agreement
§201 – Whose Meaning Prevails
§202 – Rules in Aid of Interpretation
§203 – Standards of Preference in Interpretation
§212 – Interpretation of Integrated Agreement
§214 – Evidence of prior or contemporaneous agreements and negotiations
§222 – Usage of Trade
§223 – Course of Dealing
UCC 2-202 – Parol Evidence
UCC 2-208 – Course of Performance or Practical Construction
§200 – Interpretation of Promise or Agreement
§201 – Whose Meaning Prevails
§202 – Rules in Aid of Interpretation
§203 – Standards of Preference in Interpretation
Frigaliment
Pacific Gas v. G.W. Thomas Drayage
Trident Center v. Connecticut Life
Columbia Nitrogen v. Royster
Southern Concrete Svcs. v. Mableton
§212 – Interpretation of Integrated Agreement
§214 – Evidence of prior or contemporaneous agreements and negotiations
§222 – Usage of Trade
§223 – Course of Dealing
UCC 2-202 – Parol Evidence
UCC 2-208 – Course of Performance or Practical Construction
Frigaliment
Pacific Gas v. G.W. Thomas Drayage
Trident Center v. Connecticut Life
Columbia Nitrogen v. Royster
Southern Concrete Svcs. v. Mableton
(Plain Meaning on reverse)
New York/“Plain Meaning”
Ambiguity
Look at entire document for clues to meaning, but do not go beyond its borders to find ambiguity.
Admissible Evidence
Inherently/Operationally Ambiguous Terms
1) Look at extrinsic evidence.
Unambiguous Terms
1) Look no further.
In Re Soper
WWW Associates v. Giancontieri
Voiding K - MISUNDERSTANDING and INDEFINITENESS
Misunderstanding
Indefiniteness
To void a K:
a) Neither party knows or has reason to know the meaning attached
by the other, or
b) Each party knows or has reason to know the meaning attached by
the other.
To void a K:
1) Not clear that the parties have intended to make a K (material
terms indefinite
2) No reasonably certain basis for giving an appropriate remedy
§20 – Effect of Misunderstanding
§33 – Certainty
UCC 2-204(3) – Formation in General
Raffles v. Wichelhaus
Varney v. Ditmars
To void a K:
a) Neither party knows or has reason to know the meaning attached
by the other, or
b) Each party knows or has reason to know the meaning attached by
the other.
To void a K:
1) Not clear that the parties have intended to make a K (material
terms indefinite
2) No reasonably certain basis for giving an appropriate remedy
§20 – Effect of Misunderstanding
§33 – Certainty
UCC 2-204(3) – Formation in General
Raffles v. Wichelhaus
Varney v. Ditmars
Voiding K - MISREPRESENTATION
Facts at the time of K
Fraudulent Misrepresentation
Requirements
1) Misrepresentation
2) Knowledge of falsity
3) Intent to induce K
4) Justifiable inducement
5) Injury
Negligent / Innocent Misrepresentation
§163
– When a Misrepresentation prevents formation of a K
Requirements
§167
1) Misrepresentation
– When a Misrepresentation is an inducing cause
§168
2) Materiality
– Reliance on Assertions of Opinion
§169
3) Intent
– When
to induce
Reliance
K on Assertion of Opinion is not justified
§171
4) Justifiable
– When inducement
Reliance on Assertion of Intention is not justified
§172
5) Injury
– When fault makes reliance unjustified [buyer's duty]
Types
Affirmative False Statement
- Opinion*
- Future Prediction*
- Promise of future performance*
Concealment
Nondisclosure (silence)
* credibility/no basis in facts req'd
§159 – Misrepresentation Defined
§160 – When Action is Equivalent to an Assertion
§161 – When Non-disclosure is equivalent to an assertion
§162 – When a Misrepresentation is fraudulent or material
§162(b) – When a Misrepresentation is fraudulent or material
Requirements
1) Misrepresentation
2) Knowledge of falsity
3) Intent to induce K
4) Justifiable inducement
5) Injury
Requirements
1) Misrepresentation
2) Materiality
3) Intent to induce K
4) Justifiable inducement
5) Injury
Types
Affirmative False Statement
- Opinion*
- Future Prediction*
- Promise of future performance*
Concealment
Nondisclosure (silence)
* credibility/no basis in facts req'd
§159 – Misrepresentation Defined
§160 – When Action is Equivalent to an Assertion
§161 – When Non-disclosure is equivalent to an assertion
§162 – When a Misrepresentation is fraudulent or material
§163 – When a Misrepresentation prevents formation of a K
§167 – When a Misrepresentation is an inducing cause
§168 – Reliance on Assertions of Opinion
§169 – When Reliance on Assertion of Opinion is not justified
§171 – When Reliance on Assertion of Intention is not justified
§172 – When fault makes reliance unjustified [buyer's duty]
§162(b) – When a Misrepresentation is fraudulent or material
Cases
Spiess v. Brandt
Danann Realty Corp. v. Harris
Voiding K - DURESS
Requirements
Duress (Unequal Bargaining Position)
1) Improper threat
Undue Influence
1) Domination or Relationship of dependence and trust
2) Expected to induce assent
3) Actually induces assent
4) Lack of reasonable alternatives
2) Abuse of position by unfairly persuading entry into a K
3) K is adverse to victim's interests
§175 – When duress makes a K voidable
§176 – When a threat is improper
§73 – Performance of Legal Duty
§89 – Modification of Executory K
UCC 2-209 comment 2 [good faith for modifications]
§177 – When undue influence makes a K voidable
Alaska Packers' Ass'n v Domenico
Wolf v. Marlton
Alternate universe Williams v. Walker-Thomas (if he had
bullied/cajoled her)
Voiding K - UNCONSCIONABILITY
Prevention of Oppression and Unfair Surprise
Usually requires both. More of one means less need for the other.
Requirements
Procedural Unconscionability
Substantive Unconscionability
Absence of Meaningful choice
a) Gross inequality of bargaining power
b) Absence of meaningful choice
c) Opportunity to understand
d) Ability to understand [paternalism]
Harsh, unfair, unduly favorable terms
“So one-sided as to be unconscionable” - UCC 2-302 comment 1
§206 – Interpretation Against the Draftsman
§208 comment d – “weakness in the bargaining process”
UCC 2-302 – Unconscionable K or clause
§206 – Interpretation against the draftsman
§208 comment c – “overall imbalance”
UCC 2-302 – Unconscionable K or clause
Cases
Williams v. Walker-Thomas Furniture Co.
Henningsen v. Bloomfield Motors
How to Kill an Adhesion Term
1) Remove from K
2) Reinterpret narrowly (not to apply)
1. Interpretation against the draftsman
3) Duress
4) Unconscionability
1. Hidden on the form (addresses duty-to-read)
2. Inability to bargain (form K)
3. Inability to comprehend
4. Grossly disproportionate value to one party vs other (substantive unconscionability)
Voiding K - MISTAKE
Facts at the time of K
Requirements
Mutual Mistake
Unilateral Mistake
1) Shared Erroneous belief as to the facts at the time of the contract
1) Error concerned facts at the time of the contract.
2) Erroneous fact was a basic assumption (fundamental to shared
intent; K would not have been formed if known)
2) Erroneous fact was a basic assumption (fundamental to intent;
mistaken party would not have entered into K if known)
3) Error has a material effect on the agreed exchange of performance 3) Error has a material effect on the agreed exchange of performance
[most effective is when it is less desirable to party seeking excuse
[most effective when less desirable to mistaken party and more
and more advantageous to other party]
advantageous to other party]
4) Adversely affected party did not bear the risk of mistake.
4) Mistaken party did not bear the risk of the mistake
5) Do the equities favor relief? Either...
(a) Enforcement would be unconscionable, or
(b) Other party had reason to know of mistake/caused mistake.
§151 – Mistake Defined
§152 – When mistake of both parties makes K voidable
§154 – When a party bears the risk of mistake (allocation)
§157 – Effect of fault of party seeking relief
§151 – Mistake Defined
§153 – When mistake of one party makes K voidable
§154 – When a party bears the risk of mistake (allocation)
§157 – Effect of Fault of Party seeking relief
Cases
Sherwood v. Walker
Anderson Bros. v. O'Meara
Gillette's Takeway
Broad/narrow framing of mistake defines whether it is shared or unilateral; Tim Principle is really doing the work here.
Voiding K - IMPRACTICABILITY/FRUSTRATION
Unforeseen events after K formed
Impracticability
Frustration
1) Supervening event occurs, the non-occurrence of which was a
basic (shared) assumption of the K.
2) The event renders performance unduly burdensome
3) The party seeking relief did not cause the occurrenc
4) The party seeking relief did not bear the risk of the occurrence
1) Supervening event occurs, the non-occurrence of which was a
basic (shared) assumption of the K.
2) The event destroys the purpose of the contract. [not profit]
3) The party seeking relief did not cause the occurrence
4) The party seeking relief did not bear the risk of the occurrence
§261 – Discharge by Supervening Impracticability
§262 – Death or Incapacity of Person Necessary for Performance
§263 – Destruction, Deterioration, or failure to come into existence
of thing necessary for performance
§264 – Prevention by Government Regulation or Order
§266 – Existing Impracticability or Frustration
§270 – Partial Impracticability
§265 – Discharge by Supervening Frustration
Taylor v. Caldwell
Transatlantic Financing Corp. v. U.S.
Eastern Airlines v. Gulf Oil Corp.
ALCOA v. Essex Group, Inc.
Krell v. Henry
Lloyd v. Murphy
BREACH
Material Breach
Indicia 1) Extent of deprivation of expected benefit (centrality)
2) Extent to which injured party can be adequately compensated
3) Likelihood of cure
4) Good faith (willful?)
Effect
If Uncured: Discharge of duties; ability to sue for full damages.
If Cured: Ability to sue for any injury caused.
UCC: Perfect Tender
If goods fail to conform in any way to those contracted for, buyer can:
(a) Reject all
(b) Accept all
(c) Reject some and accept some
§235 – Effect of ... non-performance as breach
§237 – Effect on other party's duties of failure to render performance
§241 – Circs significant in determining whether a failure is material
UCC 2-601 – Buyer's rights on improper delivery
UCC 2-714 – Buyer's damages for breach in regard to accepted goods
UCC 2-717 – Deduction of Damages from the Price
Substantial Performance
Indicia
O.W. Grun
1) Intended in good faith to comply with the K
2) Defects not pervasive
3) Defects not a deviation from general plan
4) Defects not so essential that object of K can't be obtained by remedying
J&Y (Cardozo): Dependent or Independent promise?
1) Purpose to be served
2) Desire to be gratified
3) Excuse for deviation from the letter
4) Cruelty of forced adherence
Effect
Does not excuse performance of other party
Entitles other party to damages for the difference in value.
“Satisfaction” - Haymore
Subjective Standard: Undertaking is to do something in which pleasing
personal taste is of predominant importance. E.g. Art
Objective Standard: As to operative fitness. (but see O.W. Grun)
§237 comment d - “substantial performance
§241 – Circs significant in determining whether a failure is material
Jacob & Youngs v. Kent
O.W. Grun Roofing and Construction Co. v. Cope
Haymore v. Levinson
Indicia -
Indicia
1) Extent of deprivation of expected benefit (centrality)
2) Extent to which injured party can be adequately compensated
3) Likelihood of cure
4) Good faith (willful?)
O.W. Grun
1) Intended in good faith to comply with the K
2) Defects not pervasive
3) Defects not a deviation from general plan
4) Defects not so essential that object of K can't be obtained by remedying
Effect
If Uncured: Discharge of duties; ability to sue for full damages.
If Cured: Ability to sue for any injury caused.
UCC: Perfect Tender
If goods fail to conform in any way to those contracted for, buyer can:
(a) Reject all
(b) Accept all
(c) Reject some and accept some
§235 – Effect of ... non-performance as breach
§237 – Effect on other party's duties of failure to render performance
§241 – Circs significant in determining whether a failure is material
UCC 2-601 – Buyer's rights on improper delivery
UCC 2-714 – Buyer's damages for breach in regard to accepted goods
UCC 2-717 – Deduction of Damages from the Price
J&Y (Cardozo): Dependent or Independent promise?
1) Purpose to be served
2) Desire to be gratified
3) Excuse for deviation from the letter
4) Cruelty of forced adherence
Effect
Does not excuse performance of other party
Entitles other party to damages for the difference in value.
“Satisfaction” - Haymore
Subjective Standard: Undertaking is to do something in which pleasing
personal taste is of predominant importance. E.g. Art
Objective Standard: As to operative fitness. (but see O.W. Grun)
§237 comment d - “substantial performance
§241 – Circs significant in determining whether a failure is material
Jacob & Youngs v. Kent
O.W. Grun Roofing and Construction Co. v. Cope
Haymore v. Levinson
Damages - EXPECTATION DAMAGES
Facts at the time of K
Normal Expectation Damages
Types
Expectancy: benefit had K been performed
Reliance: Reliance costs incurred in performance
Lost Volume
Requirements
1) Capacity to make additional sale
2) Additional sale would have been profitable
Restitution: Benefit conferred on breacher
3) Probably would have made the sale absent the breach (buyer resale ≠)
Calculation – 349, 350
Value of Performance + Other loss – Avoided costs – Mitigation
Mitigating Factors
1) Unforeseeability of costs
2) Uncertainty of benefits
3) Duty to Mitigate (only adequate substitutes)
4) Diminution-in-value (subst. perf)
§344 – Purposes of Remedies
§345 – Judicial Remedies available
§349 – Damages based on Reliance Interest
§350 – Avoidability as Limitation on Damages
§351 – Unforeseeability and related limitations on damages
§352 – Uncertainty as a limitation on damages
UCC 2-708 – Seller's Damages for non-acceptance or repudiation
UCC 2-713 – Buyer's Damages for non-delivery or repudiation
UCC 2-717 – Deduction of Damages from the Price
§347 comment f - “lost volume”
§350 comment d - “lost volume”
UCC 2-708(2)
Freund v. Washington Square Press
Hadley v. Baxendale
Hector Martinez v. Washington Square Press
Jacob & Youngs v. Kent
American Standard v. Schectman
Peevyhouse v. Garland Coal & Mining
R.E. Davis v. Diasonics, Inc.
Rodriguez v. Learjet
Types
Expectancy: benefit had K been performed
Reliance: Reliance costs incurred in performance
Restitution: Benefit conferred on breacher
Requirements
1) Capacity to make additional sale
2) Additional sale would have been profitable
3) Probably would have made the sale absent the breach (buyer resale ≠)
Calculation – 349, 350
Value of Performance + Other loss – Avoided costs – Mitigation
Mitigating Factors
1) Unforeseeability of costs
2) Uncertainty of benefits
3) Duty to Mitigate (only adequate substitutes)
4) Diminution-in-value (subst. perf)
§344 – Purposes of Remedies
§345 – Judicial Remedies available
§349 – Damages based on Reliance Interest
§350 – Avoidability as Limitation on Damages
§351 – Unforeseeability and related limitations on damages
§352 – Uncertainty as a limitation on damages
UCC 2-708 – Seller's Damages for non-acceptance or repudiation
UCC 2-713 – Buyer's Damages for non-delivery or repudiation
UCC 2-717 – Deduction of Damages from the Price
§347 comment f - “lost volume”
§350 comment d - “lost volume”
UCC 2-708(2)
Freund v. Washington Square Press
Hadley v. Baxendale
Hector Martinez v. Washington Square Press
Jacob & Youngs v. Kent
American Standard v. Schectman
Peevyhouse v. Garland Coal & Mining
R.E. Davis v. Diasonics, Inc.
Rodriguez v. Learjet
Damages - SPECIFIC PERFORMANCE and LIQUIDATED DAMAGES
Specific Performance
Restatement
1) Difficulty of proving damages
2) Difficulty of procuring suitable substitute performance
3) Unlikelihood of collection of monetary award
UCC
1) “Unique” goods
2) “Other proper circumstances
Exceptions
Liquidated Damages
Penalty determination is a question of law
Test for Penalty:
1) Specifies a single sum in damages for breaches of different gravity
2) Does not reflect a reasonable effort to estimate damages
3) Exceeds the actual damages
UCC 2-718 factors
1) anticipated/actual harm
2) difficulties of proof of loss
3) inconvenience or nonfeasibility of otherwise obtaining remedy
1) Personal service Ks (indentured servitude)
2) Marketing Ks
§357 – Availability of specific performance and injunction
§358 §359 – Effect of Adequacy of Damages
§360 -
§356 – Liquidated Damages and Penalties
UCC 2-718 – Liquidation or Limitation of Damages; Deposits
UCC 2-718 comment 1 - “
UCC 2-719 – Contractual modification/limitation of remedy
Beverly Glen Music v. Warner Comm's
Sedmak v. Charlie's Chevrolet
Klein v. Pepsico
Bander v. Grossman (Aston Martin – if spec. perf. impossible)
Lake River v. Carborundum
Restatement
1) Difficulty of proving damages
2) Difficulty of procuring suitable substitute performance
3) Unlikelihood of collection of monetary award
Penalty determination is a question of law
Test for Penalty:
1) Specifies a single sum in damages for breaches of different gravity
2) Does not reflect a reasonable effort to estimate damages
3) Exceeds the actual damages
UCC
1) “Unique” goods
2) “Other proper circumstances
Exceptions
1) Personal service Ks (indentured servitude)
2) Marketing Ks
UCC 2-718 factors
1) anticipated/actual harm
2) difficulties of proof of loss
3) inconvenience or nonfeasibility of otherwise obtaining remedy
§357 – Availability of specific performance and injunction
§358 §359 – Effect of Adequacy of Damages
§360 -
§356 – Liquidated Damages and Penalties
UCC 2-718 – Liquidation or Limitation of Damages; Deposits
UCC 2-718 comment 1 - “
UCC 2-719 – Contractual modification/limitation of remedy
Beverly Glen Music v. Warner Comm's
Sedmak v. Charlie's Chevrolet
Klein v. Pepsico
Bander v. Grossman (Aston Martin – if spec. perf. impossible)
Lake River v. Carborundum