Contracts Short Outline

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Offer and Acceptance
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Elements of a contract: Offer, acceptance, consideration, mutual assent
An offer must be reasonably certain, meaning that a reasonable person in the offeree’s
position would conclude that communication of acceptance is all that is necessary to
form a binding contract.
The test of the true interpretation of an offer or acceptance is not what the party
making it thought it meant or intended it to mean, but what a reasonable person in the
position of the parties would have thought it meant.
“To be enforceable and valid, a contract to enter into a future covenant must specify all
material and essential terms and leave nothing to be agreed upon as a result of future
negotiations.” Walker v. Kieth
“The fact that parties contemplate that a formal agreement will eventually be executed
does not necessarily render prior agreements mere negotiations, where it is clear that
the ultimate contract will substantially be based on the same terms as the previous
document. If the parties intended the previous document to be binding, that intent
would not be defeated by the mere fact that a formal agreement is yet to be drawn.
However, parties may specifically provide that agreements are not final until the formal
agreement is executed.” Quake Construction
General terms that must be included in an offer: the price, the parties, and the subject
of the agreement.
Consideration
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Consideration is either a detriment to the promisee or a benefit to the promisor. The
promisee’s detriment must be bargained for in exchange for the promise.
Consideration arising from events that happened before the agreement is not
consideration, and morality and/or appreciation of past services is not consideration
Plowman v. Indian Refining Co.
In general, a waiver of legal right at the request of another party is sufficient
consideration for a promise. It is enough to say that something is promised, done,
forborne or suffered by the party to whom the promise is made as consideration for the
promise made to him.
The promise must induce the detriment and the detriment must induce the promise.
If the promisor simply intends to make a gift to a promise contingent upon some small
act by the promisor, it’s just a conditional gift
UCC Battle of the Forms
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UCC 2-207 (quizlet)
o A change is material under 2-207(2) when it is surprising and substantial
economic hardship has occurred.
The UCC applies to contracts that are based predominantly on the sale of goods,
common law applies to all else.
A contract is based on the sale of goods if it satisfies one of these two tests:
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o Predominate Purpose Test- Why have they entered the contract? What is the
main purpose of the sale?
o Gravamen Test- Where is the primary controversy in the contract? What is its
primary value?
Non-Contract Remedies (P.E., U.E., P.R.)
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Elements of Promissory Estoppel (Restatement): (1) a promise which the promisor
should reasonably expect to induce action or forbearance of a definite and substantial
character on the part of the promisee, (2) such reliance action or forbearance does
occur, (3) such reliance is reasonable, and (4) injustice can only be avoided by
enforcement of the promise
o Reliance usually occurs when there is a change in position of the party relying
Restatement Definition of a Promise - A manifestation of intention to act or refrain from
acting in a specified way, so made as to justify a promise in understanding that a
commitment has been made.
Elements of unjust enrichment: (1) one party provided another party with a valuable
item or service, expecting compensation in return, (2) the recipient benefited from that
item or service, and (3) equity demands that the recipient provide reasonable
compensation in return for the benefit.
o Justice is only offended if the claimant meets two criteria: (1) The claimant must
not have intended to confer the benefit gratuitously and, (2) must not have
imposed it on the recipient.
o The claimant had gratuitous intent if a reasonable person in the recipient’s
position would perceive the grantor as not expecting compensation, the intent is
gratuitous, no matter what the grantor claims to have been thinking.
Contract implied in law: (same thing as a quasi contract) An instrument the court puts in
place in order to give way to a claim of unjust enrichment. A C.I.I.L. is not based on the
findings, by a process of implication from the facts, of an agreement between the
parties. It is a legal fiction, an obligation created by the law without regard to the
parties’ expression of assent by their words or conduct.
o The elements of a C.I.I.L. are the same elements as unjust enrichment.
Contract implied in fact: Has the same legal effect as a regular contract. It is based on an
implicit promise, one that is inferred from the parties’ conduct, not solely from their
words. A contract implied in fact is not put into promissory words with sufficient clarity,
so a fact finder must examine and interpret the parties’ conduct to give definition to
their unspoken agreement.
Promissory Restitution: Claim can be held when one party confers a material benefit on
the other party and the benefiting party makes a promise to pay for the benefit after
the act causing the benefit occurs. The obligation to pay must not be based on a purely
moral obligation; it must have a legal duty.
o (1) A promise made in recognition of a benefit previously received by
the promisor from the promisee is binding to the extent necessary to prevent
injustice.
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o (2) A promise is not binding under Subsection (1)
 (a) if the promisee conferred the benefit as a gift or for other reasons
the promisor has not been unjustly enriched; or
 (b) to the extent that its value is disproportionate to the benefit.
Statute of Frauds
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SOF requires that there be a writing that identifies the basic terms of the contract,
makes clear either that the contract has been made or that an offer has been made by
the person who signed the writing, and is signed by the person asserting that the statute
of frauds precludes enforcement of the contract.
UCC 2-201 requires contracts for the sale of goods for the price of $500 or more to be
evidenced by a writing singed by the party against whom enforcement is sought, unless
some exception to the statute applies.
o A check may constitute a writing sufficient to satisfy the requirements of 2-201
provided it (1) contains a writing sufficient to indicate a contract of sale between
the parties, (2) is signed by the party or his authorized agent against whom
enforcement is sought, and (3) states a quantity.
SOF applies to contracts that by the express terms of the contract it cannot be
performed in less than one year.
The SoF requires sale of land, or any interest in land, to be backed up by writing.
o Restatement- A contract for the transfer of an interest in land may be specifically
enforced notwithstanding failure to comply with the Statute of Frauds if it is
established that the party seeking enforcement, in reasonable reliance on the
contract and on the continuing assent of the party against whom enforcement is
sought, has so changed his position that injustice can be avoided only by specific
enforcement.
A signature, both under the restatement and the UCC, is defined as “any symbol
executed or adopted by a party with present intention to authenticate a writing.”
The statute of frauds does not require the memorandum to be in one document. It may
be pieced together out of separate writings, connected with one another expressly or by
the evidence of subject matter and occasion. Restatement (contracts) sect 208 subd. A.
o Sufficient connection between the signed and unsigned papers is established
simply by a reference in them to the same subject matter or transaction. Oral
testimony should be admitted to show the connection between the documents
and to establish the connection between the D and the contents of the unsigned
document.
A promissory estoppel claim negates the S.O.F.
Principles of Interpretation
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UCC 2-208 course of performance; practical construction
Restatement (second) 204- When the court concludes that the parties did not make an
agreement but evidence of intent to be bound or the degree of performance already
rendered may cause recession of the contract to be inappropriate, the restatement
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recommends that in those situations the court should supply a term that is reasonable
under the circumstances.
When A knows or had reason to know what meaning B attached to the disputed terms
and that B did not know or have reason to know what meaning A attached to the terms,
the court should conclude that the contract is on B’s terms.
When one of the parties is not a member of the trade/industry or other circle, his
acceptance of the standard assumed in the trade must be made to appear by proving
that either he had actual knowledge of the usage or that the usage is “so generally
known in the community that his actual individual knowledge of it may be inferred.”
o Trade usage term only needs to be proven by preponderance of the evidence
Restatement (second) Contracts 540-541: “Although customers typically adhere to
standardized agreements and are bound by them without even appearing to know the
standard terms in detail, they are not bound to unknown terms which are beyond the
range of reasonable expectation.”
o A party who adheres to the other party’s standard terms does not assent to a
term if the other party has reason to believe that the adhering party would not
have accepted the agreement if he had known that the agreement contained the
particular term.”
o “Reason to believe may be inferred from the fact that the term is bizarre or
oppressive, from the fact that it eviscerates the non-standard terms explicitly
agreed to, or from the fact that it eliminates the dominant purpose of the
transaction.”
o “The inference is reinforced if the adhering party never had an opportunity to
read the term, or if it is illegible or hidden from view.”
Parole Evidence
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“Gist” of the parole evidence rule- When the parties to a contract have mutually agreed
to incorporate or integrate a final version of their entire agreement in a writing, neither
party will be permitted to contradict or supplement that written agreement with
“extrinsic” evidence (written or oral) of prior agreements or negotiations between
them. When the writing is intended to be final only with respect to a part of their
agreement, the writing may not be contradicted, but it may be supplemented by such
extrinsic evidence.
Complete integration vs. partial integration
o A complete integration occurs when a writing is intended to be a final and
exclusive expression of the agreement of the parties.
o A partial integration occurs when a writing is intended to be final but not
complete because it deals with some but not all aspects of a transaction
between the parties
Exceptions to parole evidence rule- Rule does not apply to:
o Evidence offered to explain or interpret the agreement, but only if contract is
partially (not completely) integrated
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o Evidence offered to invalidate the contract as a whole (fraud, duress, mistake,
lack of consideration, illegality etc.)
o Evidence offered to show a collateral agreement- The collateral agreement
either must be such that it would have naturally been omitted from the contract
or that it has separate consideration
o Evidence offered to show agreements made after the execution of the writing
o Evidence offered to show contract was subject to an oral condition precedent
o Evidence offered to provide an equitable remedy, such as reformation of the
contract. Only if it’s clear that parties intended agreement to contain the
equitable terms.
UCC 2-202; 2-208 (course of performance); 2-209 modification/waiver
Implied Terms
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UCC § 2-306 (Output, Requirements and Exclusive Dealings)
UCC § 2-309 (Absence of Specific Time Provisions; Notice of Termination)
Under the Uniform Commercial Code, when a contract does not provide a specified
duration, the party terminating the agreement must provide reasonable notice of
termination.
A distributorship agreement is a contract for the sale of goods, not a service contract.
So, the UCC applies.
Warranties
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§ 2-313. Express Warranties by Affirmation, Promise, Description, Sample.
§ 2-314. Implied Warranty: Merchantability; Usage of Trade
§ 2-315. Implied Warranty: Fitness for Particular Purpose
§ 2-316. Exclusion or Modification of Warranties
§ 2-317. Cumulation and Conflict of Warranties Express or Implied
In order to prove that a product is not merchantable, the P must first establish the
standard of merchantability in the trade.
To establish an implied warranty of fitness for a particular purpose, the buyer must
prove as a threshold matter that he made known to the seller the particular purpose for
which the goods were required.
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