I)
Remedies
a) Damages: The Basics §346
1) Expectation (MOST COMMON) §347
(A) The position the π would’ve been in had the K been performed
(i) Usually the lost profits (only if “reasonably certain”)
(i) “New Biz Rule” Mindgames didn’t get expectation damages because their
lost profits were too speculative
(ii) Market Value can be used to determine amount
(iii)Hawkins 100% Hand vs. Hairy mangled hand
(iv) Value of promised performance – benefit of not having to complete own
performance
(i) Ex: Late performance causes a building owner to lose $10K rent, but also
benefits the owner from not having to pay $2K in utilities (so $8K
damages)
(v) Proper damages from PE claims if foreseeable and reasonably certain
Dynalectric. ∆ sub contractor refused to do the work on their accepted bid, so
π had to seek out other parties to do the work and were given the difference in
the ∆ bid and actual cost ($10.3M-$7.8M=$2.5M)
2) Reliance §349
(A) The position the π was in before the K
(i) Out-of-pocket cost in reliance on the K
(ii) Usually used when profits too speculative, on losing K’s (no profit), and PE
(i) Goodman v Dicker π was induced to think they had franchised for the sale
of radios. NO K but PE, and No expectation for lost profits b/c too
speculative
(iii)Calculated by cost to π not value to ∆
(iv) Boone v Coe π couldn’t get reliance damages because of the statute of frauds
(>1 year K) and no restitution for their travel because ∆ didn’t benefit
(v) Goodman v Dicker π was induced to think they had franchised for the sale of
radios. NO K but PE, and No expectation for lost profits b/c too speculative
3) Restitution [see I(c)(1)]
(A) ∆ pays π amount = to benefit received from π §373
(i) Prevents unjust enrichment
(ii) The breaching party can recover §374
(i) Britton v Turner a worker could recover in restitution $100 worth of his
$120 yearlong K after he willingly left the farm
1. If ∆ was damaged by breach recovery be amount owed - damage to
non-breacher
2. Breaching party can recover
(ii) Pinches v Swedish Evangelical π Builder breached by not making the
church to ∆ specifications, but sense ∆s congregation was using it π was
entitled to restitution damages (K price – Diminution in Value)
1. Even willful breaches may be recovered if in good faith
(iii)Market Value
(iv) Not available if π has fully performed §373
(v) Even available in losing Ks (likely place to use it
b) Limitations on the Compensation Principle
1) Mitigation
(A) A party must use reasonable effort to avoid damages or risk losing them.
(i) Thou Shalt Mitigate! §350
(ii) Once Breach happens you can’t recover for work completed after the breach.
(Rockingham County v. Luten Bridge)
(iii)Must attempt to find similar work in employment cases
(i) Parker v. 20th Century Fox: what defines a similar position?
1. Lead in Big Country (Australia) not similar enough to lead in Bloomer
Girl (Los Angeles)
2. Dissent says this is too narrow
(ii) Worldcom Michael Jordan claimed he didn’t need to mitigate because he
was a lost volume seller (but he wasn’t)
2) Foreseeability
(A) Party can recover for all foreseeable damages and any special circumstances
as long as they are communicated §351
(i) Hadley π could only recover lost profit for late delivery of crankshaft because
they never communicated that it was the only one they had and because of that
the whole mill was shut down
3) Emotional Damages
(A) Damages for mental distress are generally not recoverable unless K
inherently personal
(i) Valentine jobs are not inherently personal because they are primarily
economic
(ii) Exceptions: Promise to Marry, Improper funeral procedure
c) Restitution/ Contractual Controls on the Damage Remedy: Damage Clauses
1) Disgorgement
(A) Taking a breaching parties profit and giving it to the nonbreaching party
because of the opportunistic/”bad faith” nature of the breach. §39
(i) This can be in excess of the expectation damages
(ii) Watson v Cal 3 ∆ wrongfully took the profits which he was not entitled to, so
ct gave π all profits - ∆s efforts
(iii) §39 Profit from Opportunistic Breach
2) Liquidated Damages and Penalties
(A) “Good Faith” Breacher may recover liquid damages if they can show that the
nonbreaching party has been not been injured Vines v Orchard Hills
(i) Couple wanted to recover down payment (liquidated damages) on a condo
after they had to move to a different state (remanded so Vines could prove
Orchard hills not damaged because increase in value doesn’t work)
(B) Liquid damages CANNOT be penalties!! §356
(i) this would discourage economically efficient breaches
(ii) Amount in question cannot exceed actual costs/damages
(i) Muldoon v Lynch $10 a day for emotional ($7,820 in 1885) too much
(C) Liquid damages clause valid if amount hard to determine, K not
unreasonable, and value not disproportionate
(i) $50 cap for faulty alarm in pawn shop that lost $68k not reasonable, easy to
determine and disproportionate Samson
d) Enforcement in Equity
1) Specific Performance (injunction)
(A) This is an exception to damages when they’re too speculative or the thing in
question is unique
(i) LAND is very unique and thus subject to SP frequently Edge Group
(ii) §360 how to determine if damages are inadequate
(i) Difficulty of proving damages
(ii) Are damages a suitable substitute to performance
(iii)Could damages be collected
(iii)Even when there is no adequate remedy, cts generally will not force SP for
personal services. (NO positive injunction)
(i) Fitzpatrick $8/week and the house to be my nurse reneged (Nurse loses)
(ii) Cts may impose negative injunction on [negative covenants] though
(keeping a party from doing something they indirectly K’d not to do)
1. Lumley opera singer can’t sing anywhere else during the time which
the breached K was supposed to run
II) Legally Enforceable Promises
a) The Bargained-For Exchange
1) To be enforceable, a K must have consideration (be bargained for) §71
(A) Congregation Kadimah Toras-Moshe the synagogue dead guys money after he
orally promised it (Ct: NO consideration, this is a gift and is not enforceable)
(B) Consideration is either a benefit to promisor or detriment to promisee §71
(i) $5k to be a nerd (Hamer v Sidway) (Ct: YES consideration)
(i) Forbearance: giving something up you have the legal right to do
(ii) Marmer π couldn’t enforce K b/c family unity is not enough to “benefit
promisor”
(C) Promise must be adequate to induce K to be consideration (true benefit or true
detriment) §74
(i) Fischer v Union Trust $1 in exchange for a deed of land is not real consideration,
therefore it is a gift
b) Promises Grounded in the Past & Reliance on a Promise
1) A promise based on a moral obligation but made without legal consideration
does not constitute an enforceable contract
(A) Mills v Wyman π took care of ∆’s sick adult son until he died. ∆ then said he’d
pay π (after he had already died). Unenforceable b/c no legal consideration the
promise was based on (son was independent adult and not in ∆’s legal care).
2) When a promisor receives a material benefit and then after promises a promisee
something in return it is enforceable when necessary to prevent injustice. §86
(A) Webb v McGowin Webb must be paid biweekly even after McGowin’s death b/c
that was the promise by McGowin
3) Reliance on a K, unenforceable K, or gift inducing action can be consideration
(A) Seavey v Drake Father promised son deed, so son improved land (expenditure).
Father died w/o conveying deed, but b/c of action by son the promise can be
enforced.
(B) Kirksey v Kirksey bro-in-law induced π to move to his farm and work it.
Eventually kicked her off. (was allowed because it was a gift and she gave up
nothing) Promise must be supported by real consideration.
c) Promissory Estoppel §90
1) 1) A promise which the promisor should reasonably expect to induce reasonable
action by promisee and does induce such action is binding if injustice can be
avoided only by enforcement.
(2) A charitable subscription or a marriage settlement is binding under
Subsection (1) without proof that the promise induced action or forbearance.
(A) Rickets v Scothorn uses Equitable Estoppel but is the same principle. ($2k to not
have my grand-daughter work was relied on so enforceable)
(B) Allegheny College Cardozo found there was an implied duty to name the fund
after Mrs. Johnston, therefore the remaining $4k was to be paid to the school. (he
created consideration)
(C) PE allows reliance to stand in for consideration when justice so requires
(D) Stewart v Cendant π told she had “nothing to worry about” after her husband left
to work for a competing company. She stayed but was soon let go. (PE because
she reasonably relied to her detriment (lost bonus and job prospects). (252)
(E) §139 PE can enforce an oral agreement being barred by statute of frauds.
(i) Requires the same statndards
(ii) Kolkman π moved on and fixed up farm after ∆ promised to let him live there
rent free for helping to maintain the land. ∆ then wanted $550 a month, ct
ruled promise was reasonably relied upon to own detriment so SoF wouldn’t
bar recovery.
(F) Doesn’t need to include all essential details of a transaction Hoffman v Red
Owl
d) Precontractual Obligation
1) Promisor can revoke promise at any time prior to acceptance (exceptions)
(A) Under seal §95
(i) At common law a seal is evidence of the validity of a K (therefore require no
consideration) Thomason v Bescher
(B) Option K §87 binding if…
(i) In writing signed by offeror
(ii) Recites purported consideration, and
(iii)Proposes a fair exchange in a reasonable time
(i) A bid is not an offer until there is acceptance of the bid
1. James Baird ∆ subcontractor revoked bid with incorrect amount 2 days
before π contractor accepted so there was no consideration (no K)
(C) Started Performance (becomes option) §45
(D) Promissory Estoppel on the secondary promise
(i) Drennan same facts as James Baird but the revocation happened after
contractor’s bid was accepted. Traynor tests the bounds of the option and says
PE on the second promise b/c π relied to their detriment
III) The Agreement Process: When (and How) Promises Become Enforceable
a) Mutual Assent, Offer and Acceptance
1) Mutual Assent
(A) To have a valid K there must be an objective meeting of the minds §17
(i) Raffles (π & ∆ K’d for 2 diff Peerless ships) No mutual assent No K
(i) §20 different meanings to the same word (latent ambiguity) No K if
1. Neither party knows or both know or have reason to know
(B) The actions of one party may know or have reason to know that the action will
induce reliance by the other party §19
(i) Embry π relied on ∆’s statement “you’re all right… don’t worry” to mean he
was secure in his employment. (Ct: held a valid K based on reliance)
Offer and Acceptance
(C) §63 Acceptance takes effect when it is out of the offeree’s possession (mailbox)
(i) Mailbox rule: When an acceptance to an offer is put in the mail it is binding
(i) Morrison v Thoelke
(D) An offer is something that can be answered with a yes §24
(i) An ad/letter with general language is not an offer it is an invitation to offer
(i) Moulton v Kershaw
(ii) Would be an offer if it specifically tailored to recipients needs
(ii) Exception in Carlill v Carbolic: ∆ made an ad that could be construed as an
offer due to its direct language. Acceptance could be made if both conditions
(1. Use the ball 2. Get sick) were met (Unilateral K)
(E) Manifested intent not subjective intent makes an offer valid §29
(i) Cobaugh Hole-in-One Car (even though the car was intended for the
tournament only, there was no way for Cobaugh to know that)
2) Unilateral K: Promise for performance (action or inaction)
(A) Can be revoked at anytime before performance has started Petterson §45???
(i) Petterson Kellogg (majority) say the money was not transferred so revocable
(possibly preparation for performance) . Lehman (dissent) says performance
started when he showed up to pay ($780 mortgage reduction)
(B) Once requested action is performed the K is binding!! §45
(i) Brackenbury π were promised deed if they moved in with mom. They did then
mom revoked offer and gave deed to son. (NOPE you can renege here! Binding!)
3) Bilateral K : Promise for a Promise
(A) When in doubt of which type courts tend to go with Bilateral Davis v Jacoby
(Restatement 1st §31)
(i) Davis v Jacoby the offer was accepted by a promise to perform b/c Frank and
Caro had to perform after Mr. Whitehead died as well
(ii) §32 allows the offeree to choose in case of ambiguity (Bi or Uni)
(i) So in ambiguous situations offeree’s performance can be acceptance §62
4) Termination of Power of Acceptance §36
(A) Rejection or counter offer by offeree
(B) Lapse of time
(C) Revocation by offeror
(D) Death or incapacity of either party
(E) Noncompliance with acceptance conditions
(i) Preferred acceptance terms don’t knock out alternative acceptance
methods (such as performance) Allied Steele
b) Limited and Indefinite Promises
1) Mutuality of Obligation
(A) Each party must owe a duty to perform §79
(i) So if one party had the unilateral discretion to perform or not (no
consideration, no K)
(ii) This was overcome in Wood v Lucy when Cardozo set forth a rule that
allowed the K to exist if there is an implied promise to make reasonable
efforts on behalf of the other party. (need not be expressly present in K)
(i) Cardozo says, “No one would enter a K putting themselves at the mercy of
someone else.” (he didn’t like her)
(B) Illusory promises make a K invalid because they don’t actually require
action by the party that make them (totally in that party’s control) §77
(i) “I promise to buy if I feel like it.”
(ii) Omni ∆ argue that there is no valid consideration b/c Omni’s “satisfaction”
with feasibility report would make the promise illusory. Ct ruled that
satisfaction in this case is to an “objective reasonable standard” and therefore
Omni would have to buy if “objectively reasonable” [Not Illusory]
(C) Output K’s require good-faith best efforts to supply (not unconditional)
UCC 2-306
(i) Levy & Sons ∆ stopped producing breadcrumbs for their output k in “bad-faith”
b/c they would make losses (Ct remanded b/c it would be a ? of fact whether
the losses were trivial enough to forego the making of breadcrumbs
(D) Terms of K must be specific or reasonably certain to be binding §33
(i) Sun Printing K’d for 16 months, but only gave price and time for first 4 months,
therefore, when ∆ stopped delivery after 4 months, there was nothing even the
great Cardozo could do
(ii) Exception!! Vohs K stated, “offer is subject to sellers obtaining home of their
choice on or before Feb 20, 2007”. ∆ reneged offer. Π sold to someone else for
less money. Π were entitled to damages b/c the statement was neither illusory
(the choice was not the Vohes, but the homeowners) or indefinite (2 day turn
around, so it was obvious they had a deal set up)
(iii)Doesn’t bar PE Blinn “at least five more years of work to do,” kept π at the
hospital he worked at. Once fired, the statement wasn’t enough to claim breach
of K (b/c there must be mutual assent to form a K), but got π PE (b/c he
reasonably relied on that statement).
IV) Identifying the Bargain
a) The Effects of a Writing & Interpretation of Promises
1) Generally no need to put K in writing
(A) But when done the agreement is usually determined to be integrated (complete)
unless stated otherwise §209
2) PER: bars ev of prior or contemporaneous oral agreements of promise, prior
written agreements (that contradict K or vary a term in the K) §213
(A) 3 part test
(i) Collateral agreement
(ii) No contradiction w/ express or implied provisions
(iii)Not (normally) be expected in writing
(B) Doesn’t cover future agreements (subsequent)
$70 for
$400
per acre
(i) Mithill v Lath (ICE HOUSE) ∆’s orally promised to remove ice house across
the road
(i) Andrews (maj): If it was so important to the π put it in the K
(ii) Lehman (dis): Correct rule, but the K only deals with the land bought not
the other (and it was an implied condition that induced π to buy land)
(C) How to know if there is full integration?
(i) Andrews: K trumps everything; If it can be read as complete it is
(i) Stability, Certainty, Predictability
(ii) Broadens PER scope (? Of Law)
(ii) Lehman: View the entire circumstance, (How credible is the evidence)
(i) Flexibility, Fairness
(ii) Narrows Per (? Of Fact)
(D) PER Pros and Cons
(i) Pros: protects from fraud, encourages contracting standard, reduces litigation
cost
(ii) Cons: disregards intent, not functional, increases transaction costs
(E) PER Exceptions
(i) Separate consideration (Independent Collateral Agreement)
(ii) Naturally omitted terms
(iii)Doesn’t contradict
(iv) Partial integration
(i) §215 can’t contradict
(ii) §216 allows additional terms that are consistent if the K is not fully
integrated
1. Hatley ∆ used buyout option to take back possession of land being
used by the π. Π brought forth evidence that this was only supposed to
last for the first 30-60 days of the K (The K stated no time) So this is
not inconsistent
2. §214 allows prior agreements/ negotiations as evidence (sometimes)
3. 2-202 is the UCC exception to PER
(v) NO Written K
(vi) Fraud (in inducement)
(i) Lipsit New York law Parole Evidence can be produced for fraud in a tort
claim not a breach of K. π left job for ∆ oral promise for equity interests
that he never received (sued for misrepresentation)
1. Promissory Fraud: never intending to follow through on the promsie
a. Can only get resitution here
b. Can’t get PE where PER applies
(ii) LaFazia π (the bad faith party) want remainder on promissory note ($10k).
∆: no you frauded us. Ct: (1) you can’t rescind b/c you started making
payments (2) specific disclaimer barred fraud claim (“does not rely on any
rep of the seller w/ respect to the same”)
(vii) Mutual Mistake
(i) Hoffman v Chapman Chapmans and Hoffmans agreed upon a piece of a
piece of land. Deed accidently conveyed the whole amount of land. Parole
Ev allowed to determine the parties true intent
(F) Merger Clause: says fully integrated (Andrews agrees) (Lehman will factor this
in)
(i) WWW Associates merger clause said the K was fully integrated (so a clear
unambiguous clause that gave either party the right to cancel the k after a
certain date if litigation of some issue was still ongoing was held binding)
(i) PER would apply b/c ev would contradict the K
(G) Extrinsic Ev can be used to interpret the language of a K (ambiguity)
(i) Pacific Gas (intentions not words are the basis for Ks) [look at the totality of
the circumstances] (allows Parole ev)
(i) Opens the door for more litigation when not needed
(ii) Frigaliment To interpret, cts may consider the plain meaning of the term, the
negotiations between the parties, trade usage, other contract provisions,
market factors, and the course of dealing between the parties.
(H) K can’t incorporate terms of a separate doc if it is unclear what document is
referenced Hess
(I) A K is generally interpreted according to the plain meaning of its terms
(i) Even if the result is unexpected by the parties
(ii) Hemenway 10% royalty on sales price = 10% royalty (regardless if part of the
sales price is an unexpected sales tax)
3) STATUTE OF FRAUDS!!!!!
b) Contracts without Bargaining
1) A counter offer is a rejection of the offer
(A) Livingstone “Cannot reduce price” was a rejection and a counteroffer for the
original offer of $1800
(B) “Last shot rule” the offer remaining is the last real shot
(C) EXCEPTION: If the offer was an option K, the C/O doesn’t kill it
(D) §59 a reply to an offer that adds additional terms is not acceptance but a C/O
2) UCC 2-207
(A) Is there a K? What are the terms?
(i) Different Terms: Conflicting terms are dropped (knock out rule)
(ii) Additional terms: Extra terms
(i) Not merchants (they are proposals and most likely dropped)
(ii) Merchants: they become part of the K unless (expressly limited, materially
alter the K, objection w/in a reasonable time
(B) 2-207(3) conduct of the parties can make a K even though the writings don’t
recognize one
3) Shrink-wrap licenses are enforceable
(A) Unless objectionable or unconscionable terms
(B) Pro CD a license agreement that only showed up on screen after the purchase and
download of a program can be binding if the user was given enough time to return
the program
(i) 2-204(1), “a contract for sale of goods may be made in any manner sufficient
to show agreement, including conduct by both parties which recognizes the
existence of such a contract.”
(ii) 2-206 a buyer accepts when he fails to make an effective rejection (2-602)
(iii)Subsequent cases (w/ same facts)
4)
5)
6)
7)
(i) Hill (Easterbrook) UCC binds consumers to purchase agreements inside
the package as long as there is ample opportunity to reject/return them
1. A K need not be read to be enforceable
(ii) Klocek (Sotomayor) §2-207 protects non-merchants from additional and
different terms they did not expressly agree to
1. NOTICE
Can’t hide terms to a K
(A) If a party is unaware of terms b/c hidden, no mutual assent, no K
(i) Specht π needed to download “Smart Downloader” to download
“Communicator”. “C” had clear terms, but “SD” did not. Πs reasonably
thought this was a gift and not a K b/c the whole thing was free. (Netscape
was collecting data on the internet usage of their customers)
(ii) Grosvenor π was aware even though after clicking “I agree” Grosvenor had to
search through the website for the arbitration clause. The agreement was
conspicuous b/c the language on the “I agree” screen was clear about the
arbitration clause, the welcome letter referenced it again, and he had 30 days
to change his mind.
1. Π eventually won though b/c the K was illusory. ∆ could’ve
unilaterally changed the terms of the K (even though they didn’t)
(B) How to overcome hidden terms
(i) NOTICE, Draw Attention, Clear Headings, Ask customers if they want
disputable terms
Silence is not acceptance unless… §69
(i) Taking the benefit of the offered services w/ reasonable opportunity to reject
(ii) Reason to believe silence would be acceptance
(iii)Past dealings makes silence seem like acceptance is acceptance
(i) Hobbs Prior history of π sending ∆ eel skins and then having ∆ accept is
reason to believe that silence from ∆ constituted acceptance again
Implied K
(A) An agreement which can legitimately be seen by intent through evidence and
common sense
(i) Can only exist in the absence of an expressed K
(ii) Based upon the conduct of the parties
(iii)Unsolicted goods can be viewed as a gift
(iv) Implied in Fact: Expectation
(i) Intent based on facts (there was an implied real K based on the conduct)
(v) Implied in Law: Restituion
(i) Intent unnecessary (Public policy, unjust enrichment finds a quasi K)
(ii) Volunteers have no right to restitution
(iii)Martin v Little Brown π tipped off ∆ publisher that one of its books was
being plagiarized. ∆ brought suit against plagiarizer, but π is entitled to
nothing b/c his services were not sought out by ∆
Standardized Forms
(A) “Take it or Leave it”
(B) Duty to read, and thus duty to perform
(C) Benefits of Standardized forms
(i) Protects consumers
(ii) Efficiency (quick “negotations”
(iii)Lowers cost for the whole
(iv) Convenience
(v) Doesn’t require consumer expertise
(D) Henningsen Warranty disclaimer for the sale of a car indirectly barred recovery for
personal injuries. Ct doesn’t like this.
(i) Unclear warranty can’t bar recovery especially when the bargaining
positions of the parties are grossly unequal. (here there were no alt b/c all 3
american car manufacturers used the same terms)
(E) Exculpatory Agreement can be voided if public policy outweighs freedom to
K (3 factors) Richards v Richards (facts under the factors)
(i) Insuffcient notice
(i) The “Passenger Authorization” agreement wasn’t clearly an exculpatory
agreement
(ii) Too Broad
(i) The agreement covers ALL liability that have anything to do with any of
the companies vehicles
(iii) No negotiating power
(i) This is a take it or leave it option (she can’t ride otherwise)
c) Mistake, Misrepresentation, Warranty, and Non-Disclosure
1) Nondisclosure: there is generally no duty to disclose information (unless…)
(A) Info not accessible to both parties (inequality of bargaining position)
(i) Laidlaw π knew the War of 1812 had ended but when asked if there was any
reason to expect the price of tobacco to rise said he didn’t. (ct ruled for π
saying had no duty to disclose the info.
(i) Ct said you had to be careful not to mislead (which there is probably a
good argument for in this case)
(B) Previous assertion lead to a misrepresentation of subsequent info §161(a)
(C) Correct an assumption made by the party that they are making the decision
to K on §161(b)
(D) Correct a mistake of the other party as to the contents/effect of the K §161(c)
(E) Fiduciary duty exists §161(d)
(i) Jackson v Seymour ∆ bought π (sister) land and unintentional frauded her b/c
the land was worth 10x price paid. Ct made him give the land back for his
payment b/c there was a fiduciary duty to inform his sister
(i) Constructive fraud (this is a legal fiction)
(ii) This case is an exception because lack of consideration does not usually
invalidate a K
2) Mutual Mistake (the K is voidable by the adversely affected party) (unless he
bears the risk) §152
(A) §154 Party bears the risk when…
(i) the agreement stipulates it
(ii) is aware of his own limited knowledge, but treats knowledge as sufficient
(i) This is the dissent argument in Rose of Aberlone
(iii)the ct allocates risk based on reasonable circumstances
(B) OLD COMMON LAW RULE Rose of Aberlone
(i) Let ∆ keep the cow because of mutual mistake, even though the dissent
pointed out that this was a gamble by both sides and the ruling simply allowed
the ∆ to revoke the K because his gamble was incorrect
(i) The thing bargained for was substantively different than the actual cow
1. Tracy v Morell (stolen tractor fits here too)
2. ADD TWO SCHOOLS OF THOUGHT HERE
3) Unilateral Mistake can’t voided unless..
(A) Unconscionable
(B) Other party had reason to know about the mistake (or did)
(i) Elsinore plumbing row empty when π knew when they accepted but didn’t. This
was an honest excusable mistake
(i) Can rescind based on clerical errors (not judgment errors) even though this
was an open option K
1. May have forced ∆ to keep K if π was relying on it
(C) Other party caused the mistake
4) Warranty (UCC 2-313-316)
(A) 2-313 Express warranties by Affirmation, Promise, Description, Samples
(B) 2-314 (If Merchant) Implied warranty that goods are fit for intended use
(C) 2-315 (If Merchant) Implied warranty that goods are fit for a particular use the
consumer may be seeking
(D) 2-316 Exclusion or Modification (“as is” “with all faults”)
(i) Restrictive purpose terms imply a warranty that land/good is capable to
be used in that capacity
(i) Hinson v Jefferson Sewage in the flood plain case
1. This was a deed for land (not UCC), but it was really for a house
a. Most cts say this can’t extend to “raw” land
(E) Tribe Expressed statement about past behavior is not an expressed warranty
(i) There is no “No Buck” warranty
(F) Warranty extends to innocent misrepresentations
(i) Johnson v Healy ∆ told π house was made of the best materials. Π relied on
this statement when he bought the house. House settled. Warranty found (π
recovered representation-actual condition)
(G) Cushman (2 rules) ∆ sold π house. Π relied on statement that water was fine (it
was sulfuric). Π out $5k to hook up the water to a nearby town.
(i) Wife was fraudulent b/c she misrepresented the quality of the water (if you
have full info and disclose only partial info that the other party doesn’t have
info about that is fraud)
(ii) Husband b/c he did not correct wife’s misrep (duty to speak)
d) Changed Circumstances
1) Impossibility: impossible to render performance of the K
(A) Taylor v Caldwell Concert Hall burns down so the K can no longer be performed
so K can be voided (obviously)
(i) Existence of the Concert Hall was an implied condition of the K
(B) A contractual duty to perform is not excused by inevitable accident or any other
unforeseen event not within the control of the parties.
(i) Tompkins v Dudley schoolhouse ∆ was to have completed for π burned down
when it was nearly completed. (The rule says the ∆ had a duty to complete and
it isn’t impossible to do so) Go build it again! (∆ incurred the risk)
(C) Bowerstock Restitution is recoverable for partial performance of
modifications to specific building if performance becomes impossible
(i) B/c whatever was incorporated into the warehouse was a benefit
(D) Kel Kim not being able to obtain insurance (when the K stated that they must do
so) was not unforeseeable and thus cannot be used as a defense
2) Impracticability: performance becomes unreasonably burdensome
(A) American Trading the close of the Suez due to the 6 days war did not make the K
commercially impracticable (They did perform) (they also assumed the risk when
they crossed the Med Sea and made the K)
(i) Mere increase in cost is not enough (must be extreme)
(B) YPI it is foreseeable that you may not be able to find a lender to finance the
purchase of property (especially at $124m)
(i) The finiacial crisis of 2008 doesn’t constitute imposs/impract
(i) Macro Econ conditions not enough to get out of a K
3) Frustration of Purpose: entire purpose for entering K is gone
(A) Krell π (suing for the remainder of K amount) rented his apartment to ∆ for the
sole purpose of watching the coronation of King Edward VII. When the
coronation was postponed the K was voided and ∆ was allowed to get back his
partial payment.
(B) Chase Precast when MA decided to change their K with ∆ to not put anymore
median barriers in their public work project, ∆ was allowed to cancel the remaining
order with π (had to pay for only those they used)
V) Policing the Bargain
a) Duress, Coercive Renegotiation & Unconscionability
1) Duress in Inducement: coercing the other party into making a K §175
(A) Batsakis ∆ got 500k Greek (worth $25) for an agreement to pay π $2k plus
interest after the war. ∆ argued duress in inducement, but the ct didn’t bite.
(i) Minimal consideration is enough to make a K valid
(i) Unconscionability may not allow this to happen today
(B) Alaska Packers ∆ agreed to pay π fishermen more money when they threatened to
not fish and ∆ couldn’t find any replacements. Ct held that ∆ didn’t have to pay
the $100 amount b/c the consideration for the new K was the fishermen’s
preexisting legal duty
(i) §73 Preexisting Legal Duty: can’t use what you are already legally obligated
to do as consideration for a new a promise
(ii) 2-209 (1) agreement needs no consideration to be binding (needs proof of a
legitimate waiver though) [wouldn’t apply above b/c K not for goods]
(C) Austin Instruments ∆ seeked to recover payment for parts they were coerced into
paying a higher price for b/c π was going to withhold all shipments unless they
paid more. ∆ (supplier to the navy during Vietnam) agreed to the coerced terms so
they did lose biz with Navy and Patriotism (lol)
(i) Ct ruled for ∆ voidable on the grounds of Economic Duress
(i) Economic Duress factors
1. Improper threat
a. Bad-faith (threat of breach)
2. Lack of Alternative
3. Damages would be inadequate breach remedy
a. Like in this case losing future navy K’s
2) Coercion
(A) Can’t modify a duty under a K that has not been fully performed unless…
(i) Fair and equitable in the circumstances no anticipated
(ii) A statute gives authority
(iii)Justice requires enforcement in view of material change in postion in
reliance on the promise
(iv) Levine π wanted 2nd year rent reduced to $175 due to economic adversity
(i) Economic adversity is not sufficient consideration to support subsequent
agreement/modification to the K
(ii) There is also a preexisting duty here §73
(v) Hackley v Headley π took ∆s offer (which was $2000 less than what he was
owed) due to is poor financial state. Then sued arguing duress/coercion.
(i) Ct: No ∆ did not put you in the financial situation you were in. Only
duress if compelled to commit to an illegal exaction
(B) Denney v Reppert ∆ (officer) is the only one allowed to collect the reward b/c he
was outside his jurisdiction when he apprehended the robbers
(i) Agents, employees, and public officials acting w/in the scope of their
duties cannot collect a reward (similar to preexisting duty)
(C) Universal Builders ∆ agent orally promised to pay π for more work (the K said no
oral modifications) ∆ agent then watched as π did more work. Π sued to recover
what it was orally promised. Ct: manifestly unjust to not allow payment here)
(i) There are shades of PE here (the court does not like bad faith)
(ii) 1st §224 condition may be excused by oral modification, if the promisee
changes position in reliance on that new oral agreement
(iii)2-209 (2) allows changes like this between merchants
(D) Waivers can waive non material aspects of the K (if materially ct will question it)
3) Unconscionability
(A) Unconscionable Ks will not be enforced §205, §208
(i) Unconscionable if no reasonable person would agree to terms
(ii) Gross disparity in consideration
(i) Woolums 40ç for $15 per acre (ct says unconscionable so π doesn’t have
to sell to evil ∆)
(ii) Waters π induced by ∆ and boyfriend to sell ($189k annuity for $50k) Ct
says unconscionable on two counts procedural and substantive
1. Procedural: unfairness in the bargaining process (factors)
a. Circumstances (signed on hood of car)
b. Gross disparity in consideration
c. High pressure tactics (∆ took advantage of π)
d. Misrepresentation (∆ lawyer’d π not)
2. Substantive: Resulting K is unfair (outcome)
(iii)Inadequacy of consideration can be considered in unconscionability cases
(B) Williams v Walker-Thomas
(i) PU: terms were hidden, hard to understand, no bargaining
(ii) SU: The k wouldn’t allow π to payoff items effectively
(C) Brower v Gateway adhesion arbitration clause was not PU, but was SU b/c
arbitration clause was a little difficult to find and the cost of going to arbitration
was so high it basically acted as a deterrence
VI) Performance and Breach of Contractual Obligations
a) The Interdependence of Promises
1) Most promises are dependent
(A) Kingston Implied Promissory Condition Precedent b/c the security needed to be
given to the ∆ before the π would receive the business
(B) K & G π promised to pay ∆ for “workmanlike performance” ∆ caused damage to
a wall and refused to fix or pay. Π refused to pay and eventually found new sub
(i) Ct promises were mutually dependent so π didn’t have to pay b/c obligation
was intertwined with ∆s breached promise to work
(C) Independent Promises (RARE)
(i) Price v Van Lint b/c it was reasonable to assume the deed may not make it
back in time (WWII in Holland) the loan and deed exchange were
independent promises
(ii) If it is unclear go with dependent
(D) §234 Order of Performance
(i) If performance can be simultaneous then they are due simultaneously
(ii) NO Condition Precedent
(E) §238 Effect of other parties failure to perform
(i) If one party fails to perform (simultaneous) other party still has duty
2) Anticipatory Repudiation §253
(A) Party can repudiate if they reasonably believe the other party is in breach
(i) Wholesale Sand ∆ breached b/c π’s conduct suggested he was not going to
finish the job even though he was planning on it (said 1 week, had 90 days,
repeatedly said he’d “get right on it”)
(ii) THIS IS DANGEROUS!! Only do it if you know for sure the other party has
breached
(iii) A formal demand for performance is not needed when the other party is
unable to perform (executory K)
(i) Ziehen ∆ could’ve actually performed by paying off the mortgage on the
15th, therefore he could’ve performed. Π needed to give demand for
performance in this case to prove breach (Ct found this way because they
don’t like anticipatory repudiation
3) Work before pay (exceptions galore)
(A) Stewart v Newbury π wants payment for the amount of work (3 months 1 floor)
they have done for the ∆ (because of an apparent 85% “usual pay”). Tr ct gives it
to them, Ct: no the work must be substantially performed before payment (R&R
to decide if substantially performed)
(B) Exceptions to mitigate the harsh rule
(i) Restitution Britton
(ii) Substantial performance Stewart
(iii)Divisible Ks
(i) Tipton π’s delivery of slaughtered hogs should have been met with
payment for the slaughtered hogs (doesn’t have to wait until 2nd delivery
live hogs)
(ii) Divisible Ks: separate promises for performance can be divided if they can
be exchanged into corresponding pairs §240
1. This allows partial recovery in a sense because the divisible K can be
fully performed
b) Conditions
1) Condition: required performance of something (that is uncertain) before the
other party performs §224 (If not performed then the other parties performance
is excused)
2) Exceptions (4)
(A) Promise: required not to do something (allows recovery less harsh)
(i) Howard v FCIC π destroyed tobacco stalks before inspection to replow his
field. ∆ said this was a CP and that π not entitled to insurance payment. CT:
viewed the provision ∆ relied on as a promise (which allows potential
recovery)
(i) §261 cts will not construe a provision as CP unless expressly stated
1. Cts want to protect parties against full forfeiture
(B) Prevention Doctrine: nonoccurrence of CP will not excuse parties
nonperformance if they materially contributed to nonoccurrence §245
(i) Moore Bros. ∆ had a CP “pay when paid” clause w/ π (subcontractors),
however when their misleading of lenders caused payment not to be available
they were still liable to pay π (subs) b/c their actions materially caused the
nonoccurrence of their payment first
(C) Impossibility §271
(i) Royal π (insurer) was not liable to ∆ (insuree) for not paying for personal
injuries because she did not comply w/ condition of notification by waiting 4
months to notify them of the hit and run.
1. There were 2 conditions
a. Notice W/in 24 hours (she was in the hosp so this one was
impossible and would not bar recovery)
b. Give prompt response (4 months later is not prompt)
(ii) Grenier π was supposed to get certification from city engineer to prove work
completed (CP). ∆ says won’t pay b/c didn’t get it (got city attorney 10 days
later) City engineer didn’t issue these so it was impossible, and this was
material (the material part was having a proper road.
(D) Waiver/Estoppel
(i) Conduct can waive a condition (but proper notice can reinstate it)
1. Porter v Harrington ∆ consistently allowed late payment for 3+years
from π (even though there was a timeliness condition). This action
waived the condition and didn’t allow ∆ to evict π for late payment
later on
2. Clark v West π was give $4 per page incentive CP to abstain from
drinking while writing a text book (the purpose was so the ∆ cold
obtain a well written book) π drank a little, but wrote a good book and
alleged a waiver. If waiver proven then he gets extra $4 per page (even
though he directly broke the expressed wording of the K, he fulfilled
the implied purpose behind it) (THE CP was not material)
a. Preexisting legal duties cannot be constued as waivers
i. Clark (the acceptance of the book at $2 per page wasn’t the
waiver)
(E) Avoiding FORFEITURE
c) Breach
1) Substantial performance (not 100%) with some deviation does not = breach
(A) Strouth peanut to kidney pool = Material deviation & thus breach §241(a) and (d)
VII) Rights and Duties of Nonparties