FORMATION
Acceptance
Terminate before acceptance? (R.2d 36)
If offer do not specify, then either returned
promise or return performance (R.2d 32)
Is there a Promise
Lapse of Time
Unilateral
Bilateral
a. Majority approach:
Returned
does not bound offeree to
promise
complete performance
(Cook v. Coldwell
Banker) (R.2d 45)
Create an option
Silence (R.2d 69)
contract
Generally not acceptance
unless (check outline)
b. Minority approach:
1. Specific offeree
2. Definite terms
3. Intention to be bound
No
Can he revoke?
Yes, unless:
Revocation
Is there an offer?
Yes
Rejection
1. Option Contract (Kmoch)
2. Mere recital* (§ 87(1)a)
3. Estoppel
Counter-offer
Did he revoke?
1. Offeror acted inconsistently
2. Offeree learned through
reliable source (§ 43) (Kmoch)
Ads* (Lonergan)
Is there Consideration?
1. Benefit/DetrimentTest
2. Bargained-for Exchange (R. 71)
* Charitable Cause
a. Maj: still need consideration (King v. BU)
b. Min: waive consideration (R.2d 90b)
Mailbox Rule (R.63)
i. Bilateral (§ 87(2)) - Drennan
ii. Unilateral (§ 45) - Cook
Death/Incapacity
No
Beginning performance
bound offeree to
complete performance
(R.2d 62)
unless it is rewards
(Sateriele v. R.J. Reynolds)
Did he revoke in time before
acceptance was sent?
Yes
Terminate power of acceptance
Invalid Consideration
1. Sham/nominal/recital
consideration
2. Past performance /
Preexisting Legal Duty
3. Inadequacy
4. Illusory Promise
5. Gift / "prize"
Promissory Estoppel (R.2d 90)
If not
1. Promise
2. Reasonable Expected Reliance
3. Actual Reliance
4. Injustice
Promissory Restitution
Non-Promissory Restitution
1. Renewed promise
2. Promise to perform a voidable obligation
3. Promise to pay a debt discharged by
bankruptcy
4. Material benefit rule (R. 86) - Webb v. Gowin
Pop's Cone / Harvey v. Dow
1. Benefit received
2. D has knowledge of that benefit
3. D has accepted or retained that benefit
4. It would be inequitable for D to retain
benefit without paying value
TERM INTERPRETATION
Plain Meaning Rule
Do parties agree on the terms?
Patent ambiguity
Is the word ambiguous on its face?Yes, go to Parol Evidence for extrinsic evidence
Partially Integrated
Yes
No
Do both parties know / did not know?
That meaning governs
R.2d 201
Yes
No
Gap Filler
Parol Evidence
What is the level of
integration?
Add or explain only
Cannot contradict terms
Completely Integrate
No contract
Who has reason to know?
Explain only
Cannot add or contradict terms
(Thompson v. Libby) (R.2d 215)
R.2d 201(3)
The meaning of innocent
party prevails
R.2d 201(2)
Context
Latent ambiguity
Review extrinsic evidence through Parol Evidence
then decide if there is ambiguity (R.2d 210)
Exception
1. Explain ambiguity
2. Subsequent agreement
(modification)
3. Oral conditions
4. Illegality (fraud in
execution only)
5. Equitable
remedy/Restitution
6. Collateral Agreement
TERM CONSTRUCTION
determine legal effects independent of parties' assent
Covenant of Good Faith and Fair Dealing
(R.2d 205) / UCC 1-304
Agreement to Agree
(what if there are missing terms?)
Different/Additional terms from
offer to acceptance
Appropriateness of a party's
Minority
Majority
R.2d 27 / Quake Constructionv.AA (Walker v. Keith)
Business Efficacy
Finding a breach / bad
exercise of discretion
(reasonable effort/obligation)
faith when no express term
(Morin Bldg. v. Baystone)
(Wood v. Lucy, Lady McDuff)
has been violated
(Locke v. Warner Bros.)
Battle of the Form
Min: subjective
Yes
Gap Filler
UCC
Mirror Image Rule
(Seidenberg)
Maj: objective
Common Law
No
No Contract
Contract Term
Rejection / Counter-offer
Parol Evidence
If both parties performed
to reveal parties' expectation
Last Shot Rule
Changed Circumstance
DEFENSES TO CONTRACT FORMATION
Capacity
Duress (R.2d 175(1))
1. Improper/wrongful/coercive acts
2. Inducing involuntary assent
3. Circumstances permitting no alternative
Is the contract "within" the statute?
No
Yes
Unexpected and important event that upset "basic assumption?"
Yes
No
Yes
Undue Influence (R.2d 177)
No
The party seeking relief bears the risk?
1. Unfair persuasion
2. Domination; OR
3. Confidential/special relationship
Statute of Fraud
Yes
Is the contract written and signed by D? R.2d 132 - 133
Yes
No
Is K in one document?
Yes
No
Are exceptions available?
Part performance (land only)
Yes
No
Beaver v. Brumlow
R.2d 129
Promissory Estoppel (general issue)
Rice v. Alaska Dem.
Others
Impossibility
Modification
More demanding than R.2d 90
Event makes that party’s
performance impracticable?
Event substantially destroy value
of other party’s performance?
Nondisclosure (R.2d 161)
1.
2.
3.
4.
Impracticability
Is there a nondisclosure?
Of material fact or fraudulent in nature?
Justifiable reliance
That induces recipient's assent
Unconscionability (R.2d 208)
Parol Evidence
Crabtree v. Elizabeth
1. Fraudulent OR material in character
2. Justifiable reliance
3. That induces recipient's assent
R.2d 139
Seeking specific performance
No
Fraud / Misrepresentation
No
Yes
Are pieces refer to
same transaction?
Satisfied SofF
Was event fault of party seeking relief?
1. Procedural unconscionability
2. Substantive unconscionability
Unilateral Mistake (R.2d 153, 154)
Mistake
1. A unilateral mistake
2. About "basic assumption" of contract
3. "Material effect" on mistaken party
4. The adversely affected party was not assigned the risk
5. Enforcement would be unconscionable OR non-mistaken
party had reason to know of the mistake
Frustration of Purpose
Mutual Mistake (R.2d 152, 154)
1.
2.
3.
4.
A mutual mistake
About "basic assumption" of contract
"Material effect" on exchange of performance
Who bears the risk?
Is there a condition to a party’s
performance ripen in the contract?
BREACH
No
Yes
Is there Anticipatory Repudiation?
Is the condition unambiguous? (i.e. contains "if")
No
Yes
Yes
No
Has it been rescinded in time? (R.2d 256)
Truman&Sons v. Schupf
Constructive condition
Express condition
Yes
No
Has the condition been discharged or excused?
Contract defenses
Disproportionate forfeiture
Waiver
Prevention
No
Rest 234(2): if performance cannot be rendered at the same time,
the performance requiring the longer period of time must be
rendered before the other performance.
a. Simultaneous performance: sale of goods / land
b. Longer performance goes first: construction / employment
Yes
BREACH
Constructive condition / Anticipatory Breach
Express condition
Is it material? (R.2d 241)
Total Breach (R.2d 242)
Non-breaching party can terminate
Yes
No
1) Would the delay prevent the making of substitute arrangements by the nonbreaching party? / 2) Does the contract emphasize the importance of performing
without delay? / 3) Is the breacher's conduct unreasonable?
Yes
Non-breaching party can suspend performance
(R.2d 242)
Non-breaching party terminate. Can seek both Reliance Damage
(past damages) & Expectation Damages (future damages) (R.2d 236(1))
Sackett v. Spindler
In Partial Breach, only include
[loss value + other loss] when
calculating Expectation Damages
Jacob&Young v. Kent
No
Total Breach
Material Breach (R.2d 241)
Partial Breach (R.2d 235)
Non-breaching party must continue performing.
Can only seek Reliance Damage (actual harm resulted to date) (R.2d 243(4))
In Total Breach, when the contract is terminated,
must include [cost avoided - loss avoided] when
calculating Expectation Damages
Acceptance
Same Term
Different / Additional Term
Does it fall under UCC?
Battle of the Form (UCC 2-207)
Proceed to next step analysis
Yes
No
Is acceptance expressly condition on add-terms?
Yes
No
Common Law
Mirror Image Rule
A contract is formed
There is no contract. Look to Conduct
(2-207(3))
2-207(1)
Look to conduct to see if the terms are
consistent with the intention of having a
contract when both parties intend so
Are terms different or additional?
Different
Inclusive
Evaluate but
usually excluded
Additional (2-207(2))
Exclusive
Knock-out
New terms are
proposal
UCC fills gap based
on common practice
Non-merchant
Merchant
Additional terms
are proposal
Do the additional terms:
The offer expressly limits acceptance to the
terms of the offer
Materially alter the offer
Objection raised to the additional terms
Yes
Proposals that can be
accepted/rejected
No
New terms become
part of the contract
Electronic T&C
Who is the offeror?
Buyer
Seller
Easterbrook approach
Klocek approach
Offer/Invite acceptance: click to buy / place an order
Offer
Invite acceptance: shipping with all the terms
Offer
2-204
Does consumer have an opportunity to review?
shipping / accept payment: seller 's acceptance
Acceptance
Yes
Does consumer expressly consent to ADDITIONAL TERMS (proposals)?
Yes
No
Contract
Proposals
New proposals
Acceptance
2-207
No
Does consumer keep after specified time?
Yes
No
Contract
No contract
No contract
DAMAGES
Limitations to Recovery
1. Causation
2. Foreseeability Hadley
3. Certainty Floralfax v. GTE
4. When Justice so requires
5. Contract allocation of risk
6. Losing contract
AA v. Schectman / Handicapped Children
J&Y v. Kent
Wartzman v. Hightower
Walser v. Toyota
US Coastal Steel v. Blair
Specific Performance
1. Adequacy of remedy at law
2. Lack suitable substitute
3. Collectability
4. Definiteness
5. Hardship in supervision
City Stores v. Ammerman