Contracts Outline
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2.
3.
4.
Which law governs?
ID Promise
Is promise supported by consideration?
If not, is there a consideration alternative? (what are consideration alternatives?)
CONTRACT
Restatement 1
a promise or set of promises for the breach of which the law gives a remedy
Contract Elements- or (offer , acceptance, consideration)
1. Mutual Assent (shown by Offer + Acceptance)
Offer- Restatement §24
The manifestation of willingness to enter into a bargain, so made as to justify
another person in understanding that his assent to that bargain is invited and will
conclude it. - MUST BE REASONABLY CERTAIN
- Offer made in jest- not valid if offeree known or should have
known offer was in just (i.e offer 1 million dollars to paint
house)
- Preliminary negotiations- invitation, quotation or proposal.
- Advertisement- unless no room for negotiation
- Offer cannot be terminated after acceptance
- Methods of Termination
o Rejection or counter-offer
o Lapse of time (may be specified- if not, reasonable
based on surrounding circumstances)
o Death of legal incapacity
o Revocation by offeror (must be communicated prior
to acceptance)
 IRREVOCABLE OFFERS- Option contracts
and firm offers
 Option contracts are created when the
offeror keeps an offer open for a limited
amount of time in exchange for the
offeree consideration. In unilateral
contracts the partial performance is the
consideration.

Firm Offer- Offer to buy or sell goods
will be open for a limited amount of time
not to exceed 3 months.
 Offeror is a merchant
 Must be in writing
 Must be signed
Acceptance- Restatement 50
a manifestation of assent to the terms thereof made by the offeree in a manner
invited or required by the offeror
- Offer may only be accepted by intended offeree in the manner
prescribed by offeror or if the manner is not specified then by
return promise or performance
- Common law -Must be mirror image- unconditional assent to
the exact same terms
- UCC- Battle of the Forms 2-207
o Assent to the sale of goods
- Acceptance effective upon communication to the offeror
- Mailbox rule- acceptance effective upon dispatch if properly
addressed, if not properly addressed then the mailbox rule will
only apply if it is received in the time that a properly addressed
acceptance would have been received.
o Unless offer specifies when I received signed
agreement
o Does not apply to unilateral contracts- in unilateral
contracts acceptance is upon full performance
o Options contract- effective upon receipt
- Silence
o Offeror received benefit and did not object to it and
offeree expected compensation
o Offeree exercised dominon over property
o Prior dealings of acceptance that make it reasonable for
an offeree to assume there will be notification of
rejection
o Implied in fact contract- if the parties agree offeree’s
silence is acceptance
2. Intent to be legal bound
3. Consideration (bargain for exchange – reciprocal inducement)
Mutual Assent- meeting of the minds
Common Law governs unless sale of goods then UCC governs/ preempts
Objective theory of contracts- how would a ssrp view these facts
SSRP= Similarly situated reasonable person
UNIFORM COMMERCIAL CODE (UCC)
1.
2.
3.
4.
Sale of goods
Goods - all things movable (except money) at the time of the sale
Sale- a transaction that consists of transfer of title from one party to another
Merchant- person who deals in goods of the kind or by occupation has knowledge or
skill peculiar to the goods
PROMISE
A manifestation of intent 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
-
Promisor- person manifesting the intention
Promisee- person to whom the manifestation is addressed
Restatement 2nd (4) – a promise must be stated in words either oral or written or maybe inferred
wholly or partly from conduct
ConsiderationTraditional Consideration- benefit to promisor or legal detriment of promise
(Hamer v. Sidway)
Uncle and Nephew entered into a contract in which uncle promised nephew $5,000 if nephew
promised to refrain from drinking, smoking and gambling until he reached the age of 21.
Nephew lived up to his promise and uncle said he would give his nephew the money when the
nephew was “capable of taking care of it. Hamer, a party to whom nephew owed money, sued
the deceased uncle’s estate through Sidway, the executor. The New York Court of Appeals held
that the forbearance of a legal right constitutes adequate consideration, valid to form an
enforceable contract.
Modern Consideration- return promise or performance must be bargained for- eye for eye –
quid pro quo
(Kirskey v. Kirskey)
Plaintiff Kirskey, was the sister-in law of Defendant Kirksey. After Plaintiff’s husband died,
Defendant offered to put up Plaintiff on his land. Plaintiff gave up her land and moved to
Defendant’s property, but approximately two years later Defendant made Plaintiff leave his
property. A mere gratuitous promise is without the consideration necessary for enforcement as a
contract.
Restatement 2nd (71) Modern
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To constitute consideration a performance or a return promise must be bargained for
A performance or promise is bargained for if its sought by the promisor in exchange
for his promise and given the promise in exchange of that promise
The performance may consist of
A. An act other than a promise
B. Forbearance
C. The creation, modification, or destruction of a legal relation
Bargained for exchange- promisor seek to induce the promisee for return promise or
performance and the promise and so does induce a return promise or performance from promisee
Past and moral consideration- not sufficient consideration
Restatement 79 Adequacy of consideration/ Mutuality of Obligation
If the requirement of consideration is met, there is no additional requirement of.
1. A gain, advantage or benefit to the promisor or a loss, disadvantage or detriment to
the promisee or
2. Equivalence in the values exchanged or
3. Mutuality of Obligation
(Batsakis v. Demotsis)
Plaintiff, Batsakis, loaned Defendant, Demotsis, 500,000 drachmae. In exchange for the loan,
Defendant signed an instrument promising to pay Plaintiff $2,000 in U.S. currency. The 500,000
drachmae were worth approximately $25.00 at the time. Inadequacy of consideration alone will
not void a contract.
(Dyer v. National By-Products, Inc.)
Plaintiff sued Defendant for breach of an oral contract, claiming that Defendant had promised
him lifetime employment in exchange for his agreement not to litigate his claim for person
injury. The trial court granted Defendant’s motion for summary judgment. Plaintiff appealed.
Forbearance from filing an unmeritorious legal claim that the party in good faith believes is valid
constitutes sufficient consideration for a settlement agreement.
**Forbearance to assert an invalid claim is not consideration unless the claim or defense is
doubtful because of uncertainty as to the facts of law or the forbearing party believes the claim is
valid.
Notes:
-
Gratuitous Promise- not a contract because not supported by consideration i.e if P
does not get anything in return from D then it is a gift- not a contract
Conditional Gratuitous Promise- a gratuitous promise/ gift with the condition that
the D does something to get the gift i.e. walk to my house to get X-not a contract
Executed Gift- A completed gift. P cannot try to recover a gift from D i.e. P gives
money to then wants it back.
Unilateral Contract-bargained for exchange of promise for performance- valid
contract
Bilateral Contract- promise made in exchange for a promise. Both P & D are
promisor/ promisee. Valid contract
Illusory Promise- not sufficient consideration. Not a concrete promise because the
promise is an illusion i.e. D agrees to do something for P “if they have time”
Legal detriment can be not suing when you feel you have a case
Nominal consideration- pretense of consideration is a gift not consideration
Past consideration- not sufficient for past completed acts
MODIFICATION
Modification is a new contract- contract to change a contract
Common Law
Traditional Rule R.2d section 73 (ex. Alaska packers case- sailors already had duty to
fish for salmon but tried to get more money when on the boat and claimed the nets were
faulty)
(Alaska Packers v. Domenico)
Sailors who agreed to work for company refused to adhere to the original contractual
terms and demanded increased compensation. The company’s representative agreed to
the higher compensation in a new contract. There can be no consideration for a modified
contract that arises from a coerced promise for increased compensation for performing
what one is already obligated to perform.
**Pre- existing duty rule- a promise to act that promisor already has a pre- existing duty
to perform is not valid consideration because there is no new consideration for that
promise.
Performance of legal duty owed to a promise which is neither doubtful nor subject to
honest dispute is not consideration
But a similar performance is consideration if it differs in a way which reflects more than
a pretense
Modern Rule R.2d 89 (ex. Angel v. Murray- more money for trash pickup and town
increased by 400 dwellings)
(Angel v. Murray)
The Plaintiff, the city of Newport (Plaintiff), agreed to pay more than it was contractually
obligated to pay for refuse collection, in modification of the original contract. The trial
court held there was no consideration for the increased payments because the Defendant,
Maher (Defendant), was already obligated to collect the refuse. The preexisting duty rule
will not be applied when there are unforeseen circumstances and the opposing party
agrees to compensate for those unforeseen circumstances.
**Modifications are allowed so as the modification is
1. fair & equitable and
2.due to unforeseen circumstances and
3. executory
UCC: 2-209 an agreement modifying a contract needs no consideration to be binding.
1. Must be done in good faith,
2. in writing
Merchant- person who deals in goods of the kind or by occupation has knowledge or skill
peculiar to the goods
Good faith test?
OPTIONS CONTRACT
includes time for one party to consider whether they want to accept an offer or enter another
contract- additional time in exchange for money (i.e. real estate transactions- shopping mall ex.)
Traditional R.2d 25--Promise which meets the requirements for the formation of a contract and
limits the promisor’s power to revoke an offer.
Modern- R.2d 87(1) minority rule an offer is binding as an option contract if it is
1. In writing and
2. signed by the offeror,
3. recites a purported-(writing states there is consideration, but it has not been exchanged
i.e. $1) consideration for the making of the offer, and
4. proposes an exchange on fair terms
5. within a reasonable time; or
6. There is a statue
Restatement 45 Option contract created by part performance
1. Where an offer invites an offeree to accept by rendering a performance and does not
invite a promissory acceptance, an option contract is created when the offeree tenders
or begins the invited performance
2. The offeror’s duty of performance under any option contract so created is conditional
on completion of the invited performance in accordance with the terms of the offer
UCC- 2205 Firm Offer
1. An offer by a merchant to buy or sell goods in a
2. Signed writing which by its terms gives assurance that it will be held open is not
revocable, for lack of consideration,
3. during the time stated or if no time is stated for a reasonable time, but in no event should
exceed 3 months
4. but any such term of assurance on a form supplied by the offeree must be separately
signed by the offeror.
CONSIDERATION ALTERNATIVE
1. Material Benefit/ Promissory Restitution- Restatement §86- (enforce moral or past
benefit)
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.
A promise is not binding under Subsection (1)
if the promisee conferred the benefit as a gift or for other reasons the promisor has not been
unjustly enriched; or
to the extent that its value is disproportionate to the benefit.
Must have some reasonable expectation of restitution.
(Webb v. McGowin)
P was an employee of D. P stopped a block of wood from falling on D. P suffered from severe
injuries and D’s life was saved. A moral obligation is a sufficient consideration to support a
subsequent promise to pay where the promisor has received a material benefit.
2. Promissory Estoppel- Restatement §90 (enforce gratuitous gift)
The doctrine allowing recovery on a promise made without consideration when the reliance on
the promise was reasonable, and the promisee relied to his or her detriment.
A promise which the promisor should reasonably expect to induce action or forbearance on a
promisee and which does induce such action or forbearance
Binding if injustice can be avoided only by enforcement of the promise.
Reliance – It must be shown that the injured party relied on the promise that was made, and took
some action based on that promise.
Detriment – The party that relied upon the promise must have suffered some sort of detriment or
loss, which puts him in a worse position than when he started.
Unconscionability – In must be shown that it was unfair for the promisor to break his promise to
the promisee.
1. D made a promise
2. The promise was made in such cicrumstances that the promisor intended and reasonably
expected that the promisee act in reliance on the promise
3. The promisee acted reasonably relying on the promise
4. A refusal by the court to enforce the promise would result in an injustice.
(Ricketts v. Scothorn)
Defendant executed a promissory note for $2000 payable with 6% annual interest. Plaintiff
sought to enforce the note and alleged that the consideration for the note was her promise to quit
her job as bookkeeper and to stop working for a living. Promissory estoppel bars a party from
asserting lack of consideration where reliance was induced by the party asserting there was no
requisite consideration.
MUTUAL ASSENT
Restatement 18
Manifestation of mutual assent to an exchange requires that each party either make a promise or
begin or render a performance.
Comment:
a. Manifestation of assent. Assent to the formation of an informal contract is operative only to
the extent that it is manifested
b. Assent by promise or performance. Where a bargain has been fully performed on one side,
there is commonly no need to determine the moment of making of the contract or whether the
performing party made a promise before he performed.
c. Sham or jest. Where all the parties to what would otherwise be a bargain manifest an intention
that the transaction is not to be taken seriously, there is no such manifestation of assent to the
exchange as is required by this Section.
Agreement by both parties to a contract. Mutual assent must be proven objectively, and is often
established by showing an offer and acceptance (e.g., an offer to do X in exchange for Y,
followed by an acceptance of that offer).
Offer + Acceptance =Mutual Assent
Both the offer and acceptance must be stated in a way that makes it clear to another reasonable
person that the parties have reached an understanding as to the terms of the agreement.
(Raffles v. Wichelhaus) **Peerless case
P agreed to sell the D 125 bales of Surat cotton from India that would come from the ship
Peerless. Upon arrival, the D refused to pay for the cotton because it came from a different ship
from the one agreed upon although it was still named Peerless. It appears that two ships named
Peerless set sail from Bombay, and the evidence showed that the D meant one ship while the P
meant the other. There was no meeting of the minds, so there is no binding contract.
BARGAIN REQUIRMENT
Restatement § 17. Requirement Of A Bargain
1. Except as stated in Subsection (2), the formation of a contract requires a bargain in which
there is a manifestation of mutual assent to the exchange and a consideration.
REASONABLE CERTAINTY
Restatement 33
Even though manifestion of intention is intended to be understood as an offer, it cannot be
accepted to form a contract unless the terms of the contract are reasonably certain
A contract is reasonably certain if
1. The terms provide a basis for determining the existence of a breach and for
giving appropriate remedy.
2. The fact that one or more terms of a proposed bargain are left open or
uncertain may show that a manisfestation of intention is not intended to be
understood as an offer or an acceptance.
(Varney v.Ditmars)
D offered to provide increased compensation to P by granting him a fair share of the D’s profits
the following year. P filed an action for recovery of a share in the profits. The court dismissed
the case due to the lack of definite terms. For a contract, promise, or agreement to be valid the
parties to it must be certain and explicit and their full intention may be ascertained to a
reasonable degree of certainty. Their agreement must be neither vague nor indefinite, and, if thus
defective, parol proof cannot be resorted to.
OFFER
Restatement §24
The manifestation of willingness to enter into a bargain, so made as to justify another person in
understanding that his assent to that bargain is invited and will conclude it.
Restatement § 22. Mode Of Assent: Offer And Acceptance
1. The manifestation of mutual assent to an exchange ordinarily takes the form of an offer
or proposal by one party followed by an acceptance by the other party or parties.
2. A manifestation of mutual assent may be made even though neither offer nor acceptance
can be identified and even though the moment of formation cannot be determined.
UCC 2-204 Formation in General.
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.
2. An agreement sufficient to constitute a contract for sale may be found even though the
moment of its making is undetermined.
3. Even though one or more terms are left open a contract for sale does not fail for indefiniteness
if the parties have intended to make a contract and there is a reasonably certain basis for giving
an appropriate remedy.
PRELIMINARY NEGOTIATIONS
Restatement 26
A willingness to enter into a bargain is not an offer if the person to whom it is addressed knows
or has reason to know that the person making it does not intend to conclude a bargain until he
was made a further manifestation of assent
Advertisements are not offers
Exceptions are when the offer is
1. in definite terms
2. made to a specific person
3. overacceptance is unlikely
Restatement 35 Offeree’s Power of Acceptance
1. An offer gives the offeree a continuing power to complete the manifestation of mutual
assent by acceptance of the offer.
2. A contract cannot be created by acceptance of an offer after the power of acceptance has
been terminated by one of the ways listed in section 36.
TERMINATING OFFERS
1. Revocation prior to acceptance
2. Expressly revoke
3. If you learn an offer is no longer available
Restatement 36
(1) An offeree's power of acceptance may be terminated by
(a) rejection or counter-offer by the offeree, or
(b) lapse of time, or
(c) revocation by the offeror, or
(d) death or incapacity of the offeror or offeree.
(2) In addition, an offeree's power of acceptance is terminated by the non-occurrence of any
condition of acceptance under the terms of the offer.
Revocation
Restatement 42 An offeror may expressly revoke an offer as long as it is communicated to the
offeree prior to a timely acceptance. It is effective upon receipt
Indirect Revocation
Restatement 43
An offeree’s power of acceptance is terminated when the offeror takes definite action inconstant
with an intention to enter into the proposed contract and the offeree acquires reliable information
to that effect.
The general rule is that the revocation is effective only when it is made known to the offeree.
Until it is communicated to the offeree, directly or indirectly, the offeree has reason to believe
that there still is an offer that may be accepted. The offeree may rely on this belief. If the offeror
seeks to revoke the offer, but the offeree accepts the offer before notice of the revocation, a valid
contract is created.
COUNTEROFFER
Restatement 39
An offeree’s power of acceptance is terminated by his making a counter- offer; unless the offeror
has manifested a contrary intention or unless the counter- offer manifests a contrary intention of
the offeree
A conditional acceptance is a counteroffer. EX: if Jones accepts the $10,000.00 price but adds a
term by stating that new tires must be put on the car, this is a conditional acceptance and
therefore a counteroffer.
Termination, rejection or counteroffer is not effective until received by offeror
(Foster v. Ohio State University)
D offered P a job as a chairperson. D’s offer letter specified that the offer had to be accepted in
writing by June 2, 1983. P called D’s office and left a vmail stating he would accept the offer and
start on Ju1y 15 as opposed to the start date in the letter. D rejected the counter offer. The court
held a reply to an offer which purports to accept but is conditional on the offeror's assent to terms
additional to or different from those offered is not an acceptance but is a counteroffer. 1
Restatement of the Law 2d, Contracts (1981) 145, Section 59. Plaintiff's telephonic purported
acceptance of June 2, 1983 was therefore a counteroffer and not an unconditional acceptance
which was rejected by Dean Broekema in his letter of June 7, 1983 and, therefore, no contract
was created. The undisputed facts indicate that plaintiff simply failed to accept the terms of the
offer and therefore no contract exists.
ACCEPTANCE
Restatement 50
a manifestation of assent to the terms thereof made by the offeree in a manner invited or required
by the offeror
Common Law- Must have mirror image
Bilateral contract- requires return promise
Unilateral contract- requires complete performance
Restatement § 30. Form of Acceptance Invited
(1) An offer may invite or require acceptance to be made by an affirmative
answer in words, or by performing or refraining from performing a specified act, or
may empower the offeree to make a selection of terms in his acceptance.
(2) Unless otherwise indicated by the language or the circumstances, an offer
invites acceptance in any manner and by any medium reasonable in the
circumstances.
Restatement § 32. Invitation Of Promise Or Performance
In case of doubt an offer is interpreted as inviting the offeree to accept either by promising to
perform what the offer requests or by rendering the performance, as the offeree chooses.
Restatement § 60. Acceptance of Offer Which States Place, Time or Manner of Acceptance
If an offer prescribes the place, time or manner of acceptance its terms in this respect must be
complied with in order to create a contract. If an offer merely suggests a permitted place, time or
manner of acceptance, another method of acceptance is not precluded.
Restatement 62- Inviting performance of promise
when given the option of promise or performance, if you choose to accept by performance and
you start the work, then you are bound to complete the work
UCC 2-206. Offer and Acceptance in Formation of Contract
Unless otherwise unambiguously indicated by the language or circumstances
1. an offer to make a contract shall be construed as inviting acceptance in any manner and by
any medium reasonable in the circumstances;
2. an order or other offer to buy goods for prompt or current shipment shall be construed as
inviting acceptance either by a prompt promise to ship or by the prompt or current shipment of
conforming or non-conforming goods, but such a shipment of non-conforming goods does not
constitute an acceptance if the seller seasonably notifies the buyer that the shipment is offered
only as an accommodation to the buyer.
3. Where the beginning of a requested performance is a reasonable mode of acceptance an
offeror who is not notified of acceptance within a reasonable time may treat the offer as having
lapsed before acceptance.
UNSPECIFIED ACCEPTANCE TERMS
Restatement 32
In case of doubt an offer is interpreted as inviting the offeree to accept either by
promising to perform what the other requests or by rendering the performance or as the
offeree chooses
(Evertite Roofing v. Green)
P sued D for breach of contract after contracting with D to re-roof their home. When P arrived to
D’s residence to complete the roofing work there was another company doing the job. The Court
ruled the contract was accepted by plaintiff by the commencement of the performance of the
work contracted to be done. The commencement began with the loading of the trucks with the
necessary materials and transporting the materials to D’s house. Actual commencement or
performance of the work therefore began before any notice of dissent by defendants was given
plaintiff. The proposition and its acceptance thus became a completed contract. The power to
create a contract by acceptance of an offer terminates at the time specified in the offer, or, if no
time is specified, at the end of a reasonable time. What is a reasonable time is a question of fact
depending on the nature of the contract proposed, the usages of business and other circumstances
of the case which the offeree at the time of his acceptance either knows or has reason to know.
Restatement 40 Mailbox rule
acceptance is effective upon dispatch as opposed to the rule that acceptance is effective
upon receipt.
If the offeror does not otherwise specify, a mailed accep­tance takes effect when the acceptance
is properly mailed. This is known as the “Mailbox Rule.” If the offeror specifies that an
acceptance shall not be effective until received, there is no acceptance until acceptance is
received. The Mailbox Rule also would not apply in a situation where the offeror requires
receipt of a payment to accompany an acceptance. Improper mailing of an acceptance can cause
the acceptance to take effect only when received.
UCC 2-207 BATTLE OF THE FORMS
2-207 (1) acceptance or counteroffer
2-207 (2) if acceptance then what terms govern or control (original or additional or UCC
gap fillers)?
2-207(3) no contract (counteroffer) but parties perform like there is a contract -compare
original agreement and counteroffer any overlapping terms become part of a new
agreement any missing terms are filled in by UCC gap fillers- frankenstein contract
Additional Terms in Acceptance or Confirmation.
(1) A definite and seasonable expression of acceptance or a written confirmation which is sent
within a reasonable time operates as an acceptance even though it states terms additional to or
different from those offered or agreed upon, unless acceptance is expressly made conditional on
assent to the additional or different terms. COUNTEROFFER IF TERMS ARE
MATIERIALLY DIFFERENT (ie original offeror wants to sell a marker for $10 and
offerree says I agree if you sell it for $4) v ACCEPTANCE (offeror sends 20 page contract
and offeree writes an additional term on the first page- does not write “you must accept my
terms”) has to be expressly made for counteroffer
(2) The additional terms are to be construed as proposals for addition to the contract. Between
merchants such terms become part of the contract unless:
(a) the offer expressly limits acceptance to the terms of the offer;
(b) they materially alter it; or
(c) notification of objection to them has already been given or is given within a reasonable time
after notice of them is received.
Are the additional terms part of the contract or are we using UCC gap fillers?
If both parties are not merchants than the additional terms are not added
If both offeror and offeree are merchants than the additional terms become part of the
contract.
UNLESS:
1. The offeror expressly limits the terms to the original agreement (says you can’t add
terms)
2. If the new terms materially alter the deal (i.e offeree changes the price of good)
3. Offeror objects within a reasonable amount of time
(3) Conduct by both parties which recognizes the existence of a contract is sufficient to establish
a contract for sale although the writings of the parties do not otherwise establish a contract. In
such case the terms of the particular contract consist of those terms on which the writings of the
parties agree, together with any supplementary terms incorporated under any other provisions of
this Act.
UCC 2-207 comments
1. This section is intended to deal with two typical situations. The one is the written
confirmation, where an agreement has been reached either orally or by informal correspondence
between the parties and is followed by one or both of the parties sending formal memoranda
embodying the terms so far as agreed upon and adding terms not discussed. The other situation is
offer and acceptance, in which a wire or letter expressed and intended as an acceptance or the
closing of an agreement adds further minor suggestions or proposals such as "ship by Tuesday,"
"rush," "ship draft against bill of lading inspection allowed," or the like. A frequent example of
the second situation is the exchange of printed purchase order and acceptance (sometimes called
"acknowledgment") forms. Because the forms are oriented to the thinking of the respective
drafting parties, the terms contained in them often do not correspond. Often the seller's form
contains terms different from or additional to those set forth in the buyer's form. Nevertheless,
the parties proceed with the transaction.
2. Under this Article a proposed deal which in commercial understanding has in fact been closed
is recognized as a contract. Therefore, any additional matter contained in the confirmation or in
the acceptance falls within subsection (2) and must be regarded as a proposal for an added term
unless the acceptance is made conditional on the acceptance of the additional or different terms.
3. Whether or not additional or different terms will become part of the agreement depends upon
the provisions of subsection (2). If they are such as materially to alter the original bargain, they
will not be included unless expressly agreed to by the other party. If, however, they are terms
which would not so change the bargain they will be incorporated unless notice of objection to
them has already been given or is given within a reasonable time.
4. Examples of typical clauses which would normally "materially alter" the contract and so result
in surprise or hardship if incorporated without express awareness by the other party are: a clause
negating such standard warranties as that of merchantability or fitness for a particular purpose in
circumstances in which either warranty normally attaches; a clause requiring a guaranty of 90%
or 100% deliveries in a case such as a contract by cannery, where the usage of the trade allows
greater quantity leeways; a clause reserving to the seller the power to cancel upon the buyer's
failure to meet any invoice when due; a clause requiring that complaints be made in a time
materially shorter than customary or reasonable.
5. Examples of clauses which involve no element of unreasonable surprise and which therefore
are to be incorporated in the contract unless notice of objection is seasonably given are: a clause
setting forth and perhaps enlarging slightly upon the seller's exemption due to supervening
causes beyond his control, similar to those covered by the provision of this Article on merchant's
excuse by failure of presupposed conditions or a clause fixing in advance any reasonable formula
of proration under such circumstances; a clause fixing a reasonable time for complaints within
customary limits, or in the case of a purchase for sub-sale, providing for inspection by the subpurchaser; a clause providing for interest on overdue invoices or fixing the seller's standard
credit terms where they are within the range of trade practice and do not limit any credit
bargained for; a clause limiting the right of rejection for defects which fall within the customary
trade tolerances for acceptance "with adjustment" or otherwise limiting remedy in a reasonable
manner
6. If no answer is received within a reasonable time after additional terms are proposed, it is both
fair and commercially sound to assume that their inclusion has been assented to. Where clauses
on confirming forms sent by both parties conflict each party must be assumed to object to a
clause of the other conflicting with one on the confirmation sent by himself. As a result the
requirement that there be notice of objection which is found in subsection (2) is satisfied and the
conflicting terms do not become a part of the contract. The contract then consists of the terms
originally expressly agreed to, terms on which the confirmations agree, and terms supplied by
this Act, including subsection (2). The written confirmation is also subject to Section 2-201.
Under that section a failure to respond permits enforcement of a prior oral agreement; under this
section a failure to respond permits additional terms to become part of the agreement.
7. In many cases, as where goods are shipped, accepted and paid for before any dispute arises,
there is no question whether a contract has been made. In such cases, where the writings of the
parties do not establish a contract, it is not necessary to determine which act or document
constituted the offer and which the acceptance. See Section 2-204. The only question is what
terms are included in the contract, and subsection (3) furnishes the governing rule
(Iconics v. Elmwood Sensors, Inc.)- terms that are in direct conflict are not added to the
contract if in writing and if the terms materially alter the contract. MERCHANTS
P purchased thermostats from D for installation in water dispensers. Several of the dispensers
subsequently caused fires which resulted from defects in the sensors. P filed suit against D in
order to recover costs incurred from the fires. Where the terms in two forms are contradictory,
each party is assumed to object to the other party's conflicting clause. Mere acceptance of the
goods by the buyer is insufficient to infer consent to the seller's terms under the language of
subsection. Nor do such terms become part of the contract under subsection (2) because
notification of objection has been given by the conflicting forms. Any additional terms did not
become part of the contract because notification of objection to conflicting terms was in the
purchase order form only, and the new terms had materially altered those in the offer.
(Hill v. Gateway 2000)- P accepted the additional terms because they did not return the
computer within 10 days
Plaintiff Hill, purchased a computer from Defendant, Gateway 2000, Inc. Included in the box
with the computer was a list of terms. The list of terms included a provision requiring that
disputes be resolved exclusively through final and binding arbitration. Additional terms included
in a box shipped by the seller do become part of the contract between the parties, even if the
purchaser is unaware of the additional terms and the purchaser’s acceptance of the terms is by
not returning the item purchased.
(Klocek v. Gateway)- terms not added unless non merchant expressly agrees to the terms. NON
MERCHANT
Plaintiff Klocek, purchased a computer from Defendant Gateway, Inc. Inside the box containing
the instruction manuals was a copy of Defendant’s Standard Terms and Conditions Agreement.
The agreement stated that it is accepted by the purchaser if the purchaser keeps the computer
longer than five days. One of the provisions in Defendant’s agreement requires arbitration.
Terms received with a product do not become part of the contract unless the non-merchant buyer
expressly agrees to them.
Restatement 139- Promissory Estoppel in Statue of Frauds Cases
§ 139. Enforcement By Virtue Of Action In Reliance
(1) A promise which the promisor should reasonably expect to induce action or
forbearance on the part of the promisee or a third person and which does induce the
action or forbearance is enforceable notwithstanding the Statute of Frauds if injustice
can be avoided only by enforcement of the promise. The remedy granted for breach is
to be limited as justice requires.
(2) In determining whether injustice can be avoided only by enforcement of the
promise, the following circumstances are significant:
(a) the availability and adequacy of other remedies, particularly cancellation and
restitution;
(b) the definite and substantial character of the action or forbearance in relation to
the remedy sought;
(c) the extent to which the action or forbearance corroborates evidence of the
making and terms of the promise, or the making and terms are otherwise established
by clear and convincing evidence;
(d) the reasonableness of the action or forbearance;
(e) the extent to which the action or forbearance was foreseeable by the promisor.
STATUTE OF FRAUDS
Certain contracts must be in signed writing in order to be enforced
M- marriage- agreement made upon consideration of marriage i.e man agrees to marry women if
her father gives him land not just a mutual promise to marry
Y- cannot be fully performed in year
L-Transfer interest in land (leases, mortgage- except short term- less than a year) also, cases that
are to the detriment of promise (i.e promisee makes significant repairs to property- still
enforceable if not in writing because of promissory estoppel.)
E- Executor/ administrator contracts- promises to pay decedent’s debt.
G- Goods over $500 unless customized goods and seller began making product, non-injured
party admits contract was made, payment made and accepted or goods have been delivered
S- Suretyship- cosign- promisor (surety/ guarantor) promises to pay person’s debt unless
promisor’s main purpose is to further their own economic advantage rather than help another
person.
MICELLANEOUS TERMS
Third party beneficiary- performance of a promise benefits someone other than the promisor
Obligation = duty
Obligor- a promisor whose promise creates an obligation under contract law
Oblige- the promise to whom the obligation is owed
Adequacy – courts will not evaluate the adequacy of consideration unless it is unsconsciable
Mutuality of Obligation (MOO) / Illusory Promise- both parties must be bound to perform their
obligations or neither party is bound
Implied Contract- come from actions
Express Contract- come from words
Implied Warranty (UCC Term)