FINAL EXAM TIPS
ALWAYS LEAD WITH CONCLUSION - yes/ no
-argue both sides- but chose a side
-DISCUSS INTERESTS OF THE CLIENT What are the priorities of the parties- what does your
client want, need, and want to know
- short succinct answers
EXPLAIN YOUR REASONING WITH LOGIC- it should be read as an offer because
USE SYLLOGISMS FROM CASES TO EXPLAIN LOGIC
Exam Tips
- Don't use promiser/ promisee or other similar terms- use the client's name
- Have an instinct for the capillary= what is important in the question
- Focus on the important facts to the question
- Use text - quoted language
- Context- conduct is less powerful than the text
Formation Exam Strategies:
❏ Distinguish between services (CL) and goods (UCC)
❏ Analyze every line of text → determine if it’s an offer, acceptance, counteroffer, inquiry
❏ Consider context (to make sense of text)
❏ Agreement = offer + acceptance (formation)
❏ Make sure there is consideration
❏ Make sure it is valid under SOF
There are four basic elements that are required to form a contract: FORMATION
1. Offer
2. Acceptance
3. Consideration
4. Mutual intent to be bound
1. Offer
a. as the manifestation of willingness to enter into a bargain that justifies another
person in understanding that assent to that bargain is invited.
i.
EX: I will pay you 100 dollars to paint my house
b. Valid Offer- an offer is valid when it contains reasonably certain terms that offer
to exchange something of value.
i.
A reasonable person should therefore be able to conclude that an offer
has been made.
1. Just because an offer is valid does not mean that there will
necessarily be a contract.
2. The offeree may choose to not accept, there may be a lack of intent
to be legally bound or there may be insufficient consideration.
3.
A valid offer may also be terminated before acceptance.
a. Once an offer has been terminated, the offeree no longer
has the power to accept the offer.
b. However, if the offeree has already accepted the offer, then
the offer may not be terminated.
c. Invalid Offeri.
ii.
iii.
Joke - determined based on whether a reasonable person would have
considered the offer a joke or not.
preliminary negotiations- invitations to bid, price quotations, and
proposals
Advertisements- usually invalid offer, unless it contains a reasonably
certain promise that leaves no room for negotiation.
1. For example, an advertisement that says, “Coats are on sale for
$200,” is not a valid offer because it leaves room for negotiation in
terms of the types of coats and the time of the sale.
a. The store is not legally obligated to sell coats for $200.
2. However, if it says “All of our fur coats are on sale for $200 on
Saturday, from 9 a.m. until noon,”
a. may be considered a valid offer
the course of dealing- previous interactions or present interactions of the two parties
will negotiating or making offers/acceptances/counteroffers etc.
Test for an offer
a. Just say yes test
i.
can you accept it
b. Offer- the person that made the offer cannot just say oh in my mind i was kidding
c. The court will look at the objective view not the subjective view of the offerer
OFFER + ACCEPTANCE = MUTUAL ASSENT- a “meeting of the minds.”
i.
The parties to a contract must mutually assent to the formation and
understand that they are entering into a contract together.
ii. Mutual Assent -Modern contract cases state that the mental assent of the
parties IS NOT a requisite to the formation of a contract and that objective
intent is sufficient.
1. most cases would be decided using the objective theory of
assent.
2.
It is enough that one of the parties intended to engage in the
act in question
Considerationa. exchange= commitment or limit on freedom of action
b. Reciprocal conventional inducement - Each side is getting something and giving
something
c. Mutuality of obligation = exists when both parties have assumed some legal obligation.
if the agreement leave one party free to perform or to withdraw from the agreement at his
own unrestricted pleasure, the promise is illusory and lacks consideration
d. Past Performance is Not Consideration
Promises as Consideration
1. Bilateral contracts - a promise for a promise; there is a right and a duty on each side.
a. Courts recognize that the consideration for a promise may be found in a return
promise, even in one not partly performed
b. Restatement §75: "the promise is enforced by virtue of the fact of the bargain,
without more"
2. Unilateral Contracts- promise for performance; duty on one side and right on the other
side.
3. Conditional promises- A promise is conditional if its performance will become due only
if a particular event, known as a "condition" occurs
Difference Between promise & condition
a. Conditions can’t be breached → they either occur or they don’t
b. If term is material/essence of contract → it’s a condition (not promise)
Promissory Estoppel (Substitute for Consideration)
NEVER USE PROMISSORY ESTOPPEL IS THERE IS CONSIDERATION
Restatement §90- A Promise Reasonably Inducing Action or Forbearance
The promise is binding even without consideration under promissory estoppel
Requirements:
1. promisor should reasonably expect to induce action on the promisee
2. promise does induce that action, and
3. justice can be avoided only by enforcing the promise
Acceptance - A voluntary act of the offeree whereby he exercises the power conferred upon him
by the offer, and thereby creates the set of legal relations called a contract
a. The offeror can bargain either for performance or for a promise to bind them
b. The offeree cannot modify the offer – if they do that, counter-offer and needs to be
accepted; they can only exercise the power that was given to them by the offeror
Shipment of Goods as Acceptance
UCC §2-206 : an order "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 nonconforming goods"
·
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
Silence is Not Ordinarily Acceptance
EXCEPTIONE: When there is an ongoing business relationship where, for example, the seller
ships the goods and the buyer just sends payment - in this case, when the buyer receives the
goods he has a duty to either say he doesn't want them or send payment in a reasonable time
Methods of Terminating of an Offer
1. Rejection or counteroffer
a. Counteroffer- A counteroffer is merely an offer, made by the offeree to the
offeror, that proposes different terms relating to the same matter as the initial
offer.
i.
For instance, John might counteroffer by saying, “I’ll paint your house for
$200.”
ii.
In either situation, Anne’s offer to pay John $100 has been terminated,
and John can no longer accept that offer.
2. Lapse of time
a. The amount of time may be specified or, if unspecified, must be reasonable based
on the circumstances surrounding the offer and attempted acceptance.
For example, Anne could say, “I offer to pay you $100 to paint my house;
you have 3 days to accept,” and her offer would expire after 3 days.
ii. If Anne does not specify an amount of time, then the offer would expire at
a reasonable time based on the surrounding circumstances, such as when
Anne ends her conversation with John.
3. Death or incapacity
a. if either Anne or John dies or becomes legally incapacitated, then Anne’s offer
will be terminated
4. Revocation
a. When the offerer revokes their offer.
i.
b.
the offeror must communicate her intent to the offeree before acceptance.
Two types of Irrevocable Contracts
1. Option contracts
a.
created when the offeror keeps an offer open for a limited amount of time, in exchange
for the offeree’s consideration.
b. Typically, a unilateral contract will form an irrevocable option contract when the offeree
begins to perform, because the partial performance serves as the offeree’s consideration.
i.
“I’ll pay you $100 to paint my house. If you give me $20, I’ll keep this offer open
until the end of the month.”
1. If John pays Anne the $20, then Anne and John will have an option
contract, and Anne cannot revoke her offer before the end of the month.
Firm offers
a.
a signed writing by a merchant who deals in goods, explicitly assuring the offeree that an
offer to buy or sell goods will be held open for a limited amount of time.
a. a firm offer may only be irrevocable for up to 3 months.
i.
Mike could give John a signed writing, explicitly
assuring him that an offer to sell him a ring for
$10,000 will be held open for 6 months.
ii.
Note that, unlike an option contract, John is not
required to provide consideration for a firm offer.
2 kinds of binding/enforceable preliminary agreements
1. fully binding preliminary agreement: parties reached agreement on all issues requiring
negotiation but desire more formal agreement
a.
Binds parties to ultimate contractual objective
i.
Factors:
1. express reservation of being bound not in writing?
2. partial performance
3. all terms agreed on?
4. whether agmt is type usually in writing
2. binding preliminary commitment: only commit parties to negotiate open issues in good
faith in attempt to reach contractual objective
a. Party barred from renouncing deal or abandoning negotiations
b. Factors
1. language of agreement (most important),
2. existence of open terms,
3. partial performance?
4. context of negotiations
5. custom of transactions
Four Corners Rule- interpretation
Parol Evidence Rule
For Parol Evidence Question:
❏ Determine if it’s partial or complete integration
❏ Evidence of multiple agreements or future additional agreements? Even terms
suggesting agreements not within this single contract?
❏ Integration clause?
❏ Kanno: 1) does written agreement appear on its face to be complete agreement?
2) does the oral agreement directly contradict the written agreement? 3) Would
the oral agreement have been certainly included in the written instrument? 4)
Would evidence of oral agreement likely mislead trier of fact?
❏ If partial:
❏ Determine whether evidence supplements or contradicts
❏ Determine whether oral agreement would naturally be separate agreement
● Two types of integration:
○ Partial integration: parties intended writing to be full expression of part of their
agreement (full expression of a term, not necessarily full agreement)
■ Presence of multiple agreements indicates partial integration
○ Complete integration: writing is all of parties’ agreement
■ Integration clause: used to try to limit judges to text of contract → not
conclusive but persuasive that agreement is completely integrated
●
Parol evidence rule: limits evidence that can be used to interpret agreements
○ PE pre-dating agreement:
■ Partial integration: PE can be used to supplement agmt w/ consistent additional
terms, but can’t contradict it
● Prior agmt:
○ Must be one that would naturally be separate (Kanno)
○ Can’t contradict terms
■ Complete integration: PE can’t be used to supplement or contradict agreement
○ Does not exclude PE post-dating agreement
○ PE can always admissible to demonstrate defense to formation of contract (ex: fraud),
ambiguous terms, formation issues
IMPLIED OBLIGATIONS
Implied Covenant -implying in writing that is not explicit in the writing, but it is necessary to
give meaning to the writing.
Contract implied in Law- equity- not based on assent at all- purely based on policy obligations
Implied contract example- going to a restaurant and ordering- implying to pay for the food
Implied Covenant of Good Faith and Reason
a. There is no implied covenant during negotiations
b. The covenant of good faith and fair dealing is, by definition, an implied contract term; it
has no relation to any statutory duties which may exist
c. The fundamental purpose of the implied covenant of good faith and fair dealing is that
neither party will do anything which will injure the right of the other to receive the
benefits of the agreement
d. Good faith performance of a contract emphasizes faithfulness to an agreed common
purpose and consistency with the reasonably justified expectations of the other party
i.
The essence of the good faith covenant is objectively reasonable conduct
ii.
A party to a contract breaches the implied covenant of good faith and fair dealing
by interfering with or failing to cooperate with the plaintiff in the performance of
the contract.
Implied Contract Cases
Wall Noon Corp. v. Hill- IMPLIED
Drennan- implied offer to hold option open
Wood v. lucy- implied to use reasonable efforts to promote the clothes
Maglica v. Maglica - implied in fact contract
Performance
1. First question to ask when talking about performance- When is this performance
due?
2. There is already formation and a contract- now that we are at performance stage
Doctrine of Conditions
a. Restatement tells you that a condition is something that is not certain to happen but must
happen before the performance is due.
b. A promise= commitment
i.
Can also operate as a condition
ii.
River Ran Rice- text looks like a promise- but the court treats it as a condition
Conditions- Performance (not in formation)
2207- BATTLE OF FORMS
MIRROR IMAGE RULE-
UCC- 2207-0 about acceptance when it has additional terms (about assent)
(•pertains to acceptance; varying terms do not vitiate acceptance unless acceptance
expressly conditioned on offeror’s agreement.
Traditional Common Law Approach: Mirror Image Rule -> Acceptance must be on the
exact terms proposed by the offer
a. The acceptance must be absolute, unconditional, and identical with the terms of the offer
b. Any qualification of or departure from the terms invalidates the offer- variation is
considered a counter-offer
Last shot rulea. under the mirror image rule, the party that sent the last message before performance
began usually prevails
b. because each message operated as a rejection of the prior message and performance by
the recipient constituted acceptance of the terms of the final offer in the series
Battle of the Formsa. sale of goods begins with a series of messages with forms such as quotation forms and
purchase orders.
b. Usually parties don’t read them thoroughly so don’t notice additional terms.
c. Usually the purchase order would be the offer and acknowledgment would be acceptance
unless acknowledgment changes terms i.
> then that would be last shot and buyer accepts by accepting goods
UCC Approach (§2-207) : Reject the Mirror Image and Last Shot Rule
§2-207 Breakdown:
You can have a contract if the offer and acceptance don't match, when there was a
definite expression of acceptance or a written confirmation sent within reasonable time ->
UNLESS the acceptance says "my terms only"
2. If the terms don’t match and there are extra terms in the acceptance, we treat those terms
like proposals for addition to the contract -> UNLESS the parties are merchants
· If they are merchants, those additional terms automatically become part of
the contract UNLESS
o The offer says “my terms only”
o The new terms materially alter the contract
o Notification of objection to the new terms is given within
reasonable time after notice of them is given
3. When both parties act like they have a contract, that will establish a contract even if their
written terms don’t completely agree (example: when offeree’s expression of acceptance
1.
is conditional on different terms and the offeror doesn’t assent to those but the parties
proceed to performance)
When this happens, the terms which they actually do agree on will be binding and supplementary
terms added by the UCC will also be added in as binding terms
a. Section 1- starts with acceptance- because problem it is addressing- when the acceptance
doesn't line up with the offer then use 2207 (1)
i.
In common law- if it doesn't match the initial offer- it is a counter-offer
b. This rule states that : acceptance is still acceptance even if the terms are different from
initial offer
i.
Formation occurs here in UCC-Acceptance with different terms
Buyers Breach- WHEN MARKET PRICES HAVE GONE DOWN
Seller’s Breach- WHEN MARKET PRICES HAVE GONE UP
Contract 508 - Perfect Tender
1. Is there a conforming tender?
a. If there is a conforming tender- then there was no breach of contract
b. No- there is no conforming tender
i.
Did I cure within the contract period1. Yes- no breach
2. No- cannot use 508(1)
a. Then they ask: Were there reasonable grounds to believe
the shipment was okay?
b. And timely notice of intent to substitute the conforming
shipmenti.
If NO- BREACH- MOVE ON TO DAMAGES
If you refuse to accept a shipment that conforms under UCC- get boomerang
a. Boomerang occurs when one party takes the position that the other party is in breach of
contract- and then stops their performance
b. If they are wrong- and the party is not in breach- then they have put themselves in breach
by stopping performance
Conditions
a. A condition is an uncertain event that must occur before a party can be required to
perform
b. The effect of a condition is the obligor must perform only if the condition occurs.
c. Obligor- a person who is bound to another by contract or other legal procedure.
i.
Express Condition
1. condition is one to which the parties explicitly agree.
a. Example: delivery of the car that someone purchases
b.
ii.
Constructive Condition
1. a condition implied by law to avoid injustice.
a. Condition of Good Faith and Fair Dealing- implied in all contracts.
Excuses to Non Occurrence of Condition- Performance still required
1. If Condition is excused then the obligor must perform regardless of the condition.
a. EX: causes a nonoccurrence in bad faith will still be required to perform
2. excused if the condition isn’t a material part of the agreement and occurrence is
impracticable.
a. For example, if the seller agreed to deliver the car within one week, but a blizzard
prevented timely delivery until one additional day had passed, then the
nonoccurrence of the delivery deadline would likely be excused.
3. Estoppel
a. With estoppel, an obligor must perform if
1. the obligor promised to perform despite the nonoccurrence.
2. the obligee changed his or her position in reasonable,
foreseeable, and detrimental reliance on that promise
3. enforcing the condition would unfairly harm the obligee
4. Waiver
a. An obligor can waive a condition by:
1. making an express statement to that effect or
2. by accepting performance despite knowing of the nonoccurrence.
ii.
However, a waiver doesn’t excuse nonoccurrence if the condition is a
material part of the contract, that is,
1. if nonoccurrence would deprive the obligor of the benefit of the
bargain.
5. Disproportionate forfeiture
a. Elements
1. first, the condition is not a material part of the contract
2. the obligee has substantially relied on the expectation of the
parties’ exchange;
3. the obligee’s loss if the condition were enforced would be much
greater than the obligor’s loss if the nonoccurrence were excused.
Warranties
Warranties
a. A form of obligation
b. A K term in the form of a representation that something is or is not the case
Warranties- apply to the sale of goods.
3 types of warranties
1. Express Warranties
a. Based on a sellers guarantee or affirmation that the good will perform a certain
way.
b. Created by a description, model, or sample.
c. Does not need to refer to it specifically as a warranty for it to be expressed.
d. Can only be disclaimed by an express disclaimer
e. Ex: the phone has a battery life of 15 hours
2. Implied Warranties of Merchantability
a. Automatically Created at the sale of the good
b. PERSON MUST BE A MERCHANT UNDER UCC.
c. guarantees that the goods are merchantable
i.
Goods are merchantable when they are fit for the ordinary purposes for
which such goods are used.
ii. may be disclaimed by the seller’s written language.
1. For example, Sean could negate his implied warranty of fitness for
a particular purpose by adding a written term to the sales contract
that says, “This cell phone does not have a camera.”
2. Any written disclaimer must be conspicuous, which means it
cannot be in fine print
3. Implied Warranties of Fitness for a Particular Purpose
a. guarantees that the goods are fit for the buyer’s particular purpose and is
automatically created when the buyer relies on the seller’s skill or judgment to
select suitable goods.
b. Also, the seller must know of the buyer’s purpose and reliancec
c. may be explicitly disclaimed by the seller’s explicit language, which may be
spoken or written but must include the word “merchantability.”
i.
For example, Sean could negate his implied warranty of merchantability
by saying, “This cell phone is not merchantable because it is unable to
make phone calls.”
d.
Disclaimers to Warranties
a. May negate or limit the warranty.
1. Explicit Disclaimers
a. explicitly disclaimed by the seller’s explicit language, which may
be spoken or written but must include the word “merchantability.”
For example, Sean could negate his implied warranty of
merchantability by saying, “This cell phone is not merchantable
because it is unable to make phone calls.”
2. Implicit Disclaimers
a. may be implicitly disclaimed by the language of the sale or the
buyer’s examination of the goods.
b. All implied warranties may be excluded by expressions like “as
is,” “with all faults,” or other language that, in general
understanding, calls the buyer’s attention to the fact that there are
no implied warranties, provided that the buyer has examined, or
has refused to examine, the goods.
i.
First, the seller may indicate to the buyer during the sale
that there is no implied warranty, using plain language such
as “as is” or “with all faults.
ii. there is no implied warranty for any defects that a buyer
examination would have revealed.
Defenses to Enforceability
1. LACK OF CAPACITY
2. DURESS
3. UNCONSCIONABILITY
4. IMPRACTICABILITY
5. IMPOSSIBILITY
6. ILLEGALITY
7. MISREPRESENTATION/ DECEIT
8. FRUSTRATION
9. MISTAKE
10. STATUTE OF FRAUDS
1. Lack of capacity
a. Too young
b. Mental illness- unable to understand the contract
c. Intoxication - unable to reasonably understand or act on the contract.
i.
Other party must know they are intoxicated, too young and unable to
reasonably understand the material of the contract.
2. Duress- 175
a. Assent was induced by an improper threat
b. There was no reasonable alternative other than entering contract
c. Duress makes assent not voluntary and therefore voids the contract
i.
176- When a threat is Improper
1. A threat is improper if
a. what is threatened is a crime or a tort, or the threat itself would be a crime or a
tort if it resulted in obtaining property,
b. what is threatened is a criminal prosecution,
c. what is threatened is the use of civil process and the threat is made in bad faith, or
d. the threat is a breach of the duty of good faith and fair dealing under a contract
with the recipient.
2. A threat is improper if the resulting exchange is not on fair terms, and
a. the threatened act would harm the recipient and would not significantly benefit
the party making the threat,
b. the effectiveness of the threat in inducing the manifestation of assent is
significantly increased by prior unfair dealing by the party making the threat, or
c. what is threatened is otherwise a use of power for illegitimate ends.
Improper threats are not limited to crimes or acts of violence, but they also can include torts and
other wrongful civil actions.
3. Unconscionability
a. Definition: absence of meaningful choice on the party of one of the parties to a
contract, combined with contractual terms which are unreasonably in favor of the
other party
Procedural Unconscionability
A contract is procedurally unconscionable when it results
from a significant inequality of bargaining power between
the two parties.
i.
standard form contracts in which the signing party
does not have the power to negotiate or modify the
terms, as well as contracts containing buried terms
that are actively hidden.
Substantive Unconscionability
A. contract is substantively unconscionable when its terms are overly harsh or one-sided
against one of the parties.
a. For example, if Dan agrees to pay $3 million for Molly’s used car, then their
contract may be substantively unconscionable.
4. Illegality
a. Contract involves Endangerment of public welfare, crime, tort.
5. Misrepresentation/ Deceit
a. may be asserted by a party whose assent was induced by a misrepresentation, or
untrue assertion, that was fraudulent or material, as long as the party’s reliance on
the assertion was justified.
b. a misrepresentation- untrue assertion, or a statement that is not in accordance
with the facts.
c. If an agreement is based on deceit- then assent is not properly given because
its based on a false premise
d. Can use deceit as a defense to void the contract and file a tort of fraud as well
i.
An untrue assertion may also take the form of concealment or nondisclosure.
ii.
Concealment may be a misrepresentation when affirmative action is taken
to prevent the discovery of a fact.
iii.
Non-disclosure may also be a misrepresentation when the non-disclosing
party knows that disclosure is necessary to correct the other party’s
mistake or has a relationship of trust and confidence with the other party
that entitles the other party to disclosure, such as a fiduciary relationship.
If Molly is Dan’s real estate agent and knows the house has
termites, then her non-disclosure will also be a misrepresentation
based on their fiduciary relationship.
e. To prove Misrepresentation as defense to Enforceability- it must be
i.
Fraudulent or Material
Fraudulent- when intended to induce the party’s assent and made
by someone who knows or believes that the assertion is untrue or
who isn’t confident that the assertion is true.
For example, Molly’s misrepresentation that the house does
not have termites is fraudulent if she’s trying to convince
Dan to purchase the house and also knows that the house
does have termites or isn’t confident that the house does not
have termites.
Material -when it is likely to induce a reasonable person’s assent,
or when it is known to be likely to induce the party’s assent.
For example, Molly’s misrepresentation that the house does
not have termites will be material if it is likely to induce a
reasonable person’s assent or if Molly knows that it is
likely to induce Dan’s assent.
ii. Justifiably Relied on the fraudulent or material misrepresentation
iii. This means that the misrepresentation must not be an opinion or “mere
puffery.”
Special Relationship of trust and confidence with the other
person, such that it is reasonable to rely on the other person’s
opinion.
reasonably believes that the other person has special skill,
judgment, or objectivity regarding the subject matter.
An opinion can be deceit because it violates the good faith and
fair dealing notion
Example: telling someone they have a talent for dancing and they
could become a national level dancer as long as they sign a
contract with your dance company
Works like statement of fact for deceit - where justifiable reliance
is more prominent for an opinion
6. Impossibility
7. Impracticability- must be unforeseeable
a. When something happens that was unforeseeable and it makes performance
very difficult or impossible
b. ‘“A thing is impossible in legal contemplation when it is not practicable; and a
thing is impracticable when it can only be done at an excessive and unreasonable
cost.’
i.
Impracticability does not depend on a mistake of either parties
c. Would it be socially undesirable for the performance to occur- do not want to
force someone to do something that is impossible or impractical
i.
Force Majeure Event- common clause in contracts which essentially
frees both parties from liability or obligation when an extraordinary event
or circumstance beyond the control of the parties, such as a war, strike,
riot, crime, epidemic
§ 270 Partial Impracticability
Where only part of an obligor's performance is impracticable, his duty to render the remaining
part is unaffected if:
a.
it is still practicable for him to render performance that is substantial, taking account of
any reasonable substitute performance that he is under a duty to render; or
b. the obligee, within a reasonable time, agrees to render any remaining performance in full
and to allow the obligor to retain any performance that has already been rendered.
ii.
8. Frustration
§ 265 Discharge by Supervening Frustration
Where, after a contract is made, a party's principal purpose is substantially frustrated without his
fault by the occurrence of an event the non-occurrence of which was a basic assumption on
which the contract was made, his remaining duties to render performance are discharged, unless
the language or the circumstances indicate the contrary.
9. Mistake
a. Definition: A mistake is a belief that is not in accordance with the facts at the
time of the contract. Rather than a simple misunderstanding, a mistake means that
one or more of the parties has entered into the contract based on an erroneous
belief.
b. Use the doctrine of Mistake when people have an absence of agreement because the Misconception undermines the quality of the agreement
c. May be able to avoid performance
Elements of Unilateral Mistake
1.
2.
3.
4.
5.
the mistake must be regarding a basic assumption on which the contract was made,
a. in that it relates to the substance of the agreement.
the mistake must have a material effect on the agreed-upon exchange of performances.
the adversely affected party must not bear the risk of the mistake
Adversely affect party must also have been the mistaken party.
one of the following must be true:
a. the mistake must cause unconscionability
b. the other party must know of the mistake
c. or the other party’s fault must cause the mistake
§ 153 When Mistake of One Party Makes a Contract Voidable- UNILATERAL MISTAKE
Where a mistake of one party at the time a contract was made as to a basic assumption on which
he made the contract has a material effect on the agreed exchange of performances that is
adverse to him, the contract is voidable by him if he does not bear the risk of the mistake under
the rule stated in § 154, and
(a) the effect of the mistake is such that enforcement of the contract would be unconscionable, or
(b) the other party had reason to know of the mistake or his fault caused the mistake.
152- MUTUAL MISTAKE
Elements
1. the mistake must be regarding a basic assumption on which the contract was made.
a. This means that the mistake relates to the substance of the agreement.
b. For example, the mistaken belief that Amy’s land is worthless is a basic
assumption of its sale for only $1,000
2. Must have a material Effect
a. There has been a material effect when the resulting imbalance in the exchange is
so severe that the adversely affected party cannot be fairly required to perform.
b. Typically, this means that the mistake must have had the effect of disadvantaging
one party and advantaging the other.
3. Party must not Bears the Risk of a Mistake - 3 ways bear risk of mistake
a. If one party bears the risk of a mistake, then the other party does not
1. when the parties have agreed in the contract to allocate the risk
to that party.
a. if the contract for the sale of Amy’s land reads, “Amy
agrees to accept the risk that mineral deposits may be found
in her land,”
2. when a court allocates the risk to that party because it is
reasonable under the circumstances.
a. For example, a court would likely allocate to Amy the risk
of a mistake regarding any mineral deposits, because she is
the seller of her land.
3. when that party is consciously ignorant.
a. This means that the party is aware, at the time of the
contract, that she has only limited knowledge regarding the
relevant facts, but treats her limited knowledge as sufficient
anyway.
When these three elements are met, and both parties have the same mistaken belief, then
the adversely affected party may avoid performing the contract
10. Statute of Frauds
Marriage- (contracts in consideration of: mostly obsolete)
Year (one: contracts that cannot be performed within a year
Land (sale of an interest in )
Executor (promise by exector to pay estate costs herself
Goods contracts for sale of where the amount exceeds 500 dollars
Surety
Purpose of Statute of Frauds
a. Prevent perjury/ selective recollection
b. Provide evidence of the making and terms of important agreements
c. Bring home to parties the seriousness of their acts
d. Increase clarity of agreements by forcing them to be written down
DAMAGES
Estimated Damages = LV + OL -CA- LA
LV= Loss in Value
a. difference between what party expected and what party received.
b. - These are direct damages.
OL= other loss
1. consequential damages
a. Further loss in other transactions or endeavors that were dependent upon the K.
These are special damages.
2. Incidental damages
a. Additional costs incurred after the breach in a reasonable attempt to avoid loss.
These are also direct damages (although sometimes called special)
CA= Cost avoided
a. Loss in value avoided.
b. (Money you expected to spend, but didn't have to.
LA= Loss Avoided
a. Other losses avoided
Specific Performance
a. Court-ordered remedy that requires precise fulfillment of a contractual obligation where
a breaching party is required to carry out their promise.
b. Available when $$ damages are insufficient
c. Comes even closer than expectation damages.
i.
It doesn't put them in the exact same position b/c they had to go to court to get it
done.
Advantages of Specific Performance:
1. Puts the NBP in the position he would be in if K had been performed (NBP gets their
expectation).
2. We don't have to go through the ugly formula to figure out how much $$ it takes - Saves
Court and parties time (putting on damages experts, etc).
B. Disadvantages:
1. Cost - really hard and expensive.
Duty to Mitigate
a. Non breaching party has a duty to mitigate losses once the party has breached.
Mitigation Doctrine
a. You cannot recover damages you could have mitigated with reasonable efforts.
i.
Reasonable efforts- however you are not required to do something that is
unreasonable.
ii. Just because he could have gotten a new deal does not mean he is required
to take it.
Lost Volume Seller doctrine
LDP (LIquidated Damages Provision —-----Penalty?
a. The distinction between a penalty and liquidated damages is not an easy one to draw in
practice but we are required to draw it and can give only limited weight to the district
court’s determination. Whether a provision for damages is a penalty clause or a
liquidated-damages clause is a question of law rather than fact.
b. liquidation of damages must be a reasonable estimate at the time of contracting of the
likely damages from breach, and the need for estimation at that time must be shown by
reference to the likely difficulty of measuring the actual damages from a breach of
contract after the breach occurs.
c. If damages would be easy to determine then, or if the estimate greatly exceeds a
reasonable upper estimate of what the damages are likely to be, it is a penalty.
A penalty clause
A. is a contractual clause that imposes liquidated damages that are unreasonably high and
represent a punishment for breach, rather than a reasonable forecast of damages for the
harm that is caused by the breach, are referred to as penalty clauses.
B. These clauses allow parties, at the time of contracting, to agree to their respective
damages liability if they later breach.
C. While liquidated damages clauses are generally enforceable, courts do not enforce
penalty clauses.
Divisibility of the ContractDivisible contract: parties divided performance into units so that each past performance is rough
compensation for corresponding past performance by other party
○ Test for divisibility: whether parties would be willing to exchange part performance
rgdls of what transpired after, whether divisions made are merely to req periodic
payments as work progresses
● Divisibility reduces amount of damages
● Payment required on units delivered.
Equitable Remedies - instead of seeking merely monetary damages, the
plaintiff is seeking that the court compels the defendant to perform a certain
act or refrain from a certain act.
Three types of Equitable Remedies
1. Specific Performance
2. Injunction
3. Restitution
Specific Performance An order of specific performance is intended to produce as nearly
as is practicable the same effect that the performance due under a contract would have
produced
Immeasurability -impossible to measure damages.
Factors for Specific Performance
1. Permanent Injunction/ Specific Performance
2. Irreparable Injury
a. Irreparable by damages- cannot be remedied through money.
b. Immeasurability
c. Compensability
3. Adequacy of Legal Remedies
a. whether legal remedies—namely, money damages—can remedy MVFS’s injury, is
closely related to the first factor.
b. Courts frequently note that irreparable injury occurs when an injured party cannot be fully
compensated by money damages.
4. Balance of Harms/ Hardships
a. Balance of
5. Public Interest
a.