MANIFESTATION
Common Law1. There must be an outward manifestation of intent to lead another to reasonably believe an agreement has been
reached; secret intent is irrelevant. (strictly objective, context specific (all chars of E), modified context
specific(only chars of Emb that M knew)). (Embry v. McKittrick)
2. Manifestations must be made to the party, not a 3rd party (Texaco v. Pennzoil).
3. If a party makes an offer in jest the offer can be binding. (Lucy v. Zehmer).
Restatement1. §19(2)- Conduct as MOMA- Conduct not manifestation unless party agrees to conduct and knows or has
reason to know other party infers assent from conduct.
2. §19(1)- Conduct as MOMA- MOMA can be made by written, spoken, other acts, failure to act.
3. MOMA (§18)- promise, or begin or render performance.
4. §17- Requirement for Bargain- bargain where there is MOMA for consideration
UCC1. 2-204- Formation in General- K can be made in any manner sufficient to show agreement; must intend to
make a K and there must be reasonably certain basis for determining remedy
OFFER
Common Law1. Offer is distinct from preliminary negotiations- advertisement in general is an invitation for an offer but can
be an offer if it has completed terms (Nebraska Seed Co. v. Harsh, Lefkowitz v. Great Minn Surplus).
2. Responding to an ad can be considered an offer. (Leonard v. PepsiCo)
3. Ads are not necessarily unilateral offers. (Leonard v. PepsiCo)
4. Revocation can be made any time prior to acceptance. (Default Rule). (Dickinson v. Dodds).
5. Letters of intent can be binding but must look at K as a whole; both parties must express clear intent to be
bound (Empro v. BallCo)
6. Factors indicating intent to be bound include if party expressly reserved right to be bound only when
agreement signed, if partial performance by one party has been accepted, if all essential terms agreed upon,
complexity of transaction. (Texaco v. Pennzoil).
Restatement1. §22- Mode of Assent- MOMA via offer and acceptance; formation moment does not have to be determinative
2. §24- Offer- MOMA as to justify interp as intent to be bound
3. §26- Prelim Negotiations are not offers.
4. §29- To Whom Offer Addressed- power of acceptance must be created in specified person/group
5. §30- Form of acceptance can be specified
6. §32- Invitation of promise or performance- in case of doubt offeree can decide (?)
7. §33- Certainty- can be void if not reasonably certain terms; must provide basis for determining existence
of breach and remedy
8. §36- Termination before lapse- direct revocation (§42), indirect revocation (§43), counter offer, death,
incapacity
9. §27- Written Memorial Contemplated- K not prevented from being binding even if a written memorial is
contemplated; just have to have MOMA and essential terms. Otherwise is prelim negotiation.
10. §25- Option K- promise which meets the requirements for the formation of a K and limits the promisor’s
power to revoke an offer
11. §37- acceptance under an option K is not terminated by rejection, counter offer, death, incapacity unless
requirements met for discharge of K duty.
UCC2. 2-204- Formation in General- K can be made in any manner sufficient to show agreement; must intend to
make a K and there must be reasonably certain basis for determining remedy
3. 2-206- Offer and Acceptance- offer invites acceptance by any reasonable mode unless otherwise stated; if
performance is acceptance must start w/in reasonable time otherwise offer lapses (3 month max.)
4. 2-205- Firm Offer- offer by merchant to buy/sell goods in signed writing that gives assurance by its terms
that it will be held open is not revocable for lack of consideration during the time specified (or 3 months max
if no time specified). If offeree supplies assurance form then offeror must sign it.
5. Gap fillers to fill in uncertain termsa. 2-305- Open Price
b. 2-308- Absence Specified Place for Delivery
c. 2-309- Absence of Specific Time, notice of termination
d. 2-310- Open time for payment
e. 2-312-316- Warranty
ACCEPTANCE
Common Law
1. Mirror Image Rule- any departure constitutes rejection and counteroffer unless clear that it is a mere inquiry
or states something implied in K. (Ardente v. Horan) (remember- this does NOT apply to sale of goods under
UCC).
2. Mailbox Rule- acceptance is effective as soon as out of offeror’s possession; binding K at that time
3. Last Shot Rule- if a K is recognized by virtue of mutual performance, it is on the terms of the last
communication. (not applied under the UCC).
4. Acceptance by performance must be manifested by some appropriate act; mere preparations are not
enough. (White v. Corlies)
5. If bilateral K, must rescind before acceptance by performance. (Petterson v. Pattberg)
6. Acceptance can be made in the form of silence if previous business dealings make it reasonable for the offeror
to believe that the silence of the offeree was acceptance (Hobbs v. Massasoit Whip Co.).
7. Assent may be manifested electronically if clear assent obtained- clicking ‘I Agree’ prior to continuing was
enough (click wrap) (Capsi v. Microsoft Network).
8. Downloading software is not sufficient to show assent if did not have to agree to terms to proceed (Specht v.
Netscape).
9. If the terms and conditions are not obvious and user can enter site without agreeing, then no assent to terms
and conditions unless there is actual proof of knowledge of terms and conditions (browse wrap) (Ticketmaster
v. Tickets.com).
a. **See UCITA §112- Manifesting Assent: Opportunity to Review, p. 369 of book
Restatement
1. §61- Acceptance that requests change of terms is not invalid as long as it is clear that the acceptance does
not depend on the changing of those terms
2. §63- Acceptance is effective as soon as it is out of hands of oferee; under option K acceptance is effective
upon receipt
3. §64- Acceptance by phone or fax
4. §65- Medium of acceptance is reasonable if it is same as one used by offeror
5. §36(1)(b)- Must accept before lapse (or revocation)
6. §60- Mode- If mode specified, must accept by that mode. If requested then must accept by that mode or
reasonably consistent mode. If none specified then can use same method as offeror or any customary or
reasonable method for that transaction.
7. §54- Acceptance by Performance- No notification necessary unless requested by offeror if offeror makes
clear that acceptance can be in form of performance; but offeree must notify offeror if has reason to believe
that offeror has no means to learn of performance
8. §62- Beginning performance is acceptance in that it represents a promise to complete performance
9. §45- Option K created by partial performance or tender- can form option K like any other K (separate
consideration from larger K); from review session- By making offer to form unilateral K, if the offeree
commences performance then it’s an option K. Can’t revoke the offer. §45. still conditional on completion.
So offeror just can’t revoke, don’t have to do anything until there is full performance
10. §69- Silence can be acceptance if- offeree takes benefit of services; offeree has reason to know that silence
can be acceptance to offer, previous business dealings, doing anything inconsistent w/offeror’s ownership (i.e,
destroying skins).
UCC
1. 2-204- Formation in General- K can be made in any manner sufficient to show agreement; must intend to
make a K and there must be reasonably certain basis for determining remedy
2. 2-206- Offer and Acceptance- offer invites acceptance by any reasonable mode unless otherwise stated; if
performance is acceptance must start w/in reasonable time otherwise offer lapses (3 month max.)
DISCERNING THE TERMS
Common Law
1. Uncertainty must relate to a material aspect of the K (Raffles v. Wichelhaus).
2. If there are two equally reasonable meanings to an expression and each party understands the expression
differently then no K is formed. (Raffles).
3. If one meaning is more reasonable than the other the objective reasonable meaning prevails. (Frigaliment
Importing Co. v. BNS Int’l Sales Co.) (?).
4. If there is a common industry meaning that meaning can be used. (Weinberg v. Edelstein).
5. If intent is in doubt or the court cannot establish a basis for what is agreed and neither party is culpable there is
an incurable uncertainty and there is no K. (Oswald v. Allen).
6. In a requirements contract, good faith must be used to solve the proportionality problem; there is an
implied duty to make the request for the requirements in good faith; limited to actual requirements, not just
market speculation. (New York Central Iron v. US Radiator)
7. A disproportionate decrease is permissible if made in good faith but an increase is subject to the exception in
2-306, the idea being that the sellers may otherwise be harmed.
8. Implied promises may be read into a K to create adequate consideration (Wood v. Lucy Lady Duff Gordon).
Restatement
1. §201- Whose Meaning Prevails- (1) if parties have same meaning then use that meaning (2) if parties have
different meaning then attach the meaning of one of them- look at culpability of parties and knowledge of
other parties’ interpretation (3) unless can make it work under 1 or 2 there is no K.
2. §202- Evidentiary Standards- consider (1) context of words (2) the writing as a whole and how the words fit
into the agreement (3) unless clear intention is manifested, use the generally prevailing meaning of word or the
trade definition (4) consider repeated performance done without objection (5) try to interpret manifestation of
parties as consistent with each other and trade usage where possible.
3. §204- Gap Filling- if a bargain is sufficiently defined to form a K (i.e., reasonable basis for determining
breach and remedy) and the parties have not agreed to a term that is essential to determine rights and duties, a
term reasonable in the circumstances can be supplied by the court.
UCC
1. 2-208- Course of performance or practical construction- if need to interpret language, look at (1) express
terms (2) prior action of parties in deal (3) other deals the parties have engaged in in the past (4) trade usage.
2. 2-305- Open Price- (1) Price is reasonable at time for deliver if (a) nothing said as to price (b) price is left to
be agreed by parties and they fail to agree (c) the price is fixed in terms of the market or other standard
recorded by 3rd party; (2)price fixed by buyer or seller must be in good faith; (3) if price fails to be fixed by
fault of one party then other party may treat it as cancelled K or fix reasonable price; (4) if parties intent not to
be bound w/out specified price then there is no K.
3. 2-306- Outputs, Requirements, Exclusive Dealings- quantity measured by output of seller or requirements
of buyer must be made in good faith; cannot be disproportionate. Exclusive dealings imposes obligation by
seller to use best efforts to supply goods and buyer to use best efforts to promote sale.
4. 2-308- Absence Specified Place for Delivery-(a) place for delivery is seller’s place of business or residence
(if no place of business) unless otherwise stated; (b) if parties know at time of K that goods are in other place
then that is place for deliver; (c) title documents can be delivered through customary banking channels.
5. 2-309- Absence of Specific Time Provisions; Notice of Termination- (1) unless specified, reasonable
shipment time (2) if indefinite in duration then valid for reasonable time but may be terminated at any time by
either party unless otherwise agreed (3) termination of K by one party without happening of specified event
must reasonably notify other party (if there’s an agreement that dispenses with notice it is invalid if
unconscionable)
6. 2-310- Open time for Payment; Authority to Ship- payment due at time buyer to receive goods; buyer can
inspect goods on delivery; (see p. 305 in text)
7. 2-312 to 2-316- Warranties
I.
II.
III.
II.
III.
BATTLE OF FORMS
Remember- this is only under the UCCa. Carnival Cruise Lines v. Shute- could not argue under 2-207 b/c not a UCC case. Forum selection
clauses are prima faciae valid even if no assent in traditional manner.
Remember- critical to determine formation of K at earliest possible time- OFFEROR IS MASTER OF
THE OFFER AND CAN SET THE TERMS OF ACCEPTANCE
Generally: UCC 2-207a. Imposed whenever one or both parties use written communications in the process of forming a K
b. Abolishes the Mirror Image rule in sale of goods transactions; if response can reasonably be
interpreted as acceptance, it is recognized as such despite a variation from the offer
c. It rejects the “last shot” rule. If a K is recognized by virtue of mutual performance, it is not simply
on the terms set out in last communication.
i. Conflicting terms fall away and are replaced by supplementary terms in the UCC
Offer (determine from common law) and Acceptance (2-207(1))
a. Must use common law principles to determine if it is an offer. Once offer est., 2-207(1) focuses on
acceptance.
b. Changing a date may or may not be too different to be a definite and seasonable acceptance, have to
argue it under the circumstances.
c. Watch out for “subject to” acceptances- they are NOT what would be considered a provisio
d. Provisio MUST say something like “acceptance is expressly made conditional on offeror’s assent to
additional or different terms”
Proposals- 2-207(2)
a. Additional terms are construed as PROPOSALS for addition to the K
b. Between merchants, such terms become part of the K UNLESS:
i. The offer expressly limits acceptance
ii. They materially alter it; or
1. REMEMBER- material alterations are things that would create surprise or hardship on
the merchant.
2. DON’T FORGET ABOUT GAP FILLERS.
iii. Notification of objection to them has already been given or is given within a reasonable time
after notice of them is received
c. Only applies if the response to offer is an ACCEPTANCE; does not apply to a counteroffer or if both
parties perform under 2-207(3)
d. Proposal Exclusions- 2-207(2)
i. Additional terms do NOT become part of the contract unless both parties are merchants
1. merchant as defined in 2-204(1)2. transaction must be BETWEEN merchants under 2-207(2); if both not merchants than
proposals do not become part of the K
ii. The term does not enter the K if it materially alters it1. a term is material if it provides for an important aspect of contractual performance- it is
a significant element of the exchange bargained for by the party
a. K must be interpreted in context to determine if material
b. Even if the sale is between merchants a proposed term does not enter the K if it
has more than a minimal impact on the exchange and it is not sufficiently
common to be expected
iii. The term does not enter the K if the Offer limits acceptance to its terms1. offeror can eliminate possibility of proposals entering the K by putting “expressly
conditional” language in the purported acceptance
iv. The term does not enter the K if the Offeror objects- (?)
1. offeror can subsequently object either in anticipation of the proposal or w/in reasonable
time of acquiring notice
e. Note- “different” terms not mentioned in 2-207(2)i. Some courts treat as inadvertent and apply 2-207(2) anyway
ii. Other courts say that different terms can never become part of the K
iii. Other courts say that the conflicting terms cancel each other out and the law should then supply
a filler term (“Knockout” rule)
f. 2-207(3)- Mutual Performance but no K
i. Conduct by both parties that recognizes the existence of a K is sufficient to est. a K for sale
ALTHOUGH the writings of parties do not otherwise est. a K.
1. the terms of particular K consist of terms on which the writings agree; plus
2. any supplementary terms incorporated under any other provisions in this act
DAMAGES
Expectation Damages
Common Law
1. The court attempts to put the promisee in the position he would have been in had the promise been fully
performed. Proper measure of value is the difference between the value of the good perfect hand and the hand
he got. (Hawkins v. McGee).
2. Sale of Goods vs. Sale of services- if it is mixed transaction, must see which dominantly applies. If sale of
goods then UCC governs. (JO Hooker v. Roberts Cabinet Co.)
3. General rule is that you should get the expectation interest (1-106). More specific one for goods that says
you should get difference in market value and contract price (2-713) (Tongish v. Thomas)
Restatement
1. §347- Measure of Damages in General- Damages = [Loss in value] + [other incidental or consequential loss]
– [cost avoided] – [loss avoided]
UCC
1. 2-713(1)- General measure of damages is the difference between the market price at time buyer learned of
breach and the K price plus incidental and consequential damages minus expenses saved. (2) market price
generally determined by place for tender
2. 2-712- Cover- Buyer may cover in good faith and without reasonable delay any reasonable purchase of or K
to purchase substitute goods
3. 2-715- (a) Incidental damages- expenses reasonably incurred in inspection, receipt, transportation, and care
and custody and commercially reasonable charges in connection with covering; (b) Consequential damagesloss resulting from K breach that could not be prevented
4. 2-717- buyer can deduct all or part of damages from any part of the price still due to the seller under the K
Reliance
Common Law1. Reliance damages attempt to put the promisee back in the position he would have been in had the promise not
been made.
2. If the injured party could cover by using reliance materials on another job then reliance damages may not be
granted. (White v. Corlies)
3. There may be no limit to reliance damages b/c there may be no limit to the amount the P has done in reliance
on the K. (Nurse v. Barnes).
4. The injured party is only entitled to recover costs it would not have otherwise incurred absent the breach.
(Hooker).
5. Recoverable reliance damages are those that were incurred as necessary expenses in furtherance of
performance from the time of K to the time of breach. (Chicago v. Dempsey)
6. In event of a losing K, reliance damages are an alternative to expectation damages. The injured party must
prove the reliance damages. The breaching party must prove the amount of the loss if they want to deduct it
from the injured party’s recovery. (Mistletoe).
Restatement1. Restatement §349: party-not-in-breach has the alternative of suing for reliance damages.
Restitution
Other Party in Breach1. Court attempts to put promisor back in position they would have been in had the promise not been made.
Might be awarded if the promisee conferred a benefit on the promisor in the course of the transaction.
Awarded when promisee has partly, but not fully, performed.
2. A contract does not have to be formally rescinded before one can sue for restitution damages. (Bush v.
Canfield).
3. Must first show total breach or repudiation before action taken.
4. Both parties must give up benefit conferred.
5. One cannot sue for restitution if the only thing left to fulfill the K is payment (would have to sue for
expectation).
Party in Breach1. Quantum Meruit- a common law action in assumpsit to recover payment for services rendered to another; used
as an equitable remedy to provide restitution for another’s unjust enrichment
2. Partial performance of K can be compensated to prevent unjust enrichment. Recovery for partial labor will be
based on the value in the K and offset by any damages caused by the breach. (Britton v. Turner).
3. To prove unjust enrichment, the party in breach must show that the benefits received were greater than the
damages suffered. (Vines v. Orchard Hills).
4. Benefits must be assessed at time of breach rather than time of litigation. (Vines v. Orchard Hills).
Quantum Meruit1. A quasi K is a legal fiction, based on quantum meruit, that is a K implied by law because of the conduct of the
parties, some special relationship between them, or because one of them would be unjustly enriched. More
likely to be found when it would be impossible to make a regular K.
2. The surgeon was entitled to reasonable compensation for services rendered. Negotiation with unconscious
person impossible but customarily the unconscious person would want to enter the K. (Cotnam v. Wisdom).
3. To sustain a claim of unjust enrichment it must be shown by the facts pleaded that the person wrongly secured
or passively received a benefit that it would be unconscionable to retain. (Martin v. Little Brown and Co.)
Restatement
1. Restatement § 371- Measure of Restitution Interest- If a sum of money is awarded to protect a party’s
restitution interest, it may as justice requires be measured by either:
a. The reasonable value to the other party of what he received in terms of what it would have cost him to
obtain it from a person in the claimant’s position (cost avoided); or
b. The extent to which the other party’s property has been increased in value or his interests advanced (net
benefit)
c. “As justice requires” usually read to give deference to non-breaching party on theory of measurement.
i. Restatement § 371, comment b: “[A] party seeking restitution for part performance is commonly
allowed the more generous measure of reasonable value, unless that measure is unduly difficult to
apply, except when he is in breach.”
ii. Recovery can be higher of these two measures; can exceed expectation damages
2. Restatement § 373- Restitution when other party is in breach
a. Injured party is entitled to restitution for any benefit that he has conferred on the other party by way of part
performance or reliance
b. The injured party has no right to restitution if he has performed all of his duties under the K and no
performance by the other party remains due other than payment of a definite sum of money for that
performance
c. Restatement Comment to 373: “A party who has lost the right to claim damages for total breach by, for
example, acceptance or retention of performance with knowledge of defects has also lost the right to
restitution.”
3. Restatement § 374- Restitution in favor of party in breach:
a. The party in breach is entitled to restitution for any benefit that he has conferred by way of part
performance or reliance in excess of the loss that he has caused by his own breach
b. To the extent that, under the manifested assent of the parties, a party’s performance is to be retained in the
case of a breach, that party is not entitled to restitution if the value of the performance as liquidated
damages is reasonable in light of the anticipated or actual loss caused by the breach and the difficulties of
proof of loss
i. comment b: “Since the party seeking restitution is responsible for posing the problem of
measuring benefit, doubts will be resolved against him and his recovery will not exceed the less
generous of the two measures specified in § 371…. If no value can be put on this, he cannot
recover.”
DAMAGE LIMITATIONS
Common LawRemoteness or Foreseeability1. Damages must be foreseeable at the time of the K; no lost profits awarded if they do not arise naturally
from the breach or are reasonably in contemplation of the parties at the time they made the K as the probable
result of the breach. (default) (Hadley v. Baxendale).
2. To hold an employer liable, must notify an agent of the employer (not just a clerk). (Hadley)
3. General damages are awarded only if injury were foreseeable to a reasonable man and that special
damages are awarded only if actual notice was given the carrier of the possibility of injury. Actual harm
does not have to be the most foreseeable, just has to be foreseeable to reasonable man. (Hector Martiniez &
Co. v. Southern Pacific).
4. Minority Rule- Tacit Agreement- Recipient of notice has to actually acknowledge that they are agreeing to
expanded liability (Morrow v. First National Bank of Hot Springs). (UCC and majority reject this-force
parties to K around default).
5. Can K around the default Hadley rule by specifying damages to be included.
Restatement4. Restatement § 351- Unforeseeability and Related Limitations on Damages
a. (1) Damages are not recoverable for loss that the party in breach did not have reason to foresee as a
probable result of the breach when the contract was made.
b. (2) Loss may be foreseeable as a probable result of a breach because it follows from the breach
i. (a) in the ordinary course of events, or
ii. (b) as a result of special circumstances, beyond the ordinary course of events, that the party in
breach had reason to know.
Certainty of HarmCommon Law
1. Lost profits cannot be recovered if too remote or uncertain. (Chicago Coliseum Club v. Dempsey)
2. Parties cannot recover for expenditures that were made before there was a K. (default) (Chicago).
3. If you enter a losing K and sue for reliance damages, if the party in breach can prove the amount you would have
lost then that amount can be deducted from your reliance recovery. (Mistletowe v. Locke).
4. A breaching party cannot recover the amount of “savings” under a losing K.
5. ENGLISH CASE- A party can claim wasted expenditure before the K if it was reasonably in contemplation of
the parties as likely to be wasted if the K was broken. (Anglia Television v. Reed).
Restatement2. Restatement §352: Damages are not recoverable for loss beyond an amount that the evidence permits to be
established with reasonable certainty.
3. Restatement §349: party-not-in-breach has the alternative of suing for reliance damages.
AvoidabilityCommon Law
1. Expenditures can only be recovered from point of K to point of breach; performance cannot be continued
after notice of breach and recover for those expenditures. (Rockingham County v. Luten Bridge Co.)
2. If an employee accepts alternative employment the employment can be deducted from their recovery if it is
employment they could not have performed but for the termination.
3. If an employee does not accept any alternative work that could be deducted from recovery, the employer has
the burden to prove that the employee did not attempt to mitigate damages and must prove that
substantially similar employment was available to the employee and that the employee did not accept.
(Shirley MacLaine Parker v. Twentieth Century Fox)
4. The rule that wages earned by a former employee in a new job may be applied in mitigation of damages but
might not apply in liquidated damages clauses b/c liq damages often account for subjective elements not
objectively calculable (Wassernaar v. Towne Hotel).
5. If the seller can prove that the lost sale is a lost volume transaction, 2-708(2) applies rather than normal
market price damages and the seller can recover for lost profits plus incidental and consequential damages.
(Neri v. Retail Marine)
6. There is a split of authority over common law mitigation. One set of courts believes that mitigation is
mitigation so you should have to do it; other set of courts considers fairness and may not force a party to
mitigate if it would be unfair for the innocent party to bare the loss (Eddie/Gunter/UGA K hypo).
Restatement
1. Restatement § 350c. “(1) Except as stated in Subsection (2), damages are not recoverable for loss that the injured party could
have avoided without undue risk, burden or humiliation.”
d. “(2) The injured party is not precluded from recovery by the rule stated in Subsection (1) to the extent that
he has made reasonable but unsuccessful efforts to avoid loss.”
UCCSeller Breach1. 2-712- Buyer may cover (good faith, reasonable)
2. 2-713- If buyer does not cover, can recover the difference in K and market price plus incidental plus
consequential but less expenses saved by the breach.
Buyer Breach1. § 2-703. Seller remedies in general. Seller may, among other things:
a. Resell goods and recover damages (See § 2-706)
b. Recover damages for non-acceptance (See § 2-708)
2. § 2-706(1). Seller may resale goods upon buyer breach.
a. If Seller resells, damages = contract price – resale price + other loss.
3. § 2-708. If Seller chooses not to resell, (1) the measure of damages for non-acceptance or repudiation by the
buyer is the difference between the market price at the time and place for tender and the unpaid contract price
together with any incidental damages provided in this Article (Section 2-710), but less expenses saved in
consequence of the buyer's breach (2) LOST VOLUME- If the measure of damages provided in subsection
(1) is inadequate to put the seller in as good a position as performance would have done then the measure of
damages is the profit (including reasonable overhead) which the seller would have made from full
performance by the buyer, together with any incidental or consequential damages provided in this Article,
(due allowance for costs reasonably incurred and due credit for payments or proceeds of resale.) – last
sentence eventually removed b/c of confusion, interpreted to mean scrap or salvage costs.
4. UCC §2-718- Deposits1. (2) Where the seller justifiably withholds delivery of goods because of the buyer’s breach, the buyer is
entitled to restitution of any amount by which the sum of his payments exceeds
(a) the amount to which the seller is entitled by virtue of terms liquidating the seller’s damages in
accordance with subsection (1).
(b) in the absence of such terms, 20% of the value of the total performance for which the buyer is
obligated under the contract or $500, whichever is smaller.
2. (3) The buyer’s right to restitution under subsection (2) is subject to offset to the extent that the seller
establishes
(a) a right to recover damages under the provisions of this Article other than subsection (1), and
(b) the amount or value of any benefits received by the buyer directly or indirectly by reason of
the contract.
5. UCC 2-719- Limitations on damages cannot be unconscionable (i.e, can’t limit damages on bodily injury- has
to make sense- boat hypo)
LIQUIDATED/PUNITIVE
Common Law
1. Courts will generally uphold liquidated damages clause where the amount of damages is not foreseeable.
Where the amount of damages can be readily ascertained, a liquidated damages clause constitutes a penalty clause
the court will not honor. (Kemble v. Farren).
2. Liquidated damages clauses must be reviewed as applied rather than as facial. (Wassenaar v. Towne Hotel).
3. To determine if clause is liquidated or penalty, court will apply a reasonableness test- did the parties intend to
provide for damages or penalty, how difficult is it to ascertain the damages, are stipulated damages a reasonable
forecast of compensatory damages? (Wassenaar v. Towne Hotel).
4. Courts should consider policy behind reasonableness test, e.g. allow for consequential damages (permanent injury
to professional rep, emotional stress). (Wassenaar)
5. An employee does not have to deduct mitigated damages from liquidated damages because that would cut
into the authority of the liquidated damages provision. (Wassenaar v. Towne Hotel).
6. The power to award punitive damages rests solely with the state and the state may not delegate this power to an
arbitrator. If parties agree to the punitive damages awarded by the arbitrator the award is still void as a matter of
public policy. (Garrity v. Lyle Stuart Co.)
7. Arbitrators are permitted to award punitive damages in cases arising under federal law. Punitive damages that
arise from arbitrator’s abuse of power are reviewable by the courts. (Willoughby Roofing Co. v. Kajima Int’l)
Restatement
1. Restatement § 356 (1): Damages for breach by either party may be liquidated in the agreement but only at an
amount that is reasonable in light of the anticipated or actual loss caused by the breach and the difficulties of proof
of loss. A term fixing unreasonably large liquidated damages is unenforceable on grounds of public policy as a
penalty.
2. Restatement (Second) §355: Punitive damages are not recoverable for a breach of contract unless the conduct
constituting the breach is also a tort for which punitive damages are recoverable.
UCC
1. UCC 2-718(1): Damages for breach by either party may be liquidated in the agreement but only at an amount
which is reasonable in the light of the anticipated or actual harm caused by the breach, the difficulties of proof of
loss, and the inconvenience or nonfeasibility of otherwise obtaining an adequate remedy. A term fixing
unreasonably large liquidated damages is void as a penalty.
2. UCC: § 1-305(a): penal damages may be had only “as specifically provided” in the Code.
OTHER REMEDIES
(specific performance, injunction, tortious interference)
Common Law1. Land is presumed to be unique. The uniqueness or scarcity of property can override the presumption
favoring money damages but the court has discretion. (Loveless v. Diehl)
2. Specific performance is one-way default rule- can K around it by saying it will not be awarded but cannot
say that it will be awarded.
3. Goods are presumed to be non-unique but specific performance may be awarded where goods are unique,
of sentimental value, or hard to replace. (Cumbest v. Harris).
4. In order for replevin to be awarded, P must have the exclusive and immediate right to possession. (Scholl
v. Hartzell)
5. Specific performance may be awarded for goods that are “unique” in liberal sense of word- in short supply and
replacement could not be obtained without considerable expense, dealy, and inconvenience. (Sedmak v.
Charlie’s Chevrolet Inc.)
6. In general specific performance is not awarded for personal service Ks because it would abridge
individual autonomy. Enforcement would be harsh and unfair (close proximity), coerced performance may be
given half-heartedly, moral problems like involuntary servitude and lack of consent, and practical problems
would make it difficult for the court to monitor. (In Re Mary Clark).
7. A negative injunction is more likely to be granted when Ps losses would be great (money for advertising),
when D breached in bad faith (tights), and when the K is fair and balanced between the parties. (Duff v.
Russell).
8. A negative stipulation is more likely to be enforced when the D is a person of exceptional and unique skill,
knowledge and ability in performing the service called for in the K. Not meaning that no one else can do the
job- meaning the D possesses strong talents that would be hard to replace (Dallas Cowboys Football Club v.
Harris)
9. A party that induces a breach can be liable to the non-breaching party for tortious interference with K.
There must be an existing K and a malicious inducement of a breach. (Lumley v. Gye).
10. To be subject to liability the actor must have knowledge of the K with which he is interfering. It is not
necessary that the actor appreciate the legal significance of the facts giving rise to the K duty. If he knows of
those facts he is subject to liability even though he is mistaken as to their legal significance and believes that
the agreement is not legally binding. (Texaco v. Pennzoil).
Restatement
1. Restatement (Second) of TORTS § 766- Intentional Interference with Performance of a Contract by Third
Persona. One who intentionally and improperly interferes with the performance of a K between another and a third
person by inducing or otherwise causing the third person not to perform the contract, is subject to liability
to the other for the pecuniary loss resulting to the other from the failure of the third person to perform the
contract
i. Elements:
- A contract
- Improper/intentional Interference with it (assumes knowledge of contract)
- Inducement of breach
- Damages
UCC1. § 2-716. Buyer's Right to Specific Performance or Replevin.
a. Specific performance may be decreed where the goods are unique or in other proper circumstances.
b. The judgment for specific performance may include such terms and conditions as to payment of the price,
damages, or other relief as the court may deem just
c. The buyer has a right of replevin of goods identified to the contract if after reasonable effort he is unable to
effect cover for such goods or the circumstances reasonably indicate that such effort will be unavailing or
if the goods have been shipped under reservation and satisfaction of the security interest in them has been
made or tendered.
2. § 2-709. Action for the Price. (buyer price + incidental damages)
a. (1) When the buyer fails to pay the price as it becomes due the seller may recover, together with any
incidental damages under the next section, the price
ii. (a) of goods accepted or of conforming goods lost or damaged within a commercially reasonable
time after risk of their loss has passed to the buyer; and
iii. (b) of goods identified to the contract if the seller is unable after reasonable effort to resell them at
a reasonable price or the circumstances reasonably indicate that such effort will be unavailing.