CONTRACTS class notes

10/27
Thinking like a lawyer by Brickman principal of logical relevance. Logically prove assertions derive conclusions with no gaps of reasoning. Relevance be concise say o more no less than u have to. Office Hours Doesnt really keep them. Just drop by. Brickman on the textbook Kessler and Sharp (??) saw contract law as a series of contradictions. (theme vs. counter-theme) Paired opposite = thrust vs. counter-thrust Core syllogism of all law schools subjects If A then B o if the facts are such and such (A) then the outcome is B BUT If C then D o if the facts are different such and such (B) then the outcome is D one lawyer arguing facts A, one lawyer C only matters what jduge buys into Legal rules travel in pairs of opposites in some cases youll see explicit paired opposites o look for If... and But if... this will clearly indicate a legal syllogism some cases youll have to construct the paired opposites yourself Book is organized with paired opposite cases often older, Common Law case and more recent (statutory?) case o similar facts, different outcomes anytime u bought exclusive rights you can exclude others from competing who have not purchased exclusive rights. ................................................................................................................................................ Pittsburgh Athletic Club Hypos 1) Operation Sail-Bye 1. Yes 2. Yes 3. Maybe 4. Yes 5. No, interferes with exclusive contract 6. No

BRICKMAN Offers to sell exclusive rights to let trucks cross the Brooklyn Bridge. Can he do this? 4) Pirate Parking Lots Will the Pirates lose money if homeowners can lease out their parking? Yes, because external parking decreases value of permit parking at Pirates games QUESTION Is the property yours to sell? The fact that someone will buy something from you doesnt mean it was yours to sell. 3) New York City Streets City owns the city streets. City is corporation. Can a TV station which buys the exclusive rights to broadcast calamities enjoin other stations from broadcasting from those calamities? 2) Political Convention Brickman Whats the significance of news? Constitutional Issues (1st Amendment) Refers to AP case references in Pirates o tradeoff between press freedom and commercial value once something is broadcast anyone can comment on it, BUT who broadcasts it first is commercially valuable Public Interest Political convention Brooklyn bridge- the fact that u sell it does not mean that u own it New york city streetCan they do thisPittsburgh Athletic Co v. KQV Broadcasting Co. Did the plaintiffs win because they have a property right or do they have a property right because they won? this was sui generis (new) this was the FIRST time that a baseball game was broadcast on the radio o therefore no precedent o was similar Australian case, but this is distinguished on unfair competition How did the court know there was a property right?

We have a legal rule (If the Pirates do A, B, C, D, etc. then they have a legal right. you have the facts... o Pirates own the team, built the stadium, etc. Brickman There is a GAP. It does not follow as a matter of logic that if A then B because there was no rule to follow. The court created a rule. So then... Did the plaintiffs win because they have a property right or do they have a property right because they won? In this case, the judge created a legal rule. Why did he do this? How did he know to do this? Brickman (refocusing the question) Create 2 worlds. In one Pittsburgh went the other way (no property right). The other is the world we have the world today. How do you distinguish between these worlds? One has higher GDP (ours) WHY? o if no property right, no one buys, no one advertises o disincentive to innnovate Brickman Was the judge looking at economic effects? wealth creation is good this judge favored the creation of wealth, unlike the Australian court If anyone can broadcast, value of those right would be very low. (If 17 stations are broadcasting the same game, why advertise?) ................................................................................................................................................ HISTORICAL OVERVIEW of Contract Contracts based on quid pro quo basic foundation of reciprocity which underlies all law Despite evolution of contracts, modern contracts still contain large vestiges of original contracts law ENGLAND Early days claims about transactions heard in domestic (local) courts. William the Conqueror (1066) comes in, conquers, and creates Kings Courts primarily used to prosecute bad guys Sets up Chancellor hear disputes in stead of King

 become increasingly professional Law of Equity evolves from this Raising revenue want to fight costly wars King decides to create business in Kings Courts o Writs (which would allow you to go to court) could be purchased from the King Writs Became relatively standardized o Debt recover money owed o Covenant dealing with seals o Trespass When entering court, had to invoke one of these Writs o No writ, no right o if your case didnt fit under one of these Writs, could not go to court Nobles didnt like Writs b/c they got sued got together and decided the King shouldnt order any more Writs o MAGNA CARTA first significant limitation on the power of the sovereign became the basis for Anglo American law Brickman How do we go from these Writs to modern rights? creativity of lawyers starting with trespass Trespass trespass on the case Writs o forerunner of negligence o if craftsman does a bad job, can sue o today this would fall under malpractice Writ of assumpsit o where there was an express promise to pay for goods and good were delivered but no paid for promise to pay must be shown o There was no liability for breach of (executory ) promise I promise to sell you my crops, you promise to buy them, one of us renegs... no right to sue Indebitatis Assumpsit allowed for suit when a delivery was made but not paid for (or paid for but not maid) key link towards Slades Case

Slades Case (1692) first time allowed for suit on executory promise o neither side had acted o could sue for malfeasance but NOT for nonfeasance if you did something badly, could be sued if you didnt do something AT ALL, could not be sued before this disposed of the argument that a P who sought to recover a debt had to proceed under certain Writs after Slades, promises were enforceable before this, promises were morally binding (under Canon law) but had no legal force ................................................................................................................................................ Actual Contracts vs. Contracts Implied in Law I. Two kinds of actual contracts 1. Express contract a. Contract is expressed 2. Implied Contract a. No express contract to pay b. EX. Riding the bus i. You dont enter into a contract with the bus driver ii. this contract is implied from the facts c. EX. Supermarket i. dont sign a contract to pay when you get in line with your groceries II. Contract Implied in Law 1. Quasi-contract a. EX. You lose your wallet, someone finds it, refuses to return it i. no actual contract signed here, but there is unjust enrichment 2. These are contractual-type remedies

10/29
Do you have to enter into contract? NO Traveling on the Kings Highway in 17th century England *Answer to question for next semester Did innkeepers on the Kings highway have the right to refuse rooms to whoever they pleased? NO As a condition of the franchise of having an inn on the Kings highway, must provide a room to any traveler unless they are unruly Did this to facilitate commerce o commerce = money = taxes = services/WAR Can you refuse to sell your home to anyone for any reason? Subject to limits statutes, the King, etc. etc. Person is dying on the street. Does a doctor who sees this have an obligation to treat him? NO Does a lawyer have to take on a client? Not unless the court orders him to Hurley v. Eddingfield (1901) pg. 56 Holding Doctor has no obligation to treat anyone. If you were going to argue that there was a contractual obligation for the doctor to assist, would have to show a quid pro quo Quid Could argue that by agreeing to the familys phsyician (which he had been for many years) he had already entered into an employment contract with the family, whereby he was obligated to attend to them when they became ill. implied in fact contract Promise to provide service whenever needed. Quo EXCLUSIVITY would have to show that the family would not rely on other doctors

Great Atlantic & Pacific Tea Co. v. Cream of Wheat Co. (pp. 58-59) Brickman How does this relate to Hurley? no obligation to enter into contract Cream of Wheat demanded that it set its resale price. Resale price maintenance. A&P was going to cut the set price. Court says that Cream of Wheat can refuse to sell to A&P for this reason. SCOTUS has been divided on this issue. Currently it is not believed to be a violation of the Sherman Act. Optional Case FTC v. Beechnut Refusal to deal was declared to be a violation of the Sherman Act, b/c Beechnut went around and checked to make sure the stores it sold to were charging its price. Couldnt refuse to sell your product to a retailer if the purpose was to violate the Sherman Act.

Poughkeepsie Buying Service Inc. v. Poughkeepsie Newspapers Inc. (1954) pp. 64-66 Facts 1. Plaintiff wants to force newspaper to carry its ads 2. Newspaper asserts its right to not engage in contract Holding Newspaper wins based on its freedom to choose, for any reason, who it enters into a business relationship. Brickman What alternative basis could there be for the ruling? First Amendment o but does not apply b/c there is no Congressional or state statute but rather at a private business decision

Continental Forest Products, Inc. v. Chandler Supply Co. (1974) pp. 67-73 Buyers & Sellers When identifying plaintiffs and defendants use their business identification (Buyer or Seller) Facts 1. Buyer (Chandler) purchasing 2 cars of lumber for retail 2. attempting to buy from Seller North American Millwork (NAM) 3. NAM employee left and took order to Seller Continental a. can assume there was nothing wrong with the plywood that was eventually delivered by Continental b/c Buyer does not allege this to be the case 4. Buyer also does not contest the price 5. ISSUE is the trade debt offset owed by NAM to Chandler a. footnote 7 on pg. 68 says NAM was insolvent therefore Chandler would not be able to collect from them in the future b. either Chandler or Continental is going to lose the value of that credit 6. Brickman What was the value of the credit? a. could be NOTHING b. see the mortgage crisis i. $100,000 mortgage could be worth NOTHING 7. Brickman As a matter of fundamental fairness, Continental should be the loser TEMPLATES CRIMINAL JUSTICE TEMPLATE 1. Didnt do it 2. Did it but not a crime 3. Did it but crime is unconstitutional

CONTRACT TEMPLATE 1. Express contract 2. contract implied in fact 3. contract implied in law (quasi-contract)
Contract implied in law is about unjust enrichment

Continental Forest Products, Inc. v. Chandler Supply Co. Seller is suing the buyer. Seller says We have an express contract. Buyer says We dont have an express contract with you. We had one with NAM. Seller says We have a contract implied in fact. Buyer says We never asked for anything from you therefore no contract implied in fact. Seller says We have a contract implied in law. You used our services and were thus unjustly enriched. Buyer says Amount of enrichment between the parties is what is used to judge... Because Chandler had a right to deal exclusively with NAM, it should not have to pay the full cost of the goods. Watteau v. Fenwick Facts: Defendant owned a hotel-pub that employed Humble to manage the establishment. Humble was the exclusive face of the business; Humbles name was on the bar and the license of the pub. Defendant explicitly instructed Humble not to make any purchases outside of bottled ales and mineral waters, but Humble still entered into an agreement with Plaintiff for the purchase of cigars. Plaintiff discovered that Defendant was the actual owner and brought an action to collect from Defendant. Issues: The issue is whether Defendant is liable for damages resulting from an agreement between Plaintiff and Humble, who is knowingly acting outside his actual authority as an agent for Defendant. Reasoning: Defendant is liable for damages. Humble was acting with an authority that was inherently reasonable for an agent in that position. The situation is analogous to a partnership wherein one partner is silent but is still liable for actions of the partnership as a whole. Case in a word fraud (a swindle) Terms of contract with company who bought the bar said that Humble could buy ale and mineral water, but not cigars. Seller is suing, because they had sold to Humble on credit, he sold the cigars and kept the money. Seller sues the company that owns the bar to collect, either because the money is gone or Humble is gone. Someone is going to eat the costs, either the bar or the seller. Someone is going to lose = zero sum game. Seller claims that Humble is acting as an agent of the company.

Question from BRICKMAN: Is the OWNER a BUYER for purposes of the collection of fees? Doctrine of Principal and Agent The principal is responsible for the actions of their agent which the agent is authorized to make. The agent has authority to bind the principal. Buyer (company) says that Humble did not have the authority to buy the cigars, therefore the company is not obligated to pay for the cigars. Cigars were outside the scope of principal and agent contract. Humble had NO ACTUAL AUTHORITY. Doctrine of Apparent Authority The principal is responsible for actions of the agent that are within the scope of his apparent authority. someone in Humbles position looks like they have the authority to buy the cigars When an agent appears to have the authority to exercise authority for purposes of binding the principal. Buyer (owner) says that the seller could not have relied on apparent authority because they did not know that Humble was an agent. If seller did not know Humble was an agent, he could not be relying on apparent authority. Buyer says: Apparent authority is not applicable when there is an undisclosed principal. If we allow undisclosed principals to trump apparent authority, then it becomes a policy issue. Court says that principal and agent theory applies here. court makes a policy argument o if we allow the buyer not to pay, then it will create an incentive for principals to enlist secret agents to defraud sellers What is the economic goal here? reduce fraud if dont hold the buyer liable, sellers will have to deal with owners (CEOs only); our goal is to maximize profits Relative costs to the owner versus the seller want to make cost the lowest b/c costs get passed on buyer is the lowest cost avoider b/c he can avoid these costs compared to the alternatives; if you made the seller responsible they would have to hire staff to keep an eye on their buyers and this would be very expensive o buyers already have mechanism and incentive for monitoring their agents ACTUAL CONTRACTS v QUASI-CONTRACTS Noble v. Williams Facts: Teachers who were hired to teach public school. The , school board, failed to pay the schoolhouse rent, or furnish necessary classroom materials. The 's allege that they were therefore required to pay for the supplies themselves, and so they sought to recover

their costs in furnishing the schoolhouse. demurred and circuit court sustained the demurrer. Issues: Was a there an implied contract between the teachers and the school board, solely because the school board benefited from the teachers' actions? Reasoning: The court reasoned that the teachers had no right to provide the supplies themselves and then demand payment, because they would be forcing the school board into a contract that the school board did not intend. Plaintiffs hired as public school teachers. Schoolboard failed to provide.... anything. Teachers bought supplies with their own money and they knew it was beyond their authority. Schoolboard says the teachers were volunteers did it of their own volition (were volunteers) and therefore there is no unjust enrichment. Court rules for the schoolboard not the teachers. Brickman HYPO Kid walks by your home and offers to mow your lawn for $20. You say nothing. Kid mows your lawn and then asks for the money. Homeowner acquiesced in receiving the service. Under quasi-contract theory, you have to pay. Owner is accepting the service; his passive acquiescence should require the homeowner to pay. Paradigm for implied in fact, is that you asked for you getting on the bus, you got it and now you have to pay for it even though there is no express contract to pay. Brickman What is the argument the teachers could make supporting what they did? schoolboard acquiesced in what the teachers did; argue for implied in fact contract; the school board was unjust enriched at its expense.

Look for a variety of legal theories which you can apply. BRICKMAN HYPO What if teachers failed to pay the coal company? Can the coal company sue the school board? Teachers had the apparent authority and coal company could have a viable suit.

Cotnam v. Wisdom Facts Man involved in a terrible car accident. Unconscious. The doctor won. Why did the court say this is different than Noble? virtual certainty that the patient would agree to the contract policy argument teachers could have asked the schoolboard, but the doctor could not ask the patient because he was unconscious In a quasi-contract, the financial condition of the patient doesnt matter at the time. Davis & Co. v. Morgan Facts Davis signed a one year contract at $40 per month. Got a better offer ($65 per month) after he had already entered into an agreement with current employer. Employer offers Davis $120 bonus if he stays with him. Davis agrees. Davis gets fired before the end of his contract and doesnt get the $120 bonus. Sues. Brickman Why did the employer agree to give Davis the bonus and then later fire him? He needed him at one point and didnt at another (both within the term of the contract and employer did not pay the bonus) Brickman What might Davis trade be? each season work on a different line Employee loses. What is a naked promise? No extra consideration; employee is no worse off if promise is broken. D promising to do what he is already obligated to do so there is no valid consideration. OFFER/ACCEPTANCE/CONSIDERATION What is the legal basis for this? Davis had a pre-existing contract to stay on Davis had already promised to expend all he could expend o promise for the bonus is void because he had nothing to offer o there was no consideration that could flow under this common law obligation of pre-existing duty that which was promised was already committed Is free volition or social control being implemented in this case? Social Control contact theory used to strike down agreements voluntarily entered into

Schwartzreich v. Bauman-Basch, Inc. Employee has contract for $90 per week. Gets a better offer. Employer agrees to pay him more to keep the employee on. Employer eventually fires him. About a month before his contract is about to begin, Employee gets a better offer and presents to employer. Employer creates a new contract for agreement. Employee sues for the promise of extra compensation. Employee wins. Brickman Why did the employee win here and not in Davis? Here the new contract (quid) terminated the old contract (quo) There must be new consideration to support it, but when the old contract was terminated and the new one executed Brickman By what means did the parties enter into a new contract? by terminating the old one What is the defect in the reasoning here according to Corbin? circular reasoning here there are only two steps (termination of old contract, implementation of the new one) need 3 steps old contract contract of termination (missing according to Corbins analysis) formation of new contract Need a quid pro quo Must have a CONTRACT OF TERMINATION to remove the pre-existing duty In terms of how a court might look at these two sets of fact, can you identify any factors that distinguish these cases? duress employer can make a more rational choice in Schwartzreich (employee came before contract started) than in Davis (employee came during the height of the season) because there is a question of opportunity there was more time for Schwartzreich to find someone else (not seasonal) Social control is being upheld in Davis. Consideration theory can strike down agreements voluntarily entered into. Social control is being implemented to support free volition by taking duress out of the picture where it is apparent. Tearing up a page is not a way to rescind obligation. The only way to rescind a contract is by contract.

UCC is an abrogation of a large number of contract provisions from common law. Wood v. Boynton Facts A woman has a stone, doesnt know what it is, takes it to a local jeweler. Jeweler says that he doesnt know what it is but hell give her $1 for it. Woman refuses to sell but later decides to. Turns out the stone is a diamond worth $700. Woman wants to rescind the contract and wants it back, so she gives the jeweler $1.10 (price paid + interest). Jeweler wont give it back. If theres a mistake in value without fraud or misrepresentation, there is no cause to rescind contract. The court is rewarding the jewelers ignorance here. If it could be proven that he knew, then theres a case for fraud. Woman sues, jeweler wins. Caveat emptor buyer beware Caveat venditor seller beware Brickman Say youre selling your house for $150,000 and buyer overpays and its only worth $120K, what legal theory can be prescribed? Caveat emptor? You sell house for 120K but its worth $150K, can you rescind? Caveat venditor If buyer knows the true value of property and you sell under the market value. Can you rescind? House sold for 150K and theres oil underneath and worth 30MM. Can you rescind? The value of anything is the price the seller is willing to sell for and the price the buyer is willing to pay. Where those meet, that is the value and that is the legal rule (absent fraud). Think of the alternative legal regime. You have a constant attack on all transactions by the buyer or seller. This would create a high transaction cost, which would reduce the value of the transaction. The house example is an example of a difference in degree. Difference in Kind vs. Difference in Degree Key distinction is use. a difference in degree is when it is the same structure but different, a difference in kind is when it doesnt even relate, whole new product.

Who has the greatest opportunity to determine the value of the commodity? The Seller Look at cows. What are cows used for? Sherwood v. Walker If the buyer of the cow was a butcher he might want the cow for meat. Buyer here was a banker. Wanted to buy the cow to breed it. But seller said it was a barren cow. Buyer thought he could get the cow to breed (thought it was a deal). Butcher might say that the cow being barren was a difference in degree whereas the actual purchaser would say it was a difference in kind (different product). The key difference is always VALUE.

11/4 Debbies First Half Notes

11/4/2008 Caveat emptor: buyer beware Caveat venditor: seller beware We reward diligence, if you sell something with a mistaken sense of its value, tough. Sherwood v. Walker WOOD SHERWOOD Value $700 $750-$1000 Price Paid $1 $80 D/D OR D/K D/K D/D K? K upheld NO K (not upheld)

The function of the object is a purely human creation. If its a difference in kind then it is may be rescindable, if its a difference in degree then it is not rescindable. Laidlaw v. Organ The Seller asked if there was any news to change the perception of the purchase of tobacco. The demand for tobacco went down and the price also dropped. The defendant bought tobacco from the plaintiff using the depressed price without telling the plaintiff that the war was about to end and consequently that the price would increase. But the defendant did not misrepresent that the war was going to go on, he just did not say anything about it. The judge instructed the jury to find for the plaintiff, and the case was reversed on this ruling

because the jury should not be led to a conclusion by the judge. Case reversed and remanded to trial court to determine if silence constitutes fraud. Common law default rule: there is no warranty unless it is states that there is a warranty UCC rule: there is a warranty unless it is stated there is no warranty Swinton v. Whitinsville Savings Bank The knowledge of termites by the seller was not disclosed to the buyer. At the time, the court ruled in favor of the seller because it did not count as fraud. Largely this view is no longer in effect. UCC adopted in 1963 requires a warranty of merchantability attached to every purchase of personal property (unless there isnt). Sternaman v. Metropolitan Life Ins. Co. Public policy is a dynamic concept that changes with time. Parties cannot make a binding contract against binding statutory law or binding public policy School Trustees of Trenton v. Bennett Instituting piles upon which to hold the building due to soil moisture and it will cost contractor more money to build and the contractor did not originally anticipate those costs. p.102: if the covenant is possible, then the thing must be done regardless of new difficulties that come up. But if its impossible, then contract is not upheld. To bring the case within the rule of dispensation, it must appear that the thing to be done cannot by any means be accomplished. Performance bond: construction companies promise to complete a certain amount of work Severable contracts = if the contract is considered severable, then each is a mini contract. If you have progress payments (not severable, part of whole or entire contract). Here, if the contract was severable, then the D would win. Commercial frustration: every contract to the extent that a contract relies on a common assumption by both parties on the state of fairs, and that assumption is incorrect, one of the parties may attempt to get out of the contract based on this. It is possible to get out of the contract, but very rare.

..........................................................................................................................
What is a crankshaft? changes the vector of the force What is important about the crankshaft? It was broken was NOT mass produced o therefore no spares on hand o to make a new one, they would use the broken shaft as a model transitional point in history in England (mid 19th century)

IR and the Law Law changed rapidly in England Judges saw it as their role to adapt law to facilitate commerce

Industrial Revolution this mill was not powered by modern means

What was the problem with delivery of the crank shaft? contracted with Pickford to get the crank shaft to Joyce and Co. Pickford did not get the crank shaft to Joyce fast enough Hadley changed the law by amending established law that said that damages only paid for natural consequences other judges read this as to exclude injuries which could not be causally related to the breach pre-Hadley the King could sue the blacksmith for loss of his kingdom familiar chain of events from lack of horseshoe to loss of kingdom TODAY cannot sue for that, because it is too remote causationally Hadley reads the phrase natural consequences as normal (predictable) consequences more rigorous could not predict fall of kingdom FACTUAL QUESTION was whether or not there was communication of this special knowledge (that there was no spare crankshaft and the mill would lose money unless the crankshaft was needed to make a new one) Have Hadley (a) = normal consequences, and Hadley (b) = communication of special circumstances Baron Alderson in Hadley 1) noted that there were no special circumstances in the contract and therfore loss of profit from when the mill was not in service could not be recovered 2) millers would normally have substitute shaft, so no recovery under normal consequences 3) lower judge should not have told the jury to butt out Brickman Baron Alderson and the reporter had very different views about the holding of the case. Reporter at this time = guy who goes to court and writes about what happens there. This was resolved by the courts. No more reporters in this sense today. The court writes its own, authoritative, reports.

NOTE Were mostly looking at appellate cases here. Looking at less than 1/10th of 1% of contracts. Most of the time contracts are totally fine or disputes resolved out of court (certainly before appeal) BRICKMAN The circumstances of this case are very unusual in that an appeals court judge is overruling a jury based not on the law (really) but on the facts MAKES NEW LAW Baron Alderson is making a normative judgment that the IR is good and expanding the economy is a worthy social goal, etc. etc. Mistake in Value Suppose both Buyer and Seller are mistaken about the value of something. SEE Restatement CANNOT rescind the contract Sherwood is good law with regard to cows o there is a case that modifies Sherwood in the second half of class TOMORROW pp. 111-163

11/5
Brickman If you make a statement and say This should not have legal consequences does that mean it doesnt have legal consequences? Contract law gives judges a means of distinguishing enforceable from unenforceable promises. EX. You make an appointment to meet with your friend for lunch. They dont show up. Did they break a promise? YES Are there legal consequences? NO (usually) There is a COST for assessing legal consequences to sth. We should only assess this cost if there is some sort of societal benefit to doing so. Brickman What about marriage? Was the promise in Balfour upheld or not? It was NOT. Court said there was no intention for there to be legal consequencs. Why did the court say this? didnt want to allow married couples to sue each other POLICY reasons... didnt want a negative effect on marriage

Very different public policy today vs. England in 1919. Would not apply Balfour today. Judge did not predicate his ruling on public policy but rather lack of intent Davis v. General Foods p.121 GF says payment rests solely at our discretion. Davis alleges that GF used her idea and didnt pay for it. This is Davis KEY contention Court rules that GF does not have to pay for her idea. The terms were too indefinite to give rise to binding obligation. Brickman What might a basis for recovery be here? quasi-contract o GF was enriched at the expense of Davis o would be unjust for there to be no compensation Brickman Here the court holds on policy grounds that Davis cannot sue. This case would generally be decided differently by other courts. See NY Times article about ad agencies and unsolicited ideas General Rule (right now) No intention to contract, no contract Mabley & Carew Co. v. Borden p.124 Brickman Why do they want her to stay on? shes a good employee What do they say to her? If you stay on till you die, well pay one years salary to a person who you designate purely voluntary and gratuitous undertaking o sounds like no legal consequences o BUT the court rules there is a contract Brickman draws the steal jaws of contract on the board... very artfully. Youre out for an afternoon stroll, walk across the steal jaws of contract and BAM youre in contract Mabley says there was offer and acceptance o companys offer induces her to stay on o she stayed on

o Court says Honor your promise! Despite the stated desire of Mabley & Carew to not make the agreement legally binding, offer and acceptance = CONTRACT Armstrong v. MGhee p. 128 Armstrong sells his valuable horse to his friend for much less than its proper value. Armstrong wants his horse back, but his friend refuses. Armstrong sues, but while the suit is pending the horse dies (b/c of being ridden too hard.) Armstrong is then suing for damages (initially for replevin, which is return of good). Armstrong (seller) wins. Jury awards 8 pounds in damages. Brickman argues the horse is worth 500 pounds!! Jury is sticking it to Armstrong for starting this whole process and basically being a moron Brickman Its not the subject intent of the offeror, but the objective understanding of the offeree

If an ordinary reasonable prudent person would not regard this offer as seriously stated then there is no offer (and therefore there is no acceptance). Anderson v. Backlund p.129 Tenant (Anderson) cant pay what he owes landowner (Backlund). Landowner says tenant should get more cattle. Tenant says that theres not enough water for more cattle. Landowner says this is never a problem in Minnesota. Tenant buys cattle and they die for lack of water. Tenant sues the landowner for breach of contract. asserts that the landlord promised to provide water and did not Brickman This would be a gift and not an enforceable contract. Tenant did not make this argument. What did the tenant say that the landowner did? Promises I promise to do X if you promise to do Y. What is the promise here? Tenant says If you provide me with water, Ill buy cattle. Court rules that the promise was not binding. Whats wrong with it?

Tenant claims it was an offer by the landlord for water, which he could then accept Court says NO OFFER

Whats the problem with the landlords offer? Didnt say how much water Didnt say how he was going to give the tenant the water The terms are too indefinite for there to be a legitimate offer according to the court Brickman Tenant would fare better today (promissory estoppel). <Well talk about this later> So, there must be a reasonable offer with terms that have enough specificity Sullivan v. Connor p. 131 Sullivan got a nose job. Says that the doctor did a bad job (had to do 3 surgeries instead of 2, nose looked bad, etc.) Sullivan is suing for breach of contract and malpractice. Jury found for the doctor (defendant) on the malpractice claim o no violation of the standard of care What are the terms of the contract (according to Plaintiff)? Doctor promised an objective outcome o I will make you a better nose, to your satisfaction o Not just a promise to do good work, but a specific outcome How does the doctor respond? Doctor says he didnt promise it o similar to Armstrong Even if I said what you say I said, you couldnt believe I was serious. Everyone knows that doctors cannot promise an outcome. Statements are advertising not a warranty. Brickman This could have been based on puffery and cannot be taken as a serious statement The jury gets to determine whether an objective, reasonable person could interpret the doctors statements as promising a result. Jury decides that they could and awards damages. Shaheen v. Knight p. 137 Court says there can be a contract in this situation, but says its invalid on public policy grounds. Children are what is supposed to happen in marriage, theyre good.

Brickman Now (50 years later) we have different public policy. Have suits against birthcontrol companies for children being born. Suits seek costs for raising the unwanted child. Tripartite Distinction in Contracts Quasi contracts occur in situations where theres unjust enrichment. HYPO House painter goes to paint a house, messes up and paints the wrong house. Does the homeowner have to pay the painter? Probably. unjust enrichment Painter suing for the value of the job LIABLE for the increased value of the house o THIS is the unjust enrichment! increment of the value of the house before it was painted and after it was painted (limited by the total value of painters services) Benefit inferred without permission; benefit cannot be taken back. Similar to a situation where the bank accidentally deposits someone elses money in your bank account. You have to give it back unjust enrichment by banks mistake; theres no acquiescence or acceptance here. HYPO. Son works for father for 20years taking care of pops business and gave up his own promising career. Father says in exchange for sons services, he will give son extra in the will. The father dies and the will leaves everything to the sons equally. There was a request for services and an acceptance. Sounds like an implied in fact contract-->You asked for it, you got it. Why no implied in fact contract? Asked for it under circumstances where payment would be expected, here the law presumes that in the familial relationship, when you ask for services, you do not expect payment. Ergo, theres no implied in fact contract.

Hertzog v. Hertzog p.147 Son sued his fathers estate for recovery of services rendered on a farm. Father probably requested the service and got what he asked for. Brickman Whats the problem here? There was no offer What is an implied in fact contract? You ask for something you got it you have to pay for it. Brickman Using the general paradigm, how is You asked for it modified? You asked for it under circumstances where payment is expected, you got it, you have to pay for it In Hertzog the court says services rendered within the family are presumably rendered without expectation of payment. This is rebuttable. Must show expectation of payment! New Implied in Fact Paradigm You asked for it under circumstances where payment is expected, you got it, you have to pay for it

Probate is the process that you implement a will after the death of a party.

Barnets Estate Widow wants more than half of husbands estate. Already getting a lot. Shes greedy. Brickman What is the order of who gets paid after someone dies in debt? 1) Government (taxes) 2) Lawyers 3) Secured creditors 4) Unsecured creditors 5) Legatees (family, heirs, etc.) Widow is trying to boost herself up into the ranks of creditors Wife wants to convert her position from a statutory heir to a general creditor. As a general creditor, she takes more money from other creditors and gets more money. Suppose that

she is able to do this and theres not enough money to go around. Who is the dispute between now? Creditors! Previously all creditors would be paid before the widow, but if she gets classified as a creditor she gets a piece of that pie too. Cropsey v. Sweeney p.153 Cropsey thought she was married to James Ridgeway. After he died, found out that he was already married at the time they were married and therefore the marriage is invalid. The putative spouse died and the putative (reputed to be) wife received nothing. Whats the legal claim? What kind of contract? How can I get the result that my client wants? Cropsey gets nothing when Ridgeway dies. Sues to recover for services rendered (housekeeping). Court rules against her b/c they say that she had no expectation of receiving pay for her work (thought she was married.) Should argue quasi-contract. equate to the House Painter Hypo o thought she was painting the marriage house but was actually painting the not married house! Shaw v. Shaw p. 154 Goes the other way. Says that widow who thought she was married can recover. Court comes up with an idea about whats right which way to go and makes legal noises to justify it. Spouses warrant that they are in a position to be married. Hewitt v. Hewitt p. 155 Trend over time is to recognize the validity of the promise if it can be proved. Brickmans SUMMARY 1) Whenever services are rendered (at the request of or) with the knowledge of the recipient there is an implied in fact contract, the law will recognize a promise to pay BUT

2) In familial relationships the law presumes the services were rendered gratuitously (may be overcome) suppose one of the children of elderly parents cares for them while the other siblings fend for themselves parents die and children inherit equally o child who helped care for the parents should get MORE 3) Presumptions may be strong or weak gives the judge some control over the jury if judge thinks the child is undeserving or untruthful then he can say the child has not overcome the presumption (of gratuitous service) other factors that contribute to this analysis o say child left his home to care for the parent, maybe presumption overcome 1. the benefit incurred to the decedent 2. the financial circumstances 3. foregone other opportunities o depends on how the facts cut Criteria for determining fairness? What would influence our decision in the hypothetical above? 1. degree to which the work benefited the estate 2. profitableness of other possible endeavors for that child 3. financial circumstances of the parties 4. was there a duty? Amount of the jury verdict will be affected by the amount of expectation and the vividness with which it is shown. Say there is some understood agreement between the child and parents that he will be taken care of (something extra) in the will and he is not. Who would the child sue? The Estate What/Who is the estate? What if the contest is between the good samaritan son and general creditors (not the unfilial siblings) more difficult to show that he deserves to collect Remember, parents could have changed the will but they did not. Court sets up pretty significant burden to do this.

11/11

Morris Lefkowitz v Great Minneapolis Surplus Store, Inc. pg 184 The advertisement for fur coat and stole. The issue is whether there is a valid offer? Did the plaintiff accept if there was a valid offer? When the issue is when theres an offer, put into the notes the exact words that constitute the alleged offer. Worth $139.50 is definitive (VALID OFFER), worth to $100 is speculative (NO OFFER). Most advertisements are no offers. Must particularize it in a specific waymust identify the offerees (ie, first come first served, first 25 customers) and may also need to specify the quantity. The principal requirement to make an ad an offer is the uniqueness of the OFFEREES. If an ad is not an offer, merchant may change or revoke at his whim. However, a merchant may be legally bound to honor his ad due to public policy and statutory laws re: fraud and deceptive practices. Fairmount Glass Work v Crunden-Martin Woodenware Co. The specific language of the order inquiry and the words for immediate acceptance. Channel Master Corp. v. Aluminum Ltd. Inducing another to act or refrain from action in reliance thereon in a business transaction. Brickman Common law has been reluctant to recognize duty to negotiate in good faith. Once contract entered into, obligation of good faith ensues wrt their duties. Today we deal with pre-contract negotiations. Is a duty imposed here? What is the standard? Still have strong capitalist belief that you can take advantage of superior knowledge acquired by work and diligence. By contrast to the Common Law rule, National Labor Relations Act imposes duty on labor and management to bargain in good faith. Courts are willing to grant damages when the party claiming lack of agreement has relied on the party being sued. Hill v. Waxberg p. 203 Hill (landowner/Seller) wants to build a building. Contracts with Waxberg (contractor/Buyer) to develop plans for the building. Hill needs financing. Going to get it from the FHA. Shows an increasing propensity for courts to impose liability

Hill needs someone to do the work for the FHA loan application. Hires Waxberg to do this on the understanding that Waxberg will build the building once the loan comes through. Waxberg incurs expenses based on this reliance. Flies from AK to Seattle several times to deal w/ architects, finalize FHA application, etc. etc. After FHA loan approved, Hill decides to go with different contractor. Waxberg sues under quasi-contract theory (implied in fact). Suing for $5,896.88. Value of Ps services plus expenses. Brickman This would be the value awarded if there was a quasi-contract. Did the court award damages based on Hills failure to award him the building contract? NO How would they determine the value of this contract? What information do you need in order to compute the value of the contract that was not entered into? Brickman When you sit down with a contractor you make a lot of choices (type of building materials, square footage, etc. etc.) When you solicit competitive bids you get bids all over the place. Brickman Cannot award damages based on hypothetical building contract because it is TOO SPECULATIVE. What is too speculative? The amount of the PROFIT. Profit = Revenue Expenses. Cannot determine this. This is why he did not sue for breach of contract. What DID he sue for? Reasonable value of his services o sounds like implied in fact contract you asked for my services, you got em, PAY for them Trial court gave him implied in fact damages AND implied in law damages (based on quasi-K theory) o Trial court gave a total of $11,167.46 ($4800 unjust enrichment damages for value conferred on Hill + costs) APPEALS Court overruled, saying he could only collect on his costs, not the unjust enrichment component) Heyer Products Co. v. US p. 207 Heyer believes that the US (Army) rejected his bid in bad faith. Sues for cost of preparing the bid and lost profits. Court decides that he has NO right to lost profits, b/c even if he were the low bidder, govt didnt have to award him the contract. Court denies motion to dismiss. Allows a trial, where Heyer could try to show that the bid was not considered in good faith. FAILS to show this (very difficult w/o snitch in the Army).

Theoretically could have recovered for cost of bid, if bad faith shown. Goodman v. Dicker p. 209 Would-be-Franchiser (Dicker) sues Distributor (Goodman) for expenses plus lost profits, claiming that Distributor had promised that he would get a franchise. Dicker did not get the franchise. Dicker projects that he would have made a profit of $350 on the 30 radios that he bought to start the franchise (total of $1500-- $1150 cost of radios + $350 profit). Trial court awards him damages for both expenses and lost profits. Appeals court allows recovery of expenses but not lost profits. This comes under theory of promissory estoppel. Justice requires that when you induce reliance from another party you follow through on your promise (cannot say that you did not make a promise.) In the absence of K, promissory estoppel (action in reliance) is a basis for liability. Brickman In Goodman, unlike Hill, there is no contract. In Hill the court used contract language (always does if it can). Now have an 4) promissory estoppel (reliance) added to the template for Contracts. Why cant he recover for lost profits? 70-80% of new businesses fail! No guarantee that he would have been able to sell the radios. No track record. Too Speculative What else do we know about this $350 in lost profit? Whats another reason to deny it? it would be double recovery (recovery for the same components twice) UNLESS they need to show they would have made $1500 in REVENUE o Profits are based on REVENUE EXPENSES o So, unless they can show revenue of 1500 then you have double recovery Could recover both if the gross profit would cover the expense he incurred plus additional revenue that would generate a profit of $350. Through the sale of the radios, Dicker may have made money OR lost money Chrysler Corp. v. Quimby p.211 Randall was Pres. of Randall Motors (Chrysler dealer in DC). He dies. Quimby, friend and investor wants to take over the business. Tells Chryslers regional manager (Neely) that he wants to take over. Neely says he cannot recommend him. Neely tells Quimby he needs to purchase 51 percent stake in the business from Randalls widow and the rest from other stockholder. Neely does this.

Most valuable party of this business is the FRANCHISE. W/o Chryslers cars there is no business. Tomorrow we will have a play! Curtain goes up. Act I Scene 1... whats there? Whos on the stage, whos saying what to whom? Also more acts...

11/12
Setting the Stage 1. Despondent widow a. I dont know anything about running the business b. How will I survive? Woe is me!! 2. Randall onstage Act I Scene 2 1. Enter Quimby a. lawyer by trade, friend, officer of Randall Motors Inc. b. cant change oil c. along with the widow, they want to keep Randalls legacy intact i. Randall was a really great guy d. Chrysler also liked Randall i. they also want to help the widow, but they DONT want Quimby to take over the franchise ii. doesnt like Quimby b/c hes a lawyer... and lawyers sue!

Act I Scene 3 1. Neely (and Chrysler) get Quimby to buy the widows share (51%) at a good price a. this takes care of the widow (who Chrysler likes) 2. The next step, in Neelys plan agreed to by Quimby, is for him to buy up the rest of the stock in the company, with the anticipation that Quimby would then sell the stock to someone else at a good price a. Quimby buys the stock, but Chrysler doesnt name transferee and give the franchise to someone else b. Quimbys stock is now worth MUCH less left holding the bag Brickman Was there a contract here? No quid pro quo BUT there was reliance Court awards Quimby reliance costs + lost profits (from 90 day period where he owned the franchise and could have sold cars). Brickman Why lost profits awarded here and not in Goodman?

Acted in bad faith Chrysler involved a franchise for a business already in existence, whereas in Goodman lost profits would have been speculative Goodman franchise was terminable at will, whereas here there was a 90 day retention clause o Brickman Courts have bounded these clauses to some extent. Dont rely on this clause too much

Brickman Can you get lost profit damages for reliance suits? Purpose of promissory estoppel is to compensate a party for their loss due to reliance on another party. It would appear, then, that only reliance damages are appropriate. BUT courts will often find that lost profits awards are appropriate. Promissory Estoppel does generally result in awarding the expectation interest as well as the reliance interest, where expected profits can be clearly shown. If lost profits are speculative, then no award for them. If promise generates out of pocket losses to the person relying on such promise, should the injured party be allowed to receive lost profits in additional to actual losses. Hoffman v. Red Owl Stores, Inc. p. 223 No contract. Promissory estoppel case. Trial court awards reliance damages for loss on the sale of the bakery, rental and moving expenses, down payment for rental in Chilton, profits from grocery store that he sold. Case says that he sold his bakery at a loss o this could mean less than market value sold it b/c he needed the money to buy a grocery store (to gain experience in food management in anticipation of opening a Red Owl store) Does not award lost profits from the sale of his grocery store. The purpose of promissory estoppel is to repay P of losses incurred due to promises relied on by D. Brickman Red Owl does not advance the ball on the question of whether the court will award expectation damages in a reliance case. It appears that they dont award expectation damages, but they actually do. Hoffman would not have purchased the grocery store unless he sold the bakery. Would not have sold the bakery unless he thought he would get the Red Owl franchise. So, awarding damages for the grocery store would be double recovery. Brickman says perhaps profits from the grocery store should offset the loss from the sale of the bakery (since grocery store only bought b/c he sold bakery b/c he wanted Red Owl franchise.) Court does not do this.

Brickman If the court had awarded lost profits, would have had to have been for the Red Owl store he never got. This is too speculative and would never fly. So the court does not deal with the issue of lost profits. Damages sought are for the loss of profits from the grocery store... but this is a reliance issue, not an expectation issue. Hoffman does not address expectation issues. Restricted to analysis of reliance issue. As part of his reliance, he should be compensated for profits he would have made from the grocery store. RULE Courts will, when they consider it appropriate, award lost profits in reliance cases. By and large courts do award reliance AND expectation damages in promissory estoppel cases. Adjustrite Systems When you have back & forth communications and 1 party says K and the other party says no K, then the issue is is there a K? The answer depends on the intent of the parties (common law). INTENT #1: There is until a formal document has been executed. INTENT#2: we can reach a K if we have agreement on the critical terms and make good faith attempt to resolve other matters. Intent is measured and gleaned by 4 factors: see Adjustrite case pages 6 Sun Printing p.216 Brickman Justice Cardozo is usually the contract maker, but in this case is the contract maker. Buyer agreed to purchase 1000 tons of paper per month. Set a price for first four months, then would agree on the price. Set maximum at the Canadian export price. Seller agrees to sell newsprint to a Buyer. Eventually the Seller refuses to sell, b/c the contract was lower than the market price. They left two things undecided... the price and the length of time for which the price was to govern. if only one things left unstated, thats okay since they had a maximum price set, that would be okay, but theres not time limit set on it, so Cardozo says no K Rhetorical Question Cardozo says the ruling in this case advances certainty in contract. Does it really? Here the seller didnt want to sell b/c they could get a better deal than the contract price.... Borg-Warner Corp. v. Anchor Coupling Co. Complicated fact set. Write out a timeline of the transactional history.

Whats the problem here? Conroy and Fritsch, the chief officers of Anchor Coupling Co., want to sell to Borg Warner o problem is that Conroy wants to stay on (guaranteed job) whereas Fritsch doesnt care TIMELINE 1. Feb. 20 BW to AC set price with 60 day option to buy 2. Feb. 29 AC to BW consider this as a letter of intent authorizing you to make the necessary survey, your offer must give retention of employment of employees and Conroy 3. Feb. 29 BW to AC Firm Offer? 4. Feb. 29 AC to BW (through agent of AC) BW has option to buy, so long as major points are agreed to, other things can be worked out in good faith later; Amplification of information in 4 of communication #2. 5. Mar 14 BW to AC Is this an offer? 6. Mar 14 AC to BW Yes 7. Mar 14 BW to AC We accept Conroy steps in and blocks the deal to protect his job. Appeals Court says that there may have been a contract here. Should go to trier of fact. Were Ds asking that contracts of employments be agreed upon precedent to contract or were they just asking for assurances? 2 ambiguous, allow introduction of parole evidence (4) Borg-Warner eventually got $1 million. Parol evidence is evidence extraneous to the contract documents. There is a parol evidence rule, which excludes admission of evidence about the dealings if there is a contract which says this is our deal and nothing else counts (written integration clause)... then you cannot bring in parol evidence. Did the parties intend to contract after everything decided and no open issues? Or did parties intend to negotiate w/good faith in spite of open issues? Itek p. 236 Can have contract HYPO 30 day option to buy my land. Do I have to sell my land? YES Do you have to buy my land? NO Noone can force to be in contract, BUT you can agree to be in contract by your silence. HYPO

Fire insurance company to insured. We will renew your fire insurance unless we hear to the contrary from you. Insured says nothing. Fire insurance company sends you a premium bill. You refuse to pay. Is there a contract? Can they collect? NO HYPO Same facts, barn burns down. Insurance company says there was no contract. There was no acceptance on the part of the insured. HYPO Tobacco smoking uncle to nephew, I would like you to take up smoking and I will pay you $5k. No response but nephew takes up smoking. Is there a K? Is there acceptance? NEW HYPO: Tobacco owner to nephew: I will pay you $5K if you dont smoke for the next 3 years; nephew doesnt smoke for next 3 years. No express assent. Is this a valid acceptance? If the offeror authorizes silence as a means of acceptance, they are bound by it. But the offeree is not (necessarily) bound by this. NEW HYPO: You receive an offer from a magazine saying that you are entitled to a reduced fee magazine and if you dont do anything it will be sent to you and we have a deal. However, the offeror cannot impose on the offeree a duty to speak or else be in K. UNLESS, the offeree has agreed prior thereto to allow the offeror to impose on the offeror a duty to speak or else be in K. NEW HYPO: I sell you the option to buy my land for 30 days for $50. You buy the $50 option. Am I bound to sell the land to you during the 30 day period? YES; Are you bound to buy during the 30 day period? NO Prescott v. Jones What is a non-sequitor and is there one here? This does not follow Court says that the offeror can prescribe the mode of acceptance BUT it is also the case that the offeror cannot impose on the offeree o The INSURER prescribed the mode of acceptance, the INSURED did nothing and fire happened and the INSURED tried to collect and INSURER said NO K bcuz there was no acceptance o CT says NO K Unless the offeree is bound, then the offeror cannot be bound. if the offeree cannot be bound by silence, the offeror likewise cannot be bound by silence The offeror cannot bind the offeree to be in K, but it can authorize offeree to accept an offer by silence. Is Silence acceptance? Depends on facts.

SEE HYPO... just because Seller is bound to sell does not mean the Buyer is bound to buy. COURT Even though the offeror can dictate the terms (including silence) since the offeree cannot be bound by their silence, the offeror cannot bind... National Union p. 241 Even though it cost more to try this case than they made, it is a precedential case Prior course of dealings dictates that he has to pay. Austin v. Burge p. 242 Burge subscribes to a newspaper. Subscription runs out, paper keeps coming. Burge keeps using the paper (actually pays on two occasions). Newspaper sues for recovery of unpaid subscription fees. Wins under Implied in Fact contract. Given the Statute on p. 244, would he still be liable? YES, b/c the statute refers to receiv[ing] the paper... but he did more than this, he used it.

11/17
Cole-McIntyre-Norfleet Co. v. Holloway p.244 Brickman Who is the offeror and who is the offeree? Owner is the offeror and the company is the offeree; the company did not accept the offer. The owner became the offeror when he filled out the order form supplied by the offeree. Owner was waiting for order to be accepted so he became offeror and company the offeree. Whats the problem? Owner never received confirmation of the acceptance or rejection of the order. Later the company refuses to sell to owner bcuz price has gone up. Owner sues contending that silence for an unreasonable amount of time constituted an acceptance. CHECK is a credit instrument, unless other specified, an offer to sell is an offer to sell for CASH. COUNTEROFFER rejects the offer and the original offer is no longer valid for acceptance. EACH counteroffer is an OFFER that the OFFEREE is at liberty to accept. On the terms of the form prescribed by the offeree, the offer had to be accepted by their headquarters. Order was not subject to countermand. (You cannot choose not to buy.) 60 days later store owner was told there was not K. Price of the good (meal) had risen.

Court concluded that the delay in notifying the shopholder constituted an acceptance of the offer. Given the unreasonable nature of the delay, silence = acceptance. BRICKMAN The first thing you do when you read a case is figure out who the offeror is and who the offeree is. If you dont know who made the offer and who accepted the offer, cant do anything. Offeror (shopkeeper) is harmed by the delay, while the offeree (company) uses this time to play the market. This is CONTRACT (not promissory estoppel). Brickman What is the common law rule about offers? An offer is revocable at will provided there has not been acceptance unless there is consideration for keeping the offer open. o ex. In an option contract consideration is given to keep the offer open In exchange for $10 in hand, I give you the option to buy my property for $10,000 within the next 30 days. buyer has paid consideration for keeping the offer open irrevocable w/in that 30 day period

NY General Obligations Law (GOL) -- problems with statutes Problem with codification of common law is that the common law is always changing (modified every day by judges.) Once you have a law, though, it is set in stone and will not be addressed, in all probability, for a long time.
5-1109. Written irrevocable offer. Except as otherwise provided in section 2205 of the uniform commercial code with respect to an offer by a merchant to buy or sell goods, when an offer to enter into a contract is made in a writing signed by the offeror, or by his agent, which states that the offer is irrevocable during a period set forth or until a time fixed, the offer shall not be revocable during such period or until such time because of the absence of consideration for the assurance of irrevocability. When such a writing states that the offer is irrevocable but does not state any period or time of irrevocability, it shall be construed to state that the offer is irrevocable for a reasonable time.

What is the difference between this and UCC 2-205? Both agree that it has to be in writing, signed by offeror, differ in terms of who can be the offeror. UCC specifies merchants whereas 5-1109 can be anyone. 5-1109 does not require two signatures on forms supplied by offerees. 5-1109 says that ANYONE can bind themselves by an irrevocable offer 5-1109 is enacted before UCC UCC adopted in the 1960s by NY

How do you deal with the conflict between the two? Except as otherwise provided... in 5-1109 says that if there is a conflict, 2-205 prevails. Do you need 1 signature or 2 on an offer by a merchant that contains an irrevocability clause on a form supplied by an offeree? 2 because 2-205 HYPO Cole-McIntyre, but seller revokes 3 days after offer. Contract or no contract under NY law? NO CONTRACT b/c UCC takes precedence and says no contract Brickman This is the plain meaning interpretation o if the form is signed once by the offeror the contract IS revocable b/c 51109 defers to the UCC Elegant Approach/Interpretation Common law says no consideration for a term of irrevocability, the K is not enforceable. However, 2-205 abrogates the common law by stating when an K w a term of irrevocability and no consideration is valid and enforceable. These are Offer by a merchant to buy or sell goods In writing Clause of irrevocability o Form supplied by Offeree 2 signatures If its a merchant making the offer and there is a term of irrevocability then we make an exception to the common law, saying that the irrevocability clause IS BINDING. Then 2-205 makes an exception to the exception. If the term of irrevocability is on a form supplied by the offeree, then the irrevocability clause is NOT BINDING unless clause separately signed by the offeror. BOTTOM LINE Common law says no irrevocability (contracts revocable at will provided no acceptance or option.) UCC cuts out exception, saying contracts can be irrevocable w/o consideration, but then lays out exception to this, going back to common law (for forms supplied by offeree.) THEREFORE if there is only one signature (offeror), then 2-205 is not otherwise providing so it is the regular common law rule. Under this analysis, 5-1109 would prevail if there was only one signature, b/c 2-205 does not otherwise provide and therefore there is a contract.

SO, under the elegant approach irrevocability clause IS binding, whereas under the plain meaning approach the irrevocability clause IS NOT binding. under plain meaning store owner wins under elegant approach seller wins HYPO Offers to sell house for $100k. Offer open for 3 months. You reply I accept and will pay in 3 installments. NO REPLY this is NOT an acceptance, it is a rejection and a counteroffer 2 days later I accept and will pay in 2 installments. NO REPLY 1 week later reply and say I will pay in cash. REMOVES OFFER Do I have to sell? NO, b/c once the initial offer is rejected, no longer an offer! HYPO 2 Same scenario, but you show up with a check for $100k immediately. NO CONTRACT Why? Offer implies CASH. Check is CREDIT. The world operates on credit. Its what makes the world go round. BUT if you show up with a check, this is a COUNTEROFFER and destroys the initial offer Langellier v. Schaefer p. 247 BUYER says I would prefer to do it on credit, but I will pay cash if you require it. This is acceptance The terms regarding where to send the deed and all the steps constituted a qualification of the offer and thereby cancelled the contract. BUT, buyer also puts in new term (different place of delivery- St. Paul). This destroys the contract. Butler v. Foley p. 250 Initial offer was for 50 shares, counteroffer was for 44 shares. HOWEVER, subject was left out of the telegram. Subject here indicated they would not hold the stock for the buyer. So if we hear from you, we will hold the stock, if we dont hear, we will not hold stock. When D responded by telegraph, made telegraph co. his agent. Fact that agent made mistake is attributed to D. counteroffer destroys initial offer new offer INITIATED BY D, therefore D is making telegraph co. his agent WHO is responsible for the telegraph error?

When the seller instituted his counteroffer, he became the offeror and the buyer the offeree. Therefore, the OFFEROR bears the risk of the error on the part on the telegraph company. Therefore there is a contract and therefore a breach of contract. Consequences of the error are attributed to D. US v. Braunstein p. 253 US initiated bidding process for rotten raisins (during WWII). Alcohol was a wartime material used for making gunpowder. Pearl (Buyer) is trying to get out of deal; govt screwed up by messing up pounds with boxes and writing an error. Shortly after this contract dispute, War came to end, greatly decreasing the value of the raisins. ZERO SUM GAME. Whoever ends up with or sells the raisins loses money. Govt messed up, otherwise Braunstein would have been the fall guy. Would have ended up with a bunch of semi-worthless rotten raisins. There was an error in the govt reply to Pearl Distilling Co.s offer (10c per BOX instead of 10c per POUND.) Pearl does not pay, does not reply, raisins never shipped. Later govt says that Pearl is bound by initial offer. In common law, language to keep offer open for any period of time is not binding without CONSIDERATION. The UCC pretty much changes this understanding. Court says there was no acceptance (b/c of error) so there was no contract. Buyer could not, however, have taken advantage of the govts error b/c it was clear that it was an error UCC 2-205 FIRM OFFERS Must have 1. offer by merchant to buy or sell goods 2. signed writing by which its terms gives assurance that it will held open 3. offer is irrevocable w/in that time frame (no longer than 3 months). BUT any such term of assurance on a form supplied by the offeree must be separately signed by the offeror. one regular signature, standard to all contracts and ANOTHER signature specifically acknowledging that they have read the irrevocability clause

What if UCC 2-205 had been in effect at the time of Cole-McIntyre? Contract would have been invalid b/c there was only ONE signature on the form (supplied by the offeree). Offer was revoked and the term of irrevocability was not valid. What is the goal of this UCC requirement? To prevent surprise. Allows for irrevocability BUT, if the form is supplied by the offeree, need two signatures. Roto-Lith Ltd. v. F.P. Bartlett & Co. This case is about WARRANTY. This is an outcome determinative case. If the court says there IS a warranty, BUYER wins b/c breach of warranty. If the court says NO warranty, SELLER wins. Facts Buyer agrees to buy celophane bags. Contained terms stating that there is no warranty and statement saying If these terms are not acceptable, you must notify the seller immediately. BRICKMAN Most contracts today are form contracts. Businessmen usually ignore discrepancies and expect to resolve differences as they go along. When things go wrong, lawyers come in and start spouting out stuff about the common law, etc. etc. Llwelyn wanted to move the law to reflect actual business practices. UCC 2-211 deals with Battle of the Forms. Poel v. Brunswick Seller sends written offer to B offering to sell processed rubber at fixed price. Buyer replies by ordered fixed quantity of rubber from Seller at the price, EXCEPT from included says that Seller must promptly acknowledge acceptance of this offer. Seller does not acknowledge but ships rubber. When rubber arrives, Buyer refused to accept b/c WWII ended and price of rubber fell greatly. Seller sue buyer for Breach of K Buyer defends that b/c of his aknowledgement clause, his order was NOT an acceptance, but rather a COUNTEROFFER which was not accepted b/c they did not reply. Court finds in favor of Buyer, referring to the common law. Last Shot Rule- Under the common law, any change in the last shot can fundamentally alter the contract Youre a seller, what does your form say? NO WARRANTY

Youre a buyer, what does your form say? ALL WARRANTIES Default under the UCC is that there ARE warranties unless they are excluded. major change w/ UCC Every time you have a sale, forms exchanged back and forth between Buyer and Seller, all with conflicting clauses. (Sellers form says no warranty, Buyers form says All kinds of warranties for everything operating into eternity, etc. etc. Under the Common Law this mean there is no contract! UCC 2-207 (a) Can still have acceptance, even with different or additional terms. Applies in two cases. 1. where you have acceptance a. DIFFERENT from common law acceptance, in that it does not require mirror image can have different terms (b) If there is a conditionality clause, may or may not be contract (c) Contract by Conduct (subsection 3) 1. parties recognize existence of a contract by their conduct a. applies generally where Seller ships the goods and Buyer uses them (e.g. Roto-Lith) b. Roto-Lith is Contract by Conduct What is the purpose of this? Figure out which terms apply. UCC says that the terms upon which the parties agree are binding, together with any supplementary terms included in UCC (gap filler terms.) Conflicting terms cancel each other out. Critical GAP FILLER is WARRANTY. If one form says warranty, the other says no warranty, UCC says there is WARRANTY. BUYER always wants to take Route C. When Seller ships the goods he was agreeing to buyers terms and the warranties clause was a counteroffer. By shipping the products, the seller accepted Buyers terms. When do the various routes apply? Route A is when the differing terms are immaterial. Or Confirmation. not relevant enough to prevent acceptance Route B says there is no acceptance under Route A if acceptance is conditional upon my way or no way clause what if both forms have this? IF goods shipped and used, go to Route C

IF goods not shipped, Route A

Brickman Can you form a contract under Route B by conduct? Say Seller ships and Buyer uses. Is assent broad enough to incorporate conduct? Conduct were talking about is the Buyer accepting the goods. Seller ships the good with the conditions that Buyer accept his terms. Buyer accepts the goods and uses them. IS THAT ASSENT? Its possible... its plausible Under Route B, Seller wins. Under Route C, Buyer wins. Which did the UCC intend when the writings dont create (common law) contract? Route C (it would appear...) 2-207 P 2 Applies to Route A. Tells you what to do with the additional terms. Add them to the contract, UNLESS 1. offer expressly limits acceptance to the terms of the offer 2. they materially alter it 3. notification of objection already received Route A changes mirror image rule. Route B retains in some measure the mirror image rule. if terms dont match up, no deal In Roto-Lith the court supposedly uses Route B What facts or terms support using Route B? looking for conditional terms when you go into Route B you dont know where youll end up... 1. If the terms are not acceptable, buyer must notify seller immediately... a. Court DOES NOT rely on this for choosing Route B BRICKMAN This is the core of this case. EXPLAIN how the court chooses Route B. Court must find conditionality.

11/18
Brickman Beauty of UCC is that it is uniform (though each state has to adopt it, and there are some issues with this).

Will tell us either to use the Elegant Approach, the Plain Text approach... or give us a factual setting and we have to determine How do we get to Route B? pg. 263 Where there is a response to the offer which states a condition solely to the What this court is saying is that the equivalent of conditionality is a response with a materially different term that benefits the responder Make an argument in favor of the Buyer that the Seller accepted the Buyers offer. Buyer knew of the Sellerss term and shipped the good if the Seller really wanted to attach conditions, they should not have shipped the goods under Common Law can say that there was offer and acceptance b/c the goods were shipped Court says the contract depends on the materiality of any given term purpose was to inject certainty.... but term materiality is inherently unclear and subject to interpretation Related policy object of 2-207 was to close the loophole for the welcher HYPO If between the time of the exchange of the forms and the time the emulsion was shipped, the market price went down, under Roto-Lith what could the buyer do? could welch b/c under Roto-Lith contract wasnt formed until the buyer received and used the goods Suppose that Roto-Lith is the law. Youre a buyer and you read about Roto-Lith. You go to a lawyer and say what do I do? hire a bunch of lawyers and every time you get an acknowledgment of an order you send a response put in your form offer the magic words from 2-207 2 (a) o use those terms, seller ships the goods and uses a form that contradicts your form What do you have to do to overcome Roto-Lith? ALWAYS SEND THE LAST FORM Where does your client want to go? Route C Air Products Hartford is identical to Air Product

Trial Court held that Provision Number 6 became part of the contract under 2-207 after shipment. AC reverses. Since 6 is a material alteration of the contract, under 2-207 it does not become part of the contract. If we have different terms, we treat them as if they were additional terms. Professor White has a different view of different terms. Terms cancel each other out and there is no gap filler in the code. He is relying on comment 6 to 2-207 which deals with written confirmations sent by parties after having reached an oral agreement. Assume that the buyer sends a purchase order saying that any dispute will be resolved in the state in which the seller is located. Is that an acceptance? Brickman Yes, b/c 2-207 (a) was designed to resolved battle of the forms where the parties agree on the terms of bargain (goods, price, place of delivery, etc.) Assume that there is a dispute. Sellers acceptance is an acceptance to all terms on the Buyers form Arbitration clause in the offer survives the no arbitration clause in the response (b/c the offer controls) and it therefore drops out How much can terms differ, before they are material terms? o as long as they are not traditional bargaining terms HYPO: Arbitration clause in K for sale. Seller will contend that its acceptance was expressly made conditional by the reasoning in RotoLith. Prof. White argues that Air Products should not have been decided under P2 Argues that the sellers return form is acceptance only on what the seller and buyer agree (NOT arbitration vs. litigation)... no gap filler on this issue as there is for warranty COMMENT 6 to 2-207 when you have a written confirmation (a la Route A) of a prior oral agreement... suppose you have 2 written confirmations w/ differing terms Conflicting terms knock each other out Add them to the contract, UNLESS 1. offer expressly limits acceptance to the terms of the offer 2. they materially alter it 3. notification of objection already received From this Prof. White extrapolates to the Acceptance term Does not limit Comment 6 to written confirmations that have differing terms

In this case you dont have written confirmation. Offer says arbitration, Response by Seller says disputes resolved in court where seller is located. SO, the end deal would not include an arbitration provision Prof. Summer believes that Comment 6 is NOT APPLICABLE. Says comment 6 only applies to the same form (here we have separate forms... and Offer form and an Acceptance form). White says this gives the Buyer an unearned first shot advantage. Summers says this advantage is not unearned. White is adding a Route A knockout. Most judicial decisions side with Prof. White. 10th Circuit canvassed cases and the majority decided with White. Flender v. Tippins Adopts the knockout, affirming the refusal of the trial court to compel arbitration. What are the implications of a Route A knockout? only in Route A if there is an acceptance if the acceptance has different terms (warranty, arbitration, etc.) the plain meaning (as Summers would say) they are conflicting terms they are ignored CRITICAL DISTINCTION o What if we have the exchange of forms in a jurisdiction w/ Route A kfnockout and a dispute arises b/4 goods shipped would say there is a CONTRACT in Route C there is no contract under Whites analysis the different terms knock each other out, you gap fill... there is no gap filler for arbitration TOMORROW Review 2-205, 5-1109 Look at Roto-Lith and see how the court used Route B (diametrically opposed outcome from Route C, which was what the UCC intended) Pro Hill Shrink Wrap 2003 Amendment to 2-206 and 2-207

11/19
UCC 2-207 says that when multiple forms are exchanged that conflict over dicker terms, the first form controls and the contract is still valid.

White analysis only applies to 2-207 (1) (different terms) NOT to 2-207 (2) (additional terms) Where is the White analysis? See White & Summers assignment on assignment sheet to be read after Roto-Lith CONTRACTS in the Information Age You call up a company and order something (say software or a computer). You agree to pay and they ship it. You have a CONTRACT, right? NO Does software qualify as goods? UCC Articles 1,2 and 3 only apply to goods... software MIGHT be goods. Undecided. Most courts treat software as goods. ProCD Inc. v. Zeidenberg ProCD sells two versions of software that bundled 3000+ phone books on CD. Sold two versions, one to consumers and one to businesses. Cost millions of dollars to produce. Sold in shrinkwrap box. Box said that use of product was subject to terms inside the box. You were buying a license to USE the product. Whether you were buying it commercially or at a store, it was shrinkwrapped. Terms inside the box and alert within the software stated that you were just buying a license to use the software, not the software itself. Gave right to return D copied the material from the CD (phone numbers- not copyrightable) posted them online and sold them. ProCD sues. DC rules for Zeidenberg. AC overturns holding for ProCD Judge says that in order to invoke 2-207 you need two forms with different terms. This is not the case here, there is only one form. BUT Judge is wrong. 2-207 does not require two forms with competing terms. Hills v. Gateway Hills order computer from Gateway. Get it. No terms on the box or indication that theyre inside. They are inside. Contain an arbitration clause. If buyer objected to the terms, sole remedy is to return the computer w/in 30 days. Did not do this, found defects, wanted to go to court. Gateway wants arbitration clause enforced. DC wont enforce the arbitration provision. AC overrules

Brickman Court is enforcing a layered contract. There are stages. Phone. Delivery. Inspection of Terms (which buyer may accept or reject).

Klocek v. Gateway (2000 KS case) Court says since Klocek was not a merchant, could not add terms (applying common law rules). This is an outlier. Most courts follow ProCD and Hills. Courts have generally ignored the common law and the UCC. Specht v. Netscape Communication Corp. Clickwrap. Have to check I agree when purchasing things online. Usually license terms. Browsewrap. Browsewrap license can only be found by scrolling to that license. Must click on a button to look at the terms, but you DO NOT HAVE TO b/4 you click I agree. Courts have held that these are not enforceable, b/c of mutual assent. Brickman ProCD judge misinterpreted 2-207. Said that since you dont have formS (plural) this is not a 2-207 problem. It is. But it doesnt matter. KEY DISTINCTION Is there a common law (or 2-207 abrogated common law) contract or a rolling contract? PROMISSORY ESTOPPEL Was there a promise? Should the promisor have expected the promisee to act? Was the reliance foreseeable? Did the promisee take this action? Was action substantial? Can injustice be enforced only by finding reliance? Amendments to 2-206 and 2-207 2-206 (revised) Adds P3, allowing for Route A acceptance under 2-207 terms 2-207 (revised) See Statute Book Removed provisions and put them in 2-206. Revised 2207 only applies if there is a contract formed under some other provision of the UCC (e.g. 2206, 2202 or other provisions)

Compare old and new 2-207 New does not deal with contract formation. What happens to Route B (counteroffer)? Boilerplate language in all forms Courts require assent to contract terms.... Whether there has been acceptance or a counteroffer is now dealt with over 2206. 2207 gives the advantage to the first shotter White gets rid of this advantage Amended 2-207 it doesnt matter who is the offeror or offeree Deals with the TERMS of the contract Route B is out of 2-207 (now resolved under 2-204 and 2-206) What happens to Route B under new 2-206? Still can say My way or no way. If both sides say that, good are shipped and used, goes to Route C. ............................................................................................................................................... Bargain Theory of Contract Consideration is not an ironclad condition of enforceability. Unfairness of contracts (in the minds of the courts) led to promissory estoppel and now to bargain theory. RELIANCE (Consideration) 1. Promise? 2. Expected promisee to act (reliance foreseeable?) Was reliance substantial? 3. Action taken? 4. Action substantial? 5. Unjustice avoided only by enforcement of the promise? (discretionary) Holmesian/Williston Theory To count as consideration must be a bargain Parable Benevolent gentleman says to a tramp You may go around the corner to that shop and buy an overcoat on my account. When the tramp arrives there, the man takes back his offer. Is this a contract or simply a promise to give a gift? Key is going around the corner (some risk there). If the promise had been made in front of the store, no risk. Holmes said no bargain here, b/c going around the corner didnt benefit the man.

Promissory Estoppel (Reliance) Opposite of Holmes

Siegel v. Spear & Co. QUERY Why does the defendant want the furniture in storage? Protect it. Why does he care about protecting it? Who is the promissor here? SELLER (says hell take insurance) Is that pure altruism or does he have a commercial motive? SELLER keeps title to the furniture. Just like when you buy a car with a bank loan, the bank still owns the title of the car until you pay off the loan. Here, SELLER has a security interest in the furniture. It was in the interest of the SELLER to have the furniture insured since he still owns it, therefore his promise to take out insurance for the purchaser could be seen as consideration. NY Court of Appeals finds liability on an expanded consideration theory (w/ some help from property law.) Holmsian court would not have found consideration. Most courts would apply promissory estoppel- relied to his detriment on the SELLER to take out insurance (even though there was no CONTRACT). NY Court of appeals didnt use promissory estoppel. When the bailee made the promise, misfeasance was the equivalent of consideration. They found consideration by means of trust law. Fisher v. Jackson Baker goes to work for newspaper as reporter. Claims they offered him a permanent position. He had no skills. How likely is this? Court relies on BARGAIN THEORY Could have gone two ways: 1) I dont believe you. 2) Bargain Theory This is the nice way of framing I dont believe you. Underwood Typewrite Co. v. Century Realty Co.

Underwood wants to sublet its space. Asks Century Realty for permission. CR says if they can find a suitable tenant, its okay. Underwood finds a tenant and is planning to charge them more for the space (make a profit). Century then says they cannot sublet. Court finds for Underwood (tenant) under unilateral contract theory. CR had promised to allow Underwood to sublet and so they have to. Obligation is only on ONE SIDE Capital Savings & Loan Asssn. V. Przybylowicz Bank makes error on loan amount. In reliance on this D sells his house. Bank realizes its error and tries to correct it. Court rules that the bank is bound by its original rate quote. Key factor is that P was not very well educated and Bank should have known better. PROMISSORY ESTOPPEL Chapman v. Bomann Promissory estoppel often enforced as a contract. If you dont have an oral contract (just a promise with reliance) then promissory estoppel can create K. This contradicts with statute of frauds (saying certain contracts must be in writing). Most courts say PE trumps statute of frauds. Feinberg v. Pfeiffer Co. STRATEGIC OR TACTICAL ISSUE Plaintiff is dying of cancer. P is suing for past due amount. COULD have sued for past due amount + future amount (given her life expectancy, which was limited.) Lawyer made clear choice to forego asking for future amount, believing the court would more readily rule in her favor. We look better if we dont try to get every dollar possible. Brickman In line with Mabley and Carrew Court finds reliance under Section 90 estoppel. Firm Offers and the Bargain Principle So far have looked at UCC 2-205, Restatement 2nd Section 87, GL 5-1109 (?) [Look at Restatement 2nd Section 87] At the time the offeree came to accept the offer, there was no more offer, therefore no meeting of the minds, therefore no contract. Dickinson v. Dodds

Dodds offers to sell piece of land to Dickinson (gives him two days to accept.) Dickinson becomes aware that Dodds is going to sell the property to another person. When Dickinson discovers that Dodds is going to the sell the property to another, it is an implied revocation of the offer. Therefore there is no longer an offer.

43 Indirect Communication of Revocation An offeree's power of acceptance is terminated when the offeror takes definite action inconsistent with an intention to enter into the proposed contract and the offeree acquires reliable information to that effect. Here it seems the court would say that Dodds offer to sell to a third party would fall under taking definite action inconsistent with an intention to enter into the proposed contract SECTION 43 was based (at least in part) on this case. Jordan v. Dobbins Guarantee by Dobbins expired upon his death. Brickman DONT GENERALIZE from this. Many cases where an offer of a guarantee is found to have sufficient consideration to keep it open even after the death of the guarantor. Wilhelm v. Chain Doesnt take much for there to be consideration, which survives death. James Baird Co. v. Gimbel Bros. (memorize this case) This is a Learned Hand decision, which makes it memorable. 25 years later, another great jurist, Justice Traynor reaches the opposite conclusion. Plaintiff: General contractor, bidding for the construction of a public building Defendant: Subcontractor, sold linoleum to general contractors What was the subcontractor doing in this case? Making a bid for providing the linoleum for this job Here general contractor is suing the subcontractor for breach of contract. If successful, what would the subcontractor have to pay? Difference between subcontractors bid and the amount general contractor actually paid for linoleum

Defendant argues that he revoked his offer before acceptance. Defendant made his offer to many different general contractors. Brickman Was the defendants communication even an offer? Could he argue that he never made an offer? Could argue Molton v. Kershaw where offer sent to many parties at once, this is the beginning of a negotiation, NOT an offer What is the decisive consideration the other way? Pg. 323 Explicit language in the communication which makes it an offer (we are offering these prices for reasonable prompt acceptance after the general contract has been awarded. What is the subcontractor bargaining for with this offer? An acceptance What form would the acceptance take? o RETURN PROMISE o Bilateral Contract Making an offer which could be accepted by a return promise to buy the linoleum at the bid price This is CONTRACT When did the subcontractor notify the contractor that he was withdrawing the offer? AFTER the general contractor had submitted his bid, but BEFORE the bid was accepted Why did the general contractor not just withdraw his bid? Because it was a PUBLIC BUILDING he had been required to put down a performance bond to guaranty he would do the work This bond was generally around 10% of bid o General contractor would lose this money if he withdrew his bid General contractor argues promissory estoppel. Why does Learned Hand reject this? There are 5 elements of promissory estoppel. 1. Promise 2. foreseeability of reliance 3. reliance to the detriment 4. substantial damages 5. justice be prevented only by upholding LH says there is no promise LH says offer becomes promise only when it is accepted

LH says that for purposes of promissory estoppel that there is no promise upon which there can be reliance

If offer only becomes a promise when it is accepted, at that point there is a CONTRACT, therefore there can be no promissory estoppel (in the commercial world.) Offer made Contractor submits bid Subcontractor presents mistake to contractor Sub withdraws his bid What is the GC to do? Learned Hand here says that PROMISSORY ESTOPPEL does not exist in the commercial world! HYPO We are counsel for a major general contractor. Baird comes down. GC is upset. Asks for advice on how to plan business going forward. What would LH advise you to do? Ensure that there is a contract between the general and subcontractor which is conditional on the acceptance of the general contractors bid Brickman How might this contract read? o I the subcontractor promise to supply X amount of linoleum for Y dollars, if you, the general contractor are awarded the contract using my bid. General Contractor is not happy with this. Would have to have a lot of lawyers checking all kinds of subcontracts all the time. How can we do this without lawyers? General contractor wants a FIRM OFFER from the subcontractor. Wants the subcontractors bid to be irrevocable . Brickman Remember the importance of bonds. All general contractors and subcontractors have bonding limits, which mean that they cannot keep offers open indefinitely. Subcontractor may agree to keep the offer open one or two days after the general contract has been awarded. Form must be signed twice (once near the terms of irrevocability). Brickman Remember that 5-1109 applies to everyone (2-205 applies only to merchants). Why is this form strategy not available in Drennan? Because Drennan deals with paving (which is a service and thus not governed by UCC).

 5-1109. Written irrevocable offer. Except as otherwise provided in section 2-205 of the uniform commercial code with respect to an offer by a merchant to buy or sell goods, when an offer to enter into a contract is made in a writing signed by the offeror, or by his agent, which states that the offer is irrevocable during a period set forth or until a time fixed, the offer shall not be revocable during such period or until such time because of the absence of consideration for the assurance of irrevocability. When such a writing states that the offer is irrevocable but does not state any period or time of irrevocability,it shall be construed to state that the offer is irrevocable for a reasonable time.

What if Drennan happened in NY? 5-1109 does NOT only apply to goods therefore, you COULD have a form in Drennan under 5-1109 Remember Hand said An offer isnt a promise until it is accepted by the offeree. Drennan v. Star Paving Co. Did Traynor find a promise? YES -- Implied Subsidiary Promise Traynor is implying a promise that the offer would be kept open and that is the promise that promissory estoppel is based on. Who won? General contractor What did the subcontractor do? Found an error in his bid and refused to perform What is the subcontractor arguing? He withdrew his offer before acceptance. What is the legal theory that the court uses to find for the general contractor? PROMISSORY ESTOPPEL 1. Promise? Traynor says yes There was a promise to keep the offer open. Where did this contract comes from? TRAYNORS HEAD!!! He calls this an implied promise (implied in his head) There is no express promise he finds it there. How did he find it? Subsidiary promise is the promise to keep the offer open (subsidiary to the promise to do the work) o Traynor says this is implied o Refers to Section 45 of Restatement

Says that once you begin performance in reliance on the offer, then the offer is not revocable once you start halfway up the flagpole, you cant revoke the offer. This deals with unilateral contracts and doesnt apply here, BUT Traynor is reasoning by analogy

Could you use Traynors reasoning to find for the general contractor in Baird? Is there an express promise to keep the offer open in Baird? o YES prompt acceptance after the general contract has been awarded. o Can argue that there is a subsidiary promise, BUT we dont even need that because we have an express subsidiary promise which was RELIED ON to make a bid for the general contract A faxed acceptance is treated the same as email which is treated the same as mail. The mailbox rule. Brickman Heres where we are. Cover the rest of the cases quickly next class and then move on to the material for the next class. CONSIDERATION & CONTRACT BY CORRESPONDENCE Mailbox rule: offer binding when received; acceptance binding when sent UNILATERAL vs. BILATERAL CONTRACTS UCC 2-206 collides the bilateral/unilateral routes. Bilateral: each promise is sufficient consideration for the other; Unilateral: doing of act constitutes acceptance/consideration CARLILL v CARBOLIC SMOKE BALL The flu had wiped out a 1/3rd of population. Mrs. Carlill did as ad said and tried to collect. I promise to pay 100, if you do something. Was it an offer? Was there notice? TAFT v HYATT The accused sought legal advice from atty and the atty turned him in The chief of police should not be rewarded for doing his job. The offeror gets to keep the money STRONG v. SHEFFIELD The holder of a note is asked by a 3rd party to forbear collection. Husband (maker of note), wife (3rd party) and wifes uncle (holder of note). Maker of note does not have finances to pay the note; wife goes to uncle and ask that he forbear collection of the note. Uncle agrees to forbear on the condition that wife forbears the note so that she pays if husband does not pay. She endorses. 2 years go by and uncle seeks payment, husband has no assets and wife refuses to pay. Uncle sues wife on the basis of collateral agreement to reimburse the note.

Who should prevail and what are the legal mechanism to reach that result? Ct found mutual promises; promise to forbear and promise to endorse: so could be BILATERAL K o Promise to forbear is not a promise to do anything bcuz of its indefinite terms and cannot be consideration because it was too vacuous and did not impose a legal detriment to Offeree If we wanted to find for the uncle, we would use UNILATERAL K HAY v. FORTIER There are 2 agreements; D is liable for surety; there is a 2nd action based on Ds promise to pay $100 on account and the balance by April. Ds contends that there is no K bcuz there is no consideration. Pre-existing duty I promise to pay $100 and the balance in exchange for your forbearance against the suit DAVIS v JACOBY

12/1/08
Swindell (pg. 424) Is there a requirements contract here? Court says NO (though this is a factual issue and it could theoretically have gone either way) Bank agreed to lend Swindell up to $20,000 when he needed it. Today we would call that a credit line. Typically companies pay a fee (say 1%) to a bank to keep the line of credit open Companies may also be required to do their business with him Why was this determined to be a UNILATERAL contract? Swindells company never had to get the credit Brickman This is clearly an OPTION contract. In an option contract the one who paid the consideration doesnt have to buy. Brickman Why didnt the bank want to lend money to Swindell? Probably because Swindell became insolvent or nearly insolvent. Brickman Court is looking for a way to find for the bank and they stumble a bit in defining it as a unilateral contract. Lima Locomotive pg. 427 EASY. There is a requirement contract here. Eastern Air Lines, Inc. v. Gulf Oil Corp. pg. 428 Was there a requirements contract here? YES What was the reason given by the court? Course of Dealing (long-term relationship). Court determined this to mean that EA had agreed for a long period to buy its oil from Gulf and Gulf had agreed to provide it. Utah International Inc. pg. 437 Brickman Whats the problem here? Colorado Ute built larger electric plants than agreed Brickman This has a take or pay clause. Common in contracts where one party invests a large amount of money in infrastructure (as the coal mine here). If Buyer reneges, Seller is out for a large sunk cost. This creates an incentive to renege. HIGH incentive to breach.

Take or Pay. If Im going to build this coal mine, then you must agree to take or pay a minimum amount of coal (defined in the contract). this insures the Seller for their sunk cost. IF this was a requirements contract with no stated minimum, then Colorado-Utes building of larger plants might have invalidated the entire deal. BUT what we have here is a contract with a minimum amount. Court says Colorado-Ute is entitled to this minimum amount. NOT entitled to any coal above that minimum amount. NOTE: The coal company wants out of the deal b/c they can sell the coal for more than the value set forth in the contract. Brickman Requirements contracts are difficult (and thats why common law didnt really recognize them) b/c there are no hard numbers. The requirements could be anything its about anticipation of requirements based on facts. MINIMUM could be ZERO, if in good faith the Buyers requirement is zero. UCC 2-306 sets a MAXIMUM (industry standard??) Schlegel Manufacturing Co. pg. 446 Supply of dolls from Germany cut off due to WWI so there was an increase in the production of dolls (as well as boxes and other products that require glue). Also, people were increasingly eating their horses (making them worth more as food than as glue). Perfect storm driving up the price of glue. Brickman Is there is a requirements contract here? What determined how much they bought? How much they could sell. What determined how much they could sell? The differential between the market price and the contract price. Therefore when the market price goes up they can sell more (b/c they have a fixed price contract) Is this then a requirements contract? NO, b/c middleman (jobber) doesnt have requirements like retailers have. What determined how much fuel Eastern Airlines needed? The amount of their BUSINESS. If they have more passengers, they need more fuel. If less then less. This is the same for other requirements contracts (e.g. if youre providing all the steel for a car company the amount of steel they need will be based on how many cars they can sell.)

HERE the court is saying that this is really a supply contract as opposed to a requirements contract. They call it an illusory contract b/c P is not a consumer of glue but rather a middleman. If UCC 2-306 had been around could have used that to decide for D.

Additional Reading Homestack Mining Huge bankruptcy case. END of the nuclear power era in the US. Nuclear plants became losing proposition after this b/c of political opposition, union opposition, etc. PAIRED OPPOSITE: Option contract vs. Requirments contract Price of uranium shot up b/c of OPEC embargo. Ore went from $7/lb to $20+/lb. Court found that this is a requirements contract. . Instinct with an Obligation Lady Lucy was a big-time fashion icon. She gave rise to the cartoon character Betty Boop. Lady Lucy was a Titanic survivor along with her husband. Husband lost his position in society b/c he paid to get on the lifeboats. Wood v. Lucy, Lady Duff-Gordon pg. 451 Wood was selling Lady Lucys name. He was essentially an agent for her. Brickman Key reason why LL reneged on the deal to give Wood exclusive rights to deal in her name was that she was negotiating a deal with SEARS. Cardozo saves the deal. How does he do this? LL promised to share half of the revenue generated from these endorsements. Wood expressly promised to do NOTHING. Cardozo found an implied promise by Wood to use his best efforts (whatever he can do) to get LL endorsements. KEY In order to bind HER we have to bind HIM. Cardozo does this with his implied promise. Instinct with Obligation comes out of this case. Logic is that it doesnt make any sense for LL to bind herself to this exclusive deal unless there was an implication by Wood that he would use his best efforts to make her money!

Brickman Implied promise not always available. Many contracts say If I do X, you will do Y. In these situations it is not necessarily true that the promissor has agreed to get the lease (or whatever) but rather may remain free to act of not act. If one party has full freedom to act or not to act, can they still BIND the other party with their action? Mixed outcomes in the cases that come up, but courts have generally found that contracts where the promissor binds himself minimally is still binding. Back to Lady Lucy Keep in mind that WOOD is suing for breach of K. To show K that binds her, he must show that HE is bound (even though no express promise on his part to do anything.) Hammond v. C.I.T. Financial Corp. pg. 453 Hammond is suing for his commission. He wins. Brickman Why is this case here? b/c the court implies a best efforts undertaking by the broker in order to allow the broker to sue the seller for his commission. Who is suing who? Broker (Hammond) is suing Seller (C.I.T.) What is Hammond arguing? Bilateral contract. Promise by the company to pay him a commission. Hammonds quid to the companys quo is his best efforts. No express promise to deliver his best efforts. Must show that he was BOUND by this. Sylvan Crest Sand & Gravel Co. pg. 457 Brickman If K can be cancelled at any time, then the contract is ILLUSORY. Here the govt cancelled a contract. BIG PROBLEM: If this contract is illusory then literally millions of WWII contracts entered into by the govt would be illusory. Court needs to find a contract here. Court points to good faith. Govt gave NO NOTIFICATION saying that they have the right to cancel whenever they want. The power of cancellation, though unlimited, could not be exercised merely by failure to give delivery orders. Govt had to give notification if it was going to cancel. This notification requirement was enough to create consideration, making a binding contract. Carlton 461 & Reinert 463

Question in these cases is: Have you bound yourself to make a good faith effort (to get the lease or rezoning, etc.)? It depends. You can reserve for yourself the full freedom to act or not to act. Does that make this an illusory contract? Modern courts say NO, b/c if you do perform (say, get the lease) then you are BOUND. This is enough to create a K. Moreover, there may be a good faith duty to try to perform (get the lease or whatever). This is a factual determination. Bernstein v. W.B. Manufacturing Co. pg. 465 Why was the right to terminate the issue in this case? Came before the court twice. First time dealing with Clause 1. First case upheld the contract by reading significant limitations into the words delivered to the best of our ability (saying it is an objective rather than a subjective standard.) There are reasonable bases for excusing performance (e.g. fire, natural disaster, whatever) but otherwise performance is due. Second case dealing with Clause 2 focused on determination at any time by us. Buyer says that this means they can exit the deal whenever they want. Seller is arguing that this only refers to the solvency of the Buyer (if Seller determines Buyer is insolvent they dont have to sell.) Same court that saved the contract the first time went to great lengths to destroy the contract this time. This is a much criticized case. Gurfein pg. 467 Seller is arguing illusory contract b/c buyer had the unrestricted option to cancel the shipment. Brickman Remember that in Sylvan the court found K even with a very tiny amount of consideration by the govt. Under what circumstance could Seller have bound Buyer here? If they shipped IMMEDIATELY upon receiving the order. Court says this is all that is necessary to constitute a legal obligation and create K. Gratuitous Noncommercial Promise

Recurrent theme in our history has been the development of specialized areas of contracts (insurance, collective bargaining, etc.) These areas tend to go their own way, taking little from and contributing little to general contract law. NEVERTHELESS having a general theory of contract is deeply rooted in our legal tradition. 19th Century theorists were trying to find fundamental principles (Satisfactory General Theory of Contract.) Had reasonable success and got to contract law is commercial law. Noncommercial promises then had to be judged against the same criteria as arms-length promises by merchants. This could never have worked. Under strict bargain theory, an executory gift promise (I promise to give you something) could never be supported. Courts devise ways to make these enforceable, especially when there are improvements. Well see a case where this applies to land (even though no DEED transferred, which is the only way to give land.) Brickman Cardozo court in NY never adopted bargain theory. Therefore Cardozos court could ALWAYS find consideration. Kirksey v. Kirksey pg. 473 Court finds that sisters coming to brother-in-laws land was not bargained for. There was an executory promise but no deed transferred. BUT suppose the letter had said besides Im lonely here. This could have been interpreted as something bargained for (companionship). Seavey v. Drake p. 476 Land not given b/c NO DEED transfer. (Court says land transferred but it was not.) In reliance on promise, however, P made improvements to the land. Court says this is consideration and therefore the promise will be enforced. Brickman This is an example of how courts get around the harsh results stemming from bargain theory. Roberts-Horsefield pg. 478 SAME IDEA as Seavey Devecmon v. Shaw pg. 480 UNILATERAL CONTRACT which is the antithesis of bargain for theory.

Benefit to D is irrelevant. P had promised to pay for the trip. I promise to do X if you do Y. Bargain For Theory would classify this as a promise to make a gift and the fact that D benefited would be relevant. NY CASES WHO DIDNT ADOPT STRICT BARGAIN THEORY/EXTENDED CONSIDERATION THEORY Hamer v. Sidway pg. 483 Saying that plaintiff had the right to do all sorts of things (drink, play cards, swear, etc.) that he DID NOT DO in reliance on the contract therefore contract valid. Ricketts v. Scothorn pg. 491 Basis of the contract is an estoppel. Here there is reliance. Same time frame as Hamer and also in NY didnt need estoppel b/c they had this expanded consideration theory. De Cicco v. Schweizer pg. 494 Breach of contract to marry is eliminated as a Tort today, but during this time engagement to marry is a binding contract. Seems that the fathers promise is unenforceable b/c the couple had already agreed to marry. Nonetheless Cardozo finds consideration. He held that the promise to pay was made to induce the couple not to rescind their enforceable agreement. They had this right to rescind their marriage contract by entering into another contract. The promise by the father to provide money induced them not to exercise this right. Cardozo sees an implied admission that the couple may be wavering in their commitment (thinking about rescinding) b/c otherwise there is no reason to offer the money. NOTE: Most courts would have found promissory estoppel here, but Cardozos court doesnt need such parochial notions. Cardozos court had a relaxed view of consideration. Allegheny College pg. 501 Brickman What does Cardozo want to do here? BIND the promisor. What does he need to do this? Find CONTRACT What does have to show to find contract? CONSIDERATION

Here he goes back to Lady Lucy and finds a bilateral contract. Cardozo acknowledges that other courts would find promissory estoppel but does not sue this theory. Instead says that when the College agreed to publicize the gift they entered into contract. Implies a request by donor to have donee publicize the gift. This therefore is the DUTY of the donee, which it accepted when it took the gift and therefore it is a CONTRACT. REMEMBER There is a distinction between a gift and an executory promise to give a gift a gift is already given.

12/2/08
Provisional Contracts: I promise to do Y if you do X. Although X is not really bound by this contract (doesnt have to do X) modern courts do not find this to be an illusory contract, b/c IF you do X then you ARE bound (so not TOTAL freedom of action). What affect does death have on an offer to enter into a contract? Unless there is some consideration the offer is closed BUT it doesnt take much consideration to keep the offer open (see Bank case, where the bank could still collect after person died b/c the President had declared them depository bank) What application does the UCC have for money? NONE --- sections 1, 2 and 3 of UCC only apply to goods REMEMBER transaction in goods is more broad than sale of goods Moral Consideration Theory of causa all promises seriously made that are not illegal or immoral are binding 19th century slogan was eaten away by its own exceptions. The only way that a past consideration would not count would be when there was a Lampleigh Requested a service got the service no express promise to pay. Quasi-contract. (Implied in fact) No express promise to pay Got a lawyer, presumably, to go and try to find the king.

Common, ordinary implied in fact contract, except that it took place in the 17th c. b/4 implied in fact contract. This is the development of moral consideration. Lampleigh is an overbroad statement by a court that didnt have implied in fact theory available to it. Eastwood chopped down the moral consideration Good Samaritan strain A seeks reimbursement for acts committed in kindness. Today they are more likely to collect than in the past. These cases can be constructively compared to quasi-contract cases. Maritime principle that salvors are rewarded for finding property, contrast that with generally no reward for good Samaritans. **Sometimes courts will simply cite moral obligation where they cannot find anything else.** Eastwood v. Kenyon NEW RULE: pg. 519-520 Promisor promises to pay part of the barred debt. That promise is binding, if it is a new promise. NOTE: Can only be bound by YOUR debt, not someone elses debt. Some states require that Perreault v. Hall P was promised that if she never married and worked full time for Ds business she would be taken care of for life. P continued to work for D until 1937 when she retired. D agreed to pay her $20 for life as a pension, provided she doesnt marry. D pays her until his death in 1943. P seeks continued payments and Ds estate refuses. Court obviously wants to find in favor of the plaintiff.

Court says no consideration, no K. BUT she promised never to marry isnt that consideration? NO, b/c it is void as against public policy. BUT the court rescues this promise by saying that she was only promising not to marry while she was working. P says that she performed the request of D. Court says its not clear whether there is a unilateral or bilateral contract, BUT we dont care b/c D says in his letter that she complied. The deal was done b/4. It was either a promise for an act or a promise for a promise. Doesnt matter. 1937 letter was an ACKNOWLEDGMENT of a pre-existing deal. This is a finding of what you could find. Therefore motion to dismiss should be denied. There is a QUESTION OF FACT. Mills v. Wyman Moral (but NOT legal) obligation (b/c son was an adult.) C v. W Father of illegitimate child did not want to pay child support. Father says there was no consideration and therefore no agreement (contract). No estoppel here b/c the father acknowledges his paternity. **When we get to Cook v. Wright (566) come back and look at this C v. W** In most jurisdictions the agreement in C v. W would have been enforceable. If father BELIEVED he had an obligation, that would be sufficient consideration Perrault v Hall. At common law, the executor is responsible for any payments by estate that are improper. Since promisor paid during his lifetime, the judge is likely to find a way to continue payment. Promise is not enough becuz no consideration. The promise not to marry is against public policy and would eviscerate any agreement whatsoever. However, ct wants to uphold K so finds UNILATERAL. In re Schoenkermans Estate Moral Obligation Theory In previous case wife mistakenly believed that she was caring for her own family but she was NOT (put her effort into something that was not hers)

Court says their claim should be dismissed b/c they were relatives and there was no express promise to pay so services are rendered free of charge. HERE, though the rebuttable presumption that family members offer services for free is rebutted here. The court cites this as the reason why it cant simply say that this is implied in fact K. Remember in Perrault v. Hall the court acknowledges the letter as evidence in a similar fashion Elbinger Court just had to add to the litany statute of frauds (in addition to stat. of lim., bankruptcy and infancy). When a debt is barred by statute of frauds then unless there is a written agreement the statute is BINDING. There is a broker SOF which required that agreement be buttressed by a written agreement. Webb v. McGowan This is a tactical decision by the lawyer in terms of what he is suing for. Lawyer is NOT seeking payments for life (could have) but rather seeking value up to the time of the suit. Lawyer knows that this case is balanced on a knifes edge that could go either way (doesnt want to overdo it w/ a greedy claim.) Medberry v. Olcovich Look at CA Civil Code Section 1606 Does P have claim? NO existing legal obligation There is a moral obligation (it was his son driving the car) but was there a BENEFIT CONFERRED? Maybe (made father feel better) Look at NY General Obligations Law Does P have a claim? NO no promise in writing Section 86 of Restatement Second Does P have a claim? NO difficult to interpret REVIEW 12/3

Route A Knockout vs. Route C Route C is contract by conduct. You have two forms with conflicting terms and therefore no K. BUT if goods are shipped and used then there is Route C contract, where the terms upon which the parties agree are binding, the others are eliminated and you use UCC gap fillers. Route A Knockout (White) this is not a traditional Route A analysis. Two ways to Route A. 1) Written confirmation OR 2) definite and seasonal acceptance White applies Comment 6 (written confirmationS of a prior oral agreement). Eliminates first shot advantage. The response, so long as it is not conditional and accepts the dicker terms (quantity, price, etc.) is binding. If conflicting terms they knock each other out. Brickman Remember Cole v. Brunswick (rubber case). Buyer wanted to get out of the deal. Took advantage of a clause in his response to invalidate the contract. (Last shot advantage) White Knockout Rule has nothing to do with 2-207 P 2. Other scholar says 2-207 P 2 was a drafting error and they meant to say additional or different terms. KEY DIFFERENCE In Cole there was no performance, BUT you could still have contract under Route A. Under Route C you MUST HAVE PERFORMANCE. So, Route A can lead you to contract even without performance. Roto-Lith Turned Route B into Route C (which is no good.) There should be no Route B contract by conduct. Route B says conditionality Roto Lith says any materially different term = conditionality what does this MEAN? No basis in Route B. Remember ROTO-LITH has been overruled. Sherwood Continues to be cited by many courts on the question of mistake. BRICKMAN Is it relevant whether Sherwood was a butcher? Not really b/c steak comes from steers (not from cows) so the meat wouldnt be very valuable.

TAKE HOME: Read the paired opposite about difference in kind vs. degree and see how much there is there

DIFFERENCE IN KIND vs. DEGREE If youre looking at an object that is a human creation, with utility in a social context, then that utility is subjective depending on your purpose. Compare this to objective differences (which do not rely on your purpose e.g. The molecular weight of something.) Amended 2-207 NOT part of NY Code Need to know that this is pretty much Route C No application to the question of formation (only applies to the terms of a K formed under other code provisions) MUTUAL MISTAKE Formal doctrine is that contracts are void by mutual mistake. But courts will void contracts (sometimes) for unilateral mistake. -- see General Contractor cases The more the mistake hurts the General Contractor, the less likely the court is to let the Sub contractor out NOTE, this is not a legal principle. -- NOTE, we have yet to do mistake in a formal way HADLEY (B) Dont worry about it! BILATERAL CONTRACT Definition is a promise for a promise vs. offer to enter into a unilateral contract (If I do X, you promise to do Y) Offer to enter into a bilateral contract cannot be accepted by an act, must be return promise.

CONTRACTS BY CONDUCT very LARGE part of the exam

Need to know various permutations Acceptance on dispatch, revocation on receipt.

If you send a rejection and then you send an acceptance, and the acceptance overtakes the rejection, what happens? If you send an acceptance to the wrong address, what happens? --See the RESTATEMENT these questions WILL be on the exam SHRINKWRAP CASES Judge Easterbrook says that 2-207 requires multiple forms (conformations) thats not true, but courts have adopted his interpretation. Rolling contract Under common law if you call and order a computer, that is K. Easterbrook says no K until computer arrives.