1) INTRODUCTION / Indefinite Promises 2) Consideration 3) Unconscionability 4) Substantial Performance / Risk Allocation / Intro to remedies 5) ENFORCING PROMISES / Consideration Revisited

6) Adequacy of Consideration / Promissory Estoppel 7) Employment Contracts 8) CONTRACT FORMATION / Offer 9) Acceptance 10) Acceptance 11) Revocation / Offer-Counteroffer 12) Offer-Counteroffer 13) Computer Licensing 14) CONTRACTUAL RELATIONSHIPS / Preliminary Negotiations, Agreements 15) Outputs, Requirements, Exclusive Dealings 16) Exclusive Dealings / Reducing Conflicts of Interest 17) Modification of existing agreements 18) REGULATING THE BARGAINING PROCESS / Duress 19) Fraud: Misrepresentation 20) Fraud: Nondisclosure / Statute of Frauds 21)CONTRACT INTERPRETATION / Parol Evidence: Common Law 22) Parol Evidence: Common Law 23) Parol Evidence: UCC, Merger Clauses 24) Interpretation: Common Law and UCC 25) Interpretation: Common Law and UCC 26) PERFORMANCE AND BREACH / Conditions: Divisibility 27) Conditions: Divisibility 28) Modification, Waiver, Estoppel of Conditions / Perfect Tender and Cure 29) Mistake 30) Mistake 31) Impossibility / Impracticability 32) Frustration of Purpose 33) REMEDIES / Calculating Expectations Damages / Intro to Damages 34) Specific Performance 35) Reliance and Restitution 36) Certainty 37) Mitigation of Damages

FOUR BASIC QUESTIONS: Has a valid contract been formed? o Doctrine of Consideration o Offer o Acceptance o Duress, Fraud, Misrepresentation o Statute of Frauds What are the duties and obligations of the parties? o Interpretive principles o Parol Evidence o Conditions o Warranties Have the duties and obligations been discharged / performed? o Substantial Performance o Perfect Tender Rule o Excuse o Mistake What are the consequences when one/both parties dont perform? o Measures of Damages o Specific Performances o Limitations on Damages

INDEFINITE PROMISES
Restatement 2d 1,2,4 BAILEY v. WEST (Horse left at plaintiffs facility) There was no intent to promise between the parties so as to establish a K implied in fact, and that there was no quasi-contract because plaintiff was aware of a controversy of ownership and volunteered to board the horse despite this risk Implied In Fact requires 1) Mutual Agreement, 2) intent to promise, 3) not made in words, 4) Supported by the facts. Quasi-contract (AKA: Implied in Law) requires: 1) Benefit conferred upon defendant by plaintiff, 2) appreciation by defendant of such benefit, 3) acceptance of benefit by defendant such that non-payment for the benefit would be inequitable to plaintiff. Note 6, p11) Quasi contract is usually recoverable if the recipient of the benefit conferred had the last clear chance to remedy the situation by preventing the mistake or error that led to the conferral of the benefit. Restatement 2d 4 A promise may be stated in words either oral or written, or may be inferred wholly or partly from conduct. Restatement 2d 5. Terms Of Promise, Agreement, Or Contract (1) A term of a promise or agreement is that portion of the intention or assent manifested which relates to a particular matter. (2) A term of a contract is that portion of the legal relations resulting from the promise or set of promises which relates to a particular matter, whether or not the parties manifest an intention to create those relations. So a person cannot set up that he was merely jesting when his conduct and words would warrant a reasonable person in believing that he intended a real agreement. OR: You have to act like youre joking to actually be joking. Restatement 2d 20, 18, 16, 5 LUCY v ZEHMER (Restaurant Check Farm Sale) Whether the offer was serious by both parties, or was serious by the buyer but secretly in jest by the seller, the evidenced actions of the seller manifested his intention and thus created a binding contract. All that is necessary in this case is that a party acts as though they assent to the contract... that the other party would have reason to know that you are serious even if youre not. Immediate Withdrawal is a bogus argument because a promise is relied upon at the moment it is made, because it is legally inefficient to allow it to be a question since the promise will be enforced, and because it interferes with the right of another to pursue actions based on the promise. RESTATEMENT 2d 33 VARNEY v DITMARS (Drafting Bonus) The contract in question is uncertain because the use of the words fair and reasonable have meanings indiscernible in terms of the intent, manifested or thought, by the promissor. The agreement of the parties bust be certain and explicit and their intention must be ascertained to a reasonable degree of certainty. No Quantum Meruit because court could not adequately define the sum to be paid.

A party who has performed under an agreement that is unenforceable for indefiniteness may recover in quantum meruit an equitable remedy to provide restitution to a person who has rendered services in a quasi-contractual relationship. UCC 2-102, 2-105, 2-204, 2-305, 2-308, 2-309, 2-310 D.R. Curtis, Company v. Mathews (Grain Sale) The UCC clearly states that the contract is valid, even lacking specific terms for price, as long as the parties intend to form a binding contract. They did so intend. The contract is thus not overly ambiguous or indefinite simply because the parties failed to reach an agreement on the price. The difference between the common law refusal to enforce agreements to agree and those in sale of goods is that there is likely no external reference point for disputed values in common law cases. As such, without this point of reference, the court is put in a position to create an arbitrary value. In sale of goods, there is always a market value for the item, and if not one can easily be determined through appraisal or auction. UCC 2-105: Information is not a good. Securities are not a good. Movable parts of a building are goods... fixtures, a shed, bathtub, sink... PREDOMINANT PURPOSE TEST: UCC WILL apply to delivery of goods, but not to the delivery of a service. Whichever purpose is PREDOMINANT will decide application of the UCC. GRAVAMEN OF THE ACTION TEST: UCC will apply if lawsuit was brought relative to the goods of a business, but not relative to the business itself.
$1000 chair, $300 for wood, $700 for craftsmanship Suing about defective wood Suing about defective craftsmanship PP = No Gravamen = Yes PP = No Gravamen = No $1000 chair, $700 wood, $300 craftsmanship PP = Yes Gravamen = Yes PP = Yes Gravamen = No

CONSIDERATION
CONSIDERATION: Anything given or forborne by one party in exchange for the promise or undertaking of another. Restatement 2d 71, 81 Hamer v. Sidway (Dont Smoke or Drink) The promisee gave up a legal right to enjoy tobacco, liquor, etc. on the basis of the promise and as such the promise maintains the requisite hardship to grant consideration by the promisor who was benefited in a legal sense by the nephews actions. The Benefit-Detriment Rule: consideration where there is a benefit to the promisor or a detriment to the promisee Motive and Consideration: as long as there is evidence of consideration, additional motives for a promise will not bar it from being enforceable Restatement 2d 81 (1) The fact that what is bargained for does not of itself induce the making of a promise does not prevent it from being consideration for the promise. 4

(2) The fact that a promise does not of itself induce a performance or return promise does not prevent the performance or return promise from being consideration for the promise. St. Peter v. Pioneer Theatre (Waited outside for drawing) In a unilateral contract, action or forbearance of an action is sufficient to constitute consideration by the promisee Unilateral contract: One in which the promisor receives no promise in return, but instead is made contingent on their promise by the action or forbearance of action by the other party. (Contract formed AFTER the act or forbearance is performed) Bilateral Contract: Mutual promises between parties. (Contract formed at exchange of promises) Promise does not induce detriment No Bargain A promises B $5k. (Promise) B buys $5k television. (detriment) No bargain. Dumb reliance. Detriment does not induce promise No bargain A gives B his old PC.(Detriment) B Promises to give A $50.(Promise) No bargain. RECIPROCAL INDUCEMENT IS NECESSARY FOR BARGAIN Reciprocal Inducement: A promises to pay B $10 in exchange for Bs promise to give A a book. Summary of the Bargain Theory A contract is a legally enforceable promise ( 1) A promise is legally enforceable only when there is consideration ( 17) Consideration may be a return promise or a performance ( 71) A promise or performance is consideration when it is bargained for. ( 71(1)) A promise or performance is bargained for if it is sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise. ( 71(2))

UNCONSCIONABILITY
Restatement 2d 208; UCC 2-302 Williams v. Walker-Thomas Furniture Co. I (Payments affect total balance) There is nothing in the law to support invalidation of the contract simply because the appellant didnt read it. Williams v. Walker-Thomas Furniture Co. II If a contract be unreasonable and unconscionable, but not void for fraud, a court of law will give to the party who sues for its breach damages, not according to its letter, but only such as he is equitably entitled to. In determining reasonableness or fairness, the primary concern must be with the terms of the contract considered in light of the circumstances existing when the contract was made. Unconscionability has generally been held to include an absence of meaningful choice on the part of one of the parties together with contract terms that are unreasonably favorable to the other party. Substantive Unconscionability: Refers to the terms of the agreement itself, i.e., n unreasonable price or contract term which deprives a party of the essence of his bargain. Procedural Unconscionability:

Describes a defective bargaining process, e.g., an unreasonable failure of one party to inform the other party about important aspects of the exchange.

SUBSTANTIAL PERFORMANCE
Restatement 2d 237, 241; UCC 2-601 Jacob & Youngs v. Kent (Reading Pipe) The difference due to the mistake was nominal and thus the contract was performed substantially according to its purpose. If any restitution need be paid to the owner it is merely the difference in value of the brands of pipe (nominal as well) because the cost of replacement is grossly out of proportion with the good to be attained. The substantial performance doctrine permits a party to withhold his own performance only when the defect MATERIALLY IMPAIRS the essence of what was contacted for.

RISK ALLOCATION AND EXCUSE

Restatement 2d 205, 224, 261, 263 Stees v. Leonard (Sinking Building) No exception was made allowing them to opt out in inclement conditions that would hinder the process. The contract is clear and enforceable. Performers Risk Rule: Performer has the knowledge and skill and is liable for their promises, regardless of factors that they didnt consider. Impossibility Doctrine holds that an agreement does not bind the parties if the parties contract was explicitly or implicitly CONDITIONED on (performance by the promisor remaining possible) during that period. The Spearin Doctrine: If the contractor is bound to build according to plans and specifications prepared by the owner, the contractor will not be responsible for the consequences of the defects in the plans and specifications... In general, contract law assigns to the promisor the costs of foreseeable risks of performance, even when the risk comes about and the conditions of the circumstances are significantly changed, inducing hardship or expense on the promisor. Taylor v. Caldwell (Burned Down Theater) In contracts in which the performance depends on the existence of a given person or thing, a condition is implied that the impossibility of performance arising from the perishing of the person or thing shall excuse the performance. Impossibility doctrine. Was there an unexpected contingency contrary to a basic assumption of both parties? Did the contingency make performance impossible or, under the modern and UCC view, impracticable? Upon which party should the risk of the unexpected contingency be placed?

INTRO TO REMEDIES: Expectations Damages

Restatement 2d 344, 347, 348, 349, 371, 373 Restatement (2d) 344: Purposes Of Remedies Judicial remedies under the rules stated in this Restatement serve to protect one or more of the following interests of a promisee: (a) his "expectation interest," which is his interest in having the benefit of his bargain by being put in as good a position as he would have been in had the contract been performed,

(b) his "reliance interest," which is his interest in being reimbursed for loss caused by reliance on the contract by being put in as good a position as he would have been in had the contract not been made, or (c) his "restitution interest," which is his interest in having restored to him any benefit that he has conferred on the other party. Expectations: the benefit of the bargain To put the promisee in the position in which he/she would have been had the promise been performed Reliance: the detriment to the promisee To put the promisee back in the position in which he/she would have been had the promise not been made Restitution: the benefit to the promisor To put the promisor back in the position in which he/she would have been had the promise not been made EXAMPLE>>>Expectation: $70k because of the expected profit of $10k over costs. Reliance: $60k because of the costs so far. Restitution: $40k because of the benefit conferred upon the landowner. Hawkins v. McGee (Hairy Hand) The damages should be decided according to the difference between the result and that promised by contract through the doctors statements. The extent of the plaintiffs suffering does not measure into the contract created for the hand, as this is something that the patient consented to as a part of the process of delivering the intended result. Freund v. Washington Square Press (Book Deal) The plaintiffs restitution interest was protected when his manuscript was returned to him. Plaintiff alleged no reliance losses. Expectation interests remained, which were limited to the advance and the royalties from publication. The advance was fulfilled.

ENFORCING PROMISES:
THREE DOCTRINES DISTINGUISH BETWEEN ENFORCEABLE AND NONENFORCEABLE PROMISES: 1) The Consideration Doctrine (Res. 2d. 71) 2) Promissory Estoppel (90) 3) Promissory Estoppel ( 86) 71 basically says that Bargained For promises are supported by consideration where gift promises are not.

CONSIDERATION REVISITED
Restatement 2d 71, 81 Kirksey v. Kirksey (Widow moved to dead husbands bros land) The promise was not binding, but merely the offer of a gift. The loss and inconvenience of moving her family was merely a condition necessitated by the offer of an immobile gift. A helpful test is to consider whether the construction of the promise is that of a gift or of consideration is to ask whether the promisor benefits from the condition of the

promise. If the promisee has incurred detriment on the faith of the promise, they are likely to be considered having provided consideration. IN RE GREENE (Mistress Promises) The promise to pay a woman on account of cohabitation which has ceased is void for want of consideration. This is because the consideration (sex) has passed. The consideration of a dollar is nominal and cannot be seriously considered to support a promise for $375k. The phrase other good and valuable consideration is too vague where the facts show nothing like that was given at the time of contract. A gift is not made a contract by adding consideration. The Benefit Doctrine states that the consideration for a promise must be bargained for as part of the agreement. The MODERN RULE: Nominal or Sham consideration is worthless. The TRADITIONAL rule: ANY bargained for consideration, even a peppercorn, is valid and binding.

ADEQUACY OF CONSIDERATION
Restatement 2d 79,208 Batsakis v. Demotsis (Wartime loan, $25 for $2000) Mere inadequacy of consideration will not void a contract. Wolford v. Powers (Naming Child trade for education) When a party gets all the consideration he bargained for, it cannot be said that this is inadequate or nonexistent, in this case having the child named after you. Any consideration made must be deemed to be adequate, otherwise the judgment of the court would substitute the intentions of the contractors, thus making a new contract. Adequacy Doctrine: That something as small as a peppercorn is consideration as long as the parties bargain so. They are better judges of the evaluation of the exchange in their circumstances than others. Nominality Doctrine: Disparity in value sometimes indicates that the consideration was not in fact bargained for, but merely a formality or pretense. Courts will not void a contract because of an imbalance of exchange... but Gross inadequacy can be evidence of fraud, duress, or some other basis for voiding a contract (R.2d 79, Cmts c,e) The difference between adequacy of consideration and unconscionability is that unconscionability allows the court to look beyond the valid consideration in cases of extreme disparity.

PROMISSORY ESTOPPEL
Elements of Promissory Estoppel Promise Foreseeability Reasonable Reliance Injustice Restatement 2d 90 Promise reasonably inducing action or forbearance (1) A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires.

Consideration is no longer the sole tenet under which a promise is enforced. Reliance Principle: Promises may be enforced if the promisee has incurred costs or conferred benefits, on the reasonable expectation that the promise would be fulfilled. Ostensibly eliminates the need to identify a bargained for exchange. Promissory Estoppel It would cut up the consideration doctrine by the roots if a promisee could make a gratuitous promise binding by subsequently acting on it. >Yet, many business transactions such as stock trading would not be possible without the reliance on verbal agreement or hasty memos. >In fact, the detrimental reliance of the changing of ones habits in reliance on a promise may not be seen by the court but still act as a reliance injury. Courts rarely acknowledge this uncompensated reliance when they refuse to enforce gratuitous promises. Instead the absence of bargained for consideration presumes non-enforcement. Henderson: Those who press the 90 claim based on reliance must make the court balance the reliance principle in promissory estoppel with the consideration doctrine which is based on reciprocity. Claiming that the reliance is proof of a bargain impairs the reliance principle in cases where that alone is the basis for relief (because it is making a consideration argument). Thus, the risk that the reliance is not sufficient to apply 90 or the reliance is merely the condition of a gratuitous promise is increased. Haase v. Cardoza (Death bed will of former deceased) To be enforceable, there must be some accompanying factor of the past (past consideration), or some subsequent change of position in reliance on the promise. There was no prior business history, debt, or promise in regards to the sums, nor was there evidence that the parties changed their position in reliance that would warrant estoppel as a substitute for consideration. The promises stand utterly alone and are unactionable. Ricketts v. Scothorn (Quit work in reliance on promise) The appellant made the promise in expectation that the respondent would or at least could rely on the promised bounty, which she did. Having intentionally influenced the plaintiff to do so, it would be inequitable to fail to enforce the promise that was made on the grounds that it lacked consideration. The context of the promise can determine the degree to which the court will infer an atmosphere of a bargain, and thus enforceability under the reliance doctrine. In Haase, the context was not concurrent with a bargain, but in Ricketts, there was a more formal and clear atmosphere of negotiation. The promisor is affected only by reliance which he des or should foresee, and enforcement must be necessary to avoid injustice. Donative promises are generally not enforced because while reliance may partially show that a promise was made, it does not provide secure evidence that the type of reliance was consistent with a binding promise. Intrafamilial promises are the paradigm non-bargain context. BARGAIN THEORY INFO: CONTRACTS WINTER 7 PPTX

EMPLOYMENT CONTRACTS
Feinberg v. Pfeiffer Co. (Retirement $$ at employees leisure) 9

Her forbearance of the right to continue working was adequate consideration. The combination of the reliance aspect and the consideration of forbearing her right to continued employment precludes the notion that the promise was a gift. Hayes v. Plantations Steel Co. (Company totake care of worker) Plaintiff made the choice to retire independently of any offer made by the defendant. The work that he did after the promise but before he quit was not consideration because it was not bargained for prior to his decision. He did not evidence any reliance because he consistently returned to the company to ask about the probability of repeated checks, which were clearly Tokens of appreciation. If reliance is the basis for recovery, it does not measure the recovery. Recovery is based on specific performance or expectation damages. MATERIAL BENEFIT RULE: An exception to the consideration doctrine. Courts have limited the enforcement of promises based on past benefits to those in which the benefit was conferred with expectation of payment. o For instance: A promise to renew a debt that was discharged by law due to bankruptcy, fraud, etc. o ALSO: In the sale of creative ideas and informational services, if the value of As idea is desirable but of an unknown value to B and A confers to B in expectation of payment for the reasonable value of the idea, A cannot collect under consideration but CAN under Material Benefit. Yay! o Thus the material benefit rule can use the promised amount as the bargained for amount because it was determined by the beneficiary when they decided to turn the good deed into consideration for a promise. Consideration doctrine requires something to be done to validate a promise, material benefit rule requires that as long as the consideration is not itself a donative promise, the resulting promise can come after the consideration. Promissory Estoppel requires enforcement of promises that create reliance by the promisee, material benefit requires the enforcement of promises made in exchange for prior reliance activity, or activity that should be compensated due to unjust prior enrichment.

CONTRACT FORMATION
OFFER
Restatement 2d 2,17,20,22,24,25,26,30 Restatement 2d 24: Offer Defined An offer is the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it. Restatement 2d 26: Preliminary Negotiations A manifestation of willingness to enter into a bargain is not an offer if the person to whom it is addressed knows or has reason to know that the person making it does not intend to conclude a bargain until he has made a further manifestation of assent. Promise vs. Offer

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A promise is a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made. (Restatement 2d 2) An offer is the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it. (Restatement 2d 24) TESTS of MUTUAL ASSENT: 17: Formation of a contract requires a bargain with a MANIFESTATION OF MUTUAL ASSENT to the exchange and consideration, which ordinarily takes the form of an offer and an acceptance (22), even if those elements or the time of their formation cant be identified. The OBJECTIVE TEST, the modern standard, relies on the outward manifestation of intent, imposing obligation based on what the parties reasonably believed was said and done rather than what was intended. Language indicates offer... price, quantity, delivery date, payment terms, all are important indicators. Many of those factors can be present, such as in assistance to contractor in making bids, without a valid offer being made: this is CONTEXTUAL ANALYSIS and necessary for determining offer. Dyno Const. Co. v. McWane, Inc. (Quotes, please call) To constitute an offer, a price quote must be made under circumstances evidencing the express or implied intent of the offeror that its acceptance shall constitute a binding contract. The word estimate and the message please call indicated only preliminary quotes from defendant, and plaintiffs signing of the latter documents indicated consent that previous negotiations were not binding. Lefkowitz v. Great Minneapolis Surplus Store, Inc. (Furs for $1) The test of advertisements as offers is: whether the facts show that some performance was promised in positive terms in return for something requested. The offer by the defendant was explicit, clear, definite, and left nothing open for negotiation. The plaintiff, by arriving and offering the purchase price, was entitled to performance. Typically, the quote is an invitation for an offer, and the purchase order is the offer. Frequently, the seller accepts the offer presented by a purchase order by written acknowledgement including shipping date. The seller, however can reject the terms of the purchase order (as offer) and propose alternatives. Self Service stores create an offer on the part of the store to enter a contract for the sale of goods... all the goods and their prices are the offer, the purchase is the acceptance.

ACCEPTANCE
ACCEPTANCE: manifestation of assent to the terms thereof made by the offeree in a manner invited or required by the offer Restatement 2d 25, 30, 32, 35, 36, 38, 40-43, 50, 54, 56 The restatement makes clear that the offeree has the power to avoid consent to the terms of a contract by avoiding the manifestations of intent defined by the offeror. Restatement 2d 30: Form Of Acceptance Invited

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(1) An offer may invite or require acceptance to be made by an affirmative answer in words, or by performing or refraining from performing a specified act, or may empower the offeree to make a selection of terms in his acceptance. (2) Unless otherwise indicated by the language or the circumstances, an offer invites acceptance in any manner and by any medium reasonable in the circumstances. Restatement 2d 50: Acceptance Of Offer Defined; Acceptance By Performance; Acceptance By Promise (1) Acceptance of an offer is a manifestation of assent to the terms thereof made by the offeree in a manner invited or required by the offer. (2) Acceptance by performance requires that at least part of what the offer requests be performed or tendered and includes acceptance by a performance which operates as a return promise. (3) Acceptance by a promise requires that the offeree complete every act essential to the making of the promise. Ever-Tite Roofing Corp. v. Green (Late Roofers discover replacements) The restatement requires that if no time frame is set forth, then a reasonable amount of time is necessary for cancellation, as defined by the circumstances which the offeree knows or has reason to know This was a bilateral contract wherein the parties exchanged promises (work for payment)... where the promise by the contractor could be made linguistically of by commencing. IF the acceptance had been conditioned on COMPLETION of the task, then it would have been a unilateral contract. Plaintiff began the work by loading the trucks and heading to the defendants work site. Actual commencement or performance of the work began before any notice of dissent by defendants was given plaintiff. The proposition and its acceptance thus became a completed contract, which the defendants breached. Defendants are required to pay the expected profits from the job and all expenses incurred by plaintiff prior to receiving notice. Ciaramella v. Readers Digest Assn, Inc. (Settlement 2nd opinion) If the parties set forth that the agreement will not be binding until set forth in writing and signed, then they will not be bound until then, regardless of an otherwise binding oral agreement. Four factors to determine the intent of parties to be bound by settlement in lieu of an agreement: 1) whether there has been an express reservation of a right not to be bound in the absence of a signed writing (which there was) 2) whether there has been partial performance of the contract,(Which there was not) 3) whether all of the terms in the contract have been agreed upon, (nope) 4) whether the agreement in issue is the type of contract usually committed to writing. (yes.) Brooklyn Bridge: OLD RULE: No unilateral contract until you have finished walking across. MODERN RULE is that once you start walking across the bridge, the promisor cannot revoke but you can opt out. Restatement 2d 36 Historically:

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Unilateral contracts sucked because the offer can be revoked until performance is completed... disadvantaging the performer. Modern: Once the performance has begun, the offeror cannot withdraw until the performance is complete... Thus by such terms the offeror intended to be bound only when the act was complete but implies that he let it be done, keeping his offer open until the offeree is finished. If the offeror mails an offer, reconsiders, and then mails a revocation AFTER the offeree has accepted, then the offeror is stuck with the initial offer. Bummer. Shoulda got e-mail. (Mailbox Rule) SILENCE OR DOMINION AS ACCEPTANCE: CD clubs.... silence as acceptance unless otherwise made by notice to offeror. If previous business practices are consistent with silence as notice. Where the offeree takes the benefit knowing that compensation is expected. Where the offeror states that silence or inaction is accepted as acceptance, and the offeree intends to accept.

REVOCATION
Restatement 2d 25,36,38,40-43,45,46,87 Irrevocable Offers: You can pay (like a down payment, but actually a fee) for another party to make their offer irrevocable: For instance if I offer to sell you an antique for $1000 and you need to authenticate it and I say Ill keep the offer open for a week, there is no consideration for my promise to do so until you pay me to make the offer irrevocable. Pavel Enterprises, Inc. v. A.S. Johnson Company Inc. (Sub Bid) PEI did not rely on the bid, and the bid was an offer subject to the condition of PEI being awarded the contract. PEI did not rely on the bid because to prove that the reliance was substantial, the general contractor would have to prove that the sub expected the general to rely on the offer. Because the sub did not believe that to be true (J.J. Kerlin was the apparent low bidder), his reasonable expectation of reliance had dissipated. If the offer was subject to the condition of PEI being awarded the contract, then the sub clearly withdrew before the final award. Sub bids are conditional. The offer is to perform the work if the sub is PAID. Until the general accepts the offer, there is no unconditional offer on which to rely. Thus, in order to find that the offer is irrevocable, a second promise I will not revoke this bid if you use it must be implied.

OFFER and COUNTER-OFFER

Restatement 2d 39,59,61,211; UCC 1-201,1-205,1-303,2-102,2-104,2-105,2-204,2205,2-206,2-207,2-208 Dataserv Equipment Inc. v. Technology Finance Leasing Corp. Once an offer is rejected, it cannot be subsequently accepted without ratification by the offeror. By refusing to accept according to the terms of the (Oct 1) proposal, Data rejected Techs counteroffer and thus no contract was formed. Moreover, Datas offer to substitute other 3rd party installers, rejected by Tech, operated as a counteroffer by Data, and as termination of its power to accept Techs counteroffer.

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An alternative rule that treats a counteroffer as a continuance of the bargain process would allow an offeree to wait around for a price drop. A rule that did so in the case of constant values would allow contracts to remain open so that counterofferors can tie up additional inventory. ... MIRROR IMAGE RULE: Parties exchange offers and counteroffers until the offers exchanged match, mirroring each other. Any changes are counteroffers. Unless specific terms were agreed on to hold the offer open, these rules governed. Option contracts are an example of how this was achieved, allowing the parties to negotiate specifics without fear of terminating the whole offer. Courts still hold that COUNTEROFFER REJECTS THE INITIAL OFFER. LAST SHOT DOCTRINE: When performance of some part of a contract was made prior to a mirrored finality of negotiation, both parties were bound to the last counteroffer available. The last shot fired between parties dictates the terms, with acceptance made by the silence of the final offeree. UCC 2-207) 1) If you accept, but also add additional terms, then it is valid acceptance, UNLESS the additional terms are required for acceptance, in which case it is a counteroffer. (Offerree choice... otherwise counteroffer.) 2) The additional terms are proposals for addition to the contract, and become part of the contract unless a) the offer expressly limits acceptance to the original offer, or b) the additional terms materially alter the offer (examples where it doesnt materially alter: cash or check, shipping date, packaging, etc... MINOR things.) c) notification of objection to the additional terms has already been given or is given within reasonable time after notice of them is received. 3) Conduct by both parties which recognizes a contract establishes a contract for sale, even if writings between parties do not establish one, defined by the terms on which writings agree. Section 3 indefiniteness acts to apply indefiniteness doctrine... no knockout if K is totally knocked out of workability... indefiniteness asks whether enough is left to validate any contract... Ionics Inc. v. Elmwood Sensors, Inc. Where the terms in two forms are contradictory, each party is assumed to object to the other partys conflicting clause. As a result, mere acceptance of the goods of the buyer is insufficient to infer consent to the sellers terms under the language of subsection 1, nor do such terms become part of the contract under section2 because notification of objection has been given by the conflicting forms. ACKNOWLEDGEMENT WAS ACCEPTANCE OF IONICS OFFER, CONDITIONAL ON ELMWOODS TERMS... WHICH UNDER 2-207 IS A COUNTER OFFER. Counter offer = conditional acceptance = counter offer

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The conduct of the parties demonstrates the existence of a contract, as required by section 3, which states that: Conduct by both parties which recognizes a contract establishes a contract for sale, even if writings between parties do not establish one, defined by the terms on which writings agree. Rather than assuming that a failure to object to the offerees conflicting terms indicated offerors assent to those terms, we shall make the more reasonable inference that each party continues to object to the others contradictory terms. Note 5, p.257) Different or Additional terms 2-207 (1). Different terms are not addressed... so one of 3 results: 1) Different = Additional 2) Different = Not in the contract 3) KNOCK OUT RULE :Conflicting terms cancel, leaving a blank subject to UCC gap-filling. Approach 3, the knock out rule is criticized for ignoring judicial interpretation of intent that would allow courts to choose one form or the other.

COMPUTER LICENSING
UCC 2-204,2-207 Restatement 211: Standardized Agreements (1) Except as stated in Subsection (3), where a party to an agreement signs or otherwise manifests assent to a writing and has reason to believe that like writings are regularly used to embody terms of agreements of the same type, he adopts the writing as an integrated agreement with respect to the terms included in the writing. (2) Such a writing is interpreted wherever reasonable as treating alike all those similarly situated, without regard to their knowledge or understanding of the standard terms of the writing. (3) Where the other party has reason to believe that the party manifesting such assent would not do so if he knew that the writing contained a particular term, the term is not part of the agreement. Step-Saver Data Systems, Inc. v. Wyse Technology Inc. The terms of the license were not sufficiently important to TSL, that it would abandon the contract in absence of their acceptance. Parties both agreed that the box-top license did not represent the parties agreement with respect to their right to transfer copies of the software to third parties. Thus, there is no basis that Step-Saver could infer that certain terms (the transferability portions of the box-top agreement) were not crucial, while other terms (the warranty disclaimers) were crucial. Since TSL didnt clearly express that it would cancel the transaction in absence of the License agreement, it was not a conditional acceptance under 2-207(1). Also, since the terms materially alter the agreement between the parties, they are not merely proposed amendments under 2207(2)(b). Amended UCC 2-207: Terms Of Contract; Effect Of Confirmation Subject to Section 2-202, if (i) conduct by both parties recognizes the existence of a contract although their records do not otherwise establish a contract, (ii) a contract is formed by an offer and acceptance, or

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(iii) a contract formed in any manner is confirmed by a record that contains terms additional to or different from those in the contract being confirmed, the terms of the contract are: (a) terms that appear in the records of both parties; (b) terms, whether in a record or not, to which both parties agree; and (c) terms supplied or incorporated under any provision of this Act. Hill v. Gateway 2000, Inc. (Box-Top Contract/Ordered PC) In absence of another contract or form of agreement, the box-top contract is binding. A vendor, as master of the offer, may invite acceptance by conduct, and may propose limitations on the kind of conduct that constitutes acceptance. A buyer may accept by performing the acts the vendor proposes to treat as acceptance.

CONTRACTUAL RELATIONSHIPS
PRELIMINARY NEGOTIATIONS/AGREEMENTS
Restatement 2d 26,27,33,90,205; UCC 2-103(b) Promises made during negotiation are generally held to be unenforceable. UNLESS the parties indicate that they intend to be bound. General rule: Promises made in preliminary negotiations generally are not enforceable (Coley). Each party bears the risk of its own precontractual reliance Mere agreement to enter into (non-binding) negotiations v. Agreement to commit to a deal Coley v. Lang (Letter Agreement to Buy Stock) The Letter Agreement is not one upon which specific performance can be based. It as merely an agreement to enter into an agreement upon terms to be decided later. That the negotiations proved unfruitful does not warrant equitable estoppel, and the actions of Lang were not substantial reliance as noted in the restatement. Hoffman v. Red Owl Stores, Inc. (Moved/Sold business for Red Owl) Red Owl should reasonably expect that their promises would and did induce substantial action by Hoffman. Restatement 90 makes clear that the promisor who induces reasonably foreseeable substantial action by the promisee in reliance on the promise, for which injustice cannot be avoided without enforcement of the promise, is liable for reliance by the promisee. The court decided that injustice would result if Hoffman was not granted some relief because of the failure of defendants to keep their promises which induced plaintiffs to act to their detriment. INDEFINITE AGREEMENTS: One of the core principles of contract law is that promises must be explicit enough that the intentions of the parties are ascertained with reasonable certainty. The UCC goes beyond the common law in allowing an expansive role of the courts in filling open terms in otherwise incomplete agreements. BINDING PRELIMINARY AGREEMENTS: Recently, a new framework for addressing Agreements to Agree has emerged in the courts, relaxing the sharp rule of common law, under which such agreements were either fully enforceable or not at all.

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Brown v. Cara (Preliminary Const. Agreement) In some circumstances, preliminary agreements can create binding obligations. Type I preliminary agreements reflect a meeting of the minds on all the issues perceived to require negotiation. The four factor test for this type is 1) Whether there is an expressed reservation of a right not to be bound in the absence of a writing, 2) Whether there has been partial performance of the contract, 3) whether all of the terms of the contract have been agreed upon, and 4) whether the agreement is the type usually committed to writing. This agreement was NOT a type I. Type II preliminary agreements are binding only to a certain degree, reflecting agreement on certain major terms, but leaving others for later negotiation. A type II agreement does not commit the parties to the ultimate contractual goal, but merely requires that they negotiate open issues in good faith in order to reach the objective within the agreed framework. Five considerations: 1) Whether the intent to be bound is revealed by the language of the agreement 2) the context of the negotiations 3) the existence of open terms 4) partial performance 5) the necessity of putting the agreement in final form, as indicated by the customary form of such transactions. The MOU was a type II agreement and therefore the parties are required to negotiate.

OUTPUTS, REQUIREMENTS, EXCLUSIVE DEALINGS

UCC 1-201,1-205, Revised 1-303,2-208,2-306 EASTERN AIRLINES v. GULF OIL CORP. (Oil Requirements) Issue: Whether the requirements contract was binding, and if so, whether Eastern breached by fuel freighting. A contract for requirements or output is not too indefinite because it means simply the good faith output or requirements of the party. [UCC 2-306(1)] The essential test is whether the party is acting in good faith. Due to the past reliance on the contract without trouble, a pattern is established by which the contract is found to be binding and in good faith. Eastern is not in breach because the fluctuations in the fuel market show a need for fuel freighting that is an established industry practice commonly occurring between the parties. As such, engaging in the practice cannot violate good faith as described by UCC 2-201(19) and 2-103(1)(b). Empire Gas Corp. v. American Bakeries Co. (Gas Conversion) The requirement contract does not allow the buyer to reduce its purchase to zero without good faith reason to do so. UCC 2-306 Comment 2: good faith variations are permitted even when the variation may be such as to result in discontinuance. Sometimes this good faith reason could be that there is no need for the service due to a change in industry practices or that another factor makes the contract unnecessary. It is not a good faith reason to abandon the requirements contract in absence of evidence that

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the decision to do so was reasonable, and not simply a choice to opt out. To do so would be unreasonably disproportionate. UCC 2-306: Output, Requirements And Exclusive Dealings (1) A term which measures the quantity by the output of the seller or the requirements of the buyer means such actual output or requirements as may occur in good faith, except that no quantity unreasonably disproportionate to any stated estimate or in the absence of a stated estimate to any normal or otherwise comparable prior output or requirements may be tendered or demanded. (2) A lawful agreement by either the seller or the buyer for exclusive dealing in the kind of goods concerned imposes unless otherwise agreed an obligation by the seller to use best efforts to supply the goods and by the buyer to use best efforts to promote their sale. I agree that the reasonably disproportionate test is only an elaboration on the obligation of good faith, because by its nature it is a flexible recognition of changing business practices. If it were separate from good faith, then unfair competitive practices could be gained by bad faith, yet justified changes to the amounts requested. (Such as demanding more than max capacity to void a contract)

EXCLUSIVE DEALINGS CONTRACTS

UCC 2-306, Restatement 2d 205 Wood v. Lucy, Lady Duff-Gordon (Fashion Exclusive License) Wood entered into a contract with Defendant that he was to have exclusive right to use s name in endorsement of fashionable items for sale, that they would split the profits equally, that he would procure any rights necessary to protect the value of the goods sold, and that he would create an accounting of the earnings on a monthly basis The contract is adequate to create a binding agreement implied upon the fact that if he does no work, he gets nothing. The contract therefore indicates enforceable duties of the plaintiff. Bloor v. Falstaff Brewing Corp. (Sell my beer so I stay paid) The clause required Falstaff to maintain a HIGH volume of sales. Though not necessary to do this at the cost of the entire business, no evidence was given to show that this was impossible even given the restructuring of the business. Some drop in volume would likely have been forgiven, but the level created by the Falstaff policies was not. While Falstaff did breach the contract clause requiring volume, the nature of his doing so was not incongruous with the decline in the market. As such, the clause requiring large payments for breach is unwarranted.

REDUCING CONFLICTS OF INTEREST

Restatement 2d 188,205; UCC (Revised) 1-304 Wagenseller v. Scottsdale Memorial Hospital (Moon River) The court held that an employee may be fired for good cause or for no cause, but not for "bad" cause. The court concluded that termination of employment for refusal to participate in public exposure of one's buttocks was a termination contrary to public policy. Although an employment contract for an indefinite term is presumed to be terminable at will, that presumption, like any other presumption, is rebuttable by contrary evidence.

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The right of discharge without cause is an implied contractual term which is said to exist in an at-will relationship when there are no factual indications to the contrary. The intent to create a different relationship, as well as the parameters of that relationship, are to be discerned from the totality of the parties' statements and actions regarding the employment relationship. The duty not to act in bad faith or deal unfairly thus becomes a part of the contract, and, as with any other element of the contract, the remedy for its breach generally is on the contract itself. Consumers Intl. Inc., v. Sysco Corp. In the absence of a contrary contract provision or statutory regulation, a franchisor's enforcement of a "no-cause" termination clause need not be for "good cause." Bad faith cannot be evidenced in a distribution agreement simply from a "no cause" termination in accordance with the explicit terms of the contract. Mostly, handbooks arent enforceable contracts. Sometimes they are, if accompanied by signed statements agreeing to them as contracts. Gagliardi Bros. Inc. v. Caputo (Non-Competitive Meat) 4 requirements for a valid covenant not to compete: Must be related/ancillary to the contract of employment Must be supported by adequate consideration Must be reasonably limited in time and geographic territory Must be necessary for the protection of the employer

MODIFICATION OF EXISTING AGREEMENTS

Restatement 2d 205,;UCC 2-208,2-209 Alaska Packers Association. v. Domenico (Arctic Mutiny) A contract signed (under duress) for the exact same performance already contracted for, is invalid for lack of consideration. The sailors were already obligated to perform under the previous contract, and the new contract was for the exact same service. The consideration owed under a previous contract cant be used again simply because it was unilaterally revoked from the first. If the parties truly would have walked away from the contract, then it is likely the modification is enforceable. If the parties would not walk away, then it seems that one is simply extorting the other... Two ways to avoid the pre-existing duty rule: For the promisor to do or promise to do something in addition. Rescind the first contract before entering into a revised contract. Courts are more willing to enforce modifications where the conditions show substantially increased burden than anticipated. No Modification Clauses. Commonly unenforceable. If a man makes a contract, he can un-make it and the clause can be unmade, too. Termination agreements after a contract is formed are new contracts.

REGULATING THE BARGAINING PROCESS

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DURESS
RESTATEMENT 2D 174,175,176 Duress Elements of the defense of duress Improper threat The threat itself need not be illegal 2d 176 (1)(a)-(c): Legally impermissible acts or abuse of process 2d 176 (1)(d): hold ups, threats under a contract Inducement of the promise by the threat Causation : 2d 175 No reasonable alternative/ reasonable inducement : 2d 175 The rules policing the bargain are MANDATORY; they cannot be altered by contrary agreement. (Unlike those previous) Wolf v. Marlton Corp. (Changed mind after down payment, made threats to recover) Though certain threats of entirely legal activities are allowable to strike a hard-bargain, threats that use legal means to effectuate wrongful damage to another are not allowable (such as a transaction based on fear of those damages) The case is remanded to the district court for proceedings on the following issues: If the threats were made and If the defendant believed they would be carried out and If defendants will was thereby overborne (Causation) THEN defendant was justified in treating the contract as breached and is entitled to resulting damages to be determined by the court. Austin Instrument, Inc. v. Loral Group (Navy bid, refusal blackmail) A contract is voidable on the grounds of duress when it is established that the party making the claim was forced to agree to it by means of a wrongful threat precluding the exercise of its free will. Economic duress is demonstrated by proof that immediate possession of needful goods is threatened. This is a UCC contract because it is for sale of goods.. In this case, the above is meant to construe that one party to a contract has threatened to breach the agreement by withholding goods unless the party agrees to some further demand, couldnt find another source, and breach of contract doesnt apply. Three essential elements in evaluating a duress claim: o 1) An improper threat made to the promisor o 2) inducement of the promise by that threat, and o 3) reasonable inducement Thus, even if a promisor was induced to make a promise by an improper threat, the defense of duress will not lie unless the threat eliminated any reasonable alternatives to making the promise. Plea bargains arent under duress unless an unfair manipulation of sentence in order to obtain the guilty verdict has been made... hard to prove. Settlements can sometimes be under duress, such as a deeply indebted party accepting a crappy settlement to avoid defaulting on those debts (which could have dire consequences for a business or marriage, etc.)

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FRAUD: MISREPRESENTATION
Restatement 2d 162,164,167-69 A misrepresentation provides a basis for avoiding the contract when: a partys manifestation of assent is induced by a fraudulent; or a material; Misrepresentation; which the party actually believes and relies upon. Thus, an intentional misrepresentation need not be material, whereas an unintentional misrepresentation must be material. Promisors have the responsibility to inform themselves of their promises, therefore a promisors ignorance does not excuse their obligation to perform. Caveat Emptor The law prohibits only intentional misrepresentations or concealment on which promisors reasonably rely. Harmless lying and lying that should not have been taken at face value do not excuse contractual liability. Spiess v. Brandt (Resort operating at profit) The defendants regularly indicated that plaintiffs could make good money which in no terms could be congruent with a business operating at substantial loss even in the most prosperous years for the type of business The fact that defendants refused to allow plaintiffs to see the books after these representations were made indicates intent to conceal the truth. 164: When the misrepresentation makes shit voidable. 169: Reliance on opinion. Danann Realty Corp. v. Harris The contract provisions clearly stated a disclaimer of representation clause (Merger Clause), absolving any party of any prior representations made regarding the property except those in the contract. Disclaimer of representation precludes fraudulent oral representations prior to contract? YES Where a person has read and understood the merger clause, he is bound by it. Note 3, 424) In the fraud setting, contracts and torts overlap... Under the restatement of Contracts, the misrepresentation may be either fraudulent OR material. In the restatement of Torts, the misrepresentation must be BOTH fraudulent and material. Note 4) Tort law allows punitive damages, while Contract actions do not. Thus torts are justified in their stricter requirements and shorter statutes of limitation. The prospect of punitive damages would definitely prevent some efficient breaches from taking place, because many contracts in which a breach can be reasonably calculated and planned for would become unknowable, thus the pre-contracting process would be longer and more complex, casting more in time money and effort, and making negotiations more difficult. Large damage awards will always lead to strategic behavior, as weve discussed in CivPro. The holding decreases the likelihood of strategic behavior by allowing parties to be able to predict the consequences of breach and agree on those terms mutually without fear of an otherwise strategy-laden court process ruining the balance.

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Once the wronged party is on notice of fraud, they must decide whether to ratify or rescind the contract. The right of recission is forfeited by acts constituting affirmation of the contract.

FRAUD: NONDISCLOSURE/CONCEALMENT
Restatement 2d 160,161 160 When Action Is Equivalent To An Assertion (Concealment) Action intended or known to be likely to prevent another from learning a fact is equivalent to an assertion that the fact does not exist. 161 When Non-Disclosure Is Equivalent To An Assertion Obde v. Schlemeyer (Secret Termites) If either party to a contract of sale conceals or suppresses a material fact which he is in good faith bound to disclose then his silence is fraudulent. Reed v. King (Murder House) The court reversed because the fact of the murders may have had a quantifiable effect on the market value of the real estate, which plaintiff was entitled to prove. A seller of real property has a duty to disclose: where the seller knows of facts materially affecting the value or desirability of the property that are known or accessible only to him. Mandatory Disclosure: There are instances where Congress or an agency decides that disclosure should be mandatory by necessity. Used cars... stock reports. On the plus side, this allows parties to become aware uniformly of important material factors to the transaction. On the minus side, it also allows the relevant information to be lost in information overload.

STATUTE OF FRAUDS
Restatement 2d 110,130,131,136,139; UCC 2-201 The required writing need not contain all of the material terms of the contract and such material terms stated need not be precise. If the price consists of goods rather than money then the quantity of goods must be stated. Receipt or acceptance of goods or of the price constitutes an unambiguous overt admission by both parties that a contract exists. Part performance by the buyer requires the delivery of something by him that is accepted by the seller as such performance. Failure to satisfy the requirements does not void the entire contract, but merely prevents it from being judicially enforced in favor of any party to the contract. The predominant purpose test applies the UCC to transactions if their predominant purpose is to sell goods, but reverts to common law if the predominant purpose is to sell services. Monetti, S.P.A. v. Anchor Hocking Corp. (Summary Agreement Binding?) The summary Agreement document combined with partial performance met both the Illinois statute of frauds and that of the UCC 2-201. The court found that the second memorandum was a writing sufficient to evidence the existence of the contract, satisfying the statute of frauds in (UCC) 2-201, even if the partial-performance doctrine

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was not available to plaintiff under the UCC for sales of goods. The contract in question need not be in writing, as long as there is writing to EVIDENCE a contract.... Unilateral performance is pretty solid evidence that there really is a contract. Almost the whole purpose of contracts is to protect the party who performs first from being taken advantage of by the other party, so if a party performs first there is some basis for inferring that he had a contract. Restatement 2d 110 / 130: Must be POSSIBLE to be performed within a year! Otherwise statute of frauds applies. If an OFFER stands for a long time, its fine because performance of each acceptance can be completed within a year. If it takes 3 years but was expected to take 3 months then thats okay, too. . Not to be Performed Within a Year Not to be Performed = Cannot Possibly be Performed E.g. A promises to pay B $1,000,000 upon Cs death not within statute because death can occur at any time E.g. a promise by A to work for B for the rest of As life not within statute Discharge and/or excuse does not constitute performance A to work for B for 5 years but agreement will terminate if A dies within statute A to work for B for 5 years but either A or B can terminate at any time with 30 days notice not within statute A to work for B for 5 years and A may quit at any time within statute Restatement 2d 131: General Requisites Of A Memorandum Restatement 2d 136: Time Of Memorandum

CONTRACT INTERPRETATION
Parol Evidence: Common Law
Restatement 2d 209,210,212-216 What is Parol Evidence? Prior (oral or written) agreements between the parties. Contemporaneous (oral or written) agreements between the parties. Also: Course of Performance, course of dealing, and usage of trade. (UCC) IDENTIFYING TERMS OF AN AGREEMENT (INTEGRATION) Did the parties commit any or all of their terms to a final writing? None? Then the agreement is not integrated and the parol evidence rule does not apply. Parties are free to introduce any kind of evidence to prove their claim in regards to terms. Some? The parol evidence rule applies and some ordinarily admissible evidence will be excluded in proving whether the agreement contains a particular term. Some? Partially Integrated agreement. Parties are allowed to introduce evidence of additional terms of the agreement provided those terms do not contradict the final writing. ALL? Fully Integrated agreement. Parties not allowed evidence of ANY additional terms, even if they are consistent with the writing. 23

It is generally agreed that the parol evidence rule is limited to prior or contemporaneous oral agreements, and thus does not apply to an agreement made subsequent to the writing. Hence, it does not bar evidence of illegality, fraud, etc., that prove a breakdown in the bargaining process. Level of integration is determined by parties intent. A writing constitutes the final expression of some or all of the parties terms only if the parties so intended at the time of the writing. How is this INTENT determined? o Traditional Four Corners analysis: If the document appears on its face to be the complete and exclusive statement of all the terms, it is presumed to be fully integrated. o Alternatively: o To be complete and exclusive the court uses natural omission doctrine: Even if the writing appears to be the final statement of all the terms of the agreement, evidence of additional terms is admissible if the court finds that the parties would have naturally omitted those terms in the final writing. (This is common law, the UCC uses the certainly test as in Hunt...) Thus: To determine whether a final writing is also an exclusive statement of all the terms of an agreement the court must look beyond the writing itself to other evidence of additional terms to determine if the parties would have naturally omitted them. The extrinsic evidence addressing the integration question ALONE, does not address whether or not a promise was made...so parol evidence relative to integration does not affect the fundamental question of promise For contracts governing the sale of goods, UCC 2-202 supplants the parol evidence rule. 2-202 provides that, if there is a written agreement, evidence of missing terms are not admissible if the additional terms are such that, if agreed upon, they would certainly have been included in the document in the view of the court. The principal difference between the certain inclusion test and the natural omission test is that under the UCC the parties certainly rather than naturally would have included the terms in the writing in order to hold that the writing was integrated. Thus raising the hurdle... Can the parties opt out of the burden of proving an intent to integrate by expressly agreeing in the contract itself that the writing was integrated? Such merger clauses are likely to be upheld, but are subject to the courts interpretation as to whether they were understood. INTERPRETING THE TERMS OF AN AGREEMENT: Plain Meaning = Objective Meaning Courts must use the plain meaning even if it appears that another meaning was intended. Ambiguous or Vague meanings require the court to examine the context first for plain meaning, then consider extrinsic evidence to interpret the meaning. The Restatement 2d rejects the Plain Meaning rule in favor of a more subjective, interpretive standard, but the application of this approach is varied.

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o The UCC clearly rejects the Plain Meaning rule substituting a robust scheme of interpretation relying on the relevant layers of commercial context in which the agreement was made. Because all meaning is contextual... all interpretation must address context. Mitchill v. Lath (Icehouse Outlier) The contract was specific enough in its provisions, and closely related enough to the claim of an additional term, that the court found no compelling reason to hear evidence on the possibility of an additional contract. The presence of a written agreement clearly invoked the parol evidence rule striking the outside oral agreement. Moreover, the court held that although the oral agreement was collateral in nature, it could have been readily inserted into the more dominating written form. The term would have naturally been admitted in the document. That it wasnt is evidence the agreement was fully integrated and thus the additional term regarding the icehouse is to be excluded. Accordingly, defendant was not required remove the icehouse. Masterson v. Sine (Wanted reverter, didnt use correct language) There is nothing in the record to indicate that the parties to this family transaction, through experience in land transactions or otherwise, had any warning of the disadvantages of failing to put the whole agreement in the deed. This case is one, therefore, in which it can be said that a collateral agreement such as that alleged "might naturally be made as a separate agreement." A fortiori, the case is not one in which the parties "would certainly" have included the collateral agreement in the deed. The Parol Evidence Rule in the Restatement (Second) Is written agreement intended by the parties to be the final expression of their agreement? [an integrated agreement] 209 If so, extrinsic evidence of inconsistent prior agreements (both written and oral) may not be introduced. 213(1) If not, extrinsic evidence of inconsistent prior agreements (both written and oral) may be admissible. Is written agreement intended by the parties to be the final expression of their agreement AND a complete and exclusive statement of the terms of the agreement? [a completely integrated agreement] 210(1) If so, extrinsic evidence may not be used to prove additional terms (even if they are consistent the writing). If not, extrinsic evidence may be used to prove additional terms that are consistent with the writing. 216(1) Whether an agreement is integrated or completely integrated depends on the intent of the parties. Williston (no extrinsic evidence unless a term is vague or ambiguous) vs. Corbin/Wigmore/Restatement 2d 214 (extrinsic evidence may be used to determine whether the parties intended their agreement to be integrated) Integrated? > Omission (natural or certain)? > Intent? > Objectivity?

PAROL EVIDENCE: UCC; MERGER CLAUSES

UCC 2-202 Revised UCC 2-202 UCC 2-202, comment 3 If the additional terms are those that, if agreed upon, would certainly have been 25

included in the document in the view of the court, then evidence of their alleged making must be kept from the trier of fact. This section is not intended to suggest what should be the evidentiary strength of a merger clause as evidence of the mutual intent that the record be final and complete. That determination depends upon the particular circumstances of each case. Hunt Foods & Industries v. Doliner Oral evidence inadmissible only if it contradicts the writing, otherwise okay. It is not sufficient that the existence of the condition is improbable. It must be impossible. Using the UCC rule of Certain omission, the court found that the condition must be impossible to have excluded from the contract in order for evidence as to the term to be excluded from consideration by the court. The conversations in this case, some of which are not disputed, and the expectation of all the parties for further negotiations, suggest that the alleged oral condition precedent cannot be precluded as a matter of law or as factually impossible. The parol evidence rule is limited to prior contemporaneous oral agreements, and does not apply to subsequent agreements to the writing. Thus it cannot bar evidence of a subsequent agreement. The rule does not bar evidence if illegality, fraud, duress, mistake, or anything other than an additional term or terms. Finally, it does not bar admission of evidence to prove that the performance of a contract was subject to an oral condition precedent. A condition may be shown, even if it contradicts the writing, under the theory that the writing is not an integrated agreement or that it is only partially integrated until the condition occurs. UAW-GM H.R. v. KSL Recreation (Resort Rental/Union Only) The merger clause is read to equal an Integration Clause, thus creating a fully integrated writing where the parol evidence rule does not allow additional evidence. The court correctly recognized that the existence of an integration clause bars any reinterpretation of the context of the agreement, because by its very inclusion the parties are stating that there is no term or issue not addressed in the writing. Danann Realty Corp. v. Harris Where a person has read and understood the disclaimer of representation clause (merger clause), he is bound by it.

INTERPRETATION: Common Law & UCC

Restatement 2d 201-204,206,212; UCC 2-202 Plain meaning versus Contextualism Terms CAN have a meaning that varies based on literal definition or context. Objectivism and Contextualism in Common Law Interpretation Plain meaning can be ambiguous, such as in the case where cotton was to be shipped on the S.S. Peerless, when in fact there were two such ships and the parties had each intended the opposite. (No meeting of the minds / no contract) Revised UCC 2-202, cmnts 2 & 5 Because a record is final for the included terms (an integration), this does not mean that the parties intended that the record contain all the terms of their agreement (a total integration). If a record is final but not complete and exclusive, it cannot be contradicted by evidence of prior agreements reflected in a record or prior or contemporaneous oral agreements, but it can be supplemented by other evidence, drawn 26

from any source, of consistent additional terms. Even if the record is final, complete and exclusive, it can be supplemented by evidence of noncontradictory terms drawn from an applicable course of performance, course of dealing, or usage of trade unless those sources are carefully negated by a term in the record. If the record is final, complete and exclusive it cannot be supplemented by evidence of terms drawn from other sources, even terms that are consistent with the record. Issues of interpretation are generally left to the courts. In interpreting terms in a record, subsection (2) permits either party to introduce evidence drawn from a course of performance, a course of dealing, or a usage of trade without any preliminary determination by the court that the term at issue is ambiguous. This article takes no position on whether a preliminary determination of ambiguity is a condition to the admissibility of evidence drawn from any other source or on whether a contract clause can exclude an otherwise applicable implied-in-fact source. In Re Sopers Estate (Two Sopers, One Dead, Who Benefits?) Parol evidence is necessary to indicate the intent of the parties to the contract when the plain meaning of a crucial term is ambiguous. (Which WIFE?) P.G. & E. v. G.W. Thomas Drayage and Rigging Co. (Turbine Repair) The fact that the terms of an instrument appear clear to a judge does not preclude the possibility that the parties chose the language of the instrument to express different terms. (Like damage to plaintiff of to 3rd parties.) Although extrinsic evidence is not admissible to add to, detract from, or vary the terms of a written contract, these terms must first be determined before it can be decided whether or not extrinsic evidence is being offered for a prohibited purpose If the court decides that the language is susceptible to either of the contended meanings, then the court can consider the extrinsic evidence thereof. The court is not saying that they are always going to determine the meaning of the terms of a contract, thus altering them through definition, the court is saying that it will use extrinsic evidence to consider the susceptibility of the terms to interpretation, and apply a court interpretation IF ascertainable. Trident Center v. Connecticut General Life Insurance (Interest Rate Change) Parol Evidence Must be considered in case even with two sophisticated parties operating with clear terminology. Under traditional contract principles, extrinsic evidence is inadmissible to interpret, vary or add to the terms of an unambiguous integrated written instrument. However, California does not follow the traditional rule. The previous decision made it necessary to interpret terms in virtually any situation... Hard or Soft PER are decided according to the complexity of the contract and the sophistication of the parties. Unsophisticated parties or complex contracts get SOFT PER because they are less likely to include all terms. Sophisticated or Simple agreements get HARD PER because they are more likely to have included all terms.

PERFORMANCE AND BREACH

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IMPLIED & EXPRESSED CONDITIONS: DIVISIBILITY

Restatement 2d 205,224,227,234; UCC 2-103(1)(b),2-307,2-311,2-612 DEFINING THE TERMS OF PERFORMANCE Performance of every contract will have both a procedural and substantive aspect. Procedural Default Rules define the sequence of performances: when, where, and to what extent each party must perform, and MOST IMPORTANTLY the relationship between the parties performance/reciprocity. Substantive Default Rules then provide the quality standards against which performance is assessed. The default rules in this chapter specify the obligations of the parties regarding performance. CONDITIONS a) Allocating Risks of Performance In general, the risks associated with the performance of an executory promise are allocated to the promisor whose performance is thereby affected. Performers Risk principle is a central default rule of Contract Law. Based on the notion that the performer has more control over performance and any necessary precautions. Performers Risk Rule: Performer has the knowledge and skill and is liable for their promises, regardless of factors that they didnt consider. Stees v. Leonard b) Implied or Constructive Conditions of Exchange Obligation to perform is not absolute. Constructive conditions must be met. One straightforward condition implied is that the return performance will be forthcoming, as in payment on delivery or payment as a condition precedent to the duty to perform. Nature of a Condition A promise may be conditional or absolute. A condition is an event, other than the lapse of time, that, unless the condition is excused, (1) must occur before a duty to perform becomes due (condition precedent); or (2) that discharges a duty of performance that has already arisen (condition subsequent). In general, liability for breach of contract attaches to breaches of promises, not for failures of conditions. Implied or Constructive Conditions A promise to perform is implicitly conditioned on the receipt of a return performance. But who goes first? Default Rule of Concurrent Conditions In the absence of indications to the contrary, the default rule is that promises are to be performed at the same time, under mutual concurrent conditions. What happens when concurrent or simultaneous performance is not possible? This occurs when the performance of one or more parties extends over time 2 options: Default rule of work before pay Divisibility doctrine Bell v. Elder (Water to Undeveloped Land)

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In determining the order of performance of exchanged promises, the court looks first to the contract itself, and, if no order of performance is therein specified, the court applies the common law of constructive contractual conditions. In a case where there is no express indication of the intended order for performance, the law implies a covenant and condition that the related obligations be performed concurrently. In other words, the party who desires to use legal process to exercise his legal remedies under such a contract must make a tender of his own agreed performance in order to put the other party in default. The Work Before Pay rule: Stewart v. Newbury The desire of a performer to receive payment periodically as the performance progresses is only legally mandated if this method of payment is part of the contract. Otherwise, no payment is due until substantial performance has been completed. In Stewart, the contractor demanded payment as per custom. There were no such terms in the contract, so there was no obligation to pay prior to performance. A party financing the other before performance is not the default rule for good reason, but we pay tuition prior to education and employers finance their employees between checks. We also pay prior to receiving goods. Payment is the condition precedent in some contracts but not others. Note 3) In Ethyl Corp v. United Steelworkers, The employees requirement to work a certain number of hours prior to receiving paid vacation was subject to an implied condition that the company not prevent them from completing their requirements. Thus, the workers received their vacations. John v. United Advertising, Inc. (Some signs installed) Whether a contract is entire or severable is a matter which cannot be determined with mathematical precision, as it has been said that there is no set formula which furnishes a foolproof method for determining in a given case just which contracts are severable and which are entire. The primary objective is to ascertain the intent of the contracting parties, as such intent is manifested by not only the several terms and provisions of the contract itself, but also as such are viewed in the light of all the surrounding circumstances, including the conduct of the parties before any dispute has arisen. And the singleness or apportionability of the consideration is said to be an important factor to be considered. Express Conditions: a) Promises and conditions In drafting a contract that varies from the default rules, is it better to make strict rules or variable standards? o Rules decrease misunderstanding o Standards benefit the discretion of the court, which has the advantage of Hindsight. Howard v. Federal Crop Insurance Co. (Plaintiffs destroyed crops on which they had a claim prior to an inspection contractually required to validate the claim) The provisions of a contract were not construed as conditions precedent in the absence of language plainly requiring such construction. Merely plowing under the tobacco stalks did not of itself operate to forfeit coverage under the policy.

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There is a general legal policy opposed to forfeitures. Insurance policies are generally construed most strongly against the insurer. When it is doubtful whether words create a promise or a condition precedent, they will be construed as creating a promise. "Warranty" and "condition precedent" are often used interchangeably to create a condition of the insured's promise, and manifestly the terms "condition precedent'' and "warranty" were intended to have the same meaning and effect. Pay-if-paid clauses are generally held to be promises unless language explicitly provides a condition precedent (such as the language x will pay y ONLY IF z pays x...)

Modification, Waiver, Election, Estoppel: Conditions

Restatement 2d 230; UCC 2-209 Clark v. West (No Drinking = More $$) The court held that plaintiff's complaint contained sufficient allegations that, if proven, would establish that defendant expressly waived the sobriety condition precedent by, with full knowledge of plaintiff's non-observance of the alcohol abstinence stipulation, not only accepting plaintiff's completed manuscript without objection but repeatedly assuring plaintiff that he would receive the higher royalty rate. A condition precedent can be waived and if so waived expressly, a defendant is clearly not in a position to insist upon the forfeiture which his waiver was intended to annihilate. It is well established that if the words and acts of a party reasonably justify the conclusion that with full knowledge of all the facts it intended to abandon or not to insist upon the particular defense afterwards relied upon, a verdict or finding to that effect establishes a waiver, which, if it once exists, can never be revoked. No consideration is required for waiver, nor any prejudice or injury to the other party. Preexisting duty rule problem would result from waiver of consideration. Generally, performing a legal duty which is already owed does not constitute consideration, unless that duty is doubtful or honestly disputed. Promises are modified and conditions are waived... >>>>>UCC 2-209!!!<<<<<<< Wisconsin Knife v. Natl Metal Crafters where modification could only be effectuated in writing the jury instruction that modification could occur otherwise was erroneous. On remand, the trial court was free to consider the alleged waiver of delivery and damages. UCC 2-209 provides that an attempt at modification which does not satisfy a contractual requirement that modifications be in writing (AN ORAL MODIFICATION)nevertheless can operate as a waiver. An attempted modification is effective as a waiver only if there is reliance. Reliance, if reasonably induced and reasonable in extent, is a common substitute for consideration in making a promise legally enforceable. If the damage of which the promisee complains would not have been avoided by the promisor's not breaking his promise, the breach cannot give rise to damages.

PERFECT TENDER AND CURE

Restatement 2d 241: UCC 2-106,2-508,2-601,2-602,2-607,2-601,2-611 UCC 2-601

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If the goods or tender fail to conform to the contract in any respect, the buyer has the absolute right to reject them. This precise rule might be overinclusive, inviting strategic behavior by the buyer/promisee. The UCC ameliorates this concern by providing the seller with a right to cure his defective performance in certain circumstances. T.W. Oil, Inc. v. Consolidated Edison Co. (Substitute Oil) A fair interpretation of 2-508(2) required the buyer to accept the substitute shipment of conforming oil. Once the oil supplier gave seasonable notice, it was permitted to cure the defect within a reasonable time beyond the time the contract was to be performed, as it had acted in good faith and with a reasonable expectation that the original oil shipment was acceptable to the buyer. Section 2-508(2) was not limited to cases in which the seller knowingly made a nonconforming tender it believed the buyer would accept. If seasonable notice be given, a seller who, acting in good faith and without knowledge of any defect, tenders nonconforming goods to a buyer who properly rejects them may offer to cure the defect within a reasonable period beyond the time when the contract is to be performed so long as the seller has acted in good faith and with a reasonable expectation that the original goods would be acceptable to the buyer. Under the UCC, a "reasonable time" depends on the "nature, purpose and circumstances" of any action which is to be taken Ramirez v. Autosport (Van with Minor Defects) Plaintiffs had properly rejected tender of the van within a reasonable time. The court noted that once plaintiff rejected the van, the burden shifted to defendant to prove that the defects had been cured. The court found that because defendant had not done so within a reasonable time, plaintiffs were entitled to rescind or cancel the contract.

MISTAKE
Rstatement 2d 152-154 Mistake is said to excuse performance when an endogenous risk materializes that is, when one or both parties are mistaken about a material fact that exists at the time of their agreement. Excuse discharges performance when an exogenous risk materializes that is, when an unanticipated future event not contemplated by the agreement renders performance impossible. These are rules for allocating risks not expressly allocated by the parties. Properly understood, when a party successfully invokes the law of Mistake or Excuse, that party demonstrates that his performance duty was subject to a condition that was not satisfied. The law of mistake should only excuse a partys performance if most people similarly situated would so condition their duty to perform. The law of excuse provides a default rule for interpreting the parties allocation of risk of subsequent events that adversely affect one of the parties. To avoid a contract on the basis of mistake, the mistake must relate to a basic assumption as to a vital existing fact. Risks as to changing facts are addressed by the doctrines of impossibility, 31

impracticability and frustration of purpose. Where the parties are merely uncertain or even consciously ignorant, the doctrine of mistake is inapplicable. Mutual Mistake: Where both parties are mistaken about a basic assumption on which they based their bargain, and the risk has not otherwise been allocated by the parties, through default rules, or by the court. Unilateral Mistake: Where one party is mistaken, the contract may be avoided where the other party is knows or had reason to know of the mistake. This is equivalent to nondisclosure. In some cases, the contract may also be avoided where the unilateral mistake would make enforcement of the contract unconscionable, but in general, there are in cases where (i) the mistake is computational or clerical in nature (a scriveners error); and (ii) there has been little or no reliance by the non-mistaken party. Defenses: Potential defenses to a claim of mistake include: (i) detrimental reliance by the other party; (ii) affirmance of the transaction after the discovery of the mistake; (iii) failure to avoid the contract with reasonable promptness. Sherwood v. Walker (Replevin for a Cow) Here, both parties believed the cow to be barren when they discussed the price, but it was later learned by defendant that the cow was pregnant, and therefore, worth a lot more. This fact was a material issue and went to the substance of the contract. Where there was mutual mistake as to the substance of the contract, defendant had a right to rescind. The buyer was indifferent to the unknown fact. He would have been pleased to keep the unexpected windfall. But he under stood that the bargain rested on a presumed state of facts. Anderson Brothers Corp. v. OMeara (Wrong Dredge Type) The court determined that appellee's mistake in believing that the dredge was capable, without modification, of performing sweep dredging was not a mistake shared by appellant seller, who had designed and built the dredge for use in trenching operations and knew its capabilities. The court held that when unilateral mistake was asserted as a ground for relief, the care which the mistaken complainant exercised or failed to exercise was a factor for consideration. Further, although a court of equity would grant relief from mistake, it would not assist a party whose condition was attributable to its lack of due diligence. This is consistent with the general rule of equity that when a person does not avail himself of an opportunity to gain knowledge of the facts, he will not be relieved of the consequences of acting upon supposition. The starting point in the analysis of a mistake claim is whether the mistake is mutual or unilateral. 153 and 154 spell out the liabilities of the parties. A party bears the risk of a unilateral mistake when he commits the error. That liability shifts when the other party knew or should have known that the error was being made.

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Comment H: The rule applies only when both parties are mistaken as to the same basic assumption. Their mistakes need not be, and often arent, identical. If, however, the parties are mistaken as to different assumptions, rule 153 applies. The burden of proving that a mutual mistake should be grounds for voiding a contract rests with the party who wants the contract voided. Traditionally, a party with superior information has no duty to disclose their superior information. On the other hand, the approach to unilateral mistake allows contracts to be voided where one party knew that the other party was operating under a mistaken belief.... So! A unilateral mistake as to value, whether or not known to the other party will not, by traditional standards, constitute grounds for recission. Aluminum Co. of America v. Essex Group, inc. (Price Index Standard) The court held that the WPI-IC index upon which the parties based their 21 year contract was mistakenly relied upon as a reliable indicator of pricing terms that would exists to enable the mutual benefits of the contract. The mistake as to the use of this indicator was a basic assumption upon which both parties relied, and both parties understood that the contract rested on this assumed state of facts. Atlas v. U.S. If the existence of a fact is not known to the parties, they cannot have a belief as to that fact, much less a mistaken one

IMPOSSIBILITY / IMPRACTICABILITY
General rule is that of Stees v. Leonard: pacta sund servanda (roughly, contracts must be served). Impossibility is an exception to this performers risk rule. Impossibility doctrine holds that an agreement does not bind the parties if the parties contract was explicitly or implicitly conditioned on performance by the promisor remaining possible during that period. Impossibility tends to arises in cases involving unique goods, or the specialized service of a particular individual. Impossibility does not arise from a mistake per se, but extends the principle underlying the doctrine of mutual mistake to facts and circumstances not in existence at the time of formation. Since those facts were not in existence at the time, the parties could not have been mutually mistaken about them. Was there an unexpected contingency contrary to a basic assumption of both parties? Did the contingency make performance impossible or, under the modern and UCC view, impracticable? Upon which party should the risk of the unexpected contingency be placed? Transatlantic Financing Corp. v. United States (Suez Canal) The court found that it was not impossible or impracticable to sail around Africa to deliver the goods, since it only ate the profits of the trip. First, a contingency (something unexpected) must have occurred. Second, the risk of the unexpected occurrence must not have been allocated either by agreement or by custom. Finally, occurrence of the contingency must have rendered performance commercially impracticable. Unless the court finds these three requirements satisfied, the plea of impossibility must fail.

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UCC 2-614 Excuses delay due to events such as the closing of the Suez, but not permit the shipper to recover the added costs. Eastern Airlines v. Gulf Oil Corp (Oil Crisis not Impracticable) The fact that performance has become economically burdensome or unattractive is not sufficient for performance to be excused. The courts will not allow a party to a contract to escape a bad bargain merely because it is burdensome. The buyer has a right to rely on the party to the contract to supply him with goods regardless of what happens to the market price. The party undertaking the burden of establishing "commercial impracticability" by reason of allegedly increased raw material costs undertakes the obligation of showing the extent to which he has suffered, or will suffer, losses in performing his contract. Aluminum Co. of America v. Essex Group, Inc. ($$ Index=Huge Losses) Where, after a contract is made, a party's performance is made impracticable without his fault by the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made, his duty to render that performance is discharged, unless the language or the circumstances indicate the contrary.

FRUSTRATION OF PURPOSE
Restatement 2d 265 Changed circumstances can also disappoint the contractual expectations of the party whose only obligation under the contract is to pay for the performance in question. The objective of one party is the basis on which both parties enter into the contract. Where this principal objective becomes frustrated (i.e. is rendered valueless to the party), that partys obligations under the contract may be discharged. In other words, where the non-occurrence of the frustrated event is a basic assumption on which the contract was made, such that the principal purpose of the contract is frustrated, performance is excused on the basis of a constructive condition. Distinction from impossibility and impracticability In frustration cases, performance is still practicable, and there might be no impediment to performance at all, but the value of that performance has been negated by some supervening event. Performance has been made pointless, rather than impossible. Requires a showing that there was a clear, mutually understood, predominant purpose of the agreement and that the unanticipated event so utterly undermines that purpose from being achieved that the non-occurrence of that event must have been a basic assumption of the agreement. In Krell, the joint purpose was the letting of a room for the purposes of viewing the coronation. But in Lloyd, there is no joint purpose: the lessees purpose was to sell new cars, but the lessors purpose was to lease commercial property. It is not enough that the transaction has become less profitable, or even that the promisor sustains a loss. The frustration must be so severe that it is not fairly to be regarded as within the risks that he assumed under the contract. The COMMON OBJECT of both parties has to be frustrated, not merely the advantage that one party might have achieved from the contract.

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REMEDIES
CALCULATING EXPECTATIONS DAMAGES
Restatement 2d 344,347,348,349,371,373 Expectation Damages as a Substitute for Performance If promises are to be sufficiently reliable, remedies for breach of contract must substitute for the performance that was originally promised under the contract. Reliance Damages Are measured by the actual amount of detrimental reliance suffered by the disappointed promisee. She is made whole by a payment equaling her true loss, the monetary equivalent of her disappointment. Expectancy damages represent the amount the promisee expected to see as a result of full performance, the difference between promisees current position and the position she would have been in had the contract been fully performed. Although both are alternative measures of the value of performance, expectancy is the standard default measure. Judicial remedies under the rules stated in this Restatement serve to protect one or more of the following interests of a promisee: (a) his "expectation interest," which is his interest in having the benefit of his bargain by being put in as good a position as he would have been in had the contract been performed, (b) his "reliance interest," which is his interest in being reimbursed for loss caused by reliance on the contract by being put in as good a position as he would have been in had the contract not been made, or (c) his "restitution interest," which is his interest in having restored to him any benefit that he has conferred on the other party. Expectations: the benefit of the bargain To put the promisee in the position in which he/she would have been had the promise been performed Reliance: the detriment to the promisee To put the promisee back in the position in which he/she would have been had the promise not been made Restitution: the benefit to the promisor To put the promisor back in the position in which he/she would have been had the promise not been made EXAMPLE>>>Expectation: $70k because of the expected profit of $10k over costs. Reliance: $60k because of the costs so far. Restitution: $40k because of the benefit conferred upon the landowner. American Standard, Inc. v. Schectman (Leftover Concrete) The cost of completion, not the difference in value, was the proper measure of damages. The property owner's proof showed a substantial deviation from the required grade lines and the existence above grade of structures, and supported the finding, implicit in the jury's verdict, that the contractor failed to perform as agreed. That the fulfillment of defendants promise would add little or nothing to the sale value of the property does not excuse the default

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That the burdens of performance were heavier than anticipated and the cost of completion disproportionate to the end to be obtained does not, without more, alter the rule that the measure of plaintiffs damages is the cost of completion. Peevyhouse v. Garland Coal & Mining Company (Mine Holes) Where the economic benefit which would result to lessor by full performance of the work is grossly disproportionate to the cost of performance, the damages which lessor may recover are limited to the diminution in value resulting to the premises because of the non-performance. BOTH DECISIONS ARE WRONG...(AND DULY CRITICIZED) In private land contracts, the damages should be the cost of performance, and in corporate or company land deals for sale, the diminution in value should be adequate.

SPECIFIC PERFORMANCE
Restatement 2d 357,359,360; UCC 2-709,2-716 Specific Performance is given when Damages are inadequate... The adequacy of damages for one part of the contract does not preclude specific performance or injunction of the contract as a whole... Basic Modern Test for Specific Performance Specific Performance is an available remedy, but only in cases where the withheld performance is unique, hard to replace, or (for some other reason) ones remedy at law is inadequate. Goods: Non-uniqueness presumed, but heirlooms, works of art, and other oneof-a-kind objects may be unique, as well as patents, copyrights, closely-held stocks, etc. Land: Uniqueness is presumed Personal Services: Strong presumption against Limitations on Specific Performance Value: nominal consideration, and contracts under seal insufficient. Indefiniteness: the performance required must be specified with greater precision than under law. Insecurity: may require security/collateral to account for any undue risk. Difficulties of enforcement/ institutional concerns: there may be difficulties of supervision by the court Unfairness: unconscionability, unclean hands, balancing of hardships. Sedmak v. Charlies Chevrolet, Inc. (Unique Corvette) As long as the parties agreed to a method by which the price was to be determined and as long as the price could be ascertained at the time of performance, the price requirement for a valid and enforceable contract was satisfied. The court held that because there was no dispute as to quantity, part payment for a single indivisible commercial unit removed the oral contract from the Statute of Frauds. The court held further that plaintiffs had no adequate remedy at law (Due to the rarity of the vehicle and the unlikeliness that another with the same options could be procured) and, thus, were entitled to specific performance. Under the Uniform Commercial Code, the court may decree specific performance as a buyer's remedy for breach of contract to sell goods where the goods are unique or in other proper circumstances. 36

Klein v. Pepsico (Not Unique Jet) Virginia's adoption of the Uniform Commercial Code does not abrogate the maxim that specific performance is inappropriate where damages are recoverable and adequate. The market was not thin because he clearly could have provided cover, in fact made bids on such cover, thus showing that the market sustained his ability to cover and receive money damages from pepsico in the form of the difference between cost of cover and price paid by Kleins buyer. Thus, money is appropriate. The difficult issue (since unique goods are defined very narrowly) is how to determine when the market is so thin as to require specific performance. Market thinness is largely defined by a parties ability to obtain cover. Courts are reluctant to enforce contracts for specific performance of service contracts. Those in breach are less likely to adequately perform. Plus, it smacks of involuntary servitude... (Princes contract with Sony) Occasionally, courts will enforce the specific performance of a service contract, if the contract is not personal in nature (such as one for mechanical service at a chain of repair shops).

RELIANCE AND RESTITUTION

RESTATEMENT 2D 349,370,371,372,373,374 IF THE PLAINTIFF HAS IN RELIANCE ON THE PROMISE OF THE DEFENDANT CHANGED HIS POSITION, RELIANCE DAMAGES PUT HIM IN THE POSITION HE WOULD HAVE OCCUPIED WERE THE PROMISE NEVER MADE. (Whereas Expectation damages put him in the position he would have been in were the promise fully performed) Sullivan v. OConnor (Fucked Up Face) Plaintiff could bring a breach of contract action against defendant because he made promises of a specific outcome, and that pain and suffering beyond that contemplated were compensable. Suffering or distress resulting from the breach going beyond that which was envisaged by the treatment as agreed is compensable on the same ground as the worsening of the patient's conditions because of the breach. The tendency of the formulation is to put the plaintiff back in the position he occupied just before the parties entered upon the agreement, to compensate for the detriments suffered in reliance upon the agreement. Kizas v. Webster (Cancelled Advancement Preference) Each plaintiff had some chance of becoming such an agent and some chance of remaining in that position. For that chance plaintiffs incurred losses, and these losses are legally compensable where, as here, plaintiffs have been deprived of that opportunity by defendants. Here, therefore, where there is no showing or attempt to show that plaintiffs would have in fact suffered a loss had the contract been fully performed, plaintiffs are entitled to recover at least the loss they suffered in reliance on the clerk-to-agent program. The Court thus concludes that plaintiffs are entitled to recover their reliance losses and reliance expenditures.

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Restitution: When a benefit has been conferred to one party requiring compensation under contract. Either by the breaching party or the other party... as long as theres a benefit conferred, the conferrer can often receive damages. Recovery limited by the lowest of cost of service/benefit conferred/contract price. 2d 374 2d 371 United States v. Zara Contracting Co. (Clay in the Runway) Conditions during runway construction were way worse than anticipated. Plaintiff Company completed obligation at a loss. It is to be noted that, when it is the defendant who is in default, and plaintiffs' performance is part of the very performance for which the defendant has bargained, it is to be valued, not by the extent to which the defendant's total wealth has been increased thereby, but by the amount for which such services and materials as constituted the part performance could have been purchased from one in the plaintiff's position at the time they were rendered. The measure of recovery by way of restitution, though often confused with recovery on the contract, should not be measured or limited thereby; but the contract may be important evidence of the value of the performance to the defendant, as may also the cost of the labor and materials. Britton v. Turner (Labor is pay-as-you-go) In a labor contract, the worker in breach is rightly compensated via restitution for the value of the benefit construed on the employer.

CERTAINTY
Restatement 2d 350,351,352 Drews Company, Inc. v. Ledwith Wolfe Associates, Inc. (Const.Delayed Opening) The court held (1) the contractor could be held liable for the damages resulting from its performance delays regardless of whether the contract specified a completion date or stated that "time was of the essence," (2) the "new business rule" did not automatically bar the owner from recovering lost profits damages, and (3) the trial court erred in submitting the issue of lost profits damages to the jury because the owner failed to establish his lost profits with reasonable certainty. Hadley v. Baxendale (Shaft as model for replacement delayed) The special circumstances surrounding the shaft were not communicated to the shipper, thus they are not liable for any losses due to the delay. 1) It is not always wise to make the defaulting promisor pay for all of the damage due to his breach 2) The proper test for determining whether the particular items of damage should be compensable is to inquire whether they should have been foreseen at the time of the contract. USE VALUE OF GOODS: Goods with an obvious use value are sometimes held to be compensable in cases of delay because of the foreseeability that a delay would cause rental or interest costs. Emotional Distress can Also be compensable if foreseeable... such as in house purchase or funeral arrangements.

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DUTY TO MITIGATE
Rockingham County v. Luten Bridge Co. (Keep building for no reason!) When the county gave notice to the builder that it would not proceed with the project, plaintiff should have stopped building. After plaintiff had received notice of the breach, it should have done nothing to increase the damages. Parker v. 20th Century Fox (Steel Magnolias isnt TerminatorII) The court found that Shirley Maclaine didnt have a duty to mitigate damages by accepting a role in an entirely different movie because the employment offered as an acceptable mitigation was different and inferior. If its different and inferior, then you dont have to accept it to mitigate damages from a breach.

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