Contents

I. A. B. C. II. III. A. B. C. D. E. F. G. IV. A. B. C. D. E. V. A. B. C. VI. VII. A. B. C. D. What constitutes an offer? ............................................................................................................... 3 Acceptance .................................................................................................................................. 4 CONSIDERATION .......................................................................................................................... 4 Mutual Assent .............................................................................................................................. 5 What Kind of Contract is it?.............................................................................................................. 6 What Promises/Contracts are Enforceable ................................................................................... 6 Statute of Frauds- must be in writing ........................................................................................... 6 Mutuality of Obligation ................................................................................................................ 6 Gifts ............................................................................................................................................. 7 Mistake/Non-Disclosure/Warranty/Misrepresentation ................................................................ 7 Unconscionable Contracts ............................................................................................................ 9 Duress ........................................................................................................................................ 10 Employment Contracts ............................................................................................................... 11 Creation/Elimination of Duty to Perform .................................................................................... 11 Order of Performance in a bilateral contract .............................................................................. 11 Conditions.................................................................................................................................. 12 Impossibility/Impracticability/Frustration of Purpose (elimination of duty) ................................ 13 Waiver and Estoppel .................................................................................................................. 15 Accord and Satisfaction .............................................................................................................. 15 Interpretation/Parol Evidence ........................................................................................................ 16 Parol Evidence............................................................................................................................ 16 Interpretation ............................................................................................................................ 18 Interpreting Divisible v. Entire .................................................................................................... 19 Modification .............................................................................................................................. 19 Breach/Repudiation/Performance.............................................................................................. 20 Anticipatory Repudiation............................................................................................................ 20 Breach........................................................................................................................................ 20 Good Faith Substantial Performance .......................................................................................... 20 Goods ........................................................................................................................................ 21

VIII. A. B. C.

Remedies (damages) .................................................................................................................. 21 Remedies in Equity ..................................................................................................................... 21 Remedies at Law ........................................................................................................................ 22 Promissory Estoppel ................................................................................................................... 24

I.
y

What constitutes an offer?

An offer of a promise/act in exchange for a promise/act o Advertisements: an offer to make an offer, not actually in and of itself, generally are preliminary proposals (Malton)  Unless: when it objectively constitutes an offer (Carbolic) y Unilateral contract y Does it invite acceptance by an act o when a reasonable person would believe that an offer has been made for a unilateral contract (Colbaugh) Things to help determine if there has objectively been an offer: o The words used in communication o Significant terms o Relationship of the parties o Common practices or trade usages If contract is vague as to whether it is a bilateral or unilateral contract court will interpret as bilateral o Bilateral: if you promise to do this, I promise to pay you o Unilateral: if you do this, I will pay you Duration of the offer: o Unless otherwise stipulated the contract remains open for a specific period of time o Option usually requires specific language as to how long the option will stay open  If not specified use reasonable time o If attempt to accept after the date of acceptance has expired look at circumstances and language used  Could create new offer from offeree (thereby making him oferror)  Offeror s failure to reject late acceptance may suggest either it was not late at all or the offeror acquiesced in the delay making acceptance effective Revocation: o Death of offeror before acceptance by offeree constitutes revocation of unilateral contract o Offeror can revoke contract at any time before acceptance  Option contract for which there is separate consideration, cannot be revoked before the expiration date y Even if oferree rejects the option, the option stays open o May have an estoppel argument

A.
y

Acceptance

y y

Unless the contract explicitly states otherwise, any reasonable means of acceptance constitutes acceptance (performance, verbal acceptance, written acceptance) o CONTRACT MUST EXPLICITLY SPECIFY THAT IT REQUIRES A SPECIFIC TYPE OF PERFORMANCE IN ORDER TO ENFORCE THAT PERFORMANCE (Allied Steel) o Mailbox Rule: posting in the mail constitutes acceptance from the date of the post (Morrison)  Does not apply to option contracts y Option contracts are not accepted until acceptance received (Restatement 63) Unilateral Contract: must complete performance in order to accept, but once begins substantial performance, the offeror cannot rescind the offer o Employee: when an employee continues to work after receipt of new handbook, constitutes acceptance of unilateral contract o Must know about offer in order for performance to constitute acceptance (reward cases) Acceptance by silence: if prior dealing or course of conduct makes reasonable expectation from offerror that silence suffices for acceptance o Also could be expressly stated in the contract Shrinkwrap: An acceptance becomes binding on the offeree (purchaser) when he is afforded an opportunity to reject the terms after discovering them but does not Rejection: o if the offer lapses the offeree rejects it o or can explicitly reject Counteroffer o General Rule: Acceptance must correspond to the terms of the offer (Mirror Image) o Rejects the initial offer and presents new offer (Livingstone v. Evans)  UCC 2-207: You can accept with changes to the contract, which count as proposals for additional terms to be added to/changed in the contract, these new proposals become part of the contract unless they expressly conflict with the original offer. In this case they are removed (knockoutrule) and are replaced with any UCC gap fillers (Richardson), if there are any gap fillers y This is only if there has been objective manifestation of agreement by the offeror (proceeds under these new terms) o There can only be one offer on the table at an given o However, can interpret as a rejection with an explanation or request for information or a suggestion for changes with intent of reserving the decision to accept until the offeror reacts to the request

B.
y

CONSIDERATION

Promise/act that is part of a bargained for exchange on each side

y y y

y y y

No consideration it is a gift, promises to make gifts are not enforceable o Promises to make gifts are not enforceable unless there has reasonably relied on the promises(promissory estoppel) Consideration can be a detriment or benefit Bargained for exchange: must be something sought by one of the parties Nominal: generally courts do not consider the adequacy of consideration, but if it is GROSSLY inadequate then the court might void the contract (Fischer) o Consider time value (20 dollars now for 100 dollars later) (Batsakas, Shnell) Past Consideration: a promise made on past actions is gratuitous and unenforceable where the promisor did not directly benefit from the past actions (Mills v. Wyman), but where one intervenes unrequested and prevents harm to another, the direct beneficiaries promise is enforceable (Webb v. Mcgowin) o Watch out for the officious intermeddler Settlements: for a settlement to count as valid consideration, the claim being settled must be made in good faith and must have substantial foundation, had a legal right to sue (Duncan v. Black) o Restatement: don t need both, must have one or the other o Counts as forbearance of a legal right to sue Incidental detriment is not consideration: sticking out your hand to accept a gift is not consideration o Is it condition of a gift or is it consideration? Anything that you already had a legal duty to perform is not consideration o Legal, contractual, statutory (Levine v. Blumenthal) Promissory estoppel can serve in the absence of consideration Option contracts need separate consideration/detrimental reliance

C.
y y

Mutual Assent

y y

Each party has to intend to be agreeing to the same thing = subjective theory (Raffles) Objective theory: a reasonable meaning of the words used by the party in context and actually believed by the counter party o If X means A and writes B, and Y believes B: X is held to B o If X means A and writes B, but Y believes it to be A: court interprets what parties agreed to Subjective views may be brought in as evidence as to what a reasonable person in the actors situation would believe (see parol evidence) If the court determines the terms are too vague to form a contract, but a reasonable person would reasonably believe that there was a contract formed, may get reliance damages (promissory estoppel, Wheeler)

II.
y y

What Kind of Contract is it?

Goods/Services UCC

III.

What Promises/Contracts are Enforceable

A.
y y y

Statute of Frauds- must be in writing

y y y y

Contracts for sale of land Goods over $500 Contracts that cannot be performed within one year o Courts reluctant to apply it unless it is absolutely clear the contract cannot be performed within a year of its making, even if it is unlikely that it will be performed in a year Promises to answer for debt default or miscarriage of another Marriage If not in writing = unenforceable but not void o Voidable = someone must challenge it to get it thrown out NOTE*: Option contracts must also be in writing (EaCoronis) o Not statute of frauds

B.
y

Mutuality of Obligation

There must be a point at which each side is ACTUALLY bound to do something o Otherwise illusory and contract fails o Must be possible state of affairs in which the party will be bound under the agreement  Promise to make a promise is not enforceable (Sun Printing and Empro)  If I feel like it is not enforceable (Davis) Conditional promises: before condition is met/fulfilled there is no obligation on either party to perform o Once the condition precedent has occurred, both parties are bound by the contract o If condition precedent based on one party s satisfaction or discretion this does not render contract illusory b/c that party must use discretion in good faith While an express promise may be lacking, it still may be instinct with obligation, an implied promise imperfectly expressed is a form of valid contract o Usually will find an obligation of good faith and fair dealing (Lady Duff)  Promise to use best efforts Output/Requirement Contracts (promise of exclusive dealing) o Requirements: I promise to buy all my requirements from the seller  Seller has promise to produce as much as he needs o Output Contract: I promise to sell you everything I make/or I promise to buy everything you make o Even though there is no specificity as to the amount, they must proceed in good faith

UCC 2-306(1): quantity tendered or demanded may not be disproportionate to any estimate, or if no estimate was stated, to any normal or otherwise comparable output or requirements y For increases in demand or output, not necessarily for decreases  Normally good faith is honesty in fact, but if merchant under UCC 2-1031(b) imposes a higher standard of objective and section o The fact that you are not making profits the way you expected is not sufficient to terminate the contract, but severe economic hardship may allow for termination (forcing to go out of business) Franchisor can break a franchise agreement for any reason in good faith but must provide sufficient notice (Corenswet) o Generally a party may not retain a unilateral right to terminate without notice as stated in the contract: include term that gives specific time period for notice Alternative Performance Contracts: if a party is not bound because of a choice of performance, but each choice constitutes bargained for consideration, then the contract is fine o One of the alternative performances would have been consideration and there is or appears to the parties to be a substantial possibility that before the promisor exercises his choice events may eliminate the alternatives which would not have been consideration Contract is incomplete if it lacks BOTH duration and price (SunPrinting) o Can use UCC gap fillers for one, but not both 

C.
y

Gifts

Where the circumstances evidence that ones effort to give services to another is voluntary, no payment can be expected (Martin v. Little Brown) o The one who is trying to receive payment, has the burden of proof that both parties intended there to be payment personal services rendered between the couple will not constitute an implied contract (aka a contract implied-in-fact) because such services are ordinarily understood to be gratuitous (Marone) Contract implied in fact when a plaintiff without being requested to do so renders services under circumstances indicating that he expects to be paid therefore, and the defendant knowing or should know such circumstances avails himself of those services (Collins v. Lewis) Contract implied in law unjust enrichment. Not about the expectations of the party anymore, it is solely about whether benefit was conferred from one party onto another. If such benefit is conferred, payment is expected. Donee has burden of proving donative intent.

D.
y y

Mistake/Non-Disclosure/Warranty/Misrepresentation

All of these things can lead to rescission rather than a breach Non-Disclosure o No duty in an arm s length transaction to disclose information (Laidlaw) o If you have fiduciary/confidentiality/agency duty, this defeats the rule of non-disclosure

 Jackson v. Seymour Misrepresentation o Cannot make an affirmative misrepresentation = fraud (Cushman) o Cannot knowingly permit a knowing affirmative misrepresentation to be made (Husband in Cushman) o Seller of land has a duty to disclose all known defects of the property that are not reasonably discoverable by an inspection o There must be reasonable reliance by the buyer on the misrepresentation by the seller (Cushman)  Buyer must not have known about the condition which was misrepresented What constitutes a mistake? o Error in judgment does not qualify as a mistake o Incorrect prediction of future events is not a mistake o Mistake of fact must be distinguished from mistake as to meaning (misunderstanding) o Mistake of law could as a fact o Situation appears to call for the application of mistake doctrine may be more properly treated as a breach of contractual commitment Mutual Mistake o Where both parties make a mistake about a material term of the contract, price or structure reflects a mutual understanding of the goods, which turns out to be incorrect the parties can rescind the contract  Sherwood v. Walker  Parties must have shared an erroneous belief concerning a fact at time of contract  The erroneous fact was a basic assumption on which the contract was made  The mistake must have a material effect on the exchange of performance  Adversely affected party must not have borne the risk of the mistake Unilateral Mistake: where a material mistake is made by one party, including a clerical error (Elsinore), but does not constitute the neglect of a legal duty, and the other party knows or has reason to know of the mistake, the mistake maker can get rescission o The error concerns a fact o The fact is a basic assumption on wich the mistaken party made the contract o The mistake has a material effect on the exchange, adverse to the mistaken party o The mistaken party must not bear the risk of the mistake  Negligence on the mistaken part will not constitute avoidance o The equities must favor relief for the mistake  Would one party receive a windfall Mistakes in transcription o Mistake in the way in which the agreement is expressed in writing o Must convincingly show that an error was made in recording the terms agreed, and plausibly explain why he failed to notice it when signing the document

Relief is to reform the contract to reflect was actually agreed Question of reformation could also be when parties chose words that do not have the legal effect intended Express Warranty: When seller provides an express warranty that goods will correspond to a particular description, the seller has a duty to provide goods of such quality o Language resembling a guaranty can qualify as express warranty o Description of past performance is not an express warranty of future performance (Tribe v. Peterson) o Breach caused by the party given the warranty, does not qualify as a breach of the warranty against the giver of the warranty o Puffery (unspecific positive expressions) do not count as express warranty  this house is awesome and indeed this house is not so awesome Implied Warranty: Circumstances, language of contract, and context of dealing create an expectation of the quality of the subject matter o Where land is sold with the restriction on use, the land is sold with an implied warranty for that use (Hinson) o Any sale of residence by the builder carries with it an implied warranty of habitability (Johnson v. Healy)  This works in a vacuum o If there is an as is clause in the contract, where the buyer agrees that he has not relied on any representations of quality by the seller, there can be no breach of warranty, because there was no warranty (Lafazia) o o

E.
y

Unconscionable Contracts

General rule of unconscionability: an equity court will not enforce a contract that it decides no reasonable person would have entered into o Needs procedural and substantive unconscionability Procedural: absence of meaningful choice or opportunity to appreciate the terms o mere disparity of bargaining power is not enough o Factors include:  Education  Legal representation  Sophistication of the person/contract  Maze of fine print  Setting of the transaction  High pressure tactics (take it or leave it) o Was there meaningful choice of party entering contract o Freedom of contract v. procedural unconscionability creates no freedom to contract Substantive: terms shock the conscience, the terms are completely unfair, and they are favoring the party who is at an advantage in formation of the contract o Sometimes if the substantive unconscionability is egregious, courts may not require procedural unconscionability

o All takes place in equity o Freedom of contract v. protection of powers UCC: courts have wide leeway to find part or all of a contract unconscionable o Court is not bound by what victim requests o More likely to reduce than raise o Reconciles freedom of contract v. protection of parties Contracts of Adhesion: can give rise to procedural or substantive unconscionability o Generally a standard form contract, despite duty to read can give rise to procedural/substantive unconscionabality o Must be adequate market mechanism to allow the otherp arty to negotiate a change in terms or to seek an alternative  The imposition of unfavorable terms on a take it or leave it basis  Will not be automatically unenforceable o Has to contradict the reasonable expectations of the adherent or be excessively one sided (Broemmer abortion case)  Certain terms can be stricken to conform with reasonable expectations Standardized disclaimers: in order for a disclaimer to be upheld, it must be 1) either clear or not legalese, or must be explained to the customer, and (2) conform with public policy o Factors courts determine (Richards needs all 3):  Unclear  Excessively one sided (universal disclaimer of responsibility)  Non-negotiable Good faith is a factor o It is unclear exactly what good faith constitutes or requires o (for exam): trickery = not acting in good faith o Never dispositive in determining unconscionability  Will skew analysis towards injured party

F.
y

Duress

y y

A party makes an improper threat that induces assent that leaves victim no reasonable alternative but to agree o Can be implied threat  Can be economic duress or physical duress  Can be something that the threatening party has legal right to do (Wolf, minority subjective view) o Makes contract voidable o Must overcome free will leaving no choice  Can be loss of valued customer or damage to reputation Duress can apply to modifications of contract (Alaska) Abuse of position to make victim enter disadvantaged contract o No real threat o Usually not available for arm s length transactions

y y

Must not have time nor ability to pursue legal remedy When someone drops his legal right to contest the disputed sum of money, because of a financial need, that financial need will not entitle him to a claim of duress (Hackley) o Unless other party knows about his financial situation and purposefully leverages him to enter into a deal he would not have otherwise entered into

G.
y

Employment Contracts

Employment at will is when either party can terminate the employment at any time for any reason. o Employment is by default at will unless there is an agreed upon time period and the contract specifies that one can only terminate for a cause o Employee at will can be fired without cause  Has to EXTREMELY CLEAR for it to be modifying at-will relationship General right of an employer to terminate an at will employee will not be upheld when it contravenes public policy such as a stated law (Sheets) o Must be clearly mandated public policy Employee can be bound in at-will employee contract by policies in manual if the employer does not clearly disclaim indicating that the polices are changeable, otherwise employees can rely on promises they have o Dispute/resolution process in manual, that will modify the at-will relationship, and bind the employer for going through that process unless clear conspicuous disclaimer An employee s willful breach of his duties under his employment contract is a factor in considering whether employee may lose pension after retirement o will not substantially negate many years of loyal service. o Employment contracts are divisible and likened to installment contracts  breach during a couple years does not materially affect other

IV.

Creation/Elimination of Duty to Perform

A.
y

Order of Performance in a bilateral contract

3 types of related duties in a bilateral contract: o Mutual and Independent Promises  All promises are absolute an independent of one another (old view that all are like this)  Performance of one does not depend on performance of the other y I ll go get lunch and you have to watch over the room y Even if I desert the room, you still must get lunch o Conditional and Dependent  One party must perform to create the duty of the other party to perform y if I buy lunch, then you will repay me

y If I don t buy lunch, you do not need to pay me o Mutual performance  no party needs to perform until the other party performs swap at the same time  don t need to perform unless the other party triggers the obligation by performing  each can put the other in default by performing Categorizing order of performance o For the court to decide o Determine performance by what the parties conceivably meant at the time AND what makes most commercial sense  Which one takes longer? o Look at negotiations of the parties to determine what category they fall into o If the contract specifies an order then it is category 2 Tender and Demand o Must be in category 3 o can put the other party in default by tendering performance and demand performance  or you can perform (no need to demand)  tendering is showing that you are ready, willing, able to perform o in order to put the other party in breach you have to show that the other was not able to tender performance as of the required date  while tendering performance is needed to throw the other party in default, if it is clear that the other party cannot or will not perform by the required date, tender is not needed (ziehen) y however, still must show you were able to tender performance  an assumption that the other party will not (be able) to perform does not absolve your duty (Hathaway)

B.
y

Conditions

General rule: whether a party has meant for a provision to be a condition or a promise, is a matter of party s intent to be gleaned from the language of the contract, the circumstances of the agreement, and common sense (Glaholm) Where it is ambiguous a court will likely interpret it as a promise versus a condition as to avoid forfeiture o Usually condition will cause greater loss than promise because when a condition is breached an obligation for the other party never arises o Where a promise is breached, the obligation still arises but you must pay for the harm that arises as a result of the breach of promise  Insurance contracts- as to avoid someone paying premiums and then all of a sudden not be able to reap the benefits of the contract y If you miss a premium payment and it is considered a promise you lose that amount of coverage

y y

y y

y y

y If premium payment was condition you would lose entire coverage If you can demonstrate sufficiently that there was a condition precedent, court will STILL construe the condition very narrowly Burden of proof is on the party wanting to interrupt the status quo o Condition precedent: is a condition where the status quo there is no obligation until the condition is met, once the condition is met the obligation arises.  The obligee is the one who wants the condition to be met, wants the obligation of the obligor to arise, so the obligee has the burden of proof to show condition exists and it was met o Condition subsequent: status quo is that there is an obligation, unless the condition is met  The obligor who has an obligation in absence of the condition, is looking for the condition to be present and met to avoid his obligation, has the burden of proof of showing the condition exists and it was met Prevention: if the occurrence of a condition will give rise to your obligation, you cannot actually try and prevent it from happening (Parsons) Time is of the essence clauses: generally frowned upon and you must show that this is commercially necessary and you are not just sticking it in there o If purpose behind clause is legitimate then it includes the additional obligation to perform by the EXACT time requirements as opposed to the usual leeway o See waiver and estoppel A condition can be waived as opposed to central consideration (Clark v. West) Insurance Contracts o Normally courts honor conditions o For insurance companies wont enforce conditions against the insured, if insured can show (burden of proof) that this failure to meet the condition did not burden the insurance company Conditions of satisfaction: conditions based on idiosyncratic satisfaction/discretion carry with them a duty of good faith and if they are a merchant they carry with them commercial reasonability If there is language in the contract that sets up an event for performance (payday), could just be an estimated time for performance instead of a condition

C. Impossibility/Impracticability/Frustration of Purpose (elimination of duty)

y Impossibility through no fault of either party can excuse performance of the contract o If the contract contemplated performance to be depended on the continued existence of a person or thing, and the person died or thing was destroyed after the contract s execution but before performance is completed = impossibility  Material item o Objectively impossible and event was unforeseen by both parties at time of contract

 Kel-Kim: unforeseeable o Increase in cost does not render performance impossible, and a contractor yet to deliver GFSP is liable if building destroyed. o If partial performance by contractor wrought into larger structure of owner and whole structure destroyed, impossibility excuses, and contractor can recover in quantum meruit (Carroll) o UCC 2-613: for specified goods ( that car ) if the loss of the goods is not the fault of the seller, the seller is excused (contract is avoided) o where goods are fungible, the provider must provide, including replacing destroyed goods (Bunge).  Soybeans vs. soybeans from this farm Impracticability (UCC2.615) o Available to party who is adversely affected by the change in circumstances o After contract was made, an event occurred, the non-occurrence of which was a basic assumption of the contract  Must be unforeseen (not unforeseeable)  Occurrence must be external to the contract y Change in law or government regulation y Change in market condition (however, generally not one that is used because basic assumption of contracts is market will change) but if there was an unexpected thing that changed the market in an unexpected manner may be able to invoke the doctrine (war, embargo, natural disaster) o The effect of the event is to render the party s performance impracticable unduly burdensome  Must have such a severe impact on the performance that it cannot be rendered w/o great loss, risk, or other hardship y Economic loss may be allowed depending on hardship of economic loss (Taylor, what if another music hall down the road was available?) o Party seeking relief was not at fault in causing the occurrence o Party seeking relief must not have borne the risk of the event occurring  Force majeure clause: provides allocation for risk  Could be implied in contract  Commercial practices and expectations o Impracticability relives duty of performance and liability for damages  May also be able to claim restitution o Impracticability may also apply to only a part of the contract o unless a particular method of perf. is specified as only acceptable one, party prevented from perf. by impossibility of expected method must find another way, even if increased cost, and is not excused for impossibility or impracticability. (American Trdg.) Frustration of Purpose o Event so seriously affects the value or usefulness of the benefit that it frustrates the contract s central purpose for that party

o o

Cannot be secret or obscure purpose  Shared basis (Krell v. Henry) No explicit allocation of risk

D.
y y

Waiver and Estoppel

After a contract is entered into, the promisor who indicates by words or conduct induces the other to believe, that he will not exercise, has not exercised, and is not exercising a right Estoppel: Party by its words or conduct, induces the other party to act to his detriment by causing him justifiably to believe that he is not exercising his right o Estoppel can be lifted by sufficient notice (qualitatively and time) o When a conditional seller repeatedly and consistently accepts late and inadequate payments without objection, his course of conduct estops him from asserting a condition subsequent to terminate the contract  Clear notice of the seller s reassertion of his right to prompt payment would remove the estoppel and reestablish the condition Waiver: Voluntary relinquishment of a known right (can be by words or conduct, but tougher to prove for conduct) o If a waiver is made prior to due date it can be retracted if the other party has yet to rely on that waiver o Can waive specific demands o does not require consideration o lower standard of proof to show that you did not waive a right than notestopped  need proof of reliance on waiver/proof can be inferred from circumstances to trump a claim of non-waiver o Waivers are limited to situations where a party to a contract abandons a right that party has under a contract (Quigley)  Cannot waive the basic consideration of a contract Estoppel vs. Waiver o Estoppel is more appropriate if detrimental reliance can be shown and there is some question about whether the right relinquished is material enough to require consideration o Waiver is better if no prejudicial reliance can be established, but there is an argument that the abandoned right is not central to the exchange E.

Accord and Satisfaction

When a promisor cashes a check for services rendered, which the promissee declares for full payment, even if the promisor accepts and cashes the check on condition that it is for partial payment only, with the remainder to be litigated in court, this counts as fully payment (Martin) UCC 1207: promisor can cash the check and still challenge the payment

V.

Interpretation/Parol Evidence
A.
y

Parol Evidence

y y

y y

Applies when there is an agreement that is recorded in writing and one of the parties proffers evidence to prove a term that is not contained in the writing or to explain or expand on a term in the writing o Rule of law Covers evidence of terms allegedly agreed to prior to the written contract o Includes oral/written Covers terms allegedly agreed contemporaneously with the writing o Does not extend to evidence of all contemporaneous written agreement  Existence of writing is more reliable  Contract need not be contained in single document o Course of performance is not parol evidence because usually takes place after the writing Does not cover evidence of either oral/written agreements claimed to have been made after the execution of the writing You can use parol evidence where it is: o A collateral agreement  Collateral agreements will be allowed usually because the agreement is sufficiently distinct from the scope of the writing, it can be seen as a different contract, related to but separate from the integrated written agreement  Still cannot contradict terms in writing  Must have separate consideration  Separately identified o Does not contradict the writing any express or implied provision of the contract o Does not constitute some agreement that would naturally be in the writing Is there an integration? Is the contract a complete, final and certain record of what the parties agreed to? o If there is an integration clause, the contract is integrated o Problem if the writing does not say it is an integration  Andrews: if it is clear from the language that the written memorandum was intended to be an integration of the parties agreement = integrated  Lehman: Take in external evidence to determine parties intention  Traynor: allow parol evidence on the question of an integration, where such evidence leads to an interpretation of the integration language, of which such language is reasonably susceptible o Scope of integration clause:  Look at language of the clause, if it is not clear how much the integration clause covers, then may not be fully integrated  UCC 2-202: allow in parol evidence as long as it does not contradict

y y

Full Integration: If written memorandum is a complete, final, and certain record of the partie s agreement y No parol evidenceof anything within the scope of the agreement y Merger clauses provide evidence to complete integration o Boiler plate merger clauses are less likely to be upheld  Partial Integration: not complete and final record of the agreement, may fully and finally express some terms but not all of the terms y parol evidence is excluded relating to any term that is integrated in the writing y permits evidence that supplements or explains the writing to the extent that it is not integrated y must not be inconsistent with terms of the agreement  Unintegrated: may not fully and finally express any terms y Parol evidence can be admitted to explain all terms Interpreting the language: interpreting meaning a substantive term in the contract that may be ambiguous/vague o Court not jury o Andrews/Kaye: only allow extrinsic evidence to resolve a patent ambiguity, if it is clear on its face, no extrinsic evidence no matter what it would show. (WWW Associates) o Lehman: admit extrinsic evidence to determine whether there is an ambiguity about a term of the contract  Latent ambiguity: parol evidence shows there is an ambiguous term that may not otherwise be ambiguous o Traynor: only allow extrinsic evidence on the preliminary question, whether to apply parol evidence rule to the substance, where such extrinsic evidence suggests a meaning to which the language  Judge looks at parol evidence, sees what it suggests, if parol evidence suggest something that is a reasonable interpretation of the language, he will allow it  If the parol evidence is wild and crazy: FUCK THAT! (Pacific Gas) Practice of interpreting ambiguities/integration o Just because the parties dispute over the meaning of the term does not mean the term is ambiguous (objective approach) o First they look to four corners of the written document: if document appears complete and raises no ambiguities no parol evidence (WWW Assc.) o Evidence concerning course and practice of dealings in a particular field is an admissible to explain the scope of the terms (Columbia) o Industry usage of certain terms will be given their industry meaning When a contract is not ambiguous by its terms but reading the contract as a whole will lead to ridiculous results, parol evidence or common sense context can be added Party who wants to narrow common sense meaning of a word, has the burden to show the narrower meaning was intended 

Exceptions to Parol Evidence: o Unequivocal evidence of mutual mistake  Mutual Mistake  Injury to the beneficiary party is negligible (no windfall for adverse party) y Impact of such action would not be too detrimental to party losing as result (Hoffman)  The contract itself can show the court how to rewrite the document o To prove fraud (Lipsit)  Sometimes not allowed if evidence contradicts express term of contract (Bank of America v. Pendergrass) y Minority view  Allowed even if there is an integration clause y Wont be allowed if there is an as is clause saying they agreed not to rely on representations in accepting contract (Lafazia) o External evidence can be introduced to show an orally made conditioned performance, that does not appear in the writing, unless it contradicts express term in the writing (LI Trust)  I only agree if you get them all to agree o Duress and other bases for invalidating or avoiding contract

B.
y y

Interpretation

Parties sometimes fail to express their assent adequately, leave a material aspect of their agreement is ambiguous/vague, they failed to resolve it, or provide for it all No contract comes into being if a material aspect of the agreement is left indefinite by the parties and the uncertainty cannot be resolved by the process of interpretation or construction o There must be an incurable uncertainty about what the parties agreed to, so intent to enter in contract is in doubt o The uncertainty must relate to a material aspect of the relationship Courts will tolerate some degree of indefiniteness as long as it is clear that the parties intended to enter into a contract o Must have some means of resolving the uncertainty so that a breach can be identified and remedied Interpretation by courts use: o Ordinary meaning of the words  Trade usage o History of communication/negotiation o Course of performance o Course of dealings Construction: inferring meaning as a matter of law, go beyond facts to find what the parties would have probably meant, not necessarily what they did mean

y y

y y

Term may be implied in law even though it overrides or conflict with what was agreed upon Courts try to interpret the contract in a way to give it meaning and make it enforceable o Avoid forfeiture o Specific provisions are given greater weight than general provisions  Specific controls the general o Look at negotiated terms over standardized terms o When one party has drafted the unclear language, courts choose meaning that favors the other party Courts can use gap fillers Parties cannot effectively agree to exclude terms that are so fundamental to fair dealings that these legally implied obligations are needed o Reasonably and in good faith Agreements to agree may be enforced if the court determines that the term will be settled by some objective standard o Objective v. subjective standard Sometimes courts recognize that the parties entered into a preliminary and subsidiary contract in which each gave consideration by forbearing to exercise the right to terminate negotiations at will and promising to negotiate in good faith in an effort to reach agreement on the principal contract o Lack of good faith v. negotiation breakdown Agreement to record in writing may be upheld if the writing is just a formality and had intended to be bound by the oral agreement Party with more reasonable understanding will often prevail o

C.
y y

Interpreting Divisible v. Entire

When multiple deliveries are all of the same type of good, and no time of payment is stated in the contract, it is most likely the contract will be interpreted as entire rather than divisible UCC 2-307: if contract is silent then entire delivery and entire payment are due at the same time, if it allows for installment deliveries, there may be demands for part payment at each delivery Where its clear from the nature of the contract that there are 2 separate agreements pasted into one contract, the payment of the contract will be divisible

VI.
y y

Modification
Modifications situations where contracting parties incur different duties and obligations from those in their original contract Any modification of a contract requires separate consideration o Cannot promise to do what you were already had legal duty to do (Levine) o UCC 2-209: do not need separate consideration for modification  Subject to good faith requirements of 2-203

When circumstances unforeseen to both parties make the performance of the contract unduly burdensome, the parties may agree , in view of changed conditions to an adjustment of the price o Consideration for increased amount of money is increased amount of work o The previous contract was for building a foundation without having to clear additional wreckage, the new contract is to clear the additional wreckage (Brian Constr.) o Restatement 89: If the modification is fair and equitable in view of circumstances not anticipated by the parties when the contract was made, you can modify the original contract without additional consideration Unless it is a contract for the sale of goods, a non-material written term may be impliedly modified and need not be done in writing explicitly even when the contract requires written modification (Universal Builders)

VII.

Breach/Repudiation/Performance
A. Anticipatory Repudiation
Where a party makes a definite and unequivocal manifestation of an intention, not to render promised performance at an appointed time, counter party does not have to wait to institute legal proceedings against the repudiator (Whole Sale Sand v. Decker) o Unclear what qualifies as definite and unequivocal manifestation

B.
y y

Breach

y y y

Fails to honor a promise of performance when that performance falls due Material breach: failure or deficiency in performance is central to the contract, it substantially impairs its value and disappoints reasonable expectations of party o Total material breach promisee can (K&G):  Withhold performance  Terminate contract  Claim full damages Partial breach may entitle injured party to damages but not termination Non-material breach will not entitle injured party to rescission unless contract provides o Rescission only available upon material breach UCC 2-610: Can treat anticipatory repudiation as a breach

C.
y y y

Good Faith Substantial Performance

When you have GFSP the contractor has performed, and is entitled to the contract price (less cost of minor repairs/difference in value for larger items) GFSP: where deviation from a construction plan does not amount to frustration of details, of great personal importance, and where rectifying such deviations would result in economic waste When general provides sub-contract, performance not complete until general delivers substantial performance on entire contract to ultimate owner

y y

o General bears the risk of loss until he conveys o Sub-contractor not liable for loss if he has given GFSP to general contractor Failure to deliver GFSP it absolves the other party from performance (terminates other party s duty) o Considered a material breach When contract to work and no date set for payment work must be substantially performed before payment is demanded GFSP can allow contractor to recover under quantum meruit

D.
y

Goods

UCC 2-601: For non-installment contracts, buyer can rightfully reject if proffered goods do not conform to the contract in every respect (perfect tender) o Limited by buyer s obligation of good faith (honesty in fact or if between merchants conformity to standards of trade and reasonable commercial standards)  Seller must prove lack of good faith o Even a wrongful rejection is still effective, but it is actionable  Can sue for damages What constitutes acceptance? o Buyer accepts when buyer either:  indicates acceptance despite non-conformity  fails to make an effective rejection o UCC 2-607: once buyer accepts he must pay contract price and cannot reject for nonconformity, unless buyer reasonably believed that seller would promptly cure nonconformity and seller fails to do so  Seller must cure any non-conformity buyer reasonably seller had agreed to cure  If seller does not cure 2-608(1)(a), the buyer can revoke acceptance  Otherwise: buyer can only later revoke acceptance if buyer, with burden, can show a significant impairment of value

VIII. Remedies (damages)

A.
y

Remedies in Equity

Rescission: Resets to before the contract was performed o Must be because of something mutual  Mutual agreement to rescind  Mutual mistake y Exception: see Elsinore o Unconscionability o To get rescission, need both:  Material breach and  Favorable equity

y y

Other remedies in the contract are relevant to court s decision in determining whether equities favor rescission

Specific Performance: o One must persuade the court that:  Any monetary damages would be inadequate (due to unvaluability) y Family heirloom y Unique piece of land  Balance of the equities is in your favor o Court cannot affirmatively order specific performance of personal service contract  Can enforce negative covenant not to work elsewhere y Limited circumstances

B.
y

Remedies at Law

Expectancy Damages: o P Phrase: put the promise in the position he would have been in, had the promisor performed (Hawkins) o Diminution of value o Cost of completion  Normal damages unless would be economically wasteful/inefficient  Even if economically wasteful/inefficient, if the damaged party would complete it on its own because of some idiosyncratic value = cost of completion y BOP on damaged party o Only gets difference between contract price and market price at time and place of delivery (Acme Mills) o Installment Contract: look at difference between contract price and market price as of the time and place of EACH installment  Different for each installment as market price fluctuates (Missouri Furnace) o UCC 2-712: If promisee covers, then the damages are difference between cover price and contract price o Fungible Goods: if the buyer breaches a contract to purchase a fungible good, resale of the goods by the seller does not absolve the buyer from paying full damages  2 sale rule (Neri)  SEE UCC FOR ALL DAMAGES INVOLVING GOODS o Promisee only compensated for actual losses Limitations on Expectancy damages: o Mitigation: once promisee knows of promisor s breach, promisee must work to mitigate damaged caused  Non-breaching party entitled to expected profit plus expense incurred prior to breach  Contract price less expenditures saved by breach  See UCC2-709/2-713  Second sale is not mitigation when goods are costlessly expandable

y Kiearsage  An employee must accept a new job, if the terms/conditions are not inferior to the job lost because of the breach (Parker v. 20th Cent. Fox) o Consequential damages: promisee receives 1)direct consequences that arise in the ordinary course of the breach 2) what was reasonably foreseen by both parties as of contract formation as a consequence of breach (Hadley)  Restatement: court can limit as it deems appropriate  Holmes requires some sort of agreement, even if it is tacit agreement that contemplates payment for special circumstances (Globe)  UCC 2-715(2): foreseeability not necessarily foreseen o No emotional distress damages in contracts (Valentine) o No speculative damages o No damages for efficient breach o Promisee has burden of proving damages Reliance Damages: where expectancy is too speculative do reliance damages instead o Reimburse the promisee for expenses made in the expectation of performance o Cannot be expenditures before the contract was made (Dempsey) o If working on something that prevents you from working on another project you still cannot collect  Too hypothetical and theoretical  If you can pinpoint to something and show with certainty that you would have been able to make money had it not been for spending time on the contract that was breached you can collect o Promisee can recover expenses incurred in reliance of contract with promisor, minus the losses incurred had the contract had been fulfilled  Breacher must prove that it was a losing for the promisee Restitution: claim for unjust enrichment o Off contract theory of recovery  Unenforceable contracts cannot recover expectancy go to restitution o Claim for conferral of benefit on the promisor by the promisee unjustly enriching the promisor  Promisor must show donative intent to rebut the claim  Not for losses incurred by the promisee o If you get to a certain point in the contract where its basically complete (like GFSP) will not have claim for restitution, only have claim for contract price o Employment Restitution  If the employee breaches the contract, he can seek restitution for the value of work performed, measured as % of the contract price equal to the % of the work he performed minus damages that his breach caused the employer  Does not work in continuous employment o Contractor Restitution:

Where a contractor delivers GFSP there is no breach If there are a few small things that are off, and the owner refuses to pay recovery is the agreed upon contract price minus the decrease in diminution of value resulting from deviations from the contract o Property Restitution:  Where buyer of property breaches after making a down payment, can recover down payment as restitution less damages incurred by the seller from the breach Liquidated Damages o Court will only enforce liquidated damages clause where:  Actual damages are difficult to ascertain at time of breach (Samson)  Amount agreed upon is good faith reasonable estimate of damages (Samson)  The court does not deem it to be penalty (Muldoon) o Limited liability clause is more likely to be enforced: not a penalty agreed upon to statement to limit liability o UCC 2-718(1): reasonableness of pre-estimate can be determined as of contract formation or time of breach  

C.
y

Promissory Estoppel

If there is no enforceable contract, courts can enforce promissory estoppel if: o There was a promise from the promisor to the promisee o Foreseeable that the promisee would rely on the promise o The promisee actually does reasonably rely on the promise o The reliance is of a definite and substantial nature o Injustice can only be avoided by enforcement of the promise party seeking to invoke promisory estoppel for an otherwise unenforceable contract under the statute of frauds (employer contract), must show clear and convincing evidence of fraud (Stearns) option contracts are subject to promissory estoppel