Leftsin - Fall Contracts Outline 2006 Adam Maldonado Remedy for Party in Breach...........................................................................................20 Implied in fact or implied in law...................................................................................

22

[MUTUAL ASSENT]
REACHING AN AGREEMENT The formation of a contract requires TWO basic elements 1. The mutual assent of the parties meeting of the minds 2. Some showing that assent was the kind the law will enforce RS 17 Contract Formation The formation of a contract requires a bargain in which there is a manifestation of mutual assent (a meeting of the minds) to exchange and a consideration. RS 18 Manifestation of Mutual Assent A manifestation of mutual assent to an exchange requires that each party either make a promise or begin or render a performance RS 19 Conduct as Manifestation of Assent The manifestation of assent may be made wholly or party by written or spoken words or by other acts or by a failure to act The conduct of a party is not effective as a manifestation of his assent UNLESS he intends to engage in the conduct and knows or has reason to know that the other party may infer from his conduct that he asserts that he intended to form a contract The conduct of a party may manifest assent even though he does not in fact assent. In such cases a resulting contract may be voidable because of fraud, duress, mistake, or other invalidating clauses. THE OBJECTIVE THEORY The objective theory focuses on whether a bargain has been formed through the mutual assent of the parties (meeting of the minds) and is determined by examining what a reasonable person in the position of each party would be led to believe by the words and/or conduct of the other party in the particular circumstances. YES Objective Intentions (outward manifested intentions) NO Subjective Intentions (inner thoughts) Objective Theory of Assent SUBJECTIVE OBJECTIVE

Leftsin - Fall Contracts Outline 2006 Adam Maldonado Intent Inner thoughts of the partiesIntent External manifestations Reaction Of individual in question Reaction RPP in same circumstances Subjective twist: The party claiming assent or lack of assent must reasonably believe there is assent or lack of assent. Otherwise, there is no reliance on the K RULE: Subjective theory is far too difficult for the court to determine Embry v. McKittrick [Ps contract with D expired/ P asked supervisor to extend contract/ disagreement as to whether contract was extended or not] The meeting of the minds that is essential to the formation of a contract is not determined by the secret intentions of the parties but of their outward expressed intentions. RULE: Secret intentions will not destroy an otherwise valid contract / only look to outward intent Lucy v. Zhemer [P believed D sold him farm while two were drinking in tavern. D wrote contract on napkin/ D claimed it was a joke/ court upheld contract] If a partys outward manifestations lead a RPP to believe a contract is formed, the claim that the assentor was not serious or was joking is not a valid claim that the contract should be terminated. Secret intentions will not destroy an otherwise valid contract/agreement. (ex of subjective twist) OFFERS An offer is the manifestation of a willingness to enter into a bargain made in such a way that a reasonable person would believe they could conclude the bargain by accepting it. A valid offer creates the power of acceptance. RS 24 Offer Defined Is a manifestation of willingness to enter into a bargain that justifies another persons understanding that his assent to the bargain is invited and will conclude it. General Elements Communicated between parties Indicates a desire to enter into a contract Directed at a person or group of persons Provides an invitation for acceptance Possible a contract will arise without further negotiations Terms of Certainty Established Parties Identified Price Subject Matter Time of Performance Naked Offer Nudem Practicum where there is no promise for performance or promise for promise then it is not the type of offer the court will enforce

Leftsin - Fall Contracts Outline 2006 Adam Maldonado

RS 29 To Whom an Offer is Addressed The offeror determines the person in whom is created the power of acceptance UCC 2-204 Gap Items Offers do not have to be complete so long as there is sufficient INTENT present. The offer creates the power of acceptance even though some terms may be undefined or subject to further negotiation Terms that the UCC will Fill-in - Open price term - Absence of specified place of delivery - Absence of specific time provisions - Notice of termination - Open time for payment or running credit; authority to ship under reservation * Note: court will NOT fill quality under gap 2-204 Preliminary Negotiations RS 26 Preliminary Negotiation Defined 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. UCC 2-206 Offer & Acceptance in the Formation of a Contract UCC 2-206: Offer and Acceptance in the Formation of a Contract i. An offer to make a contract shall be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances ii. An order or other offer to buy goods for prompt or current shipment shall be construed as inviting acceptance either by a prompt promise to ship or by the prompt or current shipment of conforming or non-conforming goods, but such a shipment of non-conforming goods does not constitute an acceptance if the seller reasonably notifies the buyer that the shipment is offered only as an accommodation to the buyer iii. If offeror is not notified of acceptance within a reasonable time, it may treat the offer as having lapsed. Counter Offer A counter offer is an offer made by an offeree to an offeror that concerns the same subject matter as the original offer, but differs in its terms. A counteroffer terminates the offerees power of acceptance, on the same rationale that applies to rejections

Leftsin - Fall Contracts Outline 2006 Adam Maldonado RULE: Additional terms must be independent of the original offer, otherwise it is a does not mirror and is a COUNTEROFFER Ardnete [D agreed to sell property to P for specified price. D sent offer letter to P. P signed offer and sent back a letter stating additional requests. D rejects request] An acceptance may not impose additional conditions on the offer nor may it add limitations UNLESS the additional conditions are independent of the original offer. A counter offer kills the original offer. Inquiries and Requests The offerees power of acceptance is not terminated by an inquiry concerning the offer or by a request for different terms. EX: would you consider adding...? Advertisements The general rule is that advertisements are normally deemed to be invitations to deal rather than offers. The rule is typically based on one of the following basis: Advertisements are usually indefinite as to quantity and other terms Sellers ought to be able to choose with whom they will deal Advertisements are typically addressed to the general public Rewards Contracts Rewards contracts are the EXCEPTION to the general rule that advertisements are not offers. The offeror implies that he does not need notification of acceptance as is evidenced by nature of advertisement. EX: Lost dog posters, free pizza for first 100 patrons RULE: If a party implies that performance will constitute acceptance the performing party needs not give any more notice than the performance itself Carill v. Smoke Ball [Advertisement for $$$ if you got a disease while using product] A continuing offer may be accepted by performance of the condition named in the offer. If a particular mode of acceptance is implied, then whatever mode that is may be reasonably followed. RULE: An advertisement will not constitute an offer unless it contains language implying a party can take action without further communication to the offering party Leonard v. Pepsico [ad on tv for pepsi points/ P attempts to purchase jet] The general rule is that an advertisement is NOT an offer. An advertisement does not constitute an offer UNLESS it contains some language of commitment or invitation to take action without any further communication. RULE: An advertisement is not an offer if it contains general nonspecific terms Nebraska Seed v. Harsh [D sent P a letter saying he had 1800 or so lbs of seed he wished to sell/ P wrote back accepting the offer/ D did not deliver seeds/ P sued for breach of contract] An advertisement of a product is not an offer if it contains general, nonspecific terms such as an advertisement (no time or place provided due to its general terms) RS 33 Certainty of Terms (Traditional View)

1. 2. 3.

Leftsin - Fall Contracts Outline 2006 Adam Maldonado Even though a manifestation of intention is intended to be understood as an offer, it cannot be accepted so as to form a contract UNLESS the terms of the contract are reasonably certain Terms are reasonably certain if they provide the basis for determining the existence of a breach and for giving an appropriate remedy (modern court approach) If one or more terms of a proposed bargain are left open it may show that a manifestation of intention is not intended to be understood as an offer or as an acceptance (typically: parties, price, subject matter, and time of performance) UCC 2-204 Formation in General (Departs from Restatement) - A contract for the sale of GOODS may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such conduct - An agreement sufficient to constitute a contract for the sale of goods may be found even though the moment of determination is undetermined - Even if one or more terms are left open in a contract for a sale of goods it will not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving the appropriate remedy UCC 2-305 Open Price Term (gap filler) -Parties can conclude a contract for a sale of goods even if the price is not fixed IF - Nothing has been said as to the price - The price is left to be agreed by the parties and they fail to agree - The price is to be fixed in terms of some agreed market or other standard as set or recorded by a third person or agency and is not so set or recorded - A price to be fixed by the seller or buyer means a price for him to fix in good faith - Where the parties intend to be bound unless the price be fixed or agreed and it is not fixed or agreed there is no contract. -In such a case the buyer must return any goods already received or if unable, must pay their reasonable value at the time of delivery and the seller must return any portion of the price paid on the account. UCC 2-308 Absence of Specified Place for Delivery (gap filler) A place for delivery of goods is the sellers place of business or if he does not have a place of business it is his residence UCC 2-309 Absence of Time of Delivery (gap filler) - The time of shipment shall be made in a reasonable time. - Where the contract provides for successive performances but is indefinite, it must be a reasonable time but can be terminated at any time by either party. - A termination of a contract by one party must provide reasonable notification unless otherwise identified in the contract UCC 2-310 Open Time for Payment or Running of Credit - Payment is due at the time and place at which the buyer is to receive the goods

Leftsin - Fall Contracts Outline 2006 Adam Maldonado - Goods may be shipped under reservation and buyer may inspect the goods before transfer of title and before payment is made - When shipping on credit, the credit period runs from the time of shipment but post dating invoices or delaying the dispatch will correspondingly delay the starting of the credit period Offer vs. Proposal 1. Words used in communication (usually more vague, more preliminary) 2. Omits significant terms 3. Not specifically directed at a particular group 4. Relationship of parties 5. Common practices of industry Written Memorial Contemplated RS 27 Existence of Contract Where Written Memorial is Contemplated Manifestations of assent that are in themselves sufficient to conclude a K will not be prevented from so operating by the fact that the parties also manifest an intention to prepare and adopt a written memorial thereof, but the circumstances may show that the agreements are preliminary negotiations. RULE: A party will not be forced to be bound if that party does not manifest an intent to do so Embro v. Ball Co. [P and D drafted and signed letter of intent for transaction/ D backed out and P argues letter of intent had the effect of binding D into a contract] Parties who have made their pact subject to a later definitive agreement have manifested an intent NOT to be bound. The purpose of a letter of intent is to set out preliminary terms and list others that need to be finalized (usually at a later point in time) Revoking An Offer A revocation may be given at any time prior to acceptance. The offeror has the power to revoke his offer anytime BEFORE the offeree accepts. RULE: An offeror may revoke his offer at any time prior to the offerees acceptance where an option does not exist Dickinson v. Dodds [Letter, agreed to sell house/ had until Friday at 9am/ heard offeror agreed to sell to someone else/ attempted to accept offer even though he knew offeror intended to sell to someone else] An offeree may not bind an offeror by accepting a revoked offer even if the revocation had not been communicated prior to acceptance. General rule is that the offeror can revoke the offer at ANY TIME prior to acceptance by the offeree. RS 35 Offerees Power of Acceptance An offer gives to the offeree a continued power of acceptance. A contract cannot be created by acceptance after the acceptance has been revoked (see RS 36) RS 36 Methods of Termination of Power of Acceptance 1. Rejection 2. Counter Offer

Leftsin - Fall Contracts Outline 2006 Adam Maldonado 3. 4. 5. 6. Lapse of Time Revocation by offeror Death or Incapacity of either party Non-Occurrence of any condition of acceptance under the terms of the offer

Option Contracts An option is a promise to keep an offer open for a stated period of time. The offeree must give something to the offeror (money or something else) to satisfy the requisite consideration to validate the option. In effect, the offeree purchases the option for a price. Option contracts are the exception to the rules of revocation Public Policy Argument Court will enforce it if the option contract 1) seems genuine and fairly bargained and the 2) term period of the option is not unreasonably long. Even a $1 consideration may be ok as it demonstrates an official intent to be bound. RS 25 Option Contract Defined An option contract is a promise which meets the requirements for the formation of a contract and LIMITS the promissors power to revoke an offer RS 37 Option Contract / Power of Acceptance The power of acceptance under an option contract is NOT terminated by ejection, counter-offer, by revocation, or by death or incapacity of the offeror UNLESS the requirements are met for the discharge of a contractual duty Firm Offers If 2-205 criteria are met, consideration is not needed to make the offer irrevocable for the time stated or for a reasonable time if any expiry date is specified. The time period of irrevocability is limited to three months unless otherwise specified. Merchants Defined Firm offers apply when the offer is to buy or sell goods is made by a merchant who trades professionally in goods of a particular kind. UCC 2-205 Firm Offers Defined Open offers by MERCHANTS are not recoverable for lack of consideration UNLESS it is in signed writing and states the offer is irrevocable for a reasonable amount of time (no longer than 3 months) Public Policy

Leftsin - Fall Contracts Outline 2006 Adam Maldonado Merchants are professionals and do not need specifics / it would be too burdensome for them to impose same standards / it would slow down commerce K cant be revoked during performance implied option K ACCEPTANCES Mirror Image General rule that an acceptance must mirror the terms of the original offer. If the offeree stipulates a condition or limitation, it is considered to be a COUNTER OFFER not and acceptance. A counter offer is a REJECTION which destroys the original offer RULE: An acceptance based on a condition or limitation is a counter offer that kills the original offer Ardente v. Horan [D offered house to P/ P sent purchase agreement, deposit, and letter stating additional condition that furniture come with sale] An acceptance that is predicated upon a condition or a limitation is a COUNTER OFFER and requires an acceptance by the original offeror BEFORE a contractual relationship can exist. Different Possible Responses to Offer Rejection Acceptance Counteroffer (which equals a rejection) Acceptance + offer to modify Inquiry (effect of taking bargain under consideration, wondering if offeror would consider another bargain while still maintaining original offer. An inquiry is neither an acceptance or a rejection of an offer.) Negotiation Possibilities CONDITIONAL ACCEPTANCE + COUTNER OFFER = REJECTION REQUEST FOR MODIFICATION + ACCEPTANCE = ACCEPTANCE ACCEPTANCE + SEPARATE CONTRACT OFFER = ACCEPTANCE NON-COMMITTAL + SEPARATE CONTRACT OFFER = WAIT FOR REPLY RS 61 Acceptance Requesting Change of Terms An acceptance which requests a change or addition to the terms of the offer is not thereby invalidated UNLESS the acceptance is made to depend on an assent to the changed or added terms UCC & Mirror Image Rule The UCC doesnt have a Mirror Image Rule but UCC 2-206 says in part: An order or other offer to buy goods for prompt or current shipment shall be construed as inviting acceptance either by a prompt promise to ship or by the

Leftsin - Fall Contracts Outline 2006 Adam Maldonado prompt or current shipment of conforming or non-conforming goods, but such a shipment of non-conforming goods does not constitute an acceptance if the seller reasonably notifies the buyer that the shipment is offered only as an accommodation to the buyer Mailbox Rule The general rule is that acceptance is effective upon dispatch. An acceptance by the offeree takes place upon putting the acceptance in the mail REGARDLESS as to whether the offeror ever receives it. Risk is placed on offeror NOT offeree. *** Note: it is the offeror who determines whether acceptance will be effective upon receipt OR if mail delivery will suffice. The offeree cant revoke acceptance after dispatch even if he intercepts it If revocation arrives prior to acceptance the contract is still valid Certain rights of the parties may be affected. Attempt to revoke may be an offer to revoke, may be considered repudiation RS 63 Time When Acceptance Takes Effect - Acceptance is made in a manner invited by the offer, the assent takes place once the acceptance if out of the offerees possession, whether or not it reaches the offeror HOWEVER an acceptance under an option contract is not operative until it is received by the offeror (this is an exception to the rule as it switches risk allotment) NOTE: when the offeror does not specify the manner of acceptance the offeree is free to choose a valid form of his choosing; only if the offeror does not specifcy RS 64 Acceptance by Telephone Same as it would be had the acceptance been in person RS 65 Reasonable Medium of Acceptance A method of acceptance used by the offeror or by custom of the industry will suffice RS 66 Acceptance Must be Properly Dispatched Offeree has to correctly address the mail otherwise it is NOT an acceptance Silence as Acceptance The general rule is that the silence of an offeree does not constitute acceptance. The purpose is to prevent the offeror from placing the offeree in a situation where the offeree must either take an affirmative action to reject the offer or else become liable on contract. RULE: A prior history of dealing may allow a partys silence as a valid form of acceptance Hobbs [P sent eelskins to D/ D kept for months until they were destroyed/ P received no notice D declined to accept/ prior relationship of acceptance by silence existed between P and D]

Leftsin - Fall Contracts Outline 2006 Adam Maldonado Conduct which imports acceptance or assent is acceptance or assent in view of the law, regardless of what may have been the actual state of mind of the party when an existing relationship exists. While silence is usually NOT a sign of assent, if the parties have a history of similar interactions it may be ok. RS 69 Benefit & Silence Where one party takes the benefit of services from another party with an opportunity to reject the services, the partys silence is said to be a form of acceptance. EX: piano lesson hypo Silence will operate as acceptance in the following situations: 1. Where an offeree takes on the benefit of the offered services with reasonable opportunity to reject them and reason to know that they were offered with the expectation of compensation. (services) 2. Where the offeror has stated or given the offeree reason to understand the assent may be manifested by silence or inaction, and the offeree in remaining silent and inactive intends to accept the offer. 3. Where because of previous dealings or otherwise, it is reasonable that the offeree should notify the offeror if he does not intent to accept. 4. If offeree exercises dominion over the goods or acts inconsistent with the offerors ownership of the goods (goods) Note: Under RS 69 if you received unsolicited magazines and kept them and read them (exercised dominion) you would be charged for them despite not ordering them. (state/fed law sometimes protects consumers from such situations) Bilateral Acceptance Bilateral acceptance occurs most often in contracts between parties. Bilateral acceptance requires notice of acceptance. PROMISE PROMISE Unilateral Acceptance / Accepted by Performance A unilateral contract arises when there is an agreement pursuant to which a party agrees to act or to forbear from acting in exchange for performance in the part of the other party PROMISE PERFORMANCE RS 54 Acceptance by Performance - If an offeror invites an offeree to accept by performance, then no notification is necessary UNLESS the offeror requests such notification. (EX: lost dog posters) - The contractual duty of the offeror is discharged if the offeree knows that the offeror has no adequate means of learning of performance with reasonable promptness and certainly UNLESS:

Leftsin - Fall Contracts Outline 2006 Adam Maldonado - The offeree exercised reasonable diligence to notify the offeror of acceptance OR - The offeror learns of performance within a reasonable time OR - The offeror indicates that notification of acceptance is not required RS 32 Invitation of Promise or Performance When doubt arises an offer is interpreted as inviting the offeree to accept either by promising to perform what the offer requests or by rendering the performance, as the offeree chooses RULE: An offeror may revoke even if the offeree begins performance in bilateral contracts if the offeree begins performing without first notifying the offeror of such performance White [furniture and paneling to put in office/ requested notice/ worker didnt notify and bought materials] K was bilateral requiring notice of acceptance therefore the offeror could revoke the offer even though performance had begun. RS 45 Option Contract Created by Part Performance or Tender Where an offeror invites an offeree to accept by rendering a performance and DOES NOT invite a promissory acceptance, an option contract is created when the offeree tenders or begins the invited performance or tenders a beginning of it. The offeror loses power the power to revoke the offer when the offeree begins performance. NOTE: offeror must express that performance is only notice necessary Example: Bridge Hypo If I promise to pay you $100 for walking across the bridge I am making a unilateral contract with you whereby we are contracting a promise (I pay you $100) for a performance (you walk the bridge). RS 45 implies a fictional option contract the power to revoke my offer is limited once performance has begun. PPR: I cant revoke once you begin crossing the bridge as that would lead to injustice. E-Commerce & Mutual Assent Although jurisdictions vary as far as how they treat intangibles such as the transfer of software, software is generally considered to NOT be a good. (Restatement governs) Shrink-wrap licensing Presents user with a message on the package of the software explaining that the purchaser manifests his assent to the software licensing agreement of the product by unwrapping the shrinkwrap on the software. Click-wrap licensing

Leftsin - Fall Contracts Outline 2006 Adam Maldonado Presents user with a message on their computer screen, requiring user to manifest their assent by clicking on an icon. The product cannot be obtained unless the icon is clicked. Browser wrap Clicking on a link that states that by clicking on the link you are assenting to the licensing agreement but no preventive steps are taken if you do not actually read the licensing agreement. Courts does not find these as valid contracts. No evidence of assent. Limitations Terms and condition of k must be easily viewable (Ticketmaster), and you must be required to review prior to acceptance (encouraging to review is not enough Netscape), you must also have option of opting out (MSN). You may imply assent by clicking I have read or I accept. In MSN case, you could not download until you clicked I agree on all required screens.

RULE: User must have an opportunity to view the terms and must actively assent to them Caspi v. Microsoft [class action alleging fraud for rolling over plans to more expensive ones/ Ps had to assent by clicking I agree to a form selection clause] A contracting party may be bound by the terms of a form contract even if the party did not read it. There existed 1) an opportunity to view and the party 2) had to actively assent to it. RULE: A terms & conditions clause must require a user to assent (click) for them to be valid Ticketmaster [Allegation that D breached contract by deep linking into their site/ against terms and conditions of contract] A terms and conditions clause on a homepage of a website that does not require user to click I agree to proceed does NOT create a valid contract for which a breach claim can arise; there was no mutual assent. Case is NOT like shrink wrap because the language was not obvious or hard to miss; it was barely visible on the webpage and easy for a user to miss. RULE: The act of downloading software is NOT considered a users assent to any terms or provisions Specht v. Netscape [free software downloaded by used allowing company to have access to users personal info/ no agreement before downloading software] The offer of a license agreement made independently of freely offered software and not expressly accepted by the user if the software does NOT bind the user to an arbitration clause contained in the license. Act of downloading is NOT assent. RULE: A user clicking I assent to terms is different than a user clicking download Specht #2 [Spect #1 appealed on a basis that reasonable person would know existence of terms]

Leftsin - Fall Contracts Outline 2006 Adam Maldonado Where consumers are urged to download free software, mere reference to the existence of license terms on a submerged section of the screen does NOT place consumers on inquiry notice or constructive notice of the terms. Note: I Accept is DIFFERENT than Download Court rejects Inquiry Notice

[INTERPRETING THE CONTRACT]

General Principles The objective theory dominates the interpretation of contracts. Subjective evaluation displaces the objective theory if the parties subjectively agree upon the meaning of terms within the contract. However, if the parties subjectively disagree (a TIE occurs), it is important to determine which partys understanding will control: Primary Question: Does one party know or have reason to know of the meaning attached to the term by the other party? If YES the innocent party / ignorant partys meaning controls. A party who knows cannot reasonably be relying on the terms ambiguous meaning while the innocent party will be rely on their meaning. If NO There is no agreement on that specific term. The parties subjectively disagree and there is no way to resolve such ambiguity. MISC ambiguity of a term may not always amount to a failure in assent; it may be unnecessary to determine the meaning of a term and assent can still result OR it may be possible for the court to supplement the term itself General Rule: You are only held to the other partys understanding, if you know or had reason to know the other partys understanding. AMBIGIOUS TERMS Ambiguous terms are words without clearly defined meanings. The issue concerns the determination as to which meaning was intended. (EX: arms = guns or body part)

Leftsin - Fall Contracts Outline 2006 Adam Maldonado RS 201 Whose Meaning Prevails (breaking the tie) Where the parties have attached the same meaning to a term it is interpreted in accordance with that meaning. Where the parties have attached different meanings it is interpreted in accordance with one meaning IF: 1. A party didnt know of the different meaning attached by the other and the other knew of the meaning assigned by the first party OR 2. A party had no reason to know of a different meaning attached by the other, and the other had reason to know the meaning attached by the first party. Neither party is bound by the meaning attached by the other, even though the result may be a failure of mutual assent. RS 202 Rules in Aid of Interpretation Court looks to 1) words or conduct in light of all the circumstances 2) writing interpreted as a whole 3) the course of dealing or usage of trade norms 4) whatever has been accepted by performance by the parties 5) technical meaning of terms given technical / general meaning *Rules are Objective RULE: If parties affixed different meanings to a material contract term then no mutual assent existed Raffles [P agrees to sell D cotton that would arrive on the peerless ship/ there were two ships with that name arriving at different times] Where neither party knows or has reason to know of ambiguity surrounding a contract term it is given the meaning that each party subjectively intended it to have. If different meanings were intended and the ambiguity relates to a material contract term then there is NO contract because there was NO mutual assent. RULE: No rational basis exists for the court to exact a rational basis for siding with one party over another if one of the parties was or should have been aware of the others affixed meaning Oswald [P thought he was getting all Swiss coins/ D though she was selling only the Swiss collection which was only part of the entire collection/ language barriers present] When any of the terms used to express an agreement is ambivalent, and the parties understand it in different ways, there cannot be a contract UNLESS one of them should have been aware of the others understanding. In this case, there exists no rational basis for siding with one side or the other. UCC 1-205 Course of Dealing & Usage of Trade Court looks to 1) course of dealings between parties 2) standard of the industry 3) expressed terms in the agreement Express Terms History Standard (order of importance) UCC 2-208 Course of Performance / Practical Construction Objective Rules for Interpretation 1. Acquiescence without rejection will be relevant in determining contract validity if situation involves repeated occasions for performance with the party given knowledge of the nature of the performance and an opportunity for objection 2. When evaluating the express terms, course of performance, course of dealings,

Leftsin - Fall Contracts Outline 2006 Adam Maldonado and usage of trade, the Express Terms control over all followed by the course of performance which controls over the course of dealing and the usage of trade VAGUE TERMS Vague terms are those which do not have a fixed or precise meaning. The issue concerns to what extent the words were meant to apply beyond their agreed core meaning. (EX: green = color or political party) RULE: A tie may be broken if the court is able to determine an objective meaning of a material K term Weinberg [D had a restrictive covenant and could not sell dresses in mall/ D sold skirt and blouse matching sets which court determined were NOT dresses] Court found an objective meaning of dresses based on the usage of the trade. The objective meaning happened to conform with the Ds meaning of dresses. Case involved a situation where an ambiguous term (dresses) existed but there was a way for the court to break the tie (objective meaning). Note: Case different from Raffles due to presence of objective meaning. RULE: The party seeking interpretation of a material term in a narrower sense than its everyday use has the burden of showing it was used in that sense rather than its generally accepted broader usage Frigaliment [chicken case/ what constitutes a chicken? Fryer vs. stewing] Where a term in a contract for the sale of goods is vague, the court will look to the context of the contract AND look to the trade use of the term to determine its meaning. The party that seeks to interpret the terms of the contract in a narrower sense than the terms everyday use has the burden of showing the term was used in the narrower sense rather than is broader usage. Establishing Objective Meaning Tools & Evidence used in that effort (in order from most important) 1. Contract itself / Express Terms 2. Actual negotiations b/w P & D 4. Course of performance (P & D) 5. Course of dealing (previous K) 6. Usage of trade \ Indefiniteness / Gaps UCC 2-204 Gap Items Offers do not have to be complete so long as there is sufficient INTENT present. The offer creates the power of acceptance even though some terms may be undefined or subject to further negotiation Terms that the UCC will Fill-in - Open price term - Absence of specified place of delivery - Absence of specific time provisions - Notice of termination - Open time for payment or running credit; authority to ship under reservation

Leftsin - Fall Contracts Outline 2006 Adam Maldonado * Note: court will NOT fill quality under gap filling Specified Time Although the UCC provides that the court has a propensity toward enforcing contracts even when certain terms are vague or ambiguous, the court may not enforce a contract due to a failure of a specified time. RULE: The absence of a specified time may complicate the courts ability to enforce the contract Sun Printing [initial negation for price BUT price terms left open for determination at a later time] Cardozo: the absence of a time term makes it difficult to appropriate a remedy; the contract may be invalid due to the failure to specify a time. Contract lacks 1) price and 2) length of term

[REMEDIES]
DAMAGES FOR BREACH OF CONTRACT EXPECTATION INTEREST The default rule of K law is that a non-breaching party is entitled to expectancy, or the benefit of the bargain: damages sufficient to put the non-breaching party in as good a position as if the breaching party had performed. The court seeks to place the P in the position he would have been in had the contract been performed by the D. This is a forward looking remedy. Damage Calculation The formula for calculating expectation damages is equal to the loss in value (missing profits), any other loss incurred (incidental and consequential) minus any gains made or costs avoided . Damages (Expectation -Restatement 347) = loss in value + other loss loss avoided (salvage value) cost avoided (other ks you could get due to breach) OR Damages (Expectation -Restatement 347/Hooker) = Net Expectance or net profit (value expected costs) + other loss (incidental costs + consequential damages) gains made (salvage value) - cost avoided (other ks you could get due to breach/$ saved from not performing) UCC / Cover Price Market price contract price

Leftsin - Fall Contracts Outline 2006 Adam Maldonado When terms are certain you can use the formula for cost of cover for contracts for services in addition to contracts for goods. Definitions Essential Reliance: Cost of performing the promisees (NBP) own obligations under the K. Cancels out under RS (if awarded under other losses you would be getting it twice.) Incidental Reliance: Cost of attaining substitute performance Costs which are not related to your own performance under the K. Expenses that did not have to be made in order to perform your side of the deal. Damages include such items as transportation expenses, storage expenses, and other small but direct expenses associated with the breach and buyers attempts to cover for it. (Caused by but not flowing from) Consequential Reliance: Costs which are foreseeable as a result of breach (aka: costs that flows from the breach). Include the profits which the buyer could have made by reselling the contracted-for goods had they been delivered. These profits must be proved with appropriate certainty, and must be shown to have been reasonably foreseeable at the time of the contract.

RULE: Buyers damages is the difference b/w the expected value and the present value Hawkins v. McGee [ Harry Hand Case] Measure of a buyers damages is the difference between the expected value and the present value of the hand. RULE: Buyers damagers are measured by value of goods as they would have been if the warranty as to the quality had been true minus the actual value at time of sale plus any incidental consequences. RULE: The jury has the power to award special damages; those in excess of the particular items value Nurse v. Barns [ D promised P he could use iron mill in exchange for a price] Special damages may be awarded for breach. In this case, the use of the iron mill; special damages for the stock laid in for using it. Awarding special damages is at the courts discretion. RULE: A party is only entitled to recover expenses that would not have otherwise occurred absent the breach. Hooker v. Roberts [duty to dispose cabinets / issue calculating damages / sale of services even though] P could not cover storage costs because it was already paying rent / had breach not occurred it would have had to pay regardless. RULES: 1) A party is only entitled to recover damages for expenses in storing goods that it would not otherwise have incurred absent the other partys breach. 2) A party is only entitled to recover wages paid to an employee whose labor resulted in no economic value because of breach RULE: Proper damage measure in sale of goods is the difference b/w market and contract price. Tongish v. Thomas [sunflower seeds / market drops / seller back out]

Leftsin - Fall Contracts Outline 2006 Adam Maldonado In the action for breach of contract for the sale of GOODS, the proper measure of damages is the difference between the market price value of the goods and the contractually agreed price of the goods by the parties. Court does not care with P plans to do with the goods. LOST VOLUME RULE General UCC Lost Volume A seller who can accommodate more than one buyer and has an UNLIMITED supply of goods may seek the difference from the market price and the contracted price PLUS incidentals. If this does not sufficiently restore him to his expected position, since but for-the buyers breach he would have had two sales, he may recover lost profits plus any incidentals. UCC 2-708 Sellers Damages for Non-Acceptance or Repudiation A seller can recover the difference between the market price and the contracted price PLUS any incidental damages minus any expenses avoided as long as the amount of damages is sufficient to place the seller in as good a position as performance would have done OR the seller may recover lost profits plus incidental damages and reasonable costs Lost Volume UCC 2-708 Unique good or service Unlimited supply damages = market price contract price + incidentals + other reasonable costs damages = lost profit contract price + incidentals + other reasonable costs

RULE: When a seller has an unlimited supply of goods and the buyer breaches the seller is entitled to the profit they would have expected; we assume they will always have one less sale due to the breach Neri v. Retail Marine Corp [UCC Boats / Lost Volume Case // P contracted to buy boat then reneged on offer/ D had already ordered and received boat/ D refused to refund Ps deposit] The seller would have made two sales but for Ps breach; the seller therefore is entitled to both profits assuming the seller had an unlimited supply of goods (boats). Lost Volume Rule when a lost volume situation occurs, (where volume is not decreased due to the breach), the P is entitled to the profit they expected under the breached transaction RELIANCE INTEREST The purpose of the reliance interest is to put the non-breacher in the position he would have been had the contract not been made. The reliance interest is backward looking. RS 349: Damages Based on Reliance Interest As an alternative to expectation damages, the injured party has a right to damages based on his performance, minus any that the party in breach can prove with reasonable certainty non-breaching party would have suffered had the K been performed.

Leftsin - Fall Contracts Outline 2006 Adam Maldonado Damage Calculation Reliance damages are equal to expenditures in preparation of contract, including incidental and consequential damages, less any loss avoided or gains made as a result of the breach. Damages (Reliance - Restatement 349) = other loss (incidental costs + consequential damages) loss avoided (salvage value) cost avoided (other contracts you would get due to the breach) Damages (Reliance - UCC) = expenditures in preparation for contract loss avoided Pre Contract Expenses RULE: An injured party can claim expenses incurred before the contract if they are reasonably w/in the contemplation of parties that the expense would be wasted if K broken. Anglia [P contracted with D to be in movie/ D breached b/c he double booked / P sued for reliance damages including expenses made before contract was formed] If the D has knowledge of the Ps previous expenditures before entering contract the D is liable for damages for the expenditures wasted by the breach. reasonably contemplated expenses RULE: The non-breaching party may choose to recover any expenses they made in reliance on the K Mistletoe Express [Mistletoe agreed to deliver for 12 months then backed out/ D spent money in reliance/ now seeks to recover / losing contract] 1) Where one party to a contract makes expenditures in preparation for performance under a contract, the proper measure of damages for breach includes the recovery of her investment in order to return her to the position she would have enjoyed had the contract been performed. 2) As an alternative to expectation, the P can choose to recover any expenses she made in reliance on her contract. Incidental / Essential Reliance Essential ONLY available under reliance. Under the reliance interest you can get these damages BUT may not be able to recoup all of them under the expectation interest. This is why you may be able to recover more under reliance than under expectancy. (ex: losing contract) RESTITUTION INTEREST The purpose of restitution interest is to put the promisor back in the position in which he would have been in had the contract NOT been made. It is the defendants value of the plaintiffs work (may recover more than the contract). It seeks to remedy unjust enrichment: when the promisee confers upon the promisor something or improves the promisors property, the promisor is said to have been unjustly enriched. Three Types of Restitution Interest 1. Restitution as a contract remedy 2. Restitution to a party in breach of a contract 3. Restitution for a quasi-contract

Leftsin - Fall Contracts Outline 2006 Adam Maldonado Damage Calculation Restitution Restatement 371 Measure of Restitution Interest: the reasonable value to the other party of what he received OR the extent to which the other partys property has been increased in value or his other interests advanced. Restitution UCC If a party justifiably refuses to perform on the ground that his remaining duties have been discharged by the other partys breach, the party in breach is entitled to any restitution for any benefit that the has conferred by part performance or reliance in excess of the loss caused by his own breach. A party is not entitled to restitution where they have provided by mutual assent for liquidated damages if the damages are reasonable in light of the anticipated or actual loss. TYPES OF RESTITUTION INTEREST Remedy for Non-Breaching Party / Typical RS 373 Restitution when the other party is in breach: the injured party is entitled to restitution for any benefit that he has conferred on the other party by way of the part performance or reliance. Occurs in situations where there is unjust enrichment by one party due to breach / unfair benefit conferred by one party to another Usually granted when the non-breaching party has made a losing contract Damages = Amount advanced + interest (if any) RULE: A party may only gain as much conferred on another party under restitution Bush v. Canfield [P contracted with D to deliver flour/ P advanced cash, D failed to deliver] The measure of damages for a failure to deliver goods is the amount advanced by the buyer plus interest. Restitution is not limited by expectation. Remedy for Party in Breach RS 374 Restitution in Favor of Party in Breach If a party justifiably refuses to perform on the ground that his remaining duties of performance have been discharged by the other partys breach, the party in breach is entitled to restitution for any benefit that he has conferred by way of his part performance or reliance in excess of the loss that he has caused by his own breach. That party is not entitled to restitution if the value of the performance as liquated damages is reasonable in light of the anticipated or actual loss caused by the breach and the difficulties of proof of loss. RULE: Under quantum meruit the breaching party may recover the value of the labor performed under the restitution interest after his breach.

Leftsin - Fall Contracts Outline 2006 Adam Maldonado Britton v. Turner [P contracted with D to work for a year/ P quite after 9 months for no reason/ D refuses to pay for any of Ps work] Where labor is performed under a contract under a specified price, the breaching party can recover in quantum meruit (i.e. the amount which he deserves, a.k.a. restitution) the value of the labor performed to the degree it is greater than the damage to the other party. The existing contract price limits recovery under quantum meruit. House HYPO [you contract with someone to build you a house/ there are slight problems] If a building is built with minor variations from the original plans, the owner still receives the benefit of the labor and materials if he chooses to live in it. Case is an example of quantum meruit. Remedies for Quasi-Contracts Quasi-Contracts are a form of legal fiction where no official promise occurs. It is used when a court wishes to create an obligation upon a non-contracting party to avoid injustice; public policy concerns. This type of contract is usually applicable in emergency or other necessity situations. RS 107 Quasi-Contracts When a person requests another to perform services, it is ordinarily inferred that he intends to pay for them, unless circumstances indicate otherwise. RS 307 Measurement of Restitution Interest It may as justice requires be measured by the reasonable market value to the other party of what he received in terms of what it would have cost the recipient to obtain the service under normal conditions OR the actual enrichment of how much was benefited to the party that was enriched Proving Quasi Contracts A plaintiff can recover in restitution or quasi-contract if he can show that: - He conferred a benefit on the defendant - He conferred the benefit with the expectation that he would be paid its value - The defendant knew or had reason to know of the plaintiffs expectation - The defendant would be unjustly enriched if he were allowed to retain the benefit without paying its value RULE: A party providing services in an emergency situation may recover for the aid rendered Cotnam v. Wisdom [doctor performed emergency aid on unconscious patient/ sought to recover value of operation despite the fact that no contract was made]

Leftsin - Fall Contracts Outline 2006 Adam Maldonado A person rendering emergency medical services may college reasonable fees even though no official contract was made due to the emergency. *** Value of aid rendered DOES NOT depend on income status of unconscious victim. The right to care is equal for poor and wealthy men alike RULE: Volunteers have no right to restitution / no quasi contract relief for volunteers Martin v. Little Brown [law student volunteered into to publishing co. about plagiarism/ after co. took action against plagiarizer/ student demanded portion of fees/ co. refused/ student claimed quasi-contract] Volunteers have not right to restitution. Implied in fact or implied in law An implied contract can either be implied in fact or implied in law. A contract which is implied in fact is one in which the circumstances imply that parties have reached an agreement even though they have not done so expressly. For example, by going to a doctor for a physical, a patient agrees that he will pay a fair price for the service. If he refuses to pay after being examined, he has breached a contract implied in fact. THREE LIMITATIONS ON DAMAGE INTEREST FORESEEABILITY RS 351: Unforeseeability and Related Limitations on Damages Damages are not recoverable for loss the breaching party did not reasonably foresee as a probable result of breach at time of of the contract. Foreseeable losses follow from breach in ordinary course of events OR as a result of special circumstances that the breaching party had reason to know. UCC 351: Unforeseeability and Related Limitations on Damages No recovery on unforeseeable damages. Loss is foreseeable only if occurs in ordinary course of events. Special circumstances need to be agreed beforehand. RULE: A party can only recover losses that were foreseeable by the other party at the time of contract Hadley v. Baxendale [broken mill crankshaft/ slow delivery/ caused lost profits/ damages were not foreseeable in case] 1) The P is only entitled to recover the measure of damages that both parties may foresee as a result of the breach at the time the contract was formed 2) The loss must be one that may fairly and reasonably considered to arise naturally OR it may be one to have been contemplated by both parties at the time the contract was formed. RULE: A partys losses do not have to be most foreseeable; they just need to be reasonably foreseeable Martinez v. South Pacific [dragline damaged and delayed/ lost profits b/c couldnt use it for 4 months/ damages were foreseeable in this case] Special damages are awarded only if actual notice of possibility of injury was given to the carrier. Ps losses do not need to be the most foreseeable, they just need to be reasonably foreseeable.

Leftsin - Fall Contracts Outline 2006 Adam Maldonado CERTIANTY RS 352: Uncertainty As a Limitation on Damages Damages are not recoverable for loss beyond the amount that the evidence permits to be established with reasonable certainty. UCC 1-106 Remedies to be liberally administered Remedies in UCC have the goal to put a party in as good a position as if the other party had fully performed. Consequential and special damages awarded only where stated in this act. RULE: A party may not recover lost profits if they are not proven with reasonable certainty Chicago v. Dempsey [contract for prizefight/ not allowed to fight anyone else/ D breached and fought] 1) An aggrieved party may not recover special damages (lost profits) unless such damages are definite and certain. 2) A party can only recover damages which naturally flow from and are the result of the act complained of. 3) The breaching party is not liable for expenditures made by the nonbreaching party before the contract was formed. 4) A party cannot recover for legal fees incurred in trying to obtain an injunction against the breaching party unless it was provided for at the time of the contract such expenses are the risk that the non-breaching party takes. 5) Salaries are recoverable only if they were hired specifically for the contract; otherwise they are like the storage costs and would have been an expense regardless of whether the contract was made or not. RULE: Certainty is a limitation on expectation damages; profits must be reasonably certain Winston Cigarette [contract for prizefight/ not allowed to fight anyone else/ D breached and fought] Uncertainty is a limitation on expectation damages. Lost profits were rejected as they were subject to too many contingencies and too dependant on market fluctuations. RULE: Recovery may include recovery of investment in preparation for performance under the reliance interest Mistletoe Expressv. Locke [L entered into K with M for pickup & delivery service/ L made expenditures in reliance of K/ M cancelled K/ L then closed business/ M argues L should only recover lost profits since she was losing money, not making profit/ M argues L should not get damages -losing contract.] 1) Where one party to a contract makes expenditures in preparation for performance under a contract, the proper measure of damages for breach includes the recovery of her investment in order to return her to the position she would have enjoyed had the contract been performed. 2) As an alternative to expectation, the P can choose to recover any expenses she made in reliance on her contract. AVOIDABILITY A P cannot recover damages that could have been avoided or mitigated w/out undue risk, burden, and humiliation. RS 350: Damages not recoverable for loss that injured party could have avoided without undue risk, burden or humiliation. Injured party not limited if he made a reasonable but unsuccessful effort to avoid loss RULE: A party may not rack up damages after a contract has been breached; duty to mitigate Rockingham v. Luten Bridge [city Ks with bridge co./ council votes to rescind K/ bridge keeps working]

Leftsin - Fall Contracts Outline 2006 Adam Maldonado 1) After repudiation of performance of the contract, the non-breaching party cannot continue to perform and expect to recover damages based on full performance. It is the non-breaching partys duty to not increase the damages flowing from the breach. 2) The measure of Ps damages after notice is given = the amount sufficient to compensate the P for labor and materials expended and expense incurred in the partial performance of the contract before the breach + profit the P would have realized if the contract had been fully carried out. RULE: Duty to mitigate does not include taking a job that is inferior or of a substantially different type or nature that the one lost Maclaine v. 20th Century Fox [P contracted with D to perform in bloomer girl/ D cancelled film and offered P another role in big man big country / D refused and sued for provits she would have made] 1) When an employer breaches a contract, the employee has a duty to try to mitigate damages, however, he is not required to accept a job that is inferior or of a substantially different kind/type/nature then the one originally contracted for. 2) Projected earnings from other employment opportunities will only offset damages if the employment is substantially similar to that which the employee has been deprived. MODIFICATIONS TO THE DEFAULT DAMAGE RULES Limits on Consequential & Incidental Damages UCC 2-719 - Contractual Modification or Limitation of Remedy (Contracting Around the Rules) A contract may provide for remedies in addition to the remedies the RS provides. Parties may limit or alter the measure of damages recoverable according to the RS, by limiting the buyers remedies to return the goods and repayment of the price or to repair and replace non-conforming goods or parts. Consequential damages may be limited or excluded unless the limitation or exclusion is unconscionable. Limitation of consequential damages for injury to the person in the case of consumer goods is unconscionable BUT limitation of damages where the loss is commercial is not. Damages that would result from breach must have been impractical or extremely difficult to assess at time contract was made AND Amount of damages fixed must be reasonable estimate of damages that would result from breach. Court in principle will not enforce agreements that it views as unconscionable or limiting the freedom of contract. (see liquidation clauses) ADHESION CONTRACTS An adhesion contract is an imprecise term used to describe a document containing nonbargained clauses that are in fine print, complicated, and/or exceptionally favorable to the drafter. Types of Adhesion Contracts 1. Refusal to enforce: If the court is convinced that: (1) the contract or the clause in question was not negotiated; and (2) the drafter had a gross disparity in bargaining power, the court may refuse to enforce the contract or clause.

Leftsin - Fall Contracts Outline 2006 Adam Maldonado 2. Tickets and other "pseudo contracts": Refusal to enforce what the court finds to be a "adhesion contract" is especially likely where the transaction is one in which the non-drafter does not even realize that he is entering into a contract at all. Parking-garage tickets, tickets for trains or planes, and tickets to sporting events, are examples: there is often contractual language in fine print on the back of the ticket, but the purchaser does not understand that by buying the ticket she is agreeing to the printed contractual terms. Unconscionability If a court finds that a contract or clause is so unfair as to be "unconscionable," the court may decline to enforce that contract or clause. See UCC 2-302(1). LIQUIDATED DAMAGES / PENALTY CLAUSES Common Law A contract that fixes the amount of damages that will be recoverable in a breach is ok if it is a liquidated damages clause. It is NOT enforceable if it is a penalty clause. Liquidated Damages Clause will be enforceable IF: - Damages that would result from the breach must have been impracticable OR extremely difficult to assess at the time the contract was made AND - The amount of damages fixed must be reasonable estimate of the damages that would likely result from the breach * If not enforceable, then use expectation / reliance damages instead Pros Bypass courts / prevents breach / prevents breaching party from receiving undue benefit from breach, which may occur in efficiency breaches Cons Challenge to power of courts / courts are uneasy about having parties do the job of courts in allocating damages / courts tend to disfavor efficiency breach Misc. Application Deposits May serve same purpose as liquidated damages; may be recovered to the extent it exceeds innocent partys actual damages UNLESS deposit itself has valid liquidated damages provision UCC / Restatement UCC 2-718 Liquidation or Liquidation of Damages

Leftsin - Fall Contracts Outline 2006 Adam Maldonado Damages for breach may be liquidated ONLY at a reasonable amount in light of the anticipated or actual harm suffered. A term fixing unreasonably large damages is VOID as a penalty when: 1. the seller justifiably withholds the delivery of goods because of the buyers breach, the buyer is entitled to restitution of any amount by which the sum of his payments exceeds. * Possible to look at time of contract or time of actual breach Restatement 355 Punitive Damages Punitive damages are not recoverable for a breach of contract UNLESS the conduct constituting the breach is also a tort for which punitive damages are recoverable. Restatement 356 Liquidated Damages and Penalties Damages for breach by either party may be liquidated in the agreement BUT only at the amount that is reasonable in light of the anticipated or actual loss caused by the breach and the difficulties of proof of loss. A term fixing unreasonably large liquidated damages is UNENFORCEABLE on public policy grounds as constituting a penalty. RULE: Liquidated damage clauses must approximate actual damages Kemble v. Farren [P contracted with D to perform at theatre/ if anyone breached, breacher pays 1000L] A contract with liquidated damage clause must approximate the actual damages. In this case, because actor had already performed the contract, the court lessened the award of 1000 to 750 / contract would have given far less. Public policy. Unfair to enforce; what if performance was 99.9% complete? RULE: A valid stipulated damage clause must be reasonable under the circumstances Wassenar v. Towne [P had 3 yr employment contract with D/ contract had liquidated damages clause stating if termination occurred, then payment of sum equal to remaining salary would follow] A stipulated damage clause is valid if it is reasonable under the totality of circumstances / under the circumstances. In this case, the D did not meet the burden of proof on the unreasonableness of the stipulated damages clause; court enforced it. Efficient Breach (*Special Category*) The idea that sometimes it is more efficient to allow a contract to be breached. If it is more economically efficient to breach the contract, then we should encourage the breaching party to do so. ON THE OTHER HAND even though there is a social value in breach, there is also the social benefit of promoting a system that encourages that contracts will be fulfilled. [Efficient Breach = when liquidated damages < expected profits from breach] RULE: A liquidated damages clause with no relation to anticipated damages is void as a penalty Lake River v. Carborundum [Judge Posner argues for Efficient Breach]

Leftsin - Fall Contracts Outline 2006 Adam Maldonado A liquidated damages clause must be a reasonable estimation at the time of contract of probable damage from beach, in order to be enforceable. Liquidation damages amount with no relation to anticipated damages is void as a penalty. SPECIFIC PERFORMANCE Specific Performance WILL NOT be granted when another remedy at law exists, such as monetary relief. When no alternative remedy exists, a party may attempt to have the court grant specific performance depending on the circumstances. Contracts for Land Specific performance is generally granted for contracts for land because land is considered UNIQUE / not fungible RULE: Land is a unique good Loveless v. Diehl [farm leased, option to buy/ 3rd party purchases farm for adequate price/forced sell] In a contract for the sale of property, the court may award the remedy of specific performance as a matter of course irrespective of the adequacy of remedies at law. Land is unique. Contracts for Goods Specific performance is generally not granted for contracts for goods. It is only granted when a remedy at law is inadequate and goods are unique. Goods are not typically unique. HOWEVER the UCC expands meaning of unique to encompass instances when a good is difficult or impossible to obtain under the circumstances, allowing it to qualify as unique. UCC 2-716 Specific Performance Specific performance may be ordered where goods are unique or in other proper circumstances where the good is extremely sparse, unique, or peculiar. The buyer also has a right of replevin for goods identified to the contract if after a reasonable effort he is unable to effect cover for such goods or if the circumstances indicate such an effort would be unavailing. (ease burden on court) RULE: SP granted for goods if it is 1) unique or sentimental in value or 2) not otherwise obtainable Cumbest v. Harris [P used stereo as collateral on loan/ D avoided receipt of payment in order to keep stereo/ stereo considered unique] Specific performance for the sale of personal property will be enforced only if there is no sufficient remedy at law, the item is of unique or sentimental value or the item is not otherwise obtainable or scarce. RULE: If a good can be feasibly replaced specific performance should not be granted Scholl v. Hartzell [D selling car/ P contracts for car, places deposit/ D ends up selling to someone else] In a contract in which performance is yet to be rendered, the payment of a deposit does not give rise to an action of replevin (u have my stuff give it back), and the non-breaching party must seek relief based on breach. In this case, the car was not truly unique; it could have been commercially feasible to replace. Payment of deposit does not entitle P to ownership of car.

Leftsin - Fall Contracts Outline 2006 Adam Maldonado RULE: SP for goods can be granted if 1) the item is unique in nature or 2) not easily available elsewhere or 3) obtaining a replacement would be extremely difficult Sedmak v. Chevrolet [P contracts with D for limited edition chevy/ P pays deposit to D/ D breaches Specific performance for a contract for the sale of goods may be granted where the item is unique in nature, i.e. is not easily available elsewhere or obtaining a replacement would be extremely difficult. Contracts for Personal Services Specific performance IS NOT ALLOWED for contracts involving personal services. Allowing it would amount to slavery. HOWEVER, courts will issue injunctions to stop people with unique skills from working for competitors if they breach their contracts. Similar effect. RULE: Specific Performance for contract for services is unconstitutional Mary Clark Woman of Color [writ of habeas corpus] Specific performance in a services contract amounts to slavery and is therefore unconstitutional Courts are hesitant to grant SP for services because forcing parties to perform their promises raises questions of involuntary servitude and will lead to courts ruling on whether a party is performing adequately enough / additional lawsuits. RULE: A negative injunction may have the effect of grating specific performance Lumley v. Wagner [D agreed to sing for 3 months/ exclusivity clause in contract/ D breaches/ P seeks injunction against D prohibiting her from singing elsewhere] The court may grant a negative injunction restraining the breaching party from rendering services for any other employer during the contract period. *Note: this was an English case. RULE: Court cannot grant 1) specific performance OR 2) negative injunction because it has the same affect in contracts for personal services Ford v. Jermon [P agreed to perform at Ds theatre / P agreed not to perform anywhere else/ P breached] The court may not order specific performance for a contract for personal services. Court also MAY NOT grant a negative injunction because it would amount to the same result as would SP. (Not Followed) RULE: Negative injunction is permissible to stop a party from performing elsewhere when the party does not have a valid excuse Duff v. Russell [D-opera singer agreed to perform for P/ D sings for someone else/ there was no clause in her contract saying she had to exclusively perform for the P/ court determined D had implied promise] Without a reasonable excuse a party contracted to provide personal services may be enjoined from performing alternative services. In this case, it was not possible for D to perform elsewhere without violating her contract, it was for 7 days a week performances.*Note: This is the MODERN APPROACH RULE: Special skill not easily replaceable under the circumstances may be considered unique Cowboys v. Harris [player with above average skill / P wants to enjoin D from playing for other teams] When one having a special skill agrees to perform a service, he may be enjoined from performing services for another. So long as someone has uncommon skill such that he cannot be easily replaced

Leftsin - Fall Contracts Outline 2006 Adam Maldonado (Harris couldnt have been easily replaced as the Cowboys were in the middle of their season), he may be prevented from performing for others during the term of the contract. * Negative Covenant makes injunctions easier BUT is not always necessary