Contracts Final Outline

29/11/2010 19:25:00

I. What is a contract? A promise, or set of promises that the law will enforce, or a promise, or set of promises for the breach of which the law will provide a remedy. II. Formation of a contract through MA and C (K=MA+C) Manifestation of MA to common terms of a bargain. Parties agree to the same terms of the offer in a form permitted or requested by the offeror. Objective standard, what it appears that they meant; what a reasonable person in the position of the other party would believe. Is it reasonable to believe that the offeror was seeking a return promise or confirmation of the agreement as acceptance, or completed performance as acceptance?

III. Mutual Assent: We do not need actual mutual assent; rather, we need the manifestation or appearance of mutual assent to the common terms of a bargain. Objective approach, what would a reasonable person believe given the circumstances? Mutual mistake: if both parties made mistakes to the facts relating to the bargain or agreement, the contract can be voided by the adversely affected if three elements are present. o Mistake concerns a basic assumption upon which the K is made o Mistake has a material affect on the agreed upon exchange (i.e. a cubic zirconium is worth only a hundredth of what a diamond is worth) o The party seeking avoidance did not assume the risk of the mistake

IV. Offer An offer is an expression that identifies the a bargain or the terms of a bargain that expresses the present willingness of the speaker to be bound by that bargain. It has to invite assent in such a way that if assent is given, it will close a bargain.

(1) An offer is an expression (2) That identifies the bargain or terms of bargain (3) Expresses present willingness to be bound (4) Invites assent so that if assent is given, it will close a bargain All four of these elements must be met. Analyze using each part. Just because a communication claims that it is an offer, does not mean it is a legal offer. An offer is an act whereby one person confers upon another the power to create contractual relations between them. o An invitation to open up negotiation is not binding as an offer to contract, rather an invitation to make an offer (Owen v. Tunison) o Stating a possible sale price is not binding as an offer to sale unless it expresses the speakers intent to be bound (Harvey v. Facey) o A price quote, unless specific, is not an offer. Advertisements as offers- General Rule: Typical ads are not offers, rather invitations by the seller to the buyer to make an offer to purchase. There can be no offer if we do not know who is making the bargain or completing the bargain. o However: first come first serve advertisements are offers if they identify a bargain and meet the definition. o Competitive bidding: the bidders are the offerors. This is important because if the seller is not the offeror, then all the seller has to do is decline the offer, and then there is no sale. Offeror is master of the contract. Can set the terms of contract with no leeway, and has the power to specify exactly what an offeree must do in order to accept the offer. o In order for a communication to be an offer, it has to put into the hands of the person to who it is addressed the power for it to come into existence without anything else to happen. o o o o

V. Acceptance

An acceptance is a manifestation of assent to be bound to the terms of an offer made by the offeree in a manner required or invited by the offer. Acceptance & Bilateral and Unilateral Contracts Bilateral: An offer, the acceptance of which will result in a bilateral contract, is an offer that seeks acceptance in the form of the offerees return promise. At the formation of bilateral contract, there will be promises left to be performed on both sidesthis is what makes it bilateral. Rule: In an offer to bilateral contract, an act alone with no indication of acceptance does not constitute acceptance. However, an act that does indicate or convey assent or consent to the terms of the bargain is sufficient for acceptance. The acceptance must be manifested by some appropriate act from which the offeror must be able to reasonably infer that the offeree act or acts was an acceptance. Unilateral: an offer the acceptance of which will result in a unilateral contract is an offer that seeks acceptance in the form of the offerees performance. At the formation of a unilateral contract, there will be only one promise left to be performed. The offeree is assenting to the terms and accepting the bargain by completing the performance of its promise. There cannot be a unilateral contract until performance on the part of the offeree is completed. Rule: the only way for an offer for unilateral contract to be accepted is through completed performance by the offeree. Once an offer is accepted, neither party can revoke the contract. After acceptance, it is too late. o Suggestion of method of acceptance does not preclude other methods o Generally, the same method used for the offer is an acceptable method of acceptance Acceptance and the Sale of goods: UCC 206

o Shipment of goods as acceptance. UCC differs from common law rules in that under the UCC the buyers revocation comes too late if the seller has promptly shipped. UCC 2.206 (B) an order of another offer to buy goods for prompt or current shipment shall be construed as inviting acceptance either by (1) a prompt promise to ship or (2) by the prompt or current shipment of conforming or (3) non-conforming goods, but such a shipment of non-conforming goods does not constitute an acceptance if the seller seasonably notifies the buyer that he shipment is offered only as an accommodation to the buyer. Ways the seller (offeree) can accept the buyers (offeror) offer: 1.) The sellers promising to ship the goods 2.) The sellers shipping of conforming goods 3.) The sellers shipment of non-conforming goods Only applies to purchase of goods, only applies when buyer is the offeror, and when buyer is making an order for prompt or current shipment of goods. When a seller ships non-conforming goods, the contract is still for the conforming goods, and the seller still has an obligation to fulfill its performance. At the moment when the seller ships the non-conforming goods, the seller has bound itself to send the conforming goods because the shipment of non-conforming goods constitutes acceptance to the offer and since mutual assent is present, there is a contract, and the seller has a duty to perform by sending the conforming goods or they will be in breach of contract.

Silence not ordinarily acceptance. There may be circumstances where silence is acceptance, but generally speaking, silence cannot constitute acceptance. An offeror cannot say unless I hear from you in two days, then we have a contract. Silence is not a manifestation of assent to be bound to a bargain. Exceptions include people who have been doing business in such a manner for a long time, or book clubs or cds (BMG).

VI. Termination of the power of acceptance

An offerees power of acceptance may be terminated by: Lapse of time Revocation by the offeror Death or incapacity of the offeror or offeree Rejection of the offer

1.) Lapse of an offer- the expiration of the period within which an offer can be accepted. If no time specified by the offeror, it lapses after a reasonable time that is to be determined by the circumstances. Examples: If it is an offer for goods, rapid fluctuations in the price of goods will shorten the time. An offer made in a face-to-face meeting unless otherwise specified expires at the end of the meeting. An offer will always lapse after a reasonable amount of time. 2.) Revocation- an offer is freely revocable. Only a offeror can revoke an offer, there are different forms a revocation can take, anything that will communicate that the offeror does not have the assent to the offer will tell the offeree that the offer is revoked. Anything that indicates to the offeree that offeror no longer wants to be bound to the terms of a bargain is a revocation. Direct revocation: when an offeror directly informs an offeree of revocation of the offer Indirect revocation: receiving reliable information from someone else whereby the offeree could reasonably realize there was a revocation (Dickinson v. Dodd)

 Option contracts: Offeror may make a promise that limits the offerors power to revoke. An enforceable promise contained in an offer to keep that offer open for a specified period of time is an option contract. If the promise to keep the offer open is enforceable, then it is a separate contract. If its not enforceable, then the offeror can still freely revoke at any time. Pre-contractual liability. Three instances in which option contracts may be created: Consideration: if there is consideration for the promise Promissory estoppel: if the promise is supported by reliance, thereby enforceable Firm offer: a promise to keep an offer open is enforceable if supported by 2.205 o 2-205 defines firm offer as a promise by the offeror to make K irrevocable if it: (1) Is by a merchant (2) Is in a signed writing (3) Gives explicit assurance that the offer will be held open o Such an offer is irrevocable even if it is w/o consideration o No offer can be made irrevocable for any longer than 3 mos. 45 Unilateral Ks have an option created when an offer invites an offeree to accept by rendering a performance and does not invite a promissory acceptance and offeree beings the invited performance. Offerors duty of performance under option K is conditional on completion or tender of the invited performance in accordance with the terms of the offer. If the offer is for a bilateral K, the offerees making of preparations will cause the offer to be temporarily irrevocable if justice requires.

Firm offer. UCC 2.205- Sales of goods- promise not to revoke is enforceable even though there is no consideration for it if The transaction is a sale of goods transaction If the offer was made by a merchant (only if offeror is merchant) Offer is in writing The offeror has signed that writing, and

The written offer itself contains the promise not to revoke the offer or to hold that offer open But in no event such period of irrevocability exceed three months Any such term of assurance (that offeror will keep the offer open) on a form signed by the offeree and offeror. UCC definition of merchant: includes people who regularly deal in goods of this kind. It is not just a seller, but also a buyer who regularly buys goods that are the nature of the goods in the transaction, then one is a merchant.

3.) Death of an offeror: Death, even if unknown to the offeree, does revoke an offer. Power to accept an offer terminates in the offeror dies.because willingness to assent dies with the offeror. Exception: can still be enforced by the estate if there is an option contract. 4.) Rejection: Rejection of an offer by the offeree terminates the power of acceptance so that the offeree cannot thereafter accept the offer. Can be an outright statement or via the mirror image rule- the acceptance must be assent to the exact terms of the offer. I accept, but is not an acceptance but a counter-offer and thus a rejection. If an offeror is merely contemplating and is unsure whether or not they want to accept, this is not enough for a rejection. The Mirror Image Rule- acceptance must be on the terms proposed in the offer without variation. The Offeror, being the master of the offer, enjoys freedom from contract except on the Offerors own terms. If an Offeree accepts with conditions, it is not an acceptance (it is not on the terms of the offer); it is a counter-offer and must then be accepted by the original Offeror. The acceptance must be a mirror image of the offer (however courts will recognize that certain acceptances that use language that may seem like additional conditions for acceptance, are not counter offers. In back and forth bargaining, the last form accepted, the last shot is the offer that is held and the conditions of acceptance from this offer are the ones that must be met. 4 ways an offer may be irrevocable:

Statutes can say that bids on public works are irrevocable UCC 2-205 Firm offers If a promise not to revoke has consideration, then offer cannot be revoked, this is an option contract. Promissory estoppel- reliance on the promise not to revoke

The Mailbox rule, Contracts by Correspondence: the rule at Commonlaw is once an acceptance is dispatched (put into the mail) an acceptance has been made. The offer is complete (accepted) upon mailing, not receipt by the offeror. The mailbox rule only applies to methods of acceptance, and not rejection or revocation. Revocation and rejection are only binding upon receipt by the offeror or offeree. It does not matter if the offeror receives the rejection first, as long as the offeror has not received the rejection before the acceptance hits the mail. If the offeree sent a rejection first, before they sent an acceptance, then there is still acceptance unless RK 40 governs the jurisdiction in question and offeror receives the rejection first. VII. Consideration: Basis for the enforceability of promises Consideration is a bargained for exchange Rule: 4 required elements of consideration o The act/forbearance or promise was sought by the promisor in exchange for the promisors promise o The act/forbearance or promise was given by the promisee in exchange for the promisors promise o The promisee was under no pre-existing duty to so act or forbear or promise o The promise is not illusory If all four elements are met, then there is consideration and the contract is enforceable The promisee must be aware of the promise (i.e. rewards/lost and found)

B. What does not constitute consideration

Mere gifts and gratuitous promises Promises based on moral obligations are not enforceable o Moral obligations are subjective and open to interpretation o Element 1: the p/or was not seeking the action or services in return o Exception: qualified medical personnel giving treatment to unconscious victims who would have promised to pay for the services. Illusory promises: an illusory promise is a statement that is in the form of a promise, but upon close examination the statement does not promise anything, because it leaves the p/or a free, unfettered way out. A naked promise Pre-existing duty: if p/ee is under pre-existing duty, then there is no consideration. o Exceptions: new or different consideration for the promise o Modification: if the parties agree to modify their contract, consideration is usually found to exist where the obligations of both parties have been changed.

C. Mutuality Must be consideration on both sides of the agreement Even though the p/or has some choice or discretion in the following types of agreements, there is still mutuality: Requirements or output contract: I shall buy all that I require or I promise to sell all that I manufacture (eastern v. gulf) o The quantities must not be disproportionate to the normal levels of business or outside the stated range, if one exists. Thus the p/ee is protected when the p/or alters the quantities in an unforeseeable fashion, even if the change in demand was in good faith. o Going out of business problem: the fact that a party to a requirements or output contract might go out of business does nor make the promise illusory. D. Conditional promises

Conditional promises are enforceable, no matter how remote the contingency, unless the condition is entirely within the p/ors control, thus making the promise illusory. Promise conditioned on satisfaction is not illusory, because one cannot reject them unless dissatisfied Personal satisfaction in an agreement: two tests o The good faith standard for satisfaction The person with the right to reject the agreement based on satisfaction must act in good faith If the standards for satisfaction in a clause are personal and subjective, then the good faith standard is applied. (Mattei v. Hopper) o The standard of reasonableness Would a reasonable person have been satisfied? Standard applies when objective standard exits in the satisfaction clause Termination clauses: if there is a termination clause with no restrictions, then whoever has the ability to terminate, made an illusory promise. However, if there are any restrictions on the termination clause that negates illusoriness. Reasonable efforts implied (exclusivity) (wood v. lady duff Gordon) o Often used in an exclusive marketing contract: in cases of exclusivity, such as one person having the exclusive right to market and license material, the promise may appear illusory. However, in cases of exclusivity, there is an implied promise that the marketer will use his/her best efforts; the court will thus enforce the implied obligation or promise.

VI. Promissory Estoppel as an alternate basis for the enforcement of promises Always do consideration analysis first; if I find consideration, looking for PE will be unnecessary. A promise without consideration is enforceable under promissory estoppel if:

RK Second 90: (1) a promise which (2) forseeability which the promisor should reasonably expect to induce action or forbearance on the part of the promisee and (3) which does induce such a forbearance or action is biding if (4) injustice can be avoided only by the enforcement of that promise. o A promise o Which the promisor should reasonably expect to induce such action or forbearance o Which does induce such action or forbearance is binding if o Injustice can only be avoided by the enforcement of the promise The promisee only needs to prove that the promisees reliance was foreseeable to the promisor, even if that reliance was not reasonable. The last part of this rule is important because under the RK second view, if a promise is not supported by consideration, but is enforceable only because of promissory estoppel, then the court can limit the damages as necessary, and may only enforce as much as needed to avoid injustice (rather than the entire promise) VII. Restitution as a basis for relief, not for the enforcement of promises. Restitution is a basis for recovery in the absence of a promise or a contract If A thinks there is a contract and performs, and B claims there is not contract, then it would be unjust to allow B to retain a benefit from A. The law of Unjust Enrichment: Two elements (1) A party may not retain a benefit received unjustly (2) At the expense of another VIII. The Battle of the Forms and the UCC 2-207; Determining mutual assent

Forms are standardized. Buyer sends a purchase order on a standard form containing a set of terms, then the seller sends back its own standard form of acceptance, which may contain different terms than are in the offer. Under the Commonlaw mirror image rule, an acceptance is only an acceptance if it conforms to the exact details identified in the offer. However, when dealing with the sale of goods, this no longer applies. Only look to 2-207 if there is no mutual assent through any other method, such as, but not limited to, mirror-image acceptance, shipment of goods or promise of shipment of goods under 2-206. The last offer before parties begin performance is the offer that is used, under the last shot doctrine. Ex the buyer accepts the goods, there has been acceptance of the terms of the contract. Behavior is the manifestation of assent to the last offer made.

2-207 (1) is there an acceptance? The first subsection deals only with whether an offerees expression of acceptance of an offer is an acceptance when it contains terms different from or additional to those in the offer. A definite and seasonable expression of acceptance is an acceptance even if it contains terms additional to or different from the offer (nonmirror image response). If there is a non-mirror image acceptance, it is an acceptance unless expressly conditional upon assent to additional or different terms (this would be a counter offer) o Now we have two sets of terms, those in the offer and those in the acceptance. As of the moment that there is a 2-207 acceptance, there is a contract for the original terms contained in the offer (always, bc offeror is master of the K), not the terms of the acceptance. This section applies to everyone, merchants or non-merchants, as long as it is for the sale of goods.

2-207 (2) what do we do with additional terms? One would go to the second subsection only if it was concluded that there was an acceptance under the first subsection. The only thing the second subsection does is provide rules for determining the effect of additional terms in the acceptance on the content of the resulting contract. The additional terms are to be construed as proposals for addition to the contract. Between merchants, such terms become part of the contract unless: o The offer expressly limits acceptance to the terms of the offer o They materially alter it; or o Notification of objection to them has already been given or is given within a reasonable time after notice of them is received. This section does not say anything about different terms, only additional terms; there are three possible outcomes for different meanings. o The literal reading is the minority view: different terms in the acceptance under subsection 1 do not nullify the acceptance, but they are just not included in the contract under subsection 2. Terms in the offer will be terms of K. o The majority view (knock out doctrine) is that the different terms in the acceptance and the term that it differs from in the offer cancel each other out, and as a result, neither term makes it into the K and thus the code will provide a gapfiller. o The smallest minority rule, CA, where different terms in the expression of acceptance are treated as if they are additional terms. Under this approach, we would not look to subsection 2 for different and additional terms. 2-207 (3) one would go to the third subsection only if the parties are behaving as if there is a contract between them, but mutual assent cannot be shown either directly or by establishing offer and acceptance. In such a case, this section both permits a contract to be found to exist and gives instructions for determining what some of the Ks terms are.

Conduct by both parties, which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. In such case, the terms of the particular contract consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of this act.

Pre- contractual Liability, 45, 87(2) We have already looked at precontractual liability in option contracts that are supported by consideration and promissory estoppel and through firm offers. This is different liability. Pre-contractual liability unilateral K 45: In an offer for unilateral contract, beginning performance will convert that offer or the time specified under which the offeror would not revoke into an option contract. If time specified, that become the period of irrevocability. If no time specified, then a reasonable time under which performance could be completed is implied. According to 45, once performance has begun and thus there is an option K, the offeror is precluded from revoking until the offeree has had a reasonable time to complete performance. Still, the only way to accept is complete performance. o The reason partial performance makes a promise irrevocable is because of promissory estoppel. The promisee began the act and thus relied on the promise. Pre-contractual liability bilateral K Offers for bilateral K can generally be revoked any time before acceptance. 87 (2) (used for either unilateral or bilateral, but primarily bilateral) an offer that the offeror should reasonably expect to induce action or forbearance of a substantial character on the part of the offeree before acceptance and which does induce such action or forbearance is binding as an option contract to the extent necessary to avoid injustice.

o This is different from an option contract because there is no promise not to revoke that promisee relied on, only the promise contained in the bargain. o The remedy will be the amount necessary to avoid injustice. Damages may be less than breach of k remedy. o A party or potential offeree that relies on a promise that a K is forthcoming may recover under promissory estoppel or 87 (remedy in this case would be repayment for actions that completed in order to try and get the k) X. The Requirement of definiteness. A court must be able to figure out what the appropriate remedy is for a breach of contract. Therefore, the court must know with sufficient specificity just what the terms of the contract are in order to provide the correct remedy. Terms such as reasonable efforts and good faith have been found by the courts to be sufficiently definite. The line: agreement to agree not sufficient. An agreement to most elements, but one left open to be settled later, is not definite enough.

XI. Defenses to formation of a K Statute of Frauds: a law that requires certain types of contracts to be in writing. It makes a contractual promise unenforceable unless it is evidenced by o (1) A writing o (2) Signed by the promisor Only use this analysis after you have determined that there is a contract. The SOF only applies to contracts, not offer or acceptance. It is an affirmative defense asserted in answer to a s pleading. Policy considerations: to prevent fraud by requiring certain types of K to be in writing

Steps of analysis:

First, ask yourself if it is the type of K that is required by statute to be in writing. If it is, then it is within the statute of frauds. If it is within the SOF, see if there is an adequate writing. If there is, then the SOF is satisfied. If it is within the SOF but no adequate writing, then see if there is an exceptionif there is, it is taken out of the SOF. A promise that is within the SOF is generally not enforceable unless there is either an adequate writing or an exception to the adequate writing requirement, if there is an exception, we say it is taken out of the SOF o Majority view: if we have a K within the SOF but no adequate writing, there is still a K but it has become unenforceable, it is voidable by the person who the statute sought to protect o Minority view: a K without adequate writing voids the K.

Three questions to ask: 1.) Which types of contract are required to be in writing? 2.) What does it take to satisfy the SOF? 3.) What result if the contract is within the statute, but the statute is not satisfied? Is there a way to enforce? Four types of K always under the SOF: 1.) Contracts for the sale of an interest in real property 2.) Suretyship contracts 3.) Contracts not to be performed within one year of their making 4.) Contracts for the sale of goods at a price of $500 or more (UCC) (price, not value) Suretyship contracts: contractual promise to answer for the debt of another. o The creditor is to whom the obligation is owed. o The principal is the person who is primarily responsible for the obligation. o The surety is the person who promises the creditor that if the principal does not perform, the surety will.

o A novation is the substitution of one principal for another. o Agreement is effective only if creditor consents to it and there is consideration. Exceptions to SOF The main purpose doctrine: if the promisors main purpose in making promise of the suretyship was to benefit from the K, the promise does not fall within SOF Equitable estoppel: if K is taken out of SOF by equitable estoppel, that K is enforceable by whatever means would be available had the K been in writing. One-year clause: majority rule states that a K is within the SOF only if it is impossible by its own terms to be performed within one year of formation. Exception to this, a writing will not be required if the party seeking to enforce the K has fully performed his side of the bargain even if it actually takes that party more than a year to perform. Equal dignities doctrine: K required to be in writing and is signed on behalf of a party by his agent and agents authority to do the act must also be in writing and signed by the principal. XII. Requisites of recording and signing What exactly is required to be in the writing? o Non-UCC SOF writing must contain all the essential elements of the bargain, and must be signed, or initialed, by the person against whom the contract is sought to be enforced. Nothing requires this to be a formal document, could be written on a napkin. o UCC SOF: 2-201. (1) The quantity of goods involved must be stated in the writing (2) there also must be a writing that is sufficient to indicate a contract for sale has been made and (3) signed by the party against whom enforcement is sought.

Merchants exception: applies only when both parties are merchants. If a K for the sale of goods between two merchants is within the SOF, then the statute can be satisfied even when both have not signed. Merchant A sends Merchant B a confirmation of the contract between them, and that writing would be sufficient under 2-201 to bind A; that same writing binds B even if B does not sign it, and does not object within ten days. o Exceptions to 2.201.(3) (a) the Specially manufactured goods exception: only works when buyer is whom enforcement of K is sought against. Only applies when K in question is for the sale of goods that were specially designed or manufactured for the buyer. Seller has either begun manufacture, or committed to acquiring those goods. If these are both present, the buyers promise is enforceable against the buyer even if there is no writing. o Exception 2-201 (3) (b) if a party admits in court, or any judicial proceedings, to the existence of a contract, then that contract can be enforced against him even if there is no writing (only UCC) Only enforceable up to quantity admitted in court o Exception 2-201 (3) (c ) The UCC part performance doctrine. A K that is required to be in writing and that is not in writing is enforceable to the extent that there has either been payment made or accepted or goods delivered and accepted. The enforcement of the K is limited to the amount of payment or goods that have been partially performed. (home improvement) XII. Policing the Bargain A.) Although a K may meet formal requirements for enforceability, such as assent, consideration and compliance with the SOF, there are cases where the law may refuse nonetheless to enforce the bargain. Policing Concerns: 1.) Status of the parties: mentally ill, minors, those under the influence

2.) Behavior of the parties: how they bargained in fact 3.) Substance of the bargain: a bargain no one would make, lopsided bargains Three Categories of Incapacity: (Defenses) they can enter into contracts, but these contracts are freely voidable at the request of the person that lacks capacity. People under the influence of alcohol and drugs: in order to rescind under the category you must be intoxicated to the extent that you are not able to understand the nature of your actions AND the other party has reason to know this is the case. Contracts made by minors: Age 0-18. A contract made by a minor is voidable in all circumstances. A minor must do two things to avoid a contract: o The minor must give notice they are a minor o Minor must return to the other party whatever it is the received under the K, whether the property is destroyed or broken. They may then get restitution of any payments made. o Minor misrepresentation rule: if a minor lies about his age in order to K, there is a jurisdictional split: Majority rule: K is still voidable and can be rescinded Minority rule: he is estopped from voiding bc of minor status A minor may also disaffirm a K after reaching maturity; courts have held that one-year after is not unreasonable. EXCEPTION: if a minor entered into a K for necessaries and then seeks to void it, the person they contracted with may be able to recover through restitution of a reasonable value of goods. Mentally infirm or disabled: two approaches: o Restatement majority approach: requires o (1) Mental illness o (2) Cannot reasonably contract o (3) 3rd party knows about incapacity o Cognitive traditional minority approach:

o Unable to understand the nature and consequences of his actions XV. Unfairness Both the RK and UCC impose a duty of good faith and fair dealing in K performance and enforcement, though not in K formation. Cases in equity: being ordered to do what you promised to do If a party is suing for performance, the case is in equity. Rule: in equity, a contract must be fair, conscionable, and have adequate consideration. o If all of these are met, then the K should be enforced even if the value to one is more than the value to another. o Equitable relief measures what is fair; it is a greater standard than general remedy in the form of damages o Look only at the circumstances at the inception of the offer; occurrences that occur after are not relevant. XVI. Contract Modification See handout for pre-existing duty rule. UCC 2-209 Modification (only sale of goods) o An agreement modifying a contract within this article needs no consideration to be binding. o A signed agreement that states that modification or recession must be in writing, then it must be in writing or it is rescinded. Unless the agreement is between merchants, such a requirement on a form supplied by merchant must be signed separately by the other party. o The requirement of the SOF section of this article (2-201) must be satisfied if the contract as modified is within its provisions. RK 89 Modification: three requirements Consideration is still necessary for a modification, unless: 1.) K has not been performed on either side (executory K)

2.) Modification was made in good faith 3.) Modification was reasonable and fair in light of a change in circumstances If a party has already fully performed on a contract for which there was no consideration bc there was pre-existing duty, then the pre-existing duty rule cannot be invoked in order to get out of the contract, must use duress. A contract can always be rescinded with mutual assent from both parties. XVII. Overreaching A.) Pressure in Bargaining Threats must have a degree of temerity and those threats must be severe and have a criminal or tortious value B.) Duress (not a cause of action, its just used to disaffirm K) Duress consists of restraint or danger, either actually inflicted or impending, which is sufficient in severity or apprehension to overcome the mind of a person of ordinary firmness. The victim must have no other viable alternatives or way out of pressure Effect of finding an act done under duress: the K can be rescinded by the person under duress, either the formation or the modification of K. Duress is not present if threat is of a legal action! Avoidance must be asserted ASAP after coercion is lifted, otherwise k is considered accepted. Doctrine of Duress: a K is voidable on the ground of duress when it is established that the party making the claim was forced to agree by means of a wrongful threat precluding the exercise of his free will. How duress is proven: (UCC) 1.) Proof that immediate possession of the needful goods is threatened

2.) One party to K has threatened to breach the agreement by withholding goods unless the other party agrees to some further demand. 3.) It must also appear that the threatened party could not obtain the goods from another source of supply and that the ordinary remedy of an action for breach of K would not be adequate. C.) Undue Influence (similar to duress, but no threat or danger involved) Elements: a mismatch of capacities o Excessive pressure (by dominant party) o To persuade one (servient party) vulnerable to such pressure o Pressure is applied and used by a dominant subject to persuade a servient subject to act in a way that is counter to the servient parties best interests. If undue influence is present, the contract entered into while under the influence can be rescinded. Things to look for: o Discussion of transaction at inappropriate place and time o Consummation of transaction in unusual place o Insistent demand that business be finished at once o Extreme emphasis on untoward consequences of delay o Absence of third party advisors for the servient party

D.) Concealment and Misrepresentation Difference between misrepresentation and undue influence: in misrepresentation the other partys perception of the facts is altered, this is not necessary to undue influence. Question to ask: do you have to disclose certain points of knowledge? Intentional Misrepresentation: (1) Misrepresenting party knows that what they are saying is false

(2) The misrepresentation was made for the purpose of inducing the other party, and (3) The party that the misrepresentation is directed towards has to have reliance in fact (actual causation) but for believing the misrepresentation, that party would not have entered into the K. Unintentional Misrepresentation: (1) State of mind: negligent or innocent (2) Reliance in fact (but for) (3) Pecuniary harm: unless K is rescinded, victim will suffer a $ loss (4) Materiality: has to be a material representation of a material fact. A material misrepresentation must be more than a trivial departure from the truth A material fact is a fact of the type that a RPP would be concerned with in deciding whether to enter into a contract of the type youre dealing with. A statement of opinion may qualify as a fact if the parties are not of equal footing Concealment: Individual is aware of a fact and does not lie about the fact, but covers up the existence of the fact for the purpose of hiding it from prospective buyers. Generally, there is no duty to disclose unless a legal duty: Duty to disclose: Seller of residential real property: the seller has a legal duty to disclose defects in that property of (1) which the seller is aware and (2) are material defects that (3) the perspective buyer would not likely discover upon a reasonable inspection of property. A seller of anything (goods, real estate) that makes partial disclosure, which is misleading to what they did not say, has a duty to disclose entire truth. Active concealment of defect- duty to disclose (ex. Tapestry over floor to ceiling crack)

 Where there is a legal duty to disclose, and the seller does not disclose, this is the equivalent of an intentional misrepresentation. The only thing the victim needs to establish is reliance in fact, had they been told, they would never have entered into the k. D.) Unconscionability: Safety net or catchall, when a party can find no other reason to avoid the enforcement of a K. Standard form Contracts: mass-produced Ks. How to determine if unconscionable: o Superior bargaining level o Take it or leave it (party using superior bargaining level) o And especially if person is unfamiliar with language used A contract of adhesion is fully enforceable according to its terms, unless other certain factors are present to render it otherwise: o If it is not a reasonably expected provision/contract, it will not be enforced, such a contract or provision which does not fall within reasonable expectations of the weaker or adhering party will not be enforced against them o A k or provision, even if consistent with the reasonable expectations of the parties, will be denied enforcement if it is unduly oppressive or unconscionable. Unlike all the other policing the bargain categories, the contract is not rescinded, just the bad terms taken out. Procedural Unconscionability: How did the K get to where it is? Substantive Unconscionability: is there a term that is unfair to one side? Unconscionability has generally been recognized to include an absence of meaningful choice on the part of the parties, together with contract terms that are unreasonably favorable to the other party. This is both procedural and substantive. Remedy: Majority: procedural/ substantive alone is not enough for nonenforcement. unenforceability or unconscionable terms, not voidability.

E.) Illegality: Precludes not only the enforcement of an agreement but also any restitutionary claims. Contractual promises which have as their purpose or for their consideration some illegal act are not enforceable. We are not looking at protecting the bargainers from themselves, but protecting society from the bargainers. Three ways to determine if a K is illegal: (1) Performance itself calls for action that is contrary to public policy (2) Consideration in agreement is contrary to public policy (3) K resulted from behavior that is contrary to public policy Remedies: court leaves parties to illegal K as they find them. Exceptions: Doctrine of non in pari delicto (not of equal blame) party to an illegal K that is not of equal blame may recover by restitution, if the party seeking relief is of lesser fault that the one against whom the relief is sought.

XX. Parol Evidence Rule The Parol evidence rule is a rule that prevents a party to a written contract from presenting oral evidence that contradicts or adds to the written terms of the contract that appears to be whole. Parol evidence cannot be used to prove a term that would contradict the writing! For example, Carl agrees in writing to sell Betty a car for $1,000. Betty argues that Carl told her that she would only need to pay Carl $800. The Parol evidence rule would generally prevent Betty from testifying to this conversation because the testimony ($800) would directly contradict the written contract's terms ($1,000).

Parol evidence consists only of negotiations and agreements of the parties to a contract up to the moment they adopt a writing as the expression of their K. When the Parol evidence rule applies, its effect is to restrict the use of Parol evidence. Therefore a party who wants to use Parol evidence would not want the rule to apply.

There is no reason to even consider this unless: (1) There is a written contract, and (2) A party thereto contends that the contracts terms are in some way more than or different from what the writing says, and (3) There is Parol evidence that would be relevant to proving that contention. If even one of these is not present, there is no need to discuss Parol evidence. The judge must look at the K itself. The test for integration is the completeness and specificity of the writing. Determine whether the writing is integrated: o Did the parties intend the writing to be the final statement as to one or more terms of their K? o Is the term within the scope of the content of the writing? o Judges may use the four corners rule (looking solely at the document) or Corbin view (4 corners and all available evidence) Not integrated: no writing, or writing was not final version of agreement Integrated (partial) Test for partial integration: Integration is only partial if the term sought to be proved by the use of Parol evidence is either (a) supported by separate consideration and (b) one that the parties might naturally have omitted from the writing. o Effect: If partially integrated, Parol evidence can be used to prove consistent additional terms.

Integrated (complete) Test for complete integration: A writing that is not only the final expression of agreement, but that is also intended to include all details of the agreement. o Effect: No Parol evidence may be admitted which would either contradict or add to the writing. Rule is more restrictive if the K is completely integrated. o If an ancillary document is signed at the same time a formal document is signed, the ancillary document is treated as part of the writing, and will not be subject to the Parol evidence rule. o Merger clause: a clause stating that the writing constitutes the sole agreement between the parties. The presence of such a clause makes it more likely that the court will find the writing to have been intended as a total integration (in which case, not even consistent additional prior oral or written terms may be shown.

Mistake in Integration: If an agreed term is accidentally omitted from the parties written contract, a court can reform the writing to include the term. o Reformation is permitted if it is proved that at the same time the parties adopted the writing as an expression of their contract, both mistakenly believed the term was in their writing.

XI. Interpreting the Law of the K After the K is formed and while it is being performed, one party complains about the performance of the other party.but when we consult the language, whether oral or written, does not resolve the dispute. This may be because the language of the K may be vague or ambiguous or the language of the K does not contain anything about the disputed terms or area of performance.

Parol Evidence can also be introduced for the purpose of interpretation of vague or ambiguous terms. o Vague terms: this is a term that has a range of meanings. Ex, blue.there are many shades of blue. o The court starts out in favor of the broad interpretation of the term. IF used term that carries a broad interpretation, we are going to presume that they meant the broad meaning. When it comes to vague terms the burden of proof is on the party that is asserting the narrower meaning. When it comes to vague terms the burden of proof is on the party that is asserting the narrower meaning. The party that is asserting the narrower interpretation, party X, must persuade the court that at the time the K was formed, Y knew or should have know that X attached the narrower meaning of the word. o Ambiguous terms: Two distinct meanings. They do not overlap or fall into a subset of another; the word just has two different meanings. (The ship peerless) o If the court cannot resolve the ambiguity and the ambiguous term is a central term, then the term drops out, and there are no longer enough terms to make a K, then there is no MA and therefore no K.

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(4)

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