Introduction:1. Contract = law

a. §1 Restatement: a contract is a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty.

b. Sources: judicial decisions (common law), statutes (UCC), Restatements, Legal commentary.

c. Legal agreement between two or more parties that is a common understanding of something that is going to be done in the future by either one or both.

d. Temporal: Future performance of past expectations.e. Relational: Contracts allow us to take legal public laws and apply them to

our private relationships to maintain order in our personal relationships. By taking the public laws and applying them to private relationships we make our relationships available and susceptible to public judgment.

f. Circular: A contract is an agreement that has a legal effect. An agreement that has a legal effect is a contract – the definition is circular.

g. What is a promise vs. what is a statement of present intent, a statement of present intent is NOT a promise.

h. Restatement §1,2,5. What qualifies as a promise. Need NOT actually say the word “promise.” Generally any manifestation, by words or conduct or both, which the promise is justified in understanding as an expression of intention to make a promise.

2. Implied promisea. §4 Restatement 2nd: a promise may be stated in words either oral or

written, or may be inferred wholly or partly from the conduct.b. Going FROM express TO implied; If they did NOT expressly state the

promise DID they still IMPLY the promise?c. Infer by implicationwhat a reasonable 3rd party would have thoughtd. Looking at words, conduct, and context, the intent from the actual

agreement. Trying to infer intent the intent may come from a variety of places

e. Cardozo was readily implying thingsf. Found MORE in Modern Regime than in the classical g. Found mostly in Implied in Fact

3. Lon Fuller: The Functions Performed by Legal Formalities:a. Evidentiary

i. Seal is the best exampleii. Provides evidence of the existing contract

iii. Evidentiary security may be secured in a number of ways: writing, attestation, certification of a notary

iv. Makes finding proof and court easier

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b. Cautionary i. deliberation (in bargain for exchange)

ii. acting as a check against inconsiderate actioniii. puts you into the frame of mind appropriate in one pledging his

future.iv. you know that there are consequences to your promises

c. Channelingi. Signing of the seal channels the promise into a legally enforceable

contract.ii. Directs issues into law in general as well as specific areas of the

law.iii. On the boundaries of the different types of law. A rule within tort

damages that does not allow you to get economic relief when there is no physical injury. This case would be channeled out of torts and into contract. Channels disputes into different areas of the law.

iv. Rules are used to channel cases out to other realms of lawd. Interrelations of the 3:

i. whatever tends to accomplish one of these purposes will also tend to accomplish the other two

ii. Ex: last will and testamente. Fuller’s article goes on to say that ALTHOUGH the seal has decayed the

Doctrine of Consideration CAN and often does serve one or all of the above functions that the seal used to serve.

Classical = formalism: 1. 1850-1920; Williston, Holmes, Lyndell2. First Restatement3. Channeling the common law and applying those rules to case.4. Objective, rigid rules not afraid to punish people.5. You sign it you’re bound.6. Fairness is determined by symmetry, the mirror image rule applies.7. Issues of law, less govt., indifferent to issues of morality or social policy.8. Mechanical black letter law.9. What promises should the law enforce: promises under the seal that have

remedies.10. Theoretical applications to the “real world” do not always work. (business

settings)11. An attempt to develop reasonably clear rules on the various issues the courts

faced in contract cases. Concern with the impact of these rules on commercial behavior, or with reform of the needs of businesses and consumers, was NOT considered to be an issue for contract law to address.

12. Result = fundamental gap between law and the way the world actually works.

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Modernism = Realism:1. 1920’s-1980’s; Corbin, Llewellyn, Gilmore, Farnsworth2. 2nd Restatement, the UCC3. Subjective: WHAT A REASONABLE PERSON WOULD HAVE

THOUGHT4. Context is key: “All text is context”5. Issues of fact6. Giving better social welfare benefit answers7. Care about enforcing the agreement as made or at least as adhered to.8. Decision making process, person affected by person’s point of view, interests

and goals.9. Business rules are important10. Llewellyn wanted someone there to help decipher the facts from a business

rules view.11. Judges immerse themselves in facts, intuition arises, decision is made.12. Economic view: Chicago school, Judge Possner13. Moral view: Fried14. Fundamental: Rules do NOT decide cases, judges do!

Contract Frame1. Filter = consideration2. Proof of agreement:

a. Classical: Offer + Acceptance + consideration = contract.b. Documentary evidence.c. Modern: Subjective test: if both sides had the same subjective

understanding, thoughts and intents and agreement exists. 3. §24 Restatement 1st: an offer is the manifestation of willingness to enter into a

bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it.

Types of Contractsi. Bilateral Contract:

1. Promise for a promise2. Formed when the parties exchange promises of performance to take place in the

future.3. Preliminary negotiations = invitation to make offer. (NOT binding under

Classical).4. Offer and acceptance or counteroffer.5. Mirror-image rule:

a. The offer that is made and the offer that is accepted are ONLY the same if they are mirror images.

b. If they are NOT mirror images THEN there is no ‘meeting of the minds’ 6. Rejection of offer = offer disappears, NO contract.7. Offeror is the master of the contract; has the ability to revoke the offer.8. It is the offeror’s responsibility to inform the offeree of the retraction.

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9. Offeree has the power of acceptance, UNLESS:a. Express/implicit time limit lapses.b. Offeror revokes the offer.

10. §69 Restatement 2nd: Silence as acceptance: facts must supportf. Where an offeree FAILS to reply to an offer, his SILENCE and inaction

operate as an ACCEPTANCE in the following cases ONLY:i. Where an offeree takes the benefit of offered services with

reasonable opportunity to object them and reason to KNOW that they were offered with the expectation of compensation.

ii. Where the offeror has stated or given the offeree reason to understand that assent may be manifested by silence or inaction, and the offeree in remaining silent and inactive intends to accept the offer.

iii. Where bc of previous dealings or otherwise, it is reasonable that the offeree SHOULD NOTIFY the offeror if he does NOT INTEND to accept.

g. An offeree who does any act inconsistent with the offeror’s ownership of offered property is bound in accordance with the offered terms UNLESS they are manifestly unreasonable. But if the act is wrongful as against the offeror it is an acceptance only if ratified by him.

1. Mail-Box Rule:a. Acceptance: the date in which you put it into the mail box is the

effective date of acceptance of a contract.b. The acceptance must reach the offeror in a timely fashion.c. Revocation: the date in which the offeror receives the revocation in the

mail is the effective date of revocation.d. The mail box rule is the default rule that the court uses when nothing

else is in the contract that states otherwise.e. The offeror has the power. If the offeror does not like the mail box rule

and makes other specifications for the acceptance of the offer then those rules apply.

f. Offeror can contract around the mail box rule.2. §25 of the Restatement 1st : “Meeting of the minds”

a. if from a promise or manifestation of intention or from the circumstances existing at the time the person to whom the promise or manifestation is addressed KNOWS or has reason to know that the person making it does NOT intend it as an expression of his fixed purpose until he has given a further expression of assent, he has not made an offer.

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3. Lonergan v. Scolnick pg. 162a. After an exchange of letters the Plaintiff claims that there was a contract

for him to buy the land which the defendant sold from under him to a third party.

b. ISSUE: Did the defendant offer a contract to sell his property to the plaintiff?

c. Trial court: there was an offer made, but no contract bc there was NO timely acceptance.

d. HOLDING: No offer was made so NO contract. There was no meeting of the minds and therefore no contract. The newspaper advertisement was an invitation for an offer, not an offer itself.

4. Izadi v. Machado (Gus) Ford Inc. pg. 166a. The plaintiff saw an ad for $3000 trade in towards a new vehicle not

matter what the condition of the car you trade in. there was fine print that said that it would only go towards an Aerostar.

b. ISSUE: was there an offer?c. “bait and switch:” A binding offer may be implied from the very fact

that deliberately misleading advertising intentionally leads the reader to the conclusion that one exists. (Modern)

d. Reasonable person: a reasonable person would have thought that there was an offer. (classical).

e. HOLDING: There is an offer which the plaintiff accepted and therefore there is a breach of contract claim. Even though the offeror did NOT intend the offer that it extended.

ii. Unilateral Contract1. An act for a promise2. Once you complete the act then my promise will be enforced.3. Only one party (offeror) would be a promisor, and the offeree’s rendering of

performance would also constitute her acceptance of the offer.4. This view affords maximum protection to the offeror5. If the offeror should revoke his offer at a time when the offeree had commenced

but not yet completed the requested performance, classical theory denied the offeree any remedy on the contract bc the offer was revoked before the proposed contract ever came into being.

6. Offer can be revoked at any time before the act is completed, even if it is in the middle of the act (pure classical).

7. Performance is the consideration, the completion of the performance binds the offer (pure classical).

8. But Williston contradicts himself!! Substantial performance is enough to make the offer irrevocable, thus leading to the DEATH OF CONTRACTS.

9. §45 First Restatement: PARTIAL PERFORMANCE: is enough so that the offer cannot be revoked.

a. In an offer for a unilateral contract is made and PART of the consideration requested in the offer is given or tendered by the offeree in response thereto, the offeror is bound by a contract, the duty of

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immediate performance of which is conditional on the full consideration being given or tendered within the time stated in the offer or if no time is stated therein within a reasonable time.

b. Corbin like, Not Williston. In conflict with the 1st Restatement.c. There is NO Substantial performance in section 45d. Moral hazard problem in insurance: insurance distorts behaviors, people

tend to act with less caution when they are insurede. there is an opportunity for the offeror to act strategically after accepting

an offer and so this section makes it so that this does not occur, it makes sure that performance has started & assures that it WILL BE DONE by the deadline.

f. This section creates SYMMETRY in the unilateral contract.10. Petterson v. Pattberg pg. 179

a. The defendant offered the plaintiff opportunity to pay off mortgage at discounted rate. Plaintiff showed up at defendant’s house with full amount. Defendant did not let plaintiff in or accept the money, revoking the offer instead. Defendant had sold the mortgage to a third party.

b. ISSUE: The plaintiff did everything that they could possibly do in an effort to accept the offer. Did the plaintiff accept the offer?

c. RULE: under unilateral contract the offeror had the right to revoke the offer until the performance of the money being tendered to him was COMPLETED. No acceptance until money is tendered.

d. HOLDING: Offer of the defendant was withdrawn before it became a binding promise and therefore that no contract was ever made for the breach of which the plaintiff may claim damages. (formalism inside formalism).

e. Dissent: if the defendant would have acted in good faith then the offer would have been accepted. Instead the defendant acted so as to obstruct the plaintiff from accepting the offer. The offer should have been accepted.

11. Cook v. Coldwell Banker/ Frank Laiben Realty Co. pg.184a. Cook’s boss offered in March a sales competition. Cook’s sales would

earn her a bonus. Cook made a substantial amount of sales before the next meeting. At the next meeting the boss attempted to amend the offer, thus revoking the initial offer. This would have made it so that Cook could not receive her bonus if she left for other employment.

b. ISSUE: Was the first offer accepted via partial performance thus creating a unilateral contract? In which case the offeror could NOT revoke or amend the offer bc it was already a valid contract?

c. RULE: court cites §45 but does not follow it exactly. The court talks about substantial performance instead of partial performance.

d. HOLDING: Bc there had already been a substantial amt of performance the March offer was accepted, and a unilateral contract was formed, this could NOT be revoked or amended.

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iii. Option 4. § 87 Restatment 2nd: Option: an offer is binding as an option contract if it:

i. is in writing and signed by the offeror, recites a purported consideration for making the offer, and proposes an exchange on fair terms within a reasonable time.

ii. Is made irrevocable by statuteb. An offer which the offeror should reasonably expect to induce action or

forebearance of a substantial character on the part of the offeree BEFORE acceptance and which does induce such action or forebearance is BINDING AS AN OPTION contract to the extent necessary to avoid injustice.

c. §87: states several ways in which an offer may become “binding as an option contract” in addition to promise and consideration

d. §87(1)(b): the offer may be “made irrevocable by statute.” This is odd bc the purpose of the Restatement is to state the common law. But it reminds us that this is an area where statutes are likely to serve an important role.

5. An offer that is irrevocable, intent to hold an offer open to a specific person for a specified period of time, fixed price, must be supported by valuable consideration.

6. Option has to be embedded in some sort of consideration7. Option needs to be written into the offer contract. Language in the contract

must convey the intent for an option.8. If seller sells to someone else within the option specified time period then the

seller is STILL obligated to the option holder, must now decide how to compensate both parties that the house was sold to.

9. Signed under ‘seal’ a formalistic requirement. Is enough to validate an option WITHOUT consideration.

10. An option is antithetical to a unilateral contract.11. Counter-offer = Rejection of initial offer:12. Normile v. Miller PG. 171

a. Normille (buyer) made the first offer to purchase the property. An option was contained in their offer to hold the offer open until 5:00. Miller signed the offer under seal, but with some changes (counteroffer). BEFORE Normile accepted the counteroffer Miller sold the property at 12:00. Miller communicated to Normile before they accepted the counteroffer that the offer was revoked.

b. HOLDING: The counteroffer that Miller made was a REJECTION of the initial offer. The counteroffer did NOT contain the option to keep the offer open until 5:00.

c. Miller effectively revoked the offer BEFORE it was accepted, No contract.

13. False consideration:a. Classical: is NO consideration.b. Modern: it is good enough just state that you are giving consideration,

you don’t actually have to give it.

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14. Berryman v. Kmoch PG. 202a. Berryman offered Kmoch an option contract to buy his land. On the

contract it stated for $10 consideration, but the $10 was never paid! Berryman revoked his offer and then Kmoch tried to exercise his option to buy. Berryman brought the first claim for declaratory judgment to have the option declared null and void, Kmoch counterclaimed.

b. ISSUE: Is the FALSE consideration sufficient to keep the contract framed as an OPTION OPEN so that Berryman could NOT REVOKE his offer?

c. RULE: Option: an option contract to purchase land to be binding must be supported by consideration the same as any other contract.

d. False consideration is NO consideration; An option contract which is NOT supported by consideration is a mere offer to sell which may be withdrawn at any time prior to acceptance.

e. HOLDING: Berryman was able to revoke his offer framed as an option b. False consideration can NOT hold open an option contract. The offer was a regular contract offer which Berryman had the power to revoke at any time prior to acceptance.

Invalidating Contracts1. When it shocks the consciousness of the court.2. Lack of consideration3. Lack of Reliance4. Unconscionability5. Adhesion Contracts: When might an adhesion contract be enforceable?.

BINDING WHEN:a. plain and clear notification of terms,b. if buyer understands what they are consenting to, c. falls within reasonable expectation of buyers or weaker party.

6. Unconscionable adhesion contract: a standardized contract form offered to consumers on a ‘take it or leave it’ basis without affording the consumer a realistic opportunity to bargain. The weaker party has NO choice as to its terms.

a. Substantively unconscionable: i. actual terms, the contract itself is unfair and one-sided.

b. Procedurally unconscionable: i. absence of a meaningful choice,

ii. no room for negotiation, pre-printed standardized form,iii. disparity in power between parties,iv. arbitration clause in an inconspicuous place

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7. Burch v. Second Judicial District Court of Nevada pg. 15a. Dispute by homebuyers over an arbitration clause that was contained in

the homebuyers warranty that was signed 4 months after the closing.b. HOLDING: Bc the contract qualifies as an unconscionable adhesion

contract the contract is unenforceable.c. RULE: Federal Arbitration Act: “if the contract is an ‘unconscionable

adhesion contract’ then the arbitration clause is unenforceable” d. Substantively unconscionable: it gave the builders the unilateral and

exclusive right to decide the arbitration rules.e. Procedurally unconscionable: absence of a meaningful choice, no room

for negotiation (pre-printed standardized form), disparity in power between parties, arbitration clause was in an inconspicuous location.

f. Arbitration Clause: Courts MUST HONOR valid arbitration clauses: Burch is the exception.

8. MISTAKE : 9. §154: When a party bears the risk of a mistake:

a. the risk is allocated to him by agreement of the partiesb. he is AWARE, at the time the contract is made, that he has only limited

knowledge with respect to the facts to which the mistake relates but treats his limited knowledge as sufficient

c. the risk is allocated to him by the court on the ground that it is reasonable in the circumstances to do so.

10. Mutual Mistakea. §152 Restatement 2nd: where a mistake of BOTH parties at the time a

contract was made as to a basic assumption on which the contract was and has a material effect on the agreed exchange of performances, the contract is voidable by the adversely affected party UNLESS he bears the risk of the mistake under the rule in §154.

i. In determining whether the mistake has a material effect on the agreed exchange of performances, account is taken of any relief by way of reformation, restitution or otherwise.

b. If there is no subjective meeting of the minds 11. Unilateral Mistake

a. §153 Restatement 2nd : where a mistake of ONE party at the time a contract was made as to a basic assumption on which he made the contract has a material effect on the agreed exchange of performances that is adverse to him, the contract is voidable by him if he does not bear the risk of the mistake under the rule stated in §154, and

i. the effect of the mistake is such that enforcement of the contract would be unconscionable, or

ii. the OTHER PARTY had reason to know of the mistake or his fault caused the mistake.

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12. Ray v. William G. Eurice and Bros. Inc. (1952) PG. 27a. HOLDING: Unilateral mistake, therefore contract still valid. b. Clash of personalities. Eurice and Ray’s contracted to build Ray’s house.

There was no meeting of the minds, Eurice thought that he had agreed to different specifications and accused Ray of sneaking in the different specifications without his knowledge.

c. Test in this case is objective and not subjective. It doesn’t matter what the person who entered the contract was thinking or what they meant, all that matters is what the law interprets from what they signed, the only excuse is mutual mistake. Unilateral mistake is no excuse; UNLESS there is fraud or duress.

d. Instead of the court forcing Eurice to do specific performance told Eurice they had to pay for the new builders to build Ray’s house, Ray’s expectation interests were protected.

13. Fraud a. §162 Restatement 2nd : a misrepresentation is fraudulent IF the maker

intends his assertion to induce a party to manifest his assent and the maker1. knows or believes that the assertion is not in accord with

the facts, or 2. does not have the confidence that he states or implies in the

truth of the assertion, or3. knows that he does not have the basis that he states or

implies for the assertion.ii. A misrepresentation is material if it would be likely to induce a

reasonable person to manifest his assent, or if the maker knows that it would be likely to induce the recipient to do so.

b. Elements of actual FRAUD:i. Material misrepresentation of past or existing fact by the party to

be charged, which:1. Was false,2. Was made with knowledge or in reckless ignorance of the

falsity3. Was relied upon by the complaining party, and 4. Proximately caused the complaining party injury.

c. Fraud if actively expressed or passively concealed.d. Fraud requires a misrepresentation of a present fact rather than a

promise to do something in the future.e. A breach of promise may be fraud if the promisor did not intend to

perform the promise at the time the promise was made.

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14. Park 100 Investors, Inc. v. Kartes pg. 36a. Park alleges that Kartes got him to sign a personal guarantee of a lease by

fraud. Park tried to collect for the unpaid rent 10 years later when a different tenant was renting the building. Park claims that Kartes had the duty to read the form and know what it contained before signing.

b. ISSUE: the 3rd element of FRAUD. Did Park misrepresent the form?c. HOLDING: Park 100 misrepresented the form, there was fraud, court

found for Kartes.d. Here the burden of proof to prove fraud is put on the defendant.e. RULE: Where one employs misrepresentation to induce a party’s

obligation under a contract, one cannot bind the party to the terms of the contract.

f. “while a person relying on another’s representations must use ordinary care and diligence to guard against fraud, the requirement of reasonable prudence in business transactions is NOT carried to the extent that the law will ignore an intentional fraud practiced on the unwary.”

15. Duressa. §175 Restatement 2nd:

i. if a party’s manifestation of assent is induced by an improper threat by the other party that leaves the victim no reasonable alternative, the contract is voidable by the victim.

ii. If a party’s manifestation of assent is induced by one who is not a party to the transaction, the contract is voidable by the victim UNLESS the other party to the transaction in good faith and without reason to know of the duress EITHER gives value or relies materially on the transaction.

b. 2 types: 1) the other party is responsible and the other where 2) the defendant is responsible bc of background circumstances.

3 Doctrines for enforcing a contract1. Consideration2. Promissory estoppel3. Restitution

Consideration1. Why do we have this filter? So that all promises are not legally enforceable.2. §71 Restatement :

a. to constitute consideration, a performance or a return promise MUST be bargained for.

b. A performance or return promise bargained for if it is sought by the promisor in exchange for his promise and is given by the promise in exchange for that promise.

c. The performance may consist of:i. An act other than a promise

ii. A forebearance

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iii. The creation, modification, or destruction of a legal relationd. The performance or return promise may be given to the promisor or to

some other person. It may be given by the promisee or by some other person.

3. Forebearance is the intuition behind consideration: giving up something to get something.

4. A valuable consideration in the sense of the law may consist either in some right, interest, profit or benefit accruing to the one party, or some forebearance, detriment, loss or responsibility given, suffered or undertaken by the other.

5. 2 tests for consideration: a. Benefit/detriment & b. Bargain for exchange theory.

6. Benefit/detriment test:a. §2 Restatement 2nd : a promise is a manifestation of intention to act or

refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made.

b. Arguing for an expansion of the rules (Modern)c. If I gave up something that I was legally entitled to and I received some

benefit then there is considerationd. You do NOT have to make the benefit/detriment test symmetrical on

both sidese. Must have a benefit for the promisor –OR- a detriment to the promisee –

OR- both. Not the other way around.f. Gratuitous gifts are NOT something that the benefit/detriment test will

find to have consideration. 7. Hamer v. Sidway PG. 41

a. The uncle told the nephew that if he abstained from tobacco, alcohol and sex until he was 21 then he would give him $5,000. The uncle sent the nephew a letter that said that he satisfied the performance and is entitled to the money. The uncle died. Court eventually decided that this letter created a trust and so consideration was not necessary.

b. The evidentiary function=the letter and the cautionary function= the nephew abstaining from legal behavior. Both satisfied.

c. ISSUE: was the nephews abstinence from legal acts sufficient detriment to qualify for consideration?

d. RULE: (Benefit/detriment test) in general a waiver of any legal right at the request of another party IS sufficient consideration for a promise.

e. Not so much that one party benefits but that other party abandons some legal right.

f. HOLDING: the promise was BINDING and made upon good consideration.

8. Bargain for Exchange Theorya. §17 Restatement 2nd :

i. except as stated in §2, the formation of a contract requires a bargain in which there is a manifestation of mutual assent to the exchange and a consideration.

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b. (this is also the definition of consideration in the 1st restatement, but it is conserved in the 2nd restatement)

c. (focuses on process) d. arguing for a restriction of the rules.e. bargain does not mean an exchange of things of equivalent, or any value.

It means a negotiation resulting in the voluntary assumption of an obligation by one party upon condition of an act or forbearance by the other.

f. Consideration thus insures that the promise enforced as a contract is NOT accidental, casual, or gratuitious, BUT has been uttered intentionally as the result of some deliberation, manifested by reciprocal bargaining or negotiation.

g. It is an attempt to be as reasonable as we can in deciding which promises constitute contracts.

h. Harder to find bargain for exchange in the family situation and it is also harder to find than benefit/detriment

9. Baehr v. Penn-O-tex Oil Corp. PG. 47a. The defendant took control of the oil company when the owner was unable

to run it. The plaintiff called and asked for the money that the owner owed him or else he would sue. The defendant said that they promised that they would get the money to the plaintiff.

b. ISSUE: was there a contract?c. RULE: Bargain for Exchange theoryd. Would a reasonable person who heard that conversation would have

thought that a promise and a contact had been made. e. HOLDING: Promise to pay: Yes. But contract: No bc there was no

consideration.f. There is NO evidence that there was any forebearance from suing bc the

plaintiff sued in his own leisurely time. No consideration.g. no bargain, no consideration, no contract.

10. Gratuitous Promise:a. Why gratuitous gifts should NOT be enforced as consideration: Eisenberg

i. Proof problemsii. Present intent

iii. Capacity, often made during emotional states b. Administrative: it would be too easy to convince the jury that a promise

had been made.c. Informal vs. deliberative, the promise is more likely to be uncalculated

than deliberatived. Ingratitude: the person whom the promise is made to would be ingratiouse. A mere written promise that recites consideration will probably NOT

create an obligation enforeceable against the promisor’s estate.

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11. Plowman v. Indian Refining Co. PG. 64a. 13 employees and 5 dead bring this case against their old employer. The

employer laid them off and told them that he was thankful for their work and that if they came to the company each week they could pick up a check for ½ of their pay. The duration unspecified. The company changed owners and the payments stopped.

b. ISSUE: is a conditioned promise sufficient consideration for the gratuitous promise?

c. RULE: Benefit detriment: failed. Bargain for exchange: failed.d. HOLDING: it is a gratuitous arrangement without consideration and

therefore there is no contract. There is no legislation and there was no meeting of the minds and therefore there is no contract a conditioned promise is not sufficient for consideration.

e. legislation? Meeting of the minds? Consideration? Moral Consideration? A gratuitous promise is NOT enforceable.

f. Moral consideration = NO legal consideration.12. Donative Gift13. Dougherty v. Salt PG. 54

a. The old aunt told the boy that she would pay him $3000 for being a good boy. “because you have always done for me someday I will do for you.”

b. There is an evidentiary function: the note, just as in Hamer. But in Hamer there was a cautionary function and here there is not.

c. ISSUE: Can a note, be considered the necessary consideration for a contract, where it states: “for value received”?

d. RULE: Past consideration is NO consideration. “What have you done for me lately?”

e. HOLDING: The consideration “for value received” might have been consideration if it had a $$ value placed on it. It did not, this was only past consideration= no consideration. Gratuitous promise not enforced by law, no consideration.

14. Adequacy of considerationa. Historically courts did assess adequacy of consideration, classical regime

stopped. Classical said either there is consideration or there is not. Modern regime does not address adequacy of consideration in and of itself, but they address it by other means such as fraud, misrepresentation, or duress (something else is going on).

b. §79 Restatement 2nd: if the requirement of consideration is met, there is NO additional requirement of

i. a gain, advantage, or benefit to the promisor or a loss, disadvantage, or detriment to the promisee; or

ii. “mutuality of obligation.”

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15. Batsakis v. Demotsis PG. 59a. Drachmas case. The defendant borrowed $25 worth of Drachmas, she

signed a contract that said she promised to pay back $2000 + 8%. The court ruled that the contract is binding, there was consideration, she owes the money to the plaintiff.

b. ISSUE: Should the court consider adequacy of consideration?c. HOLDING: ALL that matters is that there was consideration, it does

NOT matter if it was a fair deal or not.d. This case was framed in consideration, but it would have been better if it

had been judged in a different frame: Fraud =No, misrepresentation= NO, duress= Maybe.

e. Duress: 2 types: one where the other party is responsible and the other where the defendant is responsible bc of background circumstances. In this case the duress would have been the background circumstances. (can argue that the court would have come to a different conclusion).

Promissory Estoppel Frame1. Filter = Detrimental Reliance2. History: went from being a substitution for consideration to being its own entity.3. Began in the family context and charitable settings and then moved into

commercial settings.4. §90 is about EQUITABLE REMEDY:

a. More Justice=More Remedy; b. Less Justice=Less Remedy.

5. Elements of Promissory Estoppel:a. A promiseb. Reasonable reliance to one’s detriment c. Reasonable for the promisor to think that the promisee reliedd. Injustice can be avoided only by the enforcement of the promise.

6. §90 of the Restatement 1st :a. Promise reasonably inducing definite and substantial action is

BINDING. A promise which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee and which DOES induce such action or forbearance; is BINDING IF injustice can be avoided ONLY by enforcement of the promise.

b. Makes the promise that is made enforceable by law.7. Family context: Promissory Estoppel

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15. Kirksey v. Kirksey pg. 74a. Widow was comfortably settled on her property, brother-in-law wrote to

her telling her that she could come to where he lived and he would provide for her. She left all of her belongings to go to where the brother-in-law lived. He gave her a house, but later kicked her out.

b. ISSUE: is promissory estoppel a substitution for consideration for making a promise legally enforceable?

c. HOLDING: Promissory estoppel is a substitution for lack of consideration. She relied to her detriment on the brother-in-law’s promise (by leaving her interest and moving) & it was reasonable for the brother-in-law to believe that she relied. (Foreshadowing theory of promissory estoppel).

d. The court awards the plaintiff $$ instead of specific performance. Is this remedy appropriate? Does it put the plaintiff in the position she would have been had she never relied?

e. Other Frames: consideration or promissory estoppel or unilateral contract??

16. Greiner v. Greiner pg. 76a. Father died and left some children uninherited. The mother promised

Frank that if he moved to her town then she would give him a house. The younger brother doesn’t want Frank to have the house. The mother now sues to get Frank out of the house.

b. ISSUE: was the mother’s promise to the son legally enforceable?c. RULE: Relianced. HOLDING: Frank relied on the promise to his detriment (by moving). The

mother should sign the deed of the house over to Frank. Court can NOT say that it would NOT be unjust to deny him the deed.

e. This is a promissory estoppel case where the court preserved the expectation interests of Frank by awarding him the deed to the house.

f. Other Frame: as a unilateral contract: if you move here then I will give you the house.

g. Other Frame: consideration: both the benefit/detriment and the bargain for exchange theory are satisfied. Frank gave up his old house to get the new house (giving up something to get something). Frank got the new house (benefit), but he had to move (detriment).

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17. Charitable Donations18. Allegheny College v. National Chautauqua County Bank pg. 86

a. Mary signed a subscription for a charitable donation. She was to pay $5000 when she died and a memorial would be made in her name. she paid $1000 before she died and the memorial was never made. She revoked her offer and then died.

b. ISSUE: can a charitable subscription be legally enforceable when the subscriber attempts to revoke?

c. RULE: promissory estoppel: it was used to make consideration.d. There is NO promissory estoppel in this case. The school relied on the

promise made by Mary, but they did not do so reasonably.e. Consideration is manufactured out of promissory estoppel.f. HOLDING: contract supported by consideration and school gets paid.g. Cardozo uses §90 to justify consideration. He manufactures

consideration by saying that Mary made an implied promise in fact for which there is no consideration, but Cardozo filled in the holes of consideration with §90.

h. This case brought up a lot of discussion about §90. i. Cardozo works with the rules to make charities win.j. Dissent: finds no reasoning for a contract, it is a gift. But was there a

unilateral contract? Death has the effect of revoking the offer. No matter where we look there is no contract. Don’t try and force it into a contract.

19. Promises in a Commercial Setting20. Kantz v. Danny Dare, Inc. pg. 102

a. Katz was forced to retire from his job. He did not know it, but they planned to fire him if he did not quit. They offered him a pension if he quit. Then they told him if he didn’t start working for them part time again they would quit paying his pension.

b. ISSUE: was there promissory Estoppel?c. RULE: case lays out the elements of Promissory estoppeld. HOLDING: The elements of promissory estoppel are present. Once

reliance is found then the expectation interest should be preservede. Appeals court says that it does not matter if the company was going to fire

Katz. All that matters is that Katz quit with the reliance on the promise of Dare that they would pay him the pension.

f. Just bc you benefit it does NOT mean that you detrimentally relied.

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21. Shoemaker v. commonwealth Bank pg. 108a. Shoemaker had in their mortgage contract that they must retain insurance

on the house and if they did not then the bank would get it for them. Shoemaker failed to retain insurance. The bank fulfilled its promise and got the insurance, but then terminated the policy without informing Shoemaker. The house burned down.

b. ISSUE: was Shoemakers reasonable reliance on the banks promise detrimental?

c. The ambiguity of duration in the promise. d. The plaintiff alleges that she would have maintained insurance if she had

known that the Bank had terminated the policy. e. HOLDING: the court believed that the Shoemakers had enough

information and evidence to support a claim for promissory estoppel, enough to let this case go to trial, the jury is to decide whether or not there was actual promissory estoppel (detrimental).

22. Building Sub-contractors: offer irrevocabilitya. Despite arguments in form of a symmetrical, “both parties are bound or

neither is bound” approach; the decisions have continued to invoke promissory estoppel to protect the general contractor against subcontractor withdrawal WHILE declining to find the general contractor bound to a particular subcontractor merely bc its sub-bid was used.

b. Hand: classical: small §90 circles, only applies to charitable donations and family settings

c. Traynor: Realist: Big §90 cirlces, applies to commercial setting.23. James Baird Co. v. Gimbel Bros., Inc. (Hand) pg. 190

a. General contractor was making a bid for a big job. The subcontractor made a bid to supply the linoleum to the general contractor. The numbers were wrong and the subcontractor realized that they had made a mistake. Before the subcontractor could revoke their bid the general contractor submitted their bid to the big job. The general contractor now knows that there is an error in his bid to the big job, he cannot increase his bid, he cannot withdraw his bid without penalty. If he follows out the contract as is the net profit will be decreased bc the linoleum price is wrong.

b. ISSUE: was the offer revocable?c. RULE: Since the offer was withdrawn before it was accepted, the

acceptance was too late. Restatement of Contracts §35.d. HOLDING: Judge Hand, viewing the facts in this way concludes that a

reasonable person would not think that there had been offer and acceptance. Hand says that there is NO contract and this is NOT a candidate for promissory estoppel.

e. This case is a good example of the classical mentality.

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24. Drennan v. Star Paving Co. (Traynor) PG. 193a. The general contractor received a bid from the subcontractor. General

went over to sub’s office to accept the offer. At which time sub attempted to revoke the offer.

b. ISSUE: does §90 apply in the commercial business setting?c. Bid numbers are a careful and deliberate promise.d. Defendant had reason to expect that if its bid proved the lowest it would

be used by the plaintiff, never mentioned right to revoke. If he had this would be considered.

e. HOLDING: it is only fair that the plaintiff has the opportunity to accept the bid when there is sufficient reliance. The defendant’s mistake should not bar plaintiff from recovery under §90.

f. Channeling Function: Traynor’s tortbased reasoning: acts as a channeling function. The defendant committed a tort by negligently preparing a bid that caused harm to the plaintiff.

25. Negotiations: Pre-contract reliance26. Pop’s Cones, Inc. v. Resorts International pg. 208

a. Pop’s negotiated to rent land at Resorts. They agreed for Pop’s to set up moveable cart as a trial run. Resorts told Pop’s that the contract would be approved and to plan on moving in. Pop’s left their old location and put their stuff in storage anticipating the contract with Resorts. Resorts submitted copy of boilerplate lease form but as a non-binding template for a future contract subject to changes by parties. Resorts cancelled negotiations and said that they never offered.

b. ISSUE: is it reasonable to rely on promises made during the course of negotiations?

c. Unsophisticated plaintiff and defendant’s sales dept. in negotiations for plaintiff to relocate TCBY.

d. Pop’s reasonably relied to its detriment on the promises and assurances of Resorts that it would be permitted to relocate its operation to Resorts location.

e. By not renewing its lease and by packing its belongings into storage Pop’s altered its position.

f. Here defendant should have reasonably expected the promises made would induce action by the plaintiff and the plaintiff detrimentally relied.

g. Strict loyalty to a “clear and definite promise?” NOh. More equitable analysis designed to avoid injustice- YESi. HOLDING: this raises a question for the jury to decide.j. Hoffman: The court cites with approval to Hoffman, a leading decision

HOLDING that assurances made during negotiations that a contract will be forthcoming amount to a promise sufficient to invoke promissory estoppel, WHEN the promisee relied to its detriment by giving up another business location and incurring out-of-pocket expenses in preparation for the new location.

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k. If judge Hand would have decided the case he would have said that the defendant owed nothing to the plaintiff and the plaintiff should not have done any of the acts that they did in order to prepare for the move into the new store without a sufficient contract.

l. Some courts have kept to the strict rule that there must be a “clear and definite promise” in order to enforce by promissory estoppel.

Restitution: UNJUST ENRICHMENT1. PURE Restitution is equity

a. Non-promissory theory for recoveryb. Not a promise filterc. A completely different legal theory for recoveryd. Core of restitution: I confer a benefit to you and it is unjust for you to

retain it without paying. e. CONTRACT TRUMPS RESTITUTION!f. Restatement of Restitution §2: under the rule recovery is denied so that

one will NOT have to pay for a benefit forced upon one against one’s willg. § 116 Restatement of Restitution: tells us that: in certain circumstances

restitution for certain services performed will be required even though the recipient did NOT request or voluntarily consent to receive such services. The hospital must have acted unofficiously.

h. §107 Restatement of Restitution: Contracts trump restitution: cannot have a claim for unjust enrichment if there is a claim for a contract!! There cannot be a claim for both. When there is a contract, contract trumps restitution, this is so that strategic behavior is stopped. This is also a channeling function. This channels the disputes that have both components into contract. If the contract fails as it does in this case (bc of incapacity) now the case is kicked into restitution. In this case restitution acts as a safety feature when contracts fail.

2. Implied in Law (contract) Quasi-contacta. UNJUST ENRICHMENTb. Social obligationsanyone in this situation should be paying to serve the

social context; socially imposed dutyc. Are NOT contracts at alld. Where a person performs services for another; which are known to and

accepted by the latter, the law implies a promise to pay for those services, as long as the actor who performed the services acted unofficiously.

e. You have a legal obligation to pay whether or not you wanted the services

f. Elements:i. A benefit was conferred on the defendant by the plaintiff

ii. Appreciation or knowledge of the benefit by the defendantiii. Acceptance or retention of benefit by the defendant under

circumstances make it inequitable for the defendant to retain the benefit.

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g. Implied in law definition: is an obligation imposed by the law without regard to either party’s expressions of assent either by words or acts. Such contracts DO NOT ARISE from the usual bargaining process. They rest on a legal fiction arising from considerations of justice and the equitable principles of unjust enrichment. As such they are not real contracts and the general rules of contracts therefore do not apply to them.

27. Credit Bureau enterprises Inc v. Pelo pg. 118a. Pelo was ordered by the magistrate at 3AM to be admitted against his will

to the hospital. At the hospital he received treatment for bi-polar disorder even though he did not consent to the treatment.

b. ISSUE: was there a contract implied in law?c. RULE: § 116 of the Restatement of Restitution tells us that: in certain

circumstances restitution for certain services performed will be required even though the recipient did not request or voluntarily consent to receive such services. The hospital must have acted unofficiously.

d. The defendant in this case did not give consent to the acts. Bc of his mental state he did not have to capacity to decide whether or not he would consent to the treatment. If the court could find that the defendant would not have consented to the treatment had he been in the right mind then they could not claim restitution.

e. HOLDING: Pelo was legally obligated to pay for those services based on an implied in law contract theory (quasicontract theory). Bc there was an implied in law contract there is no need to decide whether or not there was an express contract conferred when he signed the form.

f. The court is basically saying that they are seeing this as a restitution claim, they should have gone through and first proven that there is no express contract bc contract trumps restitution.

28. Commerce v. Equity Contracting pg. 127a. The subcontractor was contracted out by the general contractor to put

stucco on the defendant’s bldg. the general contractor never paid the subcontractor. The defendant did pay the general contractor. General contractor filed bankruptcy.

b. ISSUE: was there a contract implied in law?c. RULE: unjust enrichmentd. The defendant paid the general contractor for the subcontractors services.

The general contractor was the one that had to pay the subcontractor.e. HOLDING: in order to recover under implied in law the plaintiff must

prove that the defendant did not pay the general contractor in full.f. There was no contract implied in fact bc the defendant only conversed

with the general contractor and never the subcontractor. It was the general contractor that asked the subcontractor to perform the services.

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29. Implied in Fact (contract) a. Is in fact a contractb. Supported by parties intentinferring the intent by acts and conduct

as opposed to words: MUST have knowledgec. If there was a contract between them it would be supported by the facts.

Here the facts are there, but the underlying contract is NOT there, the court WILL recognize the contract.

d. They asked for the services, they know that the services cost money, now they refuse to pay for them.

e. It substitutes for an expressed contractf. Emphasize independent will.g. Based on the parties actions not just wordsh. IMPLIED PROMISES: are most often found here.

30. Watts v. Watts PG. 134a. The girlfriend lived with her boyfriend for 12 yrs. They “fronted” as a

married couple and procreated. After she worked for him without being paid they broke up, she moved out and he gave her nothing.

b. ISSUE: Can the ex-girlfriend recover based on unjust enrichment when the contract was implied in law?

c. RULE: unjust enrichment: one who has received a benefit has a duty to make restitution where retaining such a benefit would be unjust. (quasi contract)

d. They shared assets jointly, she helped him run the business and was not compensated for it, he knew that she was doing it and he benefited from it. He kicked her out and retained everything, she got nothing.

e. Allowing no relief at all to one party in a so-called “illicit” relationship effectively provides total relief to the other by leaving that party owner of all the assets acquired through the efforts of both.

f. HOLDING: unjust enrichment is an implied in law contract. the facts alleged are sufficient to state a claim for recovery based upon unjust enrichment.

g. ISSUE: was there an implied-in-fact contract?h. RULE: A change in one party’s circumstance (she quit her job when he

promised to take care of her) in performance of the agreement may imply an agreement between the parties.

i. HOLDING: the facts imply that there was an implied-in-fact contract.Promissory Restitution

1. IT IS a promissory theory2. Boundary between contract and restitution3. Material benefit was conferred and then there was a promise to pay for it after

the fact.4. Material Benefit Rule: if a person receives a material benefit form another other

than gratuitously a subsequent promise to compensate the person for rendering such benefit is enforceable.

5. You did the service for me. NOW I promise to pay you for that past service.

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6. Damages: what you promise to pay, unless it is grossly unproportional to the benefit conferred

7. It is a theory based on the ex-post promise.8. §86 Restatement 2nd : PROMISSORY RESTITUTION:

a. a promise made in recognition of a benefit previously received by the promisor from the promisee is binding to the extent necessary to prevent injustice.

b. A promise is NOT binding under Subsection (1) i. If the promise conferred the benefit as a gift or for other reasons

the promisor has not been unjustly enriched; orii. To the extent that its value is disproportionate to the benefit.

9. §86 recognizes several limitations on the availability of promissory restitution.10. Promissory restitution cases occupy the middle ground between classical contract

law and pure restitution.11. Promissory restitution bears a similarity to classical contract: the obligation rests

on the assent of the person subject to liability. But promissory restitution cases involve liability even though no bargained-for exchange has occurred.

12. The measure of recovery is based on restitutionary principles.13. Rescuing: a nonprofessional that rescues another may not be compensated for

their out of pocket costs incurred by the rescue. Although justice would require that the rescuee who has enjoyed the benefits of a rescuer’s efforts bear the costs of that benefit to the extent the rescuee is financially able.

14. Moral Obligation: as sufficient consideration31. Mills v. Wyman pg. 146

a. The plaintiff took care of the defendant’s son until he died. The father (defendant) wrote a letter to the plaintiff telling him that he would repay him for the service he provided to the son.

b. ISSUE: was defendant’s moral obligation to pay enforceable under promissory restitution?

c. Moral obligation is sufficient consideration for an express promise is to be limited in its application to cases where at some time or other a good or valuable consideration has existed.

d. HOLDING: the plaintiff NEVER introduced evidence that the son owed him anything, there is NO claim under promissory restitution unless the son owed something. The moral obligation is NOT SUFFICIENT.

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32. Webb v. McGowin pg. 151a. Webb worked for McGowin. Instead of letting the block of wood land on

McGowin he broke its fall and suffered injuries. McGowin promised to pay him $15 every 2 weeks. McGowin paid until he died.

b. ISSUE: Did McGowin’s moral obligation qualify as sufficient consideration to enforce the contract when the benefit was conferred in the past?

c. RULE: Material Benefit Rule: if a person receives a material benefit form another other than gratuitously a subsequent promise to compensate the person fro rendering such benefit is enforceable.

d. RULE: a moral obligation is a sufficient consideration to support a subsequent promise to pay where the promisor has received a material benefit, although there was no original duty or liability resting on the promisor.

e. HOLDING: The defendant received a material benefit from the plaintiff and subsequently the defendant promised to pay for that benefit, under the material benefit rule the defendant is legally obligated to pay.

UCC Frame1. Civil law system based on codes2. Legal formalism on steroids3. Developed by Llewellyn who was a common law advocate and liked flexibility in

the standard.4. Rejects the “mirror image rule”5. The UCC only has jurisdiction over goods, ‘this is not a goods case’ – instead

of applying a statute that the judge does not like6. Problem does not fall under the UCC – apply common law standards7. Goods = anything moveable except money8. “Good faith and fair dealing”9. UCC rules are very general and there is a lot of common law flavor to them.10. Buzz words: “situation sense” and “all text is context.”

Firm Offer: Irrevocability by Statute:11. §87: states several ways in which an offer may become “binding as an option

contract” in addition to promise and consideration12. §87(1)(b): the offer may be “made irrevocable by statute.” This is odd bc the

purpose of the Restatement is to state the common law. But it reminds us that this is an area where statutes are likely to serve an important role.

13. UCC §2-205: FIRM OFFERSa. An offer by a merchant to buy or sell goods in a signed writing which by

its terms gives assurance that it will be held open is NOT revocable, for lack of consideration, during the time stated or if no time is stated for a reasonable time, but in no event may such period of irrevocability exceed three months; but any such term of assurance on a form supplied by the offeree must be separately signed by the offeror.

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14. The UCC §2-205 also has some provisions making certain offers irrevocable.a. UNLESS you are a merchant you CANNOT make a firm offer, in

which case then the common law rule would prevail.i. The common law rule is that the offer is available but it can be

revoked at any time until it is acceptedb. Restricting the seller’s freedom to withdraw from sale goods being

offered in an “auction without reserve”c. ‘firm offer’: The UCC allows merchants to make irrevocable offers

without the qualification of consideration. UCC allows options to be made without consideration. Trying to map the law onto the practice that we already notice is going on in free business.

d. `A ‘firm offer’ MUST express in its language the INTENT to keep the offer open.

e. “Firm” offer will be held open for the reasonable period of irrevocability created which might be less than 3 months, but will NEVER exceed that time UNLESS there is consideration.

f. Any “Firmness” supplied on a form by the offeree MUST be signed separately by the offeror. This is to provide protection against inadvertent signing of a “Firm” offer.

g. What does to “sign” mean under the UCC? It does NOT have to be a signature as long as it is authenticated; anything that is functional and serves this purpose is ok, a letterhead. I want to make sure that it is coming from you but I don’t want to get caught up in the details. As long as it is in tangible form.

15. ONLY merchants can make a ‘firm offer’16. UCC §2-104: “merchant”

a. Means a person that deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or sill peculiar to the practices or goods involved in the transaction or to whom such knowledge or skill may be attributed by his employment of an agent or broker or other intermediary who by his occupation holds himself out as having such knowledge or skill.

17. relationship between the UCC (§2-205) and the principle of reliance-protection exemplified by the Restatement § 90.

a. Llewellyn had little enthusiasm for the principle of promissory estoppel, at least in business affairs, he preferred to bring the law in line with the expectations of business people, not by protecting reliance, but by expanding the concept of agreement, free from any of the technicalities that plagued common law.

b. Llewellyn wanted to change the way that the UCC is interpreted in order to better facilitate business. But a lawyers theory of how business would best work is NOT always right.

c. Bc of these reasons Gibson suggests that the UCC (§2-205) should be read as precluding any pre-acceptance protection for an oral firm offer to buy or sell goods substantially relied on.

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d. Gibson also says that many courts have seen UCC (§1-103) as an invitation to apply the principles of “estoppel” under the Code unless “displaced” and have not viewed §2-205 as such displacement.

Battle of the Forms1. UCC §2-207: additional terms in acceptance or confirmation: BATTLE OF

THE FORMS:a. A definite and seasonable expression of acceptance or a written

confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon UNLESS acceptance is expressly made conditional on assent to the additional or different terms.

b. The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract UNLESS:

i. The offer expressly limits acceptance to the terms of the offerii. They materially alter it; or

iii. Notification of objection to them has already been given or is given within a reasonable time after notice of them is received.

c. 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.

2. ask 2 questions: a. is there a contractb. what are its terms

3. Which form rules as contract?? 3 approaches: deciding whether different or additional terms get into the contract: It depends on the jurisdiction which rule will be applied:

a. Last-shot ruleb. Fist-shot rulec. Knock-out rule

4. Last shot Rule:a. classical courts followed the last shot rule to determine when a

counteroffer was accepted. Under that rule a partly implied assented to and thereby accepted a counter-offer by conduct indicating lack of objection to it

5. First-shot Rule: a. The UCC tried to fix the problem of the last-shot rule, but instead they

developed the problem with the first-shot rule.b. If the different term does not come in, then the “first shot” is how the

contract will stand. Not coming in says whatever was in the initial offer stays.

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6. Knock-out Rule:a. Apply the knock-out rule: rather than being added to the contract, the

different term will erase out the old term. Now the default rules of the UCC will replace. The knock-out rule says that we should not give privilege to either the first-shot or the last-shot, clearly the parties are in conflict so we should throw out both of the terms and replace it with the UCC rules.

b. Courts usually apply the knock-out rule.c. Is there potential for people to act strategically when they know that they

are in a jurisdiction that employs the knock-out rule?7. Mixed cases: Which Law Governs???

a. Predominant factor test: Bonebrakei. Transaction for sale of Goods with Services incidentally involved

UCCii. Rendition of Services with Goods incidentally involved

Common Lawiii. 3 Factors to consider the NATURE of the contract:

1. The language of the contract2. The nature of the business supplier3. The intrinsic worth of the materials.

8. Last-shot Rule: a. After applying the Predominant factor test the court rules that this is

a common law case and applies the LAST-SHOT RULE although they do NOT cite the last-shot rule.

33. Princess Cruises, Inc. v. General Electric Co.a. GE performed services for Princess. They performed the services

negligently and caused Princess’s ship to be out of commission.b. Princess sent GE an offer. They accepted the offer over the phone. GE

then sent an acknowledgement of the acceptance which contained different and additional terms. Princess accepted the counter-offer.

c. ISSUE: which law governs UCC or common law?d. RULE: Bonebrake: Predominant Factor Test: the test for inclusion or

exclusion is not whether they are mixed, but granting that they are mixed, whether their predominant factor…3 Factors to consider.

e. HOLDING: The GE-Princess transaction was primarily concerned with servicesapply common law

f. ISSUE: which form is the contract?g. Princess did everything necessary to accept the counter-offer by GE.h. HOLDING: the counteroffer made by GE was the contract. Court used

the “last shot rule,” but the court does NOT cite the “last shot rule.”

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34. FORMING THE CONTRACT: which form is the contract??? Using the First-Shot Rule:

35. Brown Machine Inc. v. Hercules, Inc. pg. 231a. Brown sent to Hercules a “price quote” for them to make an offer

containing the indemnity clause. Hercules sent their offer to buy the machine without the indemnity clause. Brown returned the form with the indemnity clause. Hercules said that they agreed to the contract except for anything that was not included in their offer to buy the machine. They did NOT expressly state that they would not accept indemnity clause.

b. ISSUE: was the indemnification clause in the contract?c. UCC: IF the first price quote was an offer then that is the one that binds

by the contract.d. The UCC is layered on the Common law: the common law says that a

price quote is NOT an offer.e. RULE: UCC: The counterforms even if they are different will usu

constitute as an acceptance; UNLESS the form that comes back is expressly conditioned and says that these are the terms you must agree to. These are deal breakers.

f. Hercules generally assented to Brown’s terms, Hercules did NOT expressly state that they would accept the indemnity clause. They were SILENT!! Silence is NOT acceptance to different terms, the indemnity clause is a different and material term as a matter of law.

g. RULE: Under §2-207 additional terms become a part of the contract between merchants unless a) the offer expressly limits acceptance to the terms of the offer; b) they materially alter it; c) notification of objection to them has already been given or is given within a reasonable time after notice of them is given.

i. `Hercules’ purchase order here expressly limited acceptance to the terms of its offer. Given such an express limitation the additional terms, including the indemnification provision, FAILED to become part of the contract between the parties.

ii. The additional terms MATERIALLY ALTERED THE CONTRACT.

h. HOLDING: there is NO indemnification bc the contract was formed under Hercules terms. FIRST-SHOT RULE WAS USED.

i. Brown’s acknowledgement is NOT a counter offer. Acceptance will be considered a counteroffer ONLY IF the acceptance is expressly made conditional on assent to the additional terms. Brown’s acknowledgement operates as acceptance with additional or different terms from the offer since the purchase order contained no indemnity provision.

j. First-shot rule is poor substitute for the last-shot rule of common law contract.

k. The court could not find any way to get the indemnification clause in so it is out.

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36. Additional terms:a. Silence= acceptance of Additional terms; they will be included in a

contract UNLESS they are material. 37. Different Terms:

a. Silence does NOT make acceptance. b. 3 approaches on how to treat different terms:

i. Treat the “different” terms as “additional” terms if they are material then they will NOT be included.

ii. The offeror’s terms control bc the offeree’s different terms merely falls out; §2-207 cannot rescue the different terms since that subsection applies only to additional terms. Knock-out rule is NOT applicable bc it refers only to conflicting terms in confirmation forms following oral agreement, NOT conflicting terms in the writings that form the agreement.

iii. Knock-out rule: (preferred) the conflicting terms cancel one-another out. The ultimate contract then includes those non-conflicting terms and any other terms supplied by the UCC, including terms incorporated by the course of performance, course of dealing, usage of trade, and other “gap fillers” or “off –the-rack” terms.

38. What is material?a. Something that is normally bargained forb. Terms that materially alters the contractc. “Surprise or Hardship Test” to determine whether or not the term

materially alters the contract- as a matter of fact.i. SURPRISE : whether the new term would catch the buyer

unaware. If the buyer is generally aware OR should have known of the provisions in the industry then that is enough.

ii. HARDSHIP : Whether a limitation of consequential damages would impose “substantial economic hardship”

d. Essential elements: price, time, quantity, ARE material e. Indemnification clauses are material as a matter of lawf. Warranty is a material term as a matter of law.

39. If you treat the materiality as the test then the different terms will all be left out bc they are material. Only nonmaterial terms will be allowed in.

40. Easy case: conditioned acceptance: if a party includes the “magic words” then the terms apply as they intend. If you do not accept these terms then there is no contract.

41. Problem: Boilerplate language. Standardized Forms: Where the language is in one of the exchanged forms, but it is NOT reflected in the intent of the accepting party. Should the terms be enforced, as they are in the language of the boilerplate, or should we look at the intent of the parties to see if they intended to accept these conditions???

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42. CONTRACT ALREADY FORMED: DIFFERENT TERMS43. Dale R. Horning Co. v. Falconer Glass PG. 240

a. Dale had a contract to put glass windows on the credit union. If they did not finish by a certain date they would suffer penalties. Dale made a contract with Falconer over the phone for glass. At the same time they sent each other forms containing different provisions. Falconer’s form included a limitation on consequential damages.

b. ISSUE: whether Falconer’s limitation of consequential damages contained on its standard form is a term of the parties’ contract under the UCC??

c. RULE: §2-207: such terms become part of a contract UNLESS they materially alter the prior agreement. (this is subsection 2, subsection 1 is about forming a contract which there already is) (what we are addressing here is how subsection 2 addresses such additional terms)

d. limitations on warranties will always be viewed as material, material as a matter of law. We know this from the comments of the code.

e. Indemnification is normally always viewed as material.f. RULE: An additional term is said to materially alter a contract “if its

incorporation into the contract without express awareness by the other party would result in surprise or hardship.”

g. HOLDING: It is reasonable to believe that the party should have expected a provision like this, NO SURPRISE. BUT the other party should NOT be able to reasonably rely upon a boilerplate clause in a boilerplate form and a corresponding operation of law to shift substantial economic burdens from itself to a non-assenting party when it had every opportunity to negotiate it if it so desired. There IS HARDSHIP.

h. The court employs the surprise or hardship test, but they ultimately rely on their own intuition. “if it is important enough then the parties would have brought it up and bargained about it. Then it would be material.” “if it is important enough that the parties would want to bargain about it ex-ante then it is material.”

i. Merely inserting boilerplate provisions into standard forms is not the end-all way to deal with the UCC. Such post-agreement action is not always enough to force one party’s desires upon another.

j. Court inserted the Default rule of the UCC that consequential damages are unlimited.

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44. Additional terms: Electronic contracting45. Hill v. Gateway 2000, Inc.

a. a customer orders a computer over the phone. The order arrives and in the box there are additional conditions. It states that 30 days after receiving the box the additional conditions will apply. One of the terms was an arbitration clause. The plaintiffs kept the computer for more than 30 days before complaining about the performance.

b. ISSUE: are these terms effective as the parties contract, or is the contract term-free bc the order-taker did not read any terms over the phone and elicit the customers assent?

c. RULE: ProCD: terms inside a box bind consumers who use the software after an opportunity to read the terms and to reject them by returning the product.

d. FAA: e. COURT USES COMMON LAW and looks to ProCD, they do NOT use

the UCC §2-207 bc they decide that it is not applicable bc there is only ONE form in the case, NO exchange of form(s).

f. Judge Easterbrook frames the case: EITHER there is a contract with all of Gateways terms, OR there is no contract at all bc the telephone operator never told them of the additional terms.

g. Judge Easterbrook. CONTRACT FORMATION: Gateway made an offer that made it clear that they would ship the box and upon receipt the plaintiff would find the additional terms and that by keeping the computer for 30 days they accept the additional terms. the terms in the box bind Gateway to repair the computer JUST AS the arbitration clause binds the Hills. Notion of giving something up to get something, bargain theory.

h. Shoppers have 3 ways to discover things:i. They can ask the vendor to send a copy before they buy

ii. Consult public sourcesiii. They may inspect the documents upon delivery.

i. HOLDING: The Hills knew in advance that the box containing the computer would hold some additional specific claims and they did not choose to discover those in advance. By keeping the computer beyond 30 days the Hills accepted Gateway’s offer, INCLUDING the arbitration clause.

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46. Additional terms: 47. Klocek v. Gateway, Inc.

a. Facts: the plaintiff received a computer and in the box there was a booklet that contained additional terms and agreements. One was the arbitration clause. In bold print on the front of the booklet it stated that if you keep the computer for 5 days then you accept these terms and conditions.

b. ISSUE: If there is a contract then is the arbitration clause in it?c. Court cites Brown Machine “the conditional nature of the acceptance

must be clearly expressed in a manner sufficient to notify the offeror that the offeree is unwilling to proceed with the transaction UNLESS the additional or different terms are included in the contract.”

d. The court cites Brown Machine “express assent CANNOT be presumed by silence or mere failure to object.”

e. HOLDING: The buyer was the offeror, the seller accepted by shipping the computer. Therefore there is a contract that is enforceable under §2-207. The additional terms are NOT in the contract bc the purchaser was NOT a merchant & Gateway did NOT sufficiently communicate that the additional terms are part of their conditional acceptance and the buyer did NOT expressly assent to those terms. Silence is NOT acceptance.

f. If we use 2-207(3) there and fill in the gaps with the default UCC rules then there is no arbitration clause bc there is no arbitration clause in the UCC.

g. RULES:h. §2-207: it says forms, but in this case there is only one form. The court

says that it does NOT matter that there is only one form and the rule should be applied. (This court recognizes that Hill & ProCD did not use the UCC bc there was only one form, this court thinks that UCC still applies even though there was only one form.)

i. RULE: §2-204: Contract Formation: the court cites it to define a contract and whether or not there was a contract. In §2-204 it is a very flexible definition.

j. §2-204 UCC:i. A contract for sale of goods may be made in ANY manner

sufficient to show agreement, including conduct by both parties which recognizes the existence of such contract.

ii. An agreement sufficient to constitute a contract for sale may be found even though the moment of its making is undermined.

iii. Even though one or more terms are left open a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy.

k. §2-206: offer and acceptance: “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.” oral, or by shipping will be acceptance of the offer. The court said that

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the buyer of the computer was the offeror. Gateway accepted the offer by shipping it out.

l. §2-206 UCC:i. unless otherwise unambiguously indicated by the language or

circumstances 1. an offer to make a contract shall be construed as inviting

acceptance in any manner and by any medium reasonable in the circumstances;

2. 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 seasonably notifies the buyer that the shipment is offered only as an accommodation to the buyer.

ii. where the beginning of a requested performance is a reasonable mode of acceptance an offeror who is not notified of acceptance within a reasonable time may treat the offer as having lapsed before acceptance.

Agreement to Agree1. When parties have completed their bargaining and think that they have reached an

agreement. Their agreement is incomplete either bc:a. Some matters usu dealt with in such agreements have not been explicitly

coveredb. Bc the parties themselves have designated certain matters for postponed

decision, agreement at some future time.2. both the UCC and the Restatement recognize that parties may be bound

contractually when they have reached agreement in principle, even though they contemplate either further negotiations (agreement to agree) or the execution of a formal written contract (formal contract contemplated).

3. There are 2 different things that are happening in these cases:a. an agreement to agree, at a later dateb. “formal contract contemplated:” agreement in principle in a letter of intent

which contemplates the execution of a formal contract.4. Does NOT award expectation damages5. Will award reliance based damages6. Will award liquidated damages7. Corbin (Classical):

a. Even though one of the parties may believe that the negotiation has been concluded, all items agreed upon, and the contract closed, there is still no contract UNLESS he is reasonable in his belief and the other party ought to have known that he would so believe.

b. If the contract that the parties agreed to make is to contain any essential, material term that is not expressly agreed on, no contract has yet been made; and so-called “contract to make a contract” is NOT a contract at all!

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8. Common Law: does NOT enforce any contract where the parties failed to agree on either a specific price or at least a method.

9. Common law does NOT like the agreement to agree10. UCC: takes the opposite position of the common law.

a. §2-305: provides that an “open price term” will NOT prevent enforcement of a contract for sale, if the parties intended to be bound by the agreement.

b. When the parties leave the price to be determined at a later date the court may enforce the contract.

c. If the parties later fail to agree on a price the court may enforce a “reasonable price”

d. If one party has the power to fix price, he must do so “in good faith”e. Under §2-305(4) the court may conclude that the parties did NOT intend to

be bound unless the price was fixed by agreement. In that event, failure to reach agreement on price will mean that NO enforceable contract of sale has been made, and the court will NOT fix a “reasonable” price for the parties.

11. §2-305 UCC: OPEN PRICE ITEM:a. The parties if they so intend can conclude a contract for sale even

though the price is NOT settled. In such a case the price is a reasonable price at the time of delivery if:

i. Nothing is said as to price; orii. The price is left to be agreed by the parties and they fail to agree;

oriii. 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 it is not so set or recorded.

b. A price to be fixed by the seller or by the buyer means a price for him to fix in “good faith.”

c. When a price left to be fixed is otherwise than by agreement of the parties fails to be fixed through fault of one party the other may at his option treat the contract as cancelled or himself fix a reasonable price.

d. Where, however, the parties intend NOT 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 so to do must pay their reasonable value at the time of delivery and the seller must return any portion of the price paid on account.

12. In Quake the court held that whether a contract is formed in cases of agreement to agree or formal contract contemplated turns on the factual question of whether the parties intended to be bound when they agreed in principle OR only after further negotiations prove successful. The court identified a number of factors that are relevant to a determination of the parties’ intention.

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13. Indefinite terms to be decided: left open in the contract: NOT enforceable:14. Walker v. Keith

a. the lessors lent a property to the plaintiff for 10 yrs @ $100/month. The contract said that the plaintiff had the option of extending the lease, under the same terms and conditions except as to rental. The renewal option provided: “rental will be fixed in such amount as shall actually be agreed upon by the lessors and the lessee…” The plaintiff gave the proper notice to renew but the parties were unable to agree upon the rental rate.

b. ISSUE: whether the quoted provision is so indefinite and uncertain that the parties cannot be held to have agreed upon this essential rental term of the lease?

c. RULE: Common law!!!! To be enforceable and valid, a contract to enter into a future covenant MUST specify all material and essential terms. Terms in a contract may be left for future agreement, but merely leaving them without some sort of method for future determination is NOT sufficient, it renders the agreement unenforceable for uncertainty.

d. court must be able to determine the exact meaning. (Williston)e. An agreement to agree is not a contract.f. HOLDING: Uncertainty NOT enforceable. A renewal option should

be treated as a contract, rent is a material term of a lease. If the parties do not fix it with reasonable certainty it is not the business of courts to do so. The judgment is reversed.

g. The court says give me a formula in order to find the number for the amount of rent, or give me a process from which I can determine the rent and I will do that, but you have NOT provided anything by simply agreeing to agree.

15. Letters of Intent: Intent of the parties: specific terms are enough to enforce contract.

16. Quake Construction, Inc. v. American Airlines, Inc. pg. 278a. Jones was employing a contractor for work for American Airlines. He

gave the job to Quake. Jones sent Quake a letter on April 18 that had some of the conditions of the agreement, but it said that it was not a formal contract and that a formal contract would follow. The letter was sent to induce Quake to act. At the end of the letter there was a cancellation clause. At the meeting Quake was told that the agreement had been terminated.

b. ISSUE: whether the letter of intent was an enforceable contract???c. RULE: although letters of intent may be enforceable, such letters are not

necessarily enforceable unless the parties intend them to be contractually binding.

d. Factors in determining intent for an agreement to agree:i. Whether the type of agreement involved is one usu put into

writing,ii. Whether the agreement contains many or few details,

iii. Whether the agreement involves a large or small amount of money

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iv. Whether the agreement requires formal writing for the full expression of the covenants,

v. Whether the negotiations indicated that a formal written document was contemplated at the completion of the negotiations.

e. HOLDING: The number and extent of the terms in the letter can indicate the parties’ intent to be bound by the letter. The final contract only need to be substantially based on the terms in the letter as long as the parties intended the letter to be binding.

f. There is ambiguity so the plaintiff is allowed to introduce more evidence and the jury will decide whether or not there was an open agreement or an agreement to agree.

g. Parole evidence rule: if I have a writing and if that writing is intended by the parties to be a final and complete statement of their intent, then I will look only to that writing and will exclude any other evidence either

i. If the writing is ambiguous then I can introduce other parole evidence in order to clear up the ambiguity.

ii. If the writing is unambiguous then I do not let any other writing in.h. Different ways to look at this case: what we are asking is what the

parties intended in this case, they could have intended one of three things:

i. no contract is one theory in this caseii. an agreement with open terms

iii. an agreement to agree

STATUTE OF FRAUDS: DOES NOT ENFORCE A CONTRACT!!!ELIMINATES A DEFENSEIT IS A SEPARATE LINE OF INQUIRY FROM CONTRACTDoes NOT require a written contractWritings may be used as evidence to enforce the contract.Under the common law

1. All of the essential terms MUST be in writing; 2. the pasting of all of the essential terms is very important3. ask 2 questions:

a. is the contract at issue one of the types to which the statute of frauds applies so that a signed memorandum will be required for its enforcement?

b. If YES: is the statute of frauds satisfied?i. Is there some sort of written statement of its terms,

ii. Signed by the defendant,iii. That is sufficient to meet the statutes requirements?

c. If YES: then the statute again presents no bar to enforcement and the case may proceed in normal fashion.

d. If NO; are there other factors in the case, such as performance or reliance by the plaintiff, which might invoke an exception to the statutory bar?

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4. §110 Restatement 2ND: STATUTE OF FRAUDS: classes of contracts covered:a. the following classes of contracts are subject to statute, commonly called

the Statute of Frauds, forbidding enforcement unless there is a written memorandum or an applicable exception:

i. a contract of an executor or administrator to answer for a duty of his decedent (the executor-administrator provision)

ii. a contract to answer for the duty of another ( the suretyship provision)

iii. a contract made upon consideration of marriage (marriage provision)

iv. a contract for the sale of an interest in land (the land contract provision)

v. a contract that is not to be performed within one year from the making thereof (the one-year provision)

b. the following classes of contracts which were traditionally subject to the statute of frauds are NOW governed by Statute of Frauds provisions of the UCC:

i. a contract of the sale of goods for the price of $500 or more (UCC §2-201)

ii. a contract for the sale of securities (UCC §8-319)iii. a contract for the sale of personal property not otherwise

covered, to the extent of enforcement by way of action or defense beyond $5,000 in amount or value of remedy (UCC §1-206)

5. Pasting of writings: Under common law6. Crabtree v. Elizabeth Arden Sales Corp. pg. 298

a. The defendant denied that they had agreed to employ the plaintiff for 2 yrs, even if they had agreed defendant argues that the statute of frauds barred the contract’s enforcement.

b. ISSUE: was the memorandum that was taken by the secretary on the telephone order blank sufficient writing to satisfy the memorandum of terms requirement (it stated 2 yrs and payment plan)?

c. RULE: it is enough to meet the statute’s demands that at least one writing, the one establishing a contractual relationship between the parties, must bear the signature of the party to be charged, while the unsigned document must on its face refer to the same transaction as that set forth in the one that was signed.

d. HOLDING: Statute of frauds was implicated bc the contract was for 2 yrs and it was satisfied by pasting together the payroll cards and the memo stated the terms. There was a contract and it should be enforced.

7. Partial performance: Equitable Doctrine: to enforce contracta. §129 Restatement 2nd ; PARTIAL PERFORMANCE UNDER THE

STATUTE OF FRAUDS: i. A contract for the transfer of an interest in land may be specifically

enforced notwithstanding failure to comply with the Statute of Frauds if it is established that the party seeking enforcement:

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1. Reasonable reliance on the contract on the continuing assent of the party against whom enforcement is sought

2. Has so changed position that3. Injustice can be avoided only by specific performance

ii. 4 requirements:1. promise2. reasonable reliance3. change in position

8. Justice requires enforcement9. Winternitz v. Summit Hills Joint Venture pg. 305

a. there are 2 contract agreements in this case. 1) that the defendant would renew the lease to the plaintiff 2) that the defendant would allow the plaintiff to transfer the lease over to the person that the plaintiff sold his business to. The plaintiff seeks money damages in this case, legal damages. He is NOT asking for equitable damages which would be specific performance. The plaintiff argues that he paid the first months rent of the renewed lease and that qualifies as partial performance for the contract.

b. RULE: §129: Partial Performance; Law is clear and well est that “part performance” is an equitable doctrine available only where the principle relief sought is specific performance of an oral agreement. It has NO application in an action at law for money damages.

c. HOLDING: Since the doctrine is NOT applicable in this claim for legal damages, it cannot be used to enforce a contract, NO CONTRACT.

d. The statute of frauds is invoked bc the one yr and this is an interest in land.

e. This case is a candidate for pasting.f. the defendants conduct was malicious and so the plaintiff may bring a

claim in tort law using the breach of contract as evidence.10. Reliance: Reasonably relied to detriment: enough to enforce contract

a. §139: reliance under the statute of frauds: how far liberal and modern the court will go to get around the statute of frauds

b. 2nd Restatement §139: RELIANCE UNDER STATUTE OF FRAUDS:i. a promise which the promisor should reasonably expect to induce

action or forbearance on the part of the promisee or a third person and which does induce the action or forebearance is enforceable notwithstanding the statue of frauds if injustice can be avoided only be enforcement of the promise. The remedy granted for breach is to be limited as justice requires.

ii. In DETERMINING whether injustice can be avoided only by enforcement of the promise the following circumstances are significant: 5-factor test:

1. The availability and adequacy of other remedies, particularly cancellation and restitution

2. The definite and substantial character of the action or forebearance in relation to the remedy sought

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3. The extent to which the action of forebearance corroborates evidence of the making and terms of the promise, or the making and terms are otherwise est by clear and convincing evidence

4. The reasonableness of the action or forebearance 5. The extent to which the action or forebearance was

foreseeable by the promisor.c. §139 gives a 5-factor test that must be applied, this is why §139 is more

strict than §90. §90 is only the regular reasonable person standard to decide whether or not there is injustice.

11. Alaska Democratic Party v. Rice pg. 314a. Plaintiff was offered a job for 2 yrs. She quit her job and moved to Alaska

for the job and when she got there she was told that there was no job.b. RULE: §139: Reliance, injustice only avoided by enforcement; 5-factor

test.c. HOLDING: The promise is only enforceable where injustice can only be

avoided by enforcement of the promise. d. The jury was correct in finding that there was an enforceable contract.e. The statute of frauds is invoked bc it meets the 1yr requirement.

Under the UCC1. §2-201 UCC: STATUTE OF FRAUDS:

a. except as otherwise provided in this section a contract for the sale of goods for the price of $500 or more is NOT enforceable by way or action or defense UNLESS there is some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker. A writing is NOT insufficient bc it omits or incorrectly states a term agreed upon but the contract is NOT enforceable under this paragraph beyond the quantity of goods shown in such writing. (The only term that needs to be stated and agreed on is the quantity).

b. Between merchants if within a reasonable time a writing in confirmation of the contract and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of subsection(1) against such party UNLESS written notice of objection to its contents is given within 10 days after it is received.

c. A contract which does NOT satisfy the requirements of subsection(1) but which is valid in other respects is enforceable;

i. If the goods are to be specially manufactured for the buyer and are not suitable for sale to others in the ordinary course of the seller’s business and the seller, before notice of repudiation is received and under circumstances which reasonably indicate that the goods are for the buyer, has made either a substantial beginning of their manufacture or commitments for their procurement; or

ii. If the party against whom enforcement is sought admits in his pleading, testimony or otherwise in court that a contract for sale was made, but the contract is NOT enforceable under this provision

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beyond the quantity of goods admitted (there is a contract, but not for the amt that the plaintiff alleges, ONLY for the amt that the defendant admitted in testimony); or

iii. With respect to goods for which payment has been made and accepted or which have been received and accepted. (partial performance/payment)

2. Requirements to Invoke the Statute of Frauds under UCC:a. MUST be a sale of goods b. over $500

3. why is it different from the common law?a. Need a writing, the writing needs to infer a contract, the UCC is far more

liberal in what constitutes as “signing”b. Difference comes from how Llewelyn is different from Willistonc. The pasting of all of the essential terms is NOT as important here as it was in

the common law; the one that must be in writing is quantity.4. Functionalism vs. formalism; we just want to know that there is a real transaction

here, we need to know that there is a quantity; any other specifications do NOT need to be included.

5. Statute of frauds §2-201(1): 3 requirements to enforce contract:a. contractb. signedc. stated quantity

6. Exceptions to the UCC statue of frauds:a. Merchants exceptionb. Specialized goods exceptionc. Partial payment or partial performanced. Judicial admissions (testimony)

7. Merchants exception to the statute of frauds:a. §2-201(2) b. It has to be a contract BETWEEN merchantsc. Written confirmationd. Sent within a reasonable time; depends on the situation sense.e. The written confirmation has to be valid against the sender- go up to

subsection 1; would this be valid. MUST be a writing indicating a contract signed by the party to be charged that states a quantity.

f. Party who receives it must have reason to know its contents- worried about notice as to its contents

g. The party fails to object within a reasonable time- 10 days, I have 10 days and only 10 days to object

i. After 10 days you cannot raise the statute of frauds as a defense.8. specialized goods exception:

a. §2-201(3)b. if the goods themselves bespeak a contract then it should be enforced

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9. partial payment or partial performance exception:a. §2-201(3)b. it might not get the whole contract enforced but it will enforce it to the point

that the contract has been partially paid for or partially performed10. Judicial admissions exception:

a. §2-201(3)b. if there is testimony that there was a contract, the quantity stated in the

testimony is the one that will be enforced.11. Mixed cases

a. Predominant factor testb. Written confirmationc. 10 days to object of else the terms are accepted.

12. Buffaloe v. Hart pg. 326a. The parties agreed for the plaintiffs to buy the barns in an oral agreement.

Agreement was for 4 payments of $5,000 each. The plaintiff delivered the first check and the defendant accepted it. The next day the defendant called and said that they tore up the check and were not going to sell the barns.

b. UCC GOVERNS BC THE BARNS ARE GOODS THAT ARE MOVABLE.c. §2-201(1): a check may constitute writing sufficient to satisfy §2-201

provided iti. contains a writing sufficient to indicate a contract of sale between the

partiesii. is signed by the party or his authorized agent against whom

enforcement is sought.iii. States a quantity.

d. The writing in this case is a personal check which specifies 5 barns and contains the amt of $5,000, but does NOT satisfy §2-201 bc it is NOT signed by the defendants.

e. Since the check was NOT sufficient to satisfy the plaintiff argues partial performance

f. RULE: §2-201(3): the seller must deliver the goods and have them accepted by the buyer. acceptance must be voluntary and conditional and may be inferred from the buyers conduct in taking physical possession of the goods or some part of them. for the buyer he is required to deliver something to the seller that is considered part-performance. Payment may be made by a check that is accepted by the seller.

g. Evidence that the plaintiff accepted the barns under the condition of the contract: they bought insurance, contracted someone to fix the barns, found someone to buy the barns from them.

h. Evidence that the defendant accepted a payment for the barns under the terms and conditions of the contract.

i. HOLDING: the writing is NOT sufficient to satisfy the statute of frauds, BUT there is an argument for partial performance. Whether or not the agreement to sell was accepted is a question of fact for the jury to decide.

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13. Bazak International Corp. v. Mast Industries, Inc. pg. 333a. the seller never sent the goods. buyer is trying to enforce the contract. Here

the statute of frauds is being used as a defense, the defendant must show that there was no enforceable contract bc the statute of frauds is not satisfied.

b. ISSUE: were the documents here sufficient to indicate the existence of the prior agreement, is the merchants exception to the statute of frauds satisfied? (should the merchants exception be interpreted strictly or loosely??)??

c. RULE: Writings were sufficient bc they were very specific. Writings sufficient so long as they afford a basis for believing that they reflect a real transaction between the parties. These were sophisticated parties.

d. Of the various requirements of UCC §2-201 4 are not in controversy:i. Both parties are merchants

ii. The writing was sent within a reasonable time after the alleged agreement

iii. That it was received by someone with reason to know of its contentsiv. That no written objection was madev. If the writings can be construed as confirming the alleged oral

agreement, they are sufficient under UCC §2-201e. LOOSE INTERPRETATION of the merchants exception. By interpreting

the merchants exception loosely they are eliminating a defense, the defendant cannot use the defense that the statute of frauds is NOT satisfied and so there is NO contract.

f. HOLDING: The court says that the purchase order form signed by the buyer, sent to the seller and retained by the seller without objection (10 days) falls within the merchants exception of §2-201 and satisfies the statute of frauds.

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DAMAGES1. Expectation interest

a. Put the plaintiff in the same position as if the promise had been keptb. Forward lookingc. Specific performanced. Money damagese. Classical Contract theory will award thisf. Modern theory: more flexible whatever it takes to serve justice

2. Reliance interesta. Put the plaintiff same position as if no promise made, undo harmb. Backward lookingc. Specific performance OR $$$$$ does $$ fulfill this goal??d. Promissory estoppel

3. Restitutiona. Pay plaintiff for benefit of value conferredb. The value of the contractual obligationc. If the expectation CANNOT be measured then revert and compensate for

the reliance interest.

UCC Gap Fillers1. Implied warranties2. Consequential damages3. Reasonable price4. Good faith5. Reasonable time period6. NO arbitration clause

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