Contracts Warner 1

Mike Hughes Contracts Outline Spring 2000 Prof.
Warner
Page 1 of 66
BLACK-LETTER LAW OUTLINE
I. Consideration
A. Bargain Theory
1. Restatement (2d) - The promissor makes a promise in order to get a
promise or performance in return, and the promissee gives the promise or
performance in order to get the promissors promise.
B. UCC 2-306 Output, Requirements, an e!"#usi$e ea#ings Implies a
good faith requirement to promote and/or sell with due diligence.
C. %re-e!isting uty ru#e Rep#a"e &y UCC 2-20' ( Rest )2* +,')a*-
1. A promise modifying a duty under a contract not fully performed on either side
is binding if the modification is fair and equitable in view of circumstances not
anticipated by the parties when the contract was made, and made in good
faith.
II. Promissory Estoe!
A. If the promissor should have reasonably expected to induce action or
forbearance on the part of the promissee or a 3d party, and did induce such
action or forbearance, then the promise is enforceable, to the e!tent
ne"essary to a$oi in.usti"e.
III. Interretation
A. O&.e"ti$e /ntent Test-
1. A promise is legally enforceable when a reasonable person would, under the
circumstances, interpret it as a promise. !ntent of promissor is irrelavent."
B. 0ypotheti"a# /ntent Test- (Fall-bac test- used when the unforeseen
occurs!*
1. #etermine main purpose of the contract
$. #etermine what rational parties would have agreed to had they contemplated
the unforeseen occurrence.
%. #etermine the obligations of the parties.
I". Remedies
A. 1!pe"tation 2 3itigation 3easure
1. #etermine the position the non-breacher would have been in had the contract
been performed as promised.
$. #etermine the position the properly mitigating non-breacher would be in as a
result of the breach.
%. #etermine how much & it takes to move from $." to 1."
B. 0a#ey Ru#e " gets damages reasonably foreseeable at time of contract!
(#imits expectation/mitigation damages!$ A#4ays As5-
1. 'ho has relevant info of the nature of loss that could occur(
$. 'ho has the control to avoid such losses(
C. %roo6 o6 7amages 4ith R1A8O9AB:1 C1RTA/9T; )#imits
expectation/mitigation damages.*
Mike Hughes Contracts Outline Spring 2000 Prof. Warner
Page 2 of 66
7. 7iagram o6 7amage A4ars 6or 8e##er<s 2 Buyer<s Brea"h
Who Breache!!
Seller Bu"er
Co#er!
$es % 2&'12( Bu"er gets CP&)P*+nci,Cons-.&Sa#ings.
.o % 2&'1/( su0 Mkt. Price for CP a0o#e.
1esale in 2itigation!
$es % 3not lost&#olu2e4 2&'06( Seller gets )P&1P*+nci&Sa#ings
.o % 2&'05314( )P&Mkt.P*+nci&Sa#ings
6hen ask7 +s this 8ust co2pensation!
$es % 2&'05314
.o % 2&'05324( Lost profits. 39ost&#ol. seller( failure to halt pro.4
1. Re#ian"e 7amages )%econd-choice &amage 'easures*
1. #amages incurred in reliance on a contract.
a4 STRICT& Onl" those spent in :ctual reliance( :;6<1 for2ation of contract.
04 LIBERAL/MODERN- Before , after e=penses( or >hen e=p?2it a2ages are har
to pro#e@ reliance a2ages use as lo>&en esti2ate.
=. :iquiate 7amages C#auses
1. A clause is an )#* when liquidated damages are its essential purpose.
a4 So2eti2es hel to 0e a separate contract 3option4 altogether.
$. +nforceable when,
a4 :ctual e=p?2it a2ages not reail" a#aila0le at ti2e of contracting( AND
04 6he 9AC is a reasona0le esti2ate of a2ages 3incluing 2itigation4 at the ti2e of
contract( OR
c4 6he a2ount in 9AC is reasona0l" proportionate to the actual a2ages at ti2e of trial
>. 8pe"i6i" %er6orman"e
1. & damages must be inadequate, cases like,
a4 uni-ue goos
04 unreproucea0le contract
c4 generall" not a#aila0le in e2plo"2ent cases
0. Cost o6 Comp#etion
1. -on-breacher is entitled to cost of completion, e.cept when * of * is grossly
disproportionate to the value produced by completing the work - then the non-
breacher gets the diminution of value unless willful breach - then * of *".
/. Restitution )On#y a$ai#a&#e 4hen there has &een a 8u&stantia# Brea"h.*
1. */A itself, $ elements,
a4 B conferre 0enefit on C
04 +t is un8ust to allo> C to retain the 0enefit.
(1) gets reasonable value of benefit conferred.
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". Pro#!ems o$ Per$orman%e
A. Restitution )see a&o$e*
1. #etermine if 0ubstantial 1reach occurred.
a4 Su0stantial 0reacher 2a" onl" sue off contract( in restitution
04 .on&su0stantial 0reacher 2a" sue either on or off contract
(1) Nnon-substantial breacher cannot sue off contract (in restitution) if he has
completely performed and is merely awaiting payment.
B. Res"ission )unoes "ontra"t*
1. Available in 0ale of 2oods conte.t when,
a4 0reach is announce prior to perfor2ance
04 goos tenere out of spec
(1) Where any tender or delivery by the seller is rejected because non-
conforming and the time for performance has not yet epired! the seller may
seasonably notify the buyer of his intention to cure and may then within the
contract time ma"e a conforming delivery.
(#) Where the buyer rejects a non-conforming tender which the seller had
reasonable grounds to believe would be acceptable with or without money
allowance the seller may if he seasonably notifies the buyer have a further
reasonable time to substitute a conforming tender.
C. 1!"use
1. 0ubstantial breach +3*40+0 non-breacher from s&#se'&ent performance
$. !nterference with 1 partys performance by the other party may be grounds for
substantial breach that e.cuses performance.
7. Anti"ipatory Repuiation
1. 5ust be definite and unequivocal announcement of breach
$. !s treated as breach 6 -on-breacher may commence suit immediately
%. *an be repealed if non-breacher has not acted in reliance
7. UCC 2-()*, 'hen reasonable grounds for insecurity arise with respect to the
performance of either party the other may in +ritin, demand adequate
assurance of due performance and until he receives such assurance may if
%ommer%ia!!y reasona#!e suspend any performance for which he has not
already received the agreed return.
"I.-!ittin, t.e Losses / +.cuses grieving party from performance, losses lie
where they fall.
A. /mpra"ti"a&i#ity
1. !f a condition whose e.istence is essential to the contract, and is assumed by
both parties, fails through no fault of either party, the contract is called off and
losses lie where they fall. +)+5+-T0 to claim !589A*T!*A1!)!T:,
a4 :n unforeseen e#ent renere performance DCo22erciall" +2practica0leE
04 Part" 2ust ought not 0ear the loss cause 0" the e#ent.
(1) $lways as"% What performance is owed- is that performance
impracticable&
B. =rustration
1. $ elements,
a4 :n une=pecte e#ent 2akes the perfor2ance lose its essential point.
04 Part" 2ust ought not 0ear the loss cause 0" the e#ent.
(1) Who can best insure against the loss&
(#) Who is in best position to ta"e precautions against loss&
(') (elative "nowledge of the parties as to the events that caused loss.
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C. 3ista5e
1. !f contract was formed under a false assumption, it was never formed. $
elements,
a4 :t the ti2e of entering the contract( O.< O1 BO6H P:16+<S entere uner a
2istaken assu2ption( >here the assu2ption >as 0asic to the contract.
04 Part" 2ust ought not 0ear the loss resulting fro2 the contract.
(1) )onscious *gnorance not allowed. +ust show you investigated! if called for.
$. 4nilateral 5istake e.g., mistaken bid" ; 5isunderstandings 5tg. of 5inds"
a4 Court >ill allo> e=cuse as 8ustice re-uires 3generall" allo>e4
(1) Not ecused if too much wor" already done or , spent in reliance! unless
party accepting the bid should have noticed - didn.t act-/ast clear chance
(#) )ourt may ecuse! order new bids - assess any assoc. costs to mista"en pty
%. 5istake of Transcription 0uit is for 9eformation"
a4 Must pro#e >hat >as agree to is not >hat is >ritten o>n. +f so( court >ill re>rite it
(1) 0he degree of 1223 4$*05 reliance may uphold the contract as written
7. 7o"trine o6 1quita&#e Apportionment
1. Applied in !mpracticability, <rustration and 5istake cases when 9estitution is
not adequate.
a4 Court has inherent right to 2ake e-uita0le assess2ent against one part".
"II. -tat&te o$ 0ra&ds
A. 3 arriage -Contra"ts 4here marriage is "onsieration )not ?<s to marry*.
B. ; ear - Contra"ts not per6orma&#e 4ithin one year.
C. : an - Contra"ts that "reate an interest in #an.
7. 1 states - @hen e!e"utor agrees to pay inso#$ent estate<s e&ts.
1. > oos - @orth more than AB00 UCC 2-20C.
=. 8 urety - Contra"t to pay the e&t o6 another.
>. 0o4 to get out o6 8tatute o6 =raus-
1. Any signed writing will do sufficient to prove e.istence of contract".
$. !f one party orally agreed to put = in writing and never does, he cant benefit.
%. 9estitution
7. Acts of reliance by one party estops him from using 0>< as defense.
"III. O$$er and A%%etan%e
A. O==1R
1. A manifestation of a willingness to enter a bargain
$. so made as to 1U-TI02 the recipient of the communication in understanding
that his assent will conclude the bargain. (TRAN-0ER- T3E POWER).
a4 :s fro2 P1+G:6< sellers >?lt -uantit" are genl" not offers H 0u"er not 8ustifie
04 :s fro2 COMM<1C+:9 sellers >?unlt -uantit" are genl" offers H o 8ustif"
c4 .ot an offer if offeror retains the right to sell to another
4 +f language like Dfor "our i22. acceptanceE use( it 8ustifies the 0u"er , is an offer
%. ?ow long is an offer open(
a4 ;or a2ount of ti2e specifie in offer( if an"
04 +f not specifie( offer lapses after a reasona0le a2t of ti2e 3look at circu2stances4
c4 1ules of 6hu20( O.9$7
(1) 2ral! face to face offers epire at end of conversation
(#) 2ffers rec.d in mail don.t lapse before end of business day
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7. 9e@ection of offer terminates the offer
A. 9evocation of offer
a4 can occur an"ti2e 0efore acceptance
04 take effect >hen 1<C<+G<A 0" other part"
c4 if offer >as 2ae through pu0lication( it can onl" 0e re#oke in like pu0lication
4 if an offeree learns( through relia0le 2etho( of a re#ocation( or that offeror is no
longer a0le to perfor2( then the offeree can no longer accept the offer.
B. A""eptan"e
1. A manifestation of a willingness to enter into a bargain based on the terms of
the offer.
$. 4ai!#o5 R&!e 6 Acceptance takes effect when dispatched put in mail"
a4 <=ceptions7
(1) When improper method of response is used and causes long delay
(#) *f method of acceptance epressed in offer is not followed
(') lapse! prior revocation
%. 9estatement $d" - Acceptance can be by any method reasonable under the
circumstances.
a4 restate2ent protects the rel"ing offeree >ho nees certaint"
04 oes a>a" >? unilateral?0ilateral istinction.
7. !n general, silence is not acceptance, unless,
a4 in conte=t of the ealings( or past ealings( silence >as acceptance& ut" to sa" DnoE
04 1st pt" acts >ith e=pectation that 2 pt" >ill 0e lia0le for certain perfor2ance( an
the 2 pt" is a>are of this an oes nothing( an tries to reap the 0enefit
A. -otice of Acceptance by 8erformance
a4 6here is no re-uire2ent for offeree to notif" offeror of acceptance 0" perfor2ance(
unless offoree has reason to think that offeror >ill not fin out a0out perfor2ance(
then( unless offeror has inicate that notice is unnecessar"( 14 the offeree 2ust use
ue iligence to notif"( or 24 the offeror 2ust learn of perfor2ance in a reasona0le
a2ount of ti2e.
C. Unorthoo! 7o"trines
1. An offer can become irrevocable if offeree acts in reasonable reliance, and it
would be un@ust to allow the offeror to revoke the offer.
a4 Su0&contractor can sue to ha#e Jeneral use his ser#ices if his 0i >as the one the
Jeneral use to o0tain the contract an Su0 has acte in reasona0le reliance.
$. 8romissory +stoppel as *ause of Action
a4 :llo>s for reliance a2ages incurre AK1+.J .<JO6+:6+O.S( >ithout contract
04 Must fulfill all ele2ents of Pro2. <stoppel as note a0o#e & +ncluing Justice clause
I6.Terms o$ Contra%t
A. UCC 2-20D )rep#a"es 3irror /mage Ru#e*
1. A definite and seasonable e.pression 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 e.pressly made conditional on assent to the
additional or different terms.
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$. The additional terms are to be construed as proposals for addition to the
contract. 1etween merchants such terms become part of the contract unless,
a4 the offer e=pressl" li2its acceptance to the ter2s of the offer@
04 the" 2ateriall" alter it 3>arrant"&$( ar0itration&$( reasona0le eli#er" ate&.4@ or
c4 notification of o08ection to the2 has alrea" 0een gi#en or is gi#en >ithin a
reasona0le ti2e after notice of the2 is recei#e.
%. *onduct by both parties which recogniBes the e.istence of a contract is
sufficient to establish a contract for sale although the writings of the parties
do not otherwise establish a contract. !n 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.
B. %aro# 1$ien"e Ru#e
1. Terms with respect to which the confirmatory memoranda of the parties agree
or which are otherwise set forth in a writing intended by the parties as a final
e.pression of their agreement with respect to such terms as are included
therein may not #e %ontradi%ted by evidence of any prior agreement or of a
contemporaneous oral agreement but may be e.plained or supplemented
a4 0" course of ealing or usage of trae 3L1&20I4 or 0" course of perfor2ance 3L2&
2054@ an
04 0" e#ience of consistent aitional ter2s unless the court fins the >riting to ha#e
0een intene also as a co2plete an e=clusi#e state2ent of the ter2s of the
agree2ent. 3COMLETE INTE!RATION CLA"SE4
(1) $ contract is a complete integration if that is what the parties intend
(#) )omplete *ntegration ma"es all side agreements w6in its scope
unenforceable. 3etermined by N2(+$/ *N)/78*2N 0980
#a$ If t%e parties &oul' normall( %a)e inclu'e' t%e si'e a*reement
&/in t%e &ritten contract+ t%e si'e a*reement is
RES"MTI,EL- &/in t%e scope of t%e &ritten contract.
#/$ REB"TTABLE
3i4 <#en Parol <#ience rule 0ars a sie agree2ent as part of the
contract( it 2a" 0e use as e#ience to clarif" a20iguities in
>ritten contract.
C. Reasona&#e 1!pe"tations 7o"trine )/98URA9C1 %O:/C; CA818*
1. 0uit is for 9eformation. $ views of doctrine,
a4 9ess raical ? More accepte
(1) 9:0(9+9/; )omplicated )ontract
(#) $uthoritative representation by agent said something different than what.s
written.
(') /egally sophisticated )o. v. $verage! legally unsophisticated consumer
04 More raical #ersion
(1) (easonable epectations can be generated by other means than
authoritative representation by agent.
#a$ -ou as0 for somet%in* to /e inclu'e' in t%e contract+
#insurance polic($+ an' it is not inclu'e'. Allo&s for
reformation &/out t%e misrepresentation.
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6. Unen$or%ea#!e Contra%ts
A. Un"ons"iona&i#ity has &oth pro"eura# an su&stanti$e e6e"ts
1. 8rocedural #efect
a4 9ack of 2eaningful choice 3e.g.( har sell( all sellers ha#e sa2e ter2s4
$. 0ubstantive #efect 6 unfairness in the contract itself
a4 no opportunit" to hanle isputes( or ifficult an e=pensi#e to o so@ /= price
B. 7uress 2 e#ements-
1. !mproper Threat
$. Threat of 0ufficient 0eriousness
a4 Aefect in proceure that is greater than that neee for unconsciona0ilit".
C. Unue /n6#uen"e
1. 'hen ones will is overcome, but conscious is not.
a4 .o ti2e to reflect( or Man" against one
Exam
Aeter2ine H in orer7
What contracts e=ist!
offer , acceptance
What are the ter2s!
2&20'( parol e#ience
Who 0reache >hat!
What are the re2eies!
e=p?2it 3Hale"( proof4
0u"er?seller
reliance( lc( spec per( cost of co2pl( rest
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6I. Warner Contra%ts7 *8
6II. Promissory estoe!
A. 3a5es promises en6or"ea&#e 4ithout "onsieration
B. 1!amp#e
1. !f a promisor makes a promise that
a4 14 the pro2isor shoul kno> >ill inuce reliance on the pro2ise on the part of the pro2issee or a thir
part"
04 24 6he pro2ise oes inuce such reliance
c4 6hen the pro2ise is enforcea0le
4 /4 to the e=tent necessar" to a#oi in8ustice
(1) *f this did not eist! almost every contract would be enforceable
e4 :ll "ou nee is a pro2ise....
$. Then the promise is enforceable
C. 0ypo-
1. <armer <red and 0ister 0ally
a4 ;ar2er ;re pro2ises to gi#e Sall" lan if she co2es to California to li#e. Sall" 2o#es( 0ut ;re
refuses
$. There is no consideration, is it enforceable
%. :es, 4nder 8romissory +stopple,
a4 ;re shoul kno> that if >oul cause reliance
04 +t i inuce reliance
c4 +n8ust!
(1) ;es! because she spent all her money and uprooted her family to come to )alifornia
6III.Interretation
A. 1m&ry $. 0argaine-3"?ittri"5 7ry >oos Co.
B. Reasona&#e %erson 2 O&.e"ti$e /ntent TestE
1. 0tep 1, 'hat are the relevant circumstances(
a4 He >as an e2plo"ee
04 See case for facts
$. 0tep $, 'ould a reasonable person, like 2ranny, think that 5c=ittricks words were in the
circumstances, a promise.
a4 Most likel" "es
04 6he court agrees
C. 0ypo
1. 0ail and sail boat e.ample
a4 Was there a pro2ise to 2ake the sale out of )e#lar!
(1) *9% Were the words <promise to ma"e a jib of certain weight and wind range capabilities. a
promise to ma"e the sail out of "evlar&
04 1ule7 1. +f a reasona0le person >oul ha#e interprete the >ors an actions to ha#e i2plie the
pro2ise( than that i2plie pro2ise >oul 0e enforcea0le.
c4 :rgu2ents
(1) 0he buyer promised to ma"e it out of the appropriate material
(#) $t the time of the agreement! they both thought <=evlar.
(') Which is right&
(>) )ourt% )ourts will not read into these facts. 0he prevailing definition
(?) 3o not apply the trade usage doctrine
4 1ule 7 H"potheticall" if the partie ha consiere a#aila0ilit" of the ne> 2aterial( reasona0le parties
>oul ha#e chosen the ne> 2aterial.
e4 :rgu2ents7
(1) ;es they would have anyway! so there is really a promise to use the best material
Page 10 of 66
7. 8pau#ing $. 3orse
1. <acts,
a4 Pa"2ent scheule set up to take care of chil
$. 9easonable person,
a4 : reasona0le person test >oul sa" that he pro2ise to pa" until he >ent to college.
04 Sho>s that the reasona0le person test is onl" 2oeratel" helpful.
%. 8urpose of the contract test
a4 Ji#en the 2ain purpose of the contract( >hat >oul Jeorge an 1uth 3reasona0le parties4 ha#e agree
to a0out support if the" ha consiere the possi0ilit" that 1ichar >oul 0e rafte into the :r2"!
04 We hol the 2ain purpose of the contract fi=e( an >e are consiering the parties to 0e 1easona0le
c4 :): h"pothetical intent test.
1. Choosing a test-
1. 4se reasonable person test first, if that doesnt work, go to hypothetical intent test.
=. Ber4i"5 ( 8mith Co. $. 8a#em %ress, /n".
1. <acts, !n the publishing trade, copy means one of each.
$. #ecision,
a4 9ack of kno>lege of trae efinitions is not an e=cuse for transactions 0et>een 2erchants.
04 6hus the -uestion >ill 0e one of >hat >oul a reasona0le 2erchant think( rather then >hat >oul a
reasona0le person think.
c4 :gain( this applie onl" 0et>een 2erchants in the sa2e trae.
>. Thus 4e ha$e three tests-
1. 9easonable person, then hypothetical intent test, and where applicable, the merchant test.
$. 'hen all else fails, courts will sometimes interpret ambiguity against the drafter or the more
knowledgeable party.
0. 0ypotheti"a#
1. ?airy hand caseC
a4 See online iscussion
6I".Remedies9
A. >enera#
1. #etermining what is owed when one party breaks or violates a promise.
$. <our basic types
a4 <=pectation? 2itigation 2easure
(1) @astly preferred measure
04 1eliance 2easure
c4 1estitution
4 Specific Perfor2ance
%. 2oal is to be the non-breacher is as good a position as you would have been had the contract been
fulfilled.
7. Thus, they are prospective.
A. 4niform *ommercial *ode
a4 Ho> to use it to eter2ine a2ages
04 Ao not >orr" a0out the ifferences 0et>een +nciental an Conse-uential a2ages.
c4 +nciental a2ages
(1) & A misc categories ( phone calls! store! reasonable epenses incurred as a result of the
breach)
4 Conse-uential a2ages
(1) 5adley rule types of situation (lost profits)
Page 11 of 66
B. 1!pe"tation measure
1. Three questions to ask
$. 'here would the non-breacher be had the contract been performed as promised(
%. 'here is the non-breacher as a result of the breach(
7. ?ow much money do we have to give the non-breacher to move him or her from $ to 1.
A. ?awkins v. 5c2ee
a4 Aa22ages7
(1) ;ou determine where they are now!
(#) 0hen determien where they would have been
(') What is the difference& A those are the dammages.
(>) 8ee tutorial
04 H"po7
(1) 2ffice cleaning eample.
#a$ 1%ere &oul' (ou %a)e /een2
3i4 Clean office( less N10 ollars
#/$ 1%ere are (ou as result of /reec%
3i4 Messier office( still ha#e N10
#c$ 1%at (ou *et
3i4 Aifference 0et>een 2essier office an original state & NI
3ii4 Aifference in #alue 0et>een clean an irt" office & N10.
D. 9evised rule,
a4 1;igure out >here the non&0reacher >oul 0e if the 0reacher ha faile to 0reach.
04 24 ;igure our the position that the non&0reacher >oul 0e in as a srusult of the 0reach& pro#ie the
non&0reacher ha one >hate#er >as possi0le H >ithin reason& to 2itigate a2ages@
c4 /4 ;igure out ho> 2uch he or she nees to get fro2 the position escri0e in 324 position to 314
position
4 6his is calle the e=pectation H 2itigation rule
e4 When eter2ining if so2ething if reasona0le( the court 0ens o#er 0ack>ars to acco22oate the
2itigate.
E. 9ockingham *ty. v. )uten 1ridge *o.
a4 :ppl" re#ise rule to 9uten Brige7 >hat happens if 9uten tries
04 When
F. ?ypo re, Tutoring
a4 Contract perfor2e position7 F hours for NF0
04 Contract 0reache position7
(1) Baid for # hours but no instruction
(#) # hours for ,1C
(') Baid ,'C for # hours of instruction
G. 8arker v. Twentieth *entury-<o. <ilm *orp
a4 Woul a proper 2itiagtor ha#e taken the 8o0!
04 Aecision7
(1) *n the employment contet! the employee is not reDuired to accept an inferior job and will not
be found to not be a proper mitigate
(#) Euestion% is the job significantly inferior to justify not ta"ing it.
c4 Oustificaiton ? +ssues
(1) *nvoluntary servitude
(#) 7neDual bargaining power
(') /aw tends to give the benefit of the doubt to the mitigating non-breacher.
1H. ?ypo,
a4 Mural e=a2ple
04 Contract perfor2e position7
(1) $ mural by Fohn
(#) Gusiness $ttracting mural
c4 Position as result fro2 0reech7
(1) 5alf a mural by Fohn
(#) No business attraction
#a$ T%us no a''itional /usiness
Page 12 of 66
4 Ai she propert" 2itigate!
(1) 8hould she have hired Baul and 1eorge&
(#) *f you say no%
#a$ T%en s%e is entitle' to t%e 'ifference /et&een more /usiness an' no increase in
/usiness.
(') *f you say yes%
#a$ T%en s%e is entitle' to 'ama*es minus &%at s%e &oul' %a)e pai' ! an'
11. Theoretical consideration of damages
a4 6heor" of efficient 0reech
(1) Where a second buyer comes along and is willing to pay more than the contracted buyer
(#) 0he idea is that it is rational for a party to breacher a contract to deal with another instead if
the breacher can fully compensate the non-breacher
04 We >ant to encourage situations >here "ou >ill 0e 0etter off for 0reaching "our contract as long as the
nu20er of people 0etter off fro2 the 0reach is greater than the nu20er of people >ho >ill 0e >orse
off. 3the original 0u"er #s. the ne> 0u"er an the seller4
c4 6his 8ustifies the e=pectation 2itigation 2easure.
C. =oreseea&i#ity 7o"trine
1. ?adley rule
a4 Splits the a2ages 0et>een the 0reacher an the non&0reecher.
04 $ou can onl" get the a2ages that are reasona0l" foreseea0le at the ti2e of the 0reech
c4 1ule for2 the ecision7
(1) 3irect 3amages A arise in the usual course of thing! always get these
(#) 8pecial 3amages A reasonably foreseeable at the time contracting as the probable result of
the breech
4 1e7 e=pectation 2easure
(1) 0his is a limit on the epectation measure
e4 Warner anal"sis7
(1) )ontrat performed% new shaft and no si days lost profits
(#) Greech% delayed shaft! si days lost profits
(') 3ifference% (assuming that doing nothing was proper mitigation) the si days lost profit
f4 6his ecision sa"s that this approach is >rong( for the2 to 0e entitle to lost profit( the" 2ust either 0e
such that arise in the nor2al course of things( or at least reasona0l" foreseea0le at the ti2e of the
contract.
g4 6his is si2ilar to reasona0l" foreseea0le for torts( this >ill usuall" epen upon ho> "ou look at the
facts
h4 Were the profits reasona0l" foreseea0le!7 Onl" if the" ha co22unicate the possi0le a22ages to
the other part".
i4 6he court sa"s that the co2pan" shoul ha#e ha an e=tra shaft( therefor the Hale"s >ere
responsi0le for their loss.
$. ?adly 9ule,
a4 1euces the lia0ilit" of the 0reacher to onl" those losses that are foreseea0le at the ti2e of the contract.
04 See sheet
%. ?ypo, 9e, ?adley rule
a4 Where >oul "ou ha#e 0een if the contract 0een fulfille
(1) Brofit 1>?C
(#) Greech profit ?C
(') Was the loss reasonably foreseeable.
Page 1/ of 66
04 9ook at >ho is in the 0est position to foresee an pre#ent the loss.
c4 Who has the infor2ation an control.
7. 'hen determining if
a4 ;irst ask >ho is the 0est loss a#oie7 >ho has the 0est infor2ation!
04 Was it reasona0le that the" e=pecte those losses!
7. :ost Fo#ume 8e##er
1. -eri v 5arine,
a4 +f "ou appl" 2&'06( he >oul not get an" a2ages.
04 6his is a 0reach of contract( there shoul 0e so2e a2ages
c4 6he sale of the 0oat to another custo2er is not 2itigation( 0ut another sale in the usual course of
0usiness
4 KCC 2&'05 324
e4 6his section of KCC is esigne to protect 0usinesses fro2 0u"ers 0acking out of contracts.
f4 $ou get "our lost net profits fro2 the 0reache sale.
1. %ro$ing 7amages 4ith Greasona&#e "ertainty<
1. <reund
a4 Contract to pu0lish 0ook H >as not pu0lishe
04 +n ter2s of consieraiton( this >ill 0e enforea0le e#en though the pu0 has not gi#en up an"thing
c4 See Wickha2 Caol the" pro2ise to pu0lishe if the" >ant to
4 6he" o ha#e an o0ligation to 0e sufficient consieration
(1) 2nly HC days to decide
(#) 0his is an escape clause
e4 6here is no consieration pro0le2
f4 Plaintiff sought to get a22ages
(1) 3elay of academic promotion
(#) /oss of profit
(') )ost of publication on his own
g4 Aecision7
(1) 5is academic career was not delayed
(#) 0he dollar amount of the loss of profit was not determined
(') 0o award the cost of publication would put him into better position than he should be put into
h4 Court of :ppeals7
(1) 0hey apply the hadley rule A you can only get damages for the damages that were reasonably
foreseeable at the time of contract.
i4 Point7 the 2easure2ent of the loss of profit is not goo enough7 2ust pro#e >ith reasona0le certaint"
or "ou ont get the2
84 He i not put forth e#ience therefore he pro#ie no egree of reasona0le certaint".
=. Re$ie4-
1. 1. +.pectation 5itigation
a4 .ot a legal ut"( "ou are not getting if "ou ont encourage non&0reaching part" to 2ake up losses
04 1e-uire2ent >hen calculating a2ages
$. $. ?adley 9ule, aka foreseeability rule 6 damages limited to those that are reasonably foreseeable at
the time of the contract.
%. %. 8roof requirement reasonably certainty.
7. Applying the above to <reund
a4 .o possi0le 2itigation so proper 2itigation is to o nothing
04 Hale" rule
c4 Proof Pro0le2
A. 9easonable certainty 6 has become more liberal in interpretation of this.
a4 Ol rule7
(1) rather strict A espicially in area of lost profits-
(#) 1enerally cannot recover lost profits b6c it would be impossible to prove these with
reasonable certainty
04 .e> Business rule7
(1) ;ou are allowed to put up evidence of what your losses would be
#a$ E34 race %orse case4
3i4 6rack recor is #ali as e#ience
Page 1F of 66
3ii4 Sho>s ho> li0eral the court has 0eco2e in >hat -ualifies as e#ience
(#) ;ou cannot get damages for G2) in commercial transactions.
(') Gut in the appropriate case! you can collect (grandpa on the freeway)
>. Re#ian"e 3easure o6 7amages
1. :ou get e.penses accrued in reliance of the contract.
a4 6he court usuall" refer to so2ething else >hen sa"ing Preliance a2ages
$. 'e are using the def in the restatement.
%. ?:8/
a4 See on line iscussion H Santa Monica Pier # Sail : Wa"
04 SMP 0reeches contract >ith sail
c4 <=pectation Mitigation Aa2ages
(1) Where would have been%
#a$ 567+777 #a''itional profit in a mont% of operation$
#/$ 58+777 #9777 people ta0in* /oat ri'e$
(#) Where they are now%
#a$ 57 e3tra profit
#/$ 57 in /oat ri'e fees
(') 3o they get the ,#I!CCC&
#a$ Miti*ation possi/ilities4
3i4 :nother charter( another sail 0oat
3ii4 :ssu2e no rel#ant possi0ilities( proper 2itigation >as to o nothing
#/$ Are t%e 'ama*es foreseea/le # at t%e time of t%e :$
3i4 S:W H the aitional custo2ers are speculati#e at the ti2e therefore the" are not
foreseea0le
#c$ roof Re;uirement4
3i4 Can the P pro#e >ith reasona0le certaint" that the calculation of lost profit are
reasona0l" certain.
7. /ther way 6 0A' sues 5ast <i.,
a4 S:W asks for
(1) /ost profts ,>ICC
(#) )ompensation for liability
04 <=pectation?Mitigation
(1) Where would have been
#a$ No loss+ lia/ilit(
(#) Where now%
#a$ Loss+ lia/ilit(
(') 5owever%
#a$ T%e lia/ilit( &as not foreseea/le a t%e time of t%e :
#/$ It is reasona/l( foreseea/le t%at t%e mast &ill /rea0 t%erefore SA1 s%oul' %a)e
%a' a spare mast
A. -eri
a4 Bu"s a 0oat H sells to a secon 0u"er
04 See ucc 2&'05
c4 He is entitle to the possi0le profits fro2 the sale if he is a retail H t"pe seller
4 Kse 2&'05324 When
(1) #-IC1-1 will award too little or
(#) something else will award too much
D. 0ecurity 0tove,
a4 Breech7
(1) No stove no ehibit no or fewer sales! less reputation gain and epenses
04 Whe" argue this >a" rather than another >a"
(1) )an.t get epectation damages b6c can.t prove them with reasonable certainty! so as" for
reliance damages
c4 :ppl" 1eliance a2ages7
(1) 8trict J epenses incurred in reliance of the contract
(#) )ourt J more! why
#a$ 9. Tal0 reliance /ut a&ar' e3pectation OR
#/$ 6. Court 'on<t mean /( reliance 'ama*es &%at t%e 6
n'
restatement means.
(') 2pinions on the matter%
Page 1I of 66
#a$ "se reliance to ma0e a lo& le)el estimate of 'ama*es an' a'' in e3penses t%at
are connecte'
(>) 2n eam% chec" to see if Duestion is based on common law reliance damages or is based
strictly on the #
nd
(.
E. ?:8/, 9e, reliance
a4 ;B. co2puter trae sho> 32onitor e=a2ple4
(1) Broblem with proving with reasonable certainty epectation damages (lost profits)
(#) 3amages would be the same as those awarded under 8ecurity 8tove
F. Albert and 0on,
a4 6he" get N/00 an the" get lost a2ages
(1) 0his only wor"e if we loo" at mitigation damages A but they still call it reliance damages
G. ?ypo,
a4 6on" 6ennor offere part of P2a og in Din#asion of the frat 0o"sE.
04 Contract sa"s to loose I0 l0s an loose .$ accent
c4 Mo#e co2pan" 0reaches ) 0ut offers another 2o#ie
4 <=pectation a2ages
(1) 3educt mitigation from possible profits 6 other job
(#) What is proper mitigation
(') Where would he have been if contract performed
(>) Where is he now.
(?) Bossible profits A mitigation J damages
e4 1eliance7
(1) Nutritionist and N; accent (linguist)
(#) ;es A did not matter that it is not in the contract
0. :iquiate 7amages
1. *lause in the = that says in the cause of a breach the damages will be IIIII
$. To be enforceable,
a4 Must 0e reasona0le esti2ate of a2ages( at the ti2e of the ) O1
04 Must 0e reasona0le esti2ate of a2ages( at the ti2e of trial
%. !f clause is not enforced, most courts will use e.pectation mitigation damages
7. 5*J
a4 Court reser#es the right to eter2ine if >hat "ou call a li-uiate a2ages clause is actuall" a li-
a2ages clause.
04 Court can call it either is li- a2ages clause or can call it an alternati#e 2etho of perfor2ance
A. +., of an Alternate method,
a4 Pro2ise to 0u" a house or pa" N10(000
04 .ot li-a2 0?c if "ou pa" the 2one" there is no 0reach of k
c4 +f court sa"s it is a li-a2 clause go 0ack to top
D. Truck rent a center
a4 Make sure 2itigation is taken into consieration
04 Penalit" % li-a2 clause is unenforcea0le( nothing2ore
/. Out#ine o6 UCC 6or 7amages C
st
As5 @ho Brea"heH 8e##er
1. 'as there a reasonable cover purchase purchase of substitute goods(" 'as there proper
mitigation("
a4 $es
(1) 3amages J )over price A )ontract Brice (#-I1#)
04 .o
(1) 3amages J +ar"et price A )ontract Brice (#-I1')
$. 1uyer
a4 Was there a reasona0le resale!
(1) ;es
#a$ Dama*es = Contract rice > Resale rice #6-87?$
(#) No
#a$ Appl( 6-87@#9$2
3i4 $es
Page 16 of 66
(a) 3amages J )ontract Brice A +ar"et price (#-ICK(1))
3ii4 .o
(a) 3amages J /ost Brofits (#-ICK(#))
I. 8pe"i6i" %er6orman"e
1. #o specific performance stuff on own K see tutorials.
$. There will be a question on the midterm
%. )ike rare book case and a breach of contract
?. Cost o6 Comp#etion
1. 8eeveyhouse,
a4 Contract7 pa" ro"alties an fill in hole
04 Pa" ro"alties( 0ut lea#e hole
c4 Cost of co2pletion re2e"
4 :lso( cases that in#ol#e cracke houses( an si2ilar situations
e4 He get i2inution #alue H >hat the ifference 0et>een the lan >ith the hole( an the lan >ith the
hole(
$. Argument vs. spend $G,HHH to make land &AHH better off.
a4 Cost of Co2pletion7 "ou get the #alue if the #alue of the co2plete >ork is not grossl"
isproportionate to the cost of co2pleting it.
04 Measure2ent point H
(1) )an he argue that the land is ugly and that he should be compensated for that
(#) 5e should have argued that the diminution in value was incorrect or inaccurate
%. Lacobs and :oung v (
a4 House >ith pipes H sues 0uiler for the cost of ripping out the pipe use an to 0e replace >ith the
re-ueste pipes.
04 Woul ha#e to spen a lot of 2one" to get >here "ou >ant to go( an "ou >oul not en up an" 0etter
off.
7. Also, mural case . . .
A. *ost of completion remedy
a4 1eall" the e=pectation 2itigation re2e" is other clothes
D. +lmira 0chool #istrict
a4 6he" hire so2e to 0uil a s>i22ing pool( the" >ante prett"( la2inate 0ea2s.
04 6he" >ante the cost of co2pletion to replace the 0ea2s.
c4 6his >ill cost a lot of 2one"( an there >ill not 0e a large increase the #alue.
4 6he" get the cost of co2petition unless it is grossl" isproportionate to the #alue prouce 0"
co2pleting the >ork.
e4 Ho> to 2easure the #alues7
(1) +ar"et value
(#) 8ubjective or esthetic value
Page 1' of 66
f4 <sthetic #alue is in -uestion here.
g4 $ou can ecie on this case on the esthetic #alue alone
h4 Ho> o "ou 2easure the #alue -uestion
E. #roher ; 0ons v Toushin
a4 Sa2e thing H the" ont get cost of co2pletion
04 Si2ilar fact pattern
:. Cost o6 "omp#etion $ e!pe"tation.
1. 'illfulness e.ception 6 in cost of completion they can award what is essentially a punitive damage in
the form of cost of completion.
$. -o such thing as aesthetic value damages
%. Malue of completing the work, sometimes measured by considering the esthetic value usually market
value"
7. They are in effect asserting punitive damages, without calling it that.
3. Restitution
1. *alled a damage, but is a */A in its own right
$. Two elements,
a4 Plaintiff conferre a 0enefit on the efenant
04 Kn8ust to let the A keep that 0enefit.
%. #amages, reasonable value of the benefit conferred.
7. /steen v Lohnson 6
a4 Countr" >estern singer
04 Pro#ing the e=pectation a>ars( it >oul 0e ifficult to pro#e the e=pect? 2itigation a2ages 0ecause
she is an aspiring singer thus she has no track recor( an cannot pro#e >ith reasona0le certaint" >hat the potential earnings >oul 0e.
c4 1estitution a2ages7
1) B conferred a benefit on the 3&
#a$ -es - 56A77
#) *s it unjust to let the 3 "eep that benefit
#/$ -es > *ot mone( 'i' not &or0
(#) 1et % the reasonable value of the benefit conferred.
(') /inda gets the reasonable value of the benefit conferred.
4 6>o sies issues re7 contracts an restitution
1) 9istence of a contract is a bar to the suit in restitution
#) ;ou can sue in restitution even if there is a contract provided there was a substantial breach ( a really big
breach! not just a little one).
A. *onformance must be in good faith
D. !f you allowed each party to sue for e.pectation mitigation damages, the prices of the contracts void
each other, but the only difference will be the cost
E. 'hen does it make a difference if you find that there is a substantial difference(
F. Two theories in this case,
a4 <=pectation Mitigation suit H >ork not co2plete( contracte not pai H Cost of co2pletion >ill 0e
a>are after contract prices are #oie out
04 1estitution H ont allo> the su0stantial 0reacher to argue that the other sie 0reache. H Jet so2e
result as <=?Mit
G. 1 6 -on breacher may but need no sue in restitution, can and typically does sue for e.pectation>
mitigation.
1H. ?andout,
a4 1estitution H >a"s of 2easuring the reasona0le #alue of the 0enefit conferre H a CO: in its o>n right
04 Market #alue
(1) 3etermined by how much people generally are willing to pay
c4 Galue to an ini#iual
(1) 3etermined by how much that person is willing to pay A this may be more or less than the
mar"et value
(#) $ctual cost of providing the good or service
Page 15 of 66
4 :ctual cost of pro#iing the goo or ser#ice7
(1) 9% Goo" dealer obtains a rate boo" for ,?C. 0he dealer sells the boo" for its mar"et value of
,1CC. 0he cost of providing the good is ,?C
e4 :#erage cost to the reasona0le seller7
(1) 0he average cost of the rare boo" to a boo"-dealer might be more or less than the actual cost
to some particular dealer. 0he average cost might be ,I?. $ particular dealer might pay more
or less.
f4 <=pecte #. :cutal a2ages
(1) )ourt will never choose a measure that awards the breacher more than the contract price
minus epectation damages. 0o do so would be to reward the breacher for breaching. 0hey
will not do this even if the non-breach has not cross-complained for epectation damages
(#) )ourts may sometimes choose a measure that awards less than the contract price minus
epectation damages. 0wo possibilities% the court wants to punish the breacher for an
especially bad breach
g4 H"pos
(1) )attle )ontracts with co for food and medicine to ma"e cows fat A they do not gain weight
(#) Duestion% What is the reasonable value of the benefit of feed and medicine&
(') $ssume the company substantially breaches
(>) (ancher sues for breach of contract A epectation6 mitigation damages
(?) )ompany dues in restitution.
(H) What is the epected benefit%
#a$ Increase in mar0et in )alue )ia t%e effect of t%e me'icine an' fee'.
(I) What is the reasonable benefit%
#a$ Ditto2
(K) 9pectation mitigation case % 4armer sues )ompany
#a$ Contract performe'4 pai' plus fat co&s > increase mar0et )alue
#/$ Breac%4 ai' plus t%in co&s
#c$ A&ar'4 possi/le increase mar0et )alue
(L) (estitution case% )ompany sues farmer
#a$ 57
11. 9eliance and restitution compared
a4 1eliance
(1) (ecover epenses incurred in <reliance on the contract. including payments to third parties
(#) No substantial breach reDuirement.
(') No reDuirement that the B have conferred a benefit on the 3
04 1estitution
(1) (ecover the reasonable value of the benefit conferred on the 3- )annot recover payments to
third parties
(#) )ontract a bar to restitution unless there is a substantial breach
(') +ucst have conferred a benefit on the 3
6". Pro#!ems o$ er$orman%e
A. 8u&stantia# per6orman"e
1. 40 v *oastal
a4 +ssue7 >h" int coastal sue for <=pectation? Mitigation
(1) = minus epectation damages A epenses saved as a result of the breach.
(#) Gecause they saved a great deal of money by breaching the suit! thus the non-breacher would
have not have gotten any money.
$. /liver v *ampbell,
a4 :ttorne" has co2plete the >ork an is >aiting for the pa"2ent( "ou cannot sue in restitution.
04 6here is no nee for an alternati#e to the e=pectation&2itigation a2age
c4 KCC H
(1) (eplaces the common law substantial breach doctrine with something called <cure.
#a$ Ol' la& on sale of *oo's > perfect ten'er - if t%e *oo's 'i' not e3actl( matc%
t%e contract e3actl(+ t%e /u(er can rescin' t%e contract.
#/$ B6-A7@ > arra*es for people to *et reme'ies &%en t%e *oo'
Page 1M of 66
%. 8erfect tender rule
a4 Ol 9a>7 perfect tener H if the goos i not confor2 perfectl" >ith the k( the 0u"er ha the right of
recession.
04 1ecission7
c4 Pro0le2 >ith this rule7 What happens >hen the seller
(1) 7))% #-?CK
#a$ 1%ere an( ten'er or 'eli)er( /( %e seller is reCecte' /ecause non-conformin*
an' t%e time for performance %as not (et e3pire'+ t%e seller ma( seasona/l(
notif( t%e /u(er of is intention to cure an' ma( t%en &it%in t%e contract time
ma0e a conformin* 'eli)er(.
3i4 1e2e20er that there are t>o re-uire2ents( this >ill 0e on the e=a2
3ii4 6ake these in orer( if one fails( there is a right to recession( cf. : right to cure.
(a) Non-conforming goods
(b) 0ime for performance not yet epired
(c) 0imely notify buyer of intention to cure
(d) 3eliver conforming goods
#/$ 1%ere t%e( /u(er reCects a non-conformin* ten'er &%ic% t%e seller %a'
reasona/le *roun's to /elie)e &oul' /e accepta/le &it% or &it%out mone(
allo&ance t%e seller ma( if %e seasona/l( notifies t%e( /u(er
3i4 1e-uire2ents7
(a) Non-conforming goods
(b) 0ime for performance has epired
(c) (easonable ground to believe goods acceptable with or without
money allowance.
(d) 0imely notifies buyer of intention to cure
(e) 0hen further reasonable time to deliver conforming goods.
(#) *f there is no right to cure! there is still a right to recession
4 H"po7 Mason Ai=on line7 uses ne> 0rick as co2pare to the use 0rick that is re-uire in the )
e4 Su0stantial Breech octrine H 2akes it a -uestion of >hether the parties can sue on or off of the )
7. -e.t topic - *onditionsC
a4 .ot a pro2ise@
04 6he conition is calle a conition
c4 ;ailure of a conition can
4 Wai#er
(1) 0here is waiver of the breech by the non-breaching party
(#) *ssue% when is there an implied waiver.
A. 0ubstantial breach issue
a4 6he sol#enc" of the 0reacher. +f the 0reacher is financiall" shak"( that 2a" 2ake suspening
perfor2ance esira0le H as >e suggeste in iscussing ) , J Construction. 6his is an Pae-uac" of
re2e" consieration. 6he >orr" is that the 0reacher 2a" 0e 8uge2ent proof 3ha#e no 2one" to pa"
off the a2age a>ar4 0" the ti2e the case gets to trial. 6his >ill point to not fining a su0stantial
0reach.
04 Harship on the 0reacher. 6his is a ti2ing issue. Contracts usuall" call for perfor2ance in a particular
ti2e se-uence. +f >e allo> one sie to suspen perfor2ance( that 2a" put the other sie in a 0in.
6his >ill point to a su0stantial 0reach.
c4 9ikelihoo of continue perfor2ance.
4 6ests7
(1) 8ubstantial Greach A restitution off the contract&
Page 20 of 66
(#) 8ubstantial Greach J can sue off contract under restitution.
(') No 8ubstantial Greach J must sue on contract under epectation.
(>) 8uing off the =
#a$ 9. 1as t%e /reac% &illful2
#/$ 6. To &%at e3tent 'i' t%e /reac%er perform %is or %er 'uties2 E3tent of &or0
'one > t%e less &or0 'one+ t%e more li0el( to fin' su/stantial
#c$ D. A'e;uate compensation for t%e non-/reac%er. 1oul' a&ar'in* e3pectation
'ama*es /e a'e;uate 'ama*es. T%e more t%at e3pectation *i)es a'e;uate
'ama*es+ less li0el( to fin' su/stantial /reac%. Deals &it% fairness to non
/reac%er.
#'$ E. rotectin* t%e /reac%er. 1oul' it un'er compensate t%e /reac%er to sue
un'er restitution. Fairness to t%e /reac%er issue.
(?)
#a$ 1%en (ou &ant t%e /reac%er to /e e3cuse'+ t%e( 'on<t &ant it to count an' t%e(
'on<t &ant to /e lia/le.
#/$ Restutution4 t%ere &as a su/stantial /reac% an' sue off t%e contract
#c$ Sol)anc( of t%e /reac%er > &as t%e /reac%er financiall( s%a0e(+
#'$
e4 On line h"po7
(1) 7nder the > part test set out by the (estatement! there would probably not be a substantial
breach! and 8mith would have to sue under epectation damages.
(#) 8olvancy issue% the fact that 8mith "new that the contractors were financially sha"y would
suggest a finding that there was not a substantial breach.
(') *n this eample! the courts would not find that there was a substantial breach! thus 8mith
would have to sue on the contract. 0here would not be a substantial breach because 1) 0he
breach was not willful (not etremely reprehensible). #) 0he contractor performed M of the
wor". ') 8uing under restitution would under compensate the breacher (the reasonable value
of the benefit conferred is ,1CCC! while the actual value of the wor" not paid for is ,#?CC!
thus they would be shorted ,1?CC). >) 0he fact that the breacher is financially sha"y would
support a finding that the breach was not substantial because it reasonable that they stopped
wor"ing rather than complete a project that they weren.t going to be paid for! thus putting
themselves in an even worse position.
B. Anti"ipatory Repuiation-
1. ?okster v #e)atour
a4 6he la> shoul a#oi neeless >aste
04 +f there is final Hefinite an une-ui#ocall" notification that the 0reacher is going to 0reach H then it is
proper 2itigation to take action at the ti2e of learning of the announce 0reach.
c4 :0sent reliance on the announce 0reach( the person that that repuiate can call up an retract the
repuiation.
4 Courts ten to 0e #er" li0eral in a>aring 2itigation.
e4 :nticipator" repuiation( can 0e retracte
$. ?athaway v 0aben
a4 6he hall o>ner felt sure that the 0an >oul not arri#e( so he i not heat the hall( thus no sho>( no
2one".
04 Aecision7 this is not proper
(1) 0he parties cannot communicate! owner says that he "nows they cannot perform! this is just
li"e hos"ter. 5e "new this through inference. 5e should be allowed to mitigate! rather than
act in anticipation
(#) )ourt% 0his was not proper because he decided to far in advance! there was still a significant
possibility that the musicians would arrive
(') 5e should have waited until later in the day! when it became more certain that the musicians
would not arrive
(>) When is the belief reasonable that the = would not be performed
c4 Moern la>7 KCC
(1) *n a sale of goods! #-HCL! (ight to $deDuate $ssurane of Berformance.
#a$ A contract for sale imposes an o/li*ation on eac% part( t%at t%e ot%er<s
e3pectation of recei)in* 'ue performance &ill not /e impaire'. 1%en
reasona/le *roun's for insecurit( arise &it% respect to t%e performance of
eit%er part( t%e ot%er ma( in &ritin* 'eman' a'e;uate assurance of 'ue
Page 21 of 66
performance an' until %e recei)es suc% assurance ma( if commerciall(
reasona/le suspen' an( performance for &%ic% %e %as not alrea'( recei)e' t%e
a*ree return.
(#) Boints%
#a$ 9$ Reasona/le *roun's for insecurit(
#/$ 6$ In &ritin* 'eman' a'e;uate assurance of 'ue performance
#c$ D$ "ntil %e recei)es suc% assuranceGsuspen's an( performance ..
4 Moern 9a>7 1estate2ent ? Co22on 9a>
(1) Where reasonable grounds for insecurity arise to believe that the obligor will commit a
breach by non performance that would of itself give the obligee a claim for damages for total
breachN.the obligee may demand adeDuate assurance of due performance.
#a$ Re;uires reasona/le *roun's t%at t%ere &ill /e a su/stantial /reac%
#/$ Stricter stan'ar'. "n'er "CC Cust nee' reasona/le *roun's t%at t%e part( &ill
not perform.
#c$ uts *reater /ur'en on t%e non-/reac%er
e4 More notes on 2&60M
(1) 2fficial comments%
#a$ Common 0no&le'*e is essential to coor'ination.
(#) 1) a contract for sale imposes an obligation on each party that the other.s epectation of
receiving due performance will not be impaired. When reasonable grounds for insecurity
arise with respect to the performance of either party the other may in writing demand
adeDuate assurance of due performance and until he receives such assurance may if
commercially reasonable suspend any performance for which he has not already received the
agree return
6"I. -!ittin, t.e !osses
A. /mpra"ti"a&i#ity 3ista5e
1. The court may e.cuse you from your violation, but they still may pay some damages.
a4 <-uita0le :pportion2ent7
$. 5odern !mpracticability #octrine
a4 $ou are e=cuse fro2 a contractual o0ligation if unforeseen a the ti2e of contracting "ou
(1) 1. +a"e your performance commercially impracticable (difficult and really epensive)! and
(#) #.;ou 2ught not to bear the loss occasioned by the occurrence of the unforeseen
circumstance.
04 Must o 1 an then sho> 2
%. <rustration doctrine
a4 :s the ele2ent of essential purpose
04 +f the essential purpose is a pro0le2( recession is allo>e.
c4 .e=t ti2e7 a2erican traing( krell # henr"( 2&61I( i2practi0ilit" cases.
7. Taylor v. *aldwell
a4 6his is ol la> H
04 Hale" rule7 there is a li2itation on e=pectation 2itigation a>ar
c4 Kse >hen a2ages are une=pectel" large
4 +2practica0ilit" 3frustration an 2istake 4
(1) )ome in when there needs to be an interpretation of the contract.
e4 6he court fins an i2plie conition that the 2usic hall shoul continue to e=ist. 6he failure of this
conition e=cuses the perfor2ance.
f4 Perfor2ance renere i2possi0le 0" circu2stances
g4 Moern la>7 it is not i2possi0ilit"( 0ut rather i2practica0ilit".
A. Transatlantic <inancing *orp. v. 4nited 0tates
a4 6he" >ant to sue in restitution for the aitional costs of going aroun :frica. 3the contract >oul ha#e
to 0e #oie4
04 +2practica0ilit"
(1) 2ne is ecused under impracticability doctrine provided that.
#a$ An e)ent une3pecte' at t%e time of contractin* ma0es one<s performance
commerciall( impractica/le+ an'
#/$ One ou*%t not to /ear t%e loss for t%e occurrence of t%e e)ent.
#c$ T%e une3pecte' e)ent is calle' a )ariet( of 'ifferent t%in*s.
(#) *ssue% was delivery of the grain commercially impracticable.
Page 22 of 66
c4 6here is no clear stanar of >hat co22ercial i2practica0ilit" 2eans 0ut it usuall" 2eans reall"(
reall" e=pensi#e
4 +f >e ont cancel the )( the shipping co2pan" cannot argue that the" shoul 0e a0le to get restitution.
e4 6here are three consierations
(1) /oo" at the =! is there any clauses about who bears ris"s
#a$ T%eses are clauses t%at in'icate &%en t%e contract &ill /e consi'ere' rescin'e'
(#) *s there an implied allocation of ris"&
#a$ Is t%ere a custom &it%in t%e tra'e2 1%o %as t%e /est information to 'eal &it%
t%e situation or /e a&are of it at t%e earliest point+ an' &%o is responsi/le for
%an'lin* t%at information
f4 ;actors to consier7
(1) *nformation Boint% Who has the best information
(#) )ontrol Boint% Who is in the best position to ta"e precautions
(') *nsurance% Who is the best insurer&
(>) $ssumption of the ris"% 0ransatlantic entered the contract "nowing that the canal closure was
a possibilityO they assumed the ris" of loss.
g4 )eep in 2in the octrine an run through the steps
D. 'edgematic
a4 +f a technolog" seller is allo>e to clai2 i2practica0ilit" to #oi the contract( the" >oul 0e oing
research that( if successful( the 0u"er pa"s for ( an if unsuccessful( the 0u"er pa"s for as >ell
04 6he court >ill not let the2 out 0ecause this >oul counter act the purpose of i2practica0ilit"
c4 Court -uotes the ucc( 0ut sa"s that it is not necessar" to rel" on it 0ecause the
B. =ustration
1. 4** $-D1A
a4 :& Aela" in eli#er" or non&eli#er" in >hole or in part 0" a seller >ho co2plies >ith papr 0 * c 3 see
ucc section4
$. 2eneral
a4 One is e=cuse uner frustration octrine pro#ie that
(1) 1 - $n event unepected at the time of contracting ma"es one.s performance lose its essential
point! and
(#) # - 2ne ought not to bear the loss from the occurrence of the event.
04 )rell # Henr"
(1) =rell rented a flat to watch the coronation
(#) 5enry does not have ceremony A he is sic"
(') =rell would not recover6 would be forced to pay under *mpracticability doctrine! therefore the
court creates a new test6category.
c4 H"po7
(1) Goat for $merica.s cup! race cancelled! is the buyer allowed to get out of the = due to
fustration&
(#) 3epends on the purpose of the =
#a$ If it is Cust to *et a sail/oat. >no /ecause t%e purpose of *ettin* a sail/oat is still
present
#/$ If it is to *et a sail/oat to race in t%e America<s cup+ (es > /ecause t%e purpose
(') Way to get around this
#a$ Clause in : t%at sa(s+ in t%e e)ent of race cancellationGG
(>) $ssume that the essential purpose is not void! who is in the better position to accept the losses
#a$ T%e racer+ /ecause %e &oul' %a)e more information a/out &%et%er or not t%e
race is *oin* to run+ an' &oul' /e more li0el( to ta0e out insurance in case t%e
race is cancelle'.
4 KCC H see official co22ent F
e4 :2erican 6raing
(1) Blaintiff sued for the etra costs of going around $frica
(#) *n this case! the captain still went into the +editerranean after hearing that the canal was
closed.
(') 0hus the captain was in the best position to have information about the loss and was in the
best position to prevent the loss.
(>) Gecause of this! the court will not allow the shipping company to recover the etra costs. 0hey
still get the original = price.
(?) )ourt feels that the captain acted irrationally! thus they cannot recover.
Page 2/ of 66
(H) $ppling *mpracticability%
#a$ Is it commerciall( impractical to perform.2
#/$ S%oul' t%e compan( ou*%t not to /ear t%e costs2
(I) $pplying 4rustration
#a$ Is t%e essential point )oi'e' or nullifie'
#/$ S%oul' t%e compan( out not to /ear of t%e costs2
%. 9emedies under <ustration> splitting the losses,
a4 +f "ou fin that the ) is #oi( >hat >a"s are there to reco#er an" 2one" fro2 either part"
04 Such as house 2o#ing cases 3so2ething happens to the house in transit so that it is no longer necessar"
or a0ilit" to 2o#e the house4
(1) )an the house mover sue in restitution&
#a$ 1as t%ere a /enefit conferre'2 - not reall(+ /ut sometimes t%e courts &ill
stretc% t%e meanin* of /enefit to allo& one si'e to reco)er in restitution.
(#) 8ome courts will find an implied promise to pay for wor" done! even if there is no arguable
benefit.
#a$ T%e courts Cust ma'e up t%e 'octrine+ an application of interpretation 'octrine
#/$ T%e( t%in0 t%at it is fair to %a)e t%e
(') (estatement%
#a$ Call it e;uita/le apportionment. = t%e court %as t%e in%erent e;uita/le po&er to
%a)e one part( pa( anot%er as Custice re;uires.
(>) Fust accept it as it isN. 8ub contracting cases! eDuitable apportionment is available as a
remedy. $vailable after = is recinded%
C. Apportioning the #osses
1. According to <ault,
a4 :): co2parati#e fault7 the" >ho are 2ost to 0la2e >ill 0e pai the least an >ill pa" out the 2ost.
04 House 2o#ing e=7
(1) 5ome owner demands a certain route
(#) 5ouse mover is not as careful as could have been
(') )ourt will determine the value of the wor" done and restrict by the amount of fault.
c4 Cf. SuperPlu20er7
(1) 5e leave the bathroom a mess
(#) 0he problem is beyond pluming science
(') )omparative fault does not wor" because there is no fault that the job cannot be completed.
$. Another approach, who is in the best position to have the information, and who is in the best position
to avoid the loss, who is the best insurer. Aka assumption of risk
a4 6his takes into account professional stanars an cultural nor2s
%. 0ee Albre 5arble ; Tile *o. v. Lohn 1owen
7. 3ista5e 7o"trine
1. /ne is e.cused under mistake doctrine provided that
a4 1 & :t the ri2e of entering the contract( on e or 0oth parties entere the contract uner a 2istaken
assu2ption( >here the assu2ption is an assu2ption 0asic to the contract an
04 2 & One ought not to 0ear the loss resulting fro2 the 2istake.
c4 .ote7 it is often sai that e=cuse uner 2istake
4 Conscious ignorance7
(1) )onscious ignorance can play in important role in mista"e cases. 0he idea is that party
assumes the ris" if the party "nows that he or she is acting on limited "nowledge! on
information that might be crucially incomplete or inaccurate. 0he reDuirement is usually put
this way% you can.t get out on mista"e if you were consciously ignorant.
e4 Breath of conscious ignorance
(1)
$. #oes not require mutual mistake.
%. This deals with mistakes before the =, parties are under a mistaken assumption, must be an
important event, significant to the =
7. -/T+, !mpracticability and frustration deal with mistakes after the = is in progress
A. 5utual 5istake
a4 Jriffith # Br"2er H
(1) $nother cancelled coronation case.
Page 2F of 66
(#) =ing gets sic"! cancelled! "! learn of cancellation.
(') Blaintiff argued that he could get his money because of a mista"e by both parties that the
coronation would ta"e place.
(>) 7nder mista"e doctrine%
#a$ 9 - Bot% parties &ere un'er a mista0en assumption.
#/$ 6 > Interpretation of t%is factor is &%at &ill 'etermine t%e case.
04 H"po7 Sher>oo
(1) 8afe was sold at = for ,?C! later ,'#!CCC.
(#) Goth parties were under a mista"en assumption that there was nothing of value behind the
door
(') )hec" out )onscious ignorance from above
c4 Co> Case7
(1) $ fertile cow is a different "ind of creature than a barren cow
(#) 0here was a mutual mista"e
4 Aia2on Case DWoo # Bo"ntonE
(1) 0he fact that it is a diamond rather than what each of the parties assumed it to be.
D. 4nilateral mistake
a4 Courts >ill usuall" let off people >ho 2ake 0is >ith 2istakes in the2
04 <lsinore Knion G. )astorff
(1) 0he mista"e in on the part of the bidder! but he notifies the school before the school contacts
the other bidders been notified. 0hus the school in no worse off then they were before!
however the contractor will be much worse off.
(#) 0he courts will loo" to see if any of the parties will be any worse off if the bidder is allowed to
recinde the bid.
(') )ourts will loo" to see what is the fairest remedy! and in this case they said there was no
contact
E. 5istakes, Lokes, Ambiguities.
a4 6ra#elers
(1) 0he debate is about the content of the contract! not whether or not the contract eists.
(#) Blaintiff as"s for reformation% changing of the =
(') 5e thin"s he will get ,?CC a year! but the form says ,?CC6 month
(>) 5e cannot get it A 0he agreement they made was for the yearly payment.
(?) $rgument% that it was the insurance companies fault! they should have to pay
(H) )ourt% will reform the = in these situations! see also last clear chance doctrine.
(I) )ourts will not reform =s if there is reliance upon the mista"en belief. *f he has reasonably
relied on the =.
04 9uc" G. Qeh2er
(1) Fo"e cases usually turn out a little different these days.
(#) )ourt applies objective intent test.
(') 0wo etremes% 0he more that everyone thin"s that it is a jo"e! the less li"ely the court will
enforce the =. 0he more li"ely that a reasonable person would thin" that the = is real! the
more li"ely the courts will enforce the =.
c4 1affles # Wichelhause
(1) Where there is no meeting of the minds! there is no =!
(#) +odern cases will rely on mista"e rather than meeting of the minds!
(') = will be rescinded unless you can show that one side "new that there was a mista"e and
whether one side was in a position to correct the mista"e.
Page 2I of 66
6"II. O$$er and a%%etan%e9
A. Arises as 4hen someone 4ants out o6 a ?, this is not a es"ription o6 4hat peop#e o.
B. 3ai#&o! ru#e 8ee tutoria#
1. #eals with when the acceptance of an offer makes a =,
$. !n the eyes of the law, a = is formed when the acceptance is effective upon dispatch.
%. -eed some reliable record of when it was sent.
7. 9evocation of an offer or revocation of an acceptance" is effective on receipt.
A. 'here does the uncertainty about the e.istence of the contract lie(
a4 With the seller H 6he offeror is 2aster of his offer. 6he offeror can re#oke an offer an"ti2e prior to
acceptance.
D. 'ays around the mailbo. rule
a4 H"po7 car sale h"po
(1) 3ealer and person who needs the car right away
(#) 3ealer sends a offer! buyer accepts
(') Guyer is the one that needs certainty
(>) +ailbo rule wor"s well for this situation.
04 H"po 27
(1) Need car in net si months
(#) 8eller is the one who need certainty
(') 5ow to adjust the mailbo rule for this A proper method of acceptance
E. 8roper method of acceptance 6
a4 offer 2entions a 2etho 2ust use other>ise use a reasona0le 2etho
04 But "ou can also fin a2 i2plie proper 2etho of acceptance.
c4 See 9e>is # Bro>ning
(1) 0he seller has put the uncertainty upon the buyer! by putting in a reDuirement that the
telegram be accepted by the seller.
F. /ption = 6 contract to hold an offer open for a specified amount of time. usually binding without
consideration, but some state may still hold that there needs to be some consideration" 6 5ail bo. rule
does not apply in relation to option contracts
C. O66er puts the po4er in the hans o6 the o66eree. %uts the po4er to 6orm a ?, though its
a""eptan"e, to 6orm a #ega##y &ining agreement.
1. A communication is an offer if it is a
a4 Manifestation of >illingness to enter into a 0argain
04 So 2ae as to 8ustif" another person H the recipient of the co22unication & in unerstaning that his
or her assent >ill conclue the 0argain.
$. The recipiant of the communication has to be @ustified in thinking they have the power
%. ?ypo,
a4 : in paper for 0is to construct 0oat H 0i >ill go to the lo>est 0ier.
04 6he contractor is not 8ustifie in thinking that his sening the 0it >ill result in a contract.
c4 6he court >ill fin that the contractor is 8ustifie onl" in thinking that +; his 0i is the lo>est( then
there 2a" 0e a contract
7. @hat "ounts as an o66er an as a re$o"ation-
1. !s an add an offer 6 see )efkowtB
a4 1e7 as7
(1) *t would be nice if there was a continuous spectrum from private sellers with a limited
inventory and mass mar"eters on the other hand
(#) $s to the Brivate seller A an add it not an offer
(') Gut as to +ass mar"eters A an add it is an offer. *n this situation you are justified in thin"ing
that you have the power to ma"e a contract
(>) 5owever real life does not mirror this.
(?) $dds are covered by statutory law! which complicates the problem.
Page 26 of 66
04 +f it is a then 9efko>tR has the po>er to 2ake a contract.
c4 9efko>tR is the first one there( there are no conflicting )s
4 6herefore he >as 8ustifie in thinking that he ha the po>er to 2ake the contract.
e4 Offers o not necessaril" ha#e to 0e efinite an co2plete. 6here are shaes of gra" as to >hether or
not
f4 Who nees certainit" to eter2ine if an offer has 0een 2ae. H once there is an offer out there
$. 0ecret *onditions,
a4 Courts al>a"s sa" no secret conitions( ho>e#er the" are >illing to fin conitions as i2plie.
%. ?ow long does an offer stay open
a4 +f an offer is still open( a person is 8ustifie in thinking that their acceptance >ill create a contract.
04 6he offer sta"s open for a reasona0le a2ount of ti2e( an >hat is reasona0le epens on the
circu2stances
c4 Was the acceptance ti2el"
4 :kers # Se0errr" H ill uration of offer
(1) 2ffer to resign employment. (offer to end the contractual agreement)
(#) 2ffer made 4riday 8ept #L
(') 2ffer accepted +onday 2ct # A by telegram
(>) No revocation in the meantime A at least not eplicitly.
(?) 8o! was there a contract&
#a$ If (ou *o /( t%e mail/o3 rule+ if t%ere is still an offer at t%at time
(H) Gut the offer lapses after a reasonable amount of time! there is no = if the offer lapsed after
4riday! 8ept #L
e4 6>o general rules7
(1) *f the offer is made in a face to face conversation! the offer lasts as long as the conversation.
(#) *f the offer is sent by mail! the offer does not lapse until the end of the day on which the offer
was received.
f4 Ho>e#er
(1) 0hese are not hard and fast rules
(#) $lso need to loo" at who bears the uncertainty and who is in the better shape to withstand the
uncertainty
g4 Back to the case
(1) 0he court says that because she rejected the offer at the conversation! the offer was closed.
(#) 8ays that her behavior implied that she rejected the offer.
h4 H"po 17
(1) 8eed offer% first time P* am as"ing #> cents per poundQ this is a reDuest for an offer
(#) 9ven if it is an offer! the net telegram rejects it.
(') 8eed )ompany% * am as"ing#'! but we have an offer of ## M
(>) *s this an offer&
#a$ No > it is Cust t%e see' compan( sa(in* t%eir position. T%e( 'o not &ant to *i)e
Bro&n t%e po&er to create t%e contract. T%e( &ant to retain t%e po&er to ma0e
a contract.
(?) 0herefore Grown is not justified in thin"ing that he has the power to create a contract
i4 H"po 27
(1) *s the following an offer%
#a$ 1e ;uote (ou Mason fruit Cars+ complete+ on one 'oHen /o3es+ 'eli)ere'I G. For
imme'iate acceptance an' s%ipment not later t%an Ma( 9A+
(#) )ourt says that here you have a contract because the seller has clearly wished to transferred
to the buyer the power to ma"e a contract.
84 H"po /7
(1) $irphone eample!
(#) * have 1CCC red white and blue shoe strings% * am as"ing a dollar a pair
#a$ Is t%is an offer+ ma(/e (es+ ma(/e no+ /ut /ecause t%ere is a counter offer+ it
'oes not matter
(') 0hat.s a high price! * don.t want to pay more than ?C cents
#a$ Counter offer &ill terminate an offer unless ot%er&ise specifie'.
#/$ Most li0el( t%is is not an offer.
(>) Bhone problem% you fa acceptance of ?C! just after you receive acceptance of dollar a pair.
#a$ Dollar offer &oul' ma0e a : if t%e pre)ious offer %as not lapse' > %as a
reasona/le time passe'2
Page 2' of 66
#/$ On t%ese facts it is 'ifficult to tell+ &oul' &ant to 0no& t%e /ac0*roun' of t%e
transactions /et&een t%e parties
#c$ A7 cents offer is not a : /ecause t%ere &as no :
(?) When there is a seDuence of communications! loo" at the legal status of each communication
to determine if there is a
7. /ption contracts
a4 So2e courts sa" that in option )s if the offerror oes not rel" on the re8ection of the offer that the
offeree 2a" still accept an create a 0ining )
A. 'ithdrawing offers
a4 Shoe # Knite States7
(1) $n award for an arrest is bigger than the award for information leading to an arrest
(#) (ule% (evo"ed by publication must be in the same mar"et as the offer was made in - ny times
revo"ed in ny times
1. 0o4 to prote"t the re#ying o66eree2 @ays o6 a""epting an re.e"ting-
1. :ou can interpret contracts as an implied option =
$. Traditional distinction,
a4 Offers that can onl" 0e accepte #er0all" are 0ilateral H the" in#ol#e a pro2ise on the part of the
offeree an the offeror. 6here are pro2ise on 0oth sies
04 Offers that con onl" 0e accepte 0" perfor2ance are unilateral.
c4 What a0out fairness to the pro2isee
(1) 8ee 3avis v Facoby%
#a$ If Caro comes to CA > (ou &ill in%erit e)er(t%in*.
#/$ 1%ere 'i' t%e acceptance occure2 1as it /ilateral or unilateral
#c$ Court sa(s it &as /ilateral > acceptance coul' %a)e /een 'one /( &ritin* or /(
performance
(#) =loc"ner v 1reen%
#a$ Oral : to ta0e care of ol' &oman t%at &as /ase' upon promise to &rite &ill >
t%e la'( 'oes e)er(t%in* /ut si*n t%e &ill
#/$ S%e ma'e t%e offer > t%e( ta0e care of %er > t%e( ne)er )er/all( accept
#c$ Is t%ere a :2 'i' t%e( accept2 >
#'$ But > if (ou sa( t%at t%e offer &as /ilateral > t%e( &ill not reco)er //c t%e( 'i'
not orall( accept >
#e$ So t%e court %ere %ol' t%at t%e offer &as unilateral an' it &as accepte' /(
performance.
4 H"po7
(1) ;ou leave for a meeting and will not be bac" until the end of the dayO * don.t care when you
clean it as long as it gets done by the end of the day. ;ou are also the only person * am going
to as"O * have no time to as" anyone else. $s * am leaving! * say to you! <*.ll pay you ten to
clean up my office.. ;ou don.t accept right away and she leaves
(#) 0he offeror is willing to accept a certain amount of uncertainty A thus she is not harmed by
the uncertainty seeing as there is only one person that can clean the office!
%. 0econd 9estatement,
a4 6here is a presu2ption in fa#or of see ) as 0ilateral >here there is a20iguit" .
7. 9eview> consider,
a4 Who takes on the 0uren in the relationship( 0e careful 0?c courts can use the rules an change the2
ho>e#er the" >ant to use the" an the octrine gets 2esss"
A. -otice !ssue
a4 6here is no re-uire2ent that the offeror 0e notifie of acceptance 0" perfor2ance@ unless the offeree
has reason to think the offeror >ill not fin out a0out the perfor2ance( then 1 H the offeree has to use P
ue iligence to notif" the offeror( or 2 H the offeror has to learn a0out the perfor2ance in a reasona0le
a2ount of ti2e( or the offeror has inicate that notification is not necessar".
04 Car0olic s2oke 0all case7
(1) 0hey offered 1CC lbs if anyone gets sic"
(#) When was there acceptance A by the performance of purchasing the smo"e ball
(') Gut A she needs to let them "now that she has accepted the =.
(>)
Page 25 of 66
D. 8rotecting the offeree by finding a ="
a4 6he offer >as alrea" accepte
(1) Gy agreement
(#) Gy beginning performance
04 6he offer can still 0e accepte 0ecause is irre#oca0le
(1) 9plicitly or impliedly
(#) Gy virtue of beginning performance
(') Gy virtue of reliance
E. 8rotecting the offeror
a4 6he offer >asnt reall" an offer
04 6he offer ha alrea" e=pire 0ecause
(1) Gy lapse of a reasonable time
(#) Gy previous rejection
(') Gy revocation prior to acceptance
c4 6he offer >as not accepte 0ecause the acceptance
(1) Was by the wrong method
(#) Was untimely under the mailbo rule
(') Wasn.t really an acceptance
4 6he contract >as #oi for so2e other reason H 2istake( etc.
=. Unorthoo! o"trinesE
1. ?offman
a4 ;acts
(1) 0hey assure him that the 1K!CCC is sufficientN..
04 +ssue7
(1) 0hese are only negotiations! there is never a formal contract! this is li"e the normal course of
business
c4 Point of case
(1) 2utrageous fact pattern! there is no tort! or no misrepresentation! no coa under any tort.
(#) )annot recover under breach of contract because there was no contract.
(') 0he court lets him recover under promissory estopple.
(>) $ promise is binding which the promisor%
(?) 8hould reasonably epect to induce reliance
#a$ 1%ic% 'oes in'uce suc% reliance
#/$ 1%ic% it &oul' /e unCust not to enforce it. #enforcea/le to t%e e3tent re;uire'
to a)oi' inCustice$
(H) 0he court allows him to use promissory estopple as a cause of action% 0hey said
#a$ T%e Defen'ant ma'e a promise #representations$+ &%ic% t%e 'efen'ant
#/$ S%oul' %a)e reasona/l( e3pecte' to in'uce reliance
#c$ 1%ic% 'i' in'uce suc% reliance
#'$ 1%ic% it &oul' /e unCust not to enforce it.
4 Wh" this is strange7
(1) 0his goes against the central ideas of negotiation that you be able to ma"e representations
and overstate your situation
(#) 0he court goes this way in this case because the situation is so drastic and outrageous
(') 0his is an eample of real reliance damages.
(>) 0he court finds a need to protect the offeree! rather than the offeror
(?) 9ample of real life negotiations where it is difficult to determine where in the negotiations!
and the lawyers come in later to try to determine where offer
(H) 8tands for allowing promissory as a coa in a breach of = situation
#a$ Difference from promissor( estopple &e learne' /efore+ 'ifference is reme'ial
posture+ %ere t%e court a&ar'e' reliance 'ama*es+ &%ereas &it% t%e ot%er+ t%e
court &ill enforce t%e promise.
$. *ole, K
a4 ;acts
(1) 0here is an offer! followed by silence
(#) 8ales person ta"es orders and sends them on. 0his is his normal routine!
(') *n this case! the sales man
Page 2M of 66
04 Aoctrine7 Silence in not acceptance( e=cept >hen it is 3in e=ceptional cases4
c4 6he court sa"s there >as an affir2ati#e o0ligation to respon 0ecause of past course of ealings. 6he
courts are i2posing an affir2ati#e ut" >here the parties i not e=pect or anticipate one( ho>e#er(
here a lack of co22ent 0" the co2pan" has al>a"s inicate to the sales2an that there >as nothing
>rong >ith the orer.
%. #ay
a4 Brick>all 0et>een lots e=pecte to split cost. .o for2al ). .eigh0or 1 3.eigh0or 2 is a>are of the
0uiling4 0uils an .eigh0or 2 use the >all for his 0enefit
04 9egall" enforcea0le pro2ise to pa" for the >all( so2e representation 0et>een the neigh0ors.
c4 6here >as reasona0le reliance on the representation
7. -ote,
a4 6hese cases stretch the iea of protecting the offeree an protecting those that rel" on representations.
>. 3irror /mage ru#e
1. *ommon law rule, replaced by 4** $-$HE
a4 Co22on la>7
(1) $n acceptance is effective (creates a =) only if the terms of the acceptance eactly match the
terms of the offer.
(#) 8ee ardente and selling house
#a$ Offer to sell at J price+ /u(er accepts on certain con'itions+ t%us t%e acceptance
'oes not matc% t%e offer+ un'er common la&+ t%is means t%ere is no :.
(') )ourts do not follow this rule b6c it interferes with normal course of negotiations.
04 KCC7
(1) When courts want to uphold the =! they 8ay that the parts of the = that match count as
acceptance! and the other parts are additional! see later.
(#) When courts want to void a =! they loo" at the = as a whole
$. Ardente,
a4 1e7 sale of propert"( an 2oification of ) #ia letters.
04 House seller sen a )( the 0u"er creates the k 0" signing it.
c4 Bu"er signs )( 0ut sens letter asking 2ore -uestions.
4 Suestion7 is the siginging of the ) acceptance( or is the >hole thing atte2pte acceptance!
(1) 1 - )ould be a rejection and counter offer%
#a$ ReCection terminate' t%e Kornan<s offer an' put a ne& offer on t%e ta/le+ t%e
Korans no& %a)e t%e po&er to /in' Ar'ents
(#) # A could be an inDuiry and a new offer.
#a$ T%en t%ere are t&o offers+ one on eac% si'e of t%e ta/le+ an' eit%er si'e can
create a :
#/$ Nee' to ma0e it )er( clear t%at (ou are not reCectin* prior offer
(') ' A )ould be acceptance plus new offer%
#a$ T%is is an acceptance plus a ne& offer+ t%is is &%at t%e Korans ar*ue t%at t%e
letter 'oes
e4 What happene in this case7
(1) 0he parties need to "now when a = was created A this is very important for = law!
(#) 0he mirror image law ta"es a very formulaic approach to =.s while real life is much more
messy because negotiations
%. 0ee also 8oel
a4 Work through the letters an tr" to figure out >here there >as acceptance an >here there >as offer(
etc( to see if 3or >hen4 there >as a ).
7. 4**
a4 Aoes a>a" >ith the 2irror i2age rule7
04 Wh"7 0?c offer an acceptance are al2ost al>a"s not 2atching 0?c the parties o not use 2atching
for2s.
c4 <= ? note7
(1) 0here is an offer on the table! #-#CI does not come into play unless there is an epression of
acceptance ( a communication that says * acceptance) #-#CI does not govern whether or not
a communication is an acceptance
4 Sualifications@
(1) Punless acceptance is epressly made conditional on assent to the additional or different
termsQ
Page /0 of 66
#a$ Acceptance
e4 Section +
f4 Section ++ H >hat "ou o >ith the aitional ter2s7
(1) 0hey are to be construed as proposals for additional to the =! (esp between non-merchants
(#) Getween merchants%
#a$ T%e a''itional terms /ecome part of t%e : unless
3i4 1. 6he offer e=pressl" li2its acceptance to the ter2s of the offer@
3ii4 2. 6he" 2ateriall" alter it
3iii4 /. .otification of o08ection to the2 has alrea" 0een gi#en or is gi#en >ithin a
g4 Section +++7
(1) 7se this when there is no = under sections * and **
(#) 8ays that if the writings are insufficient to prove offer or acceptance! if they act li"e they have
a =! then there is a =! and it is on the areas where the writings agree
h4 .ote7
(1) *f there is a = that says that
i4 H$PO7
(1) 0here is an offer and acceptance between merchants for delivery on Fune 1
(#) Getween merchants! the differing terms are included! thus Fune 1 is the delivery date.
A. ?:8/
a4 Hair coloring orer #ia airplane
(1) *s ed.s P* will do it for 'CCQ an offer $=$% 3oo 9dward and 3ebbie have a contract after the
converstaion&
#a$ If it is+ Is 'e//ie Custifie' in t%in0in* s%e %as t%e po&er to create a :+ t%us is a :
create'
(#) *s 3ebbie.s 4irst fa an acceptance or a new offer&
(') *s 9d.s response an acceptance or is it a new offer&
#a$ Anal(He t%is t%rou*% common la& an' "CC
(>) 4or eam A go through each communication to determine the statutes of each
(?) Note% *f this is for the sale of goods&
#a$ Treat t%e 994 T%urs'a(+ 5D77 is an offer
(H) 7)) #-#CI
#a$ 9. A 'efinite an' seasona/le e3pression of acceptance or a &ritten confirmation
&%ic% is sent &it%in a reasona/le time operates as an acceptance e)en t%ou*% it
states terms a''itional to or 'ifferent from t%ose offere' or a*ree' upon++ unless
acceptance is e3pressl( ma'e con'ition on assent to t%e a''itional or 'ifferent
terms.
#/$ 6. T%e a''itional terms are to /e construe' as proposals for a''ition to t%e :+
Bet&een merc%ants suc% terms /ecome part of t%e contract unless4
3i4 a. 6he offer e=pressl" li2its acceptance to the ter2s of the offer7
3ii4 0. 6he" 2ateriall" alter it or
3iii4 c. .otification of o08ection to the2 has alrea" 0een gi#en or is gi#en >ithin a
(I) *n the 9% there is nothing that ma"es it epressly conditional! thus there is a =
Page /1 of 66
6"III. Written Contra%ts
A. 8tatute o6 =raus
1. 0ays that certain =s must be writing 6 categories differ from state to state 6 courts tend to have a
liberal interpretation b>c they dont like it.
$. Thinks Nmy legs
%. 5ain categories,
a4 M H Marriage 3) for >hich Marriage is consieration( not ) of Marriage4
04 $ H $ear 3) not perfor2a0le >ithin a "ear 2ust 0e in >riting4
c4 9 H 9an 3 see propert" class4 3transfers of a lan or transfers of interests( such as ease2ents4
4 < H <states 3check the statute4
e4 J H Joos 3) for sale of goos( ucc 2&201!( o#er NI00 in >riting4
f4 S H Suret" 3) to guarantee the e0t of another4
7. 8urpose of statue,
a4 <#ientiar"7 >e >ant e#ience that ) e=ists
(1) Gut why only these categories&
04 People >ill 0e 2ore cautious a0out entering into )s
A. 'hat to remember about 0taute of frauds
a4 Ho> to get aroun the2
04 Courts are #er" li0eral in ter2s of >hat counts as >ritten proof of the ) H it onl" has to 0e sufficient to
pro#e the e=istence of the ).
c4 Main >a" aroun it is reliance H this can estoppe the other sie fro2 e#oking the statute of fraus as a
efense.
4 1e2e20er that certain ) nee to 0e in >riting( 2ain categories are a0o#e( check the statue in each
state to fin out particulars.
B. %aro# 1$ien"e-
1. #oes e.ecution of one = invalidate another =(
$. 1rings up the main question regarding evidence and the enforceability of a =.
%. 4** version of rule $-$H1
a4 6er2s >ith respect to >hich the confir2ator" 2e2orana of the parties agree or >hich are other>ise
set forth in a >riting intene 0" the parties as a final e=pression of their agree2ent >ith respect to
such ter2s as are inclue therein
04 Means7 the >ritten agree2ent 2a" not 0e contraicte 0" the sie agree2ent( 0ut 2a" 0e e=plaine or
supple2ente 0" it.
c4 Written agree2ent( sie agree2ent( as long as the sie is not contraictor"( the sie agree2ent is
enforcea0le.
4 .ote7 all of this is true( unless the court fins that >riting to ha#e 0een intene also as a co2plete an
e=clusi#e state2ent of the ter2s of the agree2ent.
e4 : sie agree2ent consistent >ith the >ritten agree2ent is enforcea0le unless the >ritten agree2ent is a
co2plete integration 3a co2plete an final state2ent of the parties agree2ent 4 an the sie agree2ent
falls >ithin the scope of the >ritten agree2ent.
7. 5itchell v )aith
a4 Sale of far2 >ith offening +ce House
04 +llustrates the for2al operation of the rule
A. -ote,
a4 Parole e#ience gi#es a lot of >eight to the >ritten agree2ent
D. -ormal !nclusion test, !f the side agreement would normally be included in the completed integration,
then the side agreement is presumptively in the scope of the written agreement. This presumption is
rebuttable. This is our normal test for scope, do not use any others on the e.amK.
E. 'ays around the parol evidence rule,
a4 Hickes # Bush7
(1) 0here was a written agreement and a oral side agreement.
#a$ 1ritten a*reement4 mer*e
#/$ Oral4 not mer*e unless
(#) *s the oral agreement admissible under parole evidence rule
#a$ Strictl(+ not a)aila/le.4 arol testimon( is a'missi/le to pro)e a con'ition
prece'ent to t%e le*al effecti)eness of a &ritten a*reement
Page /2 of 66
(') Gut the court says the oral agreement is admissible b6c it is used to clarify the written
contract
#a$ -ou 'on<t as0 for a'missi/ilit(+ /ut Cust as0 to allo& it into e)i'ence interpret
t%e &ritten :. Effect is t%at it &ill enforce t%e si'e :.
(>) 0he court views the written agreement as a complete merger
#a$ T%us t%e si'e a*reement is unenforcea/le4
#/$ To *et aroun' t%is4 sa( t%at (ou are intro'ucin* t%e si'e a*reement
(?) 7nder the 8econd restatements%
#a$ T%ere must /e some am/i*uit( in t%e : /efore (ou can /rin* in t%e si'e
a*reement to interpret it.
#/$ An Am/i*uit( can %a)e a )ariet( of interpretations+ can /e strict or li/eral
04 9usk
(1) 4acts%
#a$ Couple /u(s propert( after *ettin* confirmation t%at t%e *as station &ill
conform to t%e rest of t%e su/'i)ision an' t%ere &ill /e a &all /et&een t%e t&o
lots
#/$ : contains a completel( inte*rate' clause
#c$ "*l( *as station /uilt+ an' anot%er /uil'in* put on lot alon* si'e t%e *as station
(#) $ complete integration%
#a$ A complete an' final statement of parties< o/li*ations
#/$ All ot%er a*reements are unenforcea/le.
#c$ A : is a complete inte*ration if t%e parties inten'e' it to /e
#'$ E)i'ence of complete inte*ration4 mer*er # inte*ration$ clauses are #*oo'$
e)i'ence of complete inte*ration.
#e$ Mer*er clause4 t%is 'ocument represents t%e complete mer*er or inte*ration of
all a*reements.
c4 See also7 Hoch2eister7
(1) Written = for sale of flour! oral agreements about Duality! merger clause! court says oral is
evidence.
4 Aannon
(1) )ourt enforces the " b6c there is a huge! obnoious merger clause.
(#) *f there had been a normal merger clause in the =! they would have won! but the courts want
the parties to be able to ma"e an enforceable =! and if they invalidate clauses as complete as
this one! then parities will not be able to ma"e an enforceable merger clause
e4 :pproach Parol <#ience roles
(1) *s the written agreement a complete integration ( this is a matter of party intent! merger
clause is evidence of integration)
#a$ -es
3i4 Sie :gree2ents in scope are unenforcea0le
#/$ No
3i4 +s it consistent >ith the >ritten agree2ent
(a) ;es
i" +nforceable
(b) No
i" 0ide agreement is unenforceable
(#) Note% #-#CI has nothing to do with parol evidence.
F. ?ypo,
a4 1e2e20er to go step 0" step through the co22unications.
04 Screa2ingl" fast 500
(1) 0here is a reDuest for an offer A internet ad
(#) Gecause the ad went to so many people! a person receiving the ad would not be justified in
thin"ing that they have the power to ma"e a =.
(') (esponse bac" says% interested in buying! N at a price around
#a$ T%is is also a re;uest for an offer.
Page // of 66
C. Reasona&#e e!pe"tation
1. #octrine
a4 Ae#elope out of insurance contract la>
6I6. Un%ons%ionsa#i!ity
A. %ro"eura# un"ons"iona&i#ity
1. )ack of freedom or lack of sufficient relevant information
B. 8u&stanti$e un"ons"iona&i#ity
1. 0ome basic unfairness in the =
66.
66I. Re:ie+ '&estion9
A. They are &oth mer"hants, neg the sa#e o6 goos, thus you ha$e to "onsier the U"",
B. 0o4 many ? o =re an 8am ha$eH
1. There are three contracts. The first is a written contract. To see that there is a written contract, the
first issue to consider is whether the ad is an offer.
$. Ads are not an offer, they are a request for an offer
%. 0ams memo is an offer
a4 1ule7 a co22unication is an offer if the recipient of the co22unication is 8ustifie in thinking that he
or she has the po>er to conclue the 0argain 0" his other assets.
04 Possi0ilit" of 2ultiple contracts uner the 2ail0o= rule 2eans the a is not an offer 2eans
7. <reds pre-printed contract is not an acceptance, it is an offer
A. This offer is accepted when 0ame sends back the = and letter $-$HE-1.
a4 Cite this in the essa" on the e=a2
C. The ne!t issue is, is there an ora# "ontra"t &et4een =re an 8am
1. /ral agreement about delivery date
$. /ral agreement about service.
%. 0am offers to sign the contract if <red will promise 7 free months of service.
7. <red accepts. This case is very similar to a case we did in 8arole +vidence section
A. 0o there is a =, is it enforceable, 8arol evidence rule issue
D. !s the written = a complete integration(
a4 1ule7 : contract is a co2plete integration if the parties so inten
04 6his contract contains a 2erger clause. 6his is e#ience of the rele#ant part" intent
c4 Ho>e#er( it is not ecisi#e e#ience an here there is e#ience to the contrar".
4 .ot a co2plete integration
e4 6hen oral agree2ent enforcea0le if consistent
f4 Consistent! H "es
g4 What if co2plete integration! 6hen >e ha#e a scope issue. .or2al inclusion test.
66II. 4is% -t&$$
A. @hat are the terms o6 the 4ritten "ontra"t. The a""eptan"e o6 the 4ritten "ontra"t "onsists o6 the
signe "ontra"t an the #etter. Uner 2-20D-2 &et4een mer"hants, the terms o6 the "ontra"t are,
su&.e"t to e!"eptions, the terms o6 the a""eptan"e, = an 8 are mer"hants su&.e"t
B. 1!am notes-
1. All facts are relevant, designed to point to one correct answer, know 4**, know the black letter law
and apply, spit back what he says. 0ee online discussion for e.amples of questions.
Page /F of 66
Page /I of 66
Contracts
Williston? 1estate2ent 2. L 17 : contract is a pro2ise( or set of pro2ises( for 0reach of
>hich the la> gi#es a re2e"( or the perfor2ance of >hich the la> in so2e >a"
recogniRes as a ut".
KCC7 the total legal o0ligation create 0" a 0argain
6he la> enforces7
a pro2ise 2ae as a 0argaine&for e=change for so2e legall" sufficient consieration H
classic contract
a ut" to perfor2 >hen a pro2ise reasona0l" inuce another to change position in
reliance on the pro2ise H pro2issor" estoppel or etri2ental reliance.
So2e contracts o not re-uire agree2ents( e.g. pro2issor" estoppel.
So2e agree2ents o not re-uire contracts( e.g. illegal acts( gifts
Terms
12 L 27 : pro2ise is a 2anifestation of intention to act or refrain fro2 acting in a
specifie >a"( so as to 8ustif" a pro2isee in unerstaning that a co22it2ent has 0een
2ae.
12 L /7 :n agree2ent is a 2anifestation of 2utual assent on the part of t>o or 2ore
persons. : Bargain is an agree2ent to e=change pro2ises or to e=change a pro2ise for a
perfor2ance.
Merchant H K.C.C. One is a 2erchant if he 14 eals in goos of the kin( 24 0" his
occupation hols hi2self out as ha#ing kno>lege or skill peculiar to the practices
in#ol#e in the transaction( or /4 0" his occupation hols hi2self out as ha#ing
kno>lege or skill peculiar to the goos in#ol#e in the transaction( or F4 e2plo"s an
inter2eiar" >ho 0" his occupation hols hi2self out as ha#ing such kno>lege or skill(
an that kno>lege or skill 2a" 0e attri0ute to person >hose status is in -uestion.
Mutual Assent
Offer an' Acceptance #D79-D9$
.o contract if offer >ithra>n 0efore acceptance( >hich 2ust 0e the 2anner specifie. +f
2anner of acceptance is a20iguous( 12 L /2 allo>s offeree to choose 2eans of
acceptance.
:cceptance 0" perfor2ance
:cceptance 0" pro2ise to perfor2
What is acceptance!
12 L I07 :CC<P6:.C< O; O;;<1 A<;+.<A@ :CC<P6:.C< B$
P<1;O1M:.C<@ :CC<P6:.C< B$ P1OM+S<
314 :cceptance of an offer is a 2anifestation of assent to the ter2s thereof 2ae 0" the
offeree in a 2anner in#ite or re-uire 0" the offer.
Page /6 of 66
324 :cceptance 0" perfor2ance re-uires that at least part of >hat the offer re-uests 0e
perfor2e or tenere an inclues acceptance 0" a perfor2ance >hich operates as a
return pro2ise.
3/4 :cceptance 0" a pro2ise re-uires that the offeree co2plete e#er" act essential to the
2aking of the pro2ise.
Who 2a" accept! 6he person to >ho2 the offer is 2ae. ..B. an offer can 0e 2ae to
2ore than one person an to the pu0lic at large
Offer is #ali until offeror re#okes 3a2ong other things4
Po>er to re#oke 2a" 0e li2ite 0" an option. Options are separate contracts an re-uires
2utual assent an consieration. ..B. KCC li0eraliRes option contract consieration
re-uire2ent7 Option contracts 0et>een 2erchants nee not ha#e consieration.
6>o for2s of acceptance create ifferent lia0ilities
B" pro2ise to perfor27 lia0ilit" follo>s at acceptance
B" perfor2ance7 lia0ilit" as perfor2ance 0egins
What ter2s 2a" 0e accepte!
Basic rule H Mirror +2age 1ule7 :cceptance 2ust 2irror ter2s of offer.
KCC 2&20'7 Battle of the ;or2s7 Makes it possi0le to create a contract e#en though the
ter2s of the acceptance iffer fro2 the ter2s of the offer. see 6he Battle of the ;or2s(
infra.
Shaheen #. )night7 Suit 0rought against ph"sician for 0reach of contract seeking a2ages
for e=pense of raising chil 0orn after unsuccessful #asecto2".
.o >arrant" of care in Penns"l#ania( 0ut octors 2a" contract for an e=plicit result.
+2pl"ing a >arrant" of care raises polic" concerns an iscourages octors fro2 treating
risk" patients.
;urther2ore( pu0lic polic" an tort la> o not allo> a2ages for 0irth of health" chil.
Aickinson #. Aos7 Aos offere a piece of real propert" to Aickinson goo until M:M
;ria"( 0ut continue to solicit 0u"ers. He sol to one of these others though Aickinson
accepte 0efore the ealine.
Court hel that AosT note constitute an offer
12 L /I3147 offeree Uis gi#en a continuing po>er to co2plete the 2anifestation of
2utual assent 0" acceptance of the offer.U
12 L /67 po>er of acceptance ter2inates 0"7
re8ection or counter&offer
lapse of ti2e
face to face an phone offers lapse at en of con#ersation unless other>ise intene
:kers( 256 S.W.2 61'.
reasona0le perio usuall" a -uestion of fact 0ase on the circu2stances
re#ocation of offer H e#en inirect
eath or incapacit" of either part"
non&occurrence of an" conition of acceptance uner ter2s of the offer
Page /' of 66
Aickinson argues that an offer 2a" 0e >ithra>n 0ut that such offeror 2ust a#ise
offeree of change.
O08ecti#e #ie>7 Mellish( O.7 +f reasona0le person >oul ha#e kno>n that offer no longer
e=ists( then offer oes not e=ist.
Su08ecti#e #ie>7 no re-uisite 2eeting of the 2ins espite out>ar appearances
Aefining a state2ent as an offer7
<20r" #. Hargaine( Mc)ittrick Ar" Joos
<20r"( plaintiff( e2plo"ee of Mc)ittrick >orking >?o a current contract(( atte2pte to
negotiate a ne> one "earTs contract an threatene to -uit if one >as not agree to.
Super#isor replie that he >as 0us" 0ut that <20r" nee not >orr" an shoul go 0ack to
>ork. Soon thereafter <20r" >as fire.
<20r" argues that he then ha a one&"ear contract 0reache 0" the earl" ter2ination.
Hel7 1easona0le 2an >oul ha#e unerstoo Mc)ittrick as agreeing to a contract.
.either a co2pletel" o08ecti#e or su08ecti#e stanar >ill 0e conclusi#e in a courtTs
interpretation of an offer an acceptance. Knless 0oth tests are satisfie 3so&calle
O/Cecti)e T%eor( of Assent4( no contract e=ists.
Here although the court foun a contract uner the o08ecti#e stanar( <20r" i in fact
3su08ecti#e test4 unerstan a contract to e=ist. +f Mc)ittrick ha a#ise the Boar of
Airectors that no contract >as intene( this >oul ha#e ha no effect as <20r" still
unerstoo a contract to e=ist
: UMeeting of the 2insU is a ter2 of art( referring 2ore to out>ar inications( not
actual 2ental states H see 12 L 1'7
12 L 1'7 1e-uire2ent of a Bargain
<=cept as state in 324( the for2ation of a contract re-uires a 0argain in >hich there is a
2anifestation of 2utual assent to the e=change an a consieration.
Whether or not there is a 0argain a contract 2a" 0e for2e uner special rules applica0le
to for2al contracts or uner the rules state in 12 LL 52&MF.
9uc" #. Qeh2er
Arinking 0uies >rote a UcontractU for the sale of lan for NI. UOffereeU trie to enforce.
Court hel7
V8est is a -uestion of fact7W Woul a reasona0le person ha#e 0elie#e that Qeh2er intene
to for2 a contract! .o no intent to for2 contract H 8ust a 8oke
Ai 9uc" actuall" 0elie#e that Qeh2er intene to contract! irrele#ant 0ecause other
prong of O08ecti#e 6heor" of :ssent pre#ents enforce2ent of this contract.
:lso7 +nto=ication can 0e a efense to contract for2ation.
<20r" an 9uc" e2onstrate the application of the O08ecti#e 6heor" of :ssent7
Woul a reasona0le person ha#e unerstoo >ors an ees as an acceptance!@ an
Ai Plaintiff kno> so2ething 3that the reasona0le person >oul not ha#e kno>n4 that
affecte >hether or not a contract e=iste!
ro/lem Areas Concernin* Offer an' Acceptance
Page /5 of 66
reliminar( Ne*otiations #D6E-E7$
K.S. #. Braunstein7 Aistiller" agree to 0u" raisins at 10 cents per poun 0ut go#ern2ent
2istakenl" 3final4 offere at 10 cents per X10 0o=. Aistiller" accepte. Contract hel
in#ali
K.S. use su08ecti#e prong of O6: to efeat o08ecti#e assent.
<#en though istiller" co2pan" kne> that go#ern2ent letter >as an acceptance( that i
not 2ake up for an unsatisfactor" 2anifestation of assent.
K.S. aske court to for2 a contract out of the series of prior co22unications 0et>een the
parties. 6he court ecline.
KCC allo>s Ugap filling(U 0ut courts are reluctant to re>rite contracts.
6he o08ecti#e of contract la> is to enforce agree2ents an facilitate co2pletion of
ispute contracts.
.e0raska See #. Harsh
;ar2er efenant >ire See co. e=pressing >illingness to enter into a 0argain7 U+ >ant
N2.2I per c>t. for this see.....U See co. >rote( Uaccept "our offer....(U an then sue for
0reach >hen far2er i not ship see. Court hel no contract.
2ere in#itations to trae are not offers.
12 L 267 Preli2inar" .egotiations7
: 2anifestation of >illingness to enter into a 0argain is not an offer if the person to
>ho2 it is aresse kno>s or has reason to kno> that the person 2aking it oes not
inten to conclue a 0argain until he has 2ae a further 2anifestation of assent.
Co2pare KCC L2&20F7
: contract for sale of goos 2a" 0e 2ae in an" 2anner sufficient to sho> agree2ent(
incluing conuct 0" 0oth parties >hich recogniRes the e=istence of such a contract.
:n agree2ent sufficient to constitute a contract for sale 2a" 0e foun e#en though the
2o2ent of its 2aking is uneter2ine.
<#en though one or 2ore ter2s are left open a contract for sale oes not fail for
inefiniteness if the parties ha#e intene to 2ake a contract an there is a reasona0l"
certain 0asis for gi#ing an appropriate re2e".
See gap&filling rules infra at Contract +nterpretation
T%e LMail/o3 RuleL #DA6-?A$
12 L 6/7 +f an offer is accepte 0" Uan" 2eiu2 reasona0le in the circu2stancesU it is
effecti#e >hen it is put out of the possession of the offeree. Maile 3also ;e<=( etc.4
contracts are accepte at ti2e 2aile( unless other>ise pro#ie. Offers 2a" re-uire a
particular 2eans of acceptance.
Polic"7 offeree nees to kno> >hen agree2ent 0eco2es #ali. +f offeror re-uires
other>ise( he 2a" so e=pressl" stipulate( though >here receipt of acceptance is crucial to
perfor2ance( the 2ail0o= rule i2pliel" oes not appl".
Offeror cannot re#oke offer after acceptance is 2aile to hi2.
Page /M of 66
..B. 12 L 6/3047 Option contract acceptance is not operati#e until recei#e 0" the
offeror( protecting offeree
12 L 6'7 <#en if unreasona0le 2etho of acceptance is use( it is effecti#e >hen sent
pro#ie that it is recei#e >ithin the ti2e a seasona0l" ispatche acceptance sent in a
reasona0le 2anner >oul nor2all" ha#e arri#e. Other>ise effecti#e upon receipt.
Proper 2eiu2 to co22unicate acceptance is 2etho eter2ine 0" offeror( or that
>hich is custo2ar" in si2ilar transactions.
12 L 6F7 phone?fa=?telet"pe?telegraph other instantaneous 2eans go#erne 0" rules for a
personal 2eeting 3in praesentes4.
12 L F07 :n acceptance ispatche after a re8ection has 0een sent is not effecti#e until
recei#e an onl" if recei#e prior to the re8ection. <=pectation of offeror protecte. +f
acceptance is recei#e after re8ection( it is a counteroffer. 1( : 1( : % no contract@ 1( :
:( 1 % contract
12 L 6/7 co22ent c7 :( 1 1( : % contract( 0ut not enforcea0le. O#ertaking re8ections
2a" 0e looke upon as a offer to rescin or repuiate the contract. Cf. :( 1 :( 1 %
contract
Acceptance /( erformance an' "nilateral Contracts #D?8-86I D@E$
Bilateral7 a pro2ise for a pro2ise@ Knilateral7 pro2ise for perfor2ance
.otice7 2ust offeror notif" offeree of perfor2ance!
generall" no ut" to gi#e notice of perfor2ance( e=cept >hen offeror re-uests that notice
0e gi#en or offeree has reason to kno> offeror has no ae-uate 2eans of learning of
perfor2ance.
What is perfor2ance! Beginning( co2plete perfor2ance.
Carlill #. Car0olic S2oke Ball
Car0olic a#ertise Y100 for the contraction of flu follo>ing ail" use of its s2oke 0all.
:s are generall" an offer of an offer( e=cept >here a contains language to 2ake an
offer.
Car0olic argue not an offer 0ecause no notice gi#en.
Carlill argue reasona0le 2an >oul not ha#e unerstoo a nee to gi#e notice.
12 L IF7 no notification neee unless re-ueste
12 L /27 :20iguous offer allo>s offeree to choose 2eans of acceptance.
Acceptance /( erformance4 Notification #D@E-E77$
Crook #. Co>an
si2ilar to Carlill 0ecause offeror i not ask for notification of acceptance
anger of 2ailing offers accepta0le 0" perfor2ance7 contractual lia0ilit" 2a" 0e create
>ithout offerorTs kno>lege
12 L IF7 allo>s offeror to re-uire notification
Page F0 of 66
Peterson #. Patt0er"
Peterson o>e a e0t@ Patt0er" offere to reuce
Ma8orit" #ie>7 perfor2ance >oul ha#e 0een actual transfer of 2one". Since other sie
>oul not ha#e taken 2one"( no perfor2ance possi0le.
12 LFI7 Once "ou 0egin tener or 0egin perfor2ance( the offeror is constraine as to
re#oca0ilit" H an option is create Perfor2ance in full accepts contract
perfor2ance 0egins >hen actual perfor2ance( not preparation to perfor2 0egins.
Con'uct In)ali'atin* Assent
6he concern here is not >hether a contract e=ists( 0ut >hether one part" has a efense to
contract for2ation.
Misrepresentation #997D-67$
12 L 16F7 6here are four ele2ents to 2isrepresentation
4a state2ent or assertion not in accor >ith the facts( that is
4frauulent or 2aterial( an
4relie upon 0" the other part"( >here
4reliance >as 8ustifie
4
Halpert #. 1osenthal7 Seller of ho2e represente propert" as free fro2 ter2ites. Once a
o>npa"2ent >as pai( ter2ites >ere isco#ere. A. i not 0u" an P. sue for the
N1M(000 iscount at >hich he sol to another 0u"er.
P argue 2isrepresentation innocent an that the 2erger clause e=clues outsie rules
like 2isrepresentation. Court hel innocence no e=cuse.
Ma8orit" rule7 2isrepresenterTs goo faith is i22aterial
Minorit"?+llinois rule7 2isrepresenterTs kno>lege of falsit" of 2isrepresentation 2ust 0e
pro#e 0efore contract 2a" 0e in#aliate
12 L 1IM7 : 2isrepresentation is an assertion that is not in accor >ith the facts.
12 L 162 3247 Misrepresentation is 2aterial if it >oul likel" inuce a reasona0le person
to 2anifest his assent( or if the 2aker kno>s that it >oul 0e likel" to inuce the
recipient to o so. 3o08ecti#e test H contrast to 3non&econo2ic4 uress4
12 L 162 3147 Misrepresentation is frauulent if the 2aker intens his assertion to inuce
a part" to 2anifest his assent an the 2aker
3a4 kno>s or 0elie#es that the assertion is not in accor >ith the facts(Vkno>lege of
falsit"W or
304 oes not ha#e the confience that he states or i2plies in the truth of the assertion( or
3c4 kno>s that he oes not ha#e the 0asis that he states or i2plies for the assertion.
Misrepresentation must touc% on material fact( not erroneous state2ents of opinion.
Page F1 of 66
12 L 16F7 When : Misrepresentation Makes : Contract Goia0le
+f a part"Ts 2anifestation of assent is inuce 0" either a frauulent or a 2aterial
2isrepresentation 0" the other part" upon >hich the recipient is 8ustifie in rel"ing( the
contract is #oia0le 0" the recipient.
+f Z 2anifestation of assent Zinuce Z0" frauulent or 2aterial 2isrepresentation 0"
one >ho is not a part" to the transaction upon >hich the recipient is 8ustifie in rel"ing(
the contract is #oia0le 0" the recipient( unless the other part" to the transaction in goo
faith an >ithout reason to kno> of the 2isrepresentation either gi#es #alue or relies
2ateriall" on the transaction.
B"ers #. ;eeral 9an Co.7 P sought cancellation of a contract to 0u" far2lan an
reco#er" of pa"2ents( alleging A frauulentl" represente 14 that A actuall" o>ne lan(
24 A in actual possession of lan( /4 lan >as >orth N/I?acre 3not N1I.4 hel7
ATs clai2 that it o>ne the lan >as i22aterial 2isrepresentation as it ha entere
contract to sell lan >ith true o>ner
:ctual possession i2plie 0" lease >as 2aterial 2isrepresentation as ;9C i not inten
to transfer possession
Honest opinion as to #alue of propert"( state as an opinion is not frauulent
2isrepresentation( a0sent special reliance or superior kno>lege( 0ut a state2ent as an
opinion if not oneTs real opinion 2a" 0e.
Gokes #. :rthur Murph"7 Aancing lesson case H at issue opinions gi#ing rise to
2isrepresentation
14 Material misrepresentation of fact7 no kno>lege of falsit"( 0ut 2ust 0e 2aterial( i.e.
>oul affect reasona0le person
co2pare frauulent 2isrepresentation of fact7 re-uires kno>lege of falsit"
127 nee not 0e 2aterial
Courts7 appl" 2aterialit"
to 2ake it a state2ent of fact( part" raising efense( here Mrs. Gokes 2ust sho> fact.
Opinions are generall" not actiona0le
12 L 1657 1<9+:.C< O. :SS<16+O.S O; OP+.+O.
14:n assertion is one of opinion if it e=presses onl" a 0elief( >ithout certaint"( as to the e=istence
of a fact or e=presses onl" a 8ug2ent as to -ualit"( #alue( authenticit"( or si2ilar 2atters.
24 V+f it is reasona0le to o so( the recipient of an assertion of a personTs opinion as to facts not
isclose an not other>ise kno>n to the recipient 2a" properl" interpret it as an assertion
a)that the facts "nown to that person are not incompatible with his opinion! or
b)that he "nows facts sufficient to justify him in forming it.
c)
24 1elie upon 0" other part"
/4 Oustifia0le reliance
12 L 16M7 WH<. 1<9+:.C< O. :. :SS<16+O. O; OP+.+O. +S .O6
OKS6+;+<A
6o the e=tent that an assertion is one of opinion onl"( the recipient is not 8ustifie in rel"ing on it
unless the recipient
a) stands in such relation of trust and confidence to the person whose opinion is asserted
that the recipient is reasonable in relying on it! or
Page F2 of 66
b) reasonably believes that! as compared with himself! the person whose opinion is
asserted has special s"ill! judgment! or objectivity with respect to the subject matter! or
d)is for some other special reason particularly susceptible to a misrepresentation of the
type involved.
T%reats an' Duress #996E-E?$
Auress pre#ents assent. .o assent no contract
<le2ents
i2proper threat
inuces #icti2Ts 2anifestation of assent
lea#es #icti2 >ith no reasona0le alternati#e
[[[[[[[
;or2erl"( uress onl" >here Uforce or threatene forceU use 39or Coke4.
generall" a su08ecti#e test of >hether the uress cause this person to ac-uiesce to
contract for2ation(
Ho>e#er >here econo2ic coercion is clai2e( courts e2an an o08ecti#e ele2ent.
: gun to the hea is a clearl" ph"sical threat no assent & 6hese are the eas" cases.
12 L 1'F7 When uress 0" ph"sical co2pulsion pre#ents for2ation of a contract +f
conuct that appears to 0e a 2anifestation of assent 0" a part" >ho oes not inten to
engage in that conuct is ph"sicall" co2pelle 0" the other part" that lea#es the #icti2
no reasona0le alternati#e( the contract is #oia0le 0" the #icti2.
12 L 1'I7 When uress 0" threat 2akes a contract )oi'a/le7
4+f a part"Ts 2anifestation of assent is inuce 0" an i2proper threat 0" the other part"
that lea#es the #icti2 no reasona0le alternati#e( the contract is #oia0le 0" the #icti2
4+f a part"Ts 2anifestation of assent is inuce 0" one >ho is not a part" to the
transaction( the contract is #oia0le 0" the #icti2 unless the other part" to the
transaction in goo faith an >ithout reason to kno> of the uress either gi#es #alue
or relies 2ateriall" on the transaction.
4
U6ake it or lea#e it.U is an accepta0le threat inherent to econo2ic acti#it".
12 L 1'67 When a threat is i2proper7
14 : threat is i2proper if
3a4 >hat is threatene is a cri2e or tort( or the threat itself >oul 0e a cri2e or a tort if it
resulte in o0taining propert"(
304 >hat is threatene is the use of ci#il process an the threat is 2ae in 0a faith( or
3c4 >hat is threatene is a cri2inal prosecution(
34 the threat is a 0reach of the ut" of goo faith an fair ealing uner a contract >ith
the recipient.
24 : threat is i2proper if the resulting e=change is not on fair ter2s( an
the threatene act >oul har2 the recipient an >oul not significantl" 0enefit the part"
2aking the threat(
Page F/ of 66
the effecti#eness of the threat in inucing the 2anifestation of assent is significantl"
increase 0" prior unfair ealing 0" the part" 2aking the threat( or
>hat is threatene is other>ise a use of po>er for illegiti2ate ens.
Sils0ee #. We00er \ 112F7 P.Ts son >as caught stealing. A threatene to tell P.Ts sick
hus0an unless she ga#e hi2 N1I00 restitution. P sue uner theor" of uress.
no threat to o an"thing illegal
Hel7 not a goo response H UV6Whe fear >as reasona0le( an a sufficientl" po>erful
2oti#e naturall" to o#erco2e self&interest@ an therefore that the plaintiff ha a right to
a#oi her actZU
Court use a su08ecti#e stanar H U+f a part" o0tains a contract 0" creating a 2oti#e
fro2 >hich the other part" ought to 0e free( an >hich in fact is( an is kno>n to 0e
sufficient to prouce the result( it oes not 2atter that the 2oti#e >oul not ha#e
pre#aile >ith a ifferentl" constitute person...U
Co2pare7 Hackle" #. Heale" \ 11/27 A. pai P. NF000 on a N6000 lu20er contract(
kno>ing that P. coul not affor to sue an that not accepting the NF000 >oul ruin P.
Hel7 >here 3threatene X4 act not illegal( no uress.
:ustin +nstru2ent #. 9oral Corp. \ 11/'7 :ustin( the onl" feasi0le supplier of gears that
9oral neee to fulfill .a#" t>o contracts( cease eli#er" on the first su0contract. :.
e2ane su0stantial price increases on 0oth the ol an ne> su0contracts. 9. finall"
agree. :fter co2plete perfor2ance( 9. sought reco#er" of e=cess pai on grouns of
uress.
U: contract is #oia0le on the grouns of uress >hen it is esta0lishe that the part"
2aking the clai2 >as force to agree to it 0" 2eans of a >rongful threat precluing the
e=ercise of his free >ill.U
U2ere threat...to 0reach not...in itself econo2ic uress....+t 2ust also appear that the
threatene part" coul not o0tain the goos fro2 another source of suppl" an that the
orinar" re2e" of an action for 0reach of contract >oul not 0e ae-uate.U
K.S. #. Progressi#e <nterprises \ 11F/7 +f no protest to increase price( the offeror 2a"
assu2e that a ne> contract has 0een create.
KCC L 2&20M7 14 :n agree2ent 2oif"ing a contract >ithin this :rticle V2W nees no
consieration to 0e 0ining.
"nconsciona/ilit( #99AA-8EI 998?-M7$
Knlike uress( unconsciona0ilit" oes not re-uire a threat.
KCC 2&/02 protects against unfair surprise an oppression.
Courts consier 3fro2 Wille #. South>estern Bell47
4Vuse of 0oilerplate 0" theW part" in stronger econo2ic position
4significant cost&price isparit" ? e=cessi#e price
4enial of 0asic rights an re2eies
4inclusion of penalt" clauses
Page FF of 66
4attenant circu2stances to contract
4hiing of clauses isa#antageous to >ither part" in fine print( etc.
confession of 8ug2ent clauses( isclai2er of >arrant"( Ua&onsU
4use of 8argon
4i20alance in rights an pri#ileges i2pose 0" the 0argain
4e=ploitation of >eak
4ine-ualit" of 0argaining ? econo2ic po>er
Proceural #. Su0stanti#e unconsciona0ilit".
Process of contracting( #ersus
6he resulting contract
Willia2s #. Walker&6ho2as ;urniture7 1ent&to&o>n store lease agree2ent pro#ie that
until all ite2s lease fro2 it >ere pai off in full( it retaine title to the goos. P. sought
relief fro2 reple#".
Hel7 UKnconsciona0ilit" has generall" 0een recogniRe to inclue an a0sence of
2eaningful choice in the part of one of the parties together >ith contract ter2s >hich are
unreasona0l" fa#ora0le to the other part".U
gross ine-ualit" of 0argaining po>er
KCC L2&/02 ? 12 L 2057 Knconsciona0le Contract or Clause
4VpphW Court 2a" fin contract or a clause unconsciona0le as a 2atter of la> an refuse
to enforce contract( refuse to enforce clause( or li2it clauseTs operation so as to a#oi
unconsciona0le result.
4VpphW Parties gi#en reasona0le opportunit" to gi#e e#ience in support of their positions
on unconsciona0ilit"
:hesion contracts 3see( e.g. Carni#al Cruise 9ines4 are allo>e for a #ariet" of reasons.
stanariRation
econo2ies of scale
ho> to regulate >ithout using unconsciona0ilit"!
:4 Kse 2ore traitional 2eans like offer( acceptance( an consieration to
4a0rogate the contract
4construe a20iguous ter2s 2ore fa#ora0l" to the person in the >eaker 0argaining
position.
B4 Su08ect contract ter2s to Ureasona0lenessU test as in Carni#al.
P. o not clai2 that the" i not consent to Carni#alTs pro#isions( ho>e#er( the pro#isions
are on the 0ack of tickets >hich are non&refuna0le upon receipt.
..B. Case la> 2akes custo2er 0oun after a reasona0le ti2e to rea ahesion contract(
so after taking the cruise( it is ifficult to clai2 no consent.
issent7 : is offer( contacting Carni#al is acceptance
12 L 2117 StanariRe :gree2ents
Page FI of 66
4Where the other part" has reason to 0elie#e that the part" 2anifesting such assent >oul
not o so if he kne> that the >riting containe a particular ter2( the ter2 is not part
of the agree2ent.
Misun'erstan'in*s #ED8-AE$
Peerless 31affles #. Wichelhaus4 in >hich each part" intene that cotton arri#e in
9i#erpool on a ifferent ship kno>n as Beerless
Os>al #. :llen7 P. accepte offer for A.Ts US>iss coins(U not realiRing that the rare S>iss
coins he assu2e >ere inclue in the offer >ere in fact part of ATs U1are coinU
collection.
+n 0oth cases no contract foun.

12 L 2017 Whose 2eaning pre#ails
4Where the parties ha#e attache the sa2e 2eaning to a pro2ise or agree2ent or a ter2
thereof( it is interprete in accorance >ith that 2eaning.
4Where the parties ha#e attache ifferent 2eanings to a pro2ise or agree2ent or a ter2
thereof( it is interprete in accorance >ith the 2eaning attache 0" one of the2 if at
the ti2e the agree2ent >as 2ae(
46hat part" i not kno> of an" ifferent 2eaning attache 0" the other( an the other
kne> the 2eaning attache 0" the first part"@ or
46hat part" ha no reason to kno> of an" ifferent 2eaning attache 0" the other( an the
other ha reason to kno> the 2eaning attache 0" the first part".
4<=cept as state in this section( neither part" is 0oun 0" the 2eaning attache 0" the
other( e#en though the result 2a" 0e a failure of 2utual assent.
12 L 2027 1ules in ai of interpretation
4Wors an other conuct are interprete in the light of all the circu2stances( an if the
principal purpose of the parties is ascertaina0le it is gi#en great >eight.
4: Writing is interprete as a >hole( an all >ritings that are part of the sa2e transaction
are interprete together.
4Knless a ifferent intention is 2anifeste
4>here language has a generall" pre#ailing 2eaning( it is interprete in accorance >ith
that 2eaning@
4technical ter2s an >ors of art are gi#en their technical 2eaning >hen use in a
transaction >ithin their technical fiel
4Where an agree2ent in#ol#es repeate occasions for perfor2ance 0" either part" >ith
kno>lege of the nature of the perfor2ance an opportunit" for o08ection to it 0" the
other( an" course of perfor2ance accepte or ac-uiesce in >ithout o08ection is gi#en
great >eight in the interpretation of the agree2ent.
4Where#er reasona0le( the 2anifestations of intention of the parties to a pro2ise or
agree2ent are interprete as consistent >ith each other an >ith an" rele#ant course
of perfor2ance( course of ealing( or usage of trae.
Page F6 of 66
Su08ecti#e agree2ent >ith a20iguous ter2s contract >ith su08ecti#e unerstaning.
:20iguous ter2s * a20iguous agree2ent no contract unless [[[[[[
Mista0es #99M9-96D7$
.o a20iguit" in 2eaning of ter2s( rather in 0elief at ti2e of agree2ent
Parties o not usuall" get e#er"thing the" >ant in a contract
Courts efine 2istake so as to not allo> a0uses( i.e. >here enforce2ent >oul 0e
se#erel" etri2ental. +t is onl" a #ali efense to contract 3reners #oia0le 0" part" not
at fault4 >here7
4a mutual 2istake
4goes to a core assu2ption on >hich contract 2ae( an
4the 2istake has a 2aterial effect on the agree e=change( an
4the 2istake is not one for >hich the part" raising the efense 0ears the risk.
Who assu2e the risk of a gi#en 2istake! :ssu2ption 2a" 0e e=presse or i2plie
Sher>oo #. Walker7 Barren co> turns out to 0e fertile. Seller no longer >ants to sell H
#oi contract for 2istake. Court hel that the contract is #oia0le 0ecause a 0arren co> is
a ifferent goo than a fertile co>. Aissent argue sa2e goo 3co>4 >ith ifferent #alues.
.ester #. Michigan 9an , +ron Co.7 Contract in#ol#ing sale of ti20er( 2istake as to
-ualit". Both parties ha reasona0le 0elief that >oo 2ight 0e efecti#e an lo>ere
price accoringl". Bu"er >illing to take risks as sho>n 0" sellerTs refusal to guarantee
-ualit" of ti20er. Hel no 2istake.
12 L 1IF07 Bu"er kne> that he ha li2ite kno>lege 0ut procee an">a" in
conscious ignorance.
Knilateral 2istakes generall" are not a #ali efense to contract for2ation e=cept >here
the other part"( i.e. the part" not seeking relief fro2 the contract >as or shoul ha#e 0een
a>are of the 2istake.
12 L 1617 : personTs non-'isclosure of a fact kno>n to hi2 is e-ui#alent to an
assertion that the fact oes not e=ist in the follo>ing cases onl"7
4>here he kno>s that the isclosure of the fact is necessar" to pre#ent so2e pre#ious
assertion fro2 0eing a 2isrepresentation or fro2 0eing frauulent or 2aterial.
4>here he kno>s that isclosure of the fact >oul correct a 2istake of the other part" as
to a 0asic assu2ption on >hich that part" is 2aking the contra an if non&isclosure
of the fact a2ounts to a failure to act in goo faith an in accorance >ith reasona0le
stanars of fair ealing
4>here he kno>s that isclosure of the fact >oul correct a 2istake of the other part" as
to the content or effect of a >riting( e#iencing or e20o"ing an agree2ent in >hole
or in part.
4>here the other person is entitle to kno> the fact 0ecause of a relation of trust an
confience 0et>een the2.
Page F' of 66
COMMENT4 .e#ertheless( a part" nee not correct all 2istakes of the other an is
e=pecte onl" to act in goo faith an in accorance >ith reasona0le stanars of fair
ealing( as reflecte in pre#ailing 0usiness ethics.
Consi'eration
Bar*ains )s. Con'itione' !ifts #??8-@?$
+n aition to offer an acceptance( contracts re-uire consieration.
<=a2ples7
4: sa"s to B( U+f "ou paint 2" house( +Tll gi#e "ou N200.U Contract for2e.
4: sa"s to B( UHere are N200.U .o contract
4: sa"s to B( UCo2e to 2" house an +Tll gi#e "ou N200.U .o contract
4
12 L '17 Kner U0argaine forU co2ponent. Consieration is7
4Pro2ise 2a" 0e to inuce pro2ise or perfor2ance
4Pro2ise or perfor2ance is unertaken in response to a pro2ise
Oohnson #. Otter0ein Kni#ersit"7 Mone" >as 0e-ueathe to a uni#ersit" for e0t relief 0ut
then 2ae una#aila0le. 6he uni#ersit" argue an enforcea0le contract. Ho> to ecie!
4Was pro2ise 2ae to inuce return pro2ise or perfor2ance 0" the college! .o.
4Ai school act in response to the plege an incur an" e0t as a result! .o. <ar2arking
funs for e0t is 2erel" a conition like Uco2e to 2" house an +Tll gi#e "ou...(U not
#ali consieration H Hel7 a gift >ith conitions attache.
4
Ha22er #. Si>a"7 Kncle pro2ise nephe> NI(000 to refrain fro2 certain acts until 20
"ears of age. Perfor2ance appears to ha#e 0een unertaken in response to a pro2ise.
Contract for2e.
Co2pare no contact in UCo2e to 2" house an +Tll gi#e "ou N200.U .o contract.
Co2pare se#erit" of nephe>Ts etri2ent to se#erit" of >alking to house. :lso note siRe of
0enefit an act unertaken to recei#e 0enefit.
Before the 1estate2ent( consieration referre to 0argaine&for e=change 0ut also 0enefit
to pro2isor or etri2ent to pro2isee.
Courts o not re-uire negati#e outco2es to efine etri2ent. 1ather( pro2isee oes
so2ething not uner legal o0ligation to o or refrains fro2 e=ercising a legal right( here
to engage in #ice
Benefit oes not 2ean that "ou 2ust gain 0ut onl" that got other part" to o so2ething
not re-uire to o.
12 oes not stress 0enefit an etri2ent@ 2ost courts toa" efine consieration 0"
fining a 0enefit an a etri2ent. So2e look for a sho>ing of etri2ent( 0enefit( an
0argaine for e=change.
Was there 0argaine&for e=change consieration!
4Was the pro2ise 2ae to inuce the returne pro2ise or perfor2ance!
4Was the returne pro2ise or perfor2ance gi#en in response to the initial pro2ise!
Page F5 of 66
Aetri2ent to pro2isee ? 0enefit to pro2isor 2a" she light on intent of parties e#en
though 12 oes not aress.
12 L '17 What is 0argaine&for e=change!
46o constitute consieration( a perfor2ance or a return pro2ise 2ust 0e 0argaine for.
4: perfor2ance or return pro2ise is 0argaine for if it is sought 0" the pro2isor in
e=change for his pro2ise an is gi#en 0" the pro2isee in e=change for that pro2ise.
46he perfor2ance 2a" consist of
4an act other than a pro2ise
4a for0earance
4the creation( 2oification( or estruction of a legal relation.
46he perfor2ance or return pro2ise 2a" 0e gi#en to the pro2isor or to so2e other
person. +t 2a" 0e gi#en 0" the pro2isee or 0" so2e other person.
ast Consi'eration #?@?-@8$
Wherein perfor2ance preates pro2ise( so no 0argaine for e=change no
consieration. 3Moore #. <l2er H clair#o"ant >ager4
Moral Consi'eration #?@8-M@$
Mills #. W"2an7 Man pro2ise to repa" 2an >ho ha pre#iousl" nurse his son 0ack to
health no consieration
We00 #. McJro#is7 Man i#erte falling >oo( sa#ing 2an 0elo> 0ut in8uring hi2self
per2anentl". Sa#e 2an pro2ise N1I per 2onth.
12 L 567
4Pro2ise for 0enefit recei#e pre#iousl" fro2 pro2isee is 0ining to the e=tent necessar"
to pre#ent in8ustice
4.ot enforcea0le if 0enefit >as
4a gift or no un8ust enrich2ent
4to the e=tent the #alue is isproportionate to the 0enefit
Action not Ta0en in Response #?M@-87D$
Jlo#er #. Oe>ish War Geterans7 Whether a person gi#ing infor2ation leaing to the arrest
of 2urerer >ithout an" kno>lege that a re>ar has 0een offere for such infor2ation
0" non&go#ern2ental organiRation is entitle to collect the re>ar.
Hel7 in pri#ate re>ars( there can 0e no contract unless the clai2ant >hen gi#ing the
esire infor2ation kne> of the offer of the re>ar an acte >ith the intention of
accepting such offer.
11st L7 U+t is i2possi0le that there shoul 0e an acceptance unless the offeree kno>s of
the e=istence of the offer.U
12 L 2/7 +t is essential that each part" 2anifest assent >ith reference to the
2anifestation of the other.
Page FM of 66
re-e3istin* Dut( Rule an' Contract Mo'ification #87D-9?$
Stilk #. M"rick7 Where a part" pro2ises to o >hat it is alrea" legall" o0ligate to o
there is no consieration 3in#ol#e sea2anTs >ages4. Si2ilar rule in :laska Packers #.
Ao2encio in >hich o0ligee 8ust >ante 2ore 2one".
.o contract >here parties alrea" o0ligate at one price agree to lo>er re2uneration for
sa2e >ork or goo.
When ho>e#er a su0se-uent agree2ent i2poses aitional o0ligations or 0urens not
pre#iousl" assu2e( supporte 0" consieration( the ne> contract is #ali an 0ining.
Brian Construction #. Brighetti
12 L 5M7 : pro2ise 2oif"ing a ut" uner a contract not full" perfor2e on either sie
is 0ining
4if the 2oification is fair an e-uita0le in #ie> of circu2stances not anticipate 0" the
parties >hen the contract >as 2ae@ or
4to the e=tent pro#ie 0" statute
4to the e=tent that 8ustice re-uires enforce2ent in #ie> of 2aterial change of position in
reliance on the pro2ise.
KCC L2&20M7 Moification( rescission( an >ai#er7 14 :n agree2ent 2oif"ing a contact
>ithin this article nees no consieration to 0e 0ining...
Official Co22ent7 Must satisf" goo faith re-uire2ent an 2a" in so2e situations
re-uire an o08ecti#el" e2onstra0le reason for seeking such 2oifications.
A'e;uac( of Consi'eration #89?-6E$
Harest" #. S2ith7 3la2p patent case4 When a part" gets the consieration he contracte
for he cannot clai2 failure of consieration. Courts >ill generall" not in-uire into
>hether consierationTs #alue is siRa0le.
romissor( Estoppel #@7D-DMI @E6-M?$
&: contract that lacks 0argaine&for e=change 2a" ne#ertheless 0e enforcea0le.
&Historicall" pro2ises 2ae uner seal neee no consieration to 0e enforcea0le( a
position re8ecte 0" 2ost states an the KCC.
&KCC7 MerchantTs fir2 offer can 0e enforcea0le >ithout consieration.
&:fter eli#er" of a gift( the gift is irre#oca0le.
&Pro2issor" estoppel is an e-uita0le octrine that pre#ents in8ur" to a part" that relie on
pro2ises inucing perfor2ance.
&1icketts #. Scothorn7 3N2000?"earl" to granaughter4 U+t has 0een hel that a note gi#en
in e=pectation of the pa"ee perfor2ing certain ser#ices( 0ut >ithout an" contract 0ining
hi2 to ser#e( >ill not support an action...0ut >hen the pa"ee changes his position to his
isa#antage( in reliance on the pro2ise( a right of action oes arise....U UHa#ing
intentionall" influence the plaintiff to alter her position for the >orse on the faith of the
note 0eing pai >hen ue( it >oul 0e grossl" ine-uita0le to per2it the 2aker( or his
e=ecutor( to resist pa"2ent on the groun that the pro2ise >as gi#en >ithout
consieration.U <=pectanc" 3full #alue of >hat she >as pro2ise4 a2ages a>are.
Page I0 of 66
6he court applie the oler theor" of e;uita/le estoppel >hich re-uire a state2ent of
fact. :lthough there >as no consieration( ine-uita0le to allo> granfather an out
0ecause granaughter relie on his pro2ise to her etri2ent.
&Pro2issor" <stoppel is an alternati#e to consieration7
4+n case of gratuitous pro2ises & 1icketts
4Cases >here offer is 2ae 0ut not "et accepte
4Cases >herein offer not "et e#en 2ae
&Jreiner #. Jreiner7 Mother ac-uire lan fro2 eath of hus0an an son1. She pro2ise
son2 lan if he 2o#e 0ack an then refuse to transfer title.
Jel"7 Ai she >ant son2 to 0e on an e-ual footing >ith son1! $ gift >ith conition
Jel"7 Ai she >ant son2 to 2o#e 0ack to lan! $ 0argaine&for e=change >ithout
pro2issor" estoppel anal"sis
Mother shoul ha#e reasona0l" e=pecte son to act. :s in 1icketts( a gratuitous?onati#e
pro2ise that inuces su0stantial action is 0ining >ithout consieration.
11st L M07 Pro2ise reasona0l" inucing efinite an su0stantial action is 0ining.
:lleghen" College #. .ational Chautagua Count" Bank of Oa2esto>n.
Jel"7 anal"sis of pro2issor" estoppel cannot 0e i#orce fro2 anal"sis of consieration
Wo2an onate N1(000 to a college( >ith NI(000 to follo> upon her eath. She
repuiate pro2ise an later her estate >as sue.
What coul 0e consieration! 14 .a2ing scholarship fun after the onor! 24 interest in
Christian eucation! /4 :nticipation of others su0scri0ing!
4Court hel "es. +n return for offer of pro2ise onation( college i2plicitl" pro2ise to
na2e fun for the onor 0" accepting the N1(000. : 0ilateral contract is for2e >hen
pro2ises are e=change. <=change pro2ises can 0e consieration.
24 .o. Aonor i not 2ake pro2ise in e=change for 2
4.o. Aonor i not gi#e 2one" 0ecause of /
Jel"7 Wh" oes court e=plore pro2issor" estoppel >hen CaroRo uses consieration!
Pro2issor" estoppel e#elope later in .$ an the court >as not thrille 0" the prospect.
<ffecti#e onation for2 >oul stipulate that an e=change of pro2ises >as occurring(
there0" for2ing a 0ilateral contract. Charities ? non&profits generall" o not phrase
pleges to create 0ilateral contracts 0ecause the" 2ight 0e 0oun to 0uil( etc. e#en if
eclining enroll2ent...
;ein0erg #. Pfeiffer Co.7 Wo2an retire after ha#ing 0een pro2ise N200?2onth pension
for life. 6he 2one" >as not conitione on an" pro2ise. 6he >o2an relie upon >hat
the co2pan" escri0e as a Ufir2 o0ligationU arising fro2 her "ears of ser#ice. 6he court
foun etri2ental reliance ? pro2issor" estoppel >hen the pa"2ents stoppe.
such a pro2ise not enforcea0le in consieration 0ecause of past consieration
Ho>e#er( pro2issor" estoppel allo>s enforce2ent if reliance >as likel" an >here
necessar" to pre#ent in8ustice. 6herefore if pro2ise >ithra>n 0efore her retire2ent( no
reliance no pro2issor" estoppel.
Page I1 of 66
Bair7 Jeneral contractor su02its offer 0ase on erroneousl" lo> esti2ate of
su0contractor. Client accepts( contractor tries to 2ake su0&k perfor2. What is
acceptance! .o acceptance offer 2a" 0e >ithra>n. 9earne Han( O. li2its
application of pro2issor" estoppel to gratuitous pro2ises( not situations in >hich the
offeree e=pects so2ething in return.
Opposite result in Arennan. : JC su02itte offer 0ase on erroneousl" lo> su0&)
esti2ate. Hel that Su0&k shoul ha#e foreseen reliance. 6ra"nor( O. hel that >hether an
offer or a gratuitous pro2ise shoul not 2atter in pro2issor" estoppel.
uses rationale of an options contract7
12 L FI7 Once perfor2ance 0egins an option contract is create( pre#enting
unreasona0l" pro2pt re#ocation.
12 L M07 : pro2ise >hich the pro2isor shoul reasona0l" e=pect to inuce action or
for0earance of a efinite an su0stantial character on the part of the pro2isee an >hich
oes inuce such action or for0earance is 0ining if in8ustice can 0e a#oie onl" 0"
enforce2ent of the pro2ise.
;air to hol su0&) to offer 0ecause foreseea0le that its 0i coul 0e the lo>est an >oul
ha#e 0een accepte! Han Hno( 6ra"nor H"es.
KCC L 2&20I7 ;ir2 offer in >riting irre#oca0le for lack of consieration
12 L 5'7 :n offer reasona0l" e=pecte to inuce a su0stantial action 0efore acceptance
is 0ining as an option contact to the e=tent necessar" to a#oi in8ustice.
Joo2an 3raio ealership case4 an Hoff2an #. 1e O>l Stores are slightl" ifferent.
Here there >as no offer( 2erel" a pro2ise of an offer. Pro2issor" estoppel is an
alternati#e to stanar for2s of action for eceit. 1eliance a2ages onl" H to restore
plaintiff to original conition. .o actual enforc2ent of contract >hich >oul re-uire
e=pectanc" a2ages
Contract Interpretation
Determinin* t%e Meanin* of 1or's #E78-9?I E6M-D9I EDA-D8I EAA-??$
Aefault Ugap fillingU rules( 0riefl"7
KCC L 2&20F7 <#en though one or 2ore ter2s are left open a contact for sale oes not
fail for inefiniteness to 2ake a contract if the partiesT ha#e intene a reasona0l" certain
0asis for gi#ing an appropriate re2e".
KCC L 2&/0I7 Open rice Term accepta0le. Ceterus pari0us( price is a reasona0le price
at ti2e for eli#er"@ goo faith re-uire@ if a price left to 0e fi=e 0" a 2eans other than
agree2ent of the parties fails to 0e fi=e as a result of a part"Ts fault( the other part" 2a"
Page I2 of 66
treat the contract as cancelle or hi2self fi= a reasona0le price. :n agree2ent not to 0e
0oun unless a efinite price is fi=e >ill pre#ent for2ation of a contract if no such price
is fi=e. Both parties then return goos or failing that pa" reasona0le #alue or goos
recei#e H seller returns pa"2ents recei#e theretofor.
KCC L 2&/067 24 e3clusi)e contract 'efault rule7 o0ligation to use 0est efforts to sell or
pro2ote sale of goos
KCC L 2&/057 A/sence of Specifie' lace for Deli)er(7 SellerTs place of 0usiness( or if
none his resience. +f at ti2e of contracting the goos are kno>n to 0e in so2e other
place( eli#er" is at that point.
KCC L 2&/0M7 A/sence of Specific Time ro)isionsI Notice of Termination7
Knspecifie ti2e of ship2ent or eli#er" in >hole or in part is a reasona0le ti2e.
Successi#e perfor2ances inefinite in uration continue for a reasona0le perio su08ect
to ter2ination 0" either part". 6er2ination re-uires reasona0le notification that 2a" 0e
ispense >ith 0" agree2ent >ithin the 0ouns of unconsciona0ilit".
KCC L 2&/107 Open Time for a(ment or Runnin* of Cre'itI Aut%orit( to S%ip
"n'er Reser)ation7 Pa"2ent ue at ti2e?place >hich 0u"er us to recei#e the goos(
e#en if the place of ship2ent. Where the seller is authoriRe to sen goos he 2a" ship
uner reser#ation an tener title ocu2ents. Bu"er 2a" inspect goos
0efore pa"2ent is ue. Where eli#er" is 2ae 0" ocu2ents of title
Where parties agree that as to ter2s( ho> 2uch a20iguit" is tolera0le!
Sun Printing #. 1e2ington Paper
Woo #. 9uc"( 9a" Auff Joron H the court took a 2ore li0eral approach to i2posing
conitions. JoronTs seal of appro#al helpe sell haute couture. She grante e=clusi#e
use of seal for one "ear su08ect onl" to her appro#al of the ite2s in return for I0] of
profits. 6he "ear&to&"ear contract re-uire M0 a"s notice to cancel. Joron 0egan
enorsing clothing >ithout WooTs per2ission. CaroRo( O. Onl" one reasona0le
interpretation an 8ug2ent against Joron.
Jel" H Proper >a" to i2pose conitions7 if onl" one clear 2eaning( i2pl" that. +f there
are 2ore than one( 0e cautious.
Ho> oes a court eter2ine the 2eaning of a20iguous ter2s!
Wein0urg #. <elstein7 Where no su08ecti#e agree2ent( o08ecti#e ter2s of contract use
;rigali2ent +2porting Co. #. B...S. +ntTl Sales Corp.
:ction for 0reach of the >arrant" that goos sol >ill correspon to the escription. P.
sa"s Ufo>l?ste>ing chickensU i not constitute chicken uner the 2eaning of the la>.
What oes UchickenU 2ean!
4Course of perfor2ance % earlier perfor2ance in this contract
4Course of ealings % prior contracts 0et>een these parties
Page I/ of 66
4Ksage of trae % other 2e20ers of inustr"
:20iguities prouce 0" outsie factors are hanle 0" the parol e#ience rule
Interpretin* a 1ritin*4 T%e arole E)i'ence Rule #E89-M7$
State2ent of the rule7 Where the parties to a contract e=press their agree2ent in a >riting
>ith the intent that it e20oies the full an final e=pression of their 0argain( an" other
e=pressions & >ritten or oral & 2ae prior to or conte2poraneous >ith the >riting are
ina2issi0le to #ar" the ter2s of the >riting.
+s the >riting an UintegrationU! UWhether there is an integrate agree2ent is to 0e
eter2ine 0" the court as a -uestion preli2inar" to eter2ination of a -uestion of
interpretation or to application of the parol e#ience ruleU 12 L 20M324
1. +s the >riting intene as a final e=pression! 12 L 20M314
2. +s the >riting a co2plete integration! 12 L 2107
4integrate agree2ent
4aopte 0" the parties
4as a co2plete an e=clusi#e state2ent of the ter2s of the agree2ent.
+f "es( there is a co2pletel" integrate agree2ent
See 12 L 2107
4: co2pletel" integrate agree2ent is an integrate agree2ent aopte 0" the parties as a
co2plete an e=clusi#e state2ent of ter2s of the agree2ent.
4: partiall" integrate agree2ent is an integrate agree2ent other than a co2pletel"
integrate agree2ent.
4Whether an agree2ent is co2pletel" or partiall" integrate is to 0e eter2ine 0" the
court as a -uestions preli2inar" to eter2ination of a -uestion of interpretation or to
application of the parol e#ience rule.
What are the i2plications of fining that the agree2ent is co2pletel" integrate!
6he agree2ent cannot 0e contraicte or supple2ente
12 L 21/3147 : 0ining integrate agree2ent ischarges prior agree2ents to the e=tent
that it is inconsistent >ith the2( an 324 that the" are >ithin its scope.
Ho>e#er( if not co2pletel" integrate7
6he agree2ent cannot 0e contraicte( 0ut can 0e supple2ente 0" introucing
consistent aitional ter2s.
Ho> is the -uestion of integration ecie!
Consier 6ho2pson H e=a2ine four corners
an Bro>n H Mo'ern approac% look at >riting an circu2stances attenant for intent
When is the Parol <#ience 1ule not applica0le!
4<=pressions su0se-uent to the >ritten( integrate agree2ent are not affecte 0" the
parole e#ience rule.
4Merger clauses H pro#isions sa"ing that e=pression is co2plete( final( e=clusi#e
e=pression of agree2ent. Presence of a 2erger clause o0#iates nee for either
6ho2pson or Bro>n tests.
/4 Consier 12 L 21F7 3pph4 6he parole e#ience rule allo>s e#ience prior to or
conte2porar" >ith the contract to sho> illegalit"( frau( uress( 2istake( lack of
consieration( or other in#aliating causes
6he issue of a20iguit" & Pacific Jas 3p. F'M4 an 6rient Center 3p. F5/4.
Page IF of 66
Pacific Jas hel that e#ience presente regaring 2eaning of >ors of contract >ere
rele#ant. 6he four corners coul i2pose a result neither part" intene. .o core 2eaning
of >ors H e=a2ine the2 in conte=t.
6rient Center #. Conn. Jen. 9ife +ns. isagrees >ith Pacific Jas >hose principle of no
core 2eaning see2s to allo> capricious an ar0itrar" contract in#aliation.
Mirror Ima*e Rule H ;or acceptance to 0e effecti#e it 2ust 2irror ter2s of offer
Last S%ot Rule H +f offeror proceee >ith contract espite iffering ter2s of suppose
acceptance( he >oul ha#e constructi#el" aopte ter2s of counteroffer 0" his
perfor2ance.
Both rules fail to recogniRe the realities of the 2arketplace 3esp. goos4
Seller al>a"s has the last shot( resulting in ahesion.
So2e courts interpret acceptance ter2s as suggestions 2oif"ing contract if accepte.
Others tr" to reconcile offer an acceptance ter2s to for2 a contract
Pro0le2 areas7
4<ntere a contact 0efore perfor2ance. <=trinsic factors change paritiesT 2ins. H look
for iscrepancies for >a" out of the contract.
4Parties ha#e perfor2e. Aispute arises o#er ter2s for2 2ight ha#e i#ergent for2 of
contract. 6er2s!
4
T%e Battle of t%e Forms #EMA-A9D$
KCC 2&20'7 +n a 0reak >ith the Mirror +2age 1ule( 2&20' allo>s contract for2ation
>here the ter2s of the acceptance iffer fro2 the offer as follo>s7
4: efinite an seasona0le acceptance operates as an acceptance e#en though ter2s
ifferent or aitional to those of offer
efinite % no U+ >ant N2I forZU
seasona0le % custo2aril" seasona0le ti2e fra2e
4+f either part" is a non&2erchant( a contract e=ists( 0ut aitional ter2s are 2erel"
proposals. Bet>een 2erchants( aitional ter2s 0eco2e part of contract e=cept7
>here original offer states that no alterations to 0e 2ae( or
if the aitional ter2s 2ateriall" alter the contract( or
if the offeror notifies offeree of his o08ection to aitional ter2s.
:n alternati#e route to contract for2ation7 +f no k e=ists uner 14( e.g. allege acceptance
is not seasona0le( "et 0oth parties go on to perfor2 as if one oes. 9ook to offer ,
acceptance an co22on ter2s >hich 0eco2e ter2s of contract. +nconsistent ter2s are
roppe. Japs fille >ith KCC 2&/05?M?10.
<=press conitions like Uonl" on the conition that "ou agree >ith 2" aitional ter2s...U
create counteroffers unless perfor2ance ensues( in >hich case a contract 2a" 0e for2e.
Step&Sa#er #. W"se7 6S9 argue that offer 2ae o#er phone is 2ateriall" altere 0" 0o=&
top license ? acceptance of Step Sa#erTs 0o=&top license ter2s a conition of sales.
Step&Sa#er argues 0o=&top license is a su0se-uent ter2 an in#ali uner L 2&20'
KCC L 2&20'7 : contract results e#en >here offer an acceptance contain a iscrepanc"(
e=cept acceptance is conitionse on assent to aitional ? ifferent ter2s.
Page II of 66
4:itional to or ifferent ter2s re-uire a efinite an seasona0le acceptance an
V>ritten!W confir2ation
4:itional ter2s are proposals for aition to the contract e=cept if 0oth parties are
2erchants( in >hich case the aitional ter2s are part of contract
7nless the proposal epressly limits acceptance to its terms! the new terms materially
alter! or in case of timely objection to new terms.
46hose ter2s upon >hich parties agree are inclue in contract. Arop inconsistent ter2s
an fill in gaps per L 2&/0M( etc.
B" KCC 2&20'314 a efinite an seasona0le e=pression of acceptance operates as an
acceptance e#en though it states ter2s aitional to or ifferent fro2 those offere unless
acceptance is e=pressl" 2ae conitional on assent to the ifferent ter2s.
Acceptance ). Counteroffer7 :cceptance is a seasona0le an efinite e=pression of
acceptance >ith ifferent or aitional ter2s. Counteroffer?re8ection if7
4not seasona0le
4not efinite
4e=pressl" conitional
Response to Counteroffers4
4no acceptance or perfor2ance no contract
4clear 2anifestation of acceptance 0" offeror contract on offereeTs ter2s
4no acceptance 0ut perfor2ance contract uner L 2&20'3/4
T%e Statute of Frau's #A9D-D8$
+n 2ost circu2stances an oral contract is #ali. Ho>e#er( certain agree2ents( 0" statute(
2ust 0e e#ience 0" a >riting signe 0" the parties sought to 0e 0oun. 6he >riting
ser#es e#ientiar" an notification purposes
4Creation?transfer of an interest in lan7
4sale of real propert" or interests therein
4leases for 2ore than one "ear
4ease2ents of 2ore than one "ear
4fi=tures
4ti20er( 2inerals( etc.
4structures to 0e se#ere fro2 lan 0" the 0u"er 0ut not ite2s easil" se#ere fro2 the
lan >ith 2ini2al a2age like corn
42ortgages
4so2eti2es taken out of SO; >hen t>o of the follo>ing e=ist7
i4 pa"2ent
ii4 possession
iii4 #alua0le i2pro#e2ents
4<=ecutor or a2inistrator pro2ises 3collateral( not pri2ar"4 personall" to pa" estate
e0ts an not >here leaing purpose of pro2ise is pro2isorTs o>n pecuniar" gain
4Pro2ises in consieration of 2arriage
4Perfor2ance cannot 0e co2plete >ithin one "ear fro2 ate of agree2ent
1ight to ter2inate in one "ear7
Page I6 of 66
Ma8orit"7 SO; applies to nonperfor2ance >hich is not perfor2ance >ithin one "ear.
Minorit"? 127 Since the contract is ter2ina0le 0" either part" >ithin one "ear it is
outsie the SO;.
4Joos price at NI00 or 2ore( e=cept
4oral contracts enforcea0le for speciall" 2anufacture goos ^ NI00
4>ritten confir2ation 0et>een 2erchants of ite2 unless re8ecte >ithin 10 a"s
4a2issions in pleaings or court of e=istence of contract
4>here partial pa"2ent or partial eli#er" up to the e=tent of greater a2ount
6he >riting 2ust contain7
4the ientit" of the part" sought to 0e 0oun
4the contractTs su08ect 2atter
4ter2s an conitions of the agree2ent
4recital of consieration
4signature of the part" to 0e charge or his agent
.onco2pliance reners contract unenforcea0le at the option of the part" to 0e charge. +f
not raise as a efense( SO; is >ai#e.
Occasionall" pro2issor" estoppel is applie to cases >here ine-uita0le to allo> SO; to
efeat a 2eritorious clai2. 1ile"
erformance
Dut( of !oo' Fait% #M9M-D8$
KCC L 1&20/7 <#er" contract or ut" >ithin this :ct i2poses an o0ligation of goo faith
in its perfor2ance or enforce2ent.
KCC L 1&20131M47 Joo faith 2eans honest" in fact in the conuct or transaction concerne
KCC L 2&10/3143047 Joo faith in the case of a 2erchant 2eans honest" in fact an o0ser#ance of
reasona0le co22ercial stanars of fair ealing in the trae
12 L 20I7 <#er" contract i2poses upon each part" a ut" of goo faith an fair ealing
in its perfor2ance an its enforce2ent
COMM<.67 Joo faith perfor2ance or enforce2ent of a contract e2phasiRes
faithfulness to an agree co22on purpose an consistenc" >ith the 8ustifie e=pectations
of the other
part"...ecenc"...fairness...reasona0leness
Mutual 9ife7 Was 0eha#ior to escape pro#isions of content or for legiti2ate 0usiness
reasons! Mo#ing fur salon to top floor rente uner a ifferent lease that i not re-uire
F] of gross profits lanlor >as not 0reach of goo faith. Plaintiff ha e#er"
opportunit" to >rite F] clause into fifth floor lease 0ut chose not to...
Breac%
Anticipator( Repu'iation #M@D-ME$
Page I' of 66
1ests at the no perfor2ance of the spectru2 enco2passing co2plete ? su0stantial ? no
perfor2ance
:llo>s innocent person to treat contract as 0reache U>hen reasona0le grouns for
insecurit" arise >ith respect to the perfor2ance of either part"...U
KCC L2&6107 When either part" repuiates the contract >ith respect to a perfor2ance not
"et ue the loss of >hich >ill su0stantiall" i2pair the #alue of the contract to the other(
the aggrie#e part" 2a"
4for a co22erciall" reasona0le ti2e a>ait perfor2ance 0" the repuiating part"( or
4resort to an" re2e" for 0reach 3L 2&'0/ or L 2&'114( e#en though he has notifie the
repuiating part" that he >oul a>ait the latterTs perfor2ance an has urge
perfor2ance@ an
4in either case suspen his o>n perfor2ance or procee in accorance >ith the pro#isions
of this :rticle V2W on the sellerTs right to ientif" goos to the contract not>ithstaning
0reach or to sal#age unfinishe goos 3L 2&'0F4.
KCC L 2&6117 1etraction of :nticipator" 1epuiation
14 Kntil the repuiating part"Ts ne=t perfor2ance is ue he can retract his repuiation
unless the aggrie#e part" has since the repuiation cancelle or 2ateriall" change his
position or other>ise inicate that he consiers the repuiation final.
24 1etraction 2a" 0e 0" an" 2etho >hich clearl" inicates to the aggrie#e part" that
the repuiating part" intens to perfor2( 0ut 2ust inclue an" assurance 8ustifia0l"
e2ane uner the pro#isions of this :rticle 3Section 2& 60M4
41etraction reinstates the repuiating part"Ts rights uner the contract >ith ue e=cuse
an allo>ance to the aggrie#e part" for an" ela" occasione 0" the repuiation.
Deman's for A'e;uate Assurance of erformance #MME-MMM$
See Scott #. Cro>n H >heat case
KCC L 2&60M7 1ight to :e-uate :ssurance of Perfor2ance
14 : contract for sale i2poses an o0ligation on each part" that the otherTs e=pectation of
recei#ing ue perfor2ance >ill not 0e i2paire. When reasona0le grouns for insecurit"
arise >ith respect to the perfor2ance of either part" the other 2a" in >riting e2an
ae-uate assurance of ue perfor2ance an until he recei#es such assurance 2a" if
co22erciall" reasona0le suspen an" perfor2ance for >hich he has not alrea" recei#e
the agree return.
24 Bet>een 2erchants the reasona0leness of grouns for insecurit" an the ae-uac" of
an" assurance offere shall 0e eter2ine accoring to co22ercial stanars.
/4 :cceptance of an" i2proper eli#er" or pa"2ent oes not pre8uice the aggrie#e
part"Ts right to e2an ae-uate assurance of future perfor2ance.
4:fter receipt of a 8ustifie e2an failure to pro#ie >ithin a reasona0le ti2e not
e=ceeing thirt" a"s such assurance of ue perfor2ance as is ae-uate uner the
circu2stances of the particular case is a repuiation of the contract.
Material Breac% #MMM-976A$
Page I5 of 66
+n general a part" nee not perfor2 on the precise a" state in the contract
if ti2e is not of the essence( reasona0le ela" is not a 2aterial 0reach
if ti2e is of the essence( an" ela" is a 0reach
erfect Ten'er Rule H Joos that are the o08ect of contract 2ust 0e e=actl" as pro2ise
in contract. :n" e#iation is a 0reach of contract
"CC mo'ifies TR \ 1020*
KCC L 2&6017 :opts perfect tener rule. Bu"er 2a"
4re8ect the >hole
4accept the >hole
4accept ? re8ect co22ercial units
KCC L 2&602?67 +f 0u"er fails to re8ect goos in a reasona0le ti2e or fails to notif" the
seller seasona0l" of non&confor2ing goos( his re8ection is ineffecti#e.
KCC L 2&I053147 +f seller infor2s 0u"er of intent to cure efecti#e tener >ithin contract
perio he has an unconitional a0ilit" to 2ake the eli#er".
KCC L 2&I053247 <#en if ti2e of perfor2ance passes seller 2a" cure if he has reasona0le
grouns to 0elie#e tener >oul 0e accepte >ith or >ithout 2one" allo>ance( he has a
further reasona0le ti2e to cure.
Bu"er accepts goos an then fins the2 non&confor2ing
KCC L 2&6053147 :fter acceptance the situation changes. 1e8ection is possi0le 0ut uner
su0stantial perfor2ance( not total perfor2ance stanars.
Su/stantial erformance #976A-D7I 97DE-A7$
Oaco0s , $oungs #. )ent7 House 0uiling contract re-uire stanar pipe 2anufacture
0" 1eaing. Builer use another 0ran ientical in all respects 0ut 2aker. Hel7 .on&
2aterial e#iation an su0stantial perfor2ance.
6>o 2easures of a2age
$Difference in )alue of house as promise' an' as performe'. O>ner generall" entitle
to this a2ount unless grossl" out of proportion to goo attaine
4Voften higherW Cost of completion as in Jro#es #. Oohn Wuner in >hich efenant
acte >illfull" 3gra#el re2o#al case4.
<_:MP9<7 +f 0uilers 2ake a 10=12 roo2 >here specs call for 10=12.I( likel" not a
2aterial 0reach a0sent other factors H 0ut if 0u"er 2ae clear that he neee 12.I
clearance for rafting ta0le( etc 2aterial 0reach
Courts e=a2ine the e-uit" of the transaction7
4Ho> 2uch of the contracte&for 0enefit has plaintiff actuall" recei#e!
4Can plaintiff 0e ae-uatel" co2pensate in a2ages!
4<=tent of forfeiture that efenant >ill suffer
4Was 0reach >illful!
Page IM of 66
Disc%ar*e
Impossi/ilit( #96D9-EM$
Paraine #. Oane7 Plaintiff e2ane three "ears 0ack rent. 9anlor ha alrea"
perfor2e. Aefenant clai2e force off lan 0" Jer2an prince an coul not inha0it
rente lan. 9anlor ha alrea" perfor2e contract H no contract ter2 for continue
en8o"2ent.
Har&line approach to i2possi0ilit" efense7 9anlor pro2ise to pro#ie lan( a
pro2ise not renere i2possi0le 0" occupation 0" ar2" e#en if actual possession
i2possi0le. 6enant pro2ise to pa" rent( also not 2ae i2possi0le 0" occupation.
6a"lor #. Ca2p0ell7 Aefenants recei#e 2one" in return for PlaintiffTs use of their 2usic hall on
four su22er a"s in 156/. Hall 0urne. Court foun perfor2ance i2possi0le an ischarge
contract for i2possi0ilit"
Impractica/ilit(
<astern :ir 9ines #. Julf Oil Corp.7 Per KCC L 2&61I there are four factors for i2practica0ilit"7
4<#ent 2ust ha#e 2ae perfor2ance as agree i2practica0le
+ncrease cost alone oes not trigger i2practica0ilit" unless result of an unforeseen e#ent
that su0stantiall" alters contract.
4Occurrence of e#ent 2ust ha#e 0een VcoreW assu2ption in >hich contract >as 2ae
4Must ha#e resulte >ithout fault of part" seeking to 0e e=cuse.
Part" seeking e=cuse 2a" raise efense if negligence or fault cause e#ent.
4Part" seeking to 0e e=cuse 2ust not ha#e Ve=plicitl" or i2plicitl"W assu2e a greater
o0ligation than the la> i2poses.
Frustration of urpose #96A?-?6$
9lo" #. Murph"7 Aefenant rente lot in Be#erl" Hills for Une> car sales an the
occaional use car...U an ser#ice. Warti2e regulations prohi0ite the sale of ne> cars.
Aefenant clai2e frustration of purpose. Court hel not i2possi0le( not i2practici0le( 0ut
efeenant >as not getting full #alue of lease&for pre2ises frustration of purpose.
:s in +2possi0ilit" cases( ask here >hich part" assu2e the risk in -uestion
;our ele2ents7
4<#ent ? non&occurrence 2ust ha#e su0stantiall" frustrate agree2entTs principle purpose@
ne=t three ele2ents sa2e as i2practica0ilit"
4non&occurrence of e#ent >hich >as a core assu2ption of contract
4non&occurrence of e#ent 2ust ha#e resulte >ithout fault of part" seeking to 0e e=cuse
4part" seeking to 0e e=cuse 2ust not ha#e assu2e( e=pressl" or i2plicitl"( a greater
o0ligation than the la> i2poses
+f go#ern2ent restricts use for >hich lan >as lease( 0ut oes not outla> it( the leaseTs
purpose is not frustrate.
12 L 26I7 Where after a contract is 2ae( a part"Ts principal purpose is su0stantiall"
frustrate >ithout his fault 0" the occurrence of an e#ent the non&occurrence of >hich
Page 60 of 66
>as a 0asic assu2ption on >hich the contract >as 2ae( his re2aining uties to rener
perfor2ance are ischarge( unless the language or the circu2stances inicate the
contrar".
Reme'ies
Dama*e Interests #86-M?$
Specific Perfor2ance7 innocent part" asks other sie to perfor2 on its pro2ise
Monetar" Aa2ages7 co2pensate >ith 2one" for failure to perfor2 H 2a" 0e plea in the
alternati#e. ;airness an certaint" in calculating a2ages H la> seeks 0est appro=i2ation(
e-uit" 2a" re-uire a8ust2ent of a2ounts
E3pectation Dama*es7 the efault( generall" largest reco#er" H Court atte2pts to put the
pro2isee in the position in >hich the pro2isee >oul ha#e 0een ha the pro2ise 0een
perfor2e( i.e. sufficient a2ages to 0u" a su0stitute perfor2ance.
Reliance Dama*es7 Where e=pectation a2ages are too speculti#e to 2easure( reliance
a2ages put the plaintiff in the position she >oul ha#e 0een in ha the contract ne#er
0een for2e. Jenerall" less reco#er" 0ecause no accounting for lost profits. 1eliance
0ase in >aste.
Restitution7 Put the guilt" part" >here it >oul ha#e 0een in transaction up to the point
of 0reach H gi#e up 0enefits. 9east generous for2 of reco#er" 0ecause oes not take
account of either the pro2iseeTs lost profit 3e=pectanc"4 or reliance 0" the pro2isee that
prouces no 0enefit to the pro2isor.
:lso inci'ental / conse;uential 'ama*es per KCC L2&'1I7
4+nciental a2ages resulting fro2 the sellerTs 0reach inclue e=penses reasona0l"
incurre in inspection( receipt( transportation( an care an custo" of goos
rightfull" re8ecte( an" co22erciall" reasona0le charges( e=penses or co22issions in
connection >ith effecting co#erV( anW an" other reasona0le e=pense incient to the
ela" or other 0reach.
4Conse-uential a2ages resulting fro2 the sellerTs 0reach inclue
4an" loss resulting fro2 general or particular re-uire2ents an nees of >hich the seller
at the ti2e of contraction ha reason to kno> an >hich coul not reasona0l" 0e
pre#ente 0" co#er or other>ise@ an
4in8ur" to person or propert" pro=i2atel" resulting fro2 an" 0reach of >arrant"
Limitations on Dama*es #M?-9A8$
6hree li2itations on a2ages
41e2oteness or ;oreseea0ilit" of Har2
Hale" #. Ba=enale7 3Mill a=le case4 Mill o>ner&plaintiff sent a 0roken crankshaft to
repair shop >ith instructions to e=peite. Shipper negligentl" ela"e ship2ent. Plaintiff
sue for a2ages ue to o>n&ti2e. Hel7 Shop onl" lia0le for foreseea0le a2ages an
that i not inclue 2illTs o>n&ti2e.
6he -uestion is not >hat efenant foresa> 0ut >hat he coul ha#e reasona0l" foreseen.
Page 61 of 66
+f 2ill ha co22unicate the special circu2stances attenant( it coul ha#e create
lia0ilit" in the a2ount nor2all" arising uner these circu2stances( ho>e#er courts are
hesitant to i2pose a2ages on notice alone.
: 2inorit" #ie> applie in Morro>( calle the Tacit A*reement Rule sa"s that notice is
not enough an that a>areness of lia0ilit" 3ifficult to pro#e4 is re-uire.
12 L /I17 Knforeseea0ilit" an 1elate 9i2itations on Aa2ages
314 Aa2ages are not reco#era0le for loss that the part" in 0reach i not ha#e reason to foresee as
a pro0a0le result of the 0reach >hen the contract >as 2ae.
324 9oss 2a" 0e foreseea0le as a pro0a0le result of a 0reach 0ecause it follo>s fro2 the 0reach
(a) in the ordinary course of events! or
(b) as a result of special circumstances! beyond the ordinary course of events! that the party in
breach had reason to "now.
3/4 : court 2a" li2it a2ages for foreseea0le loss 0" e=cluing reco#er" for loss of profits( 0"
allo>ing reco#er" onl" for loss incurre in reliance( or other>ise if it conclues that in the
circu2stances 8ustice so re-uires in orer to a#oi isproportionate co2pensation.
4Certaint" of Har2
Chicago Coliseu2 Clu0 #. Ae2pse"7 CCC contracte >ith 0o=er Wills an separatel"
>ith a pro2oter an then >ith Oack Ae2pse". Ae2pse" agree inter alia to not engage in
an" other fights( etc. He then starte training for a ifferent an conflicting fight(
repuiating his contract >ith CCC. CCC sought a2ages on four grouns7
149oss of profits >hich >oul ha#e 0een eri#e 0" the plaintiff in the e#ent of the holing of the
contest in -uestion. Here the court hel that uncertain nature of profits pre#ente reco#er"
24<=penses incurre 0" CCC prior to the signing of the agree2ent >ith Ae2pse". Hel7 : part"
can onl" reco#er on a2ages >hich naturall" flo> fro2 an are the result of the 0reach
co2plaine of a0sent special circu2stances
/4<=penses incurre in atte2pting to restrain Ae2pse" fro2 engaging in other fight7 .ot
reco#era0le 0ecause these efforts ca2e after the repuiation an >ere at CCCTs o>n risk.
F4<=penses incurre 0et>een signing an 0reach. Hel reco#era0le insofar as ite2s >ere incurre
as a necessar" e=pense in furtheance of the perfor2ance
12 L /F67 :G:+9:B+9+6$ O; A:M:J<S
14 6he in8ure part" has a right to a2ages for an" 0reach 0" a part" against >ho2 the contract is
enforcea0le unless the clai2 for a2ages has 0een suspene or ischarge.
24 +f the 0reach cause no loss or if the a2ount of the loss is not pro#e uner the rules state in
this Chapter( a s2all su2 fi=e >ithout regar to the a2ount of loss >ill 0e a>are as no2inal
a2ages.
12 L /F'7 M<:SK1< O; A:M:J<S +. J<.<1:9
Su08ect to the li2itations state in ss /I0&I/( the in8ure part" has a right to a2ages 0ase on his
e=pectation interest as 2easure 0"
(a) the loss in the value to him of the other partyRs performance caused by its failure or
deficiency! plus
(b) any other loss! including incidental or conseDuential loss! caused by the breach! less
(c) any cost or other loss that he has avoided by not having to perform.
12 L /FM7 A:M:J<S B:S<A O. 1<9+:.C< +.6<1<S6
Page 62 of 66
:s an alternati#e to the 2easure of a2ages state in L /F'( the in8ure part" has a right to
a2ages 0ase on his reliance interest( incluing e=penitures 2ae in preparation for
perfor2ance or in perfor2ance( less an" loss that the part" in 0reach can pro#e >ith reasona0le
certaint" VL/I2W the in8ure part" >oul ha#e suffere ha the contract 0een perfor2e.
12 L /I27 K.C<16:+.6$ :S : 9+M+6:6+O. O. A:M:J<S
Aa2ages are not reco#era0le for loss 0e"on an a2ount that the e#ience per2its to 0e
esta0lishe >ith reasona0le certaint"
12 L /5F7 1<SK+1<M<.6 6H:6 P:16$ S<<)+.J 1<S6+6K6+O. 1<6K1.
B<.<;+6
314 <=cept as state in Su0section 324( a part" >ill not 0e grante restitution unless
(a) he returns or offers to return! conditional on restitution! any interest in property that he has
received in echange in substantially as good condition as when it was received by him! or
(b) the court can assure such return in connection with the relief granted.
324 6he re-uire2ent state in Su0section 314 oes not appl" to propert"
(a) that was worthless when received or that has been destroyed or lost by the other party or as a
result of its own defects!
(b) that either could not from the time of receipt have been returned or has been used or disposed
of without "nowledge of the grounds for restitution if justice reDuires that compensation be
accepted in its place and the payment of such compensation can be assured! or
(c) as to which the contract apportions the price if that part of the price is not included in the
claim for restitution.

4:#oia0ilit" of Har2
;or2erl" kno>n as the Aut" to Mitigate( though not an affir2ati#e ut"
Clark7 Part" that 0reache shoul onl" pa" for a2age it cause. +nnocent part" shoul
stop perfor2ance >hen learns of 0reach to 2ini2iRe a2ages. Ho>e#er cases e=ist
>here 0est >a" to 2ini2iRe a2ages is continue perfor2ance.
e.g. learn of 0reach >hile loaing grain into silo keep loaing to a#oi spoilage
Parker7 +f plaintiff coul ha#e foun another 8o0( euct earnings fro2 a2ages of initial
contract
Distinction in goos7 Shoul procees of secon sale 0e eucte fro2 the a2ages of
original contract! H no 0ecause >oul ha#e 2ae these sales 0ut for 0reach
12 L /I07 :GO+A:B+9+6$ :S : 9+M+6:6+O. O. A:M:J<S
14 <=cept as state in Su0section 324( a2ages are not reco#era0le for loss that the in8ure part"
coul ha#e a#oie >ithout un'ue risk( /ur'en or hu2iliation.
2 6he in8ure part" is not preclue fro2 reco#er" 0" the rule state in Su0section 314 to the
e=tent that he has 2ae reasona0le 0ut unsuccessful efforts to a#oi loss.
KCC L 2&'067 SellerTs 1esale +ncluing Contract for 1esale

14 Kner the conitions state in Section 2&'0/ on sellerTs re2eies( the seller 2a" resell the
goos concerne or the uneli#ere 0alance thereof. Where the resale is 2ae in goo faith an
in a co22erciall" reasona0le 2anner the seller 2a" reco#er the ifference 0et>een the resale
price an the contract price together >ith an" inciental a2ages allo>e uner the pro#isions of
this :rticle 3Section 2&'104( 0ut less e=penses sa#e in conse-uence of the 0u"erTs 0reach.
Page 6/ of 66
24 <=cept as other>ise pro#ie in su0section 3/4 or unless other>ise agree resale 2a" 0e at
pu0lic or pri#ate sale incluing sale 0" >a" of one or 2ore contracts to sell or of ientification to
an e=isting contract of the seller. Sale 2a" 0e as a unit or in parcels an at an" ti2e an place an
on an" ter2s 0ut e#er" aspect of the sale incluing the 2etho( 2anner( ti2e( place an ter2s
2ust 0e co22erciall" reasona0le. 6he resale 2ust 0e reasona0l" ientifie as referring to the
0roken contract( 0ut it is not necessar" that the goos 0e in e=istence or that an" or all of the2
ha#e 0een ientifie to the contract 0efore the 0reach.
/4 Where the resale is at pri#ate sale the seller 2ust gi#e the 0u"er reasona0le notification of his
intention to resell.
F4 Where the resale is at pu0lic sale
a) only identified goods can be sold ecept where there is a recogniSed mar"et for a public sale of
futures in goods of the "indO and
b) it must be made at a usual place or mar"et for public sale if one is reasonably available and
ecept in the case of goods which are perishable or threaten to decline in value speedily the seller
must give the buyer reasonable notice of the time and place of the resaleO and
c) if the goods are not to be within the view of those attending the sale the notification of sale
must state the place where the goods are located and provide for their reasonable inspection by
prospective biddersO and
d) the seller may buy.
I4 : purchaser >ho 0u"s in goo faith at a resale takes the goos free of an" rights of the original
0u"er e#en though the seller fails to co2pl" >ith one or 2ore of the re-uire2ents of this section.
64 6he seller is not accounta0le to the 0u"er for an" profit 2ae on an" resale. : person in the
position of a seller 3Section 2&'0'4 or a 0u"er >ho has rightfull" re8ecte or 8ustifia0l" re#oke
acceptance 2ust account for an" e=cess o#er the a2ount of his securit" interest( as hereinafter
efine 3su0section 3/4 of Section 2&'114.
Contractin* Aroun' t%e Default Rules of Dama*es #9A8-8D$
)e20le #. ;arren
Li;ui'ation of Dama*es case in >hich actor >as to perfor2 e#er" night for four "ears
or risk Y1000 li-uiate a2ages
Such a clause sa#es the e=pense of trial( 0ut is it enforcea0le!
4Parties 2ust ha#e intene for li-uiate a2ages( not penalties 3this prong largel"
regare as useless4. .ot satisfie 0" Unot intene as a penalt"U in contract. 9ook to
intent
4+n8ur" cause 0" 0reach 2ust 0e uncertain or ifficult to -uantif". Court 2ore likel"
enforce in cases >here actual a2ages 2ost ifficult to calculate
4Su2 of a2ages 2ust 0e reasona0le esti2ate of pro0a0le loss 32ost i2portant prong.4
1eliance +ns. Co. #. Ktah Aept. of 6rans.
When o "ou asses reasona0leness an uncertaint"! contract for2ation or at ti2e the
actual a2ages occurre! H<9A7 6i2e of for2ation
BK6 S<<
12 L /I6 ? KCC 2&'157 ...reasona0le in light of anticipate or actual loss
POS.<1 in 9ake 1i#er Corp #. Car0orunu2 Co. \ 1'1
:s a 2atter of pu0lic polic" penal a2ages pre#ent efficient 0reaches
Specific erformance #9MA-698I 698-E8$
:n e-uita0le 2easure use >ith rare or uni-ue goos
9o#eless #. Aiehl 7 6he A<;:K96 1K9< +. 9:.A +S SP<C+;+C P<1;O1M:.C<
Page 6F of 66
49 lease to A for / "ears >ith an option to 0u" for N21(000
4A 2ae i2pro#e2ents 0ut coul not pa" N21(000
4A trie to sell lan for N22(000 an then turn aroun an 0u" fro2 9 for N21(000(
2aking a N1(000 profit.
49 isa#o>e intent to sell to A
Cu20ert #. Harris 6H< A<;:K96 1K9< ;O1 JOOAS +S MO.<6:1$ A:M:J<S
4C a2asse a large stereo s"ste2. He put it as collateral uner a contract that allo>e hi2
to 0u" it 0ack at a certain ti2e. H 0reache. 1eco#er" nor2all" 2onetar"( 0ut here
2an" co2ponents >ere one&of&a&kin specific perfor2ance
KCC L 2&'167 Specific perfor2ance >here
4Uuni-ueU goos or Uother proper circu2stancesU
48ug2ent ecree for specific perfor2ance 2a" inclue ter2s
40u"er has a right of reple#in...
1ecall Cor#ette cases7 1M62 Cor#ette not uni-ue@ #er" li2ite run 2oel uni-ue
.o specific perfor2ance a#aila0le in personal ser#ice contracts 36he Case of Mar" Clark( :
Wo2an of Color4
+n8unctions7 Contract for perfor2ance onl" for plaintiff. 9ongle" court i2pose in8unction to
preser#e ter2s of contract. Opposite result in ;or. +n Auff fre-uent perfor2ances guarantee for
P an court i2plie an e=clusi#it" clause.
Aallas Co>0o"s #. Harris7 A -uit the 1a2s an taught. His rights >ere assigne to the Co>0o"s(
>ho sought to en8oin hi2 fro2 pla"ing for the :;9 Aallas 6e=ans
H<9A7 +n8uncti#e relief grante. +t >ill 0e grante to restrain #iolation of negati#e
co#enants in personal ser#ice Ve2plo"eeW contracts if the e2plo"ee is a person of
e=ceptional an uni-ue kno>lege( skill an a0ilit" in perfor2ing
Restitution #6?9-@9$
4.ee to ha#e so2ething that 0enefitte other part"
41easona0le e=pectation of 0eing co2pensate
40enefit 2ust not ha#e 0een a gift
4so2e sense that if A not re-uire to pa" A >ill 0e un8ustl" enriche
;ocus on guilt" part" an 2aking the2 as 0efore the un8ust enrich2ent
.or2all" innocent part" asks for e=pectanc" a2ages
situations >hen not e=pectanc" a2ages not proper for plaintiff
Cotnan #. Wiso27 Suasi&contract 3legal fiction4 to a#oi un8ust enrich2ent
12 L /'17 M<:SK1< O; 1<S6+6K6+O. +.6<1<S6
+f a su2 of 2one" is a>are to protect a part"Ts restitution interest( it 2a" as 8ustice
re-uires 0e 2easure 0" either
Page 6I of 66
a4 the reasona0le #alue to the other part" of >hat he recei#e in ter2s of >hat it >oul
ha#e cost hi2 to o0tain it fro2 a person in the clai2antTs position( or
04 the e=tent to >hich the other part"Ts propert" has 0een increase in #alue or his other
interests a#ance.

12 L /'/7 1<S6+6K6+O. WH<. O6H<1 P:16$ +S +. B1<:CH
14 Su08ect to the rule state in Su0section 324( on a 0reach 0" non& perfor2ance that gi#es
rise to a clai2 for a2ages for total 0reach or on a repuiation( the in8ure part" is
entitle to restitution for an" 0enefit that he has conferre on the other part" 0" >a" of
part perfor2ance or reliance.
24 6he in8ure part" has no right to restitution if he has perfor2e all of his uties uner
the contract an no perfor2ance 0" the other part" re2ains ue other than pa"2ent of a
efinite su2 of 2one" for that perfor2ance.

12 L /'F. 1<S6+6K6+O. +. ;:GO1 O; P:16$ +. B1<:CH
314 Su08ect to the rule state in Su0section 324( if a part" 8ustifia0l" refuses to perfor2 on
the groun that his re2aining uties of perfor2ance ha#e 0een ischarge 0" the other
part"Ts 0reach( the part" in 0reach is entitle to restitution for an" 0enefit that he has
conferre 0" >a" of part perfor2ance or reliance in e=cess of the loss that he has cause
0" his o>n 0reach.
324 6o the e=tent that( uner the 2anifeste assent of the parties( a part"Ts perfor2ance is
to 0e retaine in the case of 0reach( that part" is not entitle to restitution if the #alue of
the perfor2ance as li-uiate a2ages is reasona0le in the light of the anticipate or
actual loss cause 0" the 0reach an the ifficulties of proof of loss.

T%ir' arties to Contracts #AE6-A6I A8E-@MI ?9D-68$
)ell" Health Care #. 6he Pruential 9ife +ns. Co. of :2erica
:ssig2ent of rights. One of the original parties assigns his rights to a thir part". )ell"
sue Pruential after it o0taine a efault 8ug2ent against Jreen( PruentialTs insure on
the theor" that )ell" >as JreenTs assignee
:ssign2ent re-uires co2plete 3a0solute * irre#oca0le4 assign2ent
not agenc" relationships
not po>er of attorne"
12 L /1'7 :SS+JM<.6
4:n" right uner a contract 2a" 0e assigne 3nee not 0e in >riting4 e=cept
24
4right 0eing assigne >oul su0stantiall" change ut" or risk of part" that is to perfor2
4>here prohi0ite 0" la>( e.g. assign2ent of >ages
..B. original contract 2a" li2it assign2ent
KCC L2&2107 .o elegation is allo>e if parties ha#e an interest in ha#ing original
parties perfor2
Sall" Beaut" Co. #. .e==us Proucts
Aelegation 30" sale of Best4 of contract fro2 Best Bar0er Suppl" to Sall"( a irect
.e==us co2petitor.
Most kins of uties can 0e elegate >ithout other part"Ts consent.
Page 66 of 66
Auties of trust or confience cannot 0e elgate
AOM+.:.6 ;:C6O1 6<S67 +s this case pri2aril" goos or ser#ice!
Sea#er #. 1anso27 OugeTs >ife >as "ing. Her >ill left her house to her niece. Ouge s>ore he
>oul gi#e niece enough 2one" that >ife coul lea#e house to hi2. :t his eath his >ill i not
contain such a pro#ision. Ma" the niece thir&part" 0eneficiar" sue!
12 L /027 Inten'e' Beneficiar( can sho> recognition of thir part" 0eneficiar" status is
appropriate to effectuate the intention of the parties an either
4the perfor2ance of the pro2ise >ill satisf" an o0ligation of the pro2ise to pa" 2one" to
the 0eneficiar"
4the circu2stances inicate that the pro2ise intens to gi#e the 0eneficiar" the 0enefit of
the pro2ise perfor2ance
12 L /02 3247 Inci'ental Beneficiar( is an" other than intene 0eneficiar".

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Mike Hughes Contracts Outline Spring 2000 Prof.

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